Note 3 – Investment Securities

The amortized cost and estimated fair values of investment securities classified as available for sale and held to maturity are summarized in the following tables:


	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(in thousands)
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	647,288	$	771	$	(18,078	)	$	629,981
Obligations of states and political subdivisions		128,890		294		(3,112	)		126,072
Corporate bonds		4,381		97		—			4,478
Asset backed securities		355,451		73		(1,019	)		354,505

Total debt securities available for sale	$	1,136,010	$	1,235	$	(22,209	)	$	1,115,036

Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	430,343	$	327	$	(7,745	)	$	422,925
Obligations of states and political subdivisions		14,593		82		(230	)		14,445

Total debt securities held to maturity	$	444,936	$	409	$	(7,975	)	$	437,370


	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
			(in thousands)
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	609,695	$	695	$	(5,601	)	$	604,789
Obligations of states and political subdivisions		121,597		1,888		(329	)		123,156

Total debt securities available for sale	$	731,292	$	2,583	$	(5,930	)	$	727,945

Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	500,271	$	5,101	$	(1,889	)	$	503,483
Obligations of states and political subdivisions		14,573		146		(37	)		14,682

Total debt securities held to maturity	$	514,844	$	5,247	$	(1,926	)	$	518,165

During 2018, proceeds from sales of debt securities were $293,279,000, resulting in gross gains of $207,000. During 2017 investment securities with cost basis of $24,796,000 were sold for $25,757,000, resulting in a gain of $961,000 on sale. No investment securities were sold during 2016. Investment securities with an aggregate carrying value of $597,591,000 and $285,596,000 at December 31, 2018 and 2017, respectively, were pledged as collateral for specific borrowings, lines of credit and local agency deposits.

The amortized cost and estimated fair value of debt securities at December 31, 2018 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At December 31, 2018, obligations of U.S. government and agencies with an amortized cost basis totaling $1,077,631 consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At December 31, 2018, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 5.8 years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.


Debt Securities	Available for Sale				Held to Maturity
(In thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year	$	2,410	$	2,413	$	—	$	—
Due after one year through five years		10,625		10,794		1,238		1,250
Due after five years through ten years		17,381		17,622		25,039		24,744
Due after ten years		1,105,594		1,084,207		418,659		411,376

Totals	$	1,136,010	$	1,115,036	$	444,936	$	437,370

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:


	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2018	(in thousands)
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	171,309	$	(3,588	)	$	394,630	$	(14,490	)	$	565,939	$	(18,078	)
Obligations of states and political subdivisions		63,738		(1,541	)		20,719		(1,571	)		84,457		(3,112	)
Asset backed securities		101,386		(1,019	)		—		—			101,386		(1,019	)

Total debt securities available for sale	$	336,433	$	(6,148	)	$	415,349	$	(16,061	)	$	751,782	$	(22,209	)

Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	223,810	$	(2,619	)	$	158,648	$	(5,126	)	$	382,458	$	(7,745	)
Obligations of states and political subdivisions		5,786		(114	)		4,042		(116	)		9,828		(230	)

Total debt securities held to maturity	$	229,596	$	(2,733	)	$	162,690	$	(5,242	)	$	392,286	$	(7,975	)


	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2017	(in thousands)
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	284,367	$	(2,176	)	$	166,338	$	(3,425	)	$	450,705	$	(5,601	)
Obligations of states and political subdivisions		4,904		(35	)		17,085		(294	)		21,989		(329	)

Total securities available for sale	$	289,271	$	(2,211	)	$	183,423	$	(3,719	)	$	472,694	$	(5,930	)

Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	93,017	$	(567	)	$	95,367	$	(1,322	)	$	188,384	$	(1,889	)
Obligations of states and political subdivisions		1,488		(7	)		2,637		(30	)		4,125		(37	)

Total debt securities held to maturity	$	94,505	$	(574	)	$	98,004	$	(1,352	)	$	192,509	$	(1,926	)

Obligations of U.S. government corporations and agencies: Unrealized losses on investments in obligations of U.S. government corporations and agencies are caused by interest rate increases. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At December 31, 2018, 145 debt securities representing obligations of U.S. government corporations and agencies had unrealized losses with aggregate depreciation of 2.65% from the Company’s amortized cost basis.

Obligations of states and political subdivisions: The unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At December 31, 2018, 105 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 3.42% from the Company’s amortized cost basis.

Asset backed securities: The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors in these types of securities. At the time of purchase, each of these securities were rated AA or AAA and through December 31, 2018 have not experienced any deterioration in credit rating. The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At December 31, 2018, 6 asset backed securities had unrealized losses with aggregate depreciation of 1.0% from the Company’s amortized cost basis.

Marketable equity securities: All unrealized losses recognized during the reporting period were for equity securities still held at December 31, 2018.