INVESTMENT SECURITIES

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at September 30, 2016
U.S. Government-sponsored agency securities	$	100	$	1			$	101
State and municipal	348,557		20,852		$	324	369,085
U.S. Government-sponsored mortgage-backed securities	297,557		7,040		17		304,580
Corporate obligations	31						31
Equity securities	2,016						2,016
Total available for sale	648,261		27,893		341		675,813
Held to maturity at September 30, 2016
Federal agencies	29,499		10		51		29,458
State and municipal	209,857		9,682		14		219,525
U.S. Government-sponsored mortgage-backed securities	385,259		12,804				398,063
Total held to maturity	624,615		22,496		65		647,046
Total Investment Securities	$	1,272,876	$	50,389	$	406	$	1,322,859



	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

The amortized cost and fair value of available for sale and held to maturity securities at September 30, 2016 and 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 September 30, 2016:
Due in one year or less	$	2,336	$	2,353	$	2,512	$	2,533
Due after one through five years	22,195		23,463		53,530		55,764
Due after five through ten years	66,314		70,278		76,023		77,338
Due after ten years	257,843		273,123		107,291		113,348
	$	348,688	$	369,217	$	239,356	$	248,983
U.S. Government-sponsored mortgage-backed securities	297,557		304,580		385,259		398,063
Equity securities	2,016		2,016
Total Investment Securities	$	648,261	$	675,813	$	624,615	$	647,046



	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

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $587,806,000 at September 30, 2016, and $637,358,000 at December 31, 2015.

The book value of securities sold under agreements to repurchase amounted to $134,248,000 at September 30, 2016, and $153,789,000 at December 31, 2015.

Gross gains on the sales and redemptions of available for sale securities for the three and nine months ended September 30, 2016 and 2015 are shown below.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	839	$	1,115	$	2,542	$	2,147
Gross losses							100

The following table shows investment securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2016, and December 31, 2015:



	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 September 30, 2016
State and municipal	$	22,468	$	324					$	22,468	$	324
U.S. Government-sponsored mortgage-backed securities	9,543		17						9,543		17
Total Temporarily Impaired Available for Sale Securities	32,011		341		—		—		32,011		341
Temporarily Impaired Held to Maturity Securities at September 30, 2016
Federal agencies	15,469		51						15,469		51
State and municipal	6,941		14						6,941		14
Total Temporarily Impaired Held to Maturity Securities	22,410		65						22,410		65
Total Temporarily Impaired Investment Securities	$	54,421	$	406	$	—	$	—	$	54,421	$	406



	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

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.



	September 30, 2016			December 31, 2015
Investments reported at less than historical cost:
Historical cost	$	54,826		$	178,964
Fair value	$	54,421		$	177,584
Percent of the Corporation's available for sale and held to maturity portfolio	4.2		%	13.9		%

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 is identified.

The Corporation’s management has evaluated all securities with unrealized losses for other-than temporary impairment as of September 30, 2016. 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 losses resulting from the sale of certain securities has proven the data to be accurate over time. The 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 and U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation’s investments in securities of state and political subdivisions and U.S. Government-sponsored mortgage-backed securities were caused by changes in interest rates and not credit quality. 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 investments and more likely than not the Corporation won't be required to sell the investments before recovery of its lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at September 30, 2016.

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 2016		Accumulated Credit Losses in 2015
Credit losses on debt securities held:
Balance, January 1	$	—	$	500
Reductions for previous other-than-temporary losses realized on securities sold during the year	—		(500		)
Balance, September 30	$	—	$	—

In the first quarter of 2015, the Corporation sold its remaining trust preferred security which had no remaining book value as a result of other than temporary impairment 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 for the nine months ended September 30, 2015.