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, 2013	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	26,436	$	256	$	-	$	26,692
Obligations of States and Political Subdivisions		5,643		-		-		5,643
Mortgage Backed Securities (1)		423,298		10,273		1,286		432,285
Corporate Securities		49,846		321		39		50,128
Other		825		-		-		825
Total	$	506,048	$	10,850	$	1,325	$	515,573

	Amortized		Gross Unrealized				Fair/Book
December 31, 2012	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	26,546	$	277	$	-	$	26,823
Obligations of States and Political Subdivisions		5,665		-		-		5,665
Mortgage Backed Securities (1)		341,212		11,570		10		352,772
Corporate Securities		22,318		252		12		22,558
Other		10,173		-		-		10,173
Total	$	405,914	$	12,099	$	22	$	417,991

	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 Securities		344		-		-		344
Other		10,067		-		-		10,067
Total	$	522,381	$	9,694	$	258	$	531,817

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, 2013	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	65,165	$	1,896	$	22	$	67,039
Mortgage Backed Securities (1)		341		8		-		349
Other		2,202		-		-		2,202
Total	$	67,708	$	1,904	$	22	$	69,590

	Book		Gross Unrealized				Fair
December 31, 2012	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	65,694	$	2,296	$	3	$	67,987
Mortgage Backed Securities (1)		484		12		-		496
Other		2,214		-		-		2,214
Total	$	68,392	$	2,308	$	3	$	70,697

	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

(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, 2013 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair/Book		Book		Fair
March 31, 2013	Cost		Value		Value		Value
Within one year	$	11,424	$	11,475	$	1,775	$	1,788
After one year through five years		64,583		64,968		12,144		12,527
After five years through ten years		1,315		1,417		38,182		39,602
After ten years		5,428		5,428		15,266		15,324
		82,750		83,288		67,367		69,241
Investment securities not due at a single maturity date:
Mortgage-backed securities		423,298		432,285		341		349

Total	$	506,048	$	515,573	$	67,708	$	69,590

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, 2013	Value		Loss		Value		Loss		Value		Loss

Securities Available-for-Sale
Mortgage Backed Securities	$	115,238	$	1,286	$	-	$	-	$	115,238	$	1,286
Corporate Securities		18,691		39		-		-		18,691		39
Total	$	133,929	$	1,325	$	-	$	-	$	133,929	$	1,325

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	2,841	$	22	$	-	$	-	$	2,841	$	22
Total	$	2,841	$	22	$	-	$	-	$	2,841	$	22

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2012	Value		Loss		Value		Loss		Value		Loss

Securities Available-for-Sale
Mortgage Backed Securities	$	4,542	$	10	$	-	$	-	$	4,542	$	10
Corporate Securities		3,442		12		-		-		3,442		12
Total	$	7,984	$	22	$	-	$	-	$	7,984	$	22

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	528	$	3	$	-	$	-	$	528	$	3
Total	$	528	$	3	$	-	$	-	$	528	$	3

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2012	Value		Loss		Value		Loss		Value		Loss

Securities Available-for-Sale
Mortgage Backed Securities	$	56,721	$	258	$	-	$	-	$	56,721	$	258
Total	$	56,721	$	258	$	-	$	-	$	56,721	$	258

As of March 31, 2013, the Company held 355 investment securities of which 27 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 Government Agency and Government Sponsored Entities – There were no unrealized losses on the Company's investments in securities of government agency and government sponsored entities at March 31, 2013, December 31, 2012 and March 31, 2012.

Mortgage Backed Securities - The unrealized losses on the Company's investment in mortgage backed securities were $1.3 million, $10,000, and $258,000 at March 31, 2013, December 31, 2012, and March 31, 2012, respectively. The unrealized losses on the Company's investment in mortgage backed securities were caused by interest rate fluctuations. 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 does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2013, December 31, 2012 and March 31, 2012, respectively.

Obligations of States and Political Subdivisions - The financial problems experienced by certain municipalities over the past five years, 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, 2013, 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 investment in obligation of states and political subdivision were $22,000, $3,000, and $0 at March 31, 2013, December 31, 2012 and March 31, 2012, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. 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 does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2013 and December 31, 2012.

Corporate Securities - The unrealized losses on the Company's investment in corporate securities were $39,000. $12,000, and $0 at March 31, 2013, December 31, 2012, and March 31, 2012. Changes in the prices of corporate securities are primarily influenced by: (1) changes in market interest rates; (2) changes in perceived credit risk in the general economy or in particular industries; (3) changes in the perceived credit risk of a particular company; and (4) day to day trading supply, demand and liquidity. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2013 and December 31, 2012.

Proceeds from sales and calls of securities available-for-sale were as follows:

(in thousands)	Proceeds		Gains		Losses
Three Months Ended March 31, 2013	$	45,259	$	749	$	14
Three Months Ended March 31, 2012		25,000		-		-

Pledged Securities

As of March 31, 2013, securities carried at $300.2 million were pledged to secure public deposits, FHLB borrowings, and other government agency deposits as required by law. This amount at December 31, 2012, was $296.9 million.