Fair Value Measurement (Tables)

12 Months Ended

Dec. 31, 2012

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 December 31, 2012 and December 31, 2011 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 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	$	-

Assets at December 31, 2011
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	39,572	$	-	$	39,572	$	-
Obligations of states and political subdivisions		7,393		-		7,393		-
Corporate bonds		335		-		-		335
Mutual funds		349		349		-		-
Total available for sale securities		47,649		349		46,965		335

Interest rate swaps		179		-		179		-
Total assets at fair value	$	47,828	$	349	$	47,144	$	335

Liabilities at December 31, 2011
Interest rate swaps	$	452	$	-	$	452	$	-
Total liabilities at fair value	$	452	$	-	$	452	$	-

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 years ended December 31, 2012 and 2011 were as follows:

	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

Notes to Consolidated Financial Statements

	Total Gains (Losses) Realized/Unrealized
(In thousands)	Balance January 1, 2011		Included in earnings			Included in Other Comprehensive Income			Transfers in and/or out of Level 3 and 2		Balance December 31, 2011
Available for sale securities	$	552	$	(189	)	$	(28	)	$	-	$	335

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 December 31, 2012
(In thousands)	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		-

	Carrying Value at December 31, 2011
(In thousands)	Balance as of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Unobservable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Assets:
Impaired loans, net	$	1,855	$	-	$	-	$	1,855
Other real estate owned, net		1,776		-		-		1,776

Quantitative Information about level 3 fair value measurements

The following table displays quantitative information about Level 3 Fair Value Measurements for December 31, 2012:

	Quantitative Information about Level 3 Fair Value Measurements
(In thousands)	Fair Value		Valuation Technique(s)	Unobservable Input	Weighted Average
Corporate securities available for sale	$	325	Discounted cash flow	Discount based on prepayment rate, probability of default and loss severity		42	%
Impaired Loans:
Commercial and industrial loans		262	Appraised values	*		20	%
Commercial real estate loans		-	Appraised values	*		-
Construction and land loans		46	Appraised values	*		55	%
Residential real estate loans		69	Appraised values	*		10	%
Total Impaired Loans		377
Total	$	702

Estimated fair values of the financial instruments

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

	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	$	508,638	$	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

	Fair Value Measurements at December 31, 2011
(In thousands)	Balance as of December 31, 2011		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, 2011
Assets
Cash and short-term investments	$	72,161	$	69,660	$	2,547	$	-	$	72,207
Securities available for sale		47,649		349		46,965		335		47,649
Restricted investments		2,543		-		2,543		-		2,543
Net Loans		452,086		-		461,564		1,885		463,449
Accrued interest receivable		1,534		-		1,534		-		1,534
Interest rate swaps		179		-		179		-		179
BOLI		11,621		-		11,621		-		11,621
Total Financial Assets	$	587,773	$	70,009	$	526,953	$	2,220	$	599,182

Liabilities
Deposits	$	530,569	$	-	$	535,567	$	-	$	535,567
Borrowings		25,000		-		26,023		-		26,023
Company obligated mandatorily
redeemable capital securities		4,124		-		4,982		-		4,982
Accrued interest payable		401		-		401		-		401
Interest rate swaps		452		-		452		-		452
Total Financial Liabilities	$	560,546	$	-	$	567,425	$	-	$	567,425

- 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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