NOTE 3: INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities, as of the dates indicated, are summarized as follows:


	June 30, 2012
(Dollars in thousands)	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
Held To Maturity
US Government agency obligations	$7,154	$149	$—	$7,303
Government Sponsored Entities (GSE) mortgage-backed securities	11,919	524	—	12,443
Corporate bonds	6,535	65	(94)	6,506
Collateralized mortgage obligations GSE	8,314	179	—	8,493
State and municipal tax-exempt	22,091	548	—	22,639
Total	$56,013	$1,465	$(94)	$57,384

Available For Sale
US Government agency obligations	$39,808	$81	$(33)	$39,856
GSE mortgage-backed securities	30,968	683	—	31,651
Collateralized mortgage obligations GSE	6,535	19	(21)	6,533
Corporate bonds	38,904	263	(397)	38,770
State and municipal tax-exempt	1,112	—	(7)	1,105
Asset-backed securities	9,684	89	(1)	9,772
Equity securities	27	—	(13)	14
Total	$127,038	$1,135	$(472)	$127,701


	December 31, 2011
(Dollars in thousands)	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
Held To Maturity
Government Sponsored Entities (GSE) mortgage-backed securities	$14,363	$493	$—	$14,856
Corporate Bonds	1,548	18	—	1,566
Collateralized mortgage obligations GSE	8,139	163	—	8,302
State and Municipal tax-exempt	12,377	580	—	12,957
Total	$36,427	$1,254	$—	$37,681

Available For Sale
US Government agency obligations	$43,698	$194	$(1)	$43,891
GSE mortgage-backed securities	24,792	533	(12)	25,313
Collateralized mortgage obligations GSE	6,148	24	(20)	6,152
Corporate bonds	27,141	84	(878)	26,347
Asset-backed securities	5,737	78	—	5,815
Equity securities	27	—	(15)	12
Total	$107,543	$913	$(926)	$107,530

Included in unrealized losses are market losses on securities that have been in a continuous unrealized loss position for twelve months or more and those securities that have been in a continuous unrealized loss position for less than twelve months. The table below details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at June 30, 2012 and December 31, 2011.


		June 30, 2012
(Dollars in thousands)	Total Fair Value		Total Unrealized Loss		Fair Value Impaired Less Than 12 Months		Unrealized Loss Less Than 12 Months			Fair Value Impaired More Than 12 Months	Unrealized Loss More Than 12 Months
Held To Maturity
Corporate bonds	$4,895		$(94)		$4,895		$(94)			$—	$—
Total	$4,895		$(94)		$4,895		$(94)			$—	$—


Available For Sale
US Government agency obligations	$13,041		$(33)		$13,041		$(33)			$—	$—
Collateralized mortgage obligations GSE	4,211		(21)		4,211		(21)			—	—
Corporate bonds	18,147		(397)		9,850		(52)			8,297	(345)
State and municipal tax-exempt	304		(7)		304		(7)			—	—
Asset-backed securities	2,959		(1)		2,959		(1)			—	—
Equity securities	14		(13)		—		—			14	(13)
Total	$38,676		$(472)		$30,365		$(114)			$8,311	$(358)

	December 31, 2011
(Dollars in thousands)	Total Fair Value			Total Unrealized Loss		Fair Value Impaired Less Than 12 Months		Unrealized Loss Less Than 12 Months	Fair Value Impaired More Than 12 Months			Unrealized Loss More Than 12 Months
Available For Sale
US Government agency obligations	$1,522			$(1)		$1,522		$(1)	$—			$—
GSE mortgage-backed securities	4,428			(12)		4,428		(12)	—			—
Collateralized mortgage obligations GSE	4,554			(20)		4,554		(20)	—			—
Corporate bonds	18,023			(878)		14,232		(477)	3,791			(401)
Equity securities	12			(15)		—		—	12			(15)
Total	$28,539			$(926)		$24,736		$(510)	$3,803			$(416)

As of June 30, 2012, there were 21 corporate bonds, eight U.S. agency obligations, two collateralized mortgage obligations, one tax-exempt municipality, one asset-backed security, and six equity securities which were in an unrealized loss position. Twenty-five of these 39 securities did not meet the criteria of having market value loss greater than 10% of book value or had been impaired for more than 12 months. DNB does not intend to sell these securities and management of DNB does not expect to be required to sell any of these securities prior to a recovery of its cost basis. Management does not believe any individual unrealized loss as of June 30, 2012 represents an other-than-temporary impairment. There were 8 corporate bonds and 6 equity securities that were impaired for more than 12 months. One of the corporate bonds that were impaired for more than 12 months had a market value loss greater than 10% of book value. DNB reviews its investment portfolio on a quarterly basis judging each investment for other-than-temporary impairment (OTTI). The OTTI analysis focuses on duration and amount by which a security is below book. As of June 30, 2012, the following securities were reviewed:

Corporate Securities The unrealized loss on eight investments in the Corporate Bond portfolio was caused by a number of factors. Some of the bonds have had downgrades since they were purchased. Some of the Corporates have been affected by the market's perception of the impact of sovereign debit holdings and spreads on the financial sector have widened since they were purchased. The book value of the eight securities is $8.6 million and the unrealized loss is $345,000 or 4.0%. Seven of the bonds have been impaired for more than twelve months and have a loss less than 10% of the book value. One of the bonds has been impaired for more than twelve months and has a loss greater than 10% of the book value. The contractual terms of those investments do not permit the issuer to settle these securities at a price less than the par value of the investments. Based on this analysis and an evaluation of DNB's ability and intent to hold these securities for a reasonable period of time sufficient for each security to increase to DNB's cost, DNB does not intend to sell these securities and it is not more likely than not that DNB will be required to sell the securities before recovery of their cost, DNB does not consider these securities to be other-than-temporarily impaired at June 30, 2012.

Equity securities. DNB's investment in six marketable equity securities consists primarily of securities in common stock of community banks in Pennsylvania. The unrealized losses on the six securities in the equity securities portfolio were all impaired for more than twelve months. The severity and duration of the impairment are driven by higher collateral losses, wider credit spreads, and changes in interest rates within the financial services sector. DNB evaluated the prospects of all issuers in relation to the severity and duration of the impairment. Based on this analysis and an evaluation of DNB's ability and intent to hold these securities for a reasonable period of time sufficient for each security to increase to DNB's cost, DNB does not intend to sell these securities and it is not more likely than not that DNB will be required to sell the securities before recovery of their cost, DNB does not consider these securities to be other-than-temporarily impaired at June 30, 2012.

The amortized cost and estimated fair value of investment securities as of June 30, 2012, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid without penalties.


	Held to Maturity		Available for Sale
(Dollars in thousands)	Amortized Cost	Estimated Fair Value	Amortized Cost	Estimated Fair Value
Due in one year or less	$—	$—	$2,541	$2,541
Due after one year through five years	32	32	54,368	54,454
Due after five years through ten years	23,530	23,892	26,448	26,388
Due after ten years	32,451	33,460	43,654	44,304
No stated maturity	—	—	27	14
Total investment securities	$56,013	$57,384	$127,038	$127,701

DNB sold $9.8 million and $15.8 million from the Available For Sale portfolio during the three month periods ending June 30, 2012 and 2011, respectively. Gains and losses resulting from investment sales, redemptions or calls were as follows:


	Six Months Ended June 30
(Dollars in thousands)	2012	2011
Gross realized gains-AFS	$85	$85
Gross realized losses-AFS	(6)	(83)
Net realized gain	$79	$2

At June 30, 2012 and 2011, investment securities with a carrying value of approximately $92 million and $128 million, respectively, were pledged to secure public funds, repurchase agreements and for other purposes as required by law.