INVESTMENT SECURITIES

The following is a summary of the amortized cost and fair value of investment securities available-for-sale and investment securities held-to-maturity at December 31, 2014 and 2013:



	Investment Securities Available-for-Sale
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(In thousands)
December 31, 2014
U.S. Treasury securities	$	8,272	$	—	$	13	$	8,259
Government sponsored agencies	263,658		356		511		263,503
State and political subdivisions	45,157		1,087		17		46,227
Residential mortgage-backed securities	240,465		885		1,543		239,807
Collateralized mortgage obligations	145,316		261		1,194		144,383
Corporate bonds	44,930		213		48		45,095
Preferred stock	1,389		201		—		1,590
Total	$	749,187	$	3,003	$	3,326	$	748,864
December 31, 2013
Government sponsored agencies	$	93,895	$	250	$	382	$	93,763
State and political subdivisions	42,450		1,355		7		43,798
Residential mortgage-backed securities	303,495		968		5,097		299,366
Collateralized mortgage obligations	182,128		452		1,639		180,941
Corporate bonds	65,028		499		252		65,275
Preferred stock	1,389		63		25		1,427
Total	$	688,385	$	3,587	$	7,402	$	684,570



	Investment Securities Held-to-Maturity
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(In thousands)
December 31, 2014
State and political subdivisions	$	305,913	$	7,294	$	4,557	$	308,650
Trust preferred securities	10,500		—		3,410		7,090
Total	$	316,413	$	7,294	$	7,967	$	315,740
December 31, 2013
State and political subdivisions	$	263,405	$	5,462	$	6,846	$	262,021
Trust preferred securities	10,500		—		4,250		6,250
Total	$	273,905	$	5,462	$	11,096	$	268,271

The majority of the Corporation's residential mortgage-backed securities and collateralized mortgage obligations are backed by a U.S. government agency (Government National Mortgage Association) or a government sponsored enterprise (Federal Home Loan Mortgage Corporation or Federal National Mortgage Association).

At December 31, 2014, the Corporation held $10.5 million of trust preferred investment securities that were recorded as held-to-maturity, with $10.0 million of these securities representing a 100% interest in a trust preferred investment security of a small non-public bank holding company in Michigan that has been assessed by the Corporation as financially strong. The remaining $0.5 million represents a 10% interest in another trust preferred investment security of a small non-public bank holding company located in Michigan that was considered well-capitalized under regulatory guidelines at December 31, 2014.

At December 31, 2014, it was the Corporation's opinion that the market for trust preferred investment securities was not active, and thus, in accordance with GAAP, when there is a significant decrease in the volume and activity for an asset or liability in relation to normal market activity, adjustments to transaction or quoted prices may be necessary or a change in valuation technique or multiple valuation techniques may be appropriate. The Corporation obtained pricing information for its trust preferred investment securities from an independent third-party pricing source. The pricing information was based on both observable inputs and unobservable inputs, including appropriate risk adjustments that market participants would make for possible nonperformance, illiquidity and issuer specifics such as size, leverage position and location. The observable inputs were based on the existing market and insight into appropriate rate of return adjustments that market participants would require for the additional risk associated with a single issue investment security of this nature. Based on the information obtained from the independent third-party pricing source, the Corporation calculated a fair value at December 31, 2014 of $6.8 million on its $10.0 million trust preferred investment security and $0.3 million on its $0.5 million trust preferred investment security, resulting in a combined unrealized loss of $3.4 million at that date.

The following is a summary of the amortized cost and fair value of investment securities at December 31, 2014, by maturity, for both available-for-sale and held-to-maturity investment securities. The maturities of residential mortgage-backed securities and collateralized mortgage obligations are based on scheduled principal payments. The maturities of all other debt securities are based on final contractual maturity.



	December 31, 2014
	Amortized Cost		Fair Value
	(In thousands)
Investment Securities Available-for-Sale:
Due in one year or less	$	194,598	$	194,475
Due after one year through five years	487,952		487,511
Due after five years through ten years	61,825		61,887
Due after ten years	3,423		3,401
Preferred stock	1,389		1,590
Total	$	749,187	$	748,864
Investment Securities Held-to-Maturity:
Due in one year or less	$	37,069	$	37,222
Due after one year through five years	131,711		134,918
Due after five years through ten years	96,736		98,774
Due after ten years	50,897		44,826
Total	$	316,413	$	315,740

The following schedule summarizes information for both available-for-sale and held-to-maturity investment securities with gross unrealized losses at December 31, 2014 and 2013, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position.



	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
December 31, 2014
U.S. Treasury securities	$	8,259	$	13	$	—	$	—	$	8,259	$	13
Government sponsored agencies	166,963		406		31,927		105		198,890		511
State and political subdivisions	62,310		3,348		36,847		1,226		99,157		4,574
Residential mortgage-backed securities	17,276		52		180,194		1,491		197,470		1,543
Collateralized mortgage obligations	63,077		179		31,620		1,015		94,697		1,194
Corporate bonds	—		—		14,952		48		14,952		48
Trust preferred securities	—		—		7,090		3,410		7,090		3,410
Preferred stock	—		—		—		—		—		—
Total	$	317,885	$	3,998	$	302,630	$	7,295	$	620,515	$	11,293
December 31, 2013
Government sponsored agencies	$	47,352	$	205	$	14,031	$	177	$	61,383	$	382
State and political subdivisions	126,345		6,475		19,074		378		145,419		6,853
Residential mortgage-backed securities	274,076		5,097		—		—		274,076		5,097
Collateralized mortgage obligations	84,995		1,127		14,684		512		99,679		1,639
Corporate bonds	14,931		78		19,826		174		34,757		252
Trust preferred securities	—		—		6,250		4,250		6,250		4,250
Preferred stock	1,024		25		—		—		1,024		25
Total	$	548,723	$	13,007	$	73,865	$	5,491	$	622,588	$	18,498

An assessment is performed quarterly by the Corporation to determine whether unrealized losses in its investment securities portfolio are temporary or other-than-temporary by carefully considering all reasonably available information. The Corporation reviews factors such as financial statements, credit ratings, news releases and other pertinent information of the underlying issuer or company to make its determination. Management did not believe any individual unrealized loss on any investment security at December 31, 2014, represented an other-than-temporary impairment (OTTI). Management believed that the unrealized losses on investment securities at December 31, 2014 were temporary in nature and due primarily to changes in interest rates and reduced market liquidity and not as a result of credit-related issues. Unrealized losses of $3.4 million in the trust preferred securities portfolio, related to trust preferred securities of two well-capitalized bank holding companies in Michigan, were attributable to illiquidity in financial markets for these types of investments. The Corporation performed an analysis of the creditworthiness of these issuers and concluded that, at December 31, 2014, the Corporation expected to recover the entire amortized cost basis of these investment securities.

At December 31, 2014, the Corporation did not have the intent to sell any of its impaired investment securities and believed that it was more-likely-than-not that the Corporation will not have to sell any such investment securities before a full recovery of amortized cost. Accordingly, at December 31, 2014, the Corporation believed the impairments in its investment securities portfolio were temporary in nature. Additionally, no impairment loss was realized in the Corporation's consolidated statement of income for the year ended December 31, 2014. However, there is no assurance that OTTI may not occur in the future.

Investment securities with an amortized cost of $493 million and $616 million at December 31, 2014 and 2013, respectively, were pledged to secure public fund deposits, short-term borrowings and for other purposes as required by law.