Note 4. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at September 30, 2015 and December 31, 2014 are summarized as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2015:
Securities available-for-sale:
U.S. Treasury securities	$	9,996	$	3	$	-	$	9,999
U.S. government agency securities		147,268		83		2,548		144,803
Mortgage-backed agency securities		584,066		8,797		1,892		590,971
State and municipal securities		156,469		7,200		175		163,494
Asset-backed securities		51,348		52		509		50,891
Corporate notes and other		11,258		880		1		12,137
	$	960,405	$	17,015	$	5,125	$	972,295
Securities held-to-maturity:
State and municipal securities	$	31,698	$	227	$	75	$	31,850
	$	31,698	$	227	$	75	$	31,850

December 31, 2014:
Securities available-for-sale:
U.S. Treasury securities	$	-	$	-	$	-	$	-
U.S. government agency securities		117,098		12		3,654		113,456
Mortgage-backed agency securities		447,757		10,322		2,240		455,839
State and municipal securities		130,545		8,213		180		138,578
Asset-backed securities		13,089		14		85		13,018
Corporate notes and other		10,196		969		2		11,163
	$	718,685	$	19,530		6,161	$	732,054
Securities held-to-maturity:
State and municipal securities	$	38,676	$	205	$	92	$	38,789
	$	38,676	$	205	$	92	$	38,789

At September 30, 2015, approximately $757.2 million of securities within Pinnacle Financial's investment portfolio were either pledged to secure public funds and other deposits or securities sold under agreements to repurchase.

The amortized cost and fair value of debt securities as of September 30, 2015 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage- and asset-backed securities since the mortgages and assets underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories in the following summary (in thousands):

	Available-for-sale				Held-to-maturity
September 30, 2015:	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	17,623	$	17,670	$	962	$	963
Due in one year to five years		38,088		39,631		8,990		9,058
Due in five years to ten years		180,128		184,465		12,863		12,964
Due after ten years		89,152		88,667		8,883		8,865
Mortgage-backed securities		584,066		590,971		-		-
Asset-backed securities		51,348		50,891		-		-
	$	960,405	$	972,295	$	31,698	$	31,850

At September 30, 2015 and December 31, 2014, the following investments had unrealized losses. The table below classifies these investments according to the term of the unrealized losses of less than twelve months or twelve months or longer (in thousands):

	Investments with an Unrealized Loss of less than 12 months				Investments with an Unrealized Loss of 12 months or longer				Total Investments with an Unrealized Loss
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At September 30, 2015:

U.S. Treasury securities	$	-	$	-	$	-	$	-	$	-	$	-
U.S. government agency securities		60,704		1,206		65,803		1,342		126,507		2,548
Mortgage-backed securities		108,531		762		105,911		1,130		214,442		1,892
State and municipal securities		11,921		78		5,671		172		17,592		250
Asset-backed securities		30,183		487		7,105		22		37,288		509
Corporate notes		502		1		-		-		502		1
Total temporarily-impaired securities	$	211,841	$	2,534	$	184,490	$	2,666	$	396,331	$	5,200

At December 31, 2014:

U.S. Treasury securities	$	-	$	-	$	-	$	-	$	-	$	-
U.S. government agency securities		3,593		10		103,658		3,644		107,251		3,654
Mortgage-backed securities		91,410		405		102,892		1,835		194,302		2,240
State and municipal securities		3,561		15		16,502		257		20,063		272
Asset-backed securities		-		-		9,289		85		9,289		85
Corporate notes		950		1		154		1		1,104		2
Total temporarily-impaired securities	$	99,514	$	431	$	232,495	$	5,822	$	332,009	$	6,253

The applicable dates for determining when securities are in an unrealized loss position are September 30, 2015 and December 31, 2014. As such, it is possible that a security had a market value that exceeded its amortized cost on other days during the past twelve-month periods ended September 30, 2015 and December 31, 2014, but is in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the tables above, at September 30, 2015, Pinnacle Financial had $5.2 million in unrealized losses on $396.3 million of securities. The unrealized losses associated with these investment securities are driven by changes in interest rates and the unrealized loss is recorded as a component of equity. These securities will continue to be monitored as a part of our ongoing impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond issuers. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. If a shortfall in future cash flows is identified, a credit loss will be deemed to have occurred and will be recognized as a charge to earnings and a new cost basis for the security will be established.

Because Pinnacle Financial currently does not intend to sell those securities that have an unrealized loss at September 30, 2015, and it is not more-likely-than-not that Pinnacle Financial will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, Pinnacle Financial does not consider these securities to be other-than-temporarily impaired at September 30, 2015.

Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, Pinnacle Financial will consider selling the security, but will review each security on a case-by-case basis as these factors become known. Consistent with the investment policy, available-for-sale securities of $125.0 million were sold and a gain of $562,000 realized during the nine months ended September 30, 2015. The investment portfolios of our acquired institutions were restructured in accordance with our asset liability policies. Of the $125.0 million in available-for-sale securities sold during the nine months ended September 30, 2015, $75.4 million and $16.3 million of the securities were sold to restructure the acquired portfolios of CapitalMark and Magna, respectively. As this restructuring was performed using Day 1 fair values, no gain or loss was recorded on these transactions.

The carrying values of Pinnacle Financial's investment securities could decline in the future if the financial condition of issuers deteriorates and management determines it is probable that Pinnacle Financial will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future. Additionally, there is a risk that other-than-temporary impairment charges may occur in the future if management's intention to hold these securities to maturity and or recovery changes.