Securities

(In Thousands, Except Number of Securities)

The amortized cost and fair value of securities held to maturity were as follows as of the dates presented:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2015
Obligations of other U.S. Government agencies and corporations	$	101,155	$	26	$	(1,214	)	$	99,967
Obligations of states and political subdivisions	357,245		16,636		(95		)	373,786
	$	458,400	$	16,662	$	(1,309	)	$	473,753
December 31, 2014
Obligations of other U.S. Government agencies and corporations	$	125,081	$	10	$	(2,915	)	$	122,176
Obligations of states and political subdivisions	305,082		15,428		(198		)	320,312
	$	430,163	$	15,438	$	(3,113	)	$	442,488

In light of the ongoing fiscal uncertainty in state and local governments, the Company analyzes its exposure to potential losses in its security portfolio on at least a quarterly basis. Management reviews the underlying credit rating and analyzes the financial condition of the respective issuers. Based on this analysis, the Company sold certain securities representing obligations of state and political subdivisions that were classified as held to maturity during 2013. The securities sold showed significant credit deterioration in that an analysis of the financial condition of the respective issuers showed the issuers were operating at net deficits with little to no financial cushion to offset future contingencies. The securities sold in 2013 had carrying values of $4,290, and the Company recognized a net gain of $169 on the sales during the year ended December 31, 2013. No securities classified as held to maturity were sold during the years ended December 31, 2015 or December 31, 2014.

The amortized cost and fair value of securities available for sale were as follows as of the dates presented:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2015
Obligations of other U.S. Government agencies and corporations	$	6,093	$	126	$	(19	)	$	6,200
Residential mortgage backed securities:
Government agency mortgage backed securities	362,669		3,649		(1,778		)	364,540
Government agency collateralized mortgage obligations	168,916		1,449		(2,305		)	168,060
Commercial mortgage backed securities:
Government agency mortgage backed securities	58,864		1,002		(107		)	59,759
Government agency collateralized mortgage obligations	4,947		158		(1		)	5,104
Trust preferred securities	24,770		—		(5,301		)	19,469
Other debt securities	18,899		468		(34		)	19,333
Other equity securities	2,500		1,840		—			4,340
	$	647,658	$	8,692	$	(9,545	)	$	646,805



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2014
Obligations of other U.S. Government agencies and corporations	$	6,119	$	147	$	(119	)	$	6,147
Residential mortgage backed securities:
Government agency mortgage backed securities	292,283		4,908		(832		)	296,359
Government agency collateralized mortgage obligations	158,436		1,523		(2,523		)	157,436
Commercial mortgage backed securities:
Government agency mortgage backed securities	45,714		1,608		(137		)	47,185
Government agency collateralized mortgage obligations	4,970		202		—			5,172
Trust preferred securities	26,400		137		(6,781		)	19,756
Other debt securities	17,517		487		(74		)	17,930
Other equity securities	2,331		1,268		—			3,599
	$	553,770	$	10,280	$	(10,466	)	$	553,584

During the year ended December 31, 2015, the Company sold its pooled trust preferred security XIII with a carrying value of $1,117 at the time of sale for net proceeds of $1,213 resulting in a gain of $96. Furthermore, the Company sold certain investments acquired from Heritage shortly after acquisition with an aggregate carrying value of $7,231 at the time of sale for net proceeds of $7,231, resulting in no gain or loss on the sale. During the same period in 2014 and 2013, the Company sold securities with a carrying value at the time of sale of $724 and $9,130, respectively, for net proceeds of $1,099 and $9,015, respectively, resulting in a gain of $375 and a loss of $115, respectively.

Gross realized gains and gross realized losses on sales of securities available for sale for the years 2015, 2014 and 2013 were as follows:



	Year Ended December 31,
	2015		2014		2013
Gross gains on sales of securities available for sale	$	96	$	375	$	—
Gross losses on sales of securities available for sale	—		—		(115		)
Gain/(loss) on sales of securities available for sale, net	$	96	$	375	$	(115	)

At December 31, 2015 and 2014, securities with a carrying value of approximately $679,492 and $617,189, respectively, were pledged to secure government, public, trust, and other deposits. Securities with a carrying value of $39,275 and $16,410 were pledged as collateral for short-term borrowings and derivative instruments at December 31, 2015 and 2014, respectively.

The amortized cost and fair value of securities at December 31, 2015 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.



	Held to Maturity				Available for Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	17,073	$	17,255	$	—	$	—
Due after one year through five years	96,728		98,992		6,093		6,200
Due after five years through ten years	214,256		219,865		—		—
Due after ten years	130,343		137,641		24,770		19,469
Residential mortgage backed securities:
Government agency mortgage backed securities	—		—		362,669		364,540
Government agency collateralized mortgage obligations	—		—		168,916		168,060
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		—		58,864		59,759
Government agency collateralized mortgage obligations	—		—		4,947		5,104
Other debt securities	—		—		18,899		19,333
Other equity securities	—		—		2,500		4,340
	$	458,400	$	473,753	$	647,658	$	646,805

The following table presents the gross unrealized losses and fair value of investment securities, aggregated by investment category and the length of time the investments have been in a continuous unrealized loss position as of the dates presented:



	Less than 12 Months						12 Months or More						Total
	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Held to Maturity:
December 31, 2015
Obligations of other U.S. Government agencies and corporations	10	$	31,567	$	(414	)	8	$	38,688	$	(800	)	18	$	70,255	$	(1,214	)
Obligations of states and political subdivisions	6	4,815		(53		)	7	4,921		(42		)	13	9,736		(95		)
Total	16	$	36,382	$	(467	)	15	$	43,609	$	(842	)	31	$	79,991	$	(1,309	)
December 31, 2014
Obligations of other U.S. Government agencies and corporations	2	$	1,000	$	(1	)	26	$	119,174	$	(2,914	)	28	$	120,174	$	(2,915	)
Obligations of states and political subdivisions	3	3,353		(29		)	16	10,052		(169		)	19	13,405		(198		)
Total	5	$	4,353	$	(30	)	42	$	129,226	$	(3,083	)	47	$	133,579	$	(3,113	)



	Less than 12 Months						12 Months or More						Total
	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Available for Sale:
December 31, 2015
Obligations of other U.S. Government agencies and corporations	1	$	3,981	$	(19	)	0	$	—	$	—		1	$	3,981	$	(19	)
Residential mortgage backed securities:
Government agency mortgage backed securities	34	130,306		(937		)	9	27,431		(841		)	43	157,737		(1,778		)
Government agency collateralized mortgage obligations	25	52,128		(347		)	16	51,574		(1,958		)	41	103,702		(2,305		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	8	16,782		(104		)	1	814		(3		)	9	17,596		(107		)
Government agency collateralized mortgage obligations	1	1,882		(1		)	0	—		—			1	1,882		(1		)
Trust preferred securities	0	—		—			3	19,469		(5,301		)	3	19,469		(5,301		)
Other debt securities	1	1,316		(3		)	2	3,866		(31		)	3	5,182		(34		)
Other equity securities	0	—		—			0	—		—			0	—		—
Total	70	$	206,395	$	(1,411	)	31	$	103,154	$	(8,134	)	101	$	309,549	$	(9,545	)
December 31, 2014
Obligations of other U.S. Government agencies and corporations	0	$	—	$	—		1	$	3,881	$	(119	)	1	$	3,881	$	(119	)
Residential mortgage backed securities:
Government agency mortgage backed securities	3	18,924		(39		)	13	49,612		(793		)	16	68,536		(832		)
Government agency collateralized mortgage obligations	6	32,169		(138		)	18	65,552		(2,385		)	24	97,721		(2,523		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	0	—		—			3	10,651		(137		)	3	10,651		(137		)
Government agency collateralized mortgage obligations	0	—		—			0	—		—			0	—		—
Trust preferred securities	0	—		—			3	18,503		(6,781		)	3	18,503		(6,781		)
Other debt securities	0	—		—			2	4,175		(74		)	2	4,175		(74		)
Other equity securities	0	—		—			0	—		—			0	—		—
Total	9	$	51,093	$	(177	)	40	$	152,374	$	(10,289	)	49	$	203,467	$	(10,466	)

The Company does not intend to sell any of the securities in an unrealized loss position, and it is not more likely than not that the Company will be required to sell any such security prior to the recovery of its amortized cost basis, which may be maturity. Furthermore, even though a number of these securities have been in a continuous unrealized loss position for a period greater than twelve months, the Company has experienced an overall improvement in the fair value of its investment portfolio and is collecting principal and interest payments from the respective issuers as scheduled. As such, the Company did not record any other-than-temporary impairment for the years ended December 31, 2015 or 2014.

The Company holds investments in pooled trust preferred securities that had a cost basis of $24,770 and $26,400 and a fair value of $19,469 and $19,756 at December 31, 2015 and 2014, respectively. The investments in pooled trust preferred securities consist of three securities representing interests in various tranches of trusts collateralized by debt issued by over 250 financial institutions. Management’s determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Company’s tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments, before recovery of the investments’ amortized cost, which may be at maturity. At December 31, 2015, management did not, and does not currently, believe such securities will be settled at a price less than the amortized cost of the investment, but the Company previously concluded that it was probable that there had been an adverse change in estimated cash flows for all three trust preferred securities and recognized credit related impairment losses on these securities in 2010 and 2011. For the years ended December 31, 2015, 2014, and 2013, the Company determined the pooled trust preferred securities and their estimated cash flow were fairly valued, and no additional impairment was recognized during these periods.

The Company’s analysis of the pooled trust preferred securities during the second quarter of 2015 supported a return to accrual status for one of the three securities (XXVI). During the second quarter of 2014, the Company’s analysis supported a return to accrual status for one of the other securities (XXIII). An observed history of principal and interest payments combined with improved qualitative and quantitative factors described above justified the accrual of interest on these securities. However, the remaining security (XXIV) is still in “payment in kind” status where interest payments are not expected until a future date and therefore, the qualitative and quantitative factors described above do not justify a return to accrual status at this time. As a result, pooled trust preferred security XXIV remains classified as a nonaccruing asset at December 31, 2015, and investment interest is recorded on the cash-basis method until qualifying for return to accrual status.

The following table provides information regarding the Company’s investments in pooled trust preferred securities at December 31, 2015:



Name	Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Lowest Credit Rating	Issuers Currently in Deferral or Default
XXIII	Pooled	B-2	$	8,473	$	5,950	$	(2,523	)	Baa3	19%
XXIV	Pooled	B-2	12,076		10,449		(1,627		)	Caa2	28%
XXVI	Pooled	B-2	4,221		3,070		(1,151		)	Ba3	25%
			$	24,770	$	19,469	$	(5,301	)

The following table provides a summary of the cumulative credit related losses recognized in earnings for which a portion of OTTI has been recognized in other comprehensive income:



	2015			2014
Balance at January 1	$	(3,337	)	$	(3,337	)
Additions related to credit losses for which OTTI was not previously recognized	—			—
Increases in credit loss for which OTTI was previously recognized	—			—
Balance at December 31	$	(3,337	)	$	(3,337	)