INVESTMENTS IN DEBT AND EQUITY SECURITIES

Securities Available for Sale. The amortized cost, contractual maturity, gross unrealized gains and losses and fair value of investment securities available for sale at September 30, 2013 and December 31, 2012 were as follows:



	Maturity									Total Amortized Cost	Gross				Weighted Average Yield
	1 Year			1-5		5-10		After			Unrealized			Fair
	or Less			Years		Years		10 Years			Gains	Losses		Value
	(dollars expressed in thousands)
September 30, 2013:
Carrying value:
U.S. Government sponsored agencies	$	—		48,784		88,769		136,582		274,135	3,067	(1,168	)	276,034	1.36	%
Residential mortgage-backed	—			23,581		138,415		933,135		1,095,131	17,245	(14,147	)	1,098,229	2.44
Commercial mortgage-backed	—			—		796		—		796	72	—		868	5.03
State and political subdivisions	1,042			3,060		201		28,448		32,751	98	(588	)	32,261	1.35
Corporate notes	4,960			140,342		45,133		—		190,435	5,350	(346	)	195,439	2.76
Equity investments	—			—		—		1,500		1,500	—	(44	)	1,456	2.19
Total	$	6,002		215,767		273,314		1,099,665		1,594,748	25,832	(16,293	)	1,604,287	2.27
Fair value:
Debt securities	$	6,064		222,057		273,224		1,101,486
Equity securities	—			—		—		1,456
Total	$	6,064		222,057		273,224		1,102,942

Weighted average yield	3.05		%	2.24	%	1.92	%	2.36	%

December 31, 2012:
Carrying value:
U.S. Government sponsored agencies	$	10,051		80,328		—		213,892		304,271	6,304	(146	)	310,429	1.42	%
Residential mortgage-backed	364			24,014		219,286		1,251,917		1,495,581	38,983	(497	)	1,534,067	2.32
Commercial mortgage-backed	—			—		806		—		806	109	—		915	4.86
State and political subdivisions	985			3,579		201		—		4,765	164	—		4,929	4.05
Corporate notes	—			137,090		49,704		—		186,794	6,192	(621	)	192,365	3.13
Equity investments	—			—		—		1,000		1,000	22	—		1,022	2.54
Total	$	11,400		245,011		269,997		1,466,809		1,993,217	51,774	(1,264	)	2,043,727	2.26
Fair value:
Debt securities	$	11,476		251,558		275,251		1,504,420
Equity securities	—			—		—		1,022
Total	$	11,476		251,558		275,251		1,505,442

Weighted average yield	2.01		%	2.17	%	2.65	%	2.21	%

Securities Held to Maturity. The amortized cost, contractual maturity, gross unrealized gains and losses and fair value of investment securities held to maturity at September 30, 2013 and December 31, 2012 were as follows:



	Maturity									Total Amortized Cost	Gross				Weighted Average Yield
	1 Year			1-5		5-10		After			Unrealized			Fair
	or Less			Years		Years		10 Years			Gains	Losses		Value
	(dollars expressed in thousands)
September 30, 2013:
Carrying value:
U.S. Government sponsored agencies	$	—		—		18,665		—		18,665	—	(164	)	18,501	1.37	%
Residential mortgage-backed	—			17,167		186,341		538,970		742,478	679	(16,295	)	726,862	1.93
State and political subdivisions	1,021			1,019		55		1,066		3,161	8	(54	)	3,115	2.07
Total	$	1,021		18,186		205,061		540,036		764,304	687	(16,513	)	748,478	1.92
Fair value:
Debt securities	$	1,026		17,903		201,942		527,607

Weighted average yield	2.91		%	2.08	%	1.57	%	2.04	%

December 31, 2012:
Carrying value:
U.S. Government sponsored agencies	$	—		—		52,582		—		52,582	269	—		52,851	1.63	%
Residential mortgage-backed	—			—		108,420		466,863		575,283	6,142	(614	)	580,811	1.82
State and political subdivisions	826			1,099		252		1,511		3,688	51	(377	)	3,362	1.89
Total	$	826		1,099		161,254		468,374		631,553	6,462	(991	)	637,024	1.80
Fair value:
Debt securities	$	836		1,129		164,433		470,626

Weighted average yield	2.56		%	3.40	%	1.77	%	1.81	%

Proceeds from sales of available-for-sale investment securities were $25.1 million and $143.7 million for the three and nine months ended September 30, 2013, respectively, compared to $107.6 million and $315.2 million for the comparable periods in 2012. Gross realized gains and gross realized losses on investment securities for the three and nine months ended September 30, 2013 and 2012 were as follows:



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2013			2012		2013		2012
	(dollars expressed in thousands)
Gross realized gains on sales of available-for-sale securities	$	110		790		802		1,682
Gross realized losses on sales of available-for-sale securities	—			—		(354	)	(374	)
Other-than-temporary impairment	(2		)	(1	)	(411	)	(2	)
Net realized gain on investment securities	$	108		789		37		1,306

Other-than-temporary impairment for the nine months ended September 30, 2013 includes impairment of $407,000 recorded during the first quarter of 2013 on a municipal investment security classified as held-to-maturity. Investment securities with a carrying value of $314.8 million and $257.6 million at September 30, 2013 and December 31, 2012, respectively, were pledged in connection with deposits of public and trust funds, securities sold under agreements to repurchase and for other purposes as required by law.

During the first quarter of 2013, the Company reclassified certain of its available-for-sale investment securities to held-to-maturity investment securities at their respective fair values, which totaled $242.5 million, in aggregate. The determination of the reclassification was made by management based on the Company’s current and expected future liquidity levels and the resulting intent to hold such investment securities to maturity. The net gross unrealized gain on these available-for-sale investment securities at the time of transfer of $5.0 million, in aggregate, was recorded as additional premium on the securities and is being amortized over the remaining lives of the respective securities, as further described in Note 10 to the consolidated financial statements.

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012, were as follows:



	Less Than 12 Months				12 Months or More			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(dollars expressed in thousands)
September 30, 2013:
Available for sale:
U.S. Government sponsored agencies	$	45,008	(960	)	19,939	(208	)	64,947	(1,168	)
Residential mortgage-backed	401,599		(14,043	)	6,373	(104	)	407,972	(14,147	)
State and political subdivisions	27,860		(588	)	—	—		27,860	(588	)
Corporate notes	34,794		(339	)	4,993	(7	)	39,787	(346	)
Equity investments	1,456		(44	)	—	—		1,456	(44	)
Total	$	510,717	(15,974	)	31,305	(319	)	542,022	(16,293	)
Held to maturity:
U.S. Government sponsored agencies	$	18,501	(164	)	—	—		18,501	(164	)
Residential mortgage-backed	662,903		(16,284	)	7,622	(11	)	670,525	(16,295	)
State and political subdivisions	1,012		(54	)	—	—		1,012	(54	)
Total	$	682,416	(16,502	)	7,622	(11	)	690,038	(16,513	)

December 31, 2012:
Available for sale:
U.S. Government sponsored agencies	$	20,018	(146	)	—	—		20,018	(146	)
Residential mortgage-backed	125,449		(441	)	270	(56	)	125,719	(497	)
Corporate notes	—		—		17,675	(621	)	17,675	(621	)
Total	$	145,467	(587	)	17,945	(677	)	163,412	(1,264	)
Held to maturity:
Residential mortgage-backed	$	66,011	(614	)	—	—		66,011	(614	)
State and political subdivisions	1,133		(377	)	—	—		1,133	(377	)
Total	$	67,144	(991	)	—	—		67,144	(991	)

The Company does not believe the investment securities that were in an unrealized loss position at September 30, 2013 are other-than-temporarily impaired. The unrealized losses on the investment securities were primarily attributable to fluctuations in interest rates. It is expected that the securities would not be settled at a price less than the amortized cost. Because the decline in fair value is attributable to changes in interest rates and not credit loss, and because the Company does not intend to sell these investments and it is more likely than not that First Bank will not be required to sell these securities before the anticipated recovery of the remaining amortized cost basis or maturity, these investments are not considered other-than-temporarily impaired. The unrealized losses for U.S. Government sponsored agencies for 12 months or more at September 30, 2013 included one security. The unrealized losses for residential mortgage-backed securities for 12 months or more at September 30, 2013 and December 31, 2012 included 11 and nine securities, respectively. The unrealized losses for corporate notes for 12 months or more at September 30, 2013 and December 31, 2012 included one and six securities, respectively.