NOTE 2. SECURITIES

Debt and equity securities have been classified in the balance sheets according to management’s intent. The amortized costs of securities available for sale and their approximate fair values at September 30, 2013 and December 31, 2012 follow:


	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

September 30, 2013
Government-sponsored enterprises	$	3,500,000	$	2,900	$	3,895	$	3,499,005
Mortgage-backed securities		34,067		1,077		—		35,144
Corporate bonds		550,000		—		99,000		451,000
Equities and mutual funds		520,180		28,869		5,542		543,507

	$	4,604,247	$	32,846	$	108,437	$	4,528,656


December 31, 2012
Government-sponsored enterprises	$	2,500,000	$	4,875	$	—	$	2,504,875
Mortgage-backed securities		41,659		1,316		—		42,975
Corporate bonds		550,000		—		107,250		442,750
Equities and mutual funds		508,836		3,416		—		512,252

	$	3,600,495	$	9,607	$	107,250	$	3,502,852

At September 30, 2013 and December 31, 2012, substantially all government-sponsored enterprises securities were pledged as collateral on public deposits and for other purposes as required or permitted by law. The mortgage-backed securities were pledged to the Federal Home Loan Bank.

Maturities of mortgage-backed bonds are stated based on contractual maturities. Actual maturities of these bonds may vary as the underlying mortgages are prepaid. The scheduled maturities of securities (all available for sale) at September 30, 2013, were as follows:


	Amortized		Fair
	Cost		Value
Due in one year or less	$	520,180	$	543,507
Due after one year through five years		4,057,373		3,957,431
Due after five years through ten years		15,739		16,354
Due after ten years		10,955		11,364


	$	4,604,247	$	4,528,656

The following table shows investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012. These unrealized losses on investment securities are a result of volatility in interest rates which relate to government-sponsored enterprises and corporate bonds issued by other banks and market volatility as it relates to equity and mutual fund investments at September 30, 2013 and December 31, 2012.


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses

September 30, 2013
Government-sponsored enterprises	$	1,496,105	$	3,895	$	—	$	—	$	1,496,105	$	3,895
Corporate bonds		—		—		451,000		99,000		451,000		99,000
Equities and mutual funds		256,350		5,542		—		—		256,350		5,542

	$	1,752,455	$	9,437	$	451,000	$	99,000	$	2,203,455	$	108,437


December 31, 2012
Corporate bonds	$	—	$	—	$	442,750	$	107,250	$	442,750	$	107,250

	$	—	$	—	$	442,750	$	107,250	$	442,750	$	107,250

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity and duration of the decline in market value in determining if impairment is other than temporary. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based upon this evaluation, there are two securities in the portfolio at September 30, 2013, with unrealized losses for a period greater than 12 months. These securities also had unrealized losses for a period greater than 12 months at December 31, 2012. We have analyzed each individual security for Other Than Temporary Impairment (“OTTI”) purposes by reviewing delinquencies, loan-to-value ratios, and credit quality and concluded that all unrealized losses presented in the tables above are not related to an issuer’s financial condition but are due to changes in the level of interest rates and no declines are deemed to be other than temporary in nature.

The Company had realized gains of $5,297 from the sales of equity and mutual fund investment securities for the nine month periods ended September 30, 2013. Total proceeds from the sales amounted to $47,268. There were no such gains in 2012.