FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Summary of Assets Measured at Fair Value on a Recurring Basis

The following tables present the assets reported on the consolidated balance sheet at their fair value on a recurring basis as of December 31, 2012 and 2011 (in thousands) by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

2012	Level 1		Level II			Level III		Total
Fair value measurements on a recurring basis:
Securities available for sale:
U.S. agency securities	$	-	$	127,234		$	-	$	127,234
U.S. treasuries		-		4,947			-		4,947
Obligations of state and political subdivisions		-		100,875			-		100,875
Corporate obligations		-		22,109			-		22,109
Mortgage-backed securities in government sponsored entities		-		53,673			-		53,673
Equity securities in financial institutions		1,414		-			-		1,414
Trust Preferred Interest Rate Swap		-		(200	)		-		(200	)

2011	Level 1		Level II			Level III		Total
Fair value measurements on a recurring basis:
Securities available for sale:
U.S. Agency securities	$	-	$	168,600		$	-	$	168,600
Obligations of state and political subdivisions		-		101,547			-		101,547
Corporate obligations		-		8,460			-		8,460
Mortgage-backed securities in government sponsored entities		-		38,974			-		38,974
Equity securities in financial institutions		1,242		-			-		1,242
Trust Preferred Interest Rate Swap		-		(348	)		-		(348	)

Summary of Assets Measured at Fair Value on Non-recurring Basis

Assets measured at fair value on a nonrecurring basis as of December 31, 2012 and 2011 (in thousands) are included in the table below:

	December 31, 2012
	Level 1		Level II		Level III		Total

Impaired Loans	$	-	$	-	$	9,836	$	9,836
Other real estate owned		-		-		616		616

	December 31, 2011
	Level 1		Level II		Level III		Total

Impaired Loans	$	-	$	-	$	8,387	$	8,387
Other real estate owned		-		-		860		860

Significant Unobservable Inputs Used in Fair Value Measurement Process

The following table provides a listing of the significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques.

	Fair Value at December 31, 2012		Valuation Technique(s)	Unobservable input	Range
Impaired Loans	$	4,882	Discounted Cash Flows	Probability of Default		0	%
				Change in interest rates		0-7	%

		4,954	Appraised Collateral Values	Discount for time since appraisal		0-20	%
				Selling costs		0%-10	%
				Holding period	0 - 18 months

Other real estate owned		616	Appraised Collateral Values	Discount for time since appraisal		0-20	%
				Selling costs		6%-10	%
				Holding period	0 - 18 months

Fair Value of Financial Instruments

The fair values of the Company's financial instruments are as follows (in thousands):

	Carrying
December 31, 2012	Amount		Fair Value		Level I		Level II		Level III		Total
Financial assets:
Cash and due from banks	$	26,333	$	26,333	$	26,333	$	-	$	-	$	26,333
Available-for-sale securities		310,252		310,252		1,414		308,838		-		310,252
Loans held for sale		1,458		1,458		1,458						1,458
Net loans		495,679		522,502		-		-		522,502		522,502
Bank owned life insurance		14,177		14,177		14,177		-		-		14,177
Regulatory stock		3,565		3,565		3,565		-		-		3,565
Accrued interest receivable		3,816		3,816		3,816		-		-		3,816
Financial liabilities:
Deposits	$	737,096	$	742,422	$	462,557	$	-	$	279,865	$	742,422
Borrowed funds		46,126		43,403		-		43,403		-		43,403
Trust preferred interest rate swap		200		200		-		200		-		200
Accrued interest payable		1,143		1,143		1,143		-		-		1,143

	Carrying
December 31, 2011	Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	30,432	$	30,432
Available-for-sale securities		318,823		318,823
Net loans		481,022		527,724
Bank owned life insurance		13,669		13,669
Regulatory stock		3,301		3,301
Accrued interest receivable		3,621		3,621
Financial liabilities:
Deposits	$	733,993	$	740,839
Borrowed funds		53,882		51,437
Trust preferred interest rate swap		348		348
Accrued interest payable		1,512		1,512

- 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 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.

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

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-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

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-Name Statement of Financial Accounting Standard (FAS)

-Number 159

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-Publisher FASB

-Name Accounting Standards Codification

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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

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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.

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-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.

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-Topic 825

-SubTopic 10

-Section 50

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