3. INVESTMENT SECURITIES

A summary of our investment securities portfolio as of December 31, 2015 and 2014 is as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in thousands)
December 31, 2015
Held-to-Maturity:
Mortgage-backed securities:
Residential - U.S. Government sponsored entities	$	152,315	$	123	$	(2,915	)	$	149,523
Commercial - U.S. Government sponsored entities	95,602		—		(989		)	94,613
Total	$	247,917	$	123	$	(3,904	)	$	244,136

Available-for-Sale:
Debt securities:
States and political subdivisions	$	187,552	$	3,819	$	(898	)	$	190,473
Corporate securities	107,721		1,077		(227		)	108,571
Mortgage-backed securities:
Residential - U.S. Government sponsored entities	771,657		5,885		(5,633		)	771,909
Residential - Non-government sponsored entities	64,286		733		(987		)	64,032
Commercial - Non-government sponsored entities	135,439		2,033		(1,118		)	136,354
Other	848		68		—			916
Total	$	1,267,503	$	13,615	$	(8,863	)	$	1,272,255

December 31, 2014
Held-to-Maturity:
Mortgage-backed securities:
Residential - U.S. Government sponsored entities	$	140,741	$	196	$	(2,150	)	$	138,787
Commercial - U.S. Government sponsored entities	97,546		—		(736		)	96,810
Total	$	238,287	$	196	$	(2,886	)	$	235,597

Available-for-Sale:
Debt securities:
States and political subdivisions	$	191,280	$	2,054	$	(1,689	)	$	191,645
Corporate securities	99,237		1,492		(125		)	100,604
Mortgage-backed securities:
Residential - U.S. Government sponsored entities	744,527		11,064		(4,033		)	751,558
Residential - Non-government sponsored entities	45,275		1,510		(92		)	46,693
Commercial - Non-government sponsored entities	135,630		2,946		(935		)	137,641
Other	757		120		—			877
Total	$	1,216,706	$	19,186	$	(6,874	)	$	1,229,018

The amortized cost and estimated fair value of our investment securities at December 31, 2015 by contractual maturity are shown below. Actual maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



	December 31, 2015
	Amortized Cost		Estimated Fair Value
	(Dollars in thousands)
Held-to-Maturity:
Mortgage-backed securities	$	247,917	$	244,136

Available-for-Sale:
Due in one year or less	$	15,596	$	15,797
Due after one year through five years	106,255		107,125
Due after five years through ten years	73,452		74,980
Due after ten years	99,970		101,142
Mortgage-backed securities	971,382		972,295
Other	848		916
Total	$	1,267,503	$	1,272,255

Proceeds from sales of investment securities available for sale were $117.5 million, $162.5 million, and $271.9 million in 2015, 2014 and 2013, respectively, resulting in no gross realized gains in 2015, and gross gains of $0.9 million and $3.9 million in 2014 and 2013, respectively. Gross realized losses were $1.9 million, $0.7 million, and $3.4 million in 2015, 2014 and 2013, respectively. The specific identification method was used as the basis for determining the cost of all securities sold.

In the second quarter of 2015, we completed an investment portfolio repositioning strategy designed to reduce net interest income volatility and enhance the potential prospective earnings and an improved net interest margin. In connection with the repositioning, we sold $119.4 million in lower-yielding available-for-sale non-agency collateralized mortgage obligation securities, and purchased $120.6 million in higher yielding, longer duration mortgage-backed securities. The securities sold had an average net yield of 1.35% and a weighted average life of 4.4 years. Gross proceeds of the sale were reinvested into agency mortgage-backed securities with an average net yield of 2.71% and weighted average life of 7.6 years. The new securities were classified in the available-for-sale portfolio. Gross realized losses on the sale of the available for sale investment securities were $1.9 million.

In the second quarter of 2014, we sold certain available-for-sale investment securities for gross proceeds of $162.5 million. Gross realized gains and losses on the sales of the available-for-sale investment securities were $0.9 million and $0.7 million, respectively. The securities sold had an average net yield of 2.69% and weighted average life of 5.7 years. Proceeds of the sale were used to reduce overnight borrowings, improving the bank's interest rate position in a rising rate environment.

Investment securities of $1.0 billion and $900.5 million at December 31, 2015 and 2014, respectively, were pledged to secure public funds on deposit and other long-term and short-term borrowings.

There were a total of 155 and 195 securities in an unrealized loss position at December 31, 2015 and 2014, respectively. Provided below is a summary of investment securities which were in an unrealized loss position at December 31, 2015 and 2014:



	Less than 12 months					12 months or longer					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2015
Debt securities:
States and political subdivisions	$	30,481	$	(532	)	$	12,576	$	(366	)	$	43,057	$	(898	)
Corporate securities	32,977		(227		)	—		—			32,977		(227		)

Mortgage-backed securities:
Residential - U.S. Government sponsored entities	507,525		(6,241		)	88,271		(2,307		)	595,796		(8,548		)
Residential - Non-government sponsored entities	37,975		(987		)	—		—			37,975		(987		)
Commercial - U.S. Government sponsored entities	94,613		(989		)	—		—			94,613		(989		)
Commercial - Non-government sponsored entities	62,555		(961		)	4,644		(157		)	67,199		(1,118		)
Total temporarily impaired securities	$	766,126	$	(9,937	)	$	105,491	$	(2,830	)	$	871,617	$	(12,767	)

December 31, 2014
Debt securities:
States and political subdivisions	$	23,591	$	(145	)	$	68,622	$	(1,544	)	$	92,213	$	(1,689	)
Corporate securities	23,938		(125		)	—		—			23,938		(125		)

Mortgage-backed securities:
Residential - U.S. Government sponsored entities	107,755		(487		)	318,571		(5,696		)	426,326		(6,183		)
Residential - Non-government sponsored entities	15,895		(92		)	—		—			15,895		(92		)
Commercial - U.S. Government sponsored entities	11,455		(34		)	85,355		(702		)	96,810		(736		)
Commercial - Non-government sponsored entities	4,962		(8		)	47,539		(927		)	52,501		(935		)
Total temporarily impaired securities	$	187,596	$	(891	)	$	520,087	$	(8,869	)	$	707,683	$	(9,760	)

The unrealized losses on the Company’s investment securities were caused by market conditions. Investment securities are evaluated on a quarterly basis, and include evaluating the changes in the investment securities’ ratings issued by rating agencies and changes in the financial condition of the issuer, and for mortgage related securities, delinquency and loss information with respect to the underlying collateral, changes in levels of subordination for the Company’s particular position within the repayment structure, and remaining credit enhancement as compared to expected credit losses of the security. Substantially all of these investment securities continue to be investment grade rated by one or more major rating agencies.

Other-than-temporary impairment (“OTTI”)

Unrealized losses for all investment securities are reviewed to determine whether the losses are “other-than-temporary.” Investment securities are evaluated for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary. In conducting this assessment, we evaluate a number of factors including, but not limited to:


•	The length of time and the extent to which fair value has been less than the amortized cost basis;


•	Adverse conditions specifically related to the security, an industry, or a geographic area;


•	The historical and implied volatility of the fair value of the security;


•	The payment structure of the debt security and the likelihood of the issuer being able to make payments;


•	Failure of the issuer to make scheduled interest or principal payments;


•	Any rating changes by a rating agency; and


•	Recoveries or additional decline in fair value subsequent to the balance sheet date.

The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses.

The declines in market value were primarily attributable to changes in interest rates and disruptions in the credit and financial markets. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, we do not consider our investments to be other-than-temporarily impaired.