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, 2016
U.S. Government-sponsored agency securities	$	100					$	100
State and municipal	360,779		$	8,443	$	5,564	363,658
U.S. Government-sponsored mortgage-backed securities	313,459		1,904		3,071		312,292
Corporate obligations	31						31
Equity securities	21,820				1,039		20,781
Total available for sale	696,189		10,347		9,674		696,862
Held to maturity at December 31, 2016
U.S. Government-sponsored agency securities	22,619				479		22,140
State and municipal	224,811		3,136		1,796		226,151
U.S. Government-sponsored mortgage-backed securities	360,213		4,956		1,527		363,642
Total held to maturity	607,643		8,092		3,802		611,933
Total Investment Securities	$	1,303,832	$	18,439	$	13,476	$	1,308,795

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

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 $523,773,000 and $178,964,000 at December 31, 2016 and 2015, respectively. Total fair value of these investments was $510,297,000 and $177,584,000, which was approximately 39.1 and 13.9 percent of the Corporation's available for sale and held to maturity investment portfolio at December 31, 2016 and 2015, 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 OTTI is identified.

The Corporation’s management has evaluated all securities with unrealized losses for OTTI as of December 31, 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 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, 2016. As noted in the table above, the mortgage-backed securities portfolio contains unrealized losses of $3,071,000 on forty-six securities and $1,527,000 on twenty-nine 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, 2016. As noted in the table above, the state and political subdivision securities portfolio contains unrealized losses of $5,564,000 on one hundred eight securities and $1,796,000 on seventy-one securities in the available for sale and held to maturity portfolios, respectively.

U.S. Government-Sponsored Agency Securities

The unrealized losses on the Corporation's investment in U.S. Government-Sponsored Agency securities were a result of interest rate changes. 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, 2016. As noted in the table above, the U.S. Government-Sponsored Agency securities portfolio contains no unrealized losses in the available for sale portfolio, and $479,000 on four securities in the held to maturity portfolio.

Equity Securities

The unrealized losses on the Corporation's investment in Equity securities were a result of fluctuations in the stock market. 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, the Corporation does not consider those investments to be other-than-temporarily impaired at December 31, 2016. As noted in the table above, the Equity securities portfolio contains unrealized losses of $1,039,000 on one security in the available for sale portfolio, and no unrealized losses in the held to maturity portfolio.

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
	2016		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, December 31	$	—	$	—

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, 2016 and 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 December 31, 2016
State and municipal	$	126,593	$	5,564					$	126,593	$	5,564
U.S. Government-sponsored mortgage-backed securities	185,544		3,071						185,544		3,071
Equity securities	18,765		1,039						18,765		1,039
Total Temporarily Impaired Available for Sale Securities	330,902		9,674						330,902		9,674
Temporarily Impaired Held to Maturity Securities at December 31, 2016
U.S. Government-sponsored agency securities	19,121		479						19,121		479
State and municipal	50,897		1,796						50,897		1,796
U.S. Government-sponsored mortgage-backed securities	109,377		1,527						109,377		1,527
Total Temporarily Impaired Held to Maturity Securities	179,395		3,802						179,395		3,802
Total Temporarily Impaired Investment Securities	$	510,297	$	13,476					$	510,297	$	13,476


	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

The amortized cost and fair value of securities available for sale and held to maturity at December 31, 2016 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, 2016
Due in one year or less	$	2,703	$	2,717	$	2,046	$	2,047
Due after one through five years	16,359		17,068		61,921		63,193
Due after five through ten years	60,614		62,241		61,606		61,145
Due after ten years	281,234		281,763		121,857		121,906
	360,910		363,789		247,430		248,291
U.S. Government-sponsored mortgage-backed securities	313,459		312,292		360,213		363,642
Equity securities	21,820		20,781
Total Investment Securities	$	696,189	$	696,862	$	607,643	$	611,933

Securities with a carrying value of approximately $572,896,000, $637,358,000 and $449,408,000 were pledged at December 31, 2016, 2015 and 2014, respectively, to secure certain deposits and securities sold under repurchase agreements, and for other purposes as permitted or required by law.

The book value of securities sold under agreements to repurchase amounted to $145,936,000 at December 31, 2016, and $153,789,000 at

December 31, 2015.

Gross gains of $3,389,000, $2,770,000 and $3,581,000 were realized on sales of investment securities in 2016, 2015 and 2014, 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 2016 or 2014.