INVESTMENT SECURITIES

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2015
U.S. Government-sponsored agency securities	$	100	$	4			$	104
State and municipal	291,730		14,241		$	60	305,911
U.S. Government-sponsored mortgage-backed securities	342,550		4,234		518		346,266
Corporate obligations	31						31
Equity securities	3,912						3,912
Certificates of deposit	2,176						2,176
Total available for sale	640,499		18,479		578		658,400
Held to maturity at December 31, 2015
State and municipal	219,767		6,982		15		226,734
U.S. Government-sponsored mortgage-backed securities	398,832		7,601		787		405,646
Total held to maturity	618,599		14,583		802		632,380
Total Investment Securities	$	1,259,098	$	33,062	$	1,380	$	1,290,780

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

On December 31, 2015, the Corporation acquired 100 percent of Ameriana as discussed in Note 2. ACQUISITIONS AND DIVESTITURES, in the Notes to Consolidated Financial Statements included as Item 8 of this Annual Report on Form 10-K. This purchase resulted in investment securities acquired of approximately $60.4 million.

Certain investments in debt securities are reported in the financial statements at amounts less than their historical cost. The historical cost of these investments totaled $178,964,000 and $73,249,000 at December 31, 2015 and 2014, respectively. Total fair value of these investments was $177,584,000 and $72,390,000, which was approximately 13.9 and 6.1 percent of the Corporation's available for sale and held to maturity investment portfolio at December 31, 2015 and 2014, respectively.

Except as discussed below, 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 impairment (“OTTI”) is identified.

The Corporation’s management has evaluated all securities with unrealized losses for OTTI as of December 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 I and Level II 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 classified 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.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation's investment in mortgage-backed securities were a result of interest rate changes. The Corporation expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at December 31, 2015. As noted in the table above, the mortgage-backed securities portfolio contains unrealized losses of $518,000 on twenty-six securities and $787,000 on twenty-two securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a government-sponsored entity.

State and Municipal Securities

The unrealized losses on the Corporation's investments in securities of state and political subdivisions were caused by interest rate increases. 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. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at December 31, 2015. As noted in the table above, the state and political subdivision securities portfolio contains unrealized losses of $60,000 on twenty-two securities and $15,000 on seven securities in the available for sale and held to maturity portfolios, respectively.

Certain Losses Recognized on Investments

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



	Accumulated Credit Losses in			Accumulated Credit Losses in
	2015			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, December 31	$	—		$	500

The following table shows the Corporation’s gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2015 and 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 December 31, 2015
State and municipal	$	7,558	$	60					$	7,558	$	60
U.S. Government-sponsored mortgage-backed securities	83,396		445		$	2,101	$	73	85,497		518
Total Temporarily Impaired Available for Sale Securities	90,954		505		2,101		73		93,055		578
Temporarily Impaired Held to Maturity Securities at December 31, 2015
State and municipal					1,982		15		1,982		15
U.S. Government-sponsored mortgage-backed securities	69,641		519		12,906		268		82,547		787
Total Temporarily Impaired Held to Maturity Securities	69,641		519		14,888		283		84,529		802
Total Temporarily Impaired Investment Securities	$	160,595	$	1,024	$	16,989	$	356	$	177,584	$	1,380


	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

The amortized cost and fair value of securities available for sale and held to maturity at December 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 December 31, 2015
Due in one year or less	$	4,658	$	4,704	$	4,144	$	4,148
Due after one through five years	13,725		14,295		28,054		29,175
Due after five through ten years	52,878		55,375		81,483		83,646
Due after ten years	220,600		231,672		106,086		109,765
	291,861		306,046		219,767		226,734
U.S. Government-sponsored mortgage-backed securities	342,550		346,266		398,832		405,646
Equity securities	3,912		3,912
Certificates of deposit	2,176		2,176
Total Investment Securities	$	640,499	$	658,400	$	618,599	$	632,380

Securities with a carrying value of approximately $637,358,000, $449,408,000 and $373,533,000 were pledged at December 31, 2015, 2014 and 2013, respectively, to secure certain deposits and securities sold under repurchase agreements, and for other purposes as permitted or required by law.

Gross gains of $2,770,000, $3,581,000 and $487,000 were realized on sales of investment securities in 2015, 2014 and 2013, respectively. Gross losses of $100,000 were realized on sales of investment securities in 2015. There were no losses from the sales of investment securities in 2014 or 2013, respectively.