INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and approximate fair value of the investment securities at the dates indicated were:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at March 31, 2015
U.S. Government-sponsored agency securities	$	100	$	7			$	107
State and municipal	249,699		12,195		$	310	261,584
U.S. Government-sponsored mortgage-backed securities	265,740		8,949		62		274,627
Corporate obligations	31						31
Equity securities	1,706						1,706
Total available for sale	517,276		21,151		372		538,055
Held to maturity at March 31, 2015
State and municipal	225,225		6,429		76		231,578
U.S. Government-sponsored mortgage-backed securities	426,193		12,988		148		439,033
Total held to maturity	651,418		19,417		224		670,611
Total Investment Securities	$	1,168,694	$	40,568	$	596	$	1,208,666



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2014
U.S. Government-sponsored agency securities	$	100	$	9			$	109
State and municipal	216,915		11,801		$	123	228,593
U.S. Government-sponsored mortgage-backed securities	310,460		8,771		127		319,104
Corporate obligations	31						31
Equity securities	1,706						1,706
Total available for sale	529,212		20,581		250		549,543
Held to maturity at December 31, 2014
State and municipal	204,443		5,716		96		210,063
U.S. Government-sponsored mortgage-backed securities	426,645		11,527		512		437,660
Total held to maturity	631,088		17,243		608		647,723
Total Investment Securities	$	1,160,300	$	37,824	$	858	$	1,197,266

The amortized cost and fair value of available for sale securities and held to maturity securities at March 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at March 31, 2015:
Due in one year or less	$	3,836	$	3,869	$	8,072	$	8,121
Due after one through five years	8,980		9,245		19,561		20,155
Due after five through ten years	50,220		52,853		86,271		88,851
Due after ten years	186,794		195,755		111,321		114,451
	$	249,830	$	261,722	$	225,225	$	231,578
U.S. Government-sponsored mortgage-backed securities	265,740		274,627		426,193		439,033
Equity securities	1,706		1,706
Total Investment Securities	$	517,276	$	538,055	$	651,418	$	670,611

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $458,131,000 at March 31, 2015, and $449,408,000 at December 31, 2014.

The book value of securities sold under agreements to repurchase amounted to $129,110,000 at March 31, 2015, and $120,027,000 at December 31, 2014.

Gross gains on the sales and redemptions of available for sale securities for the three months ended March 31, 2015, and 2014 are shown below. There were no losses on the sale and redemption of available for sale securities, or other-than-temporary impairment losses recognized during the three months ended March 31, 2015, and 2014.



	Three Months Ended March 31,
	2015		2014
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,025	$	581

The following table shows investments securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2015, and December 31, 2014:



	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at March 31, 2015
State and municipal	$	23,922	$	310					$	23,922	$	310
U.S. Government-sponsored mortgage-backed securities	4,876		4		2,374		58		7,250		62
Total Temporarily Impaired Available for Sale Securities	28,798		314		2,374		58		31,172		372
Temporarily Impaired Held to Maturity Securities at March 31, 2015
State and municipal	7,243		76						7,243		76
U.S. Government-sponsored mortgage-backed securities	4,963		42		11,626		106		16,589		148
Total Temporarily Impaired Held to Maturity Securities	12,206		118		11,626		106		23,832		224
Total Temporarily Impaired Investment Securities	$	41,004	$	432	$	14,000	$	164	$	55,004	$	596



	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at December 31, 2014
State and municipal	1,256		7		$	9,850	$	116	$	11,106	$	123
U.S. Government-sponsored mortgage-backed securities	2,186		13		5,447		114		7,633		127
Total Temporarily Impaired Available for Sale Securities	3,442		20		15,297		230		18,739		250
Temporarily Impaired Held to Maturity Securities at December 31, 2014
State and municipal	5,119		96		250				5,369		96
U.S. Government-sponsored mortgage-backed securities	9,791		82		38,491		430		48,282		512
Total Temporarily Impaired Held to Maturity Securities	14,910		178		38,741		430		53,651		608
Total Temporarily Impaired Investment Securities	$	18,352	$	198	$	54,038	$	660	$	72,390	$	858

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost as indicated in the table below.



	March 31, 2015			December 31, 2014
Investments reported at less than historical cost:
Historical cost	$	55,599		$	73,249
Fair value	$	55,004		$	72,390
Percent of the Corporation's available for sale and held to maturity portfolio	4.6		%	6.1		%

Management believes the decline in fair value for these securities was temporary. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income during the period the other-than-temporary ("OTTI") is identified.

The Corporation’s management has evaluated all securities with unrealized losses for OTTI as of March 31, 2015. The evaluations are based on the nature of the securities, the extent and duration of the loss and the intent and ability of the Corporation to hold these securities either to maturity or through the expected recovery period.

In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy. The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor was classifying these securities based upon these inputs. From these discussions, the Corporation’s management is comfortable that the classifications are proper. The Corporation has gained trust in the data for two reasons: (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis and (b) actual gains or loss resulting from the sale of certain securities has proven the data to be accurate over time. Fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

State and Municipal

The unrealized losses on the Corporation’s investments in securities of state and political subdivisions were caused by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Corporation does not intend to sell the investment and it is not more likely than not that the Corporation will be required to sell the investment before recovery of its new, lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at March 31, 2015.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation’s investment in U.S. Government-sponsored mortgage-backed securities were a result of changes in interest rates. The Corporation expects to recover the amortized cost basis over the term of the securities as the decline in market value is attributable to changes in interest rates and not credit quality. The Corporation does not intend to sell the investment and it is not more likely than not that the Corporation will be required to sell the investment before recovery of its new, lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at March 31, 2015.

Corporate Obligations

In the first quarter of 2015, the Corporation sold its remaining trust preferred security which had no remaining book value as a result of OTTI of approximately $500,000 taken in 2009. The sale of this security resulted in a gain of $45,000, which is included in the Consolidated Condensed Statement of Income in the current period.

Credit Losses Recognized on Investments

Certain corporate obligations experienced fair value deterioration due to credit losses and other market factors. The following table provides information about those securities for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income.



	Accumulated Credit Losses in 2015			Accumulated Credit Losses in 2014
Credit losses on debt securities held:
Balance, January 1	$	500		$	11,355
Reductions for previous other-than-temporary losses realized on securities sold during the year	(500		)	(10,855		)
Balance, March 31	$	—		$	500