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Securities
 9 Months Ended
Sep. 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 September 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 September 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
September 30, 2013            
Agency obligations (a)$ — — 23,744 22,079 45,823  — 3,253 $ 49,076
Agency RMBS (a)  — — 3,679 142,311 145,990  1,196 3,179   147,973
State and political subdivisions  — 2,096 19,739 45,077 66,912  1,998 399   65,313
Trust preferred securities  — — — 742 742  164 115   693
 Total available-for-sale$ — 2,096 47,162 210,209 259,467  3,358 6,946 $ 263,055

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 $135.8 million and $134.0 million at September 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 September 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 September 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
September 30, 2013:                 
Agency obligations $45,822  3,253   —   — $45,822  3,253
Agency RMBS 95,325  3,179   —   —  95,325  3,179
State and political subdivisions 7,751  399   —   —  7,751  399
Trust preferred securities  —   —   385   115 $ 385   115
  Total $ 148,898   6,831   385   115 $ 149,283   6,946

                    
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 primarily driven by wider credit spreads. 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, 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 respective periods are presented below.

 

    Quarter ended September 30,  Nine months ended September 30,
(Dollars in thousands) 2013  2012  2013  2012
Balance, beginning of period$ 757 $ 1,257 $ 1,257 $ 3,276
 Additions:           
  Subsequent credit impairments  —   —   —   130
 Reductions:           
  Securities sold  —   —   —   2,149
  Securities fully written down and deemed worthless  —   —   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 September 30,  Nine months ended September 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 September 30,  Nine months ended September 30,
(Dollars in thousands)  2013  2012  2013  2012
Gross realized gains $ — $ 203 $ 685 $ 927
Gross realized losses   —   (25)   (6)   (189)
Other-than-temporary impairment charges   —   —   —   (130)
  Realized gains, net $ — $ 178 $ 679 $ 608