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efsi:contract efsi:employee xbrli:pure iso4217:USD xbrli:shares false --12-31 Q3 2012 2012-09-30 10-Q 0000880641 3344737 Smaller Reporting Company EAGLE FINANCIAL SERVICES INC 2037000 2037000 1923000 1923000 1923000 67000 95000 1200000 377000 131000 396000 139000 275000 102000 290000 94000 -409000 -92000 <div> <table border="0" cellspacing="0"> <tr><td width="48%"> </td> <td width="9%"> </td> <td width="17%"> </td> <td width="11%"> </td> <td width="12%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">September 30, 2012</td> <td style="border-bottom: #000000 3px double;" colspan="2" align="right">December 31, 2011</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td style="text-indent: 4px;" colspan="2" align="left">(in thousands)</td> <td align="left"> </td></tr> <tr><td colspan="5"> </td></tr> <tr valign="bottom"><td align="left">Noninterest bearing demand deposits</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">122,093</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">107,237</td></tr> <tr><td colspan="5"> </td></tr> <tr valign="bottom"><td align="left">Savings and interest bearing demand deposits:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">NOW accounts</td> <td align="left">$</td> <td align="right">83,477</td> <td align="left">$</td> <td align="right">78,927</td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Money market accounts</td> <td align="left"> </td> <td align="right">82,962</td> <td align="left"> </td> <td align="right">83,393</td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Regular savings accounts</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">53,545</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">47,838</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">219,984</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">210,158</td></tr> <tr valign="bottom"><td align="left">Time deposits:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Balances of less than $100,000</td> <td align="left">$</td> <td align="right">70,193</td> <td align="left">$</td> <td align="right">76,956</td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Balances of $100,000 and more</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">44,908</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">54,114</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">115,101</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">131,070</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">457,178</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">448,465</td></tr></table> </div> 1.00 397239000 4206000 22866000 34937000 83106000 24375000 10594000 33429000 4517000 179209000 2178000 25022000 132000 318200000 13053000 23722000 28117000 32000 233000 442000 104000 1367000 2668000 6688000 6613000 1657000 227000 1230000 5939000 3485000 16960000 21573000 65651000 15990000 9839000 31862000 2320000 150520000 721000 991000 1330000 5759000 2595000 755000 355000 967000 10249000 2215000 5113000 4641000 4029000 985000 11134000 414151000 3119000 20286000 39561000 90711000 29346000 11824000 32774000 2811000 183719000 2513000 27644000 191000 332442000 13157000 20947000 30605000 371000 733000 639000 248000 522000 2435000 5335000 6592000 2042000 408000 251000 907000 9674000 3119000 15197000 23927000 73826000 21458000 11416000 31150000 1904000 150445000 599000 2085000 5776000 797000 194000 11496000 2055000 7843000 3784000 4410000 931000 11582000 2008-12-01 P2Y 6804000 3379000 3425000 4356000 2655000 1701000 0.50 10000000 10000000 136000 46000 126000 43000 89000 107000 <div> <table style="width: 609px; height: 295px;" border="0" cellspacing="0"> <tr><td width="45%"> </td> <td width="3%"> </td> <td width="18%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="21%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td width="3%" align="left"> </td> <td width="45%" colspan="4" align="center">Fair Value Measurements at September 30, 2012</td> <td width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td width="3%" align="left"> </td> <td width="18%" align="center">Impaired</td> <td width="3%" align="center"> </td> <td width="3%" align="center"> </td> <td width="21%" align="center">Other Real</td> <td width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="18%" align="center">Loans</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">Estate Owned</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td width="3%" align="left"> </td> <td width="45%" colspan="4" align="center">(in thousands)</td> <td width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Balance - January 1, 2012</td> <td width="3%" align="left">$</td> <td width="18%" align="right">3,425</td> <td width="3%" align="left"> </td> <td width="3%" align="left">$</td> <td width="21%" align="right">636</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Sales proceeds</td> <td width="3%" align="left"> </td> <td width="18%" align="right">-</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Valuation allowance</td> <td width="3%" align="left"> </td> <td width="18%" align="right">-</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">(Loss) on disposition</td> <td width="3%" align="left"> </td> <td width="18%" align="right">-</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Transfers into Level 3</td> <td width="3%" align="left"> </td> <td width="18%" align="right">959</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Transfers out of Level 3</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="18%" align="right">(2,683</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="right">(636</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Total assets at fair value</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="18%" align="right">1,701</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="21%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td></tr></table> </div> <div> <div> <table border="0" cellspacing="0"> <tr valign="bottom"><td colspan="2" align="center">Three Months Ended</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="4" align="center">September 30, 2012</td> <td colspan="3" align="center">September 30, 2011</td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">(in thousands)</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Number of</td> <td align="center"> </td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center">Number of</td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td> <td style="border-bottom: #000000 3px double;" align="center"> </td></tr> <tr><td colspan="9"> </td></tr> <tr><td colspan="9"> </td></tr> <tr valign="bottom"><td align="left">Commercial Real Estate:</td> <td align="left"> </td> <td align="left">1</td> <td align="left">$</td> <td align="right">93</td> <td style="text-indent: 15px;" align="left">- </td> <td align="left"> $</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Non-owner occupied</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left">Residential:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Single family</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">3</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">512</td> <td style="border-bottom: #000000 3px double;" align="right">3</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">983</td></tr> <tr><td colspan="9"> </td></tr> <tr valign="bottom"><td align="left">Total</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">4</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">605</td> <td style="border-bottom: #000000 3px double;" align="right">3</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">983</td></tr></table></div>   <div> <table style="width: 770px; height: 353px;" border="0" cellspacing="0"> <tr><td width="24%"> </td> <td width="14%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="16%"> </td> <td width="20%"> </td> <td width="3%"> </td> <td width="13%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Nine Months Ended</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="4" align="center">September 30, 2012</td> <td colspan="3" align="center">September 30, 2011</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">(in thousands)</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Number of</td> <td align="center"> </td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center">Number of</td> <td align="center"> </td> <td align="center">Recorded</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td></tr> <tr><td colspan="8"> </td></tr> <tr><td colspan="8"> </td></tr> <tr valign="bottom"><td align="left">Commercial Real Estate:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Owner occupied</td> <td align="left"> </td> <td align="right">-</td> <td align="left">$</td> <td align="right">-</td> <td align="right">2</td> <td align="left">$</td> <td align="right">613</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Non-owner occupied</td> <td align="left"> </td> <td align="right">1</td> <td align="left"> </td> <td align="right">93</td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td align="left">Residential:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Single family</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">4</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">870</td> <td style="border-bottom: #000000 3px double;" align="right">5</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">1,904</td></tr> <tr><td colspan="8"> </td></tr> <tr valign="bottom"><td align="left">Total</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">5</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">963</td> <td style="border-bottom: #000000 3px double;" align="right">7</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">2,517</td></tr></table></div> </div> <div> <div> NOTE 12. New Branch Construction On August 3, 2012, the Company entered into a $1.2 million contract to build its twelfth retail branch, located in Purcellville, Virginia.  The branch is expected to be completed in early 2013.  </div> </div> Three One two 9 eight Six one three one one one One Two 146000 39000 58000 8000 P30D 0.25 P65Y P15Y 7217000 7217000 7217000 7217000 7217000 7217000 7217000 7217000 0.12 0.06 0.12 0.06 September 1, 2037 <div> <table border="0" cellspacing="0"> <tr><td width="57%"> </td> <td width="2%"> </td> <td width="22%"> </td> <td width="2%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="57%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="22%" align="center">September 30, 2012</td> <td style="border-bottom: #000000 3px double;" width="17%" colspan="2" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="57%" align="left"> </td> <td width="41%" colspan="4" align="center">(in thousands)</td></tr> <tr><td width="98%" colspan="5"> </td></tr> <tr valign="bottom"><td width="57%" align="left">Federal Reserve Bank Stock</td> <td width="2%" align="left">$</td> <td width="22%" align="right">344</td> <td width="2%" align="left">$</td> <td width="15%" align="right">344</td></tr> <tr valign="bottom"><td width="57%" align="left">Federal Home Loan Bank Stock</td> <td width="2%" align="left"> </td> <td width="22%" align="right">2,293</td> <td width="2%" align="left"> </td> <td width="15%" align="right">3,036</td></tr> <tr valign="bottom"><td width="57%" align="left">Community Bankers' Bank Stock</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="22%" align="right">140</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">140</td></tr> <tr valign="bottom"><td width="57%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="22%" align="right">2,777</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">3,520</td></tr></table> </div> <div> <div> <table border="0" cellspacing="0"> <tr valign="bottom"><td width="70%" colspan="23" align="center">As of and for the Nine Months Ended September 30, 2012</td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td width="2%" align="left"> </td> <td width="70%" colspan="23" align="center">(in thousands )</td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center">Co ns tructio n</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center">Res idential</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center">Co mmercial</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center">All Other</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="5%" align="center"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">and Farmland</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">Real Es tate</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">Real Es tate</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">Co mmercial</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">Co ns umer</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">Lo ans</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">Unallo cated</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">To tal</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="19%" colspan="2" align="left">A llo wa nc e fo r c re dit lo s s e s :</td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Beginning Balance</td> <td width="2%" align="left">$</td> <td width="5%" align="right">2,618</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="5%" align="right">3,544</td> <td width="2%" align="left"> </td> <td style="text-indent: 1px;" width="2%" align="left">$</td> <td width="5%" align="right">1,057</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="5%" align="right">1,077</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="5%" align="right">131</td> <td width="2%" align="left"> </td> <td width="2%" align="center">$</td> <td width="5%" align="right">123</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="5%" align="right">193</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="5%" align="right">8,743</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Charge-Offs</td> <td width="2%" align="left"> </td> <td width="5%" align="right">(1,303</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">(508</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">(660</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">(50</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">(103</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">(23</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">-</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">(2,647</td> <td width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="17%" align="left">Reco veries</td> <td width="2%" align="left"> </td> <td width="5%" align="right">3</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">60</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">58</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">30</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">57</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">7</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">-</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">215</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">P ro vis io n</td> <td width="2%" align="left"> </td> <td width="5%" align="right">212</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">361</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">1,681</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">(216</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">35</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">6</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="right">(429</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="5%" align="right">1,650</td> <td width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Ending balance</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">1,530</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">3,457</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">2,136</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">841</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">120</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="center">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">113</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">(236</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="5%" align="right">7,961</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Ending balance: Individually</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">evaluated fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">141</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">2,005</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">740</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">475</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">3,361</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Ending balance: co llectively</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">evaluated fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">1,389</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">1,452</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">1,396</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">366</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">120</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">113</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">(236</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">4,600</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">F ina nc ing re c e iv a ble s :</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Ending balance</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">41,170</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">219,304</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">130,272</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">20,286</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">13,348</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">3,119</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">427,499</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Ending balance individually</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">evaluated fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">1,982</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">8,823</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">6,220</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">713</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">17,738</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="89%" colspan="25"> </td></tr> <tr valign="bottom"><td width="19%" colspan="2" align="left">Ending balance co llectively evaluated</td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">39,188</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">210,481</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">124,052</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">19,573</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">13,348</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">3,119</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">409,761</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table></div>   <div> <table style="width: 1322px; height: 708px;" border="0" cellspacing="0"> <tr><td width="18%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td> <td width="6%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="18%" align="left"> </td> <td width="2%" align="center"> </td> <td width="76%" colspan="22" align="center">As of and for the Twe lve Months Ended December 31, 2011</td></tr> <tr valign="bottom"><td width="18%" align="left"> </td> <td width="2%" align="center"> </td> <td width="76%" colspan="22" align="center">(in thousands )</td></tr> <tr valign="bottom"><td width="18%" align="left"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center">Co ns tructio n</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center">Res idential</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center">Co mmercial</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center">All Other</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center"> </td> <td width="2%" align="center"> </td> <td width="6%" align="center"> </td> <td width="2%" align="center"> </td></tr> <tr valign="bottom"><td width="18%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">and Farmland</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">Real Es tate</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">Real Es tate</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">Co mmercial</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">Co ns umer</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">Lo ans</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">Unallo cated</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">To tal</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td></tr> <tr valign="bottom"><td width="20%" colspan="2" align="left">A llo wa nc e fo r c re dit lo s s e s :</td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Beginning Balance</td> <td width="2%" align="left">$</td> <td width="6%" align="right">1,386</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="6%" align="right">3,457</td> <td width="2%" align="left"> </td> <td style="text-indent: 2px;" width="2%" align="left">$</td> <td width="6%" align="right">1,231</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="6%" align="right">819</td> <td width="2%" align="left"> </td> <td width="2%" align="right">$</td> <td width="6%" align="right">182</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="6%" align="right">36</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="6%" align="right">-</td> <td width="2%" align="left">$</td> <td width="6%" align="right">7,111</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Charge-Offs</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(721</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(1,203</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(14</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(572</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(331</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(125</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="6%" align="right">-</td> <td width="2%" align="left"> </td> <td width="6%" align="right">(2,966</td> <td width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="18%" align="left">Reco veries</td> <td width="2%" align="left"> </td> <td width="6%" align="right">5</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="right">298</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="right">2</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="right">292</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="right">195</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="right">56</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="right">-</td> <td width="2%" align="left"> </td> <td width="6%" align="right">848</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">P ro vis io n</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">1,948</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">992</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">(162</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">538</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">85</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">156</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">193</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">3,750</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Ending balance</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">2,618</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">3,544</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">1,057</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">1,077</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">131</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">123</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">193</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">8,743</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Ending balance: Individually</td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">evaluated fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">1,468</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">2,071</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">150</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">544</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">4,233</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Ending balance: co llectively</td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">evaluated fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">1,150</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">1,473</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">907</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">533</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">131</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">123</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">193</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">4,510</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="18%" align="left">F ina nc ing re c e iv a ble s :</td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Ending balance</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">34,969</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">217,155</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">118,043</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">22,866</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">13,185</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">4,206</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">410,424</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="18%" align="left">Ending balance individually</td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">evaluated fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">3,357</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">9,748</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">6,186</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">599</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">19,890</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr><td width="96%" colspan="24"> </td></tr> <tr valign="bottom"><td width="20%" colspan="2" align="left">Ending balance co llectively evaluated</td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td> <td width="6%" align="left"> </td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="18%" align="left">fo r impairment</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">31,612</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">207,407</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">111,857</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">22,267</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">13,185</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">4,206</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">390,534</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table></div> </div> 959000 -2683000 -636000 10700000 8400000 8 1 1 6 7 2 5 1 1 3 3 3 1 1 1 5 1 4 1 1 4 1 3 5187000 890000 1530000 2767000 74000 74000 348000 162000 95000 91000 95000 95000 5133000 890000 1530000 2713000 72000 72000 348000 162000 95000 91000 95000 95000 2517000 613000 1904000 983000 983000 963000 93000 870000 605000 93000 512000 <div> NOTE 6. Troubled Debt Restructurings All loans deemed a troubled debt restructuring, or "TDR", are considered impaired, and are evaluated for collateral and cash-flow sufficiency. A loan is considered a TDR when the Company, for economic or legal reasons related to a borrower's financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. All of the following factors are indicators that the Bank has granted a concession (one or multiple items may be present): <ul> <li>The borrower receives a reduction of the stated interest rate to a rate less than the institution is willing to accept at the time of the restructure for a new loan with comparable risk. </li> <li>The borrower receives an extension of the maturity date or dates at a stated interest rate lower than the current market interest rate for new debt with similar risk characteristics. </li> <li>The borrower receives a reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement. </li> <li>The borrower receives a deferral of required payments (principal and/or interest). </li> <li>The borrower receives a reduction of the accrued interest. </li></ul> There were twenty-four (24) troubled debt restructured loans totaling $8.4 million at September 30, 2012. At December 31, 2011, there were twenty-five (25) troubled debt restructured loans totaling $10.7 million. There were no outstanding commitments to lend additional amounts to troubled debt restructured borrowers at September 30, 2012. <div> </div> The following tables set forth information on the Company's troubled debt restructurings by class of financing receivable occurring during the stated periods: <div> <table style="width: 1561px; height: 344px;" border="0" cellspacing="0"> <tr><td width="16%"> </td> <td width="7%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="4%"> </td> <td width="4%"> </td> <td width="7%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="3%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="4" align="center">Three Months Ended September 30, 2012</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="4" align="center">Three Months Ended September 30, 2011</td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="3" align="center">(in thousands)</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="3" align="center">(in thousands)</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="3" align="center">Pre-Modification                                                Post-Modification</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="3" align="center">Pre-Modification                                                Post-Modification</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center">Outstanding</td> <td align="center"> </td> <td align="center">Outstanding</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center">Outstanding</td> <td align="center"> </td> <td align="center">Outstanding</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Number of</td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center"> </td> <td align="center">Recorded</td> <td colspan="2" align="center">Impairment</td> <td align="center">Number of</td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center"> </td> <td align="center">Recorded</td> <td colspan="2" align="center">Impairment</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Contracts</td> <td align="center"> </td> <td align="center">Investment</td> <td align="center"> </td> <td align="center">Investment</td> <td colspan="2" align="center">Accrued</td> <td align="center">Contracts</td> <td align="center"> </td> <td align="center">Investment</td> <td align="center"> </td> <td align="center">Investment</td> <td colspan="2" align="center">Accrued</td></tr> <tr><td colspan="15"> </td></tr> <tr><td colspan="15"> </td></tr> <tr valign="bottom"><td align="left">Construction and Farmland:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Commercial</td> <td align="right">1</td> <td style="text-indent: 2px;" align="left">$</td> <td align="right">95</td> <td align="left">$</td> <td align="right">95</td> <td align="left">$</td> <td align="right">-</td> <td align="right">-</td> <td style="text-indent: 2px;" align="left">$</td> <td align="center">- </td> <td align="left"> $</td> <td align="right">-</td> <td align="left">$</td> <td align="right">-</td></tr> <tr valign="bottom"><td align="left">Residential:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Single family</td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="right">1</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">72</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">74</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">19</td></tr> <tr><td colspan="15"> </td></tr> <tr valign="bottom"><td align="left">Total</td> <td style="border-bottom: #000000 3px double;" align="right">1</td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">95</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">95</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="right">1</td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">72</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">74</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">19</td></tr></table></div>   <div> <table border="0" cellspacing="0"> <tr><td width="16%"> </td> <td width="7%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="7%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="3%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td colspan="3" align="center">Nine Months Ended September 30, 2012</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td colspan="3" align="center">Nine Months Ended September 30, 2011</td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td colspan="3" align="center">(in thousands)</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td colspan="3" align="center">(in thousands)</td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td colspan="3" align="center"> Pre-Modification Post-Modification</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td colspan="3" align="center"> Pre-Modification Post-Modification</td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="center">Outstanding</td> <td align="left"> </td> <td align="center">Outstanding</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="center">Outstanding</td> <td align="left"> </td> <td align="center">Outstanding</td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Number of</td> <td align="left"> </td> <td align="center">Recorded</td> <td align="left"> </td> <td align="center">Recorded</td> <td align="left"> </td> <td align="right">Impairment</td> <td align="right">Number of</td> <td align="left"> </td> <td align="center">Recorded</td> <td align="left"> </td> <td align="center">Recorded</td> <td align="left"> </td> <td align="right">Impairment</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Contracts</td> <td align="left"> </td> <td align="center">Investment</td> <td align="left"> </td> <td align="center">Investment</td> <td align="left"> </td> <td align="right">Accrued</td> <td align="right">Contracts</td> <td align="left"> </td> <td align="center">Investment</td> <td align="left"> </td> <td align="center">Investment</td> <td align="left"> </td> <td align="right">Accrued</td></tr> <tr><td colspan="15"> </td></tr> <tr valign="bottom"><td align="left">Commercial Real Estate:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Owner occupied</td> <td align="right">1</td> <td style="text-indent: 2px;" align="left">$</td> <td align="right">162</td> <td align="left">$</td> <td align="right">162</td> <td align="left">$</td> <td align="right">-</td> <td align="right">-</td> <td style="text-indent: 2px;" align="left">$</td> <td align="center">-</td> <td align="left"> $</td> <td align="right">-</td> <td align="left">$</td> <td align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Non-owner occupied</td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="right">1</td> <td align="left"> </td> <td align="right">890</td> <td align="left"> </td> <td align="right">890</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td align="left">Construction and Farmland:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Residential</td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="right">1</td> <td align="left"> </td> <td align="right">1,530</td> <td align="left"> </td> <td align="right">1,530</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Commercial</td> <td align="right">1</td> <td align="left"> </td> <td align="right">95</td> <td align="left"> </td> <td align="right">95</td> <td align="left"> </td> <td align="right">-</td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td align="left">Residential:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Single family</td> <td style="border-bottom: #000000 3px double;" align="right">1</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">91</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">91</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="right">6</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">2,713</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">2,767</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">-</td></tr> <tr><td colspan="15"> </td></tr> <tr valign="bottom"><td align="left">Total</td> <td style="border-bottom: #000000 3px double;" align="right">3</td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">348</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">348</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="right">8</td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">5,133</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">5,187</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">-</td></tr></table></div>   During the three months ended September 30, 2012, the Company restructured one loan by granting concessions to a borrower experiencing financial difficulties. One construction and farmland loan was modified by changing the amortization period to reduce the payment amount. During the nine months ended September 30, 2012, the Company restructured three loans by granting concessions to borrowers experiencing financial difficulties. One residential loan was modified by granting an interest rate reduction. In addition, one owner occupied commercial real estate loan and one construction and farmland loan were modified by changing the amortization period to reduce the payment amount. During the three months ended September 30, 2011, the Company restructured one loan by granting concessions to a borrower experiencing financial difficulties. A residential loan was modified by granting an interest rate reduction. During the nine months ended September 30, 2011, the Company restructured eight loans by granting concessions to borrowers experiencing financial difficulties. Two commercial real estate loans were combined into the one restructured commercial real estate loan reflected in the table above. Monthly payments on this loan were converted from principal and interest to interest only. The residential construction loan was modified by granting a reduction in the required monthly payment. Six single family residential loans were modified during the nine months ended September 30, 2011. Three of the loans were modified by granting interest rate reductions, another two had payment requirements modified from principal and interest to interest only while the remaining loan was modified by granting a reduction in the required monthly payment. <div> </div> Loans by class of financing receivable modified as TDRs within the previous 12 months and for which there was a payment default during the stated periods were: <div> <table border="0" cellspacing="0"> <tr><td width="24%"> </td> <td width="14%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="16%"> </td> <td width="20%"> </td> <td width="3%"> </td> <td width="10%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Three Months Ended</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="4" align="center">September 30, 2012</td> <td colspan="3" align="center">September 30, 2011</td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">(in thousands)</td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Number of</td> <td align="center"> </td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center">Number of</td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td> <td style="border-bottom: #000000 3px double;" align="center"> </td></tr> <tr><td colspan="9"> </td></tr> <tr><td colspan="9"> </td></tr> <tr valign="bottom"><td align="left">Commercial Real Estate:</td> <td align="left"> </td> <td align="left">1</td> <td align="left">$</td> <td align="right">93</td> <td style="text-indent: 15px;" align="left">- </td> <td align="left"> $</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Non-owner occupied</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left">Residential:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Single family</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">3</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">512</td> <td style="border-bottom: #000000 3px double;" align="right">3</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">983</td></tr> <tr><td colspan="9"> </td></tr> <tr valign="bottom"><td align="left">Total</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">4</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">605</td> <td style="border-bottom: #000000 3px double;" align="right">3</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">983</td></tr></table></div>   <div> <table style="width: 770px; height: 353px;" border="0" cellspacing="0"> <tr><td width="24%"> </td> <td width="14%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="16%"> </td> <td width="20%"> </td> <td width="3%"> </td> <td width="13%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Nine Months Ended</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="4" align="center">September 30, 2012</td> <td colspan="3" align="center">September 30, 2011</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">(in thousands)</td> <td align="center"> </td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Number of</td> <td align="center"> </td> <td align="center"> </td> <td align="center">Recorded</td> <td align="center">Number of</td> <td align="center"> </td> <td align="center">Recorded</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td> <td style="border-bottom: #000000 3px double;" align="center">Contracts</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Investment</td></tr> <tr><td colspan="8"> </td></tr> <tr><td colspan="8"> </td></tr> <tr valign="bottom"><td align="left">Commercial Real Estate:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Owner occupied</td> <td align="left"> </td> <td align="right">-</td> <td align="left">$</td> <td align="right">-</td> <td align="right">2</td> <td align="left">$</td> <td align="right">613</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Non-owner occupied</td> <td align="left"> </td> <td align="right">1</td> <td align="left"> </td> <td align="right">93</td> <td align="right">-</td> <td align="left"> </td> <td align="right">-</td></tr> <tr valign="bottom"><td align="left">Residential:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Single family</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">4</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">870</td> <td style="border-bottom: #000000 3px double;" align="right">5</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">1,904</td></tr> <tr><td colspan="8"> </td></tr> <tr valign="bottom"><td align="left">Total</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">5</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">963</td> <td style="border-bottom: #000000 3px double;" align="right">7</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">2,517</td></tr></table></div>   A loan is considered to be in payment default once it is thirty days contractually past due under the modified terms. </div> <div> NOTE 9. Trust Preferred Capital Notes In September 2007, Eagle Financial Statutory Trust II (the "Trust II"), a wholly-owned subsidiary of the Company, was formed for the purpose of issuing redeemable capital securities. On September 20, 2007, Trust II issued $7,000,000 of trust preferred securities and $217,000 in common equity. The principal asset of Trust II is $7,217,000 of the Company's junior subordinated debt securities with the same maturity and interest rate structures as the capital securities. The securities have a LIBOR-indexed floating rate of interest and the interest rate at September 30, 2012 was 2.04%. The securities have a mandatory redemption date of September 1, 2037, and were subject to varying call provisions beginning September 1, 2012. The Company does not expect to exercise any call provisions in the foreseeable future. The trust preferred securities are included in Tier 1 capital for regulatory capital adequacy purposes as long as their amount does not exceed 25% of Tier 1 capital, including total trust preferred securities. The portion of the trust preferred securities not considered as Tier 1 capital, if any, may be included in Tier 2 capital. At September 30, 2012, the total amount ($7,000,000) of trust preferred securities issued by Trust II is included in the Company's Tier 1 capital. The obligations of the Company with respect to the issuance of the capital securities constitute a full and unconditional guarantee by the Company of the Trust's obligations with respect to the capital securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution payments on the related capital securities. </div> 7000000 7000000 7000000

-69000

-151000

336000

281000

2931000

3720000

9568000

10218000

110000

173000

2000

<div> <table border="0" cellspacing="0"> <tr><td width="41%"> </td> <td width="1%"> </td> <td width="15%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="15%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="41%" align="left"> </td> <td width="1%" align="left"> </td> <td width="15%" align="center">Nine Months Ended</td> <td width="2%" align="center"> </td> <td width="1%" align="center"> </td> <td width="15%" align="center">Year Ended</td> <td width="2%" align="center"> </td> <td width="1%" align="center"> </td> <td width="12%" align="center">Nine Months Ended</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="41%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="center">September 30, 2012</td> <td style="border-bottom: #000000 3px double;" width="2%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="center">December 31, 2011</td> <td style="border-bottom: #000000 3px double;" width="2%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="12%" align="center">September 30, 2011</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="41%" align="left"> </td> <td width="1%" align="left"> </td> <td width="15%" align="center"> </td> <td width="2%" align="center"> </td> <td width="1%" align="center"> </td> <td width="15%" align="center">(in thousands)</td> <td width="2%" align="center"> </td> <td width="1%" align="center"> </td> <td width="12%" align="center"> </td> <td width="2%" align="left"> </td></tr> <tr><td width="92%" colspan="10"> </td></tr> <tr valign="bottom"><td width="41%" align="left">Balance, beginning</td> <td width="1%" align="left">$</td> <td width="15%" align="right">8,743</td> <td width="2%" align="left"> </td> <td width="1%" align="left">$</td> <td width="15%" align="right">7,111</td> <td width="2%" align="left"> </td> <td width="1%" align="left">$</td> <td width="12%" align="right">7,111</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="41%" align="left">Provision charged to operating expense</td> <td width="1%" align="left"> </td> <td width="15%" align="right">1,650</td> <td width="2%" align="left"> </td> <td width="1%" align="left"> </td> <td width="15%" align="right">3,750</td> <td width="2%" align="left"> </td> <td width="1%" align="left"> </td> <td width="12%" align="right">2,850</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="41%" align="left">Recoveries added to the allowance</td> <td width="1%" align="left"> </td> <td width="15%" align="right">215</td> <td width="2%" align="left"> </td> <td width="1%" align="left"> </td> <td width="15%" align="right">848</td> <td width="2%" align="left"> </td> <td width="1%" align="left"> </td> <td width="12%" align="right">568</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="41%" align="left">Loan losses charged to the allowance</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">(2,647</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">(2,966</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">(2,638</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="41%" align="left">Balance, ending</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">7,961</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">8,743</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">7,891</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table> </div>

568022000

574152000

114134000

13043000

2246000

111888000

34546000

2246000

18533000

45766000

2246000

13043000

34546000

18533000

45766000

101186000

12145000

2264000

98922000

26209000

2264000

16726000

43842000

1701000

2264000

12145000

26209000

16726000

43842000

3425000

636000

114134000

101186000

109190000

12421000

2054000

33420000

17655000

43640000

94955000

10954000

2054000

24643000

15788000

41516000

31000

10000

135000

85000

17000

33000

23000

6492000

1913000

4003000

576000

1371000

104000

85000

17000

2000

13000

6198000

1913000

4003000

282000

1098000

294000

273000

114134000

13043000

2246000

114134000

34546000

18533000

45766000

101186000

12145000

2264000

101186000

2264000

98922000

26209000

16726000

43842000

5079000

707000

192000

1143000

878000

2159000

6254000

1191000

210000

1566000

938000

2349000

135000

85000

17000

33000

23000

<div> NOTE 4. Securities Amortized costs and fair values of securities available for sale at September 30, 2012 and December 31, 2011 were as follows: <div> <table border="0" cellspacing="0"> <tr><td width="30%"> </td> <td width="3%"> </td> <td width="18%"> </td> <td width="3%"> </td> <td width="15%"> </td> <td width="3%"> </td> <td width="16%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="6%"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="21%" colspan="2" align="center">Amortized Cost</td> <td width="18%" colspan="2" align="center">Gross Unrealized Gains</td> <td width="19%" colspan="2" align="center">Gross Unrealized (Losses)</td> <td width="3%" align="center"> </td> <td width="9%" colspan="2" align="center">Fair Value</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="70%" colspan="9" align="center">September 30, 2012</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="70%" colspan="9" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="30%" align="left">Obligations of U.S. government corporations and agencies</td> <td width="3%" align="right">$</td> <td width="18%" align="right">15,788</td> <td width="3%" align="right">$</td> <td width="15%" align="right">938</td> <td width="3%" align="right">$</td> <td width="16%" align="right">-</td> <td width="3%" align="right"> </td> <td width="3%" align="right">$</td> <td width="6%" align="right">16,726</td></tr> <tr valign="bottom"><td width="30%" align="left">Mortgage-backed securities</td> <td width="3%" align="right"> </td> <td width="18%" align="right">24,643</td> <td width="3%" align="right"> </td> <td width="15%" align="right">1,566</td> <td width="3%" align="right"> </td> <td width="16%" align="right">-</td> <td width="3%" align="right"> </td> <td width="3%" align="right"> </td> <td width="6%" align="right">26,209</td></tr> <tr valign="bottom"><td width="30%" align="left">Obligations of states and political subdivisions</td> <td width="3%" align="right"> </td> <td width="18%" align="right">41,516</td> <td width="3%" align="right"> </td> <td width="15%" align="right">2,349</td> <td width="3%" align="right"> </td> <td width="16%" align="right">(23)</td> <td width="3%" align="right"> </td> <td width="3%" align="right"> </td> <td width="6%" align="right">43,842</td></tr> <tr valign="bottom"><td width="30%" align="left">Corporate securities</td> <td width="3%" align="right"> </td> <td width="18%" align="right">10,954</td> <td width="3%" align="right"> </td> <td width="15%" align="right">1,191</td> <td width="3%" align="right"> </td> <td width="16%" align="right">-</td> <td width="3%" align="right"> </td> <td width="3%" align="right"> </td> <td width="6%" align="right">12,145</td></tr> <tr valign="bottom"><td width="30%" align="left">Equity securities</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="18%" align="right">2,054</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">210</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="16%" align="right">-</td> <td width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">2,264</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="18%" align="right">94,955</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">6,254</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="16%" align="right">(23)</td> <td width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">101,186</td></tr> <tr><td align="left"> </td> <td colspan="9" align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" colspan="9" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="9" align="center">(in thousands)</td></tr> <tr valign="bottom"><td align="left">Obligations of U.S. government corporations and agencies</td> <td align="left">$</td> <td align="right">17,655</td> <td align="left">$</td> <td align="right">878</td> <td align="left">$</td> <td align="right">-</td> <td align="left"> </td> <td align="left">$</td> <td align="right">18,533</td></tr> <tr valign="bottom"><td align="left">Mortgage-backed securities</td> <td align="left"> </td> <td align="right">33,420</td> <td align="left"> </td> <td align="right">1,143</td> <td align="left"> </td> <td align="right">(17</td> <td align="left">)</td> <td align="left"> </td> <td align="right">34,546</td></tr> <tr valign="bottom"><td align="left">Obligations of states and political subdivisions</td> <td align="left"> </td> <td align="right">43,640</td> <td align="left"> </td> <td align="right">2,159</td> <td align="left"> </td> <td align="right">(33</td> <td align="left">)</td> <td align="left"> </td> <td align="right">45,766</td></tr> <tr valign="bottom"><td align="left">Corporate securities</td> <td align="left"> </td> <td align="right">12,421</td> <td align="left"> </td> <td align="right">707</td> <td align="left"> </td> <td align="right">(85</td> <td align="left">)</td> <td align="left"> </td> <td align="right">13,043</td></tr> <tr valign="bottom"><td align="left">Equity securities</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">2,054</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">192</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">-</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">2,246</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">109,190</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">5,079</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">(135</td> <td style="border-bottom: #000000 3px double;" align="left">)</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">114,134</td></tr></table></div>   <div> <div> During the first nine months of 2012, the Company sold $2.1 million in available for sale securities for a net gain of $15 thousand. During the first nine months of 2011, the Company sold $4.8 million in available for sale securities for a net gain of $155 thousand. <div> </div> The fair value and gross unrealized losses for securities available for sale, totaled by the length of time that individual securities have been in a continuous gross unrealized loss position, at September 30, 2012 and December 31, 2011 were as follows:</div> <table border="0" cellspacing="0"> <tr><td width="28%"> </td> <td width="4%"> </td> <td width="11%"> </td> <td width="3%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="13%"> </td> <td width="2%"> </td> <td width="4%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="3%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="29%" colspan="4" align="center">Less than 12 months</td> <td style="border-bottom: #000000 3px double;" width="21%" colspan="4" align="center">12 months or more</td> <td style="border-bottom: #000000 3px double;" width="21%" colspan="4" align="center">Total</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="15%" colspan="2" align="center">Fair Value</td> <td width="14%" colspan="2" align="center">Gross Unrealized Losses</td> <td style="border-bottom: #000000 3px double;" width="15%" colspan="2" align="center">Fair Value</td> <td width="6%" colspan="2" align="center">Gross Unrealized Losses</td> <td style="border-bottom: #000000 3px double;" width="10%" colspan="2" align="center">Fair Value</td> <td width="11%" colspan="2" align="center">Gross Unrealized Losses</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="71%" colspan="12" align="center">September 30, 2012</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="71%" colspan="12" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="28%" align="left">Obligations of U.S. government corporations and agencies</td> <td width="4%" align="right">$</td> <td width="11%" align="right">-</td> <td width="3%" align="right">$</td> <td width="11%" align="right">-</td> <td width="2%" align="right">$</td> <td width="13%" align="right">-</td> <td width="2%" align="right">$</td> <td width="4%" align="right">-</td> <td width="2%" align="right">$</td> <td width="8%" align="right">-</td> <td width="3%" align="right">$</td> <td width="8%" align="right">-</td></tr> <tr valign="bottom"><td width="28%" align="left">Mortgage-backed securities</td> <td width="4%" align="right"> </td> <td width="11%" align="right">-</td> <td width="3%" align="right"> </td> <td width="11%" align="right">-</td> <td width="2%" align="right"> </td> <td width="13%" align="right">-</td> <td width="2%" align="right"> </td> <td width="4%" align="right">-</td> <td width="2%" align="right"> </td> <td width="8%" align="right">-</td> <td width="3%" align="right"> </td> <td width="8%" align="right">-</td></tr> <tr valign="bottom"><td width="28%" align="left">Obligations of states and political subdivisions</td> <td width="4%" align="right"> </td> <td width="11%" align="right">1,098</td> <td width="3%" align="right"> </td> <td width="11%" align="right">13</td> <td width="2%" align="right"> </td> <td width="13%" align="right">273</td> <td width="2%" align="right"> </td> <td width="4%" align="right">10</td> <td width="2%" align="right"> </td> <td width="8%" align="right">1,371</td> <td width="3%" align="right"> </td> <td width="8%" align="right">23</td></tr> <tr valign="bottom"><td width="28%" align="left">Corporate securities</td> <td width="4%" align="right"> </td> <td width="11%" align="right">-</td> <td width="3%" align="right"> </td> <td width="11%" align="right">-</td> <td width="2%" align="right"> </td> <td width="13%" align="right">-</td> <td width="2%" align="right"> </td> <td width="4%" align="right">-</td> <td width="2%" align="right"> </td> <td width="8%" align="right">-</td> <td width="3%" align="right"> </td> <td width="8%" align="right">-</td></tr> <tr valign="bottom"><td width="28%" align="left">Equity securities</td> <td style="border-bottom: #000000 3px double;" width="4%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="13%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">-</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">1,098</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">13</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="13%" align="right">273</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">10</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">1,371</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">23</td></tr> <tr><td width="99%" colspan="13"> </td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="71%" colspan="12" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="71%" colspan="12" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="28%" align="left">Obligations of U.S. government corporations and agencies</td> <td width="4%" align="right">$</td> <td width="11%" align="right">-</td> <td width="3%" align="right">$</td> <td width="11%" align="right">-</td> <td width="2%" align="right">$</td> <td width="13%" align="right">-</td> <td width="2%" align="right">$</td> <td width="4%" align="right">-</td> <td width="2%" align="right">$</td> <td width="8%" align="right">-</td> <td width="3%" align="right"> $</td> <td width="8%" align="right">-</td></tr> <tr valign="bottom"><td width="28%" align="left">Mortgage-backed securities</td> <td width="4%" align="right"> </td> <td width="11%" align="right">4,003</td> <td width="3%" align="right"> </td> <td width="11%" align="right">17</td> <td width="2%" align="right"> </td> <td width="13%" align="right">-</td> <td width="2%" align="right"> </td> <td width="4%" align="right">-</td> <td width="2%" align="right"> </td> <td width="8%" align="right">4,003</td> <td width="3%" align="right"> </td> <td width="8%" align="right">17</td></tr> <tr valign="bottom"><td width="28%" align="left">Obligations of states and political subdivisions</td> <td width="4%" align="right"> </td> <td width="11%" align="right">282</td> <td width="3%" align="right"> </td> <td width="11%" align="right">2</td> <td width="2%" align="right"> </td> <td width="13%" align="right">294</td> <td width="2%" align="right"> </td> <td width="4%" align="right">31</td> <td width="2%" align="right"> </td> <td width="8%" align="right">576</td> <td width="3%" align="right"> </td> <td width="8%" align="right">33</td></tr> <tr valign="bottom"><td width="28%" align="left">Corporate securities</td> <td width="4%" align="right"> </td> <td width="11%" align="right">1,913</td> <td width="3%" align="right"> </td> <td width="11%" align="right">85</td> <td width="2%" align="right"> </td> <td width="13%" align="right">-</td> <td width="2%" align="right"> </td> <td width="4%" align="right">-</td> <td width="2%" align="right"> </td> <td width="8%" align="right">1,913</td> <td width="3%" align="right"> </td> <td width="8%" align="right">85</td></tr> <tr valign="bottom"><td width="28%" align="left">Equity securities</td> <td style="border-bottom: #000000 3px double;" width="4%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="13%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">-</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="right"> $</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">6,198</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right"> $</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">104</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> $</td> <td style="border-bottom: #000000 3px double;" width="13%" align="right">294</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> $</td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">31</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> $</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">6,492</td> <td style="border-bottom: #000000 3px double;" width="3%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">135</td></tr></table></div> <div> <div> <div> Gross unrealized losses on available for sale securities included three (3) and nine (9) debt securities at September 30, 2012 and December 31, 2011, respectively. The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company's mortgage-backed securities are issued by U.S. government agencies, which guarantee payments to investors regardless of the status of the underlying mortgages. Consideration is given to the length of time and the amount of an unrealized loss, the financial condition of the issuer, and the intent and ability of the Company to retain its investment in the issuer long enough to allow for an anticipated recovery in fair value. The fair value of a security reflects its liquidity as compared to similar instruments, current market rates on similar instruments, and the creditworthiness of the issuer. Absent any change in the liquidity of a security or the creditworthiness of the issuer, prices will decline as market rates rise and vice-versa. The primary cause of the unrealized losses at September 30, 2012 and December 31, 2011 was changes in market interest rates. Since the losses can be primarily attributed to changes in market interest rates and not expected cash flows or an issuer's financial condition, the unrealized losses are deemed to be temporary. The Company's holdings of corporate securities and equity securities represent investments in larger financial institutions. The current economic crisis involving housing, liquidity and credit were the primary causes of the unrealized losses on these securities at December 31, 2011. The Company monitors the financial condition of these issuers continuously and will record other-than-temporary impairment if the recovery of value is unlikely.   The Company's securities are exposed to various risks, such as interest rate, market, currency and credit risks.  Due to the level of risk associated with certain securities and the level of uncertainty related to changes in the value of securities, it is at least reasonably possible that changes in risks in the near term would materially affect securities reported in the financial statements. In addition, recent economic uncertainty and market events have led to unprecedented volatility in currency, commodity, credit and equity markets culminating in failures of some banking and financial services firms and government intervention to solidify others.  These recent events underscore the level of investment risk associated with the current economic environment, and accordingly the level of risk in the Company's securities.   Securities having a carrying value of $19.2 million at September 30, 2012 were pledged to secure securities sold under agreements to repurchase and other purposes required by law. </div></div> The composition of restricted investments at September 30, 2012 and December 31, 2011 was as follows: <div> <table border="0" cellspacing="0"> <tr><td width="57%"> </td> <td width="2%"> </td> <td width="22%"> </td> <td width="2%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="57%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="22%" align="center">September 30, 2012</td> <td style="border-bottom: #000000 3px double;" width="17%" colspan="2" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="57%" align="left"> </td> <td width="41%" colspan="4" align="center">(in thousands)</td></tr> <tr><td width="98%" colspan="5"> </td></tr> <tr valign="bottom"><td width="57%" align="left">Federal Reserve Bank Stock</td> <td width="2%" align="left">$</td> <td width="22%" align="right">344</td> <td width="2%" align="left">$</td> <td width="15%" align="right">344</td></tr> <tr valign="bottom"><td width="57%" align="left">Federal Home Loan Bank Stock</td> <td width="2%" align="left"> </td> <td width="22%" align="right">2,293</td> <td width="2%" align="left"> </td> <td width="15%" align="right">3,036</td></tr> <tr valign="bottom"><td width="57%" align="left">Community Bankers' Bank Stock</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="22%" align="right">140</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">140</td></tr> <tr valign="bottom"><td width="57%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="22%" align="right">2,777</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">3,520</td></tr></table></div></div> </div>

13970000

18839000

21941000

21812000

21941000

21812000

4869000

-129000

7610000

7978000

21941000

21812000

0.54

2.50

10000000

3286992

3324636

8217000

8312000

217000

5214000

1809000

5758000

1521000

0.0204

-3000

-1000

-3000

-1000

<div> NOTE 7. Deposits The composition of deposits at September 30, 2012 and December 31, 2011 was as follows: <div> <table border="0" cellspacing="0"> <tr><td width="48%"> </td> <td width="9%"> </td> <td width="17%"> </td> <td width="11%"> </td> <td width="12%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">September 30, 2012</td> <td style="border-bottom: #000000 3px double;" colspan="2" align="right">December 31, 2011</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td style="text-indent: 4px;" colspan="2" align="left">(in thousands)</td> <td align="left"> </td></tr> <tr><td colspan="5"> </td></tr> <tr valign="bottom"><td align="left">Noninterest bearing demand deposits</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">122,093</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">107,237</td></tr> <tr><td colspan="5"> </td></tr> <tr valign="bottom"><td align="left">Savings and interest bearing demand deposits:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">NOW accounts</td> <td align="left">$</td> <td align="right">83,477</td> <td align="left">$</td> <td align="right">78,927</td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Money market accounts</td> <td align="left"> </td> <td align="right">82,962</td> <td align="left"> </td> <td align="right">83,393</td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Regular savings accounts</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">53,545</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">47,838</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">219,984</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">210,158</td></tr> <tr valign="bottom"><td align="left">Time deposits:</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Balances of less than $100,000</td> <td align="left">$</td> <td align="right">70,193</td> <td align="left">$</td> <td align="right">76,956</td></tr> <tr valign="bottom"><td style="text-indent: 6px;" align="left">Balances of $100,000 and more</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">44,908</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">54,114</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">115,101</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">131,070</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">457,178</td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">448,465</td></tr></table></div>   </div>

448465000

457178000

448465000

449990000

457178000

458504000

629000

624000

580000

672000

0.0285

2008-12-04

<div> NOTE 11. Derivative Instruments and Hedging Activities Interest Rate Swaps The Company uses interest rate swaps to reduce interest rate risk and to manage interest expense. By entering into these agreements, the Company converts floating rate debt into fixed rate debt, or alternatively, converts fixed rate debt into floating rate debt. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest expense. These interest rate swap agreements are derivative instruments that qualify for hedge accounting as discussed in Note 1. The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. In the event of default by a counterparty, the risk in these transactions is the cost of replacing the agreements at current market rates. On December 4, 2008, the Company entered into an interest rate swap agreement related to the outstanding trust preferred capital notes. The swap agreement became effective on December 1, 2008. The notional amount of the interest rate swap was $7,000,000 and has an expiration date of December 1, 2016. Under the terms of the agreement, the Company pays interest quarterly at a fixed rate of 2.85% and receives interest quarterly at a variable rate of three month LIBOR. The variable rate resets on each interest payment date. The following table summarizes the fair value of derivative instruments at September 30, 2012 and December 31, 2011: <div> <table border="0" cellspacing="0"> <tr><td width="31%"> </td> <td width="19%"> </td> <td width="4%"> </td> <td width="10%"> </td> <td width="18%"> </td> <td width="4%"> </td> <td width="6%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 6px;" colspan="3" align="center">September 30, 2012</td> <td style="border-bottom: #000000 3px double; text-indent: 8px;" colspan="3" align="center">December 31, 2011</td> <td style="border-bottom: #000000 3px double;" align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center">Balance Sheet</td> <td align="center"> </td> <td align="center">Fair</td> <td align="center">Balance Sheet</td> <td align="center"> </td> <td align="center">Fair</td> <td align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Location</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center">Value</td> <td style="border-bottom: #000000 3px double;" align="center">Location</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" align="center">Value</td> <td style="border-bottom: #000000 3px double;" align="center"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td style="text-indent: 1px;" colspan="2" align="left">(dollars in thousands)</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left">Derivatives designated</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left">as hedging instruments</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left">under GAAP</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr><td colspan="8"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" align="left">Interest rate swap contracts</td> <td align="center">Other Liabilities</td> <td align="left">$</td> <td style="text-indent: 5px;" align="left">672</td> <td align="center">Other Liabilities</td> <td align="left">$</td> <td align="left"> </td> <td align="left">580</td></tr></table></div>   The following tables present the effect of the derivative instrument on the Consolidated Balance Sheet at September 30, 2012 and 2011 and the Consolidated Statements of Income for the three and nine months ended September 30, 2012 and 2011: <div> <table border="0" cellspacing="0"> <tr><td width="21%"> </td> <td width="3%"> </td> <td width="8%"> </td> <td width="3%"> </td> <td width="12%"> </td> <td width="3%"> </td> <td width="24%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="14%"> </td> <td width="1%"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="42%" colspan="4" align="center">Three Months Ended September 30,</td> <td style="border-bottom: #000000 3px double;" width="7%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="14%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="3%" align="left"> </td> <td width="23%" colspan="3" align="center">Amount of Gain (Loss)</td> <td width="3%" align="center"> </td> <td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="7%" align="center"> </td> <td width="14%" align="center"> </td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="3%" align="left"> </td> <td width="23%" colspan="3" align="center">Recognized in OCI</td> <td width="3%" align="center"> </td> <td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="21%" colspan="2" align="center">Amount of Gain (Loss)</td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="center">Derivatives in GAAP</td> <td width="3%" align="left"> </td> <td style="text-indent: 4px;" width="23%" colspan="3" align="center">on Derivative</td> <td width="3%" align="center"> </td> <td width="24%" align="center">Location of Gain (Loss)</td> <td width="3%" align="center"> </td> <td width="21%" colspan="2" align="center">Recognized in Income</td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="center">Cash Flow Hedging</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="23%" colspan="3" align="center">(Effective Portion)</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td width="24%" align="center">Recognized in Income</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="21%" colspan="2" align="center">(Ineffective Portion)</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td></tr> <tr valign="bottom"><td style="border-bottom: #000000 3px double;" width="21%" align="center">Relationships</td> <td style="border-bottom: #000000 3px double;" width="11%" colspan="2" align="center">2012</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="12%" align="center">2011</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="24%" align="center">(Ineffective Portion)</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="7%" align="center">2012</td> <td style="border-bottom: #000000 3px double;" width="14%" align="center">2011</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="3%" align="left"> </td> <td style="text-indent: 1px;" width="23%" colspan="3" align="left">(dollars in thousands)</td> <td width="3%" align="left"> </td> <td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" colspan="2" align="center">(dollars in thousands)</td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left">Interest rate swap</td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="3%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="14%" align="left"> </td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left">contracts, net of tax</td> <td width="3%" align="left">$</td> <td width="8%" align="right">(25</td> <td width="3%" align="left">) $</td> <td width="12%" align="right">(195</td> <td width="3%" align="left">)</td> <td style="text-indent: 1px;" width="24%" align="left">Not applicable</td> <td width="3%" align="right">$</td> <td width="7%" align="right"> -</td> <td width="14%" align="center"> $</td> <td width="1%" align="left">-</td></tr></table></div>   <div> <table border="0" cellspacing="0"> <tr><td width="21%"> </td> <td width="3%"> </td> <td width="8%"> </td> <td width="3%"> </td> <td width="12%"> </td> <td width="3%"> </td> <td width="24%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="14%"> </td> <td width="1%"> </td></tr> <tr valign="bottom"><td width="21%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="42%" colspan="4" align="center">Nine Months Ended September 30,</td> <td style="border-bottom: #000000 3px double;" width="7%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="14%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="center"> </td> <td width="3%" align="center"> </td> <td width="23%" colspan="3" align="center">Amount of Gain (Loss)</td> <td width="3%" align="center"> </td> <td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="7%" align="center"> </td> <td width="14%" align="center"> </td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="center"> </td> <td width="3%" align="center"> </td> <td width="23%" colspan="3" align="center">Recognized in OCI</td> <td width="3%" align="center"> </td> <td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="21%" colspan="2" align="center">Amount of Gain (Loss)</td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="center">Derivatives in GAAP</td> <td width="3%" align="center"> </td> <td style="text-indent: 4px;" width="23%" colspan="3" align="center">on Derivative</td> <td width="3%" align="center"> </td> <td width="24%" align="center">Location of Gain (Loss)</td> <td width="3%" align="center"> </td> <td width="21%" colspan="2" align="center">Recognized in Income</td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="center">Cash Flow Hedging</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="23%" colspan="3" align="center">(Effective Portion)</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td width="24%" align="center">Recognized in Income</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="21%" colspan="2" align="center">(Ineffective Portion)</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td></tr> <tr valign="bottom"><td style="border-bottom: #000000 3px double;" width="21%" align="center">Relationships</td> <td style="border-bottom: #000000 3px double;" width="11%" colspan="2" align="center">2012</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="12%" align="center">2011</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="24%" align="center">(Ineffective Portion)</td> <td style="border-bottom: #000000 3px double;" width="3%" align="center"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="7%" align="center">2012</td> <td style="border-bottom: #000000 3px double;" width="14%" align="center">2011</td> <td style="border-bottom: #000000 3px double;" width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="3%" align="left"> </td> <td style="text-indent: 1px;" width="23%" colspan="3" align="center">(dollars in thousands)</td> <td width="3%" align="center"> </td> <td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="21%" colspan="2" align="center">(dollars in thousands)</td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left">Interest rate swap</td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="3%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="14%" align="left"> </td> <td width="1%" align="left"> </td></tr> <tr valign="bottom"><td width="21%" align="left">contracts, net of tax</td> <td width="3%" align="left">$</td> <td width="8%" align="right">(61</td> <td width="3%" align="left">) $</td> <td width="12%" align="right">(270</td> <td width="3%" align="left">)</td> <td style="text-indent: 1px;" width="24%" align="left">Not applicable</td> <td width="3%" align="right">$</td> <td width="7%" align="right"> -</td> <td width="14%" align="center"> $</td> <td width="1%" align="left">-</td></tr></table></div> </div>

-270000

-195000

-61000

-25000

580000

672000

2016-12-01

<div> NOTE 13. Recent Accounting Pronouncements In April 2011, the FASB issued ASU 2011-03, "Transfers and Servicing (Topic 860) – Reconsideration of Effective Control for Repurchase Agreements." The amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this ASU are effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements. In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." This ASU is the result of joint efforts by the FASB and International Accounting Standards Board (IASB) to develop a single, converged fair value framework on how (not when) to measure fair value and what disclosures to provide about fair value measurements. The ASU is largely consistent with existing fair value measurement principles in U.S. GAAP (Topic 820), with many of the amendments made to eliminate unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments are effective for interim and annual periods beginning after December 15, 2011 with prospective application. Early application is not permitted. The Company has included the required disclosures in its consolidated financial statements. In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220) – Presentation of Comprehensive Income." The objective of this ASU is to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments require that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The single statement of comprehensive income should include the components of net income, a total for net income, the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present all the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The amendments do not change the items that must be reported in other comprehensive income, the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects, or the calculation or reporting of earnings per share. The amendments in this ASU should be applied retrospectively. The amendments are effective for fiscal years and interim periods within those years beginning after December 15, 2011. Early adoption is permitted because compliance with the amendments is already permitted. The amendments do not require transition disclosures. The Company has included the required disclosures in its consolidated financial statements. In September 2011, the FASB issued ASU 2011-08, "Intangible – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment." The amendments in this ASU permit an entity to first assess qualitative factors related to goodwill to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued. The adoption of the new guidance did not have a material impact on the Company's consolidated financial statements. In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities." This ASU requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company does not expect the adoption of ASU 2011-11 to have a material impact on its consolidated financial statements. In December 2011, the FASB issued ASU 2011-12, "Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." The amendments are being made to allow the Board time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by ASU 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company has included the required disclosures in its consolidated financial statements. <div> </div> In July 2012, the FASB issued ASU 2012-02, "Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment." The amendments in this ASU apply to all entities that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. The amendments in this ASU provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the asset's fair value when testing an indefinite-lived intangible asset for impairment. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company does not expect the adoption of ASU 2012-02 to have a material impact on its consolidated financial statements. In October 2012, the FASB issued ASU 2012-06, "Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution." The amendments in this ASU clarify the applicable guidance for subsequently measuring an indemnification asset recognized as a result of a government-assisted acquisition of a financial institution. In addition, the amendments should resolve current diversity in practice on the subsequent measurement of these types of indemnification assets. The amendments are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted. The amendments should be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption arising from a government-assisted acquisition of a financial institution. The Company does not expect the adoption of ASU 2012-06 to have a material impact on its consolidated financial statements. </div>

<div> <div> <div> <h5 style="text-align: justify; margin: 0in 0in 0pt; font-family: 'Arial Unicode MS','sans-serif'; font-size: 10pt;">NOTE 2.  Stock-Based Compensation Plan</h5>   During 2003, the Company's shareholders approved a stock incentive plan which allows key employees and directors to increase their personal financial interest in the Company. This plan permits the issuance of incentive stock options and non-qualified stock options and the award of stock appreciation rights, common stock, restricted stock, and phantom stock. The plan authorizes the issuance of up to 300,000 shares of common stock.   The Company periodically grants Restricted Stock to its directors and executive officers. Restricted Stock provides grantees with rights to shares of common stock upon completion of a service period or achievement of Company performance measures. During the restriction period, all shares are considered outstanding and dividends are paid to the grantee. In general, outside directors are periodically granted restricted shares which vest over a period of less than nine months. Beginning during 2006, executive officers are granted restricted shares which vest over a three year service period and restricted shares which vest based on meeting annual performance measures. The Company recognizes compensation expense over the restricted period. The following table presents Restricted Stock activity for the nine months ended September 30, 2012 and 2011:</div> <table border="0" cellspacing="0"> <tr><td width="32%"> </td> <td width="13%"> </td> <td width="4%"> </td> <td width="5%"> </td> <td width="11%"> </td> <td width="14%"> </td> <td width="4%"> </td> <td width="5%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td style="text-indent: 9px;" colspan="8" align="center">Nine Months Ended September 30,</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 9px;" colspan="4" align="center">2012</td> <td style="border-bottom: #000000 3px double;" colspan="4" align="center">2011</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Weighted</td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Weighted</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Average</td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Average</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Grant Date</td> <td align="center"> </td> <td align="center"> </td> <td colspan="2" align="center">Grant Date</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">Shares</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" colspan="2" align="center">Fair Value</td> <td style="border-bottom: #000000 3px double;" align="center">Shares</td> <td style="border-bottom: #000000 3px double;" align="center"> </td> <td style="border-bottom: #000000 3px double;" colspan="2" align="center">Fair Value</td></tr> <tr valign="bottom"><td align="left">Nonvested, beginning of period</td> <td align="right">13,700</td> <td align="left"> </td> <td align="left">$</td> <td align="right">16.11</td> <td align="right">12,772</td> <td align="left"> </td> <td align="left">$</td> <td align="right">16.89</td></tr> <tr valign="bottom"><td align="left">Granted</td> <td align="right">14,500</td> <td align="left"> </td> <td align="left"> </td> <td align="right">17.87</td> <td align="right">12,300</td> <td align="left"> </td> <td align="left"> </td> <td align="right">16.76</td></tr> <tr valign="bottom"><td align="left">Vested</td> <td align="right">(7,363</td> <td align="left">)</td> <td align="left"> </td> <td align="right">16.10</td> <td align="right">(5,691</td> <td align="left">)</td> <td align="left"> </td> <td align="right">17.26</td></tr> <tr valign="bottom"><td align="left">Forfeited</td> <td style="border-bottom: #000000 3px double;" align="right">(737</td> <td style="border-bottom: #000000 3px double;" align="left">)</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">16.25</td> <td style="border-bottom: #000000 3px double;" align="right">(2,081</td> <td style="border-bottom: #000000 3px double;" align="left">)</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="right">18.38</td></tr> <tr valign="bottom"><td align="left">Nonvested, end of period</td> <td style="border-bottom: #000000 3px double;" align="right">20,100</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">17.37</td> <td style="border-bottom: #000000 3px double;" align="right">17,300</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">16.50</td></tr></table></div> </div>

315000

189000

297000

87000

1772000

1795000

1.10

0.34

1.50

0.38

1.10

0.34

1.49

0.37

<div> NOTE 3. Earnings Per Common Share Basic earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. The number of potential common shares is determined using the treasury method and relates to outstanding stock options and unvested restricted stock grants. The following table shows the weighted average number of shares used in computing earnings per share for the three and nine months ended September 30, 2012 and 2011 and the effect on the weighted average number of shares of dilutive potential common stock. Potential dilutive common stock had no effect on income available to common shareholders. <div> <table border="0" cellspacing="0"> <tr><td width="43%"> </td> <td width="14%"> </td> <td width="15%"> </td> <td width="15%"> </td> <td width="11%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="2" align="center">Three Months Ended</td> <td colspan="2" align="center">Nine Months Ended</td></tr> <tr valign="bottom"><td align="left"> </td> <td colspan="2" align="center">September 30,</td> <td colspan="2" align="center">September 30,</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 3px double;" align="center">2012</td> <td style="border-bottom: #000000 3px double;" align="center">2011</td> <td style="border-bottom: #000000 3px double;" align="center">2012</td> <td style="border-bottom: #000000 3px double;" align="center">2011</td></tr> <tr><td colspan="5"> </td></tr> <tr valign="bottom"><td align="left">Average number of common shares outstanding</td> <td align="right">3,341,050</td> <td align="right">3,302,082</td> <td align="right">3,328,065</td> <td align="right">3,287,943</td></tr> <tr valign="bottom"><td align="left">Effect of dilutive common stock</td> <td style="border-bottom: #000000 3px double;" align="right">11,287</td> <td style="border-bottom: #000000 3px double;" align="right">9,390</td> <td style="border-bottom: #000000 3px double;" align="right">9,643</td> <td style="border-bottom: #000000 3px double;" align="right">7,953</td></tr> <tr valign="bottom"><td align="left">Average number of common shares outstanding</td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td> <td align="left"> </td></tr> <tr valign="bottom"><td align="left">used to calculate diluted earnings per share</td> <td style="border-bottom: #000000 3px double;" align="right">3,352,337</td> <td style="border-bottom: #000000 3px double;" align="right">3,311,472</td> <td style="border-bottom: #000000 3px double;" align="right">3,337,708</td> <td style="border-bottom: #000000 3px double;" align="right">3,295,896</td></tr></table></div> </div>

507000

164000

502000

162000

<div> <div> <table border="0" cellspacing="0"> <tr><td width="31%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="12%"> </td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="2%" align="center"> </td> <td width="12%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="40%" colspan="5" align="center">Carrying value at September 30, 2012</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="2%" align="center"> </td> <td width="12%" align="center">Balance as of</td> <td width="2%" align="center"> </td> <td width="12%" align="center">Identical</td> <td width="2%" align="center"> </td> <td width="12%" align="center">Observable</td> <td width="14%" colspan="2" align="center">Unobservable</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="2%" align="center"> </td> <td width="12%" align="center">September 30,</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Inputs</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">(Level 3)</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="56%" colspan="8" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="31%" align="left">Financial Assets:</td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Impaired loans</td> <td width="2%" align="left">$</td> <td width="12%" align="right">4,356</td> <td width="2%" align="left">$</td> <td width="12%" align="right">-</td> <td width="2%" align="left">$</td> <td style="text-indent: 8px;" width="12%" align="right">2,655</td> <td width="2%" align="left">$</td> <td width="12%" align="right">1,701</td></tr> <tr><td width="87%" colspan="9"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Nonfinancial Assets:</td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Other real estate owned</td> <td width="2%" align="left"> </td> <td width="12%" align="right">2,364</td> <td width="2%" align="left"> </td> <td width="12%" align="right">193</td> <td width="2%" align="left"> </td> <td style="text-indent: 8px;" width="12%" align="right">2,171</td> <td width="2%" align="left"> </td> <td width="12%" align="right">-</td></tr></table></div>   <div> <table border="0" cellspacing="0"> <tr><td width="35%"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="45%" colspan="5" align="center">Carrying value at December 31, 2011</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center">Quoted Prices</td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center">in Active</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center">Markets for</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Other</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Significant</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center">Balance as of</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Identical</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Observable</td> <td width="3%" align="center"> </td> <td width="13%" align="center"> Unobservable</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center">December 31,</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Inputs</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 3)</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="64%" colspan="8" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="35%" align="left">Financial Assets:</td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="35%" align="left">Impaired loans</td> <td width="2%" align="left">$</td> <td width="14%" align="right">6,804</td> <td width="3%" align="left">$</td> <td width="13%" align="right">-</td> <td width="3%" align="left">$</td> <td style="text-indent: 8px;" width="13%" align="left">3,379</td> <td width="3%" align="left">$</td> <td width="13%" align="right">3,425</td></tr> <tr><td width="99%" colspan="9"> </td></tr> <tr valign="bottom"><td width="35%" align="left">Nonfinancial Assets:</td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="35%" align="left">Other real estate owned</td> <td width="2%" align="left"> </td> <td width="14%" align="right">2,378</td> <td width="3%" align="left"> </td> <td width="13%" align="right">-</td> <td width="3%" align="left"> </td> <td style="text-indent: 8px;" width="13%" align="left">1,742</td> <td width="3%" align="left"> </td> <td width="13%" align="right">636</td></tr></table></div> </div>

<div> <div> <table border="0" cellspacing="0"> <tr valign="bottom"><td width="39%" colspan="5" align="center">Fair Value Measurements at September 30, 2012 Using</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center">Quoted Prices</td> <td width="4%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center">in Active</td> <td width="4%" align="center"> </td> <td width="11%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center">Markets for</td> <td width="4%" align="center"> </td> <td width="11%" align="center">Other</td> <td width="3%" align="center"> </td> <td width="11%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center">Carrying Value</td> <td width="3%" align="center"> </td> <td width="10%" align="center">Identical</td> <td width="4%" align="center"> </td> <td width="11%" align="center">Observable</td> <td width="3%" align="center"> </td> <td width="11%" align="center">Unobservable</td> <td width="3%" align="center"> </td> <td width="14%" align="center">Fair Value</td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center">as of</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Inputs</td> <td width="3%" align="center"> </td> <td width="14%" align="center">as of</td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">September 30, 2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">(Level 3)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">September 30, 2012</td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center"> </td> <td width="15%" colspan="2" align="center">(in thousands)</td> <td width="3%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left">Financial Assets:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Cash and short-term investments</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">21,812</td> <td width="3%" align="left">$</td> <td width="10%" align="right">21,812</td> <td width="4%" align="left">$</td> <td width="11%" align="right">-</td> <td width="3%" align="left">$</td> <td width="11%" align="right">-</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">21,812</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Securities</td> <td width="3%" align="left"> </td> <td width="14%" align="right">101,186</td> <td width="3%" align="left"> </td> <td width="10%" align="right">2,264</td> <td width="4%" align="left"> </td> <td width="11%" align="right">98,922</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">101,186</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Restricted Investments</td> <td width="3%" align="left"> </td> <td width="14%" align="right">2,777</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">2,777</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">2,777</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Loans, net</td> <td width="3%" align="left"> </td> <td width="14%" align="right">419,538</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">432,731</td> <td width="3%" align="left"> </td> <td width="11%" align="right">1,701</td> <td width="3%" align="left"> </td> <td width="14%" align="right">434,432</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Accrued interest receivable</td> <td width="3%" align="left"> </td> <td width="14%" align="right">1,923</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">1,923</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">1,923</td></tr> <tr><td width="100%" colspan="11"> </td></tr> <tr valign="bottom"><td width="24%" align="left">Financial Liabilities:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Deposits</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">457,178</td> <td width="3%" align="left">$</td> <td width="10%" align="right">-</td> <td width="4%" align="left">$</td> <td width="11%" align="right">458,504</td> <td width="3%" align="left">$</td> <td width="11%" align="right">-</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">458,504</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Federal funds purchased and securities</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 5px;" width="24%" align="left">sold under agreements to repurchase</td> <td width="3%" align="left"> </td> <td width="14%" align="right">10,000</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">10,122</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">10,122</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Federal Home Loan Bank advances</td> <td width="3%" align="left"> </td> <td width="14%" align="right">32,250</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">33,298</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">33,298</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Trust preferred capital notes</td> <td width="3%" align="left"> </td> <td width="14%" align="right">7,217</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">7,217</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">7,217</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Accrued interest payable</td> <td width="3%" align="left"> </td> <td width="14%" align="right">281</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">281</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">281</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Interest rate swap contract</td> <td width="3%" align="left"> </td> <td width="14%" align="right">672</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">672</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">672</td></tr></table></div>   <div> <table style="width: 907px; height: 487px;" border="0" cellspacing="0"> <tr><td width="28%"> </td> <td width="3%"> </td> <td width="19%"> </td> <td width="30%"> </td> <td width="3%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="3%" align="left"> </td> <td width="19%" align="center"> </td> <td width="30%" align="center">December 31, 2011</td> <td width="3%" align="center"> </td> <td width="15%" align="center"> </td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="3%" align="left"> </td> <td width="19%" align="center">Carrying Value</td> <td width="30%" align="center">(in thousands)</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Fair Value</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="3%" align="left"> </td> <td width="19%" align="center">as of</td> <td width="30%" align="center"> </td> <td width="3%" align="center"> </td> <td width="15%" align="center">as of</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="19%" align="center">December 31, 2011</td> <td width="30%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="28%" align="center">Financial assets:</td> <td width="3%" align="left"> </td> <td width="19%" align="left"> </td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Cash and short-term investments</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="19%" align="right">21,941</td> <td width="30%" align="left"> </td> <td width="3%" align="left">$</td> <td width="15%" align="right">21,941</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Securities</td> <td width="3%" align="left"> </td> <td width="19%" align="right">114,134</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">114,134</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Restricted Investments</td> <td width="3%" align="left"> </td> <td width="19%" align="right">3,520</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">3,520</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Loans, net</td> <td width="3%" align="left"> </td> <td width="19%" align="right">401,681</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">418,230</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Accrued interest receivable</td> <td width="3%" align="left"> </td> <td width="19%" align="right">2,037</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">2,037</td></tr> <tr><td width="98%" colspan="6"> </td></tr> <tr><td width="98%" colspan="6"> </td></tr> <tr valign="bottom"><td width="28%" align="left">Financial liabilities:</td> <td width="3%" align="left"> </td> <td width="19%" align="left"> </td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Deposits</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="19%" align="right">448,465</td> <td width="30%" align="left"> </td> <td width="3%" align="left">$</td> <td width="15%" align="right">449,990</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Federal funds purchased and securities</td> <td width="3%" align="left"> </td> <td width="19%" align="left"> </td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 5px;" width="28%" align="left">sold under agreements to repurchase</td> <td width="3%" align="left"> </td> <td width="19%" align="right">10,000</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">10,350</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Federal Home Loan Bank advances</td> <td width="3%" align="left"> </td> <td width="19%" align="right">42,250</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">44,833</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Trust preferred capital notes</td> <td width="3%" align="left"> </td> <td width="19%" align="right">7,217</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">7,217</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Accrued interest payable</td> <td width="3%" align="left"> </td> <td width="19%" align="right">336</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">336</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Interest rate swap contract</td> <td width="3%" align="left"> </td> <td width="19%" align="right">580</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">580</td></tr></table></div> </div>

<div> NOTE 10. Fair Value Measurements GAAP requires the Company to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. "Fair Value Measurements" defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: <div> <table border="0" cellspacing="0"> <tr><td width="11%"> </td> <td width="88%"> </td></tr> <tr valign="bottom"><td align="left"> Level 1</td> <td align="left">Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.</td></tr> <tr><td colspan="2"> </td></tr> <tr valign="bottom"><td valign="top" align="left"> Level 2</td> <td align="left">Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.</td></tr> <tr><td colspan="2"> </td></tr> <tr valign="bottom"><td align="left"> Level 3</td> <td align="left">Inputs to the valuation methodology are unobservable and significant to the fair value measurement.</td></tr></table></div>   The following sections provide a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy: Securities Available for Sale: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Interest Rate Swap: The fair value is estimated by a third party using inputs that are observable or that can be corroborated by observable market data, and therefore, are classified within Level 2 of the valuation hierarchy. <div> </div> The following table presents balances of financial assets and liabilities measured at fair value on a recurring basis at September 30, 2012 and December 31, 2011: <div> <table border="0" cellspacing="0"> <tr><td width="30%"> </td> <td width="3%"> </td> <td width="11%"> </td> <td width="5%"> </td> <td width="13%"> </td> <td width="3%"> </td> <td width="15%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="48%" colspan="5" align="center">Fair Value Measurements at September 30, 2012 Using</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center"> </td> <td width="5%" align="center"> </td> <td width="13%" align="center">Quoted Prices</td> <td width="3%" align="center"> </td> <td width="15%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center"> </td> <td width="5%" align="center"> </td> <td width="13%" align="center">in Active</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center"> </td> <td width="5%" align="center"> </td> <td width="13%" align="center">Markets for</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Other</td> <td width="3%" align="center"> </td> <td width="14%" align="center">Significant</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center">Balance as of</td> <td width="5%" align="center"> </td> <td width="13%" align="center">Identical</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Observable</td> <td width="3%" align="center"> </td> <td width="14%" align="center">Unobservable</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center">September 30,</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">Inputs</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">(Level 3)</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="center"> </td> <td width="5%" align="center"> </td> <td width="31%" colspan="3" align="center">(in thousands)</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Assets:</td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="5%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Securities available for sale</td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="5%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="30%" align="left">Obligations of U.S. government</td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="5%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 5px;" width="30%" align="left">corporations and agencies</td> <td width="3%" align="left">$</td> <td width="11%" align="right">16,726</td> <td width="5%" align="left">$</td> <td width="13%" align="right">-</td> <td width="3%" align="left">$</td> <td width="15%" align="right">16,726</td> <td width="3%" align="left">$</td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="30%" align="left">Mortgage-backed securities</td> <td width="3%" align="left"> </td> <td width="11%" align="right">26,209</td> <td width="5%" align="left"> </td> <td width="13%" align="right">-</td> <td width="3%" align="left"> </td> <td width="15%" align="right">26,209</td> <td width="3%" align="left"> </td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="30%" align="left">Obligations of states and</td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="5%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">political subdivisions</td> <td width="3%" align="left"> </td> <td width="11%" align="right">43,842</td> <td width="5%" align="left"> </td> <td width="13%" align="right">-</td> <td width="3%" align="left"> </td> <td width="15%" align="right">43,842</td> <td width="3%" align="left"> </td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="30%" align="left">Corporate securities</td> <td width="3%" align="left"> </td> <td width="11%" align="right">12,145</td> <td width="5%" align="left"> </td> <td width="13%" align="right">-</td> <td width="3%" align="left"> </td> <td width="15%" align="right">12,145</td> <td width="3%" align="left"> </td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="30%" align="left">Equity securities:</td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="5%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Bank preferred stock</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">2,264</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="right">2,264</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="30%" align="left">Total assets at fair value</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">101,186</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="13%" align="right">2,264</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">98,922</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">-</td></tr> <tr><td width="97%" colspan="9"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Liabilities:</td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="5%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="30%" align="left">Interest rate swap</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">672</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">672</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="30%" align="left">Total liabilities at fair value</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">672</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="13%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">672</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">-</td></tr></table></div>   <div> <table style="width: 756px; height: 575px;" border="0" cellspacing="0"> <tr><td width="31%"> </td> <td width="3%"> </td> <td width="14%"> </td> <td width="4%"> </td> <td width="14%"> </td> <td width="3%"> </td> <td width="15%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="49%" colspan="5" align="center">Fair Value Measurements at December 31, 2011 Using</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="4%" align="center"> </td> <td width="14%" align="center">Quoted Prices</td> <td width="3%" align="center"> </td> <td width="15%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="4%" align="center"> </td> <td width="14%" align="center">in Active</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="4%" align="center"> </td> <td width="14%" align="center">Markets for</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Other</td> <td width="3%" align="center"> </td> <td width="14%" align="center">Significant</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center">Balance as of</td> <td width="4%" align="center"> </td> <td width="14%" align="center">Identical</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Observable</td> <td width="3%" align="center"> </td> <td width="14%" align="center">Unobservable</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center">December 31,</td> <td style="border-bottom: #000000 2px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 2px solid;" width="14%" align="center">Assets</td> <td style="border-bottom: #000000 2px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 2px solid;" width="15%" align="center">Inputs</td> <td style="border-bottom: #000000 2px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 2px solid;" width="14%" align="center">Inputs</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td style="border-bottom: #000000 2px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 2px solid;" width="14%" align="center">2011</td> <td style="border-bottom: #000000 2px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 2px solid;" width="14%" align="center">(Level 1)</td> <td style="border-bottom: #000000 2px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 2px solid;" width="15%" align="center">(Level 2)</td> <td style="border-bottom: #000000 2px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 2px solid;" width="14%" align="center">(Level 3)</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="4%" align="center"> </td> <td width="32%" colspan="3" align="center">(in thousands)</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Assets:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Securities available for sale</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Obligations of U.S. government</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 5px;" width="31%" align="left">corporations and agencies</td> <td width="3%" align="left">$</td> <td width="14%" align="right">18,533</td> <td width="4%" align="left">$</td> <td width="14%" align="right">-</td> <td width="3%" align="left">$</td> <td width="15%" align="right">18,533</td> <td width="3%" align="left">$</td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Mortgage-backed securities</td> <td width="3%" align="left"> </td> <td width="14%" align="right">34,546</td> <td width="4%" align="left"> </td> <td width="14%" align="right">-</td> <td width="3%" align="left"> </td> <td width="15%" align="right">34,546</td> <td width="3%" align="left"> </td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Obligations of states and</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="31%" align="left">political subdivisions</td> <td width="3%" align="left"> </td> <td width="14%" align="right">45,766</td> <td width="4%" align="left"> </td> <td width="14%" align="right">-</td> <td width="3%" align="left"> </td> <td width="15%" align="right">45,766</td> <td width="3%" align="left"> </td> <td width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="31%" align="left">Corporate securities</td> <td width="3%" align="left"> </td> <td width="14%" align="right">13,043</td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">13,043</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Equity securities:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Bank preferred stock</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">2,246</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">2,246</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="31%" align="left">Total assets at fair value</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">114,134</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">2,246</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">111,888</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">-</td></tr> <tr><td width="101%" colspan="9"> </td></tr> <tr><td width="101%" colspan="9"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Liabilities:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="4%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Interest rate swap</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">580</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">580</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">-</td></tr> <tr valign="bottom"><td width="31%" align="left">Total liabilities at fair value</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">580</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">580</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">-</td></tr></table></div>   <div> </div> Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower of cost or market accounting or write downs of individual assets. The following describes the valuation techniques used by the Company to measure certain financial and nonfinancial assets recorded at fair value on a nonrecurring basis in the financial statements: Impaired Loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. The measurement of loss associated with impaired loans can be based on the observable market price of the loan, the fair value of the collateral securing the loan, or the present value of estimated future cash flows. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. Level 2 impaired loan value is determined by utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business' financial statements if not considered significant using observable market data. Level 3 impaired loan values are determined using inventory and accounts receivables collateral and are based on financial statement balances or aging reports. If the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old or has been discounted based on management's historical knowledge, changes in market conditions from the time of valuation, and/or management's expertise and knowledge of the client and client's business, then the fair value is considered Level 3. Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income. Other Real Estate Owned: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lesser of the fair value of the property, less estimated selling costs or the loan balance outstanding at the date of foreclosure. Any write-downs based on the asset's fair value at the date of acquisition are charged to the allowance for loan losses. If there is a contract for the sale of a property, and management reasonably believes the contract will be executed, fair value is based on the sale price in that contract (Level 1). Lacking such a contract, the value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value is considered Level 3. After foreclosure, valuations are periodically performed by management and property held for sale is carried at the lower of the new cost basis or fair value less cost to sell. Any subsequent valuation adjustments are applied to earnings in the consolidated statements of income. Impairment losses on property to be held and used are measured as the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property improvements are capitalized, whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell. We believe that the fair value component in its valuation follows the provisions of GAAP. The following table displays quantitative information about Level 3 Fair Value Measurements for certain financial assets measured at fair value on a nonrecurring basis for September 30, 2012: <div> <table border="0" cellspacing="0"> <tr><td width="23%"> </td> <td width="30%"> </td> <td width="28%"> </td> <td width="18%"> </td></tr> <tr valign="bottom"><td width="23%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="76%" colspan="3" align="center">Quantitative information about Level 3 Fair Value Measurements for September 30, 2012</td></tr> <tr valign="bottom"><td width="23%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="30%" align="center">Valuation Technique(s)</td> <td style="border-bottom: #000000 1px solid;" width="28%" align="center">Unobservable Input</td> <td style="border-bottom: #000000 1px solid;" width="18%" align="center">Range</td></tr> <tr valign="bottom"><td width="23%" align="left">Assets:</td> <td width="30%" align="left"> </td> <td width="28%" align="left"> </td> <td width="18%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="23%" align="left">Impaired loans</td> <td width="30%" align="center">Discounted appraised value</td> <td width="28%" align="center">Selling cost</td> <td width="18%" align="right">6% - 12%</td></tr> <tr><td width="99%" colspan="4"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="23%" align="left">Other real estate owned</td> <td width="30%" align="center">Discounted appraised value</td> <td width="28%" align="center">Selling cost</td> <td width="18%" align="right">6% - 12%</td></tr></table></div>   <div> </div> <div> The following table summarizes the Company's financial and nonfinancial assets that were measured at fair value on a nonrecurring basis at September 30, 2012 and December 31, 2011: <div> <table border="0" cellspacing="0"> <tr><td width="31%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="12%"> </td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="2%" align="center"> </td> <td width="12%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="40%" colspan="5" align="center">Carrying value at September 30, 2012</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="2%" align="center"> </td> <td width="12%" align="center">Balance as of</td> <td width="2%" align="center"> </td> <td width="12%" align="center">Identical</td> <td width="2%" align="center"> </td> <td width="12%" align="center">Observable</td> <td width="14%" colspan="2" align="center">Unobservable</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="2%" align="center"> </td> <td width="12%" align="center">September 30,</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Inputs</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">(Level 3)</td></tr> <tr valign="bottom"><td width="31%" align="left"> </td> <td width="56%" colspan="8" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="31%" align="left">Financial Assets:</td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Impaired loans</td> <td width="2%" align="left">$</td> <td width="12%" align="right">4,356</td> <td width="2%" align="left">$</td> <td width="12%" align="right">-</td> <td width="2%" align="left">$</td> <td style="text-indent: 8px;" width="12%" align="right">2,655</td> <td width="2%" align="left">$</td> <td width="12%" align="right">1,701</td></tr> <tr><td width="87%" colspan="9"> </td></tr> <tr valign="bottom"><td width="31%" align="left">Nonfinancial Assets:</td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td> <td width="2%" align="left"> </td> <td width="12%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="31%" align="left">Other real estate owned</td> <td width="2%" align="left"> </td> <td width="12%" align="right">2,364</td> <td width="2%" align="left"> </td> <td width="12%" align="right">193</td> <td width="2%" align="left"> </td> <td style="text-indent: 8px;" width="12%" align="right">2,171</td> <td width="2%" align="left"> </td> <td width="12%" align="right">-</td></tr></table></div>   <div> <table border="0" cellspacing="0"> <tr><td width="35%"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="45%" colspan="5" align="center">Carrying value at December 31, 2011</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center">Quoted Prices</td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center">in Active</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="13%" align="center"> </td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="13%" align="center">Markets for</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Other</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Significant</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center">Balance as of</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Identical</td> <td width="3%" align="center"> </td> <td width="13%" align="center">Observable</td> <td width="3%" align="center"> </td> <td width="13%" align="center"> Unobservable</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="2%" align="center"> </td> <td width="14%" align="center">December 31,</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Inputs</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">(Level 3)</td></tr> <tr valign="bottom"><td width="35%" align="left"> </td> <td width="64%" colspan="8" align="center">(in thousands)</td></tr> <tr valign="bottom"><td width="35%" align="left">Financial Assets:</td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="35%" align="left">Impaired loans</td> <td width="2%" align="left">$</td> <td width="14%" align="right">6,804</td> <td width="3%" align="left">$</td> <td width="13%" align="right">-</td> <td width="3%" align="left">$</td> <td style="text-indent: 8px;" width="13%" align="left">3,379</td> <td width="3%" align="left">$</td> <td width="13%" align="right">3,425</td></tr> <tr><td width="99%" colspan="9"> </td></tr> <tr valign="bottom"><td width="35%" align="left">Nonfinancial Assets:</td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td> <td width="3%" align="left"> </td> <td width="13%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="35%" align="left">Other real estate owned</td> <td width="2%" align="left"> </td> <td width="14%" align="right">2,378</td> <td width="3%" align="left"> </td> <td width="13%" align="right">-</td> <td width="3%" align="left"> </td> <td style="text-indent: 8px;" width="13%" align="left">1,742</td> <td width="3%" align="left"> </td> <td width="13%" align="right">636</td></tr></table></div>   The changes in Level 3 financial assets measured at estimated fair value on a nonrecurring basis during the nine months ended September 30, 2012 were as follows: <div> <table style="width: 609px; height: 295px;" border="0" cellspacing="0"> <tr><td width="45%"> </td> <td width="3%"> </td> <td width="18%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="21%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td width="3%" align="left"> </td> <td width="45%" colspan="4" align="center">Fair Value Measurements at September 30, 2012</td> <td width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td width="3%" align="left"> </td> <td width="18%" align="center">Impaired</td> <td width="3%" align="center"> </td> <td width="3%" align="center"> </td> <td width="21%" align="center">Other Real</td> <td width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="18%" align="center">Loans</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">Estate Owned</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td width="3%" align="left"> </td> <td width="45%" colspan="4" align="center">(in thousands)</td> <td width="3%" align="center"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Balance - January 1, 2012</td> <td width="3%" align="left">$</td> <td width="18%" align="right">3,425</td> <td width="3%" align="left"> </td> <td width="3%" align="left">$</td> <td width="21%" align="right">636</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Sales proceeds</td> <td width="3%" align="left"> </td> <td width="18%" align="right">-</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Valuation allowance</td> <td width="3%" align="left"> </td> <td width="18%" align="right">-</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">(Loss) on disposition</td> <td width="3%" align="left"> </td> <td width="18%" align="right">-</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Transfers into Level 3</td> <td width="3%" align="left"> </td> <td width="18%" align="right">959</td> <td width="3%" align="left"> </td> <td width="3%" align="left"> </td> <td width="21%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Transfers out of Level 3</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="18%" align="right">(2,683</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="right">(636</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Total assets at fair value</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="18%" align="right">1,701</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="21%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td></tr></table></div></div> GAAP defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than through a forced or liquidation sale for purposes of this disclosure. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The following methods and assumptions were used to estimate the fair value of the Company's financial instruments: Cash and short-term investments/accrued interest: The fair value was equal to the carrying amount. Securities: The fair value, excluding restricted securities, was based on quoted market prices. The fair value of restricted securities approximated the carrying amount based on the redemption provisions of the issuers. Loans: The fair value of variable rate loans, which reprice frequently and with no significant change in credit risk, was equal to the carrying amount. The fair value of all other loans was determined using discounted cash flow analysis. The discount rate was equal to the current interest rate on similar products. <div> </div> Deposits and borrowings: The fair value of demand deposits, savings accounts, and certain money market deposits was equal to the carrying amount. The fair value of all other deposits and borrowings was determined using discounted cash flow analysis. The discount rate was equal to the current interest rate on similar products. Off-balance-sheet financial instruments: The fair value of commitments to extend credit was estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the credit worthiness of the counterparties. The fair value of fixed rate loan commitments also considered the difference between current interest rates and the committed interest rates. The fair value of standby letters of credit was estimated using the fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties. The carrying amount and fair value of the Company's financial instruments at September 30, 2012 and December 31, 2011 were as follows: <div> <table border="0" cellspacing="0"> <tr><td width="24%"> </td> <td width="3%"> </td> <td width="14%"> </td> <td width="3%"> </td> <td width="10%"> </td> <td width="4%"> </td> <td width="11%"> </td> <td width="3%"> </td> <td width="11%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="39%" colspan="5" align="center">Fair Value Measurements at September 30, 2012 Using</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center">Quoted Prices</td> <td width="4%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center">in Active</td> <td width="4%" align="center"> </td> <td width="11%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center">Markets for</td> <td width="4%" align="center"> </td> <td width="11%" align="center">Other</td> <td width="3%" align="center"> </td> <td width="11%" align="center">Significant</td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center">Carrying Value</td> <td width="3%" align="center"> </td> <td width="10%" align="center">Identical</td> <td width="4%" align="center"> </td> <td width="11%" align="center">Observable</td> <td width="3%" align="center"> </td> <td width="11%" align="center">Unobservable</td> <td width="3%" align="center"> </td> <td width="14%" align="center">Fair Value</td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center">as of</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">Assets</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Inputs</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Inputs</td> <td width="3%" align="center"> </td> <td width="14%" align="center">as of</td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">September 30, 2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">(Level 1)</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">(Level 2)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">(Level 3)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">September 30, 2012</td></tr> <tr valign="bottom"><td width="24%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="10%" align="center"> </td> <td width="15%" colspan="2" align="center">(in thousands)</td> <td width="3%" align="center"> </td> <td width="11%" align="center"> </td> <td width="3%" align="center"> </td> <td width="14%" align="center"> </td></tr> <tr valign="bottom"><td width="24%" align="left">Financial Assets:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Cash and short-term investments</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">21,812</td> <td width="3%" align="left">$</td> <td width="10%" align="right">21,812</td> <td width="4%" align="left">$</td> <td width="11%" align="right">-</td> <td width="3%" align="left">$</td> <td width="11%" align="right">-</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">21,812</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Securities</td> <td width="3%" align="left"> </td> <td width="14%" align="right">101,186</td> <td width="3%" align="left"> </td> <td width="10%" align="right">2,264</td> <td width="4%" align="left"> </td> <td width="11%" align="right">98,922</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">101,186</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Restricted Investments</td> <td width="3%" align="left"> </td> <td width="14%" align="right">2,777</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">2,777</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">2,777</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Loans, net</td> <td width="3%" align="left"> </td> <td width="14%" align="right">419,538</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">432,731</td> <td width="3%" align="left"> </td> <td width="11%" align="right">1,701</td> <td width="3%" align="left"> </td> <td width="14%" align="right">434,432</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Accrued interest receivable</td> <td width="3%" align="left"> </td> <td width="14%" align="right">1,923</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">1,923</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">1,923</td></tr> <tr><td width="100%" colspan="11"> </td></tr> <tr valign="bottom"><td width="24%" align="left">Financial Liabilities:</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Deposits</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">457,178</td> <td width="3%" align="left">$</td> <td width="10%" align="right">-</td> <td width="4%" align="left">$</td> <td width="11%" align="right">458,504</td> <td width="3%" align="left">$</td> <td width="11%" align="right">-</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="14%" align="right">458,504</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Federal funds purchased and securities</td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td> <td width="3%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="11%" align="left"> </td> <td width="3%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 5px;" width="24%" align="left">sold under agreements to repurchase</td> <td width="3%" align="left"> </td> <td width="14%" align="right">10,000</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">10,122</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">10,122</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Federal Home Loan Bank advances</td> <td width="3%" align="left"> </td> <td width="14%" align="right">32,250</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">33,298</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">33,298</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Trust preferred capital notes</td> <td width="3%" align="left"> </td> <td width="14%" align="right">7,217</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">7,217</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">7,217</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Accrued interest payable</td> <td width="3%" align="left"> </td> <td width="14%" align="right">281</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">281</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">281</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="24%" align="left">Interest rate swap contract</td> <td width="3%" align="left"> </td> <td width="14%" align="right">672</td> <td width="3%" align="left"> </td> <td width="10%" align="right">-</td> <td width="4%" align="left"> </td> <td width="11%" align="right">672</td> <td width="3%" align="left"> </td> <td width="11%" align="right">-</td> <td width="3%" align="left"> </td> <td width="14%" align="right">672</td></tr></table></div>   <div> <table style="width: 907px; height: 487px;" border="0" cellspacing="0"> <tr><td width="28%"> </td> <td width="3%"> </td> <td width="19%"> </td> <td width="30%"> </td> <td width="3%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="3%" align="left"> </td> <td width="19%" align="center"> </td> <td width="30%" align="center">December 31, 2011</td> <td width="3%" align="center"> </td> <td width="15%" align="center"> </td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="3%" align="left"> </td> <td width="19%" align="center">Carrying Value</td> <td width="30%" align="center">(in thousands)</td> <td width="3%" align="center"> </td> <td width="15%" align="center">Fair Value</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td width="3%" align="left"> </td> <td width="19%" align="center">as of</td> <td width="30%" align="center"> </td> <td width="3%" align="center"> </td> <td width="15%" align="center">as of</td></tr> <tr valign="bottom"><td width="28%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="19%" align="center">December 31, 2011</td> <td width="30%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="28%" align="center">Financial assets:</td> <td width="3%" align="left"> </td> <td width="19%" align="left"> </td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Cash and short-term investments</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="19%" align="right">21,941</td> <td width="30%" align="left"> </td> <td width="3%" align="left">$</td> <td width="15%" align="right">21,941</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Securities</td> <td width="3%" align="left"> </td> <td width="19%" align="right">114,134</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">114,134</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Restricted Investments</td> <td width="3%" align="left"> </td> <td width="19%" align="right">3,520</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">3,520</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Loans, net</td> <td width="3%" align="left"> </td> <td width="19%" align="right">401,681</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">418,230</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Accrued interest receivable</td> <td width="3%" align="left"> </td> <td width="19%" align="right">2,037</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">2,037</td></tr> <tr><td width="98%" colspan="6"> </td></tr> <tr><td width="98%" colspan="6"> </td></tr> <tr valign="bottom"><td width="28%" align="left">Financial liabilities:</td> <td width="3%" align="left"> </td> <td width="19%" align="left"> </td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Deposits</td> <td style="text-indent: 1px;" width="3%" align="left">$</td> <td width="19%" align="right">448,465</td> <td width="30%" align="left"> </td> <td width="3%" align="left">$</td> <td width="15%" align="right">449,990</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Federal funds purchased and securities</td> <td width="3%" align="left"> </td> <td width="19%" align="left"> </td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 5px;" width="28%" align="left">sold under agreements to repurchase</td> <td width="3%" align="left"> </td> <td width="19%" align="right">10,000</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">10,350</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Federal Home Loan Bank advances</td> <td width="3%" align="left"> </td> <td width="19%" align="right">42,250</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">44,833</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Trust preferred capital notes</td> <td width="3%" align="left"> </td> <td width="19%" align="right">7,217</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">7,217</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Accrued interest payable</td> <td width="3%" align="left"> </td> <td width="19%" align="right">336</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">336</td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="28%" align="left">Interest rate swap contract</td> <td width="3%" align="left"> </td> <td width="19%" align="right">580</td> <td width="30%" align="left"> </td> <td width="3%" align="left"> </td> <td width="15%" align="right">580</td></tr></table></div>   <div> </div> The Company assumes interest rate risk (the risk that general interest rate levels will change) during its normal operations. As a result, the fair value of the Company's financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities in order to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay their principal balance in a rising rate environment and more likely to do so in a falling rate environment. Conversely, depositors who are receiving fixed rate interest payments are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting the terms of new loans and deposits and by investing in securities with terms that mitigate the Company's overall interest rate risk. </div>

<div> <table border="0" cellspacing="0"> <tr><td width="23%"> </td> <td width="30%"> </td> <td width="28%"> </td> <td width="18%"> </td></tr> <tr valign="bottom"><td width="23%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="76%" colspan="3" align="center">Quantitative information about Level 3 Fair Value Measurements for September 30, 2012</td></tr> <tr valign="bottom"><td width="23%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="30%" align="center">Valuation Technique(s)</td> <td style="border-bottom: #000000 1px solid;" width="28%" align="center">Unobservable Input</td> <td style="border-bottom: #000000 1px solid;" width="18%" align="center">Range</td></tr> <tr valign="bottom"><td width="23%" align="left">Assets:</td> <td width="30%" align="left"> </td> <td width="28%" align="left"> </td> <td width="18%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="23%" align="left">Impaired loans</td> <td width="30%" align="center">Discounted appraised value</td> <td width="28%" align="center">Selling cost</td> <td width="18%" align="right">6% - 12%</td></tr> <tr><td width="99%" colspan="4"> </td></tr> <tr valign="bottom"><td style="text-indent: 3px;" width="23%" align="left">Other real estate owned</td> <td width="30%" align="center">Discounted appraised value</td> <td width="28%" align="center">Selling cost</td> <td width="18%" align="right">6% - 12%</td></tr></table> </div>

546000

170000

202000

96000

10000000

10350000

10000000

10122000

10000000

42250000

32250000

42250000

44833000

32250000

33298000

1190000

406000

1112000

390000

698000

189000

726000

205000

2473000

861000

2576000

898000

7111000

36000

1386000

819000

1231000

182000

3457000

7891000

8743000

123000

2618000

1077000

1057000

131000

3544000

193000

7961000

113000

1530000

841000

2136000

120000

3457000

-236000

4510000

123000

1150000

533000

907000

131000

1473000

193000

4600000

113000

1389000

366000

1396000

120000

1452000

-236000

4233000

1468000

544000

150000

2071000

3361000

141000

475000

740000

2005000

568000

848000

56000

5000

292000

2000

195000

298000

215000

7000

3000

30000

58000

57000

60000

2638000

2966000

125000

721000

572000

14000

331000

1203000

2647000

23000

1303000

50000

660000

103000

508000

390534000

4206000

31612000

22267000

111857000

13185000

207407000

409761000

3119000

39188000

19573000

124052000

13348000

210481000

<div> <div> <table border="0" cellspacing="0"> <tr valign="bottom"><td width="69%" colspan="14" align="center">A s o f S e pte m be r 3 0 , 2 0 12</td></tr> <tr valign="bottom"><td width="25%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="69%" colspan="14" align="center">(in tho us a nds )</td></tr> <tr valign="bottom"><td width="25%" align="left"> </td> <td width="2%" align="right"> </td> <td width="11%" align="center"> </td> <td width="2%" align="center"> </td> <td width="11%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Special</td> <td width="4%" align="center"> </td> <td width="8%" align="center"> </td> <td width="1%" align="center"> </td> <td width="7%" align="center"> </td> <td width="1%" align="center"> </td> <td width="5%" align="center"> </td> <td width="1%" align="center"> </td> <td width="6%" align="center"> </td></tr> <tr valign="bottom"><td style="border-bottom: #000000 3px double;" width="25%" align="left">INTERNAL RISK RATING GRADES</td> <td style="border-bottom: #000000 3px double;" width="2%" align="right"> </td> <td style="border-bottom: #000000 3px double;" width="11%" align="center">P as s</td> <td style="border-bottom: #000000 3px double;" width="2%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="11%" align="center">Watch</td> <td style="border-bottom: #000000 3px double;" width="2%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="8%" align="center">Mentio n</td> <td style="border-bottom: #000000 3px double;" width="12%" colspan="2" align="center">Subs tandard</td> <td style="border-bottom: #000000 3px double;" width="1%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="center">Do ubtful</td> <td style="border-bottom: #000000 3px double; text-indent: 3px;" width="6%" colspan="2" align="center">Lo s s</td> <td style="border-bottom: #000000 3px double;" width="1%" align="center"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="center">To tal</td></tr> <tr><td width="94%" colspan="15"> </td></tr> <tr valign="bottom"><td width="25%" align="left">Co mmercial - No n Real Es tate:</td> <td width="2%" align="right"> </td> <td width="11%" align="left"> </td> <td width="2%" align="right"> </td> <td width="11%" align="left"> </td> <td width="2%" align="right"> </td> <td width="8%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td> <td width="1%" align="left"> </td> <td width="7%" align="left"> </td> <td width="1%" align="left"> </td> <td width="5%" align="left"> </td> <td width="1%" align="left"> </td> <td width="6%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="25%" align="left">Co mmercial &Indus trial</td> <td width="2%" align="right">$</td> <td width="11%" align="right">15,197</td> <td width="2%" align="right">$</td> <td width="11%" align="right">2,435&