ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Abstract]

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 13 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

     The estimated fair values of the Company's financial instruments were as follows at June 30, 2011 and December 31, 2010 (amounts in thousands):
 

	June 30, 2011          Carrying             Fair		December 31, 2010       Carrying            Fair
FINANCIAL ASSETS     Cash and due from banks and Federal Reserve        balance in excess of requirement     Federal funds sold     Investment securities available for sale     Investment securities held to maturity     Other investments     Loans (net) FINANCIAL LIABILITIES     Deposits     Securities sold under repurchase agreements     U.S. Treasury demand notes	Amount    $  65,869   24,000   262,391   15,029   2,302   500,743   736,846   82,626   1,444	Value    $  65,869   24,000   262,391   15,389   2,302   505,512   735,864   82,626   1,444	Amount    $  32,517   14,000   275,381   20,678   2,729   522,559   718,140   99,153   2,324	Value    $  32,517   14,000   275,381   20,784   2,729   527,787   716,733   99,153   2,324
	Notional		Notional
	Amount		Amount
OFF BALANCE SHEET INSTRUMENTS
Commitments to extend credit	$  37,052		$  38,343
Standby letters of credit	1,349		1,577

     Accounting standards require disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available for sale investment securities) or on a nonrecurring basis (for example, impaired loans).

     The accounting standard defines fair value as 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.  It also 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 standard describes three levels of inputs that may be used to measure fair value:

Level 1

Quoted market prices in active markets for identical assets or liabilities.  Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasuries, and money market funds.

Level 2

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 for substantially the full term of the assets or liabilities.  Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities, and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  This category generally includes certain derivative contracts.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.  For example, this category generally includes impaired loans, other real estate owned, certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly-structured or long-term derivative contracts.

     Following is a description of valuation methodologies used by the Company for assets and liabilities recorded on the balance sheet at fair value on a recurring or non-recurring basis:

Investment Securities Available for Sale

     Measurement is on a recurring basis based upon quoted market prices, if available.  If quoted market 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 prepayment assumptions, projected credit losses, and liquidity.  Level 1 securities include those traded on an active exchange or by dealers or brokers in active over-the-counter markets.  Level 2 securities include securities issued by government sponsored enterprises, municipal securities, and mortgage-backed securities issued by government sponsored enterprises. Generally these fair values are priced from established pricing models.

Impaired Loans

     Loans that are considered impaired are recorded at fair value on a non-recurring basis.  Once a loan is considered impaired, the fair value is measured using one of several methods, including collateral liquidation value, market value of similar debt and discounted cash flows.  Those impaired loans not requiring a specific charge against the allowance represent loans for which the fair value of the expected repayments or collateral meet or exceed the recorded investment in the loan.  At June 30, 2011, substantially all of the total impaired loans were evaluated based on the fair value of the underlying collateral.  When the Company records the fair value based upon a current appraisal, the fair value measurement is considered a non-recurring Level 3 measurement. 

Other Real Estate Owned (OREO)

     Other real estate owned is adjusted to fair value upon transfer of the loans to other real estate owned by foreclosure or deed-in-lieu of foreclosure.  Subsequently, other real estate owned is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Bank records the other real estate owned as nonrecurring Level 3 measurement. 

     Assets and liabilities measured at fair value on a recurring basis for June 30, 2011 and December 31, 2010 are presented in the following table (dollars in thousands):

June 30, 2011	Quoted market price in active markets    (Level 1)	Significant other observable inputs    (Level 2)	Significant unobservable inputs    (Level 3)
Available for sale securities
Government Sponsored Enterprises	$                    -	$        223,790	$                   -
State, County, and Municipal	-	25,322	-
Mortgage backed securities	-	12,158	-
Other	-	1,121	-
Total	$                    -	$        262,391	$                   -
December 31, 2010
Available for sale securities
Government Sponsored Enterprises	$                     -	$        244,497	$                  -
State, County, and Municipal	-	19,475	-
Mortgage backed securities	-	10,308	-
Other	-	1,101	-
Total	$                    -	$        275,381	$                  -

     Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The following table presents the assets and liabilities carried on the balance sheet by caption and by level within the valuation hierarchy (as described above) as of June 30, 2011 and December 31, 2010 for which a non-recurring change in fair value was recorded during the six months and year ended June 30, 2011 and December 31, 2010.

June 30, 2011	Quoted market price in active markets    (Level 1)	Significant other observable inputs    (Level 2)	Significant unobservable inputs    (Level 3)
Other real estate owned	$                    -	$                   -	$             7,147
Impaired loans	-	-	27,117
	$                    -	$                   -	$           35,264
December 31, 2010
Other real estate owned	$                    -	$                   -	$             5,476
Impaired loans	-	-	28,365
	$                    -	$                   -	$           33,841