XML 42 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Disclosures About Fair Value Measurements
 12 Months Ended
Dec. 31, 2011
Disclosures About Fair Value Measurements [Abstract]  
Disclosures About Fair Value Measurements

11. DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS

The following disclosures establish a hierarchal framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined within this hierarchy are as follows:

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

 

Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quoted market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things.

The fair value of the swap asset is based on an external derivative valuation model using data inputs as of the valuation date and classified Level 2.

The following table presents the assets reported on the Consolidated Balance Sheets at their fair value as of December 31, 2011 and 2010, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Assets and Liability Measured on a Recurring Basis

Assets and liability measured at fair value on a recurring basis are summarized below (in thousands):

 

     FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2011 USING  
      TOTAL      QUOTED PRICES IN
ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)		      SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)		      SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)		  

Assets:

            

U.S. Agency securities

    $ 10,709       $ —       $ 10,709       $ —   

U.S. Agency mortgage- backed securities

      172,214         —         172,214         —   

Fair value of swap asset

      346         —         346         —   

Fair value of swap liability

      346         —         346         —   

 

     FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2010 USING  
      TOTAL      QUOTED PRICES IN
ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)		      SIGNIFICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)		      SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)		  

Assets:

            

U.S. Agency securities

    $ 15,944       $ —       $ 15,944       $ —   

U.S. Agency mortgage-

backed securities

      148,867         —         148,867         —   

Fair value of swap asset

      420         —         420         —   

Fair value of swap liability

      420         —         420         —   

Loans considered impaired are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are reported at fair value of the underlying collateral if the repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on observable market data which at times are discounted. At December 31, 2011, impaired loans with a carrying value of $3.9 million were reduced by specific valuation allowance totaling $968,000 resulting in a net fair value of $2.9 million. At December 31, 2010, impaired loans with a carrying value of $12.1 million were reduced by specific valuation allowance totaling $3.8 million resulting in a net fair value of $8.3 million.

OREO is measured at fair value based on appraisals, less cost to sell at the date of foreclosure. Valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less cost to sell. Income and expenses from operations and changes in valuation allowance are included in the net expenses from OREO.

 

Assets Measured on a Non-recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below (in thousands):

 

     FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2011 USING  
      TOTAL      QUOTED PRICES IN
ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)		      SIGNIGICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)		      SIGNIVICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)		  

Assets:

            

Impaired loans

    $ 2,902       $ —       $ —       $ 2,902   

Other real estate owned

      124         —         —         124   

 

     FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2010 USING  
      TOTAL      QUOTED PRICES IN
ACTIVE MARKETS
FOR IDENTICAL
ASSETS
(LEVEL 1)		      SIGNIGICANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)		      SIGNIVICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)		  

Assets:

            

Impaired loans

    $ 8,341       $ —       $ —       $ 8,341   

Other real estate owned

      738         —         —         738