Fair Value of Financial Instruments and Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value of Financial Instruments and Fair Value Measurements [Abstract]

Carrying amount and estimated fair values of financial instruments

The carrying amount and estimated fair values of the Company’s financial instruments as of December 31 are as follows:

	Carrying		Estimated		Level
2013	Amount		Fair Value			1		2		3
	(in Thousands)
Assets
Cash and Short-Term Investments	$	68,147	$	68,147	$	68,147	$	-	$	-
Investment Securities Available for Sale		263,258		263,258		-		262,317		941
Investment Securities Held to Maturity		37		37		-		37		-
Federal Home Loan Bank Stock		3,164		3,164		3,164		-		-
Loans, Net		739,052		741,112		-		729,436		11,676
Bank-Owned Life Insurance		10,165		10,165		10,165		-		-

Liabilities
Deposits		987,529		989,101		526,646		462,455		-
Subordinated Debentures		24,229		24,229		24,229		-		-
Other Borrowed Money		40,000		42,074		-		42,074		-

2012

Assets
Cash and Short-Term Investments	$	71,041	$	71,041	$	71,041	$	-	$	-
Investment Securities Available for Sale		268,300		268,300		-		267,162		1,138
Investment Securities Held to Maturity		41		42		-		42		-
Federal Home Loan Bank Stock		3,364		3,364		3,364		-		-
Loans, Net		734,079		735,115		-		713,109		22,006

Liabilities
Deposits		979,685		982,215		486,775		495,440		-
Subordinated Debentures		24,229		24,229		24,229		-		-
Other Borrowed Money		35,000		38,424		-		38,424		-

Assets and liabilities measured at fair value on a recurring and non recurring basis

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis - The following table presents the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis as of December 31, 2013 and 2012, aggregated by the level in the fair value hierarchy within which those measurements fall. The table below includes only impaired loans with a specific reserve and only other real estate properties with a valuation allowance at December 31, 2013. Those impaired loans and other real estate properties are shown net of the related specific reserves and valuation allowances.

			Fair Value Measurements at Reporting Date Using
2013	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Recurring
Securities Available for Sale
U.S. Government Agencies Mortgage-Backed	$	259,348,058	$	-	$	259,348,058	$	-
State, County and Municipal		3,909,832		-		2,968,567		941,265

	$	263,257,890	$	-	$	262,316,625		941,265
Nonrecurring
Impaired Loans	$	11,675,691	$	-	$	-	$	11,675,691

Other Real Estate	$	7,019,799	$	-	$	-	$	7,019,799

2012

Recurring
Securities Available for Sale
U.S. Government Agencies Mortgage-Backed	$	263,059,074	$	-	$	263,059,074	$	-
State, County and Municipal		4,004,010		-		2,998,199		1,005,811
Corporate Obligations		1,104,900		-		1,104,900		-
Asset-Backed Securities		132,427		-		-		132,427

	$	268,300,411	$	-	$	267,162,173	$	1,138,238
Nonrecurring
Impaired Loans	$	22,006,150	$	-	$	-	$	22,006,150

Other Real Estate	$	8,817,204	$	-	$	-	$	8,817,204

Liabilities

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

Quantitative information for financial instruments measured at fair value

The following tables present quantitative information about the significant unobservable inputs used in the fair value measurements for assets in level 3 of the fair value hierarchy measured on a nonrecurring basis at December 31, 2013 and 2012. These tables are comprised primarily of collateral dependent impaired loans and other real estate owned:

	December 31, 2013		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)

Impaired Loans
Commercial	$	1,019,084	Sales Comparison	Adjustment for Differences Between the Comparable Sales		0.00%-15.00% (7.50%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		10.00%-50.00% (30.00%)
Real Estate
Commercial Construction		2,641,041	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(16.00)%-28.00% (6.00%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.00%-10.00% (5.00%)

			Income Approach	Capitalization Rate		8.50%

Residential Real Estate		1,323,296	Sales Comparison	Adjustment for Differences Between the Comparable Sales		0.00%-46.00% (23.00%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.00%-25.00% (12.50%)

Commercial Real Estate		5,450,788	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(27.20%)-216.80% (94.80%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		25.00%-90.00% (57.50%)

			Income Approach	Capitalization Rate		11.00%

Farmland		1,241,482	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(55.00%)-388.00% (166.50)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		10.00%-35.00% (22.50%)

Other Real Estate Owned		7,019,799	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(10.00%)-319.10% (154.55%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.36%-87.81% (29.99%)

			Income Approach	Discount Rate		10.00%

	December 31, 2012		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)

Impaired Loans
Commercial	$	1,030,877	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(45.00%)-80.00% (17.50%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.00%-80.00% (40.00%)

			Income Approach	Capitalization Rate		8.50%
Real Estate
Commercial Construction		5,885,060	Sales Comparison	Adjustment for Differences Between the Comparable Sales		0.00%-45.00% (22.50%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.00%-40.00% (20.00%)

			Income Approach	Discount Rate		7.94%

Residential Real Estate		3,581,317	Sales Comparison	Adjustment for Differences Between the Comparable Sales		0.00%-24.00% (12.00%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.00%-40.00% (20.00%)

			Income Approach	Capitalization Rate		8.90%

Commercial Real Estate		11,508,896	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(7.40%)-73.70% (32.95%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		0.00%-40.00% (20.00%)

			Income Approach	Capitalization Rate		9.50%

				Discount Rate		5.13%

Other Real Estate Owned		8,817,204	Sales Comparison	Adjustment for Differences Between the Comparable Sales		(35.00%)-129.50% (47.25%)

				Management Adjustments for Age of Appraisals and/or Current Market Conditions		3.10%-61.32% (32.33%)

			Income Approach	Discount Rate		3.00%

Fair value measurement using significant unobservable inputs (Level 3)

The following table 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 years ended December 31, 2013, 2012 and 2011.

	Available for Sale Securities
	2013			2012			2011

Balance, Beginning	$	1,138,238		$	1,122,427		$	1,016,997

Transfers into Level 3		-			788,933			-
Transfers out of Level 3		(41,908	)		-			-
Securities Purchased During the Year		-			-			-
Securities Called During the Year		-			(1,000,000	)		-
Loss on OTTI Impairment Included in Noninterest Income		(366,623	)		(59,568	)		(53,058	)
Unrealized Gains Included in Other Comprehensive Income		211,558			78,201			158,488

Balance, Ending	$	941,265		$	1,138,238		$	1,122,427

The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the end of a reporting period. During the year ended December 31, 2013, the Company had transfers out of level 3 and into level 2. The transfers out of level 3 were the result of increased market activity for these types of securities, as well as more current credit ratings on these securities. During the year ended December 31, 2012, the Company transferred certain state, county and municipal securities out of level 2 and into level 3. The transfers into level 3 were the result of decreased market activity for these types of securities, as well as a lack of current credit ratings on these securities. There were no gains or losses recognized as a result of the transfers. There were no transfers of securities between level 1 and level 2 for the years ended December 31, 2013, 2012 or 2011.

The following table presents quantitative information about recurring level 3 fair value measurements as of December 31, 2013.

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted Avg)

State, County and Municipal

941,265

Discounted Cash Flow

Discount Rate

or Yield

N/A*

* The Company relies on a third-party pricing service to value its municipal securities. The details of the unobservable inputs and other adjustments used by the third-party pricing service were not readily available to the Company.

- Definition

Tabular disclosure related to 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 recurring and/or nonrecurring basis in periods after initial recognition. Disclosures 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) as well as transfers between levels 1 and 2.

+ References

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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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.

+ References

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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