3.	INVESTMENT SECURITIES

The portfolio of securities consisted of the following (in thousands):

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	94,339	$	662	$	2	$	94,999
Obligations of state and political subdivisions		90,284		5,865		-		96,149
GSE mortgage-backed securities		105,409		4,078		-		109,487
Collateralized mortgage obligations: residential		40,855		618		5		41,468
Collateralized mortgage obligations: commercial		24,609		529		-		25,138
	$	355,496	$	11,752	$	7	$	367,241

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	116,560	$	1,138	$	-	$	117,698
Obligations of state and political subdivisions		105,376		3,593		117		108,852
GSE mortgage-backed securities		10,642		830		-		11,472
Collateralized mortgage obligations: residential		21,849		882		43		22,688
Collateralized mortgage obligations: commercial		3,045		54		-		3,099
	$	257,472	$	6,497	$	160	$	263,809

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	340	$	2	$	-	$	342
GSE mortgage-backed securities		82,497		550		-		83,047
Collateralized mortgage obligations: commercial		17,635		107		-		17,742
	$	100,472	$	659	$	-	$	101,131

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	1,588	$	20	$	-	$	1,608

With the exception of three private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $137,000 and $228,000 at December 31, 2011 and 2010, respectively, all of the Company's CMOs are government-sponsored enterprise securities.

The amortized cost and fair value of debt securities at December 31, 2011 by contractual maturity are shown below (in thousands). Except for mortgage backed securities and collateralized mortgage obligations, 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.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	79,491	$	80,258
Due after one year through five years		67,331		69,763
Due after five years through ten years		32,552		35,583
Due after ten years		5,249		5,544
Mortgage-backed securities and collateralized mortgage obligations:
Residential		146,264		150,955
Commercial		24,609		25,138
	$	355,496	$	367,241

	Amortized Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	140	$	141
Due after one year through five years		200		201
Mortgage-backed securities and collateralized mortgage obligations:
Residential		82,497		83,047
Commercial		17,635		17,742
	$	100,472	$	101,131

Details concerning investment securities with unrealized losses as of December 31, 2011 are as follows (in thousands):

	Securities with losses under 12 months				Securities with losses over 12 months				Total
Available-for-sale:	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Government sponsored enterprises	$	6,204	$	2	$	-	$	-	$	6,204	$	2
Collateralized mortgage obligations: residential		1,849		1		136		4		1,985		5
	$	8,053	$	3	$	136	$	4	$	8,189	$	7

Details concerning investment securities with unrealized losses as of December 31, 2010 are as follows (in thousands):

	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
Obligations of state and political subdivisions	$	6,919	$	117	$	-	$	-	$	6,919	$	117
Collateralized mortgage obligations: residential		4,689		36		227		7		4,916		43
	$	11,608	$	153	$	227	$	7	$	11,835	$	160

Management evaluates whether unrealized losses on securities represent impairment that is other than temporary on a quarterly basis. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities. If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors. In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market's perception of the issuer's financial health and the security's credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

The unrealized losses on debt securities at December 31, 2011 and 2010 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased. Management identified no impairment related to credit quality. At December 31, 2011 and 2010, management had both the intent and ability to hold impaired securities, and no impairment was evaluated as other than temporary. As a result, no impairment losses were recognized on debt securities during the years ended December 31, 2011, 2010, or 2009.

During the year ended December 31, 2011, the Company sold five securities classified as available-for-sale and one security classified as held-to-maturity. Of the available-for-sale securities, four securities were sold with gains totaling $94,000 and one security was sold at a loss of $4,000 for a net gain of $90,000. The securities were sold as a result of an external review performed on the municipal securities portfolio. The decision to sell the one held to maturity security, which was sold at a gain of $9,000, was based on the inability to obtain current financial information on the municipality. The sale was consistent with action taken on other securities with a similar deficiency, as identified in the external review. On October 27, 2010, the Company liquidated one equity security at a market value of $75,000 for a recognized gain of $3,000. The equity security was an investment in a portfolio of common stocks of community bank holding companies. It was determined to be impaired in the fourth quarter of 2009 and was adjusted to a fair value of $72,000 from the original value of $250,000, resulting in an impairment of $178,000.

Of the securities issued by U.S. Government sponsored enterprises and SBA held by the Company at December 31, 2011, 5 out of 25 securities contained unrealized losses. Of the collateralized mortgage obligations, 3 out of 29 contained unrealized losses.

Of the securities issued by state and political subdivisions held by the Company at December 31, 2010, 10 out of 175 securities contained unrealized losses. Of the collateralized mortgage obligations, 3 out of 17 contained unrealized losses.

Securities with an aggregate carrying value of approximately $154.1 million and $150.6 million at December 31, 2011 and 2010, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.