Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2013

Financial assets and liabilities measured at fair value on recurring basis

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012 by levels within the valuation hierarchy:

	Fair Value Measurements Using
(In thousands)	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at March 31, 2013:
Available-for-sale securities:
Obligations of U.S. Government corporations and agencies	$	37,694	$	-	$	37,694	$	-
Obligations of states and political subdivisions		7,332		-		7,332		-
Corporate bonds		313		-		-		313
Mutual funds		362		362		-		-
Total available-for sale securities		45,701		362		45,026		313

Interest rate swaps		6		-		6		-
Total assets at fair value	$	45,707	$	362	$	45,707	$	313

Liabilities at March 31, 2013:
Interest rate swaps	$	736	$	-	$	736	$	-
Total liabilities at fair value	$	736	$	-	$	736	$	-

Assets at December 31, 2012:
Available-for-sale securities:
Obligations of U.S. Government corporations and agencies	$	40,014	$	-	$	40,014	$	-
Obligations of states and political subdivisions		7,390		-		7,390		-
Corporate bonds		325		-		-		325
Mutual funds		363		363		-		-
Total available-for sale securities		48,092		363		47.404		325

Interest rate swaps		-		-		-		-
Total assets at fair value	$	48,092	$	363	$	47,404	$	325

Liabilities at December 31, 2012:
Interest rate swaps	$	841	$	-	$	841	$	-
Total liabilities at fair value	$	841	$	-	$	841	$	-

Changes in Level 3 assets measured at estimated fair value on a recurring

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the three months ended March 31, 2013 and year ended December 31, 2012 were as follows:

	Total Gains (Losses) Realized/Unrealized
(In thousands)	Balance January 1, 2013		Included in Earnings		Included in Other Comprehensive Income			Transfers in and/or out of Level 3 and 2		Balance March 31, 2013
Available-for-sale securities	$	325	$	-	$	(12	)	$	-	$	313

	Total Gains (Losses) Realized/Unrealized
(In thousands)	Balance January 1, 2012		Included in Earnings		Included in Other Comprehensive Income			Transfers in and/or out of Level 3 and 2		Balance December 31, 2012
Available-for-sale securities	$	335	$	-	$	(10	)	$	-	$	325

Financial assets measured at fair value on a nonrecurring basis

The following table summarizes the Company's financial assets that were measured at fair value on a nonrecurring basis during the period.

	Carrying Value at March 31, 2013
	Balance as of March 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Impaired loans, net	$	1,200	$	-	$	941	$	259
Other real estate owned, net		1,406		-		1,406		-

	Carrying Value at December 31, 2012
	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Impaired loans, net	$	868	$	-	$	491	$	377
Other real estate owned, net		1,406		-		1,406		-

Quantitative Information about level 3 fair value measurements

The following table displays quantitative information about Level 3 Fair Value Meaurements at March 31, 2013.

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value		Valuation Technique(s)	Unobservable Input	Weighted Average
Corporate securities available for sale	$	313	Discounted cash flow	Discount based on prepayment rate, probability of default and loss severity		30	%
Impaired Loans:
Commercial and industrial loans		135	Appraised values	*		54	%
Commercial real estate loans		-	Appraised values	*		-
Construction and land loans		124	Appraised values	*		23	%
Residential real estate loans		-	Appraised values	*		-
Total Impaired Loans		259
Total	$	572

* Discount applied based on age of appraisals, current market conditions, and experience within local market.

Estimated fair values of the financial instruments

The estimated fair values of the Company's financial instruments are as follows:

	Fair Value Measurements at March 31, 2013
(In thousands)	Carrying Value as of March 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Fair Value as of March 31, 2013
Assets
Cash and short-term investments	$	63,372	$	60,873	$	2,525	$	-	$	63,398
Securities available for sale		45,701		362		45,026		313		45,701
Restricted investments		2,138		-		2,138		-		2,138
Net Loans		443,591		-		445,283		259		445,542
Accrued interest receivable		1,404		-		1,404		-		1,404
Interest rate swaps		6		-		6		-		6
BOLI		12,138		-		12,138		-		12,138
Total Financial Assets	$	568,350	$	61,235	$	508,520	$	572	$	570,327

Liabilities
Deposits	$	509,604	$	-	$	512,147	$	-	$	512,147
Borrowings		28,185		-		28,628		-		28,628
Company obligated mandatorily redeemable capital securities		4,124		-		4,117		-		4,117
Accrued interest payable		323		-		323		-		323
Interest rate swaps		736		-		736		-		736
Total Financial Liabilities	$	542,972	$	-	$	545,951	$	-	$	545,951

	Fair Value Measurements at December 31, 2012
(In thousands)	Carrying Value as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Fair Value as of December 31, 2012
Assets
Cash and short-term investments	$	64,435	$	61,935	$	2,530	$	-	$	64,465
Securities available for sale		48,092		363		47,404		325		48,092
Restricted investments		2,337		-		2,337		-		2,337
Net Loans		445,108		-		443,045		377		443,422
Accrued interest receivable		1,283		-		1,283		-		1,283
Interest rate swaps		-		-		-		-		-
BOLI		12,038		-		12,038		-		12,038
Total Financial Assets	$	573,293	$	62,298	$	508,637	$	702	$	571,637

Liabilities
Deposits	$	515,134	$	-	$	517,811	$	-	$	517,811
Borrowings		28,200		-		28,877		-		28,877
Company obligated mandatorily redeemable capital securities		4,124		-		5,258		-		5,258
Accrued interest payable		312		-		312		-		312
Interest rate swaps		841		-		841		-		841
Total Financial Liabilities	$	548,611	$	-	$	553,099	$	-	$	553,099

- Definition

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

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- Definition

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

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- Definition

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

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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