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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2011
Fair Value Disclosures [Abstract] |
Fair Value Disclosures [Text Block] | NOTE 20. FAIR VALUE MEASUREMENTS ASC 820, “Fair Value Measurements and Disclosures” provides a framework for measuring and disclosing fair value under GAAP. This accounting guidance requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis or on a nonrecurring basis. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale and derivative assets and liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate and other assets owned (foreclosed assets). These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Under ASC 820, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine their fair values. These hierarchy levels are: Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Level 2 inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. The following is a description of valuation methodologies used for the Company’s assets and liabilities recorded at fair value. Investment Securities Available for Sale Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based on quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets. Loans The Company does not record loans at fair value on a recurring basis; however, from time to time, a loan is considered impaired and a valuation allowance may be established if there are losses associated with the loan. Loans are considered impaired if it is probable that payment of interest and principle will not be made in accordance with contractual terms. The fair value of impaired loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. At December 31, 2011 and 2010, substantially all impaired loans were evaluated based on the fair value of the collateral and were classified as Level 3 in the fair value hierarchy. Other Real Estate and Other Assets Owned (Foreclosed Assets) Foreclosed assets are adjusted for fair value upon transfer of loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value and fair value. Fair value is based on independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. At December 31, 2011 and 2010, foreclosed assets were classified as Level 3 in the fair value hierarchy. Derivative Assets and Liabilities Derivative instruments held or issued by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the Company measures fair value using models that use primarily market observable inputs, such as yield curves and option volatilities, and include the value associated with counterparty credit risk. The Company classifies derivative instruments held or issued for risk management purposes as recurring Level 2. As of December 31, 2011 and 2010, the Company’s derivative instruments consisted solely of interest rate caps. Derivative assets and liabilities are included in other assets and liabilities, respectively, in the accompanying consolidated balance sheets. Assets Recorded at Fair Value on a Recurring Basis The tables below present the recorded amount of assets measured at fair value on a recurring basis at December 31, 2011 and 2010. No assets were transferred from one hierarchy level to another during 2011 and 2010.
(Dollars in thousands) |  | Fair Value |  |  | Quoted Prices (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government agencies |  | $ | 42,148 |  |  | $ | - |  |  | $ | 42,148 |  |  | $ | - |
Mortgage-backed securities |  |  | 87,033 |  |  |  | - |  |  |  | 87,033 |  |  |  | - |
Other equity securities |  |  | 599 |  |  |  | - |  |  |  | 599 |  |  |  | - |
Total |  | $ | 129,780 |  |  | $ | - |  |  | $ | 129,780 |  |  | $ | - |
Interest rate caps |  | $ | 250 |  |  | $ | - |  |  | $ | 250 |  |  | $ | - |
(Dollars in thousands) |  | Fair Value |  |  | Quoted Prices (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government agencies |  | $ | 58,904 |  |  | $ | - |  |  | $ | 58,904 |  |  | $ | - |
Mortgage-backed securities |  |  | 39,577 |  |  |  | - |  |  |  | 39,577 |  |  |  | - |
Other equity securities |  |  | 574 |  |  |  | - |  |  |  | 574 |  |  |  | - |
Total |  | $ | 99,055 |  |  | $ | - |  |  | $ | 99,055 |  |  | $ | - |
Interest rate caps |  | $ | 2,022 |  |  | $ | - |  |  | $ | 2,022 |  |  | $ | - |
Assets Recorded at Fair Value on a Nonrecurring Basis The tables below summarize the changes in the recorded amount of assets measured at fair value on a nonrecurring basis for 2011 and 2010. All assets measured at fair value on a nonrecurring basis were classified as Level 3 in the fair value hierarchy for the periods presented.
(Dollars in thousands) |  | Construction |  |  | Residential real estate |  |  | Commercial real estate |  |  | Commercial |  |  | Consumer |  |  | Total |
2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 28,175 |  |  | $ | 15,327 |  |  | $ | 13,280 |  |  | $ | 4,374 |  |  | $ | 30 |  |  | $ | 61,186 |
Charge-offs |  |  | (4,313 | ) |  |  | (7,082 | ) |  |  | (4,643 | ) |  |  | (2,600 | ) |  |  | - |  |  |  | (18,638 | )
Payments |  |  | (1,555 | ) |  |  | (7,557 | ) |  |  | (2,364 | ) |  |  | (550 | ) |  |  | (13 | ) |  |  | (12,039 | )
Transfers to other real estate owned |  |  | (2,317 | ) |  |  | (1,642 | ) |  |  | (4,920 | ) |  |  | (388 | ) |  |  | - |  |  |  | (9,267 | )
Return to performing status |  |  | - |  |  |  | (1,907 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,907 | )
Changed to nonaccrual status |  |  | (419 | ) |  |  | (3,120 | ) |  |  | (1,825 | ) |  |  | - |  |  |  | - |  |  |  | (5,364 | )
Additions |  |  | 7,765 |  |  |  | 29,879 |  |  |  | 24,050 |  |  |  | 902 |  |  |  | 11 |  |  |  | 62,607 |
Changes in allowance |  |  | (170 | ) |  |  | (1,296 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,466 | )
Ending balance |  | $ | 27,166 |  |  | $ | 22,602 |  |  | $ | 23,578 |  |  | $ | 1,738 |  |  | $ | 28 |  |  | $ | 75,112 |
(Dollars in thousands) |  | Construction |  |  | Residential real estate |  |  | Commercial real estate |  |  | Commercial |  |  | Consumer |  |  | Total |
2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 7,163 |  |  | $ | 5,968 |  |  | $ | 2,828 |  |  | $ | 1,560 |  |  | $ | 37 |  |  | $ | 17,556 |
Charge-offs |  |  | (7,765 | ) |  |  | (5,809 | ) |  |  | (76 | ) |  |  | (2,258 | ) |  |  | (94 | ) |  |  | (16,002 | )
Payments |  |  | (2,209 | ) |  |  | (4,146 | ) |  |  | (1,099 | ) |  |  | (220 | ) |  |  | (2 | ) |  |  | (7,676 | )
Transfers to other real estate owned |  |  | (157 | ) |  |  | (1,233 | ) |  |  | (208 | ) |  |  | - |  |  |  | - |  |  |  | (1,598 | )
Return to performing status |  |  | (462 | ) |  |  | (655 | ) |  |  | - |  |  |  | (582 | ) |  |  | - |  |  |  | (1,699 | )
Changed to nonaccrual status |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Additions |  |  | 31,605 |  |  |  | 21,405 |  |  |  | 11,835 |  |  |  | 5,874 |  |  |  | 89 |  |  |  | 70,808 |
Changes in allowance |  |  | - |  |  |  | (203 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (203 | )
Ending balance |  | $ | 28,175 |  |  | $ | 15,327 |  |  | $ | 13,280 |  |  | $ | 4,374 |  |  | $ | 30 |  |  | $ | 61,186 |
(Dollars in thousands) |  | 2011 |  |  | 2010 |
Other real estate owned: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 3,702 |  |  | $ | 2,572 |
Sales |  |  | (3,978 | ) |  |  | (1,353 | )
Write-downs |  |  | (1,051 | ) |  |  | (657 | )
Additions |  |  | 10,712 |  |  |  | 3,140 |
Ending balance |  | $ | 9,385 |  |  | $ | 3,702 |
The following disclosures relate to the fair value of the Company’s financial instruments and include the methods and assumptions used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value: Cash and Cash Equivalents Cash equivalents include interest-bearing deposits with other banks and federal funds sold. For these short-term instruments, the carrying amount is a reasonable estimate of fair value. Investment Securities For all investments in debt securities, fair values are based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Loans The fair values of categories of fixed rate loans, such as commercial loans, residential mortgage, and other consumer loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Other loans, including variable rate loans, are adjusted for differences in loan characteristics. Financial Liabilities The fair values of demand deposits, savings accounts, and certain money market deposits are the amounts payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. These estimates do not take into consideration the value of core deposit intangibles. Generally, the carrying amount of short-term borrowings is a reasonable estimate of fair value. The fair values of securities sold under agreements to repurchase (included in short-term borrowings) and long-term debt are estimated using the rates offered for similar borrowings. Commitments to Extend Credit and Standby Letters of Credit The majority of the Company’s commitments to grant loans and standby letters of credit are written to carry current market interest rates if converted to loans. In general, commitments to extend credit and letters of credit are not assignable by the Company or the borrower, so they generally have value only to the Company and the borrower. Therefore, it is impractical to assign any value to these commitments. The following table provides information on the estimated fair values of the Company’s financial instruments as of December 31, 2011 and 2010.
|  | 2011 |  |  | 2010 |
|  |  |  |  | Estimated |  |  |  |  |  | Estimated |
|  | Carrying |  |  | Fair |  |  | Carrying |  |  | Fair |
(Dollars in thousands) |  | Amount |  |  | Value |  |  | Amount |  |  | Value |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 127,742 |  |  | $ | 127,742 |  |  | $ | 77,964 |  |  | $ | 77,964 |
Investment securities |  |  | 136,260 |  |  |  | 136,512 |  |  |  | 105,782 |  |  |  | 105,906 |
Loans |  |  | 841,050 |  |  |  | 856,917 |  |  |  | 895,404 |  |  |  | 908,745 |
Less: allowance for credit losses |  |  | (14,288 | ) |  |  | - |  |  |  | (14,227 | ) |  |  | - |
Total |  | $ | 1,090,764 |  |  | $ | 1,121,171 |  |  | $ | 1,064,923 |  |  | $ | 1,092,615 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 1,009,919 |  |  | $ | 1,013,964 |  |  | $ | 979,516 |  |  | $ | 983,257 |
Short-term borrowings |  |  | 17,817 |  |  |  | 17,817 |  |  |  | 16,041 |  |  |  | 16,041 |
Long-term debt |  |  | 455 |  |  |  | 470 |  |  |  | 932 |  |  |  | 982 |
Total |  | $ | 1,028,191 |  |  | $ | 1,032,251 |  |  | $ | 996,489 |  |  | $ | 1,000,280 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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