CHFC 2018 Annual Report

The following table summarizes the carrying value of investment securities at December 31, 2018, 2017 and 2016: December 31, (Dollars in thousands) 2018 2017 2016 Carried at Fair Value: U.S. Treasury securities $ — $ — $ 5,793 Government and government-sponsored enterprises 351,700 202,916 215,011 State and political subdivisions 516,286 345,970 300,088 Residential mortgage-backed securities 213,428 150,131 272,282 Collateralized mortgage obligations 1,601,298 1,033,845 320,025 Corporate bonds 293,063 192,794 89,474 Trust preferred securities 46,057 36,066 30,553 Preferred stock — 1,824 1,738 Total investment securities carried at fair value 3,021,832 1,963,546 1,234,964 Held-to-Maturity: State and political subdivisions 623,599 676,593 622,927 Trust preferred securities 500 500 500 Total investment securities held-to-maturity 624,099 677,093 623,427 Total investment securities $ 3,645,931 $ 2,640,639 $ 1,858,391 At December 31, 2018, our investment securities portfolio consisted of: Government and government-sponsored enterprise (GSE) debt obligations, comprised primarily of fixed-rate instruments backed by U.S. government agencies or government-sponsored enterprises, totaling $351.7 million; state and political subdivisions debt obligations, comprised primarily of general debt obligations, totaling $1.14 billion; residential mortgage-backed securities (MBSs), comprised primarily of fixed- rate instruments backed by U.S. government agencies or government-sponsored enterprises, totaling $213.4 million; collateralized mortgage obligations (CMOs), comprised of approximately 86.8%fixed-rate and 13.2%variable-rate instruments primarily backed by U.S. government agencies and government-sponsored enterprises, totaling $1.60 billion; corporate bonds, comprised primarily of debt obligations of large U.S. global financial organizations, totaling $293.1 million; and preferred stock and trust preferred securities (TRUPs), comprised of preferred stock debt instruments of two large regional/national banks and variable-rate TRUPs from both publicly-traded bank holding companies and small non-public bank holding companies, totaling $46.6 million. Fixed- rate instruments comprised approximately 75.5% of our investment securities portfolio at December 31, 2018. We record investment securities in accordance with ASC Topic 320, Investments-Debt Securities under which we are required to assess securities that have fair values below their amortized cost basis to determine whether the decline (impairment) is other-than-temporary. We perform a quarterly assessment to determine whether unrealized losses in our debt securities portfolio are temporary or other-than-temporary by considering all reasonably available information. We review factors such as financial statements, credit ratings, news releases and other pertinent information of the underlying issuer or company to make our determination. In assessing whether a decline is other-than-temporary, management considers, among other things (i) the length of time and the extent to which the fair value has been less than the amortized cost, (ii) the financial condition and near-term prospects of the issuer, (iii) the potential for impairments in an entire industry or sub-sector and (iv) the potential for impairments in certain economically depressed geographical locations. Our total investment securities portfolio had a carrying value of $3.65 billion at December 31, 2018, with gross unrealized losses of $61.4 million at that date. We believe that the unrealized losses on debt securities at December 31, 2018 were temporary in nature and due primarily to changes in interest rates on the investment securities and market illiquidity, and not as a result of credit-related issues. Accordingly, we believe the unrealized losses in our debt securities portfolio at December 31, 2018 were temporary in nature, and therefore, no impairment loss was recognized in our Consolidated Statement of Income in 2018. However, other-than-temporary impairment ("OTTI") may occur in the future as a result of material declines in the fair value of investment securities resulting frommarket, credit, economic or other conditions.Afurther discussion of the assessment of potential impairment and our process that resulted in the conclusion that the impairment was temporary in nature follows. At December 31, 2018, the gross unrealized losses in our investment securities portfolio of $61.4 million were comprised as follows: Government and GSE securities, residential MBSs and CMOs, combined of $32.2 million, state and political subdivisions securities of $16.0 million, corporate bonds of $11.4 million, and TRUPs of $1.8 million. The amortized costs and fair values of investment securities are disclosed in Note 4 to our Consolidated Financial Statements. 52