Note 2. Securities

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(in thousands)
June 30, 2012
Obligations of U.S. Government agencies	$	470	$	4	$	0	$	474
Obligations of state and political subdivisions		145		2		0		147
Total	$	615	$	6	$	0	$	621

December 31, 2011
Obligations of U.S. Government agencies	$	1,370	$	8	$	0	$	1,378
Obligations of state and political subdivisions		145		3		0		148
Total	$	1,515	$	11	$	0	$	1,526

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(in thousands)
June 30, 2012
Obligations of U.S. Government agencies	$	40,676	$	1,164	$	0		$	41,840
Obligations of state and political subdivisions		27,457		323		(296	)		27,484
Mortgage-backed securities		223,379		1,536		(37	)		224,878
Money market investments		1,593		0		0			1,593
Total	$	293,105	$	3,023	$	(333	)	$	295,795

December 31, 2011
U.S. Treasury securities	$	250	$	0	$	0		$	250
Obligations of U.S. Government agencies		117,848		1,706		0			119,554
Obligations of state and political subdivisions		11,999		266		(4	)		12,261
Mortgage-backed securities		102,884		396		(52	)		103,228
Money market investments		1,306		0		0			1,306
Total	$	234,287	$	2,368	$	(56	)	$	236,599

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 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 quarter ended June 30, 2012 or the year ended December 31, 2011.

TEMPORARILY IMPAIRED SECURITIES

The following table shows the gross unrealized losses and fair value of the Company's investments with unrealized losses that are deemed to be temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates indicated. The Company had no held-to-maturity securities with unrealized losses at June 30, 2012 or December 31, 2011.

	June 30, 2012
	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 state and political subdivisions	$	296	$	12,632	$	0	$	0	$	296	$	12,632
Mortgage-backed securities		37		25,738		0		0		37		25,738
Total securities available-for-sale	$	333	$	38,370	$	0	$	0	$	333	$	38,370

	December 31, 2011
	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 state and political subdivisions	$	4	$	1,706	$	0	$	0	$	4	$	1,706
Mortgage-backed securities		52		29,364		0		0		52		29,364
Total securities available-for-sale	$	56	$	31,070	$	0	$	0	$	56	$	31,070

Obligations of state and political subdivisions

The Company's portfolio of obligations of state and political subdivisions had twenty-five investments with unrealized losses at June 30, 2012 and two investments with unrealized losses at December 31, 2011. 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 maturity, the Company does not consider the investments to be other-than-temporarily impaired at June 30, 2012 or December 31, 2011.

Mortgage-backed securities

The Company's portfolio of mortgage-backed securities had two investments with unrealized losses at June 30, 2012 and three investments with unrealized losses as of December 31, 2011. 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 June 30, 2012 or December 31, 2011.

Restricted securities

The restricted security category is comprised of stock in the Federal Home Loan Bank of Atlanta (FHLB) and the Federal Reserve Bank (FRB). 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.