3. Investment Securities

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at December 31, 2012 and 2011 is as follows


	At December 31, 2012
(dollars in thousands)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Collateralized mortgage obligations	$ 97,959	$ 1,830	$ (6)	$ 99,783
Mortgage-backed securities	20,626	1,014	-	21,640
Municipal securities	11,150	967	(16)	12,101
Corporate bonds	32,231	639	(185)	32,685
Asset-backed securities	19,785	135	(191)	19,729
Trust Preferred Securities	5,785	-	(2,598)	3,187
Other securities	131	3	-	134
Total securities available for sale	$ 187,667	$ 4,588	$ (2,996)	$ 189,259

U.S. Government agencies	$ 1	$ -	$ -	$ 1
Other securities	66	2	-	68
Total securities held to maturity	$ 67	$ 2	$ -	$ 69


	At December 31, 2011
(dollars in thousands)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Collateralized mortgage obligations	$ 117,382	$ 2,629	$ -	$ 120,011
Mortgage-backed securities	12,764	1,352	-	14,116
Municipal securities	10,863	494	(323)	11,034
Corporate bonds	26,881	17	(1,281)	25,617
Trust Preferred Securities	6,375	-	(2,965)	3,410
Other securities	131	4	-	135
Total securities available for sale	$ 174,396	$ 4,496	$ (4,569)	$ 174,323

U.S. Government agencies	$ 2	$ -	$ -	$ 2
Other securities	138	4	-	142
Total securities held to maturity	$ 140	$ 4	$ -	$ 144

:The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at December 31, 2012 is as follows:


	Available for Sale		Held to Maturity
(dollars in thousands)	Amortized Cost	Estimated Fair Value	Amortized Cost	Estimated Fair Value
Due in 1 year or less	$ 16,066	$ 16,429	$ 46	$ 48
After 1 year to 5 years	67,168	69,049	21	21
After 5 years to 10 years	90,263	88,605	-	-
After 10 years	14,170	15,176	-	-
Total	$ 187,667	$ 189,259	$ 67	$ 69

Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

As of December 31, 2012 and December 31, 2011, the collateralized mortgage obligations and mortgage backed securities included in the investment securities portfolio consist solely of securities issued by U.S. government sponsored agencies. There were no private label mortgage securities held in the investment securities portfolio as of those dates. The Company did not hold any mortgage-backed securities that were rated "Alt-A" or "Subprime" as of December 31, 2012 and December 31, 2011. In addition, the Company did not hold any private issued CMO's as of December 31, 2012 and December 31, 2011. As of December 31, 2012, the asset-backed securities consist solely of Sallie Mae bonds collateralized by student loans which are guaranteed by the U.S. Department of Education. There were no asset-backed securities in the portfolio as of December 31, 2011

In instances when a determination is made that an other-than-temporary impairment exists with respect to a debt security but the investor does not intend to sell the debt security and it is more likely than not that the investor will not be required to sell the debt security prior to its anticipated recovery, FASB Accounting Standards Codification ("ASC") 320-10, Investments – Debt and Equity Securities, requires the other-than-temporary impairment to be separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income. Impairment charges (credit losses) on trust preferred securities for the year ended December 31, 2012, 2011 and 2010 amounted to $34,000, $42,000 and $372,000, respectively.

The company realized gross gains on the sale of securities of $737,000 in 2012. The related sale proceeds amounted to $25.8 million. The tax provision applicable to these gross gains in 2012 amounted to approximately $265,000. The Company realized gross gains on the sale of securities of $640,000 in 2011. The related sale proceeds amounted to $34.3 million. The tax provision applicable to these gross gains in 2011 amounted to approximately $224,000. The Company realized gross gains on the sale of securities of $1.3 million in 2010. The related sale proceeds amounted to $18.2 million. The tax provision applicable to these gross gains in 2010 amounted to approximately $439,000.

.At December 31, 2012 and 2011, investment securities in the amount of approximately $100.8 million and $87.3 million, respectively, were pledged as collateral for public deposits and certain other deposits as required by law.

The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at December 31, 2012 and 2011 for which a portion of OTTI was recognized in other comprehensive income:

(dollars in thousands)	2012	2011

Beginning Balance, January 1^st	$ 3,925	$ 3,883
Additional credit-related impairment loss on securities for which an
other-than-temporary impairment was previously recognized	34	42
Reductions for securities paid off during the period	-	-
Reductions for securities for which the amount previously recognized in other	-	-
comprehensive income was recognized in earnings because the Company	-	-
intends to sell the security	-	-
Ending Balance, December 31,	$ 3,959	$ 3,925

The following tables show the fair value and gross unrealized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2012 and 2011


	At December 31, 2012
	Less than 12 months		12 months or more		Total
(dollars in thousands)	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Mortgaged-backed securities	$ 9,991	$ 6	$ -	$ -	$ 9,991	$ 6
Municipal securities	1,050	16	-	-	1,050	16
Corporate bonds	-	-	9,811	185	9,811	185
Asset-backed securities	9,218	191	-	-	9,218	191
Trust Preferred Securities	-	-	3,187	2,598	3,187	2,598
Total	$ 20,259	$ 213	$ 12,998	$ 2,783	$ 33,257	$ 2,996


	At December 31, 2011
	Less than 12 months		12 months or more		Total
(dollars in thousands)	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Mortgage-backed securities	$ -	$ -	$ 9	$ -	$ 9	$ -
Municipal securities	-	-	4,490	323	4,490	323
Corporate bonds	18,714	1,281	-	-	18,714	1,281
Trust Preferred Securities	-	-	3,410	2,965	3,410	2,965
Total	$ 18,714	$ 1,281	$ 7,909	$ 3,288	$ 26,623	$ 4,569

The impairment of the investment portfolio totaled $3.0 million with a total fair value of $33.3 million at December 31, 2012. The most significant component of this impairment is related to the trust preferred securities held in the portfolio. Unrealized losses on the trust preferred securities amounted to $2.6 million at December 31, 2012. The unrealized losses associated with the trust preferred securities are a result of the secondary market for such securities becoming inactive and are considered temporary at this time.

The following table provides additional detail about trust preferred securities as of December 31, 2012.

(dollars in thousands)	Class / Tranche	Amortized Cost	Fair Value	Unrealized Losses	Lowest Credit Rating Assigned	Number of Banks Currently Performing	Deferrals / Defaults as % of Current Balance	Conditional Default Rates for 2013 and beyond	Cumulative OTTI Life to Date
Preferred Term Securities IV	Mezzanine Notes	$ 49	$ 40	$ (9)	CCC	5	27%	0.37%	$ -
Preferred Term Securities VII	Mezzanine Notes	1,497	1,126	(371)	C	11	59	0.34	2,173
TPREF Funding II	Class B Notes	739	334	(405)	C	16	43	0.36	260
TPREF Funding III	Class B2 Notes	1,520	745	(775)	C	17	35	0.34	480
Trapeza CDO I, LLC	Class C1 Notes	556	236	(320)	C	10	51	0.38	470
ALESCO Preferred Funding IV	Class B1 Notes	604	290	(314)	C	38	23	0.36	396
ALESCO Preferred Funding V	Class C1 Notes	820	416	(404)	C	39	33	0.36	180
Total		$ 5,785	$ 3,187	$ (2,598)		136	38%		$ 3,959

At December 31, 2012, the investment portfolio included twenty-five municipal securities with a total market value of $12.1 million. Five of these securities carried an unrealized loss at December 31, 2012. Each of the municipal securities are reviewed quarterly for impairment. Research on each issuer is completed to ensure the financial stability of the municipal entity. The largest geographic concentration was in California where thirteen municipal securities had a market value of $6.3 million. As of December 31, 2012, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio.

At December 31, 2012, the investment portfolio included seven corporate bonds with a total market value of $32.7 million. Two of these securities carried an unrealized loss at December 31, 2012. At December 31, 2012, the investment portfolio included two asset-backed securities with a total market value of $19.8 million, the majority of which (97%) is guaranteed by the U.S. Department of Education. One of these securities carried an unrealized loss at December 31, 2012. Management found no evidence of OTTI on any of these securities and the unrealized losses are due to changes in market value resulting from changes in market interest rates and are considered temporary as of December 31, 2012.