Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Estimated Fair Value of Financial Instruments

The estimated carrying and fair values of the Company’s financial instruments are as follows (in thousands):

	September 30, 2012
	Carrying Amount		Fair Value
(In thousands)			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	21,124	$	21,124	$	—	$	—	$	21,124
Interest-earning deposits in other banks	55,074		55,074		—		—		55,074
Federal funds sold	721		721		—		—		721
Available-for-sale investment securities	364,808		8,040		356,768		—		364,808
Loans, net	388,922		—		—		392,854		392,854
Federal Home Loan Bank stock	3,850		N/A		N/A		N/A		N/A
Accrued interest receivable	3,778		29		1,903		1,846		3,778
Financial liabilities:
Deposits	737,286		—		758,806		—		758,806
Short-term borrowings	4,000		—		4,049		—		4,049
Junior subordinated deferrable interest debentures	5,155		—		—		2,990		2,990
Accrued interest payable	157		—		130		27		157

	December 31, 2011
(In thousands)	Carrying Amount		Fair Value
Financial assets:
Cash and due from banks	$	19,409	$	19,409
Interest-earning deposits in other banks	24,467		24,467
Federal funds sold	928		928
Available-for-sale investment securities	328,413		328,413
Loans, net	415,999		418,084
Federal Home Loan Bank stock	2,893		N/A
Accrued interest receivable	3,953		3,953
Financial liabilities:
Deposits	712,986		719,673
Long-term debt	4,000		4,146
Junior subordinated deferrable interest debentures	5,155		2,706
Accrued interest payable	230		230

Fair Value of Assets on a Recurring Basis

The Company is required or permitted to record the following assets at fair value on a recurring basis under other accounting pronouncements as of September 30, 2012 (in thousands).

Description	Fair Value		Level 1		Level 2		Level 3
Available-for-sale securities
Debt Securities:
U.S. Government agencies	$	2,318	$	—	$	2,318	$	—
Obligations of states and political subdivisions	137,637		—		137,637		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	210,135		—		210,135		—
Private label residential mortgage backed securities	6,678		—		6,678		—
Other equity securities	8,040		8,040		—		—
Total assets measured at fair value on a recurring basis	$	364,808	$	8,040	$	356,768	$	—

The Company is required or permitted to record the following assets at fair value on a recurring basis under other accounting pronouncements (in thousands).

Description	Fair Value		Level 1		Level 2		Level 3
Available-for-sale securities
Debt Securities:
U.S. Government agencies	$	149	$	—	$	149	$	—
Obligations of states and political subdivisions	108,431		—		108,431		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	204,544		—		204,544		—
Private label residential mortgage backed securities	7,398		—		7,398		—
Other equity securities	7,891		7,891		—		—
Total assets measured at fair value on a recurring basis	$	328,413	$	7,891	$	320,522	$	—

Fair Value of Assets on a Non-recurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis.  These include assets and liabilities that are measured at the lower of cost or fair value that were recognized at fair value which was below cost at December 31, 2011 (in thousands).

Description	Fair Value		Level 1		Level 2		Level 3
Impaired loans:
Commercial:
Commercial and industrial	$	2,312	$	—	$	—	$	2,312
Total commercial	2,312		—		—		2,312
Real estate:
Owner occupied	873		—		—		873
Real estate-construction and other land loans	8,782		—		—		8,782
Commercial real estate	1,487		—		—		1,487
Total real estate	11,142		—		—		11,142
Consumer:
Equity loans and lines of credit	2,003		—		—		2,003
Consumer and installment	51		—		—		51
Total consumer	2,054		—		—		2,054
Total impaired loans	15,508		—		—		15,508
Total assets measured at fair value on a non-recurring basis	$	15,508	$	—	$	—	$	15,508

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a non-recurring basis.  These include assets and liabilities that are measured at the lower of cost or fair value that were recognized at fair value which was below cost.  There were no assets or liabilities measured at fair value on a non-recurring basis at September 30, 2012. The impaired loans measured at fair value at December 31, 2011 are no longer recorded at fair value due to the borrower payments reducing the carrying value of certain of these loans to less than fair value and due to other impaired loans now being evaluated under the discounted cash flow method versus the collateral method. The discounted cash flow method as prescribed by topic 310 is not a fair value measurement since the discount rate utilized is the loan's effective interest rate which is not a market rate. The discounted cash flow approach was determined to be the most appropriate impairment method to use for these impaired loans based on their significant payment history and the global cash flow analysis performed on each borrower.

Quantitative Information for Level 3 Fair Value Measurements