Investments:

The amortized cost and fair values of investments are as follows (in thousands):



	Available-for-Sale
	Amortized Cost		Cumulative Non-Credit OTTI Losses Recognized in OCI			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value/ Carrying Value
December 31, 2012
State and municipal securities	$	60,984	$	—		$	2,823	$	(158	)	$	63,649
Mortgage-backed securities - Agency Pass Throughs	71,821		—			2,224		(652		)	73,393
Mortgage-backed securities - Agency CMO's	110,683		—			2,209		(328		)	112,564
SBA Pools	19,962		—			359		—			20,321
Mortgage-backed securities - Non Agency CMO's (below investment grade)	10,889		(1,661		)	1,401		(387		)	10,242
	$	274,339	$	(1,661	)	$	9,016	$	(1,525	)	$	280,169
December 31, 2011
U.S. treasury securities and obligations of U.S. government agencies	$	21	$	—		$	—	$	—		$	21
State and municipal securities	35,352		—			1,791		(8		)	37,135
Mortgage-backed securities - Agency Pass Throughs	59,436		—			2,252		(126		)	61,562
Mortgage-backed securities - Agency CMO's	103,349		—			2,526		(328		)	105,547
Mortgage-backed securities - Non Agency CMO's (investment grade)	5,934		—			389		—			6,323
Mortgage-backed securities - Non Agency CMO's (below investment grade)	10,489		(2,011		)	435		(462		)	8,451
	$	214,581	$	(2,011	)	$	7,393	$	(924	)	$	219,039
	Held-to-Maturity
	Carrying Value / Amortized Cost		Cumulative Non-Credit OTTI Losses Recognized in OCI			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2012
State and municipal securities	$	14,826	$	—		$	1,518	$	—		$	16,344
December 31, 2011
State and municipal securities	$	16,143	$	—		$	1,328	$	—		$	17,471

The following table summarizes the duration of Intermountain’s unrealized losses on available-for-sale and held-to-maturity securities as of the dates indicated (in thousands).



	Less Than 12 Months					12 Months or Longer					Total
December 31, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage-backed securities & CMO’s	$	57,180	$	(785	)	$	11,408	$	(582	)	$	68,588	$	(1,367	)
State and municipal securities	12,019		(158		)	—		—			12,019		(158		)
Total	$	69,199	$	(943	)	$	11,408	$	(582	)	$	80,607	$	(1,525	)



	Less Than 12 Months					12 Months or Longer					Total
December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal securities	$	1,659	$	(8	)	$	—	$	—		$	1,659	$	(8	)
Mortgage-backed securities & CMO’s	39,905		(433		)	3,993		(483		)	43,898		(916		)
Total	$	41,564	$	(441	)	$	3,993	$	(483	)	$	45,557	$	(924	)

At December 31, 2012, the amortized cost and fair value of available-for-sale and held-to-maturity debt securities, by contractual maturity, are as follows (in thousands):



	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	—	$	—	$	503	$	514
After one year through five years	3,590		3,746		1,854		1,985
After five years through ten years	8,183		8,082		10,962		12,069
After ten years	49,210		51,821		1,507		1,776
Subtotal	60,983		63,649		14,826		16,344
Mortgage-backed securities	193,394		196,200		—		—
SBA Pools	19,962		20,320		—		—
Total Securities	$	274,339	$	280,169	$	14,826	$	16,344

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Intermountain’s investment portfolios are managed to provide and maintain liquidity; to maintain a balance of high quality, diversified investments to minimize risk; to offset other asset portfolio elements in managing interest rate risk; to provide collateral for pledging; and to maximize returns. During 2012, the Company sold one held-to-maturity security for $1.2 million, at a net gain of $122,000 based on concerns over credit concentrations and extension risk. At December 31, 2012, the Company does not intend to sell any of its available-for-sale securities that have a loss position and it is not likely that it will be required to sell the available-for-sale securities before the anticipated recovery of their remaining amortized cost or maturity date. The unrealized losses on residential mortgage-backed securities without other-than-temporary impairment (“OTTI”) were considered by management to be temporary in nature.

The following table presents the OTTI losses for the year ended December 31, 2012, 2011 and 2010:



	2012				2011					2010
	Held To Maturity		Available For Sale		Held To Maturity		Available For Sale			Held To Maturity		Held To Maturity
Total other-than-temporary impairment losses	$	—	$	7	$	—	$	229		$	—	$	1,529
Portion of other-than-temporary impairment losses transferred from (recognized in) other comprehensive income (1)	—		350		—		(84		)	—		(701		)
Net impairment losses recognized in earnings (2)	$	—	$	357	$	—	$	145		$	—	$	828

_____________________________


(1)	Represents other-than-temporary impairment losses related to all other factors.


(2)	Represents other-than-temporary impairment losses related to credit losses.

The OTTI recognized on investment securities available for sale relates to two non-agency collateralized mortgage obligations. Each of these securities holds various levels of credit subordination. These securities were valued by third-party pricing services using matrix or model pricing methodologies and were corroborated by broker indicative bids. We estimated the cash flows of the underlying collateral for each security considering credit, interest and prepayment risk models that incorporate management’s estimate of projected key assumptions including prepayment rates, collateral default rates and loss severity. Assumptions utilized vary from security to security, and are influenced by factors such as underlying loan interest rates, geographic location, borrower characteristics, vintage, and historical experience. We then used a third party to obtain information about the structure of each security, including subordination and other credit enhancements, in order to determine how the underlying collateral cash flows will be distributed to each security issued in the structure. These cash flows were then discounted at the interest rate equal to the yield anticipated at the time the security was purchased. We review the actual collateral performance of these securities on a quarterly basis and update the inputs as appropriate to determine the projected cash flows.

See Note 20 “Fair Value of Financial Instruments” for more information on the calculation of fair or carrying value for the investment securities.