Note 4 - Securities

The amortized cost and estimated fair value of investments in debt securities at December 31, 2011 and 2010 were as follows:

	December 31, 2011
(in thousands)	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securities available for sale:
Federal agencies and GSE	$	32,071	$	608	$	-	$	32,679
Mortgage-backed and CMOs		102,444		1,874		414		103,904
State and municipal		182,952		11,454		1		194,405
Corporate		2,312		66		-		2,378
Total securities available for sale	$	319,779	$	14,002	$	415	$	333,366


	December 31, 2010
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securities available for sale:
Federal agencies and GSE	$	57,292	$	785	$	-	$	58,077
Mortgage-backed and CMOs		62,128		1,273		419		62,982
State and municipal		104,937		1,582		1,421		105,098
Corporate		1,974		164		-		2,138
Total securities available for sale		226,331		3,804		1,840		228,295

Securities held to maturity:
State and municipal		3,334		106		-		3,440
Total securities held to maturity		3,334		106		-		3,440
Total securities	$	229,665	$	3,910	$	1,840	$	231,735

The amortized cost and estimated fair value of investments in securities at December 31, 2011, by contractual maturity, are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because mortgage-backed securities have both known principal repayment terms as well as unknown principal repayments due to potential borrower pre-payments, it is difficult to accurately predict the final maturity of these investments. Mortgage-backed securities are shown separately.

	Available for Sale
	Amortized		Estimated
(in thousands)	Cost		Fair Value

Due in one year or less	$	9,803	$	9,945
Due after one year
through five years		62,394		64,064
Due after five years
through ten years		91,016		98,086
Due after ten years		54,122		57,367
Mortgage-backed and CMOs		102,444		103,904
	$	319,779	$	333,366

Gross realized gains and losses from the call of certain securities or the sale of securities available for sale were as follows (in thousands):

	For the Years Ended December 31,
	2011			2010			2009

Realized gains	$	47		$	157		$	3
Realized losses		(48	)		-			-
Other-than-temporary impairment		-			(31	)		-

Securities with a carrying value of approximately $127,599,000 and $140,677,000, at December 31, 2011 and 2010, respectively, were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. FHLB letters of credit were used as additional collateral in the amounts of $72,000,000 at December 31, 2011 and $20,000,000 at December 31, 2010.

Temporarily Impaired Securities

The following table shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011. The reference point for determining when securities are in an unrealized loss position is month-end. Therefore, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.

Available for sale and held to maturity securities that have been in a continuous unrealized loss position are as follows:

	Total				Less than 12 Months				12 Months or More
(in thousands)	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Mortgage-backed	$	28,431	$	266	$	28,431	$	266	$	-	$	-
Private label CMOs		3,375		148		3,306		115		69		33
State and municipal		401		1		401		1		-		-
Total	$	32,207	$	415	$	32,138	$	382	$	69	$	33

GSE residential mortgage-backed securities. The unrealized losses on the Company's investment in 15 GSE mortgage-backed securities were caused by interest rate increases. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2011.

Private-Label Collaterlized Mortgage Obligations: The unrealized loss associated with one private residential collateralized mortgage obligation (“CMO”) is primarily driven by higher projected collateral losses; wider credit spreads and changes in interest rates. We assess for credit impairment using a cash flow model. Based upon management's assessment of the expected credit losses of the securities given the performance of the underlying collateral compared to the credit enhancement, the Company expects to recover the remaining amortized cost basis of these securities.

State and municipal securities: The unrealized losses on three investments in state and municipal securities were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2011.

The Company's investment in FHLB stock totaled $3,160,000 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 FHLB 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 Company 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 in restricted stock on the balance sheet and is not a part of the available for sale securities portfolio.

The table below shows gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2010.

	Total				Less than 12 Months				12 Months or More
(in thousands)	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Mortgage-backed	$	22,106	$	216	$	22,106	$	216	$	-	$	-
Private label CMOs		1,583		203		1,031		18		552		185
State and municipal		46,532		1,421		46,532		1,421		-		-
Total	$	70,221	$	1,840	$	69,669	$	1,655	$	552	$	185

Other-Than-Temporary-Impaired Securities

As of December 31, 2011, there were no securities classified as other-than-temporary impaired. As of December 31, 2010, the Company held one variable rate CMO which had been downgraded below investment grade to CCC status by Standard and Poor's. This issue was sold in June 2011 and the Company recognized a $46,000 loss.