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 ~~June~~September 30 , 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~~573,~~831~~481 shares outstanding as of ~~August~~ November 1, 2012.

page 1

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements.

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
	(UNAUDITED)
ASSETS
	June 30,	December 31,
	September 30,	December 31,
	2012	2011
Cash and due from banks	$2829,~~245~~364,~~448~~936	$32,182,394
Federal funds sold	27,~~140~~015,000	1,640,000
Cash and cash equivalents	3036,~~385~~379,~~448~~936	33,822,394
Interest bearing balances with banks	445,~~175~~441	543,832
Securities available for sale	~~247~~241,~~978~~087,~~010~~289	217,469,728
Loans held for sale	12,~~183~~664,~~572~~231	2,168,816
Loans
Loans net of unearned income	340,~~054~~400,~~936~~534	340,553,701
Allowance for loan losses	(7,~~188~~123,~~673~~746)	(7,470,322)
Total net loans	~~332~~333,~~866~~276,~~263~~788	333,083,379
Bank premises and equipment	18,~~850~~803,~~690~~092	18,760,960
Accrued interest receivable	23,~~871~~241,~~099~~668	3,351,127
Other real estate	6,~~962~~817,~~149~~264	7,110,969
Federal Home Loan Bank stock	1,526,500	1,526,500
Company-owned life insurance	1011,~~946~~020,~~775~~045	10,789,213
Prepaid FDIC insurance	1,~~501~~403,~~849~~588	1,731,418
Deferred tax assets, net	32,~~209~~801,~~977~~422	3,221,632
Prepayments and other assets	1,~~849~~585,~~219~~869	1,518,844
TOTAL ASSETS	$~~660~~661,~~576~~053,~~726~~133	$635,098,812
	===========	===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing balances	$93,~~018~~494,~~649~~512	$88,005,413
Interest bearing balances	~~489~~487,~~957~~530,~~537~~412	471,225,835
Total deposits	~~582~~581,~~976~~024,~~186~~924	559,231,248
Securities sold under repurchase agreements	12,~~961~~008,~~273~~458	1,850,824
Other borrowed funds	6,~~572~~542,~~073~~911	7,326,366
Accrued interest payable	~~786~~824,~~633~~056	863,878
Other liabilities	5,~~197~~733,~~442~~015	6,059,192
TOTAL LIABILITIES	~~597~~596,~~493~~133,~~607~~364	575,331,508
SHAREHOLDERS' EQUITY
Common Stock, $1 par value; authorized - 10,000,000 shares;
1,571,831 and 1,570,428 shares issued and outstanding, respectively	1,571,831	1,570,428
1,573,081 and 1,570,428 shares issued and outstanding, respectively	1,573,081	1,570,428
Capital surplus	1,~~692~~718,~~540~~905	1,601,845
Retained earnings	5758,~~609~~661,~~894~~175	54,357,140
Accumulated other comprehensive income, net	2,~~208~~966,~~854~~608	2,237,891
TOTAL SHAREHOLDERS' EQUITY	6364,~~083~~919,~~119~~769	59,767,304
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$~~660~~661,~~576~~053,~~726~~133	$635,098,812
	===========	===========
* See accompanying notes to consolidated financial statements (unaudited).

page 2

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		For ~~Six~~Nine Months Ended
	June 30,		June 30,
	September 30,		September 30,
	2012	2011	2012	2011
INTEREST INCOME:
Loans, including fees	$65,~~048~~755,~~560~~899	$6,~~137~~094,~~284~~422	$1117,~~865~~621,~~596~~495	$1218,~~070~~164,~~004~~426
Securities
Taxable	~~957~~876,~~135~~264	~~844~~800,~~389~~895	12,~~843~~719,~~670~~934	12,~~593~~394,~~352~~247
Non-taxable	~~253~~246,~~993~~963	~~311~~304,~~468~~316	~~520~~767,~~793~~756	~~640~~945,~~963~~279
Federal funds sold and other	1410,~~683~~258	1711,~~252~~289	3040,~~129~~387	2940,~~439~~728
Dividends	17,854	1816,~~662~~946	5067,~~007~~861	5067,~~815~~761
Total interest income	76,~~292~~907,~~225~~238	7,~~329~~227,~~055~~868	1421,~~310~~217,~~195~~433	1421,~~384~~612,~~573~~441
INTEREST EXPENSE:
Interest on deposits:
NOW Accounts	5753,~~645~~670	5652,~~369~~102	~~113~~167,~~550~~220	~~110~~162,~~767~~869
Savings & MMDAs	~~106~~113,~~860~~852	97106,~~509~~836	~~206~~320,~~833~~685	~~196~~303,~~386~~222
Time	~~872~~859,~~056~~982	1,~~115~~029,~~847~~005	12,~~768~~628,~~056~~038	23,~~355~~384,~~036~~041
Repurchase agreements	78,~~753~~546	8,~~418~~794	1523,~~407~~953	1624,~~188~~982
Borrowed funds	56,~~293~~257	68,~~371~~150	~~122~~178,~~376~~633	~~137~~205,~~172~~322
Total interest expense	1,~~100~~092,~~607~~307	1,~~346~~264,~~514~~887	23,~~226~~318,~~222~~529	24,~~815~~080,~~549~~436
NET INTEREST INCOME	65,~~191~~814,~~618~~931	5,~~982~~962,~~541~~981	1217,~~083~~898,~~973~~904	1117,~~569~~532,~~024~~005
Provision for loan losses	~~440~~60,000	~~400,000~~-	~~440~~500,000	1,150,000
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES	5,~~751~~754,~~618~~931	5,~~582~~962,~~541~~981	1117,~~643~~398,~~973~~904	1016,~~419~~382,~~024~~005
NON-INTEREST INCOME:
Service charges on deposit accounts	~~476~~521,~~037~~092	~~556~~576,~~870~~049	~~963~~1,~~733~~484,825	1,~~067~~643,~~484~~533
Commissions and fees	7269,~~734~~745	7776,~~689~~558	~~162~~232,~~510~~255	~~152~~228,~~218~~776
Other service charges and fees	~~291~~270,~~348~~857	~~262~~252,~~197~~531	~~573~~844,~~577~~434	~~494~~747,~~795~~326
Income on company-owned life insurance	7773,~~660~~270	8886,~~912~~589	~~157~~230,~~562~~832	~~178~~265,~~787~~376
Mortgage banking income	~~237~~266,~~201~~975	~~145~~259,~~031~~973	~~499~~766,~~250~~225	~~293~~553,~~775~~748
Gain on the sale of securities	-7,308	513,~~743~~390	1,~~042~~049,~~045~~353	~~115~~129,~~801~~191
Other income	712,~~167~~394	2226,~~507~~888	2739,~~345~~739	~~315~~342,~~743~~631
Total non-interest income	1,~~162~~221,~~147~~641	1,~~158~~291,~~949~~978	34,~~426~~647,~~022~~663	23,~~618~~910,~~603~~581

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		For ~~Six~~Nine Months Ended
	June 30,		June 30,
	September 30,		September 30,
	2012	2011	2012	2011
NON-INTEREST EXPENSE
Salaries and employee benefits	$2,~~585~~560,~~321~~567	$2,~~495~~644,~~479~~392	$57,~~199~~759,~~144~~711	$47,~~929~~573,~~049~~441
Occupancy expense, net	452,~~975~~205	~~452~~465,~~885~~670	~~919~~1,~~345~~371,550	~~928~~1,~~771~~394,441
Furniture and equipment expense	~~167~~179,~~173~~361	~~173~~176,~~952~~556	~~346~~525,~~089~~450	~~334~~511,~~855~~411
Advertising and public relations	~~150~~177,~~268~~990	~~142~~153,~~343~~803	~~282~~460,~~122~~112	~~265~~419,~~201~~004
Foreclosed assets, net	~~(10~~44,~~394)~~539	~~156~~43,~~276~~701	~~233~~277,~~359~~898	~~296~~340,~~988~~689
FDIC insurance expense	~~123~~107,~~968~~871	139,~~830~~382	~~248~~356,~~245~~116	~~366~~506,~~753~~135
Other operating expenses	~~912~~1,~~093~~322,829	~~847~~829,~~339~~610	13,~~763~~085,~~143~~972	12,~~648~~477,~~073~~683
Total non-interest expense	4,~~381~~845,~~404~~362	4,~~408~~453,~~104~~114	813,~~991~~836,~~447~~809	813,~~769~~222,~~690~~804
Income before taxes	2,~~532~~131,~~361~~210	2,~~333~~801,~~386~~845	68,~~078~~209,~~548~~758	47,~~267~~069,~~937~~782
Applicable income tax expense	~~833~~686,~~309~~359	~~731~~911,~~944~~209	2,~~038~~725,~~892~~251	12,~~298~~209,~~279~~488
NET INCOME	$1,~~699~~444,~~052~~851	$1,~~601~~890,~~442~~636	$45,~~039~~484,~~656~~507	$24,~~969~~860,~~658~~294
	===========	===========	===========	===========
Earnings per common share:
Basic	$10.0892	$1.0220	$23.5748	$13.8910
	===========	===========	===========	===========
Diluted	$10.0892	$1.0220	$23.5748	$13.8910
	===========	===========	===========	===========
Comprehensive income
Comprehensive income:
Net income	$1,~~699~~444,~~052~~851	$1,~~601~~890,~~442~~636	$45,~~039~~484,~~656~~507	$24,~~969~~860,~~658~~294
Reclassification adjustment for gains included
in net income, net of tax	-	(3,544)	(643,046)	(7,1461)
in net income, net of taxes of $2,798, $5,127,
$401,797 and $49,467, respectively	(4,510)	(8,263)	(647,556)	(79,724)
Change in unrealized gains (losses) on
available for sale securities, net of tax	1,597,876	1,276,418	614,009	1,788,507
available for sale securities, net of taxes of
Comprehensive income	$3,296,928	$2,874,316	$4,010,619	$4,686,704
$471,884, $727,408, $852,341 and $1,837,338,
respectively	762,264	1,172,324	1,376,273	2,960,831
Other comprehensive income	757,754	1,164,061	728,717	2,881,107
Comprehensive income	$2,202,605	$3,054,697	$6,213,224	$7,741,401
	===========	===========	===========	===========
* See accompanying notes to consolidated financial statements (unaudited).

page 4

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 Six Months Ended June 30, 2012
For the Nine Months Ended September 30, 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
Net Income			45,~~039~~484,~~656~~507		45,~~039~~484,~~656~~507
Reclassification adjustment
for gains included in net
income, net of tax				(~~643~~647,~~046~~556)	(~~643~~647,~~046~~556)
Change in unrealized
gains (losses) on available
for sale securities, net of tax				~~614~~1,~~009~~376,273	~~614~~1,~~009~~376,273
Cash Dividends
($0.50 per share)			(786,902)		(786,902)
($0.75 per share)			(1,180,472)		(1,180,472)
Compensation expense for
restricted stock		6794,~~375~~990			6794,~~375~~990
Issuance of new common stock	~~800~~2,050	(~~800~~2,050)			-
Issuance of common stock through
dividend reinvestment plan	603	24,120			24,723
Balance, June 30, 2012	$1,571,831	$1,692,540	$57,609,894	$2,208,854	$63,083,119
Balance, September 30, 2012	$1,573,081	$1,718,905	$58,661,175	$2,966,608	$64,919,769
	===========	===========	===========	============	============
For the Six Months Ended June 30, 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
Net Income			2,969,658		2,969,658
Reclassification adjustment
for gains included in net
income, net of tax				(71,461)	(71,461)
Change in unrealized
gains (losses) on available
for sale securities, net of tax				1,788,507	1,788,507
Cash Dividends
($0.50 per share)			(783,890)		(783,890)
Compensation expense for
restricted stock		67,375			67,375
Issuance of new common stock	800	(800)			-
Issuance of common stock through
dividend reinvestment plan	1,419	58,894			60,313
Balance, June 30, 2011	$1,566,569	$1,448,492	$52,256,076	$1,423,828	$56,694,965
	===========	===========	===========	============	============
* See accompanying notes to consolidated financial statements (unaudited).

===========

============

===========

For the Nine Months Ended September 30, 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

Net Income

4,860,294

Reclassification adjustment

for gains included in net

income, net of tax

(79,724)

Change in unrealized

gains (losses) on available

for sale securities, net of tax

2,960,831

Cash Dividends

($0.75 per share)

(1,176,457)

Compensation expense for

restricted stock

101,062

Issuance of new common stock

2,050

(2,050)

Issuance of common stock through

dividend reinvestment plan

2,151

87,442

89,593

Balance, September 30, 2011

$1,568,551

$1,509,477

$53,754,145

$2,587,889

$59,420,062

===========

============

===========

* See accompanying notes to consolidated financial statements (unaudited).

page 5

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

FIRST PULASKI NATIONAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	For Six Months Ended June 30,
	For Nine Months Ended September 30,
	2012	2011
Cash flows from operating activities:
Net income	$45,~~039~~484,~~656~~507	$24,~~969~~860,~~658~~294
Adjustments to reconcile net income
to net cash from operating activities
Provision for loan losses	~~440~~500,000	1,150,000
Depreciation of premises and equipment	~~485~~743,~~693~~487	~~493~~743,~~585~~672
Amortization and accretion of investment securities, net	~~965~~1,~~961~~518,164	~~598~~947,~~965~~977
Deferred income tax expense	29,656	498,122
Deferred income tax (benefit) expense	(30,875)	647,426
Loss (gain) on sale of other assets	~~136~~202,~~336~~563	(~~231~~273,~~001~~488)
Security gains, net	(1,~~042~~049,~~045~~353)	(~~115~~129,~~801~~191)
Stock-based compensation expense	6794,~~375~~990	67101,~~375~~062
Loans originated for sale	(1730,~~889~~116,~~770~~593)	(1019,~~169~~125,~~673~~830)
Proceeds from sale of loans	1930,~~374~~387,~~265~~403	1018,~~862~~400,~~413~~621
Mortgage banking income	(~~499~~766,~~250~~225)	(~~293~~553,~~775~~748)
Increase in cash surrender value of life insurance	(~~157~~230,~~562~~832)	(~~178~~265,~~787~~376)
Decrease in accrued interest receivable	~~480~~109,~~028~~459	~~126~~33,~~249~~461
(Increase) decrease in prepayments/other assets	(100,806)	335,424
Decrease in prepayments/other assets	260,805	137,716
Decrease in accrued interest payable	(7739,~~245~~822)	(~~368~~424,~~276~~142)
Decrease in accrued taxes	(446,735)	(426,415)
(Decrease) increase in accrued taxes	(354,731)	130,895
(Decrease) increase in other liabilities	(415,015)	343,307
Increase in other liabilities	28,556	1,457,293
Net cash from operating activities	56,~~390~~741,~~542~~503	57,~~661~~838,~~370~~642
Cash flows from investing activities:
Proceeds from maturity of securities available for sale	3451,~~400~~581,~~558~~726	3559,~~760~~248,~~782~~466
Proceeds from sale of securities available for sale	4142,~~263~~611,~~183~~113	4,~~317~~610,~~710~~660
Purchase of securities available for sale	(~~106~~117,~~142~~099,~~978~~410)	(4875,~~527~~428,~~624~~997)
Decrease (increase) in interest bearing balances with banks	98,~~657~~391	(2,~~721~~748)
Net increase in loans	(~~666~~1,~~519~~134,334)	(9642,~~811,253~~075)
Capital expenditures	(~~593~~875,~~286~~898)	(~~121~~228,~~951~~154)
Proceeds from sale of other assets	~~473~~622,~~982~~345	57,~~086~~987,~~258~~535
Net cash used by investing activities	(3124,~~166~~196,~~403~~067)	(134,~~298~~455,~~799~~313)
Cash flows from financing activities:
Net increase in deposits	2321,~~744~~793,~~938~~676	1912,~~720~~980,~~108~~420
Cash dividends paid	(~~786~~1,~~902~~180,472)	(~~783~~1,~~890~~176,457)
Proceeds from issuance of common stock	24,723	6089,~~313~~593
Net increase in securities sold under repurchase agreements	~~110~~157,~~449~~634	~~301~~500,~~483~~243
Borrowings repaid	(~~754~~783,~~293~~455)	(~~112~~165,~~608~~424)
Net cash from financing activities	2220,~~338~~012,~~915~~106	1912,~~185~~228,~~406~~375
Net (decrease) increase in cash and cash equivalents	(3,436,946)	11,547,977
Net increase in cash and cash equivalents	2,557,542	15,611,704
Cash and cash equivalents at beginning of period	33,822,394	17,043,132
Cash and cash equivalents at end of period	$3036,~~385~~379,~~448~~936	$2832,~~591~~654,~~109~~836
	=============	=============
Supplemental cash flow information
Interest paid	2$3,~~303~~358,~~467~~351	3$4,~~183~~504,~~825~~578
Income taxes paid	23,~~708~~301,000	1,~~188~~553,000
Supplemental noncash disclosures
Transfers from loans to other real estate owned	$446,135	$2,~~427~~849,~~783~~488
Securities purchased not yet settled	-	400,508
* See accompanying notes to consolidated financial statements (unaudited).

page 6

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

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 Corporation's 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 which is now reported in the statement of income and comprehensive income.

page 7

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Note 3

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income at ~~June~~September 30, 2012 and December 31, 2011 were as follows:

				Gross	Gross
			Amortized	Unrealized	Unrealized	Fair
June 30, 2012			Cost	Gains	Losses	Value
September 30, 2012			Cost	Gains	Losses	Value
	U.S. government sponsored entities		$~~120~~116,~~892~~908,~~573~~655	$1,~~327~~792,~~208~~584	$217,~~703~~161	$~~122~~118,~~198~~694,078
	Obligations of states and
		political subdivisions	3534,~~216~~689,~~768~~777	1,~~146~~130,~~431~~108	~~137~~89,~~130~~289	3635,~~226~~730,~~069~~596
	Mortgage-backed securities-residential		8884,~~289~~682,~~259~~607	1,~~276~~981,~~786~~802	121,~~182~~794	8986,~~553~~662,~~863~~615
	Total		$~~244~~236,~~398~~281,~~600~~039	$34,~~750~~904,~~425~~494	$~~171~~98,~~015~~244	$~~247~~241,~~978~~087,~~010~~289
			===========	===========	===========	===========
			============	============	============	============
				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
			===========	===========	===========	===========
			============	============	============	============

The amortized cost and fair value of debt securities at ~~June~~September 30, 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		$68,~~584~~820,~~374~~766	$68,~~661~~913,~~498~~222
Due after one year through five years		8780,~~158~~101,~~239~~942	8881,~~292~~527,~~038~~706
Due after five years through ten years		5658,~~751~~391,~~736~~129	5759,~~949~~725,~~746~~074
Due after ten years		54,~~614~~284,~~992~~595	54,~~520~~258,~~865~~672
Mortgage-backed-residential		8884,~~289~~682,~~259~~607	8986,~~553~~662,~~863~~615
	TOTAL	$~~244~~236,~~398~~281,~~600~~039	$~~247~~241,~~978~~087,~~010~~289
		===========	===========
		============	============

page 8

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Securities with unrealized losses at ~~June~~September 30, 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:

June 30, 2012

September 30, 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

$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 $01,347,930 and $~~424~~292,~~375~~950 for the three months ended ~~June~~September 30, 2012 and 2011, respectively,; and $4142,~~263~~611,~~183~~113 and $4,~~317~~610,~~710~~660 for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively. Gross gains of $117,~~042~~403 and $13,~~045~~390 and gross losses of $~~115~~10,~~801~~095 and no$0 were realized on these sales in the three months ended September 30, 2012 and 2011, respectively. Gross gains of $1,059,448 and $129,191 and gross losses of $10,095 and $0 were realized on these sales for the first ~~six~~nine 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 Corporation 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

page 9

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

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 ~~June~~September 30, 2012, the registrant's security portfolio consisted of ~~299~~294 securities, 2518 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 and obligations of states and political subdivisions. 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 ~~June~~September 30, 2012.

Note 4

Loans at ~~June~~September 30, 2012 and December 31, 2011 were as follows:

			June 30,	December 31,
			September 30,	December 31,
			2012	2011
Commercial			$3537,~~367~~010,~~062~~841	$29,518,794
Commercial and agricultural real estate:
	Commercial real estate		~~122~~120,~~721~~410,~~936~~040	127,470,394
	Agricultural real estate		3334,~~748~~002,~~771~~573	36,825,448
Residential real estate:
	Home equity line of credit		15,~~765~~951,~~596~~081	17,573,194
	1-4 family closed-end first lien		63,~~349~~422,~~303~~835	60,979,977
	1-4 family closed-end junior lien		2,~~146~~060,~~346~~813	2,593,391
	Multi-family		~~679~~663,~~330~~088	997,839
Construction and land development			29,~~128~~677,~~152~~851	27,255,729
Consumer			2524,~~172~~761,~~437~~198	26,194,891
Other			12,~~158~~617,~~222~~762	11,337,367
		Subtotal	340,~~237~~578,~~155~~082	340,747,024
Less:		Net deferred loan fees	(~~182~~177,~~219~~548)	(193,323)
		Allowance for loan losses	(7,~~188~~123,~~673~~746)	(7,470,322)
Loans, net			$~~332~~333,~~866~~276,~~263~~788	$333,083,379
			============	============

The loan balances in the following tables related to credit quality do not include approximately $1,~~772~~999,000 in accrued interest receivable and approximately $~~182~~178,000 in deferred loan fees at ~~June~~September 30, 2012 and approximately $2,292,000 in accrued interest receivable and approximately $193,000 in deferred loan fees at December 31, 2011.

page 10

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 September 30, 2012 and loans by portfolio segment and based on impairment method as of September 30, 2012.

Commercial

Construction

and Agricultural

and Land

Residential

Commercial

Real Estate

Development

Real Estate

Consumer

Other

Total

Allowance for loan losses:

Beginning balance

$~~681~~825,~~870~~198

$3,~~752~~518,~~981~~355

$1,~~146~~192,~~232~~970

$1,~~221~~272,~~617~~958

$~~334~~344,~~428~~681

$4034,~~666~~511

$7,~~177~~188,~~794~~673

Provision for loan losses

~~208~~(105,~~099~~101)

~~(44~~60,~~099)~~270

46117,~~738~~248

~~141~~(27,~~316~~299)

6511,~~661~~295

223,~~285~~587

~~440~~60,000

Loans charged-off

(673,~~571~~742)

(~~190~~34,~~690~~366)

-(64,848)

~~(92,871)~~-

(6953,~~594~~171)

~~(29,462)~~-

(~~450~~156,~~188~~127)

Recoveries

28,~~800~~291

~~163~~-

2,~~896~~511

1420,~~186~~284

~~1,022~~114

2131,~~067~~200

Ending balance

~~825~~724,~~198~~646

3,~~518~~544,~~355~~259

1,~~192~~245,~~970~~370

1,~~272~~248,~~958~~170

~~344~~323,~~681~~089

3438,~~511~~212

7,~~188~~123,~~673~~746

==========

Ending allowance balance attributable to loans:

Individually evaluated for impairment

$6954,~~022~~944

$89134,~~224~~390

$~~158~~189,~~246~~334

Collectively evaluated for impairment

~~825~~724,~~198~~646

3,~~449~~489,~~333~~315

1,~~103~~110,~~746~~980

1,~~272~~248,~~958~~170

~~344~~323,~~681~~089

3438,~~511~~212

76,~~030~~934,~~427~~412

Total ending allowance balance

$~~825~~724,~~198~~646

$3,~~518~~544,~~355~~259

$1,~~192~~245,~~970~~370

$1,~~272~~248,~~958~~170

$~~344~~323,~~681~~089

$3438,~~511~~212

$7,~~188~~123,~~673~~746

==========

Loans:

Loans individually evaluated for impairment

$46,~~512~~474

$34,~~217~~412,~~213~~189

$1905,~~156,842~~836

$2,~~651~~706,~~564~~581

$78,~~072~~071,~~131~~080

Loans collectively evaluated for impairment

3536,~~320~~964,~~550~~367

~~153~~150,~~253~~000,~~494~~424

2728,~~971~~772,~~310~~015

79,~~289~~391,~~011~~236

2524,~~172~~761,~~437~~198

12,~~158~~617,~~222~~762

~~333~~332,~~165~~507,~~024~~002

Total ending loans balance

$3537,~~367~~010,~~062~~841

$~~156~~154,~~470~~412,~~707~~613

$29,~~128~~677,~~152~~851

$8182,~~940~~097,~~575~~817

$2524,~~172~~761,~~437~~198

$12,~~158~~617,~~222~~762

$340,~~237~~578,~~155~~082

==========

The following table presents the activity in the allowance for loan losses for the three months ended ~~June~~September 30, 2011.

Commercial

Construction

and Agricultural

and Land

Residential

Commercial

Real Estate

Development

Real Estate

Consumer

Other

Total

Allowance for loan losses:

Beginning balance

$~~759~~683,~~593~~015

$4,~~070~~167,~~538~~409

$1,~~329~~319,~~386~~335

$1,~~490~~631,~~349~~898

$~~435~~443,~~477~~423

$8389,~~375~~053

$8,~~168~~334,~~718~~133

Provision for loan losses

(15101,~~226~~063)

~~160~~(341,~~450~~384)

(4289,~~453~~560)

~~206~~457,~~706~~198

7059,~~931~~706

1915,~~592~~103

~~400,000~~-

Loans charged-off

(6422,~~437~~947)

~~(68,826)~~-

~~(26,372)~~-

(90169,~~437~~509)

(8161,~~203~~404)

(152,~~000~~052)

(~~346~~255,~~275~~912)

Recoveries

~~3,085~~600

51,~~247~~206

5831,~~774~~416

253,~~280~~332

189,~~218~~355

~~1,086~~-

~~111~~45,~~690~~909

Ending balance

$~~683~~559,~~015~~605

$43,~~167~~827,~~409~~231

$1,~~319~~261,~~335~~191

$1,~~631~~922,~~898~~919

$~~443~~451,~~423~~080

$89102,~~053~~104

$8,~~334~~124,~~133~~130

==========

=========

===========

==========

=========

The following table presents the activity in the allowance for loan losses for the ~~six~~nine months ended ~~June~~September 30, 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

~~304~~199,~~682~~581

~~(58~~1,~~994)~~276

(5111,~~758)~~490

8962,~~810~~511

99110,~~435~~730

1014,~~825~~412

~~440~~500,000

Loans charged-off

(~~166~~170,~~573~~315)

(~~265~~299,~~381~~747)

-(64,848)

(147,745)

(~~181~~234,~~657~~828)

(29,462)

(~~790~~946,~~818~~945)

Recoveries

917,~~434~~725

17,663

36,~~723~~234

3757,~~327~~611

1,~~022~~136

69100,~~169~~369

Ending balance

$~~825~~724,~~198~~646

$3,~~518~~544,~~355~~259

$1,~~192~~245,~~970~~370

$1,~~272~~248,~~958~~170

$~~344~~323,~~681~~089

$3438,~~511~~212

$7,~~188~~123,~~673~~746

==========

=========

===========

==========

=========

page 11

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

The following table presents the activity in the allowance for loan losses for the ~~six~~nine months ended ~~June~~September 30, 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

(~~143~~244,~~666~~729)

~~518~~176,~~178~~794

(72162,~~991~~551)

~~626~~1,~~978~~084,176

~~201~~261,~~444~~150

2035,~~057~~160

1,150,000

Loans charged-off

(~~212~~235,~~365~~312)

(108,985)

(141,418)

(~~316~~486,~~499~~008)

(~~169~~230,~~258~~662)

(1517,~~000~~052)

(~~963~~1,~~525~~219,437)

Recoveries

34,~~535~~135

1112,~~170~~376

5890,~~774~~190

4750,~~039~~371

2736,~~593~~948

2,586

~~150~~196,~~697~~606

Ending balance

$~~683~~559,~~015~~605

$43,~~167~~827,~~409~~231

$1,~~319~~261,~~335~~191

$1,~~631~~922,~~898~~919

$~~443~~451,~~423~~080

$89102,~~053~~104

$8,~~334~~124,~~133~~130

==========

=========

===========

==========

=========

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 12

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 ~~June~~September 30, 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		$46145,~~512~~475	$46,~~512~~474	$-	$4746,~~306~~477	$-	$-
	Commercial and agricultural real estate:
		Commercial real estate	24,~~154~~237,~~302~~362	23,~~154~~367,~~838~~844	-	23,~~261~~464,~~360~~721	~~220,038~~-	~~220,038~~-
		Agricultural real estate	~~277~~360,~~650~~443	277,~~650~~849	-	~~360~~277,~~243~~849	-	-
	Residential real estate:
		Home equity line of credit	-32,818	-32,818	-	-32,958	-166	-
		1-4 family closed-end	2,~~651~~946,~~564~~358	2,~~651~~673,~~564~~763	-	2,~~690~~699,~~809~~531	317,~~984~~430	314,~~984~~978
		Multi-family	-	-	-	-	-	-
	Construction and land development		~~718~~1,~~244~~431,058	~~718~~644,~~244~~745	-	~~723~~715,~~015~~970	-	-
With an allowance recorded:
	Commercial		-	-	-	-	-	-
	Commercial and agricultural real estate:
		Commercial real estate	~~785~~766,~~261~~496	~~785~~766,~~261~~496	6954,~~022~~944	~~791~~778,~~002~~564	~~13,385~~-	~~13,385~~-
		Agricultural real estate	-	-	-	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-	-	-	-
		1-4 family closed-end	-	-	-	-	-	-
		Multi-family	-	-	-	-	-	-
	Construction and land development		~~438~~261,~~598~~091	~~438~~261,~~598~~091	89134,~~224~~390	~~561~~324,~~636~~750	-	-
			$7,072,131	$7,072,667	$158,246	$7,435,371	$237,407	$237,407
			$10,181,101	$8,071,080	$189,334	$8,340,820	$17,596	$14,978
			==========	==========	==========	==========	==========	==========

The following table presents information related to impaired loans by class of loans for the three months ended ~~June~~September 30, 2011.

		Average	Interest	Cash Basis
		Loan	Income	Interest
		Balance	Recognized	Recognized
Commercial		$6054,~~244~~495	$~~2,861~~-	$~~2,861~~-
Commercial and agricultural real estate:
	Commercial real estate	62,~~040~~941,~~674~~220	6414,~~884~~342	14,~~182~~342
	Agricultural real estate	-	-	-
Residential real estate:
	Home equity line of credit	-	-	-
	1-4 family closed-end	3,~~269~~056,~~818~~345	514,~~461~~848	514,~~461~~848
	Multi-family	-	-	-
Construction and land development		3,~~175~~287,~~476~~255	-	-
		$12,546,212	$119,206	$68,504
		$9,339,315	$19,190	$19,190
		==========	==========	==========

page 13

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

The following table presents information related to impaired loans by class of loans for the ~~six~~nine months ended ~~June~~September 30, 2012.

		Average	Interest	Cash Basis
		Loan	Income	Interest
		Balance	Recognized	Recognized
Commercial		$47,~~768~~291	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	34,~~084~~347,~~279~~248	257,963	257,963
	Agricultural real estate	~~360~~332,~~243~~617	-	-
Residential real estate:
	Home equity line of credit	-32,977	-166	-
	1-4 family closed-end	2,~~714~~746,~~180~~221	826,~~860~~290	823,~~860~~838
	Multi-family	-	-	-
Construction and land development		1,~~403~~264,~~495~~667	-	-
		$7,609,965	$266,823	$266,823
		$8,771,021	$284,419	$281,801
		==========	==========	==========

The following table presents information related to impaired loans by class of loans for the ~~six~~nine months ended ~~June~~September 30, 2011.

		Average	Interest	Cash Basis
		Loan	Income	Interest
		Balance	Recognized	Recognized
Commercial		$6259,~~370~~612	$2,861	$2,861
Commercial and agricultural real estate:
	Commercial real estate	62,~~051~~956,~~578~~113	~~115~~28,~~177~~524	1428,~~182~~524
	Agricultural real estate	-	-	-
Residential real estate:
	Home equity line of credit	-	-	-
	1-4 family closed-end	3,~~283~~083,~~128~~053	~~103~~108,~~589~~437	~~103~~108,~~589~~437
	Multi-family	-	-	-
Construction and land development		3,~~199~~403,~~799~~247	-	-
		$12,596,875	$221,627	$120,632
		$9,502,025	$139,822	$139,822
		==========	==========	==========

~~page 14~~page14

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	23,~~597~~272,~~072~~228	2,597,072	-
		Agricultural real estate	-	-	-
	Residential real estate:
		Home equity line of credit	-	-	-
		1-4 family closed-end	23,~~736~~009,~~506~~101	2,736,506	-
		Multi-family	-	-	-
	Construction and land development		~~723~~1,~~352~~444,818	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
			$9,293,775	$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 loans and loans past due 90 days still on accrual by class of loans as of ~~June~~September 30, 2012 and December 31, 2011.

				Loans Past Due Over
		Nonaccrual		90 Days and Still Accruing
		June 30,	December 31,	June 30,	December 31,
		September 30,	December 31,	September 30,	December 31,
		2012	2011	2012	2011
Commercial		$5446,~~049~~474	$59,028	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	34,~~049~~349,~~796~~230	3,504,851	-	-
	Agricultural real estate	~~483~~534,~~527~~978	378,527	-	-
Residential real estate:
	Home equity line of credit	-	-	-	-
	1-4 family closed-end first lien	3,~~652~~714,~~366~~941	3,983,744	-30,000	-
	1-4 family closed-end junior lien	6203,~~414~~685	6,250	-	-
	Multi-family	-	-	-	-
Construction and land development		~~925~~941,~~174~~893	1,539,053	-	-
Consumer		6143,~~524~~537	92,786	-	23,684
Other		-	26,507	-	-
		$8,232,850	$9,590,746	$-	$23,684
		$9,834,738	$9,590,746	$30,000	$23,684
		==========	==========	==========	==========
		===========	===========	===========	===========

page 15

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

The following table presents the aging of past due loans as of ~~June~~September 30, 2012 and December 31, 2011 by class of loans:

June 30, 2012
September 30, 2012
			90 days
		30-89 Days	or more	Total	Loans Not
		Past Due	Past Due	Past Due	Past Due	Total
Commercial		$~~389~~186,~~751~~851	$-	$~~389~~186,~~751~~851	$3436,~~977~~823,~~311~~990	$3537,~~367~~010,~~062~~841
Commercial and agricultural real estate:
	Commercial real estate	~~990~~2,~~215~~160,480	1,~~689~~690,~~817~~517	23,~~680~~850,~~032~~997	~~120~~116,~~041~~559,~~904~~043	~~122~~120,~~721~~410,~~936~~040
	Agricultural real estate	45778,~~792~~454	~~131~~130,~~045~~394	~~176~~908,~~837~~848	33,~~571~~093,~~934~~725	3334,~~748~~002,~~771~~573
Residential real estate:
	Home equity line of credit	-	-	-	15,~~765~~951,~~596~~081	15,~~765~~951,~~596~~081
	1-4 family closed-end first lien	1,~~109~~303,~~244~~124	~~297~~469,~~034~~791	1,~~406~~772,~~278~~915	61,~~943~~649,~~025~~920	63,~~349~~422,~~303~~835
	1-4 family closed-end junior lien	43,~~230~~413	-	43,~~230~~413	2,~~142~~057,~~116~~400	2,~~146~~060,~~346~~813
	Multi-family	-	-	-	~~679~~663,~~330~~088	~~679~~663,~~330~~088
Construction and land development		~~196~~333,~~357~~710	~~925~~738,~~174~~853	1,~~121~~072,~~531~~563	28,~~006~~605,~~621~~288	29,~~128~~677,~~152~~851
Consumer		~~378~~430,~~243~~740	217,~~417~~769	~~380~~448,~~660~~509	24,~~791~~312,~~777~~689	2524,~~172~~761,~~437~~198
Other		3390,~~110~~253	-	3390,~~110~~253	12,~~125~~527,~~112~~509	12,~~158~~617,~~222~~762
		$3,146,942	$3,045,487	$6,192,429	$334,044,726	$340,237,155
		$5,287,025	$3,047,324	$8,334,349	$332,243,733	$340,578,082
		=========	=========	=========	==========	==========
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 $4,052,538 and $3,016,993 in the loans not past due category, $2,764,876 and $2,895,361 in the 30-89 days past due category and $3,017,324 and $3,678,392 in the 90 days or more past due category as of September 30, 2012 and December 31, 2011, respectively.

Troubled Debt Restructurings:

During the three-month and six-month periods ended June 30, 2012, the following loans were modified as troubled debt restructurings.

		Pre-Modification	Post-Modification
	Number	Unpaid Principal	Unpaid Principal
	of Loans	Balance	Balance
Commercial real estate	3	$470,083	$470,083
	3	$470,083	$470,083
	=======	============	=============

page 16

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

~~The~~Troubled ~~modification~~Debt ~~of the terms of loans usually include one or a combination of the following~~Restructurings: 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 Corporation has not allocated any specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2012 and December 31, 2011. The Corporation has not committed to lend any additional amounts as of June 30, 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 June 30, 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 Corporation's internal underwriting policy.

During the three-month period ended September 30, 2012, the following loans were modified as troubled debt restructurings.

		Pre-Modification	Post-Modification
	Number	Unpaid Principal	Unpaid Principal
	of Loans	Balance	Balance
Home equity line of credit	1	32,818	32,818
1-4 family closed-end	3	315,703	315,703
	4	$348,521	$348,521
	=======	===========	============

During the three-month period ended September 30, 2011, the following loans were modified as troubled debt restructurings.

		Pre-Modification	Post-Modification
	Number	Unpaid Principal	Unpaid Principal
	of Loans	Balance	Balance
Construction and land development	2	267,922	267,922
	2	$267,922	$267,922
	=======	===========	============

During the nine-month period ended September 30, 2012, the following loans were modified as troubled debt restructurings.

		Pre-Modification	Post-Modification
	Number	Unpaid Principal	Unpaid Principal
	of Loans	Balance	Balance
Commercial real estate	3	$470,083	$470,083
Home equity line of credit	1	32,818	32,818
1-4 family closed-end	3	315,703	315,703
	7	$818,604	$818,604
	=======	===========	============

During the nine-month period ended September 30, 2011, the following loans were modified as troubled debt restructurings.

		Pre-Modification	Post-Modification
	Number	Unpaid Principal	Unpaid Principal
	of Loans	Balance	Balance
Commercial real estate	1	791,257	791,257
Construction and land development	2	267,922	267,922
	3	$1,059,179	$1,059,179
	=======	===========	============

       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 Corporation has not allocated any specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2012 and December 31, 2011. The Corporation has not committed to lend any additional amounts as of September 30, 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 September 30, 2012.
       A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

page 17

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

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 Corporation's internal underwriting policy.

Credit Quality Indicators

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt. For commercial, commercial and agricultural real estate and construction and land development loans information such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors, are analyzed to determine the proper risk category. For residential real estate, consumer and other loans, the analysis primarily involves monitoring the past due status of these loans and at such time that these loans are past due, the Corporation evaluates the loans to determine if a change in risk category is warranted. The Corporation analyzes loans individually by classifying the loans as to credit risk. The Corporation 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 or the value 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~~ Loans 17not 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 September 30, 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:

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 June 30, 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:

September 30, 2012
			Special
		Pass	Mention	Substandard	Doubtful	Not Rated
Commercial		$36,554,849	$185,937	$270,055	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	108,759,616	2,012,487	9,637,937	-	-
	Agricultural real estate	32,532,032	925,843	544,698	-	-
Residential real estate:
	Home equity line of credit	15,891,833	-	59,248	-	-
	1-4 family closed-end first lien	58,037,705	850,878	4,513,159	21,093	-
	1-4 family closed-end junior lien	1,765,430	91,698	203,685	-	-
	Multi-family	663,088	-	-	-	-
Construction and land development		28,436,026	9,940	1,231,885	-	-
Consumer		24,254,194	193,058	313,946	-	-
Other		11,955,785	88,632	5,026	-	568,319
Total		$318,850,558	$4,358,473	$16,779,639	$21,093	$568,319
		==========	=========	=========	=========	=========

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
		==========	=========	=========	=========	=========

June 30, 2012
			Special
		Pass	Mention	Substandard	Doubtful	Not Rated
Commercial		$34,721,311	$252,318	$393,433	$-	$-
Commercial and agricultural real estate:
	Commercial real estate	110,366,254	4,913,941	7,441,741	-	-
	Agricultural real estate	32,310,555	889,927	548,289	-	-
Residential real estate:
	Home equity line of credit	15,498,429	-	267,167	-	-
	1-4 family closed-end first lien	57,373,462	1,618,534	4,335,655	21,652	-
	1-4 family closed-end junior lien	1,828,185	101,502	216,659	-	-
	Multi-family	679,330	-	-	-	-
Construction and land development		27,598,811	10,122	1,519,219	-
Consumer		24,665,638	166,567	340,232	-	-
Other		11,528,868	89,252	5,694	-	534,408
Total		$316,570,843	$8,042,163	$15,068,089	$21,652	$534,408
		==========	==========	==========	==========	==========
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 5

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~~ page ~~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.~~19

page 18

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

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 Corporation 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 real estate 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 the client's business, resulting in a Level 3 fair value classification. ~~Appraisals are generally discounted by management based upon historical loss realization in the entire impaired loan portfolio.~~ Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted

as needed.

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 are generally discounted by management based upon historical loss realization in the entire other real estate owned portfolio.~~ 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 Corporation. Once received, a member of the Bank's Appraisal Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value.

page 1920

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Assets Measured on a Recurring Basis

		Fair Value Measurements at			Fair Value Measurements at
		June 30, 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	122,198,078	-	122,198,078	116,407,592	-	116,407,592
	Obligations of States and
	Political Subdivisions	36,226,069	-	36,226,069	38,078,290	-	38,078,290
	Mortgage-backed securities
	- residential	89,553,863	-	89,553,863	62,883,713	-	62,883,713
	Total	$247,978,010	$-	$247,978,010	$217,469,728	$-	$217,469,728
		===========	===========	===========	===========	===========	===========

Assets measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011 are summarized below:

There were no transfers between Level 1 and Level 2 during the first six months of 2012 or during 2011.

		Fair Value Measurements at			Fair Value Measurements at
		September 30, 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	118,694,078	-	118,694,078	116,407,592	-	116,407,592
	Obligations of States and
	Political Subdivisions	35,730,596	-	35,730,596	38,078,290	-	38,078,290
	Mortgage-backed securities
	- residential	86,662,615	-	86,662,615	62,883,713	-	62,883,713
	Total	$241,087,289	$-	$241,087,289	$217,469,728	$-	$217,469,728
		===========	===========	===========	===========	===========	===========

There were no transfers between Level 1 and Level 2 during the first nine months 2012 or during 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
				June 30, 2012 Using
				September 30, 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	$23,~~154~~367,~~302~~844		$23,~~154~~367,~~302~~844
		Agricultural real estate	277,~~650~~849		277,~~650~~849
		Residential real estate:
		Home equity line of credit	-		-
		1-4 family closed-end	1,~~813~~762,~~093~~936		1,~~813~~762,~~093~~936
		Multi-family	-		-
		Construction & land development	~~450~~644,~~322~~744		~~450~~644,~~322~~744
	Total impaired loans		$46,~~695~~053,~~367~~373		$46,~~695~~053,~~367~~373
			============		============
	Other real estate owned
		Comml and ag real estate:
		Agricultural real estate	$48,880		$48,880
		Residential real estate:
		Home equity line of credit	$-		$-
		1-4 family closed-end	-		-
		Multi-family	576,690		576,690
		Construction & land development	3,536,670		3,536,670
	Total other real estate owned		$4,~~113~~162,~~360~~240		$4,~~113~~162,~~360~~240
			============		============

page 2021

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 $46,~~695~~053,~~367~~373 in impaired loans measured for impairment using the fair value of the collateral at ~~June~~September 30, 2012, resulting in an additional provision for loan losses of $~~190~~99,~~690~~213 and $~~345~~444,~~549~~762 for the three and ~~six~~nine months ended ~~June~~September 30, 2012, respectively. There were $3,~~564~~395,~~468~~160 in impaired loans measured for impairment using the fair value of the collateral at ~~June~~September 30, 2011, resulting in an additional provision for loan losses of $0 and $28,200 for the three months and ~~six~~nine months ended ~~June~~September 30, 2011, respectively. Other real estate owned, which is measured at fair value less costs to sell, had a net carrying amount of $6,~~962~~817,~~149~~264 as of ~~June~~September 30, 2012. Included in this amount were properties that were written down to fair value totaling $4,~~113~~162,~~360~~240, resulting in additional foreclosed asset expense of $~~119~~9,~~933~~635 and $129,568 for the three and ~~six~~nine months ended ~~June~~September 30, 2012. Other real estate owned had a net carrying amount of $107,~~269~~830,~~157~~744 as of ~~June~~September 30, 2011. Included in this amount were properties that were written down to fair value totaling $54,~~138~~205,~~040~~560, resulting in additional foreclosed asset expense of $~~16,450~~0 and $17,155 in the three and ~~six~~nine months ended ~~June~~September 30, 2011.

page 2122

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

The following table presents qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at ~~June~~September 30, 2012. The range is equal to the weighted average in the following table.

			Valuation		Discount
		Fair Value	Technique(s)	Unobservable Input(s)	on Appraisal
Impaired loans -
	Commercial
	real estate	$23,~~154~~367,~~302~~844	Cost approach	Adjustment for differences	29.5%
				in estimated costs
			Sales comparison	Adjustment for differences
			approach	between comparable
				sales
	Agricultural		Sales comparison	Adjustment for differences	29.5%
	real estate	277,~~650~~849	approach	between comparable
				sales
	Residential		Sales comparison	Adjustment for differences	29.5%
	real estate	1,~~813~~762,~~093~~936	approach	between comparable
				sales
	Construction and		Sales comparison	Adjustment for differences	29.5%
	land development	~~450~~644,~~322~~744	approach	between comparable
				sales
Other real estate owned -
	Agricultural		Sales comparison	Adjustment for differences	6%
	real estate	48,880	approach	between comparable
				sales
	Residential		Sales comparison	Adjustment for differences	6%
	real estate	576,690	approach	between comparable
				sales
	Construction and		Sales comparison	Adjustment for differences	6%
	land development	3,536,670	approach	between comparable
				sales

Carrying amount and estimated fair values of financial instruments at ~~June~~September 30, 2012 were as follows:

			Fair Value Measurements at
			June 30, 2012
			September 30, 2012
		Carrying Value	Level 1	Level 2	Level 3	Total
		(Dollars in thousands)
Financial assets:
	Cash and short-term investments	$3036,~~831~~825	$3036,~~500~~493	$~~331~~332	$-	$3036,~~831~~825
	Securities	~~247~~241,~~978~~087	-	~~247~~241,~~978~~087	-	~~247~~241,~~978~~087
	Loans held for sale	12,~~184~~664	-	12,~~184~~664	-	12,~~184~~664
	Loans, net	~~332~~333,~~866~~277	-	-	333,~~823~~806	333,~~823~~806
	Federal Home Loan Bank stock	1,527	N/A	N/A	N/A	N/A
	Accrued interest receivable	23,~~871~~242	-	1,~~098~~243	1,~~773~~999	23,~~871~~242
Financial liabilities:
	Deposits	~~582~~581,~~976~~025	~~313~~308,~~171~~681	~~271~~273,~~103~~675	-	~~584~~582,~~274~~356
	Securities sold under repurchase agreements	12,~~961~~008	12,~~961~~008	-	-	12,~~961~~008
	Other borrowed funds	6,~~572~~543	-	6,~~889~~802	-	6,~~889~~802
	Accrued interest payable	~~787~~824	9	~~778~~815	-	~~787~~824

page 2223

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

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. 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.

page 2324

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

Note 6

The factors used in the earnings per share computation follow:

	For Three Months Ended		For ~~Six~~Nine Months Ended
	June 30,		June 30,
	September 30,		September 30,
	2012	2011	2012	2011
Net Income	$1,~~699~~444,~~052~~851	$1,~~601~~890,~~442~~636	$45,~~039~~484,~~656~~507	$24,~~969~~860,~~658~~294
Less: Distributed earnings allocated to participating securities	(~~612~~300)	(~~612~~613)	(1,~~225~~525)	(1,~~225~~838)
Less: (Undistributed income) dividends in excess of earnings
allocated to participating securities	(21,~~032~~391)	(12,~~888~~339)	(56,~~064~~364)	(35,~~414~~755)
Net earnings allocated to common stock	$1,~~696~~443,~~408~~160	$1,~~598~~887,~~942~~684	$45,~~033~~476,~~367~~618	$24,~~965~~852,~~019~~701
	==========	==========	==========	==========
Weighted common shares outstanding
including participating securities	1,574,~~223~~281	1,~~568~~569,~~255~~394	1,573,~~592~~823	1,~~567~~568,~~570~~185
Less: Participating securities	(2,~~450~~083)	(2,450)	(2,~~450~~327)	(2,450)
Weighted average shares	1,~~571~~572,~~773~~198	1,~~565~~566,~~805~~944	1,571,~~142~~496	1,565,~~120~~735
	==========	==========	==========	==========
Basic earnings per share	$10.0892	$1.0220	$23.5748	$13.8910
	==========	==========	==========	==========
Net earnings allocated to common stock	$1,~~696~~443,~~408~~160	$1,~~598~~887,~~942~~684	$45,~~033~~476,~~367~~618	$24,~~965~~852,~~019~~701
	==========	==========	==========	==========
Weighted average shares	1,~~571~~572,~~773~~198	1,~~565~~566,~~805~~944	1,571,~~142~~496	1,565,~~120~~735
Add: dilutive effects of assumed exercises of stock options	18-	~~109~~92	4730	~~148~~131
Average shares and dilutive potential common shares	1,~~571~~572,~~791~~198	1,~~565~~567,~~914~~036	1,571,~~189~~526	1,565,~~268~~866
	==========	==========	==========	==========
Dilutive earnings per share	$10.0892	$1.0220	$23.5748	$13.8910
	==========	==========	==========	==========

Stock options for 6,500 and 7,000 shares of common stock were not considered in computing diluted earnings per share for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively, because they were anti-dilutive.

~~Item~~Note ~~2. Management's Discussion and Analysis of Financial Condition and Results of Operations.~~ 7

~~The~~ On ~~following~~July ~~analysis~~17, ~~should~~2012, bethe ~~read~~registrant's inBoard ~~conjunction~~of ~~with~~Directors voted to reclassify the ~~financial~~registrant's ~~statements~~common ~~set~~stock ~~forth~~to inreduce ~~Part~~the I,number ~~Item~~of record holders of common stock below 1,200 ~~immediately~~for ~~preceding~~the ~~this~~purpose ~~section~~of going private. ~~Reference~~ To isfacilitate ~~made~~this transaction, an amendment to the ~~annual~~registrant's ~~report~~charter ofto reclassify the ~~registrant~~common onstock ~~Form~~was ~~10-K~~approved ~~for~~by the ~~year~~registrant's ~~ended~~shareholders ~~December~~on ~~31,~~November ~~2011~~8, ~~which~~2012. ~~report~~Pursuant ~~was~~to ~~filed~~the ~~with~~amendment, ~~the~~shares ~~Securities~~of ~~and~~existing ~~Exchange~~common ~~Commission~~stock ~~on March~~held ~~15,~~by ~~2012. This~~shareholders ~~Form~~who ~~10-Q~~own ~~contains~~less ~~certain~~than ~~forward-looking~~201 ~~statements~~shares ~~regarding,~~as ~~among~~of ~~other~~the ~~things,~~effective time of the ~~anticipated~~transaction ~~financial~~will ~~and~~be ~~operating~~reclassified ~~results~~into shares of ~~the~~Class ~~registrant~~A stock. ~~The~~ ~~words~~Shareholders ~~"anticipate,"~~owning ~~"expect,"~~in ~~"should,"~~excess ~~"could,"~~of ~~"may",~~201 ~~"plan,"~~shares ~~"intend",~~of ~~"believe",~~common ~~"likely",~~stock ~~"seek",~~at ~~"estimate"~~the ~~and~~effective ~~similar~~time ~~expressions~~of ~~are~~the ~~intended~~transaction will continue to ~~identify~~hold ~~such~~shares ~~forward-looking~~of ~~statements,~~common ~~but~~stock. ~~other~~The ~~statements~~reclassification ~~not~~will ~~based~~be made on ~~historical~~the ~~information~~basis ~~may~~of ~~also~~one beshare ~~considered~~of ~~forward-looking. Investors~~Class A ~~are~~stock ~~cautioned~~for ~~not~~each toshare ~~place~~of ~~undue~~common ~~reliance~~stock onheld. The ~~these~~primary ~~forward-looking~~effect ~~statements,~~of ~~which~~this ~~speak~~transaction ~~only~~will asbe ofto reduce the ~~date~~registrant's ~~hereof. The~~total ~~registrant~~number ~~undertakes~~of norecord ~~obligation~~holders toof ~~publicly~~common ~~release~~stock ~~any~~to ~~modifications~~below 1,200. ~~updates~~As ora ~~revisions~~result, the registration of ~~these~~the ~~statements~~registrant's tocommon ~~reflect~~stock ~~events~~under orfederal ~~circumstances~~securities ~~occurring~~laws ~~after~~will ~~the~~be ~~day~~terminated ~~hereof,~~and orthe toregistrant ~~reflect~~will ~~the~~no ~~occurrence~~longer ofbe ~~unanticipated~~considered ~~events~~a "public" company.

page 24

PART I - FINANCIAL INFORMATION ____________________________________________

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

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) the inability to comply with regulatory capital requirements, including those resulting from recently proposed changes to capital calculation methodologies and required capital maintenance levels, (xi) any activity in the capital markets that would cause the registrant to conclude that there was impairment of any asset including intangible assets, (xii) 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 (xiii) 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 its 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 of recoveries. 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 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

page 25

PART I - FINANCIAL INFORMATION
____________________________________________

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

~~incurred~~ 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 InMarch ~~addition~~15, ~~every~~2012. This ~~substandard~~Form or10-Q ~~worse~~contains ~~loan~~certain inforward-looking ~~excess~~statements regarding, among other things, the anticipated financial and operating results of ~~$250~~the registrant. The words "anticipate,~~000~~" "expect," "should," "could," "may", "plan," "intend", "believe", "likely", "seek", "estimate" and ~~all~~similar ~~loans~~expressions ~~classified~~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 "~~special~~safe ~~mention~~harbor" ~~loans~~provisions ~~over~~of ~~$400~~the Private Securities Litigation Reform Act of 1995,~~000~~ ~~are~~the ~~reviewed~~registrant ~~quarterly~~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 ~~Executive~~registrant. Such forward-looking statements involve known and ~~Loan~~unknown ~~Committee~~risks ofand uncertainties, including, but not limited to those described in the ~~Bank~~registrant's ~~Board~~Annual Report on Form 10-K for the year ended December 31, 2011 and, without limitation, (i) deterioration in the financial condition of ~~Directors. Other~~borrowers ~~real~~resulting ~~estate~~in ~~owned~~significant ~~acquired~~increases ~~through~~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 ~~lieu~~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 ~~foreclosure~~charge-offs ~~are~~and ~~initially~~the ~~recorded~~level atof ~~fair~~the ~~value~~provision ~~less~~for ~~costs~~losses on loans, (ix) results of regulatory examinations, (x) the inability to ~~sell~~comply ~~when~~with ~~acquired~~regulatory capital requirements, ~~establishing~~including athose ~~new~~resulting ~~cost~~from ~~basis. If~~recently ~~fair~~proposed ~~value~~changes ~~declines~~to ~~subsequent~~capital calculation methodologies and required capital maintenance levels, (xi) any activity in the capital markets that would cause the registrant to ~~foreclosure~~conclude that there was impairment of any asset including intangible assets, a(xii) ~~valuation~~changes ~~allowance~~in isstate ~~recorded~~and ~~through~~Federal ~~expense~~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. ~~Operating~~These ~~costs~~risks ~~after~~and ~~acquisition~~uncertainties ~~are~~may ~~expensed~~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.

~~OVERVIEW~~Proposed Common Stock Share Reclassification

       On July 17, 2012, the registrant's Board of Directors voted to reclassify the registrant's common stock to reduce the number of record holders of common stock below 1,200 for the purpose of going private.
       To facilitate this transaction, an amendment to the registrant's charter to reclassify the common stock has been approved by the registrant's shareholders. Pursuant to the amendment, shares of existing common stock held by shareholders who own less than 201 shares as of the effective time of the transaction will be reclassified into shares of Class A stock. Shareholders owning in excess of 201 shares of common stock at the effective time of the transaction will continue to hold shares of common stock. The reclassification will be made on the basis of one share of Class A stock for each share of common stock held.
       The primary effect of this transaction will be to reduce the registrant's total number of record holders of common stock to below 1,200. As a result, the registration of the registrant's common stock under federal securities laws will be terminated and the registrant will no longer be considered a "public" company.

page 26

PART I - FINANCIAL INFORMATION
____________________________________________

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

Critical Accounting Policies

~~Results~~ The accounting principles the registrant follows and its methods of ~~Operations~~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 its 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 of

recoveries. 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 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 in lieu of loan foreclosure is 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.

Net income of the registrant was $4,039,656 for the first six months of 2012. This amounted to an increase of $1,069,998, or 36.0 percent, compared to the first six months of 2011. This large increase in net income in the first six months of 2012 as compared to the same period of 2011 was primarily due to increased security gains and decreased loan loss provisions for the first six months of 2012. For the three-month period ended June 30, 2012, net income was $1,699,052, an increase of $97,610, or 6.1 percent, as compared to the three months ended June 30, 2011. Net interest income increased $209,077, or 3.5 percent, to $6,191,618 during the second quarter of 2012 as compared to $5,982,541 for the second quarter of 2011. Total interest income decreased $36,830, or 0.5 percent, to $7,292,225 for the second quarter of 2012 as compared to $7,329,055 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 the registrant's investment securities in the second quarter of 2012 as compared to the same period of 2011. Interest and fees on loans decreased $88,724 in the second quarter of 2012 as compared to the same period of 2011 primarily as a result of a decrease in average loans outstanding of approximately $9.8 million in the second quarter of 2012 as compared to the same period of 2011 while the average yield earned on loans increased to 7.20 percent in the second quarter of 2012 from 7.08 percent in the second quarter of 2011. The yield earned on loans was positively impacted by collection of approximately $220,000 in interest on a nonaccrual loan that was paid off in the second quarter of 2012. Interest income on securities increased $55,271 in the second quarter of 2012 as compared to the second quarter of 2011 primarily as a result of an increase in average investment securities held of approximately $49.7 million in the second quarter of 2012 as compared to the same period of 2011. The overall increase in interest income on securities was limited in the second quarter of 2012 as compared to the same period of 2011 as yields earned on securities declined to 1.99 percent in the second quarter of 2012 from 2.38 percent in the second quarter of 2011. The increase in net interest income in the second quarter of 2012 as compared to the second quarter of 2011 was primarily due to a decrease in total interest expense of $245,907, or 18.3 percent, to $1,100,607 for the second quarter of 2012 as compared to $1,346,514 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 second quarter of 2012 as compared to the second quarter of 2011. The interest expense on time deposits decreased $243,791 in the second quarter of 2012 as compared to the same period of 2011 as the average interest rate paid on time deposits fell to 1.29 percent in the second quarter of 2012 as compared to 1.62 percent in the second quarter of 2011. The average balances held in time deposits also decreased $5.9 million in the second quarter of 2012 as compared to the same period of 2011. The interest expense on NOW accounts increased $1,276 in the second quarter of 2012 as compared to the same period of 2011 as the average balances held increased $10.6 million while the average interest rate paid fell to 0.20 percent in the second quarter of 2012 from 0.22 percent for the same period of 2011. The interest expense on savings and money market accounts increased $9,351 in the second quarter of 2012 as compared to the same period of 2011 as the average balances held increased $16.5 million while the average interest rate paid fell to 0.40 percent in the second quarter of 2012 from 0.42 percent in the second quarter of 2011. Net interest income of the registrant for the six-month period ended June 30, 2012 increased by $514,949, or 4.5 percent, to $12,083,973 as compared to $11,569,024 for the six months ended June 30, 2011. Total interest income decreased $74,378, or 0.5 percent, for the first six months of 2012 as compared to the same period in 2011. This decrease was primarily the result of a $204,408 decrease in interest and fees on loans. The decrease in interest and fees on loans was primarily the result of a decrease in average loans outstanding of approximately $7.0 million in the first six months of 2012 as compared to the same period of 2011 while the average yield earned on loans increased to 7.07 percent in the second quarter of 2012 from 7.05 percent in the second quarter of 2011. The yield earned on loans in the first six months of 2012 was positively impacted by the collection of interest on a nonaccrual loan mentioned previously. Interest on investment securities increased by $130,148 in the first six months of 2012 as compared to the OVERVIEW

Total assets of the registrant grew $26.0 million, or 4.1 percent, in the first nine months of 2012. This growth in assets was primarily funded by an approximately $21.8 million, or 3.9 percent, increase in deposits. Loans net of unearned income decreased $0.2 million in the first nine months of 2012 as loan demand remained weak. The growth in deposits contributed to an increase in investment securities of approximately $23.6 million in the first nine months of 2012.
Net income decreased $445,785 to $1,444,851, or $0.92 per diluted share, in the third quarter of 2012 as compared to $1,890,636, or $1.20 per diluted share, during the same period of 2011. The decrease in net income in the third quarter of 2012 as compared to the same period of 2011 was primarily due to increased other operating expenses in the third quarter of 2012. The increase in other operating expenses was primarily due to expenses related to a branding initiative that began in the second quarter of 2012. Much of the expenses related to the branding initiative occurred in the third quarter of 2012 and these expenses should decrease in the fourth quarter of 2012. Provision for loan losses totaled $60,000 in the third quarter

page 27

PART I - FINANCIAL INFORMATION
____________________________________________

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

~~same period~~ of ~~2011~~2012, ~~primarily~~compared asto ano ~~result~~provision offor anloan ~~increase~~losses in ~~average~~the ~~investment~~third ~~securities~~quarter ~~held~~ of ~~approximately $42~~2011.5 Weak ~~million~~economic ~~which~~conditions ~~was~~continue ~~partially~~to ~~offset~~stress bythe aloan ~~decrease~~portfolio, inleading ~~average~~to ~~yields~~a ~~earned~~continued onelevated ~~investment~~allowance ~~securities~~for toloan ~~2.05~~losses ~~percent~~ in the ~~first~~third ~~six~~quarter ~~months~~ of 2012 as compared to ~~2.37~~years ~~percent~~prior into ~~the~~2008; ~~same~~however, ~~period of 2011. The increase in net interest income in~~ the ~~first~~provision ~~six~~for ~~months~~loan oflosses ~~2012~~has asbegun ~~compared~~ to ~~the~~stabilize ~~same period~~ in ~~2011~~recent ~~was~~quarters. Net ~~primarily due to a decrease in total~~ interest ~~expense~~income ofdecreased $~~589~~148,~~327~~050, or 202.95 percent, to $25,~~226~~814,~~222~~931 ~~for~~in the ~~first~~third ~~six~~quarter ~~months~~ of 2012 as compared to ~~$2,815,549 for~~ the same period inof 2011. ~~The~~ Net ~~decrease~~income inincreased ~~total~~$624,213 ~~interest~~to ~~expense~~$5,484,507, ~~was~~or ~~primarily~~$3.48 ~~caused~~per bydiluted ~~a $586~~share,~~980~~ ~~decrease~~ in ~~interest~~the ~~expense~~first onnine ~~time~~months ~~deposits~~of ~~for~~2012 ~~the~~as ~~six~~compared ~~months~~to ~~ended~~$4,860,294, ~~June~~or ~~30,~~$3.10 ~~2012~~per asdiluted ~~compared~~share, toduring the same period inof 2011. The ~~decrease~~increase in ~~interest~~net ~~expense~~income ~~on time deposits was primarily due to lower interest rates paid~~ in the first ~~six~~nine months of 2012 as ~~well as a decrease in the average balance of time deposits of $9.2 million as~~ compared to the same period of 2011. ~~The~~was ~~average~~primarily ~~interest~~due ~~rate~~to ~~paid~~increased onsecurity ~~time~~gains, ~~deposits~~ decreased toprovision ~~1.32~~for ~~percent~~loan inlosses ~~the~~and ~~first~~increased ~~six~~net ~~months~~interest ofincome ~~2012 as compared to 1.70 percent~~ in the first ~~six~~nine months of ~~2011~~2012. ~~The~~Security ~~interest~~gains ~~expense~~increased on$920,162 ~~NOW~~to ~~accounts increased~~ $21,~~783~~049,353 in the first ~~six~~nine months of 2012 as ~~the~~compared ~~average~~to ~~balances held increased~~ $~~10.8~~129,191 ~~million while the average interest rate paid fell to 0.21 percent~~ in the ~~first six months of 2012 from 0.22 percent in the~~ same period of 2011. ~~The~~Provision ~~interest~~for ~~expense~~loan onlosses ~~savings~~decreased ~~and~~$650,000 ~~money~~to ~~market accounts increased~~ $10500,~~447~~000 in the first ~~six~~nine months of 2012 as ~~the~~compared ~~average~~to ~~balances held increased~~ $~~15.7~~1,150,000 ~~million while the average interest rate paid fell to 0.39 percent from 0.44 percent~~ in the first ~~six~~nine months of ~~2012 as compared to the same period of~~ 2011. ~~This~~Net ~~shift in deposits to increased non-maturity deposits as compared to time deposits may increase the Corporation's liquidity and~~ interest rate risks since these funds may be withdrawn by the depositor at any time and the likelihood of these deposits remaining in the Bank when economic conditions improve is unknown. 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 $3366,~~198~~899, or 02.31 percent, to $117,~~162~~898,~~147~~904 ~~for~~in the ~~three-month~~first ~~period~~nine ~~ended~~months ~~June~~of ~~30,~~ 2012 as compared to ~~$1,158,949 for~~ the ~~three-month~~same period ~~ended~~of ~~June 30,~~ 2011. ~~The~~ Net ~~increase in non~~charged-~~interest~~off ~~income~~loans ~~was~~totaled ~~primarily~~approximately ~~due to a~~ $92847,~~170~~000 ~~increase~~ in ~~mortgage banking income in~~ the ~~second~~first ~~quarter~~nine months of 2012, asresulting ~~compared~~in toan ~~the~~annualized ~~same~~charge-off ~~period~~ratio of ~~2011~~0. ~~This~~33 ~~increase~~percent ~~in mortgage banking income was primarily a result of increased volumes of mortgage loans originated due to increased refinancing activity in the second quarter of 2012~~ as compared to ~~the~~net ~~same~~charge-offs ~~period~~ of ~~2011. Other~~approximately ~~service charges and fees also increased~~ $291,~~151~~023,000 in the ~~second~~first ~~quarter~~nine ofmonths ~~2012 as compared to the same period~~ of 2011, ~~primarily~~resulting ~~due to increased debit card interchange fees~~ in ~~the~~an ~~second~~annualized ~~quarter~~charge-off ratio of ~~2012~~0.40 percent. ~~This~~Nonaccrual ~~increase~~loans ~~was~~increased ~~partially~~to ~~offset~~approximately ~~by an~~ $809,~~833~~835,000 ~~decrease~~at inSeptember ~~service~~30, ~~charges on deposit accounts in the second quarter of~~ 2012 as compared to ~~the~~approximately ~~same~~$9,591,000 ~~period~~at ofDecember ~~2011~~31, ~~as overdraft fees decreased in the second quarter of 2012~~2011. ~~The~~Other ~~decrease~~real inestate ~~overdraft~~owned ~~fees~~declined ~~was primarily due~~ to ~~the~~approximately ~~Bank's~~$6,817,000 ~~deposit~~at ~~account~~September ~~holders~~30, ~~creating fewer overdrafts in the second quarter of~~ 2012 as compared to ~~the~~approximately ~~same~~$7,111,000 ~~period~~at ofDecember 31, 2011. ~~Other~~Concerted ~~income~~efforts ~~decreased~~are ~~$15,340~~being inmade ~~the~~to ~~second~~dispose ~~quarter~~ of ~~2012 as compared to~~ the ~~same period o 2011 primarily due to decreased rental income from~~ other real estate owned inwhile ~~the~~striving ~~second~~to ~~quarter~~ensure ofthat ~~2012.~~fair ~~Other~~market ~~categories~~value ofis ~~non-interest~~received ~~income showed only minor differences between the second quarter of 2012~~ and ~~the~~that ~~second~~excessive ~~quarter~~discounts ofare ~~2011~~not taken. ~~Total~~Expenses ~~non-interest~~related ~~income increased $807,419, or 30.8 percent,~~ to ~~$3,426,022~~these ~~for~~foreclosed ~~the~~assets ~~six-month~~decreased ~~period~~approximately ~~ended June 30, 2012 as compared to~~ $263,~~618,603~~000 ~~for the same period ended June 30, 2011. Much of the increase~~ in ~~non-interest income was due to an $926,244 increase in gain on~~ the ~~sale of securities in the~~ first ~~six~~nine months of 2012 as compared to the same period of 2011; ashowever, the registrant ~~restructured~~expects ~~its~~total ~~investment portfolio in the first quarter of 2012. The investment portfolio restructuring primarily consisted of increasing the amount of mortgage~~non-~~backed~~performing ~~securities~~assets ~~held in relation to other securities~~ and isexpenses ~~projected~~related to ~~increase~~foreclosed ~~interest~~assets ~~income~~will incontinue ~~flat~~at ~~and~~elevated ~~rising~~levels ~~interest~~through ~~rate environments over~~ the ~~next~~remainder ~~few~~of ~~years as compared to the projected interest income that would have been generated before the restructuring~~2012. ~~If the interest rate environment were to decline further, the investment portfolio restructuring is projected to decrease interest~~

Results of Operations

Net income of the registrant was $5,484,507 for the first nine months of 2012. This amounted to an increase of $624,213, or 12.8 percent, compared to the first nine months of 2011. This increase in net income in the first nine months of 2012 as compared to the same period of 2011 was primarily due to increased security gains, decreased loan loss provisions and increased net interest income for the first nine months of 2012. These increases to net income were partially offset by an increase in other operating expenses for the first nine months of 2012 as compared to the same period of 2011. For the three-month period ended September 30, 2012, net income was $1,444,851, a decrease of $445,785, or 23.6 percent, as compared to the three months ended September 30, 2011.
Net interest income decreased $148,050, or 2.5 percent, to $5,814,931 during the third quarter of 2012 as compared to $5,962,981 for the third quarter of 2011. Total interest income decreased $320,630, or 4.4 percent, to $6,907,238 for the third quarter of 2012 as compared to $7,227,868 for the same period in 2011. The decrease in total interest income was primarily due to a decrease in yields earned on loans and a decrease in the yields earned on the registrant's investment securities in the third quarter of 2012 as compared to the same period of 2011. Interest and fees on loans decreased $338,523 in the third quarter of 2012 as compared to the same period of 2011 primarily as a result of a decrease in yields earned to 6.65 percent in the third quarter of 2012 as compared to 7.00 percent in the same period of 2011. Interest income on securities increased $18,016 in the third quarter of 2012 as compared to the third quarter of 2011 primarily as a result of an increase in average investment securities held of approximately $45.1 million in the third quarter of 2012 as compared to the same period of 2011. The overall increase in interest income on securities was limited in the third quarter of 2012 as compared to the same period of 2011 as yields earned on securities declined to 1.84 percent in the third quarter of 2012 from 2.23 percent in the third quarter of 2011.

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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. (Continued)

These decreases in interest income ~~over~~in the ~~next~~third ~~few~~quarter ~~years~~of 2012 as compared to the ~~projected~~third quarter of 2011 were partially offset by a decrease in total interest ~~income~~expense ~~that~~of ~~would~~$172,580, ~~have~~or ~~been~~13.6 ~~generated~~percent, ~~before~~to $1,092,307 for the ~~restructuring~~third quarter of 2012 as compared to $1,264,887 for the same period in 2011. ~~Mortgage~~The ~~banking~~decrease ~~income~~in ~~also~~total ~~increased~~interest expense was primarily due to lower average interest rates paid on interest-bearing deposits in the third quarter of 2012 as compared to the third quarter of 2011. The interest expense on time deposits decreased $~~205~~169,~~475~~023 ~~due~~in the third quarter of 2012 as compared to ~~increased~~the ~~mortgage~~same ~~refinancing~~period ~~activity~~of 2011 as the average interest rate paid on time deposits fell to 1.25 percent in the ~~first~~third ~~six~~quarter ~~months~~of 2012 as compared to 1.50 percent in the third quarter of 2011. The average balances held in time deposits increased $0.3 million in the third quarter of 2012 as compared to the same period of 2011. ~~Other~~The ~~service~~interest ~~charges~~expense ~~and~~on ~~fees~~NOW accounts increased $781,~~782~~568 ~~primarily~~in ~~due~~the third quarter of 2012 as compared to the same period of 2011 as the average balances held increased ~~debit~~$10.6 ~~card~~million ~~interchange~~while ~~fees~~the average interest rate paid fell to 0.20 percent in the ~~first~~third ~~six~~quarter ~~months~~of 2012 from 0.22 percent for the same period of 2011. The interest expense on savings and money market accounts increased $7,016 in the third quarter of 2012 as compared to the same period of 2011 as the average balances held increased $14. ~~These~~5 ~~increases~~million ~~were~~while ~~partially~~the ~~offset~~average byinterest ~~decreases~~rate paid fell to 0.40 percent in the third quarter of 2012 from 0.43 percent in the third quarter of 2011. Net interest income of the registrant for the nine-month period ended September 30, 2012 increased by $~~288~~366,~~398~~899, ~~and~~or 2.1 percent, to $~~103~~17,~~751~~898,904 inas ~~other~~compared ~~income~~to ~~and~~$17,532,005 ~~service~~for ~~charges~~the onnine ~~deposit~~months ~~accounts~~ended September 30, ~~respectively~~2011. Total interest income decreased $395,008, inor 1.8 percent, for the first ~~six~~nine months of 2012 as compared to the same period ofin 2011. This decrease was primarily the result of a $542,931 decrease in interest and fees on loans. The decrease in ~~other~~interest ~~income~~and fees on loans was primarily ~~due~~the toresult of a decrease in average loans outstanding of approximately $~~274,976~~5.4 ~~gain~~million in the first nine months of 2012 as compared to the same period of 2011. Interest on investment securities increased by $148,164 in the ~~sale~~first nine months of ~~certain~~2012 ~~real~~as ~~estate~~compared to the same period of 2011, primarily as a result of an increase in average investment securities held of approximately $43.4 million which was partially offset by ~~the~~a ~~registrant~~decrease in average yields earned on investment securities to 1.98 percent in the first ~~quarter~~nine months of ~~2011~~2012 as compared 2. ~~The~~32 ~~decrease~~percent in the same period of 2011.

       The increase in net interest income in the first nine months of 2012 as compared to the same period in 2011 was primarily due to a decrease in total interest expense of $761,907, or 18.7 percent, to $3,318,529 for the first nine months of 2012 as compared to $4,080,436 for the same period in 2011. The decrease in total interest expense was primarily caused by a $756,003 decrease in interest expense on time deposits for the nine months ended September 30, 2012 as compared to the same period in 2011. The decrease in interest expense on time deposits was primarily due to lower interest rates paid in the first nine months of 2012 as well as a decrease in the average balance of time deposits of $6.0 million as compared to the same period of 2011. The average interest rate paid on time deposits decreased to 1.30 percent in the first nine months of 2012 as compared to 1.63 percent in the first nine months of 2011. The interest expense on NOW accounts increased $4,351 in the first nine months of 2012 as the average balances held increased $10.8 million while the average interest rate paid fell to 0.20 percent from 0.22 percent in the first nine months of 2012 as compared to the same period of 2011. The interest expense on savings and money market accounts increased $17,463 in the first nine months of 2012 as the average balances held increased $15.6 million while the average interest rate paid fell to 0.40 percent from 0.44 percent in the first nine months of 2012 as compared to the same period 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 decreased $70,337, or 5.4 percent, to $1,221,641 for the three-month period ended September 30, 2012 as compared to $1,291,978 for the three-month period ended September 30, 2011. The decrease in non-interest income was primarily due to a $54,957 decrease in service charges on deposit accounts in the third quarter of 2012 as compared to the same period of 2011 as overdraft fees decreased in the third quarter of 2012. Other income decreased $14,494 as rental income received on other

page 29

PART I - FINANCIAL INFORMATION
____________________________________________

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

orreal ~~decreases~~estate owned decreased in the ~~size~~third ~~and~~quarter ~~composition~~ of ~~the~~2012 ~~loan~~as ~~portfolio,~~compared ~~review~~to ofthe ~~specific~~same ~~problem~~period ~~loans,~~of ~~results~~2011. Income ofon ~~regulatory~~company ~~examinations,~~owned ~~results~~life ofinsurance ~~updated~~also ~~appraisals~~decreased $13,319 in the ~~relationship~~third quarter of 2012 as compared to the ~~allowance~~same ~~for~~period ~~credit~~of ~~losses~~2011. These todecreases ~~outstanding~~were ~~loans~~partially ~~and~~offset ~~current~~by ~~economic~~an ~~conditions~~$18,326 ~~that~~increase ~~may~~in ~~affect~~other ~~the~~service ~~borrower's~~charges ~~ability~~and fees primarily due to ~~repay. A~~increased ~~more~~debit ~~detailed~~card ~~description~~interchange offees in the ~~allowance~~third ~~for~~quarter ~~loan~~of ~~losses~~2012 ~~can~~as becompared ~~found~~to ~~under~~ the ~~section~~same ~~titled~~period ~~"Critical~~of ~~Accounting Policies~~2011.~~" For~~ ~~the~~Other ~~three~~categories of non-~~month~~interest ~~period~~income ~~ended~~showed ~~June~~only ~~30,~~minor differences between the third quarter of 2012, ~~income~~and ~~before~~the ~~taxes~~third quarter of 2011. Total non-interest income increased $~~198~~737,~~975~~082, or 818.58 percent, to $24,~~532~~647,~~361~~663 for the nine-month period ended September 30, 2012 as compared to $23,~~333~~910,~~386~~581 for the ~~three~~same ~~months~~period ended ~~June~~September 30, 2011. ~~Applicable~~ Much of the increase in non-interest income ~~taxes~~was ~~increased~~due to a $~~101~~920,~~365~~162 ~~for~~increase in gain on the ~~three-month~~sale ~~period~~of ~~ended~~securities ~~June~~in ~~30,~~the first nine months of 2012 as compared to the same period inof 2011~~. The~~ ~~effective~~as ~~tax~~the ~~rate~~registrant ~~for~~restructured ~~the~~its ~~three~~investment ~~months~~portfolio ~~ended~~in ~~June~~the ~~30,~~first ~~2012~~quarter ~~was~~of 322012.9 The ~~percent~~investment asportfolio ~~compared~~restructuring toprimarily ~~31.4~~consisted ~~percent~~of ~~for~~increasing the ~~same~~amount ~~period~~ of ~~2011. For~~mortgage-backed ~~the~~securities ~~six-month~~held ~~period~~in ~~ended~~relation ~~June~~to ~~30,~~other ~~2012,~~securities and is projected to increase interest income ~~before~~in ~~taxes~~flat ~~increased~~and ~~$1,810,611,~~rising orinterest ~~42.4~~rate ~~percent,~~environments toover ~~$6,078,548~~the next few years as compared to ~~$4,267,937~~the ~~for~~projected ~~the~~interest ~~six-month~~income ~~period~~that ~~ended~~would ~~June~~have ~~30,~~been ~~2011~~generated before the restructuring. ~~Applicable~~Mortgage banking income ~~taxes~~also increased $~~740~~212,~~613~~477 ~~for~~due ~~the~~to ~~six~~increased ~~months~~mortgage ~~ended~~refinancing ~~June~~activity ~~30,~~in the first nine months of 2012 as compared to the same period of 2011. ~~The~~Other ~~effective~~service ~~tax~~charges ~~rate~~and ~~for~~fees ~~the~~increased ~~six~~$97,108 ~~months~~primarily ~~ended~~due ~~June~~to ~~30,~~increased ~~2012~~debit ~~was~~card ~~33.5~~interchange ~~percent~~fees asin ~~compared~~the tofirst ~~30.4~~nine ~~percent~~months ~~for~~of 2012 as compared to the same period of 2011. ~~The~~ These ~~following~~increases ~~table~~were ~~shows~~partially ~~the~~offset ~~return~~by ondecreases ~~assets~~of ~~(net~~$302,892 ~~income~~and ~~divided~~$158,708 byin ~~average~~other ~~total~~income ~~assets)~~ and ~~return~~service charges on ~~equity~~deposit ~~(net~~accounts, ~~income~~respectively, ~~divided~~in bythe ~~average~~first ~~shareholders'~~nine ~~equity,~~months ~~excluding~~of ~~unrealized~~2012 ~~gain~~as orcompared ~~loss~~to onthe ~~securities)~~same ~~for~~period ~~the~~of ~~three~~2011. The ~~and~~decrease ~~six~~in ~~months~~other ~~ended~~income ~~June~~was 30primarily due to a $274,976 ~~2012~~gain ~~and~~on ~~2011~~the ~~(annualized)~~sale ~~and~~of ~~for~~certain real estate held by the ~~year~~registrant ~~ended~~in ~~December~~the ~~31,~~first quarter of 2011. The decrease

in service charges on deposit accounts was primarily due to reduced overdraft fees in the first nine months of 2012 as compared to the first nine months of 2011. Other categories of non-interest income showed only minor differences between the first nine months of 2012 and the first nine months of 2011.
       Total non-interest expenses increased $392,248, or 8.8 percent, to $4,845,362 in the third quarter of 2012 as compared to $4,453,114 for the same period of 2011. This increase in non-interest expenses was primarily due to a $493,219 increase in other expenses in the third quarter of 2012 as compared to the same period of 2011. The increase in other operating expenses was primarily due to expenses related to a new marketing initiative begun in the second quarter of 2012. Advertising and public relations expense also increased $24,187 in the third quarter of 2012 as compared to the same period of 2011. Decreases of $83,825 in salaries and employee benefits and $31,511 in FDIC insurance expense in the third quarter of 2012 as compared to the same period of 2011 partially offset these increases. Other categories of non-interest expense showed only minor differences between the third quarter of 2012 and the third quarter of 2011.
       Total non-interest expenses increased $614,005, or 4.6 percent, to $13,836,809 in the first nine months of 2012 as compared to $13,222,804 for the same period of 2011. This increase in non-interest expenses was primarily due to a $608,289 increase in other operating expenses and a $186,270 increase in salaries and employee benefits in the first nine months of 2012 as compared to the same period of 2011. The increase in other operating expenses was primarily due to expenses related to a new marketing initiative begun in the second quarter of 2012. The increase in salaries and employee benefits was primarily due to increased expense per employee in the first nine months of 2012 as compared to the same period of 2011. A smaller increase of $41,108 occurred in advertising and public relations in the first nine months of 2012 as compared to the same period of 2011. Decreases of $150,019 and $62,791 in FDIC insurance expense and foreclosed asset expense, respectively, partially offset these increases. The decrease in FDIC insurance expense was primarily due to an improvement in some of the Bank's performance ratios used by the FDIC to calculate the insurance premium in the first nine months of 2012 as compared to the same period of 2011. Other categories of non-interest expense showed only minor differences between the first nine months of 2012 and the first nine months of 2011.
       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

	Annualized for the Three		Annualized for the Six
	Months Ended June 30,		Months Ended June 30,		For year ended
	2012	2011	2012	2011	December 31, 2011
Return on assets	1.04%	1.03%	1.25%	0.97%	1.01%
Return on equity	11.32%	11.74%	13.64%	11.06%	11.26%

Financial Condition

The registrant's total assets increased 4.0 percent to $660,576,726 during the six months ended June 30, 2012, from $635,098,812 at December 31, 2011. Loans, net of unearned income were $340,054,936 at June 30, 2012, a 0.1 percent decrease compared to $340,553,701 at December 31, 2011. Securities available-for-sale increased to $247,978,010 at June 30, 2012 from $217,469,728 at December 31, 2011. At June 30, 2012, there was an unrealized gain on available-for-sale securities, net of tax, of $2,208,854, 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 3.9 percent to $597,493,607 at June 30, 2012, compared to $575,331,508 at December 31, 2011. This increase was primarily due to an increase of $18,731,702 in interest bearing deposits at June 30, 2012 as compared to December 31, 2011. Non-performing assets decreased to $15,194,999 at June 30, 2012 as compared to $16,725,399 at December 31, 2011. Non-performing assets at June 30, 2012 included $6,962,149 in other real estate owned, $8,232,850 in non-accrual loans, and no loans past due 90 days or more as to interest or principal payment and accruing interest.

page 30

PART I - FINANCIAL INFORMATION
____________________________________________

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

~~reserves~~all toof ~~customers~~2010, ~~whose~~2011 ~~loan~~and ~~terms~~2012. The ~~have~~FDIC ~~been~~also ~~modified~~adopted a uniform three-basis point increase in ~~troubled~~assessment ~~debt~~rates ~~restructurings~~effective ason January 1, 2011. In December 2009, the Bank paid $3.39 million in prepaid risk-based assessments. Prepaid FDIC insurance had a balance of ~~June~~$1.40 million at September 30, 2012, oras ~~December~~a 31$98,000 ~~2011~~reduction was made for applicable FDIC insurance premiums in the third quarter of 2012. The ~~allowance~~provision for loan losses ~~was~~for ~~87.3%~~the ofthree months ended September 30, 2012, increased to $60,000 from $0 over the ~~balance~~same period of ~~nonaccrual~~2011. The ~~loans~~provision atfor ~~June~~loan losses for the nine months ended September 30, 2012, asdecreased ~~compared~~$650,000 to ~~77.9%~~$500,000 atfrom ~~December 31~~$1,150,000 over the same period of 2011. ~~Nonaccrual~~ Although ~~loans~~the ~~are~~provision ~~those~~ for ~~which~~loan ~~management~~losses ~~has~~in ~~discontinued~~the ~~accrual~~nine months ended September 30, 2012 declined significantly from the amount in the same period of ~~interest~~2011, ~~because~~the ~~there~~size ~~exists~~of ~~significant~~the ~~uncertainty~~provision asof loan losses continued to reflect the ~~full~~effects of continued weakness in local and ~~timely~~national ~~collection~~economic conditions upon the loan portfolio, particularly within the real estate segment of ~~either~~the ~~principal~~portfolio. If oreconomic ~~interest~~conditions or ~~such~~the ~~loans~~real ~~have~~estate ~~become~~market ~~contractually~~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 loan losses is based on past ~~due~~loan 90experience ~~days~~and ~~with~~other ~~respect~~factors tothat, ~~principal~~in ormanagement's ~~interest~~judgment, ~~unless~~deserve ~~such~~current ~~loans~~recognition ~~are~~in ~~well~~estimating ~~secured~~probable and incurred credit losses. Such factors include past loan loss experience, increases or decreases in the ~~process~~size and composition of ~~collection~~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. ~~The~~A ~~additional~~more ~~amount~~detailed description of ~~interest~~the ~~that~~allowance ~~would~~for ~~have~~loan ~~been~~losses ~~recorded~~can ~~during~~be found under the ~~first~~section ~~six~~titled ~~months~~"Critical ofAccounting Policies." For the three-month period ended September 30, 2012, ifincome before taxes decreased $670,635, or 23.9 percent, to $2,131,210 as compared to $2,801,845 for the ~~above~~three ~~nonaccrual~~months ~~loans~~ended ~~had~~September ~~been~~30, ~~current~~2011. Applicable income taxes decreased $224,850 for the three-month period ended September 30, 2012 as compared to the same period in ~~accordance~~2011. The ~~with~~effective ~~their~~tax ~~original~~rate ~~terms~~for the three months ended September 30, 2012 was ~~approximately~~32.2 percent as compared to 32.5 percent for the same period of 2011. For the nine-month period ended September 30, 2012, income before taxes increased $~~406~~1,~~000~~139,976, or 16.1 percent, to $8,209,758 as compared to $7,069,782 for the nine-month period ended September 30, 2011. Applicable income taxes increased $515,763 for the nine months ended September 30, 2012 as compared to the same period of 2011. The effective tax rate for the nine months ended September 30, 2012 was 33.2 percent as compared to 31.3 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 shareholders' equity, excluding unrealized gain or loss on securities) for the three and nine months ended September 30, 2012 and 2011(annualized) and for the year ended December 31, 2011.

	Annualized for the Three		Annualized for the Nine
	Months Ended September 30,		Months Ended September 30,		For year ended
	2012	2011	2012	2011	December 31, 2011
Return on assets	0.88%	1.21%	1.12%	1.05%	1.01%
Return on equity	9.34%	13.37%	12.16%	11.85%	11.26%

Financial Condition

The registrant's total assets increased 4.1 percent to $661,053,133 during the nine months ended September 30, 2012, from $635,098,812 at December 31, 2011. Loans, net of unearned income were $340,400,534 at September 30, 2012, a less than 0.1 percent decrease compared to $340,553,701 at December 31, 2011. Securities available-for-sale increased to $241,087,289 at September 30, 2012 from $217,469,728 at December 31, 2011. At September 30, 2012, there was an unrealized gain on available-for-

page 31

PART I - FINANCIAL INFORMATION
____________________________________________

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

sale securities, net of tax, of $2,966,608, 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 3.6 percent to $596,133,364 at September 30, 2012, compared to $575,331,508 at December 31, 2011. This increase was primarily due to an increase of $16,304,577 in interest bearing deposits at September 30, 2012 as compared to December 31, 2011.
Non-performing assets decreased to $16,682,002 at September 30, 2012 as compared to $16,725,399 at December 31, 2011. Non-performing assets at September 30, 2012 included $6,817,264 in other real estate owned, $9,834,738 in non-accrual loans, and $30,000 in loans past due 90 days or more as to interest or principal payment and accruing interest.

There were $348,521 in trouble debt restructurings still accruing interest at September 30, 2012. Other real estate owned remained at an elevated level at September 30, 2012. The properties comprising other real estate owned at September 30, 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 September 30, 2012 consisted primarily of one-to-four family real estate loans, commercial 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 registrant did not allocate any specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2012 or December 31, 2011. The allowance for loan losses was 72.4% of the balance of nonaccrual loans at September 30, 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 or more 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 nine months of 2012 if the above nonaccrual loans had been current in accordance with their original terms was approximately $551,000.
      Loans that are classified as "substandard" by the registrant represent loans that are inadequately protected by the current net worth and paying capacity of the obligor or 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. As of September 30, 2012, there were approximately $7,326,000 in loans that were classified as "substandard" and accruing interest. This compares to approximately $7,497,000 in loans that were classified as "substandard" and accruing interest as of September 30, 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 (35 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 non-residential buildings (39 percent of total risk-based capital), loans to lessors of residential buildings and dwellings (32 percent of total risk-based capital), loans secured by hotel and motel properties (28 percent of total risk-based capital) and loans secured by subdivision land (26 percent of total

page 32

PART I - FINANCIAL INFORMATION
____________________________________________

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

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 nine months ended September 30, 2012, the registrant had net loan charge-offs of approximately $847,000 for a net charge-off ratio (net charge-offs divided by total loans net of unearned income) of 0.33 percent (annualized). This compares to net charge-offs of approximately $1,023,000 for the nine months ended September 30, 2011 for a net charge-off ratio of 0.40 percent (annualized).
The total allowance for loan losses decreased to $7,123,746 as of September 30, 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 2.09 percent at September 30, 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~~increased $32,~~436~~557,~~946~~542 from ~~$33,822,394 at~~ December 31, 2011 to ~~$30,385,448~~September ~~at June~~ 30, 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 $68,~~661~~913,000 at ~~June~~September 30, 2012, representing 23.7 percent of the registrant's investment portfolio as compared to $1211,~~048~~731,000, or 65.07 percent, one year earlier and $8,133,000, or 3.7 percent, at December 31, 2011. These securities may be 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 ~~June~~September 30, 2012, the registrant had approximately $~~113~~125,~~915~~470,000 in loans maturing within one year. The registrant had $27,~~140~~015,000 in federal funds sold at ~~June~~September 30, 2012, compared to $1,640,000 as of December 31, 2011. The registrant also had approximately $2829,~~245~~365,000 in cash and due from banks at ~~June~~September 30, 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
	June 30, 2012	December 31, 2011
Commitments to extend credit	$55,480,671	$49,502,377
Standby letters of credit	2,060,735	2,265,295
Mortgage loans sold with repurchase
requirements outstanding	7,262,486	10,304,698

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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 June 30, 2012, the registrant had total borrowings of $6,572,073 and had approximately $22,132,000 of available additional borrowings from the Federal Home Loan Bank of Cincinnati. At June 30, 2012, the registrant had no federal funds purchased and had $25,000,000 in additional federal funds lines available from correspondent banks.

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PART I - FINANCIAL INFORMATION
____________________________________________

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

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.

	Amount at
	September 30, 2012	December 31, 2011
Commitments to extend credit	$60,153,593	$49,502,377
Standby letters of credit	2,097,960	2,265,295
Mortgage loans sold with repurchase
requirements outstanding	7,518,805	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 September 30, 2012, the registrant had total borrowings of $6,542,911 and had approximately $22,162,000 of available additional borrowings from the Federal Home Loan Bank of Cincinnati. At September 30, 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 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 September 30, 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", FPNC and 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 September 30, 2012 and December 31, 2011.

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PART I - FINANCIAL INFORMATION
____________________________________________

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

								To Be Well Capitalized
					For Capital			Under Applicable
			Actual		Adequacy Purposes			Regulations
			Amount	Ratio	Amount		Ratio	Amount		Ratio
			(Dollars In thousands)
As of June 30, 2012
As of September 30, 2012
	Total Capital to risk weighted assets
		FPNC	$6667,~~125~~203	1516.8107%	$33,~~450~~449	>	8.00%	$41,812	>	10.00%
		FNB	6566,~~769~~842	15.7399	33,~~444~~445	>	8.00	41,~~805~~806	>	10.00
	Tier I (Core) Capital to risk weighted assets
		FPNC	6061,~~874~~953	14.5682	16,725	>	4.00	25,087	>	6.00
		FNB	6061,~~518~~592	14.4873	16,722	>	4.00	25,~~083~~084	>	6.00
	Tier I (Core) Capital to average quarterly assets
		FPNC	6061,~~874~~953	9.2444	26,~~347~~243	>	4.00
		FNB	6061,~~518~~592	9.1939	26,~~345~~240	>	4.00	32,~~931~~800	>	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

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

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PART I - FINANCIAL INFORMATION
____________________________________________

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

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 September 30, 2012, the -200 basis point rate shock was estimated to increase the current present value of the Bank's equity by 6.9 percent and a +200 basis point rate shock was estimated to decrease the current present value of the Bank's equity by 6.8 percent, both well within the policy guidelines. A -200 basis point rate shock was estimated to decrease net interest income approximately $2,835,000, or 14.1 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 $295,000, or 1.5 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 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 September 30, 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.

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PART I - FINANCIAL INFORMATION ____________________________________________

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

Changes in Internal Controls

There were no changes in the registrant's internal control over financial reporting during the registrant's fiscal quarter ended ~~June~~September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

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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

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

~~None~~ On November 8, 2012, First Pulaski National Corporation, a Tennessee corporation (the "Company"), held a special meeting of shareholders (the "Special Meeting"). At the Special Meeting, shareholders approved an amendment to the Company's charter to provide for the authorization of a new class of capital stock, Class A stock, and to reclassify certain of the Company's shares of existing common stock into the Class A stock. The final voting result of the charter amendment and reclassification proposal, which was described in more detail in the definitive proxy statement delivered to the Company's shareholders in connection with the Special Meeting and filed with the Securities and Exchange Commission on October 5, 2012, is set forth below:

page 36

For	Against	Abstain	Broker Non-Votes
1,019,440	222,427	32,707	0

PART II - OTHER INFORMATION ____________________________________________

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*

*To be filed later by amendment.

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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: ~~August~~November 89, 2012 /s/Mark A. Hayes Mark A. Hayes, Chief Executive Officer

Date: ~~August~~November 89, 2012 /s/Tracy Porterfield Tracy Porterfield, Chief Financial Officer

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Exhibit Index

*To be filed later by amendment.

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Filing Compare · FIRST PULASKI NATIONAL CORP