Note 2 - Securities

(Table amounts in $ 000s)

Year-end securities available for sale were as follows:

	Fair		Gross Unrealized
December 31, 2011	Value		Gains		Losses

States and political subdivisions	$	3,117	$	112	$	(10	)
Mortgage-backed securities		79,762		1,533		0
Equity securities		4,261		157		0

Total	$	87,140	$	1,802	$	(10	)

	Fair		Gross Unrealized
December 31, 2010	Value		Gains		Losses

U.S. Treasury	$	1,002	$	1	$	0
States and political subdivisions		3,997		75		(11	)
Mortgage-backed securities		82,648		273		(2,738	)
Other bonds		20		0		(114	)
Equity securities		4,163		31		0

Total	$	91,830	$	380	$	(2,863	)

Sales of securities available for sale were as follows:

	2011		2010		2009

Proceeds	$	20,102	$	105,697	$	74,283
Gross gains		527		2,390		3,908
Gross losses		0		0		0

Contractual maturities of debt securities available for sale at year-end 2011 were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Fair Value

Due in one year or less	$	124
Due after one year through five years		525
Due after five years through ten years		1,313
Due after ten years		1,155
		3,117
Mortgage-backed securities		79,762
Equity securities		4,261

Total	$	87,140

Securities carried at $57,041,000 and $58,956,000, respectively, at year-end 2011 and 2010, were pledged to secure public deposits, repurchase agreements and for other purposes as required or permitted by law.

The Company holds securities issued by municipalities within various states with no state's aggregate total exceeding 10% of consolidated stockholders' equity.

Included in equity securities at year-end 2011 were $4.3 million of qualified CRA investments that represents approximately 15% of consolidated stockholders' equity.

On December 31, 2011 and 2010, the Company had 7 and 10 individual securities, respectively in an unrealized loss position.

Securities with unrealized losses at year-end 2011 and 2010 aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position are as follows:

	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
December 31, 2011	Value		Losses			Value		Losses		Value		Losses

States and political subdivisions	$	941	$	(10	)	$	0	$	0	$	941	$	(10	)

Total temporarily impaired	$	941	$	(10	)	$	0	$	0	$	941	$	(10	)

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2010	Value		Losses			Value		Losses			Value		Losses

States and political subdivisions	$	779	$	(11	)	$	0	$	0		$	779	$	(11	)
Mortgage-backed securities		64,332		(2,738	)		0		0			64,332		(2,738	)
Other bonds		0		0			20		(114	)		20		(114	)

Total temporarily impaired	$	65,111	$	(2,749	)	$	20	$	(114	)	$	65,131	$	(2,863	)

Management has the intent and ability to hold these securities for the foreseeable future and the decline in fair value is largely due to increases in market interest rates subsequent to the purchase of the securities. The fair value is expected to recover as the securities approach their maturity date.

During 2011, the Company recognized $134,000 of other than temporary impairment losses on Collateral Debt Obligation securities ("CDOs") classified as other bonds. The other than temporary impairment losses were based on cash flow analyses pursuant to guidelines for recognition of impairment losses and this $134,000 wrote off the remaining carrying value of these securities. During 2010 and, 2009, the Company recognized net other than temporary impairment losses on theses CDOS of $645,000 and $3,052,000, respectively. The impairment losses on these CDOs were due to defaults and deferral of interest by the financial institutions and insurance companies that issued the debt underlying the CDOs. Subsequently in 2011, the Company sold these CDOs for $250,000 and recognized a gain on the sale of securities for that amount.

At April 1, 2009, the Company changed its accounting treatment to comply with the new accounting guidance concerning impairment that affected the Company's accounting for its CDOs. It was determined that $1,572,000 of the net other than temporary impairment loss of $8,529,000 taken on these CDOs during 2008 was the result of noncredit related loss and as such was added back to retained earnings less the tax effect.

During 2011, the Company recognized net other than temporary impairment losses of $29,000 on its investment in preferred stock issued by the Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") writing off the remaining carrying value of these equity securities. In 2011, the Company sold the FNMA and FHLMC preferred stock for $142,000 and recognized a gain on the sale of securities for that amount. During 2010, the Company recognized net other than temporary impairment losses of $14,000 and none in 2009 on the FNMA and FHLC preferred stock.