5. INVESTMENT SECURITIES

A summary of our investment securities portfolio as of December 31, 2012 and 2011 is as follows:

			Gross		Gross			Estimated
	Amortized		unrealized		unrealized			fair
	cost		gains		losses			value
	(Dollars in thousands)
2012
Held to Maturity:
U.S. Government sponsored entities mortgage-backed securities	$	161,848	$	695	$	(15	)	$	162,528

Available for Sale:
U.S. Government sponsored entities debt securities	$	278,198	$	2,741	$	—		$	280,939
States and political subdivisions	184,274		2,831		(1,194		)	185,911
U.S. Government sponsored entities mortgage-backed securities	925,018		17,548		(1,523		)	941,043
Corporate securities	125,649		2,360		(63		)	127,946
Other	866		40		—			906
Total	$	1,514,005	$	25,520	$	(2,780	)	$	1,536,745

2011
Held to Maturity:
U.S. Government sponsored entities mortgage-backed securities	$	931	$	45	$	—		$	976

Available for Sale:
U.S. Government sponsored entities debt securities	$	370,184	$	2,993	$	—		$	373,177
States and political subdivisions	12,265		729		—			12,994
U.S. Government sponsored entities mortgage-backed securities	1,077,146		20,981		(825		)	1,097,302
Corporate securities	8,403		148		—			8,551
Other	985		—		(15		)	970
Total	$	1,468,983	$	24,851	$	(840	)	$	1,492,994

The amortized cost and estimated fair value of our investment securities at December 31, 2012 by contractual maturity are shown below. Actual maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2012
	Amortized		Estimated
	cost		fair value
	(Dollars in thousands)
Held to Maturity
Mortgage-backed securities	$	161,848	$	162,528
Available for Sale
Due in one year or less	$	170,435	$	170,933
Due after one year through five years	164,101		168,358
Due after five years through ten years	113,360		114,487
Due after ten years	140,225		141,018
Mortgage-backed securities	925,018		941,043
Other	866		906
Total	$	1,514,005	$	1,536,745

Proceeds from sales of investment securities available for sale were $130.1 million, $138.0 million and $439.4 million in 2012, 2011 and 2010, respectively, resulting in gross realized gains of $1.7 million, $1.4 million and $9.6 million in 2012, 2011 and 2010, respectively, and gross realized losses of $0.9 million, $0.1 million and $8.8 million in 2012, 2011 and 2010, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

In the third quarter of 2012, we completed an investment securities portfolio repositioning to reduce net interest income volatility and enhance the potential for prospective earnings and an improved net interest margin. In connection with the repositioning, we sold $124.7 million in available for sale mortgage-backed securities with an average net yield of 0.60% and a weighted average life of 1.3 years and reinvested the proceeds in $133.2 million of investment securities with an average yield of 1.88% and a weighted average life of 5.3 years. The new securities were classified in the held to maturity portfolio and a net gain of $0.7 million was realized on the transaction.

Investment securities of $905.5 million and $938.0 million at December 31, 2012 and 2011, respectively, were pledged to secure public funds on deposit, securities sold under agreements to repurchase and other long-term and short-term borrowings.

There were a total of 118 and nine securities in an unrealized loss position at December 31, 2012 and 2011, respectively. Provided below is a summary of investment securities which were in an unrealized loss position at December 31, 2012 and 2011:

	Less than 12 months					12 months or longer				Total
			Unrealized					Unrealized				Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
At December 31, 2012:
States and political subdivisions	$	73,128	$	(1,194	)	$	—	$	—	$	73,128	$	(1,194	)
U.S. Government sponsored entities mortgage-backed securities	206,981		(1,538		)	—		—		206,981		(1,538		)
Corporate securities	23,205		(63		)	—		—		23,205		(63		)
Total temporarily impaired securities	$	303,314	$	(2,795	)	$	—	$	—	$	303,314	$	(2,795	)

At December 31, 2011:
U.S. Government sponsored entities mortgage-backed securities	$	144,520	$	(825	)	$	—	$	—	$	144,520	$	(825	)
Other	970		(15		)	—		—		970		(15		)
Total temporarily impaired securities	$	145,490	$	(840	)	$	—	$	—	$	145,490	$	(840	)

The unrealized losses on the Company’s investment securities were caused by market conditions. Investment securities are evaluated on a quarterly basis, and include evaluating the changes in the investment securities’ ratings issued by rating agencies and changes in the financial condition of the issuer. Substantially all of these investment securities continue to be investment grade rated by one or more major rating agencies.

Other-than-temporary impairment (“OTTI”)

Unrealized losses for all investment securities are reviewed to determine whether the losses are “other-than-temporary.” Investment securities are evaluated for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary. In conducting this assessment, we evaluate a number of factors including, but not limited to:

· The length of time and the extent to which fair value has been less than the amortized cost basis;

· Adverse conditions specifically related to the security, an industry, or a geographic area;

· The historical and implied volatility of the fair value of the security;

· The payment structure of the debt security and the likelihood of the issuer being able to make payments;

· Failure of the issuer to make scheduled interest or principal payments;

· Any rating changes by a rating agency; and

· Recoveries or additional decline in fair value subsequent to the balance sheet date.

The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses.

The declines in market value were primarily attributable to changes in interest rates and disruptions in the credit and financial markets. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, we do not consider our investments to be other-than-temporarily impaired.