2.	Securities Available-for-Sale:

The amortized cost and estimated fair values of securities available-for-sale at December 31, 2012, are as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Securities in Continuous Unrealized Loss Position For Less Than 12 Months		Securities in Continuous Unrealized Loss Position For 12 Months or Longer
Unrealized Loss Positions
Obligations of U.S. government agencies	$	—	$	—	$	—		$	—	$	—	$	—
Obligations of states and political subdivisions:		12,540		—		(137	)		12,403		12,403		—
Private-label mortgage-backed securities		3,130		—		(435	)		2,695		—		2,696
Mortgage-backed securities		95,803		—		(850	)		94,953		77,797		17,155

	$	111,473	$	—	$	(1,422	)	$	110,051	$	90,200	$	19,851

Unrealized Gain Positions
Obligations of U.S. government agencies	$	17,175	$	669	$	—		$	17,844
Obligations of states and political subdivisions		64,845		4,253		—			69,098
Private-label mortgage-backed securities		5,704		201		—			5,905
Mortgage-backed securities		181,257		5,730		—			186,987

		268,981		10,853		—			279,834

	$	380,454	$	10,853	$	(1,422	)	$	389,885

At December 31, 2012, there were twenty investment securities in unrealized loss positions. The unrealized loss associated with the investments of $19,851 in a continuous unrealized loss position for twelve months or longer was $604, of which $435 is related to private-label mortgage backed securities, and $169 is related to mortgage-backed securities. The Company has no current intent, nor is it more likely than not, that it will be required to sell these securities before the recovery of carrying value.

At December 31, 2012, unrealized losses exist on certain securities classified as obligations of states and political subdivisions, mortgage-backed securities, and private-label mortgage-backed securities. The unrealized losses on securities that are obligations of states and political subdivision are deemed to be temporary. Additionally, the unrealized losses on agency mortgage-backed securities are deemed to be temporary, as they continue to perform adequately and are backed by various government-sponsored enterprises (“GSEs”). These decreases in fair value are associated with the changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral. The decline in value of these securities has resulted from current economic conditions. Although yields on these securities may be below market rates during the period, no loss of principal is expected.

During the fourth quarter 2012 management reviewed all of its private-label mortgage-backed securities for the presence of other-than-temporary impairment (“OTTI”). Management’s evaluation included the use of independently-generated third-party credit surveillance reports that analyze the loans underlying each security. These reports include estimates of default rates and severities, life collateral loss rates, and static voluntary prepayment assumptions to generate estimated cash flows at the individual security level. Additionally, management considered factors such as downgraded credit ratings, severity and duration of the impairments, the stability of the issuers, and any discounts paid when the securities were purchased. During the twelve months ended December 31, 2012, management recorded no additional impairment. During the fourth quarter 2011, management booked an impairment of $10 on one of its private-label mortgage-backed securities. Management has considered all available information related to the collectability of the impaired investment securities and believes that the estimated credit loss is appropriate.

Following is a tabular roll-forward of the amount of credit-related OTTI recognized in earnings during 2012, 2011 and 2010:


	December 31,
	2012		2011			2010
Balance, beginning of period:	$	204	$	226		$	—
Additions:
OTTI credit loss recorded		—		10			226
Less:
OTTI reduction from sale or maturity		—		(32	)		—

Balance, end of period:	$	204	$	204		$	226

At December 31, 2012, eight of the Company’s private-label mortgage-backed securities with an amortized cost of $3,281 were classified as substandard as their ratings were below investment grade. Securities with an amortized cost of $3,644 and $8,400 were classified as substandard at December 31, 2011, and December 31, 2010, respectively.

The projected average life of the securities portfolio is 4.1 years and its modified duration is 3.7 years.

The amortized cost and estimated fair values of securities available-for-sale at December 31, 2011, are as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Securities in Continuous Unrealized Loss Position For Less Than 12 Months		Securities in Continuous Unrealized Loss Position For 12 Months or Longer
Unrealized Loss Positions
Obligations of U.S. government agencies	$	2,000	$	—	$	(6	)	$	1,994	$	1,994	$	—
Obligations of states and political subdivisions:		—		—		—			—		—		—
Private-label mortgage-backed securities		5,590		—		(823	)		4,767		2,290		2,477
Mortgage-backed securities		94,314		—		(685	)		93,629		92,064		1,565

	$	101,904	$	—	$	(1,514	)	$	100,390	$	96,348	$	4,042

Unrealized Gain Positions
Obligations of U.S. government agencies	$	10,553	$	411	$	—		$	10,964
Obligations of states and political subdivisions		46,721		2,855		—			49,576
Private-label mortgage-backed securities		6,927		233		—			7,160
Mortgage-backed securities		174,677		3,775		—			178,452

		238,878		7,274		—			246,152

	$	340,782	$	7,274	$	(1,514	)	$	346,542

At December 31, 2011, there were ninety-one investment securities in unrealized loss positions. The unrealized loss associated with the investments of $4,042 in a continuous unrealized loss position for twelve months or longer was $736.

The amortized cost and estimated fair value of securities at December 31, 2012, and 2011, are shown below by maturity or projected average life, depending on the type of security. Obligations of U.S. government agencies and states and political subdivisions are shown by contractual maturity. Mortgage-backed securities are shown by projected average life.


	December 31, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value

Due in one year or less	$	55,559	$	55,690	$	52,769	$	52,757
Due after one year through 5 years		182,156		185,857		199,757		202,889
Due after 5 years through 10 years		138,243		143,698		86,479		89,043
Due after 10 years		4,496		4,640		1,777		1,853


	$	380,454	$	389,885	$	340,782	$	346,542

There were no investment securities sold during 2012. During 2011 thirty-five investment securities were sold resulting in proceeds of $36,425, gains on sales of $1,134, and losses on sales of $250. The specific identification method was used to determine the cost of the securities sold.

At December 31, 2012, securities with amortized costs of $24,136 (estimated market values of $25,044) were pledged to secure public deposits, as required by law.