(4.) INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):


		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
March 31, 2013
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	125,018	$	3,489	$	101	$	128,406
State and political subdivisions		211,986		6,150		262		217,874
Mortgage-backed securities:
Federal National Mortgage Association		158,199		3,915		265		161,849
Federal Home Loan Mortgage Corporation		41,314		1,393		-		42,707
Government National Mortgage Association		51,619		3,235		-		54,854
Collateralized mortgage obligations:
Federal National Mortgage Association		69,371		1,464		142		70,693
Federal Home Loan Mortgage Corporation		110,463		1,103		747		110,819
Government National Mortgage Association		62,614		1,942		42		64,514
Privately issued		29		1,092		-		1,121
Total collateralized mortgage obligations		242,477		5,601		931		247,147
Total mortgage-backed securities		493,609		14,144		1,196		506,557
Asset-backed securities		62		538		-		600
Total available for sale securities	$	830,675	$	24,321	$	1,559	$	853,437
Securities held to maturity:
State and political subdivisions	$	17,747	$	513	$	-	$	18,260


December 31, 2012
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	128,097	$	3,667	$	69	$	131,695
State and political subdivisions		188,997		6,285		72		195,210
Mortgage-backed securities:
Federal National Mortgage Association		147,946		4,394		188		152,152
Federal Home Loan Mortgage Corporation		65,426		1,430		-		66,856
Government National Mortgage Association		56,166		3,279		-		59,445
Collateralized mortgage obligations:
Federal National Mortgage Association		60,805		1,865		2		62,668
Federal Home Loan Mortgage Corporation		78,581		1,911		-		80,492
Government National Mortgage Association		70,989		2,168		-		73,157
Privately issued		73		1,025		-		1,098
Total collateralized mortgage obligations		210,448		6,969		2		217,415
Total mortgage-backed securities		479,986		16,072		190		495,868
Asset-backed securities		121		902		-		1,023
Total available for sale securities	$	797,201	$	26,926	$	331	$	823,796
Securities held to maturity:
State and political subdivisions	$	17,905	$	573	$	-	$	18,478

For the three months ended March 31, 2013, proceeds from sales of securities available for sale were $952 thousand and gross realized gains were $892 thousand. For the three months ended March 31, 2012, proceeds from sales of securities available for sale were $360 thousand and gross realized gains were $331 thousand.

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2013 are shown below (in thousands). Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.


		Amortized		Fair
		Cost		Value
Debt securities available for sale:
Due in one year or less	$	20,802	$	20,894
Due from one to five years		95,759		99,825
Due after five years through ten years		365,312		373,338
Due after ten years		348,802		359,380
	$	830,675	$	853,437
Debt securities held to maturity:
Due in one year or less	$	12,740	$	12,818
Due from one to five years		4,212		4,474
Due after five years through ten years		708		852
Due after ten years		87		116
	$	17,747	$	18,260

There were no unrealized losses in held to maturity securities at March 31, 2013 or December 31, 2012. Unrealized losses on investment securities available for sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):


		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair	Unrealized			Fair	Unrealized
		Value		Losses		Value	Losses			Value		Losses
March 31, 2013
U.S. Government agencies and government
sponsored enterprises	$	27,857	$	95	$	2,912	$	6	$	30,769	$	101
State and political subdivisions		26,532		262		-		-		26,532		262
Mortgage-backed securities:
Federal National Mortgage Association		37,063		265		-		-		37,063		265
Collateralized mortgage obligations:
Federal National Mortgage Association		12,693		140		1,102		2		13,795		142
Federal Home Loan Mortgage Corporation		46,770		747		-		-		46,770		747
Government National Mortgage Association		3,333		42		-		-		3,333		42
Total collateralized mortgage obligations		62,796		929		1,102		2		63,898		931
Total mortgage-backed securities		99,859		1,194		1,102		2		100,961		1,196
Total temporarily impaired securities	$	154,248	$	1,551	$	4,014	$	8	$	158,262	$	1,559


December 31, 2012
U.S. Government agencies and government
sponsored enterprises	$	13,265	$	67	$	2,967	$	2	$	16,232	$	69
State and political subdivisions		8,471		72		-		-		8,471		72
Mortgage-backed securities:
Federal National Mortgage Association		25,200		188		-		-		25,200		188
Collateralized mortgage obligations:
Federal National Mortgage Association		-		-		1,173		2		1,173		2
Total collateralized mortgage obligations		-		-		1,173		2		1,173		2
Total mortgage-backed securities		25,200		188		1,173		2		26,373		190
Total temporarily impaired securities	$	46,936	$	327	$	4,140	$	4	$	51,076	$	331

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2013 was 104 compared to 52 at December 31, 2012. At March 31, 2013, the Company had positions in 6 investment securities with a fair value of $4.0 million and a total unrealized loss of $8 thousand that have been in a continuous unrealized loss position for more than 12 months. There were a total of 98 securities positions in the Company's investment portfolio, with a fair value of $154.2 million and a total unrealized loss of $1.6 million at March 31, 2013, that have been in a continuous unrealized loss position for less than 12 months. The unrealized loss on these investment securities was predominantly caused by changes in market interest rates, average life or credit spreads subsequent to purchase. The fair value of most of the investment securities in the Company's portfolio fluctuates as market interest rates change.

The Company reviews investment securities on an ongoing basis for the presence of other-than-temporary impairment ("OTTI") with formal reviews performed quarterly. When evaluating debt securities for OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intention to sell the debt security or whether it is more likely than not that it will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information then available to management.

No impairment was recorded in the three months ended March 31, 2013. During the three months ended March 31, 2012, the Company recognized an OTTI charge of $91 thousand related to a privately issued whole loan CMO that was determined to be impaired due to credit quality.

Based on management's review and evaluation of the Company's debt securities as of March 31, 2013, the debt securities with unrealized losses were not considered to be OTTI. As of March 31, 2013, the Company does not have the intent to sell any of the securities in a loss position and believes that it is not likely that it will be required to sell any such securities before the anticipated recovery of amortized cost. Accordingly, as of March 31, 2013, management has concluded that unrealized losses on its investment securities are temporary and no further impairment loss has been realized in the Company's consolidated statements of income.