Investment Securities

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 September 30, 2018 and December 31, 2017 were as follows (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
September 30, 2018
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	127,365	$	—	$	(4,696	)	$	122,669
Obligations of states and political subdivisions	176,273		570		(3,497		)	173,346
Mortgage-backed securities: GSE residential	310,122		132		(9,585		)	300,669
Other securities	2,269		127		—			2,396
Total available-for-sale	$	616,029	$	829	$	(17,778	)	$	599,080
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	69,409	$	—	$	(2,014	)	$	67,395

December 31, 2017
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	115,796	$	8	$	(2,034	)	$	113,770
Obligations of states and political subdivisions	165,037		2,254		(1,025		)	166,266
Mortgage-backed securities: GSE residential	295,778		493		(2,460		)	293,811
Trust preferred securities	2,893		—		(345		)	2,548
Other securities	2,039		145		—			2,184
Total available-for-sale	$	581,543	$	2,900	$	(5,864	)	$	578,579
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	69,332	$	103	$	(978	)	$	68,457

Trust preferred securities represents one trust preferred pooled security issued by First Tennessee Financial (“FTN”). This security was sold during the second quarter of 2018.

Realized gains and losses resulting from sales of securities were as follows during the three and nine months ended September 30, 2018 and 2017 (in thousands):



	Three months ended September 30,					Nine months ended September 30,
	2018		2017			2018			2017
Gross gains	$	—	$	394		$	941		$	746
Gross losses	—		(140		)	(40		)	(157		)

The following table indicates the expected maturities of investment securities classified as available-for-sale presented at fair value, and held-to-maturity presented at amortized cost, at September 30, 2018 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	$	85,272		$	37,397		$	—		$	—		$	122,669
Obligations of state and political subdivisions	16,847			78,561			76,890			1,048			173,346
Mortgage-backed securities: GSE residential	4			120,920			179,745			—			300,669
Other securities	—			2,015			—			381			2,396
Total available-for-sale investments	$	102,123		$	238,893		$	256,635		$	1,429		$	599,080
Weighted average yield	2.34		%	2.76		%	2.95		%	3.12		%	2.77		%
Full tax-equivalent yield	2.51		%	3.12		%	3.31		%	4.16		%	3.10		%
Held to Maturity:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	39,994		$	29,415		$	—		$	—		$	69,409
Weighted average yield	1.76		%	2.08		%	—		%	—		%	1.90		%
Full tax-equivalent yield	1.76		%	2.08		%	—		%	—		%	1.90		%

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 21% 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 September 30, 2018.

Investment securities carried at approximately $575 million and $479 million at September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017 (in thousands):



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2018
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	67,162	$	(1,957	)	$	55,507	$	(2,739	)	$	122,669	$	(4,696	)
Obligations of states and political subdivisions	101,192		(2,338		)	18,856		(1,159		)	120,048		(3,497		)
Mortgage-backed securities: GSE residential	234,958		(8,724		)	45,257		(861		)	280,215		(9,585		)
Total	$	403,312	$	(13,019	)	$	119,620	$	(4,759	)	$	522,932	$	(17,778	)
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	24,510	$	(340	)	$	42,885	$	(1,674	)	$	67,395	$	(2,014	)
December 31, 2017
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	58,584	$	(540	)	$	47,972	$	(1,494	)	$	106,556	$	(2,034	)
Obligations of states and political subdivisions	42,618		(769		)	9,267		(256		)	51,885		(1,025		)
Mortgage-backed securities: GSE residential	187,949		(1,942		)	22,609		(518		)	210,558		(2,460		)
Trust preferred securities	—		—			2,548		(345		)	2,548		(345		)
Total	$	289,151	$	(3,251	)	$	82,396	$	(2,613	)	$	371,547	$	(5,864	)
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	34,101	$	(525	)	$	14,540	$	(453	)	$	48,641	$	(978	)

U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies. At September 30, 2018 there were fourteen available-for sale U.S. Treasury securities and obligations of U.S. government corporations and agencies with a fair value of $55,507,000 and unrealized losses of $2,739,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2017 , there were eleven available-for sale U.S. Treasury securities and obligations of U.S. government corporations and agencies with a fair value of $47,972,000 and unrealized losses of $1,494,000 in a continuous unrealized loss position for twelve months or more. At September 30, 2018 there were eight held-to-maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies with a fair value of $42,885,000 and unrealized losses of $1,674,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2017 there were seven held-to-maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies with a fair value of $14,540,000 and unrealized losses of $453,000 in a continuous unrealized loss position for twelve months or more.

Obligations of states and political subdivisions. At September 30, 2018 there were forty-one obligations of states and political subdivisions with a fair value of $18,856,000 and unrealized losses of $1,159,000 in a continuous loss position for twelve months or more. At December 31, 2017, there were thirty-nine obligations of states and political subdivisions with a fair value of $9,267,000 and unrealized losses of $256,000 in a continuous unrealized loss position for twelve months or more.

Mortgage-backed Securities: GSE Residential. At September 30, 2018 there were thirty-two mortgage-backed securities with a fair value of $45,257,000 and unrealized losses of $861,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2017, there were twenty-six mortgage-backed securities with a fair value of $22,609,000 and unrealized losses of $518,000 in a continuous unrealized loss position for twelve months or more.

Trust Preferred Securities. At December 31, 2017, there was one trust preferred security with a fair value of $2,548,000 and unrealized loss of $345,000 in a continuous unrealized loss position for twelve months or more. The unrealized loss was primarily due to the long-term nature of the trust preferred security, a lack of demand or inactive market for the security, 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 sold this security during the second quarter of 2018.

Other securities. At September 30, 2018 and December 31, 2017, there were no other securities in a continuous unrealized loss position for twelve months or more.

The Company does not believe any other individual unrealized loss as of September 30, 2018 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 determines whether it is within the scope of the accounting guidance for investments in debt and equity securities or whether it must be evaluated for impairment under the accounting guidance for beneficial interests in securitized financial assets.

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. The following table provides information about the trust preferred security for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income (loss) for the nine months ended September 30, 2018 and 2017 (in thousands).



	Accumulated Credit Losses
	September 30, 2018			September 30, 2017
Credit losses on trust preferred securities held
Beginning of period	$	1,111		$	1,111
Additions related to OTTI losses not previously recognized	—			—
Reductions due to sales / (recoveries)	(1,111		)	—
Reductions due to change in intent or likelihood of sale	—			—
Additions related to increases in previously recognized OTTI losses	—			—
Reductions due to increases in expected cash flows	—			—
End of period	$	—		$	1,111

On May 29, 2018 the Company sold its trust preferred security. This sale resulted in recovery of all of the book value of the security. The net proceeds exceeded the aggregate book value of these securities by approximately $846,000 and this amount was recorded as a security gain during the second quarter of 2018.