NOTE 3 – INVESTMENTS

The amortized cost and estimated fair value of investment securities are summarized as follows (in thousands):

	June 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
AVAILABLE FOR SALE
U.S. government agencies	$	12,244	$	136	$	(3	)	$	12,377
Mortgage-backed securities of government- sponsored entities		25,723		414		(16	)		26,121
Collateralized mortgage oblications of government-sponsored entities		2,703		11		-			2,714
Obligations of states and political subdivisions:
Taxable		1,193		96		-			1,289
Tax-exempt		32,499		717		(81	)		33,135
Corporate securities		3,221		448		-			3,669
Commercial paper		7,399		-		-			7,399
Total debt securities		84,982		1,822		(100	)		86,704

Equity securities		89		47		-			136
Equity securities of financial institutions		430		56		(54	)		432
Total	$	85,501	$	1,925	$	(154	)	$	87,272

	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
AVAILABLE FOR SALE
U.S. government agencies	$	12,696	$	107	$	(29	)	$	12,774
Mortgage-backed securities of government- sponsored entities		24,104		218		(48	)		24,274
Obligations of states and political subdivisions:
Taxable		1,197		13		(11	)		1,199
Tax-exempt		28,026		361		(408	)		27,979
Corporate securities		4,265		466		(1	)		4,730
Commercial paper		8,099		-		-			8,099
Total debt securities		78,387		1,165		(497	)		79,055

Equity securities		89		56		-			145
Equity securities of financial institutions		468		58		(71	)		455
Total	$	78,944	$	1,279	$	(568	)	$	79,655

The following table shows the Company’s fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (in thousands):

	June 30, 2011
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses

U.S. government agencies	$	355	$	2	$	465	$	1	$	820	$	3
Mortgage-backed securities of government- sponsored entities		2,662		16		-		-		2,662		16
Obligations of states and political subdivisions		4,457		68		234		13		4,691		81
Total debt securities		7,474		86		699		14		8,173		100

Equity securities of financial institutions		54		2		117		52		171		54
Total	$	7,528	$	88	$	816	$	66	$	8,344	$	154

	December 31, 2010
	Less than Twelve Months				Twelve Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses

U.S. government agencies	$	2,892	$	28	$	474	$	1	$	3,366	$	29
Mortgage-backed securities of government- sponsored entities		7,446		48		-		-		7,446		48
Obligations of states and political subdivisions		10,864		395		223		24		11,087		419
Corporate securities		999		1		-		-		999		1
Total debt securities		22,201		472		697		25		22,898		497

Equity securities of financial institutions		22		1		138		70		160		71
Total	$	22,223	$	473	$	835	$	95	$	23,058	$	568

The Company reviews its position quarterly and has asserted that at June 30, 2011, the declines outlined in the above tables represent temporary declines and the Company does not intend to sell and does not believe it will be required to sell these securities before recovery of its cost basis, which may be at maturity. There were 30 and 55 positions that were temporarily impaired at June 30, 2011 and December 31, 2010, respectively. The Company has concluded that the unrealized losses disclosed above are not other than temporary, but are the result of interest rate changes, sector credit ratings changes or company-specific ratings changes that are not expected to result in the non-collection of principal and interest during the period in consideration for debt securities. Determination of other than temporary losses in the financial services equity portfolio includes consideration of the length of time in a loss position, analysis of the capital structure of the entity and review of publicly available regulatory actions and published financial reports.

The Company received proceeds of $61 and recorded a gain of $5 in 2011 from the sales of securities. In addition, the Company received proceeds of $5 and recorded a loss of $3 on a merger transaction in 2011. In the first half of 2010 the Company had no sales of securities but did record a loss of $6 in connection with a merger transaction on an equity security owned. The Company recognized other than temporary impairment expense of $30 during the first six months of 2011 and $31 in 2010.

The amortized cost and estimated fair value of debt securities at June 30, 2011, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepay penalties (in thousands):

	Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	14,809	$	14,905
Due after one year through five years		26,151		26,720
Due after five years through ten years		22,452		22,969
Due after ten years		21,570		22,110
Total debt securities	$	84,982	$	86,704