(10) Fair Value Measurements

Generally accepted accounting principles related to Fair Value Measurements, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurements and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

●	Level 1	inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●	Level 2	inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●	Level 3	inputs to the valuation methodology are unobservable and represent the Company's own assumptions about theassumptions that market participants would use in pricing the assets or liabilities.

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Assets

Securities - Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. The Company's evaluations are based on market data and the Company employs combinations of these approaches for its valuation methods depending on the asset class.

Impaired loans - Fair value accounting principles also apply to loans measured for impairment, including impaired loans measured at an observable market price (if available), or at the fair value of the loan's collateral (if the loan is collateral dependent). Fair value of the loan's collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral. When the fair value of collateral is based on an observable market price or a current appraisal value, the Company records the impaired loan as nonrecurring level 2. When a current appraisal value is not available or management determines the value, the Company records the impaired loan as nonrecurring level 3.

Other Real Estate - Certain foreclosed assets, upon initial recognition, are remeasured and reported at fair value less cost to sale through a charge-off to the allowance for loan losses based on the fair value of the foreclosed asset. The fair value of a foreclosed asset is estimated using Level 2 inputs based on observable market price or appraised value. When appraised value is not available and management determines the fair value, the fair value of the foreclosed assets is considered Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis - The following table presents the recorded amount of the Company's assets measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable		Inputs
	March 31, 2012		(Level 1)		Inputs (Level 2)		(Level 3)
Recurring
Securities Available for Sale
Mortgage-backed	$	322,724	$	---	$	322,724	$	---
State,County & Municipal		8,642		---		8,642		---
Corporate Obligations		2,110		---		1,115		995
Asset-Backed Securities		132		---		---		132
	$	333,608	$	---	$	332,481	$	1,127

Nonrecurring
Impaired Loans	$	65,481	$	---	$	15,694	$	49,787

Other Real Estate	$	20,989	$	---	$	6,817	$	14,172

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable		Inputs
	December 31, 2011		(Level 1)		Inputs (Level 2)		(Level 3)
Recurring
Securities Available for Sale
Mortgage-backed	$	294,061	$	---	$	294,061	$	---
State,County & Municipal		7,584		---		7,584		---
Corporate Obligations		2,114		---		1,124		990
Asset-Backed Securities		132		---		---		132
	$	303,891	$	---	$	302,769	$	1,122

Nonrecurring
Impaired Loans	$	63,521	$	---	$	34,936	$	28,585

Other Real Estate	$	20,445	$	---	$	6,170	$	14,275

Liabilities

The Company did not identify any liabilities that are required to be presented at fair value.

The table below presents a reconciliation and statement of income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2012.

Fair Value Measurement Using Significant Unobservable Inputs (Level 3)	Available for
	Sale Securities
	(In Thousands)

Balance, Beginning	$	1,122
Total Realized/Unrealized Gains (Losses) Included In
Loss on OTTI Impairment		(60	)
Other Comprehensive Income		65

Balance, Beginning	$	1,127