3. INVESTMENT SECURITIES

A summary of our investment portfolio is as follows:



(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2018
Held-to-maturity:
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	$	92,247	$	3	$	(3,916	)	$	88,334
Commercial - U.S. Government-sponsored entities	65,909		—		(1,913		)	63,996
Total	$	158,156	$	3	$	(5,829	)	$	152,330

Available-for-sale:
Debt securities:
States and political subdivisions	$	176,640	$	1,258	$	(1,980	)	$	175,918
Corporate securities	65,908		28		(504		)	65,432
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,746		23		(266		)	35,503
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	797,679		389		(24,343		)	773,725
Commercial - U.S. Government agencies and sponsored entities	54,429		—		(2,006		)	52,423
Residential - Non-government agencies	43,150		316		(620		)	42,846
Commercial - Non-government agencies	134,962		877		(1,717		)	134,122
Total	$	1,308,514	$	2,891	$	(31,436	)	$	1,279,969

Equity securities	$	692	$	152	$	—		$	844



(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2017
Held-to-maturity:
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	$	100,279	$	106	$	(2,222	)	$	98,163
Commercial - U.S. Government-sponsored entities	91,474		—		(436		)	91,038
Total	$	191,753	$	106	$	(2,658	)	$	189,201

Available-for-sale:
Debt securities:
States and political subdivisions	$	178,459	$	2,041	$	(719	)	$	179,781
Corporate securities	73,772		582		(76		)	74,278
U.S. Treasury obligations and direct obligations of U.S Government agencies	25,519		60		(69		)	25,510
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	808,242		2,230		(9,789		)	800,683
Commercial - U.S. Government agencies and sponsored entities	40,012		—		(287		)	39,725
Residential - Non-government agencies	45,679		1,084		—			46,763
Commercial - Non-government agencies	135,058		2,461		(193		)	137,326
Total	$	1,306,741	$	8,458	$	(11,133	)	$	1,304,066

Equity securities	$	686	$	139	$	—		$	825

The amortized cost and estimated fair value of investment securities at June 30, 2018 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



	June 30, 2018
(dollars in thousands)	Amortized Cost		Fair Value
Held-to-maturity:
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	$	92,247	$	88,334
Commercial - U.S. Government-sponsored entities	65,909		63,996
Total	$	158,156	$	152,330

Available-for-sale:
Due in one year or less	$	35,234	$	35,259
Due after one year through five years	132,627		132,431
Due after five years through ten years	50,044		49,512
Due after ten years	60,389		59,651

Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	797,679		773,725
Commercial - U.S. Government agencies and sponsored entities	54,429		52,423
Residential - Non-government agencies	43,150		42,846
Commercial - Non-government agencies	134,962		134,122
Total	$	1,308,514	$	1,279,969

Equity securities	$	692	$	844

We did not sell any available-for-sale securities during the three and six months ended June 30, 2018.

In the second quarter of 2017, we completed an investment portfolio repositioning strategy designed to enhance potential prospective earnings and improve net interest margin. In connection with the repositioning, we sold $97.7 million in lower-yielding available-for-sale securities, and purchased $97.4 million in higher yielding, longer duration investment securities. The

investment securities sold had a duration of 3.3 years and an average yield of 1.91%. Gross proceeds of the sale of $96.0 million were immediately reinvested back into investment securities with a duration of 4.6 years and an average yield of 2.57%. The new securities were classified in the available-for-sale portfolio. There were no gross realized gains on the sale of the investment securities. Gross realized losses on the sale of the investment securities were $1.6 million. The specific identification method was used as the basis for determining the cost of all securities sold.

We did not sell any available-for-sale securities during the three months ended March 31, 2017.

Investment securities of $1.03 billion and $1.08 billion at June 30, 2018 and December 31, 2017, respectively, were pledged to secure public funds on deposit and other long-term debt and short-term borrowings.

Provided below is a summary of the 345 and 223 investment securities which were in an unrealized or unrecognized loss position at June 30, 2018 and December 31, 2017, respectively, aggregated by major security type and length of time in a continuous unrealized or unrecognized loss position.



	Less Than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2018
Debt securities:
States and political subdivisions	$	72,466	$	(1,052	)	$	15,114	$	(928	)	$	87,580	$	(1,980	)
Corporate securities	47,624		(316		)	5,144		(188		)	52,768		(504		)
U.S. Treasury obligations and direct obligations of U.S Government agencies	28,864		(266		)	—		—			28,864		(266		)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	499,759		(11,959		)	339,024		(16,300		)	838,783		(28,259		)
Residential - Non-government agencies	25,590		(620		)	—		—			25,590		(620		)
Commercial - U.S. Government agencies and sponsored entities	116,420		(3,919		)	—		—			116,420		(3,919		)
Commercial - Non-government agencies	85,063		(1,717		)	—		—			85,063		(1,717		)
Total temporarily impaired securities	$	875,786	$	(19,849	)	$	359,282	$	(17,416	)	$	1,235,068	$	(37,265	)



	Less Than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2017
Debt securities:
States and political subdivisions	$	53,811	$	(305	)	$	15,403	$	(414	)	$	69,214	$	(719	)
Corporate securities	—		—			5,307		(76		)	5,307		(76		)
U.S. Treasury obligations and direct obligations of U.S Government agencies	10,740		(69		)	—		—			10,740		(69		)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	335,883		(3,372		)	340,219		(8,639		)	676,102		(12,011		)
Residential - Non-government agencies	—		—			—		—			—		—
Commercial - U.S. Government-sponsored entities	130,763		(723		)	—		—			130,763		(723		)
Commercial - Non-government agencies	28,490		(193		)	—		—			28,490		(193		)
Total temporarily impaired securities	$	559,687	$	(4,662	)	$	360,929	$	(9,129	)	$	920,616	$	(13,791	)

Other-Than-Temporary Impairment ("OTTI")

Unrealized losses for all investment securities are reviewed to determine whether the losses are deemed "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 declines 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.

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.