NOTE 2. Securities

Amortized costs and fair values of securities available for sale at December 31, 2011 and 2010 were as follows:


				Gross		Gross
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		(Losses)			Value
	December 31, 2011
	(in thousands)
Obligations of U.S. government
corporations and agencies	$	17,655	$	878	$	-		$	18,533
Mortgage-backed securities		33,420		1,143		(17	)		34,546
Obligations of states and
political subdivisions		43,640		2,159		(33	)		45,766
Corporate securities		12,421		707		(85	)		13,043
Equity securities		2,054		192		-			2,246
	$	109,190	$	5,079	$	(135	)	$	114,134

	December 31, 2010
	(in thousands)
Obligations of U.S. government
corporations and agencies	$	32,716	$	531	$	(97	)	$	33,150
Mortgage-backed securities		15,706		524		(73	)		16,157
Obligations of states and
political subdivisions		42,511		928		(531	)		42,908
Corporate securities		14,464		994		(57	)		15,401
Equity securities		2,054		124		-			2,178
	$	107,451	$	3,101	$	(758	)	$	109,794

Carrying amounts of restricted securities at December 31, 2011 and 2010 were as follows:


	December 31, 2011		December 31, 2010
	(in thousands)

Federal Reserve Bank Stock	$	344	$	344
Federal Home Loan Bank Stock		3,036		3,498
Community Bankers' Bank Stock		140		140
	$	3,520	$	3,982

The amortized cost and fair value of securities available for sale at December 31, 2011, by contractual maturity, are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.


		Amortized		Fair
		Cost		Value
		(in thousands)
Due in one year or less	$	995	$	1,015
Due after one year through five years		31,385		32,767
Due after five years through ten years		36,037		38,020
Due after ten years		38,719		40,086
Equity securities		2,054		2,246
	$	109,190	$	114,134

During 2011, the Company sold $4,849,000 in available for sale securities for a net gain of $155,000. In 2010, the Company sold $2,853,000 in available for sale securities for a net gain of $98,000. During 2011, the Company also recorded an impairment charge of $87,500 on a corporate security. The remaining book value of this security at December 31, 2011 is $38,000.

The fair value and gross unrealized losses for securities available for sale, totaled by the length of time that individual securities have been in a continuous gross unrealized loss position, at December 31, 2011 and 2010 were as follows:


	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
		Fair Value	Losses			Fair Value	Losses			Fair Value	Losses
	December 31, 2011
	(in thousands)
Obligations of U.S. government
corporations and agencies	$	-	$	-	$	-	$	-	$	-	$	-
Mortgage-backed securities		4,003		17		-		-		4,003		17
Obligations of states and
political subdivisions		282		2		294		31		576		33
Corporate securities		1,913		85		-		-		1,913		85
Equity securities		-		-		-		-		-		-
	$	6,198	$	104	$	294	$	31	$	6,492	$	135

	December 31, 2010
	(in thousands)
Obligations of U.S. government
corporations and agencies	$	6,916	$	97	$	-	$	-	$	6,916	$	97
Mortgage-backed securities		4,355		73		-		-		4,355		73
Obligations of states and
political subdivisions		11,464		481		320		50		11,784		531
Corporate securities		1,047		57		-		-		1,047		57
Equity securities		-		-		-		-		-		-
	$	23,782	$	708	$	320	$	50	$	24,102	$	758

Gross unrealized losses on available for sale securities included nine (9) and thirty-five (35) securities at December 31, 2011 and December 31, 2010, respectively. The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company's mortgage-backed securities are issued by U.S. government agencies, which guarantee payments to investors regardless of the status of the underlying mortgages. Consideration is given to the length of time and the amount of an unrealized loss, the financial condition of the issuer, and the intent and ability of the Company to retain its investment in the issuer long enough to allow for an anticipated recovery in fair value. The fair value of a security reflects its liquidity as compared to similar instruments, current market rates on similar instruments, and the creditworthiness of the issuer. Absent any change in the liquidity of a security or the creditworthiness of the issuer, prices will decline as market rates rise and vice-versa. The primary cause of the unrealized losses on obligations of U.S. government corporations and agencies, mortgage-backed securities, and obligations of states and political subdivisions at December 31, 2011 and December 31, 2010 was changes in market interest rates. Since these losses can be attributed to changes in market interest rates and not expected cash flows or an issuer's financial condition, the unrealized losses are deemed to be temporary. The Company's holdings of corporate securities and equity securities represent investments in larger financial institutions. The current economic crisis involving housing, liquidity and credit were the primary causes of the unrealized losses on these securities at December 31, 2011 and 2010. The Company monitors the financial condition of these issuers continuously and will record other-than-temporary impairment if the recovery of value is unlikely.

The Company's securities are exposed to various risks, such as interest rate, market, currency and credit risks. Due to the level of risk associated with certain securities and the level of uncertainty related to changes in the value of securities, it is at least reasonably possible that changes in risks in the near term would materially affect securities reported in the financial statements. In addition, recent economic uncertainty and market events have led to unprecedented volatility in currency, commodity, credit and equity markets culminating in failures of some banking and financial services firms and Government intervention to solidify others. These recent events underscore the level of investment risk associated with the current economic environment, and accordingly the level of risk in the Company's securities.

Securities having a carrying value of $20,117,000 at December 31, 2011 were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required by law.