3. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of our investment securities portfolio as of December 31, 2018 and 2017 are as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
December 31, 2018
Held-to-Maturity:
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	$	83,436	$	19	$	(3,174	)	$	80,281
Commercial - U.S. GSEs	65,072		—		(1,081		)	63,991
Total held-to-maturity investment securities	$	148,508	$	19	$	(4,255	)	$	144,272

Available-for-Sale:
Debt securities:
States and political subdivisions	$	174,114	$	1,035	$	(1,475	)	$	173,674
Corporate securities	55,259		—		(410		)	54,849
U.S. Treasury obligations and direct obligations of U.S Government agencies	33,257		—		(683		)	32,574
Mortgage-backed securities:
Residential - U.S. GSEs	736,175		369		(19,492		)	717,052
Residential - Non-government sponsored entities ("Non-GSEs")	41,245		337		(464		)	41,118
Commercial - U.S. GSEs and agencies	53,014		—		(1,531		)	51,483
Commercial - Non-GSEs	134,867		1,013		(1,152		)	134,728
Total available-for-sale investment securities	$	1,227,931	$	2,754	$	(25,207	)	$	1,205,478

Equity securities	826		—		—			826



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
December 31, 2017
Held-to-Maturity:
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	$	100,279	$	106	$	(2,222	)	$	98,163
Commercial - U.S. GSEs	91,474		—		(436		)	91,038
Total held-to-maturity investment securities	$	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. GSEs	808,242		2,230		(9,789		)	800,683
Residential - Non-government sponsored entities ("Non-GSEs")	45,679		1,084		—			46,763
Commercial - U.S. GSEs and agencies	40,012		—		(287		)	39,725
Commercial - Non-GSEs	135,058		2,461		(193		)	137,326
Total available-for-sale investment securities	$	1,306,741	$	8,458	$	(11,133	)	$	1,304,066

Equity securities	$	825	$	—	$	—		$	825

As discussed in Note 1 - Summary of Significant Accounting Policies, the Company adopted ASU 2016-01 beginning January 1, 2018, which resulted in a reclassification of the Company's equity investment securities portfolio of $0.8 million and $0.8 million as of December 31, 2018 and December 31, 2017, respectively, from available-for-sale investment securities to equity investment securities on the Company's consolidated balance sheets. During the first quarter of 2018, the Company recorded a cumulative effect adjustment which increased opening retained earnings (or reduced opening accumulated deficit) and decreased AOCI by $0.1 million related to the unrealized gains on the equity investment securities portfolio. Changes in the fair value of the equity investment securities portfolio are now recognized in net income.

The amortized cost and estimated fair value of our investment securities at December 31, 2018 by contractual maturity are shown below. Actual maturities may differ from contractual maturities as issuers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.



	December 31, 2018
	Amortized Cost		Fair Value
	(Dollars in thousands)
Held-to-Maturity:
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	$	83,436	$	80,281
Commercial - U.S. GSEs	65,072		63,991
Total held-to-maturity investment securities	$	148,508	$	144,272

Available-for-Sale:
Due in one year or less	$	65,470	$	65,485
Due after one year through five years	95,013		94,653
Due after five years through ten years	48,081		47,809
Due after ten years	54,066		53,150
Mortgage-backed securities
Residential - U.S. GSEs	736,175		717,052
Residential - Non-government sponsored entities ("Non-GSEs")	41,245		41,118
Commercial - U.S. GSEs and agencies	53,014		51,483
Commercial - Non-GSEs	134,867		134,728
Total available-for-sale investment securities	$	1,227,931	$	1,205,478

Equity securities	$	826	$	826

In the fourth quarter of 2018, we sold two available-for-sale corporate securities totaling $10.0 million at a gross realized loss on sale of $0.3 million.

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 an average yield of 1.91%. Gross proceeds of the sale of $96.0 million were immediately reinvested back into investment securities with 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.

There were no investment security sales in 2016.

Investment securities of $0.98 billion and $1.08 billion at December 31, 2018 and 2017, respectively, were pledged to secure public funds on deposit and other long-term and short-term borrowings.

At December 31, 2018 and 2017, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

There were a total of 336 and 223 securities in an unrealized or unrecognized loss position at December 31, 2018 and 2017, respectively. The following table summarizes securities which were in an unrealized or unrecognized loss position at December 31, 2018 and 2017, 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
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2018
Debt securities:
States and political subdivisions	$	38,099	$	(157	)	$	49,505	$	(1,318	)	$	87,604	$	(1,475	)
Corporate securities	49,729		(250		)	5,120		(160		)	54,849		(410		)
U.S. Treasury obligations and direct obligations of U.S Government agencies	30,029		(613		)	2,545		(70		)	32,574		(683		)

Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	88,957		(1,229		)	666,685		(21,437		)	755,642		(22,666		)
Residential - Non-government sponsored entities ("Non-GSEs").	—		—			24,515		(464		)	24,515		(464		)
Commercial - U.S. GSEs and agencies	13,973		(247		)	101,500		(2,365		)	115,473		(2,612		)
Commercial - Non-GSEs	33,847		(233		)	46,680		(919		)	80,527		(1,152		)
Total temporarily impaired securities	$	254,634	$	(2,729	)	$	896,550	$	(26,733	)	$	1,151,184	$	(29,462	)



	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, 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 ("GSEs")	335,883		(3,372		)	340,219		(8,639		)	676,102		(12,011		)
Commercial - U.S. GSEs and agencies	130,763		(723		)	—		—			130,763		(723		)
Commercial - Non-GSEs	28,490		(193		)	—		—			28,490		(193		)
Total temporarily impaired securities	$	559,687	$	(4,662	)	$	360,929	$	(9,129	)	$	920,616	$	(13,791	)

The unrealized losses on the Company's investment securities are primarily attributable to changes in interest rates and volatility in the credit and financial markets. Investment securities are evaluated on at least 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. 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.

Visa and MasterCard Class B Common Stock

As of December 31, 2018, the Company owned 34,631 shares and 11,170 shares of Class B common stock of Visa, Inc. ("Visa") and MasterCard, Inc. ("MasterCard"), respectively. Due to transfer restrictions and the lack of readily determinable fair values of Class B common stock of Visa and MasterCard, the Company chooses to carry the shares on the Company's consolidated balance sheets at zero cost basis.