8. Securities

Amortized cost and estimated fair value of securities available for sale are as follows:

	March 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	134,096,396	$	2,660,433	$	60,961	$	136,695,868
Mortgage-backed securities, residential		43,370,865		2,586,416		-		45,957,281
Collateralized Mortgage obligations		6,363,526		126,984		2,881		6,487,629
Obligations of states and political subdivisions		43,831,193		1,719,743		8,620		45,542,316
Corporate bonds and notes		13,448,409		432,568		50,304		13,830,673
SBA loan pools		1,871,925		34,365		-		1,906,290
Trust Preferred securities		2,540,204		134,035		309,435		2,364,804
Corporate stocks		788,013		5,878,972		1,969		6,665,016
Total	$	246,310,531	$	13,573,516	$	434,170	$	259,449,877

	December 31, 2011
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	149,140,715	$	3,022,726	$	83,671	$	152,079,770
Mortgage-backed securities, residential		48,129,271		2,637,334		-		50,766,605
Collateralized mortgage obligations		7,412,470		135,603		11,321		7,536,753
Obligations of states and political subdivisions		44,561,789		1,954,265		3,083		46,512,971
Corporate bonds and notes		13,461,675		418,969		196,446		13,684,198
SBA loan pools		1,915,419		34,187		-		1,949,606
Trust preferred securities		2,538,286		132,516		360,735		2,310,066
Corporate stocks		788,030		5,246,655		4,844		6,029,841
Total	$	267,947,655	$	13,582,255	$	660,100	$	280,869,810

Amortized cost and estimated fair value of securities held to maturity are as follows:

	March 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Obligations of states and political subdivisions	$	7,446,817	$	759,655	$	-	$	8,206,472

Total	$	7,446,817	$	759,655	$	-	$	8,206,472

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

Obligations of states and political subdivisions	$	8,311,921	$	864,035	$	-	$	9,175,956

Total	$	8,311,921	$	864,035	$	-	$	9,175,956

The amortized cost and estimated fair value of debt securities are shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties:

	March 31, 2012
	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Within One Year	$	40,873,174	$	41,400,512	$	2,083,170	$	2,103,820
After One, But Within Five Years		156,409,760		162,127,467		3,586,148		3,953,357
After Five, But Within Ten Years		44,820,918		46,015,553		1,777,499		2,149,295
After Ten Years		3,418,666		3,241,330		-		-
Total	$	245,522,518	$	252,784,861	$	7,446,817	$	8,206,472

Proceeds from sales of securities available for sale that resulted in realized gains were $ 25,679,688 and $25,170,898 for the three months ended March 31, 2012 and 2011, respectively. Gross gains of $297,169 and $193,398 were realized on these sales during the first quarter of 2012 and 2011, respectively. There were no calls of securities available for sale that resulted in gains for the three months ended March 31, 2012 and 2011. There were no gross losses from calls or sales of securities during the three months ended March 31, 2012 and March 31, 2011.

The following table summarizes the investment securities available for sale and held to maturity with unrealized losses at March 31, 2012 and December 31, 2011 by aggregated major security type and length of time in a continuous unrealized loss position:

	Less than 12 months				12 months or longer				Total
March 31, 2012	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	55,431,000		60,961	$	-	$	-	$	55,431,000	$	60,961
Collateralized mortgage obligations		1,256,943		2,881		-		-		1,256,943		2,881
Obligations of states and political subdivisions		1,059,454		8,620		-		-		1,059,454		8,620
Corporate bonds and notes		992,891		36,123		757,235		14,181		1,750,126		50,304
Trust preferred securities		-		-		346,210		309,435		346,210		309,435
Corporate stocks		-		-		1,669		1,969		1,669		1,969
Total temporarily impaired securities	$	58,740,288	$	108,585	$	1,105,114	$	325,585	$	59,845,402	$	434,170

	Less than 12 months				12 months or longer				Total
December 31, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	27,365,920	$	83,671	$	-	$	-	$	27,365,920	$	83,671
Collateralized mortgage obligations		2,546,461		11,321		-		-		2,546,461		11,321
Obligations of states and political subdivisions		947,203		3,083		-		-		947,203		3,083
Corporate bonds		5,261,074		196,446		-		-		5,261,074		196,446
Trust preferred securities		-		-		294,910		360,735		294,910		360,735
Corporate stocks		1,669		1,969		47,117		2,875		48,786		4,844
Total temporarily impaired securities	$	36,122,327	$	296,490	$	342,027	$	363,610	$	36,464,354	$	660,100

Other-Than-Temporary Impairment

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

As of March 31, 2012, the majority of the Corporation's unrealized losses in the investment securities portfolio related to two pooled trust preferred securities. The decline in fair value on these securities is primarily attributable to the financial crisis and resulting credit deterioration and financial condition of the underlying issuers, all of which are financial institutions. This deterioration may affect the future receipt of both principal and interest payments on these securities. This fact combined with the current illiquidity in the market makes it unlikely that the Corporation would be able to recover its investment in these securities if the securities were sold at this time. One of these securities has been previously written down through the income statement to an amount considered to be immaterial to the financial statements. Therefore management is no longer analyzing this security for further impairment.

Our analysis of these investments includes a $629 thousand book value collateralized debt obligation ("CDO") which is a pooled trust preferred security. This security was rated high quality at inception, but at March 31, 2012 Moody's rated this security as Caa3, which is defined as substantial risk of default. The Corporation uses the OTTI evaluation model to compare the present value of expected cash flows to the previous estimate to determine if there are adverse changes in cash flows during each quarter. The OTTI model considers the structure and term of the CDO and the financial condition of the underlying issuers. Specifically, the model details interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities.

Upon completion of the March 31, 2012 analysis, our model indicated no additional other-than-temporary impairment on the TPREF Funding II security. This security remained classified as available for sale and represented $300 thousand of the unrealized losses reported at March 31, 2012. Payments continue to be made as agreed on this security.

When conducting the March 31, 2012 analysis, the present value of expected future cash flows using a discount rate equal to the yield in effect at the time of purchase was compared to the previous quarters' analysis. The analysis indicated no further decline in value attributed to credit related factors stemming from further deterioration in the underlying collateral payment streams. Additionally, to estimate fair value the present value of the expected future cash flows was calculated using a current estimated discount rate that a willing market participant might use to value the security based on current market conditions and interest rates. This comparison indicated an increase in value based on factors other than credit which resulted in a gain reported in other comprehensive income. Changes in credit quality may or may not correlate to changes in the overall fair value of the impaired securities as the change in credit quality is only one component in assessing the overall fair value of the impaired securities. Therefore, the recognition of additional credit related OTTI could result in a gain reported in other comprehensive income. Total other-than-temporary impairment recognized in accumulated other comprehensive income was $188,878 and $228,598 for securities available for sale at March 31, 2012 and March 31, 2011, respectively.

The table below presents a roll forward of the cumulative credit losses recognized in earnings for the three-month periods ending March 31, 2012 and 2011:

	2012		2011
Beginning balance, January 1,	$	3,506,073	$	3,438,673
Amounts related to credit loss for which an other-than-temporary impairment was not previously recognized		-		-
Additions/Subtractions:
Amounts realized for securities sold during the period		-		-
Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis		-		-
Reductions for increase in cash flows expected to be collected that are recognized over the remaining life of the security		-		-
Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized		-		-
Ending balance, March 31,	$	3,506,073	$	3,438,673