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2. Investment Securities

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment securities available for sale at December 31, 2014 and 2013 are as follows:

(Dollars in thousands)
	December 31, 2014
	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	88,496		1,766		52		90,210
U.S. Government
sponsored enterprises		33,766		418		136		34,048
State and political subdivisions		145,938		6,534		226		152,246
Corporate bonds		2,469		16		18		2,467
Trust preferred securities		750		-		-		750
Equity securities		748		630		-		1,378
Total	$	272,167		9,364		432		281,099

(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

The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2014 and 2013 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, 2014
	Less than 12 Months					12 Months or More				Total
	Fair Value			Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	436		1		2,963		51		3,399		52
U.S. Government
sponsored enterprises		2,996		4		9,850		132		12,846		136
State and political subdivisions		567		1		14,998		225		15,565		226
Corporate bonds		-		-		525		18		525		18
Total	$	3,999		6		28,336		426		32,335		432

(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

At December 31, 2014, unrealized losses in the investment securities portfolio relating to debt securities totaled $432,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2014 tables above, 20 out of 176 securities issued by state and political subdivisions contained unrealized losses, eight out of 80 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses, and one out of four 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 2014, 2013 or 2012.

The amortized cost and estimated fair value of investment securities available for sale at December 31, 2014, 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, 2014
(Dollars in thousands)
		Amortized Cost				Estimated Fair Value
Due within one year		$	4,308				4,323
Due from one to five years			40,564				42,548
Due from five to ten years			117,452				121,399
Due after ten years			20,599				21,241
Mortgage-backed securities			88,496				90,210
Equity securities			748				1,378
Total		$	272,167				281,099

Proceeds from sales of securities available for sale during 2014 were $20.2 million and resulted in gross gains of $291,000 and gross losses of $25,000. During 2013, proceeds from sales of securities available for sale 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.

Securities with a fair value of approximately $89.9 million and $86.0 million at December 31, 2014 and 2013, 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, 2014 and 2013.

(Dollars in thousands)
	December 31, 2014
	Fair Value Measurements			Level 1 Valuation		Level 2 Valuation		Level 3 Valuation
Mortgage-backed securities	$	90,210		-		90,210		-
U.S. Government
sponsored enterprises	$	34,048		-		34,048		-
State and political subdivisions	$	152,246		-		152,246		-
Corporate bonds	$	2,467		-		2,467		-
Trust preferred securities	$	750		-		-		750
Equity securities	$	1,378		1,378		-		-


(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		-		-

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, 2014.

(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 and calls)		(500	)
Transfers in and/or (out) of Level 3		-
Balance, end of period	$	750

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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