Note 3. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2019 and December 31, 2018 are summarized as follows (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2019:
Securities available-for-sale:
U.S. Treasury securities	$	48,612	$	5	$	5	$	48,612
U.S. government agency securities	68,219		25		1,275		66,969
Mortgage-backed securities	1,372,248		3,798		16,325		1,359,721
State and municipal securities	1,423,313		30,366		2,948		1,450,731
Asset-backed securities	269,941		1,026		1,957		269,010
Corporate notes and other	56,062		302		1,401		54,963
	$	3,238,395	$	35,522	$	23,911	$	3,250,006
Securities held-to-maturity:
State and municipal securities	$	194,043	$	4,979	$	12	$	199,010
	$	194,043	$	4,979	$	12	$	199,010



December 31, 2018:
Securities available-for-sale:
U.S. Treasury securities	$	30,325	$	—	$	25	$	30,300
U.S. government agency securities	71,456		49		1,346		70,159
Mortgage-backed securities	1,336,469		3,110		28,634		1,310,945
State and municipal securities	1,244,471		3,785		18,602		1,229,654
Asset-backed securities	379,107		820		4,345		375,582
Corporate notes and other	69,399		170		2,523		67,046
	$	3,131,227	$	7,934	55,475		$	3,083,686
Securities held-to-maturity:
State and municipal securities	$	194,282	$	152	$	1,303	$	193,131
	$	194,282	$	152	$	1,303	$	193,131

In the third quarter of 2018, Pinnacle Financial transferred, at fair value, $179.8 million of municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related net unrealized after tax losses of $2.2 million remained in accumulated other comprehensive income (loss) and will be amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities. No gains or losses were recognized at the time of the transfer.

At March 31, 2019, approximately $1.2 billion of securities within Pinnacle Financial's investment portfolio were pledged to secure either public funds and other deposits or securities sold under agreements to repurchase. At March 31, 2019, repurchase agreements comprised of secured borrowings totaled $100.7 million and were secured by $100.7 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 to remain adequately secured.

The amortized cost and fair value of debt securities as of March 31, 2019 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
March 31, 2019:	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	63,866	$	63,860	$	325	$	326
Due in one year to five years	22,546		22,533		5,679		5,678
Due in five years to ten years	103,720		103,272		7,962		8,003
Due after ten years	1,406,074		1,431,610		180,077		185,003
Mortgage-backed securities	1,372,248		1,359,721		—		—
Asset-backed securities	269,941		269,010		—		—
	$	3,238,395	$	3,250,006	$	194,043	$	199,010

At March 31, 2019 and December 31, 2018, 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 March 31, 2019
U.S. Treasury securities	$	29,824	$	3	$	248	$	2	$	30,072	$	5
U.S. government agency securities	6,631		58		51,280		1,217		57,911		1,275
Mortgage-backed securities	82,112		565		987,424		15,760		1,069,536		16,325
State and municipal securities	161,772		2,622		80,686		509		242,458		3,131
Asset-backed securities	152,062		1,534		26,675		423		178,737		1,957
Corporate notes	10,672		719		19,871		682		30,543		1,401
Total temporarily-impaired securities	$	443,073	$	5,501	$	1,166,184	$	18,593	$	1,609,257	$	24,094

At December 31, 2018
U.S. Treasury securities	$	30,054	$	22	$	246	$	3	$	30,300	$	25
U.S. government agency securities	13,697		328		42,539		1,018		56,236		1,346
Mortgage-backed securities	203,299		2,134		882,231		26,500		1,085,530		28,634
State and municipal securities	805,821		18,643		198,610		4,078		1,004,431		22,721
Asset-backed securities	268,677		4,118		11,828		227		280,505		4,345
Corporate notes	26,272		1,538		25,915		985		52,187		2,523
Total temporarily-impaired securities	$	1,347,820	$	26,783	$	1,161,369	$	32,811	$	2,509,189	$	59,594

The applicable dates for determining when securities were in an unrealized loss position were March 31, 2019 and December 31, 2018. 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 March 31, 2019 and December 31, 2018, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the tables above, including both available-for-sale and held-to-maturity investment securities, at March 31, 2019, Pinnacle Financial had approximately $24.1 million in unrealized losses on $1.6 billion of securities. The unrealized losses associated with $179.8 million of municipal securities transferred from the available-for-sale portfolio to the held-to-maturity portfolio in 2018 represent unrealized losses since the date of purchase, independent of the impact associated with changes in the cost basis upon transfer between portfolios. The unrealized losses associated with these investment securities are 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 Pinnacle Financial's ongoing impairment analysis. 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 those securities that have an unrealized loss at March 31, 2019, 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 March 31, 2019.

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, during the three months ended March 31, 2019 available-for-sale securities of approximately $126.6 million were sold and net unrealized losses, net of tax, of $1.4 million 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 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.