Note 4. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at September 30, 2018 and December 31, 2017 are summarized as follows (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2018:
Securities available-for-sale:
U.S. Treasury securities	$	30,573	$	—	$	45	$	30,528
U.S. government agency securities	64,640		45		1,500		63,185
Mortgage-backed securities	1,334,640		3,268		43,363		1,294,545
State and municipal securities	1,240,136		1,995		29,860		1,212,271
Asset-backed securities	334,547		870		759		334,658
Corporate notes and other	69,738		617		960		69,395
	$	3,074,274	$	6,795	$	76,487	$	3,004,582
Securities held-to-maturity:
State and municipal securities	$	194,997	$	9	$	2,506	$	192,500
	$	194,997	$	9	$	2,506	$	192,500



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 and other	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

During the third quarter of 2018, Pinnacle Financial transferred, at fair value, $179.8 million of municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related unrealized after tax losses of $2.2 million remained in accumulated other comprehensive income (loss) and will be amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities. No gains or losses were recognized at the time of transfer. At September 30, 2018, approximately $1.35 billion of securities within Pinnacle Financial's investment portfolio were pledged to secure either public funds and other deposits or securities sold under agreements to repurchase. At September 30, 2018, repurchase agreements comprised of secured borrowings totaled $130.2 million and were secured by $130.2 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 to remain adequately secured.

The amortized cost and fair value of debt securities as of September 30, 2018 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage- and asset-backed securities since the mortgages and assets 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
September 30, 2018:	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	34,856	$	34,802	$	315	$	316
Due in one year to five years	77,055		77,059		6,066		6,044
Due in five years to ten years	159,471		157,274		7,997		7,875
Due after ten years	1,133,705		1,106,244		180,619		178,265
Mortgage-backed securities	1,334,640		1,294,545		—		—
Asset-backed securities	334,547		334,658		—		—
	$	3,074,274	$	3,004,582	$	194,997	$	192,500

At September 30, 2018 and December 31, 2017, the following investments had unrealized losses. The table below classifies these investments according to the term of the unrealized losses 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
At September 30, 2018

U.S. Treasury securities	$	30,284	$	39	$	244	$	6	$	30,528	$	45
U.S. government agency securities	13,605		360		45,118		1,140		58,723		1,500
Mortgage-backed securities	289,149		5,951		807,418		37,412		1,096,567		43,363
State and municipal securities	1,144,600		29,599		108,653		5,663		1,253,253		35,262
Asset-backed securities	204,638		741		4,505		18		209,143		759
Corporate notes	22,329		260		18,681		700		41,010		960
Total temporarily-impaired securities	$	1,704,605	$	36,950	$	984,619	$	44,939	$	2,689,224	$	81,889

At 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
Total temporarily-impaired securities	$	1,017,346	$	9,021	$	361,724	$	8,526	$	1,379,070	$	17,547

The applicable dates for determining when securities were in an unrealized loss position were September 30, 2018 and December 31, 2017. As such, it is possible that a security had a market value that exceeded its amortized cost on other days during the past twelve-month periods ended September 30, 2018 and December 31, 2017, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the tables above, including both available-for-sale and held-to-maturity investment securities, at September 30, 2018, Pinnacle Financial had approximately $81.9 million in unrealized losses on $2.69 billion of securities. The unrealized losses associated with the $179.8 million of municipal securities transferred from the available-for-sale portfolio to the held-to-maturity portfolio represent unrealized losses since the date of purchase, independent of the impact associated with changes in the cost basis upon transfer between portfolios. The unrealized losses associated with these investment securities are driven by changes in interest rates and are not due to the credit quality of the securities. These securities will continue to be monitored as a part of Pinnacle Financial's ongoing impairment analysis. 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 those securities that have an unrealized loss at September 30, 2018, 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 September 30, 2018.

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, during the nine months ended September 30, 2018 available-for-sale securities of approximately $22.7 million were sold and net unrealized gains, net of tax, of $30,000 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 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.