2.SECURITIES

 

The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities as of September 30, 2013 and December 31, 2012 are summarized as follows (dollars in thousands):

 

 

 

Due to restrictions placed upon the Company’s common stock investment in the Federal Reserve Bank of Richmond and Federal Home Loan Bank of Atlanta (“FHLB”), these securities have been classified as restricted equity securities and carried at cost.  These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s balance sheet.  The FHLB requires Union First Market Bank (the “Bank”) to maintain stock in an amount equal to 4.5% of outstanding borrowings and a specific percentage of the Bank’s total assets.  The Federal Reserve Bank of Richmond requires the Company to maintain stock with a par value equal to 6% of its outstanding capital. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $6.8 million for both September 30, 2013 and December 31, 2012 and FHLB stock in the amount of $12.8 million and $13.9 million as of September 30, 2013 and December 31, 2012, respectively.    

 

The following table shows the gross unrealized losses and fair value (in thousands) of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired.  These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position and are as follows:

 

 

 

As of September 30, 2013, there were $15.0 million, or 8 issues, of individual securities that had been in a continuous loss position for more than 12 months.  Additionally, these securities had an unrealized loss of $402,000 and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. 

 

The following table presents the amortized cost and estimated fair value of securities as of September 30, 2013 and December 31, 2012, by contractual maturity (dollars in thousands).  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

 

 

 

Securities with an amortized cost of $191.6 million and $183.7 million as of September 30, 2013 and December 31, 2012, respectively, were pledged to secure public deposits, repurchase agreements, and for other purposes.

 

During each quarter the Company conducts an assessment of the securities portfolio for other-than-temporary impairment (“OTTI”) consideration.  The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis.  An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell).  If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss.  Based on the assessment for the quarter ended September 30, 2013, and in accordance with the guidance, no OTTI was recognized.

 

Based on the assessment for the quarter ended September 30, 2011 and in accordance with the guidance, the Company determined that a single issuer Trust Preferred security incurred credit-related OTTI of $400,000, which was recognized in earnings for the quarter ended September 30, 2011.  There is a possibility that the Company will sell the security before recovering all unamortized costs.  The significant inputs the Company considered in determining the amount of the credit loss are as follows:

 

 

OTTI recognized for the periods presented is summarized as follow (dollars in thousands):