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 June 30, 2017
U.S. Treasury	$	499					$	499
State and municipal	366,026		$	13,156	$	2,005	377,177
U.S. Government-sponsored mortgage-backed securities	330,413		1,998		2,176		330,235
Corporate obligations	31						31
Equity securities	21,820		12,997				34,817
Total available for sale	718,789		28,151		4,181		742,759
Held to maturity at June 30, 2017
U.S. Government-sponsored agency securities	22,618				382		22,236
State and municipal	242,125		5,991		747		247,369
U.S. Government-sponsored mortgage-backed securities	334,821		4,875		1,045		338,651
Foreign Investments	1,000						1,000
Total held to maturity	600,564		10,866		2,174		609,256
Total Investment Securities	$	1,319,353	$	39,017	$	6,355	$	1,352,015



	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

The amortized cost and fair value of available for sale and held to maturity securities at June 30, 2017 and 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 June 30, 2017:
Due in one year or less	$	2,287	$	2,288	$	6,111	$	6,201
Due after one through five years	7,944		8,294		70,140		71,314
Due after five through ten years	70,137		73,381		56,851		57,493
Due after ten years	286,188		293,744		132,641		135,597
	$	366,556	$	377,707	$	265,743	$	270,605
U.S. Government-sponsored mortgage-backed securities	330,413		330,235		334,821		338,651
Equity securities	21,820		34,817
Total Investment Securities	$	718,789	$	742,759	$	600,564	$	609,256



	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

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $519,265,000 at June 30, 2017, and $572,896,000 at December 31, 2016.

The book value of securities sold under agreements to repurchase amounted to $127,020,000 at June 30, 2017, and $145,936,000 at December 31, 2016.

Gross gains on the sales and redemptions of available for sale securities for the three and six months ended June 30, 2017 and 2016 are shown below.



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	567	$	706	$	1,165	$	1,703
Gross losses

The following tables show 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 June 30, 2017, and December 31, 2016:



	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 June 30, 2017
State and municipal	$	56,404	$	1,887	$	2,547	$	118	$	58,951	$	2,005
U.S. Government-sponsored mortgage-backed securities	130,867		2,143		1,443		33		132,310		2,176
Total Temporarily Impaired Available for Sale Securities	187,271		4,030		3,990		151		191,261		4,181
Temporarily Impaired Held to Maturity Securities at June 30, 2017
U.S. Government-sponsored agency securities	17,225		293		4,910		89		22,135		382
State and municipal	25,198		747						25,198		747
U.S. Government-sponsored mortgage-backed securities	79,596		1,045						79,596		1,045
Total Temporarily Impaired Held to Maturity Securities	122,019		2,085		4,910		89		126,929		2,174
Total Temporarily Impaired Investment Securities	$	309,290	$	6,115	$	8,900	$	240	$	318,190	$	6,355



	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

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.



	June 30, 2017			December 31, 2016
Investments reported at less than historical cost:
Historical cost	$	326,043		$	523,773
Fair value	$	318,190		$	510,297
Percent of the Corporation's investment portfolio	23.7		%	39.1		%

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 other-than temporary impairment as of June 30, 2017. 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 Agency Securities

The unrealized losses on the Corporation's investments in state and municipal securities and U.S. Government-Sponsored Agency securities 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 June 30, 2017. The state and municipal securities portfolio contains unrealized losses of $2,005,000 on fifty-six securities and $747,000 on thirty-three securities in the available for sale and held to maturity portfolios, respectively. The U.S. Government-Sponsored Agency securities portfolio contains no unrealized losses in the available for sale portfolio, and $382,000 on four securities in the held to maturity portfolio.

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 June 30, 2017. The mortgage-backed securities portfolio contains unrealized losses of $2,176,000 on thirty-seven securities and $1,045,000 on twenty-three securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a U.S. government-sponsored entity.