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, 2018
U.S. Government-sponsored agency securities	$	18,492			$	134	$	18,358
State and municipal	611,528		2,920		14,280		600,168
U.S. Government-sponsored mortgage-backed securities	547,223		71		16,689		530,605
Corporate obligations	31						31
Total available for sale	1,177,274		2,991		31,103		1,149,162
Held to maturity at September 30, 2018
U.S. Government-sponsored agency securities	22,618				833		21,785
State and municipal	192,124		1,161		1,748		191,537
U.S. Government-sponsored mortgage-backed securities	260,347		300		6,514		254,133
Foreign Investments	1,000				3		997
Total held to maturity	476,089		1,461		9,098		468,452
Total Investment Securities	$	1,653,363	$	4,452	$	40,201	$	1,617,614



	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 September 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 September 30, 2018:
Due in one year or less	$	24,098	$	24,360	$	5,161	$	5,178
Due after one through five years	17,294		17,511		48,155		47,042
Due after five through ten years	75,416		75,498		57,950		58,212
Due after ten years	513,243		501,188		104,476		103,887
	630,051		618,557		215,742		214,319
U.S. Government-sponsored mortgage-backed securities	547,223		530,605		260,347		254,133
Total Investment Securities	$	1,177,274	$	1,149,162	$	476,089	$	468,452



	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 $426,200,000 at September 30, 2018, and $475,999,000 at December 31, 2017.

The book value of securities sold under agreements to repurchase amounted to $122,789,000 at September 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 nine months ended September 30, 2018 and 2017 are shown below.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,285	$	382	$	4,016	$	1,547
Gross losses			50				50

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, 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 September 30, 2018
U.S. Government-sponsored agency securities	$	18,358	$	134					$	18,358	$	134
State and municipal	397,852		11,780		$	30,820	$	2,500	428,672		14,280
U.S. Government-sponsored mortgage-backed securities	386,632		9,603		134,602		7,086		521,234		16,689
Total Temporarily Impaired Available for Sale Securities	802,842		21,517		165,422		9,586		968,264		31,103
Temporarily Impaired Held to Maturity Securities at September 30, 2018
U.S. Government-sponsored agency securities	97		3		21,688		830		21,785		833
State and municipal	44,857		857		16,326		891		61,183		1,748
U.S. Government-sponsored mortgage-backed securities	168,488		3,473		61,139		3,041		229,627		6,514
Corporate Obligations	997		3						997		3
Total Temporarily Impaired Held to Maturity Securities	214,439		4,336		99,153		4,762		313,592		9,098
Total Temporarily Impaired Investment Securities	$	1,017,281	$	25,853	$	264,575	$	14,348	$	1,281,856	$	40,201



	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.



	September 30, 2018			December 31, 2017
Investments reported at less than historical cost:
Historical cost	$	1,322,058		$	452,644
Fair value	$	1,281,856		$	446,047
Percent of the Corporation's investment portfolio	78.9		%	28.6		%

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 as of September 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 September 30, 2018. The state and municipal securities portfolio contains unrealized losses of $14,280,000 on three hundred thirty-six securities and $1,748,000 on sixty-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 $134,000 on seven securities and $833,000 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 September 30, 2018. The mortgage-backed securities portfolio contains unrealized losses of $16,689,000 on one hundred twenty-five securities and $6,514,000 on one hundred securities in the available for sale and held to maturity portfolios, respectively. All these securities are issued by a U.S. government-sponsored entity.