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, 2018
U.S. Government-sponsored agency securities	$	11,491	$	4	$	23	$	11,472
State and municipal	546,737		5,555		7,419		544,873
U.S. Government-sponsored mortgage-backed securities	553,187		258		12,984		540,461
Corporate obligations	31						31
Total available for sale	1,111,446		5,817		20,426		1,096,837
Held to maturity at June 30, 2018
U.S. Government-sponsored agency securities	22,618				755		21,863
State and municipal	225,084		2,626		955		226,755
U.S. Government-sponsored mortgage-backed securities	274,144		586		4,699		270,031
Foreign Investments	1,000				6		994
Total held to maturity	522,846		3,212		6,415		519,643
Total Investment Securities	$	1,634,292	$	9,029	$	26,841	$	1,616,480



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2017
State and municipal	$	510,852	$	16,932	$	1,091	$	526,693
U.S. Government-sponsored mortgage-backed securities	473,325		964		3,423		470,866
Corporate obligations	31						31
Equity securities	2,357						2,357
Total available for sale	986,565		17,896		4,514		999,947
Held to maturity at December 31, 2017
U.S. Government-sponsored agency securities	22,618				435		22,183
State and municipal	235,594		6,295		244		241,645
U.S. Government-sponsored mortgage-backed securities	301,443		3,341		1,404		303,380
Foreign Investment	1,000						1,000
Total held to maturity	560,655		9,636		2,083		568,208
Total Investment Securities	$	1,547,220	$	27,532	$	6,597	$	1,568,155

The amortized cost and fair value of available for sale and held to maturity securities at June 30, 2018 and December 31, 2017, 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, 2018:
Due in one year or less	$	545	$	548	$	24,829	$	25,203
Due after one through five years	9,984		10,051		59,713		59,075
Due after five through ten years	79,118		80,457		53,004		53,453
Due after ten years	468,612		465,320		111,156		111,881
	558,259		556,376		248,702		249,612
U.S. Government-sponsored mortgage-backed securities	553,187		540,461		274,144		270,031
Total Investment Securities	$	1,111,446	$	1,096,837	$	522,846	$	519,643



	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2017
Due in one year or less	$	425	$	425	$	12,015	$	12,158
Due after one through five years	5,040		5,204		76,146		76,334
Due after five through ten years	74,921		78,806		54,441		55,679
Due after ten years	430,497		442,289		116,610		120,657
	510,883		526,724		259,212		264,828
U.S. Government-sponsored mortgage-backed securities	473,325		470,866		301,443		303,380
Equity securities	2,357		2,357
Total Investment Securities	$	986,565	$	999,947	$	560,655	$	568,208

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $484,218,000 at June 30, 2018, and $475,999,000 at December 31, 2017 .

The book value of securities sold under agreements to repurchase amounted to $125,412,000 at June 30, 2018, and $136,639,000 at December 31, 2017.

Gross gains on the sales and redemptions of available for sale securities for the three and six months ended June 30, 2018 and 2017 are shown below.



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,122	$	567	$	2,731	$	1,165
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, 2018, and December 31, 2017:



	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, 2018
U.S. Government-sponsored agency securities	$	6,468	$	23					$	6,468	$	23
State and municipal	252,460		5,573		$	28,187	$	1,846	280,647		7,419
U.S. Government-sponsored mortgage-backed securities	410,442		9,466		62,943		3,518		473,385		12,984
Total Temporarily Impaired Available for Sale Securities	669,370		15,062		91,130		5,364		760,500		20,426
Temporarily Impaired Held to Maturity Securities at June 30, 2018
U.S. Government-sponsored agency securities	9,834		285		12,029		470		21,863		755
State and municipal	23,507		339		15,021		616		38,528		955
U.S. Government-sponsored mortgage-backed securities	171,516		2,878		38,947		1,821		210,463		4,699
Corporate Obligations	994		6						994		6
Total Temporarily Impaired Held to Maturity Securities	205,851		3,508		65,997		2,907		271,848		6,415
Total Temporarily Impaired Investment Securities	$	875,221	$	18,570	$	157,127	$	8,271	$	1,032,348	$	26,841



	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, 2017
State and municipal	$	13,296	$	198	$	35,324	$	893	$	48,620	$	1,091
U.S. Government-sponsored mortgage-backed securities	182,755		1,520		68,667		1,903		251,422		3,423
Total Temporarily Impaired Available for Sale Securities	196,051		1,718		103,991		2,796		300,042		4,514
Temporarily Impaired Held to Maturity Securities at December 31, 2017
U.S. Government-sponsored agency securities	9,988		131		12,196		304		22,184		435
State and municipal	2,430		36		15,805		208		18,235		244
U.S. Government-sponsored mortgage-backed securities	62,508		485		43,078		919		105,586		1,404
Total Temporarily Impaired Held to Maturity Securities	74,926		652		71,079		1,431		146,005		2,083
Total Temporarily Impaired Investment Securities	$	270,977	$	2,370	$	175,070	$	4,227	$	446,047	$	6,597

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, 2018			December 31, 2017
Investments reported at less than historical cost:
Historical cost	$	1,059,191		$	452,644
Fair value	$	1,032,348		$	446,047
Percent of the Corporation's investment portfolio	63.7		%	28.6		%

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 June 30, 2018. 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 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.

State and Municipal and U.S. Government-Sponsored Agency Securities

The unrealized losses on the Corporation's investments in securities of state and political subdivisions 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, 2018. The state and municipal securities portfolio contains unrealized losses of $7,419,000 on two hundred twenty-three securities and $955,000 on forty-eight securities in the available for sale and held to maturity portfolios, respectively. The U.S. Government-Sponsored Agency securities portfolio contains unrealized losses of $23,000 on five securities and $755,000 on five securities in the available for sale and held to maturity portfolios, respectively.

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, 2018. The mortgage-backed securities portfolio contains unrealized losses of $12,984,000 on one hundred fourteen securities and $4,699,000 on eighty securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a U.S. government-sponsored entity.