3.	INVESTMENT SECURITIES

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

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	13,422	$	2	$	-	$	13,424
Obligations of state and political subdivisions		83,093		4,328		-		87,421
GSE mortgage-backed securities		172,932		5,887		-		178,819
Collateralized mortgage obligations: residential		101,381		652		47		101,986
Collateralized mortgage obligations: commercial		28,528		1,233		-		29,761
Other asset-backed securities		12,245		497		-		12,742
Collateralized debt obligation		464		-		-		464
	$	412,065	$	12,599	$	47	$	424,617

	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, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	42,900	$	7	$	7	$	42,900
GSE mortgage-backed securities		89,383		2,819		-		92,202
Collateralized mortgage obligations: residential		5,009		-		-		5,009
Collateralized mortgage obligations: commercial		16,232		581		-		16,813
	$	153,524	$	3,407	$	7	$	156,924

	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

With the exception of 3 private-label collateralized mortgage obligations ("CMOs") with a combined balance remaining of $96,000 and $137,000 at December 31, 2012 and 2011, respectively, all of the Company's CMOs are government-sponsored enterprise securities.

The amortized cost and fair value of debt securities at December 31, 2012 by contractual maturity are shown below (in thousands). Except for mortgage backed securities, collateralized mortgage obligations, other assets backed securities, and collateralized debt 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	$	12,731	$	12,879
Due after one year through five years		48,421		50,365
Due after five years through ten years		24,665		26,790
Due after ten years		10,698		10,811
Mortgage-backed securities and collateralized mortgage obligations:
Residential		274,313		280,805
Commercial		28,528		29,761
Other asset-backed securities		12,245		12,742
Collateralized debt obligation		464		464
	$	412,065	$	424,617

	Amortized Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	296	$	296
Due after one year through five years		1,068		1,068
Due after five years through ten years		6,029		6,029
Due after ten years		35,507		35,507
Mortgage-backed securities and collateralized mortgage obligations:
Residential		94,392		97,211
Commercial		16,232		16,813
	$	153,524	$	156,924

Details concerning investment securities with unrealized losses as of December 31, 2012 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
Collateralized mortgage obligations: residential	$	10,085	$	45	$	96	$	2	$	10,181	$	47

	Securities with losses under 12 months				Securities with losses over 12 months				Total
Held-to-maturity:	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Obligations of state and political subdivisions	$	1,128	$	7	$	-	$	-	$	1,128	$	7

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
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
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

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, 2012 and 2011 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, 2012 and 2011, 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, 2012, 2011, or 2010.

During the year ended December 31, 2012, the Company sold six securities classified as available-for-sale at a net gain of $204,000. Of the six securities sold, five securities were sold with gains totaling $235,000 and one security was sold at a loss of $31,000. 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 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 an external review performed on the municipal securities portfolio.

Of the collateralized mortgage obligations held by the Company at December 31, 2012, 4 out of 56 securities contained unrealized losses. Of the securities issued by state and political subdivisions held by the Company at December 31, 2012, 4 out of 189 securities contained unrealized losses.

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.

Securities with an aggregate carrying value of approximately $226.2 million and $154.1 million at December 31, 2012 and 2011, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.