3. INVESTMENT SECURITIES

A summary of our investment securities portfolio as of December 31, 2016 and 2015 is as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in thousands)
December 31, 2016
Held-to-Maturity:
Mortgage-backed securities:
Residential-U.S. Government sponsored entities	$	124,082	$	92	$	(2,474	)	$	121,700
Commercial-U.S. Government sponsored entities	93,586		—		(920		)	92,666
Total	$	217,668	$	92	$	(3,394	)	$	214,366

Available-for-Sale:
Debt securities:
States and political subdivisions	$	184,836	$	2,002	$	(1,797	)	$	185,041
Corporate securities	98,596		974		(181		)	99,389
Mortgage-backed securities:
Residential-U.S. Government sponsored entities	775,803		3,698		(9,515		)	769,986
Residential-Non-government sponsored entities	51,681		627		(761		)	51,547
Commercial-Non-government sponsored entities	135,248		2,387		(411		)	137,224
Other	564		96		—			660
Total	$	1,246,728	$	9,784	$	(12,665	)	$	1,243,847



	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

The amortized cost and estimated fair value of our investment securities at December 31, 2016 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, 2016
	Amortized Cost		Estimated Fair Value
	(Dollars in thousands)
Held-to-Maturity:
Mortgage-backed securities	$	217,668	$	214,366

Available-for-Sale:
Due in one year or less	$	6,701	$	6,699
Due after one year through five years	132,559		133,374
Due after five years through ten years	67,541		67,664
Due after ten years	76,631		76,693
Mortgage-backed securities	962,732		958,757
Other	564		660
Total	$	1,246,728	$	1,243,847

There were no investment security sales in 2016.

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 of $117.5 million 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. There were no gross realized gains on the sale of the available-for-sale investment securities. Gross realized losses on the sale of the available-for-sale investment securities were $1.9 million. The specific identification method was used as the basis for determining the cost of all securities sold.

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. The specific identification method was used as the basis for determining the cost of all securities sold.

Investment securities of $1.1 billion and $1.0 billion at December 31, 2016 and 2015, respectively, were pledged to secure public funds on deposit and other long-term and short-term borrowings.

There were a total of 242 and 155 securities in an unrealized loss position at December 31, 2016 and 2015, respectively. Provided below is a summary of investment securities which were in an unrealized loss position at December 31, 2016 and 2015:



	Less Than 12 Months					12 Months or Longer					Total
Description of Securities	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2016
Debt securities:
States and political subdivisions	$	85,288	$	(1,797	)	$	—	$	—		$	85,288	$	(1,797	)
Corporate securities	20,357		(181		)	—		—			20,357		(181		)

Mortgage-backed securities:
Residential-U.S. Government sponsored entities	648,923		(11,766		)	3,978		(223		)	652,901		(11,989		)
Residential-Non-government sponsored entities	30,596		(761		)	—		—			30,596		(761		)
Commercial-U.S. Government sponsored entities	92,666		(920		)	—		—			92,666		(920		)
Commercial-Non-government sponsored entities	52,880		(411		)	—		—			52,880		(411		)
Total temporarily impaired securities	$	930,710	$	(15,836	)	$	3,978	$	(223	)	$	934,688	$	(16,059	)



	Less Than 12 Months					12 Months or Longer					Total
Description of Securities	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated 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	)

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 projected credit losses of the security. 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 volatility 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.