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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Schedule of balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy

	June 30,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	2016		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets:
Available-for-sale securities
Obligations of U.S. Government agencies	$	103,042		-		103,042		-
Obligations of states and political subdivisions		134,048		-		134,048		-
Mortgage-backed securities
U.S. GSE’s MBS - residential		130,009		-		130,009		-
U.S. GSE’s MBS - commercial		29,382		-		29,382		-
U.S. GSE’s CMO		180,560		-		180,560		-
Corporate bonds		119,216		-		119,216		-
Total available-for-sale securities	$	696,257		-		696,257		-

Loans held for sale		13,737		-		13,737		-

Mortgage banking derivatives		179		-		179		-

	$	710,173		-		710,173		-

Liabilities:
Interest rate swap derivatives		2,973		-		2,973		-

	$	2,973		-		2,973		-

	December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	2015		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets:
Available-for-sale securities
Obligations of U.S. Government agencies	$	145,976		-		145,976		-
Obligations of states and political subdivisions		140,060		-		140,060		-
Mortgage-backed securities
U.S. GSE’s MBS - residential		121,508		-		121,508		-
U.S. GSE’s MBS - commercial		21,669		-		21,669		-
U.S. GSE’s CMO		145,577		-		145,577		-
Corporate bonds		116,773		-		116,773		-
Total available-for-sale securities	$	691,563		-		691,563		-

Loans held for sale		18,647		-		18,647		-

Mortgage banking derivatives		24		-		24		-

	$	710,234		-		710,234		-

Liabilities:
Interest rate swap derivatives		2,013		-		2,013		-

	$	2,013		-		2,013		-

Schedule of reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

	Total			Corporate bonds
	(Dollars in thousands)

Beginning balance, January 1, 2015	$	112		$	112
Total gains or losses (realized/unrealized)
Included in earnings
Gain (loss) on sales		-			-
Other-than-temporary impairment		-			-
Included in other comprehensive income		26			26
Purchases, sales, issuances and settlements
Purchases		-			-
Sales, Calls		-			-
Issuances		-			-
Settlements		-			-
Principal repayments		-			-
Transfers into Level 3		-			-
Transfers out of Level 3		(138	)		(138	)

Ending balance, June 30, 2015	$	-		$	-

Schedule of assets and liabilities measured on a non-recurring basis

	June 30,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	2016		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets:
Impaired loans (1)	$	4,058		-		-		4,058


Other real estate owned		360		-		-		360

	$	4,418		-		-		4,418

(1) Includes loans directly charged down to fair value.

	December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	2015		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets:
Impaired loans (1)	$	10,171		-		-		10,171


Other real estate owned		360		-		-		360

	$	10,531		-		-		10,531

(1) Includes loans directly charged down to fair value.

Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis

June 30,

Valuation

Unobservable

Range

2016

Techniques

Inputs

(Weighted Avg)

(Dollars in thousands)

Impaired loans

4,058

sales comparison

adjustment for

0.00% - 146.92% (19.32%)

differences between

the comparable sales

income approach

capitalization rate

8.25% - 9.75% (9.35%)

Other real estate owned

360

sales comparison

adjustment for

11.00% - 25.00% (18.00%)

differences between

the comparable sales

Dec. 31,

Valuation

Unobservable

Range

2015

Techniques

Inputs

(Weighted Avg)

(Dollars in thousands)

Impaired loans

10,171

sales comparison

adjustment for

0.00% - 70.99% (15.71%)

differences between

the comparable sales

income approach

capitalization rate

8.25% - 10.82% (9.69%)

income approach

discount rate

4.75

liquidation value

Other real estate owned

360

sales comparison

adjustment for

11.00% - 25.00% (18.00%)

differences between

the comparable sales

Schedule of aggregate fair value, unpaid principal balance and gain or loss

	June 30, 2016		Dec. 31, 2015
	(Dollars in thousands)

Aggregate fair value	$	13,737		18,647
Unpaid principal balance		13,299		18,345
Gain		438		303

Schedule of changes in gains and losses recorded in earnings

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2016			2015		2016		2015
	(Dollars in thousands)					(Dollars in thousands)

Change in fair value	$	(18	)		85		135		94

Schedule of carrying amounts and estimated fair values of the financial instruments

	June 30, 2016
	Carrying		Fair Value Measurements
	amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	90,935		90,935		90,935		-		-
Loans, net		1,001,588		1,004,220		-		-		1,004,220
Restricted equity securities		5,478		N/A
Financial liabilities:
Deposits with stated maturities		325,611		326,431		-		326,431		-
Deposits without stated maturities		1,258,842		1,258,842		1,258,842		-		-
Securities sold under repurchase agreements		631		631		631		-		-
Advances from FHLB		90,000		91,818		-		91,818		-
Subordinated debentures		20,000		15,167		-		-		15,167

	December 31, 2015
	Carrying		Fair Value Measurements
	amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	42,917		42,917		42,917		-		-
Loans, net		977,611		981,011		-		-		981,011
Restricted equity securities		5,169		N/A
Financial liabilities:
Deposits with stated maturities		333,345		334,920		-		334,920		-
Deposits without stated maturities		1,195,735		1,195,735		1,195,735		-		-
Securities sold under repurchase agreements		15,684		15,691		15,691		-		-
Advances from FHLB		85,000		86,854		-		86,854		-
Subordinated debentures		20,000		15,065		-		-		15,065

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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