2. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows (in thousands):

	Amortized		Gross Unrealized				Fair/Book
March 31, 2012	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	66,995	$	347	$	-	$	67,342
Obligations of States and Political Subdivisions		5,753		-		-		5,753
Mortgage Backed Securities (1)		439,222		9,347		258		448,311
Corporate Bonds		344		-		-		344
Other		10,067		-		-		10,067
Total	$	522,381	$	9,694	$	258	$	531,817

	Amortized		Gross Unrealized				Fair/Book
December 31, 2011	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	82,195	$	413	$	13	$	82,595
Obligations of States and Political Subdivisions		5,782		-		-		5,782
Mortgage Backed Securities (1)		383,380		7,792		139		391,033
Other		410		-		-		410
Total	$	471,767	$	8,205	$	152	$	479,820

	Amortized		Gross Unrealized				Fair/Book
March 31, 2011	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	252,834	$	245	$	2,201	$	250,878
Obligations of States and Political Subdivisions		6,358		-		-		6,358
Mortgage Backed Securities (1)		200,365		5,415		1,911		203,869
Other		310		-		-		310
Total	$	459,867	$	5,660	$	4,112	$	461,415

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
March 31, 2012	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	63,174	$	2,565	$	-	$	65,739
Mortgage Backed Securities (1)		1,003		37		-		1,040
Other		2,239		-		-		2,239
Total	$	66,416	$	2,602	$	-	$	69,018

	Book		Gross Unrealized				Fair
December 31, 2011	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	59,640	$	2,736	$	-	$	62,376
Mortgage Backed Securities (1)		1,205		46		-		1,251
Other		2,247		-		-		2,247
Total	$	63,092	$	2,782	$	-	$	65,874

	Book		Gross Unrealized				Fair
March 31, 2011	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,094	$	1,644	$	95	$	62,643
Mortgage Backed Securities (1)		1,950		70		-		2,020
Other		2,272		-		-		2,272
Total	$	65,316	$	1,714	$	95	$	66,935

(1) All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at March 31, 2012 by contractual maturity are shown in the following tables (in thousands):

			After 1		After 5				Total
Securities Available-for-Sale	Within		but		but		Over		Fair
March 31, 2012	1 Year		Within 5		Within 10		10 years		Value
Government Agency & Government-Sponsored Entities	$	20,192	$	45,972	$	1,178	$	-	$	67,342
Obligations of States and Political Subdivisions		-		-		223		5,530		5,753
Mortgage Backed Securities		-		-		131,703		316,608		448,311
Corporate Bonds		-		344		-		-		344
Other		10,067		-		-		-		10,067
Total	$	30,259	$	46,316	$	133,104	$	322,138	$	531,817

			After 1		After 5				Total
Securities Held-to-Maturity	Within		but		but		Over		Book
March 31, 2012	1 Year		Within 5		Within 10		10 years		Value
Obligations of States and Political Subdivisions	$	1,370	$	7,379	$	42,670	$	11,755	$	63,174
Mortgage Backed Securities		-		1,003		-		-		1,003
Other		-		6		2,233		-		2,239
Total	$	1,370	$	8,388	$	44,903	$	11,755	$	66,416

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2012	Value		Loss		Value		Loss		Value		Loss
Mortgage Backed Securities	$	56,721	$	258	$	-	$	-	$	56,721	$	258
Total	$	56,721	$	258	$	-	$	-	$	56,721	$	258

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2011	Value		Loss		Value		Loss		Value		Loss
Government Agency & Government-Sponsored Entities	$	4,987	$	13	$	-	$	-	$	4,987	$	13
Mortgage Backed Securities		85,090		139		-		-		85,090		139
Total	$	90,077	$	152	$	-	$	-	$	90,077	$	152

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2011	Value		Loss		Value		Loss		Value		Loss
Government Agency & Government-Sponsored Entities	$	160,473	$	2,201	$	-	$	-	$	160,473	$	2,201
Obligations of States and Political Subdivisions		4,560		95		-		-		4,560		95
Mortgage Backed Securities		87,534		1,911		-		-		87,534		1,911
Total	$	252,567	$	4,207	$	-	$	-	$	252,567	$	4,207

As of March 31, 2012, the Company held 333 investment securities of which 9 were in a loss position for less than twelve months. No securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of U.S. Government Agency and Government Sponsored Entities

The unrealized losses on the Company's investments in securities of government agency and government sponsored entities were $0, $13,000, and $2.2 million at March 31, 2012, December 31, 2011, and March 31, 2011, respectively. Management believes that any unrealized losses were caused by interest rate increases. Repayment of these investments is guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company did not intend to sell the securities and it was more likely than not that the Company would not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at December 31, 2011 and March 31, 2011.

Mortgage Backed Securities

The unrealized losses on the Company's investments in securities of government agency and government sponsored entities were $258,000, $139,000, and $1.9 million at March 31, 2012, December 31, 2011, and March 31, 2011, respectively. The unrealized losses on the Company's investment in mortgage backed securities were caused by interest rate increases. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company did not intend to sell the securities and it was more likely than not that the Company would not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2012, December 31, 2011, and March 31, 2011, respectively.

Obligations of States and Political Subdivisions

The continuing financial problems being experienced by certain municipalities, along with the financial stresses exhibited by some of the large monoline bond insurers have increased the overall risk associated with bank-qualified municipal bonds. As of March 31, 2012, over ninety-three percent of the Company's bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are "investment grade." The Company monitors the status of the seven percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company's investments in obligations of states and political subdivisions were $0 at March 31, 2012 and December 31, 2011 and $95,000 at March 31, 2011. Management believed that any unrealized losses on the Company's investment in obligations of states and political subdivisions were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company did not intend to sell the securities and it was more likely than not that the Company would not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2011.

Pledged Securities

As of March 31, 2012, securities carried at $379.3 million were pledged to secure public deposits, FHLB borrowings, and other government agency deposits as required by law. This amount at December 31, 2011, was $373.2 million.