Investment Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and is reported, net of deferred taxes, as a component of shareholders' equity as accumulated other comprehensive income (loss). Securities designated as held-to-maturity are carried at amortized cost, as the bank has the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. We maintain investment balances based on a continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and an assessment of the potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risks.

The following table summarizes the amortized cost and estimated fair value of investment securities and presents the related gross unrealized gains and losses:



March 31, 2014
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Obligations of:
U.S. government sponsored enterprises	$	2,045	$	25	$	—	$	2,070
Residential mortgage-backed securities-GSE	356,022		971		19,429		337,564
Residential mortgage-backed securities-Private	19,338		953		9		20,282
Commercial mortgage-backed securities-GSE	22,670		—		1,080		21,590
Commercial mortgage-backed securities-Private	10,398		—		554		9,844
Business Development Company investment	1,753		898		—		2,651
Corporate notes	8,393		74		—		8,467
Total available-for-sale	$	420,619	$	2,921	$	21,072	$	402,468
Held-to-Maturity:
Residential mortgage-backed securities-GSE	138,991		—		7,564		131,427
Commercial mortgage-backed securities-Private	10,069		—		494		9,575
Total held-to-maturity	$	149,060	$	—	$	8,058	$	141,002
Total investment securities	$	569,679	$	2,921	$	29,130	$	543,470

December 31, 2013
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Obligations of:
U.S. government sponsored enterprises	$	2,051	$	26	$	—	$	2,077
Residential mortgage-backed securities-GSE	364,513		974		24,340		341,147
Residential mortgage-backed securities-Private	19,770		982		—		20,752
Commercial mortgage-backed securities-GSE	22,767		—		1,328		21,439
Commercial mortgage-backed securities-Private	10,408		—		823		9,585
Business Development Company investment	1,753		984				2,737
Corporate notes	16,795		82		—		16,877
Total available-for-sale	$	438,057	$	3,048	$	26,491	$	414,614
Held-to-Maturity:
Residential mortgage-backed securities-GSE	141,724		—		9,907		131,817
Commercial mortgage-backed securities-Private	10,071		—		763		9,308
Total held-to-maturity	$	151,795	$	—	$	10,670	$	141,125
Total investment securities	$	589,852	$	3,048	$	37,161	$	555,739

As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), the Bank is required to own capital stock in the FHLB based generally upon the balances of total assets and FHLB advances. FHLB capital stock is pledged to secure FHLB advances. This investment is carried at cost since no ready market exists for FHLB stock and there is no quoted market value. However, redemption of this stock has historically been at par value. The Bank owned a total of $5.1 million of FHLB stock at March 31, 2014 and $5.9 million at December 31, 2013. Due to the redemption provisions of FHLB stock, we have estimated that fair value approximated cost and that this investment was not impaired at March 31, 2014. FHLB stock is included in other assets at its original cost basis.

As a member bank of the Federal Reserve Bank of Richmond (“FRBR”), the Bank also is required to own capital stock of the FRBR based upon a percentage of the Bank's common stock and surplus. This investment is carried at cost since no ready market exists for FRBR stock and there is no quoted market value. At March 31, 2014 and December 31, 2013, the Bank owned a total of $4.3 million and $4.3 million of FRBR stock, respectively. Due to the nature of this investment in an entity of the U.S. government, we have estimated that fair value approximated the cost and that this investment was not impaired at March 31, 2014. FRBR stock is included in other assets at its original cost basis.

At March 31, 2014, $90.2 million of the investment securities portfolio was pledged to secure public deposits, $18.3 million was pledged to retail repurchase agreements and $76.5 million was pledged to others, leaving $364.0 million available as lendable collateral.

During the three months ended March 31, 2013, the Bank sold securities with a book value of $145.9 million and recognized a gain of$2.4 million. The Bank sold these securities in order to manage our interest rate sensitivity profile. The Bank did not sell any investment securities during the three months ended March 31, 2014.

The following tables show our investments' estimated fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013. The change in unrealized losses during the three months ending March 31, 2014 was attributed to changes in interest rates and not to changes in the credit quality of these securities. All unrealized losses on investment securities are considered by management to be temporary given the credit quality of these investment securities or the short duration of the unrealized loss, or both.



	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
March 31, 2014
Available-for-Sale:
Residential mortgage-backed securities-GSE	$	164,313	$	8,975	$	133,699	$	10,454	$	298,012	$	19,429
Residential mortgage-backed securities-Private	1,297		9		—		—		1,297		9
Commercial mortgage-backed securities-GSE	—		—		21,591		1,080		21,591		1,080
Commercial mortgage-backed securities-Private	9,843		554		—		—		9,843		554
Total available-for-sale	$	175,453	$	9,538	$	155,290	$	11,534	$	330,743	$	21,072
Held-to-Maturity:
Residential mortgage-backed securities-GSE	$	131,427	$	7,564	$	—	$	—	$	131,427	$	7,564
Commercial mortgage-backed securities-Private	9,575		494		—		—		9,575		494
Total held-to-maturity	$	141,002	$	8,058	$	—	$	—	$	141,002	$	8,058
Total	$	316,455	$	17,596	$	155,290	$	11,534	$	471,745	$	29,130

December 31, 2013
Available-for-Sale
Residential mortgage-backed securities-GSE	$	222,475	$	16,585	$	76,501	$	7,755	$	298,976	$	24,340
Commercial mortgage-backed securities-GSE	—		—		21,439		1,328		21,439		1,328
Commercial mortgage-backed securities-Private	9,585		823		—		—		9,585		823
Total available-for-sale	$	232,060	$	17,408	$	97,940	$	9,083	$	330,000	$	26,491
Held-to-Maturity:
Residential mortgage-backed securities-GSE	$	131,817	$	9,907	$	—	$	—	$	131,817	$	9,907
Commercial mortgage-backed securities-Private	9,308		763		—		—		9,308		763
Total held-to-maturity	$	141,125	$	10,670	$	—	$	—	$	141,125	$	10,670
Total	$	373,185	$	28,078	$	97,940	$	9,083	$	471,125	$	37,161

At March 31, 2014 and December 31, 2013, there were fourteen and ten available-for-sale securities that were in an unrealized loss position for 12 months or more, respectively.

COB analyzed its securities portfolio at March 31, 2014, and considered ratings, fair value, cash flows and other factors to

determine if any of the securities were other than temporarily impaired. Since none of the unrealized losses relate to the marketability

of the securities or the issuer’s ability to honor redemption obligations, and COB has determined that it is not more likely than not that

COB will be required to sell the security before recovery of its amortized cost basis, none of the securities are deemed to be other than

temporarily impaired.

The aggregate amortized cost and fair value of securities at March 31, 2014, by remaining contractual maturity, are shown in the following table. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.



	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	8,393	$	8,467	$	—	$	—
Due after one year through five years	2,045		2,070		—		—
With no stated maturity	1,753		2,652		—		—
Total	12,191		13,189		—		—
Mortgage-backed securities	408,428		389,279		149,060		141,002
Total	$	420,619	$	402,468	$	149,060	$	141,002