Note 5. Securities

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2018
Securities available-for-sale:
U.S Treasury securities	$	30,325	$	—	$	25	$	30,300
U.S. Government agency securities	71,456		49		1,346		70,159
Mortgage-backed securities	1,336,469		3,110		28,634		1,310,945
State and municipal securities	1,244,471		3,785		18,602		1,229,654
Asset-backed securities	379,107		820		4,345		375,582
Corporate notes	69,399		170		2,523		67,046
	$	3,131,227	$	7,934	$	55,475	$	3,083,686
Securities held-to-maturity:
State and municipal securities	194,282		152		1,303		193,131
	$	194,282	$	152	$	1,303	$	193,131

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

In 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 net 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 the transfer. At December 31, 2018, approximately $1.2 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, 2018, repurchase agreements comprised of secured borrowings totaled $104.7 million and were secured by $104.7 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, 2018 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	$	47,546	$	47,474	$	325	$	326
Due in one year to five years	45,037		44,925		5,710		5,700
Due in five years to ten years	100,401		98,424		7,980		7,935
Due after ten years	1,222,667		1,206,336		180,267		179,170
Mortgage-backed securities	1,336,469		1,310,945		—		—
Asset-backed securities	379,107		375,582		—		—
	$	3,131,227	$	3,083,686	$	194,282	$	193,131

At December 31, 2018 and 2017, 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, 2018
U.S. Treasury securities	$	30,054	$	22	$	246	$	3	$	30,300	$	25
U.S. government agency securities	13,697		328		42,539		1,018		56,236		1,346
Mortgage-backed securities	203,299		2,134		882,231		26,500		1,085,530		28,634
State and municipal securities	805,821		18,643		198,610		4,078		1,004,431		22,721
Asset-backed securities	268,677		4,118		11,828		227		280,505		4,345
Corporate notes	26,272		1,538		25,915		985		52,187		2,523
Total temporarily-impaired securities	$	1,347,820	$	26,783	$	1,161,369	$	32,811	$	2,509,189	$	59,594

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 date for determining when securities are in an unrealized loss position is December 31, 2018 and 2017. 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, 2018 and 2017, 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, 2018 and 2017, Pinnacle Financial had unrealized losses of $59.6 million and $17.5 million on $2.5 billion and $1.4 billion, respectively, of available-for-sale and held-to-maturity 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 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, 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, in 2018 available-for-sale securities of approximately $169.9 million were sold and net unrealized losses of $1.7 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.