NOTE C—SECURITIES

Amortized cost and fair value at December 31, 2011 and 2010, were as follows:

In thousands	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

SECURITIES AVAILABLE FOR SALE
December 31, 2011
U.S. Government and agencies	$	39,237	$	932	$	—	$	40,169
Mortgage-backed securities		102,059		5,473		5		107,527
State and municipal		44,072		2,250		5		46,317
Corporate bonds		13,105		304		30		13,379
CRA mutual fund		1,044		37		—		1,081
Stock in other banks		627		127		—		754

	$	200,144	$	9,123	$	40	$	209,227

December 31, 2010
U.S. Government and agencies	$	28,225	$	297	$	262	$	28,260
Mortgage-backed securities		109,386		5,292		319		114,359
State and municipal		34,214		643		181		34,676
Corporate bonds		11,303		367		11		11,659
CRA mutual fund		1,032		—		2		1,030
Stock in other banks		627		119		—		746

	$	184,787	$	6,718	$	775	$	190,730

SECURITIES HELD TO MATURITY
December 31, 2011
U.S. Government and agencies	$	10,032	$	648	$	—	$	10,680

December 31, 2010
U.S. Government and agencies	$	10,044	$	627	$	—	$	10,671

The following table shows the Corporation's investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011 and 2010:

	Less than 12 Months				12 Months or More				Total

In thousands	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
SECURITIES AVAILABLE FOR SALE
December 31, 2011
Mortgage-backed securities	$	1,968	$	5	$	—	$	—	$	1,968	$	5
State and municipal		1,251		5		—		—		1,251		5
Corporate Bonds		—		—		970		30		970		30

	$	3,219	$	10	$	970	$	30	$	4,189	$	40

December 31, 2010
U.S. Government and agencies	$	10,585	$	262	$	—	$	—	$	10,585	$	262
Mortgage-backed securities		21,071		319		—		—		21,071		319
State and municipal		11,680		181		—		—		11,680		181
Corporate Bonds		989		11		—		—		989		11
CRA mutual fund		1,030		2		—		—		1,030		2

	$	45,355	$	775	$	—	$	—	$	45,355	$	775

All mortgage-backed security investments are government sponsored enterprise (GSE) pass through instruments issued by the Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA) or Federal Home Loan Mortgage Corporation (FHLMC), which guarantee the timely payment of principal on these investments.

At December 31, 2011, one mortgage-backed security had an unrealized loss, and was in the continuous loss position for less than 12 months. This unrealized loss relates principally to changes in interest rates subsequent to the acquisition of the specific security. This security had an unrealized loss of less than 1% of amortized cost.

At December 31, 2011, four state and municipal securities had unrealized losses, and none of the municipal securities had been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of specific securities. None of the securities in this category had an unrealized loss that exceeded 2% of amortized cost.

At December 31, 2011, one corporate bond security had an unrealized loss. This security has been in a continuous loss position for 12 months or more. This unrealized loss relates principally to changes in interest rates subsequent to the acquisition of the specific security. This security had an unrealized loss of less than 3% of amortized cost.

In analyzing the issuer's financial condition, management considers industry analysts' reports, financial performance, and projected target prices of investment analysts within a one-year time frame. Based on the above information, management has determined that none of these investments are other-than-temporarily impaired.

The fair values of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the security's relationship to other benchmark quoted prices. The Corporation uses an independent service provider to provide matrix pricing and uses the valuation of another provider to compare for reasonableness.

Management routinely sells securities from its available for sale portfolio in an effort to manage and allocate the portfolio. At December 31, 2011, management had not identified any securities with an unrealized loss that it intends to sell. In estimating other-than-temporary impairment losses on debt securities, management considers (1) whether management intends to sell the securities, or (2) if it is more likely than not that management will be required to sell the security before recovery, or (3) if management does not expect to recover the entire amortized cost basis. In assessing potential other-than-temporary impairment for equity securities, consideration is given to management's intention and ability to hold the securities until recovery of unrealized losses.

The Corporation holds equity investments in the common stock of two bank holding companies headquartered and operating in Pennsylvania. Both holding companies continue to pay cash dividends, which was one of the driving forces in the original investment decision to purchase those stocks. However, 2009 market prices for these stocks were below the prices paid at the time of acquisition. A review of the factors contributing to the price decline led to a conclusion that the prices on these securities were not likely to recover in the near term and that they were other-than-temporarily impaired. A charge against current earnings of $522,000 was taken in the third quarter of 2009 to write down the value of these securities to their fair values.

Amortized cost and fair value at December 31, 2011, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties.

	Available for Sale				Held to Maturity

In thousands	Amortized Cost		Fair Value		Amortized Cost		Fair Value
1 year or less	$	6,582	$	6,656	$	—	$	—
Over 1 year through 5 years		39,908		41,141		10,032		10,680
Over 5 years through 10 years		39,044		40,775		—		—
Over 10 years		10,880		11,293		—		—
Mortgage-backed securities		102,059		107,527		—		—
CRA mutual fund		1,044		1,081		—		—
Stock in other banks		627		754		—		—

	$	200,144	$	209,227	$	10,032	$	10,680

The Corporation realized gross gains of $1,000 during 2011, $128,000 during 2010, and $75,000 during 2009 and gross losses of $0 during 2011, $56,000 during 2010 and $58,000 during 2009 on sales of securities available for sale. State and municipal securities were sold at a loss in 2010 and 2009 in order to adjust the Corporation's interest rate sensitivity, reduce exposure to geographic locations, balance the mix with other investment types and to reduce risks related to insurance coverage.

At December 31, 2011 and 2010, securities with a carrying value of $124,069,000 and $99,197,000, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements and for other purposes.