NOTE 2: Securities

The Corporation's debt and equity securities, all of which are classified as available for sale, at December 31, 2011 and 2010 are summarized as follows:

	December 31, 2011
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government agencies and corporations	$	15,248	$	39	$	(4	)	$	15,283
Mortgage-backed securities		2,135		81		-			2,216
Obligations of states and political subdivisions		120,165		6,998		(84	)		127,079
Preferred stock		27		41		-			68
	$	137,575	$	7,159	$	(88	)	$	144,646

	December 31, 2010
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government agencies and corporations	$	13,629	$	57	$	(30	)	$	13,656
Mortgage-backed securities		2,229		78		(7	)		2,300
Obligations of states and political subdivisions		113,620		1,694		(1,026	)		114,288
Preferred stock		27		7		(3	)		31
	$	129,505	$	1,836	$	(1,066	)	$	130,275

The amortized cost and estimated fair value of securities, all of which are classified as available for sale, at December 31, 2011 and 2010, by the earlier of contractual maturity or expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	December 31, 2011				December 31, 2010
(Dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	29,921	$	30,108	$	24,864	$	24,929
Due after one year through five years		32,983		34,169		32,848		33,050
Due after five years through ten years		47,545		51,021		45,244		45,450
Due after ten years		27,099		29,280		26,522		26,815
Preferred stock		27		68		27		31
	$	137,575	$	144,646	$	129,505	$	130,275

Proceeds from the maturities, calls and sales of securities available for sale in 2011 were $31.10 million, resulting in gross realized gains of $13,000; in 2010 were $28.69 million, resulting in gross realized gains of $88,000 and gross realized losses of $18,000; and in 2009 were $23.14 million, resulting in gross realized gains of $48,000 and gross realized losses of $26,000.

The Corporation pledges securities to primarily secure public deposits, Federal Reserve Bank treasury, tax and loan deposits and repurchase agreements. Securities with an aggregate amortized cost of $106.97 million and an aggregate fair value of $112.66 million were pledged at December 31, 2011. Securities with an aggregate amortized cost of $93.56 million and an aggregate fair value of $94.28 million were pledged at December 31, 2010.

Securities in an unrealized loss position at December 31, 2011, by duration of the period of the unrealized loss, are shown below.

	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agencies and corporations	$	2,064	$	4	$	-	$	-	$	2,064	$	4
Obligations of states and political subdivisions		3,305		35		1,328		49		4,633		84
Total temporarily impaired securities	$	5,369	$	39	$	1,328	$	49	$	6,697	$	88

There are 22 debt securities totaling $6.70 million considered temporarily impaired at December 31, 2011. The primary cause of the temporary impairments in the Corporation's investments in debt securities was fluctuations in interest rates. During the fourth quarter of 2011, the municipal bond sector, which is included in the Corporation's obligations of states and political subdivisions category of securities, experienced rising securities prices as overall lower interest rates, limited supply, increased investor demand, and an absence of widespread defaults helped drive the market. A number of external factors, including the European debt crises and concerns about global economic weakness in general, have kept interest rates at near historically low levels. There were two key drivers of the reduced supply of municipal bonds: (1) many issuers accelerated issuance in the second half of 2010 to take advantage of the expiring Build America Bond program, which reduced their borrowing needs for 2011, and (2) state and local governments employed strict fiscal measures to balance their budgets and, as a result, reduced the funding of new projects in general. The vast majority of the Corporation's municipal bond portfolio is comprised of securities where the issuing municipalities have unlimited taxing authority to support their debt servicing obligations. At December 31, 2011, approximately 96 percent of the Corporation's obligations of states and political subdivisions, as measured by market value, were rated “A” or better by Standard & Poor's or Moody's Investors Service. Of those in a net unrealized loss position, approximately 81 percent were rated “A” or better, as measured by market value, at December 31, 2011. Because the Corporation intends to hold these investments in debt securities to maturity and it is more likely than not that the Corporation will not be required to sell these investments before a recovery of unrealized losses, the Corporation does not consider these investments to be other-than-temporarily impaired at December 31, 2011 and no other-than-temporary impairment has been recognized.

The Corporation's investment in FHLB stock totaled $3.77 million at December 31, 2011. FHLB stock is generally viewed as a long-term investment and as a restricted investment security, which is carried at cost, because there is no market for the stock, other than the FHLBs or member institutions. Therefore, when evaluating FHLB stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Corporation does not consider this investment to be other-than-temporarily impaired at December 31, 2011 and no impairment has been recognized. FHLB stock is shown as a separate line item on the balance sheet and is not a part of the available for sale securities portfolio.

Securities in an unrealized loss position at December 31, 2010, by duration of the period of the unrealized loss, are shown below.

	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agencies and corporations	$	4,345	$	30	$	-	$	-	$	4,345	$	30
Mortgage-backed securities		590		7		-		-		590		7
Obligations of states and political subdivisions		38,585		925		1,178		101		39,763		1,026
Subtotal-debt securities		43,520		962		1,178		101		44,698		1,063
Preferred stock		8		3		-		-		8		3
Total temporarily impaired securities	$	43,528	$	965	$	1,178	$	101	$	44,706	$	1,066