UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

o		Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Commission file number 001-31940

F.N.B. CORPORATION

(Exact name of registrant as specified in its charter)

Florida		25-1255406
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One F.N.B. Boulevard, Hermitage, PA		16148
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 724-981-6000

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ		Accelerated Filer o		Non-accelerated Filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at October 31, 2010
Common Stock, $0.01 Par Value		114,641,514 Shares

 

 

F.N.B. CORPORATION
FORM 10-Q
September 30, 2010

INDEX

		PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			1
Consolidated Balance Sheets			2
Consolidated Statements of Income			3
Consolidated Statements of Stockholders’ Equity			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3. Quantitative and Qualitative Disclosures About Market Risk			59
Item 4. Controls and Procedures			60
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			60
Item 1A. Risk Factors			61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			61
Item 3. Defaults Upon Senior Securities			61
Item 5. Other Information			61
Item 6. Exhibits			61
Signatures			62

F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except par value

		September 30,				December 31,
		2010				2009
		(Unaudited)
Assets
Cash and due from banks		$	142,615			$	160,845
Interest bearing deposits with banks			164,406				149,705
Cash and Cash Equivalents			307,021				310,550
Securities available for sale			738,828				715,349
Securities held to maturity (fair value of $904,589 and $796,537)			869,765				775,281
Residential mortgage loans held for sale			16,729				12,754
Loans, net of unearned income of $40,343 and $38,173			6,004,577				5,849,361
Allowance for loan losses			(116,627	)			(104,655	)
Net Loans			5,887,950				5,744,706
Premises and equipment, net			114,320				117,921
Goodwill			528,720				528,710
Core deposit and other intangible assets, net			34,100				39,141
Bank owned life insurance			207,402				205,447
Other assets			288,208				259,218
Total Assets		$	8,993,043			$	8,709,077
Liabilities
Deposits:
Non-interest bearing demand		$	1,103,393			$	992,298
Savings and NOW			3,307,698				3,182,909
Certificates and other time deposits			2,186,737				2,205,016
Total Deposits			6,597,828				6,380,223
Other liabilities			105,326				86,797
Short-term borrowings			817,582				669,167
Long-term debt			203,257				324,877
Junior subordinated debt			204,204				204,711
Total Liabilities			7,928,197				7,665,775
Stockholders’ Equity
Common stock — $0.01 par value
Authorized — 500,000,000 shares
Issued — 114,784,268 and 114,214,951 shares			1,142				1,138
Additional paid-in capital			1,092,828				1,087,369
Retained earnings			(3,126	)			(12,833	)
Accumulated other comprehensive loss			(23,481	)			(30,633	)
Treasury stock — 151,418 and 103,256 shares at cost			(2,517	)			(1,739	)
Total Stockholders’ Equity			1,064,846				1,043,302
Total Liabilities and Stockholders’ Equity		$	8,993,043			$	8,709,077

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Dollars in thousands, except per share data
Unaudited

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Interest Income
Loans, including fees		$	81,507			$	81,957			$	241,885			$	247,871
Securities:
Taxable			10,524				12,765				33,100				38,342
Nontaxable			1,779				1,836				5,489				5,264
Dividends			17				33				54				120
Other			120				159				326				461
Total Interest Income			93,947				96,750				280,854				292,058
Interest Expense
Deposits			15,742				20,290				50,072				67,062
Short-term borrowings			2,029				2,072				6,191				6,369
Long-term debt			1,825				4,210				6,462				13,622
Junior subordinated debt			2,092				2,417				5,984				7,658
Total Interest Expense			21,688				28,989				68,709				94,711
Net Interest Income			72,259				67,761				212,145				197,347
Provision for loan losses			12,313				16,455				36,516				40,878
Net Interest Income After Provision for Loan Losses			59,946				51,306				175,629				156,469
Non-Interest Income
Impairment losses on securities			—				(14,234	)			(9,539	)			(15,866	)
Non-credit related losses on securities not expected to be sold (recognized in other comprehensive income)			—				10,943				7,251				11,632
Net impairment losses on securities			—				(3,291	)			(2,288	)			(4,234	)
Service charges			14,250				14,760				42,634				42,955
Insurance commissions and fees			3,921				3,960				12,094				12,878
Securities commissions and fees			1,794				1,451				5,122				5,247
Trust fees			3,084				2,856				9,430				8,786
Gain on sale of securities			80				154				2,517				498
Gain on sale of residential mortgage loans			964				666				2,339				2,341
Bank owned life insurance			1,448				1,354				3,760				4,400
Other			2,213				1,835				10,864				7,331
Total Non-Interest Income			27,754				23,745				86,472				80,202
Non-Interest Expense
Salaries and employee benefits			33,831				31,377				100,348				95,096
Net occupancy			4,781				4,741				15,159				15,518
Equipment			4,486				4,517				13,625				13,288
Amortization of intangibles			1,675				1,732				5,041				5,360
Outside services			5,737				5,819				17,144				17,638
FDIC insurance			2,627				2,613				7,890				11,201
Other			11,110				11,522				33,567				31,457
Total Non-Interest Expense			64,247				62,321				192,774				189,558
Income Before Income Taxes			23,453				12,730				69,327				47,113
Income taxes			6,236				2,424				18,208				10,558
Net Income			17,217				10,306				51,119				36,555
Preferred stock dividends and discount amortization			—				5,496				—				8,308
Net Income Available to Common Stockholders		$	17,217			$	4,810			$	51,119			$	28,247

F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (continued)
Dollars in thousands, except per share data
Unaudited

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Net Income per Common Share
Basic		$	0.15			$	0.04			$	0.45			$	0.29
Diluted			0.15				0.04				0.45				0.29
Cash Dividends per Common Share			0.12				0.12				0.36				0.36

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Dollars in thousands, except per share data
Unaudited

		Compre-												Additional								Accumulated Other
		hensive				Preferred				Common				Paid-In				Retained				Comprehensive				Treasury
		Income				Stock				Stock				Capital				Earnings				Loss				Stock				Total
Balance at January 1, 2010						$	—			$	1,138			$	1,087,369			$	(12,833	)		$	(30,633	)		$	(1,739	)		$	1,043,302
Net income		$	51,119																51,119												51,119
Change in other comprehensive income, net of tax			7,152																				7,152								7,152
Comprehensive income		$	58,271
Common stock dividends ($0.36/share)																			(41,412	)											(41,412	)
Issuance of common stock											4				3,604												(778	)			2,830
Restricted stock compensation															2,060																2,060
Tax expense of stock-based compensation															(205	)															(205	)
Balance at September 30, 2010						$	—			$	1,142			$	1,092,828			$	(3,126	)		$	(23,481	)		$	(2,517	)		$	1,064,846
Balance at January 1, 2009						$	—			$	894			$	953,200			$	(1,143	)		$	(26,505	)		$	(462	)		$	925,984
Net income		$	36,555																36,555												36,555
Change in other comprehensive income, net of tax			(3,024	)																			(3,024	)							(3,024	)
Comprehensive income		$	33,531
Common stock dividends ($0.36/share)																			(35,312	)											(35,312	)
Preferred stock dividends and amortization of discount							4,975												(8,308	)											(3,333	)
Issuance of preferred stock and common stock warrant							95,025								4,723																99,748
Redemption of preferred stock							(100,000	)																							(100,000	)
Issuance of common stock											243				126,924												(1,290	)			125,877
Restricted stock compensation															1,689																1,689
Tax expense of stock-based compensation															(158	)															(158	)
Cumulative effect of applying FSP 115-2 and 124-2																			4,563												4,563
Balance at September 30, 2009						$	—			$	1,137			$	1,086,378			$	(3,645	)		$	(29,529	)		$	(1,752	)		$	1,052,589

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
Unaudited

		Nine Months Ended
		September 30,
		2010				2009
Operating Activities
Net income		$	51,119			$	36,555
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion			21,558				20,106
Provision for loan losses			36,516				40,878
Deferred taxes			(3,137	)			(19,388	)
Gain on sale of securities			(2,517	)			(498	)
Other-than-temporary impairment losses on securities			2,288				4,234
Tax expense of stock-based compensation			205				158
Net change in:
Interest receivable			275				2,166
Interest payable			(1,685	)			(2,741	)
Residential mortgage loans held for sale			(3,975	)			(8,355	)
Bank owned life insurance			(2,289	)			(53	)
Other, net			14,145				30,964
Net cash flows provided by operating activities			112,503				104,026
Investing Activities
Net change in loans			(204,584	)			(72,289	)
Securities available for sale:
Purchases			(335,865	)			(449,945	)
Sales			59,459				758
Maturities			259,191				235,469
Securities held to maturity:
Purchases			(278,089	)			(155,467	)
Maturities			181,662				194,762
Purchase of bank owned life insurance			(27	)			(8	)
Withdrawal/surrender of bank owned life insurance			360				13,700
Increase in premises and equipment			(5,305	)			(5,758	)
Acquisitions, net of cash acquired			—				47
Net cash flows used in investing activities			(323,198	)			(238,731	)
Financing Activities
Net change in:
Non-interest bearing deposits, savings and NOW accounts			235,883				309,293
Time deposits			(18,278	)			(105,133	)
Short-term borrowings			148,415				10,144
Increase in long-term debt			108,871				26,502
Decrease in long-term debt			(230,492	)			(137,495	)
Decrease in junior subordinated debt			(506	)			(506	)
Issuance of preferred stock and common stock warrant			—				99,748
Redemption of preferred stock			—				(100,000	)
Net proceeds from issuance of common stock			4,890				127,566
Tax expense of stock-based compensation			(205	)			(158	)
Cash dividends paid			(41,412	)			(38,645	)
Net cash flows provided by financing activities			207,166				191,316
Net (Decrease) Increase in Cash and Cash Equivalents			(3,529	)			56,611
Cash and cash equivalents at beginning of period			310,550				172,203
Cash and Cash Equivalents at End of Period		$	307,021			$	228,814

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

Dollars in thousands, except per share data
(Unaudited)
September 30, 2010

BUSINESS

          F.N.B. Corporation (the Corporation) is a diversified financial services company headquartered in Hermitage, Pennsylvania. Its primary businesses include community banking, consumer finance, wealth management and insurance. The Corporation also conducts leasing and merchant banking activities. The Corporation operates its community banking business through a full service branch network in Pennsylvania and Ohio. The Corporation operates its wealth management and insurance businesses within the existing branch network. It also conducts selected consumer finance business in Pennsylvania, Ohio and Tennessee.

BASIS OF PRESENTATION

          The Corporation’s accompanying consolidated financial statements and these notes to the financial statements include subsidiaries in which the Corporation has a controlling financial interest. The Corporation owns and operates First National Bank of Pennsylvania (FNBPA), First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, Regency Finance Company (Regency), F.N.B. Capital Corporation, LLC and Bank Capital Services, LLC, and includes results for each of these entities in the accompanying consolidated financial statements.

          The accompanying consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly reflect the Corporation’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. Events occurring subsequent to the date of the balance sheet have been evaluated for potential recognition or disclosure in the consolidated financial statements through the date of the filing of the consolidated financial statements with the Securities and Exchange Commission (SEC).

          Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the SEC. The interim operating results are not necessarily indicative of operating results the Corporation expects for the full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K filed with the SEC on February 26, 2010.

USE OF ESTIMATES

          The accounting and reporting policies of the Corporation conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Material estimates that are particularly susceptible to significant changes include the allowance for loan losses, securities valuations, goodwill and other intangible assets and income taxes.

CAPITAL

          On January 9, 2009, in conjunction with the U.S. Department of the Treasury (UST) Capital Purchase Program (CPP), the Corporation issued to the UST 100,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series C (Series C Preferred Stock) and a warrant to purchase up to 1,302,083 shares of the Corporation’s common stock for an aggregate purchase price of $100,000. The warrant has a ten-year term and an exercise price of $11.52 per share.

          On June 16, 2009, the Corporation completed a public offering of 24,150,000 shares of common stock at a price of $5.50 per share. The net proceeds of the offering after deducting underwriting discounts and commissions and offering expenses were $125,784. As a result of the completion of the public stock offering, the number of shares of the Corporation’s common stock purchasable upon exercise of the warrant issued to the UST was reduced in half to 651,042 shares and the exercise price was unchanged.

          On September 9, 2009, the Corporation utilized a portion of the proceeds of its public offering to redeem all of the Series C Preferred Stock issued to the UST under the CPP and to pay the related final accrued dividend. Since receiving the CPP funds on January 9, 2009, the Corporation paid the UST $3,333 in cash dividends. Upon redemption, the remaining difference of $4,319 between the Series C Preferred Stock redemption amount and the recorded amount of discount amortization was charged to retained earnings as non-cash deemed preferred stock dividends. The non-cash deemed preferred stock dividends had no impact on total equity, but reduced earnings per diluted common share by $0.04.

          The remaining offering proceeds were used for general corporate purposes and to enhance capital levels.

MERGERS AND ACQUISITIONS

Pending Acquisition

          On August 9, 2010, the Corporation announced the signing of a definitive merger agreement to acquire Comm Bancorp, Inc. (CBI), a bank holding company with approximately $641,765 in assets based in Clarks Summit, Pennsylvania. The transaction is valued at approximately $67,727. Under the terms of the merger agreement, CBI shareholders will be entitled to receive 3.4545 shares of F.N.B. Corporation common stock and $10.00 in cash for each share of CBI common stock. The transaction is expected to be completed in the fourth quarter of 2010, pending regulatory approvals, the approval of shareholders of CBI and the satisfaction of other closing conditions.

NEW ACCOUNTING STANDARDS

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses

          In July 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to provide financial statement users with greater transparency about credit quality of financing receivables and allowance for credit losses. This update requires additional disclosures as of the end of a reporting period and additional disclosures about activity that occurs during a reporting period that will assist financial statement users in assessing credit risk exposures and evaluating the adequacy of the allowance for credit losses.

          The additional disclosures are required to be provided on a disaggregated basis. ASU No. 2010-20 defines two levels of disaggregation and provides additional implementation guidance to determine the appropriate level of disaggregation of information. The disclosures should facilitate evaluation of the nature of the credit risk inherent in a portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses.

          The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The adoption of this standard is not anticipated to have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Modification of a Loan That is Part of a Pool That is Accounted for as a Single Asset

          In April 2010, the FASB issued ASU No. 2010-18, Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset. ASU No. 2010-18 provides that modifications of acquired loans with deteriorated credit quality that are accounted for within a pool do not result in removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled asset restructuring. ASU No. 2010-18 is effective for modifications occurring in the first interim or annual reporting period ending on or after July 15, 2010. The adoption of this standard did not have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Fair Value Disclosures

          In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements. The ASU clarifies existing disclosure requirements and requires additional disclosures regarding fair value measurements. This standard clarifies that an entity should provide fair value disclosures by class rather than major

category of assets and liabilities, resulting in a greater level of disaggregated information presented in all fair value disclosures. ASU 2010-06 also clarifies that, for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3), an entity is required to describe valuation techniques and the inputs used in determining the fair values of each class of assets and liabilities and to disclose a change in valuation technique and the reason for making that change. Additionally, the ASU requires an entity to discuss the reasons for transfers in or out of Level 3 and, if significant, to disclose these transfers on a gross basis, to disclose on a gross basis the amounts and reasons for significant transfers between Level 2 and Level 3 of the fair value hierarchy, and to disclose its policy for determining when transfers between Levels are recognized. This standard is effective for interim and annual reporting periods that begin after December 15, 2009. The adoption of this standard did not have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Transfers and Servicing of Financial Assets and Extinguishments of Liabilities

          In June 2009, the FASB issued an accounting standard which amends current GAAP related to the accounting for transfers and servicing of financial assets and extinguishments of liabilities, including the removal of the concept of a qualifying special-purpose entity from GAAP. This accounting standard also clarifies that a transferor must evaluate whether it has maintained effective control of a financial asset by considering its continuing involvement with the transferred financial asset. This accounting standard is effective for interim and annual reporting periods that begin after November 15, 2009. The adoption of this standard did not have a material effect on the financial condition, results of operations or liquidity of the Corporation.

Variable Interest Entities

          In June 2009, the FASB issued an accounting standard which requires a qualitative rather than a quantitative analysis to establish the primary beneficiary for determining whether the consolidation of a variable interest entity (VIE) is required. The primary beneficiary of a VIE is the enterprise that has: (a) the power to direct the activities of the VIE that most significantly impact its economic performance, and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits of the VIE that could potentially be significant to the VIE. This accounting standard is effective for interim and annual reporting periods that begin after November 15, 2009. The adoption of this standard did not have a material effect on the financial condition, results of operations or liquidity of the Corporation.

SECURITIES

          The amortized cost and fair value of securities are as follows:

Securities Available For Sale:

						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
September 30, 2010
U.S. Treasury and other U.S. government agencies and corporations		$	281,886			$	1,939			$	—			$	283,825
Residential mortgage-backed securities:
Agency mortgage-backed securities			215,623				6,428				—				222,051
Agency collateralized mortgage obligations			151,042				2,343				—				153,385
Non-agency collateralized mortgage obligations			39				1				—				40
States of the U.S. and political subdivisions			58,904				2,294				(13	)			61,185
Collateralized debt obligations			19,288				—				(14,125	)			5,163
Other debt securities			12,990				—				(1,840	)			11,150
Total debt securities			739,772				13,005				(15,978	)			736,799
Equity securities			1,918				220				(109	)			2,029
		$	741,690			$	13,225			$	(16,087	)		$	738,828

						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
December 31, 2009
U.S. Treasury and other U.S. government agencies and corporations		$	251,192			$	1,563			$	(299	)		$	252,456
Residential mortgage-backed securities:
Agency mortgage-backed securities			319,902				6,035				(166	)			325,771
Agency collateralized mortgage obligations			43,985				54				(531	)			43,508
Non-agency collateralized mortgage obligations			47				—				(2	)			45
States of the U.S. and political subdivisions			74,177				1,495				(89	)			75,583
Collateralized debt obligations			21,590				—				(16,766	)			4,824
Other debt securities			12,999				—				(2,569	)			10,430
Total debt securities			723,892				9,147				(20,422	)			712,617
Equity securities			2,656				224				(148	)			2,732
		$	726,548			$	9,371			$	(20,570	)		$	715,349

Securities Held To Maturity:

						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
September 30, 2010
U.S. Treasury and other U.S. government agencies and corporations		$	4,981			$	265			$	—			$	5,246
Residential mortgage-backed securities:
Agency mortgage-backed securities			655,652				29,518				(38	)			685,132
Agency collateralized mortgage obligations			45,390				722				—				46,112
Non-agency collateralized mortgage obligations			38,275				471				(919	)			37,827
States of the U.S. and political subdivisions			120,413				5,637				(138	)			125,912
Collateralized debt obligations			3,466				—				(714	)			2,752
Other debt securities			1,588				29				(9	)			1,608
		$	869,765			$	36,642			$	(1,818	)		$	904,589
December 31, 2009
U.S. Treasury and other U.S. government agencies and corporations		$	5,386			$	81			$	—			$	5,467
Residential mortgage-backed securities:
Agency mortgage-backed securities			566,876				23,141				(261	)			589,756
Agency collateralized mortgage obligations			27,263				406				—				27,669
Non-agency collateralized mortgage obligations			49,000				—				(3,245	)			45,755
States of the U.S. and political subdivisions			121,548				2,477				(399	)			123,626
Collateralized debt obligations			3,590				—				(812	)			2,778
Other debt securities			1,618				11				(143	)			1,486
		$	775,281			$	26,116			$	(4,860	)		$	796,537

          The Corporation classifies securities as trading securities when management intends to sell such securities in the near term. Such securities are carried at fair value, with unrealized gains (losses) reflected through the consolidated statement of income. As of September 30, 2010 and December 31, 2009, the Corporation did not hold any trading securities.

          The Corporation recognized a gain of $2,291 for the nine months ended September 30, 2010 relating to the sale of a $6,016 U.S. government agency security and $52,625 of mortgage backed securities. These securities were sold to better position the balance sheet for the remainder of 2010. Additionally, the Corporation recognized a gain of $226 for the nine months ended September 30, 2010 relating to other securities sold during that period. The Corporation recognized a gain of $206 for the nine months ended September 30, 2009 relating to the acquisition by a third party of a company in which the Corporation owned stock. Additionally, the Corporation recognized a gain of $292 for the nine

months ended September 30, 2009 relating to securities sold and called during that period. No security sales were at a loss.

          Gross gains and gross losses were realized on sales of securities as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Gross gains		$	80			$	154			$	2,517			$	498
Gross losses			—				—				—				—
		$	80			$	154			$	2,517			$	498

          As of September 30, 2010, the amortized cost and fair value of securities, by contractual maturities, were as follows:

		Available for Sale								Held to Maturity
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Due in one year or less		$	12,880			$	12,900			$	6,438			$	6,477
Due from one to five years			267,218				269,199				23,776				24,902
Due from five to ten years			17,178				17,722				16,405				17,270
Due after ten years			75,792				61,502				83,829				86,869
			373,068				361,323				130,448				135,518
Residential mortgage-backed securities:
Agency mortgage-backed securities			215,623				222,051				655,652				685,132
Agency collateralized mortgage obligations			151,042				153,385				45,390				46,112
Non-agency collateralized mortgage obligations			39				40				38,275				37,827
Equity securities			1,918				2,029				—				—
		$	741,690			$	738,828			$	869,765			$	904,589

          Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based on the payment patterns of the underlying collateral.

          At September 30, 2010 and December 31, 2009, securities with a carrying value of $746,674 and $598,078, respectively, were pledged to secure public deposits, trust deposits and for other purposes as required by law. Securities with a carrying value of $763,352 and $616,000 at September 30, 2010 and December 31, 2009, respectively, were pledged as collateral for short-term borrowings.

          Following are summaries of the fair values and unrealized losses of securities, segregated by length of impairment:

Securities available for sale:

		Less than 12 Months								Greater than 12 Months								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
September 30, 2010
States of the U.S. and political subdivisions		$	1,357			$	(13	)		$	—			$	—			$	1,357			$	(13	)
Collateralized debt obligations			—				—				5,163				(14,125	)			5,163				(14,125	)
Other debt securities			4,070				(18	)			7,080				(1,822	)			11,150				(1,840	)
Equity securities			268				(6	)			743				(103	)			1,011				(109	)
		$	5,695			$	(37	)		$	12,986			$	(16,050	)		$	18,681			$	(16,087	)

		Less than 12 Months								Greater than 12 Months								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
December 31, 2009
U.S. Treasury and other U.S. government agencies and corporations		$	46,501			$	(299	)		$	—			$	—			$	46,501			$	(299	)
Residential mortgage-backed securities:
Agency mortgage-backed securities			68,313				(166	)			—				—				68,313				(166	)
Agency collateralized mortgage obligations			29,516				(531	)			—				—				29,516				(531	)
Non-agency collateralized mortgage obligations			45				(2	)			—				—				45				(2	)
States of the U.S. and political subdivisions			12,357				(89	)			—				—				12,357				(89	)
Collateralized debt obligations			3,755				(12,023	)			1,069				(4,743	)			4,824				(16,766	)
Other debt securities			—				—				10,430				(2,569	)			10,430				(2,569	)
Equity securities			789				(99	)			721				(49	)			1,510				(148	)
		$	161,276			$	(13,209	)		$	12,220			$	(7,361	)		$	173,496			$	(20,570	)

Securities held to maturity:

		Less than 12 Months								Greater than 12 Months								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
September 30, 2010
Residential mortgage-backed securities:
Agency mortgage-backed securities		$	15,440			$	(38	)		$	—			$	—			$	15,440			$	(38	)
Non-agency collateralized mortgage obligations			—				—				11,736				(919	)			11,736				(919	)
States of the U.S. and political subdivisions			3,642				(53	)			2,451				(85	)			6,093				(138	)
Collateralized debt obligations			—				—				2,752				(714	)			2,752				(714	)
Other debt securities			—				—				1,322				(9	)			1,322				(9	)
		$	19,082			$	(91	)		$	18,261			$	(1,727	)		$	37,343			$	(1,818	)
December 31, 2009
Residential mortgage-backed securities:
Agency mortgage-backed securities		$	20,650			$	(261	)		$	—			$	—			$	20,650			$	(261	)
Non-agency collateralized mortgage obligations			15,534				(80	)			30,221				(3,165	)			45,755				(3,245	)
States of the U.S. and political subdivisions			13,055				(362	)			1,968				(37	)			15,023				(399	)
Collateralized debt obligations			—				—				2,778				(812	)			2,778				(812	)
Other debt securities			—				—				1,192				(143	)			1,192				(143	)
		$	49,239			$	(703	)		$	36,159			$	(4,157	)		$	85,398			$	(4,860	)

          As of September 30, 2010, securities with unrealized losses for less than 12 months include 1 investment in a residential mortgage-backed security, 5 investments in states of the U.S. and political subdivision securities, 1 investment in an other debt security and 2 investments in equity securities. Securities with unrealized losses of greater than 12 months include 2 investments in residential mortgage-backed securities (non-agency collateralized mortgage obligations (CMOs)),1 investment in states of the U.S. and political subdivisions, 13 investments in collateralized debt obligations (CDOs), 6 investments in other debt securities and 4 investments in equity securities. The unrealized losses relating to the residential mortgage-backed securities and states of the U.S. and political subdivisions are considered temporary resulting primarily from changes in interest rates.

          The Corporation’s unrealized losses on CDOs primarily relate to investments in trust preferred securities (TPS). The Corporation’s portfolio of TPS consists of single-issuer and pooled securities. The single-issuer securities are primarily from money-center and large regional banks. The pooled securities consist of securities issued primarily by banks, with some of the pools including a limited number of insurance companies. The non-credit portion of unrealized losses on investments in TPS is attributable to temporary illiquidity and the uncertainty affecting these markets, as well as changes in interest rates.

Other-Than-Temporary Impairment

          The Corporation evaluates its investment securities portfolio for other-than-temporary impairment (OTTI) on a quarterly basis. Impairment is assessed at the individual security level. The Corporation considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis.

          When impairment of an equity security is considered to be other-than-temporary, the security is written down to its fair value and an impairment loss is recorded as a loss within non-interest income in the consolidated statement of income. When impairment of a debt security is considered to be other-than-temporary, the amount of the OTTI recorded as a loss within non-interest income and thereby recognized in earnings depends on whether the Corporation intends to sell the security or whether it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis.

          If the Corporation intends to sell the debt security or if it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis, OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value.

          If the Corporation does not intend to sell the debt security and it is not more likely than not the Corporation will be required to sell the security before recovery of its amortized cost basis, OTTI shall be separated into the amount representing credit loss and the amount related to all other market factors. The amount related to credit loss shall be recognized in earnings. The amount related to other market factors shall be recognized in other comprehensive income, net of applicable taxes.

          The Corporation performs its OTTI evaluation process in a consistent and systematic manner and includes an evaluation of all available evidence. Documentation of the process is as extensive as necessary to support a conclusion as to whether a decline in fair value below cost or amortized cost is other-than-temporary and includes documentation supporting both observable and unobservable inputs and a rationale for the conclusions reached. In making these determinations for pooled TPS, the Corporation consults with third-party advisory firms to provide additional valuation assistance.

          This process considers factors such as the severity, length of time and anticipated recovery period of the impairment, recoveries or additional declines in fair value subsequent to the balance sheet date, recent events specific to the issuer, including investment downgrades by rating agencies and economic conditions of its industry, and the issuer’s financial condition, repayment capacity, capital strength and near-term prospects.

          For debt securities, the Corporation also considers the payment structure of the debt security, the likelihood of the issuer being able to make future payments, failure of the issuer of the security to make scheduled interest and principal payments, whether the Corporation has made a decision to sell the security and whether the Corporation’s cash or working capital requirements or contractual or regulatory obligations indicate that the debt security will be required to be sold before a forecasted recovery occurs. For equity securities, the Corporation also considers its intent and ability to retain the security for a period of time sufficient to allow for a recovery in fair value. Among the factors that are considered in determining the Corporation’s intent and ability to retain the security is a review of its capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in fair value, the ability of the issuer to meet contractual obligations, the Corporation’s intent and ability to retain the security, and whether it is more likely than not the Corporation will be required to sell the security before recovery of its amortized cost basis require considerable judgment.

          Debt securities with credit ratings below AA at the time of purchase that are repayment-sensitive securities are evaluated using the guidance of ASC Topic 325, Investments - Other. All other debt securities are required to be evaluated under ASC Topic 320, Investments – Debt Securities.

          The Corporation invested in TPS issued by special purpose vehicles (SPVs) which hold pools of collateral consisting of trust preferred and subordinated debt securities issued by banks, bank holding companies and insurance companies. The securities issued by the SPVs are generally segregated into several classes known as tranches. Typically, the structure includes senior, mezzanine and equity tranches. The equity tranche represents the first loss position. The Corporation generally holds interests in mezzanine tranches. Interest and principal collected from the collateral held by the SPVs are distributed with a priority that provides the highest level of protection to the senior-most

tranches. In order to provide a high level of protection to the senior tranches, cash flows are diverted to higher-level tranches if the principal and interest coverage tests are not met.

          The Corporation prices its holdings of TPS using Level 3 inputs in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, and guidance issued by the SEC. In this regard, the Corporation evaluates current available information in estimating the future cash flows of these securities and determines whether there have been favorable or adverse changes in estimated cash flows from the cash flows previously projected. The Corporation considers the structure and term of the pool and the financial condition of the underlying issuers. Specifically, the evaluation incorporates factors such as over-collateralization and interest coverage tests, interest rates and appropriate risk premiums, the timing and amount of interest and principal payments and the allocation of payments to the various tranches. Current estimates of cash flows are based on the most recent trustee reports, announcements of deferrals or defaults, and assumptions regarding expected future default rates, prepayment and recovery rates and other relevant information. In constructing these assumptions, the Corporation considers the following:

	•		that current defaults would have no recovery;
	•		that some individually analyzed deferrals will cure at rates varying from 10% to 90% after the deferral period ends;
	•		recent historical performance metrics, including profitability, capital ratios, loan charge-offs and loan reserve ratios, for the underlying institutions that would indicate a higher probability of default by the institution;
	•		that institutions identified as possessing a higher probability of default would recover at a rate of 10% for banks and 15% for insurance companies;
	•		that financial performance of the financial sector continues to be affected by the economic environment resulting in an expectation of additional deferrals and defaults in the future;
	•		whether the security is currently deferring interest; and
	•		the external rating of the security and recent changes to its external rating.

          The primary evidence utilized by the Corporation is the level of current deferrals and defaults, the level of excess subordination that allows for receipt of full principal and interest, the credit rating for each security and the likelihood that future deferrals and defaults will occur at a level that will fully erode the excess subordination based on an assessment of the underlying collateral. The Corporation combines the results of these factors considered in estimating the future cash flows of these securities to determine whether there has been an adverse change in estimated cash flows from the cash flows previously projected.

          The Corporation’s portfolio of trust preferred CDOs consists of 13 pooled issues and seven single issue securities. One of the pooled issues is a senior tranche; the remaining 12 are mezzanine tranches. At September 30, 2010, the 13 pooled TPS had an estimated fair value of $7,915 while the single-issuer TPS had an estimated fair value of $12,472. The Corporation has concluded from the analysis performed at September 30, 2010 that it is probable that the Corporation will collect all contractual principal and interest payments on all of its single-issuer and pooled TPS sufficient to recover the amortized cost basis of the securities.

          Upon adoption of ASC Topic 320, the Corporation determined that $7,021 of OTTI charges previously recorded were non-credit related. As such, a $4,564 (net of $2,457 of taxes) increase to retained earnings and a corresponding decrease to accumulated other comprehensive income were recorded as the cumulative effect of adopting ASC Topic 320 as of April 1, 2009.

          The Corporation recognized net impairment losses on securities of $2,288 and $4,234 for the nine months ended September 30, 2010 and 2009, respectively, due to the write-down of securities that the Corporation deemed to be other-than-temporarily impaired. Impairment losses related to bank stocks for the nine months ended September 30, 2010 and 2009 amounted to $7 and $665, respectively. For the nine months ended September 30, 2010, impairment losses on pooled TPS amounted to $9,539, which includes $7,251 ($4,713, net of tax) for non-credit related impairment

losses recognized directly in other comprehensive income and $2,288 of credit-related impairment losses recognized in earnings.

          The impairment losses on bank stocks relate to securities that were in an unrealized loss position for an extended period of time or the percentage of unrealized loss was such that management believes it would be unlikely to recover in the near term. In accordance with GAAP, management has deemed these impairments to be other-than-temporary given the low likelihood that they will recover in value in the foreseeable future. At September 30, 2010, the Corporation held 14 bank stocks with an adjusted cost basis of $1,892 and fair value of $2,002.

          At September 30, 2010, all 12 of the pooled trust preferred security investments on which OTTI has been recognized are classified as non-performing investments.

          The following table presents a summary of the cumulative credit-related OTTI charges recognized as components of earnings for securities for which a portion of an OTTI is recognized in other comprehensive income:

		September 30,				December 31,
		2010				2009
Beginning balance of the amount related to credit loss for which a portion of OTTI was recognized in other comprehensive income		$	(16,051	)		$	—
Amount of OTTI related to credit loss on April 1, 2009 (1)			—				(8,953	)
Additions related to credit loss for securities with previously recognized OTTI			(2,235	)			(2,315	)
Additions related to credit loss for securities with initial OTTI			(46	)			(4,783	)
Ending balance of the amount related to credit loss for which a portion of OTTI was recognized in other comprehensive income		$	(18,332	)		$	(16,051	)

          TPS continue to experience price volatility as the secondary market for such securities remains limited. Write-downs were based on the individual securities’ credit performance and its ability to make its contractual principal and interest payments. Should credit quality deteriorate to a greater extent than projected, it is possible that additional write-downs may be required. The Corporation monitors actual deferrals and defaults as well as expected future deferrals and defaults to determine if there is a high probability for expected losses and contractual shortfalls of interest or principal, which could warrant further impairment. The Corporation evaluates its entire portfolio each quarter to determine if additional write-downs are warranted.

          The following table provides information relating to the Corporation’s TPS as of September 30, 2010:

																														Actual				Actual				Projected
																										Number of				Defaults (as				Deferrals (as				Recovery
						Current																Lowest				Issuers				a percent of				a percent of				Rates on
						Par				Amortized				Fair				Unrealized				Credit				Currently				original				original				Current				Expected
Deal Name		Class				Value				Cost				Value				Loss				Ratings				Performing				collateral)				collateral)				Deferrals (1)				Defaults (2)
Pooled TPS:
P1			C1			$	5,500			$	2,266			$	858			$	(1,408	)			C				46				19	%			16	%			27	%			12	%
P2			C1				4,889				2,746				446				(2,300	)			C				42				14				18				32				14
P3			C1				5,561				4,218				1,138				(3,080	)			C				52				11				8				26				16
P4			C1				3,994				2,852				680				(2,172	)			C				53				15				10				36				16
P5		MEZ					483				358				172				(186	)			C				24				15				16				46				12
P6		MEZ					1,909				1,087				629				(458	)			C				23				17				14				10				13
P7			B3				2,000				726				259				(467	)			C				23				28				9				45				14
P8			B1				3,028				2,386				667				(1,719	)			C				51				12				23				34				15
P9			C				5,048				756				51				(705	)			C				36				13				29				28				14
P10 (3)			C				507				461				83				(378	)			C				51				13				12				29				13
P11			C				2,011				787				106				(681	)			C				46				14				14				21				14
P12			A4L				2,000				645				74				(571	)			C				27				16				19				35				17
Total OTTI							36,930				19,288				5,163				(14,125	)							474				15				15				30				14
P13 (3)		SNR					3,304				3,466				2,752				(714	)			A3				21				9				12				41				12
Total Not OTTI							3,304				3,466				2,752				(714	)							21				9				12				41				12
Total Pooled TPS						$	40,234			$	22,754			$	7,915			$	(14,839	)							495				15	%			15	%			31	%			14	%
Single Issuer TPS:
S1						$	2,000			$	1,946			$	1,410			$	(536	)		BB					1
S2							2,000				1,908				1,505				(403	)		BBB+					1
S3							2,000				2,050				1,860				(190	)			B+				1
S4							2,000				2,000				1,600				(400	)			B+				1
S5							4,000				4,087				4,070				(17	)		Baa2					1
S6							1,000				999				705				(294	)		BB					1
S7							1,300				1,331				1,322				(9	)		BB					1
Total Single Issuer TPS						$	14,300			$	14,321			$	12,472			$	(1,849	)							7
Total TPS						$	54,534			$	37,075			$	20,387			$	(16,688	)							502