(3)

Securities Available-for-Sale

The following is a comparative summary of mortgage-backed securities and other securities available-for-sale at December 31, 2012 and 2011 (in thousands):


	2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises (GSEs)	$	456,441	$	22,996	$	99	$	479,338
Real estate mortgage investment conduits (REMICs):
GSEs		694,087		7,092		62		701,117
Non-GSEs		7,543		266		33		7,776

		1,158,071		30,354		194		1,188,231

Other securities:
Equity investments-mutual funds		12,998		—		—		12,998
Corporate bonds		73,708		694		—		74,402

		86,706		694		—		87,400

Total securities available-for-sale	$	1,244,777	$	31,048	$	194	$	1,275,631


	2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises (GSEs)	$	490,184	$	24,709	$	—	$	514,893
Non-GSEs		8,770		—		1,255		7,515
Real estate mortgage investment conduits (REMICs):
GSEs		426,362		4,662		135		430,889
Non-GSEs		31,114		1,859		37		32,936

		956,430		31,230		1,427		986,233

Other securities:
Equity investments-mutual funds		11,787		48		—		11,835
Corporate bonds		100,922		358		623		100,657

		112,709		406		623		112,492

Total securities available-for-sale	$	1,069,139	$	31,636	$	2,050	$	1,098,725

The following is a summary of the expected maturity distribution of debt securities available-for-sale other than mortgage-backed securities at December 31, 2012 (in thousands):


Available-for-sale	Amortized Cost		Estimated Fair Value
Due in one year or less	$	35,037		$	35,085
Due after one year through five years		38,670			39,317

	$	73,707		$	74,402

Expected maturities on mortgage-backed securities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.

Certain securities available-for-sale are pledged to secure borrowings under Pledge Agreements and Repurchase Agreements and for other purposes required by law. At December 31, 2012, and December 31, 2011, securities available-for-sale with a carrying value of $14.3 million and $4.0 million, respectively, were pledged to secure deposits. See Note 8 for further discussion regarding securities pledged for borrowings.

For the year ended December 31, 2012, the Company had gross proceeds of $207.7 million on sales of securities available-for-sale with gross realized gains and gross realized losses of approximately $3.0 million and $490,000, respectively. For the year ended December 31, 2011, the Company had gross proceeds of $182.7 million on sales of securities available-for-sale with gross realized gains and gross realized losses of approximately $2.9 million and $177,000, respectively. For the year ended December 31, 2010, the Company had gross proceeds of $221.1 million on sales of securities available-for-sale with gross realized gains and gross realized losses of approximately $1.3 million and $4,000, respectively. The Company routinely sells securities when market pricing presents, in management’s assessment, an economic benefit that outweighs holding such security, and when smaller balance securities become cost prohibitive to carry.

The Company recognized in earnings other-than-temporary impairment charges of $24,000 during the year ended December 31, 2012, related to one equity investment in a mutual fund. The Company recognized other-than-temporary impairment charges of $1.2 million during the year ended December 31, 2011, related to one equity investment in a mutual fund and two private label mortgage-backed securities. The Company recognized the credit component of $409,000 in earnings and the non-credit component of $743,000 as a component of accumulated other comprehensive income, net of tax. The Company recognized other-than-temporary impairment charges of $962,000 during the year ended December 31, 2010, related to one private label mortgage-backed security. The Company recognized the credit component of $154,000 in earnings and the non-credit component of $808,000 as a part of accumulated other comprehensive income, net of tax.

The following is a rollforward of 2012, 2011, and 2010 activity related to the credit component of other-than-temporary impairment recognized on debt securities in pre-tax earnings, for which a portion of other-than-temporary impairment was recognized in accumulated other comprehensive income (in thousands):


	2012			2011		2010
Balance, beginning of year	$	578		$	330	$	176
Additions to the credit component on debt securities in which other-than-temporary impairment was not previously recognized		—			248		154
Reductions due to sales		(578	)		—		—

Cumulative pre-tax credit losses, end of year	$	—		$	578	$	330

Gross unrealized losses on mortgage-backed securities, equity securities, agency bonds, and corporate bonds available-for-sale, and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2012 and 2011, were as follows (in thousands):


	December 31, 2012
	Less than 12 months				12 months or more				Total
	Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value
Mortgage-backed securities:
Pass-through certificates:
GSEs	$	99	$	14,156	$	—	$	—	$	99	$	14,156
Real estate mortgage investment conduits (REMICs):
GSEs		58		100,310		4		7,633		62		107,943
Non-GSEs		—		—		33		604		33		604

Total	$	157	$	114,466	$	37	$	8,237	$	194	$	122,703


	December 31, 2011
	Less than 12 months				12 months or more				Total
	Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value
Mortgage-backed securities:
Pass-through certificates:
Non-GSEs	$	307	$	2,513	$	948	$	5,002	$	1,255	$	7,515
Real estate mortgage investment conduits (REMICs):
GSEs		135		54,475		—		—		135		54,475
Non-GSEs		—		—		37		842		37		842
Corporate bonds		113		27,523		510		13,132		623		40,655

Total	$	555	$	84,511	$	1,495	$	18,976	$	2,050	$	103,487

During the year ended December 31, 2012 the Company sold two pass-through non-GSE mortgage-backed securities issued by private companies (private label) that were rated less than investment grade at a combined loss of $490,000. As a result of management’s evaluation of these securities, the Company did not recognize any other-than-temporary impairment on these securities during the year ended December 31, 2012. These securities are included in the above available-for-sale security amounts at December 31, 2011.

The Company held one REMIC non-GSE and one REMIC GSE mortgage-backed securities that were in a continuous unrealized loss position of greater than twelve months, seventy two pass-through GSE mortgage-backed securities, and nine REMIC mortgage-backed securities issued or guaranteed by GSEs, that were in an unrealized loss position of less than twelve months, and rated investment grade at December 31, 2012. The declines in value relate to the general interest rate environment and are considered temporary. The securities cannot be prepaid in a manner that would result in the Company not receiving substantially all of its amortized cost. The Company neither has an intent to sell, nor is it more likely than not that the Company will be required to sell, the securities before the recovery of their amortized cost basis or, if necessary, maturity.

The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the collateralized mortgage obligations or other securities deteriorates and our credit enhancement levels do not provide sufficient protections to our contractual principal and interest. As a result, there is a risk that significant other-than-temporary impairments may occur in the future given the current economic environment.