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 March 31, 2013
OR
o 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 000-27719

Southern First Bancshares, Inc.

(Exact name of registrant as specified in its charter)

South Carolina	58-2459561
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 Verdae Boulevard, Suite 100
Greenville, S.C.	29606
(Address of principal executive offices)	(Zip Code)

864-679-9000
(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 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 o

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 (§232.405 of this chapter) during the preceding12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o

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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 4,268,438 shares of common stock, par value $0.01 per share, were issued and outstanding as of April 18, 2013.

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
March 31, 2013 Form 10-Q

INDEX

PART I - CONSOLIDATED FINANCIAL INFORMATION		Page
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Shareholders' Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41

PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

		March 31,		December 31,
(dollars in thousands, except share data)		2013		2012
		(Unaudited)		(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	4,959		13,063
Interest-bearing deposits with banks		17,131		16,350
Federal funds sold		14,100		-
Total cash and cash equivalents		36,190		29,413
Investment securities:
Investment securities available for sale		75,106		78,222
Other investments		7,602		7,794
Total investment securities		82,708		86,016
Loans		665,244		645,949
Less allowance for loan losses		(9,367	)	(9,091	)
Loans, net		655,877		636,858
Bank owned life insurance		18,885		18,725
Property and equipment, net		18,723		18,733
Deferred income taxes		3,175		3,176
Other assets		6,147		5,077
Total assets	$	821,705		797,998
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits	$	612,394		576,299
Federal Funds Purchased		-		13,190
Federal Home Loan Bank advances and other borrowings		124,100		124,100
Junior subordinated debentures		13,403		13,403
Other liabilities		7,382		6,881
Total liabilities		757,279		733,873
Shareholders' equity:
Preferred stock, par value $.01 per share, 10,000,000 shares authorized, 15,799 and 16,299 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively		15,799		16,299
Common stock, par value $.01 per share, 10,000,000 shares authorized, 4,268,438 and 4,247,404 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively		43		43
Nonvested restricted stock		(170	)	(160	)
Additional paid-in capital		42,641		42,396
Accumulated other comprehensive income		971		1,178
Retained earnings		5,142		4,369
Total shareholders' equity		64,426		64,125
Total liabilities and shareholders' equity	$	821,705		797,998

See notes to consolidated financial statements that are an integral part of these consolidated statements. Additional paid in capital, retained earnings and common shares outstanding as of December 31, 2012 have been adjusted to reflect the ten percent stock dividend issued in 2013.

3

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		For the three months
		ended March 31,
(dollars in thousands, except share data)		2013	2012
Interest income
Loans	$	8,265	7,986
Investment securities		464	557
Federal funds sold		14	14
Total interest income		8,743	8,557
Interest expense
Deposits		806	1,262
Borrowings		1,059	1,166
Total interest expense		1,865	2,428
Net interest income		6,878	6,129
Provision for loan losses		1,125	1,200
Net interest income after provision for loan losses		5,753	4,929
Noninterest income
Loan fee income		259	200
Service fees on deposit accounts		225	181
Income from bank owned life insurance		160	159
Gain on sale of investment securities		-	72
Other income		238	225
Total noninterest income		882	837
Noninterest expenses
Compensation and benefits		2,952	2,425
Occupancy		707	583
Real estate owned activity		20	278
Data processing and related costs		576	514
Insurance		240	352
Marketing		186	194
Professional fees		181	180
Other		368	253
Total noninterest expenses		5,230	4,779
Income before income tax expense		1,405	987
Income tax expense		444	299
Net income		961	688
Preferred stock dividend		197	216
Discount accretion		-	73
Redemption of preferred stock		20	-
Net income available to common shareholders	$	784	399
Earnings per common share
Basic	$	0.18	0.09
Diluted		0.18	0.09
Weighted average common shares outstanding
Basic		4,262,330	4,222,622
Diluted		4,371,324	4,267,813

See notes to consolidated financial statements that are an integral part of these consolidated statements. Earnings per share and common shares outstanding for the 2012 period have been adjusted to reflect the ten percent stock dividend issued in 2013.

4

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

		For the three months ended March 31,
(dollars in thousands)		2013		2012
Net income	$	961		688
Other comprehensive income:
Unrealized gain (loss) on securities available for sale:
Unrealized holding loss arising during the period, pretax		(315	)	(139	)
Tax benefit		108		46
Reclassification to realized gain		-		(72	)
Tax expense		-		24
Other comprehensive loss		(207	)	(141	)
Comprehensive income	$	754		547

See notes to consolidated financial statements that are an integral part of these consolidated statements.

5

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(Unaudited)

	Common stock					Preferred stock								Nonvested restricted							Additional paid-in				Accumulated other comprehensive					Retained
(dollars in thousands, except share data)	Shares		Amount			Shares			Amount					stock							capital				income					earnings					Total
December 31, 2011	3,820,830			$	38	17,299				$	16,596				$	(16			)			$	39,546			$	1,041				$	5,334				$	62,539
Net income	-		-			-			-					-							-				-					688					688
Preferred stock transactions:
Cash dividends on Series T preferred stock	-		-			-			-					-							-				-					(216			)		(216			)
Discount accretion	-		-			-			73					-							-				-					(73			)		-
Proceeds from exercise of stock options	9,075		-			-			-					-							57				-					-					57
Stock dividend on stock options and restricted stock (10%)	1,907		-			-			-					-							14				-					(14			)		-
Issuance of restricted stock	10,000		-			-			-					(67					)		67				-					-					-
Cash in lieu of fractional shares	-		-			-			-					-							-				-					(2			)		(2			)
Amortization of deferred compensation on restricted stock	-		-			-			-					6							-				-					-					6
Compensation expense related to stock options, net of tax	-		-			-			-					-							75				-					-					75
Other comprehensive income	-		-			-			-					-							-				(141			)		-					(141			)
March 31, 2012	3,841,812	$	38			17,299		$	16,669				$	(77					)	$	39,759			$	900				$	5,717				$	63,006
December 31, 2012	4,247,404	$	43			16,299		$	16,299				$	(160					)	$	42,396			$	1,178				$	4,369				$	64,125
Net income	-		-			-			-					-							-				-					961					961
Preferred stock transactions:
Redemption of preferred stock	-		-			(500	)		(500			)		-							-				-					20					(480			)
Cash dividends on Series T preferred stock	-		-			-			-					-							-				-					(201			)		(201			)
Proceeds from exercise of stock options	18,534		-			-			-					-							116				-					-					116
Issuance of restricted stock	2,500		-			-			-					(24					)		24				-					-					-
Cash in lieu of fractional shares	-		-			-			-					-							-				-					(7			)		(7			)
Amortization of deferred compensation on restricted stock	-		-			-			-					14							-				-					-					14
Compensation expense related to stock options, net of tax	-		-			-			-					-							105				-					-					105
Other comprehensive income	-		-			-			-					-							-				(207			)		-					(207			)
March 31, 2013	4,268,438			$	43	15,799				$	15,799						$	(170	)			$	42,641			$	971				$	5,142				$	64,426

See notes to consolidated financial statements that are an integral part of these consolidated statements. Common shares outstanding as of December 31, 2011 and 2012 have been adjusted to reflect the ten percent stock dividends issued in 2012 and 2013.

6

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the three months ended March 31,
(dollars in thousands)		2013		2012
Operating activities
Net income	$	961		688
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses		1,125		1,200
Depreciation and other amortization		291		233
Accretion and amortization of securities discounts and premium, net		195		304
Gain on sale of investment securities		-		(72	)
(Gain) loss on sale and write-down of real estate owned		(4	)	256
Compensation expense related to stock options and grants		119		81
Increase in cash surrender value of bank owned life insurance		(160	)	(159	)
(Increase) decrease in deferred tax asset		108		21
(Increase) decrease in other assets, net		(272	)	375
Increase (decrease) in other liabilities, net		501		(2,016	)
Net cash provided by operating activities		2,864		911
Investing activities
Increase (decrease) in cash realized from:
Origination of loans, net		(21,145	)	(11,276	)
Purchase of property and equipment		(281	)	(193	)
Purchase of investment securities:
Available for sale		-		(2,591	)
Other		(675	)	-
Payments and maturity of investment securities:
Available for sale		2,606		4,373
Other		868		-
Proceeds from sale of investment securities		-		27,742
Proceeds from sale of real estate owned		202		753
Net cash provided by (used for) used for investing activities		(18,425	)	18,808
Financing activities
Increase (decrease) in cash realized from:
Increase in deposits, net		36,095		3,810
Decrease in short-term borrowings		(13,190	)	-
Cash dividend on preferred stock		(201	)	(216	)
Cash in lieu of fractional shares		(2	)	(2	)
Redemption of preferred stock		(480	)	-
Proceeds from the exercise of stock options and warrants		116		57
Net cash provided by financing activities		22,338		3,649
Net increase in cash and cash equivalents		6,777		23,368
Cash and cash equivalents at beginning of the period		29,413		23,005
Cash and cash equivalents at end of the period	$	36,190		46,373
Supplemental information
Cash paid for
Interest	$	2,171		2,814
Income taxes		335		279
Schedule of non-cash transactions
Real estate acquired in settlement of loans		1,001		1,056
Unrealized loss on securities, net of income taxes		(207	)	(93	)

See notes to consolidated financial statements that are an integral part of these consolidated statements.

7

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Nature of Business and Basis of Presentation

Business Activity

Southern First Bancshares, Inc. (the "Company") is a South Carolina corporation that owns all of the capital stock of Southern First Bank (the "Bank") and all of the stock of Greenville First Statutory Trust I and II (collectively, the "Trusts"). On April 1, 2013, the Bank converted from a national bank charter to a South Carolina state bank charter and the bank name was changed from Southern First Bank, N.A. to Southern First Bank. As a national bank, the Bank's primary federal regulator was the Office of the Comptroller of the Currency (the "OCC"). Subsequent to the conversion to a state bank charter, the Bank's primary federal regulator is the Federal Deposit Insurance corporation (the "FDIC"). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the FDIC, and providing commercial, consumer and mortgage loans to the general public. The Trusts are special purpose non-consolidated entities organized for the sole purpose of issuing trust preferred securities.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 (Registration Number 000-27719) as filed with the Securities and Exchange Commission on March 5, 2013. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidation," the financial statements related to the special purpose subsidiaries, the Trusts, have not been consolidated.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of income and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, other real estate owned, fair value of financial instruments, evaluating other-than-temporary-impairment of investment securities and valuation of deferred tax assets.

Reclassifications

Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis and had no effect on shareholders' equity or net income.

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management performed an evaluation to determine whether there have been any subsequent events since the balance sheet date and determined that no subsequent events occurred requiring accrual or disclosure.

As noted above, effective April 1, 2013, the Bank converted from a national bank charter to a South Carolina state bank charter and changed its name from Southern First Bank, N.A. to Southern First Bank after obtaining approval from the South

8

Carolina Board of Financial Institutions. This conversion was not as a result of any dispute or disagreement with the OCC. The charter conversion will not have substantial impact on the bank's current activities, products and services, although the bank expects certain annual cost savings related to regulatory fees.

On April 1, 2013, the Company redeemed a total of $500,000 of its outstanding preferred stock from two preferred shareholders. Since July of 2012, the Company has redeemed a cumulative $2.0 million of its outstanding preferred stock and reduced the balance to $15.3 million.

Recently Adopted Accounting Pronouncements

The following is a summary of recently adopted authoritative pronouncements that have impacted the accounting, reporting, and/or disclosure of financial information by the Company.

The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminated the option to present other comprehensive income as a part of the statement of changes in stockholders' equity and required consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements while the FASB redeliberated the presentation requirements for the reclassification adjustments. In February 2013, the FASB further amended the Comprehensive Income topic clarifying the conclusions from such redeliberations. Specifically, the amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, in certain circumstances an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. These amendments, which become effective for the Company for the March 31, 2013 reporting period, did not have a material effect on the Company's financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 2 - Preferred Stock Issuance and Partial Redemption

On February 27, 2009, as part of the Capital Purchase Program ("CPP"), the Company entered into a Securities Purchase Agreement with the U.S. Department of the Treasury (the "Treasury"), pursuant to which the Company sold 17,299 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series T (the "Series T Preferred Stock") and a warrant to purchase 399,970.34 shares of the Company's common stock (the "Warrant") for an aggregate purchase price of $17.3 million in cash. The Series T Preferred Stock qualified as Tier 1 capital and was entitled to cumulative dividends at a rate of 5% per annum for the first five years and 9% per annum thereafter. The Warrant had a 10-year term and was immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments equal to $6.487 per share of the common stock.

On June 28, 2012, the Treasury sold its Series T Preferred Stock through a public offering structured as a modified Dutch auction.  The Company bid on a portion of the Series T Preferred Stock in the auction after receiving approval from its regulators to do so.  The clearing price per share for the preferred shares was $904 (compared to a par value of $1,000 per share), and the Company was successful in repurchasing 1,000 shares of the 17,299 shares of Series T Preferred Stock outstanding through the auction process.  The remaining 16,299 shares of Series T Preferred Stock held by the Treasury were sold to unrelated third-parties through the auction process. Included in the September 30, 2012 operating results are approximately $130,000 of costs incurred by the Company related to the offering.  These costs are not tax-deductible.  The net balance sheet impact was a reduction to shareholders' equity of $904,000 which is comprised of a decrease in Series T Preferred Stock of $1.0 million and a $96,000 increase to retained earnings related to the discount on the shares repurchased.  The redemption of the $1.0 million in preferred shares will save the Company $50,000 annually in dividend expenses.

In addition, on July 25, 2012, the Company completed its repurchase of the Warrant from the Treasury for a mutually agreed upon price of $1.1 million. The difference between the fair value of the Warrant, as originally recorded, and the $1.1 million was $343,000 which resulted in a decrease to additional paid in capital. The Company also recorded the remaining accretion of $180,000 on the Series T Preferred Stock which brought the Preferred Stock to its par value. In conjunction with the repurchase of the Warrant, the Company obtained an interest only line of credit for $1.5 million with another financial institution. Interest is payable quarterly at a rate of 5%, and the line of credit matures on February 3, 2014.

Following the settlement of the Warrant on July 25, 2012, the Treasury has completely eliminated its equity stake in the Company through the Capital Purchase Program. As a result, the executive compensation and corporate governance standards

9

that were applicable to the Company while the Treasury held shares of the Series T Preferred Stock are no longer applicable to our Company, and we have the option to increase the compensation for our executive officers and other senior employees on a going forward basis.

On January 3, 2013 and April 1, 2013, the Company redeemed a total of $1.0 million of its outstanding preferred stock from three of its preferred shareholders. Since July of 2012, the Company has redeemed a cumulative $2.0 million of its outstanding preferred stock and reduced the balance to $15.3 million.

NOTE 3 - Investment Securities

The amortized costs and fair value of investment securities are as follows:

		March 31, 2013
		Amortized	Gross Unrealized		Fair
(dollars in thousands)		Cost	Gains	Losses	Value
Available for sale
US Government agencies	$	7,782	-	20	7,762
SBA securities		6,059	-	39	6,020
State and political subdivisions		24,133	920	120	24,933
Mortgage-backed securities		35,661	730	-	36,391
Total investment securities available for sale	$	73,635	1,650	179	75,106
		December 31, 2012
		Amortized	Gross Unrealized		Fair
		Cost	Gains	Losses	Value
Available for sale
US Government agencies	$	7,781	14	10	7,785
SBA securities		6,060	17	5	6,072
State and political subdivisions		24,167	1,130	48	25,249
Mortgage-backed securities		38,428	702	14	39,116
Total investment securities available for sale	$	76,436	1,863	77	78,222

10

Contractual maturities and yields on our investment securities at March 31, 2013 and December 31, 2012 are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

											March 31, 2013
		Less than one year			One to five years			Five to ten years			Over ten years			Total
(dollars in thousands)		Amount	Yield		Amount	Yield		Amount	Yield		Amount	Yield		Amount	Yield
Available for sale
US Government agencies	$	-	-		-	-		-	-		7,762	2.42	%	7,762	2.42	%
SBA securities		-	-		-	-		-	-		6,020	1.87	%	6,020	1.87	%
State and political subdivisions		419	1.44	%	3,661	0.60	%	4,980	3.11	%	15,873	2.96	%	24,933	2.61	%
Mortgage-backed securities		-	-		-	-		-	-		36,391	2.11	%	36,391	2.11	%
Total	$	419	1.44	%	3,661	0.60	%	4,980	3.11	%	66,046	2.33	%	75,106	2.29	%
											December 31, 2012
		Less than one year			One to five years			Five to ten years			Over ten years			Total
		Amount	Yield		Amount	Yield		Amount	Yield		Amount	Yield		Amount	Yield
Available for sale
US Government agencies	$	-	-		-	-		-	-		7,785	2.42	%	7,785	2.42	%
SBA securities		-	-		-	-		-	-		6,072	1.89	%	6,072	1.89	%
State and political subdivisions		421	1.43	%	3,671	0.60	%	5,031	3.11	%	16,126	2.96	%	25,249	2.60	%
Mortgage-backed securities		-	-		-	-		-	-		39,116	2.29	%	39,116	2.29	%
Total	$	421	1.43	%	3,671	0.60	%	5,031	3.11	%	69,099	2.42	%	78,222	2.37	%

The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities at March 31, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

													March 31, 2013
	Less than 12 months							12 months or longer					Total
(dollars in thousands)	#		Fair value		Unrealized losses	#		Fair value		Unrealized losses	#		Fair value		Unrealized losses
Available for sale
US Government agencies	1	$	3,762	$	20	-	$	-	$	-	1	$	3,762	$	20
SBA securities	2		6,020		39	-		-		-	2		6,020		39
State and political subdivisions	19		8,005		120	-		-		-	19		8,005		120
Total	22	$	17,787	$	179	-	$	-	$	-	22	$	17,787	$	179
													December 31, 2012
	Less than 12 months							12 months or longer					Total
	#		Fair value		Unrealized losses	#		Fair value		Unrealized losses	#		Fair value		Unrealized losses
Available for sale
US Government agencies	1	$	3,771	$	10	-	$	-	$	-	1	$	3,771	$	10
SBA securities	1		2,015		5	-		-		-	1		2,015		5
State and political subdivisions	16		6,608		48	-		-		-	16		6,608		48
Mortgage-backed securities	2		3,669		14	-		-		-	2		3,669		14
Total	20	$	16,063	$	77	-	$	-	$	-	20	$	16,063	$	77

At March 31, 2013, the Company had 22 individual investments that were in an unrealized loss position for less than 12 months. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality. The Company considers the length of time and extent to which the fair value of available-for-sale debt securities have been less

11

than cost to conclude that such securities are not other-than-temporarily impaired. We also consider other factors such as the financial condition of the issuer including credit ratings and specific events affecting the operations of the issuer, volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions. As the Company has no intent to sell securities with unrealized losses and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of amortized cost, we have concluded that the securities are not impaired on an other-than-temporary basis.

Other investments are comprised of the following and are recorded at cost which approximates fair value.

(dollars in thousands)		March 31, 2013	December 31, 2012
Federal Reserve Bank stock	$	1,485	1,485
Federal Home Loan Bank stock		5,615	5,807
Certificates of deposit with other banks		99	99
Investment in Trust Preferred securities		403	403
Total other investments	$	7,602	7,794

NOTE 4 - Loans and Allowance for Loan Losses

The following table summarizes the composition of our loan portfolio.

		March 31, 2013				December 31, 2012
(dollars in thousands)		Amount		% of Total		Amount		% of Total
Commercial
Owner occupied RE	$	157,207		23.6	%	158,790		24.6	%
Non-owner occupied RE		178,789		26.9	%	165,163		25.6	%
Construction		20,100		3.0	%	20,347		3.1	%
Business		115,615		17.4	%	114,169		17.7	%
Total commercial loans		471,711		70.9	%	458,469		71.0	%
Consumer
Real estate		87,226		13.1	%	86,559		13.4	%
Home equity		78,785		11.9	%	77,895		12.1	%
Construction		16,765		2.5	%	13,749		2.1	%
Other		10,757		1.6	%	9,277		1.4	%
Total consumer loans		193,533		29.1	%	187,480		29.0	%
Total gross loans, net of deferred fees		665,244		100.0	%	645,949		100.0	%
Less—allowance for loan losses		(9,367	)			(9,091	)
Total loans, net	$	655,877				636,858

Maturities and Sensitivity of Loans to Changes in Interest Rates

The information in the following tables summarizes the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties.

12

			March 31, 2013
(dollars in thousands)		One year or less	After one but within five years	After five years	Total
Commercial
Owner occupied RE	$	25,603	88,790	42,814	157,207
Non-owner occupied RE		55,761	97,608