SECURITIES

6 Months Ended

Jun. 30, 2011

3. SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair value of available for sale securities at June 30, 2011, are summarized as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

U.S Government-sponsored enterprises (GSEs)	$	5,500,000	$	8,716	$	(6,620	)	$	5,502,096
Municipal bonds	7,547,411		96,165		(96,711		)	7,546,865
Mortgage-backed GSE residential	30,580,988		299,445		(65,263		)	30,815,170
	$	43,628,399	$	404,326	$	(168,594	)	$	43,864,131

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities available for sale at December 31, 2010, are summarized as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

U.S. Government-sponsored enterprises (GSEs)	$	15,988,874	$	17,624	$	(228,952	)	$	15,777,546
Municipal bonds	10,783,782		6,349		(374,200		)	10,415,931
Mortgage-backed GSE residential	23,108,103		76,008		(242,448		)	22,941,663
	$	49,880,759	$	99,981	$	(845,600	)	$	49,135,140

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2011, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities Available
	For Sale
			Estimated
	Amortized		Fair
	Cost		Value

Due in one year or less	$	3,930,876	$	3,977,481
Due after one year but less than five years	15,711,098		15,844,416
Due after five years but less than ten years	14,307,011		14,417,155
Due after ten years	9,679,414		9,625,079
	$	43,628,399	$	43,864,131

For the purpose of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

During the period ended June 30, 2011, the Company had gross gains on sales of securities of $89,323 and gross losses on sales of securities of $29,250. The Company had gross gains on sales of securities of $381,883 and no losses on sales of securities during the period ended June 30, 2010.

Information pertaining to securities with gross unrealized losses at June 30, 2011 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less than					More than
	Twelve Months					Twelve Months				Total
	Gross			Estimated		Gross		Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized		Fair		Unrealized			Fair
	Losses			Value		Losses		Value		Losses			Value
GSEs	$	(6,620	)	$	1,993,380	$	—	$	—	$	(6,620	)	$	1,993,380
Municipal bonds	(96,711		)	3,524,345		—		—		(96,711		)	3,524,345
Mortgage-backed securities GSE residential	(65,263		)	9,991,599		—		—		(65,263		)	9,991,599
	$	(168,594	)	$	15,509,324	$	—	$	—	$	(168,594	)	$	15,509,324

Information pertaining to securities with gross unrealized losses at December 31, 2010 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less than					More than
	Twelve Months					Twelve Months					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
GSEs	$	(228,952	)	$	13,769,799	$	—		$	—	$	(228,952	)	$	13,769,799
Municipal bonds	(374,200		)	8,793,759		—			—		(374,200		)	8,793,759
Mortgage-backed securities GSE residential	(241,751		)	14,911,044		(697		)	117,839		(242,448		)	15,028,883
	$	(844,903	)	$	37,474,602	$	(697	)	$	117,839	$	(845,600	)	$	37,592,441

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

At June 30, 2011, twenty debt securities have unrealized losses with aggregate depreciation of 1.07% from the Company’s amortized cost basis. 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. Although some of the issuers have shown declines in earnings and/or a weakened financial condition as a result of the weakened economy, no credit issues have been identified that cause management to believe the declines in market value are other than temporary. As management has the ability to hold debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.

GSE debt securities. The unrealized losses on the two investments in GSEs were caused by interest rate increases. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2011.

Municipal bonds. The Company’s unrealized loss on seven investments in municipal bonds relates to interest rate increases. Management currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Because the Company does not plan to sell the investments, and because it is not more likely than not that the Company will be required to sell the investments before recovery of their par value, which may be maturity, management does not consider these investments to be other-than-temporarily impaired at June 30, 2011.

Mortgage-backed GSE residential. The unrealized losses on the Company’s investment in eleven residential GSE mortgage-backed securities were caused by interest rate increases. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has no immediate plans to sell the investments, and because it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, management does not consider those investments to be other-than-temporarily impaired at June 30, 2011.

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27405-111563

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Equity Security
-URI http://asc.fasb.org/extlink&oid=6511694
-Topic 320

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27161-111563

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Debt Security
-URI http://asc.fasb.org/extlink&oid=6509901
-Topic 320

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 3, 19, 20, 21, 22, 137
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27232-111563

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27357-111563

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 320
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27290-111563

+ Details

Touchmark Bancshares, Inc. 10-Q