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Fair Value
 3 Months Ended
Mar. 31, 2012
Fair Value [Abstract]  
Fair Value
 
(6)
Fair Value

The Company is required to disclose fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company's financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination, or issuance.

Cash and Cash Equivalents
For cash, due from banks and interest bearing deposits, the carrying amount is a reasonable estimate of fair value.
 
Investment Securities Available for Sale
Fair values for investment securities are based on quoted market prices.

Other Investments
For other investments, the carrying value is a reasonable estimate of fair value.

Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at lower of aggregate cost or market value.  The cost of mortgage loans held for sale approximates the market value.

Loans
The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value.   Loans are included in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments.
 
Cash Surrender Value of Life Insurance
For cash surrender value of life insurance, the carrying value is a reasonable estimate of fair value.

Derivative Instruments
For derivative instruments, fair value is estimated as the amount that the Company would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts.

Deposits
The fair value of demand deposits, interest-bearing demand deposits and savings is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Securities Sold Under Agreements to Repurchase
For securities sold under agreements to repurchase, the carrying value is a reasonable estimate of fair value.

Federal Home Loan Bank ("FHLB") Borrowings
The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings.

Junior Subordinated Debentures
Because the Company's junior subordinated debentures were issued at a floating rate, the carrying amount is a reasonable estimate of fair value.

Commitments to Extend Credit and Standby Letters of Credit
Commitments to extend credit and standby letters of credit are generally short-term and at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial.

Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements.  Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.   The following tables present the balance of securities available for sale, mortgage loans held for sale and derivatives, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2012 and December 31, 2011.

 
(Dollars in thousands)
       
 
March 31, 2012
 
Fair Value Measurements
 
Level 1
Valuation
 
Level 2
Valuation
 
Level 3
Valuation
Mortgage-backed securities
$195,543 - 195,543 -
U.S. Government
        
sponsored enterprises
$3,287 - 3,287 -
State and political subdivisions
$96,476 - 96,476 -
Corporate bonds
$1,560 - 1,560 -
Trust preferred securities
$1,250 - - 1,250
Equity securities
$1,187 1,187 - -
Mortgage loans held for sale
$6,256 - 6,256 -
 
 
(Dollars in thousands)
       
 
December 31, 2011
 
Fair Value Measurements
 
Level 1
Valuation
 
Level 2
Valuation
 
Level 3
Valuation
Mortgage-backed securities
$213,693 - 208,349 5,344
U.S. Government
        
sponsored enterprises
$7,694 - 7,694 -
State and political subdivisions
$97,097 - 97,097 -
Corporate bonds
$543 - 543 -
Trust preferred securities
$1,250 - - 1,250
Equity securities
$1,111 1,111 - -
Mortgage loans held for sale
$5,146 - 5,146 -
 
The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the three months ended March 31, 2012.   Transfers out of Level 3 during the three months ended March 31, 2012 are attributable to one available for sale security reported in Level 3 at December 31, 2011 because market pricing was unavailable from the Bank's third party bond accounting provider at that time.  This security was reported in Level 2 at March 31, 2012, as the market valuation was provided by the Bank's third party bond accounting provider.
 
(Dollars in thousands)
  
 
Investment Securities Available for Sale
 
 
Level 3 Valuation
 
Balance, beginning of period
$6,594 
Change in book value
 - 
Change in gain/(loss) realized and unrealized
 - 
Purchases/(sales)
 - 
Transfers in and/or (out) of Level 3
 (5,344)
Balance, end of period
$1,250 
     
Change in unrealized gain/(loss) for assets still held in Level 3
$- 
 
 
The Company's March 31, 2012 and December 31, 2011 fair value measurement for impaired loans and other real estate on a non-recurring basis is presented below:
 
(Dollars in thousands)
         
 
Fair Value
Measurements
March 31, 2012
 
Level 1
Valuation
 
Level 2
Valuation
 
Level 3
Valuation
 
Total Gains/(Losses) for
the Three Months Ended
March 31, 2012
Impaired loans
$51,079 - 346 50,733 (2,506)
Other real estate
$8,020 - - 8,020 (189)
             
(Dollars in thousands)
         
 
Fair Value
Measurements
December 31, 2011
 
Level 1
Valuation
 
Level 2
Valuation
 
Level 3
Valuation
 
Total Gains/(Losses) for
the Year Ended
December 31, 2011
Impaired loans
$49,901 - 431 49,470 (11,864)
Other real estate
$7,576 - - 7,576 (1,322)
 
 
The carrying amount and estimated fair value of the Company's financial instruments at March 31, 2012 and December 31, 2011 are as follows:
 
(Dollars in thousands)
         
    
Fair Value Measurements at March 31, 2012
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
         
Cash and cash equivalents
$48,104 48,104 - - 48,104
Investment securities available for sale
 299,303 1,187 296,866 1,250 299,303
Other investments
 6,205 - - 6,205 6,205
Mortgage loans held for sale
 6,256 - 6,256 - 6,256
Loans, net
 641,731 - - 635,671 635,671
Cash surrender value of life insurance
 12,937 - 12,937 - 12,937
            
Liabilities:
          
Deposits
$807,799 - 807,139 - 807,139
Securities sold under agreements
          
to repurchase
 43,479 - 43,479 - 43,479
FHLB borrowings
 70,000 - 75,525 - 75,525
Junior subordinated debentures
 20,619 - 20,619 - 20,619
 
 
(Dollars in thousands)
   
 
December 31, 2011
 
Carrying
Amount
 
Estimated
Fair Value
Assets:
   
Cash and cash equivalents
$29,236 29,236
Investment securities available for sale
 321,388 321,388
Other investments
 5,712 5,712
Mortgage loans held for sale
 5,146 5,146
Loans, net
 653,893 648,640
Cash surrender value of life insurance
 12,835 12,835
      
Liabilities:
    
Deposits and demand notes payable
$827,111 826,810
Securities sold under agreements
    
to repurchase
 39,600 39,600
FHLB borrowings
 70,000 75,046
Junior subordinated debentures
 20,619 20,619