10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                     March 31 , 2012                     

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 0-10974

FIRST PULASKI NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Tennessee                                                                                                    62-1110294         (State or other jurisdiction of incorporation or organization)                                    (I.R.S. Employer Identification No.)

206 South First Street, Pulaski, Tennessee                                             38478                     
(Address of principal executive offices)                                                         (Zip Code)     

                     931-363-2585                    
(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 (Section 232.405 of this chapter) 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 [ X ]
Non-accelerated filer [     ] (Do not check if a smaller reporting Company)                              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 ]

       Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Common Stock, $1.00 par value -- 1,571,831 shares outstanding as of May 1, 2012.

page 1

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements.

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
	(UNAUDITED)
ASSETS
	March 31,	December 31,
	2012	2011
Cash and due from banks	$25,333,658	$32,182,394
Federal funds sold	6,365,000	1,640,000
Cash and cash equivalents	31,698,658	33,822,394
Interest bearing balances with banks	445,598	543,832
Securities available for sale	242,724,005	217,469,728
Loans held for sale	2,028,867	2,168,816
Loans
Loans net of unearned income	335,513,329	340,553,701
Allowance for loan losses	(7,177,794)	(7,470,322)
Total net loans	328,335,535	333,083,379
Bank premises and equipment	18,824,289	18,760,960
Accrued interest receivable	3,315,094	3,351,127
Other real estate	7,159,467	7,110,969
Federal Home Loan Bank stock	1,526,500	1,526,500
Company-owned life insurance	10,869,115	10,789,213
Prepaid FDIC insurance	1,616,397	1,731,418
Deferred tax assets, net	4,233,738	3,221,632
Prepayments and other assets	1,621,607	1,518,844
TOTAL ASSETS	$654,398,870	$635,098,812
	===========	===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing balances	$91,518,604	$88,005,413
Interest bearing balances	487,823,751	471,225,835
Total deposits	579,342,355	559,231,248
Securities sold under repurchase agreements	1,923,406	1,850,824
Other borrowed funds	6,610,016	7,326,366
Accrued interest payable	873,317	863,878
Other liabilities	5,503,703	6,059,192
TOTAL LIABILITIES	594,252,797	575,331,508
SHAREHOLDERS' EQUITY
Common Stock, $1 par value; authorized - 10,000,000 shares;
1,571,481 and 1,570,428 shares issued and outstanding, respectively	1,571,481	1,570,428
Capital surplus	1,659,202	1,601,845
Retained earnings	56,304,412	54,357,140
Accumulated other comprehensive income, net	610,978	2,237,891
TOTAL SHAREHOLDERS' EQUITY	60,146,073	59,767,304
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$654,398,870	$635,098,812
	===========	===========
* See accompanying notes to consolidated financial statements (unaudited).

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
	For Three Months Ended
	March 31,
	2012	2011
INTEREST INCOME:
Loans, including fees	$5,817,036	$5,932,720
Securities
Taxable	886,535	748,963
Non-taxable	266,800	329,495
Federal funds sold and other	15,446	12,187
Dividends	32,153	32,153
Total interest income	7,017,970	7,055,518
INTEREST EXPENSE:
Interest on deposits:
NOW Accounts	55,905	54,398
Savings & MMDAs	99,973	98,877
Time	896,000	1,239,189
Repurchase agreements	7,654	7,770
Borrowed funds	66,083	68,801
Total interest expense	1,125,615	1,469,035
NET INTEREST INCOME	5,892,355	5,586,483
Provision for loan losses	-	750,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES	5,892,355	4,836,483
NON-INTEREST INCOME:
Service charges on deposit accounts	487,696	510,614
Commissions and fees	89,776	74,529
Other service charges and fees	282,229	232,598
Income on company-owned life insurance	79,902	89,875
Security gains, net	1,042,045	110,058
Mortgage banking income	262,049	148,744
Other income	20,178	293,236
Total non-interest income	2,263,875	1,459,654

page 3

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
	For Three Months Ended
	March 31,
	2012	2011
NON-INTEREST EXPENSES:
Salaries and employee benefits	$2,613,823	$2,433,570
Occupancy expense, net	466,370	475,886
Furniture and equipment expense	178,916	160,903
Advertising and public relations	131,854	122,858
Foreclosed assets, net	243,753	140,712
FDIC insurance expense	124,277	226,923
Other operating expenses	851,050	800,734
Total non-interest expenses	4,610,043	4,361,586
Income before taxes	3,546,187	1,934,551
Applicable income taxes	1,205,583	566,335
NET INCOME	$2,340,604	$1,368,216
	============	============
Earnings per common share:
Basic	$1.49	$0.87
	============	============
Diluted	$1.49	$0.87
	============	============
Comprehensive income
Net income	$2,340,604	$1,368,216
Reclassification adjustment for gains included
in net income, net of tax	(643,046)	(67,917)
Change in unrealized gains (losses) on
available for sale securities, net of tax	(983,867)	512,089
Comprehensive income	$713,691	$1,812,388
	============	============
* See accompanying notes to consolidated financial statements (unaudited).

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
For the Three Months Ended March 31, 2012
				Accumulated
				Other
	Common	Capital	Retained	Comprehensive
	Stock	Surplus	Earnings	Income (Loss)	Total
Balance, January 1, 2012	$1,570,428	$1,601,845	$54,357,140	$2,237,891	$59,767,304
Comprehensive income:
Net Income			2,340,604		2,340,604
Reclassification adjustment
for gains included in net
income, net of tax				(643,046)	(643,046)
Change in unrealized
gains (losses) on available
for sale securities, net of tax				(983,867)	(983,867)
Comprehensive income					713,691
Cash Dividends
($0.25 per share)			(393,332)		(393,332)
Compensation expense for
restricted stock		33,687			33,687
Issuance of new common stock	450	(450)			-
Issuance of common stock through
dividend reinvestment plan	603	24,120			24,723
Balance, March 31, 2012	$1,571,481	$1,659,202	$56,304,412	$610,978	$60,146,073
	==========	===========	==========	============	=========

page 5

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
For the Three Months Ended March 31, 2011
				Accumulated
				Other
	Common	Capital	Retained	Comprehensive
	Stock	Surplus	Earnings	Income (Loss)	Total
Balance, January 1, 2011	$1,564,350	$1,323,023	$50,070,308	$(293,218)	$52,664,463
Comprehensive income:
Net Income			1,368,216		1,368,216
Reclassification adjustment
for gains included in net
income, net of tax				(67,917)	(67,917)
Change in unrealized
gains (losses) on available
for sale securities, net of tax				512,089	512,089
Comprehensive income					1,812,388
Cash Dividends
($0.25 per share)			(391,813)		(391,813)
Compensation expense for
restricted stock		33,688			33,688
Issuance of new common stock	450	(450)			-
Issuance of common stock through
dividend reinvestment plan	705	28,905			29,610
Balance, March 31, 2011	$1,565,505	$1,385,166	$51,046,711	$150,954	$54,148,336
	==========	===========	==========	============	=========
* See accompanying notes to consolidated financial statements (unaudited).

page 6

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	For Three Months Ended March 31,
	2012	2011
Cash flows from operating activities:
Net income	$2,340,604	$1,368,216
Adjustments to reconcile net income
to net cash from operating activities
Provision for loan losses	-	750,000
Depreciation of premises and equipment	242,257	245,757
Amortization and accretion of investment securities, net	449,012	318,356
Deferred income tax (benefit) expense	(2,650)	651,890
Loss (gain) on sale of other assets	188,154	(246,817)
Security gains, net	(1,042,045)	(110,058)
Stock-based compensation expense	33,687	33,688
Loans originated for sale	(9,058,299)	(4,666,496)
Proceeds from sale of loans	9,460,297	5,579,205
Mortgage banking income	(262,049)	(148,744)
Increase in cash surrender value of life insurance	(79,902)	(89,875)
Decrease in accrued interest receivable	36,033	3,731
(Increase) decrease in prepayments/other assets	12,259	(574,015)
Increase (decrease) in accrued interest payable	9,439	(82,624)
Increase (decrease) in accrued taxes	229,868	(486,468)
(Decrease) increase in other liabilities	(785,356)	142,565
Net cash from operating activities	1,771,309	2,688,311
Cash flows from investing activities:
Proceeds from maturity of investment securities available for sale	17,857,179	13,000,212
Proceeds from sale of investment securities	41,263,183	3,893,335
Purchase of investment securities available for sale	(86,417,977)	(20,268,651)
Decrease (increase) in interest bearing balances with banks	98,234	(4,274)
Net decrease (increase) in loans	4,411,781	(3,701,895)
Capital expenditures	(323,449)	(102,466)
Proceeds from sale of other assets	117,274	4,010,644
Net cash used by investing activities	(22,993,775)	(3,173,095)
Cash flows from financing activities:
Net increase in deposits	20,111,107	17,054,277
Cash dividends paid	(393,332)	(391,813)
Proceeds from issuance of common stock	24,723	29,610
Net increase in securities sold under repurchase agreements	72,582	67,760
Borrowings repaid	(716,350)	(60,525)
Net cash from financing activities	19,098,730	16,699,309
Net increase (decrease) in cash and cash equivalents	(2,123,736)	16,214,525
Cash and cash equivalents at beginning of period	33,822,394	17,043,132
Cash and cash equivalents at end of period	$31,698,658	$33,257,657
	===========	==========
Supplemental cash flow information
Interest paid	1,116,176	1,551,659
Income taxes paid	938,000	988,000
Supplemental noncash disclosures
Transfers from loans to other real estate owned	342,063	1,659,744
* See accompanying notes to consolidated financial statements (unaudited).

page 7

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

     Notes to Consolidated Financial Statements

Note 1.

       The unaudited consolidated financial statements include the accounts of First Pulaski National Corporation (the "Corporation" or the "registrant") and its wholly-owned subsidiary, First National Bank of Pulaski (the "Bank"), and the Bank's wholly-owned subsidiary, First Pulaski Reinsurance Company.   
       The interim financial statements furnished under this item reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, as allowed under rules and regulations of the Securities and Exchange Commission for interim period presentation. The results for interim periods are not necessarily indicative of results to be expected for the complete fiscal year. Certain prior period amounts have been reclassified to conform to the current period classifications.

Note 2.

       Accounting Standards Codification ("ASC") Sections 718 and 505 require the measurement, at the date of the grant, of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Compensation cost is recognized based upon the fair value of the awards over the vesting period for each award.
       Bank employees may be granted options, restricted shares or rights to purchase shares of the registrant's common stock under the registrant's equity incentive and employee stock purchase plans.
       The 1994 employee stock purchase plan ("1994 Plan") permits the granting of rights to eligible employees of the registrant to acquire stock. A total of 150,000 shares were reserved under this plan and no shares were issued under the 1994 Plan during the first three months of 2012.
       As there are no unvested stock options as of January 1, 2012, and no stock options were granted in the first three months of 2012, there was no share-based compensation expense or tax benefit recorded in the first three months of 2012 related to stock options; however, as discussed below, the registrant incurred stock compensation expense in the first three months of 2012 related to the previously issued restricted shares. In addition, there were no unrecognized compensation costs related to stock options at March 31, 2012.

page 8

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       Below is a summary of the registrant's stock option activity for the 2011 fiscal year and the first three months of 2012:

		Weighted
		Average
	Number	Exercise
	of Options	Price
Outstanding January 1, 2011	8,000	$46.56
Granted	-	-
Exercised	-	-
Expired	(1,000)	38.50
Outstanding December 31, 2011	7,000	47.71
	=========	==============
Exercisable December 31, 2011	7,000	$47.71
	=========	==============
Outstanding January 1, 2012	7,000	$47.71
Granted	-	-
Exercised	-	-
Expired	-	-
Outstanding March 31, 2012	7,000	47.71
	=========	==============
Exercisable March 31, 2012	7,000	$47.71
	=========	==============

       The aggregate intrinsic value of outstanding options shown in the table at March 31, 2012 was $0 based on $41.00 per share, the price of which the registrant is aware, at which the registrant's common stock was traded on a date closest to and/or prior to March 31, 2012. The weighted average remaining term of the stock options in the table above was 1.4 years as of March 31, 2012.
       No stock options were exercised and no cash was received from the exercise of stock options during the three months ended March 31, 2012 and 2011. There was no intrinsic value of stock options exercised for the three months ended March 31, 2012 and 2011. 
       At March 31, 2012, the registrant had 87,750 shares reserved for award under its 2007 Equity Incentive Plan (the "2007 Plan"). During the first three months of 2012 the registrant did not grant any awards of restricted stock to employees of the Bank under the 2007 Plan. Compensation expense associated with restricted share awards, like those previously awarded under the 2007 Plan, is recognized over the time period that the restrictions associated with the awards lapse. During the three months ended March 31, 2012, the registrant recognized $33,687 in compensation costs attributable to all restricted stock awards issued under the 2007 Plan. A summary of activity for restricted share awards for the three months ended March 31, 2012 follows:

			Weighted-Average
			Grant-Date
	Nonvested Shares	Shares	Fair Value
Nonvested at January 1, 2012		3,250	$55.00
	Granted	-	55.00
	Vested	(450)	55.00
	Forfeited	-	-
Nonvested at March 31, 2012		2,800	$55.00
		===========

       The registrant expects to satisfy the exercise of stock options and the future grants of other equity-based awards, by issuing shares of common stock from authorized but unissued shares. At March 31, 2012, the registrant had approximately 8.4 million authorized but unissued shares of common stock.

page 9

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       As of March 31, 2012, there was $81,239 of total unrecognized compensation cost related to nonvested restricted shares granted under the 2007 Plan. The cost is expected to be recognized within the next year. The total fair value of shares vested during the three months ended March 31, 2012 and 2011was $18,450 and $18,900, respectively.

Note 3

Recent Accounting Pronouncements:
       In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this guidance are effective for interim and annual reporting periods beginning after December 15, 2011. The adoption of this amendment did not have a material impact on the consolidated financial statements.
       In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders' equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011. The adoption of this amendment changed the presentation of the components of comprehensive income for the Corporation as part of the consolidated statement of shareholders' equity and is now reported in the statement of income and comprehensive income.

Note 4

       The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income at March 31, 2012 and December 31, 2011 were as follows:

				Gross	Gross
			Amortized	Unrealized	Unrealized	Fair
March 31, 2012			Cost	Gains	Losses	Value
	U.S. government sponsored entities		$117,360,264	$521,737	$721,903	$117,160,098
	Obligations of states and
		political subdivisions	36,614,662	1,021,148	303,076	37,332,734
	Mortgage-backed securities-residential		87,759,000	805,192	333,019	88,231,173
	Total		$241,733,926	$2,348,077	$1,357,998	$242,724,005
			============	============	============	============
				Gross	Gross
			Amortized	Unrealized	Unrealized	Fair
December 31, 2011			Cost	Gains	Losses	Value
	U.S. treasury securities		$100,107	$26	$-	$100,133
	U.S. government sponsored entities		114,896,330	1,522,270	11,008	116,407,592
	Obligations of states and
		political subdivisions	36,668,186	1,437,841	27,737	38,078,290
	Mortgage-backed securities-residential		62,178,656	767,916	62,859	62,883,713
	Total		$213,843,279	$3,728,053	$101,604	$217,469,728
			============	============	============	============

page 10

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       The amortized cost and fair value of debt securities at March 31, 2012 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

		Available for Sale
		Amortized Cost	Fair Value
Due in one year or less		$7,342,017	$7,417,285
Due after one year through five years		81,508,856	82,156,555
Due after five years through ten years		60,408,406	60,413,741
Due after ten years		4,715,647	4,505,251
Mortgage-backed-residential		87,759,000	88,231,173
	TOTAL	$241,733,926	$242,724,005
		============	============

       Securities with unrealized losses at March 31, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

March 31, 2012
	Less Than 12 Months		12 Months or Longer		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Description of Securities	Value	Loss	Value	Loss	Value	Loss
Obligations of U.S. government
sponsored entities	$67,467,188	$721,903	$-	$-	$67,467,188	$721,903
Obligations of states and
political subdivisions	7,234,692	294,644	254,550	8,432	7,489,242	303,076
Mortgage-backed securities
- residential	43,674,732	333,019	-	-	43,674,732	333,019
Total temporarily impaired
securities	$118,376,612	$1,349,566	$254,550	$8,432	$118,631,162	$1,357,998
	==========	========	=========	========	==========	=========
December 31, 2011
	Less Than 12 Months		12 Months or Longer		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Description of Securities	Value	Loss	Value	Loss	Value	Loss
Obligations of U.S. government
sponsored entities	$8,505,750	$11,008	$-	$-	$8,505,750	$11,008
Obligations of states and
political subdivisions	1,125,358	17,763	254,050	9,974	1,379,408	27,737
Mortgage-backed securities
- residential	15,573,390	62,859	-	-	15,573,390	62,859
Total temporarily impaired
securities	$25,204,498	$91,630	$254,050	$9,974	$25,458,548	$101,604
	==========	========	=========	========	==========	=========

       Proceeds from sales of securities available for sale were $41,263,183 and $3,893,335 for the three months ended March 31, 2012 and 2011, respectively. Gross gains of $1,042,045 and $110,058 and no gross losses were realized on these sales for the first three months of 2012 and 2011, respectively.

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PART I - FINANCIAL INFORMATION____________________________________________

Item 1. Financial Statements. (Continued)

       Management evaluates securities for other-than-temporary impairment ("OTTI") at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under the provisions of ASC 320-10, Investments - Debt and Equity Securities. In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
       When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.
       As of March 31, 2012, the registrant's security portfolio consisted of 304 securities, 86 of which were in an unrealized loss position. The majority of unrealized losses are related to the registrant's obligations of U.S. government-sponsored entities as well as mortgage-backed securities that are also obligations of U.S. government-sponsored entities or U.S. government agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the registrant does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the registrant does not consider these securities to be other-than-temporarily impaired at March 31, 2012.

page 12

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Note 5

       Loans at March 31, 2012 and December 31, 2011 were as follows:

			March 31,	December 31,
			2012	2011
Commercial			$25,010,596	$29,518,794
Commercial and agricultural real estate:
	Commercial real estate		132,758,089	127,470,394
	Agricultural real estate		35,214,757	36,825,448
Residential real estate:
	Home equity line of credit		16,390,113	17,573,194
	1-4 family closed-end first lien		60,125,424	60,979,977
	1-4 family closed-end junior lien		2,348,718	2,593,391
	Multi-family		1,457,968	997,839
Construction and land development			27,112,905	27,255,729
Consumer			25,050,853	26,194,891
Other			10,231,031	11,337,367
		Subtotal	335,700,454	340,747,024
Less:		Net deferred loan fees	(187,125)	(193,323)
		Allowance for loan losses	(7,177,794)	(7,470,322)
Loans, net			$328,335,535	$333,083,379
			============	============

      The loan balances in the following tables related to credit quality do not include approximately $2,067,000 in accrued interest receivable and approximately $187,000 in deferred loan fees at March 31, 2012 and approximately $2,292,000 in accrued interest receivable and approximately $193,000 in deferred loan fees at December 31, 2011.
      The following table presents the activity in the allowance for loan losses for the three months ended March 31, 2012 and loans by portfolio segment and based on impairment method as of March 31, 2012.

				Commercial	Construction
				and Agricultural	and Land	Residential
			Commercial	Real Estate	Development	Real Estate	Consumer	Other	Total
Allowance for loan losses:
	Beginning balance		$677,655	$3,825,067	$1,198,728	$1,327,170	$389,576	$52,126	$7,470,322
		Provision for loan losses	96,583	(14,895)	(52,496)	(51,506)	33,774	(11,460)	-
		Loans charged-off	(99,002)	(74,691)	-	(54,874)	(112,063)	-	(340,630)
		Recoveries	6,634	17,500	-	827	23,141	-	48,102
	Ending balance		681,870	3,752,981	1,146,232	1,221,617	334,428	40,666	7,177,794
			==========	==========	=========	==========	==========	=========	=========
	Ending allowance balance attributable to loans:
	Individually evaluated for impairment		$-	$146,680	$83,371	$-	$-	$-	$230,051
	Collectively evaluated for impairment		681,870	3,606,301	1,062,861	1,221,617	334,428	40,666	6,947,743
		Total ending allowance balance	$681,870	$3,752,981	$1,146,232	$1,221,617	$334,428	$40,666	$7,177,794
			==========	==========	=========	==========	==========	=========	=========
Loans:
	Loans individually evaluated for impairment		$48,018	$3,664,075	$1,420,397	$2,705,201	$-	$-	$7,837,691
	Loans collectively evaluated for impairment		24,962,578	164,308,771	25,692,508	77,617,022	$25,050,853	10,231,031	327,862,763
		Total ending loans balance	$25,010,596	$167,972,846	$27,112,905	$80,322,223	$25,050,853	$10,231,031	$335,700,454
			==========	==========	=========	==========	==========	=========	=========

page 13

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       The following table presents the activity in the allowance for loan losses for the three months ended March 31, 2011:

				Commercial	Construction
				and Agricultural	and Land	Residential
			Commercial	Real Estate	Development	Real Estate	Consumer	Other	Total
Allowance for loan losses:
	Beginning balance		$1,035,511	$3,747,046	$1,474,970	$1,274,380	$383,644	$81,410	$7,996,961
		Provision for loan losses	(128,440)	357,728	(30,538)	420,272	130,513	465	750,000
		Loans charged-off	(147,928)	(40,159)	(115,046)	(226,062)	(88,055)	-	(617,250)
		Recoveries	450	5,923	-	21,759	9,375	1,500	39,007
	Ending balance		759,593	4,070,538	1,329,386	1,490,349	435,477	83,375	8,168,718
			==========	==========	==========	==========	==========	==========	=========

       The following table presents the balances in the allowance for loan losses and loans by portfolio segment and based on impairment method as of December 31, 2011:

				Commercial	Construction
				and Agricultural	and Land	Residential
			Commercial	Real Estate	Development	Real Estate	Consumer	Other	Total
Allowance for loan losses:
	Ending allowance balance attributable to loans:
	Individually evaluated for impairment		$-	$146,311	$106,227	$-	$-	$-	$252,538
	Collectively evaluated for impairment		677,655	3,678,756	1,092,501	1,327,170	389,576	52,126	7,217,784
		Total ending allowance balance	$677,655	$3,825,067	$1,198,728	$1,327,170	$389,576	$52,126	$7,470,322
			==========	==========	=========	==========	==========	==========	=========
Loans:
	Loans individually evaluated for impairment		$48,405	$3,195,817	$1,643,830	$2,736,506	$-	$-	$7,624,558
	Loans collectively evaluated for impairment		29,470,389	161,100,025	25,611,899	79,407,895	26,194,891	11,337,367	333,122,466
		Total ending loans balance	$29,518,794	$164,295,842	$27,255,729	$82,144,401	$26,194,891	$11,337,367	$340,747,024
			==========	==========	=========	==========	==========	==========	=========

page 14

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       The following table presents information related to impaired loans by class of loans as of and for the three months ended March 31, 2012. The unpaid principal balance has been reduced for net charge-offs in the following table.

			Unpaid		Allowance for	Average	Interest	Cash Basis
			Principal	Loan	Loan Losses	Loan	Income	Interest
			Balance	Balance	Allocated	Balance	Recognized	Recognized
With no related allowance recorded:
	Commercial		$48,018	$48,018	$-	$147,163	$-	$-
	Commercial and agricultural real estate:
		Commercial real estate	3,063,985	3,064,708	-	3,119,693	24,540	24,540
		Agricultural real estate	-	-	-	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-	-	-	-
		1-4 family closed-end	2,705,201	2,705,201	-	2,725,978	4,876	4,876
		Multi-family	-	-	-	-	-	-
	Construction and land development		723,352	723,352	-	723,352	-	-
With an allowance recorded:
	Commercial		-	-	-	-	-	-
	Commercial and agricultural real estate:
		Commercial real estate	600,090	600,090	146,680	597,058	-	-
		Agricultural real estate	-	-	-	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-	-	-	-
		1-4 family closed-end	-	-	-	-	-	-
		Multi-family	-	-	-	-	-	-
	Construction and land development		697,045	697,045	83,371	801,644	-	-
			$7,837,691	$7,838,414	$230,051	$8,114,888	$29,416	$29,416
			=========	=========	=========	=========	=========	=========

       The following table presents information related to impaired loans by class of loans as of and for the three months ended March 31, 2011. The unpaid principal balance has been reduced for net charge-offs in the following table.

			Unpaid		Allowance for	Average	Interest	Cash Basis
			Principal	Loan	Loan Losses	Loan	Income	Interest
			Balance	Balance	Allocated	Balance	Recognized	Recognized
With no related allowance recorded:
	Commercial		$61,572	$61,572	$-	$65,730	$-	$-
	Commercial and agricultural real estate:
		Commercial real estate	4,493,651	4,493,651	-	4,496,560	50,293	-
		Agricultural real estate	-	-	-	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-	-	-	-
		1-4 family closed-end	2,956,102	2,956,102		2,985,068	52,128	52,128
		Multi-family	-	-	-	-	-	-
	Construction and land development		1,861,553	1,861,553		1,861,552	-	-
With an allowance recorded:
	Commercial		-	-	-	-	-	-
	Commercial and agricultural real estate:
		Commercial real estate	1,428,072	1,428,072	208,525	1,431,063	-	-
		Agricultural real estate	-	-	-	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-	-	-	-
		1-4 family closed-end	319,585	319,585	67,514	319,585	-	-
		Multi-family	-	-	-	-	-	-
	Construction and land development		1,377,001	1,377,047	126,688	1,387,077	-	-
			$12,497,536	$12,497,582	$402,727	$12,546,635	$102,421	$52,128
			=========	=========	=========	=========	=========	=========

page 15

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       The following table presents information related to impaired loans by class of loans as of December 31, 2011. The unpaid principal balance has been reduced for net charge-offs in the following table.

			Unpaid		Allowance for
			Principal	Loan	Loan Losses
			Balance	Balance	Allocated
With no related allowance recorded:
	Commercial		$48,405	$48,405	$-
	Commercial and agricultural real estate:
		Commercial real estate	2,597,072	2,597,072	-
		Agricultural real estate	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-
		1-4 family closed-end	2,736,506	2,736,506	-
		Multi-family	-	-	-
	Construction and land development		723,352	723,352	-
With an allowance recorded:
	Commercial		-	-	-
	Commercial and agricultural real estate:
		Commercial real estate	598,745	598,745	146,311
		Agricultural real estate	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-
		1-4 family closed-end	-	-	-
		Multi-family	-	-	-
	Construction and land development		920,478	920,478	106,227
			$7,624,558	$7,624,558	$252,538
			=========	=========	=========

       Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans that are not performing.
       The following table presents nonaccrual and loans past due 90 days still on accrual by class of loans as of March 31, 2012 and December 31, 2011.

				Loans Past Due Over
		Nonaccrual		90 Days and Still Accruing
		March 31,	December 31,	March 31,	December 31,
		2012	2011	2012	2011
Commercial		$103,935	$59,028	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	3,899,187	3,504,851	-	-
	Agricultural real estate	378,929	378,527	-	-
Residential real estate:
	Home equity line of credit	-	-	-	-
	1-4 family closed-end first lien	3,654,286	3,983,744	-	-
	1-4 family closed-end junior lien	-	6,250	-	-
	Multi-family	-	-	-	-
Construction and land development		1,350,240	1,539,053	180,795	-
Consumer		67,507	92,786	-	23,684
Other		26,507	26,507	-	-
		$9,480,591	$9,590,746	$180,795	$23,684
		===========	===========	===========	===========

page 16

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       The following table presents the aging of past due loans as of March 31, 2012 and December 31, 2011 by class of loans:

March 31, 2012
			90 days
		30-89 Days	or more	Total	Loans Not
		Past Due	Past Due	Past Due	Past Due	Total
Commercial		$372,168	$10,623	$382,791	$24,627,805	$25,010,596
Commercial and agricultural real estate:
	Commercial real estate	3,342,399	2,873,984	6,216,383	126,541,706	132,758,089
	Agricultural real estate	164,089	250,294	414,383	34,800,374	35,214,757
Residential real estate:
	Home equity line of credit	186,717	-	186,717	16,203,396	16,390,113
	1-4 family closed-end first lien	1,132,870	383,707	1,516,577	58,608,847	60,125,424
	1-4 family closed-end junior lien	62,895	-	62,895	2,285,823	2,348,718
	Multi-family	117,789	-	117,789	1,340,179	1,457,968
Construction and land development		608,932	1,531,035	2,139,967	24,972,938	27,112,905
Consumer		465,948	19,074	485,022	24,565,831	25,050,853
Other		84,440	26,507	110,947	10,120,084	10,231,031
		$6,538,247	$5,095,224	$11,633,471	$324,066,983	$335,700,454
		=========	=========	=========	==========	===========
December 31, 2011
			90 days
		30-89 Days	or more	Total	Loans Not
		Past Due	Past Due	Past Due	Past Due	Total
Commercial		$333,697	$10,623	$344,320	$29,174,474	$29,518,794
Commercial and agricultural real estate:
	Commercial real estate	1,810,872	2,003,558	3,814,430	123,655,964	127,470,394
	Agricultural real estate	137,201	249,228	386,429	36,439,019	36,825,448
Residential real estate:
	Home equity line of credit	82,698	-	82,698	17,490,496	17,573,194
	1-4 family closed-end first lien	2,000,183	894,097	2,894,280	58,085,697	60,979,977
	1-4 family closed-end junior lien	113,240	-	113,240	2,480,151	2,593,391
	Multi-family	-	-	-	997,839	997,839
Construction and land development		1,375,760	457,065	1,832,825	25,422,904	27,255,729
Consumer		527,327	60,439	587,766	25,607,125	26,194,891
Other		69,375	27,066	96,441	11,240,926	11,337,367
		$6,450,353	$3,702,076	$10,152,429	$330,594,595	$340,747,024
		=========	=========	=========	==========	===========

       The above table includes nonaccrual loans of $3,400,115 and $3,016,993 in the loans not past due category, $2,114,302 and $2,895,361 in the 30-89 days past due category and $3,966,174 and $3,678,392 in the 90 days or more past due category as of March 31, 2012 and December 31, 2011, respectively.

page 17

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Troubled Debt Restructurings:

       During the three-month period ending March 31, 2012, no loans were modified as troubled debt restructurings. The modification of the terms of loans usually include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.
       The Company has not allocated any specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2012 and December 31, 2011. The Company has not committed to lend any additional amounts as of March 31, 2012 and December 31, 2011 to customers with outstanding loans that are classified as troubled debt restructurings.
       There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification for the period ended March 31, 2012.
       A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
       In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company's internal underwriting policy.

Credit Quality Indicators

       The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings, which are updated annually:

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

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

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

page 18

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are typically overdrafts and loans in process. An analysis of loans by risk category is performed quarterly. As of March 31, 2012 and December 31, 2011, and based on the most recent analysis performed as of each date, the risk category of loans by class of loans is as follows:

March 31, 2012
			Special
		Pass	Mention	Substandard	Doubtful	Not Rated
Commercial		$24,346,806	$187,617	$476,173	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	120,420,816	3,646,193	8,691,080	-	-
	Agricultural real estate	33,838,464	983,444	392,849	-	-
Residential real estate:
	Home equity line of credit	16,121,752	-	268,361	-	-
	1-4 family closed-end first lien	54,666,894	836,277	4,622,253	-	-
	1-4 family closed-end junior lien	1,893,936	164,881	289,901	-	-
	Multi-family	1,457,968	-	-	-	-
Construction and land development		24,960,624	191,322	1,960,959	-
Consumer		24,507,659	171,418	371,776	-	-
Other		9,611,308	117,281	26,506	-	475,936
Total		$311,826,227	$6,298,433	$17,099,858	$-	$475,936
		==========	=========	=========	=========	=========
December 31, 2011
			Special
		Pass	Mention	Substandard	Doubtful	Not Rated
Commercial		$29,009,547	$125,766	$383,481	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	115,705,423	3,656,544	8,108,427	-	-
	Agricultural real estate	35,611,655	819,682	394,111	-	-
Residential real estate:
	Home equity line of credit	17,244,456	33,020	295,718	-	-
	1-4 family closed-end first lien	55,194,491	1,177,666	4,607,820	-	-
	1-4 family closed-end junior lien	2,194,417	101,553	297,421	-	-
	Multi-family	997,839	-	-	-	-
Construction and land development		25,051,579	14,472	2,189,678	-
Consumer		25,625,547	170,075	399,269	-	-
Other		10,672,388	19,337	26,506	-	619,136
Total		$317,307,342	$6,118,115	$16,702,431	$-	$619,136
		==========	=========	=========	=========	=========

Note 6

       Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

page 19

PART I - FINANCIAL INFORMATION____________________________________________

Item 1. Financial Statements. (Continued)

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

       The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

       Investment securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

       Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower's financial statements, or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and client's business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted

       Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
       Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by independent appraisers whose qualifications have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value.

page 20

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Assets Measured on a Recurring Basis

       Assets measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 are summarized below:

		Fair Value Measurements at			Fair Value Measurements at
		March 31, 2012 using			December 31, 2011 using
			Quoted Prices			Quoted Prices
			in Active	Significant		in Active	Significant
			Markets for	Other		Markets for	Other
			Identical	Observable		Identical	Observable
		Carrying	Assets	Inputs	Carrying	Assets	Inputs
		Value	(Level 1)	(Level 2)	Value	(Level 1)	(Level 2)
Assets:
	Available for sale securities:
	U.S. Treasuries	$-	$-	$-	$100,133	$-	$100,133
	Obligations of U.S. Government
	Sponsored Agencies	117,160,098	-	117,160,098	116,407,592	-	116,407,592
	Obligations of States and
	Political Subdivisions	37,332,734	-	37,332,734	38,078,290	-	38,078,290
	Mortgage-backed securities
	- residential	88,231,173	-	88,231,173	62,883,713	-	62,883,713
	Total	$242,724,005	$-	$242,724,005	$217,469,728	$-	$217,469,728
		==========	==========	==========	==========	==========	==========

       There were no transfers between Level 1 and Level 2 during 2012 or 2011.

Assets Measured on a Non-Recurring Basis

       Assets measured at fair value on a non-recurring basis are summarized below:

				Fair Value Measurements at
				March 31, 2012 Using
				Significant
				Other	Significant
				Observable	Unobservable
			Carrying	Inputs	Inputs
			Value	(Level 2)	(Level 3)
Assets:
	Impaired loans
		Comml and ag real estate:
		Commercial real estate	$2,272,787		$2,272,787
		Agricultural real estate	-		-
		Residential real estate:
		Home equity line of credit	-		-
		1-4 family closed-end	1,876,777		1,876,777
		Multi-family	-		-
		Construction & land development	455,430		455,430
	Total impaired loans		$4,604,994		$4,604,994
			============		============
	Other real estate owned
		Residential real estate:
		Home equity line of credit	$-		$-
		1-4 family closed-end	-		-
		Multi-family	576,690		576,690
		Construction & land development	3,583,750		3,583,750
	Total other real estate owned		$4,160,440		$4,160,440
			============		============

page 21

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

				Fair Value Measurements at
				December 31, 2011 Using
				Significant
				Other	Significant
				Observable	Unobservable
			Carrying	Inputs	Inputs
			Value	(Level 2)	(Level 3)
Assets:
	Impaired loans
		Comml and ag real estate:
		Commercial real estate	$1,805,814		$1,805,814
		Agricultural real estate	-		-
		Residential real estate:
		Home equity line of credit	-		-
		1-4 family closed-end	1,908,083		1,908,083
		Multi-family	-		-
		Construction & land development	455,430		455,430
	Total impaired loans		$4,169,327		$4,169,327
			============		============
	Other real estate owned
		Residential real estate:
		Home equity line of credit	$-		$-
		1-4 family closed-end	-		-
		Multi-family	576,690		576,690
		Construction & land development	3,511,370		3,511,370
	Total other real estate owned		$4,088,060		$4,088,060
			============		============

       There were $4,604,994 in impaired loans measured for impairment using the fair value of the collateral at March 31, 2012, resulting in an additional provision for loan losses of $154,859 for the three months ended March 31, 2012. There were $3,788,787 in impaired loans measured for impairment using the fair value of the collateral at March 31, 2011, resulting in an additional provision for loan losses of $28,200 for the three months ended March 31, 2011.
       Other real estate owned, which is measured at fair value less costs to sell, had a net carrying amount of $7,159,467 as of March 31, 2012. Included in this amount were properties that were written down to fair value totaling $4,160,440, resulting in additional foreclosed asset expense of $119,933 for the three months ended March 31, 2012. Other real estate owned had a net carrying amount of $10,590,698 as of March 31, 2011. Included in this amount were properties that were written down to fair value totaling $4,632,790, resulting in additional foreclosed asset expense of $705 in the three months ended March 31, 2011.
       Fair value measurements for impaired loans and other real estate owned are derived from appraisals received from independent appraisers and are discounted by 29.5%, resulting in Level 3 classification.

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       Carrying amount and estimated fair values of financial instruments at March 31, 2012 were as follows:

			Fair Value Measurements at
			March 31, 2012
		Carrying Value	Level 1	Level 2	Level 3	Total
		(Dollars in thousands)
Financial assets:
	Cash and short-term investments	$32,144	$31,813	$331	$-	$32,144
	Securities	242,724	-	242,724	-	242,724
	Loans held for sale	2,029	-	2,029	-	2,029
	Loans, net	328,336	-	-	328,612	328,612
	Federal Home Loan Bank stock	1,527	N/A	N/A	N/A	N/A
	Accrued interest receivable	3,315	-	1,248	2,067	3,315
Financial liabilities:
	Deposits	579,342	313,163	267,596	-	580,759
	Securities sold under repurchase agreements	1,923	1,923	-	-	1,923
	Other borrowed funds	6,610	-	6,971	-	6,971
	Accrued interest payable	873	9	864	-	873

       Carrying amount and estimated fair values of financial instruments at December 31, 2011 were as follows:

		December 31, 2011
		(In thousands)
		Carrying Value	Fair Value
Financial assets:
	Cash and short-term investments	$34,366	$34,366
	Securities	217,470	217,470
	Loans held for sale	2,169	2,169
	Loans, net	333,083	332,387
	Federal Home Loan Bank stock	1,527	N/A
	Accrued interest receivable	3,351	3,351
Financial liabilities:
	Deposits	559,231	560,864
	Securities sold under repurchase agreements	1,851	1,851
	Other borrowed funds	7,326	7,733
	Accrued interest payable	864	864

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

       The methods and assumptions not previously described used to estimate fair value are described as follows:
       Carrying amount is the estimated fair value for cash and short term investments, accrued interest receivable and payable, demand deposits, and variable rate loans or deposits that reprice frequently and fully and are classified as Level 1. For deposits with stated maturities fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk, resulting in Level 2 classification. For fixed rate loans and for variable rate loans with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk, resulting in Level 3 classification. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. Fair values of debt are based on current rates for similar financing. The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2 or Level 3 classification. It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability, therefore it has been excluded from the table above. The fair value of off-balance-sheet items and loans held for sale are not considered material.

Note 7

       The factors used in the earnings per share computation follow:

	March 31,
	2012	2011
Net Income	$2,340,604	$1,368,216
Less: Distributed earnings allocated to participating securities	(613)	(613)
Less: Undistributed income allocated to participating securities	(3,033)	(1,527)
Net earnings allocated to common stock	$2,336,958	$1,366,076
	=========	=========
Weighted common shares outstanding
including participating securities	1,572,960	1,566,878
Less: Participating securities	(2,450)	(2,450)
Weighted average shares	1,570,510	1,564,428
	=========	=========
Basic earnings per share	$1.49	$0.87
	=========	=========
Net earnings allocated to common stock	$2,336,958	$1,366,076
	=========	=========
Weighted average shares	1,570,510	1,564,428
Add: dilutive effects of assumed exercises of stock options	80	188
Average shares and dilutive potential common shares	1,570,590	1,564,616
	=========	=========
Dilutive earnings per share	$1.49	$0.87
	=========	=========

       Stock options for 6,500 and 7,000 shares of common stock were not considered in computing diluted earnings per share for the three-months ended March 31, 2012 and 2011, respectively, because they were anti-dilutive.

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PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

       The following analysis should be read in conjunction with the financial statements set forth in Part I, Item 1, immediately preceding this section.
       Reference is made to the annual report of the registrant on Form 10-K for the year ended December 31, 2011, which report was filed with the Securities and Exchange Commission on March 15, 2012. This Form 10-Q contains certain forward-looking statements regarding, among other things, the anticipated financial and operating results of the registrant. The words "anticipate," "expect," "should," "could," "may", "plan," "intend", "believe", "likely", "seek", "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The registrant undertakes no obligation to publicly release any modifications, updates or revisions of these statements to reflect events or circumstances occurring after the day hereof, or to reflect the occurrence of unanticipated events.
      In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the registrant cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the registrant. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to those described in the registrant's Annual Report on Form 10-K for the year ended December 31, 2011 and, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) continuation of the historically low short-term interest rate environment, (iii) increased competition with other financial institutions, (iv) deterioration or lack of sustained growth in the economy in the registrant's market areas, (v) rapid fluctuations or unanticipated changes in interest rates, (vi) significant downturns in the businesses of one or more large customers, (vii) risks inherent in originating loans, including prepayment risks, (viii) the fluctuations in collateral values, the rate of loan charge-offs and the level of the provision for losses on loans, (ix) results of regulatory examinations, (x) any activity in the capital markets that would cause the registrant to conclude that there was impairment of any asset including intangible assets, (xi) changes in state and Federal legislation, regulations or policies applicable to banks and other financial services providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and (xii) loss of key personnel. These risks and uncertainties may cause the actual results or performance of the registrant to be materially different from any future results or performance expressed or implied by such forward-looking statements.

Critical Accounting Policies

       The accounting principles the registrant follows and its methods of applying these principles conform to accounting principles generally accepted in the United States and with general practices within the banking industry. In connection with the application of those principles to the determination of the allowance for loan losses, the registrant has made judgments and estimates that have significantly impacted the financial position and results of operations.
       The provision for loan losses is the charge to earnings which management feels is necessary to maintain the allowance for loan losses at a level considered adequate to reflect estimated credit losses for specifically identified impaired loans as well as estimated probable incurred credit losses inherent in the remainder of the loan portfolio at the balance sheet date. The allowance is increased by the provision for loan losses, which is charged against current period operating results, and decreased by the amount of charge-offs, net ofrecoveries. A formal review of the allowance for loan losses is prepared quarterly to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. The registrant's methodology of

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

assessing the appropriateness of the allowance consists of several elements, which include the historical allowance and specific allowances as described below.
       The historical allowance is calculated by applying loss factors to outstanding loans. For purposes of the quarterly review, the loan portfolio is separated by loan type, and each type is treated as a homogeneous pool. Each loan is assigned a risk rating by loan officers using established credit policy guidelines. These risk ratings are periodically reviewed and all risk ratings are subject to review by an independent Credit Review Department. Each risk rating is assigned an allocation percentage which, when multiplied times the dollar value of loans in that risk category, results in the amount of the allowance for loan losses allocated to these loans. Allocation percentages are based on the registrant's historical loss experience and may be adjusted for significant factors that, in management's judgment, affect the collectibility of the portfolio as of the evaluation date.
       Specific allowances are established in cases where management has identified significant conditions or circumstances related to a credit that management believes indicates the probability that a loss has been incurred. In addition, every substandard or worse loan in excess of $250,000 and all loans classified as "special mention" loans over $400,000 are reviewed quarterly by the Executive and Loan Committee of the Bank's Board of Directors.
       Other Real Estate Owned acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

OVERVIEW

       Total assets of the registrant grew $19.3 million, or 3.0 percent, in the first three months of 2012. This growth in assets was primarily funded by an approximately $20.1 million, or 3.6 percent increase in deposits. Loans net of unearned income decreased $5.0 million in the first three months of 2012 as loan demand remained weak. The growth in deposits along with the decline in loans contributed to an increase in investment securities of approximately $25.3 million in the first three months of 2012.
       Net income increased $972,388 to $2,340,604, or $1.49 per diluted share, in the first quarter of 2012 as compared to $1,368,216, or $0.87 per diluted share, during the same period of 2011. The increase in net income in the first quarter of 2012 as compared to the same period of 2011 was primarily due to increased security gains, decreased provision for loan losses and increased net interest income in the first quarter of 2012. Security gains increased $931,987 to $1,042,045 in the first quarter of 2012 as compared to $110,058 in the first quarter of 2011. There was no provision for loan losses in the first quarter of 2012, a decrease of $750,000 over the provision for loan losses in the first quarter of 2011. Net interest income increased $305,872, or 5.5 percent to $5,892,355 in the first quarter of 2012 as compared to the same period of 2011.
       Net charged-off loans totaled approximately $293,000 in the first three months of 2012, resulting in an annualized charge-off ratio of 0.35 percent as compared to net charge-offs of approximately $578,000 in the first three months of 2011, resulting in an annualized charge-off ratio of 0.68 percent. Nonaccrual loans decreased slightly to approximately $9,481,000 at March 31, 2012 as compared to approximately $9,591,000 at December 31, 2011. Other real estate owned totaled approximately $7,159,000 at March 31, 2012 as compared to approximately $7,111,000 at December 31, 2011. Concerted efforts are being made to dispose of the other real estate owned while striving to ensure that fair market value is received and that excessive discounts are not taken. Expenses related to these foreclosed assets increased approximately $103,000 in the first three months of 2012 as compared to the same period of 2011. The registrant expects total non-performing assets and expenses related to foreclosed assets will continue at elevated levels through the remainder of 2012.

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

Results of Operations

       Net income of the registrant was $2,340,604 for the first three months of 2012. This amounted to an increase of $972,388, or 71.1 percent, compared to the first three months of 2011.  The increase in net income was primarily due to increased security gains and decreased loan loss provisions for the first three months of 2012 as compared to the same period of 2011.
       Net interest income increased $305,872, or 5.5 percent, to $5,892,355 during the first quarter of 2012 as compared to $5,586,483 for the first quarter of 2011.  Total interest income decreased $37,548, or 0.5 percent, to $7,017,970 for the first quarter of 2012 as compared to $7,055,518 for the same period in 2011. The decrease in total interest income was primarily due to a decrease in average loans outstanding and a decrease in the yields earned on those loans in the first quarter of 2012 as compared to the same period of 2011. Interest and fees on loans decreased $115,684 in the first quarter of 2012 as compared to the same period of 2011 primarily as a result of a decrease in average loans outstanding of approximately $4.3 million and a decrease in the yield earned on those loans to 6.90 percent in the first quarter of 2012 from 7.01 as compared to the same period of 2011. Interest income on securities increased $74,877 in the first quarter of 2012 as compared to the first quarter of 2011 primarily as a result of an increase in average investment securities held of approximately $35.3 million in the first quarter of 2012 as compared to the same period of 2011. The overall increase in interest income on securities was limited in the first quarter of 2012 as compared to the same period of 2011 as yields earned on securities declined in the first quarter of 2012.
       The increase in net interest income in the first quarter of 2012 as compared to the first quarter of 2011 was primarily due to a decrease in total interest expense of $343,420, or 23.4 percent, to $1,125,615 for the first quarter of 2012 as compared to $1,469,035 for the same period in 2011. The decrease in total interest expense was primarily due to lower average interest rates paid on interest-bearing deposits in the first quarter of 2012 as compared to the first quarter of 2011. The interest expense on time deposits decreased $343,189 in the first quarter of 2012 as compared to the same period of 2011 as the average interest rate paid on time deposits fell to 1.34 percent in the first quarter of 2012 as compared to 1.78 percent in the first quarter of 2011. The average balances held in time deposits also decreased $12.6 million in the first quarter of 2012 as compared to the same period of 2011. The interest expense on NOW accounts increased $1,507 in the first quarter of 2012 as compared to the same period of 2011 as the average balances held increased $11.1 million and the average interest rate paid fell to 0.20 percent in the first quarter of 2012 as compared to 0.22 percent for the same period of 2011. The interest expense on savings and money market accounts increased $1,096 in the first quarter of 2012 as compared to the same period of 2011 as the average balances held increased $14.8 million and the average interest rate paid fell to 0.39 percent in the first quarter of 2012 from 0.46 percent in the first quarter of 2011.
       The registrant's non-interest income is composed of several components, some of which vary significantly between quarterly periods. Service charges on deposit accounts and other non-interest income generally reflect the registrant's growth, while fees for origination of mortgage loans will often reflect home mortgage market conditions and fluctuate more widely from period to period.
       Total non-interest income increased $804,221, or 55.1 percent, to $2,263,875 for the three-month period ended March 31, 2012 as compared to $1,459,654 for the three-month period ended March 31, 2011. Most of the increase in non-interest income was due to a $931,987 increase in gain on the sale of securities in the first quarter of 2012 as compared to the same period of 2011 as the registrant restructured its investment portfolio in the first quarter of 2012. The investment portfolio restructuring primarily consisted of increasing the amount of mortgage-backed securities held in relation to other securities and is projected to increase interest income in flat and rising interest rate environments over the next few years as compared to the projected interest income that would have been generated before the restructuring. Mortgage banking

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

income increased $113,305 in the first quarter of 2012 as compared to the first quarter of 2011 as mortgage refinancing activity increased. Also, other service charges and fees increased $49,631 primarily due to increased debit card interchange fees in the first quarter of 2012 as compared to the same period of 2011. These increases were partially offset by a decrease of $273,058 in other income in the first quarter of 2012 as compared to the same period of 2011. This decrease in other income was primarily due to a $274,976 gain on the sale of certain real estate held by the Corporation in the first quarter of 2011. Service charges on deposit accounts also decreased $22,918 as overdraft fees decreased in the first quarter of 2012 as compared to the same period of 2011. Other categories of non-interest income showed only minor differences between the first quarter of 2012 and the first quarter of 2011.
       Total non-interest expenses increased $248,457 or 5.7 percent, to $4,610,043 in the first quarter of 2012 as compared to $4,361,586 for the same period of 2011. This increase in non-interest expenses was primarily due to an $180,253 increase in salaries and employee benefits primarily due to increased accrued potential incentive and benefit expenses as well as increased personnel expenses per employee in the first quarter of 2012 as compared to the same period of 2011. Foreclosed asset expense increased $103,041 in the first quarter of 2012 as compared to the same period of 2011 primarily due to increased write-downs in the first quarter of 2012. These increases were partially offset by a $102,646 decrease in FDIC insurance expense in the first quarter of 2012 as compared to the same period of 2011 primarily due to a change in the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital that began in the second quarter of 2011.
       As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC. Because the FDIC's deposit insurance fund fell below prescribed levels in 2008, the FDIC announced increased premiums for all insured depository institutions, including the Bank, in order to begin recapitalizing the fund.
       In November 2009, the FDIC issued a rule that required all insured depository institutions, with limited exceptions, to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC also adopted a uniform three-basis point increase in assessment rates effective on January 1, 2011. In December 2009, the Bank paid $3.39 million in prepaid risk-based assessments. Prepaid FDIC insurance had a balance of $1.62 million at March 31, 2012, as a $124,000 reduction was made for applicable FDIC insurance premiums in the first quarter of 2012.
       There was no provision for loan losses in the three months ended March 31, 2012, leading to a decrease as compared to a provision for loan losses of $750,000 in the same period of 2011. Although the provision for loan losses in the first quarter of 2012 declined significantly from the amount in the same period of 2011, the size of the allowance for loan losses continued to reflect the effects of continued weakness in local and national economic conditions upon the loan portfolio, particularly within the real estate segment of the portfolio. If economic conditions or the real estate market deteriorates beyond management's current expectations, additional provisions for loan losses would likely be necessary, negatively impacting the registrant's net income. The provision for possible loan losses is based on past loan experience and other factors that, in management's judgment, deserve current recognition in estimating possible credit losses. Such factors include past loan loss experience, growth and composition of the loan portfolio, review of specific problem loans, results of regulatory examinations, results of updated appraisals, the relationship of the allowance for credit losses to outstanding loans and current economic conditions that may affect the borrower's ability to repay. A more detailed description of the allowance for loan losses can be found under the section titled "Critical Accounting Policies."

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

       For the three-month period ended March 31, 2012, income before taxes increased $1,611,636, or 83.3 percent, to $3,546,187 as compared to $1,934,551 for the three months ended March 31, 2011.  Applicable income taxes increased $639,248 for the three-month period ended March 31, 2012 as compared to the same period in 2011. The effective tax rate for the three months ended March 30, 2012 was 34.0 percent as compared to 29.3 percent for the same period of 2011.
       The following table shows the return on assets (net income divided by average total assets) and return on equity (net income divided by average stockholders' equity, excluding unrealized gain or loss on securities) for the three months ended March 31, 2012 (annualized) and for the year ended December 31, 2011.

	For the three months ended	For year ended
	March 31, 2012 (annualized)	December 31, 2011
Return on assets	1.47%	1.01%
Return on equity	16.01%	11.26%

Financial Condition

       The registrant's total assets increased 3.0 percent to $654,398,870 during the three months ended March 31, 2012, from $635,098,812 at December 31, 2011. Loans, net of unearned income were $335,513,329 at March 31, 2012, a 1.5 percent decrease compared to $340,553,701 at December 31, 2011. Securities available-for-sale increased to $242,724,005 at March 31, 2012 from $217,469,728 at December 31, 2011.  At March 31, 2012, there was an unrealized gain on available-for-sale securities, net of tax, of $610,978, as compared to an unrealized gain on available-for-sale securities, net of tax, of $2,237,891 at December 31, 2011.
       Total liabilities increased by 3.3 percent to $594,252,797 at March 31, 2012, compared to $575,331,508 at December 31, 2011. This increase was primarily due to an increase of $16,597,916 in interest bearing deposits at March 31, 2012 as compared to December 31, 2011.
       Non-performing assets increased to $16,820,853 at March 31, 2012 as compared to $16,725,399 at December 31, 2011.  Non-performing assets at March 31, 2012 included $7,159,467 in other real estate owned, $9,480,591 in non-accrual loans, and $180,795 in loans past due 90 days or more as to interest or principal payment and accruing interest. There were $267,922 in trouble debt restructurings still accruing interest at March 31, 2012. Other real estate owned remained at an elevated level at March 31, 2012. The properties comprising other real estate owned at March 31, 2012 were primarily construction and land development, one-to-four family real estate properties and commercial real estate properties. The balance of non-accrual loans at March 31, 2012 consisted primarily of commercial real estate loans, one-to-four family real estate loans and construction and land development loans. At December 31, 2011, the corresponding amounts of non-performing assets were $7,110,969 in other real estate owned and $9,590,746 in non-accrual loans and $23,684 in loans past due 90 days or more and accruing interest. There were $267,922 in troubled debt restructurings still accruing interest at December 31, 2011. The Company did not allocate any specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2012 or December 31, 2011. The allowance for loan losses was 75.7% of the balance of nonaccrual loans at March 31, 2012 as compared to 77.9% at December 31, 2011.
       Nonaccrual loans are those for which management has discontinued accrual of interest because there exists significant uncertainty as to the full and timely collection of either principal or interest or such loans have become contractually past due 90 days with respect to principal or interest unless such loans are well secured and in the process of collection. The additional amount of interest that would have been recorded during the first three months of 2012 if the above nonaccrual loans had been current in accordance with their original terms was approximately $223,000.

page 29

PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

Loans that are classified as "substandard" by the registrant represent loans to which management has doubts about the borrowers' ability to comply with the present loan repayment terms. As of March 31, 2012, there were approximately $8,138,000 in loans that were classified as "substandard" and accruing interest. This compares to approximately $9,361,000 in loans that were classified as "substandard" and accruing interest as of March 31, 2011 and $7,622,000 of such loans at December 31, 2011.
       Credit risk represents the maximum accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted and any collateral or security proved to be of no value. Concentrations of credit risk or types of collateral arising from financial instruments exist in relation to certain groups of customers. A group concentration arises when a number of counterparties have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The registrant does not have a significant concentration to any individual customer or counterparty. The major concentrations of credit risk for the registrant arise by collateral type in relation to loans and credit commitments. The most significant concentration that exists is in loans secured by real estate, primarily commercial real estate loans (40 percent of total loans) and 1-4 family residential loans (24 percent of total loans). Commercial loans, both those secured by real estate and those not secured by real estate, are further classified by their appropriate North American Industry Classification System ("NAICS") code. Of those loans classified by NAICS code, the registrant has concentrations of credit, defined as 25 percent or more of total risk-based capital, of loans to lessors of residential buildings and dwellings (34 percent of total risk-based capital), loans secured by hotel and motel properties (34 percent of total risk-based capital), loans secured by subdivision land (29 percent of total risk-based capital) and loans to lessors of non-residential buildings (27 percent of total risk-based capital). Although the registrant has a loan portfolio diversified by type of risk, the ability of its customers to honor their contracts is to some extent dependent upon economic conditions, particularly within the real estate segment of the economy, in the regions where our customers operate. A geographic concentration arises because the registrant grants commercial, real estate and consumer loans primarily to customers in Giles, Marshall and Lincoln Counties, Tennessee and Madison and Limestone Counties, Alabama. In order to mitigate the impact of credit risk, management strives to identify loans experiencing difficulty early enough to correct the problems and to maintain an allowance for loan losses at a level management believes is sufficient to cover incurred losses in the loan portfolio.
       For the three months ended March 31, 2012, the registrant had net loan charge-offs of approximately $293,000 for a net charge-off ratio (net charge-offs divided by total loans net of unearned income) of 0.35 percent (annualized). This compares to net charge-offs of approximately $578,000 for the three months ended March 31, 2011 for a net charge-off ratio of 0.68 percent (annualized).
       The total allowance for loan losses decreased to $7,177,794 as of March 31, 2012 from $7,470,322 as of December 31, 2011. The ratio of the allowance for loan losses to loans net of unearned income was 2.14 percent at March 31, 2012 as compared to 2.19 percent at December 31, 2011. Management believes that the allowance for loan losses is adequate to cover probable incurred losses in the loan portfolio.

Liquidity

       Liquidity is the ability to fund increases in loan demand or to compensate for decreases in deposits and other sources of funds, or both. Maintenance of adequate liquidity is an essential component of the financial planning process. The objective of asset/liability management is to provide an optimum balance of liquidity and earnings. Cash and cash equivalents decreased $2,123,736 from December 31, 2011 to March 31, 2012.
       Marketable investment securities, particularly those of short maturities, are another source of asset liquidity. Securities maturing in one year or less amounted to approximately $7,417,000 at March 31, 2012, representing 3.1 percent of the registrant's investment portfolio as compared to $10,963,000, or 5.6 percent, one year earlier and $8,133,000, or 3.7 percent, at December 31, 2011. These securities may be

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PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

sold in response to changes in interest rates, changes in prepayment risk, the need to increase regulatory capital, or asset/liability strategy. Monthly principal paydowns received on mortgage-backed securities also provide additional liquidity. Management classifies all the registrant's investment portfolio in the available-for-sale category and reports these securities at fair value. Management does not anticipate the sale of a substantial amount of investment securities in the foreseeable future.
       Other sources of liquidity include maturing loans and federal funds sold. At March 31, 2012, the registrant had approximately $108,511,000 in loans maturing within one year. The registrant had $6,365,000 in federal funds sold at March 31, 2012, compared to $1,640,000 as of December 31, 2011. The registrant also had approximately $25,334,000 in cash and due from banks at March 31, 2012 as compared to approximately $32,182,000 at December 31, 2011.
       The registrant does not anticipate that there will be any unusual demands, commitments, or events that could adversely impact the liquidity of the registrant for the remainder of 2012.

Off Balance Sheet Arrangements

       The registrant has not historically incurred off-balance sheet obligations through the use of or investment in off-balance sheet derivative financial instruments of structured finance or special purpose entities organized as corporations, partnerships or limited liability companies or trusts. However, the registrant is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. The following table summarizes the registrant's involvement in financial instruments with off-balance sheet risk:

	Amount at
	March 31, 2012	December 31, 2011
Commitments to extend credit	$55,526,056	$49,502,377
Standby letters of credit	2,610,395	2,265,295
Mortgage loans sold with repurchase
requirements outstanding	9,174,744	10,304,698

       Since these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund these commitments, the registrant has the ability to liquidate federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase federal funds from other financial institutions as well as borrow from the Federal Home Loan Bank of Cincinnati. At March 31, 2012, the registrant had total borrowings of $6,610,016 and had approximately $24,634,000 of available additional borrowings from the Federal Home Loan Bank of Cincinnati. At March 31, 2012, the registrant had no federal funds purchased and had $25,000,000 in additional federal funds lines available from correspondent banks.
       The registrant originates residential mortgage loans for sale in the secondary market which it may be required to repurchase if a default occurs with respect to the payment of any of the first four installments of principal and interest after a loan is sold and the default continues for a period of 90 days.

Capital Adequacy       The Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC have established risk-based capital guidelines for U.S. banking organizations. These guidelines provide a uniform capital framework that is sensitive to differences in risk profiles among banks. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Pulaski

page 31

PART I - FINANCIAL INFORMATION
____________________________________________

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

National Corporation ("FPNC") and First National Bank of Pulaski ("FNB") must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. FPNC's and FNB's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
       Under these guidelines, total capital consists of Tier I capital (core capital, primarily stockholders' equity) and Tier II capital (supplementary capital, including certain qualifying debt instruments and credit loss reserve).
      Assets are assigned risk weights ranging from 0 to 100 percent depending on the level of credit risk normally associated with such assets. Off-balance sheet items (such as commitments to make loans) are also included in assets through the use of conversion factors established by regulators and are assigned risk weights in the same manner as on-balance sheet items. Banking institutions are expected to maintain a Tier I capital to risk-weighted assets ratio of at least 4.00 percent, a total capital (Tier I plus Tier II) to total risk-weighted assets ratio of at least 8.00 percent, and a Tier I capital to total average assets ratio (leverage ratio) of at least 4.00 percent.
       Management believes, as of March 31, 2012 and December 31, 2011, that FPNC and FNB met all capital adequacy requirements to which they are subject.  To be categorized as well-capitalized, FNB must maintain minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table and not be subject to a written agreement order or directive to maintain capital above specified levels. The following table presents actual, minimum and "well capitalized" capital amounts and ratios for FPNC and FNB as of March 31, 2012 and December 31, 2011.

								To Be Well Capitalized
					For Capital			Under Applicable
			Actual		Adequacy Purposes			Regulations
			Amount	Ratio	Amount		Ratio	Amount		Ratio
			(Dollars In thousands)
As of March 31, 2012
	Total Capital to risk weighted assets
		FPNC	$64,792	15.48%	$33,487	>	8.00%	$41,859	>	10.00%
		FNB	64,183	15.34	33,482	>	8.00	41,853	>	10.00
	Tier I (Core) Capital to risk weighted assets
		FPNC	59,535	14.22	16,743	>	4.00	25,115	>	6.00
		FNB	58,926	14.08	16,741	>	4.00	25,112	>	6.00
	Tier I (Core) Capital to average quarterly assets
		FPNC	59,535	9.28	25,661	>	4.00
		FNB	58,926	9.19	25,658	>	4.00	32,073	>	5.00
As of December 31, 2011
	Total Capital to risk weighted assets
		FPNC	$62,769	15.06%	$33,354	>	8.00%	$41,692	>	10.00%
		FNB	62,188	14.92	33,349	>	8.00	41,686	>	10.00
	Tier I (Core) Capital to risk weighted assets
		FPNC	57,529	13.80	16,677	>	4.00	25,015	>	6.00
		FNB	56,948	13.66	16,674	>	4.00	25,012	>	6.00
	Tier I (Core) Capital to average quarterly assets
		FPNC	57,529	9.15	25,137	>	4.00
		FNB	56,948	9.06	25,133	>	4.00	31,417	>	5.00

page 32

PART I - FINANCIAL INFORMATION
____________________________________________

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest rate risk

       The registrant's primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the registrant's assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of the registrant's operations, the registrant is not subject to foreign currency exchange or commodity price risk.  
       Interest rate risk management focuses on the earnings risk associated with changing interest rates, as well as the risk to the present value of the registrant's equity. Management seeks to maintain profitability in both immediate and long-term earnings through funds management and interest rate risk management. The registrant's rate sensitive position has an important impact on earnings and the present value of the registrant's equity. Management of the registrant meets regularly to analyze the rate sensitivity position, focusing on the spread between the cost of funds and interest yields generated primarily through loans and investments. Management also seeks to maintain stability in the net interest margin under varying interest rate environments. These goals are accomplished through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.
       Analysis of rate sensitivity and rate gap analysis are the primary tools used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates. Included in the analysis are cash flows and maturities of financial instruments, changes in market conditions, and pricing and deposit volume and mix. Since these assumptions are inherently uncertain, net interest income can not be precisely estimated nor can the impact of changes in interest rates be precisely predicted. Actual results will differ due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management's strategies, among other factors.
       Simulation modeling is used to evaluate both the level of interest rate sensitivity as well as potential balance sheet strategies. Important elements in this modeling process include the mix of floating rate versus fixed rate assets and liabilities; the repricing/maturing volumes and rates of the existing balance sheet; and assumptions regarding future volumes, maturity patterns and pricing under varying interest rate scenarios. The Bank's Asset/Liability policy strives to limit the decrease in net interest income over a +/-200 basis point rate shock to no more than 9.0 percent over the next twelve months as compared to the base scenario of no changes in interest rates and to limit the decrease in the current present value of the Bank's equity to no more than 18 percent over the same +/-200 basis point rate shock.As of March 31, 2012, the -200 basis point rate shock was estimated to increase the current present value of the Bank's equity by 7.1 percent and a +200 basis point rate shock was estimated to decrease the current present value of the Bank's equity by 12.3 percent, both well within the policy guidelines. A -200 basis point rate shock was estimated to decrease net interest income approximately $2,932,000, or 13.8 percent, over the next twelve months, as compared to the base scenario. A +200 basis point rate shock was projected to decrease net interest income approximately $664,000, or 3.1 percent, over the next twelve months as compared to the base scenario. The decrease in net interest income in the next twelve months in the -200 basis point rate shock is outside the Bank's limit of -9.0%; however, the longer-term interest rate risk seems to be mitigated as shown by the smaller change in the current present value of the Bank's equity in the -200 basis point rate shock scenario as compared to rates remaining stable. Although interest rates are currently very low, the Bank believes a -200 basis point rate shock is an effective and realistic test since interest rates on many of the Bank's loans still have the ability to decline 200 basis points. For those loans that have floors above the -200 basis point rate shock, the interest rate would be the floor rate. All deposit account rates would likely fall to their floors under the -200 basis point rate shock as well. This simulation analysis assumes that NOW and savings accounts have a lower correlation to changes in market interest rates than do loans, investment securities and time deposits. The simulation analysis takes into account the call features of certain investment securities based upon the rate shock, as well as estimated prepayments on loans. The simulation analysis assumes no change in the Bank's asset/liability composition due to the inherent uncertainties of specific conditions and corresponding actions

page 33

PART I - FINANCIAL INFORMATION
____________________________________________

Item 3. Quantitative and Qualitative Disclosures About Market Risk. (Continued)

of management. Actual results would vary due to changing market conditions and management's response to those conditions.
       There have been no material changes in reported market risks during the quarter ended March 31, 2012.  

Item 4. Controls and Procedures.

       The registrant maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by the registrant in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The registrant carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and the Chief Financial Officer concluded that the registrant's disclosure controls and procedures were effective.

Changes in Internal Controls

       There were no changes in the registrant's internal control over financial reporting during the registrant's fiscal quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

PART II - OTHER INFORMATION
____________________________________________

Item 1.  Legal Proceedings.

       The registrant and its subsidiaries are involved, from time to time, in ordinary routine litigation incidental to the banking business. Neither the registrant nor its subsidiary is involved in any material pending legal proceedings.

Item 1A. Risk Factors.

       There were no material changes to the risk factors previously disclosed in Part I, Item 1A, of the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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

     (a) None

     (b) None

     (c) None

page 34

PART II - OTHER INFORMATION
____________________________________________

Item 3.  Defaults Upon Senior Securities.

      None

Item 4. Mine Safety Disclosures.

       Not applicable

Item 5.  Other Information.

      None

Item 6.  Exhibits.

      Exhibit 31.1    Certification of Mark A. Hayes, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      Exhibit 31.2    Certification of Tracy Porterfield, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      Exhibit 32.1    Certification of Mark A. Hayes, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002.
      Exhibit 32.2    Certification of Tracy Porterfield, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002.
      Exhibit 101     Interactive Data File

page 35

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.

                                                                                FIRST PULASKI NATIONAL CORPORATION

Date:  May 10, 2012                                                /s/Mark A. Hayes                                             
                                                                                Mark A. Hayes, Chief Executive Officer

Date:  May 10, 2012                                                /s/Tracy Porterfield                                            
                                                                                Tracy Porterfield, Chief Financial Officer
                                                                               

page 36

Exhibit Index

Exhibit 31.1     Certification of Mark A. Hayes, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2     Certification of Tracy Porterfield, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1     Certification of Mark A. Hayes, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                       Sarbanes-Oxley Act of 2002.
Exhibit 32.2     Certification of Tracy Porterfield, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
                       Sarbanes-Oxley Act of 2002.
Exhibit 101      Interactive Data File

EX-31

EXHIBIT 31.1

CERTIFICATIONS

I, Mark A. Hayes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Pulaski National 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

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

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2012                                                                                        /s/Mark A. Hayes                                 
                                                                                                                       Mark A. Hayes
                                                                                                                       Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATIONS

I, Tracy Porterfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Pulaski National 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

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

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2012                                                                        /s/Tracy Porterfield                  
                                                                                                       Tracy Porterfield
                                                                                                       Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Pulaski National Corporation (the "Company") on Form 10-Q for the quarter ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark A. Hayes, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company

Date: May 10, 2012                                                                    /s/Mark A. Hayes                                
                                                                                                   Mark A. Hayes, Chief Executive Officer

EX-32

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Pulaski National Corporation (the "Company") on Form 10-Q for the quarter ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Tracy Porterfield, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company

Date: May 10, 2012                                                              /s/Tracy Porterfield                              
                                                                                             Tracy Porterfield, Chief Financial Officer

XML

Stock Based Compensation

3 Months Ended

Mar. 31, 2012

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 2.

Accounting Standards Codification (“ASC”) Sections 718 and 505 require the measurement, at the date of the grant, of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Compensation cost is recognized based upon the fair value of the awards over the vesting period for each award.

Bank employees may be granted options, restricted shares or rights to purchase shares of the registrant’s common stock under the registrant’s equity incentive and employee stock purchase plans.

The 1994 employee stock purchase plan (“1994 Plan”) permits the granting of rights to eligible employees of the registrant to acquire stock. A total of 150,000 shares were reserved under this plan and no shares were issued under the 1994 Plan during the first three months of 2012.

As there are no unvested stock options as of January 1, 2012, and no stock options were granted in the first three months of 2012, there was no share-based compensation expense or tax benefit recorded in the first three months of 2012 related to stock options; however, as discussed below, the registrant incurred stock compensation expense in the first three months of 2012 related to the previously issued restricted shares. In addition, there were no unrecognized compensation costs related to stock options at March 31, 2012.

Below is a summary of the registrant’s stock option activity for the 2011 fiscal year and the first three months of 2012:

	Number of Options			Weighted Average Exercise Price
Outstanding January 1, 2011		8,000		$	46.56
Granted		—			—
Exercised		—			—
Expired		(1,000	)		38.50
Outstanding December 31, 2011		7,000			47.71
Exercisable December 31, 2011		7,000		$	47.71
Outstanding January 1, 2012		7,000		$	47.71
Granted		—			—
Exercised		—			—
Expired		—			—
Outstanding March 31, 2012		7,000			47.71
Exercisable March 31, 2012		7,000		$	47.71

The aggregate intrinsic value of outstanding options shown in the table at March 31, 2011 was $0 based on $41.00 per share, the price of which the registrant is aware, at which the registrant’s common stock was traded on a date closest to and/or prior to March 31, 2012. The weighted average remaining term of the stock options in the table above was 1.4 years as of March 31, 2012.

No stock options were exercised and no cash was received from the exercise of stock options during the three months ended March 31, 2012 and 2011. There was no intrinsic value of stock options exercised for the three months ended March 31, 2012 and 2011.

At March 31, 2012, the registrant had 87,750 shares reserved for award under its 2007 Equity Incentive Plan (the “2007 Plan”). During the first three months of 2012 the registrant did not grant any awards of restricted stock to employees of the Bank under the 2007 Plan. Compensation expense associated with restricted share awards, like those previously awarded under the 2007 Plan, is recognized over the time period that the restrictions associated with the awards lapse. During the three months ended March 31, 2012, the registrant recognized $33,687 in compensation costs attributable to all restricted stock awards issued under the 2007 Plan. A summary of activity for restricted share awards for the three months ended March 31, 2012 follows:

Nonvested Shares	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2012		3,250		$	55.00
Granted		—			55.00
Vested		(450	)		55.00
Forfeited		—			—
Nonvested at March 31, 2012		2,800		$	55.00

The registrant expects to satisfy the exercise of stock options and the future grants of other equity-based awards, by issuing shares of common stock from authorized but unissued shares. At March 31, 2012, the registrant had approximately 8.4 million authorized but unissued shares of common stock.

As of March 31, 2012, there was $81,239 of total unrecognized compensation cost related to nonvested restricted shares granted under the 2007 Plan. The cost is expected to be recognized within the next year. The total fair value of shares vested during the three months ended March 31, 2012 and 2011was $18,450 and $18,900, respectively.

XML

Summary of Significant accounting Policies

3 Months Ended

Mar. 31, 2012

Summary of Significant accounting Policies [Abstract]

Summary of Significant accounting Policies

Note 1.

The unaudited consolidated financial statements include the accounts of First Pulaski National Corporation (the “Corporation” or the “registrant”) and its wholly-owned subsidiary, First National Bank of Pulaski (the “Bank”), and the Bank’s wholly-owned subsidiary, First Pulaski Reinsurance Company.

The interim financial statements furnished under this item reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, as allowed under rules and regulations of the Securities and Exchange Commission for interim period presentation. The results for interim periods are not necessarily indicative of results to be expected for the complete fiscal year. Certain prior period amounts have been reclassified to conform to the current period classifications.

XML

Condensed Consolidated Balance Sheets (USD $)	Mar. 31, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Cash and due from banks	$ 25,333,658	$ 32,182,394
Federal funds sold	6,365,000	1,640,000
Cash and cash equivalents	31,698,658	33,822,394
Interest bearing balances with banks	445,598	543,832
Securities available for sale	242,724,005	217,469,728
Loans held for sale	2,028,867	2,168,816
Loans
Loans net of unearned income	335,513,329	340,553,701
Allowance for loan losses	(7,177,794)	(7,470,322)
Total net loans	328,335,535	333,083,379
Bank premises and equipment	18,824,289	18,760,960
Accrued interest receivable	3,315,094	3,351,127
Other real estate	7,159,467	7,110,969
Federal Home Loan Bank stock	1,526,500	1,526,500
Company-owned life insurance	10,869,115	10,789,213
Prepaid FDIC insurance	1,616,397	1,731,418
Deferred tax assets, net	4,233,738	3,221,632
Prepayments and other assets	1,621,607	1,518,844
TOTAL ASSETS	654,398,870	635,098,812
Deposits
Non-interest bearing balances	91,518,604	88,005,413
Interest bearing balances	487,823,751	471,225,835
Total deposits	579,342,355	559,231,248
Securities sold under repurchase agreements	1,923,406	1,850,824
Other borrowed funds	6,610,016	7,326,366
Accrued interest payable	873,317	863,878
Other liabilities	5,503,703	6,059,192
TOTAL LIABILITIES	594,252,797	575,331,508
SHAREHOLDERS' EQUITY
Common Stock, $1 par value; authorized - 10,000,000 shares; 1,571,481 and 1,570,428 shares issued and outstanding, respectively	1,571,481	1,570,428
Capital surplus	1,659,202	1,601,845
Retained earnings	56,304,412	54,357,140
Accumulated other comprehensive income, net	610,978	2,237,891
TOTAL SHAREHOLDERS' EQUITY	60,146,073	59,767,304
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 654,398,870	$ 635,098,812

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash dividends paid	$ 0.25	$ 0.25
Retained Earnings
Cash dividends paid	$ 0.25	$ 0.25

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net income	$ 2,340,604	$ 1,368,216
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses		750,000
Depreciation of premises and equipment	242,257	245,757
Amortization and accretion of investment securities, net	449,012	318,356
Deferred income tax (benefit) expense	(2,650)	651,890
Loss (gain) on sale of other assets	188,154	(246,817)
Security gains, net	(1,042,045)	(110,058)
Stock-based compensation expense	33,687	33,688
Loans originated for sale	(9,058,299)	(4,666,496)
Proceeds from sale of loans	9,460,297	5,579,205
Mortgage banking income	(262,049)	(148,744)
Increase in cash surrender value of life insurance	(79,902)	(89,875)
Decrease in accrued interest receivable	36,033	3,731
(Increase) decrease in prepayments/other assets	12,259	(574,015)
Increase (decrease) in accrued interest payable	9,439	(82,624)
Increase (decrease) in accrued taxes	229,868	(486,468)
(Decrease) increase in other liabilities	(785,356)	142,565
Net cash from operating activities	1,771,309	2,688,311
Cash flows from investing activities:
Proceeds from maturity of investment securities available for sale	17,857,179	13,000,212
Proceeds from sale of investment securities	41,263,183	3,893,335
Purchase of investment securities available for sale	(86,417,977)	(20,268,651)
Decrease (increase) in interest bearing balances with banks	98,234	(4,274)
Net decrease (increase) in loans	4,411,781	(3,701,895)
Capital expenditures	(323,449)	(102,466)
Proceeds from sale of other assets	117,274	4,010,644
Net cash used by investing activities	(22,993,775)	(3,173,095)
Cash flows from financing activities:
Net increase in deposits	20,111,107	17,054,277
Cash dividends paid	(393,332)	(391,813)
Proceeds from issuance of common stock	24,723	29,610
Net increase in securities sold under repurchase agreements	72,582	67,760
Borrowings repaid	(716,350)	(60,525)
Net cash from financing activities	19,098,730	16,699,309
Net increase (decrease) in cash and cash equivalents	(2,123,736)	16,214,525
Cash and cash equivalents at beginning of period	33,822,394	17,043,132
Cash and cash equivalents at end of period	31,698,658	33,257,657
Supplemental cash flow information
Interest paid	1,116,176	1,551,659
Income taxes paid	938,000	988,000
Supplemental noncash disclosures
Transfers from loans to other real estate owned	$ 342,063	$ 1,659,744

XML

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Common Stock, par value	$ 1	$ 1
Common Stock, shares authorized	10,000,000	10,000,000
Common Stock, shares issued	1,571,481	1,570,428
Common Stock, shares outstanding	1,571,481	1,570,428

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	FIRST PULASKI NATIONAL CORP
Entity Central Index Key	0000354706
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		1,571,831

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
INTEREST INCOME:
Loans, including fees	$ 5,817,036	$ 5,932,720
Securities
Taxable	886,535	748,963
Non-taxable	266,800	329,495
Federal funds sold and other	15,446	12,187
Dividends	32,153	32,153
Total interest income	7,017,970	7,055,518
Interest on deposits:
NOW Accounts	55,905	54,398
Savings & MMDAs	99,973	98,877
Time	896,000	1,239,189
Repurchase agreements	7,654	7,770
Borrowed funds	66,083	68,801
Total interest expense	1,125,615	1,469,035
NET INTEREST INCOME	5,892,355	5,586,483
Provision for loan losses		750,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	5,892,355	4,836,483
NON-INTEREST INCOME:
Service charges on deposit accounts	487,696	510,614
Commissions and fees	89,776	74,529
Other service charges and fees	282,229	232,598
Income on company-owned life insurance	79,902	89,875
Security gains, net	1,042,045	110,058
Mortgage banking income	262,049	148,744
Other income	20,178	293,236
Total non-interest income	2,263,875	1,459,654
NON-INTEREST EXPENSES:
Salaries and employee benefits	2,613,823	2,433,570
Occupancy expense, net	466,370	475,886
Furniture and equipment expense	178,916	160,903
Advertising and public relations	131,854	122,858
Foreclosed assets, net	243,753	140,712
FDIC insurance expense	124,277	226,923
Other operating expenses	851,050	800,734
Total non-interest expenses	4,610,043	4,361,586
Income before taxes	3,546,187	1,934,551
Applicable income taxes	1,205,583	566,335
NET INCOME	2,340,604	1,368,216
Earnings per common share:
Basic	$ 1.49	$ 0.87
Diluted	$ 1.49	$ 0.87
Comprehensive income
Reclassification adjustment for gains included in net income, net of tax	(643,046)	(67,917)
Change in unrealized gains (losses) on available for sale securities, net of tax	(983,867)	512,089
Comprehensive income	$ 713,691	$ 1,812,388

XML

Loans

3 Months Ended

Mar. 31, 2012

Loans [Abstract]

Loans

Note 5

Loans at March 31, 2012 and December 31, 2011 were as follows:

	March 31, 2012			December 31, 2011
Commercial	$	25,010,596		$	29,518,794
Commercial and agricultural real estate:
Commercial real estate		132,758,089			127,470,394
Agricultural real estate		35,214,757			36,825,448
Construction and land development		27,112,905			27,255,729
Residential real estate
Home equity line of credit		16,390,113			17,573,194
1-4 family closed-end first lien		60,125,424			60,979,977
1-4 family closed-end junior lien		2,348,718			2,593,391
Multi-family		1,457,968			997,839
Consumer		25,050,853			26,194,891
Other		10,231,031			11,337,367
Subtotal		335,700,454			340,747,024
Less: Net deferred loan fees		(187,125	)		(193,323	)
Allowance for loan losses		(7,177,794	)		(7,470,322	)
Loans, net	$	328,335,535		$	333,083,379

The loan balances in the following tables related to credit quality do not include approximately $2,067,000 in accrued interest receivable and approximately $187,000 in deferred loan fees at March 31, 2012 and approximately $2,292,000 in accrued interest receivable and approximately $193,000 in deferred loan fees at December 31, 2011.

The following table presents the activity in the allowance for loan losses for the three months ended March 31, 2012 and loans by portfolio segment and based on impairment method as of March 31, 2012.

	Commercial			Commercial and Agricultural Real Estate			Construction and Land Development			Residential Real Estate			Consumer			Other			Total
Allowance for loan losses:
Beginning balance	$	677,655		$	3,825,067		$	1,198,728		$	1,327,170		$	389,576		$	52,126		$	7,470,322
Provision for loan losses		96,583			(14,895	)		(52,496	)		(51,506	)		33,774			(11,460	)		—
Loans charged-off		(99,002	)		(74,691	)		—			(54,874	)		(112,063	)		—			(340,630	)
Recoveries		6,634			17,500			—			827			23,141			—			48,102
Ending balance		681,870			3,752,981			1,146,232			1,221,617			334,428			40,666			7,177,794
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—		$	146,680		$	83,371		$	—		$	—		$	—		$	230,051
Collectively evaluated for impairment		681,870			3,606,301			1,062,861			1,221,617			334,428			40,666			6,947,743
Total ending allowance balance	$	681,870		$	3,752,981		$	1,146,232		$	1,221,617		$	334,428		$	40,666		$	7,177,794
Loans:
Loans individually evaluated for impairment	$	48,018		$	3,664,075		$	1,420,397		$	2,705,201		$	—		$	—		$	7,837,691
Loans collectively evaluated for impairment		24,962,578			164,308,771			25,692,508			77,617,022		$	25,050,853			10,231,031			327,862,763
Total ending loans balance	$	25,010,596		$	167,972,846		$	27,112,905		$	80,322,223		$	25,050,853		$	10,231,031		$	335,700,454

The following table presents the activity in the allowance for loan losses for the three months ended March 31, 2011 and loans by portfolio segment and based on impairment method as of March 31, 2011:

	Commercial			Commercial and Agricultural Real Estate			Construction and Land Development			Residential Real Estate			Consumer			Other		Total
Allowance for loan losses:
Beginning balance	$	1,035,511		$	3,747,046		$	1,474,970		$	1,274,380		$	383,644		$	81,410	$	7,996,961
Provision for loan losses		(128,440	)		357,728			(30,538	)		420,272			130,513			465		750,000
Loans charged-off		(147,928	)		(40,159	)		(115,046	)		(226,062	)		(88,055	)		—		(617,250	)
Recoveries		450			5,923			—			21,759			9,375			1,500		39,007
Ending balance		759,593			4,070,538			1,329,386			1,490,349			435,477			83,375		8,168,718

The following table presents the balances in the allowance for loan losses and loans by portfolio segment and based on impairment method as of December 31, 2011:

	Commercial		Commercial and Agricultural Real Estate		Construction and Land Development		Residential Real Estate		Consumer		Other		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	146,311	$	106,227	$	—	$	—	$	—	$	252,538
Collectively evaluated for impairment		677,655		3,678,756		1,092,501		1,327,170		389,576		52,126		7,217,784
Total ending allowance balance	$	677,655	$	3,825,067	$	1,198,728	$	1,327,170	$	389,576	$	52,126	$	7,470,322
Loans:
Loans individually evaluated for impairment	$	48,405	$	3,195,817	$	1,643,830	$	2,736,506	$	—	$	—	$	7,624,558
Loans collectively evaluated for impairment		29,470,389		161,100,025		25,611,899		79,407,895		26,194,891		11,337,367		333,122,466
Total ending loans balance	$	29,518,794	$	164,295,842	$	27,255,729	$	82,144,401	$	26,194,891	$	11,337,367	$	340,747,024

The following table presents information related to impaired loans by class of loans as of and for the three months ended March 31, 2012. The unpaid principal balance has been reduced for net charge-offs in the following table.

	Unpaid Principal Balance		Loan Balance		Allowance for Loan Losses Allocated		Average Loan Balance		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial	$	48,018	$	48,018	$	—	$	147,163	$	—	$	—
Commercial and agricultural real estate:
Commercial real estate		3,063,985		3,064,708		—		3,119,693		24,540		24,540
Agricultural real estate		—		—		—		—		—		—
Residential real estate:
Home equity line of credit		—		—		—		—		—		—
1-4 family closed-end		2,705,201		2,705,201		—		2,725,978		4,876		4,876
Multi-family		—		—		—		—		—		—
Construction and land development		723,352		723,352		—		723,352		—		—
With an allowance recorded:
Commercial		—		—		—		—		—		—
Commercial and agricultural real estate:
Commercial real estate		600,090		600,090		146,680		597,058		—		—
Agricultural real estate		—		—		—		—		—		—
Residential real estate:
Home equity line of credit		—		—		—		—		—		—
1-4 family closed-end		—		—		—		—		—		—
Multi-family		—		—		—		—		—		—
Construction and land development		697,045		697,045		83,371		801,644		—		—
	$	7,837,691	$	7,838,414	$	230,051	$	8,114,888	$	29,416	$	29,416

The following table presents information related to impaired loans by class of loans as of and for the three months ended March 31, 2011. The unpaid principal balance has been reduced for net charge-offs in the following table.

	Unpaid Principal Balance		Loan Balance		Allowance for Loan Losses Allocated		Average Loan Balance		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Commercial	$	61,572	$	61,572	$	—	$	65,730	$	—	$	—
Commercial and agricultural real estate:
Commercial real estate		4,493,651		4,493,651		—		4,496,560		50,293		—
Agricultural real estate		—		—		—		—		—		—
Residential real estate:
Home equity line of credit		—		—		—		—		—		—
1-4 family closed-end		2,956,102		2,956,102				2,985,068		52,128		52,128
Multi-family		—		—		—		—		—		—
Construction and land development		1,861,553		1,861,553				1,861,552		—		—
With an allowance recorded:
Commercial		—		—		—		—		—		—
Commercial and agricultural real estate:
Commercial real estate		1,428,072		1,428,072		208,525		1,431,063		—		—
Agricultural real estate		—		—		—		—		—		—
Residential real estate:
Home equity line of credit		—		—		—		—		—		—
1-4 family closed-end		319,585		319,585		67,514		319,585		—		—
Multi-family		—		—		—		—		—		—
Construction and land development		1,377,001		1,377,047		126,688		1,387,077		—		—
	$	12,497,536	$	12,497,582	$	402,727	$	12,546,635	$	102,421	$	52,128

The following table presents information related to impaired loans by class of loans as of December 31, 2011. The unpaid principal balance has been reduced for net charge-offs in the following table.

	Unpaid Principal Balance		Loan Balance		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial	$	48,405	$	48,405	$	—
Commercial and agricultural real estate:
Commercial real estate		2,597,072		2,597,072		—
Agricultural real estate		—		—		—
Residential real estate:
Home equity line of credit		—		—		—
1-4 family closed-end		2,736,506		2,736,506		—
Multi-family		—		—		—
Construction and land development		723,352		723,352		—
With an allowance recorded:
Commercial		—		—		—
Commercial and agricultural real estate:
Commercial real estate		598,745		598,745		146,311
Agricultural real estate		—		—		—
Residential real estate:
Home equity line of credit		—		—		—
1-4 family closed-end		—		—		—
Multi-family		—		—		—
Construction and land development		920,478		920,478		106,227
	$	7,624,558	$	7,624,558	$	252,538

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans that are not performing.

The following table presents nonaccrual and loans past due 90 days still on accrual by class of loans as of March 31, 2012 and December 31, 2011.

					Loans Past Due Over
	Nonaccrual				90 Days and Still Accruing
	March 31, 2012		December 31, 2011		March 31, 2012		December 31, 2011
Commercial	$	103,935	$	59,028	$	—	$	—
Commercial and agricultural real estate:
Commercial real estate		3,899,187		3,504,851		—		—
Agricultural real estate		378,929		378,527		—		—
Residential real estate:
Home equity line of credit		—		—		—		—
1-4 family closed-end first lien		3,654,286		3,983,744		—		—
1-4 family closed-end junior lien		—		6,250		—		—
Multi-family		—		—		—		—
Construction and land development		1,350,240		1,539,053		180,795		—
Consumer		67,507		92,786		—		23,684
Other		26,507		26,507		—		—
	$	9,480,591	$	9,590,746	$	180,795	$	23,684

The following table presents the aging of past due loans as of March 31, 2012 and December 31, 2011 by class of loans:

March 31, 2012
	30-89 Days Past Due		90 days or more Past Due		Total Past Due		Loans Not Past Due		Total
Commercial	$	372,168	$	10,623	$	382,791	$	24,627,805	$	25,010,596
Commercial and agricultural real estate:
Commercial real estate		3,342,399		2,873,984		6,216,383		126,541,706		132,758,089
Agricultural real estate		164,089		250,294		414,383		34,800,374		35,214,757
Residential real estate:
Home equity line of credit		186,717		—		186,717		16,203,396		16,390,113
1-4 family closed-end first lien		1,132,870		383,707		1,516,577		58,608,847		60,125,424
1-4 family closed-end junior lien		62,895		—		62,895		2,285,823		2,348,718
Multi-family		117,789		—		117,789		1,340,179		1,457,968
Construction and land development		608,932		1,531,035		2,139,967		24,972,938		27,112,905
Consumer		465,948		19,074		485,022		24,565,831		25,050,853
Other		84,440		26,507		110,947		10,120,084		10,231,031
	$	6,538,247	$	5,095,224	$	11,633,471	$	324,066,983	$	335,700,454
December 31, 2011
	30-89 Days Past Due		90 days or more Past Due		Total Past Due		Loans Not Past Due		Total
Commercial	$	333,697	$	10,623	$	344,320	$	29,174,474	$	29,518,794
Commercial and agricultural real estate:
Commercial real estate		1,810,872		2,003,558		3,814,430		123,655,964		127,470,394
Agricultural real estate		137,201		249,228		386,429		36,439,019		36,825,448
Residential real estate:
Home equity line of credit		82,698		—		82,698		17,490,496		17,573,194
1-4 family closed-end first lien		2,000,183		894,097		2,894,280		58,085,697		60,979,977
1-4 family closed-end junior lien		113,240		—		113,240		2,480,151		2,593,391
Multi-family		—		—		—		997,839		997,839
Construction and land development		1,375,760		457,065		1,832,825		25,422,904		27,255,729
Consumer		527,327		60,439		587,766		25,607,125		26,194,891
Other		69,375		27,066		96,441		11,240,926		11,337,367
	$	6,450,353	$	3,702,076	$	10,152,429	$	330,594,595	$	340,747,024

The above table includes nonaccrual loans of $3,400,115 and $3,016,993 in the loans not past due category, $2,114,302 and $2,895,361 in the 30-89 days past due category and $3,966,174 and $3,678,392 in the 90 days or more past due category as of March 31, 2012 and December 31, 2011, respectively.

Troubled Debt Restructurings:

During the three-month period ending March 31, 2012, no loans were modified as troubled debt restructurings. The modification of the terms of loans usually include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

The Company has not allocated any specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2012 and December 31, 2011. The Company has not committed to lend any additional amounts as of March 31, 2012 and December 31, 2011 to customers with outstanding loans that are classified as troubled debt restructurings.

There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification for the period ended March 31, 2012.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings, which are updated annually:

Special mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in

deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

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

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

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are typically overdrafts and loans in process. An analysis of loans by risk category is performed quarterly. As of March 31, 2012 and December 31, 2011, and based on the most recent analysis performed as of each date, the risk category of loans by class of loans is as follows:

March 31, 2012
	Pass		Special Mention		Substandard		Doubtful		Not Rated
Commercial	$	24,346,806	$	187,617	$	476,173	$	—	$	—
Commercial and agricultural real estate:
Commercial real estate		120,420,816		3,646,193		8,691,080		—		—
Agricultural real estate		33,838,464		983,444		392,849		—		—
Residential real estate:
Home equity line of credit		16,121,752		—		268,361		—		—
1-4 family closed-end first lien		54,666,894		836,277		4,622,253		—		—
1-4 family closed-end junior lien		1,893,936		164,881		289,901		—		—
Multi-family		1,457,968		—		—		—		—
Construction and land development		24,960,624		191,322		1,960,959		—
Consumer		24,507,659		171,418		371,776		—		—
Other		9,611,308		117,281		26,506		—		475,936
Total	$	311,826,227	$	6,298,433	$	17,099,858	$	—	$	475,936
December 31, 2011
	Pass		Special Mention		Substandard		Doubtful		Not Rated
Commercial	$	29,009,547	$	125,766	$	383,481	$	—	$	—
Commercial and agricultural real estate:
Commercial real estate		115,705,423		3,656,544		8,108,427		—		—
Agricultural real estate		35,611,655		819,682		394,111		—		—
Residential real estate:
Home equity line of credit		17,244,456		33,020		295,718		—		—
1-4 family closed-end first lien		55,194,491		1,177,666		4,607,820		—		—
1-4 family closed-end junior lien		2,194,417		101,553		297,421		—		—
Multi-family		997,839		—		—		—		—
Construction and land development		25,051,579		14,472		2,189,678		—
Consumer		25,625,547		170,075		399,269		—		—
Other		10,672,388		19,337		26,506		—		619,136
Total	$	317,307,342	$	6,118,115	$	16,702,431	$	—	$	619,136

XML

Securities

3 Months Ended

Mar. 31, 2012

Securities [Abstract]

Securities

Note 4

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income at March 31, 2012 and December 31, 2011 were as follows:

March 31, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. government sponsored entities	$	117,360,264	$	521,737	$	721,903	$	117,160,098
Obligations of states and political subdivisions		36,614,662		1,021,148		303,076		37,332,734
Mortgage-backed securities-residential		87,759,000		805,192		333,019		88,231,173
Total	$	241,733,926	$	2,348,077	$	1,357,998	$	242,724,005
December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury securities	$	100,107	$	26	$	—	$	100,133
U.S. government sponsored entities		114,896,330		1,522,270		11,008		116,407,592
Obligations of states and political subdivisions		36,668,186		1,437,841		27,737		38,078,290
Mortgage-backed securities-residential		62,178,656		767,916		62,859		62,883,713
Total debt securities	$	213,843,279	$	3,728,053	$	101,604	$	217,469,728

The amortized cost and fair value of debt securities at March 31, 2012 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Available for Sale
	Amortized Cost		Fair Value
Due in one year or less	$	7,342,017	$	7,417,285
Due after one year through five years		81,508,856		82,156,555
Due after five years through ten years		60,408,406		60,413,741
Due after ten years		4,715,647		4,505,251
Mortgage-backed-residential		87,759,000		88,231,173
TOTAL	$	241,733,926	$	242,724,005

Securities with unrealized losses at March 31, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

March 31, 2012
	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Obligations of U.S. government sponsored entities	$	67,467,188	$	721,903	$	—	$	—	$	67,467,188	$	721,903
Obligations of states and political subdivisions		7,234,692		294,644		254,550		8,432		7,489,242		303,076
Mortgage-backed securities - residential		43,674,732		333,019		—		—		43,674,732		333,019
Total temporarily impaired securities	$	118,376,612	$	1,349,566	$	254,550	$	8,432	$	118,631,162	$	1,357,998
December 31, 2011
	Less Than 12 Months				12 Months or Longer				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Obligations of U.S. government sponsored entities	$	8,505,750	$	11,008	$	—	$	—	$	8,505,750	$	11,008
Obligations of states and political subdivisions		1,125,358		17,763		254,050		9,974		1,379,408		27,737
Mortgage-backed securities
—residential		15,573,390		62,859		—		—		15,573,390		62,859
Total temporarily impaired securities	$	25,204,498	$	91,630	$	254,050	$	9,974	$	25,458,548	$	101,604

Proceeds from sales of securities available for sale were $41,263,183 and $3,893,335 for the three months ended March 31, 2012 and 2011, respectively. Gross gains of $1,042,045 and $110,058 and no gross losses were realized on these sales for the first three months of 2012 and 2011, respectively.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under the provisions of ASC 320-10, Investments - Debt and Equity Securities. In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

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

As of March 31, 2012, the registrant’s security portfolio consisted of 304 securities, 86 of which were in an unrealized loss position. The majority of unrealized losses are related to the registrant’s obligations of U.S. government-sponsored entities as well as mortgage-backed securities that are also obligations of U.S. government-sponsored entities or U.S. government agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the registrant does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the registrant does not consider these securities to be other-than-temporarily impaired at March 31, 2012.

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Fair Value

3 Months Ended

Mar. 31, 2012

Fair Value [Abstract]

Fair Value

Note 6

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Investment securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Impaired Loans: At the time a loan is considered impaired, it is valued at the lower of cost or fair value. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by independent appraisers whose qualifications have been reviewed and verified by the Company. Once received, a member of the Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value.

Assets Measured on a Recurring Basis

Assets measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 are summarized below:

	Fair Value Measurements at March 31, 2012 using						Fair Value Measurements at December 31, 2011 using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Available for sale securities:
U.S. Treasuries	$	—	$	—	$	—	$	100,133	$	—	$	100,133
Obligations of U.S. Government
Sponsored Agencies		117,160,098		—		117,160,098		116,407,592		—		116,407,592
Obligations of States and
Political Subdivisions		37,332,734		—		37,332,734		38,078,290		—		38,078,290
Mortgage-backed securities - residential		88,231,173		—		88,231,173		62,883,713		—		62,883,713
Total	$	242,724,005	$	—	$	242,724,005	$	217,469,728	$	—	$	217,469,728

There were no transfers between Level 1 and Level 2 during 2012 or 2011.

Assets Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at March 31, 2012 Using
	Carrying Value		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans
Comml and ag real estate:
Commercial real estate	$	2,272,787		$	2,272,787
Agricultural real estate		—			—
Residential real estate:
Home equity line of credit		—			—
1-4 family closed-end		1,876,777			1,876,777
Multi-family		—			—
Construction & land development		455,430			455,430
Total impaired loans	$	4,604,994		$	4,604,994
Other real estate owned
Residential real estate:
Home equity line of credit	$	—		$	—
1-4 family closed-end		—			—
Multi-family		576,690			576,690
Construction & land development		3,583,750			3,583,750
Total other real estate owned	$	4,160,440		$	4,160,440

			Fair Value Measurements at December 31, 2011 Using
	Carrying Value		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level  3)
Assets:
Impaired loans
Comml and ag real estate:
Commercial real estate	$	1,805,814		$	1,805,814
Agricultural real estate		—			—
Residential real estate:
Home equity line of credit		—			—
1-4 family closed-end		1,908,083			1,908,083
Multi-family		—			—
Construction & land development		455,430			455,430
Total impaired loans	$	4,169,327		$	4,169,327
Other real estate owned
Residential real estate:
Home equity line of credit	$	—		$	—
1-4 family closed-end		—			—
Multi-family		576,690			576,690
Construction & land development		3,511,370			3,511,370
Total other real estate owned	$	4,088,060		$	4,088,060

There were $4,604,995 in impaired loans measured for impairment using the fair value of the collateral at March 31, 2012, resulting in an additional provision for loan losses of $154,859 for the three months ended March 31, 2012. There were $3,788,787 in impaired loans measured for impairment using the fair value of the collateral at March 31, 2011, resulting in an additional provision for loan losses of $28,200 for the three months ended March 31, 2011.

Other real estate owned, which is measured at fair value less costs to sell, had a net carrying amount of $7,159,467 as of March 31, 2012. Included in this amount were properties that were written down to fair value totaling $4,160,440, resulting in additional foreclosed asset expense of $119,933 for the three months ended March 31, 2012. Other real estate owned had a net carrying amount of $10,590,698 as of March 31, 2011. Included in this amount were properties that were written down to fair value totaling $4,632,790, resulting in additional foreclosed asset expense of $705 in the three months ended March 31, 2011.

Fair Value measurements for impaired loans and other real estate owned are derived from appraisals received from independent appraisers and are discounted by 29.5%, resulting in Level 3 classification.

Carrying amount and estimated fair values of financial instruments at March 31, 2012 were as follows:

			Fair Value Measurements at March 31, 2012
	Carrying Value		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Financial assets:
Cash and short-term investments	$	32,144	$	31,813	$	331	$	—	$	32,144
Securities		242,724		—		242,724		—		242,724
Loans held for sale		2,029		—		2,029		—		2,029
Loans, net		328,336		—		—		328,612		—
Federal Home Loan Bank stock		1,527		N/A		N/A		N/A		N/A
Accrued interest receivable		3,315		—		1,248		2,067		3,315
Financial liabilities:
Deposits		579,342		313,163		267,596		—		580,759
Securities sold under repurchase agreements		1,923		1,923		—		—		1,923
Other borrowed funds		6,610		—		6,971		—		6,971
Accrued interest payable		873		9		864		—		873

Carrying amount and estimated fair values of financial instruments at December 31, 2011 were as follows:

	December 31, 2011
	(In thousands)
	Carrying Value		Fair Value
Financial assets:
Cash and short-term investments	$	34,366	$	34,366
Securities		217,470		217,470
Loans held for sale		2,169		2,169
Loans, net		333,083		332,387
Federal Home Loan Bank stock		1,527		N/A
Accrued interest receivable		3,351		3,351
Financial liabilities:
Deposits		559,231		560,864
Securities sold under repurchase agreements		1,851		1,851
Other borrowed funds		7,326		7,733
Accrued interest payable		864		864

The methods and assumptions not previously described used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and short term investments, accrued interest receivable and payable, demand deposits, and variable rate loans or deposits that reprice frequently and fully and are classified as Level 1. The fair values of securities are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities and are classified as Level 2. For deposits with stated maturities fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk, resulting in Level 2 classification. For fixed rate loans and for variable rate loans with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk, resulting in Level 3 classification. Fair values of impaired loans are generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available, resulting in Level 3 classification. Fair values of debt are based on current rates for similar financing. The carrying amounts of accrued interest approximate fair value resulting in a Level 1 classification. It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability, therefore it has been excluded from the table above. The fair value of off-balance-sheet items and loans held for sale are not considered material.

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Earning Per Share

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Earning Per Share

Note 7

The factors used in the earnings per share computation follow:

	March 31,
	2012			2011
Net Income	$	2,340,604		$	1,368,216
Less: Distributed earnings allocated to participating securities		(613	)		(613	)
Less: Undistributed income allocated to participating securities		(3,033	)		(1,527	)
Net earnings allocated to common stock	$	2,336,958		$	1,366,076
Weighted common shares outstand ingincluding participating securities		1,572,960			1,566,878
Less: Participating securities		(2,450	)		(2,450	)
Weighted average shares		1,570,510			1,564,428
Basic earnings per share	$	1.49		$	0.87
Net earnings allocated to common stock	$	2,336,958		$	1,366,076
Weighted average shares		1,570,510			1,564,428
Add: dilutive effects of assumed exercises of stock options		80			188
Average shares and dilutive potential common shares		1,570,590			1,564,616
Dilutive earnings per share	$	1.49		$	0.87

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Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (USD $)	Total	Common Stock	Capital Surplus	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 31, 2010	$ 52,664,463	$ 1,564,350	$ 1,323,023	$ 50,070,308	$ (293,218)
Comprehensive income:
Net Income	1,368,216			1,368,216
Reclassification adjustment for gains included in net income, net of tax	(67,917)				(67,917)
Change in unrealized gains (losses) on available for sale securities, net of tax	512,089				512,089
Comprehensive income	1,812,388
Cash Dividends ($0.25 per share)	(391,813)			(391,813)
Compensation expense for restricted stock	33,688		33,688
Issuance of new common stock		450	(450)
Issuance of common stock through dividend reinvestment plan	29,610	705	28,905
Ending balance at Mar. 31, 2011	54,148,336	1,565,505	1,385,166	51,046,711	150,954
Beginning balance at Dec. 31, 2011	59,767,304	1,570,428	1,601,845	54,357,140	2,237,891
Comprehensive income:
Net Income	2,340,604			2,340,604
Reclassification adjustment for gains included in net income, net of tax	(643,046)				(643,046)
Change in unrealized gains (losses) on available for sale securities, net of tax	(983,867)				(983,867)
Comprehensive income	713,691
Cash Dividends ($0.25 per share)	(393,332)			(393,332)
Compensation expense for restricted stock	33,687		33,687
Issuance of new common stock		450	(450)
Issuance of common stock through dividend reinvestment plan	24,723	603	24,120
Ending balance at Mar. 31, 2012	$ 60,146,073	$ 1,571,481	$ 1,659,202	$ 56,304,412	$ 610,978

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 3

Recent Accounting Pronouncements:

In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this guidance are effective for interim and annual reporting periods beginning after December 15, 2011. The adoption of this amendment did not have a material impact on the consolidated financial statements.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholder’s equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011. The adoption of this amendment changed the presentation of the components of comprehensive income for the Corporation as part of the consolidated statement of shareholder’s equity and is now reported in the statement of income and comprehensive income.