Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 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 September 30, 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 September 30, 2013:
Available-for-sale securities:
Obligations of U.S. Government corporations and agencies	$	42,230	$	-	$	42,230	$	-
Obligations of states and political subdivisions		7,078		-		7,078		-
Corporate bonds		440		-		-		440
Mutual funds		352		352		-		-
Total available-for sale securities	$	50,100	$	352	$	49,308	$	440

Interest rate swaps	$	54	$	-	$	54	$	-
Total assets at fair value	$	50,154	$	352	$	49,362	$	440

Liabilities at September 30, 2013:
Interest rate swaps	$	345	$	-	$	345	$	-
Total liabilities at fair value	$	345	$	-	$	345	$	-

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

Change in Level 3 Fair Value

The changes in Level 3 assets measured at estimated fair value on a recurring basis during the nine months ended September 30, 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 September 30, 2013
Available-for-sale securities	$	325	$	-	$	115	$	-	$	440

	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 September 30, 2013
	Balance as of September 30, 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	$	4,690	$	-	$	4,433	$	257
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 Measurements at September 30, 2013.

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
Corporate securities available for sale	$	440	Discounted cash flows	Prepayment rate, probability of default and loss severity	5.1% to 52.4% discount rate
Impaired loans		257	Appraised values	Age of appraisal, current market conditions, and experience within local market	0% to 100% discount
Total	$	697

Estimated fair values of the financial instruments

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

	Fair Value Measurements at September 30, 2013
(In thousands)	Carrying Value as of September 30, 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 September 30, 2013
Assets
Cash and short-term investments	$	53,660	$	53,672	$	-	$	-	$	53,672
Securities available for sale		50,100		352		49,308		440		50,100
Restricted investments		1,462		-		1,462		-		1,462
Net loans		448,524		-		446,990		257		447,247
Accrued interest receivable		1,386		-		1,386		-		1,386
Interest rate swaps		54		-		54		-		54
BOLI		12,335		-		12,335		-		12,335
Total financial assets	$	567,521	$	54,024	$	511,535	$	697	$	566,256

Liabilities
Deposits	$	522,803	$	-	$	524,356	$	-	$	524,356
Borrowings		13,155		-		13,040		-		13,040
Company obligated mandatorily redeemable capital securities		4,124		-		4,114		-		4,114
Accrued interest payable		223		-		223		-		223
Interest rate swaps		345		-		345		-		345
Total financial liabilities	$	540,650	$	-	$	542,078	$	-	$	542,078

	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	$	64,465	$	-	$	-	$	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	$	64,828	$	506,107	$	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)

-Number 107

-Paragraph 15

-Subparagraph b-d

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

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

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

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

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

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

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Reference 6: http://www.xbrl.org/2003/role/presentationRef

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Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-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 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

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-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-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 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-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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