10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period of _________ to _________

Commission File Number   001-34821

Jacksonville Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	36-4670835
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification Number)

1211 West Morton Avenue Jacksonville, Illinois	62650
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code:  (217) 245-4111

Indicate by check whether issuer (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x  Yes                                o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period the registrant was required to submit and post such filings).

x  Yes                                o  No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer, large accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act.

o  Large Accelerated Filer                                                      o  Accelerated Filer

o  Non-Accelerated Filer                                                        x  Smaller Reporting Company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o  Yes                      x  No

As of August 2, 2013, there were 1,876,030 shares of the Registrant’s common stock issued and outstanding.

JACKSONVILLE BANCORP, INC.

FORM 10-Q

June 30, 2013
TABLE OF CONTENTS
		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statement of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52
Item 4	Controls and Procedures	54
PART II	OTHER INFORMATION	55
Item 1.	Legal Proceedings	55
Item 1.A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	55
	Signatures	56
EXHIBITS
	Section 302 Certifications
	Section 906 Certification
	XBRL Instance Document
	XBRL Taxonomy Extension Schema Document
	XBRL Taxonomy Calculation Linkbase Document
	XBRL Taxonomy Extension Definition Linkbase Document
	XBRL Taxonomy Label Linkbase Document
	XBRL Taxonomy Presentation Linkbase Document

PART I – FINANCIAL INFORMATION

JACKSONVILLE BANCORP, INC.
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
	June 30,			December 31,
ASSETS	2013			2012
	(Unaudited)
Cash and cash equivalents	$	7,636,250		$	7,293,711
Interest-earning time deposits in banks		2,972,000			2,972,000
Investment securities - available for sale		60,588,605			63,431,342
Mortgage-backed securities - available for sale		49,335,504			51,956,481
Federal Home Loan Bank stock		1,113,800			1,113,800
Other investment securities		89,497			96,041
Loans held for sale - net		742,147			711,986
Loans receivable - net of allowance for loan losses of $3,472,536 and $3,339,464 as of
June 30, 2013 and December 31, 2012		168,877,834			173,753,059
Premises and equipment - net		5,601,619			5,654,776
Cash surrender value of life insurance		6,713,570			6,612,642
Accrued interest receivable		2,078,170			2,053,472
Goodwill		2,726,567			2,726,567
Capitalized mortgage servicing rights, net of valuation allowance of $116,807 and $129,279
as of June 30, 2013 and December 31, 2012		654,477			664,436
Real estate owned		137,193			137,193
Income taxes receivable		253,156			-
Deferred income taxes		2,655,821			464,548
Other assets		1,022,010			1,804,184
Total Assets	$	313,198,220		$	321,446,238
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	258,384,484		$	258,520,729
Other borrowings		7,097,057			12,740,610
Advance payments by borrowers for taxes and insurance		924,287			832,345
Accrued interest payable		240,747			276,757
Deferred compensation payable		3,839,100			3,707,402
Income taxes payable		-			214,115
Other liabilities		1,435,865			1,033,951
Total liabilities		271,921,540			277,325,909
Commitments and contingencies		-			-
Preferred stock, $0.01 par value - authorized 10,000,000 shares;
none issued and outstanding		-			-
Common stock, $0.01 par value - authorized 25,000,000 shares; issued 1,902,530 shares
as of June 30, 2013 and 1,908,556 shares as of December 31, 2012		19,025			19,086
Additional paid-in-capital		15,854,388			15,943,273
Retained earnings		27,074,738			25,585,757
Less: Unallocated ESOP shares		(313,400	)		(324,380	)
Accumulated other comprehensive income (loss)		(1,358,071	)		2,896,593
Total stockholders’ equity		41,276,680			44,120,329
Total Liabilities and Stockholders’ Equity	$	313,198,220		$	321,446,238
See accompanying notes to the unaudited condensed consolidated financial statements.

1

JACKSONVILLE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(Unaudited)				(Unaudited)
INTEREST INCOME:
Loans	$	2,299,427	$	2,461,445	$	4,644,989	$	5,001,988
Investment securities		441,778		501,739		876,052		1,026,241
Mortgage-backed securities		171,551		252,869		332,119		458,194
Other		11,958		12,245		23,721		23,766
Total interest income		2,924,714		3,228,298		5,876,881		6,510,189
INTEREST EXPENSE:
Deposits		451,698		583,718		921,148		1,188,464
Other borrowings		2,600		3,892		5,241		6,683
Total interest expense		454,298		587,610		926,389		1,195,147
NET INTEREST INCOME		2,470,416		2,640,688		4,950,492		5,315,042
PROVISION FOR LOAN LOSSES		-		170,000		30,000		250,000
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		2,470,416		2,470,688		4,920,492		5,065,042
NON-INTEREST INCOME:
Fiduciary activities		58,007		60,944		124,109		138,720
Commission income		289,711		265,811		598,871		512,228
Service charges on deposit accounts		206,711		208,992		408,137		399,494
Mortgage banking operations, net		75,844		96,606		146,461		213,732
Net realized gains on sales of available-for-sale securities		104,668		301,580		688,899		526,908
Loan servicing fees		91,599		88,767		185,122		179,029
Other		201,268		163,083		362,247		320,057
Total non-interest income		1,027,808		1,185,783		2,513,846		2,290,168
NON-INTEREST EXPENSE:
Salaries and employee benefits		1,585,829		1,602,441		3,186,564		3,175,383
Occupancy and equipment		258,764		241,759		512,430		490,012
Data processing and telecommunications		140,099		140,551		283,522		270,194
Professional		72,077		81,821		157,370		133,250
Postage and office supplies		62,574		68,090		131,238		134,249
Deposit insurance premium		39,226		38,452		77,346		77,419
Other		309,041		337,581		604,019		647,289
Total non-interest expense		2,467,610		2,510,695		4,952,489		4,927,796
INCOME  BEFORE INCOME TAXES		1,030,614		1,145,776		2,481,849		2,427,414
INCOME TAXES		270,539		298,713		709,326		665,601
NET INCOME	$	760,075	$	847,063	$	1,772,523	$	1,761,813
NET INCOME PER COMMON SHARE - BASIC	$	0.41	$	0.45	$	0.95	$	0.93
NET INCOME PER COMMON SHARE - DILUTED	$	0.41	$	0.45	$	0.95	$	0.93
See accompanying notes to the unaudited condensed consolidated financial statements.

2

JACKSONVILLE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2013			2012		2013			2012
	(Unaudited)					(Unaudited)
Net Income	$	760,075		$	847,063	$	1,772,523		$	1,761,813
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $(1,713,570) and $431,054 for the three months ended June 30, 2013 and 2012, respectively, and $(1,957,571) and $484,101 for the six months ended June 30, 2013 and 2012, respectively.		(3,326,340	)		836,753		(3,799,991	)		939,724
Less: reclassification adjustment for realized gains included in net income, net of taxes of $35,587 and $102,537, for the three months ended June 30, 2013 and 2012, respectively, and $234,226 and $179,149 for the six months ended June 30, 2013 and 2012, respectively.		69,081			199,043		454,673			347,759
		(3,395,421	)		637,710		(4,254,664	)		591,965
Comprehensive Income (Loss)	$	(2,635,346	)	$	1,484,773	$	(2,482,141	)	$	2,353,778
See accompanying notes to unaudited condensed consolidated financial statements.

3

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

													Accumulated
				Additional									Other			Total
	Common			Paid-in			Retained			Unallocated			Comprehensive			Stockholders’
(Unaudited)	Stock			Capital			Earnings			ESOP Shares			Income (Loss)			Equity
BALANCE, DECEMBER 31, 2012	$	19,086		$	15,943,273		$	25,585,757		$	(324,380	)	$	2,896,593		$	44,120,329
Net Income		-			-			1,772,523			-			-			1,772,523
Other comprehensive income (loss)		-			-			-			-			(4,254,664	)		(4,254,664	)
Stock repurchases		(108	)		(208,501	)		-			-			-			(208,609	)
Exercise of stock options		59			86,834			-			-			-			86,893
Less purchase/retirement of stock		(12	)		(23,442	)		-			-			-			(23,454	)
Tax benefit of non-qualified options		-			1,796			-			-			-			1,796
Vesting options expense		-			44,711			-			-			-			44,711
Shares held by ESOP, committed to be released		-			9,717			-			10,980			-			20,697
Dividends ($0.15 per share)		-			-			(283,542	)		-			-			(283,542	)
BALANCE, JUNE 30, 2013	$	19,025		$	15,854,388		$	27,074,738		$	(313,400	)	$	(1,358,071	)	$	41,276,680

See accompanying notes to unaudited condensed consolidated financial statements.

4

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30,
	2013			2012
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,772,523		$	1,761,813
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion:
Premises and equipment		188,640			166,365
Amortization of investment premiums and discounts, net		574,012			334,966
Accretion of loan discounts		(259	)		(37,228	)
Net realized gains on sales of available-for-sale securities		(688,899	)		(526,908	)
Provision for loan losses		30,000			250,000
Mortgage banking operations, net		(146,461	)		(213,732	)
Gain on sale of real estate owned		-			(30,609	)
Shares held by ESOP commited to be released		20,697			16,725
Tax benefit related to stock options exercised		1,796			1,291
Stock option compensation expense		44,711			22,479
Changes in income taxes payable		(467,271	)		(205,437	)
Changes in assets and liabilities		1,154,674			357,497
Net cash provided by operations before loan sales		2,484,163			1,897,222
Origination of loans for sale to secondary market		(14,825,738	)		(23,066,615	)
Proceeds from sales of loans to secondary market		14,951,997			23,082,599
Net cash provided by operating activities		2,610,422			1,913,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment and mortgage-backed securities		(26,942,590	)		(33,802,052	)
Purchases of interest-earning time deposits in other banks		-			(496,000	)
Maturity or call of investment securities available-for-sale		1,500,000			7,328,000
Sale of investment securities available-for-sale		18,021,637			14,854,329
Principal payments on mortgage-backed and investment securities		6,559,637			4,707,101
Purchase of bank-owned life insurance		-			(2,000,000	)
Proceeds from sale of real estate owned		-			327,395
Net (increase) decrease in loans		4,845,484			(1,551,536	)
Additions to premises and equipment		(135,483	)		(219,979	)
Net cash provided by (used in) investing activities		3,848,685			(10,852,742	)
				(Continued)

5

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

	Six Months Ended
	June 30,
	2013			2012
	(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	$	(136,245	)	$	7,312,687
Net decrease in other borrowings		(5,643,553	)		(408,050	)
Increase in advance payments by borrowers for taxes and insurance		91,942			212,046
Exercise of stock options		86,893			15,499
Purchase and retirement of treasury stock related to stock options		(23,454	)		-
Stock repurchases		(208,609	)		-
Dividends paid - common stock		(283,542	)		(282,562	)
Net cash provided by (used in) financing activities		(6,116,568	)		6,849,620
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		342,539			(2,089,916	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		7,293,711			11,387,947
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	7,636,250		$	9,298,031
ADDITIONAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits	$	957,159		$	1,213,658
Interest on other borrowings		5,241			6,683
Income taxes paid		1,176,073			872,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in settlement of loans	$	-		$	217,130
Loans to facilitate sales of real estate owned		-			42,750

See accompanying notes to unaudited condensed consolidated financial statements.

6

JACKSONVILLE BANCORP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. FINANCIAL STATEMENTS

The accompanying interim condensed consolidated financial statements include the accounts of Jacksonville Bancorp, Inc. and its wholly-owned subsidiary, Jacksonville Savings Bank (the “Bank”) and its wholly-owned subsidiary, Financial Resources Group, Inc. collectively (the “Company”).  All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the preceding unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial condition of the Company as of June 30, 2013 and December 31, 2012 and the results of its operations for the three and six month periods ended June 30, 2013 and 2012.  The results of operations for the three and six month periods ended June 30, 2013 are not necessarily indicative of the results which may be expected for the entire year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2012 filed as an exhibit to the Company’s Form 10-K filed in March, 2013.  The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP) and to prevailing practices within the industry.

Certain amounts included in the 2012 consolidated statements have been reclassified to conform to the 2013 presentation.

2. NEW ACCOUNTING PRONOUNCEMENTS

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220):  Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.  ThisASU improves the transparency of reporting of amounts reclassified out of accumulated other comprehensive income.  The new amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income in financial statements.  The new amendments will require the Company to present (either on the face of the statements where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income.  It will also require a cross-reference to other disclosures currently required.  For public entities, the amendments are effective for reporting periods beginning after December 15, 2012.  The Company adopted the ASU during the first quarter of 2013.

7

3. EARNINGS PER SHARE

Earnings Per Share - Basic earnings per share is determined by dividing net income for the period by the weighted average number of common shares.  Diluted earnings per share considers the potential effects of the exercise of the outstanding stock options under the Company’s stock option plans.

The following reflects earnings per share calculations for basic and diluted methods:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Net income available to common
shareholders	$	760,075	$	847,063	$	1,772,523	$	1,761,813
Basic average shares outstanding		1,869,499		1,886,211		1,873,692		1,885,638
Diluted potential common shares:
Stock option equivalents		299		475		284		326
Diluted average shares outstanding		1,869,798		1,886,686		1,873,976		1,885,964
Basic earnings per share	$	0.41	$	0.45	$	0.95	$	0.93
Diluted earnings per share	$	0.41	$	0.45	$	0.95	$	0.93

Stock options for 100,335 shares of common stock were not considered in computing diluted earnings per share for the three and six month periods ending June 30, 2013, because they were anti-dilutive.  Stock options for 104,035 shares of common stock were not considered in computing diluted earnings per share for the three and six month periods ending June 30, 2012, because they were anti-dilutive.

8

4. STOCK–BASED COMPENSATION

In connection with our 2010 second step conversion and related stock offering, the ESOP purchased an additional 41,614 shares for its Employee Stock Ownership Plan (ESOP) for the exclusive benefit of eligible employees.  The ESOP borrowed funds from the Company in an amount sufficient to purchase the 41,614 shares (approximately 4% of the common stock issued in the offering).  The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Bank and dividends received by the ESOP, with funds from any contributions on ESOP assets.  Contributions will be applied to repay interest on the loan first, and the remainder will be applied to principal.  The loan is expected to be repaid over a period of up to 20 years.  Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid.  Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation, relative to total compensation of all active participants.  Participants will vest on a pro-rata basis and reach 100% vesting in the accrued benefits under the ESOP after six years.  Vesting is accelerated upon retirement, death, or disability of the participant or a change in control of the Bank.  Forfeitures will be reallocated to remaining plan participants.  Benefits may be payable upon retirement, death, disability, separation from service, or termination of the ESOP.  Since the Bank’s annual contributions are discretionary, benefits payable under the ESOP cannot be estimated.

In the event a terminated ESOP participant desires to sell his or her shares of the Company’s stock, the ESOP includes a put option, which is a right to demand that the Company buy any shares of its stock distributed to participants at fair value.

The Company is accounting for its ESOP in accordance with ASC Topic 718, “Employers Accounting for Employee Stock Ownership Plans.”  Accordingly, the debt of the ESOP is eliminated in consolidation and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheet.  Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement.  As shares are committed to be released from the collateral, the Company reports compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations.  Dividends, if any, on unallocated shares are recorded as a reduction of debt and accrued interest.

A summary of ESOP shares at June 30, 2013 and 2012 is shown below.

	June 30, 2013		June 30, 2012
Unearned shares		31,340		34,983
Shares committed for release		1,098		1,079
Allocated shares		56,292		52,815
Total ESOP shares		88,730		88,877
Fair value of unearned shares	$	597,340	$	591,213

On April 24, 2012, the compensation committee of the board of directors approved the awards of 104,035 options to purchase Company common stock.  The stock options vest over a five-year period and expire ten years after issuance.  Apart from the vesting schedule, there are no performance-based conditions or any other material conditions applicable to the options issued.

9

The following table summarizes stock option activity for the six months ended June 30, 2013.

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Instrinsic
	Options			Price/Share		Life (in years)		Value
Outstanding, December 31, 2012		107,338		$	15.60
Granted		-
Exercised		(5,902	)		15.03
Forfeited		-			-
Outstanding, June 30, 2013		101,436		$	15.63		8.66	$	347,735
Exercisable, June 30, 2013		18,251		$	15.55		8.27	$	64,075

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price.  The value is based upon a closing price of $19.06 per share on June 30, 2013.

10

5. LOAN PORTFOLIO COMPOSITION

At June 30, 2013 and December 31, 2012, the composition of the Company’s loan portfolio is shown below.

	June 30, 2013						December 31, 2012
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family residential	$	41,156,553			24.4	%	$	41,386,147			23.8	%
Commercial		33,004,015			19.5			30,973,177			17.8
Agricultural		37,077,179			22.0			37,392,116			21.5
Home equity		11,652,179			6.9			12,733,963			7.3
Total real estate loans		122,889,926			72.8			122,485,403			70.5
Commercial loans		24,400,611			14.4			29,046,437			16.7
Agricultural loans		10,676,640			6.3			10,982,491			6.3
Consumer loans		14,361,986			8.5			14,571,819			8.4
Total loans receivable		172,329,163			102.0			177,086,150			101.9
Less:
Net deferred loan fees		(21,207	)		(0.0	)		(6,373	)		(0.0	)
Allowance for loan losses		3,472,536			2.0			3,339,464			1.9
Total loans receivable, net	$	168,877,834			100.0	%	$	173,753,059			100.0	%

The Company believes that originating or purchasing sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures in place designed to focus lending efforts on the types, locations, and duration of loans most appropriate for the business model and markets. The Company’s principal lending activities include the origination of one-to four-family residential mortgage loans, multi-family loans, commercial real estate loans, agricultural loans, home equity lines of credits, commercial business loans, and consumer loans. The primary lending market includes the Illinois counties of Morgan, Macoupin and Montgomery. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, builders, attorneys and walk-in customers.  Upon receipt of a loan application, a credit report is obtained to verify specific information relating to the applicant’s employment, income, and credit standing.  In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company.  A loan application file is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness, and verifies the information provided.  The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval.  The board of directors has established individual lending authorities for each loan officer by loan type.  Loans over an individual officer’s lending limit must be approved by the officers’ loan committee consisting of the chairman of the board, president, chief lending officer and all lending officers, which meets three times a week, and has lending authority up to $750,000 depending on the type of loan.  Loans to borrowers with an aggregate principal balance over this limit, up to $1.0 million, must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, president, senior vice president, chief lending officer and at least two outside directors, plus all lending officers as non-voting members.  The board of directors approves all loans to borrowers with an aggregate principal balance over $1.0 million.  The board of directors ratifies all loans that are originated.  Once the loan is approved, the applicant is informed and a closing date is scheduled.  Loan commitments are typically funded within 30 days.

11

If the loan is approved, the borrower must provide proof of fire and casualty insurance on the property serving as collateral which insurance must be maintained during the full term of the loan; flood insurance is required in certain instances.  Title insurance or an attorney’s opinion based on a title search of the property is generally required on loans secured by real property.

One-to-Four Family Mortgage Loans - Historically, the Bank’s primary lending origination activity has been one-to-four family, owner-occupied, residential mortgage loans secured by property located in the Company’s market area.  The Company generates loans through marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses.  Generally, one-to-four family loan originations are limited to the financing of loans secured by properties located within the Company’s market area.  

Fixed rate one-to-four family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines.  The Company generally originates both fixed and adjustable rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency.

The Company originates for resale to Freddie Mac and the Federal Home Loan Bank fixed-rate one-to-four family residential mortgage loans with terms of 15 years or more.  The fixed-rate mortgage loans amortize monthly with principal and interest due each month.  Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option.  The Company offers fixed-rate one-to-four family residential mortgage loans with terms of up to 30 years without prepayment penalty.

The Company currently offers adjustable-rate mortgage loans for terms ranging up to 30 years.  They generally offer adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination.  Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan.  In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on the net interest income.  In the low interest rate environment that has existed over the past five years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio.  In addition, during this period borrowers have shown a preference for fixed-rate loans.  The Company has used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of one-year, three-years or five-years.  The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, interest rate risk position and competitors’ loan products.

Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provide an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage.  However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans.  Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase.  It is possible that during periods of rising interest rates that the risk of delinquencies and defaults on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower, resulting in increased loan losses.

12

Residential first mortgage loans customarily include due-on-sale clauses, which gives the Company the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.  Due-on-sale clauses are a means of imposing assumption fees and increasing the interest rate on mortgage portfolio during periods of rising interest rates.

When underwriting residential real estate loans, the Company reviews and verifies each loan applicant’s income and credit history.  Management believes that stability of income and past credit history are integral parts in the underwriting process.  Generally, the applicant’s total monthly mortgage payment, including all escrow amounts, is limited to 28% of the applicant’s total monthly income.  In addition, total monthly obligations of the applicant, including mortgage payments, generally should not exceed 38% of total monthly income.  Written appraisals are generally required on real estate property offered to secure an applicant’s loan.  For one-to-four family real estate loans with loan to value ratios of over 80%, private mortgage insurance is required.  Fire and casualty insurance is also required on all properties securing real estate loans.  Title insurance, or an attorney’s title opinion, may be required, as circumstances warrant.

The Company does not offer an “interest only” mortgage loan product on one-to-four family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan).  They also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.  The Company does not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation).

Commercial Real Estate Loans - The Company originates and purchases commercial real estate loans.  Commercial real estate loans are secured primarily by improved properties such as multi-family residential, retail facilities and office buildings, restaurants and other non-residential buildings.  The maximum loan-to-value ratio for commercial real estate loans originated is generally 80%.  Commercial real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the prime rate and generally have a specified floor.  Many of the fixed-rate commercial real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity.  The Company purchases from time to time commercial real estate loan participations primarily from outside the Company’s market area. All participation loans are approved following a review to ensure that the loan satisfies the underwriting standards.

Underwriting standards for commercial real estate loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The income approach is primarily utilized to determine whether income generated from the applicant’s business or real estate offered as collateral is adequate to repay the loan.  There is an emphasis on the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%).  In underwriting a loan, the value of the real estate offered as collateral in relation to the proposed loan amount is considered.  Generally, the loan amount cannot be greater than 80% of the value of the real estate.  Written appraisals are usually obtained from either licensed or certified appraisers on all commercial real estate loans in excess of $250,000.  Creditworthiness of the applicant is assessed by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

13

Loans secured by commercial real estate generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances.  This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans.  Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related business and real estate property.  If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Agricultural Real Estate Loans - The Company originates and purchases agricultural real estate loans.  The maximum loan-to-value ratio for agricultural real estate loans we originate is generally 80%. Our agricultural real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the average yield on U.S. Treasury securities, adjusted to a constant maturity of one-year, three-years, or five-years and generally have a specified floor. Many of our fixed-rate agricultural real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity. We purchase from time to time agricultural real estate loan participations primarily from other local institutions within our market area. All participation loans are approved following a review to ensure that the loan satisfies our underwriting standards

Underwriting standards for agricultural real estate include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The income approach is primarily utilized to determine whether income generated from the applicant’s farm operation or real estate offered as collateral is adequate to repay the loan. We emphasize the ratio of the property’s projected cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%).  In underwriting a loan, we consider the value of the real estate offered as collateral in relation to the proposed loan amount.  Generally, the loan amount cannot be greater than 80% of the value of the real estate.  We usually obtain written appraisals from either licensed or certified appraisers on all agricultural real estate loans in excess of $250,000.  We assess the creditworthiness of the applicant by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by agricultural real estate generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances.  This increased credit risk is a result of several factors, including the effects of general economic and market conditions on farm operations and the successful operation or management of the properties securing the loans.  The repayment of loans secured by agricultural estate is typically dependent upon the successful operation of the farm and real estate property.  If the cash flow is reduced, the borrower’s ability to repay the loan may be impaired.

Home Equity Loans – The Company originates home equity loans and lines of credit, which are generally secured by the borrower’s principal residence.  The maximum amount of a home equity loan or line of credit is generally 95% of the appraised value of a borrower’s real estate collateral less the amount of any existing mortgages or related liabilities.  Home equity loans and lines of credit are approved with both fixed and adjustable interest rates which we determine based upon market conditions.  Such loans may be fully amortized over the life of the loan or have a balloon feature.  Generally, the maximum term for home equity loans is 10 years.

Underwriting standards for home equity loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area.  Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

14

Home equity loans entail greater risks than one-to-four family residential mortgage loans, which are secured by first lien mortgages.  In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage or depreciation in the value of the property or loss of equity to the first lien position.  Further, home equity loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default.

Commercial Business Loans - The Company originates commercial business loans to borrowers located in the Company’s market area which are secured by collateral other than real estate or which can be unsecured.  Commercial business loan participations are also purchased from other lenders, which may be made to borrowers outside the Company’s market area.  Commercial business loans are generally secured by equipment and inventory and generally are offered with adjustable rates tied to the prime rate or the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years and various terms of maturity generally from three years to five years.  Unsecured business loans are originated on a limited basis in those instances where the applicant’s financial strength and creditworthiness has been established.  Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business.  Personal guarantees are generally obtained from the borrower or a third party as a condition to originating its business loans.  

Underwriting standards for commercial and agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business.  The financial strength of each applicant is assessed through the review of financial statements and tax returns provided by the applicant.  The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records.  Business loans are periodically reviewed following origination.  Financial statements are requested at least annually and review them for substantial deviations or changes that might affect repayment of the loan.  Loan officers also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral.  Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Agricultural Business Loans - The Company originates agricultural business loans to borrowers located in our market area which are secured by collateral other than real estate or which can be unsecured. Agricultural business loans are generally secured by equipment and blanket security agreements on all farm assets.  These loans are generally offered with fixed rates with terms up to five years.  Agricultural business loans generally bear lower interest rates than residential loans due to competitive market pressures.  The repayment of agricultural business loans is generally dependent on the successful operation of the farm operation.  Personal guarantees are generally obtained from the borrower as a condition to originating agricultural business loans.

Underwriting standards for agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business.  The financial strength of each applicant is assessed through the review of financial statements, pro-forma cash flow statements, and tax returns provided by the applicant.  The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records.  Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan.  Loan officers may also visit the premises of borrowers to observe the operation, facilities, equipment, and personnel and to inspect the pledged collateral.  Underwriting standards for agricultural business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

15

The repayment of agricultural business loans generally is dependent on the successful operation of a farm and can be adversely affected by fluctuations in crop prices, increase in interest rates, and changes in weather conditions.  These developments may result in smaller harvests and less income for farmers which may adversely affect such borrower’s ability to repay a loan, and potentially result in an increase in the level of problem loans and loan losses in our agricultural portfolio.  While not required, the majority of our agricultural business loans are covered by crop insurance, which provides protection against loss due to lower crop yields as a result of unfavorable weather conditions.

Consumer Loans – The Company originates consumer loans, including automobile loans, loans secured by deposit accounts, unsecured loans and mobile home loans.  Consumer loans are generally offered on a fixed-rate basis.  Automobile loans are offered with maturities of up to 60 months for new automobiles.  Loans secured by used automobiles will have maximum terms which vary depending upon the age of the automobile.  Automobile loans are generally originated with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value.  In the case of a new car loan, the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with us.

Underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area.  Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

Consumer loans entail greater risks than one-to-four family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets such as automobiles or loans that are unsecured.  In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation.  Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Such events would increase our risk of loss on unsecured loans.  Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default.

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The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of and for the periods ended June 30, 2013, June 30, 2012, and December 31, 2012.

	June 30, 2013
			Commercial			Agricultural
	1-4 Family		Real Estate			Real Estate		Home Equity			Commercial		Agricultural		Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance,
April 1, 2013	$	779,243	$	837,443		$	183,780	$	227,620		$	959,663	$	44,570	$	173,674		$	239,976	$	3,445,969
Provision charged to
expense		48,470		(67,621	)		1,606		(11,574	)		11,911		8,813		(6,715	)		15,110		-
Losses charged off		-		-			-		-			-		-		(6,427	)		-		(6,427	)
Recoveries		840		23,687			-		525			7,341		-		601			-		32,994
Ending balance,
June 30, 2013	$	828,553	$	793,509		$	185,386	$	216,571		$	978,915	$	53,383	$	161,133		$	255,086	$	3,472,536
Beginning Balance,
January 1, 2013	$	741,029	$	828,873		$	149,568	$	328,996		$	934,251	$	43,930	$	151,474		$	161,343	$	3,339,464
Provision charged to
expense		72,053		(146,933	)		35,818		(125,975	)		37,323		9,453		54,518			93,743		30,000
Losses charged off		-		-			-		-			-		-		(52,186	)		-		(52,186	)
Recoveries		15,471		111,569			-		13,550			7,341		-		7,327			-		155,258
Ending balance,
June 30, 2013	$	828,553	$	793,509		$	185,386	$	216,571		$	978,915	$	53,383	$	161,133		$	255,086	$	3,472,536
Ending balance:
individually evaluated
for impairment	$	-	$	231,740		$	-	$	-		$	648,701	$	-	$	-		$	-	$	880,441
Ending balance:
collectively evaluated
for impairment	$	828,553	$	561,769		$	185,386	$	216,571		$	330,214	$	53,383	$	161,133		$	255,086	$	2,592,095
Loans:
Ending balance	$	41,156,553	$	33,004,015		$	37,077,179	$	11,652,179		$	24,400,611	$	10,676,640	$	14,361,986		$	-	$	172,329,163
Ending balance:
individually evaluated
for impairment	$	420,195	$	1,366,682		$	-	$	64,765		$	690,046	$	-	$	6,505		$	-	$	2,548,193
Ending balance:
collectively evaluated
for impairment	$	40,736,358	$	31,637,333		$	37,077,179	$	11,587,414		$	23,710,565	$	10,676,640	$	14,355,481		$	-	$	169,780,970

17

	June 30, 2012
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate			Home Equity			Commercial		Agricultural			Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance,
April 1, 2012	$	667,641		$	1,098,838		$	123,105		$	349,467		$	708,016	$	62,562		$	128,927		$	192,355		$	3,330,911
Provision charged to
expense		11,488			119,900			(74,187	)		(9,516	)		103,614		(26,528	)		80,192			(34,963	)		170,000
Losses charged off		(70,295	)		(257,043	)		-			(20,000	)		-		-			(50,421	)		-			(397,759	)
Recoveries		20,618			-			-			5,980			-		-			753			-			27,351
Ending balance,
June 30, 2012	$	629,452		$	961,695		$	48,918		$	325,931		$	811,630	$	36,034		$	159,451		$	157,392		$	3,130,503
Beginning Balance,
January 1, 2012	$	697,223		$	1,107,585		$	115,154		$	309,409		$	711,864	$	58,428		$	138,385		$	158,559		$	3,296,607
Provision charged to
expense		(19,719	)		111,153			(66,236	)		76,761			99,450		(22,394	)		72,152			(1,167	)		250,000
Losses charged off		(70,295	)		(257,043	)		-			(66,744	)		-		-			(53,385	)		-			(447,467	)
Recoveries		22,243			-			-			6,505			316		-			2,299			-			31,363
Ending balance,
June 30, 2012	$	629,452		$	961,695		$	48,918		$	325,931		$	811,630	$	36,034		$	159,451		$	157,392		$	3,130,503
Ending balance:
individually evaluated
for impairment	$	-		$	137,608		$	-		$	-		$	515,688	$	-		$	7,359		$	-		$	660,655
Ending balance:
collectively evaluated
for impairment	$	629,452		$	824,087		$	48,918		$	325,931		$	295,942	$	36,034		$	152,092		$	157,392		$	2,469,848
Loans:
Ending balance	$	41,293,201		$	37,868,011		$	32,612,241		$	14,226,553		$	23,953,566	$	10,263,526		$	14,939,089		$	-		$	175,156,187
Ending balance:
individually evaluated
for impairment	$	286,800		$	1,389,183		$	-		$	58,090		$	752,809	$	-		$	7,359		$	-		$	2,494,241
Ending balance:
collectively evaluated
for impairment	$	41,006,401		$	36,478,828		$	32,612,241		$	14,168,463		$	23,200,757	$	10,263,526		$	14,931,730		$	-		$	172,661,946

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	December 31, 2012
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial		Agricultural			Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance,
December 31, 2011	$	697,223		$	1,107,585		$	115,154	$	309,409		$	711,864	$	58,428		$	138,385		$	158,559	$	3,296,607
Provision charged to
expense		99,055			(11,157	)		34,414		86,076			219,102		(14,498	)		74,224			2,784		490,000
Losses charged off		(82,192	)		(356,270	)		-		(80,126	)		-		-			(66,958	)		-		(585,546	)
Recoveries		26,943			88,715			-		13,637			3,285		-			5,823			-		138,403
Ending balance,
December 31, 2012	$	741,029		$	828,873		$	149,568	$	328,996		$	934,251	$	43,930		$	151,474		$	161,343	$	3,339,464
Ending balance:
individually evaluated
for impairment	$	-		$	262,177		$	-	$	-		$	610,779	$	-		$	6,185		$	-	$	879,141
Ending balance:
collectively evaluated
for impairment	$	741,029		$	566,696		$	149,568	$	328,996		$	323,472	$	43,930		$	145,289		$	161,326	$	2,460,306
Loans:
Ending balance	$	41,386,147		$	30,973,177		$	37,392,116	$	12,733,963		$	29,046,437	$	10,982,491		$	14,571,819		$	-	$	177,086,150
Ending balance:
individually evaluated
for impairment	$	339,513		$	1,603,956		$	-	$	56,677		$	728,672	$	-		$	14,392		$	-	$	2,743,210
Ending balance:
collectively evaluated
for impairment	$	41,046,634		$	29,369,221		$	37,392,116	$	12,677,286		$	28,317,765	$	10,982,491		$	14,557,427		$	-	$	174,342,940

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral.  These estimates are affected by changing economic conditions and the economic prospects of borrowers.

The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to cover probable credit losses inherent in the loan portfolio at the balance sheet date.  The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

19

A loan is considered impaired when, based on current information and events, it is probable that the scheduled payments of principal or interest will not be able to be collected when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.  Accordingly, individual consumer and residential loans are not separately identified for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The general component covers non-classified loans and is based on historical charge-off experience and expected loss given the internal risk rating process.  The loan portfolio is stratified into homogeneous groups of loans that possess similar loss characteristics and an appropriate loss ratio adjusted for other qualitative factors is applied to the homogeneous pools of loans to estimate the incurred losses in the loan portfolio.  

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on all loans at origination.  In addition, lending relationships over $500,000, new commercial and commercial real estate loans, and watch list credits are reviewed annually by our loan review department in order to verify risk ratings.  The Company uses the following definitions for risk ratings:

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

20

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2013 and December 31, 2012.

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Home Equity
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
Rating:
Pass	$	37,889,742	$	38,123,451	$	30,644,616	$	28,283,081	$	37,077,179	$	37,392,116	$	10,972,110	$	11,919,440
Special Mention		910,740		1,273,558		146,921		187,936		-		-		242,777		272,563
Substandard		2,356,071		1,989,138		2,212,478		2,502,160		-		-		437,292		541,960
Total	$	41,156,553	$	41,386,147	$	33,004,015	$	30,973,177	$	37,077,179	$	37,392,116	$	11,652,179	$	12,733,963
	Commercial				Agricultural				Consumer				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
Rating:
Pass	$	23,696,812	$	28,301,663	$	10,676,640	$	10,982,491	$	14,184,401	$	14,291,487	$	165,141,500	$	169,293,729
Special Mention		-		849		-		-		96,419		111,945		1,396,857		1,846,851
Substandard		703,799		743,925		-		-		81,166		168,387		5,790,806		5,945,570
Total	$	24,400,611	$	29,046,437	$	10,676,640	$	10,982,491	$	14,361,986	$	14,571,819	$	172,329,163	$	177,086,150

The following tables present the Company’s loan portfolio aging analysis as of June 30, 2013 and December 31, 2012.

	June 30, 2013
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	389,717	$	86,357	$	783,457	$	1,259,531	$	39,897,022	$	41,156,553	$	75,011
Commercial real estate		17,242		-		259,791		277,033		32,726,982		33,004,015		-
Agricultural real estate		-		-		-		-		37,077,179		37,077,179		-
Home equity		143,748		62,047		103,900		309,695		11,342,484		11,652,179		-
Commercial		-		-		-		-		24,400,611		24,400,611		-
Agricultural		-		-		-		-		10,676,640		10,676,640		-
Consumer		127,237		21,274		28,845		177,356		14,184,630		14,361,986		-
Total	$	677,944	$	169,678	$	1,175,993	$	2,023,615	$	170,305,548	$	172,329,163	$	75,011

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	December 31, 2012
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	727,315	$	213,126	$	984,996	$	1,925,437	$	39,460,710	$	41,386,147	$	-
Commercial real estate		-		-		279,622		279,622		30,693,555		30,973,177		-
Agricultural real estate		-		-		-		-		37,392,116		37,392,116		-
Home equity		158,414		70,596		136,508		365,518		12,368,445		12,733,963		-
Commercial		-		-		-		-		29,046,437		29,046,437		-
Agricultural		-		-		-		-		10,982,491		10,982,491		-
Consumer		181,171		64,390		33,692		279,253		14,292,566		14,571,819		-
Total	$	1,066,900	$	348,112	$	1,434,818	$	2,849,830	$	174,236,320	$	177,086,150	$	-

The accrual of interest on loans is generally discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  In all cases, loans are placed on non-accrual or charged-off at the earlier date if collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual or charged-off are reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses.  Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans.  The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring.

The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms.  Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.  Restructured loans in compliance with modified terms are classified as impaired.

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The following tables present impaired loans at or for the three and six months ended June 30, 2013 and the year ended December 31, 2012.

	Three Months Ended June 30, 2013
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	420,195	$	420,195	$	-	$	421,929	$	3,260	$	1,552
Commercial real estate		166,587		166,587		-		221,892		6,798		6,759
Home equity		64,756		64,756		-		53,741		962		954
Consumer		6,605		6,605		-		6,907		122		130
Loans with a specific allowance:
Commercial real estate		1,200,095		1,200,095		231,740		1,206,167		15,872		16,536
Commercial		690,046		690,046		648,701		731,642		7,724		7,809
Total:
One-to-four family residential		420,195		420,195		-		421,929		3,260		1,552
Commercial real estate		1,366,682		1,366,682		231,740		1,428,059		22,670		23,295
Commercial		690,046		690,046		648,701		731,642		7,724		7,809
Home equity		64,765		64,765		-		53,741		962		954
Consumer		6,505		6,505		-		6,907		122		130
Total	$	2,548,193	$	2,548,193	$	880,441	$	2,642,278	$	34,738	$	33,740

	Six Months Ended June 30, 2013
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	420,195	$	420,195	$	-	$	423,155	$	7,502	$	5,729
Commercial real estate		166,587		166,587		-		216,917		6,798		6,759
Home equity		64,765		64,765		-		48,879		1,825		1,815
Consumer		6,505		6,505		-		7,385		259		239
Loans with a specific allowance:
Commercial real estate		1,200,095		1,200,095		231,740		1,222,921		38,506		39,059
Commercial		690,046		690,046		648,701		739,709		17,440		17,839
Total:
One-to-four family residential		420,195		420,195		-		423,155		7,502		5,729
Commercial real estate		1,366,682		1,366,682		231,740		1,439,838		45,304		45,818
Commercial		690,046		690,046		648,701		739,709		17,440		17,839
Home equity		64,765		64,765		-		48,879		1,825		1,815
Consumer		6,505		6,505		-		7,385		259		239
Total	$	2,548,193	$	2,548,193	$	880,441	$	2,658,966	$	72,330	$	71,440

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	Year Ended December 31, 2012
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	339,513	$	339,513	$	-	$	343,593	$	17,163	$	16,909
Commercial real estate		201,135		201,135		-		205,756		27,727		16,136
Home equity		56,677		56,677		-		57,934		4,087		4,162
Consumer		8,207		8,207		-		9,795		495		422
Loans with a specific allowance:
Commercial real estate		1,402,821		1,402,821		262,177		1,443,005		91,130		91,075
Commercial		728,672		728,672		610,779		780,979		44,887		52,898
Consumer		6,185		6,185		6,185		7,096		573		576
Total:
One-to-four family residential		339,513		339,513		-		343,593		17,163		16,909
Commercial real estate		1,603,956		1,603,956		262,177		1,648,761		118,857		107,211
Commercial		728,672		728,672		610,779		780,979		44,887		52,898
Home equity		56,677		56,677		-		57,934		4,087		4,162
Consumer		14,392		14,392		6,185		16,891		1,068		998
Total	$	2,743,210	$	2,743,210	$	879,141	$	2,848,158	$	186,062	$	182,178

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDR’s), where economic concessions have been granted to borrowers who have experienced financial difficulties, that were classified as impaired.   These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  TDR’s are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When loans are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or based upon on the current fair value of the collateral, less selling costs for collateral dependent loans.  If the Company determined that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.  In periods subsequent to modification, the Company evaluates all TDR’s, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

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The following table presents the recorded balance, at original cost, of TDR’s, as of June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
One-to-four family residential	$	616,734	$	267,916
Commercial real estate		1,086,089		1,011,350
Agricultural real estate		-		-
Home equity		81,824		84,123
Commercial loans		662,382		701,271
Agricultural loans		-		-
Consumer loans		33,146		91,206
Total	$	2,480,175	$	2,155,866

The following table presents the recorded balance, at original cost, of TDR’s, which were performing according to the terms of the restructuring, as of June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
One-to-four family residential	$	505,942	$	127,399
Commercial real estate		1,086,089		983,450
Agricultural real estate		-		-
Home equity		76,683		84,123
Commercial loans		662,382		701,271
Agricultural loans		-		-
Consumer loans		33,146		89,045
Total	$	2,364,242	$	1,985,288

The following tables present loans modified as TDR’s during the three and six months ended June 30, 2013 and 2012.

	Three Months Ended				Six Months Ended
	June 30, 2013				June 30, 2013
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		3	$	234,015		6	$	383,982
Commercial real estate		-		-		2		114,567
Agricultural real estate		-		-		-		-
Home equity		-		-		-		-
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		-		-		2		14,151
Total		3	$	234,015		10	$	512,700

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	Three Months Ended				Six Months Ended
	June 30, 2012				June 30, 2012
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	44,267
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		-		-		1		6,041
Commercial loans		2		269,909		2		269,909
Agricultural loans		-		-		-		-
Consumer loans		2		18,818		2		18,818
Total		4	$	288,727		6	$	339,035

2013 Modifications

During the six month period ended June 30, 2013, the Company modified six one-to-four family residential real estate loans, with a recorded investment of $383,982, which were deemed to be TDR’s.  One modification was made to combine notes and capitalize interest.  Two of the modifications involved rate concessions.  Three of the modifications were made to renew notes and capitalize real estate taxes.  None of the modifications resulted in a write-off of the principal balance.

The Company also modified two commercial real estate loans with a recorded investment of $114,567.  Both modifications were made for the same borrower to provide some payment concessions while trying to sell the property.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

The Company also modified two consumer loans with a recorded investment of $14,151.  One modification was made to combine notes and capitalize interest.  The second modification was a renewal with a rate concession.  Neither modification resulted in a write-off of the principal balance.

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses.  During the six month period ended June 30, 2013, two residential real estate loans of $110,792 and one home equity loan of $5,141 that were considered TDR’s defaulted as they were more than 90 days past due at June 30, 2013.  Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

2012 Modifications

During the six month period ended June 30, 2012, the Company modified one one-to-four family residential real estate loan, with a recorded investment of $44,267, which was deemed to be a TDR.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

The Company also modified one home equity loan with a recorded investment of $6,041.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

26

The Company also modified two commercial loans with a total recorded investment of $269,909.  Both modifications were made to reduce the contractual interest rate and payment amount.  Neither modification resulted in a write-off of the principal balance.

The Company also modified two consumer loans with a total recorded investment of $18,818.  Both modifications were made to extend the term of the loans to lower the payment amount.  Neither modification resulted in a reduction of the contractual interest rate or a write-off of the principal balance.

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses.  During the six month period ended June 30, 2012, one commercial real estate loan of $28,000, and one home equity loan of $9,819 that were considered TDR’s defaulted as they were more than 90 days past due at June 30, 2012.  Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

The following table presents the Company’s nonaccrual loans at June 30, 2013 and December 31, 2012.  This table excludes performing troubled debt restructurings.

	June 30, 2013		December 31, 2012
One-to-four family residential	$	1,326,814	$	1,203,328
Commercial real estate		386,637		560,073
Agricultural real estate		-		-
Home equity		226,870		276,877
Commercial loans		44,253		51,436
Agricultural loans		-		-
Consumer loans		41,580		122,064
Total	$	2,026,154	$	2,213,778

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6. INVESTMENTS

The amortized cost and approximate fair value of securities, all of which are classified as available-for-sale, are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2013:
U.S. government and agencies	$	11,303,602	$	132,720	$	(284,471	)	$	11,151,851
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,357,410		342,900		(1,364,806	)		49,335,504
Municipal bonds		50,320,780		1,146,753		(2,030,779	)		49,436,754
	$	111,981,792	$	1,622,373	$	(3,680,056	)	$	109,924,109
December 31, 2012:
U.S. government and agencies	$	10,090,835	$	248,601	$	(10,556	)	$	10,328,880
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,917,555		1,134,245		(95,319	)		51,956,481
Municipal bonds		49,990,655		3,264,169		(152,362	)		53,102,462
	$	110,999,045	$	4,647,015	$	(258,237	)	$	115,387,823

The amortized cost and fair value of available-for-sale securities at June 30, 2013, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
Within one year	$	100,814	$	101,369
One to five years		10,272,899		10,634,124
Five to ten years		22,312,885		22,240,606
After ten years		28,937,784		27,612,506
		61,624,382		60,588,605
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,357,410		49,335,504
	$	111,981,792	$	109,924,109

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $19,169,000 at June 30, 2013 and $24,371,000 at December 31, 2012.

The carrying value of securities sold under agreement to repurchase amounted to $7,444,000 at June 30, 2013 and $13,706,000 at December 31, 2012.

Gross gains of $689,000 and $527,000 and gross losses of $0 resulting from sales of available-for-sale securities were realized during the six months ended June 30, 2013 and 2012, respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost.  Total fair value of these investments at June 30, 2013 and December 31, 2012 were $65,000,000, and $23,956,000, respectively, which were approximately 59.1% and 20.8% of the Company’s available-for-sale investment portfolio.

28

Management believes the declines in fair value for these securities are temporary.  Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at June 30, 2013 and December 31, 2012.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
June 30, 2013:
Municipal bonds	$	(2,019,789	)	$	22,730,151	$	(10,990	)	$	158,375	$	(2,030,779	)	$	22,888,526
U.S. government and agencies		(284,471	)		6,002,570		-			-		(284,471	)		6,002,570
Subtotal		(2,304,260	)		28,732,721		(10,990	)		158,375		(2,315,250	)		28,891,096
Mortgage-backed securities
(government sponsored
enterprises - residential)		(1,364,806	)		36,109,729		-			-	$	(1,364,806	)	$	36,109,729
Total	$	(3,669,066	)	$	64,842,450	$	(10,990	)	$	158,375	$	(3,680,056	)	$	65,000,825
December 31, 2012:
Municipal bonds	$	(152,362	)	$	7,237,453	$	-		$	-	$	(152,362	)	$	7,237,453
U.S. government and agencies		(10,556	)		545,291		-			-		(10,556	)		545,291
Subtotal		(162,918	)		7,782,744		-			-		(162,918	)		7,782,744
Mortgage-backed securities
(government sponsored
enterprises - residential)		(95,319	)		16,172,999		-			-		(95,319	)		16,172,999
Total	$	(258,237	)	$	23,955,743	$	-		$	-	$	(258,237	)	$	23,955,743

The unrealized losses on the Company’s investments in municipal bonds, U.S. government and agencies, and mortgage-backed securities were caused by interest rate increases.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not 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 these investments to be other-than-temporarily impaired at June 30, 2013 and December 31, 2012.

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7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

	June 30, 2013			December 31, 2012
Net unrealized gains (losses) on securities
available-for-sale	$	(2,057,683	)	$	4,388,778
Tax effect		699,612			(1,492,185	)
Net-of-tax amount	$	(1,358,071	)	$	2,896,593

8. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT

Amounts reclassified from AOCI and the affected line items in the statements of income during the three and six months ended June 30, 2013 and 2012, were as follows:

	Amounts Reclassified
	from AOCI
	Three Months Ended						Six Months Ended						Affected Line Item in the
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012			Statements of Income
Unrealized gains (losses) on													Net realized gains on sales of
available-for-sale securities	$	104,668		$	301,580		$	688,899		$	526,908		available-for-sale securities
Tax effect		(35,587	)		(102,537	)		(234,226	)		(179,149	)	Income taxes
Total reclassification out
of AOCI	$	69,081		$	199,043		$	454,673		$	347,759		Net reclassified amount

9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

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Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and December 31, 2012:

			June 30, 2013
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and
agencies	$	11,151,851	$	-	$	11,151,851	$	-
Mortgage-backed securities
(Government sponsored
enterprises - residential)		49,335,504		-		49,335,504		-
Municipal bonds		49,436,754		-		49,436,754		-

			December 31, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and
agencies	$	10,328,880	$	-	$	10,328,880	$	-
Mortgage-backed securities
(Government sponsored
enterprises - residential)		51,956,481		-		51,956,481		-
Municipal bonds		53,102,462		-		53,102,462		-

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the period ended June 30, 2013.

Available-for-Sale Securities - Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.  If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models.  Such securities are classified in Level 2 of the valuation hierarchy.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

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Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and December 31, 2012:

			June 30, 2013
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
(collateral dependent)	$	598,272	$	-	$	-	$	598,272
Real estate owned		137,193		-		-		137,193

			December 31, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
(collateral dependent)	$	1,032,580	$	-	$	-	$	1,032,580
Real estate owned		137,193		-		-		137,193

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent) - The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $(7,485) at June 30, 2013 and $(183,319) at December 31, 2012.

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Real Estate Owned – The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $0 at June 30, 2013 and $(56,193) at December 31, 2012

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements (dollars in thousands).

	Fair Value at 6/30/13		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	137,193	Market comparable properties	Comparability adjustments (%)	Not available
Collateral-dependent impaired loans		598,272	Market comparable properties	Marketability discount		20% – 30%(25%)

	Fair Value at 12/31/12		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	137,193	Market comparable properties	Comparability adjustments (%)		(26%)
Collateral-dependent impaired loans		1,032,580	Market comparable properties	Marketability discount		20% – 30%(25%)

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Fair Value of Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and December 31, 2012:

	June 30, 2013
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	7,636,250	$	7,636,250	$	-	$	-
Interest earning time deposits in banks		2,972,000		-		2,972,000		-
Other investments		89,497		-		89,497		-
Loans held for sale		742,147		-		742,147		-
Loans, net of allowance for loan losses		168,877,834		-		-		167,198,862
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		2,078,170		-		2,078,170		-
Financial Liabilities
Deposits		258,384,484		-		141,533,115		119,819,125
Short-term borrowings		7,097,057		-		7,097,057		-
Advances from borrowers for taxes and insurance		924,287		-		924,287		-
Interest payable		240,747		-		240,747		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

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	December 31, 2012
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	7,293,711	$	7,293,711	$	-	$	-
Interest earning time deposits in banks		2,972,000		-		2,972,000		-
Other investments		96,041		-		96,041		-
Loans held for sale		711,986		-		711,986		-
Loans, net of allowance for loan losses		173,753,059		-		-		172,609,490
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		2,053,472		-		2,053,472		-
Financial Liabilities
Deposits		258,520,729		-		135,656,067		125,864,749
Short-term borrowings		12,740,610		-		12,740,610		-
Advances from borrowers for taxes and insurance		832,345		-		832,345		-
Interest payable		276,757		-		276,757		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest-Earning Time Deposits in Banks, Interest Receivable, Federal Home Loan Bank Stock, and Other Investments - The carrying amount approximates fair value.

Loans Held for Sale - For homogeneous categories of loans, such as mortgage loans held for sale, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

Loans - The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits - Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits.  The carrying amount approximates fair value.  The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings, Interest Payable, and Advances from Borrowers for Taxes and Insurance - The carrying amount approximates fair value.

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Commitments to Originate Loans, Letters of Credit, and Lines of Credit - The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

10. MORTGAGE SERVICING RIGHTS

Activity in the balance of mortgage servicing rights, measured using the amortization method, for the six month period ending June 30, 2013 and the year ended December 31, 2012 was as follows:

	June 30, 2013			December 31, 2012
Balance, beginning of year	$	664,436		$	697,733
Servicing rights capitalized		63,515			219,975
Amortization of servicing rights		(85,946	)		(297,784	)
Change in valuation allowance		12,472			44,512
Balance, end of period	$	654,477		$	664,436

Activity in the valuation allowance for mortgage servicing rights for the six month period ending June 30, 2013 and the year ended December 31, 2012 was as follows:

	June 30, 2013			December 31, 2012
Balance, beginning of year	$	129,279		$	173,791
Additions		-			-
Reductions		(12,472	)		(44,512	)
Balance, end of period	$	116,807		$	129,279

11. INCOME TAXES

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense for the six months ended June 30, 2013 and 2012 is shown below.

	June 30, 2013			June 30, 2012
Computed at the statutory rate (34%)	$	843,829		$	825,321
Increase (decrease) resulting from
Tax exempt interest		(249,632	)		(268,978	)
State income taxes, net		146,828			141,573
Increase in cash surrender value		(32,555	)		(32,054	)
Other, net		856			(261	)
Actual tax expense	$	709,326		$	665,601

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12. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers in the way of commitments to extend credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis.  Substantially all of the Company's loans are to borrowers located in Cass, Morgan, Macoupin, Montgomery, and surrounding counties in Illinois.

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JACKSONVILLE BANCORP, INC.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of the Company.  The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and accompanying notes thereto.

Forward Looking Statements

This Form 10-Q contains certain “forward-looking statements” which may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.”  Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors that could cause actual results to differ materially from these estimates and most other statements that are not historical in nature.  These factors include, but are not limited to, the effect of disruptions in the financial markets, changes in interest rates, general economic conditions and the current weak state of the United States economy, deposit flows, demand for mortgage and other loans, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation, including the Dodd-Frank Act and the elimination of the Office of Thrift Supervision; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing of products and services.

Critical Accounting Policies and Use of Significant Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America.  Actual results could differ significantly from those estimates under different assumptions and conditions.  Management believes the following discussion addresses our most critical accounting policies and significant estimates, which are those that are most important to the portrayal of our financial condition and results and require management’s most difficult, subjective and complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Allowance for Loan Losses - The Company believes the allowance for loan losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of the consolidated financial statements.  The allowance for loan losses is a material estimate that is particularly susceptible to significant changes in the near term and is established through a provision for loan losses.  The allowance is based upon past loan experience and other factors which, in management’s judgement, deserve current recognition in estimating loan losses.  The evaluation includes a review of all loans on which full collectibility may not be reasonably assured.  Other factors considered by management include the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions and historical losses on each portfolio category.  In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties, which collateralize loans.  Management uses the available information to make such determinations.  If circumstances differ substantially from the assumptions used in making determinations, future adjustments to the allowance for loan losses may be necessary and results of operations could be affected.  While we believe we have established our existing allowance for loan losses in conformity with accounting principles generally accepted in the United States of America, there can be no assurance that regulators, in reviewing the Company’s loan portfolio, will not request an increase in the allowance for loan losses.  Because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that increases to the allowance will not be necessary if loan quality deteriorates.

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Foreclosed Assets – Foreclosed assets primarily consist of real estate owned.  Real estate owned acquired through loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  The adjustment at the time of foreclosure is recorded through the allowance for loan losses.  Due to the subjective nature of establishing fair value when the asset is acquired, the actual fair value of the other real estate owned could differ from the original estimate.  If it is determined that fair value of an asset declines subsequent to foreclosure, the asset is written down through a charge to non-interest expense.  Operating costs associated with the assets after acquisition are also recorded as non-interest expense.  Gains and losses on the disposition of other real estate owned are netted and posted to non-interest expense.

Deferred Income Tax Assets/Liabilities – Our net deferred income tax asset arises from differences in the dates that items of income and expense enter into our reported income and taxable income.  Deferred tax assets and liabilities are established for these items as they arise.  From an accounting standpoint, deferred tax assets are reviewed to determine that they are realizable based upon the historical level of our taxable income, estimates of our future taxable income and the reversals of deferred tax liabilities.  In most cases, the realization of the deferred tax asset is based on our future profitability.  If we were to experience net operating losses for tax purposes in a future period, the realization of our deferred tax assets would be evaluated for a potential valuation reserve.

Impairment of Goodwill - Goodwill, an intangible asset with an indefinite life, was recorded on our balance sheet in prior periods as a result of acquisition activity.  Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently.

Mortgage Servicing Rights - Mortgage servicing rights are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments.  Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise.

Fair Value Measurements – The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.  The Company estimates the fair value of financial instruments using a variety of valuation methods.  Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value.  When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value.  When observable market prices do not exist, the Company estimates fair value.  Other factors such as model assumptions and market dislocations can affect estimates of fair value.

The above listing is not intended to be a comprehensive list of all our accounting policies.  In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for management’s judgement in their application.  There are also areas in which management’s judgement in selecting any available alternative would not produce a materially different result.

Financial Condition

June 30, 2013 Compared to December 31, 2012

Total assets decreased by $8.2 million, or 2.6%, to $313.2 million at June 30, 2013 from $321.4 million at December 31, 2012.  Net loans (excluding loans held for sale) decreased $4.9 million, or 2.8%, to $168.9 million at June 30, 2013 from $173.8 million at December 31, 2012.  The decrease in loans is primarily due to a decrease of $4.6 million in commercial business loans reflecting payments on lines of credit.  The loan portfolio continues to be affected by low loan demand.  Available-for-sale investment and mortgage-backed securities decreased $5.5 million, or 4.7%, to $109.9 million at June 30, 2013.  This decrease is primarily due to a decrease of $6.4 million in unrealized gains on these investments due to changes in market rates.  The tax effect of this decrease in unrealized gains on available-for-sale investments contributed to the $2.2 million increase in deferred income taxes.  At June 30, 2013 and December 31, 2012, goodwill totaled $2.7 million.  At these dates, our goodwill was not impaired.

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Total deposits decreased $136,000, or 0.1%, to $258.4 million at June 30, 2013 from $258.5 million at December 31, 2012.  The decrease reflects a $6.0 million decrease in time deposits, partially offset by a $5.9 million increase in lower-cost transaction accounts.  Transaction accounts have continued to grow as customers have preferred to maintain short-term, liquid deposits in the current low-rate environment.  Other borrowings, which consisted of overnight repurchase agreements, decreased $5.6 million, or 44.3%, to $7.1 million at June 30, 2013.  The repurchase agreements are a cash management service provided to our commercial deposit customers.  This decrease reflects the withdrawal of seasonal deposits from our agricultural business customers.

Stockholders’ equity decreased $2.8 million, or 6.5%, to $41.3 million at June 30, 2013.  The decrease in stockholders’ equity was the result of a change of $4.3 million in other comprehensive loss, the payment of $284,000 in dividends and $209,000 in stock repurchases, which was partially offset by net income of $1.8 million.  Other comprehensive loss consisted of a decrease in unrealized gains, net of tax, on available-for-sale securities reflecting changes in market prices for securities in our portfolio. Other comprehensive income does not include changes in the fair value of other financial instruments included on the balance sheet.

Results of Operations

Comparison of Operating Results for the Three Months Ended June 30, 2013 and 2012

General:  Net income for the three months ended June 30, 2013 was $760,000, or $0.41 per common share, basic and diluted, compared to net income of $847,000, or $0.45 per common share, basic and diluted, for the three months ended June 30, 2012.  The $87,000 decrease in net income was due to decreases of $170,000 in net interest income and $158,000 in non-interest income, partially offset by decreases of $170,000 in the provision for loan losses, $43,000 in non-interest expense, and $28,000 in income taxes.

Interest Income:  Total interest income for the three months ended June 30, 2013 decreased $303,000, or 9.4%, to $2.9 million from $3.2 million for the same period of 2012.  The decrease in interest income reflected decreases of $162,000 in interest income on loans, $60,000 in interest income on investment securities, and $81,000 in interest income on mortgage-backed securities.  As noted below, the changes in the composition of our interest-earning assets reflects the investment in investment and mortgage-backed securities during a time when satisfactory loan origination opportunities were lacking.

Interest income on loans decreased $162,000 to $2.3 million for the second quarter of 2013 due to decreases in the average yield and average balance of loans.  The average yield decreased 33 basis points to 5.37% for the second quarter of 2013, compared to 5.70% for the second quarter of 2012.  The decrease in the average yield reflected lower market rates of interest and the competitive lending environment.  The average balance of the loan portfolio decreased $1.4 million to $171.3 million during the second quarter of 2013.  The decrease in the average balance of the loan portfolio reflected a decrease in the average balance of residential real estate loans, reflecting the volume of loans refinanced and subsequently sold into the secondary market.

Interest income on investment securities decreased $60,000 to $442,000 for the second quarter of 2013 compared to the second quarter of 2012. The decrease reflected a decrease in the average yield of investment securities to 2.95% during the second quarter of 2013 from 3.43% during the second quarter of 2012.  The majority of our investment portfolio consists of municipal bonds which are exempt from federal taxation, resulting in a higher tax-equivalent yield.  The decrease in the average yield was partially offset by an increase of $1.3 million in the average balance of the investment securities portfolio to $59.9 million during the second quarter of 2013, compared to $58.6 million for the second quarter of 2012.

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Interest income on mortgage-backed securities decreased $81,000 to $172,000 for the second quarter of 2013, compared to $253,000 for the second quarter of 2012.  The decrease reflected an 82 basis point decrease in the average yield of mortgage-backed securities to 1.37% for the second quarter of 2013, compared to 2.19% for the second quarter of 2012.  The average yield was impacted by higher premium amortization resulting from faster prepayment speeds on mortgage-backed securities.  The amortization of premiums on mortgage-backed securities, which reduces the average yield, increased to $225,000 during the second quarter of 2013, compared to $164,000 during the second quarter of 2012.  The decrease in the average yield was partially offset by a $4.0 million increase in the average balance of mortgage-backed securities to $50.2 million during the second quarter of 2013.

Interest income on other interest-earning assets, consisting of interest-earning demand and time deposit accounts and federal funds sold, totaled $12,000 during the second quarters of 2013 and 2012.  The average balance of these accounts decreased $2.2 million to $10.5 million for the three months ended June 30, 2013 compared to $12.7 million for the three months ended June 30, 2012.  The decrease in the average balance reflected a decrease in the average balance of federal funds sold.  The average yield on other interest-earning assets increased to 0.46% during the second quarter of 2013 from 0.39% during the second quarter of 2012, reflecting the decrease in the lower-yielding federal funds sold during this same time frame.

Interest Expense:  Total interest expense decreased $133,000, or 22.7%, to $454,000 for the three months ended June 30, 2013 compared to $587,000 for the three months ended June 30, 2012.  The lower interest expense was primarily due to a $132,000 decrease in the cost of deposits.

Interest expense on deposits decreased $132,000 to $452,000 for the second quarter of 2013 compared to $584,000 for the second quarter of 2012.  The decrease in interest expense on deposits was primarily due to a 21 basis point decrease in the average rate paid on deposits to 0.77% during the second quarter of 2013 from 0.98% during the second quarter of 2012.  The decrease reflected ongoing low short-term market interest rates during 2013, as well as a change in the composition of our deposits.  The average balance of deposits decreased $3.9 million to $233.6 million for the second quarter of 2013.  The decrease reflected a $16.1 million decrease in the average balance of time deposit accounts, partially offset by a $12.2 million increase in the average balance of lower cost transaction accounts.

Interest paid on borrowed funds decreased $1,000 to $3,000 for the second quarter of 2013 due to a decrease in the average cost of borrowings.  The average rate paid on borrowed funds decreased to 0.17% during the second quarter of 2013 compared to 0.29% during the second quarter of 2012.  The average balance of borrowed funds was $6.0 million for the second quarter of 2013 compared to $5.4 million for the second quarter of 2012.

Net Interest Income.  As a result of the changes in interest income and interest expense noted above, net interest income decreased by $170,000, or 6.5%, to $2.5 million for the three months ended June 30, 2013 from $2.6 million for the three months ended June 30, 2012.  During the prolonged period of low interest rates, we have experienced a continuing contraction in our net interest margin.  Our net interest margin decreased 25 basis points to 3.39% for the second quarter of 2013 from 3.64% for the second quarter of 2012.  Our interest rate spread decreased by 23 basis points to 3.25% during the second quarter of 2013 from 3.48% during the second quarter of 2012.  Our ratio of interest earning assets to interest bearing liabilities was 1.22x and 1.19x at June 30, 2013 and June 30, 2012, respectively

Provision for Loan Losses: The provision for loan losses is determined by management as the amount needed to replenish the allowance for loan losses, after net charge-offs have been deducted, to a level considered adequate to absorb inherent losses in the loan portfolio, in accordance with accounting principles generally accepted in the United States of America.

No provision for loan losses was made during the second quarter of 2013, compared to $170,000 during the second quarter of 2012.  The decrease in the provision for loan losses reflected the decline in loan volume and the level of net recoveries during 2013.  Net recoveries equaled $27,000 during the second quarter of 2013 compared to net charge-offs of $370,000 during the second quarter of 2012.

41

The allowance for loan losses increased $342,000 to $3.5 million at June 30, 2013 from $3.1 million at June 30, 2012.  Loans delinquent 30 days or more decreased $826,000 to $2.0 million, or 1.19% of total loans, as of June 30, 2013, from $2.8 million, or 1.61% of total loans, as of December 31, 2012.  Loans delinquent 30 days or more totaled $1.8 million, or 1.02% of total loans at June 30, 2012.

Provisions for loan losses have been made to bring the allowance for loan losses to a level deemed adequate following management’s evaluation of the repayment capacity and collateral protection afforded by each problem credit.  This review also considered the local economy and the level of bankruptcies and foreclosures in our market area.  During the recent quarter, management has also considered the expected impact the severe drought in our area will have on our agricultural borrowers and the potential adverse effect it will have in our market area economy.  The following table sets forth information regarding nonperforming assets at the dates indicated.

	June 30, 2013			December 31, 2012
Non-accruing loans:
One-to-four family residential	$	1,326,814		$	1,203,328
Commercial real estate		386,637			560,073
Commercial business		44,253			51,436
Home equity		226,870			276,877
Consumer		41,580			122,064
Total	$	2,026,154		$	2,213,778
Accruing loans delinquent more than 90 days:
One-to-four family residential		75,011			-
Total	$	75,011		$	-
Real estate owned:
Commercial real estate		137,193			137,193
Total	$	137,193		$	137,193
Total nonperforming assets	$	2,238,358		$	2,350,971
Total as a percentage of total assets		0.71	%		0.73	%

Nonperforming assets decreased $113,000 to $2.2 million, or 0.71% of total assets, as of June 30, 2013, compared to $2.4 million, or 0.73% of total assets, as of December 31, 2012.  The decrease in nonperforming assets was due to a decrease in nonperforming loans, as real estate owned remained steady.  Nonperforming loans decreased to $2.1 million as of June 30, 2013, from $2.2 million at December 31, 2012.  The decrease in nonperforming loans primarily reflected the payoff of a $201,000 nonaccrual loan secured by commercial real estate.

The following table shows the aggregate principal amount of potential problem credits on the Company’s watch list at June 30, 2013 and December 31, 2012.  All non-accruing loans are automatically placed on the watch list.  The decrease in Substandard credits reflected the payoff of the commercial real estate loan noted above.  The decrease in Special Mention credits primarily reflected the improvement and upgrade of several smaller borrowers totaling $382,000.

42

	June 30, 2013		December 31, 2012
Special Mention credits	$	1,396,857	$	1,846,851
Substandard credits		5,790,806		5,945,570
Total watch list credits	$	7,187,663	$	7,792,421

Non-Interest Income:  Non-interest income decreased $158,000, or 13.3%, to $1.0 million for the three months ended June 30, 2013 from $1.2 million for the same period in 2012.  The decrease in non-interest income resulted primarily from decreases of $197,000 in gains on the sale of available-for-sale securities and $21,000 in net income from mortgage banking operations, partially offset by an increase of $24,000 in commission income.  The decrease in gains on the sale of securities reflected changing market conditions and a lower volume of securities sold as $3.6 million were sold during the second quarter of 2013 compared to $4.7 million during the same period of 2012.  The decrease in mortgage banking income was due to a lower volume of loan sales, reflecting an increase in mortgage rates.  We sold $7.4 million of loans to the secondary market during the second quarter of 2013, compared to $9.8 million during the same period of 2012.  The increase in commission income reflected improved market conditions.

Non-Interest Expense:  Total non-interest expense decreased $43,000, or 1.7%, to $2.5 million for the three months ended June 30, 2013.  The decrease in non-interest expense consisted mainly of decreases of $23,000 in real estate owned expense and $17,000 in compensation and benefits expense.  The decrease in real estate owned expense is primarily due to a smaller number of properties to maintain during the second quarter of 2013.  The decrease in compensation and benefits expense resulted primarily from lower employee costs and reduced expenses related to benefit plans during this same period.

Income Taxes:  The provision for income taxes decreased $28,000 to $271,000 during the second quarter of 2013 compared to the same period of 2012.  The decrease in the income tax provision reflected a decrease in taxable income.  The effective tax rate was 26.25% and 26.07% during the three months ended June 30, 2013 and 2012, respectively.

Comparison of Operating Results for the Six Months Ended June 30, 2013 and 2012

General:  Net income for the six months ended June 30, 2013 was $1,773,000, or $0.95 per common share, basic and diluted, compared to net income of $1,762,000, or $0.93 per common share, basic and diluted, for the six months ended June 30, 2012.  The $11,000 increase in net income was due to a decrease of $220,000 in the provision for loan losses and an increase of $224,000 in non-interest income, partially offset by a decrease of $364,000 in net interest income and increases of $25,000 in non-interest expense and $44,000 in income taxes.

Interest Income:  Total interest income for the six months ended June 30, 2013 decreased $633,000, or 9.7%, to $5.9 million from $6.5 million for the same period of 2012.  The decrease in interest income reflected decreases of $357,000 in interest income on loans, $150,000 in interest income on investment securities, and $126,000 in interest income on mortgage-backed securities.

Interest income on loans decreased $357,000 to $4.6 million for the first half of 2013, compared to $5.0 million for the first half of 2012.  The decrease in interest income on loans was primarily due to a decrease in the average yield of loans.  The average yield on loans decreased 44 basis points to 5.40% during the first six months of 2013 from 5.84% during the first six months of 2012.  The decrease in the average yield reflected lower market rates of interest and the competitive lending environment.  The average balance of the loan portfolio increased to $172.0 million for the first six months of 2013 from $171.3 million for the first six months of 2012.

Interest income on investment securities decreased $150,000 to $876,000 for the first half of 2013 from the same period of 2012.  The decrease in interest income reflects decreases in the average yield and average balance of investment securities.  The average yield of investment securities decreased 46 basis points to 3.02% during the first six months of 2013 from 3.48% for the first six months of 2012 due to purchases of newer securities at lower interest rates.  The majority of our investment portfolio consists of municipal bonds which are exempt from federal taxation, resulting in a higher tax-equivalent yield.  The average balance of the investment securities portfolio decreased to $58.1 million during the first six months of 2013, compared to $58.8 million for the first six months of 2012.

43

Interest income on mortgage-backed securities decreased $126,000 to $332,000 for the first half of 2013, compared to $458,000 for the first half of 2012.  The decrease reflected a 76 basis point decrease in the average yield of mortgage-backed securities to 1.32% for the first half of 2013, compared to 2.08% for the first half of 2012.  The average yield was impacted by higher premium amortization resulting from faster prepayment speeds on mortgage-backed securities.  The amortization of premiums on mortgage-backed securities, which reduces the average yield, increased $140,000 to $470,000 during the first six months of 2013, compared to $330,000 during the first six months of 2012.  The decrease in interest income on mortgage-backed securities was partially offset by an increase of $6.5 million in the average balance of mortgage-backed securities to $50.5 million during the first half of 2013.

Interest income on other interest-earning assets, consisting of interest-earning demand and time deposit accounts and federal funds sold, totaled $24,000 during the first half of 2013 and 2012.  The average balance of these accounts decreased $3.1 million to $11.1 million for the six months ended June 30, 2013 compared to $14.2 million for the six months ended June 30, 2012.  The average yield on other interest-earning assets increased to 0.43% during the first half of 2013 from 0.33% during the first half of 2012.

Interest Expense:  Total interest expense decreased $269,000, or 22.5%, to $926,000 for the six months ended June 30, 2013 compared to $1.2 million for the six months ended June 30, 2012.  The lower interest expense was primarily due to a $267,000 decrease in the cost of deposits.

Interest expense on deposits decreased $267,000 to $921,000 for the six months ended June 30, 2013 compared to $1.2 million for the six months ended June 30, 2012.  The decrease in interest expense on deposits was primarily due to a 21 basis point decrease in the average rate paid to 0.79% during the first half of 2013 from 1.00% during the first half of 2012.  The decrease reflected low short-term market interest rates which continued during 2013, as well as a change in the composition of our deposits.  The average balance of deposits decreased $2.4 million to $234.2 million for the first half of 2013 compared to $236.6 million for the first half of 2012.

Interest paid on borrowed funds decreased $2,000 to $5,000 for the first half of 2013 due to a decrease in the average cost of borrowings.  The average rate paid on borrowed funds decreased to 0.21% during the first six months of 2013 compared to 0.27% during the first six months of 2012.  The average balance of borrowed funds was $5.0 million during the first six months of 2013 compared to $4.9 million during the same period of 2012.

Net Interest Income.  As a result of the changes in interest income and interest expense noted above, net interest income decreased by $364,000, or 6.9%, to $5.0 million for the six months ended June 30, 2013 from $5.3 million for the six months ended June 30, 2012.  During the prolonged period of low interest rates, we have experienced a continuing contraction in our net interest margin.  Our net interest margin decreased 29 basis points to 3.40% for the first half of 2013 from 3.69% for the first half of 2012.  Our interest rate spread decreased by 27 basis points to 3.26% during the first half of 2013 from 3.53% during the first half of 2012.

Provision for Loan Losses: The provision for loan losses is determined by management as the amount needed to replenish the allowance for loan losses, after net charge-offs have been deducted, to a level considered adequate to absorb inherent losses in the loan portfolio, in accordance with accounting principles generally accepted in the United States of America.  The following table shows the activity in the allowance for loan losses for the six months ended June 30, 2013 and 2012.

44

	Six Months Ended
	June 30, 2013			June 30, 2012
Balance at beginning of period	$	3,339,464		$	3,296,607
Charge-offs:
One-to-four family residential		-			70,295
Commercial real estate		-			257,043
Home equity		-			66,744
Consumer		52,186			53,385
Total		52,186			447,467
Recoveries:
One-to-four family residential		15,471			22,243
Commercial real estate		111,569			-
Commercial business		7,341			316
Home equity		13,550			6,505
Consumer		7,327			2,299
Total		155,258			31,363
Net loan charge-offs		(103,072	)		416,104
Additions charged to operations		30,000			250,000
Balance at end of period	$	3,472,536		$	3,130,503

The allowance for loan losses increased $342,000 to $3.5 million at June 30, 2013, from $3.1 million at June 30, 2012.  The provision decreased $220,000 to $30,000 during the first six months of 2013, compared to $250,000 during the first six months of 2012, reflecting the decline in loan volume and the level of net recoveries in 2013.  Net recoveries equaled $103,000 during the first half of 2013, compared to net charge-offs of $416,000 during the first half of 2012.

Non-Interest Income:  Non-interest income increased $224,000, or 9.8%, to $2.5 million for the six months ended June 30, 2013.  The increase in non-interest income resulted primarily from increases of $162,000 in gains on the sale of available-for-sale securities and $87,000 in commissions, partially offset by $67,000 in net income from mortgage banking operations.  The increase in gains on the sale of securities reflected changing market conditions, as a lower volume of securities totaling $18.0 million were sold during the first half of 2013 compared to $14.8 million during the same period of 2012.  Securities sales during 2013 were primarily made to reduce the volatility to interest rate changes in municipal bonds and to eliminate faster paying mortgage-backed securities.  The increase in commission income reflected improved market conditions and increased account activity during 2013.  The decrease in mortgage banking operations income was due to a lower volume of loan sales in 2013, as we sold $15.0 million of loans to the secondary market during the first half of 2013, compared to $22.9 million during the same period of 2012.  The lower volume of sales reflected a reduced volume of mortgage originations, which are affected by changes in market interest rates.

Non-Interest Expense:  Total non-interest expense increased $25,000, or 0.5%, to $5.0 million for the six months ended June 30, 2013 compared to the same period of 2012.  The increase in non-interest expense consisted primarily of increases of $24,000 in professional fees and $22,000 in occupancy expenses, partially offset by a $32,000 decrease in real estate owned expense.  The increase in professional fees is primarily due to increased legal expenses.  Higher depreciation expenses related to upgraded network and computer equipment has contributed to the increase in occupancy expense.  The decrease in real estate owned expense reflects a smaller number of properties to maintain during 2013.

Income Taxes:  The provision for income taxes increased $44,000 to $709,000 during the first six months of 2013 compared to the same period of 2012.  The increase in the income tax provision reflected an increase in taxable income, partially offset by an increase in the benefit of tax-exempt income.  The effective tax rate was 28.58% and 27.42% during the six months ended June 30, 2013 and 2012, respectively.

45

Liquidity and Capital Resources

The Company’s most liquid assets are cash and cash equivalents.  The levels of these assets are dependent on the Company’s operating, financing, and investing activities.  At June 30, 2013 and December 31, 2012, cash and cash equivalents totaled $7.6 million and $7.3 million, respectively.  The Company’s primary sources of funds include principal and interest repayments on loans (both scheduled payments and prepayments), maturities of investment securities and principal repayments from mortgage-backed securities (both scheduled payments and prepayments).  During the past six months, the most significant sources of funds have been calls and sales of investment securities, and principal repayments on loans and mortgage-backed securities.  These funds have been used primarily for purchases of U.S. Agency, municipal and mortgage-backed securities.

While scheduled loan repayments and proceeds from maturing investment securities and principal repayments on mortgage-backed securities are relatively predictable, deposit flows and prepayments are more influenced by interest rates, general economic conditions, and competition.  The Company attempts to price its deposits to meet asset-liability objectives and stay competitive with local market conditions.

Liquidity management is both a short- and long-term responsibility of management.  The Company adjusts its investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) projected purchases of investment and mortgage-backed securities, (iii) expected deposit flows, (iv) yields available on interest-bearing deposits, and (v) liquidity of its asset/liability management program.  Excess liquidity is generally invested in interest-earning overnight deposits and other short-term U.S. agency obligations.  If the Company requires funds beyond its ability to generate them internally, it has the ability to borrow funds from the FHLB.  The Company may borrow from the FHLB under a blanket agreement which assigns all investments in FHLB stock as well as qualifying first mortgage loans equal to 150% of the outstanding balance as collateral to secure the amounts borrowed.  This borrowing arrangement is limited to a maximum of 30% of the Company’s total assets or twenty times the balance of FHLB stock held by the Company.  At June 30, 2013 the Company had no outstanding FHLB advances and approximately $22.3 million available to it under the above-mentioned borrowing arrangement.

The Company maintains minimum levels of liquid assets as established by the Board of Directors.  The Company’s liquidity ratios at June 30, 2013 and December 31, 2012 were 42.7% and 43.5%, respectively.  This ratio represents the volume of short-term liquid assets as a percentage of net deposits and borrowings due within one year.

The Company must also maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments.  The Company anticipates that it will have sufficient funds available to meet its current commitments principally through the use of current liquid assets and through its borrowing capacity discussed above.  The following table summarizes these commitments at June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
Commitments to fund loans	$	44,090,675	$	34,748,383
Standby letters of credit		360,000		368,390

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier 1 capital (as defined) to average assets (as defined).  Management believes that at June 30, 2013, the Company met all its capital adequacy requirements.

46

Under Illinois law, Illinois-chartered savings banks are required to maintain a minimum core capital to total assets ratio of 3%.  The Illinois Commissioner of Savings and Residential Finance (the “Commissioner”) is authorized to require a savings bank to maintain a higher minimum capital level if the Commissioner determines that the savings bank’s financial condition or history, management or earnings prospects are not adequate.  If a savings bank’s core capital ratio falls below the required level, the Commissioner may direct the savings bank to adhere to a specific written plan established by the Commissioner to correct the savings bank’s capital deficiency, as well as a number of other restrictions on the savings bank’s operations, including a prohibition on the declaration of dividends by the savings bank’s board of directors.  At June 30, 2013, the Bank’s core capital ratio was 11.58% of total average assets, which substantially exceeded the required amount.

The Bank is also required to maintain regulatory capital requirements imposed by the Federal Deposit Insurance Corporation.  The Bank must have:  (i) Tier 1 Capital to Average Assets of 4.0%, (ii) Tier 1 Capital to Risk-Weighted Assets of 4.0%, and (iii) Total Capital to Risk-Weighted Assets of 8.0%.  At June 30, 2013 and December 31, 2012, minimum requirements and the Bank’s actual ratios are as follows:

	June 30, 2013			December 31, 2012			Minimum
	Actual			Actual			Required
Tier 1 Capital to Average Assets		11.58	%		10.89	%		4.00	%
Tier 1 Capital to Risk-Weighted Assets		17.44	%		16.46	%		4.00	%
Total Capital to Risk-Weighted Assets		18.69	%		17.72	%		8.00	%

Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data presented herein have been prepared in accordance with GAAP which require the measurement of financial position and operating results in terms of historical dollars, without considering the change in the relative purchasing power of money over time due to inflation.  The impact of inflation is reflected in the increased cost of the Company’s operations.  Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature.  As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation.  Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

47

The following table sets forth the average balances and interest rates (costs) on the Company’s assets and liabilities during the periods presented.

Consolidated Average Balance Sheet and Interest Rates
(Dollars in thousands)
	Three Months Ended June 30,
	2013							2012
	Average							Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earnings assets:
Loans	$	171,318	$	2,299		5.37	%	$	172,705	$	2,461		5.70	%
Investment securities		59,920		442		2.95	%		58,578		502		3.43	%
Mortgage-backed securities		50,150		172		1.37	%		46,188		253		2.19	%
Other		10,473		12		0.46	%		12,678		12		0.39	%
Total interest-earning assets		291,861		2,925		4.01	%		290,149		3,228		4.45	%
Non-interest earnings assets		21,548							22,297
Total assets	$	313,409						$	312,446
Interest-bearing liabilities:
Deposits	$	233,594	$	452		0.77	%	$	237,455	$	584		0.98	%
Other borrowings		5,952		3		0.17	%		5,419		4		0.29	%
Total interest-bearing liabilities		239,546		455		0.76	%		242,874		588		0.97	%
Non-interest bearing liabilities		29,652							26,959
Stockholders’ equity		44,211							42,613
Total liabilities/stockholders’ equity	$	313,409						$	312,446
Net interest income			$	2,470						$	2,640
Interest rate spread (average yield earned minus average rate paid)						3.25	%						3.48	%
Net interest margin (net interest income divided by average interest-earning assets)						3.39	%						3.64	%

48

The following table sets forth the changes in rate and changes in volume of the Company’s interest earning assets and liabilities for the comparative three month periods.

(In thousands)
Three Months Ended June 30,
	2013 Compared to 2012
	Increase(Decrease) Due to
	Rate			Volume			Net
Interest-earnings assets:
Loans	$	(142	)	$	(20	)	$	(162	)
Investment securities		(71	)		11			(60	)
Mortgage-backed securities		(101	)		20			(81	)
Other		2			(2	)		-
Total net change in income on interest-earning assets		(312	)		9			(303	)
Interest-bearing liabilities:
Deposits		(123	)		(9	)		(132	)
Other borrowings		(1	)		-			(1	)
Total net change in expense on interest-bearing liabilities		(124	)		(9	)		(133	)
Net change in net interest income	$	(188	)	$	18		$	(170	)

49

The following table sets forth the average balances and interest rates (costs) on the Company’s assets and liabilities during the periods presented.

Consolidated Average Balance Sheet and Interest Rates
(Dollars in thousands)
	Six Months Ended June 30,
	2013							2012
	Average							Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earnings assets:
Loans	$	171,957	$	4,645		5.40	%	$	171,337	$	5,002		5.84	%
Investment securities		58,078		876		3.02	%		58,772		1,026		3.48	%
Mortgage-backed securities		50,466		332		1.32	%		43,952		458		2.08	%
Other		11,060		24		0.43	%		14,199		24		0.33	%
Total interest-earning assets		291,561		5,877		4.03	%		288,260		6,510		4.52	%
Non-interest earnings assets		21,638							22,030
Total assets	$	313,199						$	310,290
Interest-bearing liabilities:
Deposits	$	234,159	$	921		0.79	%	$	236,573	$	1,188		1.00	%
Other borrowings		5,026		5		0.21	%		4,943		7		0.27	%
Total interest-bearing liabilities		239,185		926		0.77	%		241,516		1,195		0.99	%
Non-interest bearing liabilities		29,852							26,450
Stockholders’ equity		44,162							42,324
Total liabilities/stockholders’ equity	$	313,199						$	310,290
Net interest income			$	4,951						$	5,315
Interest rate spread (average yield earned minus average rate paid)						3.26	%						3.53	%
Net interest margin (net interest income divided by average interest-earning assets)						3.40	%						3.69	%

50

The following table sets forth the changes in rate and changes in volume of the Company’s interest earning assets and liabilities for the comparative six month periods.

	2013 Compared to 2012
	Increase(Decrease) Due to
	Rate			Volume			Net
Interest-earnings assets:
Loans	$	(375	)	$	18		$	(357	)
Investment securities		(138	)		(12	)		(150	)
Mortgage-backed securities		(187	)		61			(126	)
Other		6			(6	)		-
Total net change in income on interest-earning assets		(694	)		61			(633	)
Interest-bearing liabilities:
Deposits		(255	)		(12	)		(267	)
Other borrowings		(1	)		-			(1	)
Total net change in expense on interest-bearing liabilities		(256	)		(12	)		(268	)
Net change in net interest income	$	(438	)	$	73		$	(365	)

51

JACKSONVILLE BANCORP, INC.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s policy in recent years has been to reduce its interest rate risk by better matching the maturities of its interest rate sensitive assets and liabilities, selling its long-term fixed-rate residential mortgage loans with terms of 15 years or more to the secondary market, originating adjustable rate loans, balloon loans with terms ranging from three to five years and originating consumer and commercial business loans, which typically are for a shorter duration and at higher rates of interest than one-to-four family loans.  Our portfolio of mortgage-backed securities, including both fixed and variable rates, also provides monthly cash flow.  The remaining investment portfolio has been structured to better match the maturities and rates of its interest-bearing liabilities.  With respect to liabilities, the Company has attempted to increase its savings and transaction deposit accounts, which management believes are more resistant to changes in interest rates than certificate accounts.  The Board of Directors appoints the Asset-Liability Management Committee (ALCO), which is responsible for reviewing the Company’s asset and liability policies.  The ALCO meets quarterly to review interest rate risk and trends, as well as liquidity and capital ratio requirements.

The Company uses a comprehensive asset/liability software package provided by a third-party vendor to perform interest rate sensitivity analysis for all product categories.  The primary focus of the Company’s analysis is on the effect of interest rate increases and decreases on net interest income.  Management believes that this analysis reflects the potential effects on current earnings of interest rate changes.  Call criteria and prepayment assumptions are taken into consideration for investment securities and loans.  All of the Company’s interest sensitive assets and liabilities are analyzed by product type and repriced based upon current offering rates.  The software performs interest rate sensitivity analysis by performing rate shocks of plus or minus 300 basis points in 100 basis point increments.

The following table shows projected results at June 30, 2013 and December 31, 2012 of the impact on net interest income from an immediate change in interest rates, as well as the benchmarks established by the ALCO.  The results are shown as a dollar and percentage change in net interest income over the next twelve months.

	Change in Net Interest Income
	(Dollars in thousands)
	June 30, 2013						December 31, 2012						ALCO
Rate Shock:	$ Change			% Change			$ Change			% Change			Benchmark
+ 300 basis points		(20	)		-0.18	%		(193	)		-1.64	%	> (20.00)%
+ 200 basis points		35			0.31	%		(95	)		-0.81	%	> (12.50)%
+ 100 basis points		102			0.91	%		(34	)		-0.29	%	> (12.50)%
- 100 basis points		(157	)		-1.40	%		(503	)		-4.26	%	> (20.00)%

The table above indicates that as of June 30, 2013, in the event of a 200 basis point increase in interest rates, we would experience a 0.31% increase in net interest income.  In the event of a 100 basis point decrease in interest rates, we would experience a 1.40% decrease in net interest income.

The foregoing computations are based upon numerous assumptions, including relative levels of market interest rates, prepayments, and deposit mix.  The computed estimates should not be relied upon as a projection of actual results.  Despite the limitations on precision inherent in these computations, management believes that the information provided is reasonably indicative of the effect of changes in interest rate levels on the net earning capacity of the Company’s current mix of interest earning assets and interest bearing liabilities.  Management continues to use the results of these computations, along with the results of its computer model projections, in order to maximize current earnings while positioning the Company to minimize the effect of a prolonged shift in interest rates that would adversely affect future results of operations.

52

At the present time, the most significant market risk affecting the Company is interest rate risk.  Other market risks such as foreign currency exchange risk and commodity price risk do not occur in the normal business of the Company.  The Company also is not currently using trading activities or derivative instruments to control interest rate risk.

53

JACKSONVILLE BANCORP, INC.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13(a)-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13(a)-15(e) that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

54

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings
	At June 30, 2013, the Company is not involved in any pending legal proceedings other than non-material legal proceedings undertaken in the normal course of business.
Item 1.A.	Risk Factors
	There have been no material changes in the Company’s risk factors from those disclosed in its annual report on Form 10-K.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	The following table sets forth the issuer purchases of equity securities during the prior three months.

	Total number of shares purchased	Average price paid per share	Total number of shares purchased under publicly announced plan	Maximum number of shares that may be purchased under the repurchase plan
April 1 – April 30	10,753	$19.40	10,753	62,194
May 1 – May 31	-	-	-	62,194
June 1 – June 30	-	-	-	62,194

Item 3.	Defaults Upon Senior Securities
	None.
Item 4.	Mine Safety Disclosures
	None.
Item 5.	Other Information
	None.
Item 6.	Exhibits
	31.1 - Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
	32.2 - Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
	32.1 - Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101 INS - XBRL Instance Document
	101 SCH - XBRL Taxonomy Extension Schema Document
	101 CAL - XBRL Taxonomy Calculation Linkbase Document
	101 DEF - XBRL Taxonomy Extension Definition Linkbase Document
	101 LAB - XBRL Taxonomy Label Linkbase Document
	101 PRE - XBRL Taxonomy Presentation Linkbase Document

55

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	JACKSONVILLE BANCORP, INC.
	Registrant
Date: 08/07/2013	/s/ Richard A. Foss
	Richard A. Foss
	President and Chief Executive Officer
	/s/ Diana S. Tone
	Diana S. Tone
	Chief Financial Officer

56

EXHIBITS

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard A. Foss, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jacksonville Bancorp, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principle;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the period covered by this report based  on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

08/07/2013	/s/ Richard A. Foss
Date	Richard A. Foss
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Diana S. Tone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jacksonville Bancorp, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principle;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the period covered by this report based  on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

08/07/13	/s/ Diana S. Tone
Date	Diana S. Tone
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Jacksonville Bancorp, Inc. (“Company”) on Form 10-Q for the period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Foss, President and Chief Executive Officer and I, Diana S. Tone, Chief Financial Officer of the Company certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002:

(1) the Report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

08/07/13	/s/Richard A. Foss
Date	Richard A. Foss
	President and Chief Executive Officer

08/07/13	/s/Diana S. Tone
Date	Diana S. Tone
	Chief Financial Officer

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT

6 Months Ended

Jun. 30, 2013

Changes In Accumulated Other Comprehensive Income (Aoci) By Component [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT

8. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT

Amounts reclassified from AOCI and the affected line items in the statements of income during the three and six months ended June 30, 2013 and 2012, were as follows:

	Amounts Reclassified
	from AOCI
	Three Months Ended						Six Months Ended						Affected Line Item in the
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012			Statements of Income
Unrealized gains (losses) on													Net realized gains on sales of
available-for-sale securities	$	104,668		$	301,580		$	688,899		$	526,908		available-for-sale securities
Tax effect		(35,587	)		(102,537	)		(234,226	)		(179,149	)	Income taxes
Total reclassification out
of AOCI	$	69,081		$	199,043		$	454,673		$	347,759		Net reclassified amount

XML

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Fair Value Measurement of Assets Measured at Fair Value on Nonrecurring Basis (Details 1) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Impaired loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 598,272	$ 1,032,580
Real Estate Owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	137,193	137,193
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Quoted Prices in Active Markets for Identical Assets (Level 1) | Real Estate Owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Significant Other Observable Inputs (Level 2) | Impaired loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Significant Other Observable Inputs (Level 2) | Real Estate Owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Significant Unobservable Inputs (Level 3) | Impaired loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	598,272	1,032,580
Significant Unobservable Inputs (Level 3) | Real Estate Owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 137,193	$ 137,193

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
INTEREST INCOME:
Loans	$ 2,299,427	$ 2,461,445	$ 4,644,989	$ 5,001,988
Investment securities	441,778	501,739	876,052	1,026,241
Mortgage-backed securities	171,551	252,869	332,119	458,194
Other	11,958	12,245	23,721	23,766
Total interest income	2,924,714	3,228,298	5,876,881	6,510,189
INTEREST EXPENSE:
Deposits	451,698	583,718	921,148	1,188,464
Other borrowings	2,600	3,892	5,241	6,683
Total interest expense	454,298	587,610	926,389	1,195,147
NET INTEREST INCOME	2,470,416	2,640,688	4,950,492	5,315,042
PROVISION FOR LOAN LOSSES		170,000	30,000	250,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	2,470,416	2,470,688	4,920,492	5,065,042
NON-INTEREST INCOME:
Fiduciary activities	58,007	60,944	124,109	138,720
Commission income	289,711	265,811	598,871	512,228
Service charges on deposit accounts	206,711	208,992	408,137	399,494
Mortgage banking operations, net	75,844	96,606	146,461	213,732
Net realized gains on sales of available-for-sale securities	104,668	301,580	688,899	526,908
Loan servicing fees	91,599	88,767	185,122	179,029
Other	201,268	163,083	362,247	320,057
Total non-interest income	1,027,808	1,185,783	2,513,846	2,290,168
NON-INTEREST EXPENSE:
Salaries and employee benefits	1,585,829	1,602,441	3,186,564	3,175,383
Occupancy and equipment	258,764	241,759	512,430	490,012
Data processing and telecommunications	140,099	140,551	283,522	270,194
Professional	72,077	81,821	157,370	133,250
Postage and office supplies	62,574	68,090	131,238	134,249
Deposit insurance premium	39,226	38,452	77,346	77,419
Other	309,041	337,581	604,019	647,289
Total non-interest expense	2,467,610	2,510,695	4,952,489	4,927,796
INCOME BEFORE INCOME TAXES	1,030,614	1,145,776	2,481,849	2,427,414
INCOME TAXES	270,539	298,713	709,326	665,601
NET INCOME	$ 760,075	$ 847,063	$ 1,772,523	$ 1,761,813
NET INCOME PER COMMON SHARE - BASIC (in dollars per share)	$ 0.41	$ 0.45	$ 0.95	$ 0.93
NET INCOME PER COMMON SHARE - DILUTED (in dollars per share)	$ 0.41	$ 0.45	$ 0.95	$ 0.93

XML

FINANCIAL STATEMENTS

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

FINANCIAL STATEMENTS

1. FINANCIAL STATEMENTS

The accompanying interim condensed consolidated financial statements include the accounts of Jacksonville Bancorp, Inc. and its wholly-owned subsidiary, Jacksonville Savings Bank (the “Bank”) and its wholly-owned subsidiary, Financial Resources Group, Inc. collectively (the “Company”).  All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the preceding unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial condition of the Company as of June 30, 2013 and December 31, 2012 and the results of its operations for the three and six month periods ended June 30, 2013 and 2012.  The results of operations for the three and six month periods ended June 30, 2013 are not necessarily indicative of the results which may be expected for the entire year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2012 filed as an exhibit to the Company’s Form 10-K filed in March, 2013.  The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP) and to prevailing practices within the industry.

Certain amounts included in the 2012 consolidated statements have been reclassified to conform to the 2013 presentation.

XML

LOAN PORTFOLIO COMPOSITION (Tables)

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Schedule of composition of loan portfolio

	June 30, 2013						December 31, 2012
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family residential	$	41,156,553			24.4	%	$	41,386,147			23.8	%
Commercial		33,004,015			19.5			30,973,177			17.8
Agricultural		37,077,179			22.0			37,392,116			21.5
Home equity		11,652,179			6.9			12,733,963			7.3
Total real estate loans		122,889,926			72.8			122,485,403			70.5
Commercial loans		24,400,611			14.4			29,046,437			16.7
Agricultural loans		10,676,640			6.3			10,982,491			6.3
Consumer loans		14,361,986			8.5			14,571,819			8.4
Total loans receivable		172,329,163			102.0			177,086,150			101.9
Less:
Net deferred loan fees		(21,207	)		(0.0	)		(6,373	)		(0.0	)
Allowance for loan losses		3,472,536			2.0			3,339,464			1.9
Total loans receivable, net	$	168,877,834			100.0	%	$	173,753,059			100.0	%

Schedule of allowance for loan losses and recorded investment in loans based on portfolio segment and impairment method

	June 30, 2013
			Commercial			Agricultural
	1-4 Family		Real Estate			Real Estate		Home Equity			Commercial		Agricultural		Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance,
April 1, 2013	$	779,243	$	837,443		$	183,780	$	227,620		$	959,663	$	44,570	$	173,674		$	239,976	$	3,445,969
Provision charged to
expense		48,470		(67,621	)		1,606		(11,574	)		11,911		8,813		(6,715	)		15,110		-
Losses charged off		-		-			-		-			-		-		(6,427	)		-		(6,427	)
Recoveries		840		23,687			-		525			7,341		-		601			-		32,994
Ending balance,
June 30, 2013	$	828,553	$	793,509		$	185,386	$	216,571		$	978,915	$	53,383	$	161,133		$	255,086	$	3,472,536
Beginning Balance,
January 1, 2013	$	741,029	$	828,873		$	149,568	$	328,996		$	934,251	$	43,930	$	151,474		$	161,343	$	3,339,464
Provision charged to
expense		72,053		(146,933	)		35,818		(125,975	)		37,323		9,453		54,518			93,743		30,000
Losses charged off		-		-			-		-			-		-		(52,186	)		-		(52,186	)
Recoveries		15,471		111,569			-		13,550			7,341		-		7,327			-		155,258
Ending balance,
June 30, 2013	$	828,553	$	793,509		$	185,386	$	216,571		$	978,915	$	53,383	$	161,133		$	255,086	$	3,472,536
Ending balance:
individually evaluated
for impairment	$	-	$	231,740		$	-	$	-		$	648,701	$	-	$	-		$	-	$	880,441
Ending balance:
collectively evaluated
for impairment	$	828,553	$	561,769		$	185,386	$	216,571		$	330,214	$	53,383	$	161,133		$	255,086	$	2,592,095
Loans:
Ending balance	$	41,156,553	$	33,004,015		$	37,077,179	$	11,652,179		$	24,400,611	$	10,676,640	$	14,361,986		$	-	$	172,329,163
Ending balance:
individually evaluated
for impairment	$	420,195	$	1,366,682		$	-	$	64,765		$	690,046	$	-	$	6,505		$	-	$	2,548,193
Ending balance:
collectively evaluated
for impairment	$	40,736,358	$	31,637,333		$	37,077,179	$	11,587,414		$	23,710,565	$	10,676,640	$	14,355,481		$	-	$	169,780,970

	June 30, 2012
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate			Home Equity			Commercial		Agricultural			Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance,
April 1, 2012	$	667,641		$	1,098,838		$	123,105		$	349,467		$	708,016	$	62,562		$	128,927		$	192,355		$	3,330,911
Provision charged to
expense		11,488			119,900			(74,187	)		(9,516	)		103,614		(26,528	)		80,192			(34,963	)		170,000
Losses charged off		(70,295	)		(257,043	)		-			(20,000	)		-		-			(50,421	)		-			(397,759	)
Recoveries		20,618			-			-			5,980			-		-			753			-			27,351
Ending balance,
June 30, 2012	$	629,452		$	961,695		$	48,918		$	325,931		$	811,630	$	36,034		$	159,451		$	157,392		$	3,130,503
Beginning Balance,
January 1, 2012	$	697,223		$	1,107,585		$	115,154		$	309,409		$	711,864	$	58,428		$	138,385		$	158,559		$	3,296,607
Provision charged to
expense		(19,719	)		111,153			(66,236	)		76,761			99,450		(22,394	)		72,152			(1,167	)		250,000
Losses charged off		(70,295	)		(257,043	)		-			(66,744	)		-		-			(53,385	)		-			(447,467	)
Recoveries		22,243			-			-			6,505			316		-			2,299			-			31,363
Ending balance,
June 30, 2012	$	629,452		$	961,695		$	48,918		$	325,931		$	811,630	$	36,034		$	159,451		$	157,392		$	3,130,503
Ending balance:
individually evaluated
for impairment	$	-		$	137,608		$	-		$	-		$	515,688	$	-		$	7,359		$	-		$	660,655
Ending balance:
collectively evaluated
for impairment	$	629,452		$	824,087		$	48,918		$	325,931		$	295,942	$	36,034		$	152,092		$	157,392		$	2,469,848
Loans:
Ending balance	$	41,293,201		$	37,868,011		$	32,612,241		$	14,226,553		$	23,953,566	$	10,263,526		$	14,939,089		$	-		$	175,156,187
Ending balance:
individually evaluated
for impairment	$	286,800		$	1,389,183		$	-		$	58,090		$	752,809	$	-		$	7,359		$	-		$	2,494,241
Ending balance:
collectively evaluated
for impairment	$	41,006,401		$	36,478,828		$	32,612,241		$	14,168,463		$	23,200,757	$	10,263,526		$	14,931,730		$	-		$	172,661,946

	December 31, 2012
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial		Agricultural			Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance,
December 31, 2011	$	697,223		$	1,107,585		$	115,154	$	309,409		$	711,864	$	58,428		$	138,385		$	158,559	$	3,296,607
Provision charged to
expense		99,055			(11,157	)		34,414		86,076			219,102		(14,498	)		74,224			2,784		490,000
Losses charged off		(82,192	)		(356,270	)		-		(80,126	)		-		-			(66,958	)		-		(585,546	)
Recoveries		26,943			88,715			-		13,637			3,285		-			5,823			-		138,403
Ending balance,
December 31, 2012	$	741,029		$	828,873		$	149,568	$	328,996		$	934,251	$	43,930		$	151,474		$	161,343	$	3,339,464
Ending balance:
individually evaluated
for impairment	$	-		$	262,177		$	-	$	-		$	610,779	$	-		$	6,185		$	-	$	879,141
Ending balance:
collectively evaluated
for impairment	$	741,029		$	566,696		$	149,568	$	328,996		$	323,472	$	43,930		$	145,289		$	161,326	$	2,460,306
Loans:
Ending balance	$	41,386,147		$	30,973,177		$	37,392,116	$	12,733,963		$	29,046,437	$	10,982,491		$	14,571,819		$	-	$	177,086,150
Ending balance:
individually evaluated
for impairment	$	339,513		$	1,603,956		$	-	$	56,677		$	728,672	$	-		$	14,392		$	-	$	2,743,210
Ending balance:
collectively evaluated
for impairment	$	41,046,634		$	29,369,221		$	37,392,116	$	12,677,286		$	28,317,765	$	10,982,491		$	14,557,427		$	-	$	174,342,940

Schedule of credit risk profile of loan portfolio based on rating category and payment activity

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Home Equity
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
Rating:
Pass	$	37,889,742	$	38,123,451	$	30,644,616	$	28,283,081	$	37,077,179	$	37,392,116	$	10,972,110	$	11,919,440
Special Mention		910,740		1,273,558		146,921		187,936		-		-		242,777		272,563
Substandard		2,356,071		1,989,138		2,212,478		2,502,160		-		-		437,292		541,960
Total	$	41,156,553	$	41,386,147	$	33,004,015	$	30,973,177	$	37,077,179	$	37,392,116	$	11,652,179	$	12,733,963
	Commercial				Agricultural				Consumer				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
Rating:
Pass	$	23,696,812	$	28,301,663	$	10,676,640	$	10,982,491	$	14,184,401	$	14,291,487	$	165,141,500	$	169,293,729
Special Mention		-		849		-		-		96,419		111,945		1,396,857		1,846,851
Substandard		703,799		743,925		-		-		81,166		168,387		5,790,806		5,945,570
Total	$	24,400,611	$	29,046,437	$	10,676,640	$	10,982,491	$	14,361,986	$	14,571,819	$	172,329,163	$	177,086,150

Schedule of loan portfolio aging analysis

	June 30, 2013
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	389,717	$	86,357	$	783,457	$	1,259,531	$	39,897,022	$	41,156,553	$	75,011
Commercial real estate		17,242		-		259,791		277,033		32,726,982		33,004,015		-
Agricultural real estate		-		-		-		-		37,077,179		37,077,179		-
Home equity		143,748		62,047		103,900		309,695		11,342,484		11,652,179		-
Commercial		-		-		-		-		24,400,611		24,400,611		-
Agricultural		-		-		-		-		10,676,640		10,676,640		-
Consumer		127,237		21,274		28,845		177,356		14,184,630		14,361,986		-
Total	$	677,944	$	169,678	$	1,175,993	$	2,023,615	$	170,305,548	$	172,329,163	$	75,011

	December 31, 2012
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	727,315	$	213,126	$	984,996	$	1,925,437	$	39,460,710	$	41,386,147	$	-
Commercial real estate		-		-		279,622		279,622		30,693,555		30,973,177		-
Agricultural real estate		-		-		-		-		37,392,116		37,392,116		-
Home equity		158,414		70,596		136,508		365,518		12,368,445		12,733,963		-
Commercial		-		-		-		-		29,046,437		29,046,437		-
Agricultural		-		-		-		-		10,982,491		10,982,491		-
Consumer		181,171		64,390		33,692		279,253		14,292,566		14,571,819		-
Total	$	1,066,900	$	348,112	$	1,434,818	$	2,849,830	$	174,236,320	$	177,086,150	$	-

Schedule of impaired loan

	Three Months Ended June 30, 2013
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	420,195	$	420,195	$	-	$	421,929	$	3,260	$	1,552
Commercial real estate		166,587		166,587		-		221,892		6,798		6,759
Home equity		64,756		64,756		-		53,741		962		954
Consumer		6,605		6,605		-		6,907		122		130
Loans with a specific allowance:
Commercial real estate		1,200,095		1,200,095		231,740		1,206,167		15,872		16,536
Commercial		690,046		690,046		648,701		731,642		7,724		7,809
Total:
One-to-four family residential		420,195		420,195		-		421,929		3,260		1,552
Commercial real estate		1,366,682		1,366,682		231,740		1,428,059		22,670		23,295
Commercial		690,046		690,046		648,701		731,642		7,724		7,809
Home equity		64,765		64,765		-		53,741		962		954
Consumer		6,505		6,505		-		6,907		122		130
Total	$	2,548,193	$	2,548,193	$	880,441	$	2,642,278	$	34,738	$	33,740

	Six Months Ended June 30, 2013
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	420,195	$	420,195	$	-	$	423,155	$	7,502	$	5,729
Commercial real estate		166,587		166,587		-		216,917		6,798		6,759
Home equity		64,765		64,765		-		48,879		1,825		1,815
Consumer		6,505		6,505		-		7,385		259		239
Loans with a specific allowance:
Commercial real estate		1,200,095		1,200,095		231,740		1,222,921		38,506		39,059
Commercial		690,046		690,046		648,701		739,709		17,440		17,839
Total:
One-to-four family residential		420,195		420,195		-		423,155		7,502		5,729
Commercial real estate		1,366,682		1,366,682		231,740		1,439,838		45,304		45,818
Commercial		690,046		690,046		648,701		739,709		17,440		17,839
Home equity		64,765		64,765		-		48,879		1,825		1,815
Consumer		6,505		6,505		-		7,385		259		239
Total	$	2,548,193	$	2,548,193	$	880,441	$	2,658,966	$	72,330	$	71,440

	Year Ended December 31, 2012
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	339,513	$	339,513	$	-	$	343,593	$	17,163	$	16,909
Commercial real estate		201,135		201,135		-		205,756		27,727		16,136
Home equity		56,677		56,677		-		57,934		4,087		4,162
Consumer		8,207		8,207		-		9,795		495		422
Loans with a specific allowance:
Commercial real estate		1,402,821		1,402,821		262,177		1,443,005		91,130		91,075
Commercial		728,672		728,672		610,779		780,979		44,887		52,898
Consumer		6,185		6,185		6,185		7,096		573		576
Total:
One-to-four family residential		339,513		339,513		-		343,593		17,163		16,909
Commercial real estate		1,603,956		1,603,956		262,177		1,648,761		118,857		107,211
Commercial		728,672		728,672		610,779		780,979		44,887		52,898
Home equity		56,677		56,677		-		57,934		4,087		4,162
Consumer		14,392		14,392		6,185		16,891		1,068		998
Total	$	2,743,210	$	2,743,210	$	879,141	$	2,848,158	$	186,062	$	182,178

Schedule of recorded balance at original cost of troubled debt restructurings

	June 30, 2013		December 31, 2012
One-to-four family residential	$	616,734	$	267,916
Commercial real estate		1,086,089		1,011,350
Agricultural real estate		-		-
Home equity		81,824		84,123
Commercial loans		662,382		701,271
Agricultural loans		-		-
Consumer loans		33,146		91,206
Total	$	2,480,175	$	2,155,866

Schedule of recorded balance at original cost of troubled debt restructurings which were performing according to terms of restructuring

	June 30, 2013		December 31, 2012
One-to-four family residential	$	505,942	$	127,399
Commercial real estate		1,086,089		983,450
Agricultural real estate		-		-
Home equity		76,683		84,123
Commercial loans		662,382		701,271
Agricultural loans		-		-
Consumer loans		33,146		89,045
Total	$	2,364,242	$	1,985,288

Schedule of loans modified as troubled debt restructurings

	Three Months Ended				Six Months Ended
	June 30, 2013				June 30, 2013
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		3	$	234,015		6	$	383,982
Commercial real estate		-		-		2		114,567
Agricultural real estate		-		-		-		-
Home equity		-		-		-		-
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		-		-		2		14,151
Total		3	$	234,015		10	$	512,700

	Three Months Ended				Six Months Ended
	June 30, 2012				June 30, 2012
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	44,267
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		-		-		1		6,041
Commercial loans		2		269,909		2		269,909
Agricultural loans		-		-		-		-
Consumer loans		2		18,818		2		18,818
Total		4	$	288,727		6	$	339,035

Schedule of nonaccrual loans

	June 30, 2013		December 31, 2012
One-to-four family residential	$	1,326,814	$	1,203,328
Commercial real estate		386,637		560,073
Agricultural real estate		-		-
Home equity		226,870		276,877
Commercial loans		44,253		51,436
Agricultural loans		-		-
Consumer loans		41,580		122,064
Total	$	2,026,154	$	2,213,778

XML

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES (Detail Textuals) (Significant Unobservable Inputs (Level 3), USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value adjustments	$ (7,485)	$ (183,319)
Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value adjustments	$ 0	$ (56,193)

XML

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and December 31, 2012:

			June 30, 2013
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and
agencies	$	11,151,851	$	-	$	11,151,851	$	-
Mortgage-backed securities
(Government sponsored
enterprises - residential)		49,335,504		-		49,335,504		-
Municipal bonds		49,436,754		-		49,436,754		-

			December 31, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and
agencies	$	10,328,880	$	-	$	10,328,880	$	-
Mortgage-backed securities
(Government sponsored
enterprises - residential)		51,956,481		-		51,956,481		-
Municipal bonds		53,102,462		-		53,102,462		-

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the period ended June 30, 2013.

Available-for-Sale Securities - Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.  If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models.  Such securities are classified in Level 2 of the valuation hierarchy.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and December 31, 2012:

			June 30, 2013
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
(collateral dependent)	$	598,272	$	-	$	-	$	598,272
Real estate owned		137,193		-		-		137,193

			December 31, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
(collateral dependent)	$	1,032,580	$	-	$	-	$	1,032,580
Real estate owned		137,193		-		-		137,193

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent) - The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $(7,485) at June 30, 2013 and $(183,319) at December 31, 2012.

Real Estate Owned – The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $0 at June 30, 2013 and $(56,193) at December 31, 2012

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements (dollars in thousands).

	Fair Value at 6/30/13		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	137,193	Market comparable properties	Comparability adjustments (%)	Not available
Collateral-dependent impaired loans		598,272	Market comparable properties	Marketability discount		20% – 30%(25%)

	Fair Value at 12/31/12		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	137,193	Market comparable properties	Comparability adjustments (%)		(26%)
Collateral-dependent impaired loans		1,032,580	Market comparable properties	Marketability discount		20% – 30%(25%)

Fair Value of Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and December 31, 2012:

	June 30, 2013
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	7,636,250	$	7,636,250	$	-	$	-
Interest earning time deposits in banks		2,972,000		-		2,972,000		-
Other investments		89,497		-		89,497		-
Loans held for sale		742,147		-		742,147		-
Loans, net of allowance for loan losses		168,877,834		-		-		167,198,862
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		2,078,170		-		2,078,170		-
Financial Liabilities
Deposits		258,384,484		-		141,533,115		119,819,125
Short-term borrowings		7,097,057		-		7,097,057		-
Advances from borrowers for taxes and insurance		924,287		-		924,287		-
Interest payable		240,747		-		240,747		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

	December 31, 2012
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	7,293,711	$	7,293,711	$	-	$	-
Interest earning time deposits in banks		2,972,000		-		2,972,000		-
Other investments		96,041		-		96,041		-
Loans held for sale		711,986		-		711,986		-
Loans, net of allowance for loan losses		173,753,059		-		-		172,609,490
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		2,053,472		-		2,053,472		-
Financial Liabilities
Deposits		258,520,729		-		135,656,067		125,864,749
Short-term borrowings		12,740,610		-		12,740,610		-
Advances from borrowers for taxes and insurance		832,345		-		832,345		-
Interest payable		276,757		-		276,757		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest-Earning Time Deposits in Banks, Interest Receivable, Federal Home Loan Bank Stock, and Other Investments - The carrying amount approximates fair value.

Loans Held for Sale - For homogeneous categories of loans, such as mortgage loans held for sale, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

Loans - The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  Loans with similar characteristics were aggregated for purposes of the calculations.

Deposits - Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits.  The carrying amount approximates fair value.  The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings, Interest Payable, and Advances from Borrowers for Taxes and Insurance - The carrying amount approximates fair value.

Commitments to Originate Loans, Letters of Credit, and Lines of Credit - The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

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INVESTMENTS - Gross Unrealized Losses and Fair Value in Continuous Loss Position (Details 2) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	$ (3,669,066)	$ (258,237)
Less Than Twelve Months, Fair Value	64,842,450	23,955,743
Twelve Months or More, Gross Unrealized Losses	(10,990)
Twelve Months or More, Fair Value	158,375
Gross Unrealized Losses	(3,680,056)	(258,237)
Fair Value	65,000,825	23,955,743
Mortgage-backed securities (government-sponsored enterprises - residential)
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(1,364,806)	(95,319)
Less Than Twelve Months, Fair Value	36,109,729	16,172,999
Twelve Months or More, Gross Unrealized Losses
Twelve Months or More, Fair Value
Gross Unrealized Losses	(1,364,806)	(95,319)
Fair Value	36,109,729	16,172,999
Unsecured Debt
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(2,304,260)	(162,918)
Less Than Twelve Months, Fair Value	28,732,721	7,782,744
Twelve Months or More, Gross Unrealized Losses	(10,990)
Twelve Months or More, Fair Value	158,375
Gross Unrealized Losses	(2,315,250)	(162,918)
Fair Value	28,891,096	7,782,744
Unsecured Debt | Municipal bonds
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(2,019,789)	(152,362)
Less Than Twelve Months, Fair Value	22,730,151	7,237,453
Twelve Months or More, Gross Unrealized Losses	(10,990)
Twelve Months or More, Fair Value	158,375
Gross Unrealized Losses	(2,030,779)	(152,362)
Fair Value	22,888,526	7,237,453
Unsecured Debt | U.S. Government and agencies
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(284,471)	(10,556)
Less Than Twelve Months, Fair Value	6,002,570	545,291
Twelve Months or More, Gross Unrealized Losses
Twelve Months or More, Fair Value
Gross Unrealized Losses	(284,471)	(10,556)
Fair Value	$ 6,002,570	$ 545,291

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MORTGAGE SERVICING RIGHTS- Mortgage Servicing Rights Measured using Amortization Method with Aggregate Activity in Related Valuation Allowances - Activity in the balance of mortgage servicing rights, measured using the amortization method (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Transfers And Servicing [Abstract]
Balance, beginning of year	$ 664,436	$ 697,733
Servicing rights capitalized	63,515	219,975
Amortization of servicing rights	(85,946)	(297,784)
Change in valuation allowance	12,472	44,512
Balance, end of period	$ 654,477	$ 664,436

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LOAN PORTFOLIO COMPOSITION - Credit Risk Profile of Loan Portfolio based on Rating Category and Payment Activity (Details 2) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	$ 165,141,500	$ 169,293,729
Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	1,396,857	1,846,851
Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	5,790,806	5,945,570
Loans Receivable
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	172,329,163	177,086,150	175,156,187
Loans Receivable | One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	41,156,553	41,386,147	41,293,201
Loans Receivable | One-to-four family residential | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	37,889,742	38,123,451
Loans Receivable | One-to-four family residential | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	910,740	1,273,558
Loans Receivable | One-to-four family residential | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	2,356,071	1,989,138
Loans Receivable | Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	33,004,015	30,973,177	37,868,011
Loans Receivable | Commercial real estate | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	30,644,616	28,283,081
Loans Receivable | Commercial real estate | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	146,921	187,936
Loans Receivable | Commercial real estate | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	2,212,478	2,502,160
Loans Receivable | Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	37,077,179	37,392,116	32,612,241
Loans Receivable | Agricultural real estate | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	37,077,179	37,392,116
Loans Receivable | Agricultural real estate | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross
Loans Receivable | Agricultural real estate | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross
Loans Receivable | Home equity
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	11,652,179	12,733,963	14,226,553
Loans Receivable | Home equity | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	10,972,110	11,919,440
Loans Receivable | Home equity | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	242,777	272,563
Loans Receivable | Home equity | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	437,292	541,960
Loans Receivable | Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	24,400,611	29,046,437	23,953,566
Loans Receivable | Commercial loans | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	23,696,812	28,301,663
Loans Receivable | Commercial loans | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross		849
Loans Receivable | Commercial loans | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	703,799	743,925
Loans Receivable | Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	10,676,640	10,982,491	10,263,526
Loans Receivable | Agricultural loans | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	10,676,640	10,982,491
Loans Receivable | Agricultural loans | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross
Loans Receivable | Agricultural loans | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross
Loans Receivable | Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	14,361,986	14,571,819	14,939,089
Loans Receivable | Consumer loans | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	14,184,401	14,291,487
Loans Receivable | Consumer loans | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	96,419	111,945
Loans Receivable | Consumer loans | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	$ 81,166	$ 168,387

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT (Tables)

6 Months Ended

Jun. 30, 2013

Changes In Accumulated Other Comprehensive Income (Aoci) By Component [Abstract]

Schedule of reclassified from AOCI and the affected line items in the statements of income

	Amounts Reclassified
	from AOCI
	Three Months Ended						Six Months Ended						Affected Line Item in the
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012			Statements of Income
Unrealized gains (losses) on													Net realized gains on sales of
available-for-sale securities	$	104,668		$	301,580		$	688,899		$	526,908		available-for-sale securities
Tax effect		(35,587	)		(102,537	)		(234,226	)		(179,149	)	Income taxes
Total reclassification out
of AOCI	$	69,081		$	199,043		$	454,673		$	347,759		Net reclassified amount

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Schedule of accumulated other comprehensive income

	June 30, 2013			December 31, 2012
Net unrealized gains (losses) on securities
available-for-sale	$	(2,057,683	)	$	4,388,778
Tax effect		699,612			(1,492,185	)
Net-of-tax amount	$	(1,358,071	)	$	2,896,593

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INVESTMENTS - Amortized Cost and Approximate Fair Value of Available-for-Sale Securities (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	$ 111,981,792	$ 110,999,045
Available-for-sale securities, gross unrealized gains	1,622,373	4,647,015
Available-for-sale securities, gross unrealized losses	(3,680,056)	(258,237)
Available-for-sale securities, fair value	109,924,109	115,904,297
U.S. Government and agencies
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	11,303,602	10,090,835
Available-for-sale securities, gross unrealized gains	132,720	248,601
Available-for-sale securities, gross unrealized losses	(284,471)	(10,556)
Available-for-sale securities, fair value	11,151,851	10,328,880
Mortgage-backed securities (government-sponsored enterprises - residential)
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	50,357,410	50,917,555
Available-for-sale securities, gross unrealized gains	342,900	1,134,245
Available-for-sale securities, gross unrealized losses	(1,364,806)	(95,319)
Available-for-sale securities, fair value	49,335,504	51,956,481
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	50,320,780	49,990,655
Available-for-sale securities, gross unrealized gains	1,146,753	3,264,169
Available-for-sale securities, gross unrealized losses	(2,030,779)	(152,362)
Available-for-sale securities, fair value	$ 49,436,754	$ 53,102,462

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STOCK BASED COMPENSATION - Stock Option Activity (Details 1) (USD $)	1 Months Ended	6 Months Ended
	Apr. 24, 2012	Jun. 30, 2013 Stock Options
Shares
Outstanding, December 31, 2012		107,338
Granted	104,035
Exercised		(5,902)
Forfeited
Outstanding, June 30, 2013		101,436
Exercisable, June 30, 2013		18,251
Weighted Average Exercise price/Share
Outstanding, December 31, 2012		$ 15.60
Granted
Exercised		$ 15.03
Forfeited
Outstanding, June 31, 2013		$ 15.63
Exercisable, June 30, 2013		$ 15.55
Weighted Average Remaining Contractual Life (in years)
Outstanding, June 30, 2013		8 years 7 months 28 days
Exercisable, June 30, 2013		8 years 3 months 7 days
Aggregate Intrinsic Value
Outstanding, June 30, 2013		$ 347,735
Exercisable, June 30, 2013		$ 64,075

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LOAN PORTFOLIO COMPOSITION - Impaired Loans (Details 4) (Loans Receivable, USD $)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Accounts Notes And Loans Receivable [Line Items]
Recorded Balance, Total	$ 2,548,193	$ 2,548,193	$ 2,743,210
Unpaid Principal Balance, Total	2,548,193	2,548,193	2,743,210
Specific Allowance, Total	880,441	880,441	879,141
Average Impairment in Impaired Loans, Total	2,642,278	2,658,966	2,848,158
Interest Income Recognized, Total	34,738	72,330	186,062
Interest Income Recognized Cash Basis, Total	33,740	71,440	182,178
One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	420,195	420,195	339,513
Loans without a specific valuation allowance, Unpaid Principal Balance	420,195	420,195	339,513
Loans without a specific valuation allowance, Specific Allowance
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	421,929	423,155	343,593
Loans without a specific valuation allowance, Interest Income Recognized	3,260	7,502	17,163
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	1,552	5,729	16,909
Recorded Balance, Total	420,195	420,195	339,513
Unpaid Principal Balance, Total	420,195	420,195	339,513
Specific Allowance, Total
Average Impairment in Impaired Loans, Total	421,929	423,155	343,593
Interest Income Recognized, Total	3,260	7,502	17,163
Interest Income Recognized Cash Basis, Total	1,552	5,729	16,909
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	166,587	166,587	201,135
Loans without a specific valuation allowance, Unpaid Principal Balance	166,587	166,587	201,135
Loans without a specific valuation allowance, Specific Allowance
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	221,892	216,917	205,756
Loans without a specific valuation allowance, Interest Income Recognized	6,798	6,798	27,727
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	6,759	6,759	16,136
Loans with a specific valuation allowance, Recorded Balance	1,200,095	1,200,095	1,402,821
Loans with a specific valuation allowance, Unpaid Principal Balance	1,200,095	1,200,095	1,402,821
Loans with a specific valuation allowance, Specific Allowance	231,740	231,740	262,177
Loans with a specific valuation allowance, Average Impairment in Impaired Loans	1,206,167	1,222,921	1,443,005
Loans with a specific valuation allowance, Interest Income Recognized	15,872	38,506	91,130
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	16,536	39,059	91,075
Recorded Balance, Total	1,366,682	1,366,682	1,603,956
Unpaid Principal Balance, Total	1,366,682	1,366,682	1,603,956
Specific Allowance, Total	231,740	231,740	262,177
Average Impairment in Impaired Loans, Total	1,428,059	1,439,838	1,648,761
Interest Income Recognized, Total	22,670	45,304	118,857
Interest Income Recognized Cash Basis, Total	23,295	45,818	107,211
Home equity
Accounts Notes And Loans Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	64,756	64,756	56,677
Loans without a specific valuation allowance, Unpaid Principal Balance	64,756	64,756	56,677
Loans without a specific valuation allowance, Specific Allowance
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	53,741	48,879	57,934
Loans without a specific valuation allowance, Interest Income Recognized	962	1,825	4,087
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	954	1,815	4,162
Recorded Balance, Total	64,765	64,765	56,677
Unpaid Principal Balance, Total	64,765	64,765	56,677
Specific Allowance, Total
Average Impairment in Impaired Loans, Total	53,741	48,879	57,934
Interest Income Recognized, Total	962	1,825	4,087
Interest Income Recognized Cash Basis, Total	954	1,815	4,162
Commercial
Accounts Notes And Loans Receivable [Line Items]
Loans with a specific valuation allowance, Recorded Balance	690,046	690,046	728,672
Loans with a specific valuation allowance, Unpaid Principal Balance	690,046	690,046	728,672
Loans with a specific valuation allowance, Specific Allowance	648,701	648,701	610,779
Loans with a specific valuation allowance, Average Impairment in Impaired Loans	731,642	739,709	780,979
Loans with a specific valuation allowance, Interest Income Recognized	7,724	17,440	44,887
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	7,809	17,839	52,898
Recorded Balance, Total	690,046	690,046	728,672
Unpaid Principal Balance, Total	690,046	690,046	728,672
Specific Allowance, Total	648,701	648,701	610,779
Average Impairment in Impaired Loans, Total	731,642	739,709	780,979
Interest Income Recognized, Total	7,724	17,440	44,887
Interest Income Recognized Cash Basis, Total	7,809	17,839	52,898
Consumer
Accounts Notes And Loans Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	6,605	6,605	8,207
Loans without a specific valuation allowance, Unpaid Principal Balance	6,605	6,605	8,207
Loans without a specific valuation allowance, Specific Allowance
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	6,907	7,385	9,795
Loans without a specific valuation allowance, Interest Income Recognized	122	259	495
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	130	239	422
Loans with a specific valuation allowance, Recorded Balance			6,185
Loans with a specific valuation allowance, Unpaid Principal Balance			6,185
Loans with a specific valuation allowance, Specific Allowance			6,185
Loans with a specific valuation allowance, Average Impairment in Impaired Loans			7,096
Loans with a specific valuation allowance, Interest Income Recognized			573
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis			576
Recorded Balance, Total	6,505	6,505	14,392
Unpaid Principal Balance, Total	6,505	6,505	14,392
Specific Allowance, Total			6,185
Average Impairment in Impaired Loans, Total	6,907	7,385	16,891
Interest Income Recognized, Total	122	259	1,068
Interest Income Recognized Cash Basis, Total	$ 130	$ 239	$ 998

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INVESTMENTS - (Detail Textuals) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Schedule Of Investments [Abstract]
Securities pledged as collateral	$ 19,169,000		$ 24,371,000
Securities sold under agreements to repurchase	7,444,000		13,706,000
Gross realized gains on sales of available-for-sale securities	689,000	527,000
Gross realized losses on sales of available-for-sale securities	0	0
Debt securities, fair value	$ 65,000,000		$ 23,956,000
Percentage of available-for-sale investment portfolio	59.10%		20.80%

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EARNINGS PER SHARE - Earnings Per Share Calculations for Basic and Diluted Methods (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share [Abstract]
Net income available to common shareholders	$ 760,075	$ 847,063	$ 1,772,523	$ 1,761,813
Basic average shares outstanding (in shares)	1,869,499	1,886,211	1,873,692	1,885,638
Diluted potential common shares:
Stock option equivalents (in shares)	299	475	284	326
Diluted average shares outstanding (in shares)	1,869,798	1,886,686	1,873,976	1,885,964
Basic earnings per share (in dollars per share)	$ 0.41	$ 0.45	$ 0.95	$ 0.93
Diluted earnings per share (in dollars per share)	$ 0.41	$ 0.45	$ 0.95	$ 0.93

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LOAN PORTFOLIO COMPOSITION - Loans Modified as Troubled Debt Restructurings (Details 7) (Loans Receivable, USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013 Contract	Jun. 30, 2012 Contract	Jun. 30, 2013 Contract	Jun. 30, 2012 Contract
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification	3	4	10	6
Troubled debt restructurings, recorded investment	$ 234,015	$ 288,727	$ 512,700	$ 339,035
One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification	3		6	1
Troubled debt restructurings, recorded investment	234,015		383,982	44,267
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification			2
Troubled debt restructurings, recorded investment			114,567
Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification
Troubled debt restructurings, recorded investment
Home equity
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification				1
Troubled debt restructurings, recorded investment				6,041
Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification		2		2
Troubled debt restructurings, recorded investment		269,909		269,909
Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification
Troubled debt restructurings, recorded investment
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, number of modification		2	2	2
Troubled debt restructurings, recorded investment		$ 18,818	$ 14,151	$ 18,818

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INVESTMENT (Tables)

6 Months Ended

Jun. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost and approximate fair values with gross unrealized gains and losses of available for sale securities

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2013:
U.S. government and agencies	$	11,303,602	$	132,720	$	(284,471	)	$	11,151,851
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,357,410		342,900		(1,364,806	)		49,335,504
Municipal bonds		50,320,780		1,146,753		(2,030,779	)		49,436,754
	$	111,981,792	$	1,622,373	$	(3,680,056	)	$	109,924,109
December 31, 2012:
U.S. government and agencies	$	10,090,835	$	248,601	$	(10,556	)	$	10,328,880
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,917,555		1,134,245		(95,319	)		51,956,481
Municipal bonds		49,990,655		3,264,169		(152,362	)		53,102,462
	$	110,999,045	$	4,647,015	$	(258,237	)	$	115,387,823

Schedule of amortized cost and fair value of available-for-sale securities by contractual maturities

	Amortized		Fair
	Cost		Value
Within one year	$	100,814	$	101,369
One to five years		10,272,899		10,634,124
Five to ten years		22,312,885		22,240,606
After ten years		28,937,784		27,612,506
		61,624,382		60,588,605
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,357,410		49,335,504
	$	111,981,792	$	109,924,109

Schedule of gross unrealized losses and fair value in continuous loss position

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
June 30, 2013:
Municipal bonds	$	(2,019,789	)	$	22,730,151	$	(10,990	)	$	158,375	$	(2,030,779	)	$	22,888,526
U.S. government and agencies		(284,471	)		6,002,570		-			-		(284,471	)		6,002,570
Subtotal		(2,304,260	)		28,732,721		(10,990	)		158,375		(2,315,250	)		28,891,096
Mortgage-backed securities
(government sponsored
enterprises - residential)		(1,364,806	)		36,109,729		-			-	$	(1,364,806	)	$	36,109,729
Total	$	(3,669,066	)	$	64,842,450	$	(10,990	)	$	158,375	$	(3,680,056	)	$	65,000,825
December 31, 2012:
Municipal bonds	$	(152,362	)	$	7,237,453	$	-		$	-	$	(152,362	)	$	7,237,453
U.S. government and agencies		(10,556	)		545,291		-			-		(10,556	)		545,291
Subtotal		(162,918	)		7,782,744		-			-		(162,918	)		7,782,744
Mortgage-backed securities
(government sponsored
enterprises - residential)		(95,319	)		16,172,999		-			-		(95,319	)		16,172,999
Total	$	(258,237	)	$	23,955,743	$	-		$	-	$	(258,237	)	$	23,955,743

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parentheticals) (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Unrealized appreciation (depreciation) on available-for-sale securities, taxes	$ (1,713,570)	$ 431,054	$ (1,957,571)	$ 484,101
Reclassification adjustment for realized gains (losses) included in net income, taxes	$ 35,587	$ 102,537	$ 234,226	$ 179,149

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Parentheticals) (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2013
Statement Of Stockholders Equity [Abstract]
Dividends, per share	$ 0.15

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NEW ACCOUNTING PRONOUNCEMENT

6 Months Ended

Jun. 30, 2013

Accounting Changes And Error Corrections [Abstract]

NEW ACCOUNTING PRONOUNCEMENT

2. NEW ACCOUNTING PRONOUNCEMENTS

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220):  Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.  ThisASU improves the transparency of reporting of amounts reclassified out of accumulated other comprehensive income.  The new amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income in financial statements.  The new amendments will require the Company to present (either on the face of the statements where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income.  It will also require a cross-reference to other disclosures currently required.  For public entities, the amendments are effective for reporting periods beginning after December 15, 2012.  The Company adopted the ASU during the first quarter of 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,772,523	$ 1,761,813
Depreciation, amortization and accretion:
Premises and equipment	188,640	166,365
Amortization of investment premiums and discounts, net	574,012	334,966
Accretion of loan discounts	(259)	(37,228)
Net realized gains on sales of available-for-sale securities	(688,899)	(526,908)
Provision for loan losses	30,000	250,000
Mortgage banking operations, net	(146,461)	(213,732)
Gain on sale of real estate owned		(30,609)
Shares held by ESOP committed to be released	20,697	16,725
Tax benefit related to stock options exercised	1,796	1,291
Stock option compensation expense	44,711	22,479
Changes in income taxes payable	(467,271)	(205,437)
Changes in assets and liabilities	1,154,674	357,497
Net cash provided by operations before loan sales	2,484,163	1,897,222
Origination of loans for sale to secondary market	(14,825,738)	(23,066,615)
Proceeds from sales of loans to secondary market	14,951,997	23,082,599
Net cash provided by operating activities	2,610,422	1,913,206
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment and mortgage-backed securities	(26,942,590)	(33,802,052)
Purchases of interest-earning time deposits in other banks		(496,000)
Maturity or call of investment securities available-for-sale	1,500,000	7,328,000
Sale of investment securities available-for-sale	18,021,637	14,854,329
Principal payments on mortgage-backed and investment securities	6,559,637	4,707,101
Purchase of bank-owned life insurance		(2,000,000)
Proceeds from sale of real estate owned		327,395
Net (increase) decrease in loans	4,845,484	(1,551,536)
Additions to premises and equipment	(135,483)	(219,979)
Net cash provided by (used in) investing activities	3,848,685	(10,852,742)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	(136,245)	7,312,687
Net decrease in other borrowings	(5,643,553)	(408,050)
Increase in advance payments by borrowers for taxes and insurance	91,942	212,046
Exercise of stock options	86,893	15,499
Purchase and retirement of treasury stock related to stock options	(23,454)
Stock repurchases	(208,609)
Dividends paid - common stock	(283,542)	(282,562)
Net cash provided by (used in) financing activities	(6,116,568)	6,849,620
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	342,539	(2,089,916)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	7,293,711	11,387,947
CASH AND CASH EQUIVALENTS, END OF PERIOD	7,636,250	9,298,031
Cash paid during the year for:
Interest on deposits	957,159	1,213,658
Interest on other borrowings	5,241	6,683
Income taxes paid	1,176,073	872,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in settlement of loans		217,130
Loans to facilitate sales of real estate owned		$ 42,750

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LOAN PORTFOLIO COMPOSITION - Recorded Balance at Original Cost of Troubled Debt Restructurings (Details 5) (Loans Receivable, USD $)	Jun. 30, 2013	Dec. 31, 2012
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost	$ 2,480,175	$ 2,155,866
One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost	616,734	267,916
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost	1,086,089	1,011,350
Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost
Home equity
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost	81,824	84,123
Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost	662,382	701,271
Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost	$ 33,146	$ 91,206

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Schedule of fair value measurements of assets recognized in balance sheets measured at fair value on recurring basis

			June 30, 2013
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and
agencies	$	11,151,851	$	-	$	11,151,851	$	-
Mortgage-backed securities
(Government sponsored
enterprises - residential)		49,335,504		-		49,335,504		-
Municipal bonds		49,436,754		-		49,436,754		-

			December 31, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and
agencies	$	10,328,880	$	-	$	10,328,880	$	-
Mortgage-backed securities
(Government sponsored
enterprises - residential)		51,956,481		-		51,956,481		-
Municipal bonds		53,102,462		-		53,102,462		-

Schedule of fair value measurement of assets measured at fair value on nonrecurring basis

			June 30, 2013
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
(collateral dependent)	$	598,272	$	-	$	-	$	598,272
Real estate owned		137,193		-		-		137,193

			December 31, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
(collateral dependent)	$	1,032,580	$	-	$	-	$	1,032,580
Real estate owned		137,193		-		-		137,193

Schedule of quantitative information about unobservable inputs used in recurring and nonrecurring level 3 fair value measurements

	Fair Value at 6/30/13		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	137,193	Market comparable properties	Comparability adjustments (%)	Not available
Collateral-dependent impaired loans		598,272	Market comparable properties	Marketability discount		20% – 30%(25%)

	Fair Value at 12/31/12		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	137,193	Market comparable properties	Comparability adjustments (%)		(26%)
Collateral-dependent impaired loans		1,032,580	Market comparable properties	Marketability discount		20% – 30%(25%)

Schedule of estimated fair values of other financial instrument

	June 30, 2013
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	7,636,250	$	7,636,250	$	-	$	-
Interest earning time deposits in banks		2,972,000		-		2,972,000		-
Other investments		89,497		-		89,497		-
Loans held for sale		742,147		-		742,147		-
Loans, net of allowance for loan losses		168,877,834		-		-		167,198,862
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		2,078,170		-		2,078,170		-
Financial Liabilities
Deposits		258,384,484		-		141,533,115		119,819,125
Short-term borrowings		7,097,057		-		7,097,057		-
Advances from borrowers for taxes and insurance		924,287		-		924,287		-
Interest payable		240,747		-		240,747		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

	December 31, 2012
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	7,293,711	$	7,293,711	$	-	$	-
Interest earning time deposits in banks		2,972,000		-		2,972,000		-
Other investments		96,041		-		96,041		-
Loans held for sale		711,986		-		711,986		-
Loans, net of allowance for loan losses		173,753,059		-		-		172,609,490
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		2,053,472		-		2,053,472		-
Financial Liabilities
Deposits		258,520,729		-		135,656,067		125,864,749
Short-term borrowings		12,740,610		-		12,740,610		-
Advances from borrowers for taxes and insurance		832,345		-		832,345		-
Interest payable		276,757		-		276,757		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

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EARNINGS PER SHARE (Detail Textuals) (Stock Options)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities share amount	100,335	104,035	100,335	104,035

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LOAN PORTFOLIO COMPOSITION - Balance in Allowances for Loan Losses and Recorded Investment in Loans Based on Portfolio Segment and Impairment Method (Details 1) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, ending balance	$ 3,472,536		$ 3,472,536		$ 3,339,464
Loans:
Loans, individually evaluated for impairment, ending balance	2,548,193		2,548,193		2,743,210
Loans, collectively evaluated for impairment, ending balance	169,780,970		169,780,970		174,342,940
Loans Receivable
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	3,445,969	3,330,911	3,339,464	3,296,607	3,296,607
Provision charged to expense		170,000	30,000	250,000	490,000
Losses charged off	(6,427)	(397,759)	(52,186)	(447,467)	(585,546)
Recoveries	32,994	27,351	155,258	31,363	138,403
Allowance for loan losses, ending balance	3,472,536	3,130,503	3,472,536	3,130,503	3,339,464
Allowance for loan losses, individually evaluated for impairment, ending balance	880,441	660,655	880,441	660,655	879,141
Allowance for loan losses, collectively evaluated for impairment, ending balance	2,592,095	2,469,848	2,592,095	2,469,848	2,460,306
Loans:
Loans receivable gross	172,329,163	175,156,187	172,329,163	175,156,187	177,086,150
Loans, individually evaluated for impairment, ending balance	2,548,193	2,494,241	2,548,193	2,494,241	2,743,210
Loans, collectively evaluated for impairment, ending balance	169,780,970	172,661,946	169,780,970	172,661,946	174,342,940
Loans Receivable | One-to-four family residential
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	779,243	667,641	741,029	697,223	697,223
Provision charged to expense	48,470	11,488	72,053	(19,719)	99,055
Losses charged off		(70,295)		(70,295)	(82,192)
Recoveries	840	20,618	15,471	22,243	26,943
Allowance for loan losses, ending balance	828,553	629,452	828,553	629,452	741,029
Allowance for loan losses, individually evaluated for impairment, ending balance
Allowance for loan losses, collectively evaluated for impairment, ending balance	828,553	629,452	828,553	629,452	741,029
Loans:
Loans receivable gross	41,156,553	41,293,201	41,156,553	41,293,201	41,386,147
Loans, individually evaluated for impairment, ending balance	420,195	286,800	420,195	286,800	339,513
Loans, collectively evaluated for impairment, ending balance	40,736,358	41,006,401	40,736,358	41,006,401	41,046,634
Loans Receivable | Commercial real estate
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	837,443	1,098,838	828,873	1,107,585	1,107,585
Provision charged to expense	(67,621)	119,900	(146,933)	111,153	(11,157)
Losses charged off		(257,043)		(257,043)	(356,270)
Recoveries	23,687		111,569		88,715
Allowance for loan losses, ending balance	793,509	961,695	793,509	961,695	828,873
Allowance for loan losses, individually evaluated for impairment, ending balance	231,740	137,608	231,740	137,608	262,177
Allowance for loan losses, collectively evaluated for impairment, ending balance	561,769	824,087	561,769	824,087	566,696
Loans:
Loans receivable gross	33,004,015	37,868,011	33,004,015	37,868,011	30,973,177
Loans, individually evaluated for impairment, ending balance	1,366,682	1,389,183	1,366,682	1,389,183	1,603,956
Loans, collectively evaluated for impairment, ending balance	31,637,333	36,478,828	31,637,333	36,478,828	29,369,221
Loans Receivable | Agricultural real estate
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	183,780	123,105	149,568	115,154	115,154
Provision charged to expense	1,606	(74,187)	35,818	(66,236)	34,414
Losses charged off
Recoveries
Allowance for loan losses, ending balance	185,386	48,918	185,386	48,918	149,568
Allowance for loan losses, individually evaluated for impairment, ending balance
Allowance for loan losses, collectively evaluated for impairment, ending balance	185,386	48,918	185,386	48,918	149,568
Loans:
Loans receivable gross	37,077,179	32,612,241	37,077,179	32,612,241	37,392,116
Loans, individually evaluated for impairment, ending balance
Loans, collectively evaluated for impairment, ending balance	37,077,179	32,612,241	37,077,179	32,612,241	37,392,116
Loans Receivable | Home equity
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	227,620	349,467	328,996	309,409	309,409
Provision charged to expense	(11,574)	(9,516)	(125,975)	76,761	86,076
Losses charged off		(20,000)		(66,744)	(80,126)
Recoveries	525	5,980	13,550	6,505	13,637
Allowance for loan losses, ending balance	216,571	325,931	216,571	325,931	328,996
Allowance for loan losses, individually evaluated for impairment, ending balance
Allowance for loan losses, collectively evaluated for impairment, ending balance	216,571	325,931	216,571	325,931	328,996
Loans:
Loans receivable gross	11,652,179	14,226,553	11,652,179	14,226,553	12,733,963
Loans, individually evaluated for impairment, ending balance	64,765	58,090	64,765	58,090	56,677
Loans, collectively evaluated for impairment, ending balance	11,587,414	14,168,463	11,587,414	14,168,463	12,677,286
Loans Receivable | Commercial loans
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	959,663	708,016	934,251	711,864	711,864
Provision charged to expense	11,911	103,614	37,323	99,450	219,102
Losses charged off
Recoveries	7,341		7,341	316	3,285
Allowance for loan losses, ending balance	978,915	811,630	978,915	811,630	934,251
Allowance for loan losses, individually evaluated for impairment, ending balance	648,701	515,688	648,701	515,688	610,779
Allowance for loan losses, collectively evaluated for impairment, ending balance	330,214	295,942	330,214	295,942	323,472
Loans:
Loans receivable gross	24,400,611	23,953,566	24,400,611	23,953,566	29,046,437
Loans, individually evaluated for impairment, ending balance	690,046	752,809	690,046	752,809	728,672
Loans, collectively evaluated for impairment, ending balance	23,710,565	23,200,757	23,710,565	23,200,757	28,317,765
Loans Receivable | Agricultural loans
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	44,570	62,562	43,930	58,428	58,428
Provision charged to expense	8,813	(26,528)	9,453	(22,394)	(14,498)
Losses charged off
Recoveries
Allowance for loan losses, ending balance	53,383	36,034	53,383	36,034	43,930
Allowance for loan losses, individually evaluated for impairment, ending balance
Allowance for loan losses, collectively evaluated for impairment, ending balance	53,383	36,034	53,383	36,034	43,930
Loans:
Loans receivable gross	10,676,640	10,263,526	10,676,640	10,263,526	10,982,491
Loans, individually evaluated for impairment, ending balance
Loans, collectively evaluated for impairment, ending balance	10,676,640	10,263,526	10,676,640	10,263,526	10,982,491
Loans Receivable | Consumer loans
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	173,674	128,927	151,474	138,385	138,385
Provision charged to expense	(6,715)	80,192	54,518	72,152	74,224
Losses charged off	(6,427)	(50,421)	(52,186)	(53,385)	(66,958)
Recoveries	601	753	7,327	2,299	5,823
Allowance for loan losses, ending balance	161,133	159,451	161,133	159,451	151,474
Allowance for loan losses, individually evaluated for impairment, ending balance		7,359		7,359	6,185
Allowance for loan losses, collectively evaluated for impairment, ending balance	161,133	152,092	161,133	152,092	145,289
Loans:
Loans receivable gross	14,361,986	14,939,089	14,361,986	14,939,089	14,571,819
Loans, individually evaluated for impairment, ending balance	6,505	7,359	6,505	7,359	14,392
Loans, collectively evaluated for impairment, ending balance	14,355,481	14,931,730	14,355,481	14,931,730	14,557,427
Loans Receivable | Unallocated
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Allowance for loan losses, beginning balance	239,976	192,355	161,343	158,559	158,559
Provision charged to expense	15,110	(34,963)	93,743	(1,167)	2,784
Losses charged off
Recoveries
Allowance for loan losses, ending balance	255,086	157,392	255,086	157,392	161,343
Allowance for loan losses, individually evaluated for impairment, ending balance
Allowance for loan losses, collectively evaluated for impairment, ending balance	255,086	157,392	255,086	157,392	161,326
Loans:
Loans receivable gross
Loans, individually evaluated for impairment, ending balance
Loans, collectively evaluated for impairment, ending balance

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Estimated Fair Values of Other Financial Instruments (Details 3) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Carrying Amount
Financial Assets
Cash and cash equivalents	$ 7,636,250	$ 7,293,711
Interest earning time deposits in banks	2,972,000	2,972,000
Other investments	89,497	96,041
Loans held for sale	742,147	711,986
Loans, net of allowance for loan losses	168,877,834	173,753,059
Federal Home Loan Bank stock	1,113,800	1,113,800
Interest receivable	2,078,170	2,053,472
Financial Liabilities
Deposits	258,384,484	258,520,729
Short-term borrowings	7,097,057	12,740,610
Advances from borrowers for taxes and insurance	924,287	832,345
Interest payable	240,747	276,757
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value Measurement | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial Assets
Cash and cash equivalents	7,636,250	7,293,711
Interest earning time deposits in banks
Other investments
Loans held for sale
Loans, net of allowance for loan losses
Federal Home Loan Bank stock
Interest receivable
Financial Liabilities
Deposits
Short-term borrowings
Advances from borrowers for taxes and insurance
Interest payable
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value Measurement | Significant Other Observable Inputs (Level 2)
Financial Assets
Cash and cash equivalents
Interest earning time deposits in banks	2,972,000	2,972,000
Other investments	89,497	96,041
Loans held for sale	742,147	711,986
Loans, net of allowance for loan losses
Federal Home Loan Bank stock	1,113,800	1,113,800
Interest receivable	2,078,170	2,053,472
Financial Liabilities
Deposits	141,533,115	135,656,067
Short-term borrowings	7,097,057	12,740,610
Advances from borrowers for taxes and insurance	924,287	832,345
Interest payable	240,747	276,757
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value Measurement | Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents
Interest earning time deposits in banks
Other investments
Loans held for sale
Loans, net of allowance for loan losses	167,198,862	172,609,490
Federal Home Loan Bank stock
Interest receivable
Financial Liabilities
Deposits	119,819,125	125,864,749
Short-term borrowings
Advances from borrowers for taxes and insurance
Interest payable
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Other Comprehensive Income Components and Related Taxes (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Equity [Abstract]
Net unrealized gains (losses) on securities available-for-sale	$ (2,057,683)	$ 4,388,778
Tax effect	699,612	(1,492,185)
Net-of-tax amount	$ (1,358,071)	$ 2,896,593

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LOAN PORTFOLIO COMPOSITION (Detail Textuals) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013 Contract	Jun. 30, 2012 Contract	Jun. 30, 2013 Contract	Jun. 30, 2012 Contract
Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan commitments reimbursement period			30 days
Percentage of applicant's total monthly obligations to total monthly income			38.00%
Agricultural loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment
Troubled debt restructurings, number of modification
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
TDR's defaulted as they were more than 90 days past due			110,792
Troubled debt restructurings, number of modification			2
Commercial Real Estate Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
TDR's defaulted as they were more than 90 days past due				28,000
Troubled debt restructurings, number of modification				1
Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment		269,909		269,909
Troubled debt restructurings, number of modification		2		2
Automobile Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Automobile loan term			60 months
Purchase Price
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratio originated	80.00%		80.00%
NADA Book Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratio originated	100.00%		100.00%
Commercial Real Estate and Commercial Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan amount that requires risk rating verification			500,000
Officer | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount			750,000
Director | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount			1,000,000
Board of Directors | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount			1,000,000
One-to-four family residential | Adjustable rate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest rate adjustments per year, maximum			2.00%
Interest rate adjustments cap on interest rate increases over the life of the loan	6.00%		6.00%
One-to-four family residential | Minimum | Freddie Mac
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			15 years
One-to-four family residential | Minimum | Adjustable rate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			1 year
One-to-four family residential | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			30 years
One-to-four family residential | Maximum | Adjustable rate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			30 years
Mortgage loans adjustment term			5 years
One-to-four family residential | Mortgage loans on real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	234,015		383,982	44,267
Troubled debt restructurings, number of modification	3		6	1
One-to-four family residential | Mortgage loans on real estate | Modification to Combine Notes and Capitalize Interest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modification			1
One-to-four family residential | Mortgage loans on real estate | Modifications Involved Rate Concessions
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modification			2
One-to-four family residential | Mortgage loans on real estate | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			80.00%
One-to-four family residential | Mortgage loans on real estate | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of total applicant's monthly mortgage payment total monthly income			28.00%
Commercial and Agricultural Real Estate Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum ratio of property's projected net cash flow to loan's debt service requirement			120.00%
Commercial and Agricultural Real Estate Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan value that requires written appraisals from licensed or certified appraisers	250,000		250,000
Commercial and Agricultural Real Estate Loans | Mortgage loans on real estate | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			80.00%
Commercial and Agricultural Real Estate Loans | Mortgage loans on real estate | Maximum | Adjustable rate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			5 years
Agricultural real estate | Mortgage loans on real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum ratio of property's projected net cash flow to loan's debt service requirement			120.00%
Troubled debt restructurings, recorded investment
Troubled debt restructurings, number of modification
Agricultural real estate | Mortgage loans on real estate | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan value that requires written appraisals from licensed or certified appraisers	250,000		250,000
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
TDR's defaulted as they were more than 90 days past due			5,141	9,819
Troubled debt restructurings, number of modification			1	1
Home equity | Mortgage loans on real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			95.00%
Troubled debt restructurings, recorded investment				6,041
Troubled debt restructurings, number of modification				1
Home equity | Mortgage loans on real estate | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			10 years
Commercial real estate | Mortgage loans on real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment			114,567
Troubled debt restructurings, number of modification			2
Consumer loans | Mortgage loans on real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment			$ 14,151	$ 18,818
Troubled debt restructurings, number of modification			2	2

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Allowance for loan losses of loans receivable	$ 3,472,536	$ 3,339,464
Valuation allowance of capitalized mortgage servicing rights	$ 116,807	$ 129,279
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	1,902,530	1,908,556

XML

LOAN PORTFOLIO COMPOSITION

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

LOAN PORTFOLIO COMPOSITION

5. LOAN PORTFOLIO COMPOSITION

At June 30, 2013 and December 31, 2012, the composition of the Company’s loan portfolio is shown below.

	June 30, 2013						December 31, 2012
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family residential	$	41,156,553			24.4	%	$	41,386,147			23.8	%
Commercial		33,004,015			19.5			30,973,177			17.8
Agricultural		37,077,179			22.0			37,392,116			21.5
Home equity		11,652,179			6.9			12,733,963			7.3
Total real estate loans		122,889,926			72.8			122,485,403			70.5
Commercial loans		24,400,611			14.4			29,046,437			16.7
Agricultural loans		10,676,640			6.3			10,982,491			6.3
Consumer loans		14,361,986			8.5			14,571,819			8.4
Total loans receivable		172,329,163			102.0			177,086,150			101.9
Less:
Net deferred loan fees		(21,207	)		(0.0	)		(6,373	)		(0.0	)
Allowance for loan losses		3,472,536			2.0			3,339,464			1.9
Total loans receivable, net	$	168,877,834			100.0	%	$	173,753,059			100.0	%

The Company believes that originating or purchasing sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures in place designed to focus lending efforts on the types, locations, and duration of loans most appropriate for the business model and markets. The Company’s principal lending activities include the origination of one-to four-family residential mortgage loans, multi-family loans, commercial real estate loans, agricultural loans, home equity lines of credits, commercial business loans, and consumer loans. The primary lending market includes the Illinois counties of Morgan, Macoupin and Montgomery. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, builders, attorneys and walk-in customers.  Upon receipt of a loan application, a credit report is obtained to verify specific information relating to the applicant’s employment, income, and credit standing.  In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company.  A loan application file is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness, and verifies the information provided.  The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval.  The board of directors has established individual lending authorities for each loan officer by loan type.  Loans over an individual officer’s lending limit must be approved by the officers’ loan committee consisting of the chairman of the board, president, chief lending officer and all lending officers, which meets three times a week, and has lending authority up to $750,000 depending on the type of loan.  Loans to borrowers with an aggregate principal balance over this limit, up to $1.0 million, must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, president, senior vice president, chief lending officer and at least two outside directors, plus all lending officers as non-voting members.  The board of directors approves all loans to borrowers with an aggregate principal balance over $1.0 million.  The board of directors ratifies all loans that are originated.  Once the loan is approved, the applicant is informed and a closing date is scheduled.  Loan commitments are typically funded within 30 days.

If the loan is approved, the borrower must provide proof of fire and casualty insurance on the property serving as collateral which insurance must be maintained during the full term of the loan; flood insurance is required in certain instances.  Title insurance or an attorney’s opinion based on a title search of the property is generally required on loans secured by real property.

One-to-Four Family Mortgage Loans - Historically, the Bank’s primary lending origination activity has been one-to-four family, owner-occupied, residential mortgage loans secured by property located in the Company’s market area.  The Company generates loans through marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses.  Generally, one-to-four family loan originations are limited to the financing of loans secured by properties located within the Company’s market area.  

Fixed rate one-to-four family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines.  The Company generally originates both fixed and adjustable rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency.

The Company originates for resale to Freddie Mac and the Federal Home Loan Bank fixed-rate one-to-four family residential mortgage loans with terms of 15 years or more.  The fixed-rate mortgage loans amortize monthly with principal and interest due each month.  Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option.  The Company offers fixed-rate one-to-four family residential mortgage loans with terms of up to 30 years without prepayment penalty.

The Company currently offers adjustable-rate mortgage loans for terms ranging up to 30 years.  They generally offer adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination.  Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan.  In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on the net interest income.  In the low interest rate environment that has existed over the past five years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio.  In addition, during this period borrowers have shown a preference for fixed-rate loans.  The Company has used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of one-year, three-years or five-years.  The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, interest rate risk position and competitors’ loan products.

Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provide an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage.  However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans.  Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase.  It is possible that during periods of rising interest rates that the risk of delinquencies and defaults on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower, resulting in increased loan losses. 

Residential first mortgage loans customarily include due-on-sale clauses, which gives the Company the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.  Due-on-sale clauses are a means of imposing assumption fees and increasing the interest rate on mortgage portfolio during periods of rising interest rates.

When underwriting residential real estate loans, the Company reviews and verifies each loan applicant’s income and credit history.  Management believes that stability of income and past credit history are integral parts in the underwriting process.  Generally, the applicant’s total monthly mortgage payment, including all escrow amounts, is limited to 28% of the applicant’s total monthly income.  In addition, total monthly obligations of the applicant, including mortgage payments, generally should not exceed 38% of total monthly income.  Written appraisals are generally required on real estate property offered to secure an applicant’s loan.  For one-to-four family real estate loans with loan to value ratios of over 80%, private mortgage insurance is required.  Fire and casualty insurance is also required on all properties securing real estate loans.  Title insurance, or an attorney’s title opinion, may be required, as circumstances warrant.

The Company does not offer an “interest only” mortgage loan product on one-to-four family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan).  They also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.  The Company does not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation).

Commercial Real Estate Loans - The Company originates and purchases commercial real estate loans.  Commercial real estate loans are secured primarily by improved properties such as multi-family residential, retail facilities and office buildings, restaurants and other non-residential buildings.  The maximum loan-to-value ratio for commercial real estate loans originated is generally 80%.  Commercial real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the prime rate and generally have a specified floor.  Many of the fixed-rate commercial real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity.  The Company purchases from time to time commercial real estate loan participations primarily from outside the Company’s market area. All participation loans are approved following a review to ensure that the loan satisfies the underwriting standards.

Underwriting standards for commercial real estate loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The income approach is primarily utilized to determine whether income generated from the applicant’s business or real estate offered as collateral is adequate to repay the loan.  There is an emphasis on the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%).  In underwriting a loan, the value of the real estate offered as collateral in relation to the proposed loan amount is considered.  Generally, the loan amount cannot be greater than 80% of the value of the real estate.  Written appraisals are usually obtained from either licensed or certified appraisers on all commercial real estate loans in excess of $250,000.  Creditworthiness of the applicant is assessed by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by commercial real estate generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances.  This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans.  Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related business and real estate property.  If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Agricultural Real Estate Loans - The Company originates and purchases agricultural real estate loans.  The maximum loan-to-value ratio for agricultural real estate loans we originate is generally 80%. Our agricultural real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the average yield on U.S. Treasury securities, adjusted to a constant maturity of one-year, three-years, or five-years and generally have a specified floor. Many of our fixed-rate agricultural real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity. We purchase from time to time agricultural real estate loan participations primarily from other local institutions within our market area. All participation loans are approved following a review to ensure that the loan satisfies our underwriting standards

Underwriting standards for agricultural real estate include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The income approach is primarily utilized to determine whether income generated from the applicant’s farm operation or real estate offered as collateral is adequate to repay the loan. We emphasize the ratio of the property’s projected cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%).  In underwriting a loan, we consider the value of the real estate offered as collateral in relation to the proposed loan amount.  Generally, the loan amount cannot be greater than 80% of the value of the real estate.  We usually obtain written appraisals from either licensed or certified appraisers on all agricultural real estate loans in excess of $250,000.  We assess the creditworthiness of the applicant by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by agricultural real estate generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances.  This increased credit risk is a result of several factors, including the effects of general economic and market conditions on farm operations and the successful operation or management of the properties securing the loans.  The repayment of loans secured by agricultural estate is typically dependent upon the successful operation of the farm and real estate property.  If the cash flow is reduced, the borrower’s ability to repay the loan may be impaired.

Home Equity Loans – The Company originates home equity loans and lines of credit, which are generally secured by the borrower’s principal residence.  The maximum amount of a home equity loan or line of credit is generally 95% of the appraised value of a borrower’s real estate collateral less the amount of any existing mortgages or related liabilities.  Home equity loans and lines of credit are approved with both fixed and adjustable interest rates which we determine based upon market conditions.  Such loans may be fully amortized over the life of the loan or have a balloon feature.  Generally, the maximum term for home equity loans is 10 years.

Underwriting standards for home equity loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area.  Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. 

Home equity loans entail greater risks than one-to-four family residential mortgage loans, which are secured by first lien mortgages.  In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage or depreciation in the value of the property or loss of equity to the first lien position.  Further, home equity loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default.

Commercial Business Loans - The Company originates commercial business loans to borrowers located in the Company’s market area which are secured by collateral other than real estate or which can be unsecured.  Commercial business loan participations are also purchased from other lenders, which may be made to borrowers outside the Company’s market area.  Commercial business loans are generally secured by equipment and inventory and generally are offered with adjustable rates tied to the prime rate or the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years and various terms of maturity generally from three years to five years.  Unsecured business loans are originated on a limited basis in those instances where the applicant’s financial strength and creditworthiness has been established.  Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business.  Personal guarantees are generally obtained from the borrower or a third party as a condition to originating its business loans.  

Underwriting standards for commercial and agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business.  The financial strength of each applicant is assessed through the review of financial statements and tax returns provided by the applicant.  The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records.  Business loans are periodically reviewed following origination.  Financial statements are requested at least annually and review them for substantial deviations or changes that might affect repayment of the loan.  Loan officers also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral.  Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Agricultural Business Loans - The Company originates agricultural business loans to borrowers located in our market area which are secured by collateral other than real estate or which can be unsecured. Agricultural business loans are generally secured by equipment and blanket security agreements on all farm assets.  These loans are generally offered with fixed rates with terms up to five years.  Agricultural business loans generally bear lower interest rates than residential loans due to competitive market pressures.  The repayment of agricultural business loans is generally dependent on the successful operation of the farm operation.  Personal guarantees are generally obtained from the borrower as a condition to originating agricultural business loans.

Underwriting standards for agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business.  The financial strength of each applicant is assessed through the review of financial statements, pro-forma cash flow statements, and tax returns provided by the applicant.  The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records.  Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan.  Loan officers may also visit the premises of borrowers to observe the operation, facilities, equipment, and personnel and to inspect the pledged collateral.  Underwriting standards for agricultural business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security. 

The repayment of agricultural business loans generally is dependent on the successful operation of a farm and can be adversely affected by fluctuations in crop prices, increase in interest rates, and changes in weather conditions.  These developments may result in smaller harvests and less income for farmers which may adversely affect such borrower’s ability to repay a loan, and potentially result in an increase in the level of problem loans and loan losses in our agricultural portfolio.  While not required, the majority of our agricultural business loans are covered by crop insurance, which provides protection against loss due to lower crop yields as a result of unfavorable weather conditions.

Consumer Loans – The Company originates consumer loans, including automobile loans, loans secured by deposit accounts, unsecured loans and mobile home loans.  Consumer loans are generally offered on a fixed-rate basis.  Automobile loans are offered with maturities of up to 60 months for new automobiles.  Loans secured by used automobiles will have maximum terms which vary depending upon the age of the automobile.  Automobile loans are generally originated with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value.  In the case of a new car loan, the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with us.

Underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area.  Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

Consumer loans entail greater risks than one-to-four family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets such as automobiles or loans that are unsecured.  In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation.  Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Such events would increase our risk of loss on unsecured loans.  Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of and for the periods ended June 30, 2013, June 30, 2012, and December 31, 2012.

	June 30, 2013
			Commercial			Agricultural
	1-4 Family		Real Estate			Real Estate		Home Equity			Commercial		Agricultural		Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance,
April 1, 2013	$	779,243	$	837,443		$	183,780	$	227,620		$	959,663	$	44,570	$	173,674		$	239,976	$	3,445,969
Provision charged to
expense		48,470		(67,621	)		1,606		(11,574	)		11,911		8,813		(6,715	)		15,110		-
Losses charged off		-		-			-		-			-		-		(6,427	)		-		(6,427	)
Recoveries		840		23,687			-		525			7,341		-		601			-		32,994
Ending balance,
June 30, 2013	$	828,553	$	793,509		$	185,386	$	216,571		$	978,915	$	53,383	$	161,133		$	255,086	$	3,472,536
Beginning Balance,
January 1, 2013	$	741,029	$	828,873		$	149,568	$	328,996		$	934,251	$	43,930	$	151,474		$	161,343	$	3,339,464
Provision charged to
expense		72,053		(146,933	)		35,818		(125,975	)		37,323		9,453		54,518			93,743		30,000
Losses charged off		-		-			-		-			-		-		(52,186	)		-		(52,186	)
Recoveries		15,471		111,569			-		13,550			7,341		-		7,327			-		155,258
Ending balance,
June 30, 2013	$	828,553	$	793,509		$	185,386	$	216,571		$	978,915	$	53,383	$	161,133		$	255,086	$	3,472,536
Ending balance:
individually evaluated
for impairment	$	-	$	231,740		$	-	$	-		$	648,701	$	-	$	-		$	-	$	880,441
Ending balance:
collectively evaluated
for impairment	$	828,553	$	561,769		$	185,386	$	216,571		$	330,214	$	53,383	$	161,133		$	255,086	$	2,592,095
Loans:
Ending balance	$	41,156,553	$	33,004,015		$	37,077,179	$	11,652,179		$	24,400,611	$	10,676,640	$	14,361,986		$	-	$	172,329,163
Ending balance:
individually evaluated
for impairment	$	420,195	$	1,366,682		$	-	$	64,765		$	690,046	$	-	$	6,505		$	-	$	2,548,193
Ending balance:
collectively evaluated
for impairment	$	40,736,358	$	31,637,333		$	37,077,179	$	11,587,414		$	23,710,565	$	10,676,640	$	14,355,481		$	-	$	169,780,970

	June 30, 2012
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate			Home Equity			Commercial		Agricultural			Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance,
April 1, 2012	$	667,641		$	1,098,838		$	123,105		$	349,467		$	708,016	$	62,562		$	128,927		$	192,355		$	3,330,911
Provision charged to
expense		11,488			119,900			(74,187	)		(9,516	)		103,614		(26,528	)		80,192			(34,963	)		170,000
Losses charged off		(70,295	)		(257,043	)		-			(20,000	)		-		-			(50,421	)		-			(397,759	)
Recoveries		20,618			-			-			5,980			-		-			753			-			27,351
Ending balance,
June 30, 2012	$	629,452		$	961,695		$	48,918		$	325,931		$	811,630	$	36,034		$	159,451		$	157,392		$	3,130,503
Beginning Balance,
January 1, 2012	$	697,223		$	1,107,585		$	115,154		$	309,409		$	711,864	$	58,428		$	138,385		$	158,559		$	3,296,607
Provision charged to
expense		(19,719	)		111,153			(66,236	)		76,761			99,450		(22,394	)		72,152			(1,167	)		250,000
Losses charged off		(70,295	)		(257,043	)		-			(66,744	)		-		-			(53,385	)		-			(447,467	)
Recoveries		22,243			-			-			6,505			316		-			2,299			-			31,363
Ending balance,
June 30, 2012	$	629,452		$	961,695		$	48,918		$	325,931		$	811,630	$	36,034		$	159,451		$	157,392		$	3,130,503
Ending balance:
individually evaluated
for impairment	$	-		$	137,608		$	-		$	-		$	515,688	$	-		$	7,359		$	-		$	660,655
Ending balance:
collectively evaluated
for impairment	$	629,452		$	824,087		$	48,918		$	325,931		$	295,942	$	36,034		$	152,092		$	157,392		$	2,469,848
Loans:
Ending balance	$	41,293,201		$	37,868,011		$	32,612,241		$	14,226,553		$	23,953,566	$	10,263,526		$	14,939,089		$	-		$	175,156,187
Ending balance:
individually evaluated
for impairment	$	286,800		$	1,389,183		$	-		$	58,090		$	752,809	$	-		$	7,359		$	-		$	2,494,241
Ending balance:
collectively evaluated
for impairment	$	41,006,401		$	36,478,828		$	32,612,241		$	14,168,463		$	23,200,757	$	10,263,526		$	14,931,730		$	-		$	172,661,946

	December 31, 2012
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial		Agricultural			Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance,
December 31, 2011	$	697,223		$	1,107,585		$	115,154	$	309,409		$	711,864	$	58,428		$	138,385		$	158,559	$	3,296,607
Provision charged to
expense		99,055			(11,157	)		34,414		86,076			219,102		(14,498	)		74,224			2,784		490,000
Losses charged off		(82,192	)		(356,270	)		-		(80,126	)		-		-			(66,958	)		-		(585,546	)
Recoveries		26,943			88,715			-		13,637			3,285		-			5,823			-		138,403
Ending balance,
December 31, 2012	$	741,029		$	828,873		$	149,568	$	328,996		$	934,251	$	43,930		$	151,474		$	161,343	$	3,339,464
Ending balance:
individually evaluated
for impairment	$	-		$	262,177		$	-	$	-		$	610,779	$	-		$	6,185		$	-	$	879,141
Ending balance:
collectively evaluated
for impairment	$	741,029		$	566,696		$	149,568	$	328,996		$	323,472	$	43,930		$	145,289		$	161,326	$	2,460,306
Loans:
Ending balance	$	41,386,147		$	30,973,177		$	37,392,116	$	12,733,963		$	29,046,437	$	10,982,491		$	14,571,819		$	-	$	177,086,150
Ending balance:
individually evaluated
for impairment	$	339,513		$	1,603,956		$	-	$	56,677		$	728,672	$	-		$	14,392		$	-	$	2,743,210
Ending balance:
collectively evaluated
for impairment	$	41,046,634		$	29,369,221		$	37,392,116	$	12,677,286		$	28,317,765	$	10,982,491		$	14,557,427		$	-	$	174,342,940

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral.  These estimates are affected by changing economic conditions and the economic prospects of borrowers.

The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to cover probable credit losses inherent in the loan portfolio at the balance sheet date.  The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

A loan is considered impaired when, based on current information and events, it is probable that the scheduled payments of principal or interest will not be able to be collected when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.  Accordingly, individual consumer and residential loans are not separately identified for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The general component covers non-classified loans and is based on historical charge-off experience and expected loss given the internal risk rating process.  The loan portfolio is stratified into homogeneous groups of loans that possess similar loss characteristics and an appropriate loss ratio adjusted for other qualitative factors is applied to the homogeneous pools of loans to estimate the incurred losses in the loan portfolio.  

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on all loans at origination.  In addition, lending relationships over $500,000, new commercial and commercial real estate loans, and watch list credits are reviewed annually by our loan review department in order to verify risk ratings.  The Company uses the following definitions for risk ratings:

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2013 and December 31, 2012.

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Home Equity
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
Rating:
Pass	$	37,889,742	$	38,123,451	$	30,644,616	$	28,283,081	$	37,077,179	$	37,392,116	$	10,972,110	$	11,919,440
Special Mention		910,740		1,273,558		146,921		187,936		-		-		242,777		272,563
Substandard		2,356,071		1,989,138		2,212,478		2,502,160		-		-		437,292		541,960
Total	$	41,156,553	$	41,386,147	$	33,004,015	$	30,973,177	$	37,077,179	$	37,392,116	$	11,652,179	$	12,733,963
	Commercial				Agricultural				Consumer				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2013		2012		2013		2012		2013		2012		2013		2012
Rating:
Pass	$	23,696,812	$	28,301,663	$	10,676,640	$	10,982,491	$	14,184,401	$	14,291,487	$	165,141,500	$	169,293,729
Special Mention		-		849		-		-		96,419		111,945		1,396,857		1,846,851
Substandard		703,799		743,925		-		-		81,166		168,387		5,790,806		5,945,570
Total	$	24,400,611	$	29,046,437	$	10,676,640	$	10,982,491	$	14,361,986	$	14,571,819	$	172,329,163	$	177,086,150

The following tables present the Company’s loan portfolio aging analysis as of June 30, 2013 and December 31, 2012.

	June 30, 2013
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	389,717	$	86,357	$	783,457	$	1,259,531	$	39,897,022	$	41,156,553	$	75,011
Commercial real estate		17,242		-		259,791		277,033		32,726,982		33,004,015		-
Agricultural real estate		-		-		-		-		37,077,179		37,077,179		-
Home equity		143,748		62,047		103,900		309,695		11,342,484		11,652,179		-
Commercial		-		-		-		-		24,400,611		24,400,611		-
Agricultural		-		-		-		-		10,676,640		10,676,640		-
Consumer		127,237		21,274		28,845		177,356		14,184,630		14,361,986		-
Total	$	677,944	$	169,678	$	1,175,993	$	2,023,615	$	170,305,548	$	172,329,163	$	75,011

	December 31, 2012
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	727,315	$	213,126	$	984,996	$	1,925,437	$	39,460,710	$	41,386,147	$	-
Commercial real estate		-		-		279,622		279,622		30,693,555		30,973,177		-
Agricultural real estate		-		-		-		-		37,392,116		37,392,116		-
Home equity		158,414		70,596		136,508		365,518		12,368,445		12,733,963		-
Commercial		-		-		-		-		29,046,437		29,046,437		-
Agricultural		-		-		-		-		10,982,491		10,982,491		-
Consumer		181,171		64,390		33,692		279,253		14,292,566		14,571,819		-
Total	$	1,066,900	$	348,112	$	1,434,818	$	2,849,830	$	174,236,320	$	177,086,150	$	-

The accrual of interest on loans is generally discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  In all cases, loans are placed on non-accrual or charged-off at the earlier date if collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual or charged-off are reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses.  Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans.  The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring.

The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms.  Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.  Restructured loans in compliance with modified terms are classified as impaired.

The following tables present impaired loans at or for the three and six months ended June 30, 2013 and the year ended December 31, 2012.

	Three Months Ended June 30, 2013
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	420,195	$	420,195	$	-	$	421,929	$	3,260	$	1,552
Commercial real estate		166,587		166,587		-		221,892		6,798		6,759
Home equity		64,756		64,756		-		53,741		962		954
Consumer		6,605		6,605		-		6,907		122		130
Loans with a specific allowance:
Commercial real estate		1,200,095		1,200,095		231,740		1,206,167		15,872		16,536
Commercial		690,046		690,046		648,701		731,642		7,724		7,809
Total:
One-to-four family residential		420,195		420,195		-		421,929		3,260		1,552
Commercial real estate		1,366,682		1,366,682		231,740		1,428,059		22,670		23,295
Commercial		690,046		690,046		648,701		731,642		7,724		7,809
Home equity		64,765		64,765		-		53,741		962		954
Consumer		6,505		6,505		-		6,907		122		130
Total	$	2,548,193	$	2,548,193	$	880,441	$	2,642,278	$	34,738	$	33,740

	Six Months Ended June 30, 2013
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	420,195	$	420,195	$	-	$	423,155	$	7,502	$	5,729
Commercial real estate		166,587		166,587		-		216,917		6,798		6,759
Home equity		64,765		64,765		-		48,879		1,825		1,815
Consumer		6,505		6,505		-		7,385		259		239
Loans with a specific allowance:
Commercial real estate		1,200,095		1,200,095		231,740		1,222,921		38,506		39,059
Commercial		690,046		690,046		648,701		739,709		17,440		17,839
Total:
One-to-four family residential		420,195		420,195		-		423,155		7,502		5,729
Commercial real estate		1,366,682		1,366,682		231,740		1,439,838		45,304		45,818
Commercial		690,046		690,046		648,701		739,709		17,440		17,839
Home equity		64,765		64,765		-		48,879		1,825		1,815
Consumer		6,505		6,505		-		7,385		259		239
Total	$	2,548,193	$	2,548,193	$	880,441	$	2,658,966	$	72,330	$	71,440

	Year Ended December 31, 2012
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	339,513	$	339,513	$	-	$	343,593	$	17,163	$	16,909
Commercial real estate		201,135		201,135		-		205,756		27,727		16,136
Home equity		56,677		56,677		-		57,934		4,087		4,162
Consumer		8,207		8,207		-		9,795		495		422
Loans with a specific allowance:
Commercial real estate		1,402,821		1,402,821		262,177		1,443,005		91,130		91,075
Commercial		728,672		728,672		610,779		780,979		44,887		52,898
Consumer		6,185		6,185		6,185		7,096		573		576
Total:
One-to-four family residential		339,513		339,513		-		343,593		17,163		16,909
Commercial real estate		1,603,956		1,603,956		262,177		1,648,761		118,857		107,211
Commercial		728,672		728,672		610,779		780,979		44,887		52,898
Home equity		56,677		56,677		-		57,934		4,087		4,162
Consumer		14,392		14,392		6,185		16,891		1,068		998
Total	$	2,743,210	$	2,743,210	$	879,141	$	2,848,158	$	186,062	$	182,178

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDR’s), where economic concessions have been granted to borrowers who have experienced financial difficulties, that were classified as impaired.   These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  TDR’s are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When loans are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or based upon on the current fair value of the collateral, less selling costs for collateral dependent loans.  If the Company determined that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.  In periods subsequent to modification, the Company evaluates all TDR’s, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

The following table presents the recorded balance, at original cost, of TDR’s, as of June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
One-to-four family residential	$	616,734	$	267,916
Commercial real estate		1,086,089		1,011,350
Agricultural real estate		-		-
Home equity		81,824		84,123
Commercial loans		662,382		701,271
Agricultural loans		-		-
Consumer loans		33,146		91,206
Total	$	2,480,175	$	2,155,866

The following table presents the recorded balance, at original cost, of TDR’s, which were performing according to the terms of the restructuring, as of June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
One-to-four family residential	$	505,942	$	127,399
Commercial real estate		1,086,089		983,450
Agricultural real estate		-		-
Home equity		76,683		84,123
Commercial loans		662,382		701,271
Agricultural loans		-		-
Consumer loans		33,146		89,045
Total	$	2,364,242	$	1,985,288

The following tables present loans modified as TDR’s during the three and six months ended June 30, 2013 and 2012.

	Three Months Ended				Six Months Ended
	June 30, 2013				June 30, 2013
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		3	$	234,015		6	$	383,982
Commercial real estate		-		-		2		114,567
Agricultural real estate		-		-		-		-
Home equity		-		-		-		-
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		-		-		2		14,151
Total		3	$	234,015		10	$	512,700

	Three Months Ended				Six Months Ended
	June 30, 2012				June 30, 2012
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	44,267
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		-		-		1		6,041
Commercial loans		2		269,909		2		269,909
Agricultural loans		-		-		-		-
Consumer loans		2		18,818		2		18,818
Total		4	$	288,727		6	$	339,035

2013 Modifications

During the six month period ended June 30, 2013, the Company modified six one-to-four family residential real estate loans, with a recorded investment of $383,982, which were deemed to be TDR’s.  One modification was made to combine notes and capitalize interest.  Two of the modifications involved rate concessions.  Three of the modifications were made to renew notes and capitalize real estate taxes.  None of the modifications resulted in a write-off of the principal balance.

The Company also modified two commercial real estate loans with a recorded investment of $114,567.  Both modifications were made for the same borrower to provide some payment concessions while trying to sell the property.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

The Company also modified two consumer loans with a recorded investment of $14,151.  One modification was made to combine notes and capitalize interest.  The second modification was a renewal with a rate concession.  Neither modification resulted in a write-off of the principal balance.

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses.  During the six month period ended June 30, 2013, two residential real estate loans of $110,792 and one home equity loan of $5,141 that were considered TDR’s defaulted as they were more than 90 days past due at June 30, 2013.  Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

2012 Modifications

During the six month period ended June 30, 2012, the Company modified one one-to-four family residential real estate loan, with a recorded investment of $44,267, which was deemed to be a TDR.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

The Company also modified one home equity loan with a recorded investment of $6,041.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance. 

The Company also modified two commercial loans with a total recorded investment of $269,909.  Both modifications were made to reduce the contractual interest rate and payment amount.  Neither modification resulted in a write-off of the principal balance.

The Company also modified two consumer loans with a total recorded investment of $18,818.  Both modifications were made to extend the term of the loans to lower the payment amount.  Neither modification resulted in a reduction of the contractual interest rate or a write-off of the principal balance.

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses.  During the six month period ended June 30, 2012, one commercial real estate loan of $28,000, and one home equity loan of $9,819 that were considered TDR’s defaulted as they were more than 90 days past due at June 30, 2012.  Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

The following table presents the Company’s nonaccrual loans at June 30, 2013 and December 31, 2012.  This table excludes performing troubled debt restructurings.

	June 30, 2013		December 31, 2012
One-to-four family residential	$	1,326,814	$	1,203,328
Commercial real estate		386,637		560,073
Agricultural real estate		-		-
Home equity		226,870		276,877
Commercial loans		44,253		51,436
Agricultural loans		-		-
Consumer loans		41,580		122,064
Total	$	2,026,154	$	2,213,778

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Net Income	$ 760,075	$ 847,063	$ 1,772,523	$ 1,761,813
Other Comprehensive Income (loss)
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $(1,713,570) and $431,054 for the three months ended June 30, 2013 and 2012, respectively, and $(1,957,571) and $484,101 for the six months ended June 30, 2013 and 2012, respectively.	(3,326,340)	836,753	(3,799,991)	939,724
Less: reclassification adjustment for realized gains included in net income, net of taxes of $35,587 and $102,537, for the three months ended June 30, 2013 and 2012, respectively, and $234,226 and $179,149 for the six months ended June 30, 2013 and 2012, respectively.	69,081	199,043	454,673	347,759
Total other comprehensive income	(3,395,421)	637,710	(4,254,664)	591,965
Comprehensive Income (Loss)	$ (2,635,346)	$ 1,484,773	$ (2,482,141)	$ 2,353,778

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MORTGAGE SERVICING RIGHTS - Mortgage Servicing Rights Measured using Amortization Method with Aggregate Activity in Related Valuation Allowances - Activity in the valuation allowance for mortgage servicing rights (Details 1) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Transfers And Servicing [Abstract]
Capitalized mortgage servicing rights, valuation allowance , balance beginning of year	$ 129,279	$ 173,791
Capitalized mortgage servicing rights, valuation allowance Additions
Capitalized mortgage servicing rights, valuation allowance , Reductions	(12,472)	(44,512)
Capitalized mortgage servicing rights, valuation allowance , balance end of period	$ 116,807	$ 129,279

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 7,636,250	$ 7,293,711
Interest-earning time deposits in banks	2,972,000	2,972,000
Available for sale	109,924,109	115,904,297
Federal Home Loan Bank stock	1,113,800	1,113,800
Other investment securities	89,497	96,041
Loans held for sale - net	742,147	711,986
Loans receivable - net of allowance for loan losses of $3,472,536 and $3,339,464 as of June 30, 2013 and December 31, 2012	168,877,834	173,753,059
Premises and equipment - net	5,601,619	5,654,776
Cash surrender value of life insurance	6,713,570	6,612,642
Accrued interest receivable	2,078,170	2,053,472
Goodwill	2,726,567	2,726,567
Capitalized mortgage servicing rights, net of valuation allowance of $116,807 and $129,279 as of June 30, 2013 and December 31, 2012	654,477	664,436
Real estate owned	137,193	137,193
Income taxes receivable	253,156
Deferred income taxes	2,655,821	464,548
Other assets	1,022,010	1,804,184
Total Assets	313,198,220	321,446,238
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	258,384,484	258,520,729
Other borrowings	7,097,057	12,740,610
Advance payments by borrowers for taxes and insurance	924,287	832,345
Accrued interest payable	240,747	276,757
Deferred compensation payable	3,839,100	3,707,402
Income taxes payable		214,115
Other liabilities	1,435,865	1,033,951
Total liabilities	271,921,540	277,325,909
Commitments and contingencies
Preferred stock, $0.01 par value - authorized 10,000,000 shares; none issued and outstanding
Common stock, $0.01 par value - authorized 25,000,000 shares; issued 1,902,530 shares as of June 30, 2013 and 1,908,556 shares as of December 31, 2012	19,025	19,086
Additional paid-in-capital	15,854,388	15,943,273
Retained earnings	27,074,738	25,585,757
Less: Unallocated ESOP shares	(313,400)	(324,380)
Accumulated other comprehensive income (loss)	(1,358,071)	2,896,593
Total stockholders' equity	41,276,680	44,120,329
Total Liabilities and Stockholders' Equity	313,198,220	321,446,238
Investment Securities
ASSETS
Available for sale	60,588,605	63,431,342
Mortgage-backed securities (government-sponsored enterprises - residential)
ASSETS
Available for sale	$ 49,335,504	$ 51,956,481

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT - Amount Reclassified from Accumulated Other Comprehensive Income and Affected Line Items in Statements of Income (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	$ (35,587)	$ (102,537)	$ (234,226)	$ (179,149)
Total reclassification out of AOCI	69,081	199,043	454,673	347,759
Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	(35,587)	(102,537)	(234,226)	(179,149)
Total reclassification out of AOCI	69,081	199,043	454,673	347,759
Reclassification out of Accumulated Other Comprehensive Income | Unrealized gains (losses) on available-for-sale securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of available-for-sale securities	$ 104,668	$ 301,580	$ 688,899	$ 526,908

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MORTGAGE SERVICING RIGHTS (Tables)

6 Months Ended

Jun. 30, 2013

Mortgage Servicing Rights [Abstract]

Schedule of activity in balance of mortgage servicing rights measured using amortization method

	June 30, 2013			December 31, 2012
Balance, beginning of year	$	664,436		$	697,733
Servicing rights capitalized		63,515			219,975
Amortization of servicing rights		(85,946	)		(297,784	)
Change in valuation allowance		12,472			44,512
Balance, end of period	$	654,477		$	664,436

Schedule of activity in valuation allowance for mortgage servicing rights

	June 30, 2013			December 31, 2012
Balance, beginning of year	$	129,279		$	173,791
Additions		-			-
Reductions		(12,472	)		(44,512	)
Balance, end of period	$	116,807		$	129,279

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STOCK BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Share based Payments [Abstract]

Schedule of summary of ESOP shares

	June 30, 2013		June 30, 2012
Unearned shares		31,340		34,983
Shares committed for release		1,098		1,079
Allocated shares		56,292		52,815
Total ESOP shares		88,730		88,877
Fair value of unearned shares	$	597,340	$	591,213

Schedule of stock option activity

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Instrinsic
	Options			Price/Share		Life (in years)		Value
Outstanding, December 31, 2012		107,338		$	15.60
Granted		-
Exercised		(5,902	)		15.03
Forfeited		-			-
Outstanding, June 30, 2013		101,436		$	15.63		8.66	$	347,735
Exercisable, June 30, 2013		18,251		$	15.55		8.27	$	64,075

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LOAN PORTFOLIO COMPOSITION - Nonaccrual Loans (Details 8) (Loans Receivable, USD $)	Jun. 30, 2013	Dec. 31, 2012
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 2,026,154	$ 2,213,778
One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	1,326,814	1,203,328
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	386,637	560,073
Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Home equity
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	226,870	276,877
Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	44,253	51,436
Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 41,580	$ 122,064

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements (Details 2) (Significant Unobservable Inputs (Level 3), USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Real Estate Owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis	$ 137,193	$ 137,193
Valuation Technique	Market comparable properties	Market comparable properties
Unobservable Inputs	Comparability adjustments	Comparability adjustments
Range (Weighted Average)		26.00%
Collateral-dependent impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis	$ 598,272	$ 1,032,580
Valuation Technique	Market comparable properties	Market comparable properties
Unobservable Inputs	Marketability discount	Marketability discount
Range (Weighted Average)	25.00%	25.00%
Collateral-dependent impaired loans | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	20.00%	20.00%
Collateral-dependent impaired loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range (Weighted Average)	30.00%	30.00%

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LOAN PORTFOLIO COMPOSITION - Loan Portfolio Aging Analysis (Details 3) (Loans Receivable, USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due	$ 677,944	$ 1,066,900
60-89 Days Past Due	169,678	348,112
Greater Than 90 Days	1,175,993	1,434,818
Total Past Due	2,023,615	2,849,830
Current	170,305,548	174,236,320
Loans receivable gross	172,329,163	177,086,150	175,156,187
Total Loans >90 Days & Accruing	75,011
One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due	389,717	727,315
60-89 Days Past Due	86,357	213,126
Greater Than 90 Days	783,457	984,996
Total Past Due	1,259,531	1,925,437
Current	39,897,022	39,460,710
Loans receivable gross	41,156,553	41,386,147	41,293,201
Total Loans >90 Days & Accruing	75,011
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due	17,242
60-89 Days Past Due
Greater Than 90 Days	259,791	279,622
Total Past Due	277,033	279,622
Current	32,726,982	30,693,555
Loans receivable gross	33,004,015	30,973,177	37,868,011
Total Loans >90 Days & Accruing
Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days
Total Past Due
Current	37,077,179	37,392,116
Loans receivable gross	37,077,179	37,392,116	32,612,241
Total Loans >90 Days & Accruing
Home equity
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due	143,748	158,414
60-89 Days Past Due	62,047	70,596
Greater Than 90 Days	103,900	136,508
Total Past Due	309,695	365,518
Current	11,342,484	12,368,445
Loans receivable gross	11,652,179	12,733,963	14,226,553
Total Loans >90 Days & Accruing
Commercial loans
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days
Total Past Due
Current	24,400,611	29,046,437
Loans receivable gross	24,400,611	29,046,437	23,953,566
Total Loans >90 Days & Accruing
Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days
Total Past Due
Current	10,676,640	10,982,491
Loans receivable gross	10,676,640	10,982,491	10,263,526
Total Loans >90 Days & Accruing
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
30-59 Days Past Due	127,237	181,171
60-89 Days Past Due	21,274	64,390
Greater Than 90 Days	28,845	33,692
Total Past Due	177,356	279,253
Current	14,184,630	14,292,566
Loans receivable gross	14,361,986	14,571,819	14,939,089
Total Loans >90 Days & Accruing

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STOCK BASED COMPENSATION (Detail Textuals) (USD $)	1 Months Ended	6 Months Ended
	Apr. 24, 2012	Jun. 30, 2013
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Common stock reserved and awarded	104,035
Stock Options
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Vesting period	5 years
Common stock reserved and awarded
Award expiration period	10 years
Closing price per share		$ 19.06
Jacksonville Savings Bank Employee Stock Ownership Plan (ESOP)
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Common stock, shares issued in stock offerings		41,614
ESOP shares, percentage of common stock issued in the offering		4.00%
Loan repayment term, maximum		20 years
Vesting period		6 years

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LOAN PORTFOLIO COMPOSITION - Composition of Loan Portfolio (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Accounts Notes And Loans Receivable [Line Items]
Allowance for loan losses	$ 3,472,536	$ 3,339,464
Net loans	168,877,834	173,753,059
Mortgage loans on real estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	122,889,926	122,485,403
Loan portfolio, percentage	72.80%	70.50%
Loans Receivable
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	172,329,163	177,086,150	175,156,187
Net deferred loan fees	(21,207)	(6,373)
Allowance for loan losses	3,472,536	3,339,464
Net loans	168,877,834	173,753,059
Loan portfolio, percentage	102.00%	101.90%
Net deferred loan fees	0.00%	0.00%
Allowance for loan losses	2.00%	1.90%
Total loans receivable, net	100.00%	100.00%
Loans Receivable | One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	41,156,553	41,386,147	41,293,201
Loan portfolio, percentage	24.40%	23.80%
Loans Receivable | Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	33,004,015	30,973,177	37,868,011
Loan portfolio, percentage	19.50%	17.80%
Loans Receivable | Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	37,077,179	37,392,116	32,612,241
Loan portfolio, percentage	22.00%	21.50%
Loans Receivable | Home equity
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	11,652,179	12,733,963	14,226,553
Loan portfolio, percentage	6.90%	7.30%
Loans Receivable | Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	24,400,611	29,046,437	23,953,566
Loan portfolio, percentage	14.40%	16.70%
Loans Receivable | Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	10,676,640	10,982,491	10,263,526
Loan portfolio, percentage	6.30%	6.30%
Loans Receivable | Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	$ 14,361,986	$ 14,571,819	$ 14,939,089
Loan portfolio, percentage	8.50%	8.40%

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STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Share based Payments [Abstract]

STOCK BASED COMPENSATION

4. STOCK–BASED COMPENSATION

In connection with our 2010 second step conversion and related stock offering, the ESOP purchased an additional 41,614 shares for its Employee Stock Ownership Plan (ESOP) for the exclusive benefit of eligible employees.  The ESOP borrowed funds from the Company in an amount sufficient to purchase the 41,614 shares (approximately 4% of the common stock issued in the offering).  The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Bank and dividends received by the ESOP, with funds from any contributions on ESOP assets.  Contributions will be applied to repay interest on the loan first, and the remainder will be applied to principal.  The loan is expected to be repaid over a period of up to 20 years.  Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid.  Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation, relative to total compensation of all active participants.  Participants will vest on a pro-rata basis and reach 100% vesting in the accrued benefits under the ESOP after six years.  Vesting is accelerated upon retirement, death, or disability of the participant or a change in control of the Bank.  Forfeitures will be reallocated to remaining plan participants.  Benefits may be payable upon retirement, death, disability, separation from service, or termination of the ESOP.  Since the Bank’s annual contributions are discretionary, benefits payable under the ESOP cannot be estimated.

In the event a terminated ESOP participant desires to sell his or her shares of the Company’s stock, the ESOP includes a put option, which is a right to demand that the Company buy any shares of its stock distributed to participants at fair value.

The Company is accounting for its ESOP in accordance with ASC Topic 718, “Employers Accounting for Employee Stock Ownership Plans.”  Accordingly, the debt of the ESOP is eliminated in consolidation and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheet.  Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement.  As shares are committed to be released from the collateral, the Company reports compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations.  Dividends, if any, on unallocated shares are recorded as a reduction of debt and accrued interest.

A summary of ESOP shares at June 30, 2013 and 2012 is shown below.

	June 30, 2013		June 30, 2012
Unearned shares		31,340		34,983
Shares committed for release		1,098		1,079
Allocated shares		56,292		52,815
Total ESOP shares		88,730		88,877
Fair value of unearned shares	$	597,340	$	591,213

On April 24, 2012, the compensation committee of the board of directors approved the awards of 104,035 options to purchase Company common stock.  The stock options vest over a five-year period and expire ten years after issuance.  Apart from the vesting schedule, there are no performance-based conditions or any other material conditions applicable to the options issued.

The following table summarizes stock option activity for the six months ended June 30, 2013.

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Instrinsic
	Options			Price/Share		Life (in years)		Value
Outstanding, December 31, 2012		107,338		$	15.60
Granted		-
Exercised		(5,902	)		15.03
Forfeited		-			-
Outstanding, June 30, 2013		101,436		$	15.63		8.66	$	347,735
Exercisable, June 30, 2013		18,251		$	15.55		8.27	$	64,075

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price.  The value is based upon a closing price of $19.06 per share on June 30, 2013.

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INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Schedule of reconciliation of income tax expense at statutory rate to actual income tax expense

	June 30, 2013			June 30, 2012
Computed at the statutory rate (34%)	$	843,829		$	825,321
Increase (decrease) resulting from
Tax exempt interest		(249,632	)		(268,978	)
State income taxes, net		146,828			141,573
Increase in cash surrender value		(32,555	)		(32,054	)
Other, net		856			(261	)
Actual tax expense	$	709,326		$	665,601

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LOAN PORTFOLIO COMPOSITION - Recorded Balance at Original Cost of Troubled Debt Restructurings which were Performing According to Terms of Restructuring (Details 6) (Loans Receivable, USD $)	Jun. 30, 2013	Dec. 31, 2012
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing	$ 2,364,242	$ 1,985,288
One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing	505,942	127,399
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing	1,086,089	983,450
Agricultural real estate
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing
Home equity
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing	76,683	84,123
Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing	662,382	701,271
Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Troubled debt restructurings, original cost, performing	$ 33,146	$ 89,045

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME

7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

	June 30, 2013			December 31, 2012
Net unrealized gains (losses) on securities
available-for-sale	$	(2,057,683	)	$	4,388,778
Tax effect		699,612			(1,492,185	)
Net-of-tax amount	$	(1,358,071	)	$	2,896,593

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

EARNINGS PER SHARE

3. EARNINGS PER SHARE

Earnings Per Share - Basic earnings per share is determined by dividing net income for the period by the weighted average number of common shares.  Diluted earnings per share considers the potential effects of the exercise of the outstanding stock options under the Company’s stock option plans.

The following reflects earnings per share calculations for basic and diluted methods:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Net income available to common
shareholders	$	760,075	$	847,063	$	1,772,523	$	1,761,813
Basic average shares outstanding		1,869,499		1,886,211		1,873,692		1,885,638
Diluted potential common shares:
Stock option equivalents		299		475		284		326
Diluted average shares outstanding		1,869,798		1,886,686		1,873,976		1,885,964
Basic earnings per share	$	0.41	$	0.45	$	0.95	$	0.93
Diluted earnings per share	$	0.41	$	0.45	$	0.95	$	0.93

Stock options for 100,335 shares of common stock were not considered in computing diluted earnings per share for the three and six month periods ending June 30, 2013, because they were anti-dilutive.  Stock options for 104,035 shares of common stock were not considered in computing diluted earnings per share for the three and six month periods ending June 30, 2012, because they were anti-dilutive.

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (USD $)	Common Stock	Additional Paid-in Capital	Retained Earnings	Unallocated ESOP Shares	Accumulated Other Comprehensive Income (Loss)	Total
BALANCE at Dec. 31, 2012	$ 19,086	$ 15,943,273	$ 25,585,757	$ (324,380)	$ 2,896,593	$ 44,120,329
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income			1,772,523			1,772,523
Other comprehensive income (loss)					(4,254,664)	(4,254,664)
Stock repurchases	(108)	(208,501)				(208,609)
Exercise of stock options	59	86,834				86,893
Less purchase/retirement of stock	(12)	(23,442)				(23,454)
Tax benefit of non-qualified options		1,796				1,796
Vesting options expense		44,711				44,711
Shares held by ESOP, committed to be released		9,717		10,980		20,697
Dividends ($0.15 per share)			(283,542)			(283,542)
BALANCE at Jun. 30, 2013	$ 19,025	$ 15,854,388	$ 27,074,738	$ (313,400)	$ (1,358,071)	$ 41,276,680

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Fair Value Measurements of Assets Recognized in Balance Sheets on Recurring Basis (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	$ 109,924,109	$ 115,904,297
Fair Value, Measurements, Recurring | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	11,151,851	10,328,880
Fair Value, Measurements, Recurring | Mortgage-backed securities (government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	49,335,504	51,956,481
Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	49,436,754	53,102,462
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Mortgage-backed securities (government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	11,151,851	10,328,880
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Mortgage-backed securities (government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	49,335,504	51,956,481
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	49,436,754	53,102,462
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Mortgage-backed securities (government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale

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INVESTMENTS - Amortized Cost and Fair Value of Available-for-Sale Securities by Contractual Maturities (Details 1) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Available-for-sale securities, Amortized Cost
Within one year	$ 100,814
One to five years	10,272,899
Five to ten years	22,312,885
After ten years	28,937,784
Available-for-sale securities, amortized cost, subtotal	61,624,382
Available-for-sale securities, amortized cost	111,981,792	110,999,045
Available-for-sale securities, Fair Value
Within one year	101,369
One to five years	10,634,124
Five to ten years	22,240,606
After ten years	27,612,506
Available-for-sale Securities, fair value, subtotal	60,588,605
Available-for-sale securities, fair value	109,924,109	115,904,297
Mortgage-backed securities (government-sponsored enterprises - residential)
Available-for-sale securities, Amortized Cost
Available-for-sale securities, amortized cost	50,357,410
Available-for-sale securities, Fair Value
Available-for-sale securities, fair value	$ 49,335,504	$ 51,956,481

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STOCK BASED COMPENSATION - Summary of ESOP Shares (Details) (USD $)	Jun. 30, 2013	Jun. 30, 2012
Disclosure Of Compensation Related Costs Share based Payments [Abstract]
Unearned shares	31,340	34,983
Shares committed for release	1,098	1,079
Allocated shares	56,292	52,815
Total ESOP shares	88,730	88,877
Fair value of unearned shares	$ 597,340	$ 591,213

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INCOME TAXES - Reconciliation of Income Tax Expense at Statutory Rate to Actual Income Tax Expense (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Computed at the statutory rate (34%)			$ 843,829	$ 825,321
Increase (decrease) resulting from
Tax exempt interest			(249,632)	(268,978)
State income taxes, net			146,828	141,573
Increase in cash surrender value			(32,555)	(32,054)
Other, net			856	(261)
Actual tax expense	$ 270,539	$ 298,713	$ 709,326	$ 665,601

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MORTGAGE SERVICING RIGHTS

6 Months Ended

Jun. 30, 2013

Mortgage Servicing Rights [Abstract]

MORTGAGE SERVICING RIGHTS

10. MORTGAGE SERVICING RIGHTS

Activity in the balance of mortgage servicing rights, measured using the amortization method, for the six month period ending June 30, 2013 and the year ended December 31, 2012 was as follows:

	June 30, 2013			December 31, 2012
Balance, beginning of year	$	664,436		$	697,733
Servicing rights capitalized		63,515			219,975
Amortization of servicing rights		(85,946	)		(297,784	)
Change in valuation allowance		12,472			44,512
Balance, end of period	$	654,477		$	664,436

Activity in the valuation allowance for mortgage servicing rights for the six month period ending June 30, 2013 and the year ended December 31, 2012 was as follows:

	June 30, 2013			December 31, 2012
Balance, beginning of year	$	129,279		$	173,791
Additions		-			-
Reductions		(12,472	)		(44,512	)
Balance, end of period	$	116,807		$	129,279

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INVESTMENT

6 Months Ended

Jun. 30, 2013

Investments, Debt and Equity Securities [Abstract]

INVESTMENT

6. INVESTMENTS

The amortized cost and approximate fair value of securities, all of which are classified as available-for-sale, are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2013:
U.S. government and agencies	$	11,303,602	$	132,720	$	(284,471	)	$	11,151,851
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,357,410		342,900		(1,364,806	)		49,335,504
Municipal bonds		50,320,780		1,146,753		(2,030,779	)		49,436,754
	$	111,981,792	$	1,622,373	$	(3,680,056	)	$	109,924,109
December 31, 2012:
U.S. government and agencies	$	10,090,835	$	248,601	$	(10,556	)	$	10,328,880
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,917,555		1,134,245		(95,319	)		51,956,481
Municipal bonds		49,990,655		3,264,169		(152,362	)		53,102,462
	$	110,999,045	$	4,647,015	$	(258,237	)	$	115,387,823

The amortized cost and fair value of available-for-sale securities at June 30, 2013, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
Within one year	$	100,814	$	101,369
One to five years		10,272,899		10,634,124
Five to ten years		22,312,885		22,240,606
After ten years		28,937,784		27,612,506
		61,624,382		60,588,605
Mortgage-backed securities (government-
sponsored enterprises - residential)		50,357,410		49,335,504
	$	111,981,792	$	109,924,109

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $19,169,000 at June 30, 2013 and $24,371,000 at December 31, 2012.

The carrying value of securities sold under agreement to repurchase amounted to $7,444,000 at June 30, 2013 and $13,706,000 at December 31, 2012.

Gross gains of $689,000 and $527,000 and gross losses of $0 resulting from sales of available-for-sale securities were realized during the six months ended June 30, 2013 and 2012, respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost.  Total fair value of these investments at June 30, 2013 and December 31, 2012 were $65,000,000, and $23,956,000, respectively, which were approximately 59.1% and 20.8% of the Company’s available-for-sale investment portfolio.

Management believes the declines in fair value for these securities are temporary.  Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at June 30, 2013 and December 31, 2012.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
June 30, 2013:
Municipal bonds	$	(2,019,789	)	$	22,730,151	$	(10,990	)	$	158,375	$	(2,030,779	)	$	22,888,526
U.S. government and agencies		(284,471	)		6,002,570		-			-		(284,471	)		6,002,570
Subtotal		(2,304,260	)		28,732,721		(10,990	)		158,375		(2,315,250	)		28,891,096
Mortgage-backed securities
(government sponsored
enterprises - residential)		(1,364,806	)		36,109,729		-			-	$	(1,364,806	)	$	36,109,729
Total	$	(3,669,066	)	$	64,842,450	$	(10,990	)	$	158,375	$	(3,680,056	)	$	65,000,825
December 31, 2012:
Municipal bonds	$	(152,362	)	$	7,237,453	$	-		$	-	$	(152,362	)	$	7,237,453
U.S. government and agencies		(10,556	)		545,291		-			-		(10,556	)		545,291
Subtotal		(162,918	)		7,782,744		-			-		(162,918	)		7,782,744
Mortgage-backed securities
(government sponsored
enterprises - residential)		(95,319	)		16,172,999		-			-		(95,319	)		16,172,999
Total	$	(258,237	)	$	23,955,743	$	-		$	-	$	(258,237	)	$	23,955,743

The unrealized losses on the Company’s investments in municipal bonds, U.S. government and agencies, and mortgage-backed securities were caused by interest rate increases.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not 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 these investments to be other-than-temporarily impaired at June 30, 2013 and December 31, 2012.

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule of earnings per share calculations for basic and diluted methods

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Net income available to common
shareholders	$	760,075	$	847,063	$	1,772,523	$	1,761,813
Basic average shares outstanding		1,869,499		1,886,211		1,873,692		1,885,638
Diluted potential common shares:
Stock option equivalents		299		475		284		326
Diluted average shares outstanding		1,869,798		1,886,686		1,873,976		1,885,964
Basic earnings per share	$	0.41	$	0.45	$	0.95	$	0.93
Diluted earnings per share	$	0.41	$	0.45	$	0.95	$	0.93

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INCOME TAXES

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

11. INCOME TAXES

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense for the six months ended June 30, 2013 and 2012 is shown below.

	June 30, 2013			June 30, 2012
Computed at the statutory rate (34%)	$	843,829		$	825,321
Increase (decrease) resulting from
Tax exempt interest		(249,632	)		(268,978	)
State income taxes, net		146,828			141,573
Increase in cash surrender value		(32,555	)		(32,054	)
Other, net		856			(261	)
Actual tax expense	$	709,326		$	665,601

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 02, 2013
Document And Entity Information [Abstract]
Entity Registrant Name	Jacksonville Bancorp, Inc.
Entity Central Index Key	0001484949
Trading Symbol	jxsb
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock Shares Outstanding		1,876,030
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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COMMITMENT AND CONTINGENCY

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

COMMITMENT AND CONTINGENCY

12. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers in the way of commitments to extend credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis.  Substantially all of the Company's loans are to borrowers located in Cass, Morgan, Macoupin, Montgomery, and surrounding counties in Illinois.

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INCOME TAXES - Reconciliation of Income Tax Expense at Statutory Rate to Actual Income Tax Expense (Parenthetical) (Details)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Statutory rate	34.00%	34.00%