4. SECURITIES

The amortized cost and fair value of securities are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
June 30, 2016
U.S. Treasury	$	29,805	$	257	$	—		$	30,062
U.S. government-sponsored entities		432,534		3,235		—			435,769
Residential mortgage-backed securities:
Agency mortgage-backed securities		1,095,826		19,051		—			1,114,877
Agency collateralized mortgage obligations		495,943		5,239		(1,535	)		499,647
Non-agency collateralized mortgage obligations		1,034		—		(56	)		978
Commercial mortgage-backed securities		3,389		4		—			3,393
States of the U.S. and political subdivisions		38,195		280		(27	)		38,448
Other debt securities		9,778		150		(760	)		9,168

Total debt securities		2,106,504		28,216		(2,378	)		2,132,342
Equity securities		975		345		—			1,320

Total securities available for sale	$	2,107,479	$	28,561	$	(2,378	)	$	2,133,662

December 31, 2015
U.S. Treasury	$	29,738	$	58	$	—		$	29,796
U.S. government-sponsored entities		368,463		856		(1,325	)		367,994
Residential mortgage-backed securities:
Agency mortgage-backed securities		703,069		4,594		(2,832	)		704,831
Agency collateralized mortgage obligations		503,328		1,032		(8,530	)		495,830
Non-agency collateralized mortgage obligations		1,177		13		—			1,190
Commercial mortgage-backed securities		4,299		—		(12	)		4,287
States of the U.S. and political subdivisions		10,748		309		—			11,057
Other debt securities		14,729		208		(651	)		14,286

Total debt securities		1,635,551		7,070		(13,350	)		1,629,271
Equity securities		975		324		(3	)		1,296

Total securities available for sale	$	1,636,526	$	7,394	$	(13,353	)	$	1,630,567

Securities Held to Maturity
June 30, 2016
U.S. Treasury	$	500	$	204	$	—		$	704
U.S. government-sponsored entities		238,464		2,073		—			240,537
Residential mortgage-backed securities:
Agency mortgage-backed securities		882,467		22,422		—			904,889
Agency collateralized mortgage obligations		614,480		6,356		(1,305	)		619,531
Non-agency collateralized mortgage obligations		2,143		5		(4	)		2,144
Commercial mortgage-backed securities		50,294		1,776		(81	)		51,989
States of the U.S. and political subdivisions		275,957		9,031		—			284,988

Total securities held to maturity	$	2,064,305	$	41,867	$	(1,390	)	$	2,104,782

December 31, 2015
U.S. Treasury	$	500	$	153	$	—		$	653
U.S. government-sponsored entities		137,385		809		(395	)		137,799
Residential mortgage-backed securities:
Agency mortgage-backed securities		709,970		9,858		(1,176	)		718,652
Agency collateralized mortgage obligations		499,694		803		(7,657	)		492,840
Non-agency collateralized mortgage obligations		2,681		14		—			2,695
Commercial mortgage-backed securities		51,258		115		(259	)		51,114
States of the U.S. and political subdivisions		235,573		4,191		(101	)		239,663

Total securities held to maturity	$	1,637,061	$	15,943	$	(9,588	)	$	1,643,416

The increase in securities in 2016 primarily relates to the METR acquisition completed on February 13, 2016.

Gross gains and gross losses were realized on securities as follows:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands)	2016			2015		2016			2015
Gross gains	$	227		$	14	$	298		$	14
Gross losses		(1	)		—		(1	)		(9	)

Net gains	$	226		$	14	$	297		$	5

As of June 30, 2016, the amortized cost and fair value of securities, by contractual maturities, were as:

Available for Sale

Held to Maturity

(in thousands)

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

Due in one year or less

14,985

15,061

11,478

11,502

Due from one to five years

460,162

463,729

234,393

236,292

Due from five to ten years

27,882

28,135

48,491

49,991

Due after ten years

7,283

6,522

220,559

228,444

510,312

513,447

514,921

526,229

Residential mortgage-backed securities:

Agency mortgage-backed securities

1,095,826

1,114,877

882,467

904,889

Agency collateralized mortgage obligations

495,943

499,647

614,480

619,531

Non-agency collateralized mortgage obligations

1,034

978

2,143

2,144

Commercial mortgage-backed securities

3,389

3,393

50,294

51,989

Equity securities

975

1,320

—

Total securities

2,107,479

2,133,662

2,064,305

2,104,782

Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based on the payment patterns of the underlying collateral.

Following is information relating to securities pledged:


	June 30,			December 31,
(dollars in thousands)	2016			2015
Securities pledged (carrying value):
Collateral for public deposits, trust deposits and for other purposes as required by law	$	2,404,720		$	1,728,939
Collateral for short-term borrowings		298,240			272,629
Securities pledged as a percent of total securities		64.4	%		61.3	%

Following are summaries of the fair values and unrealized losses of impaired securities, segregated by length of impairment:


	Less than 12 Months							12 Months or More							Total
(dollars in thousands)	#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses
Securities Available for Sale
June 30, 2016
Residential mortgage-backed securities:
Agency collateralized mortgage obligations		1	$	12,209	$	(37	)		11	$	122,569	$	(1,498	)		12	$	134,778	$	(1,535	)
Non-agency collateralized mortgage obligations		1		974		(56	)		—		—		—			1		974		(56	)
States of the U.S. and political subdivisions		9		11,515		(27	)		—		—		—			9		11,515		(27	)
Other debt securities		—		—		—			3		4,140		(760	)		3		4,140		(760	)

Total impaired securities available for sale		11	$	24,698	$	(120	)		14	$	126,709	$	(2,258	)		25	$	151,407	$	(2,378	)

December 31, 2015
U.S. government-sponsored entities		6	$	99,131	$	(814	)		2	$	34,487	$	(511	)		8	$	133,618	$	(1,325	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		19		359,250		(2,832	)		—		—		—			19		359,250		(2,832	)
Agency collateralized mortgage obligations		9		126,309		(1,366	)		18		215,330		(7,164	)		27		341,639		(8,530	)
Commercial mortgage-backed securities		1		4,287		(12	)		—		—		—			1		4,287		(12	)
Other debt securities		—		—		—			3		4,245		(651	)		3		4,245		(651	)
Equity securities		1		632		(3	)		—		—		—			1		632		(3	)

Total impaired securities available for sale		36	$	589,609	$	(5,027	)		23	$	254,062	$	(8,326	)		59	$	843,671	$	(13,353	)

Securities Held to Maturity
June 30, 2016
Residential mortgage-backed securities:
Agency collateralized mortgage obligations		—	$	—	$	—			12	$	128,715	$	(1,305	)		12	$	128,715	$	(1,305	)
Non-agency collateralized mortgage obligations		2		1,174		(4	)		—		—		—			2		1,174		(4	)
Commercial mortgage-backed securities		1		8,541		(81	)		—		—		—			1		8,541		(81	)

Total impaired securities held to maturity		3	$	9,715	$	(85	)		12	$	128,715	$	(1,305	)		15	$	138,430	$	(1,390	)

December 31, 2015
U.S. government-sponsored entities		3	$	39,843	$	(173	)		1	$	14,778	$	(222	)		4	$	54,621	$	(395	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		17		212,024		(1,159	)		1		917		(17	)		18		212,941		(1,176	)
Agency collateralized mortgage obligations		11		150,593		(1,434	)		14		160,716		(6,223	)		25		311,309		(7,657	)
Commercial mortgage-backed securities		3		46,278		(259	)		—		—		—			3		46,278		(259	)
States of the U.S. and political subdivisions		9		17,616		(101	)		—		—		—			9		17,616		(101	)

Total impaired securities held to maturity		43	$	466,354	$	(3,126	)		16	$	176,411	$	(6,462	)		59	$	642,765	$	(9,588	)

The Corporation does not intend to sell the debt securities and it is not more likely than not that the Corporation will be required to sell the securities before recovery of their amortized cost basis.

Other-Than-Temporary Impairment

The Corporation evaluates its investment securities portfolio for other-than-temporary impairment (OTTI) on a quarterly basis. Impairment is assessed at the individual security level. The Corporation considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. The following table presents a summary of the cumulative credit-related OTTI charges recognized as components of earnings for securities for which a portion of an OTTI is recognized in other comprehensive income:


(in thousands)	Equities		Total
For the Six Months Ended June 30, 2016
Beginning balance	$	27	$	27
Loss where impairment was not previously recognized		—		—
Additional loss where impairment was previously recognized		—		—
Reduction due to credit impaired securities sold		—		—

Ending balance	$	27	$	27

For the Six Months Ended June 30, 2015
Beginning balance	$	27	$	27
Loss where impairment was not previously recognized		—		—
Additional loss where impairment was previously recognized		—		—
Reduction due to credit impaired securities sold		—		—

Ending balance	$	27	$	27

The Corporation did not recognize any impairment losses on securities for the six months ended June 30, 2016 or 2015.

States of the U.S. and Political Subdivisions

The Corporation’s municipal bond portfolio with a carrying amount of $314.4 million as of June 30, 2016 is highly rated with an average entity-specific rating of AA and 96.0% of the portfolio rated A or better. General obligation bonds comprise 99.9% of the portfolio. Geographically, municipal bonds support the Corporation’s primary footprint as 95.7% of the securities are from municipalities located throughout Pennsylvania, Ohio and Maryland. The average holding size of the securities in the municipal bond portfolio is $1.8 million. In addition to the strong stand-alone ratings, 77.0% of the municipalities have some formal credit enhancement insurance that strengthens the creditworthiness of their issue. Management also reviews the credit profile of each issuer on a quarterly basis.