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Securities
 12 Months Ended
Dec. 31, 2011
Securities  
Securities

Note 3. Securities

 

The book values and approximate fair values of investment securities at December 31, 2011 and 2010 are summarized as follows:

 

    2011   2010
    Amortized   Fair   Unrealized   Amortized   Fair   Unrealized
($ in thousands)   Cost   Value   Gains   (Losses)   Cost   Value   Gains   (Losses)
                                                                 
Securities available for sale:                                                                
Government-sponsored enterprise securities   $ 34,511       34,665       170       (16 )     43,432       43,273       214       (373 )
Mortgage-backed securities     120,032       124,105       4,164       (91 )     104,660       107,460       3,270       (470 )
Corporate bonds     13,189       12,488       279       (980 )     15,754       15,330       35       (459 )
Equity securities     10,998       11,368       409       (39 )     14,858       15,119       301       (40 )
Total available for sale   $ 178,730       182,626       5,022       (1,126 )     178,704       181,182       3,820       (1,342 )
                                                                 
Securities held to maturity:                                                                
State and local governments   $ 57,988       62,754       4,766       —       54,011       53,305       517       (1,223 )
Other     —       —       —       —       7       7       —       —  
Total held to maturity   $ 57,988       62,754       4,766       —       54,018       53,312       517       (1,223 )

 

Included in mortgage-backed securities at December 31, 2011 were collateralized mortgage obligations with an amortized cost of $1,462,000 and a fair value of $1,515,000. Included in mortgage-backed securities at December 31, 2010 were collateralized mortgage obligations with an amortized cost of $2,644,000 and a fair value of $2,740,000. All of the Company’s mortgage-backed securities, including the collateralized mortgage obligations, were issued by government-sponsored corporations.

 

The Company owned Federal Home Loan Bank (FHLB) stock with a cost and fair value of $10,904,000 at December 31, 2011 and $14,759,000 at December 31, 2010, which is included in equity securities above and serves as part of the collateral for the Company’s line of credit with the FHLB (see Note 10 for additional discussion). The investment in this stock is a requirement for membership in the FHLB system. 

 

The following table presents information regarding securities with unrealized losses at December 31, 2011:

 

($ in thousands)   Securities in an Unrealized Loss Position for Less than 12 Months   Securities in an Unrealized Loss Position for More than 12 Months   Total
    Fair Value   Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses
Government-sponsored enterprise securities   $ 8,984       16       —       —       8,984       16  
Mortgage-backed securities     14,902       61       9,302       30       24,204       91  
Corporate bonds     4,588       458       2,773       522       7,361       980  
Equity securities     4       2       22       37       26       39  
State and local governments     —       —       —       —       —       —  
Total temporarily impaired securities   $ 28,478       537       12,097       589       40,575       1,126  

 

The following table presents information regarding securities with unrealized losses at December 31, 2010:

 

($ in thousands)   Securities in an Unrealized Loss Position for Less than 12 Months   Securities in an Unrealized Loss Position for More than 12 Months   Total
    Fair Value   Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses
Government-sponsored enterprise securities   $ 18,607       373       —       —       18,607       373  
Mortgage-backed securities     21,741       470       —       —       21,741       470  
Corporate bonds     7,548       55       2,900       404       10,448       459  
Equity securities     3       1       29       39       32       40  
State and local governments     35,289       1,223       —       —       35,289       1,223  
Total temporarily impaired securities   $ 83,188       2,122       2,929       443       86,117       2,565  

 

In the above tables, all of the non-equity securities that were in an unrealized loss position at December 31, 2011 and 2010 are bonds that the Company has determined are in a loss position due to interest rate factors, the overall economic downturn in the financial sector, and the broader economy in general. The Company has evaluated the collectability of each of these bonds and has concluded that there is no other-than-temporary impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost.

 

At December 31, 2011, the Company’s $12.5 million investment in corporate bonds was comprised of the following:

 

($ in thousands)

Issuer		   S&P Issuer Ratings (1)   Maturity Date   Amortized Cost   Market Value
First Citizens Bancorp (South Carolina) Bond   Not Rated   4/1/15   $ 2,996       3,102  
Bank of America Trust Preferred Security   BB+   12/11/26     2,039       1,780  
Bank of America Trust Preferred Security   BB+   4/15/27     5,046       4,588  
First Citizens Bancorp (North Carolina) Trust Preferred Security   BB+   3/1/28     2,108       2,278  
First Citizens Bancorp (South Carolina) Trust Preferred Security   Not Rated   6/15/34     1,000       740  
Total investment in corporate bonds           $ 13,189        12,488  

(1) The ratings are as of January 26, 2012.

 

The Company has concluded that each of the equity securities in an unrealized loss position at December 31, 2011 and 2010 was in such a position due to temporary fluctuations in the market prices of the securities. The Company’s policy is to record an impairment charge for any of these equity securities that remains in an unrealized loss position for twelve consecutive months unless the amount is insignificant.

 

The aggregate carrying amount of cost-method investments was $11,368,000 and $14,766,000 at December 31, 2011 and 2010, respectively, which included the Federal Home Loan Bank stock discussed above. The Company determined that none of its cost-method investments were impaired at either year end.

 

The book values and approximate fair values of investment securities at December 31, 2011, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

    Securities Available for Sale   Securities Held to Maturity
    Amortized   Fair   Amortized   Fair
($ in thousands)   Cost   Value   Cost   Value
                                 
Debt securities                                
Due within one year   $ 3,011       3,106     $ 626       629  
Due after one year but within five years     31,497       31,660       1,743       1,843  
Due after five years but within ten years     3,000       3,001       23,188       25,201  
Due after ten years     10,192       9,386       32,431       35,081  
Mortgage-backed securities     120,032       124,105       —       —  
Total debt securities     167,732       171,258       57,988       62,754  
                                 
Equity securities     10,998       11,368       —       —  
Total securities   $ 178,730       182,626     $ 57,988       62,754  

 

At December 31, 2011 and 2010, investment securities with book values of $47,418,000 and $75,654,000, respectively, were pledged as collateral for public and private deposits and securities sold under agreements to repurchase.

 

There were $2,510,000 in sales of securities in 2011, which resulted in a net gain of $8,000. There were no sales of securities in 2010. There were $44,000 in sales in 2009, which resulted in a net gain of $9,000. In 2011, the Company recorded a net loss of $5,000 related to write-downs of the Company’s equity portfolio and recorded a net gain of $71,000 related to the call of several securities. In 2010, the Company recorded a gain of $26,000 related to the call of several municipal securities. The Company recorded losses of $113,000 related to write-downs of the Company’s equity portfolio in 2009.