AFS Securities
 12 Months Ended
Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]  
AFS Securities
Note 5 – AFS Securities
The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows as of December 31:
 
2013

Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Government sponsored enterprises
$
24,860

 
$
7

 
$
1,122

 
$
23,745

States and political subdivisions
200,323

 
5,212

 
3,547

 
201,988

Auction rate money market preferred
3,200

 
—

 
623

 
2,577

Preferred stocks
6,800

 
20

 
993

 
5,827

Mortgage-backed securities
147,292

 
657

 
3,834

 
144,115

Collateralized mortgage obligations
135,139

 
1,016

 
2,345

 
133,810

Total
$
517,614

 
$
6,912

 
$
12,464


$
512,062

 
2012

Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Government sponsored enterprises
$
25,668

 
$
108

 
$
—

 
$
25,776

States and political subdivisions
174,118

 
9,190

 
565

 
182,743

Auction rate money market preferred
3,200

 
—

 
422

 
2,778

Preferred stocks
6,800

 
—

 
437

 
6,363

Mortgage-backed securities
152,256

 
3,199

 
110

 
155,345

Collateralized mortgage obligations
128,378

 
2,627

 
—

 
131,005

Total
$
490,420

 
$
15,124

 
$
1,534

 
$
504,010


The amortized cost and fair value of AFS securities by contractual maturity at December 31, 2013 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
$
—

 
$
72

 
$
24,788

 
$
—

 
$
—

 
$
24,860

States and political subdivisions
930

 
37,672

 
96,749

 
64,972

 
—

 
200,323

Auction rate money market preferred
—

 
—

 
—

 
—

 
3,200

 
3,200

Preferred stocks
—

 
—

 
—

 
—

 
6,800

 
6,800

Mortgage-backed securities
—

 
—

 
—

 
—

 
147,292

 
147,292

Collateralized mortgage obligations
—

 
—

 
—

 
—

 
135,139

 
135,139

Total amortized cost
$
930

 
$
37,744

 
$
121,537

 
$
64,972

 
$
292,431

 
$
517,614

Fair value
$
961

 
$
38,867

 
$
122,637

 
$
63,268

 
$
286,329

 
$
512,062


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 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 activity related to sales of AFS securities was as follows during the years ended December 31:
 
2013
 
2012
 
2011
Proceeds from sales of AFS securities
$
16,229

 
$
40,677

 
$
8,877

Gross realized gains (losses)
$
171

 
$
1,119

 
$
3

Applicable income tax expense (benefit)
$
58

 
$
380

 
$
1


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:
 
2013
 
Less Than Twelve Months
 
Twelve Months or More
 
 

Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Losses
Government sponsored enterprises
$
1,122

 
$
22,873

 
$
—

 
$
—

 
$
1,122

States and political subdivisions
2,566

 
42,593

 
981

 
6,115

 
3,547

Auction rate money market preferred
—

 
—

 
623

 
2,577

 
623

Preferred stocks
—

 
—

 
993

 
2,807

 
993

Mortgage-backed securities
2,424

 
101,816

 
1,410

 
21,662

 
3,834

Collateralized mortgage obligations
2,345

 
84,478

 
—

 
—

 
2,345

Total
$
8,457

 
$
251,760

 
$
4,007

 
$
33,161

 
$
12,464

Number of securities in an unrealized loss position:
 
 
182

 
 
 
19

 
201

 
2012
 
Less Than Twelve Months
 
Twelve Months or More
 
 

Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Losses
States and political subdivisions
$
80

 
$
5,019

 
$
485

 
$
2,352

 
$
565

Auction rate money market preferred
—

 
—

 
422

 
2,778

 
422

Preferred stocks
—

 
—

 
437

 
3,363

 
437

Mortgage-backed securities
110

 
25,499

 
—

 
—

 
110

Total
$
190

 
$
30,518

 
$
1,344

 
$
8,493

 
$
1,534

Number of securities in an unrealized loss position:
 
 
15

 
 
 
6

 
21


As of December 31, 2013 and 2012, 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 as of December 31, 2013, we obtained another investment valuation (from the same firm engaged to perform the initial valuation as of March 31, 2012) as of December 31, 2013. Based on our analysis, no additional OTTI was indicated as of December 31, 2013.
The following table provides a roll-forward of credit related impairment recognized in earnings for the years ended December 31:
 
2013
 
2012
 
2011
Balance at beginning of year
$
282

 
$
—

 
$
—

Additions to credit losses for which no previous OTTI was recognized
—

 
282

 
—

Balance at end of year
$
282

 
$
282

 
$
—


Based on our analysis using the above criteria, 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 AFS securities in an unrealized loss position before recovery of their cost basis, we do not believe that the values of any other AFS securities are other-than-temporarily impaired as of December 31, 2013, or December 31, 2012.