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Securities
 12 Months Ended
Dec. 31, 2012
Securities  
Securities

Note 3. Securities

 

The book values and approximate fair values of investment securities at December 31, 2012 and 2011 are summarized as follows: 

 

   2012   2011 
   Amortized   Fair   Unrealized   Amortized   Fair   Unrealized 
($ in thousands)  Cost   Value   Gains   (Losses)   Cost   Value   Gains   (Losses) 
                                 
Securities available for sale:                                        
  Government-sponsored enterprise securities  $11,500    11,596    96    ─    34,511    34,665    170   (16)
  Mortgage-backed securities   143,539    146,926    3,717    (330)   120,032    124,105    4,164    (91)
  Corporate bonds   3,998    3,813    75    (260)   13,189    12,488    279    (980)
  Equity securities   5,026    5,017    16    (25)   10,998    11,368    409    (39)
Total available for sale  $164,063    167,352    3,904    (615)   178,730    182,626    5,022    (1,126)
                                         
Securities held to maturity:                                        
  State and local governments  $56,064    61,496    5,432    

─

    57,988    62,754    4,766    

─

 

 

Included in mortgage-backed securities at December 31, 2012 were collateralized mortgage obligations with an amortized cost of $381,000 and a fair value of $396,000. Included in mortgage-backed securities at December 31, 2011 were collateralized mortgage obligations with an amortized cost of $1,462,000 and a fair value of $1,515,000. All of the Company’s mortgage-backed securities, including the collateralized mortgage obligations, were issued by government-sponsored corporations.

 

 

The Company owned Federal Home Loan Bank (FHLB) stock with a cost and fair value of $4,934,000 at December 31, 2012 and $10,904,000 at December 31, 2011, which is included in equity securities above and serves as part of the collateral for the Company’s line of credit with the FHLB (see Note 10 for additional discussion). The investment in this stock is a requirement for membership in the FHLB system. Periodically the FHLB recalculates the Company’s required level of holdings, and the Company either buys more stock or the FHLB redeems a portion of the stock at cost.

  

The following table presents information regarding securities with unrealized losses at December 31, 2012:

 

($ in thousands)  Securities in an Unrealized
Loss Position for
Less than 12 Months		   Securities in an Unrealized
Loss Position for
More than 12 Months		   Total 
   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		 
Government-sponsored enterprise securities  $—    —    —    —    —    — 
Mortgage-backed securities   26,330    330    —    —    26,330    330 
Corporate bonds   —    —    740    260    740    260 
Equity securities   —    —    30    25    30    25 
State and local governments   —    —    —    —    —    — 
    Total temporarily impaired securities  $26,330    330    770    285    27,100    615 

 

The following table presents information regarding securities with unrealized losses at December 31, 2011:

 

($ in thousands)  Securities in an Unrealized
Loss Position for
Less than 12 Months		   Securities in an Unrealized
Loss Position for
More than 12 Months		   Total 
   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		 
Government-sponsored enterprise securities  $8,984    16    —    —    8,984    16 
Mortgage-backed securities   14,902    61    9,302    30    24,204    91 
Corporate bonds   4,588    458    2,773    522    7,361    980 
Equity securities   4    2    22    37    26    39 
State and local governments   —    —    —    —    —    — 
    Total temporarily impaired securities  $28,478    537    12,097    589    40,575    1,126 

 

In the above tables, all of the non-equity securities that were in an unrealized loss position at December 31, 2012 and 2011 are bonds that the Company has determined are in a loss position due to interest rate factors, the overall economic downturn in the financial sector, and the broader economy in general. The Company has evaluated the collectability of each of these bonds and has concluded that there is no other-than-temporary impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost.

 

 

At December 31, 2012, the Company’s $3.8 million investment in corporate bonds was comprised of the following:

 

($ in thousands)
 
Issuer		  S&P Issuer
Ratings (1)		   Maturity
Date		   Amortized
Cost		   Market Value 
First Citizens Bancorp (South Carolina) Bond   Not Rated    4/1/15   $2,998    3,073 
First Citizens Bancorp (South Carolina) Trust Preferred Security   Not Rated    6/15/34    1,000    740 
     Total investment in corporate bonds            $3,998    3,813 

 

The Company has concluded that each of the equity securities in an unrealized loss position at December 31, 2012 and 2011 was in such a position due to temporary fluctuations in the market prices of the securities. The Company’s policy is to record an impairment charge for any of these equity securities that remains in an unrealized loss position for twelve consecutive months unless the amount is insignificant.

 

The aggregate carrying amount of cost-method investments was $4,934,000 and $10,904,000 at December 31, 2012 and 2011, respectively, which was the Federal Home Loan Bank stock discussed above. The Company determined that none of its cost-method investments were impaired at either year end.

 

The book values and approximate fair values of investment securities at December 31, 2012, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   Securities Available for Sale   Securities Held to Maturity 
   Amortized   Fair   Amortized   Fair 
($ in thousands)  Cost   Value   Cost   Value 
                 
Debt securities                    
Due within one year  $—    —   $350    352 
Due after one year but within five years   14,498    14,669    3,837    4,140 
Due after five years but within ten years   —    —    29,005    31,807 
Due after ten years   1,000    740    22,872    25,197 
Mortgage-backed securities   143,539    146,926    

—

    

—

 
Total debt securities   159,037    162,335    56,064    61,496 
                     
Equity securities   5,026    5,017    

—

    

—

 
Total securities  $164,063    167,352   $56,064    61,496 

 

At December 31, 2012, investment securities with carrying values of $78,519,000 were pledged as collateral for public and private deposits. At December 31, 2011, investment securities with carrying values of $47,418,000 were pledged as collateral for public and private deposits and securities sold under agreements to repurchase. 

 

There were $9,641,000 in sales of securities in 2012, which resulted in a net gain of $439,000. There were $2,518,000 in sales of securities in 2011, which resulted in a net gain of $8,000. There were no sales of securities in 2010. During the twelve months ended December 31, 2012, 2011, and 2010, the Company recorded a net gain of $200,000, $71,000, and $26,000, respectively, related to the call of several municipal and corporate bond securities. Also, during the twelve months ended December 31, 2012, 2011, and 2010, the Company recorded net losses of $1,000, $5,000, and $0, respectively, related to write-downs of the Company’s equity portfolio.