Note 3. Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2013 and December 31, 2012 are summarized as follows:

	June 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available for sale:
U.S. Government agencies	$	3,862,322	$	55,138	$	-	$	3,917,460

State and municipal securities		16,589,144		830,170		(4,151)		17,415,163

Mortgage-backed securities:
Residential mortgage loans guaranteed by GNMA or FNMA		8,025,705		149,580		(776)		8,174,509

Collateralized mortgage obligations issued or guaranteed by U.S. Government agencies or sponsored agencies		70,490,078		75,033		(294,794)		70,270,317

	$	98,967,249	$	1,109,921	$	(299,721)	$	99,777,449

Debt securities held to maturity:
Mortgage-backed securities:
Residential mortgage loans guaranteed by GNMA or FNMA	$	40,014	$	1,151	$	-	$	41,165

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available for sale:
U.S. Government agencies	$	3,961,956	$	56,195	$	-	$	4,018,151

State and municipal securities		21,531,727		2,101,590		-		23,633,317

Mortgage-backed securities:
Residential mortgage loans guaranteed by GNMA or FNMA		9,092,205		132,038		(1,824)		9,222,419

Collateralized mortgage obligations issued or guaranteed by U.S. Government agencies or sponsored agencies		39,151,568		86,099		(14,908)		39,222,759

	$	73,737,456	$	2,375,922	$	(16,732)	$	76,096,646

Debt securities held to maturity:
Mortgage-backed securities:
Residential mortgage loans guaranteed by GNMA or FNMA	$	45,086	$	1,341	$	(8)	$	46,212

At June 30, 2013, securities with a fair value totaling approximately $50 million were pledged to secure public funds, securities sold under agreements to repurchase, as collateral for federal funds purchased from other financial institutions and serve as collateral for borrowings at the Federal Reserve Discount Window.

For the quarter ended June 30, 2013, there were available for sale securities sold with proceeds totaling $5,328,170 which resulted in gross gains realized of $424,971. There were no securities sales during 2012.

The amortized cost and estimated market value of securities at June 30, 2013, 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				Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	-	$	-	$	-	$	-
Due from one year to five years		1,267,705		1,344,690		-		-
Due from five years to ten years		6,038,433		6,394,571		-		-
Due after ten years		13,145,328		13,593,362		-		-
	$	20,451,466	$	21,332,623	$	-	$	-

Mortgage-backed securities		78,515,783		78,444,826		40,014		41,165

	$	98,967,249	$	99,777,449	$	40,014	$	41,165

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities available for sale have been in a continuous unrealized loss position, as of June 30, 2013 and as of December 31, 2012:

	As of June 30, 2013
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
State and municipal securities	$	1,179,146	$	(3,454)	$	570,530	$	(697)	$	1,749,676	$	(4,151)

Mortgage-backed securities:
Residential mortgage loans guaranteed by GNMA or FNMA		522,683		(776)		-		-		522,683		(776)

Collateralized mortgage obligations issued or guaranteed by U.S. Government agencies or sponsored agencies		33,398,941		(290,377)		9,990,227		(4,417)		43,389,168		(294,794)
	$	35,100,770	$	(294,607)	$	10,560,757	$	(5,114)	$	45,661,527	$	(299,721)

	As of December 31, 2012
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Mortgage-backed securities:
Residential mortgage loans guaranteed by GNMA or FNMA	$	667,325	$	(1,824)	$	-	$	-	$	667,325	$	(1,824)

Collateralized mortgage obligations issued or guaranteed by U.S. Government agencies or sponsored agencies		22,514,641		(14,908)		-		-		22,514,641		(14,908)
	$	23,181,966	$	(16,732)	$	-	$	-	$	23,181,966	$	(16,732)

Upon acquisition of a security, the Bank determines the appropriate impairment model that is applicable. If the security is a beneficial interest in securitized financial assets, the Bank uses the beneficial interests in securitized financial assets impairment model. If the security is not a beneficial interest in securitized financial assets, the Bank uses the debt and equity securities impairment model. The Bank conducts periodic reviews to evaluate each security to determine whether an other-than-temporary impairment has occurred. The Bank does not have any securities that have been classified as other-than-temporarily-impaired at June 30, 2013 or December 31, 2012.

At June 30, 2013 and December 31, 2012, the significant categories of temporarily impaired securities and management’s evaluation of those securities are as follows:

State and municipal securities: At June 30, 2013, three investments in obligations of state and municipal securities had unrealized losses. The Bank believes the unrealized losses on those investments were caused by the interest rate environment and does not relate to the underlying credit quality of the issuers. Because the Bank has the intent and ability to hold those investments for a time necessary to recover their amortized cost bases, which may be until maturity, the Bank does not consider those investments to be other-than-temporarily impaired at June 30, 2013.

Mortgage-backed securities: At June 30, 2013, thirteen investments in residential mortgage-backed securities had unrealized losses. This impairment is believed to be caused by the current interest rate environment. The contractual cash flows of those investments are guaranteed or issued by an agency of the U.S. Government. Because the decline in market value is attributable to the current interest rate environment and not credit quality, and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Bank does not deem those investments to be other-than-temporarily impaired at June 30, 2013.