Note 2 - Securities

Year-end securities available for sale were as follows:

	Fair		Gross Unrealized
December 31, 2012	Value		Gains		Losses

States and political subdivisions	$	2,592	$	135	$	(8	)
Mortgage-backed securities		72,266		2,889		0
Equity securities		4,292		188		0

Total at December 31, 2012	$	79,150	$	3,212	$	(8	)

	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 at December 31, 2011	$	87,140	$	1,802	$	(10	)

Sales of securities available for sale were as follows:

	2012		2011		2010

Proceeds	$	0	$	20,102	$	105,697
Gross gains		0		527		2,390
Gross losses		0		0		0

Contractual maturities of debt securities available for sale at year-end 2012 were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

December 31, 2012	Fair
	Value

Due in one year or less	$	124
Due after one year through five years		545
Due after five years through ten years		1,400
Due after ten years		523
		2,592
Mortgage-backed securities		72,266
Equity securities		4,292

Total at December 31, 2012	$	79,150

Securities carried at $53,613,000 and $57,041,000, respectively, at year-end 2012 and 2011, 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.

Equity securities at year-end 2012 were $4.3 million and consisted of a qualified CRA investment that represent approximately 27% of consolidated stockholders' equity.

On December 31, 2012 and 2011, the Company had 6 and 7 individual securities, respectively, in an unrealized loss position.

Securities with unrealized losses at year-end 2012 and 2011 aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position are as follows:

December 31, 2012	Less than 12 Months				12 Months or More					Total
	Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
	Value		Losses		Value		Losses			Value		Losses

States and political subdivisions	$	0	$	0	$	817	$	(8	)	$	817	$	(8	)

Total temporarily impaired at December 31, 2012	$	0	$	0	$	817	$	(8	)	$	817	$	(8	)

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

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

Total temporarily impaired at December 31, 2011	$	941	$	(10	)	$	0	$	0	$	941	$	(10	)

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 2012, the Company recognized no other than temporary impairment loss. During 2011 and 2010, the Company recognized $134,000 and $645,000, respectively, of other than temporary impairment losses on Collateral Debt Obligation securities ("CDOs"). The other than temporary losses were based on cash flow analyses pursuant to guidelines for recognition of impairment losses and the other than temporary impairment losses recognized on these securities in 2011 wrote off the remaining carrying value. 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. In 2011, the Company sold these CDOs for $250,000 and recognized a gain on the sale of securities for that amount.

During 2011and 2010, the Company recognized other than temporary impairment losses of $29,000 and $14,000 on its investment in preferred stock issued by the Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). The other than temporary impairment losses recognized on these securities in 2011 wrote off the remaining carrying value. 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.