Note 5. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at December 31, 2016 and 2015 are summarized as follows (in thousands):

December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale:
U.S Treasury securities	$	250	$	-	$	-	$	250
U.S. Government agency securities		22,306		-		537		21,769
Mortgage-backed securities		988,008		4,304		15,686		976,626
State and municipal securities		211,581		4,103		2,964		212,720
Asset-backed securities		79,318		111		849		78,580
Corporate notes		8,608		39		46		8,601
	$	1,310,071	$	8,557	$	20,082	$	1,298,546
Securities held-to-maturity:
State and municipal securities		25,251		87		105		25,233
	$	25,251	$	87	$	105	$	25,233
December 31, 2015
Securities available-for-sale:
U.S Treasury securities	$	-	$	-	$	-	$	-
U.S. Government agency securities		131,499		3		3,309		128,193
Mortgage-backed securities		581,998		5,948		5,030		582,916
State and municipal securities		158,072		7,094		124		165,042
Asset-backed securities		49,598		8		805		48,801
Corporate notes		9,541		589		17		10,113
	$	930,708	$	13,642	$	9,285	$	935,065
Securities held-to-maturity:
State and municipal securities		31,377		257		48		31,586
	$	31,377	$	257	$	48	$	31,586

At December 31, 2016, approximately $902.9 million of Pinnacle Financial's investment portfolio was pledged to secure public funds and other deposits and securities sold under agreements to repurchase. At December 31, 2016, repurchase agreements comprised of secured borrowings totaled $85.7 million and were secured by $85.7 million of pledged U.S. government agency securities, municipal securities, asset backed securities, and corporate debentures. As the fair value of securities pledged to secure repurchase agreements may decline, Pinnacle Financial regularly evaluates its need to pledge additional securities for the counterparty to remain adequately secured.

The amortized cost and fair value of debt securities as of December 31, 2016 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages 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
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	2,533	$	2,556	$	594	$	594
Due in one year to five years		60,311		61,591		10,186		10,182
Due in five years to ten years		122,753		123,769		10,586		10,567
Due after ten years		57,148		55,424		3,885		3,890
Mortgage-backed securities		988,008		976,626		-		-
Asset-backed securities		79,318		78,580		-		-
	$	1,310,071	$	1,298,546	$	25,251	$	25,233

At December 31, 2016 and 2015, included in securities were the following investments with unrealized losses. The information below classifies these investments according to the term of the unrealized loss 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
December 31, 2016
U.S. Treasury securities	$	-	$	-	$	-	$	-	$	-	$	-
U.S. government agency securities		-		-		20,820		537		20,820		537
Mortgage-backed securities		801,213		15,073		43,148		613		844,361		15,686
State and municipal securities		87,277		3,068		312		1		87,589		3,069
Asset-backed securities		14,510		32		34,097		817		48,607		849
Corporate notes		4,810		46		-		-		4,810		46
Total temporarily-impaired securities	$	907,810	$	18,219	$	98,377	$	1,968	$	1,006,187	$	20,187

December 31, 2015
U.S. Treasury securities	$	-	$	-	$	-	$	-	$	-	$	-
U.S. government agency securities		61,903		1,702		65,538		1,607		127,441		3,309
Mortgage-backed securities		338,230		2,789		103,003		2,241		441,233		5,030
State and municipal securities		6,509		38		6,135		134		12,644		172
Asset-backed securities		41,466		798		3,539		7		45,005		805
Corporate notes		2,554		17		-		-		2,554		17
Total temporarily-impaired securities	$	450,662	$	5,344	$	178,215	$	3,989	$	628,877	$	9,333

The applicable date for determining when securities are in an unrealized loss position is December 31, 2016 and 2015. As such, it is possible that a security had a market value less than its amortized cost on other days during the twelve-month periods ended December 31, 2016 and 2015, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the table above, at December 31, 2016 and 2015, Pinnacle Financial had unrealized losses of $20.2 million and $9.3 million on $1.0 billion and $628.9 million, respectively, of available-for-sale and held-to-maturity securities. The unrealized losses associated with these investment securities are primarily driven by changes in interest rates and are not due to the credit quality of the securities. 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. Because Pinnacle Financial currently does not intend to sell these securities 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 December 31, 2016.

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 $72.8 million were sold and net unrealized gains of $395,000 were reclassified from accumulated other comprehensive income into net income.

The carrying values of Pinnacle Financial's investment securities could decline in the future if the financial condition of the securities' 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.