Securities Available for Sale

6 Months Ended

Jun. 30, 2011

Securities Available for Sale

Securities Available for Sale

Note 7 - Securities Available For Sale

The Company's securities available for sale consist of auction-rate securities, which represent interests in pools of student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and a structured finance security. The structured finance security has an attached credit default swap under which the principal value would be partially or fully forfeited at net default rates on the underlying corporate debt obligations ranging from 8% to 9%. The actual net default rate as of June 30, 2011 was 4.89%. Both the structured finance security and the credit default swap are collateralized by investment grade credit-linked notes made up of floating rate international bank notes or credit card receivable notes.

In the second quarter of 2011, the issuer of one of the Company's student loan auction rate securities redeemed its security at par value of $4.6 million. In connection with the redemption, $0.4 million of cumulative unrealized losses, and the corresponding tax impact of $0.1 million, were eliminated from other comprehensive income.

Due to liquidity issues in the auction rate securities market, there was insufficient observable market data to determine the fair value of the Company's auction rate securities as of June 30, 2011 or December 31, 2010. Therefore, their fair value was estimated by an independent valuation firm, Houlihan Capital Advisors, LLC, using a probability-weighted discounted cash flow model. This valuation is sensitive to market conditions and management's judgment and can change significantly based on the assumptions used. The following tables set forth the fair value of the Company's auction rate securities by type of security and underlying credit rating as of June 30, 2011 and December 31, 2010 (in millions):

As of June 30, 2011	Underlying Credit Rating (1)
	AAA		CCC		Total
Student loans	$	12.1	$	—	$	12.1
Structured finance securities		—		2.3		2.3
Total auction rate securities	$	12.1	$	2.3	$	14.4
As of December 31, 2010	Underlying Credit Rating (1)
	A3/A-		CCC		Total
Student loans	$	16.4	$	—	$	16.4
Structured finance securities		—		2.6		2.6
Total auction rate securities	$	16.4	$	2.6	$	19.0

(1) The Company's auction rate securities maintain split ratings. For purposes of this table, securities are categorized according to their lowest rating.

As of June 30, 2011, the yields on the Company's auction-rate securities ranged from 1.47% to 2.45%. These yields represent the predetermined "maximum" reset rates that occur upon auction failures according to the specific terms within each security's prospectus. The issuers have been making interest payments when due. As of June 30, 2011, the weighted average yield for the Company's auction rate securities was 1.86%.

Auction Rate Securities – Changes in Fair Value

Management evaluates whether unrealized losses on investments in securities are other-than-temporary, and if believed to be other-than-temporary, an impairment charge is recorded. There were no other-than-temporary impairment losses recognized for the three or six months ended June 30, 2011. For the three months and six months ended June 30, 2010, the Company recognized $0.4 million of other-than-temporary impairment losses in earnings, with a corresponding reduction in cost basis, associated with its investment in structured finance auction rate securities.

Structured Finance Auction Rate Securities

In the fourth quarter of 2009, the Company deemed its structured finance auction rate securities to be other-than-temporarily impaired due to ratings agency downgrades of the corresponding securities. During 2010, the Company sold two of its three structured finance auction rate securities. The Company's remaining structured finance security had a par value of $5.0 million and a cost basis of $2.3 million as of June 30, 2011. Cumulative credit and other losses of $2.7 million have been recognized in prior years in connection with this security. Following the sale of two of the Company's structured finance securities in the fourth quarter of 2010, management determined that the Company no longer met the criteria for intent to hold with respect to its remaining structured finance security. Accordingly, further declines in this security's cost basis will be recognized in earnings, whereas increases will be recorded in other comprehensive income, net of applicable taxes. As of June 30, 2011, this security's cost basis approximated its carrying value. As of December 31, 2010, cumulative gross unrealized gains in other comprehensive income associated with this security totaled $0.3 million, or $0.2 million, net of applicable income taxes.

Student Loan Auction Rate Securities

Cumulative gross unrealized losses on the Company's student loan auction rate securities, which are included as a component of other comprehensive income, total $0.8 million, or $0.5 million, net of applicable income taxes as of June 30, 2011, and $1.1 million, or $0.7 million, net of applicable income taxes as of December 31, 2010.

Auction Rate Securities – Reconciliation of Cost Basis to Fair Value

The cost basis, gross cumulative unrealized (losses) gains and estimated fair values of the Company's auction rate securities for the periods indicated are as follows (in millions):

	June 30, 2011
	Adjusted Cost Basis  (1)		Gross  Cumulative Unrealized (Losses)/Gains			Fair Value
Auction rate securities – student loans	$	12.9	$	(0.8	)	$	12.1
Auction rate securities – structured finance securities		2.3		—			2.3
Total auction rate securities	$	15.2	$	(0.8	)	$	14.4
	December 31, 2010
	Adjusted Cost Basis (1)		Gross Cumulative Unrealized (Losses)/Gains			Fair Value
Auction rate securities – student loans	$	17.5	$	(1.1	)	$	16.4
Auction rate securities – structured finance securities		2.3		0.3			2.6
Total auction rate securities	$	19.8	$	(0.8	)	$	19.0

(1) Adjusted cost basis reflects adjustments for credit and other losses recognized in earnings. Cumulative adjustments to cost basis on securities held as of both June 30, 2011 and December 31, 2010 totaled $2.7 million. Par value of securities held as of June 30, 2011 was $17.9 million and as of December 31, 2010 was $22.5 million.

As of June 30, 2011, contractual maturities of the Company's student loan auction rate securities range from 17 to 36 years, and for the structured finance security, 6 years.