Investment Securities

9 Months Ended

Sep. 30, 2011

Investment Securities [Abstract]

Investment Securities

8. Investment Securities

The primary objective of the Company's management of the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. The Company is required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. The Company maintains investment balances based on a continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and the 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 risk.

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

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
September 30, 2011
Obligations of:
U.S. government sponsored agencies	$	4,603	$	17	$	11	$	4,609
States and political subdivisions		2,189		5		—		2,194
Residential mortgage-backed securities-GSE		192,522		1,149		1,203		192,468
Total	$	199,314	$	1,171	$	1,214	$	199,271
December 31, 2010
Obligations of:
U.S. Treasury and government agencies	$	20	$	1	$	—	$	21
U.S. government sponsored agencies		23,490		158		132		23,516
States and political subdivisions		23,867		885		294		24,458
Residential mortgage-backed securities-GSE		258,816		427		1,907		257,336
Total	$	306,193	$	1,471	$	2,333	$	305,331

The Bank, as a member of the FHLB of Atlanta, is required to own capital stock in the FHLB of Atlanta 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. At September 30, 2011 and December 31, 2010, the Bank owned a total of $10.1 million and $11.5 million of FHLB stock, respectively. Due to the redemption provisions of FHLB stock, the Company estimated that fair value approximated cost and that this investment was not impaired at September 30, 2011. FHLB stock is included in other assets at its original cost basis.

The Company's policy is to review for impairment of such assets at the end of each reporting period. During the nine months ended September 30, 2011, FHLB paid a quarterly dividend. At September 30, 2011, FHLB was in compliance with all of its regulatory capital requirements. Based on the Company's review, the Company believes that as of September 30, 2011, its FHLB stock was not impaired.

The Bank, as a member bank of the FRBR, 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 September 30, 2011 and December 31, 2010, the Bank owned a total of $1.2 million and $3.8 million of FRBR stock, respectively. Due to the nature of this investment in an entity of the U.S. Government, the Company estimated that fair value approximated the cost and that this investment was not impaired at September 30, 2011. FRBR stock is included in other assets at its original cost basis.

At September 30, 2011, $120.3 million of the investment securities portfolio was pledged to secure public deposits, and $3.2 million was pledged to others, leaving $75.8 million available as lendable collateral.

At December 31, 2010, $168.1 million of the investment securities portfolio was pledged to secure public deposits, including retail repurchase agreements, $27.6 million was pledged to the FRBR and $7.5 million was pledged to others, leaving $102.2 million available as lendable collateral.

The following tables show investments' gross unrealized losses and estimated fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2011 and December 31, 2010. All unrealized losses on investment securities are considered by management to be temporarily impaired given the credit ratings on 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
September 30, 2011
Obligations of:
U.S. government sponsored agencies	$	2,092	$	11	$	—	$	—	$	2,092	$	11
Residential mortgage-backed securities-GSE		107,388		1,077		12,329		126		119,717		1,203
Total	$	109,480	$	1,088	$	12,329	$	126	$	121,809	$	1,214
December 31, 2010
Obligations of:
U.S. government sponsored agencies	$	11,855	$	132	$	—	$	—	$	11,855	$	132
States and political subdivisions		8,873		294		—		—		8,873		294
Residential mortgage-backed securities-GSE		151,154		1,907		—		—		151,154		1,907
Total	$	171,882	$	2,333	$	—	$	—	$	171,882	$	2,333

At September 30, 2011, 13 available-for-sale securities were in an unrealized loss position less than 12 months compared to 29 at December 31, 2010. At September 30, 2011, the Company had three available-for-sale securities that were in an unrealized loss position for longer than 12 months. At December 31, 2010, the Company had no available-for-sale securities that were in an unrealized loss position for longer than 12 months.

The Financial Accounting Standards Board ("FASB") issued new guidance for evaluating other-than-temporary impairment ("OTTI") on debt securities in April 2009. If an entity intends to sell a debt security or cannot assert it is more likely than not that it will not have to sell the security before recovery, OTTI must be taken. If the entity does not intend to sell the debt security before recovery, but the entity does not expect to recover the entire amortized cost basis, then OTTI must be taken, but the amount of impairment is to be bifurcated between impairment due to credit (which is recorded through earnings) and noncredit impairment (which becomes a component of other comprehensive income ("OCI") for both available-for-sale and held-to-maturity securities). For held-to-maturity securities, the amount in OCI will be amortized prospectively over the security's remaining life. The Company did not have any OTTI during the nine months ended September 30, 2011 and September 30, 2010.

The Company had no securities below investment grade. As of September 30, 2011, no securities were identified as other-than-temporarily impaired based on credit issues.

The aggregate amortized cost and fair value of securities at September 30, 2011, by remaining contractual maturity, are shown below. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

	Available-for-Sale
(dollars in thousands)	Amortized Cost		Estimated Fair Value
Due after one one year through five years	$	4,293	$	4,286
Due after five years through 10 years		2,499		2,517
Total		6,792		6,803
Mortgage-backed securities		192,522		192,468
Total	$	199,314	$	199,271