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Securities
 6 Months Ended
Jun. 30, 2013
Investments debt and equity securities [Abstract]  
Investments In Debt And Marketable Equity Securities And Certain Trading Assets Disclosure Text Block

NOTE 4: SECURITIES

 

At June 30, 2013 and December 31, 2012, 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 June 30, 2013 and December 31, 2012, respectively, are presented below.

 

   1 year1 to 55 to 10After 10Fair Gross Unrealized  Amortized
(Dollars in thousands) or lessyearsyearsyearsValue GainsLosses Cost
June 30, 2013            
Agency obligations (a)$ — — 24,001 22,614 46,615  22 2,480 $ 49,073
Agency RMBS (a)  — — 3,968 149,995 153,963  938 3,416   156,441
State and political subdivisions  — 1,846 20,149 47,527 69,522  2,341 309   67,490
Trust preferred securities  — — — 694 694  137 136   693
 Total available-for-sale$ — 1,846 48,118 220,830 270,794  3,438 6,341 $ 273,697

December 31, 2012           
Agency obligations (a)$ — — 20,065 19,460 39,525  187 19 $ 39,357
Agency RMBS (a)  — — 4,700 136,760 141,460  3,012 162   138,610
State and political subdivisions  111 1,830 21,006 54,891 77,838  5,222 —   72,616
Trust preferred securities  — — — 652 652  113 154   693
 Total available-for-sale$ 111 1,830 45,771 211,763 259,475  8,534 335 $ 251,276
(a) Includes securities issued by U.S. government agencies or government sponsored entities.

Securities with aggregate fair values of $145.8 million and $134.0 million at June 30, 2013 and December 31, 2012, 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 $1.8 million and $3.0 million at June 30, 2013 and December 31, 2012, 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 June 30, 2013 and December 31, 2012, 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
June 30, 2013:                 
Agency obligations $41,593  2,480   —   — $41,593  2,480
Agency RMBS 108,049  3,416   —   —  108,049  3,416
State and political subdivisions 7,381  309   —   —  7,381  309
Trust preferred securities  —   —   364   136 $ 364   136
  Total $ 157,023   6,205   364   136 $ 157,387   6,341

                    
December 31, 2012:                 
Agency obligations $9,966  19   —   — $9,966  19
Agency RMBS 25,207  162   —   —  25,207  162
Trust preferred securities  —   —  346  154  346  154
  Total $35,173  181  346  154 $35,519  335

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. On a quarterly basis, 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. Some of these securities are guaranteed by a bond insurer, but management did not rely on the guarantee in making its investment decision. 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.

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 June 30, 2013, cost-method investments with an aggregate cost of $1.8 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.

 

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 has recognized the credit component of the loss in earnings (referred to as “credit-impaired” debt securities). Other-than-temporary impairments recognized in earnings 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 for the quarters and six months ended June 30, 2013 and 2012 were as follows:

 

    Quarter ended June 30,  Six months ended June 30,
(Dollars in thousands) 2013  2012  2013  2012
Balance, beginning of period$ 1,257 $ 1,257 $ 1,257 $ 3,276
 Additions:           
  Subsequent credit impairments  —   —   —   130
 Reductions:           
  Securities sold  —   —   —   2,149
  Securities fully written down and deemed worthless  500   —   500   —
Balance, end of period$ 757 $ 1,257 $ 757 $ 1,257

Other-Than-Temporary Impairment

 

The following table presents details of the other-than-temporary impairment related to securities

     Quarter ended June 30,  Six months ended June 30,
(Dollars in thousands) 2013  2012  2013  2012
Other-than-temporary impairment charges            
 (included in earnings):           
 Debt securities:           
  Individual issuer trust preferred securities$ — $ — $ — $ 130
   Total debt securities  —   —   —   130
Total other-than-temporary impairment charges$ — $ — $ — $ 130
Other-than-temporary impairment on debt securities:          
 Recorded as part of gross realized losses:           
  Credit-related$ — $ — $ — $ 130
Total other-than-temporary impairment on debt securities$ — $ — $ — $ 130

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.
               
     Quarter ended June 30,  Six months ended June 30,
(Dollars in thousands)  2013  2012  2013  2012
Gross realized gains $ 524 $ 251 $ 685 $ 724
Gross realized losses   (6)   —   (6)   (164)
Other-than-temporary impairment charges   —   —   —   (130)
  Realized gains, net $ 518 $ 251 $ 679 $ 430