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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

The following table presents estimated fair values of the Company's financial instruments as of September 30, 2012 and December 31, 2011, whether or not recognized or recorded at fair value is summarized as follows:

	September 30, 2012				December 31, 2011
Description	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:	(in thousands)
Cash and cash equivalents	$	15,655	$	15,655	$	17,031	$	17,031
Available for sale securities		20,891		20,891		2,992		2,992
FHLB Stock		2,422		2,422		2,444		2,444
Loans held for sale		2,089		2,089		1,807		1,807
Loans, net		304,665		309,636		295,641		297,358
Accrued interest receivable		1,249		1,249		1,234		1,234
Bank owned life insurance, net		7,160		7,160		6,981		6,981
Mortgage servicing rights		2,314		2,314		2,437		2,437

Financial liabilities:
Non-maturity deposits		176,569		176,569		170,029		170,029
Time deposits		136,475		137,918		129,968		130,672
Borrowings		8,024		7,827		8,506		8,451
Accrued interest payable		78		78		84		84
Advance payments from borrowers for taxes and insurance		542		542		291		291

Fair value of assets and liabilities

The following table presents information about the level in the fair value hierarchy for the Company's financial assets and liabilities that are not measured at fair value as of September 30, 2012:

	Fair Value at September 30, 2012
Description	Total		Level 1		Level 2		Level 3
Financial assets:	(in thousands)
Cash and cash equivalents	$	15,655	$	15,655	$	-	$	-
FHLB Stock		2,422		-		-		2,422
Loans held for sale		2,089		-		2,089		-
Loans, net		309,636		-		-		309,636
Accrued interest receivable		1,249		1,249		-		-
Bank owned life insurance, net		7,160		7,160		-		-

Financial liabilities:
Non-maturity deposits		176,569	$	-	$	-	$	176,569
Time deposits		137,918		-		137,918		-
Accrued interest payable		78		78		-		-
Advance payments from borrowers for taxes and insurance		542		-		-		542

Fair value of assets measured on recurring basis

The following table presents information about the Company's assets measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	Fair Value at September 30, 2012
Description	Total	Level 1	Level 2	Level 3
	(in thousands)
Agency Mortgage-backed Securities	$18,063	$-	$18,063	$-
Non-agency Mortgage-backed Securities	2,828	-	2,828	-
Mortgage Servicing Rights	2,314	-	-	2,314

	Fair Value at December 31, 2011
Description	Total	Level 1	Level 2	Level 3
	(in thousands)
Agency Mortgage-backed Securities	$59	$-	$59	$-
Non-agency Mortgage-backed Securities	2,933	-	2,933	-
Mortgage Servicing Rights	2,437	-	-	2,437

Fair value of assets, quantitative information

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at September 30, 2012:

Financial Instrument	Valuation Technique	Unobservable Input(s)	Weighted Average
Mortgage Servicing Rights	Discounted cash flow	Prepayment Speed Assumption		372.0	%
		Discount rate		10.0	%

Fair value of assets measured on nonrecurring basis

The following table presents information about the Company's assets measured at fair value on a nonrecurring basis:

	Fair Value at September 30, 2012
	Total	Level 1	Level 2	Level 3
Description	(in thousands)
OREO and repossessed assets	$2,548	$-	$-	$2,548
Impaired loans	$13,043	-	-	$13,043

	Fair Value at December 31, 2011
	Total	Level 1	Level 2	Level 3
Description	(in thousands)
OREO and repossessed assets	$2,821	$-	$-	$2,821
Impaired loans	13,619	-	-	13,619

Losses relating to fair value adjustments

The following table presents the total losses resulting from fair value adjustments:

	Total Losses Three Months Ended September 30,				Total Losses Nine Months Ended September 30,
	2012		2011		2012		2011
Description
OREO and repossessed assets	$	145	$	274	$	314	$	958
Impaired loans		1,197		393		4,048		1,719

Fair value, unobservable input reconciliation

The following table provides a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,
	2012			2011

Beginning balance, at fair value	$	2,558		$	3,273
Servicing rights that result from transfers of financial assets		226			113
Changes in Fair Value(1)		(259	)		(491	)
Other(2)		(211	)		(212	)
Ending balance, at fair value	$	2,314		$	2,683

	Nine Months Ended September 30,
	2012			2011

Beginning balance, at fair value	$	2,437		$	3,200
Servicing rights that result from transfers of financial assets		554			329
Changes in Fair Value(1)		97			(235	)
Other(2)		(774	)		(611	)
Ending balance, at fair value	$	2,314		$	2,683

(1) Represents changes due to principal collections over time

(2) Primarily relates to changes in prepayment speeds, duration and discount rate

- 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 assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-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 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-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 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-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 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-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 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-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)

-Number 107

-Paragraph 10

-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 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

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