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2. Investment Securities | 12 Months Ended
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Dec. 31, 2012
Investments, Debt and Equity Securities [Abstract] |
Investment Securities |
(2) | Investment Securities
Investment securities available for sale at December 31, 2012 and 2011 are as follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, 2012 |
|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |
Mortgage-backed securities |  | $ | 146,755 |  |  |  | 1,875 |  |  |  | 606 |  |  |  | 148,024 |
U.S. Government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
sponsored enterprises |  |  | 18,714 |  |  |  | 203 |  |  |  | 80 |  |  |  | 18,837 |
State and political subdivisions |  |  | 118,591 |  |  |  | 7,171 |  |  |  | 104 |  |  |  | 125,658 |
Corporate bonds |  |  | 2,571 |  |  |  | 19 |  |  |  | 4 |  |  |  | 2,586 |
Trust preferred securities |  |  | 1,250 |  |  |  | - |  |  |  | - |  |  |  | 1,250 |
Equity securities |  |  | 748 |  |  |  | 720 |  |  |  | - |  |  |  | 1,468 |
Total |  | $ | 288,629 |  |  |  | 9,988 |  |  |  | 794 |  |  |  | 297,823 |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, 2011 |
|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |
Mortgage-backed securities |  | $ | 213,378 |  |  |  | 1,371 |  |  |  | 1,056 |  |  |  | 213,693 |
U.S. Government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
sponsored enterprises |  |  | 7,429 |  |  |  | 265 |  |  |  | - |  |  |  | 7,694 |
State and political subdivisions |  |  | 92,996 |  |  |  | 4,157 |  |  |  | 56 |  |  |  | 97,097 |
Corporate bonds |  |  | 546 |  |  |  | - |  |  |  | 3 |  |  |  | 543 |
Trust preferred securities |  |  | 1,250 |  |  |  | - |  |  |  | - |  |  |  | 1,250 |
Equity securities |  |  | 748 |  |  |  | 363 |  |  |  | - |  |  |  | 1,111 |
Total |  | $ | 316,347 |  |  |  | 6,156 |  |  |  | 1,115 |  |  |  | 321,388 |
The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2012 and 2011 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.
(Dollars in thousands) |  |  |
|  | December 31, 2012 |
|  | Less than 12 Months |  |  | 12 Months or More |  |  | Total |
|  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
Mortgage-backed securities |  |  | 48,126 |  |  |  | 468 |  |  |  | 12,913 |  |  |  | 138 |  |  |  | 61,039 |  |  |  | 606 |
U.S. Government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
sponsored enterprises |  |  | 3,402 |  |  |  | 80 |  |  |  | - |  |  |  | - |  |  |  | 3,402 |  |  |  | 80 |
State and political subdivisions |  |  | 9,490 |  |  |  | 104 |  |  |  | - |  |  |  | - |  |  |  | 9,490 |  |  |  | 104 |
Corporate bonds |  |  | 1,035 |  |  |  | 4 |  |  |  | - |  |  |  | - |  |  |  | 1,035 |  |  |  | 4 |
Total |  |  | 62,053 |  |  |  | 656 |  |  |  | 12,913 |  |  |  | 138 |  |  |  | 74,966 |  |  |  | 794 |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, 2011 |
|  | Less than 12 Months |  |  | 12 Months or More |  |  | Total |
|  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
Mortgage-backed securities |  | $ | 95,122 |  |  |  | 991 |  |  |  | 4,125 |  |  |  | 65 |  |  |  | 99,247 |  |  |  | 1,056 |
State and political subdivisions |  |  | 4,444 |  |  |  | 56 |  |  |  | - |  |  |  | - |  |  |  | 4,444 |  |  |  | 56 |
Corporate bonds |  |  | 542 |  |  |  | 3 |  |  |  | - |  |  |  | - |  |  |  | 542 |  |  |  | 3 |
Total |  | $ | 100,108 |  |  |  | 1,050 |  |  |  | 4,125 |  |  |  | 65 |  |  |  | 104,233 |  |  |  | 1,115 |
At December 31, 2012, unrealized losses in the investment securities portfolio relating to debt securities totaled $794,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. At December 31, 2012, ten out of 151 securities issued by state and political subdivisions contained unrealized losses, 36 out of 90 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses and two out of four securities issued by corporations contained unrealized losses. These unrealized losses are considered temporary because of acceptable investment grades on each security and the repayment sources of principal and interest are government backed. The Company periodically evaluates its investments for any impairment which would be deemed other-than-temporary. No investment impairments were deemed other-than-temporary in 2012. As part of its evaluation in 2011, the Company determined that the fair value of one equity security was less than the original cost of the investment and that the decline in fair value was not temporary in nature. As a result, the Company wrote down its investment by $144,000. The remaining fair value of the investment at December 31, 2011 was approximately $264,000. Similarly, as part of its evaluation in 2010, the Company wrote down two equity securities by $291,000. The remaining fair value of the investments at December 31, 2010 was $409,000. The amortized cost and estimated fair value of investment securities available for sale at December 31, 2012, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
(Dollars in thousands) |  |  |  |  |  |
|  | Amortized Cost |  |  | Estimated Fair Value |
Due within one year |  | $ | 4,139 |  |  |  | 4,163 |
Due from one to five years |  |  | 14,285 |  |  |  | 14,768 |
Due from five to ten years |  |  | 100,595 |  |  |  | 106,246 |
Due after ten years |  |  | 22,107 |  |  |  | 23,154 |
Mortgage-backed securities |  |  | 146,755 |  |  |  | 148,024 |
Equity securities |  |  | 748 |  |  |  | 1,468 |
Total |  | $ | 288,629 |  |  |  | 297,823 |
Proceeds from sales of securities available for sale during 2012 were $47.1 million and resulted in gross gains of $1.3 million and gross losses of $103,000. During 2011, the proceeds from sales of securities available for sale were $111.0 million and resulted in gross gains of $4.4 million and gross losses of $9,000. During 2010, the proceeds from sales of securities available for sale were $65.8 million and resulted in gross gains of $3.3 million. Securities with a fair value of approximately $73.9 million and $83.6 million at December 31, 2012 and 2011, respectively, were pledged to secure public deposits, Federal Home Loan Bank of Atlanta (“FHLB”) borrowings and for other purposes as required by law. GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The table below presents the balance of securities available for sale, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2012 and 2011.
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, 2012 |
|  | Fair Value Measurements |  |  | Level 1 Valuation |  |  | Level 2 Valuation |  |  | Level 3 Valuation |
Mortgage-backed securities |  | $ | 148,024 |  |  |  | - |  |  |  | 148,024 |  |  |  | - |
U.S. Government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
sponsored enterprises |  | $ | 18,837 |  |  |  | - |  |  |  | 18,837 |  |  |  | - |
State and political subdivisions |  | $ | 125,658 |  |  |  | - |  |  |  | 125,658 |  |  |  | - |
Corporate bonds |  | $ | 2,586 |  |  |  | - |  |  |  | 2,586 |  |  |  | - |
Trust preferred securities |  | $ | 1,250 |  |  |  | - |  |  |  | - |  |  |  | 1,250 |
Equity securities |  | $ | 1,468 |  |  |  | 1,468 |  |  |  | - |  |  |  | - |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, 2011 |
|  | Fair Value Measurements |  |  | Level 1 Valuation |  |  | Level 2 Valuation |  |  | Level 3 Valuation |
Mortgage-backed securities |  | $ | 213,693 |  |  |  | - |  |  |  | 208,349 |  |  |  | 5,344 |
U.S. Government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
sponsored enterprises |  | $ | 7,694 |  |  |  | - |  |  |  | 7,694 |  |  |  | - |
State and political subdivisions |  | $ | 97,097 |  |  |  | - |  |  |  | 97,097 |  |  |  | - |
Corporate bonds |  | $ | 543 |  |  |  | - |  |  |  | 543 |  |  |  | - |
Trust preferred securities |  | $ | 1,250 |  |  |  | - |  |  |  | - |  |  |  | 1,250 |
Equity securities |  | $ | 1,111 |  |  |  | 1,111 |  |  |  | - |  |  |  | - |
Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the year ended December 31, 2012. Transfers out of Level 3 during the year ended December 31, 2012 are attributable to one available for sale security reported in Level 3 at December 31, 2011 because market pricing was unavailable from the Bank’s third party bond accounting provider at that time. This security was reported in Level 2 at December 31, 2012, as the market valuation was provided by the Bank’s third party bond accounting provider.
(Dollars in thousands) |  |  |
|  | Investment Securities Available for Sale |
|  | Level 3 Valuation |
Balance, beginning of period |  | $ | 6,594 |
Change in book value |  |  | - |
Change in gain/(loss) realized and unrealized |  |  | - |
Purchases/(sales) |  |  | - |
Transfers in and/or (out) of Level 3 |  |  | (5,344 | )
Balance, end of period |  | $ | 1,250 |
Change in unrealized gain/(loss) for assets still held in Level 3 |  | $ | - |

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- Definition Tabular disclosure of marketable securities. This may consist of investments in certain debt and equity securities, short-term investments and other assets. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 5 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27232-111563 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.2,12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 45 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6871852&loc=d3e26626-111562 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27161-111563 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6871852&loc=d3e26610-111562 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03.4) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 + Details
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