Fair Value (Tables)

6 Months Ended

Jun. 30, 2012

Fair value of assets measured on recurring and nonrecurring basis

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 June 30, 2012 and December 31, 2011.

(Dollars in thousands)
	June 30, 2012
	Fair Value Measurements		Level 1 Valuation	Level 2 Valuation	Level 3 Valuation
Mortgage-backed securities	$	166,021	-	166,021	-
U.S. Government
sponsored enterprises	$	2,930	-	2,930	-
State and political subdivisions	$	107,675	-	107,675	-
Corporate bonds	$	1,545	-	1,545	-
Trust preferred securities	$	1,250	-	-	1,250
Equity securities	$	1,314	1,314	-	-
Mortgage loans held for sale	$	3,753	-	-	3,753

(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 Company's June 30, 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 June 30, 2012		Level 1 Valuation	Level 2 Valuation	Level 3 Valuation	Total Gains/(Losses) for the Six Months Ended June 30, 2012
Impaired loans	$	51,729	-	345	51,384	(4,217	)
Other real estate	$	6,505	-	-	6,505	(384	)

(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	)

Analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs

The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the six months ended June 30, 2012. Transfers out of Level 3 during the six months ended June 30, 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 June 30, 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	$	-

Carrying amount and estimated fair value of financial instruments

The carrying amount and estimated fair value of the Company's financial instruments at June 30, 2012 and December 31, 2011 are as follows:

(Dollars in thousands)
			Fair Value Measurements at June 30, 2012
	Carrying Amount		Level 1	Level 2	Level 3	Total
Assets:
Cash and cash equivalents	$	69,477	69,477	-	-	69,477
Investment securities available for sale		280,735	1,314	278,171	1,250	280,735
Other investments		5,734	-	-	5,734	5,734
Mortgage loans held for sale		3,753	-	-	3,753	3,753
Loans, net		626,175	-	345	619,259	619,604
Cash surrender value of life insurance		13,040	-	13,040	-	13,040

Liabilities:
Deposits	$	780,546	-	779,500	-	779,500
Securities sold under agreements
to repurchase		50,510	-	50,510	-	50,510
FHLB borrowings		70,000	-	75,508	-	75,508
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

- Definition

Tabular disclosure related to assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition. Disclosures include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3) as well as transfers between levels 1 and 2.

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Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-Name Statement of Financial Accounting Standard (FAS)

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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