The amortized cost, gross unrealized gains and losses and estimated fair values for available-for-sale and held-to-maturity securities by major security type at December 31, 2014 and December 31, 2013 were as follows (in thousands):



December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	101,224	$	91	$	(1,358	)	$	99,957
Obligations of states and political subdivisions	75,589		2,608		(113		)	78,084
Mortgage-backed securities: GSE residential	193,814		2,548		(961		)	195,401
Trust preferred securities	3,300		—		(2,936		)	364
Other securities	4,036		26		(12		)	4,050
Total available-for-sale	$	377,963	$	5,273	$	(5,380	)	$	377,856
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	53,650	$	299	$	(12	)	$	53,937
December 31, 2013
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations & agencies	$	197,805	$	137	$	(7,574	)	$	190,368
Obligations of states and political subdivisions	65,304		1,031		(1,773		)	64,562
Mortgage-backed securities: GSE residential	229,661		2,215		(4,275		)	227,601
Trust preferred securities	3,652		—		(3,461		)	191
Other securities	6,035		34		(67		)	6,002
Total available-for-sale	$	502,457	$	3,417	$	(17,150	)	$	488,724

During the third quarter of 2014, management evaluated its available-for-sale portfolio and transferred obligations of U.S. government corporations & agencies securities with a fair value of $53.6 million from available-for-sale to held-to-maturity to reduce price volatility. Management determined it has both the intent and ability to hold these securities to maturity. Transfers of investment securities into the held-to-maturity category from available-for-sale are made at fair value on the date of transfer. There were no gains or losses recognized as a result of this transfer. The related $1.4 million of unrealized holding loss that was included in the transfer is retained in the carrying value of the held-to-maturity securities and in other comprehensive income net of deferred taxes. These amounts are being amortized into net interest income over the remaining life of the related securities as a yield adjustment, resulting in no impact on future net income.

Trust preferred securities at December 31, 2014, is one trust preferred pooled security issued by First Tennessee Financial (“FTN”). The unrealized loss of this security, which has a maturity of twenty-three years, is primarily due to its long-term nature, a lack of demand or inactive market for the security, and concerns regarding the underlying financial institutions that have issued the trust preferred security. See the heading “Trust Preferred Securities” below for further information regarding this security.

Proceeds from sales of investment securities, realized gains and losses and income tax expense and benefit were as follows during the years ended December 31, 2014, 2013 and 2012 (in thousands):



	2014		2013		2012
Proceeds from sales	$	75,618	$	69,665	$	30,500
Gross gains	1,452		2,454		934
Gross losses	737		161		—
Income tax expense	279		894		364

The following table indicates the expected maturities of investment securities classified as available-for-sale presented at fair value, and held-to-maturity presented at amortized cost at December 31, 2014 and the weighted average yield for each range of maturities (dollars in thousands):



	One year or less			After 1 through 5 years			After 5 through 10 years			After ten years			Total
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	68,602		$	31,355		$	—		$	—		$	99,957
Obligations of state and political subdivisions	5,455			35,016			37,613			—			78,084
Mortgage-backed securities: GSE residential	3,771			147,438			44,192			—			195,401
Trust preferred securities	—			—			—			364			364
Other securities	—			—			3,995			55			4,050
Total investments	$	77,828		$	213,809		$	85,800		$	419		$	377,856
Weighted average yield	1.78		%	2.43		%	2.73		%	1.13		%	2.35		%
Full tax-equivalent yield	1.99		%	2.85		%	3.79		%	1.13		%	2.86		%
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	43,925		$	—		$	9,725		$	—		$	53,650
Weighted average yield	2.13		%	—		%	2.28		%	—		%	2.22		%
Full tax-equivalent yield	2.13		%	—		%	2.28		%	—		%	2.22		%

The weighted average yields are calculated on the basis of the amortized cost and effective yields weighted for the scheduled maturity of each security. Tax-equivalent yields have been calculated using a 35% tax rate. With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, there were no investment securities of any single issuer, the book value of which exceeded 10% of stockholders' equity at December 31, 2014.

Investment securities carried at approximately $330 million and $321 million at December 31, 2014 and 2013, respectively, were pledged to secure public deposits and repurchase agreements and for other purposes as permitted or required by law.

The following table presents the aging of gross unrealized losses and fair value by investment category as of December 31, 2014 and 2013 (in thousands):



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2014
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	7,289	$	(46	)	$	75,030	$	(1,312	)	$	82,319	$	(1,358	)
Obligations of states and political subdivisions	3,586		(19		)	4,416		(94		)	8,002		(113		)
Mortgage-backed securities: GSE residential	19,565		(159		)	37,224		(802		)	56,789		(961		)
Trust preferred securities	—		—			364		(2,936		)	364		(2,936		)
Other securities	—		—			1,988		(12		)	1,988		(12		)
Total	$	30,440	$	(224	)	$	119,022	$	(5,156	)	$	149,462	$	(5,380	)
Held-to-maturity:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	4,853	$	(12	)	$	—	$	—		$	4,853	$	(12	)
December 31, 2013
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	183,074	$	(7,574	)	$	—	$	—		$	183,074	$	(7,574	)
Obligations of states and political subdivisions	29,986		(1,708		)	808		(65		)	30,794		(1,773		)
Mortgage-backed securities: GSE residential	131,125		(4,275		)	13		—			131,138		(4,275		)
Trust preferred securities	—		—			191		(3,461		)	191		(3,461		)
Other securities	3,933		(67		)	—		—			3,933		(67		)
Total	$	348,118	$	(13,624	)	$	1,012	$	(3,526	)	$	349,130	$	(17,150	)

U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies. At December 31, 2014, there were 16 available-for-sale U.S. Treasury securities and obligations of U.S. government corporations and agencies with a fair value of $75,030,000 and unrealized losses of $1,312,000 in a continuous unrealized loss position for twelve months or more. There were no held-to-maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies in a continuous unrealized loss position for twelve months or more. At December 31, 2013 there were no obligations of U.S. government corporations and agencies in a continuous unrealized loss position for twelve months or more. The increase in unrealized losses is due to the rise in interest rates that has occurred since the time the investments were purchased.

Obligations of states and political subdivisions. At December 31, 2014 there were ten Obligations of states and political subdivisions with a fair value of $4,416,000 and unrealized losses of $94,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2013, there were two Obligations of states and political subdivisions with a fair value of $808,000 and unrealized losses of $65,000 in a continuous unrealized loss position for twelve months or more. The increase in unrealized losses is due to the rise in interest rates that has occurred since the time the investments were purchased.

Mortgage-backed Securities: GSE Residential. At December 31, 2014 there were eleven mortgage-backed security with a fair value of $37,224,000 and unrealized losses of $802,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2013, there was one mortgage-backed security with a fair value of $13,000 and unrealized losses of $109 in a continuous unrealized loss position for twelve months or more. The increase in unrealized losses is due to the rise in interest rates that has occurred since the time the investments were purchased.

Trust Preferred Securities. At December 31, 2014, there was one trust preferred security with a fair value of $364,000 and unrealized losses of $2,936,000 in a continuous unrealized loss position for twelve months or more. At December 31, 2013, there was one trust preferred securities with a fair value of $191,000 and unrealized losses of $3,461,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the trust preferred securities, a lack of demand or inactive market for these securities, the impending change to the regulatory treatment of these securities, and concerns regarding the underlying financial institutions that have issued the trust preferred securities. The Company recorded no other-than-temporary impairment (OTTI) for these securities during 2014 or 2013. Because the Company does not intend to sell the remaining security and it is not more-likely-than-not that the Company will be required to sell this securities before recovery of its amortized cost basis, which may be maturity, the Company does not consider the remainder of the investment in this security to be other-than-temporarily impaired at December 31, 2014. However, future downgrades or additional deferrals and defaults in the security could result in additional OTTI and consequently, have a material impact on future earnings.

On July 22, 2013, the Company sold its holdings in PreTSL I and PreTSL II and the net proceeds exceeded the aggregate book value of the securities by approximately $1.4 million. On July 3, 2012, the Company’s holding in PreTSL VI was redeemed in full and the payment received exceeded the aggregate book of the security by approximately $139,000.

Following are the details for the impaired trust preferred security remaining as of December 31, 2014 (in thousands):



	Book Value		Market Value		Unrealized Gains (Losses)			Other-than- temporary Impairment Recorded To-date
PreTSL XXVIII	$	3,300	$	364	$	(2,936	)	$	(1,111	)

Other securities. At December 31, 2014 and 2013, there were no corporate bonds in a continuous unrealized loss position for twelve months or more.

The Company does not believe any other individual unrealized loss as of December 31, 2014 represents OTTI. However, given the continued disruption in the financial markets, the Company may be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any additional OTTI will depend on the decline in the underlying cash flows of the securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in the period the other-than-temporary impairment is identified.

Other-than-temporary Impairment

Upon acquisition of a security, the Company determines whether it is within the scope of the accounting guidance for investments in debt and equity securities or whether it must be evaluated for impairment under the accounting guidance for beneficial interests in securitized financial assets

The Company conducts periodic reviews to evaluate its investment securities to determine whether OTTI has occurred. While all securities are considered, the securities primarily impacted by OTTI evaluation are pooled trust preferred securities. For the pooled trust preferred security currently in the investment portfolio, an extensive review is conducted to determine if any additional OTTI has occurred. The Company utilizes an independent third-party to perform the OTTI evaluation. The Company's management reviews the assumption inputs and methodology with the third-party to obtain an understanding of them and determine if they are appropriate for the evaluation. Economic models are used to project future cash flows for the security based on current assumptions for discount rate, prepayments, default and deferral rates and recoveries. These assumptions are determined based on the structure of the issuance, the specific collateral underlying the security, historical performance of trust preferred securities and general state of the economy. The OTTI test compares the present value of the cash flows from quarter to quarter to determine if there has been an adverse change which could indicate additional OTTI.

The discount rate assumption used in the cash flow model is equal to the current yield used to accrete the beneficial interest. The Company’s current trust preferred security investment has a floating rate coupon of 3-month LIBOR plus 90 basis points. Since the estimate of 3-month LIBOR is based on the forward curve on the measurement date, and is therefore variable, the discount assumption for this security is a range of projected coupons over the expected life of the security.

The Company considers the likelihood that issuers will prepay their securities which changes the amount of expected cash flows. Factors such as the coupon rates of collateral, economic conditions and regulatory changes, such as the Dodd-Frank Act and Basel III, are considered.

The trust preferred security includes collateral issued by financial institutions and insurance companies. To identify bank issuers with a high risk of near term default or deferral, a credit model developed by the third-party is utilized that scores each bank issuer based on 29 different ratios covering capital adequacy, asset quality, earnings, liquidity, the Texas Ratio, and sensitivity to interest rates. To account for longer term bank default risk not captured by the credit model, it is assumed that banks will default at a rate of 2% annually for the first two years of the cash flow projection, and 36 basis points in each year thereafter. To project defaults for insurance issuers, each issuer’s credit rating is mapped to its idealized default rate, which is AM Best’s estimate of the historical default rate for insurance companies with that rating.

Lastly, it is assumed that trust preferred securities issued by banks that have already failed will have no recoveries, and that banks projected to default will have recoveries of 10%. Additionally, the 10% recovery assumption, incorporates the potential for cures by banks that are currently in deferral.

If the Company determines that a given pooled trust preferred security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

Credit Losses Recognized on Investments

As described above, some of the Company’s investments in trust preferred securities have experienced fair value deterioration due to credit losses but are not otherwise other-than-temporarily impaired. The following table provides information about those trust preferred securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012 (in thousands).



	Accumulated Credit Losses as of December 31:
	2014		2013			2012
Credit losses on trust preferred securities held:
Beginning of period	$	1,111	$	3,989		$	4,116
Additions related to OTTI losses not previously recognized	—		—			—
Reductions due to sales / (recoveries)	—		(2,878		)	(127		)
Reductions due to change in intent or likelihood of sale	—		—			—
Additions related to increases in previously recognized OTTI losses	—		—			—
Reductions due to increases in expected cash flows	—		—			—
End of period	$	1,111	$	1,111		$	3,989

Maturities of investment securities were as follows at December 31, 2014 (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Amortized Cost		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	75,041	$	74,057
Due after one-five years	65,428		66,371
Due after five-ten years	40,345		41,608
Due after ten years	3,335		419
	184,149		182,455
Mortgage-backed securities: GSE residential	193,814		195,401
Total available-for-sale	377,963		377,856
Held-to-maturity:
Due in one year or less	43,925		44,169
Due after one-five years	—		—
Due after five-ten years	9,725		9,768
Due after ten years	—		—
Total held-to-maturity	53,650		$	53,937