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SECURITIES | 9 Months Ended
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Sep. 30, 2013
Investments Debt And Equity Securities [Abstract] |
SECURITIES |
2. | SECURITIES
The amortized cost and fair value of available for sale securities and the related pre-tax gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows:
|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government agency debt obligations |  | $ | 97,460,000 |  |  | $ | 376,000 |  |  | $ | (8,542,000 | ) |  | $ | 89,294,000 |
Mortgage-backed securities |  |  | 13,382,000 |  |  |  | 1,129,000 |  |  |  | 0 |  |  |  | 14,511,000 |
Michigan Strategic Fund bonds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Municipal general obligation bonds |  |  | 17,275,000 |  |  |  | 432,000 |  |  |  | (1,000 | ) |  |  | 17,706,000 |
Municipal revenue bonds |  |  | 877,000 |  |  |  | 40,000 |  |  |  | 0 |  |  |  | 917,000 |
Mutual funds |  |  | 1,376,000 |  |  |  | 0 |  |  |  | (11,000 | ) |  |  | 1,365,000 |
|  | $ | 130,370,000 |  |  | $ | 1,977,000 |  |  | $ | (8,554,000 | ) |  | $ | 123,793,000 |
December 31, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government agency debt obligations |  | $ | 78,447,000 |  |  | $ | 1,039,000 |  |  | $ | (388,000 | ) |  | $ | 79,098,000 |
Mortgage-backed securities |  |  | 20,182,000 |  |  |  | 1,814,000 |  |  |  | 0 |  |  |  | 21,996,000 |
Michigan Strategic Fund bonds |  |  | 11,255,000 |  |  |  | 0 |  |  |  | 0 |  |  |  | 11,255,000 |
Municipal general obligation bonds |  |  | 21,700,000 |  |  |  | 1,043,000 |  |  |  | 0 |  |  |  | 22,743,000 |
Municipal revenue bonds |  |  | 1,726,000 |  |  |  | 91,000 |  |  |  | 0 |  |  |  | 1,817,000 |
Mutual funds |  |  | 1,354,000 |  |  |  | 51,000 |  |  |  | 0 |  |  |  | 1,405,000 |
|  | $ | 134,664,000 |  |  | $ | 4,038,000 |  |  | $ | (388,000 | ) |  | $ | 138,314,000 |
Securities with unrealized losses at September 30, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:
|  | Less than 12 Months |  |  | 12 Months or More |  |  | Total |
|  | Fair Value |  |  | Unrealized Loss |  |  | Fair Value |  |  | Unrealized Loss |  |  | Fair Value |  |  | Unrealized Loss |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government agency debt obligations |  | $ | 70,142,000 |  |  | $ | (7,691,000 | ) |  | $ | 6,134,000 |  |  | $ | (851,000 | ) |  | $ | 76,276,000 |  |  | $ | (8,542,000 | )
Mortgage-backed securities |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Michigan Strategic Fund bonds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Municipal general obligation bonds |  |  | 394,000 |  |  |  | (1,000 | ) |  |  | 0 |  |  |  | 0 |  |  |  | 394,000 |  |  |  | (1,000 | )
Municipal revenue bonds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Mutual funds |  |  | 1,365,000 |  |  |  | (11,000 | ) |  |  | 0 |  |  |  | 0 |  |  |  | 1,365,000 |  |  |  | (11,000 | )
|  | $ | 71,901,000 |  |  | $ | (7,703,000 | ) |  | $ | 6,134,000 |  |  | $ | (851,000 | ) |  | $ | 78,035,000 |  |  | $ | (8,554,000 | )
December 31, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government agency debt obligations |  | $ | 33,555,000 |  |  | $ | (388,000 | ) |  | $ | 0 |  |  | $ | 0 |  |  | $ | 33,555,000 |  |  | $ | (388,000 | )
Mortgage-backed securities |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Michigan Strategic Fund bonds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Municipal general obligation bonds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Municipal revenue bonds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Mutual funds |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
|  | $ | 33,555,000 |  |  | $ | (388,000 | ) |  | $ | 0 |  |  | $ | 0 |  |  | $ | 33,555,000 |  |  | $ | (388,000 | )
We evaluate securities for other-than-temporary impairment at least on a quarterly basis. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability we have to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. For those debt securities whose fair value is less than their amortized cost basis, we also consider our intent to sell the security, whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to recover the entire amortized cost basis of the security. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. At September 30, 2013, 59 debt securities and one mutual fund with fair values totaling $78.0 million have unrealized losses aggregating $8.6 million. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that unrealized losses were due to changing interest rate environments. As we do not intend to sell our debt securities before recovery of their cost basis and we believe it is more likely than not that we will not be required to sell our debt securities before recovery of the cost basis, no unrealized losses are deemed to be other-than-temporary. The amortized cost and fair values of debt securities at September 30, 2013, by maturity, are shown in the following table. The contractual maturity is utilized for U.S. Government agency debt obligations and municipal bonds. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately. Weighted average yields are also reflected, with yields for municipal securities shown at their tax equivalent yield.
|  | Weighted Average Yield |  |  | Amortized Cost |  |  | Fair Value |
Due in 2013 |  |  | 6.94 | % |  | $ | 355,000 |  |  | $ | 355,000 |
Due in 2014 through 2018 |  |  | 4.99 |  |  |  | 4,651,000 |  |  |  | 4,751,000 |
Due in 2019 through 2023 |  |  | 3.17 |  |  |  | 31,126,000 |  |  |  | 29,918,000 |
Due in 2024 and beyond |  |  | 3.64 |  |  |  | 79,480,000 |  |  |  | 72,893,000 |
Mortgage-backed securities |  |  | 5.19 |  |  |  | 13,382,000 |  |  |  | 14,511,000 |
Mutual funds |  |  | 2.09 |  |  |  | 1,376,000 |  |  |  | 1,365,000 |
|  |  | 3.74 | % |  | $ | 130,370,000 |  |  | $ | 123,793,000 |
The amortized cost of securities issued by the State of Michigan and all its political subdivisions totaled $18.2 million and $23.4 million at September 30, 2013 and December 31, 2012, respectively, with estimated market values of $18.6 million and $24.6 million, respectively. Total securities of any other specific issuer, other than the U.S. Government and its agencies, did not exceed 10% of shareholders’ equity. The carrying value of U.S. Government agency debt obligations and mortgage-backed securities that are pledged to secure repurchase agreements was $85.2 million and $83.8 million at September 30, 2013 and December 31, 2012, respectively. In addition, substantially all of our municipal bonds have been pledged to the Discount Window of the Federal Reserve Bank of Chicago. Investments in Federal Home Loan Bank stock are restricted and may only be resold or redeemed by the issuer.

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