Investment Securities

The following is a summary of the amortized cost and fair value of investment securities carried at fair value and investment securities held-to-maturity at March 31, 2018 and December 31, 2017:



	Investment Securities Carried at Fair Value
(Dollars in thousands)	Amortized Cost		Unrealized Gains⁽¹⁾		Unrealized Losses⁽¹⁾		Fair Value
March 31, 2018
Debt securities
Government sponsored agencies	$	194,256	$	436	$	1,674	$	193,018
State and political subdivisions	421,564		183		11,346		410,401
Residential mortgage-backed securities	146,736		5		4,007		142,734
Collateralized mortgage obligations	1,300,250		156		22,430		1,277,976
Corporate bonds	238,717		777		4,578		234,916
Trust preferred securities	34,934		1,369		32		36,271
Total debt securities available-for-sale	2,336,457		2,926		44,067		2,295,316
Equity securities
Preferred stock	1,389		418		—		1,807
Total equity securities	1,389		418		—		1,807
Total	$	2,337,846	$	3,344	$	44,067	$	2,297,123
December 31, 2017
Debt securities
Government sponsored agencies	$	203,099	$	765	$	948	$	202,916
State and political subdivisions	350,088		310		4,428		345,970
Residential mortgage-backed securities	151,752		5		1,626		150,131
Collateralized mortgage obligations	1,042,240		89		8,484		1,033,845
Corporate bonds	193,230		1,156		1,592		192,794
Trust preferred securities	34,848		1,280		62		36,066
Total debt securities available-for-sale	1,975,257		3,605		17,140		1,961,722
Equity securities
Preferred stock	1,389		435		—		1,824
Total equity securities	1,389		435		—		1,824
Total	$	1,976,646	$	4,040	$	17,140	$	1,963,546

(1)

The unrealized gain/loss for equity investment securities formerly in the available-for-sale category was recorded into other comprehensive income prior to January 1, 2018. Following the adoption of ASU No. 2016-01 as of January 1, 2018, the unrealized gain/loss for equity investment securities carried at fair value is recorded to net income and the unrealized gain/loss for available-for-sale debt securities continues to be recorded into other comprehensive income.



	Investment Securities Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
March 31, 2018
State and political subdivisions	$	676,347	$	2,183	$	15,334	$	663,196
Trust preferred securities	500		—		75		425
Total	$	676,847	$	2,183	$	15,409	$	663,621
December 31, 2017
State and political subdivisions	$	676,593	$	3,856	$	17,933	$	662,516
Trust preferred securities	500		—		110		390
Total	$	677,093	$	3,856	$	18,043	$	662,906

Investment securities are classified at the time they are acquired as either available-for-sale, held-to-maturity or measured at fair value based upon various factors, including asset/liability management strategies, liquidity and profitability objectives and regulatory requirements. Debt securities classified as available-for-sale and equity securities are carried at fair value. Investment securities carried at fair value may be sold prior to maturity based upon asset/liability management decisions. Unrealized gains or losses on available-for-sale debt securities are recorded as part of accumulated other comprehensive income in stockholders’ equity. Unrealized gains or losses on equity securities were recorded as part of accumulated other comprehensive income in stockholders' equity through December 31, 2017. Effective January 1, 2018, the amendments within ASU 2016-01, require that equity investments be measured at fair value with changes in fair value recognized in net income. At January 1, 2018, the Corporation's equity securities consisted of $1.8 million in preferred stocks. The Corporation recognized a cumulative effect adjustment in the amount of $344 thousand as of January 1, 2018 to reclassify the fair value position into retained earnings. Beginning January 1, 2018 the fair value changes on equity securities will be recognized in net income, rather than in accumulated other comprehensive income. As a result, there may be greater volatility in earnings each reporting period related to fair value changes. Held-to-maturity securities are carried at amortized cost, adjusted for amortization of premiums or accretion of discounts.

The majority of the Corporation’s residential mortgage-backed securities and collateralized mortgage obligations are backed by a U.S. government agency (Government National Mortgage Association) or a government sponsored enterprise (Federal Home Loan Mortgage Corporation or Federal National Mortgage Association).

Proceeds from sales of securities and the associated gains and losses recorded in earnings are listed below:



	Three Months Ended March 31,
(Dollars in thousands)	2018		2017
Proceeds	$	—	$	—
Gross gains	—		90
Gross losses	—		—

The following is a summary of the amortized cost and fair value of investment securities at March 31, 2018, by maturity, for both carried at fair value and held-to-maturity. The maturities of residential mortgage-backed securities and collateralized mortgage obligations are based on scheduled principal payments. The maturities of all other debt securities are based on final contractual maturity.



	March 31, 2018
(Dollars in thousands)	Amortized Cost		Fair Value
Investment Securities Carried at Fair Value:
Due in one year or less	$	21,498	$	21,471
Due after one year through five years	131,011		129,135
Due after five years through ten years	397,319		388,757
Due after ten years	1,786,629		1,755,953
Preferred stock	1,389		1,807
Total	$	2,337,846	$	2,297,123
Investment Securities Held-to-Maturity:
Due in one year or less	$	81,162	$	81,076
Due after one year through five years	241,937		238,254
Due after five years through ten years	162,648		157,828
Due after ten years	191,100		186,463
Total	$	676,847	$	663,621

Securities with a carrying value of $1.06 billion and $937.2 million were pledged at March 31, 2018 and December 31, 2017, respectively, to secure borrowings and deposits.

At March 31, 2018 and December 31, 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.

The following schedule summarizes information for debt securities both available-for-sale and held-to-maturity with gross unrealized losses at March 31, 2018 and December 31, 2017, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position. As of March 31, 2018, the Corporation’s securities portfolio consisted of 2,234 securities, 1,600 of which were in an unrealized loss position.



	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2018
Government sponsored agencies	$	114,568	$	910	$	14,236	$	764	$	128,804	$	1,674
State and political subdivisions	577,711		15,991		347,810		10,689		925,521		26,680
Residential mortgage-backed securities	89,157		1,767		53,532		2,240		142,689		4,007
Collateralized mortgage obligations	1,098,199		20,529		88,873		1,901		1,187,072		22,430
Corporate bonds	125,675		3,551		48,557		1,027		174,232		4,578
Trust preferred securities	—		—		4,274		107		4,274		107
Total	$	2,005,310	$	42,748	$	557,282	$	16,728	$	2,562,592	$	59,476
December 31, 2017
Government sponsored agencies	$	63,818	$	510	$	24,621	$	438	$	88,439	$	948
State and political subdivisions	437,407		12,268		349,242		10,093		786,649		22,361
Residential mortgage-backed securities	93,508		383		56,576		1,243		150,084		1,626
Collateralized mortgage obligations	713,525		7,235		73,707		1,249		787,232		8,484
Corporate bonds	71,447		1,138		47,878		454		119,325		1,592
Trust preferred securities	—		—		11,164		172		11,164		172
Total	$	1,379,705	$	21,534	$	563,188	$	13,649	$	1,942,893	$	35,183

An assessment is performed quarterly by the Corporation to determine whether unrealized losses in its debt securities portfolio are temporary or other-than-temporary by carefully considering all reasonably available information. The Corporation reviews factors such as financial statements, credit ratings, news releases and other pertinent information of the underlying issuer or company to make its determination. Management did not believe any individual unrealized loss on any debt security, as of March 31, 2018, represented other-than-temporary impairment (OTTI) as the unrealized losses for these securities resulted primarily from changes in benchmark U.S. Treasury interest rates and not credit issues. Management believed that the unrealized losses on debt securities at March 31, 2018 were temporary in nature and due primarily to changes in interest rates and reduced market liquidity and not as a result of credit-related issues.

At March 31, 2018, the Corporation did not have the intent to sell any of its impaired debt securities and believed that it was more-likely-than-not that the Corporation will not have to sell any such debt securities before a full recovery of amortized cost. Accordingly, at March 31, 2018, the Corporation believed the impairments in its debt securities portfolio were temporary in nature. However, there is no assurance that OTTI may not occur in the future.