INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2013

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 5 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of securities available-for-sale were:

	Amortized		Gross Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
March 31, 2013
Government-sponsored enterprises	$	6,939,415	$	45,203	$	—	$	6,984,618
Mortgage-backed securities	84,160,135		225,024		1,021,383		83,363,776
SBA loan pools	4,344,616		6,259		—		4,350,875
Total	$	95,444,166	$	276,486	$	1,021,383	$	94,699,269
December 31, 2012
Government-sponsored enterprises	$	21,895,143	$	44,443	$	10,565	$	21,929,021
Mortgage-backed securities	61,048,336		170,672		218,358		61,000,650
Total	$	82,943,479	$	215,115	$	228,923	$	82,929,671

The amortized cost and estimated fair values of investment securities at March 31, 2013, by contractual maturity dates, are shown in the following chart.  Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.

	Amortized Cost		Fair Value
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	2,198,338		2,197,824
Due after ten years	93,245,828		92,501,445
Total Securities	$	95,444,166	$	94,699,269

At March 31, 2013 and December 31, 2012, investment securities with book values of $14,539,908 and $14,321,961 and market values of $14,478,871 and $14,360,697, respectively, were pledged as collateral for securities sold under agreements to repurchase and a fed funds line. Gross proceeds from the sale of investment securities totaled $15,975,000 for the three months ended March 31, 2013. The gross realized gain on the sale of investment securities totaled $6,900 with no gross realized losses resulting in a net realized gain of $6,900 for the three months ended March 31, 2013. Gross proceeds from the sale of investment securities totaled $14,477,309 for the three months ended March 31, 2012. The gross realized gain on the sale of investment securities totaled $89,501 with no gross realized losses resulting in a net realized gain of $89,501 for the three months ended March 31, 2012.There were no sales of investment securities for the three months ended March 31, 2012.  The cost of investments sold is determined using the specific identification method.

The following table shows gross unrealized losses and fair value, for securities available-for-sale, and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2013 and December 31, 2012.

	Less than Twelve months				Twelve months or more				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized  losses
March 31, 2013
Mortgage-backed securities	60,673,102		1,021,383		—		—		60,673,102		1,021,383
	$	60,673,102	$	1,021,383	$	—	$	—	$	60,673,102	$	1,021,383

	Less than Twelve months				Twelve months or more				Total
	Fair value		Unrealized  losses		Fair value		Unrealized losses		Fair value		Unrealized  losses
December 31, 2012
Government-sponsored enterprises	$	4,096,526	$	10,565	$	—	$	—	$	4,096,526	$	10,565
Mortgage-backed securities	25,594,591		218,358		—		—		25,594,591		218,358
	$	29,691,117	$	228,923	$	—	$	—	$	29,691,117	$	228,923

Securities classified as available-for-sale are recorded at fair market value.  Of the securities in an unrealized loss position, there were no securities in a continuous loss position for 12 months or more at March 31, 2013 and December 31, 2012. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before recovery of their amortized cost.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary.

Nonmarketable equity securities include the cost of stock in community bank holding companies of $54,500 and $55,250 as of March 31, 2013 and December 31, 2012, and the Federal Home Loan Bank stock which has no quoted market value and no ready market exists.  Investment in the Federal Home Loan Bank is a condition of borrowing from the Federal Home Loan Bank, and the stock is pledged to collateralize such borrowings.  At March 31, 2013 and December 31, 2012, the Company’s investment in Federal Home Loan Bank stock was $1,394,900 and $2,328,500, respectively.

The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”). Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value.  If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or a portion may be recognized in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment.