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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2015

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 by level within the hierarchy:

(dollars in thousands)
September 30, 2015	Total		Level I		Level II		Level III
Assets:
Securities available-for-sale:
U.S. government-sponsored entities and agencies	$	7,014	$	-	$	7,014	$	-
State and political subdivisions		5,608		-		5,608		-
Mortgage-backed securities - residential		27,037		-		27,037		-
Collateralized mortgage obligations		25,148		-		25,148		-
Corporate bonds		2,568		-		2,568		-
Liabilities:
Derivative liability		754		-		754		-

December 31, 2014	Total		Level I		Level II		Level III
Assets:
Securities available-for-sale:
U.S. government-sponsored entities and agencies	$	7,157	$	-	$	7,157	$	-
State and political subdivisions		7,060		-		7,060		-
Mortgage-backed securities - residential		31,360		-		31,360		-
Collateralized mortgage obligations		28,962		-		28,962		-
Corporate bonds		3,094		-		3,094		-
Liabilities:
Derivative liability		725		-		725		-

Assets Measured at Fair Value on Non - Recurring Basis

The following table presents information about our assets measured at fair value on a non-recurring basis as of September 30, 2015 and December 31, 2014, by level within the fair value hierarchy. The amounts in the tables represent only assets for which the carrying amount has been adjusted for impairment during the period; therefore, these amounts will differ from the total amounts outstanding.

(dollars in thousands)
September 30, 2015	Total		Level I		Level II		Level III
Impaired Loans (Collateral Dependent):
Real estate mortgage loans:
Residential	$	1,037	$	-	$	1,037	$	-
Commercial		1,293		-		1,018		275
Construction and land		109		-		109		-
Other real estate owned:
Real estate mortgage loans:
Construction and land		3,768		-		3,768		-
Assets held for sale		-		-		-		-

December 31, 2014	Total		Level I		Level II		Level III
Impaired Loans (Collateral Dependent):
Real estate mortgage loans:
Residential	$	495	$	-	$	-	$	495
Commercial		275		-		-		275
Construction and land		252		-		-		252
Other real estate owned:
Real estate mortgage loans:
Construction and land		3,773		-		-		3,773
Assets held for sale		786		-		786		-

Quantitative Information About Unobservable Inputs for Assets Measured on Non-Recurring Basis

The following table presents quantitative information about unobservable inputs for assets measured on a non-recurring basis using Level III measurements as of September 30, 2015 and December 31, 2014. This quantitative information is the same for each class of loans.

(dollars in thousands) September 30, 2015	Fair Value			Valuation Technique		Unobservable Inputs		Range of Inputs				Weighted Average
Impaired loans (collateral dependent)	$	275		Market comparable properties		Marketability discount			10	%			10	%

December 31, 2014

Fair

Value

Valuation Technique

Unobservable Inputs

Range of Inputs

Weighted Average

Impaired loans (collateral dependent)

1,022

Market comparable properties

Marketability discount

0% – 20.0

6.2

Other real estate owned

3,773

Market comparable properties

Comparability adjustments

0% – 8.1

2.8

Summary of Outstanding Balance, Valuation Allowance, Net Carrying Amount and Period Expense Related to Level Three Non-Recurring Instruments

The table below summarizes the outstanding balance, valuation allowance and net carrying amount and period expense related to Level III non-recurring instruments for the nine months ended September 30, 2015 and 2014:

(dollars in thousands) September 30, 2015	Outstanding Balance			Valuation Allowance			Net Carrying Amount			Period Expense
Impaired loans (collateral dependent)	$	471		$	196		$	275		$	(18	)

September 30, 2014	Outstanding Balance		Valuation Allowance		Net Carrying Amount		Period Expense
Impaired loans (collateral dependent)	$	6,094	$	2,220	$	3,874	$	434
Other real estate owned		3,880		1,006		2,874		48
Assets held for sale		940		-		925		15

Carrying Amount and Estimated Fair Values of Financial Instruments

The carrying amount and estimated fair values of financial instruments as of September 30, 2015 and December 31, 2014 were as follows:

	September 30, 2015				December 31, 2014
(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	26,410	$	26,410	$	24,372	$	24,372
Securities available-for-sale		67,375		67,375		77,633		77,633
Loans, net		386,941		392,896		360,279		366,686
Federal Home Loan Bank stock		928		N/A		1,243		N/A
Accrued interest receivable		1,366		1,366		1,464		1,464

Financial liabilities:
Deposits	$	433,032	$	433,555	$	415,756	$	416,432
Federal Home Loan Bank advances and other borrowings		11,860		11,721		17,629		17,743
Subordinated debentures		16,266		8,951		16,218		8,552
Accrued interest payable		116		116		130		130
Interest rate swap		754		754		725		725

Breakdown of Cash and Cash Equivalents Between Level I and Level II

Cash and cash equivalents:

The carrying amounts of cash and cash equivalents approximate the fair value and are classified as either Level I or Level II in the fair value hierarchy, with Level II comprised solely of national certificates of deposit held by the Bank. As of September 30, 2015 and December 31, 2014, respectively, the breakdown of cash and cash equivalents between Level I and Level II were as follows:

	September 30, 2015						December 31, 2014
(dollars in thousands)	Level I			Level II			Level I			Level II
Cash and cash equivalents		$	23,197		$	3,213		$	20,186		$	4,186