Note 2. Securities

Amortized costs and fair values of securities held-to-maturity are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
September 30, 2011
Obligations of U.S. Government agencies	$	1,970	$	13	$	0		$	1,983
Obligations of state and political subdivisions		282		7		0			289
Total	$	2,252	$	20	$	0		$	2,272

December 31, 2010
Obligations of U.S. Government agencies	$	1,670	$	4	$	(7	)	$	1,667
Obligations of state and political subdivisions		282		8		0			290
Total	$	1,952	$	12	$	(7	)	$	1,957

Amortized costs and fair values of securities available-for-sale are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
September 30, 2011
U.S. Treasury securities	$	600	$	0	$	0		$	600
Obligations of U.S. Government agencies		157,203		1,907		0			159,110
Obligations of state and political subdivisions		2,279		79		0			2,358
Mortgage-backed securities		46,180		164		(2	)		46,342
Money market investments		938		0		0			938
Total	$	207,200	$	2,150	$	(2	)	$	209,348

December 31, 2010
U.S. Treasury securities	$	600	$	0	$	0		$	600
Obligations of U.S. Government agencies		201,601		513		(1,993	)		200,121
Obligations of state and political subdivisions		3,103		69		0			3,172
Mortgage-backed securities		374		8		0			382
Money market investments		1,817		0		0			1,817
Total	$	207,495	$	590	$	(1,993	)	$	206,092

TEMPORARILY IMPAIRED SECURITIES

The following table shows 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, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position. The Company had no held-to-maturity securities with unrealized losses at September 30, 2011.

September 30, 2011

Less Than Twelve Months

More Than Twelve Months

Total

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Fair

Value

(in thousands)

Securities Available-for-Sale

Debt securities:

Mortgage-backed securities

10,276

	December 31, 2010
	Less Than Twelve Months				More Than Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value		Losses		Value
	(in thousands)
Securities Available-for-Sale
Obligations of U. S. Government agencies	$	1,993	$	128,362	$	0	$	0	$	1,993	$	128,362

Securities Held-to-Maturity
Obligations of U. S. Government agencies	$	7	$	762	$	0	$	0	$	7	$	762

Total	$	2,000	$	129,124	$	0	$	0	$	2,000	$	129,124

Obligations of U.S. Government agencies

The U.S. Government agencies portfolio had fifteen investments with unrealized losses at December 31, 2010. This portfolio had no investments with unrealized losses as of September 30, 2011. The unrealized losses were caused by increases in market interest rates. The contractual terms of those investments do not permit the issuer to sell the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments, and management believes it is unlikely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2010.

Mortgage-backed securities

The Company's portfolio of mortgage-backed securities had one investment with unrealized losses at September 30, 2011. This portfolio had no investments with unrealized losses as of December 31, 2010. The unrealized losses were caused by increases in market interest rates. Because the Company does not intend to sell the investments, and management believes it is unlikely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2011.

OTHER-THAN-TEMPORARILY IMPAIRED SECURITIES

Management assesses whether the Company intends to sell or it is more-likely-than-not that the Company will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other-than-temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, the Company separates the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security's amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security's fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income.

The present value of expected future cash flows is determined using the best-estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best-estimate cash flows vary depending on the type of security. The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds, and structural support, including subordination and guarantees. The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests, and loss severity.

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts, and cash flow projections as indicators of credit issues. On a quarterly basis, management reviews all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. Management considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other-than-temporary. Relevant facts and circumstances considered include: (a) the extent and length of time the fair value has been below cost; (b) the reasons for the decline in value; (c) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (d) for fixed maturity securities, the Company's intent to sell a security or whether it is more-likely-than-not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, the Company's ability and intent to hold the security for a period of time that allows for the recovery in value.

The Company has not recorded impairment charges on securities for the nine months ended September 30, 2011 or the year ended December 31, 2010.

The unrealized losses in the securities portfolio as of September 30, 2011 relate to mortgage-backed securities, and the unrealized losses in the securities portfolio as of December 31, 2010 relate to obligations of U.S. Government agencies. In analyzing an issuer's financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts' reports. The unrealized losses are a result of changes in market interest rates and not credit issues. Since the Company has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.

The restricted securities category on the balance sheets is comprised of Federal Home Loan Bank of Atlanta (FHLB) and Federal Reserve Bank (FRB) stock. These stocks are classified as restricted securities because their ownership is restricted to certain types of entities and the securities lack a market. Therefore, FHLB and FRB stock is carried at cost and evaluated for impairment. When evaluating these stocks for impairment, their value is determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. Restricted stock is viewed as a long-term investment and management believes that the Company has the ability and the intent to hold this stock until its value is recovered.

The Company evaluated the positive and negative factors of FHLB stock for impairment and determined the stock not to be impaired at September 30, 2011 or December 31, 2010. This analysis is based on the following information. The FHLB reported net income of approximately $278 million for 2010, and paid a quarterly dividend for all four quarters of 2010. In 2011, the FHLB reported net income of approximately $51 million for the first quarter and $38 million for the second quarter, and declared a first quarter dividend in May 2011 and a second quarter dividend in August. On October 27, 2011, the FHLB declared a third quarter dividend and announced it would continue repurchasing excess stock from shareholders.