Fair Values (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Summary of Fair Value of Financial Instruments

The following table presents estimated fair values of the Company’s financial instruments as of September 30, 2013, and December 31, 2012, whether or not recognized or recorded at fair value in the Consolidated Balance Sheets.

	September 30, 2013				December 31, 2012
(Dollars in thousands)	Carrying Amounts		Fair Value		Carrying Amounts		Fair Value
Financial assets – Continued operations
Cash and cash equivalents	$	48,995	$	48,995	$	45,068	$	45,068
Securities available-for-sale		209,642		209,642		197,354		197,354
Securities held-to-maturity		34,814		31,902		31,483		31,493
Portfolio loans, net		581,302		590,780		653,260		664,119
Promissory note due from the Mortgage Company		2,943		2,943		3,592		3,592
Federal Home Loan Bank Stock		5,529		5,529		5,875		5,875
Financial liabilities – Continued operations
Deposits	$	725,523	$	725,790	$	701,052	$	702,817
Securities sold under agreements to repurchase		0		0		13,095		13,095
Federal Home Loan Bank advances		75,000		75,000		125,000		125,231
Subordinated debenture		15,465		8,580		15,465		8,109
Derivatives		2,844		2,844		4,085		4,085
Off balance sheet financial instruments:	Contract Amount				Contract Amount
Commitments to extend credit	$	181,569			$	144,333
Standby letters of credit	$	4,011			$	3,012
Guaranteed commitments outstanding	$	1,874			$	1,290

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents 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, as of September 30, 2013 and December 31, 2012.

(Dollars in thousands)	Fair Value at September 30, 2013
Recurring basis	Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. government and agencies	$	3,718	$	0	$	3,718	$	0
Obligations of states and political subdivisions		61,492		0		61,492		0
Corporate securities		52,552		0		52,552		0
Other investment securities (1)		91,880		0		91,880		0
Total assets measured at fair value	$	209,642	$	0	$	209,642	$	0
Derivatives – forward starting interest rate swap	$	2,844	$	0	$	2,844	$	0
Total liabilities measured at fair value	$	2,844	$	0	$	2,844	$	0
(Dollars in thousands)	Fair Value at December 31, 2012
Recurring basis	Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. government and agencies	$	2,946	$	0	$	2,946	$	0
Obligations of states and political subdivisions		58,484				57,353		1,131
Corporate securities		61,556		0		61,556		0
Other investment securities (1)		74,368		0		60,621		13,747
Total assets measured at fair value	$	197,354	$	0	$	182,476	$	14,878
Derivatives – forward starting interest rate swap	$	4,085	$	0	$	4,085	$	0
Total liabilities measured at fair value	$	4,085	$	0	$	4,085	$	0

(1) Principally represents residential mortgage backed securities issued by both governmental and nongovernmental agencies, and other asset backed securities.

Quantitative Information about Level 3 Fair Value Measurements

The following tables provide quantitative information about Level 3 fair value measurements for the year ended December 31, 2012:

December 31, 2012	Fair Value		Valuation Techniques(s)		Unobservable Input
Obligations of states and political subdivisions	$	1,131		Discounted cash flow	Risk adjusted discount rate
Other investment securities	$	13,747		Discounted cash flow	Constant prepayment rate Probability of default Loss Severity

Reconciliation of Assets and Liabilities Measured at Fair Value Significant Unobservable Inputs Recurring Basis

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis for the nine months ended September 30, 2013, and 2012.  

(Dollars in thousands)	Beginning balance		Transfers into Level 3		Change included in earnings		Purchases and issuances		Sales and Settlements			Transfers out			Ending balance		Net change in unrealized gains or (losses) relating to items held at end of period
Nine months ended September 30, 2013
Obligations of states and political subdivisions	$	1,131				0		0		0			(1,131	)	$	0		0
Mortgage backed securities	$	13,747				0		0		(749	)		(12,998	)	$	0		0
Nine months ended September 30, 2012
Derivatives – interest rate lock commitments (1)	$	179		0		52		0		(231	)		0		$	0		0
Earn out payable (1) (2)	$	600		0		0		0		(600	)		0		$	0		0

(1) Pursuant to the sale of the Mortgage Company effective June 30, 2012, the Company no longer has interest rate lock commitments, and has settled the earn out payable. See Note 3, Discontinued Operations in these Notes to Unaudited Consolidated Financial Statements for further detail on the sale of the Mortgage Company. The changes included in earnings have been reclassified and are included in income from discontinued operations in the Consolidated Statement of Operations.

(2) The earn out payable amount represents the fair value of the Company’s earn out incentive agreement with the Company’s former mortgage subsidiary. The non-controlling shareholder’s of the mortgage subsidiary earned certain cash payments from the Company, based on targeted results. The fair value of the earn out payable was estimated by using a discounted cash flow model whereby discounting the contractual cash flows expected to be paid out, under the assumption the mortgage subsidiary meets targeted results. During 2012, the remaining earn out incentive proceeds were netted with consideration received by the Company as part of the sales transaction of the mortgage subsidiary, and the liability was terminated as of July 1, 2012. The changes included in earnings have been reclassified and are included in income from discontinued operations in the Consolidated Statement of Operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents information about the Company’s assets and liabilities measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting period.

(Dollars in thousands)	Fair Value at September 30, 2013
Nonrecurring basis	Total		Level 1		Level 2		Level 3
Impaired loans	$	3,475	$	0	$	0	$	3,475
Total assets measured at fair value	$	3,475	$	0	$	0	$	3,475
(Dollars in thousands	Fair Value at December 31, 2012
Nonrecurring basis	Total		Level 1		Level 2		Level 3
Impaired loans	$	12,865	$	0	$	0	$	12,865
Other real estate owned		931		0		0		931
Total assets measured at fair value	$	13,796	$	0	$	0	$	13,796

Losses Resulting from Nonrecurring Fair Value

The following table presents the losses resulting from nonrecurring fair value adjustments for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2013		2012		2013		2012
Impaired loans	$	95	$	2,293	$	486	$	2,724
Other real estate owned		0		2		0		435
Total	$	95	$	2,295	$	486	$	3,159