10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2013

OR

¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 0-18279

The Community Financial Corporation

(Exact name of registrant as specified in its charter)

Maryland	52-1652138
(State of other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

3035 Leonardtown Road, Waldorf, Maryland	20601
(Address of principal executive offices)	(Zip Code)

(301) 645-5601

(Registrant's telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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.

Yes x No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 that the registrant was required to submit and post such files).

Yes x 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  ¨	Accelerated Filer  ¨
Non-accelerated Filer  ¨	Smaller Reporting Company  x
(Do not check if a smaller reporting company)

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

Yes ¨         No x

As of October 30, 2013, the registrant had 4,647,324 shares of common stock outstanding.

THE COMMUNITY FINANCIAL CORPORATION

FORM 10-Q

INDEX

	Page
PART I - FINANCIAL INFORMATION
Item 1 – Financial Statements (Unaudited)
Consolidated Balance Sheets – September 30, 2013 and December 31, 2012	3
Consolidated Statements of Income and Comprehensive Income - Three and Nine Months Ended September 30, 2013 and 2012	4
Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2013 and 2012	5
Notes to Consolidated Financial Statements	7
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	53
Item 4 – Controls and Procedures	53
PART II - OTHER INFORMATION
Item 1 –    Legal Proceedings	53
Item 1A – Risk Factors	53
Item 2 –    Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3 –    Defaults Upon Senior Securities	54
Item 4 –    Mine Safety Disclosures	54
Item 5 –    Other Information	54
Item 6 –    Exhibits	54
SIGNATURES	55

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PART I FINANCIAL STATEMENTS

ITEM I. FINANCIAL STATEMENTS

THE COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

	September 30, 2013			December 31, 2012
	(Unaudited)
Assets
Cash and due from banks	$	23,269,755		$	10,696,653
Federal funds sold		-			190,000
Interest-bearing deposits with banks		3,626,750			409,002
Securities available for sale (AFS), at fair value		50,869,490			47,205,663
Securities held to maturity (HTM), at amortized cost		91,349,615			112,619,434
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock - at cost		5,593,100			5,476,050
Loans receivable - net of allowance for loan losses of $8,079,277 and $8,246,957		759,880,727			747,640,752
Premises and equipment, net		19,272,212			19,782,236
Other real estate owned (OREO)		7,058,504			6,891,353
Accrued interest receivable		2,850,066			2,904,325
Investment in bank owned life insurance		19,195,355			18,730,580
Other assets		9,938,081			9,093,164
Total Assets	$	992,903,655		$	981,639,212
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest-bearing deposits	$	107,856,339		$	102,319,581
Interest-bearing deposits		709,391,120			717,910,707
Total deposits		817,247,459			820,230,288
Short-term borrowings		2,640,000			1,000,000
Long-term debt		70,488,848			60,527,208
Guaranteed preferred beneficial interest in junior subordinated debentures (TRUPs)		12,000,000			12,000,000
Accrued expenses and other liabilities		8,379,012			8,834,455
Total Liabilities		910,755,319			902,591,951
Stockholders' Equity
Preferred Stock, Senior Non-Cumulative Perpetual, Series C - par value $1,000; authorized 20,000;  issued 20,000		20,000,000			20,000,000
Common stock - par value $.01; authorized - 15,000,000 shares; issued 3,048,439 and 3,052,416 shares, respectively		30,484			30,524
Additional paid in capital		18,275,729			17,873,560
Retained earnings		45,626,970			41,986,633
Accumulated other comprehensive gain (loss)		(910,940	)		139,184
Unearned ESOP shares		(873,907	)		(982,640	)
Total Stockholders' Equity		82,148,336			79,047,261
Total Liabilities and Stockholders' Equity	$	992,903,655		$	981,639,212

See notes to Consolidated Financial Statements

3

THE COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Interest and Dividend Income
Loans, including fees	$	9,340,139		$	9,113,063	$	27,703,885		$	27,624,323
Taxable interest and dividends on investment securities		631,652			768,611		1,852,692			2,465,529
Interest on deposits with banks		3,268			4,982		8,552			7,730
Total Interest and Dividend Income		9,975,059			9,886,656		29,565,129			30,097,582
Interest Expense
Deposits		1,335,916			2,001,535		4,332,351			6,630,820
Short-term borrowings		4,237			298		12,930			12,483
Long-term debt		532,833			537,216		1,569,247			1,684,772
Total Interest Expense		1,872,986			2,539,049		5,914,528			8,328,075
Net Interest Income		8,102,073			7,347,607		23,650,601			21,769,507
Provision for loan losses		285,610			746,075		640,210			1,523,580
Net Interest Income After Provision For Loan Losses		7,816,463			6,601,532		23,010,391			20,245,927
Noninterest Income
Loan appraisal, credit, and miscellaneous charges		55,620			280,456		374,769			663,897
Gain on sale of asset		-			-		11,000			-
Net gain (losses) on sale of OREO		215,345			-		215,345			(96,917	)
Income from bank owned life insurance		156,348			157,177		464,775			476,294
Service charges		661,134			528,420		1,764,314			1,530,323
Gain on sale of loans held for sale		30,769			336,384		546,819			471,725
Total Noninterest Income		1,119,216			1,302,437		3,377,022			3,045,322
Noninterest Expense
Salary and employee benefits		3,737,000			3,492,524		10,883,606			9,982,603
Occupancy expense		504,627			487,233		1,556,877			1,389,024
Advertising		118,421			86,020		391,152			345,111
Data processing expense		237,054			329,005		967,368			1,118,598
Professional fees		293,028			177,818		754,719			746,322
Depreciation of furniture, fixtures, and equipment		191,320			188,870		580,842			486,159
Telephone communications		45,787			45,563		148,516			137,649
Office supplies		41,689			52,751		151,157			186,741
FDIC Insurance		284,591			201,607		858,860			1,092,809
Valuation allowance on OREO		170,560			31,050		500,536			657,226
Other		621,650			508,343		1,701,338			1,719,647
Total Noninterest Expense		6,245,727			5,600,784		18,494,971			17,861,889
Income before income taxes		2,689,952			2,303,185		7,892,442			5,429,360
Income tax expense		987,111			830,244		2,885,761			1,910,014
Net Income	$	1,702,841		$	1,472,941	$	5,006,681		$	3,519,346
Preferred stock dividends		50,000			50,000		150,000			150,000
Net Income Available to Common Shareholders	$	1,652,841		$	1,422,941	$	4,856,681		$	3,369,346
Net Income	$	1,702,841		$	1,472,941	$	5,006,681		$	3,519,346
Net unrealized holding gains (losses) arising during period, net of tax		(231,346	)		68,791		(1,050,124	)		76,542
Comprehensive Income	$	1,471,495		$	1,541,732	$	3,956,557		$	3,595,888
Earnings Per Common Share
Basic	$	0.55		$	0.47	$	1.61		$	1.11
Diluted	$	0.55		$	0.47	$	1.60		$	1.10
Cash dividends paid per common share	$	0.10		$	-	$	0.30		$	0.40

See notes to Consolidated Financial Statements

4

THE COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

	Nine Months Ended
	September 30,
	2013			2012
Cash Flows from Operating Activities
Net income	$	5,006,681		$	3,519,346
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		640,210			1,523,580
Depreciation and amortization		965,380			845,804
Loans originated for resale		(20,903,681	)		(9,987,050	)
Proceeds from sale of loans originated for sale		21,326,491			10,383,776
Gain on sale of loans held for sale		(546,819	)		(471,725	)
Net (gains) losses on the sale of OREO		(215,345	)		96,917
Gain on sale of asset		(11,000	)		-
Net amortization of premium/discount on investment securities		440,932			308,509
Increase in OREO valuation allowance		500,536			657,226
Increase in cash surrender of bank owned life insurance		(464,775	)		(476,293	)
Deferred income tax benefit		(128,314	)		(773,527	)
Decrease (Increase) in accrued interest receivable		54,259			(39,413	)
Stock based compensation		249,129			263,088
Decrease in deferred loan fees		215,478			104,942
(Decrease) Increase in accounts payable, accrued expenses and other liabilities		(455,443	)		441,789
(Increase) Decrease in other assets		(165,764	)		2,411,207
Net Cash Provided by Operating Activities		6,507,955			8,808,176
Cash Flows from Investing Activities
Purchase of AFS investment securities		(13,486,742	)		(10,101,789	)
Proceeds from redemption or principal payments of AFS investment securities		8,091,820			15,465,959
Purchase of HTM investment securities		(11,682,813	)		(11,249,535	)
Proceeds from maturities or principal payments of HTM investment securities		32,651,698			39,413,413
Net (increase) decrease of FHLB and FRB stock		(117,050	)		155,250
Loans originated or acquired		(182,200,307	)		(173,628,906	)
Principal collected on loans		168,063,366			147,989,755
Purchase of premises and equipment		(455,356	)		(4,253,518	)
Proceeds from sale of OREO		712,945			344,512
Proceeds from disposal of asset		11,000			-
Net Cash Provided by Investing Activities		1,588,561			4,135,141

5

THE COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 (continued)

	Nine Months Ended
	September 30,
	2013			2012
Cash Flows from Financing Activities
Net decrease in deposits	$	(2,982,829	)	$	(4,265,600	)
Proceeds from long-term borrowings		10,000,000			-
Payments of long-term borrowings		(38,360	)		(36,854	)
Net increase in short term borrowings		1,640,000			-
Exercise of stock options		125,222			67,391
Dividends Paid		(1,063,992	)		(1,371,571	)
Net change in unearned ESOP shares		126,812			(1,942	)
Redemption of common stock		(302,519	)		(257,935	)
Net Cash Provided by (Used in) Financing Activities		7,504,334			(5,866,511	)
Increase in Cash and Cash Equivalents	$	15,600,850		$	7,076,806
Cash and Cash Equivalents - January 1		11,295,655			19,118,189
Cash and Cash Equivalents - September 30	$	26,896,505		$	26,194,995
Supplemental Disclosures of Cash Flow Information
Cash paid during the nine months for:
Interest	$	5,856,848		$	8,340,170
Income taxes	$	3,164,596		$	1,470,590
Supplemental Schedule of Non-Cash Operating Activities
Issuance of common stock for payment of compensation	$	249,129		$	263,088
Transfer from loans to OREO	$	1,390,286		$	2,165,376

See notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

1. BASIS OF PRESENTATION

General - The consolidated financial statements of The Community Financial Corporation (formerly Tri-County Financial Corporation) (the “Company”) and its wholly owned subsidiary, Community Bank of the Chesapeake (formerly Community Bank of Tri-County) (the “Bank”), and the Bank’s wholly owned subsidiary, Community Mortgage Corporation of Tri-County, included herein are unaudited. The Bank conducts business through its main office in Waldorf, Maryland, and ten branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby, California, Maryland; and Dahlgren, Virginia. Effective October 18, 2013, the Company changed its name from Tri-County Financial Corporation and the Bank changed its name from Community Bank of Tri-County. The new names reflect the Bank's recent expansion into the Northern Neck of Virginia. The name of the holding company changed to better align the parent company name with that of the Bank.

The consolidated financial statements reflect all adjustments consisting only of normal recurring accruals that, in the opinion of management, are necessary to present fairly the Company’s financial condition, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the information presented not misleading. The balances as of December 31, 2012 have been derived from audited financial statements. There have been no significant changes to the Company’s accounting policies as disclosed in the 2012 Annual Report. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results of operations to be expected for the remainder of the year or any other period. Certain previously reported amounts have been restated to conform to the 2013 presentation.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2012 Annual Report.

In October 2013, the Company completed a stock offering and issued 1,591,300 shares of common stock at a price of $18.75 per share resulting in net proceeds of $27.4 million after commissions and related offering expenses. The additional capital raise was completed in the fourth quarter 2013 and is not reflected in the financial statements as of September 30, 2013.

2. NATURE OF BUSINESS

The Company provides a variety of financial services to individuals and businesses through its offices in Southern Maryland and King George, Virginia. Its primary deposit products are demand, savings and time deposits, and its primary lending products are commercial and residential mortgage loans, commercial loans, construction and land development loans, home equity and second mortgages and commercial equipment loans.

3. FAIR VALUE MEASUREMENTS

The Company adopted FASB ASC Topic 820, “Fair Value Measurements” and FASB ASC Topic 825, “The Fair Value Option for Financial Assets and Financial Liabilities”, which provides a framework for measuring and disclosing fair value under generally accepted accounting principles. FASB ASC Topic 820 requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available for sale investment securities) or on a nonrecurring basis (for example, impaired loans).

FASB ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

7

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis such as loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Under FASB ASC Topic 820, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These hierarchy levels are:

Level 1 inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly or quarterly valuation process.

There were no transfers between levels of the fair value hierarchy and the Company had no Level 3 fair value assets or liabilities for the three and nine months ended September 30, 2013 and the year ended December 31, 2012, respectively.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities (“GSEs”), municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans Receivable

The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are considered impaired. Management estimates the fair value of impaired loans using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Impaired loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At September 30, 2013 and December 31, 2012, substantially all of the impaired loans were evaluated based upon the fair value of the collateral. In accordance with FASB ASC 820, impaired loans where an allowance is established based on the fair value of collateral (loans with impairment) require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

8

Other Real Estate Owned (“OREO”)

OREO is adjusted for fair value upon transfer of the loans to foreclosed assets. Subsequently, OREO is carried at the lower of carrying value and fair value. Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset at nonrecurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets as of September 30, 2013 and December 31, 2012 measured at fair value on a recurring basis.

	September 30, 2013
Description of Asset	Fair Value		Level 1		Level 2		Level 3
Available for sale securities
Asset-backed securities issued by GSEs
Collateralized Mortgage Obligations ("CMOs")	$	46,471,000	$	-	$	46,471,000	$	-
Mortgage Backed Securities ("MBS")		198,713		-		198,713		-
Corporate equity securities		38,698		-		38,698		-
Bond mutual funds		4,161,079		-		4,161,079		-
Total available for sale securities	$	50,869,490	$	-	$	50,869,490	$	-

	December 31, 2012
Description of Asset	Fair Value		Level 1		Level 2		Level 3
Available for sale securities
Asset-backed securities issued by GSEs
CMOs	$	42,655,799	$	-	$	42,655,799	$	-
MBS		231,386		-		231,386		-
Corporate equity securities		37,332		-		37,332		-
Bond mutual funds		4,281,146		-		4,281,146		-
Total available for sale securities	$	47,205,663	$	-	$	47,205,663	$	-

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis as of September 30, 2013 and December 31, 2012 are included in the tables below.

	September 30, 2013
Description of Asset	Fair Value		Level 1		Level 2		Level 3
Loans with impairment
Commercial real estate	$	3,411,781	$	-	$	3,411,781	$	-
Residential first mortgage		530,170		-		530,170		-
Commercial loans		429,000		-		429,000		-
Total loans with impairment	$	4,370,951	$	-	$	4,370,951	$	-
Other real estate owned	$	7,058,504	$	-	$	7,058,504	$	-

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	December 31, 2012
Description of Asset	Fair Value		Level 1		Level 2		Level 3
Loans with impairment
Commercial real estate	$	2,028,534	$	-	$	2,028,534	$	-
Residential first mortgage		602,290		-		602,290		-
Commercial loans		94,355		-		94,355		-
Total loans with impairment	$	2,725,179	$	-	$	2,725,179	$	-
Other real estate owned	$	6,891,353	$	-	$	6,891,353	$	-

Loans with impairment have unpaid principal balances of $5,415,721 and $4,272,836 at September 30, 2013 and December 31, 2012, respectively, and include impaired loans with a specific allowance.

4. INCOME TAXES

The Company files a consolidated federal income tax return with its subsidiaries. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws and when it is considered more likely than not that deferred tax assets will be realized. It is the Company’s policy to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.

5. EARNINGS PER COMMON SHARE (EPS)

Basic earnings per common share represent income available to common shareholders, divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method. As of September 30, 2013 and 2012, there were 101,549 and 187,367 shares, respectively, excluded from the diluted net income per share computation because the exercise price of the stock options were greater than the market price, and thus were anti-dilutive. Basic and diluted earnings per share have been computed based on weighted-average common and common equivalent shares outstanding as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net Income	$	1,702,841		$	1,472,941		$	5,006,681		$	3,519,346
Less: dividends paid and accrued on preferred stock		(50,000	)		(50,000	)		(150,000	)		(150,000	)
Net income available to common shareholders	$	1,652,841		$	1,422,941		$	4,856,681		$	3,369,346
Average number of common shares outstanding		2,997,401			3,044,556			3,016,793			3,042,645
Effect of dilutive options		24,981			8,693			25,295			13,026
Average number of shares used to calculate diluted EPS		3,022,382			3,053,249			3,042,088			3,055,671

6. STOCK-BASED COMPENSATION

The Company has stock option and incentive arrangements to attract and retain key personnel. In May 2005, the 2005 Equity Compensation Plan (the “Plan”) was approved by the shareholders, which authorizes the issuance of restricted stock, stock appreciation rights, stock units and stock options to the Board of Directors and key employees. Compensation expense for service based awards is recognized over the vesting period. Performance based awards are recognized based on a vesting, if applicable, and the probability of achieving the goals.

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Stock-based compensation expense totaled $159,089 and $91,826 for the nine months ended September 30, 2013 and 2012, respectively, which consisted of grants of restricted stock and restricted stock units. Stock-based compensation for the nine months ended September 30, 2013 and 2012 included director compensation of $3,320 and $18,128, respectively, for stock granted in lieu of cash compensation for board fees. All outstanding options are fully vested and the Company has not granted any stock options since 2007.

The fair value of the Company’s outstanding employee stock options is estimated on the date of grant using the Black-Scholes option pricing model. The Company estimates expected market price volatility and expected term of the options based on historical data and other factors.

The exercise price for options granted is set at the discretion of the committee administering the Plan, but is not less than the market value of the shares as of the date of grant. An option’s maximum term is 10 years and the options vest at the discretion of the committee.  

The following tables below summarize outstanding and exercisable options at September 30, 2013 and December 31, 2012.

				Weighted				Weighted-Average
				Average		Aggregate		Contractual Life
				Exercise		Intrinsic		Remaining In
	Shares			Price		Value		Years
Outstanding at January 1, 2013		236,059		$	18.49	$	164,304
Granted at fair value		-			-
Exercised		(16,009	)		13.63		73,518
Expired		-
Forfeited		(2	)		13.05
Outstanding at September 30, 2013		220,048		$	18.84	$	478,620		0.8
Exercisable at September 30, 2013		220,048		$	18.84	$	478,620		0.8

				Weighted				Weighted-Average
				Average		Aggregate		Contractual Life
				Exercise		Intrinsic		Remaining In
	Shares			Price		Value		Years
Outstanding at January 1, 2012		264,156		$	17.90	$	175,911
Granted at fair value		-			-
Exercised		(24,780	)		12.25		88,607
Expired		-
Forfeited		(3,317	)		18.25
Outstanding at December 31, 2012		236,059		$	18.49	$	164,304		1.0
Exercisable at December 31, 2012		236,059		$	18.49	$	164,304		1.0

Options outstanding are all currently exercisable and are summarized as follows: 

Shares Outstanding		Weighted Average	Weighted Average
September 30, 2013		Remaining Contractual Life	Exercise Price
	39,668	1 years	$	12.97
	78,831	2 years		15.89
	80,138	3 years		22.29
	21,411	4 years		27.70
	220,048		$	18.84

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The aggregate intrinsic value of outstanding stock options and exercisable stock options was $478,620 and $164,304 at September 30, 2013 and December 31, 2012, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $18.95 and $15.98 per share at September 30, 2013 and December 31, 2012, respectively, and the exercise price multiplied by the number of options outstanding.

The Company has outstanding restricted stock and stock units granted in accordance with the Plan. The following tables summarize the unvested restricted stock awards and units outstanding at September 30, 2013 and December 31, 2012, respectively.

	Restricted Stock					Restricted Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Units			Fair Value
Nonvested at December 31, 2012		23,569		$	15.64		5,211		$	15.98
Granted		13,656			18.00		2,105			16.87
Vested		(16,678	)		16.35		(3,106	)		15.98
Nonvested at September 30, 2013		20,547		$	16.63		4,210		$	18.95

	Restricted Stock					Restricted Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Units			Fair Value
Nonvested at January 1, 2012		8,113		$	16.47		6,845		$	15.00
Granted		23,281			15.21		2,105			15.98
Vested		(7,825	)		15.20		(3,739	)		14.80
Nonvested at December 31, 2012		23,569		$	15.64		5,211		$	15.98

7. GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES (“TRUPs”)

On June 15, 2005, Tri-County Capital Trust II (“Capital Trust II”), a Delaware business trust formed, funded and wholly owned by the Company, issued $5,000,000 of variable-rate capital securities in a private pooled transaction. The variable rate is based on the 90-day LIBOR rate plus 1.70%. The Trust used the proceeds from this issuance, along with the $155,000 for Capital Trust II’s common securities, to purchase $5,155,000 of the Company’s junior subordinated debentures. The interest rate on the debentures and the trust preferred securities is variable and adjusts quarterly. These capital securities qualify as Tier I capital and are presented in the Consolidated Balance Sheets as “Guaranteed Preferred Beneficial Interests in Junior Subordinated Debentures.” Both the capital securities of Capital Trust II and the junior subordinated debentures are scheduled to mature on June 15, 2035, unless called by the Company.

On July 22, 2004, Tri-County Capital Trust I (“Capital Trust I”), a Delaware business trust formed, funded and wholly owned by the Company, issued $7,000,000 of variable-rate capital securities in a private pooled transaction. The variable rate is based on the 90-day LIBOR rate plus 2.60%. The Trust used the proceeds from this issuance, along with the Company’s $217,000 capital contribution for Capital Trust I’s common securities, to purchase $7,217,000 of the Company’s junior subordinated debentures. The interest rate on the debentures and the trust preferred securities is variable and adjusts quarterly. These debentures qualify as Tier I capital and are presented in the Consolidated Balance Sheets as “Guaranteed Preferred Beneficial Interests in Junior Subordinated Debentures.” Both the capital securities of Capital Trust I and the junior subordinated debentures are scheduled to mature on July 22, 2034, unless called by the Company.

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8. PREFERRED STOCK

Small Business Lending Fund Preferred Stock

On September 22, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Secretary of the Treasury (the “Secretary”), pursuant to which the Company issued 20,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”), having a liquidation amount per share equal to $1,000, for a total purchase price of $20,000,000. The Purchase Agreement was entered into, and the Series C Preferred Stock was issued, as authorized by the Small Business Lending Fund program.

The Series C Preferred Stock is entitled to receive non-cumulative dividends, payable quarterly. The dividend rate can fluctuate on a quarterly basis during the first 10 quarters during which the Series C Preferred Stock is outstanding, based upon changes in the level of “Qualified Small Business Lending” or “QSBL” (as defined in the Purchase Agreement) by the Bank. Based upon the increase in the Bank’s level of QSBL over the baseline level calculated under the terms of the Purchase Agreement, the dividend rate for the initial dividend period was set at one percent (1%). For the second through ninth calendar quarters, the dividend rate may be adjusted to between one percent (1%) and five percent (5%) per annum, to reflect the amount of change in the Bank’s level of QSBL. If the level of the Bank’s qualified small business loans declines so that the percentage increase in QSBL as compared to the baseline level is less than 10%, then the dividend rate payable on the Series C Preferred Stock would increase. For the tenth calendar quarter through four and one half years after issuance, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) based upon the increase in QSBL as compared to the baseline. After four and one half years from issuance, the dividend rate will increase to nine percent (9%). In addition, beginning on January 1, 2014, and on all Series C Preferred Stock dividend payment dates thereafter ending on April 1, 2016, if the Company had not increased its QSBL from the baseline as of the quarter ending September 30, 2013, the Company would have been required to pay to the Secretary, on each share of Series C Preferred Stock, but only out of assets legally available, a fee equal to 0.5% of the liquidation amount per share of Series C Preferred Stock. At September 30, 2013, the Company had increased its QSBL from the baseline so that the dividend rate should remain at 1% through four and one half years from issuance.

The Series C Preferred Stock is non-voting, except in limited circumstances. If the Company misses five dividend payments, whether or not consecutive, the holder of the Series C Preferred Stock will have the right, but not the obligation, to appoint a representative as an observer on the Company’s Board of Directors. The Series C Preferred Stock may be redeemed at any time at the Company’s option, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends to the date of redemption for the current period, subject to the approval of our federal banking regulator. The Company is permitted to repay its SBLF funding in increments of 25% or $5.0 million, subject to the approval of its federal banking regulator.

The Series C Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Company has agreed to register the Series C Preferred Stock under certain circumstances set forth in Annex E to the Purchase Agreement. The Series C Preferred Stock is not subject to any contractual restrictions on transfer.

9. OTHER REAL ESTATE OWNED (“OREO”)

OREO assets are presented net of the allowance for losses. The Company considers OREO as classified assets for regulatory and financial reporting. An analysis of the activity follows.

	Nine Months Ended September 30,						Year Ended December 31,
	2013			2012			2012
Balance at beginning of year	$	6,891,353		$	5,028,513		$	5,028,513
Additions of underlying property		1,390,286			2,165,375			4,020,494
Disposals of underlying property		(722,599	)		(441,429	)		(1,483,449	)
Valuation allowance		(500,536	)		(657,226	)		(674,205	)
Balance at end of period	$	7,058,504		$	6,095,233		$	6,891,353

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During the nine months ended September 30, 2013, the Bank recognized $215,345 in gains on the sale of OREO which consisted of the sale of four properties for net proceeds of $712,944 and net losses of $9,655 and the recognition of $225,000 of previously deferred gain from the sale of an OREO property that the Bank financed during 2011 that did not initially qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition. During the nine months ended September 30, 2012, the Bank disposed of three OREO properties resulting in proceeds of $344,512 and recognized net losses of $96,917.

Expenses applicable to OREO assets include the following.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Valuation allowance	$	170,560	$	31,050	$	500,536	$	657,226
Operating expenses		41,080		54,529		105,168		85,374
	$	211,640	$	85,579	$	605,704	$	742,600

Operating expenses for the nine months ended September 30, 2012 included $7,600 in deposits refunded on sold foreclosed real estate.

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10. SECURITIES

	September 30, 2013
	Amortized		Gross Unrealized		Gross Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$	181,968	$	16,745	$	-	$	198,713
Residential CMOs		47,721,616		75,448		1,326,064		46,471,000
Corporate equity securities		37,310		1,572		184		38,698
Bond mutual funds		4,078,129		82,950		-		4,161,079
Total securities available for sale	$	52,019,023	$	176,715	$	1,326,248	$	50,869,490
Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$	23,722,148	$	684,723	$	186,163	$	24,220,708
Residential CMOs		63,583,106		385,242		864,471		63,103,877
Asset-backed securities issued by Others:
Residential CMOs		3,294,474		100,907		418,975		2,976,406
Total debt securities held to maturity		90,599,728		1,170,872		1,469,609		90,300,991
U.S. government obligations		749,887		75		-		749,962
Total securities held to maturity	$	91,349,615	$	1,170,947	$	1,469,609	$	91,050,953

	December 31, 2012
	Amortized		Gross Unrealized		Gross Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$	198,400	$	32,986	$	-	$	231,386
Residential CMOs		42,507,542		266,775		118,518		42,655,799
Corporate equity securities		37,310		306		284		37,332
Bond mutual funds		4,012,609		268,537		-		4,281,146
Total securities available for sale	$	46,755,861	$	568,604	$	118,802	$	47,205,663
Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$	31,239,176	$	1,237,277	$	-	$	32,476,453
Residential CMOs		76,191,199		715,620		97,998		76,808,821
Asset-backed securities issued by Others:								-
Residential CMOs		4,439,118		197,028		484,343		4,151,803
Total debt securities held to maturity		111,869,493		2,149,925		582,341		113,437,077
U.S. government obligations		749,941		-		-		749,941
Total securities held to maturity	$	112,619,434	$	2,149,925	$	582,341	$	114,187,018

At September 30, 2013, certain asset-backed securities with an aggregate carrying value of $36.7 million were pledged to secure certain deposits. At September 30, 2013, asset-backed securities with an aggregate carrying value of $2.9 million were pledged as collateral for advances from the Federal Home Loan Bank of Atlanta.

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At September 30, 2013, 98% of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs had an average life of 5.12 years and an average duration of 4.68 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 5.54 years and an average duration of 5.14 years and are guaranteed by their issuer as to credit risk.

At December 31, 2012, 97% of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs had an average life of 3.43 years and average duration of 3.26 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 3.43 years and average duration of 3.24 years and are guaranteed by their issuer as to credit risk.

We believe that AFS securities with unrealized losses will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity. We believe that the losses are the result of general perceptions of safety and creditworthiness of the entire sector and a general disruption of orderly markets in the asset class.

Management has the ability and intent to hold the HTM securities with unrealized losses until they mature, at which time the Company will receive full value for the securities. Because our intention is not to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, management considers the unrealized losses in the held-to-maturity portfolio to be temporary.

No charges related to other-than-temporary impairment were made during the three and nine months ended September 30, 2013 and for the year ended December 31, 2012. During the year ended December 31, 2009, the Company recorded a charge of $148,000 related to other-than-temporary impairment on a single HTM CMO issue. At September 30, 2013, the CMO issue had a par value of $889,000, a market fair value of $611,000 and a carrying value of $511,000.

During the fourth quarter of the year ended December 31, 2012, the Company recognized net losses on the sale of securities of $3,736. The Company sold one AFS security with a carrying value of $1,469,911 and three HTM securities with aggregate carrying values of $3,796,011, recognizing a gain of $153,417 and losses of $157,153, respectively. The sale of HTM securities was permitted under ASC 320 “Investments - Debt and Equity Securities.” ASC 320-10-25-6 permits the sale of HTM securities for certain changes in circumstances. The Company sold the HTM positions due to a significant deterioration in the issues’ creditworthiness and the increase in regulatory risk weights mandated for risk-based capital purposes. There were no sales of AFS and HTM securities during the three and nine months ended September 30, 2013 and 2012, respectively.

AFS Securities

Gross unrealized losses and estimated fair value by length of time that the individual AFS securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:

September 30, 2013	Less Than 12				More Than 12
	Months				Months				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Losses
Asset-backed securities issued by GSEs	$	33,460,034	$	1,098,769	$	5,623,802	$	227,295	$	39,083,836	$	1,326,064
Corporate equity securities		126		184		-		-		126		184
	$	33,460,160	$	1,098,953	$	5,623,802	$	227,295	$	39,083,962	$	1,326,248

At September 30, 2013, the AFS investment portfolio had an estimated fair value of $50,869,490, of which $39,083,962 or 77% of the securities had some unrealized losses from their amortized cost. The securities with unrealized losses are predominantly mortgage-backed securities issued by GSEs.

AFS securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $1,326,064 or 2.77% of the portfolio amortized cost of $47,903,584. AFS asset-backed securities issued by GSEs with unrealized losses have an average life of 5.22 years and an average duration of 4.74 years. We believe that the securities will either recover in market value or be paid off as agreed.

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At December 31, 2012, the AFS investment portfolio had a fair value of $47,205,663 with unrealized losses from their amortized cost of $118,802. Asset-backed securities and corporate securities with unrealized losses had a fair value of $11,956,182 and all unrealized losses were for less than twelve months.

HTM Securities

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:

September 30, 2013	Less Than 12				More Than 12
	Months				Months				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Losses
Asset-backed securities issued by GSEs	$	41,773,548	$	1,029,248	$	3,300,948	$	21,386	$	45,074,496	$	1,050,634
Asset-backed securities issued by other		-		-		2,258,562		418,975		2,258,562		418,975
	$	41,773,548	$	1,029,248	$	5,559,510	$	440,362	$	47,333,058	$	1,469,609

At September 30, 2013, the HTM investment portfolio had an estimated fair value of $91,050,953, of which $47,333,058 or 52%, of the securities had some unrealized losses from their amortized cost. Of these securities, $45,074,496 or 95%, are mortgage-backed securities issued by GSEs and the remaining $2,258,562 or 5%, were asset-backed securities issued by others.

HTM securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $1,050,634 or 1.20% of the portfolio amortized cost of $87,305,254. HTM asset-backed securities issued by GSEs with unrealized losses have an average life of 6.02 years and an average duration of 5.56 years. We believe that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. All of the securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. Total unrealized losses on the asset-backed securities issued by others were $418,975, or 12.72% of the portfolio amortized cost of $3,294,474. HTM asset-backed securities issued by others with unrealized losses have an average life of 4.24 years and an average duration of 3.27 years.

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at December 31, 2012 are as follows:

December 31, 2012	Less Than 12				More Than 12
	Months				Months				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Losses
Asset-backed securities issued by GSEs	$	14,253,558	$	89,638	$	6,132,036	$	8,360	$	20,385,594	$	97,998
Asset-backed securities issued by other		-		-		3,057,666		484,343		3,057,666		484,343
	$	14,253,558	$	89,638	$	9,189,702	$	492,703	$	23,443,260	$	582,341

At December 31, 2012, the HTM investment portfolio had an estimated fair value of $114,187,018, of which $23,443,260, or 21% of the securities, had some unrealized losses from their amortized cost. Of these securities, $20,385,594, or 87%, are mortgage-backed securities issued by GSEs and the remaining $3,057,666, or 13%, were asset-backed securities issued by others.

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HTM securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $97,998 or 0.09% of the portfolio amortized cost of $107,430,375. HTM asset-backed securities issued by GSEs with unrealized losses have an average life of 1.85 years and an average duration of 1.72 years. We believe that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. All of the securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. Total unrealized losses on the asset-backed securities issued by others were $484,343, or 10.91% of the portfolio amortized cost of $4,439,118. HTM asset-backed securities issued by others with unrealized losses have an average life of 3.17 years and an average duration of 2.40 years.

Credit Quality of Asset-Backed Securities

The tables below present the Standard & Poor’s or equivalent credit rating from other major rating agencies for AFS and HTM asset-backed securities issued by GSEs and others at September 30, 2013 and December 31, 2012 by carrying value. The Company considers noninvestment grade securities rated BB+ or lower as classified assets for regulatory and financial reporting. GSE asset-backed security downgrades by Standard and Poor’s were treated as AAA based on regulatory guidance.

September 30, 2013			December 31. 2012
Credit Rating	Amount		Credit Rating	Amount
AAA	$	133,974,968	AAA	$	150,317,560
A+		-	A+		-
A		-	A		110,780
BBB		635,920	BBB		978,043
BBB-		106,045	BBB-		322,329
BB+		-	BB+		-
BB		836,679	BB		1,069,517
BB-		-	BB-		68,604
B+		66,873	B+		1,008,126
CCC+		874,410	CCC+		-
CCC		774,547	CCC		881,719
Total	$	137,269,442	Total	$	154,756,678

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11. LOANS

Loans consist of the following:

	September 30, 2013		December 31, 2012
Commercial real estate	$	445,662,038	$	419,667,312
Residential first mortgages		161,861,710		177,663,354
Construction and land development		31,113,145		31,818,782
Home equity and second mortgages		21,711,980		21,982,375
Commercial loans		86,504,220		88,157,606
Consumer loans		901,800		995,206
Commercial equipment		21,085,197		16,267,684
		768,840,090		756,552,319
Less:
Deferred loan fees		880,086		664,610
Allowance for loan loss		8,079,277		8,246,957
		8,959,363		8,911,567
	$	759,880,727	$	747,640,752

At September 30, 2013, the Bank’s allowance for loan losses totaled $8,079,277, or 1.05% of loan balances, as compared to $8,246,957, or 1.09% of loan balances, at December 31, 2012. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to the overall loss experience, current economic conditions, size, growth and composition of the loan portfolio, financial condition of the borrowers and other relevant factors that, in management’s judgment, warrant recognition in providing an adequate allowance.

At December 31, 2012, gross loans included $1,454,757 from the sales of OREO property that the Bank financed during 2011 that did not qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition”. The deferred gain balance was $225,000 at December 31, 2012. The Bank recognized the deferred gain of $225,000 during the three months ended September 30, 2013 as the transaction qualified for full accrual sales treatment under ASC Topic 360-20-40.

Risk Characteristics of Portfolio Segments

The Company manages its credit products and exposure to credit losses (credit risk) by the following specific portfolio segments (classes), which are levels at which the Company develops and documents its allowance for loan loss methodology. These segments are:

Commercial Real Estate (“CRE”)

Commercial and other real estate projects include office buildings, retail locations, churches, other special purpose buildings and commercial construction. Commercial construction balances were below 5% of the CRE portfolio at September 30, 2013 and December 31, 2012. The Bank offers both fixed-rate and adjustable-rate loans under these product lines. The primary security on a commercial real estate loan is the real property and the leases that produce income for the real property. The Bank generally limits its exposure to a single borrower to 15% of the Bank’s capital. Loans secured by commercial real estate are generally limited to 80% of the lower of the appraised value or sales price at origination and have an initial contractual loan payment period ranging from three to 20 years.

Loans secured by commercial real estate are larger and involve greater risks than one-to-four family residential mortgage loans. Because payments on loans secured by such properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.

Residential First Mortgages

Residential first mortgage loans made by the Bank are generally long term loans, amortized on a monthly basis, with principal and interest due each month. The initial contractual loan payment period for residential loans typically ranges from ten to 30 years. The Bank’s experience indicates that real estate loans remain outstanding for significantly shorter time periods than their contractual terms. Borrowers may refinance or prepay loans at their option, without penalty. The Bank originates both fixed-rate and adjustable-rate residential first mortgages.

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The annual and lifetime limitations on interest rate adjustments may limit the increases in interest rates on these loans. There are also unquantifiable credit risks resulting from potential increased costs to the borrower as a result of repricing of adjustable-rate mortgage loans. During periods of rising interest rates, the risk of default on adjustable-rate mortgage loans may increase due to the upward adjustment of interest cost to the borrower.

Construction and Land Development

The Bank offers loans for the construction of one-to-four family dwellings. Generally, these loans are secured by the real estate under construction as well as by guarantees of the principals involved. In addition, the Bank offers loans to acquire and develop land, as well as loans on undeveloped, subdivided lots for home building by individuals.

A decline in demand for new housing might adversely affect the ability of borrowers to repay these loans. Construction and land development loans are inherently riskier than providing financing on owner-occupied real estate. The Bank’s risk of loss is affected by the accuracy of the initial estimate of the market value of the completed project as well as the accuracy of the cost estimates made to complete the project. In addition, the volatility of the real estate market has made it increasingly difficult to ensure that the valuation of land associated with these loans is accurate. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, a project’s value might be insufficient to assure full repayment. As a result of these factors, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the project rather than the ability of the borrower or guarantor to repay principal and interest. If the Bank forecloses on a project, there can be no assurance that the Bank will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Home Equity and Second Mortgage Loans

The Bank maintains a portfolio of home equity and second mortgage loans. These products contain a higher risk of default than residential first mortgages as in the event of foreclosure, the first mortgage would need to be paid off prior to collection of the second mortgage. This risk has been heightened as the market value of residential property has declined.

Commercial Loans

The Bank offers commercial loans to its business customers. The Bank offers a variety of commercial loan products including term loans and lines of credit. Such loans are generally made for terms of five years or less. The Bank offers both fixed-rate and adjustable-rate loans under these product lines. When making commercial business loans, the Bank considers the financial condition of the borrower, the borrower’s payment history of both corporate and personal debt, the projected cash flows of the business, the viability of the industry in which the consumer operates, the value of the collateral, and the borrower’s ability to service the debt from income. These loans are primarily secured by equipment, real property, accounts receivable, or other security as determined by the Bank.

Commercial loans are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself.

Consumer Loans

The Bank has developed a number of programs to serve the needs of its customers with primary emphasis upon loans secured by automobiles, boats, recreational vehicles and trucks. The Bank also makes home improvement loans and offers both secured and unsecured personal lines of credit. Consumer loans entail greater risk from other loan types due to being secured by rapidly depreciating assets or the reliance on the borrower’s continuing financial stability.

Commercial Equipment Loans

These loans consist primarily of fixed-rate, short-term loans collateralized by a commercial customer’s equipment. When making commercial equipment loans, the Bank considers the same factors it considers when underwriting a commercial business loan. Commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. In the case of business failure, collateral would need to be liquidated to provide repayment for the loan. In many cases, the highly specialized nature of collateral equipment would make full recovery from the sale of collateral problematic.

20

Non-accrual and Past Due Loans

Non-accrual loans as of September 30, 2013 and December 31, 2012 were as follows:

	September 30, 2013
	90 or Greater Days Delinquent		Number of Loans		Non-accrual Performing Loans		Number of Loans		Total Dollars		Total Number of Loans
Commercial real estate	$	2,947,607		9	$	3,728,175		2	$	6,675,782		11
Residential first mortgages		2,155,122		7		565,802		3		2,720,924		10
Commercial loans		5,670,331		10		-		-		5,670,331		10
Consumer loans		-		-		31,935		1		31,935		1
Commercial equipment		316,662		5		-		-		316,662		5
	$	11,089,722		31	$	4,325,912		6	$	15,415,634		37

	December 31, 2012
	90 or Greater Days Delinquent		Number of Loans		Non-accrual Performing Loans		Number of Loans		Total Dollars		Total Number of Loans
Commercial real estate	$	1,527,844		7	$	3,802,947		2	$	5,330,791		9
Residential first mortgages		3,169,404		10		569,693		3		3,739,097		13
Home equity and second mortgages		71,296		2		-		-		71,296		2
Commercial loans		3,732,090		11		-		-		3,732,090		11
Consumer loans		-		-		51,748		1		51,748		1
Commercial equipment		216,383		4		-		-		216,383		4
	$	8,717,017		34	$	4,424,388		6	$	13,141,405		40

The Bank categorized six performing loans totaling $4,325,912 and $4,424,388 as non-accrual loans at September 30, 2013 and December 31, 2012, respectively. These six loans represent one well-secured commercial relationship with no specific reserves in the allowance due to the Bank's superior credit position with underlying collateral, which consists primarily of commercial real estate. As of September 30, 2013, the Bank had received all scheduled interest and principal payments on this relationship. It is management’s belief that there is no current risk of loss to the Bank for this relationship. These loans were classified as non-accrual loans due to the customer’s operating results. In accordance with the Company’s policy, interest income is recognized on a cash-basis for these loans.

Non-accrual loans on which the recognition of interest has been discontinued, which did not have a specific allowance for impairment, amounted to $12,932,327 and $11,371,542 at September 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at September 30, 2013 and December 31, 2012 was $432,916 and $443,856, respectively. Non-accrual loans with a specific allowance for impairment on which the recognition of interest has been discontinued amounted to $2,483,307 and $1,769,863 at September 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at September 30, 2013 and December 31, 2012 was $180,751 and $182,106, respectively.

21

An analysis of past due loans as of September 30, 2013 and December 31, 2012 was as follows:

September 30, 2013	Current		31-60 Days		61-89 Days		90 or Greater Days		Total Past Due		Total Loan Receivables
Commercial real estate	$	440,735,812	$	-	$	1,978,619	$	2,947,607	$	4,926,226	$	445,662,038
Residential first mortgages		159,568,816		-		137,772		2,155,122		2,292,894		161,861,710
Construction and land dev.		30,786,474		326,671		-		-		326,671		31,113,145
Home equity and second mortgages		21,388,847		199,217		123,916		-		323,133		21,711,980
Commercial loans		80,633,889		200,000		-		5,670,331		5,870,331		86,504,220
Consumer loans		898,574		3,226		-		-		3,226		901,800
Commercial equipment		20,730,853		37,682		-		316,662		354,344		21,085,197
Total	$	754,743,265	$	766,796	$	2,240,307	$	11,089,722	$	14,096,825	$	768,840,090
December 31, 2012
Commercial real estate	$	416,721,658	$	-	$	1,417,810	$	1,527,844	$	2,945,654	$	419,667,312
Residential first mortgages		173,593,886		97,307		802,757		3,169,404		4,069,468		177,663,354
Construction and land dev.		31,818,782		-		-		-		-		31,818,782
Home equity and second mortgages		21,499,018		350,715		61,346		71,296		483,357		21,982,375
Commercial loans		84,384,426		-		41,090		3,732,090		3,773,180		88,157,606
Consumer loans		983,094		9,363		2,749		-		12,112		995,206
Commercial equipment		15,659,007		371,921		20,373		216,383		608,677		16,267,684
Total	$	744,659,871	$	829,306	$	2,346,125	$	8,717,017	$	11,892,448	$	756,552,319

There were no accruing loans 90 days or greater past due at September 30, 2013 and December 31, 2012, respectively.

22

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses at and for the three and nine months ended September 30, 2013 and September 30, 2012, respectively, and the year ended December 31, 2012 and loan receivable balances at September 30, 2013 and September 30, 2012, respectively, and at December 31, 2012. An allocation of the allowance to one category of loans does not prevent the Company’s ability to utilize the allowance to absorb losses in a different category. The loan receivables are disaggregated on the basis of the Company’s impairment methodology.

	Commercial Real Estate			Residential First Mortgage			Construction and Land Development			Home Equity and Second Mtg.			Commercial Loans			Consumer Loans			Commercial Equipment			Total
At and For the Three Months Ended September 30, 2013
Allowance for loan losses:
Balance at July 1,	$	3,358,001		$	1,960,882		$	600,525		$	364,281		$	1,519,332		$	13,972		$	216,560		$	8,033,553
Charge-offs		(140,048	)		(80,110	)		(50	)		(155	)		(28,576	)		(1,012	)		(31	)		(249,982	)
Recoveries		-			154			-			-			168			28			9,746			10,096
Provisions		311,035			(177,787	)		(131,581	)		(45,812	)		272,009			1,539			56,207			285,610
Balance at September 30,	$	3,528,988		$	1,703,139		$	468,894		$	318,314		$	1,762,933		$	14,527		$	282,482		$	8,079,277
At and For the Nine Months Ended September 30, 2013
Allowance for loan losses:
Balance at January 1,	$	4,089,834		$	1,083,228		$	533,430		$	279,819		$	1,949,024		$	19,341		$	292,281		$	8,246,957
Charge-offs		(140,048	)		(139,048	)		(36,012	)		(111,038	)		(434,149	)		(10,003	)		(22,008	)		(892,306	)
Recoveries		-			11,054			-			-			12,059			2,010			59,293			84,416
Provisions		(420,798	)		747,905			(28,524	)		149,533			235,999			3,179			(47,084	)		640,210
Balance at September 30,	$	3,528,988		$	1,703,139		$	468,894		$	318,314		$	1,762,933		$	14,527		$	282,482		$	8,079,277
Ending balance: individually evaluated for impairment	$	559,333		$	170,741		$	-		$	-		$	291,821		$	-		$	22,875		$	1,044,770
Ending balance: collectively evaluated for impairment	$	2,969,655		$	1,532,398		$	468,894		$	318,314		$	1,471,112		$	14,527		$	259,607		$	7,034,507
Loan receivables:
Ending balance	$	445,662,038		$	161,861,710		$	31,113,145		$	21,711,980		$	86,504,220		$	901,800		$	21,085,197		$	768,840,090
Ending balance: individually evaluated for impairment	$	19,856,516		$	3,882,548		$	5,349,737		$	58,000		$	11,054,771		$	31,935		$	316,662		$	40,550,169
Ending balance: collectively evaluated for impairment	$	425,805,522		$	157,979,162		$	25,763,408		$	21,653,980		$	75,449,449		$	869,865		$	20,768,535		$	728,289,921

23

	Commercial Real Estate			Residential First Mortgage			Construction and Land Development			Home Equity and Second Mtg.			Commercial Loans			Consumer Loans			Commercial Equipment			Total
At and For the Year Ended December 31, 2012
Allowance for loan losses:
Balance at January 1,	$	2,525,199		$	539,205		$	354,385		$	143,543		$	3,850,294		$	19,119		$	223,296		$	7,655,041
Charge-offs		(486,431	)		(10,987	)		(140,835	)		(210,753	)		(1,003,824	)		(4,994	)		(168,802	)		(2,026,626	)
Recoveries		-			37,524			-			-			51,350			987			-			89,861
Provisions		2,051,066			517,486			319,880			347,029			(948,796	)		4,229			237,787			2,528,681
Balance at December 31,	$	4,089,834		$	1,083,228		$	533,430		$	279,819		$	1,949,024		$	19,341		$	292,281		$	8,246,957
Ending balance: individually evaluated for impairment	$	785,878		$	403,475		$	-		$	-		$	353,883		$	-		$	4,421		$	1,547,657
Ending balance: collectively evaluated for impairment	$	3,303,956		$	679,753		$	533,430		$	279,819		$	1,595,141		$	19,341		$	287,860		$	6,699,300
Loan receivables:
Ending balance	$	419,667,312		$	177,663,354		$	31,818,782		$	21,982,375		$	88,157,606		$	995,206		$	16,267,684		$	756,552,319
Ending balance: individually evaluated for impairment	$	21,618,890		$	3,367,827		$	4,877,868		$	291,000		$	8,778,681		$	51,748		$	4,421		$	38,990,435
Ending balance: collectively evaluated for impairment	$	398,048,422		$	174,295,527		$	26,940,914		$	21,691,375		$	79,378,925		$	943,458		$	16,263,263		$	717,561,884

	Commercial Real Estate			Residential First Mortgage			Construction and Land Development			Home Equity and Second Mtg.			Commercial Loans			Consumer Loans			Commercial Equipment			Total
At and For the Three Months Ended September 30, 2012
Allowance for loan losses:
Balance at July 1,	$	3,478,458		$	901,505		$	596,854		$	212,791		$	1,968,491		$	18,316		$	287,722		$	7,464,137
Charge-offs		(50,034	)		(10,991	)		(5,995	)		(46,989	)		(413	)		-			(90	)		(114,512	)
Recoveries		-			429			-			-			23			-			-			452
Provisions		683,311			(3,991	)		40,378			18,402			(14,062	)		1,505			20,532			746,075
Balance at September 30,	$	4,111,735		$	886,952		$	631,237		$	184,204		$	1,954,039		$	19,821		$	308,164		$	8,096,152
At and For the Nine Months Ended September 30, 2012
Allowance for loan losses:
Balance at January 1,	$	2,525,199		$	539,205		$	354,385		$	143,543		$	3,850,294		$	19,119		$	223,296		$	7,655,041
Charge-offs		(171,867	)		(10,991	)		(5,995	)		(88,931	)		(693,461	)		(999	)		(149,884	)		(1,122,128	)
Recoveries		-			37,676			-			-			1,983			-			-			39,659
Provisions		1,758,403			321,062			282,847			129,592			(1,204,777	)		1,701			234,752			1,523,580
Balance at September 30,	$	4,111,735		$	886,952		$	631,237		$	184,204		$	1,954,039		$	19,821		$	308,164		$	8,096,152
Ending balance: individually evaluated for impairment	$	1,122,590		$	247,541		$	134,500		$	21,855		$	499,654		$	-		$	4,715		$	2,030,855
Ending balance: collectively evaluated for impairment	$	2,989,145		$	639,411		$	496,737		$	162,349		$	1,454,385		$	19,821		$	303,449		$	6,065,297
Loan receivables:
Ending balance	$	406,261,770		$	176,825,516		$	31,639,206		$	21,940,441		$	86,057,488		$	1,047,046		$	17,246,112		$	741,017,579
Ending balance: individually evaluated for impairment	$	23,039,920		$	4,011,851		$	5,217,025		$	293,855		$	12,972,808		$	60,925		$	4,715		$	45,601,099
Ending balance: collectively evaluated for impairment	$	383,221,850		$	172,813,665		$	26,422,181		$	21,646,586		$	73,084,680		$	986,121		$	17,241,397		$	695,416,480

24

Credit Quality Indicators

A risk grading scale is used to assign grades to commercial real estate, construction and land development, commercial loans and commercial equipment loans. Loans are graded at inception, annually thereafter when financial statements are received and at other times when there is an indication that a credit may have weakened or improved. Only commercial loan relationships with an aggregate exposure to the Bank of $750,000 or greater are subject to being risk rated.

Residential first mortgages, home equity and second mortgages and consumer loans are evaluated for creditworthiness in underwriting and are monitored based on borrower payment history. These loans are classified as unrated unless they are part of a larger commercial relationship that requires grading or are troubled debt restructures or nonperforming loans with an Other Assets Especially Mentioned (“OAEM”) or higher risk rating due to a delinquent payment history.

Management regularly reviews credit quality indicators as part of its individual loan reviews and on a monthly and quarterly basis. The overall quality of the Bank’s loan portfolio is assessed using the Bank’s risk grading scale, the level and trends of net charge-offs, nonperforming loans and delinquencies, the performance of troubled debt restructured loans and the general economic conditions in the Company’s geographical market. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit quality indicators and allowance factors are adjusted based on management’s judgment during the monthly and quarterly review process.

Loans subject to risk ratings are graded on a scale of one to ten. The Company considers loans classified substandard, doubtful and loss as classified assets for regulatory and financial reporting.

Ratings 1 thru 6 - Pass

Ratings 1 thru 6 have asset risks ranging from excellent low risk to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks.

Rating 7 - OAEM (Other Assets Especially Mentioned) – Special Mention

These credits, while protected by the financial strength of the borrowers, guarantors or collateral, have reduced quality due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. OAEM loans are the first adversely classified assets on our watch list. These relationships will be reviewed at least quarterly.

Rating 8 - Substandard

Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. The loans may have a delinquent history or combination of weak collateral, weak guarantor strength or operating losses. When a loan is assigned to this category the Bank may estimate a specific reserve in the loan loss allowance analysis. These assets listed may include assets with histories of repossessions or some that are non-performing bankruptcies. These relationships will be reviewed at least quarterly.

Rating 9 - Doubtful

Doubtful assets have many of the same characteristics of Substandard with the exception that the Bank has determined that loss is not only possible but is probable and the risk is close to certain that loss will occur. When a loan is assigned to this category the Bank will identify the probable loss and it will receive a specific reserve in the loan loss allowance analysis. These relationships will be reviewed at least quarterly.

Rating 10 - Loss

Once an asset is identified as a definite loss to the Bank, it will receive the classification of “loss”. There may be some future potential recovery; however it is more practical to write off the loan at the time of classification. Losses will be taken in the period in which they are determined to be uncollectable.

25

Credit quality indicators as of September 30, 2013 and December 31, 2012 were as follows:

Credit Risk Profile by Internally Assigned Grade

	Commercial Real Estate				Construction and Land Dev.
	9/30/2013		12/31/2012		9/30/2013		12/31/2012
Unrated	$	63,842,162	$	59,930,126	$	4,339,477	$	4,330,321
Pass		351,452,830		329,882,941		18,631,753		19,752,749
Special mention		5,790,532		4,880,758		-		-
Substandard		24,576,514		24,973,487		8,141,915		7,735,712
Doubtful		-		-		-		-
Loss		-		-		-		-
Total	$	445,662,038	$	419,667,312	$	31,113,145	$	31,818,782

	Commercial Loans				Commercial Equipment
	9/30/2013		12/31/2012		9/30/2013		12/31/2012
Unrated	$	11,401,481	$	11,627,726	$	5,938,295	$	5,082,713
Pass		60,365,389		64,436,809		15,121,129		11,180,550
Special mention		402,000		-		2,898		-
Substandard		14,335,350		12,093,071		22,875		4,421
Doubtful		-		-		-		-
Loss		-		-		-		-
Total	$	86,504,220	$	88,157,606	$	21,085,197	$	16,267,684

Credit Risk Profile Based on Payment Activity

	Residential First Mortgages				Home Equity and Second Mtg.				Consumer Loans
	9/30/2013		12/31/2012		9/30/2013		12/31/2012		9/30/2013		12/31/2012
Performing	$	159,706,588	$	174,493,950	$	21,711,980	$	21,911,079	$	901,800	$	995,206
Nonperforming		2,155,122		3,169,404		-		71,296		-		-
Total	$	161,861,710	$	177,663,354	$	21,711,980	$	21,982,375	$	901,800	$	995,206

26

Impaired Loans and Troubled Debt Restructures (“TDRs”)

Impaired loans, including TDRs, at September 30, 2013 and September 30, 2012, respectively, and at December 31, 2012 were as follows:

September 30, 2013	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Three Month Interest Income Recognized		Nine Month Average Recorded Investment		Nine Month Interest Income Recognized
Commercial real estate	$	20,025,629	$	15,885,402	$	3,971,114	$	19,856,516	$	559,333	$	20,010,465	$	207,372	$	20,162,244	$	631,913
Residential first mortgages		3,882,548		3,181,637		700,911		3,882,548		170,741		3,910,884		30,371		3,919,666		96,616
Construction and land dev.		5,349,737		5,349,737		-		5,349,737		-		5,363,126		77,157		5,311,703		223,963
Home equity and second mtg.		58,000		58,000		-		58,000		-		120,000		1,486		216,556		6,016
Commercial loans		11,054,771		10,333,950		720,821		11,054,771		291,821		11,028,319		66,604		10,967,594		292,138
Consumer loans		31,935		31,935		-		31,935		-		36,393		1,112		43,199		2,759
Commercial equipment		335,563		293,787		22,875		316,662		22,875		336,106		1,238		350,886		7,740
Total	$	40,738,183	$	35,134,448	$	5,415,721	$	40,550,169	$	1,044,770	$	40,805,293	$	385,340	$	40,971,848	$	1,261,145

December 31, 2012	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Commercial real estate	$	21,618,890	$	18,804,478	$	2,814,412	$	21,618,890	$	785,878	$	22,501,842	$	1,119,715
Residential first mortgages		3,367,827		2,362,062		1,005,765		3,367,827		403,475		3,388,867		157,595
Construction and land dev.		4,877,868		4,877,868		-		4,877,868		-		4,792,982		276,260
Home equity and second mtg.		291,000		291,000		-		291,000		-		221,000		6,783
Commercial loans		8,778,681		8,330,442		448,238		8,778,681		353,883		9,153,074		284,095
Consumer loans		51,748		51,748		-		51,748		-		64,459		5,284
Commercial equipment		4,421		-		4,421		4,421		4,421		5,112		318
Total	$	38,990,435	$	34,717,598	$	4,272,836	$	38,990,435	$	1,547,657	$	40,127,336	$	1,850,050

September 30, 2012	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Three Month Interest Income Recognized		Nine Month Average Recorded Investment		Nine Month Interest Income Recognized
Commercial real estate	$	23,497,570	$	19,699,656	$	3,340,264	$	23,039,920	$	1,122,590	$	23,128,253	$	282,740	$	23,257,586	$	872,500
Residential first mortgages		4,011,851		2,347,285		1,664,567		4,011,851		247,541		4,021,446		35,750		4,025,659		121,746
Construction and land dev.		5,217,025		5,082,525		134,500		5,217,025		134,500		5,145,911		90,653		5,701,121		205,509
Home equity and second mtg.		293,855		272,000		21,855		293,855		21,855		246,399		1,870		220,572		5,373
Commercial loans		13,572,808		12,196,993		775,815		12,972,808		499,654		13,486,660		105,044		13,871,661		321,821
Consumer loans		60,925		60,925		-		60,925		-		63,492		1,557		70,365		4,500
Commercial equipment		4,715		-		4,715		4,715		4,715		4,909		83		5,309		266
Total	$	46,658,749	$	39,659,384	$	5,941,716	$	45,601,099	$	2,030,855	$	46,097,070	$	517,697	$	47,152,273	$	1,531,715

27

TDRs, included in the impaired loan schedules above, as of September 30, 2013 and December 31, 2012, respectively were as follows:

	September 30, 2013				December 31, 2012
	Dollars		Number of Loans		Dollars		Number of Loans
Commercial real estate	$	3,152,197		8	$	3,097,214		7
Residential first mortgages		1,485,600		4		1,418,229		3
	$	4,637,797		12	$	4,515,443		10

At December 31, 2012, all TDRs were performing according to the terms of their restructured agreements and there were no amounts specifically reserved for TDRs. At September 30, 2013, one TDR loan of $323,976 was over 90 days past due and the specific reserve of the allowance for loan losses was $12,000. Interest income in the amount of $155,812 and $220,326 was recognized on these loans for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively.

During the nine months ended September 30, 2013, the Bank entered into one TDR for $77,165 for a residential first mortgage and one TDR for $60,000 for a commercial real estate mortgage. TDR activity for the nine months ended September 30, 2013 included only two additions to the number of TDRs. During the year ended December 31, 2012, the Bank entered into TDRs for eight commercial real estate loans totaling $3,212,894 and three residential first mortgages totaling $1,419,657. For the year ended December 31, 2012, two commercial real estate TDR loans were charged-off in the amount of $415,995. One of the two charged-off commercial real estate loans was transferred to OREO with a balance of $382,500.

12. LOANS HELD FOR SALE

Residential mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value, in the aggregate. Fair value is derived from secondary market quotations for similar instruments. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Residential mortgage loans held for sale are generally sold with the mortgage servicing rights retained by the Company. The carrying value of mortgage loans sold is reduced by the cost allocated to the associated servicing rights. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold, using the specific identification method.

The Company enters into contractual commitments with potential borrowers, including loan commitments and rate-lock commitments for the origination of residential mortgage loans that will be held for sale in the secondary market. The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 15 to 60 days. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and subsequently closes within the timeframe established by the Company.

The interest rate-lock commitments are derivative financial instruments. Interest rate risk arises on these commitments and subsequently closed loans held for sale if interest rates change between the time of interest rate-lock and the delivery of the loan to a secondary market investor. To mitigate interest rate risk, the Company sells certain loans forward into the secondary market at a specified price with a specified date on a best efforts basis. These forward sales, which are entered into as a result of an interest rate-lock commitment with the Bank’s customer, are derivative financial instruments. The Company does not recognize gains or losses due to interest rate changes for loans sold forward on a best effort basis. The Bank had no loans held for sale at September 30, 2013 and 2012, respectively.

13. NEW ACCOUNTING STANDARDS

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2011-11; “Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities”. ASU 2011-11 amends Topic 210 “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements, borrowing/lending arrangements and derivative instruments with a right of offset. ASU 2011-11 was effective for the Company beginning on January 1, 2013 and did have a material impact on the Company’s consolidated financial statements.

28

ASU 2013-02 – Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The new guidance requires the presentation of significant amounts reclassified in a separate footnote and cross referencing to related footnote disclosures, if applicable. ASU 2013-02 was effective for the Company prospectively beginning on January 1, 2013 and did have a material impact on the Company’s consolidated financial statements.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Therefore, any aggregate unrealized gains or losses should not be interpreted as a forecast of future earnings or cash flows. Furthermore, the fair values disclosed should not be interpreted as the aggregate current value of the Company.

September 30, 2013					Fair Value Measurements
Description of Asset	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investment securities - AFS	$	50,869,490	$	50,869,490	$	-	$	50,869,490	$	-
Investment securities - HTM		91,349,615		91,050,953		749,962		90,300,991		-
FHLB and FRB Stock		5,593,100		6,198,000		-		6,198,000		-
Loans		759,880,727		753,916,000		-		753,916,000		-
Other real estate owned		7,058,504		7,058,504		-		7,058,504		-
Liabilities
Savings, NOW and money market accounts	$	432,564,049	$	432,564,049	$	-	$	432,564,049	$	-
Time deposits		384,683,410		387,119,000		-		387,119,000		-
Long-term debt		70,488,848		71,382,000		-		71,382,000		-
Short term borrowings		2,640,000		2,640,000		-		2,640,000		-
TRUPs		12,000,000		2,400,000		-		2,400,000		-

At December 31, 2012					Fair Value Measurements
Description of Asset	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investment securities - AFS	$	47,205,663	$	47,205,663	$	-	$	47,205,663	$	-
Investment securities - HTM		112,619,434		114,187,018		749,941		113,437,077		-
FHLB and FR Stock		5,476,050		5,469,000		-		5,469,000		-
Loans		747,640,752		757,387,000		-		757,387,000		-
Other real estate owned		6,891,353		6,891,353		-		6,891,353		-
Liabilities
Savings, NOW and money market accounts	$	414,776,285	$	414,776,285	$	-	$	414,776,285	$	-
Time deposits		405,454,003		410,257,000		-		410,257,000		-
Long-term debt		60,527,208		64,252,000		-		64,252,000		-
Short term borrowings		1,000,000		1,000,000		-		1,000,000		-
TRUPs		12,000,000		2,400,000		-		2,400,000		-

29

At September 30, 2013, the Company had outstanding loan commitments and standby letters of credit of $25.8 million and $24.7 million, respectively. Based on the short-term lives of these instruments, the Company does not believe that the fair value of these instruments differs significantly from their carrying values.

Valuation Methodology

Investment securities and FHLB and FRB stock - Fair values are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans receivable - For conforming residential first-mortgage loans, the market price for loans with similar coupons and maturities was used. For nonconforming loans with maturities similar to conforming loans, the coupon was adjusted for credit risk. Loans that did not have quoted market prices were priced using the discounted cash flow method. The discount rate used was the rate currently offered on similar products. Loans priced using the discounted cash flow method included residential construction loans, commercial real estate loans and consumer loans. The estimated fair value of loans held for sale is based on the terms of the related sale commitments.

Other real estate owned - Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral.

Deposits - The fair value of checking accounts, saving accounts and money market accounts were the amount payable on demand at the reporting date.

Time certificates - The fair value was determined using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar products.

Long-term debt and other borrowed funds - These were valued using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar borrowings.

Guaranteed preferred beneficial interest in junior subordinated securities (TRUPs) - These were valued using discounted cash flows. The discount rate was equal to the rate currently offered on similar borrowings.

Off-balance sheet instruments - The Company charges fees for commitments to extend credit. Interest rates on loans for which these commitments are extended are normally committed for periods of less than one month. Fees charged on standby letters of credit and other financial guarantees are deemed to be immaterial and these guarantees are expected to be settled at face amount or expire unused. It is impractical to assign any fair value to these commitments.

The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2013 and December 31, 2012, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amount presented herein..

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15. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables presents the components of comprehensive loss for securities for the three and nine months ended September 30, 2013 and 2012.

	Three Months Ended September 30, 2013									Three Months Ended September 30, 2012
	Before Tax			Tax Effect			Net of Tax			Before Tax		Tax Effect		Net of Tax
Net unrealized holding gain (loss) arising during period	$	(350,524	)	$	(119,178	)	$	(231,346	)	$	104,229	$	35,438	$	68,791
Reclassification adjustments		-			-			-			-		-		-
Other comprehensive gain (loss)	$	(350,524	)	$	(119,178	)	$	(231,346	)	$	104,229	$	35,438	$	68,791

	Nine Months Ended September 30, 2013									Nine Months Ended September 30, 2012
	Before Tax			Tax Effect			Net of Tax			Before Tax		Tax Effect		Net of Tax
Net unrealized holding gain (loss)arising during period	$	(1,591,096	)	$	(540,972	)	$	(1,050,124	)	$	115,973	$	39,431	$	76,542
Reclassification adjustments		-			-			-			-		-		-
Other comprehensive gain (loss)	$	(1,591,096	)	$	(540,972	)	$	(1,050,124	)	$	115,973	$	39,431	$	76,542

The following table presents the changes in each component of accumulated other comprehensive income for securities, net of tax, for the three and nine months ended September 30, 2013.

	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
	Net Unrealized Gains And Losses			Net Unrealized Gains And Losses
Beginning of period	$	(679,594	)	$	139,184
Other comprehensive loss before reclassifications		(231,346	)		(1,050,124	)
Amounts reclassified from accumulated other comprehensive income		-			-
Net other comprehensive loss		(231,346	)		(1,050,124	)
End of period	$	(910,940	)	$	(910,940	)

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ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This document may contain forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of The Community Financial Corporation (the “Company”) and Community Bank of the Chesapeake (the “Bank”). These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions.

The Company and the Bank’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company and the Bank’s market area, changes in real estate market values in the Company and the Bank’s market area and changes in relevant accounting principles and guidelines. Additional factors that may affect our results are discussed in Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “Form 10-K”) and in the prospectus, dated September 26, 2013, that we filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

GENERAL

The Company is a bank holding company organized in 1989 under the laws of the State of Maryland. It owns all the outstanding shares of capital stock of the Bank. The Company engages in no significant activity other than holding the stock of the Bank, paying its subordinated debt and preferred stock obligations, and directing the business of the Bank. Accordingly, the information set forth in this report, including financial statements and related data, relates primarily to the Company, the Bank and its subsidiaries.

In October 2013, the Company issued 1,591,300 shares of common stock at a price of $18.75 per share resulting in net proceeds of $27.4 million after commissions and related offering expenses. The additional capital raised was a fourth quarter 2013 event and was not reflected in the third quarter analysis below. In addition, the Company listed its stock on the NASDAQ Stock Exchange and began trading on September 27, 2013 under the ticker symbol “TCFC.”

Effective October 18, 2013, Community Bank of Tri-County changed its name to Community Bank of the Chesapeake. This new name reflects the Bank's recent expansion into the Northern Neck of Virginia and Fredericksburg, Virginia. The name of the holding company changed from Tri-County Financial Corporation to The Community Financial Corporation, to better align the parent company name with that of the Bank.

The Bank has sought to increase assets through loan production. The Bank believes that its ability to offer fast, flexible, local decision-making will continue to attract significant new business relationships and enhance asset growth. The Bank’s marketing is also directed towards increasing its balances of both consumer and business transaction deposit accounts. The Bank believes that increases in these account types will lessen the Bank’s dependence on higher-cost funding, such as certificates of deposit and borrowings. Although management believes that this strategy will increase financial performance over time, increasing the balances of certain products, such as commercial lending and transaction accounts, may also increase the Bank’s noninterest expense. It recognizes that certain lending and deposit products increase the possibility of losses from credit and other risks.

The Bank conducts business through its main office in Waldorf, Maryland, and ten branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby, California, Maryland, and King George, Virginia. The Bank provides commercial lending services from its three loan production offices in La Plata and Prince Frederick, Maryland and Fredericksburg, Virginia.

The Company’s results are influenced by local and national economic conditions. These conditions include the level of short-term interest rates such as the federal funds rate, the differences between short-term and long-term interest rates, the value of real estate in our markets, the prospects for economic growth or decline, and the rates of anticipated and current inflation. Local conditions, including employment growth or declines, may have direct or indirect effects on our borrowers’ ability to meet their obligations.

32

The Bank continues to evaluate its allowance for loan losses and the associated provision to compensate for the inherent risk in the loan portfolio. Any evaluation of the allowance for loan losses is inherently subjective and reflects management’s expectations as to future economic conditions in the region as well as individual borrowers’ circumstances. Management believes that its allowance for loan losses is adequate. For further information on the Bank’s allowance for loan losses see the discussion in the sections captioned “Financial Condition” and “Critical Accounting Policies” as well as the relevant discussions in the Form 10-K and Annual Report for the year ended December 31, 2012.

On September 23, 2011, the U.S. Department of Treasury purchased $20.0 million in the Company’s preferred stock under the Small Business Lending Fund (the “SBLF”). The SBLF is a program intended to encourage small business lending by providing capital to qualified community banks at favorable rates. SBLF dividend rates can fluctuate between 1% and 7% during the first four and one half years, depending on the level of the Bank’s small business lending. As of September 30, 2013 and December 31, 2012, the Company’s dividend rate on the SBLF funds was 1%. At September 30, 2013, the Company had increased its QSBL from the baseline so that the dividend rate should remain at 1% through four and one half years from issuance. For additional information regarding SBLF, refer to Note 8 in the Company’s Form 10-Q for the nine months ended September 30, 2013 and Note 18 of the Consolidated Financial Statements as presented in the Company’s Form 10-K for the year ended December 31, 2012.

SELECTED FINANCIAL DATA

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Condensed Income Statement
Interest and Dividend Income	$	9,975,059		$	9,886,656		$	29,565,129		$	30,097,582
Interest Expense		1,872,986			2,539,049			5,914,528			8,328,075
Net Interest Income		8,102,073			7,347,607			23,650,601			21,769,507
Provision for Loan Loss		285,610			746,075			640,210			1,523,580
Noninterest Income		1,119,216			1,302,437			3,377,022			3,045,322
Noninterest Expense		6,245,727			5,600,784			18,494,971			17,861,889
Income Before Income Taxes		2,689,952			2,303,185			7,892,442			5,429,360
Income Tax Expense		987,111			830,244			2,885,761			1,910,014
Net Income (NI)		1,702,841			1,472,941			5,006,681			3,519,346
Preferred Stock Dividends		50,000			50,000			150,000			150,000
NI Available to Common Shareholders		1,652,841			1,422,941			4,856,681			3,369,346
Comprehensive Income		1,471,495			1,541,732			3,956,557			3,595,888
Per Common Share
Basic Earnings	$	0.55		$	0.47		$	1.61		$	1.11
Diluted Earnings	$	0.55		$	0.47		$	1.60		$	1.10
Cash Dividends Paid (1)	$	0.10		$	-		$	0.30		$	0.40
Book Value	$	20.39		$	18.99		$	20.39		$	18.99
Return On Average Assets		0.70	%		0.61	%		0.69	%		0.49	%
Return On Average Common Equity		10.63	%		9.85	%		10.52	%		7.84	%
Return On Average Equity		8.29	%		7.58	%		8.19	%		6.07	%
Interest Rate Spread		3.48	%		3.15	%		3.41	%		3.10	%
Net Interest Margin		3.60	%		3.28	%		3.53	%		3.24	%
Cost of Funds		0.85	%		1.15	%		0.90	%		1.27	%
Cost of Deposits		0.67	%		0.99	%		0.73	%		1.10	%
Efficiency Ratio		67.73	%		64.75	%		68.43	%		71.98	%

⁽¹⁾ Beginning with the first quarter of 2013, the Company moved to paying a quarterly dividend in place of its annual dividend. The total dividends expected to be paid during 2013 are expected to remain at $0.40 per share.

33

RESULTS OF OPERATIONS – NINE MONTHS ENDED SEPTEMBER 30, 2013 AND SEPTEMBER 30, 2012

Consolidated net income available to common shareholders for the nine months ended September 30, 2013 increased $1,487,335, or 44.14%, to $4,856,681, or $1.60 per common share (fully diluted), compared to $3,369,346, or $1.10 per common share (fully diluted), for the nine months ended September 30, 2012. The increase of $0.50 per share was attributable to increased net interest income of $1,881,094 and noninterest income of $331,700 and decreased provision for loan losses of $883,370, partially offset by increased noninterest expense of $633,082 and increased income tax expense of $975,747.

	Nine Months Ended September 30,
	2013		2012		$ Change			% Change
Interest and Dividend Income
Loans, including fees	$	27,703,885	$	27,624,323	$	79,562			0.29	%
Taxable interest and dividends on investment securities		1,852,692		2,465,529		(612,837	)		(24.86	)%
Interest on deposits with banks		8,552		7,730		822			10.63	%
Total Interest and Dividend Income		29,565,129		30,097,582		(532,453	)		(1.77	)%
Interest Expenses
Deposits		4,332,351		6,630,820		(2,298,469	)		(34.66	)%
Short-term borrowings		12,930		12,483		447			3.58	%
Long-term debt		1,569,247		1,684,772		(115,525	)		(6.86	)%
Total Interest Expenses		5,914,528		8,328,075		(2,413,547	)		(28.98	)%
Net Interest Income (NII)		23,650,601		21,769,507		1,881,094			8.64	%
Provision for loan losses		640,210		1,523,580		(883,370	)		(57.98	)%
NII After Provision For Loan Losses	$	23,010,391	$	20,245,927	$	2,764,464			13.65	%

Net interest income increased from the comparable nine months in 2012 due primarily to reduced funding costs and the Company’s ability to maintain loan yields. An important component of lowering the Company’s cost of funds was the increase in average noninterest-bearing deposits of $15.9 million for the first nine months of 2013 to $86.8 million compared to $70.9 million for the first nine months of 2012. The Company’s 2013 year to date cost of funds, which includes debt and interest and non-interest bearing deposits, decreased 37 basis points to 0.90% from 1.27% for the nine months ended September 30, 2012. During the same comparable period average loan yields decreased 10 basis points from 5.14% for the nine months ended September 30, 2012 to 5.04% for the nine months ended September 30, 2013.

Net interest income increased to $23,650,601 for the nine months ended September 30, 2013 compared to $21,769,507 for the nine months ended September 30, 2012. The net interest margin was 3.53% for the nine months ended September 30, 2013, a 29 basis point increase from 3.24% for the nine months ended September 30, 2012. The increase was largely the result of a rapid decrease in the Company’s cost of funds that began during 2012 as certificates of deposit re-priced and rates declined on money market accounts. The average cost of total interest-bearing liabilities decreased 38 basis points from 1.38% for the first nine months of 2012 to 1.00% for the first nine months of 2013.

Interest and dividend income decreased by $532,453 to $29,565,129 for the nine months ended September 30, 2013 compared to $30,097,582 for the nine months ended September 30, 2012. Decreases in yields on loans and investments were partially offset by the growth in the average balance of loans. A reduction in average yields on interest-earning assets resulted in a decrease in interest income of $931,044 as rates decreased from 4.47% for the nine months ended September 30, 2012 to 4.41% for the nine months ended September 30, 2013. The Company has been successful over the last several years in mitigating the effect of the lower interest rate environment on loan rates through pricing and interest rate floors. Interest and dividend income was further reduced $231,762 as average interest-earning investment balances decreased $20.0 million from $180.3 million for the nine months ended September 30, 2012 to $160.3 million for the nine months ended September 30, 2013. These reductions were partially offset by an increase in interest income of $630,353 due to growth of $16.7 million in the average balance of loans from $716.6 million to $733.3 million.

34

Interest expense decreased $2,413,547 to $5,914,528 for the nine months ended September 30, 2013 compared to $8,328,075 for the nine months ended September 30, 2012 due primarily to a reduction in the average cost of funds on interest-bearing liabilities as interest expense decreased $2,221,583 due to a decrease in rates. This was principally achieved by a decrease in the average rates paid on certificates of deposits and money market accounts, which declined from 1.64% and 0.62%, respectively, for the nine months ended September 30, 2012 to 1.22% and 0.34%, respectively, for the nine months ended September 30, 2013. The Company has been successful in increasing its core deposits and reducing its cost of funds in the low interest rate environment over the last several years. In addition, the average rate paid on long-term debt decreased from 3.17% to 2.58% for the comparable period. Interest expense also decreased $361,932 due to a decline in average interest-bearing deposit balances of $29.2 million from $729.4 million for the nine months ended September 30, 2012 to $700.2 million for the nine months ended September 30, 2013. These reductions in interest expense were partially offset by a $169,968 increase in interest expense due to a $9.2 million increase in average debt balances.

The provision for loan losses decreased $883,370 from $1,523,580 for the comparable period in 2012 to $640,210 for the nine months ended September 30, 2013 and reflected a decrease in the allowance for specific nonperforming loans and a decrease in net-charge-offs offset by increasing average loan balances, economic conditions that affected the loss factors used to compute the allowance and an increase in the level of delinquencies. The specific allowance is based on management’s estimate of realizable value. Net charge-offs decreased $274,578 from $1,082,469 for the nine months ended September 30, 2012 to $807,891 for the nine months ended September 30, 2013. The general allowance as a percentage of gross loans increased during the nine months ended September 30, 2013 as average loans increased from the comparable period. Overall delinquency, which included all loans greater than 30 days past due, increased from 1.57% at December 31, 2012 to 1.83% at September 30, 2013. Nonperforming loans as a percentage of total loans were 1.44% at September 30, 2013 compared to 1.15% at December 31, 2012.

35

The following table presents information on the average balances of the Company’s interest-earning assets and interest-bearing liabilities and interest earned or paid thereon for the nine months ended September 30, 2013 and 2012, respectively. There are no tax equivalency adjustments.

	For the Nine Months Ended September 30,
			2013							2012
					Average							Average
	Average				Yield/			Average				Yield/
dollars in thousands	Balance		Interest		Cost			Balance		Interest		Cost
Assets
Interest-earning assets:
Loan portfolio (1)	$	733,275	$	27,704		5.04	%	$	716,566	$	27,624		5.14	%
Investment securities, federal funds sold and interest-bearing deposits		160,317		1,861		1.55	%		180,263		2,474		1.83	%
Total Interest-Earning Assets		893,592		29,565		4.41	%		896,829		30,098		4.47	%
Cash and cash equivalents		11,766							10,837
Other assets		57,294							54,428
Total Assets	$	962,652						$	962,094
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings	$	37,237	$	28		0.10	%	$	32,260	$	46		0.19	%
Interest-bearing demand and money market accounts		266,966		672		0.34	%		259,057		1,203		0.62	%
Certificates of deposit		395,974		3,632		1.22	%		438,070		5,382		1.64	%
Long-term debt		68,807		1,333		2.58	%		60,097		1,430		3.17	%
Short-term debt		5,357		13		0.32	%		4,836		12		0.33	%
Guaranteed preferred beneficial interest in junior subordinated debentures		12,000		236		2.62	%		12,000		255		2.83	%
Total Interest-Bearing Liabilities		786,341		5,914		1.00	%		806,320		8,328		1.38	%
Noninterest-bearing demand deposits		86,762							70,897
Other liabilities		8,013							7,589
Stockholders' equity		81,536							77,288
Total Liabilities and Stockholders' Equity	$	962,652						$	962,094
Net interest income			$	23,651						$	21,770
Interest rate spread						3.41	%						3.10	%
Net yield on interest-earning assets						3.53	%						3.24	%
Ratio of average interest-earning assets to average interest bearing liabilities						113.64	%						111.22	%
Cost of funds						0.90	%						1.27	%
Cost of deposits						0.73	%						1.10	%

(1) Average balance includes non-accrual loans

36

The table below sets forth certain information regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest earning asset and interest bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate); and (2) changes in rate (changes in rate multiplied by old volume). Changes in rate volume (changes in rate multiplied by the change in volume) have been allocated to changes due to volume.

	Nine Months Ended September 30, 2013
	compared to Nine Months Ended
	September 30, 2012
				Due to
dollars in thousands	Volume			Rate			Total
Interest income:
Loan portfolio (1)	$	631		$	(551	)	$	80
Investment securities, federal funds sold and interest bearing deposits		(232	)		(381	)		(613	)
Total interest-earning assets	$	399		$	(932	)	$	(533	)
Interest-bearing liabilities:
Savings		4			(22	)		(18	)
Interest-bearing demand and money market accounts		20			(551	)		(531	)
Certificates of deposit		(386	)		(1,364	)		(1,750	)
Long-term debt		169			(266	)		(97	)
Short-term debt		1			-			1
Guaranteed preferred beneficial interest in junior subordinated debentures		-			(19	)		(19	)
Total interest-bearing liabilities	$	(192	)	$	(2,222	)	$	(2,414	)
Net change in net interest income	$	591		$	1,290		$	1,881

(1) Average balance includes non-accrual loans

The following table shows the components of noninterest income and the dollar and percentage changes for the periods presented.

	Nine Months Ended September 30,
	2013		2012			$ Change			% Change
Noninterest Income
Loan appraisal, credit, and miscellaneous charges	$	374,769	$	663,897		$	(289,128	)		(43.55	)%
Gain on sale of asset		11,000		-			11,000			n/a
Net gains (losses) on sale of OREO		215,345		(96,917	)		312,262			(322.20	)%
Income from bank owned life insurance		464,775		476,294			(11,519	)		(2.42	)%
Service charges		1,764,314		1,530,323			233,991			15.29	%
Gain on sale of loans held for sale		546,819		471,725			75,094			15.92	%
Total Noninterest Income	$	3,377,022	$	3,045,322		$	331,700			10.89	%

Gains on loan sales were impacted during the third quarter by a reduction in residential mortgage refinancing activity due to rising interest rates. For the nine months ended September 30, 2013 gains on loan sales increased to $546,819 on sales of $20,903,681 compared to $471,725 on sales of $9,972,254 for the same period in 2012.

37

During the nine months ended September 30, 2013, the Bank recognized $215,345 in gains on the sale of OREO which consisted of the sale of four properties for net proceeds of $712,944 and net losses of $9,655 and the recognition of $225,000 of previously deferred gain from the sale of an OREO property that the Bank financed during 2011 that did not initially qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition. During the nine months ended September 30, 2012, the Bank disposed of three OREO properties resulting in proceeds of $344,512 and recognized net losses of $96,917.

The increase in service charge income for the nine months ended September 30, 2013 was principally the result of increased revenue from the Bank’s sale of investment products and services of $209,769. Additionally, bank account fees increased $73,897 compared with the same period in 2012, but were also impacted by the Company’s waiver of certain service charge fees during its conversion to a new data processing system during the second quarter of 2012. These increases to service charge income were offset by a decrease of $49,675 for miscellaneous service charges.

The following table shows the components of noninterest expense and the dollar percentage changes for the periods presented.

	Nine Months Ended September 30,
	2013		2012		$ Change			% Change
Noninterest Expense
Salary and employee benefits	$	10,883,606	$	9,982,603	$	901,003			9.03	%
Occupancy expense		1,556,877		1,389,024		167,853			12.08	%
Advertising		391,152		345,111		46,041			13.34	%
Data processing expense		967,368		1,118,598		(151,230	)		(13.52	)%
Professional fees		754,719		746,322		8,397			1.13	%
Depreciation of furniture, fixtures, and equipment		580,842		486,159		94,683			19.48	%
Telephone communications		148,516		137,649		10,867			7.89	%
Office supplies		151,157		186,741		(35,584	)		(19.06	)%
FDIC Insurance		858,860		1,092,809		(233,949	)		(21.41	)%
Valuation allowance on OREO		500,536		657,226		(156,690	)		(23.84	)%
Other		1,701,338		1,719,647		(18,309	)		(1.06	)%
Total Noninterest Expense	$	18,494,971	$	17,861,889	$	633,082			3.54	%

	Nine Months Ended
	September 30, 2013		September 30, 2012		Variance			% Variance
Compensation and Benefits	$	10,883,606	$	9,982,603	$	901,003			9.03	%
OREO Valuation Allowance and Expenses		605,704		742,600		(136,896	)		(18.43	)%
Other Operating Expenses		7,005,661		7,136,686		(131,025	)		(1.84	)%
Total Noninterest Expense	$	18,494,971	$	17,861,889	$	633,082			3.54	%

For the nine months ended September 30, 2013, noninterest expense increased 3.54% or $633,082 to $18,494,971 from $17,861,889 for the comparable period in 2012. Year to date increases in compensation and benefits were offset by decreases in OREO expenses and other operating expenses. Other operating expenses decreased due to one-time costs for conversion of the Bank’s data processing system in 2012 and reductions in the cost of FDIC insurance. Depreciation and occupancy expense increased primarily due to the opening of a new operations center in Waldorf, Maryland and its 11th branch in King George, Virginia in the second half of 2012. We also opened a loan production office in Fredericksburg, Virginia in August 2013. Increased revenues and a moderate increase in noninterest expense have improved the Company’s efficiency ratio to 68.43% for the nine months ended September 30, 2013 from 71.98% for the nine months ended September 30, 2012.

The Company recorded income tax expense of $2,885,761 or 36.56%, of pretax earnings of $7,892,442, for the nine months ended September 30, 2013 compared with $1,910,014 or 35.18%, of pretax earnings of $5,429,360, for the nine months ended September 30, 2012. The increase in the effective tax rate was the result of tax exempt income being relatively lower to total income in 2013 than the comparable period in 2012.

38

RESULTS OF OPERATIONS – THREE MONTHS ENDED SEPTEMBER 30, 2013 AND SEPTEMBER 30, 2012

Consolidated net income available to common shareholders for the three months ended September 30, 2013 increased 16.16%, or $229,900, to $1,652,841, or $0.55 per common share (fully diluted) compared to $1,422,941, or $0.47, per common share (fully diluted) for the three months ended September 30, 2012. The increase of $0.08 per share was attributable to increased net interest income of $754,466 and decreased provision for loan losses of $460,465 partially offset by decreased noninterest income of $183,221 and increased noninterest expense of $644,943 and income tax expense of $156,867.

	Three Months Ended September 30,
	2013		2012		$ Change			% Change
Interest and Dividend Income
Loans, including fees	$	9,340,139	$	9,113,063	$	227,076			2.49	%
Taxable interest and dividends on investment securities		631,652		768,611		(136,959	)		(17.82	)%
Interest on deposits with banks		3,268		4,982		(1,714	)		(34.40	)%
Total Interest and Dividend Income		9,975,059		9,886,656		88,403			0.89	%
Interest Expenses
Deposits		1,335,916		2,001,535		(665,619	)		(33.26	)%
Short-term borrowings		4,237		298		3,939			1321.81	%
Long-term debt		532,833		537,216		(4,383	)		(0.82	)%
Total Interest Expenses		1,872,986		2,539,049		(666,063	)		(26.23	)%
Net Interest Income (NII)		8,102,073		7,347,607		754,466			10.27	%
Provision for loan losses		285,610		746,075		(460,465	)		(61.72	)%
NII After Provision For Loan Losses	$	7,816,463	$	6,601,532	$	1,214,931			18.40	%

Net interest income increased from the comparable three months in 2012 due primarily to reduced funding costs and the Company’s ability to maintain loan yields. An important component of lowering the Company’s cost of funds was the increase in average noninterest-bearing deposits of $16.2 million for the third quarter of 2013 to $93.9 million compared to $77.7 million for the third quarter of 2012. The Company’s 2013 third quarter cost of funds, which includes debt and interest and non-interest bearing deposits, decreased 30 basis points to 0.85% for the three months ended September 30, 2013 from 1.15% for the three months ended September 30, 2012. During the same comparable period, average loan yields decreased one basis point from 5.03% for the three months ended September 30, 2012 to 5.02% for the three months ended September 30, 2013.

Net interest income increased to $8,102,073 for the three months ended September 30, 2013 compared to $7,347,607 for the three months ended September 30, 2012. The net interest margin was 3.60% for the three months ended September 30, 2013, a 32 basis point increase from 3.28% for the three months ended September 30, 2012. The increase was largely the result of a rapid decrease in the Company’s cost of funds that began during 2012 as certificates of deposit re-priced and rates declined on money market accounts. The average cost of total interest-bearing liabilities decreased 31 basis points from 1.26% for the third quarter of 2012 to 0.95% for the third quarter of 2013. Deposit costs decreased 32 basis points from 0.99% to 0.67% for the comparable period.

Interest and dividend income increased by $88,403 to $9,975,059 for the three months ended September 30, 2013 compared to $9,886,656 for the three months ended September 30, 2012. The growth in the average balance of loans was partially offset by decreases in investment average balances and yields on loans and investments. Interest and dividend income increased $249,136 due to growth of $19.8 million in the average balance of loans from $724.4 million to $744.2 million. This increase was partially offset by a reduction in average yields on investment and loan yields, which resulted in a decrease in interest income of $100,458. The Company has been successful over the last several years in limiting the effect of the lower interest rate environment on loan rates through pricing and interest rate floors. Interest and dividend income was further reduced $60,275 as average interest-earning investment balances decreased $14.9 million from $171.9 million for the three months ended September 30, 2012 to $157.0 million for the three months ended September 30, 2013.

39

Interest expense decreased $666,063 to $1,872,986 for the three months ended September 30, 2013 compared to $2,539,049 for the three months ended September 30, 2012 due primarily to a reduction in the average cost of funds on interest-bearing liabilities as interest expense decreased $629,060 due to a decrease in rates. This was principally achieved by a decrease in the average rates paid on certificates of deposits and money market accounts, which declined from 1.56% and 0.47%, respectively, for the three months ended September 30, 2012 to 1.14% and 0.33%, respectively, for the three months ended September 30, 2013. The Company has been successful in increasing its core deposits and reducing its cost of funds in the low interest rate environment over the last several years. In addition, the average rate paid on long-term debt decreased from 2.99% to 2.54% for the comparable period. Interest expense was also reduced $111,011 due to a decline in average interest-bearing deposit balances of $32.9 million from $732.1 million for the three months ended September 30, 2012 to $699.2 million for the three months ended September 30, 2013. These reductions in interest expense were partially offset by a $74,008 increase in interest expense due to a $16.0 million increase in average debt balances.

The provision for loan losses decreased $460,465 from $746,075 for the comparable period in 2012 to $285,610 for the three months ended September 30, 2013 and reflected a decrease in the allowance for specific nonperforming loans, offset by an increase in net charge-offs. The specific allowance is based on management’s estimate of realizable value. Net charge-offs increased $125,827 from $114,060 for the three months ended September 30, 2012 to $239,887 for the three months ended September 30, 2013.

40

The following table presents information on the average balances of the Company’s interest-earning assets and interest-bearing liabilities and interest earned or paid thereon for the three months ended September 30, 2013 and 2012, respectively. There are no tax equivalency adjustments.

	For the Three Months Ended September 30,
			2013							2012
					Average							Average
	Average				Yield/			Average				Yield/
dollars in thousands	Balance		Interest		Cost			Balance		Interest		Cost
Assets
Interest-earning assets:
Loan portfolio (1)	$	744,180	$	9,340		5.02	%	$	724,416	$	9,113		5.03	%
Investment securities, federal funds sold and interest-bearing deposits		157,045		635		1.62	%		171,926		774		1.80	%
Total Interest-Earning Assets		901,225		9,975		4.43	%		896,342		9,887		4.41	%
Cash and cash equivalents		13,398							15,672
Other assets		57,732							56,137
Total Assets	$	972,355						$	968,151
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings	$	37,975	$	10		0.11	%	$	33,337	$	9		0.11	%
Interest-bearing demand and money market accounts		273,750		224		0.33	%		271,260		322		0.47	%
Certificates of deposit		387,480		1,102		1.14	%		427,476		1,671		1.56	%
Long-term debt		71,526		454		2.54	%		60,544		452		2.99	%
Short-term debt		5,156		4		0.31	%		102		-		0.00	%
Guaranteed preferred beneficial interest in junior subordinated debentures		12,000		79		2.63	%		12,000		85		2.83	%
Total Interest-Bearing Liabilities		787,887		1,873		0.95	%		804,719		2,539		1.26	%
Noninterest-bearing demand deposits		93,902							77,749
Other liabilities		8,368							7,920
Stockholders' equity		82,198							77,763
Total Liabilities and Stockholders' Equity	$	972,355						$	968,151
Net interest income			$	8,102						$	7,348
Interest rate spread						3.48	%						3.15	%
Net yield on interest-earning assets						3.60	%						3.28	%
Ratio of average interest-earning assets to average interest bearing liabilities						114.39	%						111.39	%
Cost of funds						0.85	%						1.15	%
Cost of deposits						0.67	%						0.99	%

(1) Average balance includes non-accrual loans

41

The table below sets forth certain information regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest earning asset and interest bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate); and (2) changes in rate (changes in rate multiplied by old volume). Changes in rate volume (changes in rate multiplied by the change in volume) have been allocated to changes due to volume.

	Three Months Ended September 30, 2013
	compared to Three Months Ended
	September 30, 2012
				Due to
dollars in thousands	Volume			Rate			Total
Interest income:
Loan portfolio (1)	$	248		$	(21	)	$	227
Investment securities, federal funds sold and interest bearing deposits		(60	)		(79	)		(139	)
Total interest-earning assets	$	188		$	(100	)	$	88
Interest-bearing liabilities:
Savings		1			-			1
Interest-bearing demand and money market accounts		2			(100	)		(98	)
Certificates of deposit		(114	)		(455	)		(569	)
Long-term debt		70			(68	)		2
Short-term debt		4			-			4
Guaranteed preferred beneficial interest in junior subordinated debentures		-			(6	)		(6	)
Total interest-bearing liabilities	$	(37	)	$	(629	)	$	(666	)
Net change in net interest income	$	225		$	529		$	754

(1) Average balance includes non-accrual loans

The following table shows the components of noninterest income and the dollar and percentage changes for the periods presented.

	Three Months Ended September 30,
	2013		2012		$ Change			% Change
Noninterest Income
Loan appraisal, credit, and miscellaneous charges	$	55,620	$	280,456	$	(224,836	)		(80.17	)%
Net gains on sale of OREO		215,345		-		215,345			n/a
Income from bank owned life insurance		156,348		157,177		(829	)		(0.53	)%
Service charges		661,134		528,420		132,714			25.12	%
Gain on sale of loans held for sale		30,769		336,384		(305,615	)		(90.85	)%
Total Noninterest Income	$	1,119,216	$	1,302,437	$	(183,221	)		(14.07	)%

Gains on loan sales were impacted during the third quarter by a reduction in residential mortgage refinancing activity due to rising interest rates. For the three months ended September 30, 2013, gains on loan sales decreased to $30,769 on sales of $3,353,424 compared to $336,384 on sales of $6,686,204 for the same period in 2012. The increase in service charge income for the three months ended September 30, 2013 was principally the result of increased revenue from the Bank’s investment products and services and bank account fees.

42

During the three months ended September 30, 2013, the Bank recognized $215,345 in gains on the sale of OREO which consisted of the sale of four properties for net proceeds of $712,944 and net losses of $9,655 and the recognition of $225,000 of previously deferred gain from the sale of an OREO property that the Bank financed during 2011 that did not initially qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition. During the three months ended September 30, 2012, there were no sales of OREO properties,

The following table shows the components of noninterest expense and the dollar percentage changes for the periods presented.

	Three Months Ended September 30,
	2013		2012		$ Change			% Change
Noninterest Expense
Salary and employee benefits	$	3,737,000	$	3,492,524	$	244,476			7.00	%
Occupancy expense		504,627		487,233		17,394			3.57	%
Advertising		118,421		86,020		32,401			37.67	%
Data processing expense		237,054		329,005		(91,951	)		(27.95	)%
Professional fees		293,028		177,818		115,210			64.79	%
Depreciation of furniture, fixtures, and equipment		191,320		188,870		2,450			1.30	%
Telephone communications		45,787		45,563		224			0.49	%
Office supplies		41,689		52,751		(11,062	)		(20.97	)%
FDIC Insurance		284,591		201,607		82,984			41.16	%
Valuation allowance on OREO		170,560		31,050		139,510			449.31	%
Other		621,650		508,343		113,307			22.29	%
Total Noninterest Expense	$	6,245,727	$	5,600,784	$	644,943			11.52	%

	Three Months Ended
	September 30, 2013		September 30, 2012		Variance		% Variance
Compensation and Benefits	$	3,737,000	$	3,492,524	$	244,476		7.00	%
OREO Valuation Allowance and Expenses		211,640		85,579		126,061		147.30	%
Other Operating Expenses		2,297,087		2,022,681		274,406		13.57	%
Total Noninterest Expense	$	6,245,727	$	5,600,784	$	644,943		11.52	%

For the three months ended September 30, 2013, noninterest expense increased 11.52% or $644,943, to $6,245,727 from $5,600,784 for the comparable period in 2012. Employee compensation and other operating expenses continue to be impacted by greater regulatory compliance costs for legacy regulations and the impact of the Dodd-Frank Act.

The efficiency ratio of 67.73% for the three months ended September 30, 2013 was higher than the comparable three months of 2012 of 64.75%, but was in line with year to date trends (68.43% for the nine months ended September 30, 2013).

The Company recorded income tax expense of $987,111 or 36.70%, of pretax earnings of $2,689,952, for the three months ended September 30, 2013 compared with $830,244 or 36.05%, of pretax earnings of $2,303,185, for the three months ended September 30, 2012. The increase in the effective tax rate was the result of tax exempt income being relatively lower to total income in 2013 than the comparable period in 2012.

43

FINANCIAL CONDITION – SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

	September 30, 2013		December 31, 2012		$ Change			% Change
Assets	(Unaudited)
Cash and due from banks	$	23,269,755	$	10,696,653	$	12,573,102			117.54	%
Federal funds sold		-		190,000		(190,000	)		(100.00	)%
Interest-bearing deposits with banks		3,626,750		409,002		3,217,748			786.73	%
Securities available for sale (AFS), at fair value		50,869,490		47,205,663		3,663,827			7.76	%
Securities held to maturity (HTM), at amortized cost		91,349,615		112,619,434		(21,269,819	)		(18.89	)%
FHLB and FRB stock - at cost		5,593,100		5,476,050		117,050			2.14	%
Loans receivable - net of ALLL of $8,079,277 and $8,246,957		759,880,727		747,640,752		12,239,975			1.64	%
Premises and equipment, net		19,272,212		19,782,236		(510,024	)		(2.58	)%
Other real estate owned (OREO)		7,058,504		6,891,353		167,151			2.43	%
Accrued interest receivable		2,850,066		2,904,325		(54,259	)		(1.87	)%
Investment in bank owned life insurance		19,195,355		18,730,580		464,775			2.48	%
Other assets		9,938,081		9,093,164		844,917			9.29	%
Total Assets	$	992,903,655	$	981,639,212	$	11,264,443			1.15	%

Total assets at September 30, 2013 of $992,903,655 increased by $11,264,443 compared to total assets of $981,639,212 at December 31, 2012. The increase in total assets was primarily attributable to an increase in the loan portfolio and cash and cash equivalents, offset by a decrease in investment securities.The differences in allocations between the different cash and investment categories reflect operational needs.

Details of the Bank’s loan portfolio are presented below:

	September 30, 2013		%			December 31, 2012		%
Commercial real estate	$	445,662,038		57.97	%	$	419,667,312		55.47	%
Residential first mortgages		161,861,710		21.05	%		177,663,354		23.48	%
Construction and land development		31,113,145		4.05	%		31,818,782		4.21	%
Home equity and second mortgage		21,711,980		2.82	%		21,982,375		2.91	%
Commercial loans		86,504,220		11.25	%		88,157,606		11.65	%
Consumer loans		901,800		0.12	%		995,206		0.13	%
Commercial equipment		21,085,197		2.74	%		16,267,684		2.15	%
		768,840,090		100.00	%		756,552,319		100.00	%
Less:
Deferred loan fees		880,086		0.11	%		664,610		0.09	%
Allowance for loan loss		8,079,277		1.05	%		8,246,957		1.09	%
		8,959,363					8,911,567
	$	759,880,727				$	747,640,752

Loans increased $12,239,975 from $747,640,752 at December 31, 2012 to $759,880,727 at September 30, 2013, due primarily to increases in loans for commercial real estate and commercial equipment partially offset by decreases in residential mortgages and commercial loans. First and second quarter 2013 residential loan production was focused on loans originated for sale in the secondary market.

44

Asset Quality	September 30, 2013			December 31, 2012			$ Change			% Change
Gross Loans	$	768,840,090		$	756,552,319		$	12,287,771			1.62	%
Allowance for loan loss (ALLL)		8,079,277			8,246,957			(167,680	)		(2.03	)%
Foreclosed real estate (OREO)		7,058,504			6,891,353			167,151			2.43	%
Past due loans (PDLs) 31-89 days		3,007,103			3,175,431			(168,328	)		(5.30	)%
Nonperforming loans >= 90 days Delinquent (NPLs)		11,089,722			8,717,018			2,372,704			27.22	%
Nonperforming assets (NPLs + OREO)		18,148,226			15,608,371			2,539,855			16.27	%
Performing non-accrual loans		4,325,912			4,424,388			(98,476	)		(2.23	)%
Troubled debt restructures (TDRs)		4,637,797			4,515,443			122,354			2.71	%
Allowance for loan losses (ALLL) to total loans		1.05	%		1.09	%
Past due loans to total loans		0.39	%		0.42	%
Nonperforming loans to total loans		1.44	%		1.15	%
Loan delinquency (PDLs + NPLs) to total loans		1.83	%		1.57	%
NPLs and performing non-accrual loans to total loans		2.01	%		1.74	%
NPLs, performing non-accrual loans and TDRs to total loans (a)		2.57	%		2.33	%
Allowance to nonperforming loans		72.85	%		94.61	%
Nonperforming assets to total assets		1.83	%		1.59	%
Nonperforming assets, performing nonaccrual loans + TDRs to total assets (a)		2.70	%		2.50	%

(a) Ratio was adjusted to remove duplication of loans that are both nonperforming and troubled debt restructures.

The allowance for loan losses decreased from 1.09% of loans at December 31, 2012 to 1.05% of loans at September 30, 2013 due to changes to certain general allowance factors that reflect changes in historical loss and delinquency rates and general economic conditions and a reduction in specific reserves on impaired loans. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to: the overall loss experience; current economic conditions; size, growth and composition of the loan portfolio; financial condition of the borrowers; current appraised values of underlying collateral; and other relevant factors that, in management’s judgment, warrant recognition in providing an adequate allowance. Management believes that the allowance is adequate.

The allowance for loan losses decreased $167,680 from $8,246,957 at December 31, 2012 to $8,079,277 at September 30, 2013. The decrease in the allowance reflects an overall reduction in lower specific reserves partially offset by a dollar and percentage increase in the general allowance.

	September 30, 2013		% of Gross Loans			December 31, 2012		% of Gross Loans
General Allowance	$	7,034,507		0.91	%	$	6,699,300		0.89	%
Specific Allowance		1,044,770		0.14	%		1,547,657		0.20	%
Total Allowance	$	8,079,277		1.05	%	$	8,246,957		1.09	%

The specific allowance has decreased principally due to a trend in the overall improvement in asset quality over the past two years in the Bank’s commercial portfolios, which include commercial real estate, commercial loans, commercial equipment and construction and land development. Classified loans in these portfolios decreased from $62,843,351 at December 31, 2011 compared to $44,806,691 at December 31, 2012 and $47,076,654 at September 30, 2013 (See Note 11 of the Consolidated Financial Statements). The $2,269,963 increase since December 31, 2012 in classified loans in the Bank’s commercial portfolios primarily related to a line of credit on one well-secured stalled development project.

45

Nonperforming loans (90 days or greater delinquent) were $11,089,722 or 1.44% of total loans at September 30, 2013 compared to $8,717,018 or 1.15% of total loans at December 31, 2012. The Bank considers all nonperforming loans 90 days or greater delinquent to be non-accrual loans and in accordance with the Company’s policy all interest accrued but not collected from loans that are placed on non-accrual is 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.

The Bank had 31 nonperforming loans at September 30, 2013 compared to 34 nonperforming loans at December 31, 2012. The net increase of $2,372,704 was due to increases of 90 days or greater delinquency in commercial real estate of $1,419,763, commercial loans of $1,938,241 and commercial equipment loans of $100,279 partially offset by reductions in nonperforming residential first mortgages of $1,014,282 and home equity and second mortgages of $71,297. Nonperforming loans at September 30, 2013 included $6,704,665 or 60%, of nonperforming loans attributed to four well-secured customer relationships, of which $3,308,407 related to a line of credit on a stalled development project that the Bank expects to be current by the end of the year. The increase in nonperforming loans from December 31, 2012 was due primarily to the line of credit on the stalled development project. Nonperforming loans at September 30, 2013 decreased $1,214,483 from the June 30, 2013 balance of $12,304,205 or 1.63% of total loans.

The Bank categorized six performing loans totaling $4,325,912 and $4,424,388 as nonaccrual loans at September 30, 2013 and December 31, 2012, respectively. These six loans represent one well-secured commercial relationship with no specific reserves in the allowance due to the Bank's superior credit position with underlying collateral, which consists primarily of commercial real estate. As of September 30, 2013, the Bank had received all scheduled interest and principal payments on this relationship. It is management’s belief that there is no current risk of loss to the Bank for this relationship. These loans were classified as nonaccrual loans due to the customer’s operating results. In accordance with the Company’s policy, interest income is recognized on a cash-basis for these loans

Non-accrual loans on which the recognition of interest has been discontinued, which did not have a specific allowance for impairment, amounted to $12,932,327 and $11,371,542 at September 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at September 30, 2013 and December 31, 2012 was $432,916 and $443,856, respectively. Non-accrual loans with a specific allowance for impairment on which the recognition of interest has been discontinued amounted to $2,483,307 and $1,769,863 at September 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at September 30, 2013 and December 31, 2012 was $180,751 and $182,106, respectively. Specific allowances on these balances at September 30, 2013 and December 31, 2012 were $952,674 and $732,189, respectively, and are based on management’s evaluation of the underlying collateral and utilization of the Bank’s credit evaluation criteria.

The overall delinquency rate (loans past due 31-89 days and 90 days or greater) improved 43 basis points from 2.26% at March 31, 2013 to 1.83% at September 30, 2013 and was 26 basis points higher than the December 31, 2012 delinquency rate of 1.57%.

At September 30, 2013, the Bank had 12 TDRs totaling $4,637,797 compared to 10 TDRs totaling $4,515,443 as of December 31, 2012. At December 31, 2012, all TDRs were performing according to the terms of their restructured agreements and there were no amounts specifically reserved for TDRs. At September 30, 2013 one TDR loan of $323,976 was over 90 days past due and the specific reserve of the allowance for loan losses was $12,000. Interest income in the amount of $155,812 and $220,326 was recognized on these loans for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively.

Management continues to monitor nonperforming and TDR loans and is working to resolve these loans in a manner that will preserve the most value for the Company. Additional loan information is presented in this Quarterly Report on Form 10-Q under Note 11 and for prior years is presented in the Company’s Form 10-K for the year ended December 31, 2012.

The OREO balance was $7,058,504 at September 30, 2013 an increase of $167,151 compared to $6,891,353 at December 31, 2012. This increase consisted of additions of $1,390,286 offset by disposals of $722,599 and valuation allowances of $500,536 to adjust properties to current appraised values less the estimated cost to sell. OREO carrying amounts reflect management’s estimate of the realizable value of these properties incorporating current appraised values, local real estate market conditions and related costs. During the nine months ended September 30, 2013, the Bank recognized $215,345 in gains on the sale of OREO which consisted of the sale of four properties for net proceeds of $712,944 and net losses of $9,655 and the recognition of $225,000 of a previously deferred gain from the sale of an OREO property that the Bank financed during 2011 that did not initially qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition. During the nine months ended September 30, 2012, the Bank disposed of three OREO properties resulting in proceeds of $344,512 and recognized net losses of $96,917.

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At September 30, 2013, 98%, or $133,974,968, of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or an equivalent credit rating from another major rating agency compared to 97%, or $150,317,560, at December 31, 2012. Debt securities are evaluated quarterly to determine whether a decline in their value is other-than-temporary (“OTTI”). No OTTI charges were recorded for the three and nine months ended September 30, 2013 and the year ended December 31, 2012, respectively. Classified securities decreased $475,457 to $2,552,509 at September 30, 2013 from $3,027,966 at December 31, 2012.

The Bank’s asset quality trends have been generally improving over the last two years. Loans classified as substandard, doubtful or loss, OREO assets and classified securities, have decreased $22,293,455 from $81,909,520 at September 30, 2011 to $59,616,065 at September 30, 2013. Since December 31, 2012, classified assets have increased $1,020,716 from $58,595,349. Current year 2013 positive trends were offset by a substandard classification of $3,308,407 related to a line of credit on a stalled development project. The Bank expects this relationship to be current by the end of the year.

	September 30, 2013		December 31, 2012		$ Change			% Change
Liabilities	(Unaudited)
Deposits
Non-interest-bearing deposits	$	107,856,339	$	102,319,581	$	5,536,758			5.41	%
Interest-bearing deposits		709,391,120		717,910,707		(8,519,587	)		(1.19	)%
Total deposits		817,247,459		820,230,288		(2,982,829	)		(0.36	)%
Short-term borrowings		2,640,000		1,000,000		1,640,000			164.00	%
Long-term debt		70,488,848		60,527,208		9,961,640			16.46	%
Guaranteed preferred beneficial interest in junior subordinated debentures (TRUPs)		12,000,000		12,000,000		-			0.00	%
Accrued expenses and other liabilities		8,379,012		8,834,455		(455,443	)		(5.16	)%
Total Liabilities	$	910,755,319	$	902,591,951	$	8,163,368			0.90	%

Total liabilities increased $8,163,368 or 0.90%, primarily due to an increase in borrowings partially offset by a small increase in deposits.

Details of the Bank’s deposit portfolio are presented below:

	September 30, 2013		%			December 31, 2012		%
Noninterest-bearing demand	$	107,856,339		13.20	%	$	102,319,581		12.47	%
Interest-bearing:
Demand		86,009,278		10.52	%		67,351,757		8.21	%
Money market deposits		200,947,770		24.59	%		209,813,301		25.58	%
Savings		37,750,662		4.62	%		35,291,646		4.30	%
Certificates of deposit		384,683,410		47.07	%		405,454,003		49.43	%
Total interest-bearing		709,391,120		86.80	%		717,910,707		87.53	%
Total deposits	$	817,247,459		100.00	%	$	820,230,288		100.00	%

Deposits decreased $2,982,829 or 0.36%, to $817,247,459 at September 30, 2013 compared to $820,230,288 at December 31, 2012. During the last two years, the Bank’s focus has been on increasing transaction deposits, especially noninterest bearing deposits, to lower its overall cost of funds. As of September 30, 2013, the Bank’s deposit funding consisted of 52.93% transaction accounts, an increase of 2.36% from 50.57% at December 31, 2012 and an increase of 4.35% from 48.58% at September 30, 2012. Average noninterest bearing deposits increased $15.9 million for the first nine months of 2013 to $86.8 million from $70.9 million for the first nine months of 2012. During the same time frame, average time deposits decreased $42.1 million from $438.1 million to $396.0 million. Long-term debt increased $9,961,640 from $60,527,208 at December 31, 2012 to $70,488,848 at September 30, 2013. During the first quarter of 2013, the Company added $10 million in Federal Home Loan Bank advances at 0.87% for four years.

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	September 30, 2013			December 31, 2012			$ Change			% Change
Stockholders' Equity	(Unaudited)
Preferred Stock at par of $1,000	$	20,000,000		$	20,000,000		$	-			0.00	%
Common Stock at par of $0.01		30,484			30,524			(40	)		(0.13	)%
Additional paid in capital		18,275,729			17,873,560			402,169			2.25	%
Retained earnings		45,626,970			41,986,633			3,640,337			8.67	%
Accumulated other comprehensive gain (loss)		(910,940	)		139,184			(1,050,124	)		(754.49	)%
Unearned ESOP shares		(873,907	)		(982,640	)		108,733			(11.07	)%
Total Stockholders' Equity	$	82,148,336		$	79,047,261		$	3,101,075			3.92	%

During the nine months ended September 30, 2013, stockholders’ equity increased $3,101,075 to $82,148,336. The increase in stockholders’ equity was due to net income of $5,006,681 and net stock related activities of $208,510 partially offset by quarterly common dividends paid of $913,992, quarterly preferred stock dividends of $150,000 and a decrease to accumulated other comprehensive income of $1,050,124. Accumulated other comprehensive losses increased during the second and third quarters primarily due to market valuation adjustments of the Company’s AFS asset-backed securities portfolio as a result of increases in long-term interest rates. The Company believes that AFS securities with unrealized losses will either recover in market value or be paid off as agreed. The Company intends to and has the ability to hold these securities to maturity. Common stockholders' equity at $62,148,336 as of September 30, 2013 resulted in a book value of $20.39 per common share. The Company remains well-capitalized at September 30, 2013 with a Tier 1 capital to average asset ratio of 9.76%. As indicated above, the additional $27.4 million of capital raised in October 2013 was a fourth quarter 2013 event and was not reflected in the third quarter analysis above.

The Company had paid annual cash dividends on common stock since 1994. During the first quarter of 2013, the Board of Directors announced a change to a quarterly dividend in place of its previous annual dividend and that the expected total dividend to be paid in 2013 will be $0.40 per share.

LIQUIDITY AND CAPITAL RESOURCES

The Company has no business other than holding the stock of the Bank and does not currently have any material funding requirements, except for the payment of dividends on preferred and common stock, and the payment of interest on subordinated debentures.

The Company’s principal sources of liquidity are cash on hand and dividends received from the Bank. The Bank is subject to various regulatory restrictions on the payment of dividends.

The Bank’s principal sources of funds for investment and operations are net income, deposits, sales of loans, borrowings, principal and interest payments on loans, principal and interest received on investment securities and proceeds from the maturity and sale of investment securities. Its principal funding commitments are for the origination or purchase of loans, the purchase of securities and the payment of maturing deposits. Deposits are considered the primary source of funds supporting the Bank’s lending and investment activities. The Bank also uses borrowings from the Federal Home Loan Bank (FHLB) of Atlanta to supplement deposits. The amount of FHLB advances available to the Bank is limited to the lower of 30% of Bank assets or the amount supportable by eligible collateral including FHLB stock, loans and securities. In addition, the Bank has established lines of credit with the Federal Reserve Bank and commercial banks.

For additional information regarding these arrangements, including collateral, refer to Note 10 of the Consolidated Financial Statements as presented in the Company’s Form 10-K for the year ended December 31, 2012.

The Bank’s most liquid assets are cash, cash equivalents and federal funds sold. The levels of such assets are dependent on the Bank’s operating, financing and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows.

Cash, federal funds sold, and interest-bearing deposits with banks as of September 30, 2013 totaled $26,896,505, an increase of $15,600,850 or 138%, from the December 31, 2012 total of $11,295,655. The increase in cash was primarily due to cash generated from net income, net proceeds received from maturing investment securities, and increases in short-term and long-term borrowings. These increases to cash were partially offset by an excess of loan originations over principal collected and a decrease in deposits.

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During the first nine months of 2013, all financing activities provided $7,504,334 in cash compared to $5,866,511 in cash used for the same period in 2012. The Bank provided $13,370,845 more cash for financing activities in the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012, primarily due to an increase in borrowings and a reduction in the net decrease in deposits. The Bank borrowed a net of $11,638,494 for the nine months ended September 30, 2013 compared to no borrowings for the nine months ended September 30, 2012. Customer deposits for the nine months ended September 30, 2013 decreased $2,982,829 compared to a decrease in deposits of $4,265,600 for the nine months ended September 30, 2012. The Company moved to a quarterly dividend in 2013 and as a result used $307,579 less cash to pay dividends of $1,063,992 during the nine months ended September 30, 2013 compared to $1,371,571 for the nine months ended September 30, 2012. Other financing activities increased cash provided $142,001.

Operating activities provided cash of $6,507,955 for nine months ended September 30, 2013 compared to $8,808,176 of cash provided in the same period of 2012, a decrease in cash of $2,300,221 from the comparable period in 2012. Cash decreased primarily due to decreases in other assets and the provision for loan losses and a decrease in accrued expenses partially offset by an increase in net income.

Investing activities provided cash of $1,588,561 for nine months ended September 30, 2013 compared to $4,135,141 of cash provided for the same period of 2012. The decrease in cash of $2,546,580 was primarily due to a decrease in net cash provided from investment transactions from $33,683,298 of cash provided for the nine months ended September 30, 2012 to $15,456,913 of cash provided for the nine months ended September 30, 2013. Additionally, cash was reduced $8,571,401 due to increased loans originated from $173,628,906 for the nine months ended September 30, 2012 to $182,200,307 for the nine months ended September 30, 2013. These decreases to cash provided were partially offset by increased cash provided due to growth in principal payments collected, decreased premises and equipment purchases and increased proceeds from the sale of OREO and other assets. Principal payments collected increased cash provided by $20,073,611 increasing from $147,989,755 for the nine months ended September 30, 2012 to $168,063,366 for the nine months ended September 30, 2013. Net cash provided also increased $3,798,162 for the nine months ended September 30, 2013, as 2012 incurred costs were expended in 2012 for premises and equipment related to acquisition and construction costs for the operations center in Waldorf, Maryland and the King George, Virginia branch. Additionally, cash increased $379,433 due to an increase in net proceeds from sales of OREO and asset disposals.

49

REGULATORY MATTERS

The Bank is subject to Federal Reserve Board capital requirements as well as statutory capital requirements imposed under Maryland law. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. The Company’s and the Bank’s actual capital amounts and ratios at September 30, 2013 and December 31, 2012, respectively are presented in the following tables.

At September 30, 2013	Actual				Required for Capital Adequacy Purposes				To be Considered Well Capitalized Under Prompt Corrective Action
(in thousands)
Total Capital (to risk weighted assets)
The Company	$	103,176	12.79	%	$	64,545	8.00	%
The Bank	$	102,137	12.68	%	$	64,425	8.00	%	$	80,531	10.00	%
Tier 1 Capital (to risk weighted assets)
The Company	$	95,059	11.78	%	$	32,272	4.00	%
The Bank	$	94,020	11.67	%	$	32,212	4.00	%	$	48,319	6.00	%
Tier 1 Capital (to average assets)
The Company	$	95,059	9.76	%	$	38,956	4.00	%
The Bank	$	94,020	9.67	%	$	38,896	4.00	%	$	48,620	5.00	%

At December 31, 2012	Actual				Required for Capital Adequacy Purposes				To be Considered Well Capitalized Under Prompt Corrective Action
(in thousands)
Total Capital (to risk weighted assets)
The Company	$	99,280	12.84	%	$	61,842	8.00	%
The Bank	$	96,600	12.55	%	$	61,586	8.00	%	$	76,983	10.00	%
Tier 1 Capital (to risk weighted assets)
The Company	$	90,908	11.76	%	$	30,921	4.00	%
The Bank	$	88,228	11.46	%	$	30,793	4.00	%	$	46,190	6.00	%
Tier 1 Capital (to average assets)
The Company	$	90,908	9.39	%	$	38,723	4.00	%
The Bank	$	88,228	9.14	%	$	38,595	4.00	%	$	48,244	5.00	%

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that involve significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions. The Company considers its determination of the allowance for loan losses, the determination of other-than-temporarily impaired securities, the valuation of foreclosed real estate and the valuation of deferred tax assets to be critical accounting policies.

50

The Company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America and the general practices of the United States banking industry. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements. Accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When these sources are not available, management makes estimates based upon what it considers to be the best available information.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that exist in the loan portfolio. The allowance is based on two principles of accounting: (1) Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 450 “Contingencies,” which requires that losses be accrued when they are probable of occurring and are estimable and (2) FASB ASC 310 “Receivables,” which requires that losses be accrued when it is probable that the Company will not collect all principal and interest payments according to the contractual terms of the loan. The loss, if any, is determined by the difference between the loan balance and the value of collateral, the present value of expected future cash flows and values observable in the secondary markets.

The allowance for loan loss balance is an estimate based upon management’s evaluation of the loan portfolio. The allowance is comprised of a specific and a general component. The specific component consists of management’s evaluation of certain classified impaired and non-accrual loans and their underlying collateral. Management assesses the ability of the borrower to repay the loan based upon all information available. Loans are examined to determine a specific allowance based upon the borrower’s payment history, economic conditions specific to the loan or borrower and other factors that would impact the borrower’s ability to repay the loan on its contractual basis. Depending on the assessment of the borrower’s ability to pay and the type, condition and value of collateral, management will establish an allowance amount specific to the loan.

Management utilizes a risk scale to assign grades to commercial real estate, construction and land development, commercial loans and commercial equipment loans. Commercial loan relationships with an aggregate exposure to the Bank of $750,000 or greater are risk rated. Residential first mortgages, home equity and second mortgages and consumer loans are evaluated for creditworthiness in underwriting and are monitored on an ongoing basis based on borrower payment history. Consumer loans and residential real estate loans are classified as unrated unless they are part of a larger commercial relationship that requires grading or are troubled debt restructures or nonperforming loans with an Other Assets Especially Mentioned or higher risk rating due to a delinquent payment history.

The Bank’s commercial loan portfolio is periodically reviewed by regulators and independent consultants engaged by management. These reviews validate the Bank’s asset classifications and may result in adjustments to provisions based on the field examination team’s assessment of information available at the time of the examination.

In establishing the general component of the allowance, management analyzes non-impaired loans in the portfolio including changes in the amount and type of loans. Management also examines historical loss experience (charge-offs and recoveries) within each loan category. The state of the local and national economy is also considered. Based upon these factors, the Bank’s loan portfolio is categorized and a loss factor is applied to each category. Based upon these factors, the Bank will adjust the loan loss allowance by increasing or decreasing the provision for loan losses.

Management has significant discretion in making the judgments inherent in the determination of the allowance for loan losses, including in connection with the valuation of collateral, a borrower’s prospects of repayment and in establishing loss factors on the general component of the allowance. Changes in loss factors will have a direct impact on the amount of the provision and a corresponding effect on net income. Errors in management’s perception and assessment of the global factors and their impact on the portfolio could result in the allowance not being adequate to cover losses in the portfolio, and may result in additional provisions or charge-offs. An increase or decrease in the allowance could result in a charge or credit to income before income taxes that materially impacts earnings.

For additional information regarding the allowance for loan losses, refer to Notes 1 and 5 of the Consolidated Financial Statements as presented in the Company’s Form 10-K for the year ended December 31, 2012.

51

Other-Than-Temporary-Impairment (“OTTI”)

Debt securities are evaluated quarterly to determine whether a decline in their value is other-than-temporary. The term “other-than-temporary” is not necessarily intended to indicate a permanent decline in value. It means that the prospects for near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment. Under the revised guidance, for recognition and presentation of other-than-temporary impairments the amount of other-than-temporary impairment that is recognized through earnings for debt securities is determined by comparing the present value of the expected cash flows to the amortized cost of the security. The discount rate used to determine the credit loss is the expected book yield on the security.

For additional information regarding the evaluation of OTTI, refer to Notes 4 of the Consolidated Financial Statements as presented in the Company’s Form 10-K for the year ended December 31, 2012.

Other Real Estate Owned (“OREO”)

The Company maintains a valuation allowance on its other real estate owned. As with the allowance for loan losses, the valuation allowance on OREO is based on FASB ASC 450 “Contingencies,” as well as the accounting guidance on impairment of long-lived assets. These statements require that the Company establish a valuation allowance when it has determined that the carrying amount of a foreclosed asset exceeds its fair value. Fair value of a foreclosed asset is measured by the cash flows expected to be realized from its subsequent disposition. These cash flows are reduced for the costs of selling or otherwise disposing of the asset.

In estimating the cash flows from the sale of OREO, management must make significant assumptions regarding the timing and amount of cash flows. For example, in cases where the real estate acquired is undeveloped land, management must gather the best available evidence regarding the market value of the property, including appraisals, cost estimates of development and broker opinions. Due to the highly subjective nature of this evidence, as well as the limited market, long time periods involved and substantial risks, cash flow estimates are highly subjective and subject to change. Errors regarding any aspect of the costs or proceeds of developing, selling or otherwise disposing of foreclosed real estate could result in the allowance being inadequate to reduce carrying costs to fair value and may require an additional provision for valuation allowances.

For additional information regarding foreclosed real estate, refer to Notes 1 and 7 of the Consolidated Financial Statements as presented in the Company’s Form 10-K for the year ended December 31, 2012.

Deferred Tax Assets

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. FASB ASC 740 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized.

The Company periodically evaluates the ability of the Company to realize the value of its deferred tax assets.  If the Company were to determine that it was not more likely than not that the Company would realize the full amount of the deferred tax assets, it would establish a valuation allowance to reduce the carrying value of the deferred tax asset to the amount it believes would be realized. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income, future expected tax rates and available tax-planning strategies that could be implemented to realize the net deferred tax assets.

Failure to achieve forecasted taxable income might affect the ultimate realization of the net deferred tax assets.  Factors that may affect the Company’s ability to achieve sufficient forecasted taxable income include, but are not limited to, the following: increased competition, a decline in net interest margin, a loss of market share, decreased demand for financial services and national and regional economic conditions.

The Company’s provision for income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of management judgment and are based on the best information available at the time. The Company operates within federal and state taxing jurisdictions and is subject to audit in these jurisdictions.

For additional information regarding the deferred tax assets, refer to Note 11 in the Consolidated Financial Statements as presented in the Company’s Form 10-K for the year ended December 31, 2012.

52

ITEM 3. Quantitative and qualitative Disclosure about Market Risk

Not applicable as the Company is a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, management of the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, (1) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of the Company’s disclosure controls and procedures is based in part upon certain reasonable assumptions about the likelihood of future events, and there can be no reasonable assurance that any design of disclosure controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote, but the Company’s principal executive and financial officers have concluded that the Company’s disclosure controls and procedures are, in fact, effective at a reasonable assurance level. There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2013 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings – The Company is not involved in any pending legal proceedings. The Bank is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the financial condition and results of operations of the Company.

Item 1A - Risk Factors - In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A- Risk Factors” in the Form 10-K and in the prospectus, dated September 26, 2013, that we filed with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. The risks described are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c) On September 25, 2008, the Company announced a repurchase program under which it would repurchase up to 5% of its outstanding common stock or approximately 147,435 shares. The program will continue until it is completed or terminated by the Company’s Board of Directors. As of September 30, 2013, 79,824 shares were available to be repurchased under the repurchase program. The following schedule provides repurchases for the three months ended September 30, 2013.

					(c)
					Total Number
					of Shares		(d)
					Purchased		Maximum
	(a)				as Part of		Number of Shares
	Total		(b)		Publicly		that May Yet Be
	Number of		Average		Announced Plans		Purchased Under
	Shares		Price Paid		or		the Plans or
Period	Purchased		per Share		Programs		Programs
July 1-31, 2013		250	$	18.86		250		79,824
August 1-31, 2013		-		-		-		79,824
September 1-30, 2013		-		-		-		79,824
Total		250	$	18.86		250		79,824

53

Item 3 - Default Upon Senior Securities - None

Item 4 – Mine Safety Disclosures – Not Applicable

Item 5 - Other Information - None

Item 6 - Exhibits

Exhibit 1.1 – Underwriting Agreement, dated September 26, 2013, among Tri-County Financial Corporation, Community Bank of Tri-County and Keefe, Bruyette & Woods, Inc., as representative of the underwriters*

Exhibit 31 - Rule 13a-14(a) Certifications

Exhibit 32 - Section 1350 Certifications

Exhibit 101.0 - The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to the Consolidated Financial Statements.

*Incorporated herein by reference to the Form 8-K as filed with the Securities and Exchange Commission on September 27, 2013.

54

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.

	THE COMMUNITY FINANCIAL CORPORATION
Date: November 7, 2013	By:	/s/ Michael L. Middleton
		Michael L. Middleton
		Chief Executive Officer
Date: November 7, 2013	By:	/s/ William J. Pasenelli
		William J. Pasenelli
		President and Chief Financial Officer

55

EX-31.1

Certification

I, Michael L. Middleton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Community Financial Corporation;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer 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 15f-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 control over financial reporting, or caused such internal control 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 principles;

(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 end 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 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 the registrant’s board or 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 control over financial reporting.

Date: November 7, 2013	By:	/s/ Michael L. Middleton
	Michael L. Middleton
	Chief Executive Officer

EX-31.2

Certification

I, William J. Pasenelli, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Community Financial Corporation;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer 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 15f-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 control over financial reporting, or caused such internal control 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 principles;

(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 end 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 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 the registrant’s board or 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 control over financial reporting.

Date: November 7, 2013	By:	/s/ William J. Pasenelli
		William J. Pasenelli
		President and Chief Financial Officer

EX-32.1

CERTIFICATION

This Report on Form 10-Q of The Community Financial Corporation (the “Company”) for the quarter ended September 30, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2013	By:	/s/ Michael L. Middleton
		Michael L. Middleton
		Chief Executive Officer
Date: November 7, 2013	By:	/s/ William J. Pasenelli
		William J. Pasenelli
		President and Chief Financial Officer

XML

LOANS HELD FOR SALE

9 Months Ended

Sep. 30, 2013

Loans Held-for-Sale [Abstract]

Loans Held For Sale

12. LOANS HELD FOR SALE

Residential mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value, in the aggregate. Fair value is derived from secondary market quotations for similar instruments. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Residential mortgage loans held for sale are generally sold with the mortgage servicing rights retained by the Company. The carrying value of mortgage loans sold is reduced by the cost allocated to the associated servicing rights. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold, using the specific identification method.

The Company enters into contractual commitments with potential borrowers, including loan commitments and rate-lock commitments for the origination of residential mortgage loans that will be held for sale in the secondary market. The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 15 to 60 days.These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and subsequently closes within the timeframe established by the Company.

The interest rate-lock commitments are derivative financial instruments. Interest rate risk arises on these commitments and subsequently closed loans held for sale if interest rates change between the time of interest rate-lock and the delivery of the loan to a secondary market investor. To mitigateinterest rate risk, the Company sells certain loans forward into the secondary market at a specified price with a specified date on a best efforts basis. These forward sales, which are entered intoas a result of an interest rate-lock commitment with the Bank’s customer, are derivative financial instruments. The Company does not recognize gains or losses due to interest rate changes for loans sold forward on a best effort basis. The Bank had no loans held for sale at September 30, 2013 and 2012, respectively.

XML

LOANS (Schedule of Financing Receivable Recorded Investment Credit Quality Indicator) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Loans	$ 768,840,090	$ 756,552,319	$ 741,017,579
Commercial Equipment [Member]
Loans	21,085,197	16,267,684	17,246,112
Commercial Equipment [Member] | Unrated [Member]
Loans	5,938,295	5,082,713
Commercial Equipment [Member] | Pass [Member]
Loans	15,121,129	11,180,550
Commercial Equipment [Member] | Special Mention [Member]
Loans	2,898
Commercial Equipment [Member] | Substandard [Member]
Loans	22,875	4,421
Commercial Loans [Member]
Loans	86,504,220	88,157,606	86,057,488
Commercial Loans [Member] | Unrated [Member]
Loans	11,401,481	11,627,726
Commercial Loans [Member] | Pass [Member]
Loans	60,365,389	64,436,809
Commercial Loans [Member] | Special Mention [Member]
Loans	402,000
Commercial Loans [Member] | Substandard [Member]
Loans	14,335,350	12,093,071
Consumer Loans [Member]
Loans	901,800	995,206	1,047,046
Consumer Loans [Member] | Performing Financing Receivable [Member]
Loans	901,800	995,206
Home Equity and Second Mortgage [Member]
Loans	21,711,980	21,982,375	21,940,441
Home Equity and Second Mortgage [Member] | Performing Financing Receivable [Member]
Loans	21,711,980	21,911,079
Home Equity and Second Mortgage [Member] | Nonperforming Financing Receivable [Member]
Loans		71,296
Residential Mortgage [Member]
Loans	161,861,710	177,663,354	176,825,516
Residential Mortgage [Member] | Performing Financing Receivable [Member]
Loans	159,706,588	174,493,950
Residential Mortgage [Member] | Nonperforming Financing Receivable [Member]
Loans	2,155,122	3,169,404
Construction and Land Development [Member]
Loans	31,113,145	31,818,782	31,639,206
Construction and Land Development [Member] | Unrated [Member]
Loans	4,339,477	4,330,321
Construction and Land Development [Member] | Pass [Member]
Loans	18,631,753	19,752,749
Construction and Land Development [Member] | Substandard [Member]
Loans	8,141,915	7,735,712
Commercial Real Estate [Member]
Loans	445,662,038	419,667,312	406,261,770
Commercial Real Estate [Member] | Unrated [Member]
Loans	63,842,162	59,930,126
Commercial Real Estate [Member] | Pass [Member]
Loans	351,452,830	329,882,941
Commercial Real Estate [Member] | Special Mention [Member]
Loans	5,790,532	4,880,758
Commercial Real Estate [Member] | Substandard [Member]
Loans	$ 24,576,514	$ 24,973,487

XML

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest and Dividend Income
Loans, including fees	$ 9,340,139	$ 9,113,063	$ 27,703,885	$ 27,624,323
Taxable interest and dividends on investment securities	631,652	768,611	1,852,692	2,465,529
Interest on deposits with banks	3,268	4,982	8,552	7,730
Total Interest and Dividend Income	9,975,059	9,886,656	29,565,129	30,097,582
Interest Expenses
Deposits	1,335,916	2,001,535	4,332,351	6,630,820
Short-term borrowings	4,237	298	12,930	12,483
Long-term debt	532,833	537,216	1,569,247	1,684,772
Total Interest Expenses	1,872,986	2,539,049	5,914,528	8,328,075
Net Interest Income	8,102,073	7,347,607	23,650,601	21,769,507
Provision for loan losses	285,610	746,075	640,210	1,523,580
Net Interest Income After Provision For Loan Losses	7,816,463	6,601,532	23,010,391	20,245,927
Noninterest Income
Loan appraisal, credit, and miscellaneous charges	55,620	280,456	374,769	663,897
Gain on sale of asset			11,000
Net losses on sale of OREO	215,345		215,345	(96,917)
Income from bank owned life insurance	156,348	157,177	464,775	476,294
Service charges	661,134	528,420	1,764,314	1,530,323
Gain on sale of loans held for sale	30,769	336,384	546,819	471,725
Total Noninterest Income	1,119,216	1,302,437	3,377,022	3,045,322
Noninterest Expense
Salary and employee benefits	3,737,000	3,492,524	10,883,606	9,982,603
Occupancy expense	504,627	487,233	1,556,877	1,389,024
Advertising	118,421	86,020	391,152	345,111
Data processing expense	237,054	329,005	967,368	1,118,598
Professional fees	293,028	177,818	754,719	746,322
Depreciation of furniture, fixtures, and equipment	191,320	188,870	580,842	486,159
Telephone communications	45,787	45,563	148,516	137,649
Office supplies	41,689	52,751	151,157	186,741
FDIC Insurance	284,591	201,607	858,860	1,092,809
Valuation allowance on OREO	170,560	31,050	500,536	657,226
Other	621,650	508,343	1,701,338	1,719,647
Total Noninterest Expense	6,245,727	5,600,784	18,494,971	17,861,889
Income before income taxes	2,689,952	2,303,185	7,892,442	5,429,360
Income tax expense	987,111	830,244	2,885,761	1,910,014
Net Income	1,702,841	1,472,941	5,006,681	3,519,346
Preferred stock dividends	50,000	50,000	150,000	150,000
Net Income Available to Common Shareholders	1,652,841	1,422,941	4,856,681	3,369,346
Net Income	1,702,841	1,472,941	5,006,681	3,519,346
Net unrealized holding gains (losses) arising during period, net of tax	(231,346)	68,791	(1,050,124)	76,542
Comprehensive Income	$ 1,471,495	$ 1,541,732	$ 3,956,557	$ 3,595,888
Earnings Per Common Share
Basic (in dollars per share)	$ 0.55	$ 0.47	$ 1.61	$ 1.11
Diluted (in dollars per share)	$ 0.55	$ 0.47	$ 1.60	$ 1.10
Cash dividends paid per common share (in dollars per share)	$ 0.10		$ 0.30	$ 0.40

XML

EARNINGS PER COMMON SHARE (EPS)

9 Months Ended

Sep. 30, 2013

EARNINGS PER COMMON SHARE (EPS) [Abstract]

EARNINGS PER COMMON SHARE (EPS)

5. EARNINGS PER COMMON SHARE (EPS)

Basic earnings per common share represent income available to common shareholders, divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method. As of September 30, 2013 and 2012, there were 101,549 and 187,367 shares, respectively, excluded from the diluted net income per share computation because the exercise price of the stock options were greater than the market price, and thus were anti-dilutive. Basic and diluted earnings per share have been computed based on weighted-average common and common equivalent shares outstanding as follows:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Net Income	$          1,702,841	$        1,472,941	$        5,006,681	$       3,519,346
Less: dividends paid and accrued on preferred stock	(50,000)	(50,000)	(150,000)	(150,000)
Net income available to common shareholders	$          1,652,841	$        1,422,941	$        4,856,681	$       3,369,346
Average number of common shares outstanding	2,997,401	3,044,556	3,016,793	3,042,645
Effect of dilutive options	24,981	8,693	25,295	13,026
Average number of shares used to calculate diluted EPS	3,022,382	3,053,249	3,042,088	3,055,671

XML

OTHER REAL ESTATE OWNED ("OREO") (Tables)

9 Months Ended

Sep. 30, 2013

Sep. 30, 2012

OTHER REAL ESTATE OWNED ("OREO") [Abstract]

Foreclosed Real Estate Roll Forward

OREO assets are presented net of the allowance for losses. The Company considers OREO as classified assets for regulatory and financial reporting. An analysis of the activity follows.

	Nine Months Ended September 30,		Year Ended December 31,
	2013	2012	2012
Balance at beginning of year	$            6,891,353	$            5,028,513	$            5,028,513
Additions of underlying property	1,390,286	2,165,375	4,020,494
Disposals of underlying property	(722,599)	(441,429)	(1,483,449)
Valuation allowance	(500,536)	(657,226)	(674,205)
Balance at end of period	$            7,058,504	$            6,095,233	$            6,891,353

Foreclosed Real Estate Expenses

Expenses applicable to OREO assets include the following.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2013	2012	2013	2012
Valuation allowance	$                 170,560	$                   31,050	$                 500,536	$                 657,226
Operating expenses	41,080	54,529	105,168	85,374
	$                 211,640	$                   85,579	$                 605,704	$                 742,600

XML

LOANS HELD FOR SALE (Details)	9 Months Ended
	Sep. 30, 2013
Maximum [Member]
Period of time between issuance of a loan and closing and sale of a loan	60 days
Minimum [Member]
Period of time between issuance of a loan and closing and sale of a loan	15 days

XML

NEW ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2013

NEW ACCOUNTING STANDARDS [Abstract]

NEW ACCOUNTING STANDARDS

13. NEW ACCOUNTING STANDARDS

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2011-11; “Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities”. ASU 2011-11 amends Topic 210 “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements, borrowing/lending arrangements and derivative instruments with a right of offset. ASU 2011-11 was effective for the Company beginning on January 1, 2013 and did have a material impact on the Company’s consolidated financial statements.

ASU 2013-02 – Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The new guidance requires the presentation of significant amounts reclassified in a separate footnote and cross referencing to related footnote disclosures, if applicable. ASU 2013-02 was effective for the Company prospectively beginning on January 1, 2013 and did have a material impact on the Company’s consolidated financial statements.

XML

LOANS (Narrative) (Details) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2013 loan	Sep. 30, 2013 loan	Dec. 31, 2012 loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and leases receivable, allowance percentage	1.05%	1.05%	1.09%
Deferred gain on sale of property			$ 225,000
Loans	15,415,634	15,415,634	13,141,405
Investment Income, Interest		155,812	220,326
Loans and leases receivable, nonperforming, accrual of interest	4,325,912	4,325,912	4,424,388
Other real estate additions			415,995
Allowance for loan loss	8,079,277	8,079,277	8,246,957
Number of loans		6	6
Number of accruing loans 90 days or greater past due	0	0	0
Recognized deferred gain on sale of OREO	225,000
90 or Greater Days	11,089,722	11,089,722	8,717,017
Financing Receivable Troubled Debt Restructuring [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan loss			0
Reserve of the allowance for loan losses	12,000	12,000
90 or Greater Days	323,976	323,976
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and leases receivable, allowance percentage	80.00%	80.00%
Other real estate additions			382,500
Percentage status of loan in portfolio	5.00%	5.00%	5.00%
Number of accruing loans 90 days or greater past due			1
90 or Greater Days	2,947,607	2,947,607	1,527,844
Commercial Real Estate [Member] | Financing Receivable Troubled Debt Restructuring [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	60,000	60,000
Number of loans			8
Number of accruing loans 90 days or greater past due			2
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
90 or Greater Days	5,670,331	5,670,331	3,732,090
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
90 or Greater Days	2,155,122	2,155,122	3,169,404
Residential Mortgage [Member] | Financing Receivable Troubled Debt Restructuring [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Tdr Loan Transferred One		77,165
Number of loans		1
Foreclosed Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and leases receivable, nonperforming, accrual of interest			1,454,757
Eight Commercial Real Estate Loans [Member] | Financing Receivable Troubled Debt Restructuring [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans			3,212,894
Three Residential First Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans			1,419,657
Number of loans			3
Nonaccrual Loans With No Impairment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	12,932,327	12,932,327	11,371,542
Interest Due To Debt		432,916	443,856
Nonaccrual Loans With Impairment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	2,483,307	2,483,307	1,769,863
Interest Due To Debt		180,751	182,106
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Debt maturity period		20 years
Maximum [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maximum percent of capital for single borrower	15	15
Maximum [Member] | Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Debt maturity period		5 years
Maximum [Member] | Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Debt maturity period		30 years
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Debt maturity period		3 years
Credit quality indicator	$ 750,000	$ 750,000
Minimum [Member] | Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Debt maturity period		10 years

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]
Loans payable	$ 25.8
Letters of credit outstanding, amount	$ 24.7

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STOCK-BASED COMPENSATION (Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity) (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Period, Nonvested	23,569	8,113
Number of Shares, Granted	13,656	23,281
Number of Shares, Vested	(16,678)	(7,825)
Ending Period, Nonvested	20,547	23,569
Beginning Period, Weighted Average Grant Date Fair Value, Nonvested	$ 15.64	$ 16.47
Weighted Average Grant Date Fair Value, Granted	$ 18.00	$ 15.21
Weighted Average Grant Date Fair Value, Vested	$ 16.35	$ 15.20
Ending Period, Weighted Average Grant Date Fair Value, Nonvested	$ 16.63	$ 15.64
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Period, Nonvested	5,211	6,845
Number of Shares, Granted	2,105	2,105
Number of Shares, Vested	(3,106)	(3,739)
Ending Period, Nonvested	4,210	5,211
Beginning Period, Weighted Average Grant Date Fair Value, Nonvested	$ 15.98	$ 15.00
Weighted Average Grant Date Fair Value, Granted	$ 16.87	$ 15.98
Weighted Average Grant Date Fair Value, Vested	$ 15.98	$ 14.80
Ending Period, Weighted Average Grant Date Fair Value, Nonvested	$ 18.95	$ 15.98

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2013

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Fair Value, by Balance Sheet Grouping

September 30, 2013			Fair Value Measurements
Description of Asset	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant   Other Observable Inputs          (Level 2)	Significant Unobservable Inputs (Level 3)
Assets
Investment securities - AFS	$       50,869,490	$       50,869,490	$                        -	$         50,869,490	$                         -
Investment securities - HTM	91,349,615	91,050,953	749,962	90,300,991	-
FHLB and FRB Stock	5,593,100	6,198,000	-	6,198,000	-
Loans	759,880,727	753,916,000	-	753,916,000	-
Other real estate owned	7,058,504	7,058,504	-	7,058,504	-
Liabilities
Savings, NOW and money market accounts	$     432,564,049	$     432,564,049	$                        -	$       432,564,049	$                         -
Time deposits	384,683,410	387,119,000	-	387,119,000	-
Long-term debt	70,488,848	71,382,000	-	71,382,000	-
Short term borrowings	2,640,000	2,640,000	-	2,640,000	-
TRUPs	12,000,000	2,400,000	-	2,400,000	-

At December 31, 2012			Fair Value Measurements
Description of Asset	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant   Other Observable Inputs          (Level 2)	Significant Unobservable Inputs (Level 3)
Assets
Investment securities - AFS	$       47,205,663	$       47,205,663	$                        -	$         47,205,663	$                         -
Investment securities - HTM	112,619,434	114,187,018	749,941	113,437,077	-
FHLB and FR Stock	5,476,050	5,469,000	-	5,469,000	-
Loans	747,640,752	757,387,000	-	757,387,000	-
Other real estate owned	6,891,353	6,891,353	-	6,891,353	-
Liabilities
Savings, NOW and money market accounts	$     414,776,285	$     414,776,285	$                        -	$       414,776,285	$                         -
Time deposits	405,454,003	410,257,000	-	410,257,000	-
Long-term debt	60,527,208	64,252,000	-	64,252,000	-
Short term borrowings	1,000,000	1,000,000	-	1,000,000	-
TRUPs	12,000,000	2,400,000	-	2,400,000	-

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LOANS (Tables)

9 Months Ended

Sep. 30, 2013

LOANS [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Loans consist of the following:

	September 30, 2013	December 31, 2012
Commercial real estate	$             445,662,038	$           419,667,312
Residential first mortgages	161,861,710	177,663,354
Construction and land development	31,113,145	31,818,782
Home equity and second mortgages	21,711,980	21,982,375
Commercial loans	86,504,220	88,157,606
Consumer loans	901,800	995,206
Commercial equipment	21,085,197	16,267,684
	768,840,090	756,552,319
Less:
Deferred loan fees	880,086	664,610
Allowance for loan loss	8,079,277	8,246,957
	8,959,363	8,911,567
	$             759,880,727	$           747,640,752

Allowance for Credit Losses on Financing Receivables

	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Three Months Ended September 30, 2013
Allowance for loan losses:
Balance at July 1,	$          3,358,001	$       1,960,882	$          600,525	$          364,281	$       1,519,332	$            13,972	$          216,560	$       8,033,553
Charge-offs	(140,048)	(80,110)	(50)	(155)	(28,576)	(1,012)	(31)	(249,982)
Recoveries	-	154	-	-	168	28	9,746	10,096
Provisions	311,035	(177,787)	(131,581)	(45,812)	272,009	1,539	56,207	285,610
Balance at September 30,	$          3,528,988	$       1,703,139	$          468,894	$          318,314	$       1,762,933	$            14,527	$          282,482	$       8,079,277
At and For the Nine Months Ended September 30, 2013
Allowance for loan losses:
Balance at January 1,	$          4,089,834	$       1,083,228	$          533,430	$          279,819	$       1,949,024	$            19,341	$          292,281	$       8,246,957
Charge-offs	(140,048)	(139,048)	(36,012)	(111,038)	(434,149)	(10,003)	(22,008)	(892,306)
Recoveries	-	11,054	-	-	12,059	2,010	59,293	84,416
Provisions	(420,798)	747,905	(28,524)	149,533	235,999	3,179	(47,084)	640,210
Balance at September 30,	$          3,528,988	$       1,703,139	$          468,894	$          318,314	$       1,762,933	$            14,527	$          282,482	$       8,079,277
Ending balance: individually   evaluated for impairment	$             559,333	$          170,741	$                     -	$                     -	$          291,821	$                     -	$            22,875	$       1,044,770
Ending balance: collectively   evaluated for impairment	$          2,969,655	$       1,532,398	$          468,894	$          318,314	$       1,471,112	$            14,527	$          259,607	$       7,034,507
Loan receivables:
Ending balance	$       445,662,038	$    161,861,710	$      31,113,145	$      21,711,980	$      86,504,220	$          901,800	$      21,085,197	$    768,840,090
Ending balance: individually   evaluated for impairment	$        19,856,516	$       3,882,548	$       5,349,737	$            58,000	$      11,054,771	$            31,935	$          316,662	$      40,550,169
Ending balance: collectively   evaluated for impairment	$       425,805,522	$    157,979,162	$      25,763,408	$      21,653,980	$      75,449,449	$          869,865	$      20,768,535	$    728,289,921

	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Year Ended December 31, 2012
Allowance for loan losses:
Balance at January 1,	$          2,525,199	$          539,205	$          354,385	$          143,543	$       3,850,294	$            19,119	$          223,296	$       7,655,041
Charge-offs	(486,431)	(10,987)	(140,835)	(210,753)	(1,003,824)	(4,994)	(168,802)	(2,026,626)
Recoveries	-	37,524	-	-	51,350	987	-	89,861
Provisions	2,051,066	517,486	319,880	347,029	(948,796)	4,229	237,787	2,528,681
Balance at December 31,	$          4,089,834	$       1,083,228	$          533,430	$          279,819	$       1,949,024	$            19,341	$          292,281	$       8,246,957
Ending balance: individually   evaluated for impairment	$             785,878	$          403,475	$                     -	$                     -	$          353,883	$                     -	$              4,421	$       1,547,657
Ending balance: collectively   evaluated for impairment	$          3,303,956	$          679,753	$          533,430	$          279,819	$       1,595,141	$            19,341	$          287,860	$       6,699,300
Loan receivables:
Ending balance	$       419,667,312	$    177,663,354	$      31,818,782	$      21,982,375	$      88,157,606	$          995,206	$      16,267,684	$    756,552,319
Ending balance: individually   evaluated for impairment	$        21,618,890	$       3,367,827	$       4,877,868	$          291,000	$       8,778,681	$            51,748	$              4,421	$      38,990,435
Ending balance: collectively   evaluated for impairment	$       398,048,422	$    174,295,527	$      26,940,914	$      21,691,375	$      79,378,925	$          943,458	$      16,263,263	$    717,561,884

	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Three Months Ended September 30, 2012
Allowance for loan losses:
Balance at July 1,	$          3,478,458	$          901,505	$          596,854	$          212,791	$       1,968,491	$            18,316	$          287,722	$       7,464,137
Charge-offs	(50,034)	(10,991)	(5,995)	(46,989)	(413)	-	(90)	(114,512)
Recoveries	-	429	-	-	23	-	-	452
Provisions	683,311	(3,991)	40,378	18,402	(14,062)	1,505	20,532	746,075
Balance at September 30,	$          4,111,735	$          886,952	$          631,237	$          184,204	$       1,954,039	$            19,821	$          308,164	$       8,096,152
At and For the Nine Months Ended September 30, 2012
Allowance for loan losses:
Balance at January 1,	$          2,525,199	$          539,205	$          354,385	$          143,543	$       3,850,294	$            19,119	$          223,296	$       7,655,041
Charge-offs	(171,867)	(10,991)	(5,995)	(88,931)	(693,461)	(999)	(149,884)	(1,122,128)
Recoveries	-	37,676	-	-	1,983	-	-	39,659
Provisions	1,758,403	321,062	282,847	129,592	(1,204,777)	1,701	234,752	1,523,580
Balance at September 30,	$          4,111,735	$          886,952	$          631,237	$          184,204	$       1,954,039	$            19,821	$          308,164	$       8,096,152
Ending balance: individually   evaluated for impairment	$          1,122,590	$          247,541	$          134,500	$            21,855	$          499,654	$                     -	$              4,715	$       2,030,855
Ending balance: collectively   evaluated for impairment	$          2,989,145	$          639,411	$          496,737	$          162,349	$       1,454,385	$            19,821	$          303,449	$       6,065,297
Loan receivables:
Ending balance	$       406,261,770	$    176,825,516	$      31,639,206	$      21,940,441	$      86,057,488	$       1,047,046	$      17,246,112	$    741,017,579
Ending balance: individually   evaluated for impairment	$        23,039,920	$       4,011,851	$       5,217,025	$          293,855	$      12,972,808	$            60,925	$              4,715	$      45,601,099
Ending balance: collectively   evaluated for impairment	$       383,221,850	$    172,813,665	$      26,422,181	$      21,646,586	$      73,084,680	$          986,121	$      17,241,397	$    695,416,480

Schedule of Financing Receivables, Non Accrual Status

Non-accrual loans as of September 30, 2013 and December 31, 2012 were as follows:

	September 30, 2013
	90 or Greater Days Delinquent	Number of Loans	Non-accrual Performing Loans	Number of Loans	Total Dollars	Total Number of Loans
Commercial real estate	$          2,947,607	9	$          3,728,175	2	$          6,675,782	11
Residential first mortgages	2,155,122	7	565,802	3	2,720,924	10
Commercial loans	5,670,331	10	-	-	5,670,331	10
Consumer loans	-	-	31,935	1	31,935	1
Commercial equipment	316,662	5	-	-	316,662	5
	$        11,089,722	31	$          4,325,912	6	$        15,415,634	37

	December 31, 2012
	90 or Greater Days Delinquent	Number of Loans	Non-accrual Performing Loans	Number of Loans	Total Dollars	Total Number of Loans
Commercial real estate	$          1,527,844	7	$          3,802,947	2	$          5,330,791	9
Residential first mortgages	3,169,404	10	569,693	3	3,739,097	13
Home equity and second mortgages	71,296	2	-	-	71,296	2
Commercial loans	3,732,090	11	-	-	3,732,090	11
Consumer loans	-	-	51,748	1	51,748	1
Commercial equipment	216,383	4	-	-	216,383	4
	$          8,717,017	34	$          4,424,388	6	$        13,141,405	40

Past Due Financing Receivables

An analysis of past due loans as of September 30, 2013 and December 31, 2012 was as follows:

September 30, 2013	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables
Commercial real estate	$     440,735,812	$                  -	$    1,978,619	$    2,947,607	$    4,926,226	$     445,662,038
Residential first mortgages	159,568,816	-	137,772	2,155,122	2,292,894	161,861,710
Construction and land dev.	30,786,474	326,671	-	-	326,671	31,113,145
Home equity and second mortgages	21,388,847	199,217	123,916	-	323,133	21,711,980
Commercial loans	80,633,889	200,000	-	5,670,331	5,870,331	86,504,220
Consumer loans	898,574	3,226	-	-	3,226	901,800
Commercial equipment	20,730,853	37,682	-	316,662	354,344	21,085,197
Total	$     754,743,265	$       766,796	$    2,240,307	$  11,089,722	$  14,096,825	$     768,840,090

December 31, 2012
Commercial real estate	$     416,721,658	$                  -	$    1,417,810	$    1,527,844	$    2,945,654	$     419,667,312
Residential first mortgages	173,593,886	97,307	802,757	3,169,404	4,069,468	177,663,354
Construction and land dev.	31,818,782	-	-	-	-	31,818,782
Home equity and second mortgages	21,499,018	350,715	61,346	71,296	483,357	21,982,375
Commercial loans	84,384,426	-	41,090	3,732,090	3,773,180	88,157,606
Consumer loans	983,094	9,363	2,749	-	12,112	995,206
Commercial equipment	15,659,007	371,921	20,373	216,383	608,677	16,267,684
Total	$     744,659,871	$       829,306	$    2,346,125	$    8,717,017	$  11,892,448	$     756,552,319

Schedule of Financing Receivable Recorded Investment Credit Quality Indicator

Credit quality indicators as of September 30, 2013 and December 31, 2012 were as follows:

Credit Risk Profile by Internally Assigned Grade
	Commercial Real Estate		Construction and Land Dev.
	9/30/2013	12/31/2012	9/30/2013	12/31/2012
Unrated	$       63,842,162	$       59,930,126	$         4,339,477	$         4,330,321
Pass	351,452,830	329,882,941	18,631,753	19,752,749
Special mention	5,790,532	4,880,758	-	-
Substandard	24,576,514	24,973,487	8,141,915	7,735,712
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$     445,662,038	$     419,667,312	$       31,113,145	$       31,818,782
	Commercial Loans		Commercial Equipment
	9/30/2013	12/31/2012	9/30/2013	12/31/2012
Unrated	$       11,401,481	$       11,627,726	$         5,938,295	$         5,082,713
Pass	60,365,389	64,436,809	15,121,129	11,180,550
Special mention	402,000	-	2,898	-
Substandard	14,335,350	12,093,071	22,875	4,421
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$       86,504,220	$       88,157,606	$       21,085,197	$       16,267,684
Credit Risk Profile Based on Payment Activity
	Residential First Mortgages		Home Equity and Second Mtg.		Consumer Loans
	9/30/2013	12/31/2012	9/30/2013	12/31/2012	9/30/2013	12/31/2012
Performing	$     159,706,588	$     174,493,950	$       21,711,980	$       21,911,079	$            901,800	$            995,206
Nonperforming	2,155,122	3,169,404	-	71,296	-	-
Total	$     161,861,710	$     177,663,354	$       21,711,980	$       21,982,375	$            901,800	$            995,206

Impaired Financing Receivables

Impaired Loans and Troubled Debt Restructures (“TDRs”)

Impaired loans, including TDRs, at September 30, 2013 and September 30, 2012, respectively, and at December 31, 2012 were as follows:

September 30, 2013	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Three Month Average Recorded Investment	Three Month Interest Income Recognized	Nine Month Average Recorded Investment	Nine Month Interest Income Recognized
Commercial real estate	$     20,025,629	$     15,885,402	$    3,971,114	$     19,856,516	$       559,333	$     20,010,465	$         207,372	$     20,162,244	$         631,913
Residential first mortgages	3,882,548	3,181,637	700,911	3,882,548	170,741	3,910,884	30,371	3,919,666	96,616
Construction and land dev.	5,349,737	5,349,737	-	5,349,737	-	5,363,126	77,157	5,311,703	223,963
Home equity and second mtg.	58,000	58,000	-	58,000	-	120,000	1,486	216,556	6,016
Commercial loans	11,054,771	10,333,950	720,821	11,054,771	291,821	11,028,319	66,604	10,967,594	292,138
Consumer loans	31,935	31,935	-	31,935	-	36,393	1,112	43,199	2,759
Commercial equipment	335,563	293,787	22,875	316,662	22,875	336,106	1,238	350,886	7,740
Total	$     40,738,183	$     35,134,448	$    5,415,721	$     40,550,169	$    1,044,770	$     40,805,293	$         385,340	$     40,971,848	$       1,261,145

December 31, 2012	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Average Recorded Investment	Interest Income Recognized
Commercial real estate	$     21,618,890	$     18,804,478	$    2,814,412	$     21,618,890	$       785,878	$     22,501,842	$       1,119,715
Residential first mortgages	3,367,827	2,362,062	1,005,765	3,367,827	403,475	3,388,867	157,595
Construction and land dev.	4,877,868	4,877,868	-	4,877,868	-	4,792,982	276,260
Home equity and second mtg.	291,000	291,000	-	291,000	-	221,000	6,783
Commercial loans	8,778,681	8,330,442	448,238	8,778,681	353,883	9,153,074	284,095
Consumer loans	51,748	51,748	-	51,748	-	64,459	5,284
Commercial equipment	4,421	-	4,421	4,421	4,421	5,112	318
Total	$     38,990,435	$     34,717,598	$    4,272,836	$     38,990,435	$    1,547,657	$     40,127,336	$       1,850,050

September 30, 2012	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Three Month Average Recorded Investment	Three Month Interest Income Recognized	Nine Month Average Recorded Investment	Nine Month Interest Income Recognized
Commercial real estate	$     23,497,570	$     19,699,656	$    3,340,264	$     23,039,920	$    1,122,590	$     23,128,253	$         282,740	$     23,257,586	$         872,500
Residential first mortgages	4,011,851	2,347,285	1,664,567	4,011,851	247,541	4,021,446	35,750	4,025,659	121,746
Construction and land dev.	5,217,025	5,082,525	134,500	5,217,025	134,500	5,145,911	90,653	5,701,121	205,509
Home equity and second mtg.	293,855	272,000	21,855	293,855	21,855	246,399	1,870	220,572	5,373
Commercial loans	13,572,808	12,196,993	775,815	12,972,808	499,654	13,486,660	105,044	13,871,661	321,821
Consumer loans	60,925	60,925	-	60,925	-	63,492	1,557	70,365	4,500
Commercial equipment	4,715	-	4,715	4,715	4,715	4,909	83	5,309	266
Total	$     46,658,749	$     39,659,384	$    5,941,716	$     45,601,099	$    2,030,855	$     46,097,070	$         517,697	$     47,152,273	$       1,531,715

Troubled Debt Restructurings on Financing Receivables

TDRs, included in the impaired loan schedules above, as of September 30, 2013 and December 31, 2012, respectively were as follows:

	September 30, 2013		December 31, 2012
	Dollars	Number of Loans	Dollars	Number of Loans
Commercial real estate	$          3,152,197	8	$          3,097,214	7
Residential first mortgages	1,485,600	4	1,418,229	3
	$          4,637,797	12	$          4,515,443	10

XML

SECURITIES (Schedule of Unrealized Loss on Investments) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Held-To-Maturity Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Fair Value	$ 41,773,548	$ 14,253,558
Less Than 12 Months, Unrealized Loss	1,029,248	89,638
More Than 12 Months, Fair Value	5,559,510	9,189,702
More Than 12 Months, Unrealized Loss	440,362	492,703
Total, Fair Value	47,333,058	23,443,260
Total, Unrealized Loss	1,469,609	582,341
Held-To-Maturity Securities [Member] | Asset Backed Securities Issued By Others [Member]
Schedule of Held-to-maturity Securities [Line Items]
More Than 12 Months, Fair Value	2,258,562	3,057,666
More Than 12 Months, Unrealized Loss	418,975	484,343
Total, Fair Value	2,258,562	3,057,666
Total, Unrealized Loss	418,975	484,343
Held-To-Maturity Securities [Member] | Asset-backed securities issued by GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Fair Value	41,773,548	14,253,558
Less Than 12 Months, Unrealized Loss	1,029,248	89,638
More Than 12 Months, Fair Value	3,300,948	6,132,036
More Than 12 Months, Unrealized Loss	21,386	8,360
Total, Fair Value	45,074,496	20,385,594
Total, Unrealized Loss	1,050,634	97,998
Available-For-Sale Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Fair Value	33,460,160
Less Than 12 Months, Unrealized Loss	1,098,953
More Than 12 Months, Fair Value	5,623,802
More Than 12 Months, Unrealized Loss	227,295
Total, Fair Value	39,083,962
Total, Unrealized Loss	1,326,248
Available-For-Sale Securities [Member] | Asset Backed Securities Issued By Others [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Fair Value	33,460,034
Less Than 12 Months, Unrealized Loss	1,098,769
More Than 12 Months, Fair Value	5,623,802
More Than 12 Months, Unrealized Loss	227,295
Total, Fair Value	39,083,836
Total, Unrealized Loss	1,326,064
Available-For-Sale Securities [Member] | Asset-backed securities issued by GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Fair Value	126
Less Than 12 Months, Unrealized Loss	184
Total, Fair Value	126
Total, Unrealized Loss	$ 184

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EARNINGS PER COMMON SHARE (EPS) (Schedule of Earnings Per Share, Basic and Diluted) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
EARNINGS PER COMMON SHARE (EPS) [Abstract]
Net Income	$ 1,702,841	$ 1,472,941	$ 5,006,681	$ 3,519,346
Less: dividends paid and accrued on preferred stock	(50,000)	(50,000)	(150,000)	(150,000)
Net Income Available to Common Shareholders	$ 1,652,841	$ 1,422,941	$ 4,856,681	$ 3,369,346
Average number of common shares outstanding	2,997,401	3,044,556	3,016,793	3,042,645
Effect of dilutive options	24,981	8,693	25,295	13,026
Average number of shares used to calculate diluted earnings per share	3,022,382	3,053,249	3,042,088	3,055,671

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PREFERRED STOCK (Narrative) (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 22, 2011 Purchase Agreement [Member]
Shares, Issued		20,000
Preferred Stock, Liquidation Preference Per Share		$ 1,000
Preferred Stock, Liquidation Preference, Value		$ 20,000,000
Preferred Stock Dividend Rate Description		based upon changes in the level of "Qualified Small Business Lending" or "QSBL" (as defined in the Purchase Agreement) by the Bank. Based upon the increase in the Bank's level of QSBL over the baseline level calculated under the terms of the Purchase Agreement, the dividend rate for the initial dividend period was set at one percent (1%). For the second through ninth calendar quarters, the dividend rate may be adjusted to between one percent (1%) and five percent (5%) per annum, to reflect the amount of change in the Bank's level of QSBL. If the level of the Bank's qualified small business loans declines so that the percentage increase in QSBL as compared to the baseline level is less than 10%, then the dividend rate payable on the Series C Preferred Stock would increase. For the tenth calendar quarter through four and one half years after issuance, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) based upon the increase in QSBL as compared to the baseline. After four and one half years from issuance, the dividend rate will increase to nine percent (9%). In addition, beginning on January 1, 2014, and on all Series C Preferred Stock dividend payment dates thereafter ending on April 1, 2016, if the Company had not increased its QSBL from the baseline as of the quarter ending September 30, 2013, the Company would have been required to pay to the Secretary, on each share of Series C Preferred Stock, but only out of assets legally available, a fee equal to 0.5% of the liquidation amount per share of Series C Preferred Stock. At September 30, 2013, the Company had increased its QSBL from the baseline so that the dividend rate should remain at 1% through four and one half years from issuance.
Redemption Price Description	100% of the liquidation amount plus accrued but unpaid dividends to the date of redemption
Increased Percentage Of Sblf Funding	25.00%
Increased Amount Of Sblf Funding	$ 5,000,000

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LOANS (Schedule of Accounts, Notes, Loans and Financing Receivable) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 768,840,090	$ 756,552,319	$ 741,017,579
Less:
Deferred loan fees	880,086	664,610
Allowance for loan loss	8,079,277	8,246,957
Loans And Leases Receivable Adjustments	8,959,363	8,911,567
Loans And Leases Receivable Net Reported Amount	759,880,727	747,640,752
Commercial Equipment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	21,085,197	16,267,684	17,246,112
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	901,800	995,206	1,047,046
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	86,504,220	88,157,606	86,057,488
Home Equity and Second Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	21,711,980	21,982,375	21,940,441
Construction and Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	31,113,145	31,818,782	31,639,206
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	161,861,710	177,663,354	176,825,516
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 445,662,038	$ 419,667,312	$ 406,261,770

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FAIR VALUE MEASUREMENTS (Fair Value, Assets Measured on Recurring Basis) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	$ 50,869,490
Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	46,471,000
Collateralized Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	198,713
Corporate Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	38,698
Bond Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	4,161,079
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 1 [Member] | Corporate Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 1 [Member] | Bond Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	50,869,490
Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	46,471,000
Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	198,713
Fair Value, Inputs, Level 2 [Member] | Corporate Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	38,698
Fair Value, Inputs, Level 2 [Member] | Bond Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	4,161,079
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 3 [Member] | Collateralized Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 3 [Member] | Corporate Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Fair Value, Inputs, Level 3 [Member] | Bond Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0
Available-For-Sale Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		47,205,663
Available-For-Sale Securities [Member] | Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		42,655,799
Available-For-Sale Securities [Member] | Collateralized Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		231,386
Available-For-Sale Securities [Member] | Corporate Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		37,332
Available-For-Sale Securities [Member] | Bond Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		4,281,146
Available-For-Sale Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		47,205,663
Available-For-Sale Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		42,655,799
Available-For-Sale Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		231,386
Available-For-Sale Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		37,332
Available-For-Sale Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Bond Mutual Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		$ 4,281,146

XML

OTHER REAL ESTATE OWNED ("OREO") (Foreclosed Real Estate Expenses) (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
OTHER REAL ESTATE OWNED ("OREO") [Abstract]
Valuation allowance	$ 170,560	$ 31,050	$ 500,536	$ 657,226	$ 674,205
Operating expenses	41,080	54,529	105,168	85,374
Miscellaneous expenses	$ 211,640	$ 85,579	$ 605,704	$ 742,600

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SECURITIES (Tables)

9 Months Ended

Sep. 30, 2013

Trading Securities (and Certain Trading Assets)

	September 30, 2013
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$                 181,968	$                   16,745	$                            -	$                 198,713
Residential CMOs	47,721,616	75,448	1,326,064	46,471,000
Corporate equity securities	37,310	1,572	184	38,698
Bond mutual funds	4,078,129	82,950	-	4,161,079
Total securities available for sale	$            52,019,023	$                 176,715	$              1,326,248	$            50,869,490
Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$            23,722,148	$                 684,723	$                 186,163	$            24,220,708
Residential CMOs	63,583,106	385,242	864,471	63,103,877
Asset-backed securities issued by Others:
Residential CMOs	3,294,474	100,907	418,975	2,976,406
Total debt securities held to maturity	90,599,728	1,170,872	1,469,609	90,300,991
U.S. government obligations	749,887	75	-	749,962
Total securities held to maturity	$            91,349,615	$              1,170,947	$              1,469,609	$            91,050,953

	December 31, 2012
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$                 198,400	$                   32,986	$                            -	$                 231,386
Residential CMOs	42,507,542	266,775	118,518	42,655,799
Corporate equity securities	37,310	306	284	37,332
Bond mutual funds	4,012,609	268,537	-	4,281,146
Total securities available for sale	$            46,755,861	$                 568,604	$                 118,802	$            47,205,663
Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$            31,239,176	$              1,237,277	$                            -	$            32,476,453
Residential CMOs	76,191,199	715,620	97,998	76,808,821
Asset-backed securities issued by Others:				-
Residential CMOs	4,439,118	197,028	484,343	4,151,803
Total debt securities held to maturity	111,869,493	2,149,925	582,341	113,437,077
U.S. government obligations	749,941	-	-	749,941
Total securities held to maturity	$          112,619,434	$              2,149,925	$                 582,341	$          114,187,018

Schedule of Unrealized Loss on Investments

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at December 31, 2012 are as follows:

December 31, 2012	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$     14,253,558	$            89,638	$       6,132,036	$             8,360	$     20,385,594	$            97,998
Asset-backed securities issued by other	-	-	3,057,666	484,343	3,057,666	484,343
	$     14,253,558	$            89,638	$       9,189,702	$          492,703	$     23,443,260	$          582,341

Financing Receivable Credit Quality Indicators

GSE asset-backed security downgrades by Standard and Poor’s were treated as AAA based on regulatory guidance.

September 30, 2013		December 31. 2012
Credit Rating	Amount	Credit Rating	Amount
AAA	$       133,974,968	AAA	$       150,317,560
A+	-	A+	-
A	-	A	110,780
BBB	635,920	BBB	978,043
BBB-	106,045	BBB-	322,329
BB+	-	BB+	-
BB	836,679	BB	1,069,517
BB-	-	BB-	68,604
B+	66,873	B+	1,008,126
CCC+	874,410	CCC+	-
CCC	774,547	CCC	881,719
Total	$       137,269,442	Total	$       154,756,678

Held-To-Maturity Securities [Member]

Schedule of Unrealized Loss on Investments

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:

September 30, 2013	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$     41,773,548	$       1,029,248	$       3,300,948	$            21,386	$     45,074,496	$       1,050,634
Asset-backed securities issued by other	-	-	2,258,562	418,975	2,258,562	418,975
	$     41,773,548	$       1,029,248	$       5,559,510	$          440,362	$     47,333,058	$       1,469,609

Available-For-Sale Securities [Member]

Schedule of Unrealized Loss on Investments

Gross unrealized losses and estimated fair value by length of time that the individual AFS securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:

September 30, 2013	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$     33,460,034	$       1,098,769	$       5,623,802	$          227,295	$     39,083,836	$       1,326,064
Corporate equity securities	126	184	-	-	126	184
	$     33,460,160	$       1,098,953	$       5,623,802	$          227,295	$     39,083,962	$       1,326,248

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2013

BASIS AND NATURE OF BUSINESS [Abstract]

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

General - The consolidated financial statements of The Community Financial Corporation (formerly Tri-County Financial Corporation) (the “Company”) and its wholly owned subsidiary, Community Bank of the Chesapeake (formerly Community Bank of Tri-County) (the “Bank”), and the Bank’s wholly owned subsidiary, Community Mortgage Corporation of Tri-County, included herein are unaudited. The Bank conducts business through its main office in Waldorf, Maryland, and ten branch offices in Waldorf, Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby, California, Maryland; and Dahlgren, Virginia. Effective October 18, 2013, the Company changed its name from Tri-County Financial Corporation and the Bank changed its name from Community Bank of Tri-County. The new names reflect the Bank's recent expansion into the Northern Neck of Virginia. The name of the holding company changed to better align the parent company name with that of the Bank.

The consolidated financial statements reflect all adjustments consisting only of normal recurring accruals that, in the opinion of management, are necessary to present fairly the Company’s financial condition, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the information presented not misleading. The balances as of December 31, 2012 have been derived from audited financial statements. There have been no significant changes to the Company’s accounting policies as disclosed in the 2012 Annual Report. The results of operations for the three andnine months ended September 30, 2013 are not necessarily indicative of the results of operations to be expected for the remainder of the year or any other period. Certain previously reported amounts have been restated to conform to the 2013 presentation.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2012 Annual Report.

In October 2013, the Company completed a stock offering and issued 1,591,300 shares of common stock at a price of $18.75 per share resulting in net proceeds of $27.4 million after commissions and related offering expenses. The additional capital raise was completed in the fourth quarter 2013and is not reflected in the financial statements as of September 30, 2013.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

3. FAIR VALUE MEASUREMENTS

The Company adopted FASB ASC Topic 820, “Fair Value Measurements” and FASB ASC Topic 825, “The Fair Value Option for Financial Assets and Financial Liabilities”, which provides a framework for measuring and disclosing fair value under generally accepted accounting principles. FASB ASC Topic 820 requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available for sale investment securities) or on a nonrecurring basis (for example, impaired loans).

FASB ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis such as loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Under FASB ASC Topic 820, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These hierarchy levels are:

Level 1 inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly or quarterly valuation process.

There were no transfers between levels of the fair value hierarchy and the Company had no Level 3 fair value assets or liabilities for the three and nine months endedSeptember 30, 2013 and the year ended December 31, 2012, respectively.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities (“GSEs”), municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans Receivable

The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are considered impaired. Management estimates the fair value of impaired loans using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Impaired loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At September 30, 2013 and December 31, 2012, substantially all of the impaired loans were evaluated based upon the fair value of the collateral. In accordance with FASB ASC 820, impaired loans where an allowance is established based on the fair value of collateral (loans with impairment) require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Other Real Estate Owned (“OREO”)

OREO is adjusted for fair value upon transfer of the loans to foreclosed assets. Subsequently, OREO is carried at the lower of carrying value and fair value. Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset at nonrecurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets as of September 30, 2013 and December 31, 2012 measured at fair value on a recurring basis.

	September 30, 2013
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Available for sale securities
Asset-backed securities issued by GSEs
Collateralized Mortgage Obligations ("CMOs")	$     46,471,000	$                     -	$     46,471,000	$                     -
Mortgage Backed Securities ("MBS")	198,713	-	198,713	-
Corporate equity securities	38,698	-	38,698	-
Bond mutual funds	4,161,079	-	4,161,079	-
Total available for sale securities	$     50,869,490	$                     -	$     50,869,490	$                     -

	December 31, 2012
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Available for sale securities
Asset-backed securities issued by GSEs
CMOs	$     42,655,799	$                     -	$     42,655,799	$                     -
MBS	231,386	-	231,386	-
Corporate equity securities	37,332	-	37,332	-
Bond mutual funds	4,281,146	-	4,281,146	-
Total available for sale securities	$     47,205,663	$                     -	$     47,205,663	$                     -

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis as of September 30, 2013 and December 31, 2012 are included in the tables below.

	September 30, 2013
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Loans with impairment
Commercial real estate	$      3,411,781	$                    -	$      3,411,781	$                    -
Residential first mortgage	530,170	-	530,170	-
Commercial loans	429,000	-	429,000	-
Total loans with impairment	$      4,370,951	$                    -	$      4,370,951	$                    -
Other real estate owned	$      7,058,504	$                    -	$      7,058,504	$                    -

	December 31, 2012
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Loans with impairment
Commercial real estate	$      2,028,534	$                    -	$      2,028,534	$                    -
Residential first mortgage	602,290	-	602,290	-
Commercial loans	94,355	-	94,355	-
Total loans with impairment	$      2,725,179	$                    -	$      2,725,179	$                    -
Other real estate owned	$      6,891,353	$                    -	$      6,891,353	$                    -

Loans with impairment have unpaid principal balances of $5,415,721  and $4,272,836 at September 30, 2013 and December 31, 2012, respectively, and include impaired loans with a specific allowance.

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

6. STOCK-BASED COMPENSATION

The Company has stock option and incentive arrangements to attract and retain key personnel. In May 2005, the 2005 Equity Compensation Plan (the “Plan”) was approved by the shareholders, which authorizes the issuance of restricted stock, stock appreciation rights, stock units and stock options to the Board of Directors and key employees. Compensation expense for service based awards is recognized over the vesting period. Performance based awards are recognized based on a vesting, if applicable, and the probability of achieving the goals.

Stock-based compensation expense totaled $159,089 and $91,826 for the nine months ended September 30, 2013 and 2012, respectively, which consisted of grants of restricted stock and restricted stock units. Stock-based compensation for the nine months ended September 30, 2013 and 2012 included director compensation of $3,320 and $18,128, respectively, for stock granted in lieu of cash compensation for board fees. All outstanding options are fully vested and the Company has not granted any stock options since 2007.

The fair value of the Company’s outstanding employee stock options is estimated on the date of grant using the Black-Scholes option pricing model. The Company estimates expected market price volatility and expected term of the options based on historical data and other factors.

The exercise price for options granted is set at the discretion of the committee administering the Plan, but is not less than the market value of the shares as of the date of grant. An option’s maximum term is 10 years and the options vest at the discretion of the committee.  

The following tables below summarize outstanding and exercisable options at September 30, 2013 and December 31, 2012.

		Weighted		Weighted-Average
		Average	Aggregate	Contractual Life
		Exercise	Intrinsic	Remaining In
	Shares	Price	Value	Years
Outstanding at January 1, 2013	236,059	$                    18.49	$                164,304
Granted at fair value	-	-
Exercised	(16,009)	13.63	73,518
Expired	-
Forfeited	(2)	13.05
Outstanding at September 30, 2013	220,048	$                    18.84	$                478,620	0.8
Exercisable at September 30, 2013	220,048	$                    18.84	$                478,620	0.8

		Weighted		Weighted-Average
		Average	Aggregate	Contractual Life
		Exercise	Intrinsic	Remaining In
	Shares	Price	Value	Years
Outstanding at January 1, 2012	264,156	$                    17.90	$                175,911
Granted at fair value	-	-
Exercised	(24,780)	12.25	88,607
Expired	-
Forfeited	(3,317)	18.25
Outstanding at December 31, 2012	236,059	$                    18.49	$                164,304	1.0
Exercisable at December 31, 2012	236,059	$                    18.49	$                164,304	1.0

Options outstanding are all currently exercisable and are summarized as follows: 

Shares Outstanding	Weighted Average	Weighted Average
September 30, 2013	Remaining Contractual Life	Exercise Price
39,668	1 years	$	12.97
78,831	2 years		15.89
80,138	3 years		22.29
21,411	4 years		27.70
220,048		$	18.84

The aggregate intrinsic value of outstanding stock options and exercisable stock options was $478,620 and $164,304 at September 30, 2013 and December 31, 2012, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $18.95 and $15.98 per share at September 30, 2013 and December 31, 2012, respectively, and the exercise price multiplied by the number of options outstanding.

The Company has outstanding restricted stock and stock units granted in accordance with the Plan. The following tables summarize the unvested restricted stock awards and units outstanding at September 30, 2013 and December 31, 2012, respectively.

	Restricted Stock		Restricted Stock Units
	Number of Shares	Weighted  Average Grant Date Fair Value	Number of Units	Fair Value
Nonvested at December 31, 2012	23,569	$                    15.64	5,211	$                    15.98
Granted	13,656	18.00	2,105	16.87
Vested	(16,678)	16.35	(3,106)	15.98
Nonvested at September 30, 2013	20,547	$                    16.63	4,210	$                    18.95

	Restricted Stock		Restricted Stock Units
	Number of Shares	Weighted  Average Grant Date Fair Value	Number of Units	Fair Value
Nonvested at January 1, 2012	8,113	$                    16.47	6,845	$                    15.00
Granted	23,281	15.21	2,105	15.98
Vested	(7,825)	15.20	(3,739)	14.80
Nonvested at December 31, 2012	23,569	$                    15.64	5,211	$                    15.98

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INCOME TAXES

9 Months Ended

Sep. 30, 2013

INCOME TAXES [Abstract]

INCOME TAXES

4. INCOME TAXES

The Company files a consolidated federal income tax return with its subsidiaries. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws and when it is considered more likely than not that deferred tax assets will be realized. It is the Company’s policy to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.

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OTHER REAL ESTATE OWNED ("OREO") (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Schedule of Trading Securities and Other Trading Assets [Line Items]
Gains on sale of OREO			$ 215,345
Proceeds from sale of foreclosed real estate			712,945	344,512
Recognition of deferred gain from sale of OREO			225,000
Unrealized losses on sale of foreclosed assets				96,917
Operating expenses	41,080	54,529	105,168	85,374
Foreclosed Real Estate [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Gains on sale of OREO			9,655
Operating expenses			$ 7,600

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)

9 Months Ended

Sep. 30, 2013

ACCUMULATED OTHER COMPREHENSIVE INCOME [Abstract]

Schedule of Comprehensive Income (Loss)

The following tables presents the components of comprehensive loss for securities for the three and nine months endedSeptember 30, 2013 and 2012. 

	Three Months Ended September 30, 2013			Three Months Ended September 30, 2012
	Before Tax	Tax Effect	Net of Tax	Before Tax	Tax Effect	Net of Tax
Net unrealized holding gain (loss)
arising during period	$       (350,524)	$       (119,178)	$       (231,346)	$         104,229	$           35,438	$           68,791
Reclassification adjustments	-	-	-	-	-	-
Other comprehensive gain (loss)	$       (350,524)	$       (119,178)	$       (231,346)	$         104,229	$           35,438	$           68,791

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
	Before Tax	Tax Effect	Net of Tax	Before Tax	Tax Effect	Net of Tax
Net unrealized holding gain (loss)
arising during period	$     (1,591,096)	$       (540,972)	$     (1,050,124)	$         115,973	$           39,431	$           76,542
Reclassification adjustments	-	-	-	-	-	-
Other comprehensive gain (loss)	$     (1,591,096)	$       (540,972)	$     (1,050,124)	$         115,973	$           39,431	$           76,542

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in each component of accumulated other comprehensive income for securities, net of tax, for the three and nine months endedSeptember 30, 2013.

	Three Months Ended September 30, 2013	Nine Months Ended September 30, 2013
	Net Unrealized Gains And Losses	Net Unrealized Gains And Losses
Beginning of period	$           (679,594)	$             139,184
Other comprehensive loss
before reclassifications	(231,346)	(1,050,124)
Amounts reclassified from accumulated
other comprehensive income	-	-
Net other comprehensive loss	(231,346)	(1,050,124)
End of period	$           (910,940)	$           (910,940)

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FAIR VALUE MEASUREMENTS (Fair Value, Assets and Liabilities Measured on Nonrecurring Basis) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Foreclosed Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 7,058,504	$ 6,891,353
Fair Value, Inputs, Level 1 [Member] | Foreclosed Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Fair Value, Inputs, Level 2 [Member] | Foreclosed Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	7,058,504	6,891,353
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	4,370,951	2,725,179
Loans With Impairment [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,411,781	2,028,534
Loans With Impairment [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	530,170	602,290
Loans With Impairment [Member] | Commercial Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	429,000	94,355
Loans With Impairment [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 1 [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 1 [Member] | Commercial Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	4,370,951	2,725,179
Loans With Impairment [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,411,781	2,028,534
Loans With Impairment [Member] | Fair Value, Inputs, Level 2 [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	530,170	602,290
Loans With Impairment [Member] | Fair Value, Inputs, Level 2 [Member] | Commercial Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	429,000	94,355
Loans With Impairment [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 3 [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	0
Loans With Impairment [Member] | Fair Value, Inputs, Level 3 [Member] | Commercial Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 0	$ 0

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STOCK-BASED COMPENSATION (Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range) (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number Outstanding September 30, 2013 (in shares)	220,048	236,059
Weighted Average Remaining Contractual Life (in years)	9 months 18 days	1 year
Weighted Average Exercise Price (in dollars per share)	$ 18.84	$ 18.49
Option Exercisable One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number Outstanding September 30, 2013 (in shares)	39,668
Weighted Average Remaining Contractual Life (in years)	1 year
Weighted Average Exercise Price (in dollars per share)	$ 12.97
Option Exercisable Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number Outstanding September 30, 2013 (in shares)	78,831
Weighted Average Remaining Contractual Life (in years)	2 years
Weighted Average Exercise Price (in dollars per share)	$ 15.89
Option Exercisable Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number Outstanding September 30, 2013 (in shares)	80,138
Weighted Average Remaining Contractual Life (in years)	3 years
Weighted Average Exercise Price (in dollars per share)	$ 22.29
Option Exercisable Four [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number Outstanding September 30, 2013 (in shares)	21,411
Weighted Average Remaining Contractual Life (in years)	4 years
Weighted Average Exercise Price (in dollars per share)	$ 27.70

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LOANS (Troubled Debt Restructurings on Financing Receivables) (Details) (USD $)	Sep. 30, 2013 loan	Dec. 31, 2012 loan
Financing Receivable Post Modification Recorded Investment	$ 4,637,797	$ 4,515,443
Number of Loans	12	10
Residential Mortgage [Member]
Financing Receivable Post Modification Recorded Investment	1,485,600	1,418,229
Number of Loans	4	3
Commercial Real Estate [Member]
Financing Receivable Post Modification Recorded Investment	$ 3,152,197	$ 3,097,214
Number of Loans	8	7

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LOANS (Schedule of Financing Receivables, Non Accrual Status) (Details) (USD $)	Sep. 30, 2013 loan	Dec. 31, 2012 loan
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or Greater Days Delinquent	$ 11,089,722	$ 8,717,017
Number of Loans, 90 or Greater Days Delinquent	31	34
Nonaccrual Performing Loans	4,325,912	4,424,388
Number Of Loans, Nonaccrual Performing Loans	6	6
Total Dollars	15,415,634	13,141,405
Total Number of loans	37	40
Commercial Equipment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or Greater Days Delinquent	316,662	216,383
Number of Loans, 90 or Greater Days Delinquent	5	4
Total Dollars	316,662	216,383
Total Number of loans	5	4
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual Performing Loans	31,935	51,748
Number Of Loans, Nonaccrual Performing Loans	1	1
Total Dollars	31,935	51,748
Total Number of loans	1	1
Commercial Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or Greater Days Delinquent	5,670,331	3,732,090
Number of Loans, 90 or Greater Days Delinquent	10	11
Total Dollars	5,670,331	3,732,090
Total Number of loans	10	11
Home Equity and Second Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or Greater Days Delinquent		71,296
Number of Loans, 90 or Greater Days Delinquent		2
Total Dollars		71,296
Total Number of loans		2
Residential Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or Greater Days Delinquent	2,155,122	3,169,404
Number of Loans, 90 or Greater Days Delinquent	7	10
Nonaccrual Performing Loans	565,802	569,693
Number Of Loans, Nonaccrual Performing Loans	3	3
Total Dollars	2,720,924	3,739,097
Total Number of loans	10	13
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 or Greater Days Delinquent	2,947,607	1,527,844
Number of Loans, 90 or Greater Days Delinquent	9	7
Nonaccrual Performing Loans	3,728,175	3,802,947
Number Of Loans, Nonaccrual Performing Loans	2	2
Total Dollars	$ 6,675,782	$ 5,330,791
Total Number of loans	11	9

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SECURITIES (Trading Securities (and Certain Trading Assets)) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Schedule of Trading Securities and Other Trading Assets [Line Items]
Estimated Fair Value, available for sale	$ 50,869,490	$ 47,205,663
Amortized Cost, Held to Maturity	91,349,615	112,619,434
Gross Unrealized Gains, held to maturity	1,170,947	2,149,925
Gross Unrealized Losses, held to maturity	1,469,609	582,341
Estimated Fair Value, held to maturity	91,050,953	114,187,018
Bond Mutual Funds [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Held to Maturity	749,887
Gross Unrealized Gains, held to maturity	75
Estimated Fair Value, held to maturity	749,962
Asset Backed Securities Issued By Others [Member] | Us Government Obligations [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Held to Maturity		749,941
Estimated Fair Value, held to maturity		749,941
Asset Backed Securities Issued By Others [Member] | Debt Securities [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Held to Maturity	90,599,728	111,869,493
Gross Unrealized Gains, held to maturity	1,170,872	2,149,925
Gross Unrealized Losses, held to maturity	1,469,609	582,341
Estimated Fair Value, held to maturity	90,300,991	113,437,077
Asset Backed Securities Issued By Others [Member] | Residential Collateralized Mortgage Obligations [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Held to Maturity	3,294,474	4,439,118
Gross Unrealized Gains, held to maturity	100,907	197,028
Gross Unrealized Losses, held to maturity	418,975	484,343
Estimated Fair Value, held to maturity	2,976,406	4,151,803
Asset-backed securities issued by GSEs [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available for Sale	52,019,023	46,755,861
Gross Unrealized Gains, available for sale	176,715	568,604
Gross Unrealized Losses, available for sale	1,326,248	118,802
Estimated Fair Value, available for sale	50,869,490	47,205,663
Asset-backed securities issued by GSEs [Member] | Bond Mutual Funds [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available for Sale	4,078,129	4,012,609
Gross Unrealized Gains, available for sale	82,950	268,537
Estimated Fair Value, available for sale	4,161,079	4,281,146
Asset-backed securities issued by GSEs [Member] | Corporate Equity Securities [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available for Sale	37,310	37,310
Gross Unrealized Gains, available for sale	1,572	306
Gross Unrealized Losses, available for sale	184	284
Estimated Fair Value, available for sale	38,698	37,332
Asset-backed securities issued by GSEs [Member] | Residential Collateralized Mortgage Obligations [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available for Sale	47,721,616	42,507,542
Gross Unrealized Gains, available for sale	75,448	266,775
Gross Unrealized Losses, available for sale	1,326,064	118,518
Estimated Fair Value, available for sale	46,471,000	42,655,799
Amortized Cost, Held to Maturity	63,583,106	76,191,199
Gross Unrealized Gains, held to maturity	385,242	715,620
Gross Unrealized Losses, held to maturity	864,471	97,998
Estimated Fair Value, held to maturity	63,103,877	76,808,821
Asset-backed securities issued by GSEs [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available for Sale	181,968	198,400
Gross Unrealized Gains, available for sale	16,745	32,986
Estimated Fair Value, available for sale	198,713	231,386
Amortized Cost, Held to Maturity	23,722,148	31,239,176
Gross Unrealized Gains, held to maturity	684,723	1,237,277
Gross Unrealized Losses, held to maturity	186,163
Estimated Fair Value, held to maturity	$ 24,220,708	$ 32,476,453

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Loans receivable, allowance for loan losses (in dollars)	$ 8,079,277	$ 8,246,957
Preferred Stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred Stock, authorized	20,000	20,000
Preferred Stock, issued	20,000	20,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized	15,000,000	15,000,000
Common stock, issued	3,048,439	3,052,416

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OTHER REAL ESTATE OWNED("OREO")

9 Months Ended

Sep. 30, 2013

OTHER REAL ESTATE OWNED ("OREO") [Abstract]

OTHER REAL ESTATE OWNED ("OREO")

9. OTHER REAL ESTATE OWNED (“OREO”)

OREO assets are presented net of the allowance for losses. The Company considers OREO as classified assets for regulatory and financial reporting. An analysis of the activity follows.

	Nine Months Ended September 30,		Year Ended December 31,
	2013	2012	2012
Balance at beginning of year	$            6,891,353	$            5,028,513	$            5,028,513
Additions of underlying property	1,390,286	2,165,375	4,020,494
Disposals of underlying property	(722,599)	(441,429)	(1,483,449)
Valuation allowance	(500,536)	(657,226)	(674,205)
Balance at end of period	$            7,058,504	$            6,095,233	$            6,891,353

During the nine months ended September 30, 2013, the Bank recognized $215,345 in gains on the sale of OREO which consisted of the sale of four properties for net proceeds of $712,944 and net losses of $9,655 and the recognition of $225,000 of previously deferred gain from the sale of an OREO property that the Bank financed during 2011 that did not initially qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition. During the nine months ended September 30, 2012, the Bank disposed of three OREO properties resulting in proceeds of $344,512 and recognized net losses of $96,917.

Expenses applicable to OREO assets include the following.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2013	2012	2013	2012
Valuation allowance	$                 170,560	$                   31,050	$                 500,536	$                 657,226
Operating expenses	41,080	54,529	105,168	85,374
	$                 211,640	$                   85,579	$                 605,704	$                 742,600

 Operating expenses for the nine months ended September 30, 2012 included $7,600 in deposits refunded on sold foreclosed real estate.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flows from Operating Activities
Net income	$ 5,006,681	$ 3,519,346
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	640,210	1,523,580
Depreciation and amortization	965,380	845,804
Loans originated for resale	(20,903,681)	(9,987,050)
Proceeds from sale of loans originated for sale	21,326,491	10,383,776
Gain on sale of loans held for sale	(546,819)	(471,725)
Net (gains) losses on the sale of OREO	(215,345)	96,917
Gain on sale of asset	(11,000)
Net amortization of premium/discount on investment securities	440,932	308,509
Increase in OREO valuation allowance	500,536	657,226
Increase in cash surrender of bank owned life insurance	(464,775)	(476,293)
Deferred income tax benefit	(128,314)	(773,527)
Decrease (Increase) in accrued interest receivable	54,259	(39,413)
Stock based compensation	249,129	263,088
(Decrease in deferred loan fees	215,478	104,942
Decrease in accounts payable, accrued expenses and other liabilities	(455,443)	441,789
(Increase) Decrease in other assets	(165,764)	2,411,207
Net Cash Provided by Operating Activities	6,507,955	8,808,176
Cash Flows from Investing Activities
Purchase of AFS investment securities	(13,486,742)	(10,101,789)
Proceeds from redemption or principal payments of AFS investment securities	8,091,820	15,465,959
Purchase of HTM investment securities	(11,682,813)	(11,249,535)
Proceeds from maturities or principal payments of HTM investment securities	32,651,698	39,413,413
Net increase of FHLB and FRB stock	(117,050)	155,250
Loans originated or acquired	(182,200,307)	(173,628,906)
Principal collected on loans	168,063,366	147,989,755
Purchase of premises and equipment	(455,356)	(4,253,518)
Proceeds from sale of OREO	712,945	344,512
Proceeds from disposal of assets	11,000
Net Cash Provided by Investing Activities	1,588,561	4,135,141
Cash Flows from Financing Activities
Net decrease in deposits	(2,982,829)	(4,265,600)
Proceeds from long-term borrowings	10,000,000
Payments of long-term borrowings	(38,360)	(36,854)
Net increase in short term borrowings	1,640,000
Exercise of stock options	125,222	67,391
Dividends paid	(1,063,992)	(1,371,571)
Net change in unearned ESOP shares	126,812	(1,942)
Redemption of common stock	(302,519)	(257,935)
Net Cash Used in Financing Activities	7,504,334	(5,866,511)
Increase (Decrease) in Cash and Cash Equivalents	15,600,850	7,076,806
Cash and Cash Equivalents - January 1	11,295,655	19,118,189
Cash and Cash Equivalents - June 30	26,896,505	26,194,995
Supplemental Disclosures of Cash Flow Information
Interest	5,856,848	8,340,170
Income taxes	3,164,596	1,470,590
Supplemental Schedule of Non-Cash Operating Activities
Issuance of common stock for payment of compensation	249,129	263,088
Transfer from loans to OREO	$ 1,390,286	$ 2,165,376

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Fair Value, by Balance Sheet Grouping) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Assets
Investment securities - AFS, Carrying amount	$ 50,869,490	$ 47,205,663
Investment securities - HTM, Carrying amount	91,349,615	112,619,434
Federal Home Loan Bank and Federal Reserve Stock, Carrying Amount	5,593,100	5,476,050
Loans, Carrying amount	759,880,727	747,640,752
Other real estate owned, Carrying amount	7,058,504	6,891,353	6,095,233	5,028,513
Investment securities - AFS, Fair value	50,869,490	47,205,663
Investment securities - HTM, Fair value	91,050,953	114,187,018
Federal Home Loan Bank and Federal Reserve Stock, Fair value	6,198,000	5,469,000
Loans, Fair value	753,916,000	757,387,000
Other real estate owned, Fair value	7,058,504	6,891,353
Liabilities [Abstract]
Savings, NOW and money market accounts, Carrying amount	432,564,049	414,776,285
Time deposits, Carrying amount	384,683,410	405,454,003
Long-term debt, Carrying amount	70,488,848	60,527,208
Short term borrowings, Carrying amount	2,640,000	1,000,000
Guaranteed preferred beneficial interest in junior subordinated debentures, Carrying amount	12,000,000	12,000,000
Savings, NOW and money market accounts, Fair value	432,564,049	414,776,285
Time deposits, Fair value	387,119,000	410,257,000
Long-term debt, Fair value	71,382,000	64,252,000
Short term borrowings, Fair value	2,640,000	1,000,000
Guaranteed preferred beneficial interest in junior subordinated debentures, Fair value	2,400,000	2,400,000
Fair Value, Inputs, Level 1 [Member]
Assets
Investment securities - HTM, Fair value	749,962	749,941
Fair Value, Inputs, Level 2 [Member]
Assets
Investment securities - AFS, Fair value	50,869,490	47,205,663
Investment securities - HTM, Fair value	90,300,991	113,437,077
Federal Home Loan Bank and Federal Reserve Stock, Fair value	6,198,000	5,469,000
Loans, Fair value	753,916,000	757,387,000
Other real estate owned, Fair value	7,058,504	6,891,353
Liabilities [Abstract]
Savings, NOW and money market accounts, Fair value	432,564,049	414,776,285
Time deposits, Fair value	387,119,000	410,257,000
Long-term debt, Fair value	71,382,000	64,252,000
Short term borrowings, Fair value	2,640,000	1,000,000
Guaranteed preferred beneficial interest in junior subordinated debentures, Fair value	$ 2,400,000	$ 2,400,000

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CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2013	Dec. 31, 2012
Assets
Cash and due from banks	$ 23,269,755	$ 10,696,653
Federal funds sold		190,000
Interest-bearing deposits with banks	3,626,750	409,002
Securities available for sale (AFS), at fair value	50,869,490	47,205,663
Securities held to maturity (HTM), at amortized cost	91,349,615	112,619,434
Federal Home Loan Bank and Federal Reserve Bank stock - at cost	5,593,100	5,476,050
Loans receivable - net of allowance for loan losses of $8,079,277 and $8,246,957	759,880,727	747,640,752
Premises and equipment, net	19,272,212	19,782,236
Other real estate owned (OREO)	7,058,504	6,891,353
Accrued interest receivable	2,850,066	2,904,325
Investment in bank owned life insurance	19,195,355	18,730,580
Other assets	9,938,081	9,093,164
Total Assets	992,903,655	981,639,212
Liabilities and Stockholders' Equity
Non-interest-bearing deposits	107,856,339	102,319,581
Interest-bearing deposits	709,391,120	717,910,707
Total deposits	817,247,459	820,230,288
Short-term borrowings	2,640,000	1,000,000
Long-term debt	70,488,848	60,527,208
Guaranteed preferred beneficial interest in junior subordinated debentures (TRUPs)	12,000,000	12,000,000
Accrued expenses and other liabilities	8,379,012	8,834,455
Total Liabilities	910,755,319	902,591,951
Stockholders' Equity
Preferred Stock, Senior Non-Cumulative Perpetual, Series C - par value $1,000; authorized 20,000; issued 20,000	20,000,000	20,000,000
Common stock - par value $.01; authorized - 15,000,000 shares; issued 3,048,439 and 3,052,416 shares, respectively	30,484	30,524
Additional paid in capital	18,275,729	17,873,560
Retained earnings	45,626,970	41,986,633
Accumulated other comprehensive gain (loss)	(910,940)	139,184
Unearned ESOP shares	(873,907)	(982,640)
Total Stockholders' Equity	82,148,336	79,047,261
Total Liabilities and Stockholders' Equity	$ 992,903,655	$ 981,639,212

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LOANS (Past Due Financing Receivables) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Current	$ 754,743,265	$ 744,659,871
31-60 Days	766,796	829,306
61-89 Days	2,240,307	2,346,125
90 or Greater Days	11,089,722	8,717,017
Total Past Due	14,096,825	11,892,448
Total Loan Receivables	768,840,090	756,552,319	741,017,579
Commercial Equipment [Member]
Current	20,730,853	15,659,007
31-60 Days	37,682	371,921
61-89 Days		20,373
90 or Greater Days	316,662	216,383
Total Past Due	354,344	608,677
Total Loan Receivables	21,085,197	16,267,684	17,246,112
Consumer Loans [Member]
Current	898,574	983,094
31-60 Days	3,226	9,363
61-89 Days		2,749
Total Past Due	3,226	12,112
Total Loan Receivables	901,800	995,206	1,047,046
Commercial Loans [Member]
Current	80,633,889	84,384,426
31-60 Days	200,000
61-89 Days		41,090
90 or Greater Days	5,670,331	3,732,090
Total Past Due	5,870,331	3,773,180
Total Loan Receivables	86,504,220	88,157,606	86,057,488
Home Equity and Second Mortgage [Member]
Current	21,388,847	21,499,018
31-60 Days	199,217	350,715
61-89 Days	123,916	61,346
90 or Greater Days		71,296
Total Past Due	323,133	483,357
Total Loan Receivables	21,711,980	21,982,375	21,940,441
Construction and Land Development [Member]
Current	30,786,474	31,818,782
31-60 Days	326,671
Total Past Due	326,671
Total Loan Receivables	31,113,145	31,818,782	31,639,206
Residential Mortgage [Member]
Current	159,568,816	173,593,886
31-60 Days		97,307
61-89 Days	137,772	802,757
90 or Greater Days	2,155,122	3,169,404
Total Past Due	2,292,894	4,069,468
Total Loan Receivables	161,861,710	177,663,354	176,825,516
Commercial Real Estate [Member]
Current	440,735,812	416,721,658
61-89 Days	1,978,619	1,417,810
90 or Greater Days	2,947,607	1,527,844
Total Past Due	4,926,226	2,945,654
Total Loan Receivables	$ 445,662,038	$ 419,667,312	$ 406,261,770

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BASIS OF PRESENTATION (Narrative) (Details) (Subsequent Event [Member], USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended
	Oct. 31, 2013
Subsequent Event [Member]
Stock offering shares issued	1,591,300
Price per share	$ 18.75
Proceeds from stock issuance	$ 27.4

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2013

STOCK-BASED COMPENSATION [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

The following tables below summarize outstanding and exercisable options at September 30, 2013 and December 31, 2012.

		Weighted		Weighted-Average
		Average	Aggregate	Contractual Life
		Exercise	Intrinsic	Remaining In
	Shares	Price	Value	Years
Outstanding at January 1, 2013	236,059	$                    18.49	$                164,304
Granted at fair value	-	-
Exercised	(16,009)	13.63	73,518
Expired	-
Forfeited	(2)	13.05
Outstanding at September 30, 2013	220,048	$                    18.84	$                478,620	0.8
Exercisable at September 30, 2013	220,048	$                    18.84	$                478,620	0.8

		Weighted		Weighted-Average
		Average	Aggregate	Contractual Life
		Exercise	Intrinsic	Remaining In
	Shares	Price	Value	Years
Outstanding at January 1, 2012	264,156	$                    17.90	$                175,911
Granted at fair value	-	-
Exercised	(24,780)	12.25	88,607
Expired	-
Forfeited	(3,317)	18.25
Outstanding at December 31, 2012	236,059	$                    18.49	$                164,304	1.0
Exercisable at December 31, 2012	236,059	$                    18.49	$                164,304	1.0

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range

Options outstanding are all currently exercisable and are summarized as follows: 

Shares Outstanding	Weighted Average	Weighted Average
September 30, 2013	Remaining Contractual Life	Exercise Price
39,668	1 years	$	12.97
78,831	2 years		15.89
80,138	3 years		22.29
21,411	4 years		27.70
220,048		$	18.84

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

The following tables summarize the unvested restricted stock awards and units outstanding at September 30, 2013 and December 31, 2012, respectively.

	Restricted Stock		Restricted Stock Units
	Number of Shares	Weighted  Average Grant Date Fair Value	Number of Units	Fair Value
Nonvested at December 31, 2012	23,569	$                    15.64	5,211	$                    15.98
Granted	13,656	18.00	2,105	16.87
Vested	(16,678)	16.35	(3,106)	15.98
Nonvested at September 30, 2013	20,547	$                    16.63	4,210	$                    18.95

	Restricted Stock		Restricted Stock Units
	Number of Shares	Weighted  Average Grant Date Fair Value	Number of Units	Fair Value
Nonvested at January 1, 2012	8,113	$                    16.47	6,845	$                    15.00
Granted	23,281	15.21	2,105	15.98
Vested	(7,825)	15.20	(3,739)	14.80
Nonvested at December 31, 2012	23,569	$                    15.64	5,211	$                    15.98

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SECURITIES (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended		12 Months Ended			9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended			3 Months Ended	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Asset Backed Securities Issued By Others [Member]	Dec. 31, 2012 Asset Backed Securities Issued By Others [Member]	Sep. 30, 2013 Asset-backed securities issued by GSEs [Member]	Dec. 31, 2012 Asset-backed securities issued by GSEs [Member]	Dec. 31, 2012 Held-To-Maturity Securities [Member]	Dec. 31, 2012 Held-To-Maturity Securities [Member]	Sep. 30, 2013 Held-To-Maturity Securities [Member]	Dec. 31, 2012 Held-To-Maturity Securities [Member] Mortgage-Backed Securities, Issued By Private Enterprises [Member]	Sep. 30, 2013 Held-To-Maturity Securities [Member] Mortgage-Backed Securities, Issued By Private Enterprises [Member]	Sep. 30, 2013 Held-To-Maturity Securities [Member] Mortgage Backed Securities Issued By Others [Member]	Sep. 30, 2013 Held-To-Maturity Securities [Member] Asset Backed Securities Issued By Others [Member]	Dec. 31, 2012 Held-To-Maturity Securities [Member] Asset Backed Securities Issued By Others [Member]	Sep. 30, 2013 Held-To-Maturity Securities [Member] Asset-backed securities issued by GSEs [Member]	Dec. 31, 2012 Held-To-Maturity Securities [Member] Asset-backed securities issued by GSEs [Member]	Dec. 31, 2009 Held-To-Maturity Securities [Member] Residential Collateralized Mortgage Obligations [Member]	Sep. 30, 2013 Held-To-Maturity Securities [Member] Residential Collateralized Mortgage Obligations [Member]	Dec. 31, 2012 Available-For-Sale Securities [Member]	Sep. 30, 2013 Available-For-Sale Securities [Member]	Sep. 30, 2013 Available-For-Sale Securities [Member] Asset-backed securities issued by GSEs [Member]	Dec. 31, 2012 Available-For-Sale Securities [Member] Asset Backed Securities And Corporate Securities [Member]	Sep. 30, 2013 Standard Poor's, AAA Rating [Member]	Dec. 31, 2012 Standard Poor's, AAA Rating [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Asset Backed Securities Pledged To Secure Certain Deposits	$ 36,700,000		$ 36,700,000
Asset Backed Securities Pledged As Collateral	2,900,000		2,900,000
Percentage Of Asset Backed Securities In Investment Portfolio							98.00%	97.00%
Amount	137,269,442	154,756,678	137,269,442	154,756,678			1,326,064								3,294,474						1,469,911				133,974,968	150,317,560
Available For Sale Securities Average Life							5 years 1 month 13 days	3 years 5 months 5 days															5 years 2 months 19 days
Available for sale securities, average duration							4 years 8 months 5 days	3 years 3 months 4 days
Held To Maturity Securities Average Life					4 years 5 months 1 day		5 years 6 months 15 days	3 years 5 months 5 days								3 years 2 months 1 day	6 years 7 days	1 year 10 months 6 days
Held to maturity securities, average duration					3 years 3 months 7 days		5 years 1 month 21 days	3 years 2 months 27 days								2 years 4 months 24 days	5 years 6 months 22 days	1 year 8 months 19 days					4 years 8 months 27 days
Amortized Cost, Held to Maturity	91,349,615	112,619,434	91,349,615	112,619,434													87,305,254	107,430,375					47,903,584
Other than temporary impairment charges	0		0	0															148,000
Investment Securities - Held to Maturity	91,050,953	114,187,018	91,050,953	114,187,018					114,187,018	114,187,018						4,439,118
Losses on sales of HTM investment securities		3,736				3,057,666			157,153	23,443,260		20,385,594				484,343		97,998
Held To Maturity Securities Loss Of Amortized Cost Percentage						13.00%			21.00%	21.00%	52.00%	87.00%	95.00%	5.00%	12.72%	10.91%	1.20%	0.09%
Net losses on sale of investment securities															418,975
Gains on sales of AFS investment securities																					(153,417)
Certified mortgage obligation par value																				$ 889,000
Held-to-maturity Securities, Debt Maturities, Fair Value											91,050,953		45,074,496	2,258,562						611,000
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount									3,796,011	3,796,011										511,000
Percentage of amortized cost, unrealized loss							2.77%															77.00%
Securities available for sale (AFS), at fair value	50,869,490	47,205,663	50,869,490	47,205,663																	47,205,663	50,869,490		11,956,182
Gross Unrealized Losses, available for sale											47,333,058						1,050,634				118,802	39,083,962
Available-for-sale securities sold	0		0
Held-to-maturity securities sold	$ 0		$ 0

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LOANS (Impaired Financing Receivables) (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Unpaid Contractual Principal Balance	$ 40,738,183	$ 46,658,749	$ 40,738,183	$ 46,658,749	$ 38,990,435
Recorded Investment With No Allowance	35,134,448	39,659,384	35,134,448	39,659,384	34,717,598
Recorded Investment With Allowance	5,415,721	5,941,716	5,415,721	5,941,716	4,272,836
Total Recorded Investment	40,550,169	45,601,099	40,550,169	45,601,099	38,990,435
Related Allowance	1,044,770	2,030,855	1,044,770	2,030,855	1,547,657
Average Recorded Investment	40,805,293	46,097,070	40,971,848	47,152,273	40,127,336
Interest Income Recognized	385,340	517,697	1,261,145	1,531,715	1,850,050
Consumer Loans [Member]
Unpaid Contractual Principal Balance	31,935	60,925	31,935	60,925	51,748
Recorded Investment With No Allowance	31,935	60,925	31,935	60,925	51,748
Total Recorded Investment	31,935	60,925	31,935	60,925	51,748
Average Recorded Investment	36,393	63,492	43,199	70,365	64,459
Interest Income Recognized	1,112	1,557	2,759	4,500	5,284
Commercial Loans [Member]
Unpaid Contractual Principal Balance	11,054,771	13,572,808	11,054,771	13,572,808	8,778,681
Recorded Investment With No Allowance	10,333,950	12,196,993	10,333,950	12,196,993	8,330,442
Recorded Investment With Allowance	720,821	775,815	720,821	775,815	448,238
Total Recorded Investment	11,054,771	12,972,808	11,054,771	12,972,808	8,778,681
Related Allowance	291,821	499,654	291,821	499,654	353,883
Average Recorded Investment	11,028,319	13,486,660	10,967,594	13,871,661	9,153,074
Interest Income Recognized	66,604	105,044	292,138	321,821	284,095
Commercial Equipment [Member]
Unpaid Contractual Principal Balance	335,563	4,715	335,563	4,715	4,421
Recorded Investment With No Allowance	293,787		293,787
Recorded Investment With Allowance	22,875	4,715	22,875	4,715	4,421
Total Recorded Investment	316,662	4,715	316,662	4,715	4,421
Related Allowance	22,875	4,715	22,875	4,715	4,421
Average Recorded Investment	336,106	4,909	350,886	5,309	5,112
Interest Income Recognized	1,238	83	7,740	266	318
Home Equity and Second Mortgage [Member]
Unpaid Contractual Principal Balance	58,000	293,855	58,000	293,855	291,000
Recorded Investment With No Allowance	58,000	272,000	58,000	272,000	291,000
Recorded Investment With Allowance		21,855		21,855
Total Recorded Investment	58,000	293,855	58,000	293,855	291,000
Related Allowance		21,855		21,855
Average Recorded Investment	120,000	246,399	216,556	220,572	221,000
Interest Income Recognized	1,486	1,870	6,016	5,373	6,783
Construction and Land Development [Member]
Unpaid Contractual Principal Balance	5,349,737	5,217,025	5,349,737	5,217,025	4,877,868
Recorded Investment With No Allowance	5,349,737	5,082,525	5,349,737	5,082,525	4,877,868
Recorded Investment With Allowance		134,500		134,500
Total Recorded Investment	5,349,737	5,217,025	5,349,737	5,217,025	4,877,868
Related Allowance		134,500		134,500
Average Recorded Investment	5,363,126	5,145,911	5,311,703	5,701,121	4,792,982
Interest Income Recognized	77,157	90,653	223,963	205,509	276,260
Residential Mortgage [Member]
Unpaid Contractual Principal Balance	3,882,548	4,011,851	3,882,548	4,011,851	3,367,827
Recorded Investment With No Allowance	3,181,637	2,347,285	3,181,637	2,347,285	2,362,062
Recorded Investment With Allowance	700,911	1,664,567	700,911	1,664,567	1,005,765
Total Recorded Investment	3,882,548	4,011,851	3,882,548	4,011,851	3,367,827
Related Allowance	170,741	247,541	170,741	247,541	403,475
Average Recorded Investment	3,910,884	4,021,446	3,919,666	4,025,659	3,388,867
Interest Income Recognized	30,371	35,750	96,616	121,746	157,595
Commercial Real Estate [Member]
Unpaid Contractual Principal Balance	20,025,629	23,497,570	20,025,629	23,497,570	21,618,890
Recorded Investment With No Allowance	15,885,402	19,699,656	15,885,402	19,699,656	18,804,478
Recorded Investment With Allowance	3,971,114	3,340,264	3,971,114	3,340,264	2,814,412
Total Recorded Investment	19,856,516	23,039,920	19,856,516	23,039,920	21,618,890
Related Allowance	559,333	1,122,590	559,333	1,122,590	785,878
Average Recorded Investment	20,010,465	23,128,253	20,162,244	23,257,586	22,501,842
Interest Income Recognized	$ 207,372	$ 282,740	$ 631,913	$ 872,500	$ 1,119,715

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GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES (TRUPs) (Narrative) (Details) (USD $)	1 Months Ended		9 Months Ended		1 Months Ended	9 Months Ended
	Jun. 30, 2005	Jun. 30, 2005 Capital Trust I I [Member]	Sep. 30, 2013 Capital Trust I I [Member]	Jun. 15, 2005 Capital Trust I I [Member]	Jul. 31, 2004 Capital Trust I [Member]	Sep. 30, 2013 Capital Trust I [Member]	Jul. 22, 2004 Capital Trust I [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount				$ 5,000,000			$ 7,000,000
Debt Instrument, Description of Variable Rate Basis			90-day LIBOR rate plus 1.70			90-day LIBOR rate plus 2.60%
Debt Instrument, Basis Spread on Variable Rate				1.70%			2.60%
Additional Amount Contributed to Purchase Debt		155,000			217,000
Junior Subordinated Notes Purchased	$ 5,155,000				$ 7,217,000
Debt Instrument, Maturity Date			Jun. 15, 2035			Jul. 22, 2034

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STOCK-BASED COMPENSATION (Narrative) (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	$ 249,129	$ 263,088
Sale of Stock, Price Per Share (in dollars per share)	$ 18.95		$ 15.98
Option Maximum Term	10 years
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Exercisable, Intrinsic Value	478,620		164,304
Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	3,320	18,128
Restricted Stock and Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	$ 159,089	$ 91,826

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STOCK-BASED COMPENSATION (Schedule of Share-based Compensation, Stock Options, Activity) (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
STOCK-BASED COMPENSATION [Abstract]
Shares Outstanding , Beginning balance	236,059	264,156
Shares Granted at fair value	0	0
Shares Exercised	(16,009)	(24,780)
Shares Expired		0
Shares Forfeited	(2)	(3,317)
Shares Outstanding, Ending balance	220,048	236,059
Shares, Exercisable	220,048	236,059
Weighted Average Exercise Price Outstanding, Beginning balance	$ 18.49	$ 17.90
Weighted Average Exercise Price Granted at fair value	$ 0.00	$ 0.00
Weighted Average Exercise Price Exercised	$ 13.63	$ 12.25
Weighted Average Exercise Price Expired	$ 0.00	$ 0.00
Weighted Average Exercise Price Forfeited	$ 13.05	$ 18.25
Weighted Average Exercise Price Outstanding, Ending balance	$ 18.84	$ 18.49
Weighted Average Exercise Price Exercisable	$ 18.84	$ 18.49
Aggregate Intrinsic Value Outstanding, Beginning balance	$ 164,304	$ 175,911
Aggregate Intrinsic Value Exercised	73,518	88,607
Aggregate Intrinsic Value Outstanding, Ending balance	478,620	164,304
Aggregate Intrinsic Value Exercisable	$ 478,620	$ 164,304
Weighted-Average Contractual Life Remaining In Years Outstanding (in years)	9 months 18 days	1 year
Weighted-Average Contractual Life Remaining In Years Exercisable (in years)	9 months 18 days	1 year

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PREFERRED STOCK

9 Months Ended

Sep. 30, 2013

PREFERRED STOCK [Abstract]

PREFERRED STOCK

8. PREFERRED STOCK

Small Business Lending Fund Preferred Stock

On September 22, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Secretary of the Treasury (the “Secretary”), pursuant to which the Company issued 20,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”), having a liquidation amount per share equal to $1,000, for a total purchase price of $20,000,000. The Purchase Agreement was entered into, and the Series C Preferred Stock was issued, as authorized by the Small Business Lending Fund program.

The Series C Preferred Stock is entitled to receive non-cumulative dividends, payable quarterly. The dividend rate can fluctuate on a quarterly basis during the first 10 quarters during which the Series C Preferred Stock is outstanding, based upon changes in the level of “Qualified Small Business Lending” or “QSBL” (as defined in the Purchase Agreement) by the Bank. Based upon the increase in the Bank’s level of QSBL over the baseline level calculated under the terms of the Purchase Agreement, the dividend rate for the initial dividend period was set at one percent (1%). For the second through ninth calendar quarters, the dividend rate may be adjusted to between one percent (1%) and five percent (5%) per annum, to reflect the amount of change in the Bank’s level of QSBL. If the level of the Bank’s qualified small business loans declines so that the percentage increase in QSBL as compared to the baseline level is less than 10%, then the dividend rate payable on the Series C Preferred Stock would increase. For the tenth calendar quarter through four and one half years after issuance, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) based upon the increase in QSBL as compared to the baseline. After four and one half years from issuance, the dividend rate will increase to nine percent (9%). In addition, beginning on January 1, 2014, and on all Series C Preferred Stock dividend payment dates thereafter ending on April 1, 2016, if the Company had not increased its QSBL from the baseline as of the quarter ending September 30, 2013, the Company would have been required to pay to the Secretary, on each share of Series C Preferred Stock, but only out of assets legally available, a fee equal to 0.5% of the liquidation amount per share of Series C Preferred Stock. At September 30, 2013, the Company had increased its QSBL from the baseline so that the dividend rate should remain at 1% through four and one half years from issuance.

The Series C Preferred Stock is non-voting, except in limited circumstances. If the Company misses five dividend payments, whether or not consecutive, the holder of the Series C Preferred Stock will have the right, but not the obligation, to appoint a representative as an observer on the Company’s Board of Directors. The Series C Preferred Stock may be redeemed at any time at the Company’s option, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends to the date of redemption for the current period, subject to the approval of our federal banking regulator. The Company is permitted to repay its SBLF funding in increments of 25% or $5.0 million, subject to the approval of its federal banking regulator.

The Series C Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Company has agreed to register the Series C Preferred Stock under certain circumstances set forth in Annex E to the Purchase Agreement. The Series C Preferred Stock is not subject to any contractual restrictions on transfer.

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FAIR VALUE MEASUREMENTS (Narrative) (Details) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans with impairment, unpaid principal	$ 5,415,721	$ 5,415,721	$ 4,272,836	$ 5,941,716
Assets, fair value	50,869,490	50,869,490
Fair value transfers	0	0	0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	50,869,490	50,869,490
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	$ 0	$ 0	$ 0

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OTHER REAL ESTATE OWNED ("OREO") (Foreclosed Real Estate Roll Forward) (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
OTHER REAL ESTATE OWNED ("OREO") [Abstract]
Balance at beginning of year			$ 6,891,353	$ 5,028,513	$ 5,028,513
Additions of underlying property			1,390,286	2,165,375	4,020,494
Disposals of underlying property			(722,599)	(441,429)	(1,483,449)
Valuation allowance	(170,560)	(31,050)	(500,536)	(657,226)	(674,205)
Balance at end of period	$ 7,058,504	$ 6,095,233	$ 7,058,504	$ 6,095,233	$ 6,891,353

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LOANS

9 Months Ended

Sep. 30, 2013

LOANS [Abstract]

LOANS

11. LOANS

Loans consist of the following:

	September 30, 2013	December 31, 2012
Commercial real estate	$             445,662,038	$           419,667,312
Residential first mortgages	161,861,710	177,663,354
Construction and land development	31,113,145	31,818,782
Home equity and second mortgages	21,711,980	21,982,375
Commercial loans	86,504,220	88,157,606
Consumer loans	901,800	995,206
Commercial equipment	21,085,197	16,267,684
	768,840,090	756,552,319
Less:
Deferred loan fees	880,086	664,610
Allowance for loan loss	8,079,277	8,246,957
	8,959,363	8,911,567
	$             759,880,727	$           747,640,752

At September 30, 2013, the Bank’s allowance for loan losses totaled $8,079,277, or 1.05% of loan balances, as compared to $8,246,957, or 1.09% of loan balances, at December 31, 2012. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to the overall loss experience, current economic conditions, size, growth and composition of the loan portfolio, financial condition of the borrowers and other relevant factors that, in management’s judgment, warrant recognition in providing an adequate allowance.

At December 31, 2012, gross loans included $1,454,757 from the sales of OREO property that the Bank financed during 2011 that did not qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition”. The deferred gain balance was $225,000 at December 31, 2012.The Bank recognized the deferred gain of $225,000 during the three months ended September 30, 2013 as the transaction qualified for full accrual sales treatment under ASC Topic 360-20-40.

Risk Characteristics of Portfolio Segments

The Company manages its credit products and exposure to credit losses (credit risk) by the following specific portfolio segments (classes), which are levels at which the Company develops and documents its allowance for loan loss methodology. These segments are:

Commercial Real Estate (“CRE”)

Commercial and other real estate projects include office buildings, retail locations, churches, other special purpose buildings and commercial construction. Commercial construction balances were below 5% of the CRE portfolio at September 30, 2013 and December 31, 2012. The Bank offers both fixed-rate and adjustable-rate loans under these product lines. The primary security on a commercial real estate loan is the real property and the leases that produce income for the real property. The Bank generally limits its exposure to a single borrower to 15% of the Bank’s capital. Loans secured by commercial real estate are generally limited to 80% of the lower of the appraised value or sales price at origination and have an initial contractual loan payment period ranging from three to 20 years.

Loans secured by commercial real estate are larger and involve greater risks than one-to-four family residential mortgage loans. Because payments on loans secured by such properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.

Residential First Mortgages

Residential first mortgage loans made by the Bank are generally long term loans, amortized on a monthly basis, with principal and interest due each month. The initial contractual loan payment period for residential loans typically ranges from ten to 30 years. The Bank’s experience indicates that real estate loans remain outstanding for significantly shorter time periods than their contractual terms. Borrowers may refinance or prepay loans at their option, without penalty. The Bank originates both fixed-rate and adjustable-rate residential first mortgages.

The annual and lifetime limitations on interest rate adjustments may limit the increases in interest rates on these loans. There are also unquantifiable credit risks resulting from potential increased costs to the borrower as a result of repricing of adjustable-rate mortgage loans. During periods of rising interest rates, the risk of default on adjustable-rate mortgage loans may increase due to the upward adjustment of interest cost to the borrower.

Construction and Land Development

The Bank offers loans for the construction of one-to-four family dwellings. Generally, these loans are secured by the real estate under construction as well as by guarantees of the principals involved. In addition, the Bank offers loans to acquire and develop land, as well as loans on undeveloped, subdivided lots for home building by individuals.

A decline in demand for new housing might adversely affect the ability of borrowers to repay these loans. Construction and land development loans are inherently riskier than providing financing on owner-occupied real estate. The Bank’s risk of loss is affected by the accuracy of the initial estimate of the market value of the completed project as well as the accuracy of the cost estimates made to complete the project. In addition, the volatility of the real estate market has made it increasingly difficult to ensure that the valuation of land associated with these loans is accurate. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, a project’s value might be insufficient to assure full repayment. As a result of these factors, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the project rather than the ability of the borrower or guarantor to repay principal and interest. If the Bank forecloses on a project, there can be no assurance that the Bank will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Home Equity and Second Mortgage Loans

The Bank maintains a portfolio of home equity and second mortgage loans. These products contain a higher risk of default than residential first mortgages as in the event of foreclosure, the first mortgage would need to be paid off prior to collection of the second mortgage. This risk has been heightened as the market value of residential property has declined.

Commercial Loans

The Bank offers commercial loans to its business customers. The Bank offers a variety of commercial loan products including term loans and lines of credit. Such loans are generally made for terms of five years or less. The Bank offers both fixed-rate and adjustable-rate loans under these product lines. When making commercial business loans, the Bank considers the financial condition of the borrower, the borrower’s payment history of both corporate and personal debt, the projected cash flows of the business, the viability of the industry in which the consumer operates, the value of the collateral, and the borrower’s ability to service the debt from income. These loans are primarily secured by equipment, real property, accounts receivable, or other security as determined by the Bank.

Commercial loans are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself.

Consumer Loans

The Bank has developed a number of programs to serve the needs of its customers with primary emphasis upon loans secured by automobiles, boats, recreational vehicles and trucks. The Bank also makes home improvement loans and offers both secured and unsecured personal lines of credit. Consumer loans entail greater risk from other loan types due to being secured by rapidly depreciating assets or the reliance on the borrower’s continuing financial stability.

Commercial Equipment Loans

These loans consist primarily of fixed-rate, short-term loans collateralized by a commercial customer’s equipment. When making commercial equipment loans, the Bank considers the same factors it considers when underwriting a commercial business loan. Commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. In the case of business failure, collateral would need to be liquidated to provide repayment for the loan. In many cases, the highly specialized nature of collateral equipment would make full recovery from the sale of collateral problematic.

Non-accrual and Past Due Loans

Non-accrual loans as of September 30, 2013 and December 31, 2012 were as follows:

	September 30, 2013
	90 or Greater Days Delinquent	Number of Loans	Non-accrual Performing Loans	Number of Loans	Total Dollars	Total Number of Loans
Commercial real estate	$          2,947,607	9	$          3,728,175	2	$          6,675,782	11
Residential first mortgages	2,155,122	7	565,802	3	2,720,924	10
Commercial loans	5,670,331	10	-	-	5,670,331	10
Consumer loans	-	-	31,935	1	31,935	1
Commercial equipment	316,662	5	-	-	316,662	5
	$        11,089,722	31	$          4,325,912	6	$        15,415,634	37

	December 31, 2012
	90 or Greater Days Delinquent	Number of Loans	Non-accrual Performing Loans	Number of Loans	Total Dollars	Total Number of Loans
Commercial real estate	$          1,527,844	7	$          3,802,947	2	$          5,330,791	9
Residential first mortgages	3,169,404	10	569,693	3	3,739,097	13
Home equity and second mortgages	71,296	2	-	-	71,296	2
Commercial loans	3,732,090	11	-	-	3,732,090	11
Consumer loans	-	-	51,748	1	51,748	1
Commercial equipment	216,383	4	-	-	216,383	4
	$          8,717,017	34	$          4,424,388	6	$        13,141,405	40

The Bank categorized six performing loans totaling $4,325,912 and $4,424,388 as non-accrual loans at September 30, 2013 and December 31, 2012, respectively. These six loans represent one well-secured commercial relationship with no specific reserves in the allowance due to the Bank's superior credit position with underlying collateral,  which consists primarily of commercial real estate. As of September 30, 2013, the Bank had received all scheduled interest and principal payments on this relationship.  It is management’s belief that there is no current risk of loss to the Bank for this relationship. These loans were classified as non-accrual loans due to the customer’s operating results. In accordance with the Company’s policy, interest income is recognized on a cash-basis for these loans.

Non-accrual loans on which the recognition of interest has been discontinued, which did not have a specific allowance for impairment, amounted to $12,932,327 and $11,371,542 at September 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at September 30, 2013 and December 31, 2012 was $432,916and $443,856, respectively. Non-accrual loans with a specific allowance for impairment on which the recognition of interest has been discontinued amounted to $2,483,307 and $1,769,863 at September 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at September 30, 2013 and December 31, 2012 was $180,751and $182,106, respectively.

An analysis of past due loans as of September 30, 2013 and December 31, 2012 was as follows:

September 30, 2013	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables
Commercial real estate	$     440,735,812	$                  -	$    1,978,619	$    2,947,607	$    4,926,226	$     445,662,038
Residential first mortgages	159,568,816	-	137,772	2,155,122	2,292,894	161,861,710
Construction and land dev.	30,786,474	326,671	-	-	326,671	31,113,145
Home equity and second mortgages	21,388,847	199,217	123,916	-	323,133	21,711,980
Commercial loans	80,633,889	200,000	-	5,670,331	5,870,331	86,504,220
Consumer loans	898,574	3,226	-	-	3,226	901,800
Commercial equipment	20,730,853	37,682	-	316,662	354,344	21,085,197
Total	$     754,743,265	$       766,796	$    2,240,307	$  11,089,722	$  14,096,825	$     768,840,090

December 31, 2012
Commercial real estate	$     416,721,658	$                  -	$    1,417,810	$    1,527,844	$    2,945,654	$     419,667,312
Residential first mortgages	173,593,886	97,307	802,757	3,169,404	4,069,468	177,663,354
Construction and land dev.	31,818,782	-	-	-	-	31,818,782
Home equity and second mortgages	21,499,018	350,715	61,346	71,296	483,357	21,982,375
Commercial loans	84,384,426	-	41,090	3,732,090	3,773,180	88,157,606
Consumer loans	983,094	9,363	2,749	-	12,112	995,206
Commercial equipment	15,659,007	371,921	20,373	216,383	608,677	16,267,684
Total	$     744,659,871	$       829,306	$    2,346,125	$    8,717,017	$  11,892,448	$     756,552,319

There were no accruing loans 90 days or greater past due at September 30, 2013 and December 31, 2012, respectively.

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses at and for the three and nine months ended September 30, 2013 and September 30, 2012, respectively, and the year ended December 31, 2012 and loan receivable balances at September 30, 2013 and September 30, 2012, respectively, and at December 31, 2012. An allocation of the allowance to one category of loans does not prevent the Company’s ability to utilize the allowance to absorb losses in a different category. The loan receivables are disaggregated on the basis of the Company’s impairment methodology.

	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Three Months Ended September 30, 2013
Allowance for loan losses:
Balance at July 1,	$          3,358,001	$       1,960,882	$          600,525	$          364,281	$       1,519,332	$            13,972	$          216,560	$       8,033,553
Charge-offs	(140,048)	(80,110)	(50)	(155)	(28,576)	(1,012)	(31)	(249,982)
Recoveries	-	154	-	-	168	28	9,746	10,096
Provisions	311,035	(177,787)	(131,581)	(45,812)	272,009	1,539	56,207	285,610
Balance at September 30,	$          3,528,988	$       1,703,139	$          468,894	$          318,314	$       1,762,933	$            14,527	$          282,482	$       8,079,277
At and For the Nine Months Ended September 30, 2013
Allowance for loan losses:
Balance at January 1,	$          4,089,834	$       1,083,228	$          533,430	$          279,819	$       1,949,024	$            19,341	$          292,281	$       8,246,957
Charge-offs	(140,048)	(139,048)	(36,012)	(111,038)	(434,149)	(10,003)	(22,008)	(892,306)
Recoveries	-	11,054	-	-	12,059	2,010	59,293	84,416
Provisions	(420,798)	747,905	(28,524)	149,533	235,999	3,179	(47,084)	640,210
Balance at September 30,	$          3,528,988	$       1,703,139	$          468,894	$          318,314	$       1,762,933	$            14,527	$          282,482	$       8,079,277
Ending balance: individually   evaluated for impairment	$             559,333	$          170,741	$                     -	$                     -	$          291,821	$                     -	$            22,875	$       1,044,770
Ending balance: collectively   evaluated for impairment	$          2,969,655	$       1,532,398	$          468,894	$          318,314	$       1,471,112	$            14,527	$          259,607	$       7,034,507
Loan receivables:
Ending balance	$       445,662,038	$    161,861,710	$      31,113,145	$      21,711,980	$      86,504,220	$          901,800	$      21,085,197	$    768,840,090
Ending balance: individually   evaluated for impairment	$        19,856,516	$       3,882,548	$       5,349,737	$            58,000	$      11,054,771	$            31,935	$          316,662	$      40,550,169
Ending balance: collectively   evaluated for impairment	$       425,805,522	$    157,979,162	$      25,763,408	$      21,653,980	$      75,449,449	$          869,865	$      20,768,535	$    728,289,921

	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Year Ended December 31, 2012
Allowance for loan losses:
Balance at January 1,	$          2,525,199	$          539,205	$          354,385	$          143,543	$       3,850,294	$            19,119	$          223,296	$       7,655,041
Charge-offs	(486,431)	(10,987)	(140,835)	(210,753)	(1,003,824)	(4,994)	(168,802)	(2,026,626)
Recoveries	-	37,524	-	-	51,350	987	-	89,861
Provisions	2,051,066	517,486	319,880	347,029	(948,796)	4,229	237,787	2,528,681
Balance at December 31,	$          4,089,834	$       1,083,228	$          533,430	$          279,819	$       1,949,024	$            19,341	$          292,281	$       8,246,957
Ending balance: individually   evaluated for impairment	$             785,878	$          403,475	$                     -	$                     -	$          353,883	$                     -	$              4,421	$       1,547,657
Ending balance: collectively   evaluated for impairment	$          3,303,956	$          679,753	$          533,430	$          279,819	$       1,595,141	$            19,341	$          287,860	$       6,699,300
Loan receivables:
Ending balance	$       419,667,312	$    177,663,354	$      31,818,782	$      21,982,375	$      88,157,606	$          995,206	$      16,267,684	$    756,552,319
Ending balance: individually   evaluated for impairment	$        21,618,890	$       3,367,827	$       4,877,868	$          291,000	$       8,778,681	$            51,748	$              4,421	$      38,990,435
Ending balance: collectively   evaluated for impairment	$       398,048,422	$    174,295,527	$      26,940,914	$      21,691,375	$      79,378,925	$          943,458	$      16,263,263	$    717,561,884

	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Three Months Ended September 30, 2012
Allowance for loan losses:
Balance at July 1,	$          3,478,458	$          901,505	$          596,854	$          212,791	$       1,968,491	$            18,316	$          287,722	$       7,464,137
Charge-offs	(50,034)	(10,991)	(5,995)	(46,989)	(413)	-	(90)	(114,512)
Recoveries	-	429	-	-	23	-	-	452
Provisions	683,311	(3,991)	40,378	18,402	(14,062)	1,505	20,532	746,075
Balance at September 30,	$          4,111,735	$          886,952	$          631,237	$          184,204	$       1,954,039	$            19,821	$          308,164	$       8,096,152
At and For the Nine Months Ended September 30, 2012
Allowance for loan losses:
Balance at January 1,	$          2,525,199	$          539,205	$          354,385	$          143,543	$       3,850,294	$            19,119	$          223,296	$       7,655,041
Charge-offs	(171,867)	(10,991)	(5,995)	(88,931)	(693,461)	(999)	(149,884)	(1,122,128)
Recoveries	-	37,676	-	-	1,983	-	-	39,659
Provisions	1,758,403	321,062	282,847	129,592	(1,204,777)	1,701	234,752	1,523,580
Balance at September 30,	$          4,111,735	$          886,952	$          631,237	$          184,204	$       1,954,039	$            19,821	$          308,164	$       8,096,152
Ending balance: individually   evaluated for impairment	$          1,122,590	$          247,541	$          134,500	$            21,855	$          499,654	$                     -	$              4,715	$       2,030,855
Ending balance: collectively   evaluated for impairment	$          2,989,145	$          639,411	$          496,737	$          162,349	$       1,454,385	$            19,821	$          303,449	$       6,065,297
Loan receivables:
Ending balance	$       406,261,770	$    176,825,516	$      31,639,206	$      21,940,441	$      86,057,488	$       1,047,046	$      17,246,112	$    741,017,579
Ending balance: individually   evaluated for impairment	$        23,039,920	$       4,011,851	$       5,217,025	$          293,855	$      12,972,808	$            60,925	$              4,715	$      45,601,099
Ending balance: collectively   evaluated for impairment	$       383,221,850	$    172,813,665	$      26,422,181	$      21,646,586	$      73,084,680	$          986,121	$      17,241,397	$    695,416,480

Credit Quality Indicators

A risk grading scale is used to assign grades to commercial real estate, construction and land development, commercial loans and commercial equipment loans. Loans are graded at inception, annually thereafter when financial statements are received and at other times when there is an indication that a credit may have weakened or improved. Only commercial loan relationships with an aggregate exposure to the Bank of $750,000 or greater are subject to being risk rated.

Residential first mortgages, home equity and second mortgages and consumer loans are evaluated for creditworthiness in underwriting and are monitored based on borrower payment history. These loans are classified as unrated unless they are part of a larger commercial relationship that requires grading or are troubled debt restructures or nonperforming loans with an Other Assets Especially Mentioned (“OAEM”) or higher risk rating due to a delinquent payment history.

Management regularly reviews credit quality indicators as part of its individual loan reviews and on a monthly and quarterly basis. The overall quality of the Bank’s loan portfolio is assessed using the Bank’s risk grading scale, the level and trends of net charge-offs, nonperforming loans and delinquencies, the performance of troubled debt restructured loans and the general economic conditions in the Company’s geographical market. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit quality indicators and allowance factors are adjusted based on management’s judgment during the monthly and quarterly review process.

Loans subject to risk ratings are graded on a scale of one to ten. The Company considers loans classified substandard, doubtful and loss as classified assets for regulatory and financial reporting.

Ratings 1 thru 6 - Pass

Ratings 1 thru 6 have asset risks ranging from excellent low risk to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks.

Rating 7 - OAEM (Other Assets Especially Mentioned)– Special Mention

These credits, while protected by the financial strength of the borrowers, guarantors or collateral, have reduced quality due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. OAEM loans are the first adversely classified assets on our watch list. These relationships will be reviewed at least quarterly.

Rating 8 - Substandard

Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. The loans may have a delinquent history or combination of weak collateral, weak guarantor strength or operating losses. When a loan is assigned to this category the Bank may estimate a specific reserve in the loan loss allowance analysis. These assets listed may include assets with histories of repossessions or some that are non-performing bankruptcies. These relationships will be reviewed at least quarterly.

Rating 9 - Doubtful

Doubtful assets have many of the same characteristics of Substandard with the exception that the Bank has determined that loss is not only possible but is probable and the risk is close to certain that loss will occur. When a loan is assigned to this category the Bank will identify the probable loss and it will receive a specific reserve in the loan loss allowance analysis. These relationships will be reviewed at least quarterly.

Rating 10 - Loss

Once an asset is identified as a definite loss to the Bank, it will receive the classification of “loss”. There may be some future potential recovery; however it is more practical to write off the loan at the time of classification. Losses will be taken in the period in which they are determined to be uncollectable.

Credit quality indicators as of September 30, 2013 and December 31, 2012 were as follows:

Credit Risk Profile by Internally Assigned Grade
	Commercial Real Estate		Construction and Land Dev.
	9/30/2013	12/31/2012	9/30/2013	12/31/2012
Unrated	$       63,842,162	$       59,930,126	$         4,339,477	$         4,330,321
Pass	351,452,830	329,882,941	18,631,753	19,752,749
Special mention	5,790,532	4,880,758	-	-
Substandard	24,576,514	24,973,487	8,141,915	7,735,712
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$     445,662,038	$     419,667,312	$       31,113,145	$       31,818,782
	Commercial Loans		Commercial Equipment
	9/30/2013	12/31/2012	9/30/2013	12/31/2012
Unrated	$       11,401,481	$       11,627,726	$         5,938,295	$         5,082,713
Pass	60,365,389	64,436,809	15,121,129	11,180,550
Special mention	402,000	-	2,898	-
Substandard	14,335,350	12,093,071	22,875	4,421
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$       86,504,220	$       88,157,606	$       21,085,197	$       16,267,684
Credit Risk Profile Based on Payment Activity
	Residential First Mortgages		Home Equity and Second Mtg.		Consumer Loans
	9/30/2013	12/31/2012	9/30/2013	12/31/2012	9/30/2013	12/31/2012
Performing	$     159,706,588	$     174,493,950	$       21,711,980	$       21,911,079	$            901,800	$            995,206
Nonperforming	2,155,122	3,169,404	-	71,296	-	-
Total	$     161,861,710	$     177,663,354	$       21,711,980	$       21,982,375	$            901,800	$            995,206

Impaired Loans and Troubled Debt Restructures (“TDRs”)

Impaired loans, including TDRs, at September 30, 2013 and September 30, 2012, respectively, and at December 31, 2012 were as follows:

September 30, 2013	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Three Month Average Recorded Investment	Three Month Interest Income Recognized	Nine Month Average Recorded Investment	Nine Month Interest Income Recognized
Commercial real estate	$     20,025,629	$     15,885,402	$    3,971,114	$     19,856,516	$       559,333	$     20,010,465	$         207,372	$     20,162,244	$         631,913
Residential first mortgages	3,882,548	3,181,637	700,911	3,882,548	170,741	3,910,884	30,371	3,919,666	96,616
Construction and land dev.	5,349,737	5,349,737	-	5,349,737	-	5,363,126	77,157	5,311,703	223,963
Home equity and second mtg.	58,000	58,000	-	58,000	-	120,000	1,486	216,556	6,016
Commercial loans	11,054,771	10,333,950	720,821	11,054,771	291,821	11,028,319	66,604	10,967,594	292,138
Consumer loans	31,935	31,935	-	31,935	-	36,393	1,112	43,199	2,759
Commercial equipment	335,563	293,787	22,875	316,662	22,875	336,106	1,238	350,886	7,740
Total	$     40,738,183	$     35,134,448	$    5,415,721	$     40,550,169	$    1,044,770	$     40,805,293	$         385,340	$     40,971,848	$       1,261,145

December 31, 2012	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Average Recorded Investment	Interest Income Recognized
Commercial real estate	$     21,618,890	$     18,804,478	$    2,814,412	$     21,618,890	$       785,878	$     22,501,842	$       1,119,715
Residential first mortgages	3,367,827	2,362,062	1,005,765	3,367,827	403,475	3,388,867	157,595
Construction and land dev.	4,877,868	4,877,868	-	4,877,868	-	4,792,982	276,260
Home equity and second mtg.	291,000	291,000	-	291,000	-	221,000	6,783
Commercial loans	8,778,681	8,330,442	448,238	8,778,681	353,883	9,153,074	284,095
Consumer loans	51,748	51,748	-	51,748	-	64,459	5,284
Commercial equipment	4,421	-	4,421	4,421	4,421	5,112	318
Total	$     38,990,435	$     34,717,598	$    4,272,836	$     38,990,435	$    1,547,657	$     40,127,336	$       1,850,050

September 30, 2012	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Three Month Average Recorded Investment	Three Month Interest Income Recognized	Nine Month Average Recorded Investment	Nine Month Interest Income Recognized
Commercial real estate	$     23,497,570	$     19,699,656	$    3,340,264	$     23,039,920	$    1,122,590	$     23,128,253	$         282,740	$     23,257,586	$         872,500
Residential first mortgages	4,011,851	2,347,285	1,664,567	4,011,851	247,541	4,021,446	35,750	4,025,659	121,746
Construction and land dev.	5,217,025	5,082,525	134,500	5,217,025	134,500	5,145,911	90,653	5,701,121	205,509
Home equity and second mtg.	293,855	272,000	21,855	293,855	21,855	246,399	1,870	220,572	5,373
Commercial loans	13,572,808	12,196,993	775,815	12,972,808	499,654	13,486,660	105,044	13,871,661	321,821
Consumer loans	60,925	60,925	-	60,925	-	63,492	1,557	70,365	4,500
Commercial equipment	4,715	-	4,715	4,715	4,715	4,909	83	5,309	266
Total	$     46,658,749	$     39,659,384	$    5,941,716	$     45,601,099	$    2,030,855	$     46,097,070	$         517,697	$     47,152,273	$       1,531,715

TDRs, included in the impaired loan schedules above, as of September 30, 2013 and December 31, 2012, respectively were as follows:

	September 30, 2013		December 31, 2012
	Dollars	Number of Loans	Dollars	Number of Loans
Commercial real estate	$          3,152,197	8	$          3,097,214	7
Residential first mortgages	1,485,600	4	1,418,229	3
	$          4,637,797	12	$          4,515,443	10

At December 31, 2012, all TDRs were performing according to the terms of their restructured agreements and there were no amounts specifically reserved for TDRs. At September 30, 2013,one TDR loan of $323,976 was over 90 days past due and the  specific reserve of the allowance for loan losses was $12,000.  Interest income in the amount of $155,812 and $220,326 was recognized on these loans for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively.

During the nine months ended September 30, 2013, the Bank entered into one TDR for $77,165 for a residential first mortgage and one TDR for $60,000 for a commercial real estate mortgage. TDR activity for the nine months ended September 30, 2013 included only two additions to the number of TDRs. During the year ended December 31, 2012, the Bank entered into TDRs for eight commercial real estate loans totaling $3,212,894 and three residential first mortgages totaling $1,419,657. For the year ended December 31, 2012, two commercial real estate TDR loans were charged-off in the amount of $415,995.  One of the two charged-off commercial real estate loans was transferred to OREO with a balance of $382,500.

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GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES (TRUPs)

9 Months Ended

Sep. 30, 2013

GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES [Abstract]

GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES

7. GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES (“TRUPs”)

On June 15, 2005, Tri-County Capital Trust II (“Capital Trust II”), a Delaware business trust formed, funded and wholly owned by the Company, issued $5,000,000 of variable-rate capital securities in a private pooled transaction. The variable rate is based on the 90-day LIBOR rate plus 1.70%. The Trust used the proceeds from this issuance, along with the $155,000 for Capital Trust II’s common securities, to purchase $5,155,000 of the Company’s junior subordinated debentures. The interest rate on the debentures and the trust preferred securities is variable and adjusts quarterly. These capital securities qualify as Tier I capital and are presented in the Consolidated Balance Sheets as “Guaranteed Preferred Beneficial Interests in Junior Subordinated Debentures.” Both the capital securities of Capital Trust II and the junior subordinated debentures are scheduled to mature on June 15, 2035, unless called by the Company.

On July 22, 2004, Tri-County Capital Trust I (“Capital Trust I”), a Delaware business trust formed, funded and wholly owned by the Company, issued $7,000,000 of variable-rate capital securities in a private pooled transaction. The variable rate is based on the 90-day LIBOR rate plus 2.60%. The Trust used the proceeds from this issuance, along with the Company’s $217,000 capital contribution for Capital Trust I’s common securities, to purchase $7,217,000 of the Company’s junior subordinated debentures. The interest rate on the debentures and the trust preferred securities is variable and adjusts quarterly. These debentures qualify as Tier I capital and are presented in the Consolidated Balance Sheets as “Guaranteed Preferred Beneficial Interests in Junior Subordinated Debentures.” Both the capital securities of Capital Trust I and the junior subordinated debentures are scheduled to mature on July 22, 2034, unless called by the Company.

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NATURE OF BUSINESS

9 Months Ended

Sep. 30, 2013

BASIS AND NATURE OF BUSINESS [Abstract]

NATURE OF BUSINESS

2. NATURE OF BUSINESS

The Company provides a variety of financial services to individuals and businesses through its offices in Southern Maryland and King George, Virginia. Its primary deposit products are demand, savings and time deposits, and its primary lending products are commercial and residential mortgage loans, commercial loans, construction and land development loans, home equity and second mortgages and commercial equipment loans.

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LOANS (Allowance for Credit Losses on Financing Receivables) (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Allowance for loan losses:
Beginning Balance	$ 8,033,553	$ 7,464,137	$ 8,246,957	$ 7,655,041	$ 7,655,041
Charge-offs	(249,982)	(114,512)	(892,306)	(1,122,128)	(2,026,626)
Recoveries	10,096	452	84,416	39,659	89,861
Provision for loan losses	285,610	746,075	640,210	1,523,580	2,528,681
Ending Balance	8,079,277	8,096,152	8,079,277	8,096,152	8,246,957
Ending balance: individually evaluated for impairment	1,044,770	2,030,855	1,044,770	2,030,855	1,547,657
Ending balance: collectively evaluated for impairment	7,034,507	6,065,297	7,034,507	6,065,297	6,699,300
Loan receivables:
Loans	768,840,090	741,017,579	768,840,090	741,017,579	756,552,319
Ending balance: individually evaluated for impairment	40,550,169	45,601,099	40,550,169	45,601,099	38,990,435
Ending balance: collectively evaluated for impairment	728,289,921	695,416,480	728,289,921	695,416,480	717,561,884
Commercial Equipment [Member]
Allowance for loan losses:
Beginning Balance	216,560	287,722	292,281	223,296	223,296
Charge-offs	(31)	(90)	(22,008)	(149,884)	(168,802)
Recoveries	9,746		59,293
Provision for loan losses	56,207	20,532	(47,084)	234,752	237,787
Ending Balance	282,482	308,164	282,482	308,164	292,281
Ending balance: individually evaluated for impairment	22,875	4,715	22,875	4,715	4,421
Ending balance: collectively evaluated for impairment	259,607	303,449	259,607	303,449	287,860
Loan receivables:
Loans	21,085,197	17,246,112	21,085,197	17,246,112	16,267,684
Ending balance: individually evaluated for impairment	316,662	4,715	316,662	4,715	4,421
Ending balance: collectively evaluated for impairment	20,768,535	17,241,397	20,768,535	17,241,397	16,263,263
Commercial Loans [Member]
Allowance for loan losses:
Beginning Balance	1,519,332	1,968,491	1,949,024	3,850,294	3,850,294
Charge-offs	(28,576)	(413)	(434,149)	(693,461)	(1,003,824)
Recoveries	168	23	12,059	1,983	51,350
Provision for loan losses	272,009	(14,062)	235,999	(1,204,777)	(948,796)
Ending Balance	1,762,933	1,954,039	1,762,933	1,954,039	1,949,024
Ending balance: individually evaluated for impairment	291,821	499,654	291,821	499,654	353,883
Ending balance: collectively evaluated for impairment	1,471,112	1,454,385	1,471,112	1,454,385	1,595,141
Loan receivables:
Loans	86,504,220	86,057,488	86,504,220	86,057,488	88,157,606
Ending balance: individually evaluated for impairment	11,054,771	12,972,808	11,054,771	12,972,808	8,778,681
Ending balance: collectively evaluated for impairment	75,449,449	73,084,680	75,449,449	73,084,680	79,378,925
Consumer Loans [Member]
Allowance for loan losses:
Beginning Balance	13,972	18,316	19,341	19,119	19,119
Charge-offs	(1,012)		(10,003)	(999)	(4,994)
Recoveries	28		2,010		987
Provision for loan losses	1,539	1,505	3,179	1,701	4,229
Ending Balance	14,527	19,821	14,527	19,821	19,341
Ending balance: collectively evaluated for impairment	14,527	19,821	14,527	19,821	19,341
Loan receivables:
Loans	901,800	1,047,046	901,800	1,047,046	995,206
Ending balance: individually evaluated for impairment	31,935	60,925	31,935	60,925	51,748
Ending balance: collectively evaluated for impairment	869,865	986,121	869,865	986,121	943,458
Home Equity and Second Mortgage [Member]
Allowance for loan losses:
Beginning Balance	364,281	212,791	279,819	143,543	143,543
Charge-offs	(155)	(46,989)	(111,038)	(88,931)	(210,753)
Provision for loan losses	(45,812)	18,402	149,533	129,592	347,029
Ending Balance	318,314	184,204	318,314	184,204	279,819
Ending balance: individually evaluated for impairment		21,855		21,855
Ending balance: collectively evaluated for impairment	318,314	162,349	318,314	162,349	279,819
Loan receivables:
Loans	21,711,980	21,940,441	21,711,980	21,940,441	21,982,375
Ending balance: individually evaluated for impairment	58,000	293,855	58,000	293,855	291,000
Ending balance: collectively evaluated for impairment	21,653,980	21,646,586	21,653,980	21,646,586	21,691,375
Construction and Land Development [Member]
Allowance for loan losses:
Beginning Balance	600,525	596,854	533,430	354,385	354,385
Charge-offs	(50)	(5,995)	(36,012)	(5,995)	(140,835)
Provision for loan losses	(131,581)	40,378	(28,524)	282,847	319,880
Ending Balance	468,894	631,237	468,894	631,237	533,430
Ending balance: individually evaluated for impairment		134,500		134,500
Ending balance: collectively evaluated for impairment	468,894	496,737	468,894	496,737	533,430
Loan receivables:
Loans	31,113,145	31,639,206	31,113,145	31,639,206	31,818,782
Ending balance: individually evaluated for impairment	5,349,737	5,217,025	5,349,737	5,217,025	4,877,868
Ending balance: collectively evaluated for impairment	25,763,408	26,422,181	25,763,408	26,422,181	26,940,914
Residential Mortgage [Member]
Allowance for loan losses:
Beginning Balance	1,960,882	901,505	1,083,228	539,205	539,205
Charge-offs	(80,110)	(10,991)	(139,048)	(10,991)	(10,987)
Recoveries	154	429	11,054	37,676	37,524
Provision for loan losses	(177,787)	(3,991)	747,905	321,062	517,486
Ending Balance	1,703,139	886,952	1,703,139	886,952	1,083,228
Ending balance: individually evaluated for impairment	170,741	247,541	170,741	247,541	403,475
Ending balance: collectively evaluated for impairment	1,532,398	639,411	1,532,398	639,411	679,753
Loan receivables:
Loans	161,861,710	176,825,516	161,861,710	176,825,516	177,663,354
Ending balance: individually evaluated for impairment	3,882,548	4,011,851	3,882,548	4,011,851	3,367,827
Ending balance: collectively evaluated for impairment	157,979,162	172,813,665	157,979,162	172,813,665	174,295,527
Commercial Real Estate [Member]
Allowance for loan losses:
Beginning Balance	3,358,001	3,478,458	4,089,834	2,525,199	2,525,199
Charge-offs	(140,048)	(50,034)	(140,048)	(171,867)	(486,431)
Provision for loan losses	311,035	683,311	(420,798)	1,758,403	2,051,066
Ending Balance	3,528,988	4,111,735	3,528,988	4,111,735	4,089,834
Ending balance: individually evaluated for impairment	559,333	1,122,590	559,333	1,122,590	785,878
Ending balance: collectively evaluated for impairment	2,969,655	2,989,145	2,969,655	2,989,145	3,303,956
Loan receivables:
Loans	445,662,038	406,261,770	445,662,038	406,261,770	419,667,312
Ending balance: individually evaluated for impairment	19,856,516	23,039,920	19,856,516	23,039,920	21,618,890
Ending balance: collectively evaluated for impairment	$ 425,805,522	$ 383,221,850	$ 425,805,522	$ 383,221,850	$ 398,048,422

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SECURITIES (Financing Receivable Credit Quality Indicators) (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Amount	$ 137,269,442	$ 154,756,678
Standard Poor's, AAA Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	133,974,968	150,317,560
Standard Poor's, A Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount		110,780
Standard Poor's, BBB Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	635,920	978,043
Standard Poor's, BBB - Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	106,045	322,329
Standard Poor's, BB Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	836,679	1,069,517
Standard Poor's, BB - Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount		68,604
Standard Poor's, B+ Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	66,873	1,008,126
Standard Poors CCC + Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	874,410
Standard Poor's, CCC Rating [Member]
Financing Receivable, Recorded Investment [Line Items]
Amount	$ 774,547	$ 881,719

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EARNINGS PER COMMON SHARE (EPS) (Narrative) (Details)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
EARNINGS PER COMMON SHARE (EPS) [Abstract]
Shares excluded from diluted net income per share	101,549	187,367

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Schedule of Comprehensive Income (Loss)) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
ACCUMULATED OTHER COMPREHENSIVE INCOME [Abstract]
Net unrealized holding gain (loss) arising during period, Before Tax	$ (350,524)	$ 104,229	$ (1,591,096)	$ 115,973
Reclassification adjustments, Before Tax
Other comprehensive loss, Before Tax	(350,524)	104,229	(1,591,096)	115,973
Net unrealized holding gain (loss) arising during period, Tax Effect	(119,178)	35,438	(540,972)	39,431
Reclassification adjustments, Tax Effect
Other comprehensive loss, Tax Effect	(119,178)	35,438	(540,972)	39,431
Net unrealized holding gain (loss) arising during period, Net of Tax	(231,346)	68,791	(1,050,124)	76,542
Reclassification adjustments, Net of Tax
Other comprehensive gain (loss), Net of Tax	$ (231,346)	$ 68,791	$ (1,050,124)	$ 76,542

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2013

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Therefore, any aggregate unrealized gains or losses should not be interpreted as a forecast of future earnings or cash flows. Furthermore, the fair values disclosed should not be interpreted as the aggregate current value of the Company.

September 30, 2013			Fair Value Measurements
Description of Asset	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant   Other Observable Inputs          (Level 2)	Significant Unobservable Inputs (Level 3)
Assets
Investment securities - AFS	$       50,869,490	$       50,869,490	$                        -	$         50,869,490	$                         -
Investment securities - HTM	91,349,615	91,050,953	749,962	90,300,991	-
FHLB and FRB Stock	5,593,100	6,198,000	-	6,198,000	-
Loans	759,880,727	753,916,000	-	753,916,000	-
Other real estate owned	7,058,504	7,058,504	-	7,058,504	-
Liabilities
Savings, NOW and money market accounts	$     432,564,049	$     432,564,049	$                        -	$       432,564,049	$                         -
Time deposits	384,683,410	387,119,000	-	387,119,000	-
Long-term debt	70,488,848	71,382,000	-	71,382,000	-
Short term borrowings	2,640,000	2,640,000	-	2,640,000	-
TRUPs	12,000,000	2,400,000	-	2,400,000	-

At December 31, 2012			Fair Value Measurements
Description of Asset	Carrying Amount	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant   Other Observable Inputs          (Level 2)	Significant Unobservable Inputs (Level 3)
Assets
Investment securities - AFS	$       47,205,663	$       47,205,663	$                        -	$         47,205,663	$                         -
Investment securities - HTM	112,619,434	114,187,018	749,941	113,437,077	-
FHLB and FR Stock	5,476,050	5,469,000	-	5,469,000	-
Loans	747,640,752	757,387,000	-	757,387,000	-
Other real estate owned	6,891,353	6,891,353	-	6,891,353	-
Liabilities
Savings, NOW and money market accounts	$     414,776,285	$     414,776,285	$                        -	$       414,776,285	$                         -
Time deposits	405,454,003	410,257,000	-	410,257,000	-
Long-term debt	60,527,208	64,252,000	-	64,252,000	-
Short term borrowings	1,000,000	1,000,000	-	1,000,000	-
TRUPs	12,000,000	2,400,000	-	2,400,000	-

At September 30, 2013, the Company had outstanding loan commitments and standby letters of credit of $25.8 million and $24.7 million, respectively. Based on the short-term lives of these instruments, the Company does not believe that the fair value of these instruments differs significantly from their carrying values.

Valuation Methodology

Investment securities and FHLB and FRB stock - Fair values are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans receivable - For conforming residential first-mortgage loans, the market price for loans with similar coupons and maturities was used. For nonconforming loans with maturities similar to conforming loans, the coupon was adjusted for credit risk. Loans that did not have quoted market prices were priced using the discounted cash flow method. The discount rate used was the rate currently offered on similar products. Loans priced using the discounted cash flow method included residential construction loans, commercial real estate loans and consumer loans. The estimated fair value of loans held for sale is based on the terms of the related sale commitments.

Other real estate owned - Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral.

Deposits - The fair value of checking accounts, saving accounts and money market accounts were the amount payable on demand at the reporting date.

Time certificates - The fair value was determined using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar products.

Long-term debt and other borrowed funds - These were valued using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar borrowings.

Guaranteed preferred beneficial interest in junior subordinated securities (TRUPs) - These were valued using discounted cash flows. The discount rate was equal to the rate currently offered on similar borrowings.

Off-balance sheet instruments - The Company charges fees for commitments to extend credit. Interest rates on loans for which these commitments are extended are normally committed for periods of less than one month. Fees charged on standby letters of credit and other financial guarantees are deemed to be immaterial and these guarantees are expected to be settled at face amount or expire unused. It is impractical to assign any fair value to these commitments.

The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2013 and December 31, 2012, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amount presented herein..

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SECURITIES

9 Months Ended

Sep. 30, 2013

SECURITIES [Abstract]

SECURITIES

10. SECURITIES

	September 30, 2013
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$                 181,968	$                   16,745	$                            -	$                 198,713
Residential CMOs	47,721,616	75,448	1,326,064	46,471,000
Corporate equity securities	37,310	1,572	184	38,698
Bond mutual funds	4,078,129	82,950	-	4,161,079
Total securities available for sale	$            52,019,023	$                 176,715	$              1,326,248	$            50,869,490
Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$            23,722,148	$                 684,723	$                 186,163	$            24,220,708
Residential CMOs	63,583,106	385,242	864,471	63,103,877
Asset-backed securities issued by Others:
Residential CMOs	3,294,474	100,907	418,975	2,976,406
Total debt securities held to maturity	90,599,728	1,170,872	1,469,609	90,300,991
U.S. government obligations	749,887	75	-	749,962
Total securities held to maturity	$            91,349,615	$              1,170,947	$              1,469,609	$            91,050,953

	December 31, 2012
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$                 198,400	$                   32,986	$                            -	$                 231,386
Residential CMOs	42,507,542	266,775	118,518	42,655,799
Corporate equity securities	37,310	306	284	37,332
Bond mutual funds	4,012,609	268,537	-	4,281,146
Total securities available for sale	$            46,755,861	$                 568,604	$                 118,802	$            47,205,663
Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$            31,239,176	$              1,237,277	$                            -	$            32,476,453
Residential CMOs	76,191,199	715,620	97,998	76,808,821
Asset-backed securities issued by Others:				-
Residential CMOs	4,439,118	197,028	484,343	4,151,803
Total debt securities held to maturity	111,869,493	2,149,925	582,341	113,437,077
U.S. government obligations	749,941	-	-	749,941
Total securities held to maturity	$          112,619,434	$              2,149,925	$                 582,341	$          114,187,018

At September 30, 2013, certain asset-backed securities with an aggregate carrying value of $36.7 million were pledged to secure certain deposits. At September 30, 2013, asset-backed securities with an aggregate carrying value of $2.9 million were pledged as collateral for advances from the Federal Home Loan Bank of Atlanta.

At September 30, 2013, 98% of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs had an average life of 5.12 years and an average duration of 4.68 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 5.54 years and an average duration of 5.14 years and are guaranteed by their issuer as to credit risk.

At December 31, 2012, 97% of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs had an average life of 3.43 years and average duration of 3.26 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 3.43 years and average duration of 3.24 years and are guaranteed by their issuer as to credit risk.

We believe that AFS securities with unrealized losses will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity. We believe that the losses are the result of general perceptions of safety and creditworthiness of the entire sector and a general disruption of orderly markets in the asset class.

Management has the ability and intent to hold the HTM securities with unrealized losses until they mature, at which time the Company will receive full value for the securities. Because our intention is not to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, management considers the unrealized losses in the held-to-maturity portfolio to be temporary.

No charges related to other-than-temporary impairment were made during the three and nine months ended September 30, 2013 and for the year ended December 31, 2012. During the year ended December 31, 2009, the Company recorded a charge of $148,000 related to other-than-temporary impairment on a single HTM CMO issue. At September 30, 2013, the CMO issue had a par value of $889,000, a market fair value of $611,000 and a carrying value of $511,000.  

During the fourth quarter of the year ended December 31, 2012, the Company recognized net losses on the sale of securities of $3,736. The Company sold one AFS security with a carrying value of $1,469,911 and three HTM securities with aggregate carrying values of $3,796,011, recognizing a gain of $153,417 and losses of $157,153, respectively.  The sale of HTM securities was permitted under ASC 320 “Investments - Debt and Equity Securities.” ASC 320-10-25-6 permits the sale of HTM securities for certain changes in circumstances. The Company sold the HTM positions due to a significant deterioration in the issues’ creditworthiness and the increase in regulatory risk weights mandated for risk-based capital purposes. There were no sales of AFS and HTM securities during the three and nine months ended September 30, 2013 and 2012, respectively.

AFS Securities

Gross unrealized losses and estimated fair value by length of time that the individual AFS securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:

September 30, 2013	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$     33,460,034	$       1,098,769	$       5,623,802	$          227,295	$     39,083,836	$       1,326,064
Corporate equity securities	126	184	-	-	126	184
	$     33,460,160	$       1,098,953	$       5,623,802	$          227,295	$     39,083,962	$       1,326,248

At September 30, 2013, the AFS investment portfolio had an estimated fair value of $50,869,490, of which $39,083,962 or 77% of the securities had some unrealized losses from their amortized cost. The securities with unrealized losses are predominantly mortgage-backed securities issued by GSEs.

AFS securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $1,326,064 or 2.77% of the portfolio amortized cost of $47,903,584. AFS asset-backed securities issued by GSEs with unrealized losses have an average life of 5.22 years and an average duration of 4.74 years. We believe that the securities will either recover in market value or be paid off as agreed.

At December 31, 2012, the AFS investment portfolio had a fair value of $47,205,663 with unrealized losses from their amortized cost of $118,802.  Asset-backed securities and corporate securities with unrealized losses had a fair value of $11,956,182 and all unrealized losses were for less than twelve months.

HTM Securities

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:

September 30, 2013	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$     41,773,548	$       1,029,248	$       3,300,948	$            21,386	$     45,074,496	$       1,050,634
Asset-backed securities issued by other	-	-	2,258,562	418,975	2,258,562	418,975
	$     41,773,548	$       1,029,248	$       5,559,510	$          440,362	$     47,333,058	$       1,469,609

At September 30, 2013, the HTM investment portfolio had an estimated fair value of $91,050,953, of which $47,333,058 or 52%, of the securities had some unrealized losses from their amortized cost. Of these securities, $45,074,496 or 95%, are mortgage-backed securities issued by GSEs and the remaining $2,258,562 or 5%, were asset-backed securities issued by others.

HTM securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $1,050,634 or 1.20% of the portfolio amortized cost of $87,305,254. HTM asset-backed securities issued by GSEs with unrealized losses have an average life of 6.02 years and an average duration of 5.56 years. We believe that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. All of the securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. Total unrealized losses on the asset-backed securities issued by others were $418,975, or 12.72% of the portfolio amortized cost of $3,294,474. HTM asset-backed securities issued by others with unrealized losses have an average life of 4.24 years and an average duration of 3.27 years.

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at December 31, 2012 are as follows:

December 31, 2012	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$     14,253,558	$            89,638	$       6,132,036	$             8,360	$     20,385,594	$            97,998
Asset-backed securities issued by other	-	-	3,057,666	484,343	3,057,666	484,343
	$     14,253,558	$            89,638	$       9,189,702	$          492,703	$     23,443,260	$          582,341

At December 31, 2012, the HTM investment portfolio had an estimated fair value of $114,187,018, of which $23,443,260, or 21% of the securities, had some unrealized losses from their amortized cost. Of these securities, $20,385,594, or 87%, are mortgage-backed securities issued by GSEs and the remaining $3,057,666, or 13%, were asset-backed securities issued by others.

HTM securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $97,998 or 0.09% of the portfolio amortized cost of $107,430,375. HTM asset-backed securities issued by GSEs with unrealized losses have an average life of 1.85 years and an average duration of 1.72 years. We believe that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. All of the securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. Total unrealized losses on the asset-backed securities issued by others were $484,343, or 10.91% of the portfolio amortized cost of $4,439,118. HTM asset-backed securities issued by others with unrealized losses have an average life of 3.17 years and an average duration of 2.40 years.

Credit Quality of Asset-Backed Securities

The tables below present the Standard & Poor’s or equivalent credit rating from other major rating agencies for AFS and HTM asset-backed securities issued by GSEs and others at September 30, 2013 and December 31, 2012 by carrying value. The Company considers noninvestment grade securities rated BB+ or lower as classified assets for regulatory and financial reporting. GSE asset-backed security downgrades by Standard and Poor’s were treated as AAA based on regulatory guidance.

September 30, 2013		December 31. 2012
Credit Rating	Amount	Credit Rating	Amount
AAA	$       133,974,968	AAA	$       150,317,560
A+	-	A+	-
A	-	A	110,780
BBB	635,920	BBB	978,043
BBB-	106,045	BBB-	322,329
BB+	-	BB+	-
BB	836,679	BB	1,069,517
BB-	-	BB-	68,604
B+	66,873	B+	1,008,126
CCC+	874,410	CCC+	-
CCC	774,547	CCC	881,719
Total	$       137,269,442	Total	$       154,756,678

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EARNINGS PER COMMON SHARE (EPS) (Tables)

9 Months Ended

Sep. 30, 2013

EARNINGS PER COMMON SHARE (EPS) [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

Basic and diluted earnings per share have been computed based on weighted-average common and common equivalent shares outstanding as follows:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Net Income	$          1,702,841	$        1,472,941	$        5,006,681	$       3,519,346
Less: dividends paid and accrued on preferred stock	(50,000)	(50,000)	(150,000)	(150,000)
Net income available to common shareholders	$          1,652,841	$        1,422,941	$        4,856,681	$       3,369,346
Average number of common shares outstanding	2,997,401	3,044,556	3,016,793	3,042,645
Effect of dilutive options	24,981	8,693	25,295	13,026
Average number of shares used to calculate diluted EPS	3,022,382	3,053,249	3,042,088	3,055,671

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ACCUMULATED OTHER COMPREHENSIVE INCOME

9 Months Ended

Sep. 30, 2013

ACCUMULATED OTHER COMPREHENSIVE INCOME [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME

15. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables presents the components of comprehensive loss for securities for the three and nine months endedSeptember 30, 2013 and 2012. 

	Three Months Ended September 30, 2013			Three Months Ended September 30, 2012
	Before Tax	Tax Effect	Net of Tax	Before Tax	Tax Effect	Net of Tax
Net unrealized holding gain (loss)
arising during period	$       (350,524)	$       (119,178)	$       (231,346)	$         104,229	$           35,438	$           68,791
Reclassification adjustments	-	-	-	-	-	-
Other comprehensive gain (loss)	$       (350,524)	$       (119,178)	$       (231,346)	$         104,229	$           35,438	$           68,791

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
	Before Tax	Tax Effect	Net of Tax	Before Tax	Tax Effect	Net of Tax
Net unrealized holding gain (loss)
arising during period	$     (1,591,096)	$       (540,972)	$     (1,050,124)	$         115,973	$           39,431	$           76,542
Reclassification adjustments	-	-	-	-	-	-
Other comprehensive gain (loss)	$     (1,591,096)	$       (540,972)	$     (1,050,124)	$         115,973	$           39,431	$           76,542

The following table presents the changes in each component of accumulated other comprehensive income for securities, net of tax, for the three and nine months endedSeptember 30, 2013.

	Three Months Ended September 30, 2013	Nine Months Ended September 30, 2013
	Net Unrealized Gains And Losses	Net Unrealized Gains And Losses
Beginning of period	$           (679,594)	$             139,184
Other comprehensive loss
before reclassifications	(231,346)	(1,050,124)
Amounts reclassified from accumulated
other comprehensive income	-	-
Net other comprehensive loss	(231,346)	(1,050,124)
End of period	$           (910,940)	$           (910,940)

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 30, 2013
Document Documentand Entity Information [Abstract]
Entity Registrant Name	COMMUNITY FINANCIAL CORP /MD/
Entity Central Index Key	0000855874
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	tcfc
Entity Common Stock Shares Outstanding		4,647,324
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

FAIR VALUE MEASUREMENTS [Abstract]

Fair Value, Assets Measured on Recurring Basis

	September 30, 2013
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Available for sale securities
Asset-backed securities issued by GSEs
Collateralized Mortgage Obligations ("CMOs")	$     46,471,000	$                     -	$     46,471,000	$                     -
Mortgage Backed Securities ("MBS")	198,713	-	198,713	-
Corporate equity securities	38,698	-	38,698	-
Bond mutual funds	4,161,079	-	4,161,079	-
Total available for sale securities	$     50,869,490	$                     -	$     50,869,490	$                     -

	December 31, 2012
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Available for sale securities
Asset-backed securities issued by GSEs
CMOs	$     42,655,799	$                     -	$     42,655,799	$                     -
MBS	231,386	-	231,386	-
Corporate equity securities	37,332	-	37,332	-
Bond mutual funds	4,281,146	-	4,281,146	-
Total available for sale securities	$     47,205,663	$                     -	$     47,205,663	$                     -

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis

	September 30, 2013
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Loans with impairment
Commercial real estate	$      3,411,781	$                    -	$      3,411,781	$                    -
Residential first mortgage	530,170	-	530,170	-
Commercial loans	429,000	-	429,000	-
Total loans with impairment	$      4,370,951	$                    -	$      4,370,951	$                    -
Other real estate owned	$      7,058,504	$                    -	$      7,058,504	$                    -

	December 31, 2012
Description of Asset	Fair Value	Level 1	Level 2	Level 3
Loans with impairment
Commercial real estate	$      2,028,534	$                    -	$      2,028,534	$                    -
Residential first mortgage	602,290	-	602,290	-
Commercial loans	94,355	-	94,355	-
Total loans with impairment	$      2,725,179	$                    -	$      2,725,179	$                    -
Other real estate owned	$      6,891,353	$                    -	$      6,891,353	$                    -

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Schedule of Accumulated Other Comprehensive Income (Loss)) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
ACCUMULATED OTHER COMPREHENSIVE INCOME [Abstract]
Net Unrealized Gains And Losses, Beginning balance	$ (679,594)		$ 139,184
Other comprehensive loss before reclassifications	(231,346)	68,791	(1,050,124)	76,542
Amounts reclassified from accumulated other comprehensive Income
Net other comprehensive loss	(231,346)	68,791	(1,050,124)	76,542
Net Unrealized Gains And Losses, Ending balance	$ (910,940)		$ (910,940)