Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Information about the Company's assets and liabilities measured at fair value on a recurring basis

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

			Fair Value Measurements At September 30, 2012, Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	46,971	$	10,627	$	36,344	$	-
Obligations of States and Political Subdivisions		5,704		-		-		5,704
Mortgage Backed Securities		389,812		-		389,812		-
Corporate Bonds		14,864		-		14,864		-
Other		5,826		5,516		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	463,177	$	16,143	$	441,330	$	5,704

			Fair Value Measurements At December 31, 2011, Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	82,595	$	21,109	$	61,486	$	-
Obligations of States and Political Subdivisions		5,782		-		-		5,782
Mortgage Backed Securities		391,033		-		391,033		-
Other		410		-		410		-
Total Assets Measured at Fair Value On a Recurring Basis	$	479,820	$	21,109	$	452,929	$	5,782

			Fair Value Measurements At September 30, 2011, Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	162,750	$	-	$	162,750	$	-
Obligations of States and Political Subdivisions		5,813		-		5,813		-
Mortgage Backed Securities		251,886		-		251,886		-
Other		360		-		360		-
Total Assets Measured at Fair Value On a Recurring Basis	$	420,809	$	-	$	420,809	$	-

Changes in level 3 assets measured at fair value on a recurring basis

The following table presents changes in level 3 assets measured at fair value on a recurring basis.

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2012			2011		2012			2011
Balance at Beginning of Period	$	5,724		$	-	$	5,782		$	-
Total Realized and Unrealized Gains/(Losses) Included in Income		-			-		-			-
Total Unrealized Gains/(Losses) Included in Other Comprehensive Income		-			-		-			-
Purchase of Securities		-			-		-			-
Sales, Maturities, and Calls of Securities		(20	)		-		(78	)		-
Net Transfers In/(Out) of Level 3		-			-		-			-
Balance at End of Period	$	5,704		$	-	$	5,704		$	-

Information about the Company's assets and liabilities measured at fair value on a non-recurring basis

The following tables present information about the Company's other real estate and impaired loans, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans are carried at fair value. Impaired loans are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At Sept 30, 2012, Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Impaired Loans
Residential 1st Mortgage	$	200	$	-	$	-	$	200
Home Equity Lines and Loans		466		-		-		466
Total Impaired Loans		666		-		-		666
Other Real Estate
Real Estate Construction		2,553		-		-		2,553
Total Other Real Estate		2,553		-		-		2,553
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	3,219	$	-	$	-	$	3,219

The fair value of ORE was $2.6 million, net of a $4.1 million valuation allowance. ORE has been adjusted to estimated fair value, less estimated selling costs. At the time of foreclosure, foreclosed assets are recorded at the lower of the carrying amount of the loan or the estimated fair value less estimated selling costs. Any write-downs based on the asset's fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, management periodically obtains updated valuations of the foreclosed assets and, if additional impairments have occurred, the impairment is recorded in non-interest expense on the Consolidated Statements of Income.

			Fair Value Measurements At December 31, 2011, Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Impaired Loans
Commercial Real Estate	$	2,328	$	-	$	-	$	2,328
Residential 1st Mortgage		89		-		-		89
Home Equity Lines and Loans		166		-		-		166
Agricultural		409		-		-		409
Commercial		50		-		-		50
Total Impaired Loans		3,042		-		-		3,042
Other Real Estate								-
Real Estate Construction		2,553		-		-		2,553
Residential 1st Mortgage		371		-		-		371
Total Other Real Estate		2,924		-		-		2,924
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,966	$	-	$	-	$	5,966

The fair value of impaired loans with a specific reserve or a partial charge-off was $3.0 million, net of an allowance for loan losses of $1.6 million. The fair value of ORE was $2.9 million, net of a $4.1 million valuation allowance.

			Fair Value Measurements At Sept 30, 2011, Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Other Observable Inputs		Significant Unobservable Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Impaired Loans
Commercial Real Estate	$	2,329	$	-	$	2,329	$	-
Agricultural Real Estate		1,367		-		1,367		-
Residential 1st Mortgage		926		-		926		-
Home Equity Lines and Loans		33		-		33		-
Agricultural		704		-		-		704
Commercial		64		-		-		64
Total Impaired Loans		5,423		-		4,655		768
Other Real Estate								-
Commercial Real Estate		137		-		137		-
Real Estate Construction		3,045		-		3,045		-
Residential 1st Mortgage		331		-		331		-
Total Other Real Estate		3,513		-		3,513		-
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	8,936	$	-	$	8,168	$	768

- 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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