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

For the quarterly period ended    June 30, 2010

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

For the transition period from                      to                     

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 July 31, 2010
Common Stock, $0.01 Par Value		114,532,890 Shares

 

 

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

INDEX

		PAGE
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
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			57
Item 4. Controls and Procedures			57
PART II – OTHER INFORMATION
Item 1. Legal Proceedings			58
Item 1A. Risk Factors			58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 3. Defaults Upon Senior Securities			58
Item 5. Other Information			58
Item 6. Exhibits			59
Signatures			60
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

F.N.B. CORPORATION AND SUBSIDIARIES

Dollars in thousands, except par value

		June 30,				December 31,
		2010				2009
		(Unaudited)
Assets
Cash and due from banks		$	140,629			$	160,845
Interest bearing deposits with banks			60,238				149,705
Cash and Cash Equivalents			200,867				310,550
Securities available for sale			758,325				715,349
Securities held to maturity (fair value of $888,290 and $796,537)			853,698				775,281
Residential mortgage loans held for sale			7,232				12,754
Loans, net of unearned income of $39,574 and $38,173			5,967,570				5,849,361
Allowance for loan losses			(114,040	)			(104,655	)
Net Loans			5,853,530				5,744,706
Premises and equipment, net			115,323				117,921
Goodwill			528,720				528,710
Core deposit and other intangible assets, net			35,775				39,141
Bank owned life insurance			207,093				205,447
Other assets			272,497				259,218
Total Assets		$	8,833,060			$	8,709,077
Liabilities
Deposits:
Non-interest bearing demand		$	1,039,630			$	992,298
Savings and NOW			3,280,076				3,182,909
Certificates and other time deposits			2,214,952				2,205,016
Total Deposits			6,534,658				6,380,223
Other liabilities			94,749				86,797
Short-term borrowings			735,442				669,167
Long-term debt			205,834				324,877
Junior subordinated debt			204,373				204,711
Total Liabilities			7,775,056				7,665,775
Stockholders’ Equity
Common stock — $0.01 par value
Authorized – 500,000,000 shares
Issued – 114,684,308 and 114,214,951 shares			1,141				1,138
Additional paid-in capital			1,091,253				1,087,369
Retained earnings			(6,515	)			(12,833	)
Accumulated other comprehensive loss			(25,358	)			(30,633	)
Treasury stock – 151,418 and 103,256 shares at cost			(2,517	)			(1,739	)
Total Stockholders’ Equity			1,058,004				1,043,302
Total Liabilities and Stockholders’ Equity		$	8,833,060			$	8,709,077

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

Dollars in thousands, except per share data

Unaudited

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Interest Income
Loans, including fees		$	81,092			$	82,674			$	160,378			$	165,914
Securities:
Taxable			11,323				12,546				22,576				25,577
Nontaxable			1,819				1,659				3,710				3,428
Dividends			18				42				37				87
Other			109				113				206				130
Total Interest Income			94,361				97,034				186,907				195,136
Interest Expense
Deposits			16,776				22,533				34,330				46,772
Short-term borrowings			2,031				2,011				4,162				4,297
Long-term debt			2,091				4,564				4,637				9,412
Junior subordinated debt			1,982				2,594				3,892				5,241
Total Interest Expense			22,880				31,702				47,021				65,722
Net Interest Income			71,481				65,332				139,886				129,414
Provision for loan losses			12,239				13,909				24,203				24,423
Net Interest Income After Provision for Loan Losses			59,242				51,423				115,683				104,991
Non-Interest Income
Impairment losses on securities			(1,313	)			(1,429	)			(9,539	)			(1,632	)
Non-credit related losses on securities not expected to be sold (recognized in other comprehensive income)			711				689				7,251				689
Net impairment losses on securities			(602	)			(740	)			(2,288	)			(943	)
Service charges			14,662				14,596				28,384				28,195
Insurance commissions and fees			3,849				3,837				8,173				8,918
Securities commissions and fees			1,771				2,008				3,328				3,796
Trust fees			3,188				3,013				6,346				5,930
Gain on sale of securities			47				66				2,437				344
Gain on sale of residential mortgage loans			808				1,139				1,375				1,675
Bank owned life insurance			1,247				1,444				2,312				3,046
Other			3,473				3,087				8,651				5,668
Total Non-Interest Income			28,443				28,450				58,718				56,629
Non-Interest Expense
Salaries and employee benefits			33,392				31,617				66,517				63,719
Net occupancy			4,840				5,051				10,378				10,777
Equipment			4,606				4,406				9,139				8,771
Amortization of intangibles			1,679				1,813				3,366				3,628
Outside services			5,885				6,415				11,407				11,819
FDIC insurance			2,641				6,643				5,263				8,588
Other			10,041				10,320				22,457				19,935
Total Non-Interest Expense			63,084				66,265				128,527				127,237
Income Before Income Taxes			24,601				13,608				45,874				34,383
Income taxes			6,679				3,010				11,972				8,134
Net Income			17,922				10,598				33,902				26,249
Preferred stock dividends and discount amortization			—				1,469				—				2,812
Net Income Available to Common Stockholders		$	17,922			$	9,129			$	33,902			$	23,437

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net Income per Common Share
Basic		$	0.16			$	0.10			$	0.30			$	0.26
Diluted			0.16				0.10				0.30				0.26
Cash Dividends per Common Share			0.12				0.12				0.24				0.24

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

Dollars in thousands

Unaudited

																						Accumulated
		Compre-												Additional								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		$	33,902																33,902												33,902
Change in other comprehensive income, net of tax			5,275																				5,275								5,275
Comprehensive income		$	39,177
Common stock dividends ($0.24/share)																			(27,584	)											(27,584	)
Issuance of common stock											3				2,671												(778	)			1,896
Restricted stock compensation															1,418																1,418
Tax expense of stock-based compensation															(205	)															(205	)
Balance at June 30, 2010						$	—			$	1,141			$	1,091,253			$	(6,515	)		$	(25,358	)		$	(2,517	)		$	1,058,004
Balance at January 1, 2009						$	—			$	894			$	953,200			$	(1,143	)		$	(26,505	)		$	(462	)		$	925,984
Net income		$	26,249																26,249												26,249
Change in other comprehensive income, net of tax			(8,243	)																			(8,243	)							(8,243	)
Comprehensive income		$	18,006
Common stock dividends ($0.24/share)																			(21,595	)											(21,595	)
Preferred stock dividends and amortization of discount							437												(2,812	)											(2,375	)
Issuance of preferred stock and common stock warrant							95,025								4,723																99,748
Issuance of common stock											243				126,745												(1,151	)			125,837
Restricted stock compensation															1,137																1,137
Tax expense of stock-based compensation															(158	)															(158	)
Cumulative effect of applying FSP 115-2 and 124-2																			4,563												4,563
Balance at June 30, 2009						$	95,462			$	1,137			$	1,085,647			$	5,262			$	(34,748	)		$	(1,613	)		$	1,151,147

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

Dollars in thousands

Unaudited

		Six Months Ended
		June 30,
		2010				2009
Operating Activities
Net income		$	33,902			$	26,249
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion			15,238				14,340
Provision for loan losses			24,203				24,423
Deferred taxes			(1,457	)			(11,570	)
Gain on sale of securities			(2,437	)			(344	)
Other-than-temporary impairment losses on securities			2,288				943
Tax expense of stock-based compensation			205				158
Net change in:
Interest receivable			866				1,625
Interest payable			(923	)			(1,380	)
Residential mortgage loans held for sale			5,522				(15,999	)
Bank owned life insurance			(1,624	)			(453	)
Other, net			4,735				18,084
Net cash flows provided by operating activities			80,518				56,076
Investing Activities
Net change in:
Federal funds sold			—				—
Loans			(145,861	)			10,343
Securities available for sale:
Purchases			(261,012	)			(334,496	)
Sales			59,455				272
Maturities			163,233				172,741
Securities held to maturity:
Purchases			(195,733	)			(53,066	)
Maturities			116,277				129,873
Purchase of bank owned life insurance			(22	)			(8	)
Withdrawal/surrender of bank owned life insurance			—				13,700
Increase in premises and equipment			(3,393	)			(4,375	)
Acquisitions, net of cash acquired			—				11
Net cash flows used in investing activities			(267,056	)			(65,005	)
Financing Activities
Net change in:
Non-interest bearing deposits, savings and NOW accounts			144,500				289,849
Time deposits			9,936				(55,779	)
Short-term borrowings			66,275				(55,690	)
Increase in long-term debt			64,795				16,596
Decrease in long-term debt			(183,838	)			(70,251	)
Decrease in junior subordinated debt			(338	)			(338	)
Issuance of preferred stock and common stock warrant			—				99,748
Net proceeds from issuance of common stock			3,314				131,198
Tax expense of stock-based compensation			(205	)			(158	)
Cash dividends paid			(27,584	)			(23,970	)
Net cash flows provided by financing activities			76,855				331,205
Net Increase in Cash and Cash Equivalents			(109,683	)			322,276
Cash and cash equivalents at beginning of period			310,550				172,203
Cash and Cash Equivalents at End of Period		$	200,867			$	494,479

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

June 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 $100.0 million. 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 $125.8 million. 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 has been 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 $3.3 million in cash dividends. Upon redemption, the remaining difference of $4.3 million between the Series C Preferred Stock redemption amount and the recorded amount 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.

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 is not anticipated to 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.

Accounting Standards Codification (the Codification or ASC)

          In June 2009, the FASB issued an accounting standard which established the Codification as the sole source of authoritative GAAP recognized by the FASB to be applied to nongovernmental entities, with the exception of guidance issued by the SEC and its staff. Adoption of this standard as of September 30, 2009 had no impact on the Corporation’s consolidated financial position or results of operations as it does not alter existing GAAP.

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 (in thousands):

Securities Available For Sale:

						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
June 30, 2010
U.S. Treasury and other U.S. government agencies and corporations		$	285,273			$	2,147			$	—			$	287,420
Residential mortgage-backed securities:
Agency mortgage-backed securities			235,085				6,013				—				241,098
Agency collateralized mortgage obligations			148,090				1,182				(367	)			148,905
Non-agency collateralized mortgage obligations			40				1				—				41
States of the U.S. and political subdivisions			60,897				1,927				(4	)			62,820
Collateralized debt obligations			19,288				—				(14,627	)			4,661
Other debt securities			12,994				174				(1,868	)			11,300
Total debt securities			761,667				11,444				(16,866	)			756,245
Equity securities			1,921				240				(81	)			2,080
		$	763,588			$	11,684			$	(16,947	)		$	758,325

						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
June 30, 2010
U.S. Treasury and other U.S. government agencies and corporations		$	5,033			$	198			$	—			$	5,231
Residential mortgage-backed securities:
Agency mortgage-backed securities			644,967				32,981				—				677,948
Agency collateralized mortgage obligations			38,192				540				—				38,732
Non-agency collateralized mortgage obligations			42,013				205				(1,615	)			40,603
States of the U.S. and political subdivisions			118,413				3,296				(271	)			121,438
Collateralized debt obligations			3,477				—				(747	)			2,730
Other debt securities			1,603				22				(17	)			1,608
		$	853,698			$	37,242			$	(2,650	)		$	888,290
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 resell such securities in the near term and are carried at fair value, with unrealized gains (losses) reflected through the consolidated statement of income. As of June 30, 2010 and December 31, 2009, the Corporation did not hold any trading securities.

          The Corporation recognized a gain of $2.3 million for the six months ended June 30, 2010 relating to the sale of a $6.0 million U.S. government agency security and $53.8 million 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 $0.1 million for the six months ended June 30, 2010 relating to other securities sold during the first half of 2010. The Corporation recognized a gain of $0.2 million for the six months ended June 30, 2009 relating to the acquisition of a company in which the Corporation owned stock. Also, the Corporation sold $0.2 million of securities at a gain of $0.1 million for the six months ended June 30, 2009. No security sales were at a loss.

Gross gains and gross losses were realized on sales of securities as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Gross gains		$	47			$	66			$	2,437			$	344
Gross losses			—				—				—				—
		$	47			$	66			$	2,437			$	344

          As of June 30, 2010, the amortized cost and fair value of securities, by contractual maturities, were as follows (in thousands):

		Available for Sale								Held to Maturity
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Due in one year or less		$	12,969			$	12,989			$	6,916			$	6,977
Due from one to five years			269,737				271,981				22,944				23,914
Due from five to ten years			18,148				18,827				22,041				22,696
Due after ten years			77,598				62,404				76,625				77,420
			378,452				366,201				128,526				131,007
Residential mortgage-backed securities:
Agency mortgage-backed securities			235,085				241,098				644,967				677,948
Agency collateralized mortgage obligations			148,090				148,905				38,192				38,732
Non-agency collateralized mortgage obligations			40				41				42,013				40,603
Equity securities			1,921				2,080				—				—
		$	763,588			$	758,325			$	853,698			$	888,290

          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 June 30, 2010 and December 31, 2009, securities with a carrying value of $651.5 million and $598.1 million, respectively, were pledged to secure public deposits, trust deposits and for other purposes as required by law. Securities with a carrying value of $686.2 million and $616.0 million at June 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 (in thousands):

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
June 30, 2010
Residential mortgage-backed securities:
Agency collateralized mortgage obligations		$	14,612			$	(367	)		$	—			$	—			$	14,612			$	(367	)
States of the U.S. and political subdivisions			—				—				1,190				(4	)			1,190				(4	)
Collateralized debt obligations			—				—				4,661				(14,627	)			4,661				(14,627	)
Other debt securities			—				—				7,035				(1,868	)			7,035				(1,868	)
Equity securities			153				(42	)			704				(39	)			857				(81	)
		$	14,765			$	(409	)		$	13,590			$	(16,538	)		$	28,355			$	(16,947	)

		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
June 30, 2010
Residential mortgage-backed securities:
Non-agency collateralized mortgage obligations		$	8,036			$	(240	)		$	14,405			$	(1,375	)		$	22,441			$	(1,615	)
States of the U.S. and political subdivisions			9,025				(267	)			2,001				(4	)			11,026				(271	)
Collateralized debt obligations			—				—				2,730				(747	)			2,730				(747	)
Other debt securities			—				—				1,316				(17	)			1,316				(17	)
		$	17,061			$	(507	)		$	20,452			$	(2,143	)		$	37,513			$	(2,650	)
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 June 30, 2010, securities with unrealized losses for less than 12 months include 3 investments in residential mortgage-backed securities (1 investment in agency collateralized mortgage obligations (CMOs) and 2 investments in non-agency CMOs), 5 investments in states of the U.S. and political subdivision securities and 4 investments in equity securities. Securities with unrealized losses of greater than 12 months include 3 investments in residential mortgage-backed securities (non-agency CMOs), 4 investments in states of the U.S. and political subdivisions, 13 investments in collateralized debt obligations (CDOs), 6 investments in other debt securities and 2 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 entity intends to sell the security or whether it is more likely than not that the entity 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 a 50% rate after five years, while others are expected to exhibit minimal recovery;
	•		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 June 30, 2010, the 13 pooled TPS had an estimated fair value of $7.4 million while the single-issuer TPS had an estimated fair value of $12.6 million. The Corporation has concluded from the analysis performed at June 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, except for those on which OTTI was recognized.

          Upon adoption of ASC Topic 320, the Corporation determined that $7.0 million of OTTI charges previously recorded were non-credit related. As such, a $4.6 million (net of $2.4 million 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 $2.3 million and $0.9 million for the six months ended June 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 six months ended June 30, 2009 amounted to $0.6 million. The Corporation did not recognize any material impairment losses related to bank stocks for the six months ended June 30, 2010. For the six months ended June 30, 2010, impairment losses on pooled

TPS amounted to $9.5 million, which includes $7.2 million ($4.7 million, net of tax) for non-credit related impairment losses recognized directly in other comprehensive income and $2.3 million of credit-related impairment losses recognized in earnings.

          The $0.6 million in impairment losses on bank stocks during the first six months of 2009 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 June 30, 2010, the Corporation held 15 bank stocks with an adjusted cost basis of $1.9 million and fair value of $2.1 million.

          At June 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 (in thousands):

		June 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 June 30, 2010 (dollars in thousands):

																										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			$	535			$	(1,731	)		C			47				19	%			14	%			29	%			13	%
P2		C1			4,889				2,746				446				(2,300	)		C			44				14				16				35				15
P3		C1			5,561				4,218				1,158				(3,060	)		C			55				11				7				15				16
P4		C1			3,994				2,852				552				(2,300	)		C			53				14				11				28				16
P5		MEZ			483				358				219				(139	)		C			26				15				8				58				13
P6		MEZ			1,909				1,087				530				(557	)		C			24				17				14				38				12
P7		B3			2,000				726				208				(518	)		C			23				28				9				60				14
P8		B1			3,028				2,386				658				(1,728	)		C			55				12				15				28				16
P9		C			5,048				756				45				(711	)		C			39				13				22				21				15
P10		C			507				461				75				(386	)		C			53				12				11				24				14
P11		C			2,011				787				163				(624	)		C			49				14				13				16				14
P12		A4L			2,000				645				72				(573	)		C			28				13				20				32				16
Total OTTI					36,930				19,288				4,661				(14,627	)					496				15				13				29				15
P13 (3)		SNR			3,304				3,477				2,730				(747	)		A3			21				7				14				37				13
Total Not OTTI					3,304				3,477				2,730				(747	)					21				7				14				37				13
Total Pooled TPS				$	40,234			$	22,765			$	7,391			$	(15,374	)					517				14	%			13	%			29	%			15	%
Single Issuer TPS:
S1				$	2,000			$	1,945			$	1,368			$	(577	)		BB			1
S2					2,000				1,906				1,455				(451	)		BBB+			1
S3					2,000				2,053				1,931				(122	)		B+			1
S4					2,000				2,000				1,559				(441	)		B+			1
S5					4,000				4,091				4,265				174			Baa2			1
S6					1,000				999				722				(277	)		BB			1
S7					1,300				1,333				1,316				(17	)		BB			1
Total Single Issuer TPS				$	14,300			$	14,327			$	12,616			$	(1,711	)					7
Total TPS				$	54,534			$	37,092			$	20,007			$	(17,085	)					524