4. SECURITIES

The amortized cost and fair value of securities are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
September 30, 2016
U.S. Treasury	$	29,839	$	165	$	—		$	30,004
U.S. government-sponsored entities		382,570		2,106		(39	)		384,637
Residential mortgage-backed securities:
Agency mortgage-backed securities		1,039,245		17,406		—			1,056,651
Agency collateralized mortgage obligations		552,974		3,517		(1,768	)		554,723
Non-agency collateralized mortgage obligations		934		1		—			935
Commercial mortgage-backed securities		2,817		—		(1	)		2,816
States of the U.S. and political subdivisions		36,963		205		(30	)		37,138
Other debt securities		9,803		122		(580	)		9,345

Total debt securities		2,055,145		23,522		(2,418	)		2,076,249
Equity securities		975		392		—			1,367

Total securities available for sale	$	2,056,120	$	23,914	$	(2,418	)	$	2,077,616

December 31, 2015
U.S. Treasury	$	29,738	$	58	$	—		$	29,796
U.S. government-sponsored entities		368,463		856		(1,325	)		367,994
Residential mortgage-backed securities:
Agency mortgage-backed securities		703,069		4,594		(2,832	)		704,831
Agency collateralized mortgage obligations		503,328		1,032		(8,530	)		495,830
Non-agency collateralized mortgage obligations		1,177		13		—			1,190
Commercial mortgage-backed securities		4,299		—		(12	)		4,287
States of the U.S. and political subdivisions		10,748		309		—			11,057
Other debt securities		14,729		208		(651	)		14,286

Total debt securities		1,635,551		7,070		(13,350	)		1,629,271
Equity securities		975		324		(3	)		1,296

Total securities available for sale	$	1,636,526	$	7,394	$	(13,353	)	$	1,630,567

Securities Held to Maturity
September 30, 2016
U.S. Treasury	$	500	$	192	$	—		$	692
U.S. government-sponsored entities		272,715		1,076		(196	)		273,595
Residential mortgage-backed securities:
Agency mortgage-backed securities		830,590		20,337		—			850,927
Agency collateralized mortgage obligations		787,120		3,927		(3,054	)		787,993
Non-agency collateralized mortgage obligations		1,877		8		(5	)		1,880
Commercial mortgage-backed securities		50,022		1,478		(120	)		51,380
States of the U.S. and political subdivisions		306,421		6,558		(691	)		312,288

Total securities held to maturity	$	2,249,245	$	33,576	$	(4,066	)	$	2,278,755

December 31, 2015
U.S. Treasury	$	500	$	153	$	—		$	653
U.S. government-sponsored entities		137,385		809		(395	)		137,799
Residential mortgage-backed securities:
Agency mortgage-backed securities		709,970		9,858		(1,176	)		718,652
Agency collateralized mortgage obligations		499,694		803		(7,657	)		492,840
Non-agency collateralized mortgage obligations		2,681		14		—			2,695
Commercial mortgage-backed securities		51,258		115		(259	)		51,114
States of the U.S. and political subdivisions		235,573		4,191		(101	)		239,663

Total securities held to maturity	$	1,637,061	$	15,943	$	(9,588	)	$	1,643,416

Gross gains and gross losses were realized on securities as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2016		2015		2016			2015
Gross gains	$	299	$	314	$	597		$	328
Gross losses		—		—		(1	)		(9	)

Net gains	$	299	$	314	$	596		$	319

As of September 30, 2016, the amortized cost and fair value of securities, by contractual maturities, were as:

Available for Sale

Held to Maturity

(in thousands)

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

Due in one year or less

50,029

50,221

10,472

10,486

Due from one to five years

377,561

379,721

254,105

255,091

Due from five to ten years

24,302

24,482

69,863

70,901

Due after ten years

7,283

6,700

245,196

250,097

459,175

461,124

579,636

586,575

Residential mortgage-backed securities:

Agency mortgage-backed securities

1,039,245

1,056,651

830,590

850,927

Agency collateralized mortgage obligations

552,974

554,723

787,120

787,993

Non-agency collateralized mortgage obligations

934

935

1,877

1,880

Commercial mortgage-backed securities

2,817

2,816

50,022

51,380

Equity securities

975

1,367

—

Total securities

2,056,120

2,077,616

2,249,245

2,278,755

Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based on the payment patterns of the underlying collateral.

Following is information relating to securities pledged:


(dollars in thousands)	September 30, 2016			December 31, 2015
Securities pledged (carrying value):
Collateral for public deposits, trust deposits and for other purposes as required by law	$	2,876,304		$	1,728,939
Collateral for short-term borrowings		332,095			272,629
Securities pledged as a percent of total securities		74.2	%		61.3	%

Following are summaries of the fair values and unrealized losses of impaired securities, segregated by length of impairment:


	Less than 12 Months							12 Months or More							Total
(dollars in thousands)	#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses
Securities Available for Sale
September 30, 2016
U.S. government-sponsored entities		2	$	39,961	$	(39	)		—	$	—	$	—			2	$	39,961	$	(39	)
Residential mortgage-backed securities:
Agency collateralized mortgage obligations		9		127,838		(290	)		9		96,505		(1,478	)		18		224,343		(1,768	)
Commercial mortgage-backed securities		1		2,817		(1	)		—		—		—			1		2,817		(1	)
States of the U.S. and political subdivisions		11		14,304		(30	)		—		—		—			11		14,304		(30	)
Other debt securities		—		—		—			3		4,322		(580	)		3		4,322		(580	)

Total impaired securities available for sale		23	$	184,920	$	(360	)		12	$	100,827	$	(2,058	)		35	$	285,747	$	(2,418	)


December 31, 2015
U.S. government-sponsored entities		6	$	99,131	$	(814	)		2	$	34,487	$	(511	)		8	$	133,618	$	(1,325	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		19		359,250		(2,832	)		—		—		—			19		359,250		(2,832	)
Agency collateralized mortgage obligations		9		126,309		(1,366	)		18		215,330		(7,164	)		27		341,639		(8,530	)
Commercial mortgage-backed securities		1		4,287		(12	)		—		—		—			1		4,287		(12	)
Other debt securities		—		—		—			3		4,245		(651	)		3		4,245		(651	)
Equity securities		1		632		(3	)		—		—		—			1		632		(3	)

Total impaired securities available for sale		36	$	589,609	$	(5,027	)		23	$	254,062	$	(8,326	)		59	$	843,671	$	(13,353	)


Securities Held to Maturity
September 30, 2016
U.S. government-sponsored entities		2	$	39,804	$	(196	)		—	$	—	$	—			2	$	39,804	$	(196	)
Residential mortgage-backed securities:
Agency collateralized mortgage obligations		12		317,349		(1,623	)		12		121,880		(1,431	)		24		439,229		(3,054	)
Non-agency collateralized mortgage obligations		3		1,239		(5	)		—		—		—			3		1,239		(5	)
Commercial mortgage-backed securities		1		8,415		(120	)		—		—		—			1		8,415		(120	)
States of the U.S. and political subdivisions		12		36,447		(691	)		—		—		—			12		36,447		(691	)

Total impaired securities held to maturity		30	$	403,254	$	(2,635	)		12	$	121,880	$	(1,431	)		42	$	525,134	$	(4,066	)


December 31, 2015
U.S. government-sponsored entities		3	$	39,843	$	(173	)		1	$	14,778	$	(222	)		4	$	54,621	$	(395	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		17		212,024		(1,159	)		1		917		(17	)		18		212,941		(1,176	)
Agency collateralized mortgage obligations		11		150,593		(1,434	)		14		160,716		(6,223	)		25		311,309		(7,657	)
Commercial mortgage-backed securities		3		46,278		(259	)		—		—		—			3		46,278		(259	)
States of the U.S. and political subdivisions		9		17,616		(101	)		—		—		—			9		17,616		(101	)

Total impaired securities held to maturity		43	$	466,354	$	(3,126	)		16	$	176,411	$	(6,462	)		59	$	642,765	$	(9,588	)

The Corporation does not intend to sell the debt securities and it is not more likely than not that the Corporation will be required to sell the securities before recovery of their amortized cost basis.

Other-Than-Temporary Impairment

The Corporation evaluates its investment securities portfolio for other-than-temporary impairment (OTTI) on a quarterly basis. Impairment is assessed at the individual security level. The Corporation considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. The following table presents a summary of the cumulative credit-related OTTI charges recognized as components of earnings for securities for which a portion of an OTTI is recognized in other comprehensive income:


(in thousands)	Equities		Total
For the Nine Months Ended September 30, 2016
Beginning balance	$	27	$	27
Loss where impairment was not previously recognized		—		—
Additional loss where impairment was previously recognized		—		—
Reduction due to credit impaired securities sold		—		—

Ending balance	$	27	$	27

For the Nine Months Ended September 30, 2015
Beginning balance	$	27	$	27
Loss where impairment was not previously recognized		—		—
Additional loss where impairment was previously recognized		—		—
Reduction due to credit impaired securities sold		—		—

Ending balance	$	27	$	27

The Corporation did not recognize any impairment losses on securities for the nine months ended September 30, 2016 or 2015.

States of the U.S. and Political Subdivisions

The Corporation’s municipal bond portfolio with a carrying amount of $343.6 million as of September 30, 2016 is highly rated with an average entity-specific rating of AA and 99.0% of the portfolio rated A or better. General obligation bonds comprise 99.9% of the portfolio. Geographically, municipal bonds support the Corporation’s primary footprint as 92.6% of the securities are from municipalities located throughout Pennsylvania, Ohio and Maryland. The average holding size of the securities in the municipal bond portfolio is $1.9 million. In addition to the strong stand-alone ratings, 79.2% of the municipalities have some formal credit enhancement insurance that strengthens the creditworthiness of their issue. Management also reviews the credit profile of each issuer on a quarterly basis.