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Securities
 9 Months Ended
Sep. 30, 2012
Investments debt and equity securities [Abstract]  
Investments In Debt And Marketable Equity Securities And Certain Trading Assets Disclosure Text Block

NOTE 4: SECURITIES

 

At September 30, 2012 and December 31, 2011, respectively, all securities within the scope of ASC 320, Investments – Debt and Equity Securities, were classified as available-for-sale. The fair value and amortized cost for securities available-for-sale by contractual maturity at September 30, 2012 and December 31, 2011, respectively, are presented below.

 

  September 30, 2012
   1 year1 to 55 to 10After 10Fair Gross Unrealized  Amortized
(Dollars in thousands) or lessyearsyearsyearsValue GainsLosses Cost
Available-for-sale:            
Agency obligations (a)$—    —     10,113 24,503 34,616  247—     $ 34,369
Agency RMBS (a) —    —     4,986 132,627 137,613  4,077—       133,536
State and political subdivisions  112 1,706 19,464 60,687 81,969  5,486—       76,483
Trust preferred securities:            
 Individual issuer —    —    —     621 621  101 173   693
 Total available-for-sale$ 112 1,706 34,563 218,438 254,819  9,911 173 $ 245,081
(a) Includes securities issued by U.S. government agencies or government sponsored entities.

  December 31, 2011
   1 year1 to 55 to 10After 10Fair Gross Unrealized  Amortized
(Dollars in thousands) or lessyearsyearsyearsValue GainsLosses Cost
Available-for-sale:            
Agency obligations (a)$—    —     5,013 46,072 51,085  182 1 $ 50,904
Agency RMBS (a) —    —     14,935 149,863 164,798  2,534 129   162,393
State and political subdivisions —     414 17,761 63,538 81,713  4,339 48   77,422
Trust preferred securities:            
 Pooled —    —    —     100 100 —     130   230
 Individual issuer —    —    —     1,886 1,886 186    243   1,943
 Total available-for-sale$—     414 37,709 261,459 299,582  7,241 551 $ 292,892
(a) Includes securities issued by U.S. government agencies or government sponsored entities.

Securities with aggregate fair values of $133.4 million and $161.5 million at September 30, 2012 and December 31, 2011, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, Federal Home Loan Bank (“FHLB”) advances, and for other purposes required or permitted by law.

 

Included in other assets are cost-method investments. The carrying amounts of cost-method investments were $3.0 million and $5.0 million at September 30, 2012 and December 31, 2011, respectively. Cost-method investments primarily include non-marketable equity investments, such as FHLB of Atlanta stock and Federal Reserve Bank (“FRB”) stock.

Gross Unrealized Losses and Fair Value

The fair values and gross unrealized losses on securities at September 30, 2012 and December 31, 2011, respectively, segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or longer, are presented below.

    Less than 12 Months  12 Months or Longer  Total
    Fair  Unrealized  Fair  Unrealized  Fair  Unrealized
(Dollars in thousands) Value  Losses  Value  Losses  Value  Losses
September 30, 2012:                 
Trust preferred securities:                 
 Individual issuer$—      —       327   173 $ 327   173
  Total $—      —       327   173 $ 327   173

                    
December 31, 2011:                 
Agency obligations $5,000  1  —      —     $ 5,000  1
Agency RMBS 17,020  129  —      —       17,020  129
State and political subdivisions 1,686  11  718  37   2,404  48
Trust preferred securities:                 
 Pooled —      —      100  130   100  130
 Individual issuer —      —      757  243   757  243
  Total $23,706  141  1,575  410 $25,281  551

The applicable date for determining when securities are in an unrealized loss position is September 30, 2012. As such, it is possible that a security in an unrealized loss position at September 30, 2012 had a market value that exceeded its amortized cost on other days during the past twelve-month period.

For the securities in the previous table, the Company does not have the intent to sell and has determined it is not more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis, which may be maturity. The Company assesses each security for credit impairment. For debt securities, the Company evaluates, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the securities' amortized cost basis. For cost-method investments, the Company evaluates whether an event or change in circumstances has occurred during the reporting period that may have a significant adverse effect on the fair value of the investment.

 

In determining whether a loss is temporary, the Company considers all relevant information including:

 

  • the length of time and the extent to which the fair value has been less than the amortized cost basis;

     

  • adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement);

     

  • the historical and implied volatility of the fair value of the security;

     

  • the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future;

     

  • failure of the issuer of the security to make scheduled interest or principal payments;

     

  • any changes to the rating of the security by a rating agency; and

     

  • recoveries or additional declines in fair value subsequent to the balance sheet date.

 

Agency obligations

The unrealized losses associated with agency obligations were primarily driven by changes in interest rates and not due to the credit quality of the securities. These securities were issued by U.S. government agencies or government-sponsored entities and did not have any credit losses given the explicit government guarantee or other government support.

Agency residential mortgage-backed securities (“RMBS”)

The unrealized losses associated with agency RMBS were primarily driven by changes in interest rates and not due to the credit quality of the securities. These securities were issued by U.S. government agencies or government-sponsored entities and did not have any credit losses given the explicit government guarantee or other government support.

Securities of U.S. states and political subdivisions

The unrealized losses associated with securities of U.S. states and political subdivisions were primarily driven by changes in interest rates and were not due to the credit quality of the securities. These securities will continue to be monitored as part of the Company's quarterly impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond insurers. As a result, the Company expects to recover the entire amortized cost basis of these securities.

Individual issuer trust preferred securities

The unrealized losses associated with individual issuer trust preferred securities were related to securities issued on behalf of individual community bank holding companies. Management evaluates the financial performance of individual community bank holding companies on a quarterly basis to determine if it is probable that such issuer can make all contractual principal and interest payments. Based upon its evaluation, the Company expects to recover the remaining amortized cost basis of these securities.

Cost-method investments

At September 30, 2012, cost-method investments with an aggregate cost of $3.0 million were not evaluated for impairment because the Company did not identify any events or changes in circumstances that may have a significant adverse effect on the fair value of these cost-method investments.

The carrying values of the Company's investment securities could decline in the future if the financial condition of individual issuers of trust preferred securities, or the credit quality of other securities deteriorate and the Company determines it is probable that it will not recover the entire amortized cost basis for the security. As a result, there is a risk that significant other-than-temporary impairment charges may occur in the future.

 

The following tables show the applicable credit ratings, fair values, gross unrealized losses, and life-to-date impairment charges for trust preferred securities at September 30, 2012 and December 31, 2011, respectively, segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or longer.

 

Trust Preferred Securities as ofSeptember 30, 2012
           Unrealized Losses  Life-to-date
    Credit Rating  Fair Less than 12 months    Impairment
(Dollars in thousands)Moody's Fitch  Value 12 months or Longer Total  Charges
Individual issuer (a):               
Carolina Financial Capital Trust In/an/a $ 294  —     —     —       257
TCB Trustn/an/a   327  —      173  173  —    
Total trust preferred securities   $ 621  —      173  173   257
n/a - not applicable, securities not rated.
(a) 144A Floating Rate Capital Securities. Issuers are individual community bank holding companies.

Trust Preferred Securities as of December 31, 2011
           Unrealized Losses  Life-to-date
    Credit Rating  Fair Less than 12 months    Impairment
(Dollars in thousands)  Moody's Fitch  Value 12 months or Longer Total  Charges
Pooled:               
ALESCO Preferred Funding XVII Ltd (a)CCC $ 100  —     130 130  1,770
Individual issuer (b):               
Carolina Financial Capital Trust In/an/a   193  —     —     —      257
Main Street Bank Statutory Trust I (c)n/an/a   389  —     111 111  —    
MNB Capital Trust In/an/a   55  —     —     —      445
PrimeSouth Capital Trust In/an/a   75  —     —     —      425
TCB Trustn/an/a   368  —     132 132  —    
United Community Capital Trustn/an/a   806  —     —     —      379
 Total individual issuer     1,886  —     243 243  1,506
Total trust preferred securities   $ 1,986  —     373 373  3,276
n/a - not applicable securities not rated.
(a) Class B Deferrable Third Priority Secured Floating Rate Notes. The underlying collateral is primarily composed of
  trust preferred securities issued by community banks and thrifts.
(b) 144A Floating Rate Capital Securities. Issuers are individual community bank holding companies.
(c) Now an obligation of BB&T Corporation.

 

Other-Than-Temporarily Impaired Securities

 

The following table presents a roll-forward of the credit loss component of the amortized cost of debt securities that the Company has written down for other-than-temporary impairment and the credit component of the loss is recognized in earnings (referred to as “credit-impaired” debt securities). Other-than-temporary impairments recognized in earnings for the quarters and nine months ended September 30, 2012 and 2011, for credit-impaired debt securities are presented as additions in two components based upon whether the current period is the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit-impaired (subsequent credit impairments). The credit loss component is reduced if the Company sells, intends to sell, or believes it will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if the Company receives cash flows in excess of what it expected to receive over the remaining life of the credit-impaired debt security, the security matures or the security is fully written-down and deemed worthless. Changes in the credit loss component of credit-impaired debt securities were:

 

    Quarter ended September 30,  Nine months ended September 30,
(Dollars in thousands) 2012  2011  2012  2011
Balance, beginning of period$ 1,257 $ 3,040 $ 3,276 $ 2,938
 Additions:           
  Subsequent credit impairments —       236   130   338
 Reductions:           
  Securities sold —      —       2,149  —    
Balance, end of period$ 1,257 $ 3,276 $ 1,257 $ 3,276

Other-Than-Temporary Impairment

 

The following table presents details of the other-than-temporary impairment related to securities, including equity securities carried at cost, for the quarters and nine months ended September 30, 2012 and 2011.

     Quarter ended September 30,  Nine months ended September 30,
(Dollars in thousands) 2012  2011  2012  2011
Other-than-temporary impairment charges            
 (included in earnings):           
 Debt securities:           
  Individual issuer trust preferred securities$—     $236   $ 130 $ 338
   Total debt securities —      236     130   338
Total other-than-temporary impairment charges$—     $236   $ 130 $ 338
Other-than-temporary impairment on debt securities:          
 Recorded as part of gross realized losses:           
  Credit-related$—      236   $ 130 $ 338
  Securities with intent to sell —      —      —      —    
  (Transferred from) recorded directly to other            
   comprehensive income for non-credit related           
   impairment —      (80)   —       130
Total other-than-temporary impairment on debt securities$—     $ 156 $ 130 $ 468

Realized Gains and Losses
               
  The following table presents the gross realized gains and losses on sales and other-than-temporary impairment charges
related to securities, including cost-method investments.
               
     Quarter ended September 30,  Nine months ended September 30,
(Dollars in thousands)  2012  2011  2012  2011
Gross realized gains $ 203 $ 474 $ 927 $ 1,379
Gross realized losses   (25)   (23)   (189)   (478)
Other-than-temporary impairment charges  —       (236)   (130)   (338)
  Realized gains, net $ 178 $ 215 $ 608 $ 563