INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities as of December 31, 2018 and 2017, are summarized as follows:



	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(amounts in thousands)
Available-for-sale debt securities
Agency-guaranteed residential mortgage-backed securities	$	311,267	$	—	$	(5,893	)	$	305,374
Corporate notes ⁽¹⁾	381,407		920		(24,407		)	357,920
Available-for-sale debt securities	$	692,674	$	920	$	(30,300	)	663,294
Equity securities ⁽²⁾								1,718
Total investment securities, at fair value								$	665,012


(1)	Includes corporate securities issued by other bank holding companies.

(2)

Includes equity securities issued by a foreign entity that are being measured at fair value with changes in fair value recognized directly in earnings effective January 1, 2018 as a result of adopting ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (see NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION for additional information related to the adoption of this new standard).



	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(amounts in thousands)
Available-for-sale securities
Agency-guaranteed residential mortgage-backed securities	$	186,221	$	36	$	(2,799	)	$	183,458
Agency-guaranteed commercial real estate mortgage-backed securities	238,809		432		(769		)	238,472
Corporate notes ⁽¹⁾	44,959		1,130		—			46,089
Equity securities ⁽²⁾	2,311		1,041		—			3,352
Total available-for-sale securities, at fair value	$	472,300	$	2,639	$	(3,568	)	$	471,371


(1)	Includes subordinated debt issued by other bank holding companies.


(2)	Includes equity securities issued by a foreign entity.

The following table shows proceeds from the sale of available-for-sale securities, gross gains and gross losses on those sales of securities:



	For the Years Ended December 31,
	2018			2017			2016
(amounts in thousands)
Proceeds from sale of available-for-sale securities	$	476,182		$	769,203		$	2,852
Gross gains	$	—		$	8,808		$	26
Gross losses	(18,659		)	(8		)	(1		)
Net (losses) gains	$	(18,659	)	$	8,800		$	25

These (losses)/gains were determined using the specific identification method and were reported as (loss) gain on sale of investment securities included in non-interest income on the consolidated statements of income.

The following table shows available-for-sale debt securities by stated maturity. Debt securities backed by mortgages have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and are, therefore, classified separately with no specific maturity date:



	December 31, 2018
	Available for Sale
	Amortized Cost		Fair Value
(amounts in thousands)
Due in one year or less	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	329,096		308,578
Due after ten years	52,311		49,342
Agency-guaranteed residential mortgage-backed securities	311,267		305,374
Total available-for-sale debt securities	$	692,674	$	663,294

Gross unrealized losses and fair value of Customers' available-for-sale debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2018 and 2017 were as follows:



	December 31, 2018
	Less than 12 months					12 months or more				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(amounts in thousands)
Available-for-sale debt securities
Agency-guaranteed residential mortgage-backed securities	$	305,374	$	(5,893	)	$	—	$	—	$	305,374	$	(5,893	)
Corporate notes ⁽¹⁾	310,036		(24,407		)	—		—		310,036		(24,407		)
Total	$	615,410	$	(30,300	)	$	—	$	—	$	615,410	$	(30,300	)


(1)	Includes corporate securities issued by other bank holding companies.



	December 31, 2017
	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
(amounts in thousands)
Available-for-sale debt securities
Agency-guaranteed residential mortgage-backed securities	$	104,861	$	(656	)	$	66,579	$	(2,143	)	$	171,440	$	(2,799	)
Agency-guaranteed commercial mortgage-backed securities	115,970		(740		)	6,151		(29		)	122,121		(769		)
Total	$	220,831	$	(1,396	)	$	72,730	$	(2,172	)	$	293,561	$	(3,568	)

At December 31, 2018, there were twenty-six available-for-sale debt securities with unrealized losses in the less-than-twelve-month category and no available-for-sale debt securities with unrealized losses in the twelve-month-or-more category. The unrealized losses on the mortgage-backed securities are guaranteed by government-sponsored entities and primarily relate to changes in market interest rates. The unrealized losses on the corporate notes relate to securities with no company specific concentration. The unrealized losses were due to an upward shift in interest rates that resulted in a negative impact on the respective notes' fair value. All amounts related to the mortgage-backed securities and the corporate notes are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell these securities, and it is not more likely than not that Customers will be required to sell the securities before recovery of the amortized cost basis.

During the year ended December 31, 2017, Customers recorded OTTI losses of $12.9 million related to its equity holdings in Religare Enterprises, Ltd. ("Religare") for the full amount of the decline in fair value from the cost basis established at December 31, 2016 through September 30, 2017, because Customers no longer has the intent to hold these securities until a recovery in fair value. At December 31, 2017, the fair value of the Religare equity securities was $3.4 million which resulted in an unrealized gain of $1.0 million being recognized in AOCI with no adjustment for deferred taxes as Customers did not have a tax strategy in place capable of generating sufficient capital gains to utilize any capital losses resulting from the Religare investment. At December 31, 2018, Customers continues to not have a tax strategy in place capable of generating sufficient capital gains to utilize any capital losses resulting from the Religare impairment.

As described in NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION, the adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, on January 1, 2018 resulted in a cumulative effect adjustment to Customers' consolidated balance sheet with a $1.0 million reduction in AOCI and a corresponding increase in retained earnings related to the December 31, 2017 unrealized gain on the Religare equity securities. In accordance with the new accounting guidance, changes in the fair value of the Religare equity securities since adoption are recorded directly in earnings, which resulted in an unrealized loss of $1.6 million being recognized in other non-interest income in the accompanying consolidated statements of income for the year ended December 31, 2018. At December 31, 2018, the fair value of the Religare equity securities was $1.7 million.

At December 31, 2018 and 2017, Customers Bank had pledged investment securities with fair values aggregating to $23.0 million and $16.9 million, respectively, as collateral against its borrowings primarily with the FHLB and an unused line of credit with another financial institution. These counterparties do not have the ability to sell or repledge these securities.

At December 31, 2018, and 2017, no securities holdings of any one issuer, other than the U.S. Government and its agencies, amounted to greater than 10% of shareholder's equity.