AFS Securities

The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows as of December 31:



	2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Government sponsored enterprises	$	24,407	$	13	$	75	$	24,345
States and political subdivisions	224,752		7,511		46		232,217
Auction rate money market preferred	3,200		—		334		2,866
Preferred stocks	3,800		—		501		3,299
Mortgage-backed securities	264,109		1,156		1,881		263,384
Collateralized mortgage obligations	134,080		1,136		1,191		134,025
Total	$	654,348	$	9,816	$	4,028	$	660,136



	2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Government sponsored enterprises	$	24,597	$	10	$	471	$	24,136
States and political subdivisions	209,153		6,986		794		215,345
Auction rate money market preferred	3,200		—		581		2,619
Preferred stocks	6,800		31		691		6,140
Mortgage-backed securities	165,888		2,042		1,004		166,926
Collateralized mortgage obligations	152,255		1,533		1,420		152,368
Total	$	561,893	$	10,602	$	4,961	$	567,534

The amortized cost and fair value of AFS securities by contractual maturity at December 31, 2015 are as follows:



	Maturing								Securities with Variable Monthly Payments or Noncontractual Maturities
	Due in One Year or Less		After One Year But Within Five Years		After Five Years But Within Ten Years		After Ten Years				Total
Government sponsored enterprises	$	—	$	24,029	$	378	$	—	$	—	$	24,407
States and political subdivisions	30,174		69,245		92,561		32,772		—		224,752
Auction rate money market preferred	—		—		—		—		3,200		3,200
Preferred stocks	—		—		—		—		3,800		3,800
Mortgage-backed securities	—		—		—		—		264,109		264,109
Collateralized mortgage obligations	—		—		—		—		134,080		134,080
Total amortized cost	$	30,174	$	93,274	$	92,939	$	32,772	$	405,189	$	654,348
Fair value	$	30,217	$	95,452	$	96,871	$	34,022	$	403,574	$	660,136

Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations.

As the auction rate money market preferred and preferred stocks have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.

A summary of the sales activity of AFS securities was as follows during the years ended December 31:



	2015		2014		2013
Proceeds from sales of AFS securities	$	1,319	$	13,362	$	16,229
Gross realized gains (losses)	$	163	$	97	$	171
Applicable income tax expense (benefit)	$	55	$	33	$	58

The cost basis used to determine the realized gains or losses of AFS securities sold was the amortized cost of the individual investment security as of the trade date.

Information pertaining to AFS securities with gross unrealized losses at December 31 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:



	2015
	Less Than Twelve Months				Twelve Months or More
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Total Unrealized Losses
Government sponsored enterprises	$	—	$	—	$	75	$	4,925	$	75
States and political subdivisions	14		3,355		32		2,623		46
Auction rate money market preferred	—		—		334		2,866		334
Preferred stocks	—		—		501		3,299		501
Mortgage-backed securities	882		131,885		999		37,179		1,881
Collateralized mortgage obligations	415		53,441		776		26,717		1,191
Total	$	1,311	$	188,681	$	2,717	$	77,609	$	4,028
Number of securities in an unrealized loss position:			36				26		62



	2014
	Less Than Twelve Months				Twelve Months or More
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Total Unrealized Losses
Government sponsored enterprises	$	—	$	—	$	471	$	23,525	$	471
States and political subdivisions	48		5,323		746		17,416		794
Auction rate money market preferred	—		—		581		2,619		581
Preferred stocks	—		—		691		3,109		691
Mortgage-backed securities	5		9,456		999		52,407		1,004
Collateralized mortgage obligations	105		29,435		1,315		39,540		1,420
Total	$	158	$	44,214	$	4,803	$	138,616	$	4,961
Number of securities in an unrealized loss position:			22				72		94

As of December 31, 2015 and 2014, we conducted an analysis to determine whether any securities currently in an unrealized loss position, should be other-than-temporarily impaired. Such analyses considered, among other factors, the following criteria:


•	Has the value of the investment declined more than what is deemed to be reasonable based on a risk and maturity adjusted discount rate?


•	Is the investment credit rating below investment grade?


•	Is it probable the issuer will be unable to pay the amount when due?


•	Is it more likely than not that we will have to sell the security before recovery of its cost basis?


•	Has the duration of the investment been extended?

During the three month period ended March 31, 2012, we had one state issued student loan auction rate AFS investment security (which is included in states and political subdivisions) that was downgraded by Moody's from A3 to Caa3. As a result of this downgrade, we engaged the services of an independent investment valuation firm to estimate the amount of credit losses (if any) related to this particular issue as of March 31, 2012. The evaluation calculated a range of estimated credit losses utilizing two different bifurcation methods:

1) Discounted Cash Flow Method

2) Credit Yield Analysis Method

The two methods were then weighted, with a higher weighting applied to the Discounted Cash Flow Method, to determine the estimated credit related impairment. As a result of this analysis, we recognized an OTTI of $282 in earnings in the three month period ended March 31, 2012.

A summary of key valuation assumptions used in the aforementioned analysis as of March 31, 2012, follows:



	Discounted Cash Flow Method
Ratings
Fitch	Not Rated
Moody's	Caa3
S&P	A
Seniority	Senior
Discount rate	LIBOR + 6.35%

	Credit Yield Analysis Method
Credit discount rate	LIBOR + 4.00%
Average observed discounts based on closed transactions	14.00%

To test for additional impairment of this security, we obtained investment valuations (from the same firm engaged to perform the initial valuation as of March 31, 2012) on a quarterly basis until the security was sold on November 25, 2015. Based on our analyses, no additional OTTI was recorded while the security was held. The following table provides a roll-forward of credit related impairment recognized in earnings for the years ended December 31:



	2015			2014		2013
Balance at beginning of year	$	282		$	282	$	282
Additions to credit losses for which no previous OTTI was recognized	—			—		—
Reductions for credit losses realized on securities sold during the quarter	(282		)	—		—
Balance at end of year	$	—		$	282	$	282

Based on our analyses, the fact that we have asserted that we do not have the intent to sell AFS securities in an unrealized loss position, and considering it is unlikely that we will have to sell any AFS securities in an unrealized loss position before recovery of their cost basis, we do not believe that the values of any AFS securities were other-than-temporarily impaired as of December 31, 2015, or December 31, 2014.