2.	SECURITIES AVAILABLE FOR SALE:

The following tables represent the securities held in the Company’s portfolio at September 30, 2012 and at December 31, 2011:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2012	Cost		Gains		Losses		Value

US Treasury	$	4,550,577	$	57,470	$	0	$	4,608,047
US Government and federal agency		18,528,866		282,751		(81)		18,811,536
Municipals		2,262,070		88,604		0		2,350,674
Mortgage-backed and collateralized mortgage obligations– residential		12,167,411		297,248		(26,378)		12,438,281
	$	37,508,924	$	726,073	$	(26,459)	$	38,208,538

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2011	Cost		Gains		Losses		Value

US Treasury	$	4,041,881	$	25,775	$	0	$	4,067,656
US Government and federal agency		15,341,362		239,037		(7,811)		15,572,588
Municipals		2,767,463		123,957		0		2,891,420
Mortgage-backed and collateralized mortgage obligations– residential		11,733,141		317,565		(10,267)		12,040,439
	$	33,883,847	$	706,334	$	(18,078)	$	34,572,103

The amortized cost and fair value of the securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment fees. Below is the schedule of contractual maturities for securities held at September 30, 2012:

	Amortized		Fair
	Cost		Value
Due in one year or less	$	5,526,468	$	5,568,339
Due from one to five years		18,211,886		18,523,784
Due from five to ten years		1,603,159		1,678,134
Due in more than ten years		0		0
Mortgage-backed and collateralized mortgage obligations – residential		12,167,411		12,438,281
	$	37,508,924	$	38,208,538

Below is the table of securities with unrealized losses, aggregated by investment category and length of time such securities were in an unrealized loss position at September 30, 2012 and December 31, 2011:

	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2012	Value		Losses		Value		Losses		Value		Losses
US Government and federal agency	$	529,612	$	(81)	$	0	$	0	$	529,612	$	(81)
Mortgage-backed and collateralized mortgage obligations - residential		2,538,858		(17,732)		294,551		(8,646)		2,833,409		(26,378)
	$	3,068,470	$	(17,813)	$	294,551	$	(8,646)	$	3,363,021	$	(26,459)

	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2011	Value		Losses		Value		Losses		Value		Losses
US Government and federal agency	$	2,060,693	$	(7,811)	$	0	$	0	$	2,060,693	$	(7,811)
Mortgage-backed and collateralized mortgage obligations - residential		817,615		(4,240)		1,215,921		(6,027)		2,033,536		(10,267)
	$	2,878,308	$	(12,051)	$	1,215,921	$	(6,027)	$	4,094,229	$	(18,078)

No securities were sold in the three months ended September 30, 2012. There was one security sold in the first nine months of 2012. Management chose to remove the security from the portfolio because it no longer complied with the Bank’s internal investment policy. Proceeds from the sale were $257,997 resulting in a realized gain of $2,856. Proceeds from sales were $820,285 for the nine months and three months ended September 30, 2011 with a gain of $3,288 realized. There were no gross losses realized on the sales during 2012 or 2011.

Other-Than-Temporary-Impairment

Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI will be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

At September 30, 2012, six debt securities had unrealized losses with aggregate depreciation of 0.78% from the amortized cost basis. Five of the six securities are issued by government agencies and one is issued by a government-sponsored agency. It is likely that all six debt securities will be retained given the fact that they are pledged to various public funds. The reported decline in value is not material and is deemed to be market driven. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2012.