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2. Investment Securities

12 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment securities available for sale at December 31, 2013 and 2012 are as follows:

(Dollars in thousands)
	December 31, 2013
	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	123,706		1,040		769		123,977
U.S. Government
sponsored enterprises		22,115		97		69		22,143
State and political subdivisions		148,468		1,987		5,087		145,368
Corporate bonds		3,522		11		70		3,463
Trust preferred securities		1,250		-		-		1,250
Equity securities		748		941		-		1,689
Total	$	299,809		4,076		5,995		297,890

(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

The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2013 and 2012 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, 2013
	Less than 12 Months					12 Months or More				Total
	Fair Value			Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	40,857		691		10,128		78		50,985		769
U.S. Government
sponsored enterprises		9,714		69		-		-		9,714		69
State and political subdivisions		77,187		4,863		1,824		224		79,011		5,087
Corporate bonds		1,984		16		511		54		2,495		70
Total	$	129,742		5,639		12,463		356		142,205		5,995

(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

At December 31, 2013, unrealized losses in the investment securities portfolio relating to debt securities totaled $5.9 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2013 tables above, 80 out of 179 securities issued by state and political subdivisions contained unrealized losses, 28 out of 95 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses, and three out of five securities issued by corporations contained unrealized losses. These unrealized losses are considered temporary because of acceptable financial condition and results of operations on each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, 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 2013 or 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.

The amortized cost and estimated fair value of investment securities available for sale at December 31, 2013, 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.

December 31, 2013
(Dollars in thousands)
		Amortized Cost		Estimated Fair Value
Due within one year	$	4,019		4,048
Due from one to five years		31,725		32,103
Due from five to ten years		119,313		115,878
Due after ten years		20,298		20,195
Mortgage-backed securities		123,706		123,977
Equity securities		748		1,689
Total	$	299,809		297,890

Proceeds from sales of securities available for sale during 2013 were $17.5 million and resulted in gross gains of $738,000 and gross losses of $124,000. During 2012, the proceeds from sales of securities available for sale 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.

Securities with a fair value of approximately $86.0 million and $73.9 million at December 31, 2013 and 2012, 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, 2013 and 2012.

(Dollars in thousands)
	December 31, 2013
	Fair Value Measurements			Level 1 Valuation		Level 2 Valuation		Level 3 Valuation
Mortgage-backed securities	$	123,977		-		123,977		-
U.S. Government
sponsored enterprises	$	22,143		-		22,143		-
State and political subdivisions	$	145,368		-		145,368		-
Corporate bonds	$	3,463		-		3,463		-
Trust preferred securities	$	1,250		-		-		1,250
Equity securities	$	1,689		1,689		-		-

(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		-		-

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, 2013.

(Dollars in thousands)
	Investment Securities Available for Sale
	Level 3 Valuation
Balance, beginning of period	$	1,250
Change in book value		-
Change in gain/(loss) realized and unrealized		-
Purchases/(sales)		-
Transfers in and/or (out) of Level 3		-
Balance, end of period	$	1,250

Change in unrealized gain/(loss) for assets still held in Level 3	$	-

- Definition

Tabular disclosure of marketable securities. This may consist of investments in certain debt and equity securities, short-term investments and other assets.

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