FAIR VALUE MEASUREMENT

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE H - FAIR VALUE MEASUREMENT

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. For example, investment securities available for sale are recorded at fair value on a recurring basis. Additionally, we may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, impaired loans and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities. Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market exchange prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include marketable equity securities traded on an active exchange, such as the New York Stock Exchange. Level 2 securities include mortgage-backed securities and collateralized mortgage obligations, both issued by government sponsored entities, private label mortgage-backed securities, municipal bonds and corporate debt securities.

Derivatives. Derivative instruments include interest rate swaps and are valued on a recurring basis using models developed by third-party providers. This type of derivative is classified as Level 2 within the hierarchy.

Loans. Loans are not recorded at fair value on a recurring basis. However, certain loans are determined to be impaired, and those loans are charged down to estimated fair value. The fair value of impaired loans that are collateral dependent is based on collateral value. For impaired loans that are not collateral dependent, estimated value is based on either an observable market price, if available, or the present value of expected future cash flows. Those impaired loans not requiring a charge-off represent loans for which the estimated fair value exceeds the recorded investments in such loans. When the fair value of an impaired loan is based on an observable market price or a current appraised value with no adjustments, we record the impaired loan as nonrecurring Level 2. When an appraised value is not available, or we determine the fair value of the collateral is further impaired below the appraised value, and there is no observable market price, we classify the impaired loan as nonrecurring Level 3.

Interest Rate Lock Commitments. The fair value of interest rate lock commitments is based on servicing rate premium, origination income net of origination costs, fall out rates and changes in loan pricing between the commitment date and period end, typically month end. The Company classifies interest rate lock commitments as Level 3. There have been no changes in valuation techniques for the six months ended June 30, 2012.

	Interest Rate Lock Commitments
	Level 3
	Successor			Predecessor
	Fair Value			Fair Value
Balance, December 31, 2011 and 2010	$	211,622		$	53,185
(Gains) losses included in earnings		(799,263	)		(257,713	)
Transfers in - applications		65,992,688			21,788,651
Transfers out – closed and cancelled		(64,802,301	)		(21,492,407	)
Balance, June 30, 2012 and 2011	$	602,746		$	91,716

Gains on interest rate lock commitments are included in mortgage banking income within non-interest income on the consolidated statements of operations.

Foreclosed Assets. Foreclosed assets are adjusted to fair value upon transfer of loans to foreclosed assets. Subsequently, foreclosed assets are carried at lower of cost or net realizable value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Given the lack of observable market prices for identical properties, the Company classifies foreclosed assets as nonrecurring Level 3.

The following tables summarize information about assets and liabilities measured at fair value at June 30, 2012 and December 31, 2011:

				Fair Value Measurements at
				June 30, 2012, Using
				Quoted Prices		Significant
				in Active		Other			Significant
	Assets/(Liabilities)			Markets for		Observable			Unobservable
	Measured at			Identical Assets		Inputs			Inputs
Description	Fair Value			(Level 1)		(Level 2)			(Level 3)
Securities available for sale:
Residential mortgage-backed securities – GSE	$	40,011,636		$	-	$	40,011,636		$	-
Commercial mortgage-backed securities – private		6,825,181			-		6,825,181			-
Collateralized mortgage obligations – GSE		50,457,746			-		50,457,746			-
Municipals – non-taxable		15,940,346			-		15,940,346			-
Municipals – taxable		1,647,508			-		1,647,508			-
Corporate bonds		35,828,703			-		35,828,703			-
Marketable equity securities		718,475			718,475		-			-
Impaired loans		1,161,518			-		-			1,161,518
Foreclosed assets		4,743,268			-		-			4,743,268
Interest rate lock commitments		602,746			-		-			602,746
Derivative liabilities		(191,866	)		-		(191,866	)		-

				Fair Value Measurements at
				December 31, 2011, Using
				Quoted Prices		Significant
				in Active		Other			Significant
	Assets/(Liabilities)			Markets for		Observable			Unobservable
	Measured at			Identical Assets		Inputs			Inputs
Description	Fair Value			(Level 1)		(Level 2)			(Level 3)
Securities available for sale:
Residential mortgage-backed securities - GSE	$	19,364,344		$	-	$	19,364,344		$	-
Collateralized mortgage obligations		82,094,869			-		82,094,869			-
Municipals – non-taxable		13,513,891			-		13,513,891			-
Corporate bonds		27,966,102					27,966,102
Marketable equity securities		564,642			564,642		-			-
Foreclosed assets		9,422,056			-		-			9,422,056
Interest rate lock commitments		211,622			-		-			211,622
Derivative liabilities		(330,114	)		-		(330,114	)		-

Quantitative Information about Level 3 Fair Value Measurements

	Fair Value at
	June 30, 2012		Valuation Technique	Unobservable Input	Range
Recurring measurements:
Interest Rate Lock Commitments	$	602,746	Pricing model	Pull through rates	80-85%
Impaired loans		1,161,518	Discounted appraisals	Collateral discounts	15-50%
Nonrecurring measurements:
Foreclosed assets		4,743,268	Discounted appraisals	Collateral discounts	15-50%

The significant unobservable input used in the fair value measurement of the Company’s interest rate lock commitments is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. Generally, the fair value of an interest rate lock commitment is positive (negative) if the prevailing interest rate is lower (higher) than the interest rate lock commitment rate. Therefore, an increase in the pull through rates (i.e., higher percentage of loans estimated to close) will result in the fair value of the interest rate lock commitments increasing in a gain position, or decreasing in a loss position. The pull through ratio is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock. The pull through rate is computed based on historical internal data and the ratio is periodically reviewed by the Company’s mortgage banking division.

Due to the nature of the Company’s business, a significant portion of its assets and liabilities consist of financial instruments. Accordingly, the estimated fair values of these financial instruments are disclosed. Quoted market prices, if available, are utilized as an estimate of the fair value of financial instruments. The fair value of such instruments has been derived based on assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net amounts ultimately collected could be materially different from the estimates presented below. In addition, these estimates are only indicative of the values of individual financial instruments and should not be considered an indication of the fair value of the Company taken as a whole.

Cash and Cash Equivalents. The carrying amounts for cash and cash equivalents are equal to fair value.

Investment Securities Available for Sale. See discussion related to fair value estimates for securities available for sale in the fair value hierarchy section above. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Mortgage Loans Held For Sale. The fair value of mortgage loans held for sale is based on commitments on hand from investors within the secondary market for loans with similar characteristics. The changes in fair value of the assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loan for sale. As such, the Company classifies loans measured at fair value on a nonrecurring basis as a Level 2 asset. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Loans Held For Investment. The Company does not record loans held-for-investment at fair value on a recurring basis. However, when a loan is considered impaired an allowance for loan losses is established. The fair value of impaired loans is estimated using one of several methods based on portfolio type, acquired and non-acquired. Upon analyzing estimated credit losses in the acquired portfolio, we forecasted expected cash flows over the remaining life of each loan and discounted those expected cash flows to present value at current market interest rates for similar loans considering loan collateral type and credit quality. The fair value of any impaired non-acquired loans would be valued using either collateral value, market value of similar debt, enterprise value, liquidation value or discounted cash flows. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Federal Home Loan Bank Stock. Given the option to redeem this stock at par through the FHLB, the carrying value of FHLB stock approximates fair value. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Deposits. The fair value of demand deposits, savings, money market and NOW accounts represents the amount payable on demand. The fair value of fixed-maturity certificates of deposit and individual retirement accounts is estimated using the present value of the projected cash flows using interest rates currently offered for instruments of similar remaining maturities. The carrying values of short-term borrowings, including overnight, federal funds purchased and FHLB advances, approximates the fair values due to the short maturities of those instruments. There have been no changes in valuation techniques for the quarter ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Short-term Borrowings and Long-term Debt. The fair value of short-term borrowings and long-term debt are based upon discounted expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements could be obtained. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Accrued Interest Receivable and Accrued Interest Payable. The carrying amounts of accrued interest receivable and payable approximate fair value due to the short maturities of these instruments. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

Derivative Instruments. See discussion related to fair value estimates for derivative instruments in the fair value hierarchy section above. There have been no changes in valuation techniques for the six months ended June 30, 2012. Valuation techniques are consistent with techniques used in prior periods.

The following tables summarize the carrying amounts and estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, at June 30, 2012 and December 31, 2011:

	June 30, 2012
	Carrying		Estimated
	amount		fair value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	55,613,851	$	55,613,851	$	55,613,851	$	-	$	-
Investment securities		151,429,595		151,429,595		718,475		150,711,120		-
Federal Home Loan Bank stock		2,931,200		2,931,200		-		2,931,200		-
Mortgage loans held for sale		3,226,180		3,226,180		-		3,226,180		-
Loans, net		506,171,299		508,399,299		-		-		508,399,299
Accrued interest receivable		5,290,481		5,290,481		-		5,290,481		-
Financial liabilities:
Deposits		659,508,174		662,064,174		-		662,064,174		-
Long-term debt		12,288,258		12,410,257		-		-		12,410,257
Interest rate swaps		191,866		191,866		-		191,866		-
Accrued interest payable		871,398		871,398		-		871,398		-

	December 31, 2011
	Carrying		Estimated
	amount		fair value
Financial assets:
Cash and cash equivalents	$	25,361,937	$	25,361,937
Investment securities		143,503,848		143,503,848
Federal Home Loan Bank stock		8,669,300		8,669,300
Mortgage loans held for sale		3,841,412		3,841,412
Loans, net		552,650,060		552,650,060
Accrued interest receivable		2,801,634		2,801,634
Financial liabilities:
Deposits		674,418,586		674,418,586
Long-term debt		12,215,901		12,215,901
Interest rate swaps		330,114		330,114
Accrued interest payable		779,784		779,784