Note 2 - Securities

A summary of the amortized cost and estimated fair value of securities, excluding trading securities, is presented below.


	March 31, 2013								December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Held to Maturity
U. S. Treasury	$	248,286	$	28,433	$	—	$	276,719	$	248,188	$	29,859	$	—	$	278,047
Residential mortgage-backed securities		10,552		304		—		10,856		10,725		300		—		11,025
States and political subdivisions		2,808,170		13,544		30,856		2,790,858		2,696,468		15,397		4,993		2,706,872
Other		1,000		—		7		993		1,000		—		—		1,000

Total	$	3,068,008	$	42,281	$	30,863	$	3,079,426	$	2,956,381	$	45,556	$	4,993	$	2,996,944

Available for Sale:
U. S. Treasury	$	3,020,596	$	35,313	$	—	$	3,055,909	$	3,020,115	$	37,806	$	—	$	3,057,921
Residential mortgage-backed securities		2,182,312		123,611		108		2,305,815		2,382,514		135,514		25		2,518,003
States and political subdivisions		427,345		32,602		45		459,902		552,056		39,427		—		591,483
Other		35,899		—		—		35,899		35,892		—		—		35,892

Total	$	5,666,152	$	191,526	$	153	$	5,857,525	$	5,990,577	$	212,747	$	25	$	6,203,299

All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. At March 31, 2013, approximately 98.8% of the securities in the Corporation’s municipal bond portfolio were issued by political subdivisions or agencies within the State of Texas, of which approximately 78.5% are either guaranteed by the Texas Permanent School Fund, which has a “triple A” insurer financial strength, or secured by U.S. Treasury securities via defeasance of the debt by the issuers. Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost and are reported as other available for sale securities in the above table. The carrying value of securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $2.5 billion at March 31, 2013 and $2.7 billion and December 31, 2012.

During the fourth quarter of 2012, the Corporation reclassified certain securities from available for sale to held to maturity. The securities had an aggregate fair value of $2.3 billion with an aggregate net unrealized gain of $165.7 million ($107.7 million, net of tax) on the date of the transfer. The net unamortized, unrealized gain on the transferred securities included in accumulated other comprehensive income in the accompanying balance sheet as of March 31, 2013 totaled $156.6 million ($101.8 million, net of tax). This amount will be amortized out of accumulated other comprehensive income over the remaining life of the underlying securities as an adjustment of the yield on those securities.

As of March 31, 2013, securities, with unrealized losses segregated by length of impairment, were as follows:


	Less than 12 Months				More than 12 Months				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Held to Maturity
States and political subdivisions	$	2,175,897	$	30,856	$	—	$	—	$	2,175,897	$	30,856
Other		993		7		—		—		993		7

Total	$	2,176,890	$	30,863	$	—	$	—	$	2,176,890	$	30,863

Available for Sale
Residential mortgage-backed securities	$	7,668	$	108	$	—	$	—	$	7,668	$	108
States and political subdivisions		4,918		45		—		—		4,918		45

Total	$	12,586	$	153	$	—	$	—	$	12,586	$	153

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost.

Management has the ability and intent to hold the securities classified as held to maturity in the table above until they mature, at which time the Corporation will receive full value for the securities. Furthermore, as of March 31, 2013, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that the Corporation will not have to sell any such securities before a recovery of cost. Any unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of March 31, 2013, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in the Corporation’s consolidated income statement.

The amortized cost and estimated fair value of securities, excluding trading securities, at March 31, 2013 are presented below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage-backed securities and equity securities are shown separately since they are not due at a single maturity date.


	Held to Maturity				Available for Sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	24,466	$	25,158	$	1,512,771	$	1,516,143
Due after one year through five years		335,997		367,129		1,576,602		1,612,052
Due after five years through ten years		177,104		176,648		77,656		84,092
Due after ten years		2,519,889		2,499,635		280,912		303,524
Residential mortgage-backed securities		10,552		10,856		2,182,312		2,305,815
Equity securities		—		—		35,899		35,899

Total	$	3,068,008	$	3,079,426	$	5,666,152	$	5,857,525

Sales of securities available for sale were as follows:


	Three Months Ended March 31,
	2013			2012
Proceeds from sales	$	4,498,102		$	9,985,078
Gross realized gains		5			2,137
Gross realized losses		—			(2,628	)
Tax (expense) benefit of securities gains/losses		(2	)		172

Trading account securities, at estimated fair value, were as follows:


	March 31,		December 31,
	2013		2012
U.S. Treasury	$	14,013	$	14,038
States and political subdivisions		8,651		16,036

Total	$	22,664	$	30,074

Net gains and losses on trading account securities were as follows:


	Three Months Ended March 31,
	2013			2012
Net gain on sales transactions	$	294		$	323
Net mark-to-market gains (losses)		(3	)		(60	)

Net gain on trading account securities	$	291		$	263