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DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS | 12 Months Ended
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Dec. 31, 2012
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, 2012 and 2011, 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, 2012 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 |  | $ | 5,911 |  |  | $ | - |  |  | $ | 5,911 |  |  | $ | - |
U.S. Agency mortgage-backed securities |  |  | 137,735 |  |  |  | - |  |  |  | 137,735 |  |  |  | - |
Corporate bonds |  |  | 7,892 |  |  |  | - |  |  |  | 7,892 |  |  |  | - |
Fair value of swap asset |  |  | 164 |  |  |  | - |  |  |  | 164 |  |  |  | - |
Fair value of swap liability |  |  | 164 |  |  |  | - |  |  |  | 164 |  |  |  | - |
|  | 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 |  |  |  | - |
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, 2012, impaired loans with a carrying value of $4.8 million were reduced by specific valuation allowance totaling $1.6 million resulting in a net fair value of $3.2 million. 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. 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, 2012 USING
|  | TOTAL |  | QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) |  | SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2) |  | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 3,220 |  |  | $ | - |  |  | $ | - |  |  | $ | 3,220 |
Other real estate owned |  |  | 1,228 |  |  |  | - |  |  |  | - |  |  |  | 1,228 |
|  | 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: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 2,902 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,902 |
Other real estate owned |  |  | 124 |  |  |  | - |  |  |  | - |  |  |  | 124 |
December 31, 2012
|  | Quantitative Information About Level 3 Fair Value Measurements
|  | Fair Value Estimate |  | Valuation Techniques |  | Unobservable Input |  | Range
Impaired loans |  | $ | 3,220 |  |  |  | Appraisal of collateral | (1) |  |  | Appraisal adjustments | (2) |  |  | 1% to -35 | %
|  |  |  |  |  |  |  |  |  |  | Liquidation expenses | (2) |  |  | 1% to -15 | %
Other real estate owned |  |  | 1,228 |  |  |  | Appraisal of collateral(1),(3) |  |  |  |  |  |  |  | 1% to -20 | %
| (1) | Fair Value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.
| (2) | Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.
| (3) | Includes qualitative adjustments by management and estimated liquidation expenses.

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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 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: 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. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -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 5: 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. Reference 6: 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=7491637&loc=d3e13433-108611 Reference 7: 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. 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Reference 11: 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=7578670&loc=d3e19207-110258 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 13: 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 + Details
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