Note 5. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair values of the Company's investment securities classified as available-for-sale and held-to-maturity at June 30, 2011 and December 31, 2010 are summarized as follows (in thousands):

Available-for-sale	June 30, 2011
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
U.S. Government agency securities	$	9,396	$	70	$	-		$	9,466
Tax-exempt obligations of states and political subdivisions		72,484		1,092		(746	)		72,830
Taxable obligations of states and political subdivisions		28,858		720		(76	)		29,502
Mortgage-backed securities		200,599		3,064		(114	)		203,549
Other debt securities		27,872		1,484		(238	)		29,118
Other equity securities		3,000		-		-			3,000
Federal Home Loan and Atlantic Central
Bankers Bank stock		5,634		-		-			5,634
	$	347,843	$	6,430	$	(1,174	)	$	353,099



Held-to-maturity	June 30, 2011
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
Other debt securities - single issuers	$	16,340	$	134	$	(4,419	)	$	12,055
Other debt securities - pooled		1,762		-		(319	)		1,443
	$	18,102	$	134	$	(4,738	)	$	13,498

Available-for-sale	December 31, 2010
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
Tax-exempt obligations of states and political subdivisions	$	78,046	$	335	$	(3,070	)	$	75,311
Taxable obligations of states and political subdivisions		28,870		261		(454	)		28,677
Mortgage-backed securities		76,275		704		(64	)		76,915
Other debt securities		42,700		1,510		(186	)		44,024
Federal Home Loan and Atlantic Central
Bankers Bank stock		6,238		-		-			6,238
	$	232,129	$	2,810	$	(3,774	)	$	231,165


Held-to-maturity	December 31, 2010
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
Other debt securities - single issuers	$	19,526	$	128	$	(4,632	)	$	15,022
Other debt securities - pooled		1,838		-		(310	)		1,528
	$	21,364	$	128	$	(4,942	)	$	16,550

Available-for-sale security fair values are based on the fair market value supplied by a third-party market data provider while fair values for held-to-maturity securities are based on the present value of cash flows, which discounts expected cash flows from principal and interest using yield to maturity at the measurement date.

The amortized cost and fair value of the Company's investment securities at June 30, 2011, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
	cost		value		cost		value
Due before one year	$	19,134	$	19,135	$	-	$	-
Due after one year through five years		42,251		44,062		-		-
Due after five years through ten years		15,036		15,194		3,282		2,839
Due after ten years		265,788		269,074		14,820		10,659
Federal Home Loan and Atlantic
Central Bankers Bank stock		5,634		5,634		-		-
	$	347,843	$	353,099	$	18,102	$	13,498

At June 30, 2011 and December 31, 2010, investment securities with a book value of approximately $30.0 million and $19.8 million, respectively, were pledged as collateral under repurchase agreements and at December 31, 2010, Federal Home Loan Bank advances as required or permitted by law. There were $603,000 gross gains on sales of securities in the first six months of 2011 as compared to gains of $1.2 million in the first six months of 2010.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at June 30, 2011 (dollars in thousands):

June 30, 2011
Available-for-sale			Less than 12 months					12 months or longer					Total
	Number of securities		Fair Value		Unrealized losses			Fair Value		Unrealized losses			Fair Value		Unrealized losses
Description of Securities
Tax-exempt obligations of states and
political subdivisions		26	$	20,818	$	(732	)	$	1,207	$	(9	)	$	22,025	$	(741	)
Taxable obligations of states and
political subdivisions		7		5,304		(74	)		428		(1	)		5,732		(75	)
Mortgage-backed securities		8		14,923		(120	)		-		-			14,923		(120	)
Other debt securities		2		1,996		(4	)		642		(234	)		2,638		(238	)
Total temporarily impaired
investment securities		43	$	43,041	$	(930	)	$	2,277	$	(244	)	$	45,318	$	(1,174	)

June 30, 2011
Held-to-maturity			Less than 12 months				12 months or longer					Total
	Number of securities		Fair Value		Unrealized losses		Fair Value		Unrealized losses			Fair Value		Unrealized losses
Description of Securities
Other debt securities - single issuers		2	$	-	$	-	$	7,645	$	(4,419	)	$	7,645	$	(4,419	)
Other debt securities - pooled		2		-		-		1,443		(319	)		1,443		(319	)
Total temporarily impaired
investment securities		4	$	-	$	-	$	9,088	$	(4,738	)	$	9,088	$	(4,738	)

December 31, 2010
Available-for-sale			Less than 12 months					12 months or longer					Total
	Number of securities		Fair Value		Unrealized losses			Fair Value		Unrealized losses			Fair Value		Unrealized losses
Description of Securities
Tax-exempt obligations of states and
political subdivisions		65	$	54,685	$	(3,070	)	$	-	$	-		$	54,685	$	(3,070	)
Taxable obligations of states and
political subdivisions		15		14,060		(454	)		-		-			14,060		(454	)
Mortgage-backed securities		8		26,021		(64	)		-					26,021		(64	)
Other securities		11		16,771		(24	)		748		(162	)		17,519		(186	)
Total temporarily impaired
investment securities		99	$	111,537	$	(3,612	)	$	748	$	(162	)	$	112,285	$	(3,774	)

December 31, 2010 Held-to-maturity			Less than 12 months				12 months or longer					Total
	Number of securities		Fair Value		Unrealized losses		Fair Value		Unrealized losses			Fair Value		Unrealized losses
Description of Securities
Other debt securities - single issuers		3	$	-	$	-	$	10,606	$	(4,632	)	$	10,606	$	(4,632	)
Other debt securities - pooled		2		-		-		1,528		(310	)		1,528		(310	)
Total temporarily impaired
investment securities		5	$	-	$	-	$	12,134	$	(4,942	)	$	12,134	$	(4,942	)

The other debt securities included in the held-to-maturity classification on the Company's balance sheet at June 30, 2011 consist of four single issuer trust preferred securities issued by either banks or insurance companies and two pooled issuer trust preferred securities, whose collateral is made up of trust preferred securities issued by banks. The amortized cost of the single issuer trust preferred securities was $16.3 million, of which two securities totaling $4.3 million were issued by two different banks and two securities totaling $12.0 million were issued by two different insurance companies. The two pooled trust preferred securities had an aggregate amortized cost of $1.8 million.

Management evaluates whether a credit impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security's underlying collateral and (e) the payment structure of the security. The Company's best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. The Company concluded that most of the securities that are in an unrealized loss position are in a loss position because of changes in interest rates since the securities were purchased. The securities that have been in an unrealized loss position for 12 months or longer include other securities whose market values are sensitive to interest rates and changes in credit quality. The Company's unrealized loss for the debt securities, which includes four single issue trust preferred securities and two pooled trust preferred securities, is primarily related to general market conditions and the resultant lack of liquidity in the market. The severity of the impairments in relation to the carrying amounts of the individual investments is consistent with market developments. The Company's analysis of each investment is performed at the security level. However, as a result of its review, the Company did record $75,000 in other than temporary impairment in the first six months of 2011 on one pooled trust preferred security which it owns.