CHFC 2018 Annual Report

Maturity as of December 31, 2017 (1) Within One Year After One but Within Five Years After Five but Within Ten Years After Ten Years Total Carrying Value (2) Total Fair Value (Dollars in thousands) Amount Yield (3) Amount Yield (3) Amount Yield (3) Amount Yield (3) Amount Yield (3) Carried at fair value: Government and government-sponsored enterprises $ 30,241 2.29% $ 81,106 2.39% $ 61,461 2.43% $ 30,108 2.43% $ 202,916 2.39% $ 202,916 State and political subdivisions 9,219 2.55 60,691 2.14 115,623 2.63 160,437 3.70 345,970 3.04 345,970 Residential mortgage- backed securities 21,922 2.44 66,510 2.46 38,594 2.52 23,105 2.58 150,131 2.49 150,131 Collateralized mortgage obligations 223,295 2.65 500,467 2.61 231,658 2.74 78,425 2.98 1,033,845 2.68 1,033,845 Corporate bonds 13,968 1.73 37,308 2.01 141,518 3.68 — — 192,794 3.22 192,794 Trust preferred securities — — — — 22,967 3.62 13,099 2.93 36,066 3.37 36,066 Total debt securities carried at fair value 298,645 2.55 746,082 2.50 611,821 2.92 305,174 3.27 1,961,722 2.76 1,961,722 Held-to-Maturity: State and political subdivisions 89,359 2.33 237,113 3.12 152,299 3.92 197,822 3.64 676,593 3.35 662,516 Trust preferred securities — — — — — — 500 4.75 500 4.75 390 Total investment securities held-to-maturity 89,359 2.33 237,113 3.12 152,299 3.92 198,322 3.64 677,093 3.35 662,906 Total investment securities $ 388,004 2.50% $ 983,195 2.65% $ 764,120 3.12% $ 503,496 3.42% $2,638,815 2.92% $2,624,628 (1) Residential mortgage-backed securities, collateralized mortgage obligations and certain government and government-sponsored enterprise securities are based on scheduled principal maturity. All other investment securities are based on final contractual maturity. (2) The aggregate book value of securities issued by any single issuer, other than the U.S. government and government sponsored enterprises, did not exceed 10% of our shareholders' equity. (3) Yields are weighted by amount and time to contractual maturity, are on a taxable equivalent basis using a 35% federal income tax rate and are based on carrying value. Yields disclosed are actual yields based on carrying value at December 31, 2017. Approximately 22% of our investment securities at December 31, 2017 were variable-rate financial instruments. We utilize third-party pricing services to obtain market value prices for our investment securities portfolio. On a quarterly basis, we validate the reasonableness of prices received from the third-party pricing services through independent price verification on a sample of investment securities in the portfolio, data integrity validation based upon comparison of current market prices to prior period market prices and analysis of overall expectations of movement in market prices based upon the changes in the related yield curves and other market factors. We annually review the pricing methodology of the third-party pricing vendors and the results of the vendors' internal control assessments to ensure the integrity of the process that the vendor uses to develop market pricing for our investment securities portfolio. The carrying value of our investment securities totaled $3.65 billion at December 31, 2018, an increase of $1.01 billion or 38.1%, from investment securities of $2.64 billion at December 31, 2017, primarily as a result of our long-term plan to increase our investment securities portfolio as a percentage of total assets. Our investment securities portfolio as of December 31, 2018 had a weighted average life of approximately 5.3 years and an effective duration of approximately 2.6 years. 51