Note 3. Investment Securities Available for Sale

6 Months Ended

Jun. 30, 2012

Marketable Securities [Table Text Block]

3.         INVESTMENT SECURITIES AVAILABLE FOR SALE

Investment securities available for sale consisted of the following as of the dates indicated (in thousands):

	June 30, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal securities	$	42,225	$	770	$	(65	)	$	42,930
Corporate debt securities		7,000		--		(93	)		6,907
U.S. Government sponsored agency securities		6,000		2		--			6,002
Total	$	55,225	$	772	$	(158	)	$	55,839

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal securities	$	35,590	$	1,033	$	(10	)	$	36,613
Corporate debt securities		6,000		--		(190	)		5,810
U.S. Government sponsored agency securities		19,589		65		--			19,654
Total	$	61,179	$	1,098	$	(200	)	$	62,077

The following tables summarize the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other-than-temporarily impaired (“OTTI”) (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	June 30, 2012
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Municipal securities	$	5,748	$	65	$	--	$	--	$	5,748	$	65
Corporate debt securities		6,907		93		--		--		6,907		93
Total	$	12,655	$	158	$	--	$	--	$	12,655	$	158

	December 31, 2011
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Municipal securities	$	1,812	$	10	$	--	$	--	$	1,812	$	10
Corporate debt securities		3,810		190		--		--		3,810		190
Total	$	5,622	$	200	$	--	$	--	$	5,622	$	200

On a quarterly basis, management conducts a formal review of securities for the presence of OTTI.  Management assesses whether an OTTI is present when the fair value of a security is less than its amortized cost basis at the balance sheet date.  For such securities, OTTI is considered to have occurred if the Company intends to sell the security, if it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis or if the present values of expected cash flows is not sufficient to recover the entire amortized cost.

The unrealized losses are primarily a result of increases in market yields since the time of purchase.  In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired.  Additionally, the unrealized losses are also considered temporary because scheduled coupon payments have been made, it is anticipated that the entire principal balance will be collected as scheduled, and management neither intends to sell the securities nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount.

The Company has pledged investment securities available for sale with carrying values of approximately $1.2 million at each of periods ended June 30, 2012 and December 31, 2011, as collateral for certain deposits in excess of $250,000.  In addition the Company has pledged investment securities available for sale with carrying values of approximately $12.9 million and $8.9 million at June 30, 2012 and December 31, 2011, respectively, as collateral at the Federal Reserve Bank to secure transaction settlements.

The scheduled contractual maturities of debt securities at June 30, 2012 are shown below (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2012
	Amortized Cost		Fair Value		Weighted Average Rate
Within one year	$	250	$	252		4.60	%
Due from one year to five years		20,030		20,004		2.25	%
Due from five years to ten years		20,266		20,568		2.63	%
Due after ten years		14,679		15,015		3.82	%
Total	$	55,225	$	55,839		2.82	%

As of June 30, 2012 and December 31, 2011, investments with amortized cost of approximately $41.5 million and $48.5 million, respectively, have call options held by the issuer, of which approximately $14.0 million and $26.6 million, respectively, are or were callable within one year.

Sales of the Company’s investment securities available for sale are summarized as follows (in thousands):

	Three and Six Months Ended June 30,
	2012		2011
Sales proceeds	$	5,387	$	18,931
Gross realized gains	$	542	$	128
Gross realized losses		--		(567	)
Net gains (losses) on sales of investment securities	$	542	$	(439	)