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## NOTE 6— Cash and Due From Banks on Demand 

Regulations of the Board of Governors of the Federal Reserve System impose uniform reserve requirements on all depository institutions with transaction accounts (checking accounts, NOW accounts, etc.). Reserves are maintained in 

## NOTE 7— Securities Available For Sale 

2002 2001 Below is an analysis of the amortized cost and approximate fair values of securities available for sale at December 31, 2002 and 2001: 

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Mortgage backed securities include mortgage backed obligations of U.S. Government agencies and corporations, mortgage backed securities issued by other organizations and other asset backed securities. These obligations have contractual maturities ranging from less than one year to 30 years and have an anticipated average life to maturity ranging from less than one year to 18 years. All mortgage backed securities contain a certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact upon prepayment speeds, therefore the Corporation uses computer simulation models to test the average life and yield volatility of all mortgage backed securities under various interest rate scenarios to insure that volatility falls within acceptable limits. At December 31, 2002 and 2001, the Corporation owned no high risk mortgage backed securities as defined by the Federal Financial Institutions Examination Council’s Supervisory Policy Statement on Securities Activities. 

The amortized cost and estimated market value of debt securities at December 31, 2002, by contractual maturity, are shown below. Expected maturities will differ from 

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

the form of vault cash or a noninterest-bearing balance held with the Federal Reserve Bank. The subsidiary bank maintained with the Federal Reserve Bank average balances of $1,896 during 2002 and $4,269 during 2001. 

contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties. 

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Proceeds from the sales of securities available for sale were $15,328, $85,737, and $22,391 during 2002, 2001, and 2000, respectively. Gross gains of $609, $3,419, and $1,752 and gross losses of $-0-, $224, and $18 were realized on those sales during 2002, 2001, and 2000, respectively. 

Securities available for sale with an approximate fair value of $712,827 and $637,915 were pledged at December 31, 2002 and 2001, respectively, to secure public deposits and for other purposes required or permitted by law. 

(Dollar Amounts in Thousands) 

