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Investments
 3 Months Ended
Mar. 31, 2013
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities [Text Block]
3. Investments

 

A summary of investment securities available-for-sale is as follows:

 

    As of March 31, 2013  
          Gross     Gross        
    Amortized     unrealized     unrealized     Estimated  
(Dollars in thousands)   cost     gains     losses     fair value  
                         
U. S. treasury securities   $ 500     $ 1     $ -     $ 501  
U. S. federal agency obligations     14,598       46       (24 )     14,620  
Municipal obligations, tax exempt     79,495       3,293       (61 )     82,727  
Municipal obligations, taxable     47,598       889       (99 )     48,388  
Mortgage-backed securities     77,135       926       (72 )     77,989  
Common stocks     602       405       -       1,007  
Certificates of deposit     6,754       -       -       6,754  
Total   $ 226,682     $ 5,560     $ (256 )   $ 231,986  

 

    As of December 31, 2012  
          Gross     Gross        
    Amortized     unrealized     unrealized     Estimated  
(Dollars in thousands)   cost     gains     losses     fair value  
                         
U. S. federal agency obligations   $ 8,804     $ 50     $ (6 )   $ 8,848  
Municipal obligations, tax exempt     73,699       3,618       (31 )     77,286  
Municipal obligations, taxable     37,334       818       (10 )     38,142  
Mortgage-backed securities     81,113       889       (154 )     81,848  
Common stocks     602       301       (1 )     902  
Certificates of deposit     6,274       -       -       6,274  
Total   $ 207,826     $ 5,676     $ (202 )   $ 213,300  

 

Certain of the Company’s investment securities have unrealized losses, or are temporarily impaired. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which are temporarily impaired are shown below, along with the length of the impairment period.

 

          As of March 31, 2013  
(Dollars in thousands)         Less than 12 months     12 months or longer     Total  
    No. of     Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
    securities     value     losses     value     losses     value     losses  
U. S. federal agency obligations     3     $ 3,727     $ (24 )   $ -     $ -     $ 3,727     $ (24 )
Municipal obligations, tax exempt     27       5,962       (46 )     1,678       (15 )     7,640       (61 )
Municipal obligations, taxable     28       11,170       (95 )     782       (4 )     11,952       (99 )
Mortgage-backed securities     15       14,620       (72 )     -       -       14,620       (72 )
Total     73     $ 35,479     $ (237 )   $ 2,460     $ (19 )   $ 37,939     $ (256 )

 

          As of December 31, 2012  
(Dollars in thousands)         Less than 12 months     12 months or longer     Total  
    No. of     Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
    securities     value     losses     value     losses     value     losses  
U. S. federal agency obligations     2     $ 2,241     $ (6 )   $ -     $ -     $ 2,241     $ (6 )
Municipal obligations, tax exempt     16       4,669       (31 )     -       -       4,669       (31 )
Municipal obligations, taxable     8       2,948       (8 )     209       (2 )     3,157       (10 )
Mortgage-backed securities     24       27,974       (154 )     -       -       27,974       (154 )
Common stocks     1       21       (1 )     -       -       21       (1 )
Total     51     $ 37,853     $ (200 )   $ 209     $ (2 )   $ 38,062     $ (202 )

 

The Company performs quarterly reviews of the investment portfolio to determine if investment securities have any declines in fair value which might be considered other-than-temporary. The initial review begins with all securities in an unrealized loss position. The Company’s assessment of other-than-temporary impairment is based on the specific facts and circumstances impacting each individual security. The Company reviews and considers all available information, including expected cash flows, the structure of the security, the credit quality of the underlying assets and the current and anticipated market conditions. Any credit-related impairment on debt securities is realized through a charge to earnings. If an equity security is determined to be other-than-temporarily impaired, the entire impairment is realized through a charge to earnings.

 

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it is more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believes that the U.S. federal agency obligations identified in the tables above are temporarily impaired.

 

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. The Company does not intend to sell and it is more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believes that the municipal obligations identified in the tables above are temporarily impaired.

 

The Company’s mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association (“GNMA”). The receipt of principal, at par, and interest on mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its mortgage-backed securities do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it is more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believes that the mortgage-backed securities identified in the tables above are temporarily impaired.

 

It is reasonably possible that the fair values of the Company’s investment securities could decline in the future if the overall economy and/or the financial condition of some of the issuers of these securities deteriorate and/or if the liquidity in markets for these securities declines. As a result, there is a risk that additional other-than-temporary impairments may occur in the future and any such amounts could be material to the Company’s consolidated financial statements. The fair value of the Company’s investment securities may also decline from an increase in market interest rates, as the market prices of these investments move inversely to their market yields.

 

Maturities of investment securities at March 31, 2013 are as follows:

 

(Dollars in thousands)   Amortized     Estimated  
    cost     fair value  
Due in less than one year   $ 16,168     $ 16,252  
Due after one year but within five years     134,263       136,233  
Due after five years but within ten years     63,453       65,716  
Due after ten years     12,196       12,778  
Common stocks     602       1,007  
Total   $ 226,682     $ 231,986  

 

The preceding table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for mortgage-backed securities, where actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

 

Gross realized gains and losses on sales of available-for-sale investment securities are as follows:

 

    Three months ended  
(Dollars in thousands)   March 31,  
    2013     2012  
Realized gains   $ -     $ 227  
Realized losses     -       -  
Total   $ -     $ 227  

 

Other investment securities primarily consist of restricted investments in FHLB and Federal Reserve Bank (“FRB”) stock. The carrying value of the FHLB stock was $3.3 million and $3.4 million at March 31, 2013 and December 31, 2012, respectively. The carrying value of the FRB stock was $1.8 million at March 31, 2013 and December 31, 2012. These securities are not readily marketable and are required for regulatory purposes and borrowing availability. Since there is no available market value, these securities are carried at cost. Redemption of these investments at par value is at the option of the FHLB or FRB. Also included in other investment securities are other miscellaneous investments in the common stock of various correspondent banks which are held for borrowing purposes and totaled $113,000 at March 31, 2013 and December 31, 2012. The Company assessed the ultimate recoverability of these investments and believes that no impairment has occurred.