Fair Value Measurement:

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 7 Fair Value Measurement:

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Current accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

· Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date

· Level 2 – Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

· Level 3 –Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Securities: The fair values of securities available for sale are determined by obtaining significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. (Level 2)

Collateral-Dependent Impaired Loans:   The Bank does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect (1) partial write-downs, through charge-offs or specific reserve allowances, that are based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for collateral-dependent impaired loans are obtained from real estate brokers or other third-party consultants (Level 3).

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

The following table provides the hierarchy and fair value for each major category of assets and liabilities measured at fair value at June 30, 2011 and December 31, 2010.

	Fair Value Measurements as of June 30, 2011 using
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Assets and liabilities measured at fair value on a recurring basis
Assets:
Securities Available for Sale	$	-	$	23,918	$	-	$	23,918
Assets measured at fair value on a non-recurring basis
Collateral-Dependent Impaired
Loans, Net of Specific Reserves	$	-	$	-	$	15,269	$	15,269
Other Real Estate Owned	$	-	$	-	$	4,486	$	4,486
	Fair Value Measurements as of December 31, 2010 using
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Securities Available for Sale	$	-	$	32,542	$	-	$	32,542
Assets measured at fair value on a non-recurring basis
Collateral-Dependent Impaired
Loans, Net of Specific Reserves	$	-	$	-	$	17,761	$	17,761
Other Real Estate Owned	$	-	$	-	$	2,123	$	2,123

Collateral-dependent impaired loans had a net carrying value of $15.3 million and $17.8 million at June 30, 2011 and December 31, 2010, respectively. There was no specific reserve associated with these loans in either period. During the quarterly review of fair value, at June 30, 2011, a partial charge off of $1.6 million on one particular loan was processed.

Other real estate owned had a net carrying amount of $4.5 million and $2.1 million at June 30, 2011 and December 31, 2010, respectively. For the quarter ended June 30, 2011, there were no write downs on these properties as the result of the quarterly review of fair value.

Charge offs on collateral dependent loans and OREO are the result of periodic but no less than quarterly evaluation of fair value.