Note 3 – Securities

The fair value of the Bank’s securities available for sale totaled $29.5 million and $28.7 million as of December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the Bank’s securities consisted of a U.S. Government Agency Bond issued by the Federal National Mortgage Association (FNMBA), city and county issued municipal bonds, mortgage-backed securities issued by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), and collateralized mortgage obligations issued by the Government National Mortgage Association (GNMA), summarized as follows:


	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Government-Sponsored Enterprises	$	2,000,000	$	1,408	$	-		$	2,001,408
Municipal bonds		3,168,963		86,479		-			3,255,442
Collateralized mortgage obligations (CMOs)		2,861,013		30,088		-			2,891,101
Mortgage-backed securities (MBSs)		21,245,677		145,690		(32,083	)		21,359,284
Total securities available for sale	$	29,275,653	$	263,665	$	(32,083	)	$	29,507,235


	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal bonds	$	1,961,248	$	-	$	(131,775	)	$	1,829,473
Collateralized mortgage obligations (CMOs)		3,024,821		-		(82,164	)		2,942,657
Mortgage-backed securities (MBSs)		24,284,541		9,615		(360,975	)		23,933,181
Total securities available for sale	$	29,270,610	$	9,615	$	(574,914	)	$	28,705,311

The contractual maturity distribution of the Bank’s securities portfolio at December 31, 2011 are summarized below. Actual maturities may differ from contractual maturities shown below since issuers may have the right to pre-pay these obligations without pre-payment penalties.


	Securities Available For Sale
	Amortized Cost		Fair Value
Due in less than one year	$	-	$	-
Due after one year but within five years		-		-
Due after five years but within ten years		888,041		928,057
Due after ten years		28,387,612		28,579,178
Total ⁽¹⁾	$	29,275,653	$	29,507,235
(1) Maturities estimated based on average life of security.

At December 31, 2011 and 2010, the Bank also owned Federal Reserve Bank (“FRB”) stock with a cost of $394,050 and $456,300, respectively, with a yield of 6%. The amount of FRB stock held is based on our shareholders’ equity. As shareholders’ equity decreases due to losses, the amount of FRB stock may also decrease quarterly.

At December 31, 2011, the Bank owned $183,800 in Federal Home Loan Bank (“FHLB”) stock but owned no FHLB stock at December 31, 2010. The Bank became a member of the FHLB in 2011 and stock ownership is a requirement of membership. The amount of FHLB stock held is based on total assets and the amount of outstanding advances with the FHLB. Therefore, stock ownership levels with the FHLB are subject to change. Dividends received on FHLB stock are subject to change quarterly. In 2011, the yield was .49%.

Securities pledged to secure public deposits had amortized carrying costs of $6,271,639 and market value of $6,337,371 at December 31, 2011. At December 31, 2010, securities pledged to secure public deposits had amortized carrying costs of $4,960,779 and market value of $5,021,219.

Gross gains and losses recognized on the sale of securities in 2011 and 2010 are summarized as follows:


	For the Calendar Year
	2011		2010
Gross gains	$	340,203	$	367,571
Gross losses		-		(3,293	)
Net gains	$	340,203	$	364,278

There were no write-downs for other-than-temporary declines in the fair value of debt securities in 2011 or 2010. The following table summarizes the unrealized losses and fair value of securities, aggregated by category and length of time that securities have been in a continuous unrealized loss position at December 31, 2011 and 2010.


	December 31, 2011
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	10,734,122	$	(32,083	)	$	-	$	-	$	10,734,122	$	(32,083	)
Collateralized Mortgage Obligations		-		-			-		-		-		-
Municipal Bonds		-		-			-		-		-		-
Total temporarily impaired securities	$	10,734,122	$	(32,083	)	$	-	$	-	$	10,734,122	$	(32,083	)


	December 31, 2010
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	20,467,363	$	(360,975	)	$	-	$	-	$	20,467,363	$	(360,975	)
Collateralized Mortgage Obligations		2,942,657		(82,164	)		-		-		2,942,657		(82,164	)
Municipal Bonds		1,829,473		(131,775	)		-		-		1,829,473		(131,775	)
Total temporarily impaired securities	$	25,239,493	$	(574,914	)	$	-	$	-	$	25,239,493	$	(574,914	)