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Securities
 12 Months Ended
Dec. 31, 2013
Securities  
Securities

 

Note 3. Securities

 

The book values and approximate fair values of investment securities at December 31, 2013 and 2012 are summarized as follows:

 

    2013     2012  
    Amortized     Fair     Unrealized     Amortized     Fair     Unrealized  
($ in thousands)   Cost     Value     Gains     (Losses)     Cost     Value     Gains     (Losses)  
                                                 
Securities available for sale:                                                                
  Government-sponsored enterprise securities   $ 18,432       18,245       32       (219 )     11,500       11,596       96       —  
  Mortgage-backed securities     148,646       147,187       1,415       (2,874 )     143,539       146,926       3,717       (330 )
  Corporate bonds     3,999       3,598       44       (445 )     3,998       3,813       75       (260 )
  Equity securities     3,984       4,011       40       (13 )     5,026       5,017       16       (25 )
Total available for sale   $ 175,061       173,041       1,531       (3,551 )     164,063       167,352       3,904       (615 )
                                                                 
Securities held to maturity:                                                                
  State and local governments   $ 53,995       56,700       2,709       (4 )     56,064       61,496       5,432       —  

 

Included in mortgage-backed securities at December 31, 2013 were collateralized mortgage obligations with an amortized cost of $192,000 and a fair value of $200,000. Included in mortgage-backed securities at December 31, 2012 were collateralized mortgage obligations with an amortized cost of $381,000 and a fair value of $396,000. 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 $3,894,000 at December 31, 2013 and $4,934,000 at December 31, 2012, 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. Periodically the FHLB recalculates the Company’s required level of holdings, and the Company either buys more stock or the FHLB redeems a portion of the stock at cost.

 

The following table presents information regarding securities with unrealized losses at December 31, 2013:

 

 

($ 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   $ 12,212       219       —       —       12,212       219  
  Mortgage-backed securities     64,937       1,675       17,979       1,199       82,916       2,874  
  Corporate bonds     —       —       555       445       555       445  
  Equity securities     —       —       22       13       22       13  
  State and local governments     992       4       —       —       992       4  
      Total temporarily impaired securities   $ 78,141       1,898       18,556       1,657       96,697       3,555  

 

The following table presents information regarding securities with unrealized losses at December 31, 2012:

 

 

($ 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   $ —       —       —       —       —       —  
  Mortgage-backed securities     26,330       330       —       —       26,330       330  
  Corporate bonds     —       —       740       260       740       260  
  Equity securities     —       —       30       25       30       25  
  State and local governments     —       —       —       —       —       —  
      Total temporarily impaired securities   $ 26,330       330       770       285       27,100       615  

 

In the above tables, all of the non-equity securities that were in an unrealized loss position at December 31, 2013 and 2012 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, 2013, the Company’s $3.6 million investment in corporate bonds was comprised of the following:

 

($ in thousands)
 
Issuer		   S&P Issuer
Ratings		   Maturity
Date		   Amortized
Cost		     Market
Value		  
First Citizens Bancorp (South Carolina) Bond   Not Rated   4/1/15   $ 2,999       3,043  
First Citizens Bancorp (South Carolina) Trust Preferred Security   Not Rated   6/15/34     1,000       555  
     Total investment in corporate bonds           $ 3,999       3,598  

 

The Company has concluded that each of the equity securities in an unrealized loss position at December 31, 2013 and 2012 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 $3,894,000 and $4,934,000 at December 31, 2013 and 2012, respectively, which was 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, 2013, 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   $ —       —     $ —       —  
Due after one year but within five years     17,499       17,412       5,422       5,822  
Due after five years but within ten years     3,932       3,876       35,346       37,153  
Due after ten years     1,000       555       13,227       13,725  
Mortgage-backed securities     148,646       147,187       —       —  
Total debt securities     171,077       169,030       53,995       56,700  
                                 
Equity securities     3,984       4,011       —       —  
Total securities   $ 175,061       173,041     $ 53,995       56,700  

 

At December 31, 2013 and 2012, investment securities with carrying values of $79,838,000 and $78,519,000, respectively, were pledged as collateral for public deposits.

 

The Company recorded $12,908,000, $9,641,000, and $2,518,000 in sales of securities in 2013, 2012, and 2011, respectively, which resulted in net gains of $525,000, $439,000, and $8,000 in 2013, 2012, and 2011, respectively. During the twelve months ended December 31, 2013, 2012, and 2011, the Company recorded net gains of $7,000, $200,000, and $71,000 respectively, related to the call of several municipal and corporate bond securities. Also, during the twelve months ended December 31, 2013, 2012, and 2011, the Company recorded net losses of $0, $1,000, and $5,000 respectively, related to write-downs of the Company's equity portfolio.