The amortized cost, gross unrealized gains and losses and estimated fair values for available-for-sale and held-to-maturity securities by major security type at December 31, 2012 and December 31, 2011 were as follows (in thousands):



December 31, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	180,851	$	1,321	$	(3	)	$	182,169
Obligations of states and political subdivisions	53,064		3,163		(20		)	56,207
Mortgage-backed securities: GSE residential	252,310		7,162		(12		)	259,460
Trust preferred securities	4,974		—		(4,389		)	585
Other securities	9,663		225		—			9,888
Total available-for-sale	$	500,862	$	11,871	$	(4,424	)	$	508,309
December 31, 2011
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	164,812	$	1,294	$	(40	)	$	166,066
Obligations of states and political subdivisions	38,828		2,374		—			41,202
Mortgage-backed securities: GSE residential	254,930		6,940		(37		)	261,833
Trust preferred securities	5,625		—		(4,906		)	719
Other securities	9,561		—		(465		)	9,096
Total available-for-sale	$	473,756	$	10,608	$	(5,448	)	$	478,916
Held-to-maturity:
Obligations of states and political subdivisions	$	51	$	—	$	—		$	51

The trust preferred securities are three trust preferred pooled securities issued by First Tennessee Financial (“FTN”). The unrealized losses of these securities, which have maturities ranging from eighteen years to twenty-six years, are primarily due to their long-term nature, a lack of demand or inactive market for these securities, and concerns regarding the underlying financial institutions that have issued the trust preferred securities. See the heading “Trust Preferred Securities” below for further information regarding these securities.

Proceeds from sales of investment securities, realized gains and losses and income tax expense and benefit were as follows during the years ended December 31, 2012, 2011 and 2010 (in thousands):



	2012		2011		2010
Proceeds from sales	$	30,500	$	18,891	$	10,936
Gross gains	934		486		543
Gross losses	—		—		—
Income tax expense	364		189		212

The following table indicates the expected maturities of investment securities classified as available-for-sale presented at fair value, at December 31, 2012 and the weighted average yield for each range of maturities (dollars in thousands):



	One year or less			After 1 through 5 years			After 5 through 10 years			After ten years			Total
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	98,367		$	82,093		$	1,709		$	—		$	182,169
Obligations of state and political subdivisions	770			29,734			23,952			1,751			56,207
Mortgage-backed securities: GSE residential	8,434			218,584			32,442			—			259,460
Trust preferred securities	—			—			—			585			585
Other securities	—			9,828			—			60			9,888
Total investments	$	107,571		$	340,239		$	58,103		$	2,396		$	508,309
Weighted average yield	1.93		%	2.52		%	2.77		%	3.28		%	2.45		%
Full tax-equivalent yield	1.95		%	2.76		%	3.85		%	3.81		%	2.74		%

The weighted average yields are calculated on the basis of the amortized cost and effective yields weighted for the scheduled maturity of each security. Tax-equivalent yields have been calculated using a 35% tax rate. With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, there were no investment securities of any single issuer, the book value of which exceeded 10% of stockholders' equity at December 31, 2012. Investment securities carried at approximately $267,321,000 and $286,568,000 at December 31, 2012 and 2011, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law.

The following table presents the aging of gross unrealized losses and fair value by investment category as of December 31, 2012 and 2011 (in thousands):



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2012
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	10,997	$	(3	)	$	—	$	—		$	10,997	$	(3	)
Obligations of states and political subdivisions	1,969		(20		)	—		—			1,969		(20		)
Mortgage-backed securities: GSE residential	697		(12		)	—		—			697		(12		)
Trust preferred securities	—		—			585		(4,389		)	585		(4,389		)
Other securities	—		—			—		—			—		—
Total	$	13,663	$	(35	)	$	585	$	(4,389	)	$	14,248	$	(4,424	)
December 31, 2011
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	19,960	$	(40	)	$	—	$	—		$	19,960	$	(40	)
Obligations of states and political subdivisions	690		—			—		—			690		—
Mortgage-backed securities: GSE residential	15,231		(37		)	—		—			15,231		(37		)
Trust preferred securities	—		—			719		(4,906		)	719		(4,906		)
Other securities	7,190		(372		)	1,907		(93		)	9,096		(465		)
Total	$	43,071	$	(449	)	$	2,626	$	(4,999	)	$	45,696	$	(5,448	)

U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies. At December 31, 2012 and December 31, 2011, there were no U.S. Treasury securities and obligations of U.S. government corporations and agencies in a continuous unrealized loss position for twelve months or more.

Obligations of states and political subdivisions. At December 31, 2012 and December 31, 2011, there were no Obligations of states and political subdivisions in a continuous unrealized loss position for twelve months or more.

Mortgage-backed Securities: GSE Residential. At December 31, 2012 and December 31, 2011, there were no mortgage-backed securities in a continuous unrealized loss position for twelve months or more.

Trust Preferred Securities. At December 31, 2012, there were three trust preferred securities with a fair value of $585,000 and unrealized losses of $4,389,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2011, there were four trust preferred securities with a fair value of $719,000 and unrealized losses of $4,906,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the trust preferred securities, a lack of demand or inactive market for these securities, the impending change to the regulatory treatment of these securities, and concerns regarding the underlying financial institutions that have issued the trust preferred securities. The Company recorded no other-than-temporary impairment (OTTI) for these securities during 2012 and $886,000 of OTTI for these securities during 2011. These losses established a new, lower amortized cost basis for these securities and reduced non-interest income as of December 31, 2011. Because the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of their new, lower amortized cost basis, which may be maturity, the Company does not consider the remainder of the investment in these securities to be other-than-temporarily impaired at December 31, 2012. However, future downgrades or additional deferrals and defaults in these securities, in particular PreTSL XXVIII, could result in additional OTTI and consequently, have a material impact on future earnings. On July 3, 2012, the Company’s holding in PreTSL VI was redeemed in full. The payment received was sufficient to pay-off the book value of the security of $123,000, reverse the recorded OTTI impairment of $127,000 and recover previously unrecorded interest of approximately $11,500 .

Following are the details for each of the three currently impaired trust preferred securities as of December 31, 2012 (in thousands):



	Book Value		Market Value		Unrealized Gains (Losses)			Other-than- temporary Impairment Recorded To-date
PreTSL I	$	513	$	297	$	(216	)	$	(691	)
PreTSL II	809		219		(590		)	(2,187		)
PreTSL XXVIII	3,652		69		(3,583		)	(1,111		)
Total	$	4,974	$	585	$	(4,389	)	$	(3,989	)

Other securities. At December 31, 2012, there were no corporate bonds in a continuous unrealized loss position for twelve months or more. At December 31, 2011, there was one bond with a fair value of $1,907,000 and an unrealized loss of $93,000 in a continuous unrealized loss position for twelve months or more.

The Company does not believe any other individual unrealized loss as of December 31, 2012 represents OTTI. However, given the continued disruption in the financial markets, the Company may be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any additional OTTI will depend on the decline in the underlying cash flows of the securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in the period the other-than-temporary impairment is identified.

Other-than-temporary Impairment

Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities. For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model. For securities where the security is not a beneficial interest in securitized financial assets, the Company uses debt and equity securities impairment model.

The Company routinely conducts periodic reviews to identify and evaluate each investment security to determine whether OTTI has occurred. Economic models are used to determine whether OTTI has occurred on these securities. While all securities are considered, the securities primarily impacted by OTTI testing are pooled trust preferred securities. For each pooled trust preferred security in the investment portfolio (including but not limited to those whose fair value is less than their amortized cost basis), an extensive, regular review is conducted to determine if OTTI has occurred. Various inputs to the economic models are used to determine if an unrealized loss is other-than-temporary. The most significant inputs are prepayments, defaults and loss severity.

These pooled trust preferred securities relate to trust preferred securities issued by financial institutions. The pools typically consist of financial institutions throughout the United States. Other inputs to the economic models may include the actual collateral attributes, which include credit ratings and other performance indicators of the underlying financial institutions including profitability, capital ratios, and asset quality.

To determine if the unrealized losses for pooled trust preferred securities is other-than-temporary, the Company considers the impact of each of these inputs. The Company considers the likelihood that issuers will prepay their securities. During the third quarter of 2010, the Dodd-Frank Act eliminated Tier 1 capital treatment for trust preferred securities issued by holding companies with consolidated assets greater than $15 billion. As a result, issuers may prepay their securities which reduces the amount of expected cash flows. Additionally, the Company projects total estimated defaults of the underlying assets (financial institutions) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates the current credit enhancement underlying the security to determine the impact on cash flows. If the Company determines that a given pooled trust preferred security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

Credit Losses Recognized on Investments

As described above, some of the Company’s investments in trust preferred securities have experienced fair value deterioration due to credit losses but are not otherwise other-than-temporarily impaired. The following table provides information about those trust preferred securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income (loss) for the years ended December 31, 2012, 2011 and 2010 (in thousands).



	Accumulated Credit Losses as of December 31:
	2012			2011		2010
Credit losses on trust preferred securities held:
Beginning of period	$	4,116		$	3,230	$	1,812
Additions related to OTTI losses not previously recognized	—			—		—
Reductions due to sales / (recoveries)	(127		)	—		—
Reductions due to change in intent or likelihood of sale	—			—		—
Additions related to increases in previously recognized OTTI losses	—			886		1,418
Reductions due to increases in expected cash flows	—			—		—
End of period	$	3,989		$	4,116	$	3,230

Maturities of investment securities were as follows at December 31, 2012 (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Amortized Cost		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	98,706	$	99,137
Due after one-five years	119,277		121,655
Due after five-ten years	23,836		25,661
Due after ten years	6,733		2,396
	248,552		248,849
Mortgage-backed securities: GSE residential	252,310		259,460
Total available-for-sale	$	500,862	$	508,309