Investment Securities

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

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 September 30, 2019
U.S. Government-sponsored agency securities	$	48,553	$	450	$	26	$	48,977
State and municipal	754,846		42,663		634		796,875
U.S. Government-sponsored mortgage-backed securities	789,887		11,660		1,031		800,516
Corporate obligations	31		—		—		31
Total available for sale	1,593,317		54,773		1,691		1,646,399
Held to maturity at September 30, 2019
U.S. Government-sponsored agency securities	42,434		4		95		42,343
State and municipal	355,263		15,841		40		371,064
U.S. Government-sponsored mortgage-backed securities	443,824		7,024		462		450,386
Foreign investment	1,500		—		7		1,493
Total held to maturity	843,021		22,869		604		865,286
Total Investment Securities	$	2,436,338	$	77,642	$	2,295	$	2,511,685



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2018
U.S. Government-sponsored agency securities	$	13,493	$	92	$	3	$	13,582
State and municipal	605,994		5,995		5,854		606,135
U.S. Government-sponsored mortgage-backed securities	530,209		634		8,396		522,447
Corporate obligations	31		—		—		31
Total available for sale	1,149,727		6,721		14,253		1,142,195
Held to maturity at December 31, 2018
U.S. Government-sponsored agency securities	22,618		—		545		22,073
State and municipal	197,909		2,858		872		199,895
U.S. Government-sponsored mortgage-backed securities	268,860		713		3,323		266,250
Foreign investment	1,000		—		1		999
Total held to maturity	490,387		3,571		4,741		489,217
Total Investment Securities	$	1,640,114	$	10,292	$	18,994	$	1,631,412

The change in unrealized gains/losses from December 31, 2018 to September 30, 2019 is primarily due to the changes in interest rates. The longer term points on the yield curve have declined since year-end which increases the fair value of securities held in the portfolio.

The amortized cost and fair value of available for sale and held to maturity securities at September 30, 2019 and December 31, 2018, 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, 2019:
Due in one year or less	$	1,134	$	1,139	$	13,833	$	13,894
Due after one through five years	4,527		4,638		55,424		55,783
Due after five through ten years	83,254		85,475		100,501		104,733
Due after ten years	714,515		754,631		229,439		240,490
	803,430		845,883		399,197		414,900
U.S. Government-sponsored mortgage-backed securities	789,887		800,516		443,824		450,386
Total Investment Securities	$	1,593,317	$	1,646,399	$	843,021	$	865,286



	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2018
Due in one year or less	$	13,092	$	13,144	$	4,732	$	4,730
Due after one through five years	5,311		5,378		49,054		48,473
Due after five through ten years	73,280		74,411		62,873		64,163
Due after ten years	527,835		526,815		104,868		105,601
	619,518		619,748		221,527		222,967
U.S. Government-sponsored mortgage-backed securities	530,209		522,447		268,860		266,250
Total Investment Securities	$	1,149,727	$	1,142,195	$	490,387	$	489,217

The carrying value of securities pledged as collateral, to secure borrowings and for other purposes, was $632,275,000 at September 30, 2019, and $416,155,000 at December 31, 2018.

The book value of securities sold under agreements to repurchase amounted to $187,472,000 at September 30, 2019, and $116,691,000 at December 31, 2018.

Gross gains on the sales and redemptions of available for sale securities for the three and nine months ended September 30, 2019 and 2018 are shown below.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	393	$	1,285	$	3,376	$	4,016
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 September 30, 2019, and December 31, 2018:



	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, 2019
U.S. Government-sponsored agency securities	$	25,033	$	26	$	—	$	—	$	25,033	$	26
State and municipal	53,220		634		—		—		53,220		634
U.S. Government-sponsored mortgage-backed securities	155,175		939		27,238		92		182,413		1,031
Total Temporarily Impaired Available for Sale Securities	233,428		1,599		27,238		92		260,666		1,691
Temporarily Impaired Held to Maturity Securities at September 30, 2019
U.S. Government-sponsored agency securities	23,983		35		12,440		60		36,423		95
State and municipal	3,351		40		—		—		3,351		40
U.S. Government-sponsored mortgage-backed securities	122,572		426		8,567		36		131,139		462
Foreign investment	1,493		7		—		—		1,493		7
Total Temporarily Impaired Held to Maturity Securities	151,399		508		21,007		96		172,406		604
Total Temporarily Impaired Investment Securities	$	384,827	$	2,107	$	48,245	$	188	$	433,072	$	2,295



	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, 2018
U.S. Government-sponsored agency securities	$	1,490	$	3	$	—	$	—	$	1,490	$	3
State and municipal	234,431		3,958		38,028		1,896		272,459		5,854
U.S. Government-sponsored mortgage-backed securities	196,601		2,400		217,121		5,996		413,722		8,396
Total Temporarily Impaired Available for Sale Securities	432,522		6,361		255,149		7,892		687,671		14,253
Temporarily Impaired Held to Maturity Securities at December 31, 2018
U.S. Government-sponsored agency securities	—		—		22,073		545		22,073		545
State and municipal	14,952		369		16,786		503		31,738		872
U.S. Government-sponsored mortgage-backed securities	102,828		876		87,268		2,447		190,096		3,323
Foreign investment	—		—		999		1		999		1
Total Temporarily Impaired Held to Maturity Securities	117,780		1,245		127,126		3,496		244,906		4,741
Total Temporarily Impaired Investment Securities	$	550,302	$	7,606	$	382,275	$	11,388	$	932,577	$	18,994

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, 2019			December 31, 2018
Investments reported at less than historical cost:
Historical cost	$	435,367		$	951,571
Fair value	433,072			932,577
Gross unrealized losses	$	2,295		$	18,994
Percent of the Corporation's investment portfolio	17.4		%	57.1		%

The Corporation's 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 and concluded no OTTI existed at September 30, 2019.

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 Securities, U.S. Government-Sponsored Agency Securities and Foreign Investment 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 September 30, 2019. The state and municipal securities portfolio contains unrealized losses of $634,000 on twenty-six securities and $40,000 on two securities in the available for sale and held to maturity portfolios, respectively. The U.S. Government-Sponsored Agency securities portfolio contains unrealized losses of $26,000 on two securities in the available for sale portfolio and $95,000 on five securities in the held to maturity portfolio. The foreign investment securities portfolio contains no unrealized losses in the available for sale portfolio, and $7,000 on one security 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 September 30, 2019. The mortgage-backed securities portfolio contains unrealized losses of $1,031,000 on thirty-one securities and $462,000 on sixteen securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a U.S. government-sponsored entity.