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 March 31, 2015, December 31, 2014 and March 31, 2014:



	Investment Securities Available-for-Sale
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(In thousands)
March 31, 2015
U.S. Treasury securities	$	8,271	$	31	$	—	$	8,302
Government sponsored agencies	249,642		889		101		250,430
State and political subdivisions	31,701		624		3		32,322
Residential mortgage-backed securities	218,299		1,358		56		219,601
Collateralized mortgage obligations	133,713		305		718		133,300
Corporate bonds	34,925		136		64		34,997
Preferred stock	1,389		303		—		1,692
Total	$	677,940	$	3,646	$	942	$	680,644
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
March 31, 2014
Government sponsored agencies	$	91,613	$	295	$	298	$	91,610
State and political subdivisions	42,369		1,408		—		43,777
Residential mortgage-backed securities	291,187		1,023		3,472		288,738
Collateralized mortgage obligations	167,622		393		1,296		166,719
Corporate bonds	65,003		505		93		65,415
Preferred stock	1,389		170		—		1,559
Total	$	659,183	$	3,794	$	5,159	$	657,818



	Investment Securities Held-to-Maturity
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(In thousands)
March 31, 2015
State and political subdivisions	$	370,950	$	6,852	$	4,926	$	372,876
Trust preferred securities	10,500		—		3,200		7,300
Total	$	381,450	$	6,852	$	8,126	$	380,176
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
March 31, 2014
State and political subdivisions	$	267,599	$	5,331	$	6,983	$	265,947
Trust preferred securities	10,500		—		4,040		6,460
Total	$	278,099	$	5,331	$	11,023	$	272,407

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 March 31, 2015, 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 categorized as well-capitalized under regulatory guidelines at March 31, 2015.

At March 31, 2015, 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 March 31, 2015 of $7.0 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 $3.2 million at that date.

The following is a summary of the amortized cost and fair value of investment securities at March 31, 2015, 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.



	March 31, 2015
	Amortized Cost		Fair Value
	(In thousands)
Investment Securities Available-for-Sale:
Due in one year or less	$	180,558	$	180,869
Due after one year through five years	442,088		443,752
Due after five years through ten years	50,902		51,302
Due after ten years	3,003		3,029
Preferred stock	1,389		1,692
Total	$	677,940	$	680,644
Investment Securities Held-to-Maturity:
Due in one year or less	$	35,293	$	35,365
Due after one year through five years	171,557		172,699
Due after five years through ten years	120,799		122,512
Due after ten years	53,801		49,600
Total	$	381,450	$	380,176

The following schedule summarizes information for both available-for-sale and held-to-maturity investment securities with gross unrealized losses at March 31, 2015, December 31, 2014 and March 31, 2014, 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
	(In thousands)
March 31, 2015
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
Government sponsored agencies	27,889		64		18,896		37		46,785		101
State and political subdivisions	156,010		1,989		49,839		2,940		205,849		4,929
Residential mortgage-backed securities	82,303		28		3,847		28		86,150		56
Collateralized mortgage obligations	22,694		22		41,061		696		63,755		718
Corporate bonds	4,989		11		14,946		53		19,935		64
Trust preferred securities	—		—		7,300		3,200		7,300		3,200
Total	$	293,885	$	2,114	$	135,889	$	6,954	$	429,774	$	9,068
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
Total	$	317,885	$	3,998	$	302,630	$	7,295	$	620,515	$	11,293
March 31, 2014
Government sponsored agencies	$	45,396	$	110	$	15,204	$	188	$	60,600	$	298
State and political subdivisions	79,787		4,942		56,180		2,041		135,967		6,983
Residential mortgage-backed securities	247,397		3,472		—		—		247,397		3,472
Collateralized mortgage obligations	76,900		885		12,833		411		89,733		1,296
Corporate bonds	—		—		14,907		93		14,907		93
Trust preferred securities	—		—		6,460		4,040		6,460		4,040
Total	$	449,480	$	9,409	$	105,584	$	6,773	$	555,064	$	16,182

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 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, as of March 31, 2015, represented an other-than-temporary impairment (OTTI). Management believed that the unrealized losses on investment securities at March 31, 2015 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 $3.2 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 March 31, 2015, the Corporation expected to recover the entire amortized cost basis of these investment securities.

At March 31, 2015, 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 March 31, 2015, the Corporation believed the impairments in its investment securities portfolio were temporary in nature. However, there is no assurance that OTTI may not occur in the future.