INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities at March 31, 2014 are summarized as follows:



(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale
U.S. Government agencies	$	1,000	$	4	$	—		$	1,004
State and municipal bonds	79,129		5,194		(188		)	84,135
Agency mortgage-backed securities/collateralized mortgage obligations	1,340,763		19,523		(16,369		)	1,343,917
Non-agency collateralized mortgage obligations	3,289		60		—			3,349
Corporate securities and other	4,109		535		(323		)	4,321
Marketable equity securities	3,583		1,995		—			5,578
Total	$	1,431,873	$	27,311	$	(16,880	)	$	1,442,304

	Carrying Value ^(c)		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-Maturity
State and municipal bonds	$	529,528	$	16,416	$	(161	)	$	545,783
Agency mortgage-backed securities/collateralized mortgage obligations	383,014		1,488		—			384,502
Non-agency collateralized mortgage obligations	233		5		—			238
Corporate securities and other	5,565		—		—			5,565
Total	$	918,340	$	17,909	$	(161	)	$	936,088

(c) The carrying value of held-to-maturity securities represents the fair value at the date of transfer for securities which were transferred from the available-for-sale category. The carrying value of all other held-to-maturity securities represents their amortized cost.

At March 31, 2014, 240 available-for-sale debt securities, with an amortized cost basis of $492 million, a net unrealized loss of $4.1 million and a fair value of $488 million, were reclassified as held-to-maturity. Transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity securities. Such amounts are amortized over the remaining life of the security which will offset the effect on net interest income.

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities at December 31, 2013 are summarized as follows:



(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale
U.S. Government agencies	$	1,000	$	—	$	(10	)	$	990
State and municipal bonds	210,680		7,701		(3,670		)	214,711
Agency mortgage-backed securities/collateralized mortgage obligations	1,683,092		18,040		(41,952		)	1,659,180
Non-agency collateralized mortgage obligations	4,222		44		(8		)	4,258
Corporate securities and other	9,517		646		(495		)	9,668
Marketable equity securities	3,583		1,717		—			5,300
Total	$	1,912,094	$	28,148	$	(46,135	)	$	1,894,107

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-Maturity
State and municipal bonds	$	403,344	$	13,028	$	(895	)	$	415,477
Agency mortgage-backed securities/collateralized mortgage obligations	34,843		1,624		—			36,467
Non-agency collateralized mortgage obligations	258		—		—			258
Total	$	438,445	$	14,652	$	(895	)	$	452,202

Gains and losses from sales of investment securities are as follows:



(dollars in thousands)	Three Months Ended March 31,
	2014		2013
Gains	$	8	$	25
Losses	—		—
Net gains (losses) from sales of investment securities	$	8	$	25

The following tables indicate the length of time individual securities have been in a continuous unrealized loss position at March 31, 2014 and December 31, 2013, respectively.



March 31, 2014

(dollars in thousands)		Less than 12 months					12 months or longer					Total
	No. of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal bonds	47	$	19,004	$	(248	)	$	8,741	$	(101	)	$	27,745	$	(349	)
Agency mortgage-backed securities/collateralized mortgage obligations	133	486,117		(9,930		)	139,881		(6,439		)	625,998		(16,369		)
Corporate securities and other	2	—		—			1,175		(323		)	1,175		(323		)
Total	182	$	505,121	$	(10,178	)	$	149,797	$	(6,863	)	$	654,918	$	(17,041	)

The table above does not include unrealized losses of $9.8 million related to 96 securities transferred to the held-to-maturity category at March 31, 2014. The unrealized losses related to these securities are now included in their carrying value and will be amortized over their remaining lives.



December 31, 2013

(dollars in thousands)		Less than 12 months					12 months or longer					Total
	No. of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Government agencies	1	$	990	$	(10	)	$	—	$	—		$	990	$	(10	)
State and municipal bonds	145	76,402		(2,282		)	20,708		(2,283		)	97,110		(4,565		)
Agency mortgage-backed securities/collateralized mortgage obligations	241	953,423		(33,990		)	115,815		(7,962		)	1,069,238		(41,952		)
Non-agency collateralized mortgage obligations	5	820		(8		)	—		—			820		(8		)
Corporate securities and other	5	1,966		(35		)	2,708		(460		)	4,674		(495		)
Total	397	$	1,033,601	$	(36,325	)	$	139,231	$	(10,705	)	$	1,172,832	$	(47,030	)

The fair value of investment securities pledged as collateral are presented below:



(dollars in thousands)	March 31, 2014		December 31, 2013
Deposits	$	897,202	$	966,751
Repurchase agreements	655,437		650,627
Other	79,486		81,408
Total	$	1,632,125	$	1,698,786

The specified values of investment securities, by contractual maturity, at March 31, 2014 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Carrying Value		Fair Value
Due in one year or less	$	5,362	$	5,454	$	—	$	—
Due after one through five years	46,446		50,266		5,248		5,353
Due after five through ten years	151,296		156,413		150,620		154,994
Due after ten years	1,225,186		1,224,593		762,472		775,741
Marketable equity securities	3,583		5,578		—		—
Total	$	1,431,873	$	1,442,304	$	918,340	$	936,088

Evaluation of Impairment of Securities

The Company did not record any other-than-temporary impairment ("OTTI") losses for the three months ended March 31, 2014 and 2013.

As of March 31, 2014 and December 31, 2013, accumulated other comprehensive income does not include any impairment related charges for the non-credit-related components of OTTI.

The majority of the investment portfolio is comprised of U.S. Government Agency securities (mortgage-backed and collateralized mortgage obligations) and state and municipal bonds. For the investment securities in an unrealized loss position, the Company has concluded, based on its analysis, that the unrealized losses are primarily caused by the movement of interest rates, and the contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment.

At March 31, 2014, gross unrealized losses totaled $17.0 million, and the gross unrealized losses of securities in an unrealized loss position for twelve months or longer totaled $6.9 million, of which $6.4 million is attributable to agency mortgage-backed securities and $0.4 million attributable to state and municipal securities and other. The Company evaluates a variety of factors in concluding whether securities are other-than-temporarily impaired. These factors include, but are not limited to, the type and purpose of the bond, the underlying rating of the bond issuer, and the presence of credit enhancements (i.e. state guarantees, municipal bond insurance, collateral requirements, etc.). As a result of its review and considering the attributes of the individual securities, the Company concluded that the securities were not other-than-temporarily impaired.

Because the Company does not intend to sell these investments and it is not more likely than not it will be required to sell these investments before a recovery of carrying value, which may be maturity, the Company does not consider the securities in an unrealized loss position for twelve months or longer to be other-than-temporarily impaired.

Other securities on the Company’s consolidated balance sheet totaled $63.8 million and $63.7 million as of March 31, 2014 and December 31, 2013, respectively. The balance includes Federal Loan Home Bank ("FHLB") of Pittsburgh stock and Federal Reserve Bank stock. These securities lack a market, and as such they are carried at par/cost since their fair value is not readily determinable. The Company evaluates, and will continue to evaluate, these securities for impairment each reporting period and has concluded the carrying value of these securities is not impaired. During 2014, the Company purchased an additional $14 thousand, net, of capital stock from the FHLB of Pittsburgh at par/cost. Also, during 2014 and 2013 the Company received and recorded dividends on its FHLB stock.