3.	SECURITIES

The amortized cost basis and fair values of securities are as follows:

			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available-for-sale:
September 30, 2013:
Government-sponsored mortgage-backed residential	$	119,475	$	35	$	(4,960)	$	114,550
Government-sponsored collateralized mortgage obligations		78,732		300		(1,290)		77,742
Asset backed-collateralized loan obligations		33,102		-		(446)		32,656
State and municipal		12,257		423		(14)		12,666
Corporate bonds		52,794		222		(447)		52,569

Total	$	296,360	$	980	$	(7,157)	$	290,183

December 31, 2012:
U.S. Treasury and agencies	$	8,284	$	7	$	(13)	$	8,278
Government-sponsored mortgage-backed residential		144,617		774		(502)		144,889
Government-sponsored collateralized mortgage obligations		148,460		2,033		(346)		150,147
Private asset backed		4,981		151		-		5,132
State and municipal		11,394		1,324		-		12,718
Corporate bonds		32,567		433		(33)		32,967

Total	$	350,303	$	4,722	$	(894)	$	354,131

The amortized cost and fair value of securities at September 30, 2013, by contractual maturity, are shown below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Available for Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value

Due in one year or less	$	3,064	$	3,068
Due after one year through five years		49,485		49,406
Due after five years through ten years		4,751		4,624
Due after ten years		7,751		8,137
Investment securities with no single maturity date:
Government-sponsored mortgage-backed residential		119,475		114,550
Government-sponsored collateralized mortgage obligations		78,732		77,742
Asset backed-collateralized loan obligations		33,102		32,656
	$	296,360	$	290,183

The following schedule shows the proceeds from sales of available-for-sale securities and the gross realized gains and losses on those sales:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
(Dollars in thousands)

Proceeds from sales	$	24,295	$	127,569	$	125,351	$	214,830
Gross realized gains		235		2,054		1,078		3,363
Gross realized losses		223		350		839		653

Investment securities pledged to secure public deposits and Federal Home Loan Bank (FHLB) advances had an amortized cost of $145.3 million and fair value of $142.6 million at September 30, 2013 and a $130.4 million amortized cost and fair value of $132.3 million at December 31, 2012.

Securities with unrealized losses at September 30, 2013 and December 31, 2012 aggregated by major security type and length of time in a continuous unrealized loss position are as follows:

September 30, 2013	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss

Government-sponsored mortgage-backed residential	$	103,205	$	(4,608)	$	8,658	$	(352)	$	111,863	$	(4,960)
Government-sponsored collateralized mortgage obligations		40,463		(1,013)		6,739		(277)		47,202		(1,290)
Asset backed-collateralized loan obligations		32,656		(446)		-		-		32,656		(446)
State and municipal		3,614		(14)		-		-		3,614		(14)
Corporate bonds		24,769		(447)		-		-		24,769		(447)

Total temporarily impaired	$	204,707	$	(6,528)	$	15,397	$	(629)	$	220,104	$	(7,157)

December 31, 2012	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss

U.S. Treasury and agencies	$	3,255	$	(13)	$	-	$	-	$	3,255	$	(13)
Government-sponsored mortgage-backed residential		82,137		(502)		-		-		82,137		(502)
Government-sponsored collateralized mortgage obligations		33,275		(346)		-		-		33,275		(346)
Corporate bonds		5,731		(33)		-		-		5,731		(33)

Total temporarily impaired	$	124,398	$	(894)	$	-	$	-	$	124,398	$	(894)

We evaluate investment securities with significant declines in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation, to determine whether they should be considered other-than-temporarily impaired under current accounting guidance, which generally provides that if a security is in an unrealized loss position, whether due to general market conditions or industry or issuer-specific factors, the holder of the securities must assess whether the impairment is other-than-temporary.

In conducting this assessment, the Bank evaluates a number of factors including, but not limited to:

· The length of time and the extent to which fair value has been less than the amortized cost basis;

· The Bank’s intent to hold until maturity or sell the debt security prior to maturity;

· An analysis of whether it is more likely than not that the Bank will be required to sell the debt security before its anticipated recovery;

· Adverse conditions specifically related to the security, an industry, or a geographic area;

· The historical and implied volatility of the fair value of the security;

⋅ The payment structure of the security and the likelihood of the issuer being able to make payments;

⋅ Failure of the issuer to make scheduled interest or principal payments;

⋅ Any rating changes by a rating agency; and

⋅ Recoveries or additional decline in fair value subsequent to the balance sheet date.

Accounting guidance requires entities to split other than temporary impairment charges between credit losses (i.e., the loss based on the entity’s estimate of the decrease in cash flows, including those that result from expected voluntary prepayments), which are charged to earnings, and the remainder of the impairment charge (non-credit component) to accumulated other comprehensive income. This requirement pertains to both debt securities held to maturity and debt securities available for sale.

The unrealized losses on our investment securities were a result of changes in interest rates for fixed-rate securities where the interest rate received is less than the current rate available for new offerings of similar securities. Mortgage backed securities held in our investment portfolio were issued by U.S. government-sponsored entities and agencies, primarily Freddie Mac (“FHLMC”) and Fannie Mae (“FNMA”), institutions that the government has affirmed its commitment to support. Because the decline in market value on our investment securities is attributable to changes in interest rates and not credit quality, and because we do not intend to sell and it is more likely than not that we will not be required to sell these investments until recovery of fair value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at September 30, 2013.

We recognized other-than-temporary impairment charges of $26,000 for the expected credit loss during the 2012 period. The 2012 impairment charge was related to Preferred Term Security VI which was called for early redemption in July 2012.

The table below presents a roll-forward of the credit losses recognized in earnings. During 2012, all of our trust preferred securities were either called or sold which represented the remaining balance in the OTTI roll-forward.

(Dollars in thousands)	Three Months Ended		Nine Months Ended
	September 30,		September 30,
		2012		2012
Beginning balance	$	2,104	$	2,078
Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized		-		26
Sales/call of securities		(628)		(628)
Ending balance	$	1,476	$	1,476