(3.) 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, 2012
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	104,599	$	2,349	$	337	$	106,611
State and political subdivisions		141,184		4,221		116		145,289
Mortgage-backed securities:
Federal National Mortgage Association		94,953		3,090		-		98,043
Federal Home Loan Mortgage Corporation		58,911		1,154		-		60,065
Government National Mortgage Association		68,746		3,868		-		72,614
Collateralized mortgage obligations:
Federal National Mortgage Association		56,631		856		31		57,456
Federal Home Loan Mortgage Corporation		57,363		591		5		57,949
Government National Mortgage Association		96,300		2,284		2		98,582
Privately issued		147		1,175		-		1,322
Total collateralized mortgage obligations		210,441		4,906		38		215,309
Total mortgage-backed securities		433,051		13,018		38		446,031
Asset-backed securities		267		1,299		-		1,566
Total available for sale securities	$	679,101	$	20,887	$	491	$	699,497
Securities held to maturity:
State and political subdivisions	$	24,196	$	601	$	-	$	24,797

December 31, 2011
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	94,947	$	2,770	$	5	$	97,712
State and political subdivisions		119,099		5,336		11		124,424
Mortgage-backed securities:
Federal National Mortgage Association		98,679		2,944		-		101,623
Federal Home Loan Mortgage Corporation		63,838		1,017		-		64,855
Government National Mortgage Association		73,226		3,376		-		76,602
Collateralized mortgage obligations:
Federal National Mortgage Association		28,339		581		7		28,913
Federal Home Loan Mortgage Corporation		22,318		675		1		22,992
Government National Mortgage Association		103,975		2,654		18		106,611
Privately issued		327		1,762		-		2,089
Total collateralized mortgage obligations		154,959		5,672		26		160,605
Total mortgage-backed securities		390,702		13,009		26		403,685
Asset-backed securities		297		1,400		-		1,697
Total available for sale securities	$	605,045	$	22,515	$	42	$	627,518
Securities held to maturity:
State and political subdivisions	$	23,297	$	667	$	-	$	23,964

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. There were no sales of available for sale securities during the three months ended March 31, 2011.

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2012 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	$	19,166	$	19,389
Due from one to five years		72,353		74,550
Due after five years through ten years		226,616		231,886
Due after ten years		360,966		373,672
	$	679,101	$	699,497
Debt securities held to maturity:
Due in one year or less	$	18,709	$	18,823
Due from one to five years		4,363		4,638
Due after five years through ten years		991		1,161
Due after ten years		133		175
	$	24,196	$	24,797

There were no unrealized losses in held to maturity securities at March 31, 2012 or December 31, 2011. 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, 2012
U.S. Government agencies and government
sponsored enterprises	$	25,509	$	332	$	5,156	$	5	$	30,665	$	337
State and political subdivisions		11,189		112		646		4		11,835		116
Mortgage-backed securities:
Collateralized mortgage obligations:
Federal National Mortgage Association		12,960		26		1,640		5		14,600		31
Federal Home Loan Mortgage Corporation		9,972		5		-		-		9,972		5
Government National Mortgage Association		-		-		695		2		695		2
Total collateralized mortgage obligations		22,932		31		2,335		7		25,267		38
Total mortgage-backed securities		22,932		31		2,335		7		25,267		38
Total temporarily impaired securities	$	59,630	$	475	$	8,137	$	16	$	67,767	$	491

December 31, 2011
U.S. Government agencies and government
sponsored enterprises	$	2,177	$	1	$	5,246	$	4	$	7,423	$	5
State and political subdivisions		452		2		646		9		1,098		11
Mortgage-backed securities:
Collateralized mortgage obligations:
Federal National Mortgage Association		-		-		1,817		7		1,817		7
Federal Home Loan Mortgage Corporation		-		-		388		1		388		1
Government National Mortgage Association		6,138		18		-		-		6,138		18
Total collateralized mortgage obligations		6,138		18		2,205		8		8,343		26
Total mortgage-backed securities		6,138		18		2,205		8		8,343		26
Total temporarily impaired securities	$	8,767	$	21	$	8,097	$	21	$	16,864	$	42

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2012 was 53 compared to 14 at December 31, 2011. At March 31, 2012, the Company had positions in 9 investment securities with an amortized cost of $8.2 million and an unrealized loss of $16 thousand that have been in a continuous unrealized loss position for more than 12 months. There were a total of 44 securities positions in the Company's investment portfolio, with an amortized cost of $60.1 million and a total unrealized loss of $475 thousand at March 31, 2012, 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 available to management.

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. No impairment was recorded in the three months ended March 31, 2011.

Based on management's review and evaluation of the Company's debt securities as of March 31, 2012, the debt securities with unrealized losses were not considered to be OTTI. As of March 31, 2012, the Company does not intend to sell any debt securities which have an unrealized loss, it is unlikely the Company will be required to sell these securities before recovery and the Company expects to recover the entire amortized cost of these impaired securities. Accordingly, as of March 31, 2012, 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.