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Investment Securities | 12 Months Ended
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Dec. 31, 2014
Investment Securities [Abstract] |
Investment Securities | 6.Investment Securities The following table shows a comparison of amortized cost and fair values of investment securities at December 31, 2014 and 2013:
|  |  | Gross | Gross |  |  |  |
| Amortized | Unrealized | Unrealized | Fair | OTTI in
(in thousands) | Cost | Gains | Losses | Value | AOCL
December 31, 2014 |  |  |  |  |  |  |  |  |  |
Available for Sale: |  |  |  |  |  |  |  |  |  |
U.S. treasuries | $ | 29,607 | $ | 0 | $ | 11 | $ | 29,596 | $ | 0
U.S. government agencies |  | 39,077 |  | 117 |  | 253 |  | 38,941 |  | 0
Residential mortgage-backed agencies |  | 45,175 |  | 510 |  | 412 |  | 45,273 |  | 0
Commercial mortgage-backed agencies |  | 26,007 |  | 53 |  | 103 |  | 25,957 |  | 0
Collateralized mortgage obligations |  | 8,611 |  | 96 |  | 0 |  | 8,707 |  | 0
Obligations of states and political subdivisions |  | 46,151 |  | 1,413 |  | 260 |  | 47,304 |  | 0
Collateralized debt obligations |  | 37,117 |  | 1,155 |  | 12,933 |  | 25,339 |  | 6,143
Total available for sale | $ | 231,745 | $ | 3,344 | $ | 13,972 | $ | 221,117 | $ | 6,143
Held to Maturity: |  |  |  |  |  |  |  |  |  |
U.S. government agencies | $ | 24,520 | $ | 514 | $ | 0 | $ | 25,034 | $ | 0
Residential mortgage-backed agencies |  | 58,400 |  | 613 |  | 5 |  | 59,008 |  | 0
Commercial mortgage-backed agencies |  | 16,425 |  | 312 |  | 0 |  | 16,737 |  | 0
Collateralized mortgage obligations |  | 7,379 |  | 5 |  | 0 |  | 7,384 |  | 0
Obligations of states and political subdivisions |  | 2,725 |  | 0 |  | 117 |  | 2,608 |  | 0
Total held to maturity | $ | 109,449 | $ | 1,444 | $ | 122 | $ | 110,771 | $ | 0
December 31, 2013 |  |  |  |  |  |  |  |  |  |
Available for Sale: |  |  |  |  |  |  |  |  |  |
U.S. government agencies | $ | 97,242 | $ | 14 | $ | 5,221 | $ | 92,035 | $ | 0
Residential mortgage-backed agencies |  | 116,933 |  | 334 |  | 4,823 |  | 112,444 |  | 0
Commercial mortgage-backed agencies |  | 31,025 |  | 14 |  | 1,134 |  | 29,905 |  | 0
Collateralized mortgage obligations |  | 30,468 |  | 84 |  | 1,162 |  | 29,390 |  | 0
Obligations of states and political subdivisions |  | 55,505 |  | 895 |  | 1,123 |  | 55,277 |  | 0
Collateralized debt obligations |  | 37,146 |  | 778 |  | 20,386 |  | 17,538 |  | 12,703
Total available for sale | $ | 368,319 | $ | 2,119 | $ | 33,849 | $ | 336,589 | $ | 12,703
Held to Maturity: |  |  |  |  |  |  |  |  |  |
Obligations of states and political subdivisions | $ | 3,900 | $ | 249 | $ | 559 | $ | 3,590 | $ | 0
Total held to maturity | $ | 3,900 | $ | 249 | $ | 559 | $ | 3,590 | $ | 0
Proceeds from sales of available-for-sale securities and the realized gains and losses for the years ended December 31, 2014 and 2013 are as follows:
(in thousands) | 2014 | 2013
Proceeds | $ | 56,838 | $ | 44,496
Realized gains |  | 427 |  | 447
Realized losses |  | 468 |  | 369
The following table shows the Corporation’s securities with gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized position, at December 31, 2014 and 2013:
| Less than 12 months | 12 months or more
| Fair | Unrealized | Fair | Unrealized
(in thousands) | Value | Losses | Value | Losses
December 31, 2014 |  |  |  |  |  |  |  |
Available for Sale: |  |  |  |  |  |  |  |
U.S. treasuries | $ | 27,096 | $ | 11 | $ | 0 | $ | 0
U.S. government agencies |  | 0 |  | 0 |  | 18,819 |  | 253
Residential mortgage-backed agencies |  | 0 |  | 0 |  | 17,918 |  | 412
Commercial mortgage-backed agencies |  | 12,298 |  | 97 |  | 973 |  | 6
Collateralized mortgage obligations |  | 0 |  | 0 |  | 0 |  | 0
Obligations of states and political subdivisions |  | 0 |  | 0 |  | 8,981 |  | 260
Collateralized debt obligations |  | 0 |  | 0 |  | 20,290 |  | 12,933
Total available for sale | $ | 39,394 | $ | 108 | $ | 66,981 | $ | 13,864
Held to Maturity: |  |  |  |  |  |  |  |
U.S. government agencies | $ | 0 | $ | 0 | $ | 0 | $ | 0
Residential mortgage-backed agencies |  | 3,850 |  | 5 |  | 0 |  | 0
Commercial mortgage-backed agencies |  | 0 |  | 0 |  | 0 |  | 0
Collateralized mortgage obligations |  | 0 |  | 0 |  | 0 |  | 0
Obligations of states and political subdivisions |  | 0 |  | 0 |  | 2,608 |  | 117
Total held to maturity | $ | 3,850 | $ | 5 | $ | 2,608 | $ | 117
December 31, 2013 |  |  |  |  |  |  |  |
Available for Sale: |  |  |  |  |  |  |  |
U.S. government agencies | $ | 62,962 | $ | 3,154 | $ | 13,996 | $ | 2,067
Residential mortgage-backed agencies |  | 60,781 |  | 1,801 |  | 46,570 |  | 3,022
Commercial mortgage-backed agencies |  | 21,889 |  | 1,134 |  | 0 |  | 0
Collateralized mortgage obligations |  | 21,201 |  | 1,149 |  | 3,051 |  | 13
Obligations of states and political subdivisions |  | 15,422 |  | 1,123 |  | 0 |  | 0
Collateralized debt obligations |  | 0 |  | 0 |  | 16,434 |  | 20,386
Total available for sale | $ | 182,255 | $ | 8,361 | $ | 80,051 | $ | 25,488
Held to Maturity: |  |  |  |  |  |  |  |
Obligations of states and political subdivisions | $ | 0 | $ | 0 | $ | 2,301 | $ | 559
Total held to maturity | $ | 0 | $ | 0 | $ | 2,301 | $ | 559
Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of accounting guidance for subsequent measurement in ASC Topic 320 (ASC Section 320-10-35), management assesses whether (i) the Corporation has the intent to sell a security being evaluated and (ii) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair values of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses, which are recognized in other comprehensive loss. In estimating OTTI losses, management considers (a) the length of time and the extent to which the fair value has been less than cost, (b) adverse conditions specifically related to the security, an industry, or a geographic area, (c) the historic and implied volatility of the fair value of the security, (d) changes in the rating of the security by a rating agency, (e) recoveries or additional declines in fair value subsequent to the balance sheet date, (f) failure of the issuer of the security to make scheduled interest or principal payments, and (g) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Management also monitors cash flow projections for securities that are considered beneficial interests under the guidance of ASC Subtopic 325-40, Investments – Other – Beneficial Interests in Securitized Financial Assets, (ASC Section 325-40-35). Management believes that the valuation of certain securities is a critical accounting policy that requires significant estimates in preparation of its consolidated financial statements. Management utilizes an independent third party to prepare both the impairment valuations and fair value determinations for its collateralized debt obligation (“CDO “) portfolio consisting of pooled trust preferred securities. Based on management’s review of the third party evaluations, management believes that there were no material differences in the valuations between December 31, 2014 and December 31, 2013. U.S. Government Treasuries – Available for Sale - Two U.S. government treasuries have been in an unrealized loss position for less than 12 months as of December 31, 2014. The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at December 31, 2014. There were no U.S. government treasuries in an unrealized loss position for 12 months or more. U.S. Government Agencies – Available for Sale – There were no U.S. government agencies in an unrealized loss position for less than 12 months as of December 31, 2014. There were three U.S. government agencies in an unrealized loss position for 12 months or more. The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at December 31, 2014. Residential Mortgage-Backed Agencies – Available for Sale - There were no residential mortgage-backed agencies in an unrealized loss position for less than 12 months as of December 31, 2014. There were three residential mortgage-backed agency securities in an unrealized loss position for 12 months or more. The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell the securities before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at December 31, 2014. Commercial Mortgage-Backed Agencies – Available for Sale – There were two commercial mortgage-backed agencies in an unrealized loss position for less than 12 months as of December 31, 2014. There was one commercial mortgage-backed agency security in an unrealized loss position for 12 months or more. The securities are of the highest investment grade and the Corporation does not intend to sell them, and it is not more likely than not that the Corporation will be required to sell them before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at December 31, 2014. Collateralized Mortgage-Obligations – Available for Sale – There were no collateralized mortgage-obligation securities in an unrealized loss position for less than 12 months as of December 31, 2014. In addition, there were no collateralized mortgage-obligation securities in an unrealized loss position for 12 months or more. Obligations of State and Political Subdivisions – Available for Sale - No obligations of state and political subdivisions securities have been in an unrealized loss position for less than 12 months at December 31, 2014. There were four securities that have been in an unrealized loss position for 12 months or more. These investments are of investment grade as determined by the major rating agencies and management reviews the ratings of the underlying issuers and performs an in-depth credit analysis on the securities. Management believes that this portfolio is well-diversified throughout the United States, and all bonds continue to perform according to their contractual terms. The Corporation does not intend to sell these investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at December 31, 2014. Collateralized Debt Obligations – Available for Sale - The $12.9 million in unrealized losses greater than 12 months at December 31, 2014 relates to 1 4 pooled trust preferred securities that are included in the CDO portfolio. See Note 24 for a discussion of the methodology used by management to determine the fair values of these securities. Based upon a review of credit quality and the cash flow tests performed by the independent third party, management determined that there were no securities that had credit-related non-cash OTTI charges during 2014. The unrealized losses on the remaining securities in the portfolio are primarily attributable to continued depression in market interest rates, marketability, liquidity and the current economic environment. U.S. Government Agencies – Held to Maturity – There were no U.S. government agencies in an unrealized loss position at December 31, 2014. Residential Mortgage-Backed Agencies – Held to Maturity – There were two residential mortgage-backed agencies in an unrealized loss position for less than 12 months as of December 31, 2014. The Corporation has the intent and ability to hold the investments to maturity. Accordingly, management does not consider these investments to be other-than-temporarily impaired at December 31, 2014. There were no residential mortgage-backed agencies in an unrealized loss position for 12 months or more. Commercial Mortgage-Backed Agencies – Held to Maturity – There were no commercial mortgage-backed agencies in an unrealized loss position at December 31, 2014. Collateralized Mortgage-Obligations – Held to Maturity - There were no collateralized mortgage obligations in an unrealized loss position at December 31, 2014. Obligations of State and Political Subdivisions – Held to Maturity – No obligations of state and political subdivisions securities have been in an unrealized loss position for less than 12 months at December 31, 2014. There was one obligations of state and political subdivisions security that has been in an unrealized loss position for 12 months or more. This bond is a Tax Increment Fund (TIF) bond. Management performs an in-depth credit analysis on this security. The Corporation has the intent and ability to hold the investment to maturity. Accordingly, management does not consider this investment to be other-than-temporarily impaired at December 31, 2014. Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of Topic 320 (ASC Section 320-10-35), management must assess whether (i) we have the intent to sell the security and (ii) it is more likely than not that we will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair value of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses. The other losses are recognized in other comprehensive income. In estimating OTTI charges, management considers (a) the length of time and the extent to which the fair value has been less than cost, (b) adverse conditions specifically related to the security, an industry, or a geographic area, (c) the historic and implied volatility of the security, (d) changes in the rating of a security by a rating agency, (e) recoveries or additional declines in fair value subsequent to the balance sheet date, (f) failure of the issuer of the security to make scheduled interest payments, and (g) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Due to the duration and the significant market value decline in the pooled trust preferred securities held in our portfolio, we performed more extensive testing on these securities for purposes of evaluating whether or not an OTTI has occurred. The market for these securities as of December 31, 2014 is not active and markets for similar securities are also not active. The inactivity was evidenced in 2008 first by a significant widening of the bid-ask spread in the brokered markets in which these securities trade and then by a significant decrease in the volume of trades relative to historical levels. The new issue market is also inactive, as no new CDOs have been issued since 2007. There are currently very few market participants who are willing to transact for these securities. The market values for these securities, or any securities other than those issued or guaranteed by the Treasury, are very depressed relative to historical levels. Therefore, in the current market, a low market price for a particular bond may only provide evidence of stress in the credit markets in general rather than being an indicator of credit problems with a particular issue. Given the conditions in the current debt markets and the continued absence of observable transactions in the secondary and new issue markets, management has determined that (i) the few observable transactions and market quotations that are available are not reliable for the purpose of obtaining fair value at December 31, 2014, (ii) an income valuation approach technique (i.e. present value) that maximizes the use of relevant observable inputs and minimizes the use of observable inputs will be equally or more representative of fair value than a market approach, and (iii) the CDO segment is appropriately classified within Level 3 of the valuation hierarchy because management determined that significant adjustments were required to determine fair value at the measurement date. Management utilizes an independent third party to assist the Corporation with both the evaluations of OTTI and the fair value determinations for our CDO portfolio. Management believes that there were no material differences in the impairment evaluations and pricing between December 31, 2013 and December 31, 2014. The approach of the third party to determine fair value involved several steps, including detailed credit and structural evaluation of each piece of collateral in each bond, default, recovery and prepayment/amortization probabilities for each piece of collateral in the bond, and discounted cash flow modeling. The discount rate methodology used by the third party combines a baseline current market yield for comparable corporate and structured credit products with adjustments based on evaluations of the differences found in structure and risks associated with actual and projected credit performance of each CDO being valued. Currently, there is an active and liquid trading market only for stand-alone trust preferred securities. Therefore, adjustments to the baseline discount rate are also made to reflect the additional leverage found in structured instruments. On December 10, 2013, to implement Section 619 of the Dodd-Frank Act, the Treasury, the federal banking regulators including FDIC, and the Securities and Exchange Commission (the “SEC”) adopted the Volcker Rule. The Volcker Rule prohibits a banking institution from acquiring or retaining an “ownership interest” in a “covered fund”. A “covered fund” is (i) an entity that would be an investment company under the Investment Company Act of 1940, as amended, but for the exemptions contained in Section 3(c)(1) or Section 3(c)(7) of that Act, (ii) a commodity pool with certain characteristics, and/or (iii) a non-US entity with certain characteristics that is sponsored or owned by a banking entity located or organized in the US. The term “ownership interest” is defined as “any equity, partnership, or other similar interest.” On January 14, 2014, the five regulatory agencies changed provisions of the Volcker Rule and published a list of CDOs that were exempt under the rule. After our review of the exempt list, management identified 15 of our 18 holdings that were exempt from the rule. The 3 remaining holdings owned that were not included on the exempt list were invested in I-Preferred Term Securities I and I-Preferred Term Securities IV. The underlying issuers of these bonds were primarily insurance companies and not financial institutions. Since these securities were not included on the published list of exempt CDOs, management needed to determine whether or not these holdings constitute an “ownership interest” as defined above. To make this determination, management conducted a thorough review of the Indentures and Offering Memorandums for each of these bonds. The bonds do not represent an equity or partnership interest. Under the Volcker Rule, an interest will be an “other similar interest” if it exhibits one or more of seven specified characteristics identified in the Volcker Rule on a current, future, or contingent basis. Based upon review of the legal documents for I-Preferred Term Securities I and I-Preferred Term Securities IV, the Corporation determined that neither of these bonds exhibit any of these seven characteristics. Accordingly, the Corporation determined that neither of these bonds meet the definition of an “ownership interest” as defined in the Volcker Rule and that, therefore, as of December 31, 2014, the Corporation has the current intent and ability to hold these bonds until maturity. The following table presents a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses which have been recognized in earnings for the trust preferred securities in the CDO portfolio held and not intended to be sold for the years ended December 31, 2014 and 2013:
(in thousands) | 2014 | 2013
Balance of credit-related OTTI at January 1 | $ | 13,422 | $ | 13,959
Decreases for previously recognized credit-related OTTI because there was an |  |  |  |
intent to sell |  | (165) |  | 0
Reduction for increases in cash flows expected to be collected |  | (674) |  | (537)
Balance of credit-related OTTI at December 31 | $ | 12,583 | $ | 13,422
The amortized cost and estimated fair value of securities by contractual maturity at December 31, 2014 are shown in the following table. Actual maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.
| Amortized | Fair
(in thousands) | Cost | Value
Contractual Maturity |  |  |  |
Available for sale: |  |  |  |
Due in one year or less | $ | 19,524 | $ | 19,524
Due after one year through five years |  | 44,629 |  | 44,766
Due after five years through ten years |  | 29,145 |  | 29,808
Due after ten years |  | 58,654 |  | 47,082
|  | 151,952 |  | 141,180
Residential mortgage-backed agencies |  | 45,175 |  | 45,273
Commercial mortgage-backed agencies |  | 26,007 |  | 25,957
Collateralized mortgage obligations |  | 8,611 |  | 8,707
| $ | 231,745 | $ | 221,117
Held to Maturity: |  |  |  |
Due after five years through ten years | $ | 15,474 | $ | 15,775
Due after ten years |  | 11,771 |  | 11,867
|  | 27,245 |  | 27,642
Residential mortgage-backed agencies |  | 58,400 |  | 59,008
Commercial mortgage-backed agencies |  | 16,425 |  | 16,737
Collateralized mortgage obligations |  | 7,379 |  | 7,384
| $ | 109,449 | $ | 110,771
At December 31, 2014 and 2013, investment securities with a value of $192 million and $1 75 million, respectively, were pledged as permitted or required to secure public deposits, for securities sold under agreements to repurchase as required or permitted by law and as collateral for borrowing capacity.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27290-111563 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27357-111563 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -Glossary Debt Security -URI http://asc.fasb.org/extlink&oid=6509901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27232-111563 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27161-111563 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27405-111563 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -Glossary Equity Security -URI http://asc.fasb.org/extlink&oid=6511694 + Details
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