AFS Securities

The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows at:



	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Government sponsored enterprises	$	184	$	—	$	4	$	180
States and political subdivisions	193,195		1,328		566		193,957
Auction rate money market preferred	3,200		—		92		3,108
Mortgage-backed securities	196,194		21		8,079		188,136
Collateralized mortgage obligations	120,096		17		4,355		115,758
Total	$	512,869	$	1,366	$	13,096	$	501,139



	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Government sponsored enterprises	$	217	$	—	$	1	$	216
States and political subdivisions	204,131		4,486		143		208,474
Auction rate money market preferred	3,200		—		151		3,049
Mortgage-backed securities	210,757		390		2,350		208,797
Collateralized mortgage obligations	129,607		160		1,573		128,194
Total	$	547,912	$	5,036	$	4,218	$	548,730

The amortized cost and fair value of AFS securities by contractual maturity at September 30, 2018 are as follows:



	Maturing								Securities with Variable Monthly Payments or Noncontractual Maturities
	Due in One Year or Less		After One Year But Within Five Years		After Five Years But Within Ten Years		After Ten Years				Total
Government sponsored enterprises	$	—	$	184	$	—	$	—	$	—	$	184
States and political subdivisions	22,802		80,091		61,348		28,954		—		193,195
Auction rate money market preferred	—		—		—		—		3,200		3,200
Mortgage-backed securities	—		—		—		—		196,194		196,194
Collateralized mortgage obligations	—		—		—		—		120,096		120,096
Total amortized cost	$	22,802	$	80,275	$	61,348	$	28,954	$	319,490	$	512,869
Fair value	$	22,850	$	80,589	$	61,855	$	28,843	$	307,002	$	501,139

Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations.

As the auction rate money market preferred stocks have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.

A summary of the sales activity of AFS securities was as follows for the:



	Three Months Ended September 30				Nine Months Ended September 30
	2018		2017		2018		2017
Proceeds from sales of AFS securities	$	—	$	—	$	—	$	12,827
Gross realized gains (losses)	$	—	$	—	$	—	$	142
Applicable income tax expense (benefit)	$	—	$	—	$	—	$	48

The following information pertains to AFS securities with gross unrealized losses at September 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous loss position.



	September 30, 2018
	Less Than Twelve Months				Twelve Months or More
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Total Unrealized Losses
Government sponsored enterprises	$	4	$	180	$	—	$	—	$	4
States and political subdivisions	566		41,972		—		—		566
Auction rate money market preferred	—		—		92		3,108		92
Mortgage-backed securities	2,780		89,602		5,299		96,985		8,079
Collateralized mortgage obligations	2,198		72,074		2,157		39,948		4,355
Total	$	5,548	$	203,828	$	7,548	$	140,041	$	13,096
Number of securities in an unrealized loss position:			164				37		201



	December 31, 2017
	Less Than Twelve Months				Twelve Months or More
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Total Unrealized Losses
Government sponsored enterprises	$	1	$	216	$	—	$	—	$	1
States and political subdivisions	142		16,139		1		188		143
Auction rate money market preferred	—		—		151		3,049		151
Mortgage-backed securities	454		72,007		1,896		76,065		2,350
Collateralized mortgage obligations	701		76,435		872		25,308		1,573
Total	$	1,298	$	164,797	$	2,920	$	104,610	$	4,218
Number of securities in an unrealized loss position:			81				24		105

Unrealized losses on our AFS securities portfolio are the result of recent increases in intermediate-term and long-term benchmark interest rates and not credit issues.

As of September 30, 2018 and December 31, 2017, we conducted an analysis to determine whether any AFS securities currently in an unrealized loss position should be other-than-temporarily impaired. Such analyses considered, among other factors, the following criteria:


•	Has the value of the investment declined more than what is deemed to be reasonable based on a risk and maturity adjusted discount rate?


•	Is the investment credit rating below investment grade?


•	Is it probable the issuer will be unable to pay the amount when due?


•	Is it more likely than not that we will have to sell the security before recovery of its cost basis?


•	Has the duration of the investment been extended?

During the fourth quarter of 2016, we identified one municipal bond as other-than-temporarily impaired. While management estimated the OTTI to be realized, we also engaged the services of an independent investment valuation firm to estimate the amount of impairment as of December 31, 2016. The valuation calculated the estimated market value utilizing two different approaches:

1) Market - Appraisal and Comparable Investments

2) Income - Discounted Cash Flow Method

The two methods were then weighted, with a higher weighting applied to the Market approach, to determine the estimated impairment. As a result of this analysis, we reduced the carrying value to $230 which required us to recognize an OTTI of $770 in earnings for the year ended December 31, 2016. Based on internal analysis of this bond as of September 30, 2018, there was no additional OTTI recognized as of September 30, 2018 and the carrying value of this bond remained at $230.

Based on our analysis which included the criteria outlined above, the fact that we have asserted that we do not have the intent to sell AFS securities in an unrealized loss position, and considering it is unlikely that we will have to sell any AFS securities in an unrealized loss position before recovery of their cost basis, we do not believe that the values of any other AFS securities are other-than-temporarily impaired as of September 30, 2018 or December 31, 2017, with the exception of the one municipal bond discussed above.