Investment Securities

The following tables provide the amortized cost and fair value for the major categories of held-to-maturity and available-for-sale securities. Held-to-maturity securities are carried at amortized cost, which reflects historical cost, adjusted for amortization of premiums and accretion of discounts. Available-for-sale securities are carried at fair value with net unrealized gains or losses reported on an after tax basis as a component of OCI in shareholders' equity.



		December 31, 2014
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale
Debt securities
	U.S. government agency debentures	$	2,500	$	—	$	(18	)	$	2,482
	U.S. states and political subdivisions	221,052		6,756		(466		)	227,342
	Residential mortgage-backed securities:
	U.S. government agencies	951,839		22,377		(3,218		)	970,998
	Commercial mortgage-backed securities:
	U.S. government agencies	104,176		598		(1,371		)	103,403
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	1,698,015		4,777		(26,225		)	1,676,567
	Nonagency	7		—		—			7
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	222,876		863		(1,405		)	222,334
	Asset-backed securities:
	Collateralized loan obligations	297,446		11		(9,613		)	287,844
	Corporate debt securities	61,652		—		(10,315		)	51,337
	Total debt securities	3,559,563		35,382		(52,631		)	3,542,314
Equity securities
	Marketable equity securities	2,974		—		—			2,974
	Total equity securities	2,974		—		—			2,974
	Total securities available for sale	$	3,562,537	$	35,382	$	(52,631	)	$	3,545,288
Securities held-to-maturity
Debt securities
	U.S. treasuries	$	5,000	$	—	$	—		$	5,000
	U.S. government agency debentures	25,000		—		(537		)	24,463
	U.S. states and political subdivisions	517,824		12,645		(191		)	530,278
	Residential mortgage-backed securities:
	U.S. government agencies	580,727		7,495		(3,045		)	585,177
	Commercial mortgage-backed securities:
	U.S. government agencies	58,143		281		(329		)	58,095
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	1,368,534		718		(38,875		)	1,330,377
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	257,642		557		(6,768		)	251,431
	Corporate debt securities	90,739		412		(52		)	91,099
	Total securities held to maturity	$	2,903,609	$	22,108	$	(49,797	)	$	2,875,920



		December 31, 2013
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale
Debt securities
	U.S. states and political subdivisions	$	258,787	$	7,376	$	(3,796	)	$	262,367
	Residential mortgage-backed securities:
	U.S. government agencies	962,687		21,662		(14,427		)	969,922
	Commercial mortgage-backed securities:
	U.S. government agencies	72,048		7		(2,488		)	69,567
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	1,566,262		4,199		(52,068		)	1,518,393
	Nonagency	9		—		—			9
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	104,152		273		(2,157		)	102,268
	Asset-backed securities:
	Collateralized loan obligations	297,259		760		(4,332		)	293,687
	Corporate debt securities	61,596		—		(10,952		)	50,644
	Total debt securities	3,322,800		34,277		(90,220		)	3,266,857
Equity Securities
	Marketable equity securities	3,036		—		—			3,036
	Nonmarketable equity securities	3,281		—		—			3,281
	Total equity securities	6,317		—		—			6,317
	Total securities available for sale	$	3,329,117	$	34,277	$	(90,220	)	$	3,273,174
Securities held-to-maturity
Debt securities
	U.S. treasuries	$	5,000	$	4	$	—		$	5,004
	U.S. government agency debentures	25,000		—		(1,348		)	23,652
	U.S. states and political subdivisions	480,703		5,335		(10,459		)	475,579
	Residential mortgage-backed securities:
	U.S. government agencies	569,960		1,108		(11,617		)	559,451
	Commercial mortgage-backed securities:								—
	U.S. government agencies	56,596		—		(1,190		)	55,406
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	1,464,732		—		(81,818		)	1,382,914
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	240,069		6		(11,052		)	229,023
	Corporate debt securities	93,628		308		(725		)	93,211
	Total securities held to maturity	$	2,935,688	$	6,761	$	(118,209	)	$	2,824,240

The Corporation’s U.S. states and political subdivisions portfolio is composed of general obligation bonds issued by a highly diversified number of states, cities, counties, and school districts. The amortized cost and fair value of the Corporation’s portfolio of general obligation bonds are summarized by U.S. state in the tables below. As illustrated in the tables below, the aggregate fair value of the Corporation’s general obligation bonds was greater than $10 million in eleven of the thirty-seven U.S. states in which it holds investments.



(Dollars in thousands)	December 31, 2014
U.S. State	# of Issuers	Average Issue Size, Fair Value		Amortized Cost		Fair Value
Ohio	137	$	979	$	130,741	$	134,127
Michigan	169	842		138,325		142,292
Illinois	66	1,897		121,560		125,169
Wisconsin	77	841		62,543		64,776
Texas	64	801		50,307		51,293
Pennsylvania	45	1,000		44,443		45,006
Minnesota	42	674		27,740		28,326
Washington	30	952		27,987		28,558
New Jersey	37	746		26,755		27,612
Missouri	19	1,011		18,764		19,207
New York	19	628		11,659		11,929
Other	120	650		76,849		78,020
Total general obligation bonds	825	$	917	$	737,673	$	756,315



(Dollars in thousands)	December 31, 2013
U.S. State	# of Issuers	Average Issue Size, Fair Value		Amortized Cost		Fair Value
Michigan	166	$	744	$	122,198	$	123,571
Ohio	152	1,048		158,641		159,232
Illinois	75	1,314		96,863		98,521
Texas	69	771		54,295		53,204
Wisconsin	86	648		54,516		55,747
Pennsylvania	50	898		47,835		44,883
Minnesota	45	663		29,840		29,816
Washington	30	930		28,393		27,906
New Jersey	38	722		27,101		27,440
Missouri	20	969		19,253		19,382
New York	22	585		13,064		12,878
California	18	599		10,651		10,788
Other	115	631		74,918		72,572
Total general obligation bonds	886	$	831	$	737,568	$	735,940

The Corporation’s investment policy states that municipal securities purchased are to be investment grade and allows for a 20% maximum portfolio concentration in municipal securities with a combined individual state to total municipal outstanding equal to or less than 25%. A municipal security is investment grade if (1) the security has a low risk of default by the obligor and (2) the full and timely payment of principal and interest is expected over the anticipated life of the instrument. The fact that a municipal security is rated by one nationally recognized credit rating agency is indicative, but not sufficient evidence, that a municipal security is investment grade. In all cases, the Corporation considers and documents within a security pre-purchase analysis factors such as capacity to pay, market and economic data, and such other factors as are available and relevant to the security or issuer. Factors to be considered in the ongoing monitoring of municipal securities and in the pre-purchase analysis include soundness of budgetary position, and sources, strength, and stability of tax or enterprise revenues. The Corporation also considers spreads to U.S. Treasuries on comparable bonds of similar credit quality, in addition to the above analysis, to assess whether municipal securities are investment grade. The Corporation performs a risk analysis for any security that is downgraded below investment grade to determine if the security should be retained or sold. This risk analysis includes, but is not limited to, discussions with the Corporation’s credit department as well as third party municipal credit analysts and review of the nationally recognized credit rating agency’s analysis describing the downgrade.

The Corporation's evaluation of its municipal bond portfolio at December 31, 2014 did not uncover any facts or circumstances resulting in significantly different credit ratings than those assigned by a nationally recognized credit rating agency.

FRB and FHLB stock constitute the majority of other investments on the Consolidated Balance Sheet.



	December 31,
(In thousands)	2014		2013
FRB stock	$	55,681	$	55,294
FHLB stock	92,547		125,032
Other	426		477
Total other investments	$	148,654	$	180,803

FRB and FHLB stock is classified as a restricted investment, carried at cost and valued based on the ultimate recoverability of par value. Cash and stock dividends received on the stock are reported as interest income. There are no identified events or changes in circumstances that may have a significant adverse effect on these investments carried at cost.

Securities with a carrying value of $2.8 billion and $3.2 billion at December 31, 2014 and 2013, respectively, were pledged to secure trust and public deposits and securities sold under agreements to repurchase and for other purposes required or permitted by law.

Realized Gains and Losses

The following table presents the proceeds from sales of available-for-sale securities and the gross realized gains and losses on the sales of those securities that have been included in earnings as a result of those sales. Gains or losses on the sales of available-for-sale securities are recognized upon sale and are determined using the specific identification method.



	Year Ended December 31,
(In thousands)	2014			2013			2012
Realized gains	$	382		$	3,786		$	3,786
Realized losses	(216		)	(6,589		)	—
Net securities (losses)/gains	$	166		$	(2,803	)	$	3,786

Gross Unrealized Losses and Fair Value

The following table presents the gross unrealized losses and fair value of securities by length of time that individual securities had been in a continuous loss position by major categories of available-for-sale and held-to-maturity securities.



		December 31, 2014
		Less than 12 months						12 months or longer						Total
(Dollars in thousands)		Fair Value		Unrealized Losses			Number Impaired Securities	Fair Value		Unrealized Losses			Number Impaired Securities	Fair Value		Unrealized Losses
Securities available-for-sale
	Debt Securities
	U.S. government agency debentures	$	2,482	$	(18	)	1	$	—	$	—		—	$	2,482	$	(18	)
	U.S. states and political subdivisions	5,637		(11		)	11	22,528		(455		)	36	28,165		(466		)
	Residential mortgage-backed securities:
	U.S. government agencies	50,126		(182		)	5	199,773		(3,036		)	14	249,899		(3,218		)
	Commercial mortgage-backed securities:
	U.S. government agencies	12,284		(55		)	2	45,485		(1,316		)	6	57,769		(1,371		)
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	243,970		(906		)	15	905,478		(25,319		)	64	1,149,448		(26,225		)
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	31,375		(229		)	4	67,169		(1,176		)	7	98,544		(1,405		)
	Asset-backed securities:
	Collateralized loan obligations	79,042		(1,406		)	15	193,687		(8,207		)	27	272,729		(9,613		)
	Corporate debt securities	—		—			—	51,338		(10,315		)	8	51,338		(10,315		)
	Total available-for-sale securities	$	424,916	$	(2,807	)	53	$	1,485,458	$	(49,824	)	162	$	1,910,374	$	(52,631	)
Securities held-to-maturity
	Debt Securities
	U.S. government agency debentures	$	—	$	—		—	$	24,463	$	(537	)	1	$	24,463	$	(537	)
	U.S. states and political subdivisions	9,085		(17		)	9	18,371		(174		)	21	27,456		(191		)
	Residential mortgage-backed securities:
	U.S. government agencies	—		—			—	185,361		(3,045		)	10	185,361		(3,045		)
	Commercial mortgage-backed securities:
	U.S. government agencies	9,950		(4		)	2	16,735		(325		)	2	26,685		(329		)
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	28,333		(149		)	3	1,161,297		(38,726		)	58	1,189,630		(38,875		)
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	41,474		(55		)	3	171,570		(6,713		)	16	213,044		(6,768		)
	Corporate debt securities	36,933		(52		)	13	—		—			—	36,933		(52		)
	Total held-to-maturity securities	$	125,775	$	(277	)	30	$	1,577,797	$	(49,520	)	108	$	1,703,572	$	(49,797	)



		December 31, 2013
		Less than 12 months						12 months or longer						Total
(Dollars in thousands)		Fair Value		Unrealized Losses			Number Impaired Securities	Fair Value		Unrealized Losses			Number Impaired Securities	Fair Value		Unrealized Losses
Securities available-for-sale
Debt securities
	U.S. states and political subdivisions	$	38,039	$	(1,996	)	65	$	14,157	$	(1,800	)	25	$	52,196	$	(3,796	)
	Residential mortgage-backed securities:
	U.S. government agencies	434,761		(13,109		)	35	14,890		(1,318		)	2	449,651		(14,427		)
	Commercial mortgage-backed securities:
	U.S. government agencies	33,387		(1,491		)	5	16,944		(997		)	2	50,331		(2,488		)
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	1,135,151		(44,775		)	74	100,530		(7,293		)	7	1,235,681		(52,068		)
	Nonagency	—		—			—	1		—			1	1		—
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	43,747		(2,055		)	6	2,525		(102		)	1	46,272		(2,157		)
	Asset-backed securities:
	Collateralized loan obligations	223,458		(4,332		)	33	—		—			—	223,458		(4,332		)
	Corporate debt securities	—		—			—	50,644		(10,952		)	8	50,644		(10,952		)
	Total available-for-sale securities	$	1,908,543	$	(67,758	)	218	$	199,691	$	(22,462	)	46	$	2,108,234	$	(90,220	)
Securities held-to-maturity
	Debt securities
	U.S. government agency debentures	$	23,652	$	(1,348	)	1	$	—	$	—		—	$	23,652	$	(1,348	)
	U.S. states and political subdivisions	222,154		(10,276		)	353	2,478		(183		)	6	224,632		(10,459		)
	Residential mortgage-backed securities:
	U.S. government agencies	422,192		(11,617		)	22	—		—			—	422,192		(11,617		)
	Commercial mortgage-backed securities:
	U.S. government agencies	48,831		(1,190		)	8	—		—			—	48,831		(1,190		)
	Residential collateralized mortgage-backed securities:
	U.S. government agencies	1,382,915		(81,818		)	66	—		—			—	1,382,915		(81,818		)
	Nonagency	—		—			—	—		—			—	—		—
	Commercial collateralized mortgage-backed securities:
	U.S. government agencies	208,863		(11,052		)	19	—		—			—	208,863		(11,052		)
	Corporate debt securities	64,541		(725		)	23	—		—			—	64,541		(725		)
	Total held-to-maturity securities	$	2,373,148	$	(118,026	)	492	$	2,478	$	(183	)	6	$	2,375,626	$	(118,209	)

At least quarterly, the Corporation conducts a comprehensive security-level impairment assessment on all securities in an unrealized loss position to determine if OTTI exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. An OTTI loss must be recognized for a debt security in an unrealized loss position if the Corporation intends to sell the security or it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the security. Even if the Corporation does not expect to sell the security, the Corporation must evaluate the expected cash flows to be received to determine if a credit loss has occurred. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in OCI. Equity securities are also evaluated to determine whether the unrealized loss is expected to be recoverable based on whether evidence exists to support a realizable value equal to or greater than the amortized cost basis. If it is probable that the Corporation will not recover the amortized cost basis, taking into consideration the estimated recovery period and its ability to hold the equity security until recovery, OTTI is recognized.

The security-level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. The assessments are based on the nature of the securities, the financial condition of the issuer, the extent and duration of the securities, the extent and duration of the loss and the intent and whether Management intends to sell or it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis, which may be maturity. For those securities for which the assessment shows the Corporation will recover the entire cost basis, Management does not intend to sell these securities and it is not more likely than not that the Corporation will be required to sell them before the anticipated recovery of the amortized cost basis, the gross unrealized losses are recognized in OCI, net of tax.

The investment securities portfolio was in a net unrealized loss position of $44.9 million at December 31, 2014, compared to a net unrealized loss position of $167.4 million at December 31, 2013. Gross unrealized losses were $102.4 million as of December 31, 2014, compared to $208.4 million at December 31, 2013. As of December 31, 2014, gross unrealized losses are concentrated within agency MBS, CLOs, and corporate debt securities. The fair values of the agency MBSs have been impacted by the flattening yield curves throughout 2014 in which shorter term rates are higher and longer terms rates are longer than the previous year. The fair value of the CLOs have been impacted by increased supply which has widened spreads. Corporate debt securities are composed of eight, single issuer, trust preferred securities with stated maturities. Such investments are only 1% of the fair value of the entire investment portfolio. None of the corporate issuers have deferred paying dividends on their issued trust preferred shares in which the Corporation is invested. The fair values of these investments have been impacted by the market conditions which have caused risk premiums to increase, resulting in the decline in the fair value of the trust preferred securities.

Management believes the Corporation will fully recover the cost of these agency MBSs, CLOs, and corporate debt securities, and it does not intend to sell these securities and it is not more likely than not that it will be required to sell them before the anticipated recovery of the remaining amortized cost basis, which may be maturity. As a result, Management concluded that these securities were not other-than-temporarily impaired at December 31, 2014 and has recognized the total amount of the impairment in OCI, net of tax.

The Corporation also holds $287.8 million of CLOs with a gross unrealized loss position of $9.6 million as of December 31, 2014. The new Volcker regulations, as originally adopted, may affect the Corporation’s ability to hold these CLOs. Management believes that its holdings of CLOs are not ownership interests in a covered fund prohibited by the Volcker regulations, and, therefore, expect to be able to hold these investments until their stated maturities with no restriction.

Contractual Maturity of Debt Securities

The following table shows the remaining contractual maturities and contractual yields of debt securities held-to-maturity and available-for-sale as of December 31, 2014. Estimated lives on MBSs may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.