7. Securities

Debt securities that management has the positive intent and ability to hold to maturity are classified as "held to maturity" and recorded at amortized cost. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as "available for sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, in other comprehensive income (loss).

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses on debt securities, management considers (1) whether management intends to sell the security, or (2) if it is more likely than not that management will be required to sell the security before recovery, or (3) 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. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Amortized cost and fair value at March 31, 2012, and December 31, 2011, were as follows:

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

SECURITIES AVAILABLE FOR SALE

MARCH 31, 2012
U.S. Government and agencies	$	34,179	$	917	$	—	$	35,096
Mortgage-backed securities	99,450		5,428		33		104,845
State and municipal	49,746		2,051		80		51,717
Corporate bonds	13,056		328		13		13,371
CRA mutual fund	1,044		38		—		1,082
Stock in other banks	627		174		—		801
	$	198,102	$	8,936	$	126	$	206,912

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

SECURITIES HELD TO MATURITY

MARCH 31, 2012
U.S. Government and agencies	$	10,028	$	613	$	—	$	10,641

DECEMBER 31, 2011
U.S. Government and agencies	$	10,032	$	648	$	—	$	10,680

The following table shows the Corporation's gross unrealized losses and fair value for investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2012, and December 31, 2011:

	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

MARCH 31, 2012
Mortgage-backed securities	$	6,115	$	33	$	—	$	—	$	6,115	$	33
State and municipal	3,981		80		—		—		3,981		80
Corporate bonds	—		—		987		13		987		13
	$	10,096	$	113	$	987	$	13	$	11,083	$	126

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

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 March 31, 2012, four mortgage-backed securities had unrealized losses that individually did not exceed 1% of amortized cost. These securities have not 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 the specific securities.

At March 31, 2012, nine state and municipal bonds had unrealized losses that individually did not exceed 4% of amortized cost. These securities have not 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 the specific securities.

At March 31, 2012, one corporate bond had an unrealized loss. This security has been in a continuous loss position for 12 months or more. This security had an unrealized loss of less than 2% of amortized cost. This unrealized loss relates principally to changes in interest rates subsequent to the acquisition of the specific security.

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) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or by 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 security 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 March 31, 2012, management had not identified any securities with an unrealized loss that it intends or will be required to sell.

Amortized cost and fair value at March 31, 2012, by contractual maturity, where applicable, 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

7,548

7,603

—

Over 1 year through 5 years

37,842

39,218

10,028

10,641

Over 5 years through 10 years

41,627

43,062

—

Over 10 years

9,964

10,301

—

Mortgage-backed securities

99,450

104,845

—

CRA mutual fund

1,044

1,082

—

Stock in other banks

627

801

—

198,102

206,912

10,028

10,641

The Corporation realized gross gains of $4,000 and $0 in gross losses on sales or calls of securities available for sale during the first quarter of 2012. The Corporation did not realize any gross gains or losses on sales of securities available for sale during the first quarter of 2011.

At March 31, 2012, and December 31, 2011, securities with a carrying value of $119,076,000 and $124,069,000, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.