Note 5. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at December 31, 2017 and 2016 are summarized as follows (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2017
Securities available-for-sale:
U.S Treasury securities	$	30,505	$	—	$	60	$	30,445
U.S. Government agency securities	182,500		67		1,766		180,801
Mortgage-backed securities	1,270,625		5,318		12,124		1,263,819
State and municipal securities	774,949		12,251		2,588		784,612
Asset-backed securities	173,346		262		316		173,292
Corporate notes	81,615		1,346		647		82,314
	$	2,513,540	$	19,244	$	17,501	$	2,515,283
Securities held-to-maturity:
State and municipal securities	20,762		114		46		20,830
	$	20,762	$	114	$	46	$	20,830



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2016
Securities available-for-sale:
U.S Treasury securities	$	250	$	—	$	—	$	250
U.S. Government agency securities	22,306		—		537		21,769
Mortgage-backed securities	988,008		4,304		15,686		976,626
State and municipal securities	211,581		4,103		2,964		212,720
Asset-backed securities	79,318		111		849		78,580
Corporate notes	8,608		39		46		8,601
	$	1,310,071	$	8,557	$	20,082	$	1,298,546
Securities held-to-maturity:
State and municipal securities	25,251		87		105		25,233
	$	25,251	$	87	$	105	$	25,233

At December 31, 2017, approximately $1.1 billion of Pinnacle Financial's investment portfolio was pledged to secure public funds and other deposits and securities sold under agreements to repurchase. At December 31, 2017, repurchase agreements comprised of secured borrowings totaled $135.3 million and were secured by $135.3 million of pledged U.S. government agency securities, municipal securities, asset backed securities, and corporate debentures. As the fair value of securities pledged to secure repurchase agreements may decline, Pinnacle Financial regularly evaluates its need to pledge additional securities for the counterparty to remain adequately secured.

The amortized cost and fair value of debt securities as of December 31, 2017 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):



	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	33,251	$	33,196	$	1,329	$	1,330
Due in one year to five years	65,214		65,775		6,210		6,200
Due in five years to ten years	185,337		187,198		10,425		10,469
Due after ten years	785,767		792,003		2,798		2,831
Mortgage-backed securities	1,270,625		1,263,819		—		—
Asset-backed securities	173,346		173,292		—		—
	$	2,513,540	$	2,515,283	$	20,762	$	20,830

At December 31, 2017 and 2016, included in securities were the following investments with unrealized losses. The information below classifies these investments according to the term of the unrealized loss of less than twelve months or twelve months or longer (in thousands):



	Investments with an Unrealized Loss of less than 12 months				Investments with an Unrealized Loss of 12 months or longer				Total Investments with an Unrealized Loss
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2017
U.S. Treasury securities	$	29,948	$	60	$	—	$	—	$	29,948	$	60
U.S. government agency securities	173,677		1,766		—		—		173,677		1,766
Mortgage-backed securities	607,408		5,042		285,561		7,082		892,969		12,124
State and municipal securities	115,403		1,408		50,083		1,226		165,486		2,634
Asset-backed securities	68,742		198		14,136		118		82,878		316
Corporate notes	22,168		547		11,944		100		34,112		647



	Investments with an Unrealized Loss of less than 12 months				Investments with an Unrealized Loss of 12 months or longer				Total Investments with an Unrealized Loss
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Total temporarily-impaired securities	$	1,017,346	$	9,021	$	361,724	$	8,526	$	1,379,070	$	17,547

December 31, 2016
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agency securities	—		—		20,820		537		20,820		537
Mortgage-backed securities	801,213		15,073		43,148		613		844,361		15,686
State and municipal securities	87,277		3,068		312		1		87,589		3,069
Asset-backed securities	14,510		32		34,097		817		48,607		849
Corporate notes	4,810		46		—		—		4,810		46
Total temporarily-impaired securities	$	907,810	$	18,219	$	98,377	$	1,968	$	1,006,187	$	20,187

The applicable date for determining when securities are in an unrealized loss position is December 31, 2017 and 2016. As such, it is possible that a security had a market value less than its amortized cost on other days during the twelve-month periods ended December 31, 2017 and 2016, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the table above, at December 31, 2017 and 2016, Pinnacle Financial had unrealized losses of $17.5 million and $20.2 million on $1.4 billion and $1.0 billion, respectively, of available-for-sale and held-to-maturity securities. The unrealized losses associated with these investment securities are primarily driven by changes in interest rates and typically are not due to the credit quality of the securities. These securities will continue to be monitored as a part of our ongoing impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond issuers. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. Because Pinnacle Financial currently does not intend to sell these securities and it is not more-likely-than-not that Pinnacle Financial will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, Pinnacle Financial does not consider these securities to be other-than-temporarily impaired at December 31, 2017.

Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known. Consistent with the investment policy, in 2017 available-for-sale securities of approximately $300.0 million were sold and net unrealized losses of $8.3 million were reclassified from accumulated other comprehensive income into net income.

The carrying values of Pinnacle Financial's investment securities could decline in the future if the financial condition of the securities' issuers deteriorates and management determines it is probable that Pinnacle Financial will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future. Additionally, there is a risk that other-than-temporary impairment charges may occur in the future if management's intention to hold these securities to maturity and or recovery changes.