FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2013

Schedule of changes in asset subject to fair value measurement by Level

	(Dollars in Thousands)
									Fair
	Level 1		Level 2			Level 3			Value
December 31, 2012
Recurring:
Investment securities available for sale (AFS)	$	-	$	100,490		$	-		$	100,490

Non-recurring:
Maryland Financial Bank stock		-		-			30			30
Impaired loans		-		-			6,084			6,084
OREO		-		478			-			478
		-		100,968			6,114			107,082

Activity:
Investment securities AFS
Purchases of investment securities		-		21,110			-			21,110
Sales, calls and maturities of investment securities		-		(26,947	)		-			(26,947	)
Amortization/accretion of premium/discount		-		(919	)		-			(919	)
Increase in market value		-		(5,437	)		-			(5,437	)
OTTI on investments		-		(15	)		-			(15	)

Loans
New impaired loans		-		-			342			342
Payments and other loan reductions		-		-			(283	)		(283	)
Change in total provision		-		-			314			314
Loans converted to OREO		-		-			(820	)		(820	)

OREO
OREO converted from loans		-		820			-			820
Sales of OREO		-		(285	)		-			(285	)

September 30, 2013
Recurring:
Investment securities AFS		-		88,282			-			88,282

Non-recurring:
Maryland Financial Bank stock		-		-			30			30
Impaired loans		-		-			5,637			5,637
OREO		-		1,013			-			1,013
	$	-	$	89,295		$	5,667		$	94,962

Schedule of estimated fair values of financial instruments

	September 30, 2013				December 31, 2012
(In Thousands)	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and due from banks	$	8,568	$	8,568	$	9,332	$	9,332
Interest-bearing deposits		42		42		6,627		6,627
Federal funds sold		65		65		2,669		2,669
Investment securities		88,282		88,282		100,490		100,490
Investments in restricted stock		1,502		1,502		1,448		1,448
Ground rents		169		169		175		175
Loans, net		261,492		261,493		249,632		251,419
Accrued interest receivable		1,434		1,434		1,450		1,450

Financial liabilities:
Deposits		323,025		294,300		332,289		314,680
Short-term borrowings		3,100		3,100		-		-
Long-term borrowings		20,000		21,118		20,000		21,899
Dividends payable		274		274		-		-
Accrued interest payable		46		46		28		28

Off-balance sheet commitments		24,107		24,107		26,236		26,236

Schedule of gross unrealized losses and fair value, aggregated by investment category and length of time in continuous unrealized loss position

Securities available for sale:	Less than 12 months				12 months or more				Total
(Dollars in Thousands)
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss

Obligations of U.S. Govt Agencies	$	-	$	-	$	-	$	-	$	-	$	-
State and Municipal		15,620		1,649		259		42		15,879		1,691
Corporate Trust Preferred		-		-		234		115		234		115
Mortgage Backed		27,737		1,371		1,687		70		29,424		1,441
	$	43,357	$	3,020	$	2,180	$	227	$	45,537	$	3,247

Schedule of rollforward of the cumulative other-than-temporary credit losses recognized in earnings for debt securities

	At		At
	September 30,		December 31,
	2013		2012
	(Dollars in Thousands)

Estimated credit losses, beginning of year	$	3,247	$	3,247
Credit losses - no previous OTTI recognized		-		-
Credit losses - previous OTTI recognized		15		-

Estimated credit losses, end of period	$	3,262	$	3,247

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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