2.	Investment Securities

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

	June 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	12,985	$	3	$	256	$	12,732
Obligations of state and political subdivisions		66,301		2,668		217		68,752
GSE mortgage-backed securities		159,092		2,559		2,206		159,445
Collateralized mortgage obligations: residential		85,995		369		1,867		84,497
Collateralized mortgage obligations: commercial		28,096		843		116		28,823
Other asset-backed securities		12,126		457		-		12,583
Collateralized debt obligation		464		3		-		467
	$	365,059	$	6,902	$	4,662	$	367,299

	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

	June 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	46,763	$	57	$	2,852	$	43,968
GSE mortgage-backed securities		86,024		430		1,032		85,422
Collateralized mortgage obligations: residential		14,776		-		507		14,269
Collateralized mortgage obligations: commercial		16,047		431		-		16,478
	$	163,610	$	918	$	4,391	$	160,137

	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

With the exception of 3 private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $71,000 at June 30, 2013, all of the Company’s CMOs are government-sponsored enterprise (“GSE”) securities.

The amortized cost and fair value of debt securities at June 30, 2013 by contractual maturity are shown in the following table (in thousands) with the exception of other asset-backed securities, mortgage-backed securities, CMOs, and the collateralized debt obligation. Expected maturities may differ from contractual maturities for mortgage-backed securities and CMOs 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	$	9,454	$	9,581
Due after one year through five years		42,442		43,621
Due after five years through ten years		20,958		22,035
Due after ten years		6,432		6,247
Other asset-backed securities		12,126		12,583
Mortgage-backed securities and collateralized mortgage obligations:
Residential		245,087		243,942
Commercial		28,096		28,823
Collateralized debt obligation		464		467
	$	365,059	$	367,299

	Amortized Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	306	$	306
Due after one year through five years		2,063		2,048
Due after five years through ten years		6,528		6,327
Due after ten years		37,866		35,287
Mortgage-backed securities and collateralized mortgage obligations:
Residential		100,800		99,691
Commercial		16,047		16,478
	$	163,610	$	160,137

Details concerning investment securities with unrealized losses are as follows (in thousands):

	June 30, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,555	$	256	$	-	$	-	$	10,555	$	256
Obligations of state and - political subdivisions		4,300		217		-		-		4,300		217
GSE mortgage-backed securities		76,613		2,206		-		-		76,613		2,206
Collateralized mortgage obligations: residential		61,082		1,866		70		1		61,152		1,867
Collateralized mortgage obligations: commercial		4,488		116		-		-		4,488		116
	$	157,038	$	4,661	$	70	$	1	$	157,108	$	4,662

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
Collateralized mortgage obligations: residential	$	10,085	$	45	$	96	$	2	$	10,181	$	47

	June 30, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	41,664	$	2,852	$	-	$	-	$	41,664	$	2,852
GSE mortgage-backed securities		33,461		1,032		-		-		33,461		1,032
Collateralized mortgage obligations: residential		14,269		507		-		-		14,269		507
	$	89,394	$	4,391	$	-	$	-	$	89,394	$	4,391

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,128	$	7	$	-	$	-	$	1,128	$	7

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. 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.

As of June 30, 2013, 105 securities had unrealized losses totaling 3.54% of the individual securities’ amortized cost basis and 1.71% of the Company’s total amortized cost basis. Two of the 105 securities had been in an unrealized loss position for over twelve months at June 30, 2013. These two securities had an amortized cost basis and unrealized loss of $71,000 and $1,000, respectively. The unrealized losses on debt securities at June 30, 2013 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 June 30, 2013, management had the intent and ability to hold impaired securities and no impairment was evaluated as other than temporary. As a result, no other than temporary impairment losses were recognized during the six months ended June 30, 2013.

During the six months ended June 30, 2013, the Company sold 21 securities classified as available-for-sale at a net gain of $204,000. Of the 21 securities sold, 18 securities were sold with gains totaling $217,000 and three securities were sold at a loss of $13,000. During the six months ended June 30, 2012, the Company sold three securities classified as available-for-sale at a gain of $135,000.

Securities with an aggregate carrying value of approximately $285.2 million and $226.2 million at June 30, 2013 and December 31, 2012, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.