10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 000-13396

CNB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1450605
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 South Second Street

P.O. Box 42

Clearfield, Pennsylvania 16830

(Address of principal executive offices)

Registrant’s telephone number, including area code, (814) 765-9621

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

The number of shares outstanding of the issuer’s common stock as of August 6, 2012

COMMON STOCK NO PAR VALUE PER SHARE: 12,441,643 SHARES

INDEX

PART I.

FINANCIAL INFORMATION

	Page Number
ITEM 1 – Financial Statements (unaudited)
Consolidated Balance Sheets – June 30, 2012 and December 31, 2011		1
Consolidated Statements of Income – Three months ended June 30, 2012 and 2011		2
Consolidated Statements of Income – Six months ended June 30, 2012 and 2011		3
Consolidated Statements of Comprehensive Income – Three and six months ended June  30, 2012 and 2011		4
Consolidated Statements of Cash Flows – Six months ended June 30, 2012 and 2011		5
Notes to Consolidated Financial Statements		6
ITEM  2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk		37
ITEM 4 – Controls and Procedures		38
PART II. OTHER INFORMATION
ITEM 1 – Legal Proceedings		39
ITEM 1A – Risk Factors		39
ITEM 6 – Exhibits		39
Signatures		40

Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to our financial condition, liquidity, results of operations, future performance and business. These forward-looking statements are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. Forward-looking statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond our control). Forward-looking statements often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would” and “could.” Such known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements include, but are not limited to: changes in general business, industry or economic conditions or competition; changes in any applicable law, rule, regulation, policy, guideline or practice governing or affecting financial holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; adverse changes or conditions in capital and financial markets; changes in interest rates; higher than expected costs or other difficulties related to integration of combined or merged businesses; the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions; changes in the quality or composition of our loan and investment portfolios; adequacy of loan loss reserves; increased competition; loss of certain key officers; continued relationships with major customers; deposit attrition; rapidly changing technology; unanticipated regulatory or judicial proceedings and liabilities and other costs; changes in the cost of funds, demand for loan products or demand for financial services; and other economic, competitive, governmental or technological factors affecting our operations, markets, products, services and prices. Some of these and other factors are discussed in our annual and quarterly reports filed with the Securities and Exchange Commission. Such factors could cause actual results to differ materially from those in the forward-looking statements.

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of the filing of this document. We undertake no obligation to publicly update or revise any forward-looking statements included in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except to the extent required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document might not occur and you should not put undue reliance on any forward-looking statements.

Part I Financial Information

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share data

	(unaudited) June 30, 2012			December 31, 2011
ASSETS
Cash and due from banks	$	20,972		$	36,032
Interest bearing deposits with other banks		3,256			3,671
Total cash and cash equivalents		24,228			39,703
Interest bearing time deposits with other banks		275			224
Securities available for sale		715,452			638,107
Trading securities		3,560			3,233
Loans held for sale		1,499			1,442
Loans		909,884			852,769
Less: unearned discount		(3,117	)		(2,886	)
Less: allowance for loan losses		(13,690	)		(12,615	)
Net loans		893,077			837,268
FHLB and other equity interests		6,848			6,537
Premises and equipment, net		24,131			24,004
Bank owned life insurance		26,195			25,672
Mortgage servicing rights		837			906
Goodwill		10,821			10,821
Accrued interest receivable and other assets		14,097			14,290
TOTAL	$	1,721,020		$	1,602,207
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits	$	163,153		$	152,732
Interest bearing deposits		1,292,268			1,201,119
Total deposits		1,455,421			1,353,851
FHLB and other borrowings		82,182			74,456
Subordinated debentures		20,620			20,620
Accrued interest payable and other liabilities		23,150			21,391
Total liabilities		1,581,373			1,470,318
Common stock, $0 par value; authorized 50,000,000 shares; issued 12,599,603 shares		0			0
Additional paid in capital		44,099			44,350
Retained earnings		84,619			80,038
Treasury stock, at cost (159,180 shares at June 30, 2012 and 222,285 shares at December 31, 2011)		(2,289	)		(3,260	)
Accumulated other comprehensive income		13,218			10,761
Total shareholders' equity		139,647			131,889
TOTAL	$	1,721,020		$	1,602,207

See Notes to Consolidated Financial Statements

1

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Dollars in thousands, except per share data

	Three months ended June 30,
	2012			2011
INTEREST AND DIVIDEND INCOME:
Loans including fees	$	12,394		$	11,962
Deposits with banks		0			40
Securities:
Taxable		3,890			3,693
Tax-exempt		905			714
Dividends		18			8
Total interest and dividend income		17,207			16,417
INTEREST EXPENSE:
Deposits		2,946			3,501
Borrowed funds		787			808
Subordinated debentures		200			196
Total interest expense		3,933			4,505
NET INTEREST INCOME		13,274			11,912
PROVISION FOR LOAN LOSSES		1,746			992
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		11,528			10,920
NON-INTEREST INCOME:
Wealth and asset management fees		426			395
Service charges on deposit accounts		996			1,069
Other service charges and fees		468			416
Net realized and unrealized losses on securities for which fair value was elected		(140	)		(16	)
Mortgage banking		196			155
Bank owned life insurance		262			212
Other		325			385
		2,533			2,616
Total other-than-temporary impairment losses on available-for-sale securities		0			0
Less portion of loss recognized in other comprehensive income		0			0
Net impairment losses recognized in earnings		0			0
Net realized gains on available-for-sale securities		731			0
Net impairment losses recognized in earnings and realized gains on available-for-sale securities		731			0
Total non-interest income		3,264			2,616
NON-INTEREST EXPENSES:
Salaries and benefits		4,619			4,197
Net occupancy expense of premises		1,107			1,103
FDIC insurance premiums		274			280
Other		2,833			2,561
Total non-interest expenses		8,833			8,141
INCOME BEFORE INCOME TAXES		5,959			5,395
INCOME TAX EXPENSE		1,623			1,504
NET INCOME	$	4,336		$	3,891
EARNINGS PER SHARE:
Basic	$	0.35		$	0.32
Diluted	$	0.35		$	0.32
DIVIDENDS PER SHARE:
Cash dividends per share	$	0.165		$	0.165

See Notes to Consolidated Financial Statements

2

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Dollars in thousands, except per share data

	Six months ended June 30,
	2012		2011
INTEREST AND DIVIDEND INCOME:
Loans including fees	$	24,649	$	23,667
Deposits with banks		0		82
Securities:
Taxable		7,575		6,951
Tax-exempt		1,776		1,396
Dividends		31		15
Total interest and dividend income		34,031		32,111
INTEREST EXPENSE:
Deposits		6,095		6,936
Borrowed funds		1,584		1,577
Subordinated debentures		401		387
Total interest expense		8,080		8,900
NET INTEREST INCOME		25,951		23,211
PROVISION FOR LOAN LOSSES		2,850		1,769
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		23,101		21,442
NON-INTEREST INCOME:
Wealth and asset management fees		813		810
Service charges on deposit accounts		1,971		2,032
Other service charges and fees		900		768
Net realized and unrealized gains on securities for which fair value was elected		180		97
Mortgage banking		461		334
Bank owned life insurance		523		461
Other		534		625
		5,382		5,127
Total other-than-temporary impairment losses on available-for-sale securities		0		(398	)
Less portion of loss recognized in other comprehensive income		0		0
Net impairment losses recognized in earnings		0		(398	)
Net realized gains on available-for-sale securities		1,297		74
Net impairment losses recognized in earnings and realized gains on available-for-sale securities		1,297		(324	)
Total non-interest income		6,679		4,803
NON-INTEREST EXPENSES:
Salaries and benefits		9,344		8,440
Net occupancy expense of premises		2,256		2,302
FDIC insurance premiums		533		729
Other		5,714		4,961
Total non-interest expenses		17,847		16,432
INCOME BEFORE INCOME TAXES		11,933		9,813
INCOME TAX EXPENSE		3,250		2,645
NET INCOME	$	8,683	$	7,168
EARNINGS PER SHARE:
Basic	$	0.70	$	0.58
Diluted	$	0.70	$	0.58
DIVIDENDS PER SHARE:
Cash dividends per share	$	0.33	$	0.33

See Notes to Consolidated Financial Statements

3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Dollars in thousands

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
NET INCOME		4,336		$	3,891			8,683		$	7,168
Other comprehensive income, net of tax:
Change in fair value of interest rate swap agreements designated as cash flow hedges, net of tax of $73 and $78 for the three months ended June 30, 2012 and 2011, and $39 and $42 for the six months ended June 30, 2012 and 2011		(135	)		(145	)		(72	)		(78	)
Net change in unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) on other-than-temporarily impaired securities available for sale:
Unrealized gains arising during the period, net of tax of ($7) for the three months ended June 30, 2012, and ($7) and ($32) for the six months ended June 30, 2012 and 2011		13			0			13			60
Reclassification adjustment for losses included in net income, net of tax of ($139) for the six months ended June 30, 2011		0			0			0			259
		13			0			13			319
Unrealized gains (losses) on other securities available for sale:
Unrealized gains arising during the period, net of tax of ($2,455) and ($3,881) for the three months ended June 30, 2012 and 2011, and ($1,809) and ($4,556) for the six months ended June 30, 2012 and 2011		4,560			7,208			3,359			8,462
Reclassification adjustment for accumulated gains included in net income, net of tax of $256 for the three months ended June 30, 2012 and $454 and $26 for the six months ended June 30, 2012 and 2011		(475	)		0			(843	)		(48	)
		4,085			7,208			2,516			8,414
Other comprehensive income		3,963			7,063			2,457			8,655
COMPREHENSIVE INCOME	$	8,299		$	10,954		$	11,140		$	15,823

See Notes to Consolidated Financial Statements

4

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Dollars in thousands

	Six months ended June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,683		$	7,168
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses		2,850			1,769
Depreciation and amortization of premises and equipment		1,055			1,016
Securities amortization and accretion and deferred loan fees and costs		2,125			1,337
Net impairment losses realized in earnings and gains on sales of available-for-sale securities		(1,297	)		324
Net realized and unrealized gains on securities for which fair value was elected		(180	)		(97	)
Proceeds from sale of securities for which fair value was elected		1,850			170
Purchase of securities for which fair value was elected		(2,225	)		(197	)
Gain on sale of loans		(432	)		(280	)
Net gains on dispositions of premises and equipment and foreclosed assets		(19	)		(79	)
Proceeds from sale of loans		15,500			10,953
Origination of loans held for sale		(15,200	)		(9,053	)
Income on bank owned life insurance		(523	)		(461	)
Stock-based compensation expense		132			102
Contribution of treasury stock		60			60
Changes in:
Accrued interest receivable and other assets		(1,563	)		931
Accrued interest payable and other liabilities		1,648			2,193
NET CASH PROVIDED BY OPERATING ACTIVITIES		12,464			15,856
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest bearing time deposits with other banks		(51	)		1,195
Proceeds from maturities, prepayments and calls of securities		51,504			49,626
Proceeds from sales of securities		88,617			23,610
Purchase of securities		(214,250	)		(108,992	)
Loan origination and payments, net		(58,599	)		(28,091	)
Purchase of bank owned life insurance		0			(5,000	)
Purchase of FHLB and other equity interests		(311	)		(166	)
Purchase of premises and equipment		(1,038	)		(1,434	)
Proceeds from the sale of premises and equipment and foreclosed assets		467			196
NET CASH USED IN INVESTING ACTIVITIES		(133,661	)		(69,056	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in:
Checking, money market and savings accounts		145,689			142,321
Certificates of deposit		(44,119	)		(56,117	)
Proceeds from sale of treasury stock		528			652
Cash dividends paid		(4,102	)		(4,052	)
Proceeds from long-term borrowings		0			350
Repayment of long-term borrowings		(79	)		(61	)
Net change in short-term borrowings		7,805			(23,708	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		105,722			59,385
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(15,475	)		6,185
CASH AND CASH EQUIVALENTS, Beginning		39,703			37,432
CASH AND CASH EQUIVALENTS, Ending	$	24,228		$	43,617
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	8,262		$	9,006
Income taxes	$	3,488		$	1,493
SUPPLEMENTAL NONCASH DISCLOSURES:
Transfers to other real estate owned	$	15		$	69
Grant of restricted stock awards from treasury stock	$	419		$	266

See Notes to Consolidated Financial Statements

5

CNB FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.    BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in compliance with accounting principles generally accepted in the United States of America (“GAAP”). Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of management of the registrant, the accompanying consolidated financial statements as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations for the periods presented. The financial performance reported for CNB Financial Corporation (the “Corporation”) for the three and six month periods ended June 30, 2012 is not necessarily indicative of the results to be expected for the full year. This information should be read in conjunction with the Corporation’s Annual Report on Form 10-K for the period ended December 31, 2011 (the “2011 Form 10-K”). All dollar amounts are stated in thousands, except share data.

2.    STOCK COMPENSATION

The Corporation has a stock incentive plan for key employees and independent directors. The stock incentive plan, which is administered by a committee of the Board of Directors, provides for aggregate grants of up to 500,000 shares of common stock in the form of nonqualified options or restricted stock. For key employees, the plan vesting is one-fourth of the granted options or restricted stock per year beginning one year after the grant date, with 100% vested on the fourth anniversary of the grant. For independent directors, the vesting schedule is one-third of the granted options per year beginning one year after the grant date, with 100% vested on the third anniversary of the grant.

At June 30, 2012, there was no unrecognized compensation cost related to nonvested stock options granted under this plan, and no stock options were granted during the three or six month periods ended June 30, 2012. At June 30, 2012 and December 31, 2011, the Corporation had 107,375 stock options that were fully vested and exercisable.

Compensation expense for the restricted stock awards is recognized over the requisite service period noted above based on the fair value of the shares at the date of grant. Nonvested restricted stock awards are recorded as a reduction of additional paid-in capital in shareholders’ equity until earned. Compensation expense resulting from these restricted stock awards was $73 and $132 for the three and six months ended June 30, 2012, and $49 and $102 for the three and six months ended June 30, 2011. As of June 30, 2012, there was $681 of total unrecognized compensation cost related to nonvested restricted stock awards.

A summary of changes in nonvested restricted stock awards for the three months ended June 30, 2012 follows:

	Shares		Weighted Average Grant Date Fair Value
Nonvested at beginning of period		52,829	$	15.39
Granted		0		0
Vested		0		0
Forfeited		0		0
Nonvested at end of period		52,829	$	15.39

6

A summary of changes in unvested restricted stock awards for the six months ended June 30, 2012 follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at beginning of period		35,613		$	15.08
Granted		26,900			15.57
Vested		(9,684	)		14.77
Forfeited		0			0
Nonvested at end of period		52,829		$	15.39

3.    FAIR VALUE

Fair Value Option

Management elected to adopt the fair value option for its investment in certain equity securities in order to provide financial statement users with greater visibility into the Corporation’s financial instruments that do not have a defined maturity date.

Fair value changes attributable to unrealized gains (losses) that were included in earnings for the three and six months ended June 30, 2012 were $(164) and $24, respectively. Fair value changes attributable to unrealized losses that were included in earnings for the three and six month ended June 30, 2011 were ($16) and $87, respectively. Realized gains on the sale of securities for which the fair value option was elected were $24 and $156 during the three and six months ended June 30, 2012. Realized gains on the sale of securities for which the fair value option was elected were $0 and $10 during the three and six months ended June 30, 2011.

Dividend income is recorded based on cash dividends and comprises the “Dividends” line item in the accompanying consolidated statement of income. Dividend income was $18 and $31 for the three and six months ended June 30, 2012 and $8 and $15 for the three and six months ended June 30, 2011.

Fair Value Measurement

Fair value is defined 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. A fair value hierarchy has also been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs are used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other 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.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of most trading securities and securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value of one corporate bond held by the Corporation has been determined by using Level 3 inputs. The Corporation has engaged a valuation expert to price this security using a proprietary model, which incorporates assumptions about certain factors that market participants would use in pricing the securities, including bid/ask spreads and liquidity and credit premiums.

7

Trust preferred securities which are issued by financial institutions and insurance companies are priced using Level 3 inputs. The decline in the level of observable inputs and market activity in this class of investments by the measurement date has been significant and resulted in unreliable external pricing. Broker pricing and bid/ask spreads, when available, vary widely, and the once-active market has become comparatively inactive. The Corporation engaged a third party consultant who has developed a model for pricing these securities. Information such as historical and current performance of the underlying collateral, deferral and default rates, collateral coverage ratios, break in yield calculations, cash flow projections, liquidity and credit premiums required by a market participant, and financial trend analysis with respect to the individual issuing financial institutions and insurance companies are utilized in determining individual security valuations. Due to the current market conditions as well as the limited trading activity of these securities, the market value of the securities is highly sensitive to assumption changes and market volatility.

The Corporation’s derivative instrument is an interest rate swap that is similar to those that trade in liquid markets. As such, significant fair value inputs can generally be verified and do not typically involve significant management judgments (Level 2 inputs).

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals prepared by third-parties. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also adjusts appraised values based on the length of time that has passed since the appraisal and other factors. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2012 and December 31, 2011:

				Fair Value Measurements at June 30, 2012 Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities Available For Sale:
U.S. Treasury	$	6,069		$	0	$	6,069		$	0
U.S. Government sponsored entities		113,030			0		113,030			0
States and political subdivisions		161,583			0		161,583			0
Residential mortgage and asset backed		372,436			3,148		369,288			0
Commercial mortgage and asset backed		2,132			0		2,132			0
Corporate notes and bonds		13,416			0		11,345			2,071
Pooled trust preferred		360			0		0			360
Pooled SBA		44,883			44,883		0			0
Other securities		1,543			1,543		0			0
Total Securities Available For Sale	$	715,452		$	49,574	$	663,447		$	2,431
Trading Securities:
Equity securities – financial services	$	654		$	654	$	0		$	0
Equity securities – industrials		476			476		0			0
Equity securities – health care		428			428		0			0
Certificates of deposit		382			382		0			0
International mutual funds		252			252		0			0
Equity securities – energy		209			209		0			0
Equity securities – materials		162			162		0			0
Equity securities – technology		158			158		0			0
Equity securities – consumer discretionary		156			156		0			0
Large cap growth mutual funds		147			147		0			0
Money market mutual funds		108			108		0			0
Large cap value mutual funds		103			103		0			0
Corporate notes and bonds		101			0		101			0
Real estate investment trust mutual funds		64			64		0			0
U.S. Government sponsored entities		56			0		56			0
Equity securities – consumer staples		54			54		0			0
Small cap mutual funds		25			25		0			0
Mid cap mutual funds		25			25		0			0
Total Trading Securities	$	3,560		$	3,403	$	157		$	0
Liabilities:
Interest rate swaps	$	(1,779	)	$	0	$	(1,779	)	$	0

8

				Fair Value Measurements at December 31, 2011 Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities Available For Sale:
U.S. Treasury	$	8,130		$	0	$	8,130		$	0
U.S. Government sponsored entities		107,492			2,000		105,492			0
States and political subdivisions		158,437			4,655		153,782			0
Residential mortgage and asset backed		300,126			8,577		291,549			0
Commercial mortgage and asset backed		2,122			0		2,122			0
Corporate notes and bonds		13,860			0		11,800			2,060
Pooled trust preferred		340			0		0			340
Pooled SBA		46,056			46,056		0			0
Other securities		1,544			1,544		0			0
Total Securities Available For Sale	$	638,107		$	62,832	$	572,875		$	2,400
Trading Securities:
Equity securities – financial services	$	779		$	779	$	0		$	0
Equity securities – industrials		324			324		0			0
International mutual funds		257			257		0			0
Certificates of deposit		255			255		0			0
Money market mutual funds		241			241		0			0
Equity securities – health care		204			204		0			0
Equity securities – utilities		197			197		0			0
Large cap growth mutual funds		145			145		0			0
Equity securities – consumer staples		145			145		0			0
Equity securities – consumer discretionary		126			126		0			0
Large cap value mutual funds		105			105		0			0
Corporate notes and bonds		100			0		100			0
Equity securities – technology		75			75		0			0
Equity securities – energy		72			72		0			0
Real estate investment trust mutual funds		68			68		0			0
U.S. Government sponsored entities		55			0		55			0
Equity securities – materials		37			37		0			0
Small cap mutual funds		25			25		0			0
Mid cap mutual funds		23			23		0			0
Total Trading Securities	$	3,233		$	3,078	$	155		$	0
Liabilities:
Interest rate swaps	$	(1,669	)	$	0	$	(1,669	)	$	0

9

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2012:

	Corporate notes and bonds		Pooled trust preferred
Balance, April 1, 2012	$	2,040	$	340
Total gains or losses:
Included in other comprehensive income (unrealized)		31		20
Balance, June 30, 2012	$	2,071	$	360

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2012:

	Corporate notes and bonds		Pooled trust preferred
Balance, January 1, 2012	$	2,060	$	340
Total gains or losses:
Included in other comprehensive income (unrealized)		11		20
Balance, June 30, 2012	$	2,071	$	360

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2011:

	Residential mortgage and asset backed			Corporate notes and bonds			Pooled trust preferred
Balance, April 1, 2011	$	4,106		$	1,895		$	1,402
Total gains or losses:
Included in other comprehensive income (unrealized)		0			(35	)		(40	)
Purchases, issuances, sales, and settlements:
Settlements		(118	)		0			0
Balance, June 30, 2011	$	3,988		$	1,860		$	1,362

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2011:

	Residential mortgage and asset backed			Corporate notes and bonds		U.S. Gov’t Sponsored Entities			Pooled trust preferred
Balance, January 1, 2011	$	2,269		$	1,240	$	2,000		$	1,292
Transfers out of Level 3 (a)(b)		0			0		(2,000	)		0
Total gains or losses:
Included in earnings (realized)		0			0		0			(398	)
Included in other comprehensive income (unrealized)		0			620		0			468
Purchases, issuances, sales, and settlements:
Purchases		1,917			0		0			0
Settlements		(198	)		0		0			0
Balance, June 30, 2011	$	3,988		$	1,860	$	0		$	1,362

(a) Transferred from Level 3 to Level 2 since observable market data became available to value the security.

(b) The Corporation’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that caused the transfer.

10

The unrealized losses reported in earnings for the six months ended June 30, 2011 for Level 3 assets that are still held at the balance sheet date relate to pooled trust preferred securities deemed to be other-than-temporarily impaired.

The following table presents quantitative information about Level 3 fair value measurements at June 30, 2012:

	Fair value		Valuation Technique	Unobservable Inputs	Input Utilized
Corporate notes and bonds		$2,071	Discounted cash flow	Constant prepayment rate Probability of default Discount rate	0%    0% 9.2%
Pooled trust preferred		$360	Discounted cash flow	Collateral default rate Discount rate Recovery probability Prepayment rate	2% annually for 2 years; 0.36% thereafter 19% 10%, lagged 2 years 5% for next 5 years

The significant unobservable inputs used in the fair value measurement of the Corporation’s corporate notes and bonds are prepayment rates, probability of default, and discount rate. Significant increases/(decreases) in any of those inputs in isolation would result in a significantly lower/(higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of the Corporation’s pooled trust preferred securities are collateral default rate, discount rate, recovery probability, and prepayment rate. Significant increases in specific-issuer default assumptions or decreases in specific-issuer recovery assumptions would result in a significantly lower fair value measurement. Conversely, decreases in specific-issuer default assumptions or increases in specific-issuer recovery assumptions would result in a higher fair value measurement.

During the three months ended June 30, 2012 and 2011, the following available for sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category:

	2012		2011
U.S. Treasury	$	0	$	4,053
U.S. Government sponsored entities		26,034		16,124
States and political subdivisions		3,771		4,929
Residential mortgage and asset backed		40,473		37,659
Commercial mortgage and asset backed		0		2,085
Total	$	70,278	$	64,850

During the six months ended June 30, 2012 and 2011, the following available for sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category:

	2012		2011
U.S. Government sponsored entities	$	2,000	$	2,000
States and political subdivisions		4,655		4,750
Residential mortgage and asset backed		8,577		20,405
Total	$	15,232	$	27,155

These securities were transferred from the Level 1 category to the Level 2 category since there were no longer quoted prices for identical assets in active markets that the Corporation had the ability to access. During the six months ended June 30, 2011, two pooled SBA securities that were classified as Level 2 securities at December 31, 2010 were transferred to the Level 1 category. The fair value on the date of transfer was $3,437. There were no transfers of securities from the Level 2 category to the Level 1 category during the three months ended June 30, 2011. There were no transfers of securities from the Level 2 category to the Level 1 category during the three and six months ended June 30, 2012. The Corporation’s policy for determining when a transfer between the Level 1 and Level 2 categories has occurred is to monitor and report such transfers as of each quarterly reporting period.

11

Assets and liabilities measured at fair value on a non-recurring basis are as follows at June 30, 2012 and December 31, 2011:

			Fair Value Measurements at June 30, 2012 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial mortgages	$	7,907	$	0	$	0	$	7,907
Commercial, industrial, and agricultural		3,986		0		0		3,986
Residential real estate		437		0		0		437

			Fair Value Measurements at December 31, 2011 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial mortgages	$	7,219	$	0	$	0	$	7,219
Commercial, industrial, and agricultural		3,190		0		0		3,190
Residential real estate		105		0		0		105

Impaired loans, which are measured for impairment using the fair value of collateral for collateral dependent loans, had a principal balance of $14,476 with a valuation allowance of $2,146 as of June 30, 2012, resulting in an additional provision for loan losses of $1,196 and $1,597 for the corresponding three and six months then ended. Impaired loans had a principal balance of $22,384 with a valuation allowance of $1,493 as of December 31, 2011, and an additional provision for loan losses of $345 and $263 for the corresponding three and six months ended June 30, 2011.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012:

	Fair value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans – commercial mortgages	$	7,907	Sales comparison approach	Negative adjustment for selling costs and changes in market conditions since appraisal	10% -65% (15%)
Impaired loans – commercial, industrial, and agricultural		3,986	Income approach	Negative adjustment for selling costs and changes in net operating income expectations since appraisal	5% - 65% (29%)
Impaired loans – residential real estate		437	Sales comparison approach	Negative adjustment for selling costs and changes in market conditions since appraisal	10% -19% (16%)

12

Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments at June 30, 2012:

	Carrying			Fair Value Measurement Using:									Total
	Amount			Level 1			Level 2			Level 3			Fair Value
ASSETS
Cash and cash equivalents	$	24,228		$	24,228		$	0		$	0		$	24,228
Interest bearing time deposits with other banks		275			0			281			0			281
Securities available for sale		715,452			49,574			663,447			2,431			715,452
Trading securities		3,560			3,403			157			0			3,560
Loans held for sale		1,499			0			1,554			0			1,554
Net loans		893,077			0			0			918,918			918,918
FHLB and other equity interests		6,848			N/A			N/A			N/A			N/A
Accrued interest receivable		6,903			264			3,527			3,112			6,903
LIABILITIES
Deposits	$	(1,455,421	)	$	(1,231,487	)	$	(227,042	)	$	0		$	(1,458,529	)
FHLB and other borrowings		(82,182	)		0			(91,059	)		0			(91,059	)
Subordinated debentures		(20,620	)		0			0			(10,865	)		(10,865	)
Interest rate swaps		(1,779	)		0			(1,779	)		0			(1,779	)
Accrued interest payable		(1,121	)		(321	)		(783	)		(17	)		(1,121	)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2011:

	Carrying Amount			Fair Value
ASSETS
Cash and cash equivalents	$	39,703		$	39,703
Interest bearing time deposits with other banks		224			229
Securities available for sale		638,107			638,107
Trading securities		3,233			3,233
Loans held for sale		1,442			1,470
Net loans		837,268			862,389
FHLB and other equity interests		6,537			N/A
Accrued interest receivable		6,567			6,567
LIABILITIES
Deposits	$	(1,353,851	)	$	(1,357,415	)
FHLB and other borrowings		(74,456	)		(83,042	)
Subordinated debentures		(20,620	)		(10,906	)
Interest rate swaps		(1,669	)		(1,669	)
Accrued interest payable		(1,308	)		(1,308	)

The methods and assumptions, not otherwise presented, used to estimate fair values are described as follows:

Cash and cash equivalents: The carrying amounts of cash and cash equivalents approximate fair values and are classified as Level 1.

Interest bearing time deposits with other banks: The fair value of interest bearing time deposits with other banks is estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly maturities, resulting in a Level 2 classification.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

13

Loans: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values, resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

FHLB and other equity interests: It is not practical to determine the fair value of Federal Home Loan Bank stock and other equity interests due to restrictions placed on the transferability of these instruments.

Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value resulting in a classification that is consistent with the asset with which it is associated.

Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amount), resulting in a Level 1 classification. Fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.

FHLB and other borrowings: The fair values of the Corporation’s FHLB and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements, resulting in a Level 2 classification.

Subordinated debentures: The fair value of the Corporation’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of arrangements, resulting in a Level 3 classification.

Accrued interest payable: The carrying amount of accrued interest payable approximates fair value resulting in a classification that is consistent with the liability with which it is associated.

While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet date, there is no assurance that the estimated fair values would have been realized if the assets had been disposed of or the liabilities settled at that date, since market values may differ depending on various circumstances. The estimated fair values would also not apply to subsequent dates.

In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the disclosures. Also, non-financial assets such as, among other things, the estimated earnings power of core deposits, the earnings potential of trust accounts, the trained workforce, and customer goodwill, which typically are not recognized on the balance sheet may have value but are not included in the fair value disclosures.

4.    SECURITIES

Securities available for sale at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012									December 31, 2011
	Amortized Cost		Unrealized					Fair Value		Amortized Cost		Unrealized					Fair Value
			Gains		Losses							Gains		Losses
U.S. Treasury	$	6,036	$	33	$	0		$	6,069	$	8,064	$	66	$	0		$	8,130
U.S. Gov’t sponsored entities		107,398		5,641		(9	)		113,030		102,258		5,249		(15	)		107,492
State & political subdivisions		151,321		10,316		(54	)		161,583		149,685		8,844		(92	)		158,437
Residential mortgage & asset backed		363,792		8,923		(279	)		372,436		292,297		8,043		(214	)		300,126
Commercial mortgage & asset backed		2,071		61		0			2,132		2,077		45		0			2,122
Corporate notes & bonds		16,364		62		(3,010	)		13,416		17,358		50		(3,548	)		13,860
Pooled trust preferred		800		0		(440	)		360		800		0		(460	)		340
Pooled SBA		43,062		1,830		(9	)		44,883		44,851		1,282		(77	)		46,056
Other securities		1,521		22		0			1,543		1,521		23		0			1,544
Total	$	692,365	$	26,888	$	(3,801	)	$	715,452	$	618,911	$	23,602	$	(4,406	)	$	638,107

14

At June 30, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Trading securities accounted for under the fair value option at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
Corporate equity securities	$	2,297	$	1,959
Certificates of deposit		382		255
International mutual funds		252		257
Large cap growth mutual funds		147		145
Money market mutual funds		108		241
Large cap value mutual funds		103		105
Corporate notes and bonds		101		100
Real estate investment trust mutual funds		64		68
U.S. Government sponsored entities		56		55
Small cap mutual funds		25		25
Mid cap mutual funds		25		23
Total	$	3,560	$	3,233

Securities with unrealized losses at June 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows (in thousands):

June 30, 2012	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury	$	0	$	0		$	0	$	0		$	0	$	0
U.S. Gov’t sponsored entities		5,989		(9	)		0		0			5,989		(9	)
State & political subdivisions		5,046		(53	)		1,591		(1	)		6,637		(54	)
Residential mortgage & asset backed		42,816		(276	)		743		(3	)		43,559		(279	)
Commercial mortgage & asset backed		0		0			0		0			0		0
Corporate notes & bonds		1,949		(51	)		9,492		(2,959	)		11,441		(3,010	)
Pooled trust preferred		0		0			360		(440	)		360		(440	)
Pooled SBA		2,022		(9	)		0		0			2,022		(9	)
Other securities		0		0			0		0			0		0
	$	57,822	$	(398	)	$	12,186	$	(3,403	)	$	70,008	$	(3,801	)
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2011
U.S. Treasury	$	0	$	0		$	0	$	0		$	0	$	0
U.S. Gov’t sponsored entities		7,671		(15	)		0		0			7,671		(15	)
State & political subdivisions		5,314		(92	)		0		0			5,314		(92	)
Residential mortgage & asset backed		36,626		(162	)		9,485		(52	)		46,111		(214	)
Commercial mortgage & asset backed		0		0			0		0			0		0
Corporate notes & bonds		2,860		(139	)		8,841		(3,409	)		11,701		(3,548	)
Pooled trust preferred		0		0			340		(460	)		340		(460	)
Pooled SBA		8,139		(77	)		0		0			8,139		(77	)
Other securities		0		0			0		0			0		0
	$	60,610	$	(485	)	$	18,666	$	(3,921	)	$	79,276	$	(4,406	)

15

The Corporation evaluates securities for other-than-temporary impairment on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation.

At June 30, 2012, the Corporation held one structured pooled trust preferred security with an adjusted amortized cost of $800 and a fair value of $360. The Corporation evaluated this security for other-than-temporary impairment by estimating the cash flows expected to be received, taking into account future estimated levels of deferrals and defaults by the underlying issuers, and discounting those cash flows at the appropriate accounting yield. For the three and six months ended June 30, 2012, no other-than-temporary impairment was required to be realized in earnings. For the three and six months ended June 30, 2011, other-than-temporary impairment of $0 and $398, respectively, was realized in earnings. At June 30, 2012 and December 31, 2011, the Corporation held four structured pooled trust preferred securities with an adjusted amortized cost of zero.

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three and six months ended June 30, 2012 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		0
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three months ended June 30, 2011 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		0
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the six months ended June 30, 2011 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	3,656
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		398
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

Due to the insignificance of the adjusted amortized cost and other-than-temporary impairment charges to the consolidated financial statements, no further disclosures are required with respect to the Corporation’s structured pooled trust preferred securities.

For the securities that comprise corporate notes and bonds and the securities that are issued by state and political subdivisions, management monitors publicly available financial information, such as filings with the Securities and Exchange Commission, in order to evaluate the securities for other-than-temporary impairment. For financial institution issuers, management also monitors information from quarterly “call” report filings that are used to generate Uniform Bank Performance Reports. When reviewing this information, management considers the financial condition and near-term prospects of the issuer and whether downgrades by bond rating agencies have occurred. Management also considers the length of time and extent to which fair value has been less than cost and the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

16

As of June 30, 2012 and December 31, 2011, management concluded that the securities described in the previous paragraph were not other-than-temporarily impaired for the following reasons:

• There is no indication of any significant deterioration of the creditworthiness of the institutions that issued the securities.

• The unrealized losses are predominantly attributable to liquidity disruptions within the credit markets and the generally stressed condition of the financial services industry.

• All contractual interest payments on the securities have been received as scheduled, and no information has come to management’s attention through the processes previously described which would lead to a conclusion that future contractual payments will not be timely received.

The Corporation does not intend to sell and it is not more likely than not that it will be required to sell the securities in an unrealized loss position before recovery of its amortized cost basis.

Information pertaining to security sales is as follows:

	Proceeds		Gross Gains		Gross Losses
Three months ended June 30, 2012	$	46,468	$	810	$	(79	)
Six months ended June 30, 2012		88,617		1,446		(149	)
Three months ended June 30, 2011		0		0		0
Six months ended June 30, 2011		23,610		146		(72	)

The following is a schedule of the contractual maturity of securities available for sale, excluding equity securities, at June 30, 2012:

	Amortized Cost		Fair Value
1 year or less	$	22,131	$	22,295
1 year – 5 years		80,606		83,067
5 years – 10 years		128,463		138,447
After 10 years		93,781		95,532
		324,981		339,341
Residential mortgage & asset backed securities		363,792		372,436
Commercial mortgage & asset backed securities		2,071		2,132
Total debt securities	$	690,844	$	713,909

Mortgage and asset backed securities are not due at a single date; periodic payments are received based on the payment patterns of the underlying collateral.

On June 30, 2012 and December 31, 2011, securities carried at $250,338 and $264,166, respectively, were pledged to secure public deposits and for other purposes as provided by law.

17

5.    LOANS

Total net loans at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012			December 31, 2011
Commercial, industrial, and agricultural	$	266,122		$	253,324
Commercial mortgages		260,788			242,511
Residential real estate		325,200			298,628
Consumer		54,251			54,677
Credit cards		3,239			3,206
Overdrafts		284			423
Less: unearned discount		(3,117	)		(2,886	)
allowance for loan losses		(13,690	)		(12,615	)
Loans, net	$	893,077		$	837,268

At June 30, 2012 and December 31, 2011, net unamortized loan costs and fees of $71 and ($7), respectively, have been included in the carrying value of loans.

The Corporation’s outstanding loans and related unfunded commitments are primarily concentrated within Central and Western Pennsylvania. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer.

Transactions in the allowance for loan losses for the three months ended June 30, 2012 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, April 1, 2012	$	4,942		$	4,377		$	1,997		$	1,435		$	96		$	168		$	13,015
Charge-offs		(422	)		(121	)		(137	)		(382	)		(14	)		(50	)		(1,126	)
Recoveries		5			0			0			22			6			22			55
Provision (benefit) for loan losses		590			297			365			493			(7	)		8			1,746
Allowance for loan losses, June 30, 2012	$	5,115		$	4,553		$	2,225		$	1,568		$	81		$	148		$	13,690

Transactions in the allowance for loan losses for the six months ended June 30, 2012 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2012	$	4,511		$	4,470		$	1,991		$	1,404		$	71		$	168		$	12,615
Charge-offs		(647	)		(236	)		(224	)		(638	)		(33	)		(117	)		(1,895	)
Recoveries		8			0			0			49			7			56			120
Provision for loan losses		1,243			319			458			753			36			41			2,850
Allowance for loan losses, June 30, 2012	$	5,115		$	4,553		$	2,225		$	1,568		$	81		$	148		$	13,690

18

Transactions in the allowance for loan losses for the three months ended June 30, 2011 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, April 1, 2011	$	3,732		$	3,879		$	1,879		$	1,507		$	96		$	131		$	11,224
Charge-offs		(173	)		(41	)		(63	)		(202	)		(7	)		(62	)		(548	)
Recoveries		3			0			0			21			3			20			47
Provision (benefit) for loan losses		208			561			84			74			12			53			992
Allowance for loan losses, June 30, 2011	$	3,770		$	4,399		$	1,900		$	1,400		$	104		$	142		$	11,715

Transactions in the allowance for loan losses for the six months ended June 30, 2011 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2011	$	3,517		$	3,511		$	1,916		$	1,561		$	96		$	219		$	10,820
Charge-offs		(215	)		(88	)		(77	)		(462	)		(25	)		(115	)		(982	)
Recoveries		4			0			0			45			5			54			108
Provision (benefit) for loan losses		464			976			61			256			28			(16	)		1,769
Allowance for loan losses, June 30, 2011	$	3,770		$	4,399		$	1,900		$	1,400		$	104		$	142		$	11,715

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and is based on the Corporation’s impairment method as of June 30, 2012 and December 31, 2011:

June 30, 2012	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,282	$	347	$	55	$	0	$	0	$	0	$	1,684
Collectively evaluated for impairment		3,833		3,434		2,170		1,568		81		148		11,234
Modified in a troubled debt restructuring		0		772		0		0		0		0		772
Total ending allowance balance	$	5,115	$	4,553	$	2,225	$	1,568	$	81	$	148	$	13,690
Loans:
Loans individually evaluated for impairment	$	7,778	$	8,343	$	628	$	0	$	0	$	0	$	16,749
Loans collectively evaluated for impairment		258,047		242,292		324,572		54,251		3,239		284		882,685
Loans modified in a troubled debt restructuring		297		10,153		0		0		0		0		10,450
Total ending loans balance	$	266,122	$	260,788	$	325,200	$	54,251	$	3,239	$	284	$	909,884

December 31, 2011	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	329	$	917	$	19	$	0	$	0	$	0	$	1,265
Collectively evaluated for impairment		4,182		3,325		1,972		1,404		71		168		11,122
Modified in a troubled debt restructuring		—		228		0		0		0		0		228
Total ending allowance balance	$	4,511	$	4,470	$	1,991	$	1,404	$	71	$	168	$	12,615
Loans:
Loans individually evaluated for impairment	$	6,115	$	8,457	$	124	$	0	$	0	$	0	$	14,696
Loans collectively evaluated for impairment		247,209		226,366		298,504		54,677		3,206		423		830,385
Loans modified in a troubled debt restructuring		—		7,688		0		0		0		0		7,688
Total ending loans balance	$	253,324	$	242,511	$	298,628	$	54,677	$	3,206	$	423	$	852,769

19

The following tables present information related to loans individually evaluated for impairment by portfolio segment as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011:

June 30, 2012	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	6,636	$	4,525	$	1,282
Commercial mortgage		7,004		6,292		1,119
Residential real estate		598		492		55
With no related allowance recorded:
Commercial, industrial, and agricultural		8,812		8,097		0
Commercial mortgage		9,558		7,657		0
Residential real estate		136		136		0
Total	$	32,744	$	27,199	$	2,456

December 31, 2011	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	4,329	$	2,815	$	462
Commercial mortgage		4,724		4,065		1,012
Residential real estate		187		124		19
With no related allowance recorded:
Commercial, industrial, and agricultural		3,892		3,300		0
Commercial mortgage		13,839		12,080		0
Residential real estate		0		0		0
Total	$	26,971	$	22,384	$	1,493

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	3,528	$	4	$	4	$	3,290	$	4	$	4
Commercial mortgage		6,031		0		0		5,376		0		0
Residential real estate		353		4		4		277		8		8
With no related allowance recorded:
Commercial, industrial, and agricultural		3,537		0		0		3,458		0		0
Commercial mortgage		12,123		0		0		12,108		0		0
Residential real estate		68		0		0		45		0		0
Total	$	25,640	$	8	$	8	$	24,554	$	12	$	12

20

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	1,183	$	0	$	0	$	1,660	$	0	$	0
Commercial mortgage		8,835		14		14		8,810		16		16
Residential real estate		185		0		0		202		0		0
With no related allowance recorded:
Commercial, industrial, and agricultural		2,411		0		0		1,607		0		0
Commercial mortgage		4,584		0		0		3,506		0		0
Residential real estate		0		0		0		0		0		0
Total	$	17,198	$	14	$	14	$	15,785	$	16	$	16

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still accruing interest by class of loans as of June 30, 2012 and December 31, 2011:

	June 30, 2012				December 31, 2011
	Nonaccrual		Past Due Over 90 Days Still on Accrual		Nonaccrual		Past Due Over 90 Days Still on Accrual
Commercial, industrial, and agricultural	$	7,354	$	0	$	6,949	$	10
Commercial mortgages		8,530		0		8,359		122
Residential real estate		2,221		82		1,254		157
Consumer		4		187		5		125
Credit cards		0		15		0		27
Total	$	18,109	$	284	$	16,567	$	441

Nonaccrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 and December 31, 2011 by class of loans. The recorded investment in loans excludes accrued interest and loan origination fees, net due to their insignificance.

June 30, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	246	$	56	$	4,946	$	5,248	$	260,874	$	266,122
Commercial mortgages		813		422		8,530		9,765		251,023		260,788
Residential real estate		1,696		420		2,021		4,137		321,063		325,200
Consumer		587		132		191		910		53,341		54,251
Credit cards		11		28		15		54		3,185		3,239
Overdrafts		0		0		0		0		284		284
Total	$	3,353	$	1,058	$	15,703	$	20,114	$	889,770	$	909,884

21

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	239	$	53	$	6,959	$	7,251	$	246,073	$	253,324
Commercial mortgages		1,064		2,620		7,043		10,727		231,784		242,511
Residential real estate		1,816		682		1,411		3,909		294,719		298,628
Consumer		392		185		130		707		53,970		54,677
Credit cards		34		19		27		80		3,126		3,206
Overdrafts		—		—		—		—		423		423
Total	$	3,545	$	3,559	$	15,570	$	22,674	$	830,095	$	852,769

Troubled Debt Restructurings

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. All loans modified in troubled debt restructurings are performing in accordance with their modified terms as of June 30, 2012 and no principal balances were forgiven in connection with the loan restructurings.

The Corporation has allocated $209 and $228 of specific reserves to one commercial mortgage customer whose loan terms have been modified in troubled debt restructurings as of June 30, 2012 and December 31, 2011, respectively. The interest rate on the original loan was 6.60%. Due to financial difficulties experienced by the customer, the interest rate was reduced to 4.19% in the third quarter of 2010 and further reduced to 4.07% in the third quarter of 2011. In the first quarter of 2012, the customer was granted interest-only terms for six months, resulting in an additional provision for loan losses that was insignificant for the three and six months ended June 30, 2012. This loan had a total recorded investment of $1,657 and $1,662 as of June 30, 2012 and December 31, 2011, respectively.

The Corporation has allocated $101 of specific reserves to one commercial mortgage customer with two loans whose terms have been modified in a troubled debt restructuring as of June 30, 2012. The interest rates on the original loans were 6.45% and 6.47%. Due to financial difficulties experienced by the customer, the interest rates on both loans were reduced to 5.75% in the first quarter of 2012, and the maturity dates were extended to 2020 and 2024, resulting in an additional provision for loan losses of $101 for the three and six months ended June 30, 2012. These loans had a total recorded investment of $1,832 as of June 30, 2012. This commercial customer has two additional mortgage loans that were deemed to be impaired as of December 31, 2011 and whose terms were modified in a troubled debt restructuring in the first quarter of 2012. The loan payments were modified to reflect a twenty year amortization with a balloon payment due after five years. These loans had a total recorded investment of $712 and $728 and specific reserves of $463 and $465 as of June 30, 2012 and December 31, 2011, respectively. No additional provision for loan losses was required to be recorded during the three and six months ended June 30, 2012 in connection with the loan modifications.

The Corporation has a commercial mortgage customer whose loan relationships have interest-only terms that were extended during 2011. The original interest rates on the loans, which were also the market rates of interest at the time of the loan modification, were not reduced; therefore, no additional provision for loan losses was required to be recorded. These loans have a total recorded investment of $4,547 and $4,588 at June 30, 2012 and December 31, 2011, respectively.

In addition, the Corporation has a commercial mortgage customer whose loan relationship was restructured due to the forgiveness of accrued interest and late charges. The original interest rate on the loan, which was also the market rate of interest at the time of the loan modification, was not reduced; therefore, no additional provision for loan losses was required to be recorded. This loan has a recorded investment of $1,405 and $1,438 at June 30, 2012 and December 31, 2011.

The Corporation has a commercial customer with five loans whose terms were modified in a troubled debt restructuring in the first quarter of 2012 due to financial difficulties experienced by the customer. The outstanding balances on the five loans, which ranged in maturity from 2012 to 2014, were combined into one new loan with a five year term. The blended original interest rates on the loans, which were also the market rates of interest at the time of the loan modification, were not reduced; therefore no additional provision for loan losses was required to be recorded. This loan has a total recorded investment of $297 at June 30, 2012.

22

The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring, and there have been no payment defaults on loans modified in a troubled debt restructuring.

Credit Quality Indicators

The Corporation classifies commercial, industrial, and agricultural loans and commercial mortgage loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. Loans with an outstanding balance greater than $1 million are analyzed at least semi-annually and loans with an outstanding balance of less than $1 million are analyzed at least annually.

The Corporation uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not rated as special mention, substandard, or doubtful are considered to be pass rated loans. All loans included in the following tables have been assigned a risk rating within 12 months of the balance sheet date.

June 30, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	250,151	$	1,566	$	14,228	$	177	$	266,122
Commercial mortgages		236,706		1,385		21,985		712		260,788
Total	$	486,857	$	2,951	$	36,213	$	889	$	526,910

December 31, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	223,457	$	4,176	$	25,490	$	201	$	253,324
Commercial mortgages		214,098		3,172		24,513		728		242,511
Total	$	437,555	$	7,348	$	50,003	$	929	$	495,835

The Corporation’s portfolio of residential real estate and consumer loans maintained within Holiday Financial Services Corporation (“Holiday”), a subsidiary that offers small balance unsecured and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics than are typical in the Bank’s consumer loan portfolio, are considered to be subprime loans.

23

Holiday’s loan portfolio is summarized as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
Consumer	$	19,134		$	18,176
Residential real estate		1,020			1,056
Less: unearned discount		(3,117	)		(2,886	)
Total	$	17,037		$	16,346

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential real estate, consumer, and credit card loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of June 30, 2012 and December 31, 2011:

	June 30, 2012						December 31, 2011
	Residential Real Estate		Consumer		Credit Cards		Residential Real Estate		Consumer		Credit Cards
Performing	$	322,897	$	54,060	$	3,224	$	297,217	$	54,547	$	3,179
Non-performing		2,303		191		15		1,411		130		27
Total	$	325,200	$	54,251	$	3,239	$	298,628	$	54,677	$	3,206

6.    DEPOSITS

Total deposits at June 30, 2012 and December 31, 2011 are summarized as follows (in thousands):

	Percentage Change			June 30, 2012		December 31, 2011
Checking, non-interest bearing		6.8	%	$	163,153	$	152,732
Checking, interest bearing		1.4	%		310,155		305,960
Savings accounts		20.9	%		758,179		627,106
Certificates of deposit		(16.5	%)		223,934		268,053
		7.5	%	$	1,455,421	$	1,353,851

7.    EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per share is computed using the weighted average number of shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. For the three and six months ended June 30, 2012, 75,500 shares issuable pursuant to outstanding stock options under stock compensation plans were excluded from the diluted earnings per share calculations because the strike prices associated with the options exceeded the market price of the Corporation’s common stock thus making the shares anti-dilutive. For the three and six months ended June 30, 2011, 84,250 shares issuable pursuant to outstanding stock options were excluded from the diluted earnings per share calculations because the strike prices associated with the options exceeded the market price of the Corporation’s common stock thus making the shares anti-dilutive.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Corporation has determined that its outstanding non-vested stock awards are participating securities.

24

The computation of basic and diluted earnings per share is shown below (in thousands except per share data):

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income per consolidated statements of income	$	4,336		$	3,891		$	8,683		$	7,168
Net earnings allocated to participating securities		(17	)		(12	)		(33	)		(23	)
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,650		$	7,145
Basic earnings per common share computation:
Distributed earnings allocated to common stock	$	2,044		$	2,021		$	4,084		$	4,038
Undistributed earnings allocated to common stock		2,275			1,858			4,565			3,107
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,649		$	7,145
Weighted average common shares outstanding, including shares considered participating securities		12,440			12,291			12,421			12,277
Less: Average participating securities		(46	)		(36	)		(43	)		(37	)
Weighted average shares		12,394			12,255			12,378			12,240
Basic earnings per common share	$	0.35		$	0.32		$	0.70		$	0.58
Diluted earnings per common share computation:
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,650		$	7,145
Weighted average common shares outstanding for basic earnings per common share		12,394			12,255			12,378			12,240
Add: Dilutive effects of assumed exercises of stock options		3			6			3			7
Weighted average shares and dilutive potential common shares		12,397			12,261			12,381			12,247
Diluted earnings per common share	$	0.35		$	0.32		$	0.70		$	0.58

8.    DERIVATIVE INSTRUMENTS

The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as cash flow hedges, the effective portion of the changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified into earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Corporation assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction.

On August 1, 2008, the Corporation executed an interest rate swap agreement with a 5 year term and an effective date of September 15, 2008 in order to hedge $10 million of a subordinated note that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from August 1, 2008 to September 15, 2013 without exchange of the underlying notional amount. At June 30, 2012, the variable rate on the subordinated debt was 2.02% (LIBOR plus 155 basis points) and the Corporation was paying 5.84% (4.29% fixed rate plus 155 basis points).

25

In anticipation of the expiration of the 5 year interest rate swap agreement discussed immediately above, on May 3, 2011, the Corporation executed an interest rate swap agreement with a 5 year term and an effective date of September 15, 2013 which as of that effective date, will hedge $10 million of the subordinated note discussed immediately above. As with the prior interest rate swap agreement, the Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2013 to September 15, 2018 without exchange of the underlying notional amount. On the effective date, the variable rate on the subordinated debt will be LIBOR plus 155 basis points and the Corporation will be paying 5.57% (4.02% fixed rate plus 155 basis points).

As of June 30, 2012, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s consolidated balance sheet and statement of income as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Liability Derivative
		Fair value
	Balance Sheet Location	June 30, 2012			December 31, 2011
As of June 30, 2012:
Interest rate contracts	Accrued interest and other liabilities	($	1,779	)	($	1,669	)

For the Three Months Ended June 30, 2012	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	135	)	Interest expense – subordinated debentures	($	98	)	Other income		0

For the Six Months Ended June 30, 2012	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	72	)	Interest expense – subordinated debentures	($	192	)	Other income		0

For the Three Months Ended June 30, 2011	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	145	)	Interest expense – subordinated debentures	($	101	)	Other income	$	0

For the Six Months Ended June 30, 2011	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	78	)	Interest expense – subordinated debentures	($	201	)	Other income	$	0

(a) Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax

(b) Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(c) Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

26

(d) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

(e) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

Amounts reported in accumulated other comprehensive loss related to the interest rate swap will be reclassified to interest expense as interest payments are made on the subordinated debentures. Such amounts reclassified from accumulated other comprehensive loss to interest expense in the next twelve months are expected to be $372.

9.    RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued Accounting Standards Update No. 2011-4, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” Some amendments in this update clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this update are effective during interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In June 2011, the FASB issued Accounting Standards Update No. 2011-5, “Comprehensive Income (Topic 220), Presentation of Comprehensive Income.” This update amends the FASB Accounting Standards Codification (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and retrospective application is required. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.” The amendments in the update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than fifty percent. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In December 2011, the FASB issued Accounting Standards Update No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately within their respective components of net income and other comprehensive income. As such, the amendments in this update supersede only those paragraphs in Accounting Standards Update No. 2011-05 that pertain to how and where reclassification adjustments are presented. The amendments were effective at the same time as the amendments in Accounting Standards Update 2011-05. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

27

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial statements of CNB Financial Corporation (the “Corporation”) is presented to provide insight into management’s assessment of financial results. The Corporation’s principal subsidiary, CNB Bank (the “Bank”), provides financial services to individuals and businesses primarily within the Pennsylvania counties of Cambria, Cameron, Clearfield, Elk, Indiana, and McKean. It also includes a portion of western Centre County including Philipsburg Borough, Rush Township and the western portions of Snow Shoe and Burnside Townships and a portion of Jefferson County, consisting of the boroughs of Brockway, Falls Creek, Punxsutawney, Reynoldsville and Sykesville, and the townships of Washington, Winslow and Henderson. ERIEBANK, a division of CNB Bank, provides financial services to individuals and businesses in the northwestern Pennsylvania counties of Erie, Crawford, and Warren.

The Bank is subject to regulation, supervision and examination by the Pennsylvania State Department of Banking as well as the Federal Deposit Insurance Corporation. The financial condition and results of operations of the Corporation and its consolidated subsidiaries are not necessarily indicative of future performance. CNB Securities Corporation is incorporated in Delaware and currently maintains investments in debt and equity securities. County Reinsurance Company is an Arizona Corporation, and provides credit life and disability insurance for customers of CNB Bank. CNB Insurance Agency, incorporated in Pennsylvania, provides for the sale of nonproprietary annuities and other insurance products. Holiday Financial Services Corporation, incorporated in Pennsylvania, offers small balance unsecured loans and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics. When we use the terms “we”, “us” and “our”, we mean CNB Financial Corporation and its subsidiaries. Management’s discussion and analysis should be read in conjunction with the Corporation’s consolidated financial statements and related notes.

GENERAL OVERVIEW

The Bank expanded its ERIEBANK division by opening a full service office in Meadville, Pennsylvania in the second quarter of 2010, and the Corporation has obtained regulatory approval for a second Meadville location that is expected to open in the third quarter of 2012. In addition, a CNB Bank loan production office was opened in Indiana, Pennsylvania in the third quarter of 2011. A CNB Bank loan production office in Johnstown, Pennsylvania was closed in the third quarter of 2011. The Corporation is opening a ninth office for Holiday Financial Services Corporation in Dubois, Pennsylvania, in the third quarter of 2012. The Corporation also anticipates the purchase of a consumer discount company in Ebensburg, Pennsylvania during the third quarter of 2012, resulting in the acquisition of a loan portfolio of approximately $1 million with a purchase premium of $200 thousand. The Corporation will operate the acquired location as its tenth Holiday Financial Service Corporation office.

Management believes that the Corporation’s ERIEBANK division, along with the traditional CNB Bank and Holiday Financial Services Corporation market areas, should provide the Bank with sustained loan and deposit growth during the remainder of 2012. Loan growth and deposit growth were $57 million and $101 million, respectively, during the six months ended June 30, 2012.

Management concentrates on return on average equity and earnings per share metrics, plus other metrics, to measure the performance of the Corporation. The interest rate environment will continue to play an important role in the future earnings of the Corporation. Some compression of the net interest margin was experienced in 2011 and the net interest margin has decreased 8 basis points in the first six months of 2012 as a result of the current interest rate environment. During the past several years, measures have been taken such as instituting rate floors on our commercial lines of credit and home equity lines as a result of the historic lows on various key interest rates such as the Prime Rate and 3-month LIBOR. In addition, interest rates were decreased on certain deposit products during 2011 and the first six months of 2012. Non-interest costs are expected to increase with the growth of the Corporation; however, management’s growth strategies are expected to result in an increase in earning assets as well as enhanced non-interest income which is expected to more than offset increases in non-interest expenses in 2012 and beyond. While past results are not an indication of future earnings, management believes the Corporation is well-positioned to sustain core earnings during 2012.

On July 21, 2010, the Dodd-Frank Wall Street and Consumer Protection Act (the “Dodd-Frank Act”) was enacted and this law could impact the performance of the Corporation in future periods. The Dodd-Frank Act includes numerous provisions designed to strengthen the financial industry, enhance consumer protection, expand disclosures and provide for transparency. Some of these provisions included changes to FDIC insurance coverage, which has now been increased to $250,000. Additional provisions created a Consumer Financial Protection Bureau, which is authorized to write rules on all consumer

28

financial products, and a Financial Services Oversight Council, which is empowered to determine which entities are systematically significant and require tougher regulations and is charged with reviewing, and when appropriate, submitting comments to the Securities and Exchange Commission and Financial Accounting Standards Board with respect to existing or proposed accounting principles, standards or procedures. Although the aforementioned provisions are only a few of the numerous ones included in the Dodd-Frank Act, the full impact of the entire Dodd-Frank Act will not be known until the full implementation is completed.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents totaled $24.2 million at June 30, 2012 compared to $39.7 million at December 31, 2011. Cash and cash equivalents fluctuate based on the timing and amount of liquidity events that occur in the normal course of business.

Management believes the liquidity needs of the Corporation are satisfied by the current balance of cash and cash equivalents, readily available access to traditional funding sources, and the portion of the investment and loan portfolios that mature within one year. These sources of funds will enable the Corporation to meet cash obligations and off-balance sheet commitments as they come due.

SECURITIES

Securities available for sale and trading securities have combined to increase $77.7 million or 12.1% since December 31, 2011. The increase is primarily due to the purchases of residential mortgage and asset backed securities issued by government sponsored entities and resulted from deposit growth not reinvested in loans. See the notes to the consolidated financial statements for additional detail concerning the composition of the Corporation’s securities portfolio and the process for evaluating securities for other-than-temporary impairment.

The Corporation generally buys into the market over time and does not attempt to “time” its transactions. In doing this, the highs and lows of the market are averaged into the portfolio and minimize the overall effect of different rate environments. Management monitors the earnings performance and the effectiveness of the liquidity of the securities portfolio on a regular basis through meetings of the Asset/Liability Committee of the Corporation’s Board of Directors (“ALCO”). The ALCO also reviews and manages interest rate risk for the Corporation. Through active balance sheet management and analysis of the securities portfolio, a sufficient level of liquidity is maintained to satisfy depositor requirements and various credit needs of our customers.

LOANS

The Corporation experienced an increase in loans, net of unearned discount, of $56.9 million, or 6.7%, during the first six months of 2012. Lending efforts are focused in the west, central and northwest Pennsylvania markets and consists principally of commercial and retail lending, which includes single family residential mortgages and other consumer loans. The Corporation views commercial lending as its competitive advantage and continues to focus on this area by hiring and retaining experienced loan officers and supporting them with quality credit analysis. The Corporation expects sustained loan demand throughout the remainder of 2012.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established by provisions for losses in the loan portfolio as well as overdrafts in deposit accounts. These provisions are charged against current income. Loans and overdrafts deemed not collectible are charged off against the allowance while any subsequent collections are recorded as recoveries and increase the allowance.

29

The table below shows activity within the allowance account for the specified periods (in thousands):

	Six months ending June 30, 2012			Year ending December 31, 2011			Six months ending June 30, 2011
Balance at beginning of period	$	12,615		$	10,820		$	10,820
Charge-offs:
Commercial, industrial, and agricultural		647			1,796			215
Commercial mortgages		236			175			88
Residential real estate		224			217			77
Consumer		638			907			462
Credit cards		33			39			25
Overdrafts		117			222			115
		1,895			3,356			982
Recoveries:
Commercial, industrial, and agricultural		8			9			4
Commercial mortgages		—			—			—
Residential real estate		—			13			—
Consumer		49			88			45
Credit cards		7			10			5
Overdraft deposit accounts		56			94			54
		120			214			108
Net charge-offs		(1,775	)		(3,142	)		(874	)
Provision for loan losses		2,850			4,937			1,769
Balance at end of period	$	13,690		$	12,615		$	11,715
Loans, net of unearned	$	906,767		$	849,883		$	821,787
Allowance to net loans		1.51	%		1.48	%		1.43	%
Net charge-offs to average loans (annualized)		0.41	%		0.38	%		0.22	%
Nonperforming assets	$	18,519		$	17,513		$	18,368
Nonperforming % of total assets		1.08	%		1.09	%		1.23	%

The adequacy of the allowance for loan losses is subject to a formal analysis by the credit administrator of the Corporation. As part of the formal analysis, delinquencies and losses are monitored monthly. The loan portfolio is divided into several categories in order to better analyze the entire pool. First is a selection of classified loans that is given a specific reserve. The remaining loans are pooled, by category, into these segments:

Reviewed

• Commercial, industrial, and agricultural

• Commercial mortgages

Homogeneous

• Residential real estate

• Consumer

• Credit cards

• Overdrafts

The reviewed loan pools are further segregated into four categories: special mention, substandard, doubtful, and unclassified. Historical loss factors are calculated for each pool excluding overdrafts based on the previous eight quarters of experience. The homogeneous pools are evaluated by analyzing the historical loss factors from the most previous quarter end and the two most recent year ends.

30

The historical loss factors for both the reviewed and homogeneous pools are adjusted based on these six qualitative factors:

• levels of and trends in delinquencies, non-accrual loans, and classified loans;

• trends in volume and terms of loans;

• effects of any changes in lending policies and procedures;

• experience, ability and depth of management;

• national and local economic trends and conditions; and

• concentrations of credit.

The methodology described above was created using the experience of the Corporation’s credit administrator, guidance from the regulatory agencies, expertise of a third-party loan review provider, and discussions with peers. The resulting factors are applied to the pool balances in order to estimate the probable risk of loss within each pool. Prudent business practices dictate that the level of the allowance, as well as corresponding charges to the provision for loan losses, should be commensurate with identified areas of risk within the loan portfolio and the attendant risks inherent therein. The quality of the credit risk management function and the overall administration of this vital segment of the Corporation’s assets are critical to the ongoing success of the Corporation.

The previously mentioned analysis considered numerous historical and other factors to analyze the adequacy of the allowance and current period charges against the provision for loan losses. Management paid special attention to a section of the analysis that compared and plotted the actual level of the allowance against the aggregate amount of loans adversely classified in order to compute the estimated probable losses associated with those loans. By noting the “spread” at the present time, as well as prior periods, management determines the current adequacy of the allowance as well as evaluates trends that may be developing. The volume and composition of the Corporation’s loan portfolio continue to reflect growth in commercial credits including commercial real estate loans.

As mentioned in the Loans section of this analysis, management considers commercial lending to be a competitive advantage and continues to focus on this area as part of its strategic growth initiatives. However, management must also consider the fact that the inherent risk is more pronounced in these types of credits and is also driven by the economic environment within its market areas.

During the six months ended June 30, 2012, the Corporation recorded a provision for loan losses of $2.9 million, as compared to a provision for loan losses of $1.8 million for the six months ended June 30, 2011. The increase was a result of increases in loss reserves, primarily in the commercial loan portfolio. One relationship comprising two commercial loans which became impaired in 2011 necessitated an additional loss reserve of $360 thousand in the first quarter of 2012 as a result of the revision in the valuation estimate of the loan collateral. Charge-offs attributable to this loan relationship totaled $600 thousand during the six months ended June 30, 2012, which was the primary factor in the increase in net loan charge-offs from $874 thousand during the six months ended June 30, 2011 to $1.8 million during the six months ended June 30, 2012.

In May 2012, CNB management determined that one relationship comprising commercial loans totaling $2.4 million and two consumer loans totaling $200 thousand became impaired. As of March 31, 2012, the loan relationship was not deemed to be a criticized or classified loan under applicable regulatory guidelines or CNB’s internal loan policies. CNB charged off the balances of the consumer loans and recorded a specific allocation of $1.1 million for the commercial loans based on CNB’s evaluation of the borrowers’ ability and willingness to repay the loan. As a result, the provision for loan losses during the quarter ended June 30, 2012 increased by $1.3 million. It is possible that further deterioration with respect to the loan relationship may occur in the future.

Management believes that the allowance for loan losses is reasonable and adequate to absorb probable incurred losses in its portfolio at June 30, 2012.

31

FUNDING SOURCES

The Corporation considers deposits, short-term borrowings, and term debt when evaluating funding sources. Traditional deposits continue to be the main source of funds in the Corporation, increasing $101 million from $1.35 billion at December 31, 2011 to $1.46 billion at June 30, 2012. The growth in deposits was primarily due to increases in savings accounts of $131 million over this period as a result of the Corporation’s marketing of a savings product which carries an annual percentage yield which is highly competitive in the current interest rate environment. This increase in savings accounts was offset by an expected decrease in time deposits of $44 million as customers who previously held certificates of deposit migrated to the savings product.

Periodically, the Corporation utilizes term borrowings from the Federal Home Loan Bank (“FHLB”) and other lenders to meet funding needs. Management plans to maintain access to short-term and long-term borrowings as an available funding source when deemed appropriate.

SHAREHOLDERS’ EQUITY AND CAPITAL RATIOS AND METRICS

The Corporation’s capital continued to provide a base for profitable growth through June 30, 2012. Total shareholders’ equity was $139.6 million at June 30, 2012 and $131.9 million at December 31, 2011. In the first six months of 2012, the Corporation earned $8.7 million and declared dividends of $4.1 million, a dividend payout ratio of 47.2% of net income. The Corporation has also complied with the standards of capital adequacy mandated by the banking regulators. Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, or 100% (highest risk assets) is assigned to each asset on the balance sheet.

The Corporation’s capital ratios, book value per share and tangible book value per share as of June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012			December 31, 2011
Total risk-based capital ratio		15.04	%		15.14	%
Tier 1 capital ratio		13.79	%		13.89	%
Leverage ratio		7.90	%		8.22	%
Tangible common equity/tangible assets (1)		7.53	%		7.61	%
Book value per share	$	11.23		$	10.66
Tangible book value per share (1)		10.36			9.78

(1) Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill from the calculation of shareholders’ equity. Tangible assets is calculated by excluding the balance of goodwill from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. The Corporation believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition because they are additional measures used to assess capital adequacy. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

	June 30, 2012			December 31, 2011
Shareholders’ equity	$	139,647		$	131,889
Less goodwill		10,821			10,821
Tangible common equity	$	128,826		$	121,068
Total assets	$	1,721,020		$	1,602,207
Less goodwill		10,821			10,821
Tangible assets	$	1,710,199		$	1,591,386
Ending shares outstanding		12,440,423			12,377,318
Tangible book value per share	$	10.36		$	9.78
Tangible common equity/tangible assets		7.53	%		7.61	%

32

LIQUIDITY

Liquidity measures an organization’s ability to meet cash obligations as they come due. The consolidated statement of cash flows provides analysis of the Corporation’s cash and cash equivalents. Additionally, management considers that portion of the loan and investment portfolio that matures within one year to be part of the Corporation’s liquid assets. The Corporation’s liquidity is monitored by both management and the ALCO, which establishes and monitors ranges of acceptable liquidity. Management believes the Corporation’s current liquidity position is acceptable.

OFF BALANCE SHEET ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs. The contractual amount of financial instruments with off-balance sheet risk was as follows at June 30, 2012 (in thousands):

Commitments to extend credit	$	231,537
Standby letters of credit		22,008
	$	253,545

33

CONSOLIDATED YIELD COMPARISONS

AVERAGE BALANCES AND NET INTEREST MARGIN FOR THE SIX MONTHS ENDED

Dollars in thousands

	June 30, 2012								June 30, 2011
	Average Balance			Annual Rate			Interest Inc./Exp.		Average Balance			Annual Rate			Interest Inc./Exp.
ASSETS:
Interest-bearing deposits with other banks	$	3,920			0.05	%	$	—	$	15,741			1.04	%	$	82
Securities:
Taxable (1)		599,088			2.59	%		7,575		462,710			3.00	%		6,951
Tax-Exempt (1,2)		111,607			5.00	%		2,641		79,828			5.17	%		2,057
Equity Securities (1,2)		2,541			3.31	%		42		1,666			2.43	%		20
Total securities		713,236			2.96	%		10,258		544,204			3.32	%		9,028
Loans:
Commercial (2)		293,703			5.01	%		7,359		277,139			5.21	%		7,214
Mortgage (2)		527,499			5.42	%		14,299		474,594			5.72	%		13,582
Consumer		51,110			12.77	%		3,264		49,757			12.69	%		3,157
Total loans (3)		872,312			5.71	%		24,922		801,490			5.98	%		23,953
Total earning assets		1,589,468			4.48	%	$	35,180		1,361,435			4.86	%	$	33,063
Non interest-bearing assets:
Cash and due from banks		27,911								33,408
Premises and equipment		24,043								24,420
Other assets		55,130								58,049
Allowance for loan losses		(13,049	)							(11,332	)
Total non interest-bearing assets		94,035								104,545
TOTAL ASSETS	$	1,683,503							$	1,465,980
LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand – interest-bearing	$	300,482			0.54	%		809	$	288,874			0.83	%		1,202
Savings		713,618			0.91	%		3,246		434,867			1.15	%		2,503
Time		241,423			1.69	%		2,040		354,966			1.82	%		3,231
Total interest-bearing deposits		1,255,523			0.97	%		6,095		1,078,707			1.29	%		6,936
Short-term borrowings		12,539			0.11	%		7		16,975			0.31	%		26
Long-term borrowings		74,410			4.24	%		1,577		73,971			4.19	%		1,551
Subordinated debentures		20,620			3.89	%		401		20,620			3.75	%		387
Total interest-bearing liabilities		1,363,092			1.19	%	$	8,080		1,190,273			1.50	%	$	8,900
Demand – non interest-bearing		161,363								145,661
Other liabilities		22,298								14,804
Total liabilities		1,546,753								1,350,738
Shareholders’ equity		136,750								115,242
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,683,503							$	1,465,980
Interest income/Earning assets					4.48	%	$	35,180					4.86	%	$	33,063
Interest expense/Interest-bearing liabilities					1.19	%		8,080					1.50	%		8,900
Net interest spread					3.29	%	$	27,100					3.36	%	$	24,163
Interest income/Earning assets					4.48	%		35,180					4.86	%		33,063
Interest expense/Earning assets					1.01	%		8,080					1.31	%		8,900
Net interest margin					3.47	%	$	27,100					3.55	%	$	24,163

(1) Includes unamortized discounts and premiums. Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for available for sale securities.

(2) Average yields are stated on a fully taxable equivalent basis.

(3) Average outstanding includes the average balance outstanding of all non-accrual loans. Loans consist of the average of total loans less average unearned income. The amount of loan fees included in the interest income on loans is not material.

34

RESULTS OF OPERATIONS

Three Months Ended June 30, 2012 and 2011

OVERVIEW OF THE INCOME STATEMENT

The Corporation had net income of $4.3 million in the second quarter of 2012 compared to $3.9 million for the same period of 2011. The earnings per diluted share were $0.35 in the second quarter of 2012 and $0.32 in the second quarter of 2011.

INTEREST INCOME AND EXPENSE

Net interest income totaled $13.3 million, an increase of $1.4 million, or 11.4%, over the second quarter of 2011. Total interest and dividend income increased by $79 thousand, or 4.8%, as compared to the second quarter of 2011. Although the Corporation’s earning assets continue to grow, these increases have been offset by decreases in the yield on earning assets, primarily because the composition of earning assets has shifted to a greater percentage of investment securities as deposit growth has exceeded loan growth. Total interest expense decreased $572 thousand, or 12.7%, as compared to the second quarter of 2011 due to decreases in the cost of core deposits.

PROVISION FOR LOAN LOSSES

The Corporation recorded a provision for loan losses of $1.7 million in the second quarter of 2012 compared to $992 thousand in the second quarter of 2011. As disclosed in the Allowance for Loan Losses section of Management’s Discussion and Analysis, the Corporation increased its loan loss reserves in the commercial loan portfolio during the second quarter of 2012. In addition, total net loan chargeoffs were $1.1 million in the second quarter of 2012 compared to $501 thousand in the second quarter of 2011.

Management believes the provision for loan losses was appropriate and the allowance for loan losses is adequate to absorb probable incurred losses in our portfolio as of June 30, 2012.

NON-INTEREST INCOME

Excluding the effects of the securities transactions described below, non-interest income was $2.7 million for the three months ended June 30, 2012, compared to $2.6 million for the three months ended June 30, 2011. Net realized gains on available-for-sale securities were $731 thousand during the three months ended June 30, 2012, and there were no net realized gains or losses during the three months ended June 30, 2011. Net realized and unrealized losses on securities for which fair value accounting was elected were ($140) thousand and ($16) thousand during the three months ended June 30, 2012 and 2011, respectively.

NON-INTEREST EXPENSES

Total non-interest expenses increased $692 thousand, or 8.5%, during the three months ended June 30, 2012 compared to the three months ended June 30, 2011. Salaries and benefits expenses increased $422 thousand, or 10.1%, during the three months ended June 30, 2012 compared to the three months ended March 31, 2011, in part due to routine merit increases, an increase in average full-time equivalent employees, and increases in certain employee benefit expenses, such as health insurance premiums, which continue to increase in line with market conditions.

Total non-interest expenses on an annualized basis in relation to CNB’s average asset size declined from 2.19% for the three months ended June 30, 2011 to 2.06% for the three months ended June 30, 2012.

35

INCOME TAX EXPENSE

Income tax expense was $1.6 million in the second quarter of 2012 as compared to $1.5 million in the second quarter of 2011, resulting in effective tax rates of 27.2% and 27.9% for the periods, respectively. The effective rates for the periods differed from the federal statutory rate of 35.0% principally as a result of tax exempt income from securities and loans as well as earnings from bank owned life insurance.

Six Months Ended June 30, 2012 and 2011

OVERVIEW OF THE INCOME STATEMENT

The Corporation had net income of $8.7 million for the six months ended June 30, 2012 compared to $7.2 million for the same period of 2011. The earnings per diluted share was $0.70 for the six months ended June 30, 2012 and $0.58 for the six months ended June 30, 2011. The return on assets and return on equity for the six months ended June 30, 2012 are 1.03% and 12.70%, respectively, compared to 0.98% and 12.44%, respectively, for the same period of 2011.

INTEREST INCOME AND EXPENSE

During the six months ended June 30, 2012, net interest income increased $2.7 million, or 11.8%, compared to the comparable period in 2011. The Corporation’s net interest margin on a fully tax equivalent basis was 3.47% for the six months ended June 30, 2012, compared to 3.55% for the comparable period in 2011.

Although the Corporation’s earning assets continue to grow, these increases have been offset by decreases in the yield on earning assets, primarily because the composition of earning assets has shifted to a greater percentage of investment securities as deposit growth has exceeded loan growth. During the six months ended June 30, 2012, total interest expense decreased $820 thousand, or 9.2%, as compared to the comparable period in 2011 due to decreases in the cost of core deposits.

PROVISION FOR LOAN LOSSES

The Corporation recorded a provision for loan losses of $2.9 million during the six months ended June 30, 2012 compared to $1.8 million for the comparable period of 2011. As disclosed in the Allowance for Loan Losses section of Management’s Discussion and Analysis, the Corporation increased its loan loss reserves in the commercial loan portfolio during the first six months of 2012. In addition, total net loan chargeoffs were $1.8 million in the first six months of 2012 compared to $874 thousand for the comparable period of 2011.

Management believes the provision for loan losses was appropriate and the allowance for loan losses is adequate to absorb probable incurred losses in our portfolio as of June 30, 2012.

NON-INTEREST INCOME

Excluding the effects of the securities transactions described below, non-interest income was $5.2 million for the six months ended June 30, 2012, compared to $5.0 million for the six months ended June 30, 2011. Net realized gains on available-for-sale securities were $1.3 million during the six months ended June 30, 2012, compared to $74 thousand during the six months ended June 30, 2011. Net realized and unrealized gains on securities for which fair value accounting was elected were $180 thousand and $97 thousand during the six months ended June 30, 2012 and 2011, respectively. An other-than-temporary impairment charge of $398 thousand was recorded in earnings on structured pooled trust preferred securities during the six months ended June 30, 2011.

NON-INTEREST EXPENSES

Total non-interest expenses increased $1.4 million, or 8.6%, during the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Salaries and benefits expenses increased $904 thousand, or 10.7%, during the six months

36

ended June 30, 2012 compared to the six months ended June 30, 2011, in part due to routine merit increases, an increase in average full-time equivalent employees, and increases in certain employee benefit expenses, such as health insurance premiums, which continue to increase in line with market conditions. In addition, other non-interest expenses increased from $5.0 million for the six months ended June 30, 2011 to $5.7 million for the six months ended June, 2012 as a result of the Corporation’s continued growth.

Total non-interest expenses on an annualized basis in relation to CNB’s average asset size declined from 2.24% for the six months ended June 30, 2011 to 2.12% for the six months ended June 30, 2012.

INCOME TAX EXPENSE

Income tax expense was $3.3 million for the six months ended June 30, 2012 as compared to $2.6 million for the six months ended June 30 2011, resulting in effective tax rates of 27.2% and 27.0% for the periods, respectively. The effective rates for the periods differed from the federal statutory rate of 35.0% principally as a result of tax exempt income from securities and loans as well as earnings from bank owned life insurance.

CRITICAL ACCOUNTING POLICIES

The Corporation’s accounting and reporting policies are in accordance with GAAP and conform to general practices within the financial services industry. Accounting and reporting practices for the allowance for loan losses and fair value of securities are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by management could result in material changes in the Corporation’s financial position or results of operations. Note 1 (Summary of Significant Accounting Policies), Note 3 (Securities), and Note 4 (Loans), of the Corporation’s 2011 Form 10-K, provide detail with regard to the Corporation’s accounting for the allowance for loan losses and fair value of securities. There have been no significant changes in the application of accounting policies since December 31, 2011.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a financial institution, the Corporation’s primary source of market risk is interest rate risk, which is the exposure to fluctuations in the Corporation’s future earnings resulting from changes in interest rates. This exposure is correlated to the repricing characteristics of the Corporation’s portfolio of assets and liabilities. Each asset or liability reprices either at maturity or during the life of the instrument.

The principal purpose of asset/liability management is to maximize current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements. Net interest income is enhanced by increasing the net interest margin and by the growth in earning assets. As a result, the primary goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at an acceptable level.

The Corporation uses an asset-liability management model to measure the effect of interest rate changes on its net interest income. The Corporation’s management also reviews asset-liability maturity gap and repricing analyses regularly. The Corporation does not always attempt to achieve a precise match between interest sensitive assets and liabilities because it believes that an actively managed amount of interest rate risk is inherent and appropriate in the management of the Corporation’s profitability.

Asset-liability modeling techniques and simulation involve assumptions and estimates that inherently cannot be measured with precision. Key assumptions in these analyses include maturity and repricing characteristics of assets and liabilities, prepayments on amortizing assets, non-maturing deposit sensitivity, and loan and deposit pricing. These assumptions are inherently uncertain due to the timing, magnitude, and frequency of rate changes and changes in market conditions and management strategies, among other factors. However, the analyses are useful in quantifying risk and provide a relative gauge of the Corporation’s interest rate risk position over time.

37

Management reviews interest rate risk on a quarterly basis and reports to the ALCO. This review includes earnings shock scenarios whereby interest rates are immediately increased and decreased by 100, 300, and 400 basis points. These scenarios, detailed in the table below, indicate that there would not be a significant variance in net interest income over a one-year period due to interest rate changes; however, actual results could vary significantly. At June 30, 2012 and December 31, 2011, all interest rate risk levels according to the model were within the tolerance limits of ALCO approved policy of +/- 25%. In addition, the table does not take into consideration changes that management would make to realign its assets and liabilities in the event of an unexpected changing interest rate environment. Due to the historically low interest rate environment, the -300 and -400 scenarios have been excluded from the table.

June 30, 2012				December 31, 2011
Change in Basis Points	% Change in Net Interest Income			Change in Basis Points	% Change in Net Interest Income
400		2.9	%	400		-2.3	%
300		3.7	%	300		-0.1	%
100		3.1	%	100		1.5	%
(100)		-1.8	%	(100)		-5.5	%

ITEM 4

CONTROLS AND PROCEDURES

As of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) (“Exchange Act”). Based on their evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that the Corporation’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no changes in the Corporation’s internal control over financial reporting that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

38

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS – None

ITEM 1A. RISK FACTORS – There have been no material changes to the risk factors disclosed in Part I, Item 1A. of the 2011 Form 10-K.

ITEM 6. EXHIBITS

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of the Corporation, filed as Appendix B to the 2005 Proxy Statement, filed with the SEC on March 24, 2006, and incorporated herein by reference.
3.2	By-Laws of the Corporation, as amended and restated, filed as Appendix C to the 2005 Proxy Statement, filed with the SEC on March 24, 2006, and incorporated herein by reference.
31.1	Rule 13a – 14(a)/15d – 14(a) Certification of the Principal Executive Officer
31.2	Rule 13a – 14(a)/15d – 14(a) Certification of the Principal Financial Officer
32.1	Section 1350 Certification
32.2	Section 1350 Certification
101	The following financial information from the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, furnished electronically herewith, and formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.*

* In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CNB FINANCIAL CORPORATION                     (Registrant)
DATE: August 9, 2012	/s/ Joseph B. Bower, Jr.
	Joseph B. Bower, Jr.
	President and Director (Principal Executive Officer)
DATE: August 9, 2012	/s/ Brian W. Wingard
	Brian W. Wingard
	Treasurer (Principal Financial Officer)

40

EXHIBIT INDEX

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of the Corporation, filed as Appendix B to the 2005 Proxy Statement, filed with the SEC on March 24, 2006, and incorporated herein by reference.
3.2	By-Laws of the Corporation, as amended and restated, filed as Appendix C to the 2005 Proxy Statement, filed with the SEC on March 24, 2006, and incorporated herein by reference.
31.1	Rule 13a – 14(a)/15d – 14(a) Certification of the Principal Executive Officer
31.2	Rule 13a – 14(a)/15d – 14(a) Certification of the Principal Financial Officer
32.1	Section 1350 Certification
32.2	Section 1350 Certification
101	The following financial information from the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, furnished electronically herewith, and formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.*

* In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

41

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Joseph B. Bower, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of CNB Financial Corporation.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012

/s/ Joseph B. Bower, Jr.

Joseph B. Bower, Jr.

President

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Brian W. Wingard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CNB Financial Corporation.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012

/s/ Brian W. Wingard

Brian W. Wingard

Treasurer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATE

As required by 18 U.S.C. 1350, the undersigned certifies that this Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the issuer.

/s/ Joseph B. Bower, Jr.

Joseph B. Bower, Jr.

President and Director

(Principal Executive Officer)

Dated: August 9, 2012

EX-32.2

Exhibit 32.2

CERTIFICATE

As required by 18 U.S.C. 1350, the undersigned certifies that this Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the issuer.

/s/ Brian W. Wingard

Brian W. Wingard

Treasurer

(Principal Financial Officer)

Dated: August 9, 2012

XML

Securities (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Securities available for sale
Proceeds from sales of securities	$ 46,468	$ 0	$ 88,617	$ 23,610
Gross Gains	810	0	1,446	146
Gross Losses	$ (79)	$ 0	$ (149)	$ (72)

XML

Earnings Per Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share (Textual) [Abstract]
Antidilutive shares excluded from the diluted earnings per share calculations	0	84,250	0	84,250
Shares issuable under stock options plans	75,500		75,500

XML

Loans (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	$ 526,910	$ 495,835
Pass [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	486,857	437,555
Special Mention [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	2,951	7,348
Substandard [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	36,213	50,003
Doubtful [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	889	929
Commercial industrial and agricultural [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	266,122	253,324
Commercial industrial and agricultural [Member] | Pass [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	250,151	223,457
Commercial industrial and agricultural [Member] | Special Mention [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	1,566	4,176
Commercial industrial and agricultural [Member] | Substandard [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	14,228	25,490
Commercial industrial and agricultural [Member] | Doubtful [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	177	201
Commercial mortgages [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	260,788	242,511
Commercial mortgages [Member] | Pass [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	236,706	214,098
Commercial mortgages [Member] | Special Mention [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	1,385	3,172
Commercial mortgages [Member] | Substandard [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	21,985	24,513
Commercial mortgages [Member] | Doubtful [Member]
Schedule of loan assigned a risk rating within 12 months of the balance sheet date
Financing receivable recorded investment	$ 712	$ 728

XML

Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	3 Months Ended		6 Months Ended				3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012 Interest rate swap [Member]	Jun. 30, 2011 Interest rate swap [Member]	Jun. 30, 2012 Interest rate swap [Member]	Jun. 30, 2011 Interest rate swap [Member]	Jun. 30, 2012 Interest rate swap [Member] Accrued Interest Payable and Other Liabilities [Member]	Dec. 31, 2011 Interest rate swap [Member] Accrued Interest Payable and Other Liabilities [Member]	Jun. 30, 2012 Interest rate swap [Member] Interest Expense Subordinated Debentures [Member]	Jun. 30, 2011 Interest rate swap [Member] Interest Expense Subordinated Debentures [Member]	Jun. 30, 2012 Interest rate swap [Member] Interest Expense Subordinated Debentures [Member]	Jun. 30, 2011 Interest rate swap [Member] Interest Expense Subordinated Debentures [Member]	Jun. 30, 2012 Interest rate swap [Member] Other Income [Member]	Jun. 30, 2011 Interest rate swap [Member] Other Income [Member]	Jun. 30, 2012 Interest rate swap [Member] Other Income [Member]	Jun. 30, 2011 Interest rate swap [Member] Other Income [Member]
Amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation's consolidated balance sheet and statement of income
Interest expense, Fair Value	$ 394							$ (98)	$ (101)	$ (192)	$ (201)
Interest rate contract		(135)	(145)	(72)	(78)
Interest Rate Derivative Liabilities, at Fair Value	(1,779)					(1,779)	(1,669)
Other income												$ 0	$ 0	$ 0	$ 0

XML

Loans (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment
Nonaccrual	$ 18,109	$ 16,567
Past Due Over 90 Days Still on Accrual	284	441
Commercial industrial and agricultural [Member]
Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment
Nonaccrual	7,354	6,949
Past Due Over 90 Days Still on Accrual	0	10
Commercial mortgages [Member]
Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment
Nonaccrual	8,530	8,359
Past Due Over 90 Days Still on Accrual	0	122
Residential real estate [Member]
Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment
Nonaccrual	2,221	1,254
Past Due Over 90 Days Still on Accrual	82	157
Consumer [Member]
Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment
Nonaccrual	4	5
Past Due Over 90 Days Still on Accrual	187	125
Credit cards [Member]
Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment
Nonaccrual	0	0
Past Due Over 90 Days Still on Accrual	$ 15	$ 27

XML

Fair Value (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Carrying amount and fair value of financial instruments
Cash and cash equivalents	$ 24,228	$ 39,703	$ 43,617	$ 37,432
Interest bearing time deposits with other banks	275	224
Securities available for sale	715,452	638,107
Trading securities	3,560	3,233
Loans held for sale	1,499	1,442
Net loans	893,077	837,268
FHLB and other equity interests	6,848	6,537
Deposits	1,455,421	1,353,851
Subordinated debentures	20,620	20,620
Interest rate swap	(1,779)
Carrying Amount [Member]
Carrying amount and fair value of financial instruments
Cash and cash equivalents	24,228	39,703
Interest bearing time deposits with other banks	275	224
Securities available for sale	715,452	638,107
Trading securities	3,560	3,233
Loans held for sale	1,499	1,442
Net loans	893,077	837,268
FHLB and other equity interests	6,848	6,537
Accrued interest receivable	6,903	6,567
Deposits	(1,455,421)	(1,353,851)
FHLB and other borrowings	(82,182)	(74,456)
Subordinated debentures	(20,620)	(20,620)
Interest rate swap	(1,779)	(1,669)
Accrued interest payable	(1,121)	(1,308)
Fair Value [Member]
Carrying amount and fair value of financial instruments
Cash and cash equivalents	24,228	39,703
Interest bearing time deposits with other banks	281	229
Securities available for sale	715,452	638,107
Trading securities	3,560	3,233
Loans held for sale	1,554	1,470
Net loans	918,918	862,389
FHLB and other equity interests		0
Accrued interest receivable	6,903	6,567
Deposits	(1,458,529)	(1,357,415)
FHLB and other borrowings	(91,059)	(83,042)
Subordinated debentures	(10,865)	(10,906)
Interest rate swap	(1,779)	(1,669)
Accrued interest payable	(1,121)	(1,308)
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Carrying amount and fair value of financial instruments
Cash and cash equivalents	24,228
Interest bearing time deposits with other banks	0
Securities available for sale	49,574	62,832
Trading securities	3,403	3,078
Loans held for sale	0
Net loans	0
FHLB and other equity interests
Accrued interest receivable	264
Deposits	(1,231,487)
FHLB and other borrowings	0
Subordinated debentures	0
Interest rate swap	0	0
Accrued interest payable	(321)
Significant Other Observable Inputs (Level 2) [Member]
Carrying amount and fair value of financial instruments
Cash and cash equivalents	0
Interest bearing time deposits with other banks	281
Securities available for sale	663,447	572,875
Trading securities	157	155
Loans held for sale	1,554
Net loans	0
FHLB and other equity interests
Accrued interest receivable	3,527
Deposits	(227,042)
FHLB and other borrowings	(91,059)
Subordinated debentures	0
Interest rate swap	(1,779)
Accrued interest payable	(783)
Significant Unobservable Inputs (Level 3) [Member]
Carrying amount and fair value of financial instruments
Cash and cash equivalents	0
Interest bearing time deposits with other banks	0
Securities available for sale	2,431	2,400
Trading securities	0	0
Loans held for sale	0
Net loans	918,918
FHLB and other equity interests
Accrued interest receivable	3,112
Deposits	0
FHLB and other borrowings	0
Subordinated debentures	(10,865)
Interest rate swap	0	0
Accrued interest payable	$ (17)

XML

Stock Compensation (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Summary of changes in nonvested restricted stock awards
Nonvested at beginning of period, Shares	52,829	35,613
Granted, Shares	0	26,900
Vested, Shares	0	(9,684)
Forfeited, Shares	0	0
Nonvested at beginning of period, Weighted Average Grant Date Fair Value	$ 15.39	$ 15.08
Granted, Weighted Average Grant Date Fair Value	$ 0	$ 15.57
Vested, Weighted Average Grant Date Fair Value	$ 0	$ 14.77
Forfeited, Weighted Average Grant Date Fair Value	$ 0	$ 0
Nonvested at end of period, Weighted Average Grant Date Fair Value	$ 15.39	$ 15.39
Nonvested at end of period, Shares	52,829	52,829

XML

Loans (Details 8) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Recorded investment in residential and consumer loan based on payment activity
Residential real estate	$ 325,200	$ 298,628
Consumer	54,251	54,677
Credit Cards	3,239	3,206
Performing Financing Receivable [Member]
Recorded investment in residential and consumer loan based on payment activity
Residential real estate	322,897	297,217
Consumer	54,060	54,547
Credit Cards	3,224	3,179
Nonperforming Financing Receivable [Member]
Recorded investment in residential and consumer loan based on payment activity
Residential real estate	2,303	1,411
Consumer	191	130
Credit Cards	$ 15	$ 27

XML

Loans (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of net loans
Commercial, industrial, and agricultural	$ 266,122	$ 253,324
Commercial mortgages	260,788	242,511
Residential real estate	325,200	298,628
Consumer	54,251	54,677
Credit cards	3,239	3,206
Overdrafts	284	423
Less: unearned discount	(3,117)	(2,886)
Less: allowance for loan losses	(13,690)	(12,615)
Net loans	$ 893,077	$ 837,268

XML

Securities (Details 2 ) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	$ 57,822	$ 60,610
Less than 12 Months, Unrealized Loss	(398)	(485)
12 Months or More, Fair Value	12,186	18,666
12 Months or More, Unrealized Loss	(3,403)	(3,921)
Total, Fair Value	70,008	79,276
Total, Unrealized Loss	(3,801)	(4,406)
U.S. Treasury [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Loss	0	0
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Loss	0	0
Total, Fair Value	0	0
Total, Unrealized Loss	0	0
U.S. Government sponsored entities [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	5,989	7,671
Less than 12 Months, Unrealized Loss	(9)	(15)
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Loss	0	0
Total, Fair Value	5,989	7,671
Total, Unrealized Loss	(9)	(15)
States and political subdivisions [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	5,046	5,314
Less than 12 Months, Unrealized Loss	(53)	(92)
12 Months or More, Fair Value	1,591	0
12 Months or More, Unrealized Loss	(1)	0
Total, Fair Value	6,637	5,314
Total, Unrealized Loss	(54)	(92)
Residential mortgage and asset backed [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	42,816	36,626
Less than 12 Months, Unrealized Loss	(276)	(162)
12 Months or More, Fair Value	743	9,485
12 Months or More, Unrealized Loss	(3)	(52)
Total, Fair Value	43,559	46,111
Total, Unrealized Loss	(279)	(214)
Commercial mortgage and asset backed [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Loss	0	0
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Loss	0	0
Total, Fair Value	0	0
Total, Unrealized Loss	0	0
Corporate notes and bonds [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	1,949	2,860
Less than 12 Months, Unrealized Loss	(51)	(139)
12 Months or More, Fair Value	9,492	8,841
12 Months or More, Unrealized Loss	(2,959)	(3,409)
Total, Fair Value	11,441	11,701
Total, Unrealized Loss	(3,010)	(3,548)
Pooled trust preferred [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Loss	0	0
12 Months or More, Fair Value	360	340
12 Months or More, Unrealized Loss	(440)	(460)
Total, Fair Value	360	340
Total, Unrealized Loss	(440)	(460)
Pooled SBA [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	2,022	8,139
Less than 12 Months, Unrealized Loss	(9)	(77)
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Loss	0	0
Total, Fair Value	2,022	8,139
Total, Unrealized Loss	(9)	(77)
Other Securities [Member]
Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Loss	0	0
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Loss	0	0
Total, Fair Value	0	0
Total, Unrealized Loss	$ 0	$ 0

XML

Deposits (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Total deposits
Non-interest bearing deposits	$ 163,153	$ 152,732
Checking, interest bearing	310,155	305,960
Savings accounts	758,179	627,106
Certificate of deposit	223,934	268,053
Total deposits	$ 1,455,421	$ 1,353,851
Percentage change, Checking, non-interest bearing	6.80%
Percentage change, Checking, interest bearing	1.40%
Percentage change, Savings accounts	20.90%
Percentage change, Certificate of deposit	(16.50%)
Percentage change, Total	7.50%

XML

Loans (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Aging of the recorded investment in past due loans
30-59 Days Past Due	$ 3,353	$ 3,545
60-89 Days Past Due	1,058	3,559
Greater Than 90 Days Past Due	15,703	15,570
Total Past Due	20,114	22,674
Loans Not Past Due	889,770	830,095
Total	909,884	852,769
Commercial industrial and agricultural [Member]
Aging of the recorded investment in past due loans
30-59 Days Past Due	246	239
60-89 Days Past Due	56	53
Greater Than 90 Days Past Due	4,946	6,959
Total Past Due	5,248	7,251
Loans Not Past Due	260,874	246,073
Total	266,122	253,324
Commercial mortgages [Member]
Aging of the recorded investment in past due loans
30-59 Days Past Due	813	1,064
60-89 Days Past Due	422	2,620
Greater Than 90 Days Past Due	8,530	7,043
Total Past Due	9,765	10,727
Loans Not Past Due	251,023	231,784
Total	260,788	242,511
Residential real estate [Member]
Aging of the recorded investment in past due loans
30-59 Days Past Due	1,696	1,816
60-89 Days Past Due	420	682
Greater Than 90 Days Past Due	2,021	1,411
Total Past Due	4,137	3,909
Loans Not Past Due	321,063	294,719
Total	325,200	298,628
Consumer [Member]
Aging of the recorded investment in past due loans
30-59 Days Past Due	587	392
60-89 Days Past Due	132	185
Greater Than 90 Days Past Due	191	130
Total Past Due	910	707
Loans Not Past Due	53,341	53,970
Total	54,251	54,677
Credit cards [Member]
Aging of the recorded investment in past due loans
30-59 Days Past Due	11	34
60-89 Days Past Due	28	19
Greater Than 90 Days Past Due	15	27
Total Past Due	54	80
Loans Not Past Due	3,185	3,126
Total	3,239	3,206
Overdrafts [Member]
Aging of the recorded investment in past due loans
30-59 Days Past Due	0
60-89 Days Past Due	0
Greater Than 90 Days Past Due	0
Total Past Due	0
Loans Not Past Due	284	423
Total	$ 284	$ 423

XML

Stock Compensation

6 Months Ended

Jun. 30, 2012

Stock Compensation [Abstract]

STOCK COMPENSATION

2.    STOCK COMPENSATION

The Corporation has a stock incentive plan for key employees and independent directors. The stock incentive plan, which is administered by a committee of the Board of Directors, provides for aggregate grants of up to 500,000 shares of common stock in the form of nonqualified options or restricted stock. For key employees, the plan vesting is one-fourth of the granted options or restricted stock per year beginning one year after the grant date, with 100% vested on the fourth anniversary of the grant. For independent directors, the vesting schedule is one-third of the granted options per year beginning one year after the grant date, with 100% vested on the third anniversary of the grant.

At June 30, 2012, there was no unrecognized compensation cost related to nonvested stock options granted under this plan, and no stock options were granted during the three or six month periods ended June 30, 2012. At June 30, 2012 and December 31, 2011, the Corporation had 107,375 stock options that were fully vested and exercisable.

Compensation expense for the restricted stock awards is recognized over the requisite service period noted above based on the fair value of the shares at the date of grant. Nonvested restricted stock awards are recorded as a reduction of additional paid-in capital in shareholders’ equity until earned. Compensation expense resulting from these restricted stock awards was $73 and $132 for the three and six months ended June 30, 2012, and $49 and $102 for the three and six months ended June 30, 2011. As of June 30, 2012, there was $681 of total unrecognized compensation cost related to nonvested restricted stock awards.

A summary of changes in nonvested restricted stock awards for the three months ended June 30, 2012 follows:

	Shares		Weighted Average Grant Date Fair Value
Nonvested at beginning of period		52,829	$	15.39
Granted		0		0
Vested		0		0
Forfeited		0		0
Nonvested at end of period		52,829	$	15.39

A summary of changes in unvested restricted stock awards for the six months ended June 30, 2012 follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at beginning of period		35,613		$	15.08
Granted		26,900			15.57
Vested		(9,684	)		14.77
Forfeited		0			0
Nonvested at end of period		52,829		$	15.39

XML

Loans (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Allowance for loan losses
Allowance for loan losses, Beginning Balance	$ 13,015	$ 11,224	$ 12,615	$ 10,820	$ 13,690	$ 11,715
Charge-offs	(1,126)	(548)	(1,895)	(982)
Recoveries	55	47	120	108
Provision for loan losses	1,746	992	2,850	1,769
Commercial industrial and agricultural [Member]
Allowance for loan losses
Allowance for loan losses, Beginning Balance	4,942	3,732	4,511	3,517	5,115	3,770
Charge-offs	(422)	(173)	(647)	(215)
Recoveries	5	3	8	4
Provision for loan losses	590	208	1,243	464
Commercial mortgages [Member]
Allowance for loan losses
Allowance for loan losses, Beginning Balance	4,377	3,879	4,470	3,511	4,553	4,399
Charge-offs	(121)	(41)	(236)	(88)
Recoveries	0	0	0	0
Provision for loan losses	297	561	319	976
Residential real estate [Member]
Allowance for loan losses
Allowance for loan losses, Beginning Balance	1,997	1,879	1,991	1,916	2,225	1,900
Charge-offs	(137)	(63)	(224)	(77)
Recoveries	0	0	0	0
Provision for loan losses	365	84	458	61
Consumer [Member]
Allowance for loan losses
Allowance for loan losses, Beginning Balance	1,435	1,507	1,404	1,561	1,568	1,400
Charge-offs	(382)	(202)	(638)	(462)
Recoveries	22	21	49	45
Provision for loan losses	493	74	753	256
Credit cards [Member]
Allowance for loan losses
Allowance for loan losses, Beginning Balance	96	96	71	96	81	104
Charge-offs	(14)	(7)	(33)	(25)
Recoveries	6	3	7	5
Provision for loan losses	(7)	12	36	28
Overdrafts [Member]
Allowance for loan losses
Allowance for loan losses, Beginning Balance	168	131	168	219	148	142
Charge-offs	(50)	(62)	(117)	(115)
Recoveries	22	20	56	54
Provision for loan losses	$ 8	$ 53	$ 41	$ (16)

XML

Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Corporate notes and bonds [Member]
Quantitative information about Level 3 fair value measurements
Fair Value	$ 2,071
Pooled trust preferred [Member]
Quantitative information about Level 3 fair value measurements
Fair Value	$ 360
Constant prepayment rate [Member] | Corporate notes and bonds [Member]
Quantitative information about Level 3 fair value measurements
Input Utilized One	0.00%
Probability of default [Member] | Corporate notes and bonds [Member]
Quantitative information about Level 3 fair value measurements
Input Utilized One	0.00%
Discount rate [Member] | Corporate notes and bonds [Member]
Quantitative information about Level 3 fair value measurements
Input Utilized One	9.20%
Discount rate [Member] | Pooled trust preferred [Member]
Quantitative information about Level 3 fair value measurements
Input Utilized Two	10%, lagged 2 years
Collateral default rate [Member] | Pooled trust preferred [Member]
Quantitative information about Level 3 fair value measurements
Input Utilized One	19.00%
Input Utilized Two	2% annually for 2 years; 0.36% thereafter
Recovery probability [Member] | Pooled trust preferred [Member]
Quantitative information about Level 3 fair value measurements
Input Utilized Two	5% for next 5 years

XML

Fair Value (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Securities available for sale measured at fair value on recurring basis using significant unobservable inputs (Level 3)
Ending Balance		$ 3,988		$ 3,988
Residential mortgage and asset backed [Member]
Securities available for sale measured at fair value on recurring basis using significant unobservable inputs (Level 3)
Beginning Balance		4,106		2,269
Transfers out of Level 3 (a)(b)				0
Included in earnings (realized)				0
Included in other comprehensive income (unrealized)		0		0
Purchases				1,917
Settlements		(118)		(198)
Ending Balance		3,988		3,988
Corporate notes and bonds [Member]
Securities available for sale measured at fair value on recurring basis using significant unobservable inputs (Level 3)
Beginning Balance	2,040	1,895	2,060	1,240
Transfers out of Level 3 (a)(b)				0
Included in earnings (realized)				0
Included in other comprehensive income (unrealized)	31	-35	11	620
Purchases				0
Settlements		0		0
Ending Balance	2,071	1,860	2,071	1,860
U.S. Government sponsored entities [Member]
Securities available for sale measured at fair value on recurring basis using significant unobservable inputs (Level 3)
Beginning Balance				2,000
Transfers out of Level 3 (a)(b)				(2,000)
Included in earnings (realized)				0
Included in other comprehensive income (unrealized)				0
Purchases				0
Settlements				0
Ending Balance		0		0
Pooled trust preferred [Member]
Securities available for sale measured at fair value on recurring basis using significant unobservable inputs (Level 3)
Beginning Balance	340	1,402	340	1,292
Transfers out of Level 3 (a)(b)				0
Included in earnings (realized)				(398)
Included in other comprehensive income (unrealized)	20	20	20	468
Purchases				0
Settlements		0
Ending Balance	$ 360	$ 1,362	$ 360	$ 1,362

XML

Derivative Instruments (Details Textual) (USD $)	0 Months Ended	1 Months Ended		6 Months Ended	9 Months Ended
	Sep. 15, 2008	May 31, 2011	Aug. 31, 2008	Jun. 30, 2012	Sep. 30, 2011
Derivative Instrument (Textual) [Abstract]
Interest expense				$ 394,000
Term of interest rate swap agreement executed			5 years
Value of subordinated note hedged	10,000,000
Interest rate		The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2013...	The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from August 1, 2008 to…
Derivatives designated as fair value hedges				0
Interest rate swap inception date					Aug. 01, 2008
Interest rate swap maturity date					Sep. 15, 2013
Variable interest rate on subordinate debt				2.02%
Derivative variable rate basis				4.02%
Accumulated Other Comprehensive Income Loss Estimated Reclassification Adjustment On Derivatives Included In Net Income In Next Twelve Months				$ 372,000
Interest rate swap [Member]
Derivative Instrument (Textual) [Abstract]
Derivative variable rate basis				4.29%
LIBOR Plus 155 Basis Points [Member]
Derivative Instrument (Textual) [Abstract]
Variable rate on the subordinated debt on effective date in case of interest rate swap				LIBOR plus 155 basis points
4.29% Fixed Rate Plus 155 Basis Points [Member]
Derivative Instrument (Textual) [Abstract]
Variable rate on the subordinated debt on effective date in case of interest rate swap				4.29% fixed rate plus 155 basis points
Interest rate being paid by the corporation				5.84%
4.02% fixed rate plus 155 basis points [Member]
Derivative Instrument (Textual) [Abstract]
Variable rate on the subordinated debt on effective date in case of interest rate swap				4.02% fixed rate plus 155 basis points
Interest rate being paid by the corporation				5.57%

XML

Loans (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	$ 1,684		$ 1,265
Allowance for loan losses, Collectively evaluated for impairment	11,234		11,122
Allowance for loan losses, Modified in a troubled debt restructuring	772		228
Total ending allowance balance	13,690	13,015	12,615	11,715	11,224	10,820
Loans:
Loans individually evaluated for impairment	16,749		14,696
Loans collectively evaluated for impairment	882,685		830,385
Loans modified in a troubled debt restructuring	10,450		7,688
Total ending loans balance	909,884		852,769
Commercial industrial and agricultural [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	1,282		329
Allowance for loan losses, Collectively evaluated for impairment	3,833		4,182
Allowance for loan losses, Modified in a troubled debt restructuring	0
Total ending allowance balance	5,115	4,942	4,511	3,770	3,732	3,517
Loans:
Loans individually evaluated for impairment	7,778		6,115
Loans collectively evaluated for impairment	258,047		247,209
Loans modified in a troubled debt restructuring	297
Total ending loans balance	266,122		253,324
Commercial mortgages [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	347		917
Allowance for loan losses, Collectively evaluated for impairment	3,434		3,325
Allowance for loan losses, Modified in a troubled debt restructuring	772		228
Total ending allowance balance	4,553	4,377	4,470	4,399	3,879	3,511
Loans:
Loans individually evaluated for impairment	8,343		8,457
Loans collectively evaluated for impairment	242,292		226,366
Loans modified in a troubled debt restructuring	10,153		7,688
Total ending loans balance	260,788		242,511
Residential real estate [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	55		19
Allowance for loan losses, Collectively evaluated for impairment	2,170		1,972
Allowance for loan losses, Modified in a troubled debt restructuring	0		0
Total ending allowance balance	2,225	1,997	1,991	1,900	1,879	1,916
Loans:
Loans individually evaluated for impairment	628		124
Loans collectively evaluated for impairment	324,572		298,504
Loans modified in a troubled debt restructuring	0		0
Total ending loans balance	325,200		298,628
Consumer [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	0		0
Allowance for loan losses, Collectively evaluated for impairment	1,568		1,404
Allowance for loan losses, Modified in a troubled debt restructuring	0		0
Total ending allowance balance	1,568	1,435	1,404	1,400	1,507	1,561
Loans:
Loans individually evaluated for impairment	0		0
Loans collectively evaluated for impairment	54,251		54,677
Loans modified in a troubled debt restructuring	0		0
Total ending loans balance	54,251		54,677
Credit cards [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	0		0
Allowance for loan losses, Collectively evaluated for impairment	81		71
Allowance for loan losses, Modified in a troubled debt restructuring	0		0
Total ending allowance balance	81	96	71	104	96	96
Loans:
Loans individually evaluated for impairment	0		0
Loans collectively evaluated for impairment	3,239		3,206
Loans modified in a troubled debt restructuring	0		0
Total ending loans balance	3,239		3,206
Overdrafts [Member]
Ending allowance balance attributable to loans:
Allowance for loan losses, Individually evaluated for impairment	0		0
Allowance for loan losses, Collectively evaluated for impairment	148		168
Allowance for loan losses, Modified in a troubled debt restructuring	0		0
Total ending allowance balance	148	168	168	142	131	219
Loans:
Loans individually evaluated for impairment	0		0
Loans collectively evaluated for impairment	284		423
Loans modified in a troubled debt restructuring	0		0
Total ending loans balance	$ 284		$ 423

XML

Fair Value (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category
Securities transferred to level 2 fair value	$ 70,278	$ 64,850	$ 15,232	$ 27,155
U.S. Treasury [Member]
Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category
Securities transferred to level 2 fair value	0	4,053
U.S. Government sponsored entities [Member]
Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category
Securities transferred to level 2 fair value	26,034	16,124	2,000	2,000
States and political subdivisions [Member]
Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category
Securities transferred to level 2 fair value	3,771	4,929	4,655	4,750
Residential mortgage and asset backed [Member]
Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category
Securities transferred to level 2 fair value	40,473	37,659	8,577	20,405
Commercial mortgage and asset backed [Member]
Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category
Securities transferred to level 2 fair value	$ 0	$ 2,085

XML

Fair Value (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Commercial mortgages [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	$ 7,907	$ 7,219
Commercial mortgages [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	0	0
Commercial mortgages [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	0	0
Commercial mortgages [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	7,907	7,219
Commercial industrial and agricultural [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	3,986	3,190
Commercial industrial and agricultural [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	0	0
Commercial industrial and agricultural [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	0	0
Commercial industrial and agricultural [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	3,986	3,190
Residential real estate [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	437	105
Residential real estate [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	0	0
Residential real estate [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	0	0
Residential real estate [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets and liabilities measured at fair value on a non-recurring basis
Fair value assets and liabilities measured on a nonrecurring basis	$ 437	$ 105

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

1.    BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and in compliance with accounting principles generally accepted in the United States of America (“GAAP”). Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of management of the registrant, the accompanying consolidated financial statements as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011 include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial condition and the results of operations for the periods presented. The financial performance reported for CNB Financial Corporation (the “Corporation”) for the three and six month periods ended June 30, 2012 is not necessarily indicative of the results to be expected for the full year. This information should be read in conjunction with the Corporation’s Annual Report on Form 10-K for the period ended December 31, 2011 (the “2011 Form 10-K”). All dollar amounts are stated in thousands, except share data.

XML

Fair Value (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Impaired loans- commercial mortgages [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Fair Value	$ 7,907
Impaired loans- commercial mortgages [Member] | Maximum [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	65.00%
Impaired loans- commercial mortgages [Member] | Minimum [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	10.00%
Impaired loans- commercial mortgages [Member] | Weighted Average [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	15.00%
Impaired loans- commercial, industrial, and agricultural [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Fair Value	3,986
Impaired loans- commercial, industrial, and agricultural [Member] | Maximum [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	65.00%
Impaired loans- commercial, industrial, and agricultural [Member] | Minimum [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	5.00%
Impaired loans- commercial, industrial, and agricultural [Member] | Weighted Average [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	29.00%
Impaired loans- residential real estate [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Fair Value	$ 437
Impaired loans- residential real estate [Member] | Maximum [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	19.00%
Impaired loans- residential real estate [Member] | Minimum [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	10.00%
Impaired loans- residential real estate [Member] | Weighted Average [Member]
Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012
Input Utilized	16.00%

XML

Securities (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Schedule of the contractual maturity of securities available for sale, excluding equity securities
1 year or less, Amortized Cost	$ 22,131
1 year - 5 years, Amortized Cost	80,606
5 years - 10 years, Amortized Cost	128,463
After 10 years, Amortized Cost	93,781
Total, Amortized Cost	324,981
Total debt securities, Amortized Cost	690,844
1 year or less, Fair Value	22,295
1 year - 5 years, Fair Value	83,067
5 years - 10 years, Fair Value	138,447
After 10 years, Fair Value	95,532
Total, Fair Value	339,341
Total debt securities, Fair Value	713,909
Residential mortgage and asset backed [Member]
Schedule of the contractual maturity of securities available for sale, excluding equity securities
Mortgage & asset backed securities, Amortized Cost	363,792
Mortgage & asset backed securities, Fair Value	372,436
Commercial mortgage and asset backed [Member]
Schedule of the contractual maturity of securities available for sale, excluding equity securities
Mortgage & asset backed securities, Amortized Cost	2,071
Mortgage & asset backed securities, Fair Value	$ 2,132

XML

Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income per consolidated statements of income	$ 4,336	$ 3,891	$ 8,683	$ 7,168
Net earnings allocated to participating securities	(17)	(12)	(33)	(23)
Net earnings allocated to common stock	4,319	3,879	8,650	7,145
Basic earnings per common share computation:
Net earnings allocated to common stock, Basic earnings per common share computation	4,319	3,879	8,650	7,145
Weighted average common shares outstanding, including shares considered participating securities	12,440	12,291	12,421	12,277
Less: Average participating securities	(46)	(36)	(43)	(37)
Weighted average shares	12,394	12,255	12,378	12,240
Basic earnings per common share	$ 0.35	$ 0.32	$ 0.70	$ 0.58
Diluted earnings per common share computation:
Net earnings allocated to common stock, Diluted earnings per common share computation	4,319	3,879	8,650	7,145
Add: Dilutive effects of assumed exercises of stock options	3	6	3	7
Weighted average shares and dilutive potential common shares	12,397	12,261	12,381	12,247
Diluted earnings per common share	$ 0.35	$ 0.32	$ 0.70	$ 0.58
Distributed Earnings Allocated to Common Stock [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net earnings allocated to common stock	2,044	2,021	4,084	4,038
Basic earnings per common share computation:
Net earnings allocated to common stock, Basic earnings per common share computation	2,044	2,021	4,084	4,038
Undistributed earnings allocated to common stock [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net earnings allocated to common stock	2,275	1,858	4,565	3,107
Basic earnings per common share computation:
Net earnings allocated to common stock, Basic earnings per common share computation	$ 2,275	$ 1,858	$ 4,565	$ 3,107

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 20,972	$ 36,032
Interest bearing deposits with other banks	3,256	3,671
Total cash and cash equivalents	24,228	39,703
Interest bearing time deposits with other banks	275	224
Securities available for sale	715,452	638,107
Trading securities	3,560	3,233
Loans held for sale	1,499	1,442
Loans	909,884	852,769
Less: unearned discount	(3,117)	(2,886)
Less: allowance for loan losses	(13,690)	(12,615)
Net loans	893,077	837,268
FHLB and other equity interests	6,848	6,537
Premises and equipment, net	24,131	24,004
Bank owned life insurance	26,195	25,672
Mortgage servicing rights	837	906
Goodwill	10,821	10,821
Accrued interest receivable and other assets	14,097	14,290
TOTAL	1,721,020	1,602,207
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits	163,153	152,732
Interest bearing deposits	1,292,268	1,201,119
Total deposits	1,455,421	1,353,851
FHLB and other borrowings	82,182	74,456
Subordinated debentures	20,620	20,620
Accrued interest payable and other liabilities	23,150	21,391
Total liabilities	1,581,373	1,470,318
Common stock, $0 par value; authorized 50,000,000shares; issued 12,599,603 shares	0	0
Additional paid in capital	44,099	44,350
Retained earnings	84,619	80,038
Treasury stock, at cost (159,180 shares at June 30, 2012and 222,285 shares at December 31, 2011)	(2,289)	(3,260)
Accumulated other comprehensive income	13,218	10,761
Total shareholders' equity	139,647	131,889
TOTAL	$ 1,721,020	$ 1,602,207

XML

Loans (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Loans individually evaluated for impairment by portfolio
Allowance recorded Unpaid Principal Balance					$ 26,971
Impaired loans allowance	2,456		2,456		1,493
Impaired loans, principal balance	32,744		32,744
Recorded Investment, Total	27,199		27,199		22,384
Total average recorded investment	25,640	17,198	24,554	15,785
Total cash basis interest recognized	8	14	12	16
Total Interest Income Recognized	8	14	12	16
Commercial industrial and agricultural [Member]
Loans individually evaluated for impairment by portfolio
Allowance recorded Unpaid Principal Balance	6,636		6,636		4,329
Allowance recorded investment	4,525		4,525		2,815
Impaired loans allowance	1,282		1,282		462
No allowance recorded Unpaid Principal Balance	8,812		8,812		3,892
No allowance recorded investment	8,097		8,097		3,300
Impaired loans without allowance	0		0		0
Allowance average recorded Investment	3,528	1,183	3,290	1,660
Allowance recorded interest income recognized	4	0	4	0
Allowance recorded cash basis interest recognized	4	0	4	0
No allowance average recorded investment	3,537	2,411	3,458	1,607
No allowance recorded interest income recognized	0	0	0	0
No allowance recorded cash basis interest recognized	0	0	0	0
Commercial mortgages [Member]
Loans individually evaluated for impairment by portfolio
Allowance recorded Unpaid Principal Balance	7,004		7,004		4,724
Allowance recorded investment	6,292		6,292		4,065
Impaired loans allowance	1,119		1,119		1,012
No allowance recorded Unpaid Principal Balance	9,558		9,558		13,839
No allowance recorded investment	7,657		7,657		12,080
Impaired loans without allowance	0		0		0
Allowance average recorded Investment	6,031	8,835	5,376	8,810
Allowance recorded interest income recognized	0	14	0	16
Allowance recorded cash basis interest recognized	0	14	0	16
No allowance average recorded investment	12,123	4,584	12,108	3,506
No allowance recorded interest income recognized	0	0	0	0
No allowance recorded cash basis interest recognized	0	0	0	0
Residential real estate [Member]
Loans individually evaluated for impairment by portfolio
Allowance recorded Unpaid Principal Balance	598		598		187
Allowance recorded investment	492		492		124
Impaired loans allowance	55		55		19
No allowance recorded Unpaid Principal Balance	136		136		0
No allowance recorded investment	136		136		0
Impaired loans without allowance	0		0		0
Allowance average recorded Investment	353	185	277	202
Allowance recorded interest income recognized	4	0	8	0
Allowance recorded cash basis interest recognized	4	0	8	0
No allowance average recorded investment	68	0	45	0
No allowance recorded interest income recognized	0	0	0	0
No allowance recorded cash basis interest recognized	$ 0	$ 0	$ 0	$ 0

XML

Consolidated Statements of Comprehensive Income (Parenthetical) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Change in fair value of interest rate swap agreement designated as a cash flow hedge, tax	$ 73	$ 78	$ 39	$ 42
Unrealized gains arising during the period, net of tax	(7)		(7)	(32)
Reclassification adjustment for losses included in net income, tax				(139)
Unrealized gains arising during the period, tax	(2,455)	(3,881)	(1,809)	(4,556)
Reclassification adjustment for gains included in net income on other-than-temporarily impaired securities available for sale, tax	$ 256		$ 454	$ 26

XML

Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Securities available for sale
Amortized Cost	$ 692,365	$ 618,911
Unrealized Gains	26,888	23,602
Unrealized Losses	(3,801)	(4,406)
Fair Value	715,452	638,107
U.S. Treasury [Member]
Securities available for sale
Amortized Cost	6,036	8,064
Unrealized Gains	33	66
Unrealized Losses	0	0
Fair Value	6,069	8,130
U.S. Government sponsored entities [Member]
Securities available for sale
Amortized Cost	107,398	102,258
Unrealized Gains	5,641	5,249
Unrealized Losses	(9)	(15)
Fair Value	113,030	107,492
States and political subdivisions [Member]
Securities available for sale
Amortized Cost	151,321	149,685
Unrealized Gains	10,316	8,844
Unrealized Losses	(54)	(92)
Fair Value	161,583	158,437
Residential mortgage and asset backed [Member]
Securities available for sale
Amortized Cost	363,792	292,297
Unrealized Gains	8,923	8,043
Unrealized Losses	(279)	(214)
Fair Value	372,436	300,126
Commercial mortgage and asset backed [Member]
Securities available for sale
Amortized Cost	2,071	2,077
Unrealized Gains	61	45
Unrealized Losses	0	0
Fair Value	2,132	2,122
Corporate notes and bonds [Member]
Securities available for sale
Amortized Cost	16,364	17,358
Unrealized Gains	62	50
Unrealized Losses	(3,010)	(3,548)
Fair Value	13,416	13,860
Pooled trust preferred [Member]
Securities available for sale
Amortized Cost	800	800
Unrealized Gains	0	0
Unrealized Losses	(440)	(460)
Fair Value	360	340
Pooled SBA [Member]
Securities available for sale
Amortized Cost	43,062	44,851
Unrealized Gains	1,830	1,282
Unrealized Losses	(9)	(77)
Fair Value	44,883	46,056
Other Securities [Member]
Securities available for sale
Amortized Cost	1,521	1,521
Unrealized Gains	22	23
Unrealized Losses	0	0
Fair Value	$ 1,543	$ 1,544

XML

Deposits (Tables)

6 Months Ended

Jun. 30, 2012

Deposits [Abstract]

Total deposits

Total deposits at June 30, 2012 and December 31, 2011 are summarized as follows (in thousands):

	Percentage Change			June 30, 2012		December 31, 2011
Checking, non-interest bearing		6.8	%	$	163,153	$	152,732
Checking, interest bearing		1.4	%		310,155		305,960
Savings accounts		20.9	%		758,179		627,106
Certificates of deposit		(16.5	%)		223,934		268,053
		7.5	%	$	1,455,421	$	1,353,851

XML

Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Trading securities accounted for under the fair value option
Trading securities	$ 3,560	$ 3,233
Corporate equity securities [Member]
Trading securities accounted for under the fair value option
Trading securities	2,297	1,959
Certificates of deposit [Member]
Trading securities accounted for under the fair value option
Trading securities	382	255
International mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	252	257
Large cap growth mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	147	145
Large Cap Value mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	103	105
Corporate notes and bonds [Member]
Trading securities accounted for under the fair value option
Trading securities	101	100
Money market mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	108	241
Real estate investment trust mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	64	68
U.S. Government sponsored entities [Member]
Trading securities accounted for under the fair value option
Trading securities	56	55
Small cap mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	25	25
Mid cap mutual funds [Member]
Trading securities accounted for under the fair value option
Trading securities	$ 25	$ 23

XML

Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Instruments [Abstract]

Amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation's consolidated balance sheet and statement of income

The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s consolidated balance sheet and statement of income as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Liability Derivative
		Fair value
	Balance Sheet Location	June 30, 2012			December 31, 2011
As of June 30, 2012:
Interest rate contracts	Accrued interest and other liabilities	($	1,779	)	($	1,669	)

For the Three Months Ended June 30, 2012	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	135	)	Interest expense – subordinated debentures	($	98	)	Other income		0

For the Six Months Ended June 30, 2012	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	72	)	Interest expense – subordinated debentures	($	192	)	Other income		0

For the Three Months Ended June 30, 2011	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	145	)	Interest expense – subordinated debentures	($	101	)	Other income	$	0

For the Six Months Ended June 30, 2011	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	78	)	Interest expense – subordinated debentures	($	201	)	Other income	$	0

(a) Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax

(b) Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(c) Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(d) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

(e) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 8,683	$ 7,168
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses	2,850	1,769
Depreciation and amortization of premises and equipment	1,055	1,016
Securities amortization and accretion and deferred loan fees and costs	2,125	1,337
Net impairment losses realized in earnings and gains on sales of available-for-sale securities	(1,297)	324
Net realized and unrealized gains on securities for which fair value was elected	(180)	(97)
Proceeds from sale of securities for which fair value was elected	1,850	170
Purchase of securities for which fair value was elected	(2,225)	(197)
Gain on sale of loans	(432)	(280)
Net gains on dispositions of premises and equipment and foreclosed assets	(19)	(79)
Proceeds from sale of loans	15,500	10,953
Origination of loans held for sale	(15,200)	(9,053)
Income on bank owned life insurance	(523)	(461)
Stock-based compensation expense	132	102
Contribution of treasury stock	60	60
Changes in:
Accrued interest receivable and other assets	(1,563)	931
Accrued interest payable and other liabilities	1,648	2,193
NET CASH PROVIDED BY OPERATING ACTIVITIES	12,464	15,856
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest bearing time deposits with other banks	(51)	1,195
Proceeds from maturities, prepayments and calls of securities	51,504	49,626
Proceeds from sales of securities	88,617	23,610
Purchase of securities	(214,250)	(108,992)
Loan origination and payments, net	(58,599)	(28,091)
Purchase of bank owned life insurance	0	(5,000)
Purchase of FHLB and other equity interests	(311)	(166)
Purchase of premises and equipment	(1,038)	(1,434)
Proceeds from the sale of premises and equipment and foreclosed assets	467	196
NET CASH USED IN INVESTING ACTIVITIES	(133,661)	(69,056)
Net change in:
Checking, money market and savings accounts	145,689	142,321
Certificates of deposit	(44,119)	(56,117)
Proceeds from sale of treasury stock	528	652
Cash dividends paid	(4,102)	(4,052)
Proceeds from long-term borrowings	0	350
Repayment of long-term borrowings	(79)	(61)
Net change in short-term borrowings	7,805	(23,708)
NET CASH PROVIDED BY FINANCING ACTIVITIES	105,722	59,385
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(15,475)	6,185
CASH AND CASH EQUIVALENTS, Beginning	39,703	37,432
CASH AND CASH EQUIVALENTS, Ending	24,228	43,617
Cash paid during the period for:
Interest	8,262	9,006
Income taxes	3,488	1,493
SUPPLEMENTAL NONCASH DISCLOSURES:
Transfers to other real estate owned	15	69
Grant of restricted stock awards from treasury stock	$ 419	$ 266

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 0	$ 0
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	12,599,603	12,599,603
Treasury stock, shares	159,180	222,285

XML

Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Fair Value Measurement

In May 2011, the FASB issued Accounting Standards Update No. 2011-4, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” Some amendments in this update clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this update are effective during interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

Comprehensive Income

In June 2011, the FASB issued Accounting Standards Update No. 2011-5, “Comprehensive Income (Topic 220), Presentation of Comprehensive Income.” This update amends the FASB Accounting Standards Codification (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and retrospective application is required. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In December 2011, the FASB issued Accounting Standards Update No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately within their respective components of net income and other comprehensive income. As such, the amendments in this update supersede only those paragraphs in Accounting Standards Update No. 2011-05 that pertain to how and where reclassification adjustments are presented. The amendments were effective at the same time as the amendments in Accounting Standards Update 2011-05. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

Intangibles - Goodwill and Other

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.” The amendments in the update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than fifty percent. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 06, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	CNB FINANCIAL CORP/PA
Entity Central Index Key	0000736772
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		12,441,643

XML

Stock Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Stock Compensation [Abstract]

Summary of changes in nonvested restricted stock awards

A summary of changes in nonvested restricted stock awards for the three months ended June 30, 2012 follows:

	Shares		Weighted Average Grant Date Fair Value
Nonvested at beginning of period		52,829	$	15.39
Granted		0		0
Vested		0		0
Forfeited		0		0
Nonvested at end of period		52,829	$	15.39

A summary of changes in unvested restricted stock awards for the six months ended June 30, 2012 follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at beginning of period		35,613		$	15.08
Granted		26,900			15.57
Vested		(9,684	)		14.77
Forfeited		0			0
Nonvested at end of period		52,829		$	15.39

XML

Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
INTEREST AND DIVIDEND INCOME:
Loans including fees	$ 12,394	$ 11,962	$ 24,649	$ 23,667
Deposits with banks	0	40	0	82
Securities:
Taxable	3,890	3,693	7,575	6,951
Tax-exempt	905	714	1,776	1,396
Dividends	18	8	31	15
Total interest and dividend income	17,207	16,417	34,031	32,111
INTEREST EXPENSE:
Deposits	2,946	3,501	6,095	6,936
Borrowed funds	787	808	1,584	1,577
Subordinated debentures	200	196	401	387
Total interest expense	3,933	4,505	8,080	8,900
NET INTEREST INCOME	13,274	11,912	25,951	23,211
PROVISION FOR LOAN LOSSES	1,746	992	2,850	1,769
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	11,528	10,920	23,101	21,442
NON-INTEREST INCOME:
Wealth and asset management fees	426	395	813	810
Service charges on deposit accounts	996	1,069	1,971	2,032
Other service charges and fees	468	416	900	768
Net realized and unrealized losses on securities for which fair value was elected	(140)	(16)	180	97
Mortgage banking	196	155	461	334
Bank owned life insurance	262	212	523	461
Other	325	385	534	625
Total fees and commissions	2,533	2,616	5,382	5,127
Total other-than-temporary impairment losses on available-for-sale securities	0	0	0	(398)
Less portion of loss recognized in other comprehensive income	0	0	0	0
Net impairment losses recognized in earnings	0	0	0	(398)
Net realized gains on available-for-sale securities	731	0	1,297	74
Net impairment losses realized in earnings and gains on sales of available-for-sale securities	731	0	1,297	(324)
Total non-interest income	3,264	2,616	6,679	4,803
NON-INTEREST EXPENSES:
Salaries and benefits	4,619	4,197	9,344	8,440
Net occupancy expense of premises	1,107	1,103	2,256	2,302
FDIC insurance premiums	274	280	533	729
Other	2,833	2,561	5,714	4,961
Total non-interest expenses	8,833	8,141	17,847	16,432
INCOME BEFORE INCOME TAXES	5,959	5,395	11,933	9,813
INCOME TAX EXPENSE	1,623	1,504	3,250	2,645
NET INCOME	$ 4,336	$ 3,891	$ 8,683	$ 7,168
EARNINGS PER SHARE:
Basic	$ 0.35	$ 0.32	$ 0.70	$ 0.58
Diluted	$ 0.35	$ 0.32	$ 0.70	$ 0.58
DIVIDENDS PER SHARE:
Cash dividends per share	$ 0.165	$ 0.165	$ 0.33	$ 0.33

XML

Loans

6 Months Ended

Jun. 30, 2012

Loans [Abstract]

LOANS

5.    LOANS

Total net loans at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012			December 31, 2011
Commercial, industrial, and agricultural	$	266,122		$	253,324
Commercial mortgages		260,788			242,511
Residential real estate		325,200			298,628
Consumer		54,251			54,677
Credit cards		3,239			3,206
Overdrafts		284			423
Less: unearned discount		(3,117	)		(2,886	)
allowance for loan losses		(13,690	)		(12,615	)
Loans, net	$	893,077		$	837,268

At June 30, 2012 and December 31, 2011, net unamortized loan costs and fees of $71 and ($7), respectively, have been included in the carrying value of loans.

The Corporation’s outstanding loans and related unfunded commitments are primarily concentrated within Central and Western Pennsylvania. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer.

Transactions in the allowance for loan losses for the three months ended June 30, 2012 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, April 1, 2012	$	4,942		$	4,377		$	1,997		$	1,435		$	96		$	168		$	13,015
Charge-offs		(422	)		(121	)		(137	)		(382	)		(14	)		(50	)		(1,126	)
Recoveries		5			0			0			22			6			22			55
Provision (benefit) for loan losses		590			297			365			493			(7	)		8			1,746
Allowance for loan losses, June 30, 2012	$	5,115		$	4,553		$	2,225		$	1,568		$	81		$	148		$	13,690

Transactions in the allowance for loan losses for the six months ended June 30, 2012 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2012	$	4,511		$	4,470		$	1,991		$	1,404		$	71		$	168		$	12,615
Charge-offs		(647	)		(236	)		(224	)		(638	)		(33	)		(117	)		(1,895	)
Recoveries		8			0			0			49			7			56			120
Provision for loan losses		1,243			319			458			753			36			41			2,850
Allowance for loan losses, June 30, 2012	$	5,115		$	4,553		$	2,225		$	1,568		$	81		$	148		$	13,690

Transactions in the allowance for loan losses for the three months ended June 30, 2011 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, April 1, 2011	$	3,732		$	3,879		$	1,879		$	1,507		$	96		$	131		$	11,224
Charge-offs		(173	)		(41	)		(63	)		(202	)		(7	)		(62	)		(548	)
Recoveries		3			0			0			21			3			20			47
Provision (benefit) for loan losses		208			561			84			74			12			53			992
Allowance for loan losses, June 30, 2011	$	3,770		$	4,399		$	1,900		$	1,400		$	104		$	142		$	11,715

Transactions in the allowance for loan losses for the six months ended June 30, 2011 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2011	$	3,517		$	3,511		$	1,916		$	1,561		$	96		$	219		$	10,820
Charge-offs		(215	)		(88	)		(77	)		(462	)		(25	)		(115	)		(982	)
Recoveries		4			0			0			45			5			54			108
Provision (benefit) for loan losses		464			976			61			256			28			(16	)		1,769
Allowance for loan losses, June 30, 2011	$	3,770		$	4,399		$	1,900		$	1,400		$	104		$	142		$	11,715

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and is based on the Corporation’s impairment method as of June 30, 2012 and December 31, 2011:

June 30, 2012	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,282	$	347	$	55	$	0	$	0	$	0	$	1,684
Collectively evaluated for impairment		3,833		3,434		2,170		1,568		81		148		11,234
Modified in a troubled debt restructuring		0		772		0		0		0		0		772
Total ending allowance balance	$	5,115	$	4,553	$	2,225	$	1,568	$	81	$	148	$	13,690
Loans:
Loans individually evaluated for impairment	$	7,778	$	8,343	$	628	$	0	$	0	$	0	$	16,749
Loans collectively evaluated for impairment		258,047		242,292		324,572		54,251		3,239		284		882,685
Loans modified in a troubled debt restructuring		297		10,153		0		0		0		0		10,450
Total ending loans balance	$	266,122	$	260,788	$	325,200	$	54,251	$	3,239	$	284	$	909,884

December 31, 2011	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	329	$	917	$	19	$	0	$	0	$	0	$	1,265
Collectively evaluated for impairment		4,182		3,325		1,972		1,404		71		168		11,122
Modified in a troubled debt restructuring		—		228		0		0		0		0		228
Total ending allowance balance	$	4,511	$	4,470	$	1,991	$	1,404	$	71	$	168	$	12,615
Loans:
Loans individually evaluated for impairment	$	6,115	$	8,457	$	124	$	0	$	0	$	0	$	14,696
Loans collectively evaluated for impairment		247,209		226,366		298,504		54,677		3,206		423		830,385
Loans modified in a troubled debt restructuring		—		7,688		0		0		0		0		7,688
Total ending loans balance	$	253,324	$	242,511	$	298,628	$	54,677	$	3,206	$	423	$	852,769

The following tables present information related to loans individually evaluated for impairment by portfolio segment as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011:

June 30, 2012	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	6,636	$	4,525	$	1,282
Commercial mortgage		7,004		6,292		1,119
Residential real estate		598		492		55
With no related allowance recorded:
Commercial, industrial, and agricultural		8,812		8,097		0
Commercial mortgage		9,558		7,657		0
Residential real estate		136		136		0
Total	$	32,744	$	27,199	$	2,456

December 31, 2011	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	4,329	$	2,815	$	462
Commercial mortgage		4,724		4,065		1,012
Residential real estate		187		124		19
With no related allowance recorded:
Commercial, industrial, and agricultural		3,892		3,300		0
Commercial mortgage		13,839		12,080		0
Residential real estate		0		0		0
Total	$	26,971	$	22,384	$	1,493

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	3,528	$	4	$	4	$	3,290	$	4	$	4
Commercial mortgage		6,031		0		0		5,376		0		0
Residential real estate		353		4		4		277		8		8
With no related allowance recorded:
Commercial, industrial, and agricultural		3,537		0		0		3,458		0		0
Commercial mortgage		12,123		0		0		12,108		0		0
Residential real estate		68		0		0		45		0		0
Total	$	25,640	$	8	$	8	$	24,554	$	12	$	12

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	1,183	$	0	$	0	$	1,660	$	0	$	0
Commercial mortgage		8,835		14		14		8,810		16		16
Residential real estate		185		0		0		202		0		0
With no related allowance recorded:
Commercial, industrial, and agricultural		2,411		0		0		1,607		0		0
Commercial mortgage		4,584		0		0		3,506		0		0
Residential real estate		0		0		0		0		0		0
Total	$	17,198	$	14	$	14	$	15,785	$	16	$	16

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still accruing interest by class of loans as of June 30, 2012 and December 31, 2011:

	June 30, 2012				December 31, 2011
	Nonaccrual		Past Due Over 90 Days Still on Accrual		Nonaccrual		Past Due Over 90 Days Still on Accrual
Commercial, industrial, and agricultural	$	7,354	$	0	$	6,949	$	10
Commercial mortgages		8,530		0		8,359		122
Residential real estate		2,221		82		1,254		157
Consumer		4		187		5		125
Credit cards		0		15		0		27
Total	$	18,109	$	284	$	16,567	$	441

Nonaccrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 and December 31, 2011 by class of loans. The recorded investment in loans excludes accrued interest and loan origination fees, net due to their insignificance.

June 30, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	246	$	56	$	4,946	$	5,248	$	260,874	$	266,122
Commercial mortgages		813		422		8,530		9,765		251,023		260,788
Residential real estate		1,696		420		2,021		4,137		321,063		325,200
Consumer		587		132		191		910		53,341		54,251
Credit cards		11		28		15		54		3,185		3,239
Overdrafts		0		0		0		0		284		284
Total	$	3,353	$	1,058	$	15,703	$	20,114	$	889,770	$	909,884

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	239	$	53	$	6,959	$	7,251	$	246,073	$	253,324
Commercial mortgages		1,064		2,620		7,043		10,727		231,784		242,511
Residential real estate		1,816		682		1,411		3,909		294,719		298,628
Consumer		392		185		130		707		53,970		54,677
Credit cards		34		19		27		80		3,126		3,206
Overdrafts		—		—		—		—		423		423
Total	$	3,545	$	3,559	$	15,570	$	22,674	$	830,095	$	852,769

Troubled Debt Restructurings

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. All loans modified in troubled debt restructurings are performing in accordance with their modified terms as of June 30, 2012 and no principal balances were forgiven in connection with the loan restructurings.

The Corporation has allocated $209 and $228 of specific reserves to one commercial mortgage customer whose loan terms have been modified in troubled debt restructurings as of June 30, 2012 and December 31, 2011, respectively. The interest rate on the original loan was 6.60%. Due to financial difficulties experienced by the customer, the interest rate was reduced to 4.19% in the third quarter of 2010 and further reduced to 4.07% in the third quarter of 2011. In the first quarter of 2012, the customer was granted interest-only terms for six months, resulting in an additional provision for loan losses that was insignificant for the three and six months ended June 30, 2012. This loan had a total recorded investment of $1,657 and $1,662 as of June 30, 2012 and December 31, 2011, respectively.

The Corporation has allocated $101 of specific reserves to one commercial mortgage customer with two loans whose terms have been modified in a troubled debt restructuring as of June 30, 2012. The interest rates on the original loans were 6.45% and 6.47%. Due to financial difficulties experienced by the customer, the interest rates on both loans were reduced to 5.75% in the first quarter of 2012, and the maturity dates were extended to 2020 and 2024, resulting in an additional provision for loan losses of $101 for the three and six months ended June 30, 2012. These loans had a total recorded investment of $1,832 as of June 30, 2012. This commercial customer has two additional mortgage loans that were deemed to be impaired as of December 31, 2011 and whose terms were modified in a troubled debt restructuring in the first quarter of 2012. The loan payments were modified to reflect a twenty year amortization with a balloon payment due after five years. These loans had a total recorded investment of $712 and $728 and specific reserves of $463 and $465 as of June 30, 2012 and December 31, 2011, respectively. No additional provision for loan losses was required to be recorded during the three and six months ended June 30, 2012 in connection with the loan modifications.

The Corporation has a commercial mortgage customer whose loan relationships have interest-only terms that were extended during 2011. The original interest rates on the loans, which were also the market rates of interest at the time of the loan modification, were not reduced; therefore, no additional provision for loan losses was required to be recorded. These loans have a total recorded investment of $4,547 and $4,588 at June 30, 2012 and December 31, 2011, respectively.

In addition, the Corporation has a commercial mortgage customer whose loan relationship was restructured due to the forgiveness of accrued interest and late charges. The original interest rate on the loan, which was also the market rate of interest at the time of the loan modification, was not reduced; therefore, no additional provision for loan losses was required to be recorded. This loan has a recorded investment of $1,405 and $1,438 at June 30, 2012 and December 31, 2011.

The Corporation has a commercial customer with five loans whose terms were modified in a troubled debt restructuring in the first quarter of 2012 due to financial difficulties experienced by the customer. The outstanding balances on the five loans, which ranged in maturity from 2012 to 2014, were combined into one new loan with a five year term. The blended original interest rates on the loans, which were also the market rates of interest at the time of the loan modification, were not reduced; therefore no additional provision for loan losses was required to be recorded. This loan has a total recorded investment of $297 at June 30, 2012.

The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring, and there have been no payment defaults on loans modified in a troubled debt restructuring.

Credit Quality Indicators

The Corporation classifies commercial, industrial, and agricultural loans and commercial mortgage loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. Loans with an outstanding balance greater than $1 million are analyzed at least semi-annually and loans with an outstanding balance of less than $1 million are analyzed at least annually.

The Corporation uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not rated as special mention, substandard, or doubtful are considered to be pass rated loans. All loans included in the following tables have been assigned a risk rating within 12 months of the balance sheet date.

June 30, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	250,151	$	1,566	$	14,228	$	177	$	266,122
Commercial mortgages		236,706		1,385		21,985		712		260,788
Total	$	486,857	$	2,951	$	36,213	$	889	$	526,910

December 31, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	223,457	$	4,176	$	25,490	$	201	$	253,324
Commercial mortgages		214,098		3,172		24,513		728		242,511
Total	$	437,555	$	7,348	$	50,003	$	929	$	495,835

The Corporation’s portfolio of residential real estate and consumer loans maintained within Holiday Financial Services Corporation (“Holiday”), a subsidiary that offers small balance unsecured and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics than are typical in the Bank’s consumer loan portfolio, are considered to be subprime loans.

Holiday’s loan portfolio is summarized as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
Consumer	$	19,134		$	18,176
Residential real estate		1,020			1,056
Less: unearned discount		(3,117	)		(2,886	)
Total	$	17,037		$	16,346

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential real estate, consumer, and credit card loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of June 30, 2012 and December 31, 2011:

	June 30, 2012						December 31, 2011
	Residential Real Estate		Consumer		Credit Cards		Residential Real Estate		Consumer		Credit Cards
Performing	$	322,897	$	54,060	$	3,224	$	297,217	$	54,547	$	3,179
Non-performing		2,303		191		15		1,411		130		27
Total	$	325,200	$	54,251	$	3,239	$	298,628	$	54,677	$	3,206

XML

Securities

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

SECURITIES

4.    SECURITIES

Securities available for sale at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012									December 31, 2011
	Amortized Cost		Unrealized					Fair Value		Amortized Cost		Unrealized					Fair Value
			Gains		Losses							Gains		Losses
U.S. Treasury	$	6,036	$	33	$	0		$	6,069	$	8,064	$	66	$	0		$	8,130
U.S. Gov’t sponsored entities		107,398		5,641		(9	)		113,030		102,258		5,249		(15	)		107,492
State & political subdivisions		151,321		10,316		(54	)		161,583		149,685		8,844		(92	)		158,437
Residential mortgage & asset backed		363,792		8,923		(279	)		372,436		292,297		8,043		(214	)		300,126
Commercial mortgage & asset backed		2,071		61		0			2,132		2,077		45		0			2,122
Corporate notes & bonds		16,364		62		(3,010	)		13,416		17,358		50		(3,548	)		13,860
Pooled trust preferred		800		0		(440	)		360		800		0		(460	)		340
Pooled SBA		43,062		1,830		(9	)		44,883		44,851		1,282		(77	)		46,056
Other securities		1,521		22		0			1,543		1,521		23		0			1,544
Total	$	692,365	$	26,888	$	(3,801	)	$	715,452	$	618,911	$	23,602	$	(4,406	)	$	638,107

At June 30, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Trading securities accounted for under the fair value option at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
Corporate equity securities	$	2,297	$	1,959
Certificates of deposit		382		255
International mutual funds		252		257
Large cap growth mutual funds		147		145
Money market mutual funds		108		241
Large cap value mutual funds		103		105
Corporate notes and bonds		101		100
Real estate investment trust mutual funds		64		68
U.S. Government sponsored entities		56		55
Small cap mutual funds		25		25
Mid cap mutual funds		25		23
Total	$	3,560	$	3,233

Securities with unrealized losses at June 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows (in thousands):

June 30, 2012	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury	$	0	$	0		$	0	$	0		$	0	$	0
U.S. Gov’t sponsored entities		5,989		(9	)		0		0			5,989		(9	)
State & political subdivisions		5,046		(53	)		1,591		(1	)		6,637		(54	)
Residential mortgage & asset backed		42,816		(276	)		743		(3	)		43,559		(279	)
Commercial mortgage & asset backed		0		0			0		0			0		0
Corporate notes & bonds		1,949		(51	)		9,492		(2,959	)		11,441		(3,010	)
Pooled trust preferred		0		0			360		(440	)		360		(440	)
Pooled SBA		2,022		(9	)		0		0			2,022		(9	)
Other securities		0		0			0		0			0		0
	$	57,822	$	(398	)	$	12,186	$	(3,403	)	$	70,008	$	(3,801	)
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2011
U.S. Treasury	$	0	$	0		$	0	$	0		$	0	$	0
U.S. Gov’t sponsored entities		7,671		(15	)		0		0			7,671		(15	)
State & political subdivisions		5,314		(92	)		0		0			5,314		(92	)
Residential mortgage & asset backed		36,626		(162	)		9,485		(52	)		46,111		(214	)
Commercial mortgage & asset backed		0		0			0		0			0		0
Corporate notes & bonds		2,860		(139	)		8,841		(3,409	)		11,701		(3,548	)
Pooled trust preferred		0		0			340		(460	)		340		(460	)
Pooled SBA		8,139		(77	)		0		0			8,139		(77	)
Other securities		0		0			0		0			0		0
	$	60,610	$	(485	)	$	18,666	$	(3,921	)	$	79,276	$	(4,406	)

The Corporation evaluates securities for other-than-temporary impairment on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation.

At June 30, 2012, the Corporation held one structured pooled trust preferred security with an adjusted amortized cost of $800 and a fair value of $360. The Corporation evaluated this security for other-than-temporary impairment by estimating the cash flows expected to be received, taking into account future estimated levels of deferrals and defaults by the underlying issuers, and discounting those cash flows at the appropriate accounting yield. For the three and six months ended June 30, 2012, no other-than-temporary impairment was required to be realized in earnings. For the three and six months ended June 30, 2011, other-than-temporary impairment of $0 and $398, respectively, was realized in earnings. At June 30, 2012 and December 31, 2011, the Corporation held four structured pooled trust preferred securities with an adjusted amortized cost of zero.

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three and six months ended June 30, 2012 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		0
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three months ended June 30, 2011 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		0
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the six months ended June 30, 2011 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	3,656
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		398
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

Due to the insignificance of the adjusted amortized cost and other-than-temporary impairment charges to the consolidated financial statements, no further disclosures are required with respect to the Corporation’s structured pooled trust preferred securities.

For the securities that comprise corporate notes and bonds and the securities that are issued by state and political subdivisions, management monitors publicly available financial information, such as filings with the Securities and Exchange Commission, in order to evaluate the securities for other-than-temporary impairment. For financial institution issuers, management also monitors information from quarterly “call” report filings that are used to generate Uniform Bank Performance Reports. When reviewing this information, management considers the financial condition and near-term prospects of the issuer and whether downgrades by bond rating agencies have occurred. Management also considers the length of time and extent to which fair value has been less than cost and the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

As of June 30, 2012 and December 31, 2011, management concluded that the securities described in the previous paragraph were not other-than-temporarily impaired for the following reasons:

• There is no indication of any significant deterioration of the creditworthiness of the institutions that issued the securities.

• The unrealized losses are predominantly attributable to liquidity disruptions within the credit markets and the generally stressed condition of the financial services industry.

• All contractual interest payments on the securities have been received as scheduled, and no information has come to management’s attention through the processes previously described which would lead to a conclusion that future contractual payments will not be timely received.

The Corporation does not intend to sell and it is not more likely than not that it will be required to sell the securities in an unrealized loss position before recovery of its amortized cost basis.

Information pertaining to security sales is as follows:

	Proceeds		Gross Gains		Gross Losses
Three months ended June 30, 2012	$	46,468	$	810	$	(79	)
Six months ended June 30, 2012		88,617		1,446		(149	)
Three months ended June 30, 2011		0		0		0
Six months ended June 30, 2011		23,610		146		(72	)

The following is a schedule of the contractual maturity of securities available for sale, excluding equity securities, at June 30, 2012:

	Amortized Cost		Fair Value
1 year or less	$	22,131	$	22,295
1 year – 5 years		80,606		83,067
5 years – 10 years		128,463		138,447
After 10 years		93,781		95,532
		324,981		339,341
Residential mortgage & asset backed securities		363,792		372,436
Commercial mortgage & asset backed securities		2,071		2,132
Total debt securities	$	690,844	$	713,909

Mortgage and asset backed securities are not due at a single date; periodic payments are received based on the payment patterns of the underlying collateral.

On June 30, 2012 and December 31, 2011, securities carried at $250,338 and $264,166, respectively, were pledged to secure public deposits and for other purposes as provided by law.

XML

Earning Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Computation of basic and diluted earning per share

The computation of basic and diluted earnings per share is shown below (in thousands except per share data):

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income per consolidated statements of income	$	4,336		$	3,891		$	8,683		$	7,168
Net earnings allocated to participating securities		(17	)		(12	)		(33	)		(23	)
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,650		$	7,145
Basic earnings per common share computation:
Distributed earnings allocated to common stock	$	2,044		$	2,021		$	4,084		$	4,038
Undistributed earnings allocated to common stock		2,275			1,858			4,565			3,107
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,649		$	7,145
Weighted average common shares outstanding, including shares considered participating securities		12,440			12,291			12,421			12,277
Less: Average participating securities		(46	)		(36	)		(43	)		(37	)
Weighted average shares		12,394			12,255			12,378			12,240
Basic earnings per common share	$	0.35		$	0.32		$	0.70		$	0.58
Diluted earnings per common share computation:
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,650		$	7,145
Weighted average common shares outstanding for basic earnings per common share		12,394			12,255			12,378			12,240
Add: Dilutive effects of assumed exercises of stock options		3			6			3			7
Weighted average shares and dilutive potential common shares		12,397			12,261			12,381			12,247
Diluted earnings per common share	$	0.35		$	0.32		$	0.70		$	0.58

XML

Fair Value (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value [Abstract]

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2012 and December 31, 2011:

				Fair Value Measurements at June 30, 2012 Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities Available For Sale:
U.S. Treasury	$	6,069		$	0	$	6,069		$	0
U.S. Government sponsored entities		113,030			0		113,030			0
States and political subdivisions		161,583			0		161,583			0
Residential mortgage and asset backed		372,436			3,148		369,288			0
Commercial mortgage and asset backed		2,132			0		2,132			0
Corporate notes and bonds		13,416			0		11,345			2,071
Pooled trust preferred		360			0		0			360
Pooled SBA		44,883			44,883		0			0
Other securities		1,543			1,543		0			0
Total Securities Available For Sale	$	715,452		$	49,574	$	663,447		$	2,431
Trading Securities:
Equity securities – financial services	$	654		$	654	$	0		$	0
Equity securities – industrials		476			476		0			0
Equity securities – health care		428			428		0			0
Certificates of deposit		382			382		0			0
International mutual funds		252			252		0			0
Equity securities – energy		209			209		0			0
Equity securities – materials		162			162		0			0
Equity securities – technology		158			158		0			0
Equity securities – consumer discretionary		156			156		0			0
Large cap growth mutual funds		147			147		0			0
Money market mutual funds		108			108		0			0
Large cap value mutual funds		103			103		0			0
Corporate notes and bonds		101			0		101			0
Real estate investment trust mutual funds		64			64		0			0
U.S. Government sponsored entities		56			0		56			0
Equity securities – consumer staples		54			54		0			0
Small cap mutual funds		25			25		0			0
Mid cap mutual funds		25			25		0			0
Total Trading Securities	$	3,560		$	3,403	$	157		$	0
Liabilities:
Interest rate swaps	$	(1,779	)	$	0	$	(1,779	)	$	0

				Fair Value Measurements at December 31, 2011 Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities Available For Sale:
U.S. Treasury	$	8,130		$	0	$	8,130		$	0
U.S. Government sponsored entities		107,492			2,000		105,492			0
States and political subdivisions		158,437			4,655		153,782			0
Residential mortgage and asset backed		300,126			8,577		291,549			0
Commercial mortgage and asset backed		2,122			0		2,122			0
Corporate notes and bonds		13,860			0		11,800			2,060
Pooled trust preferred		340			0		0			340
Pooled SBA		46,056			46,056		0			0
Other securities		1,544			1,544		0			0
Total Securities Available For Sale	$	638,107		$	62,832	$	572,875		$	2,400
Trading Securities:
Equity securities – financial services	$	779		$	779	$	0		$	0
Equity securities – industrials		324			324		0			0
International mutual funds		257			257		0			0
Certificates of deposit		255			255		0			0
Money market mutual funds		241			241		0			0
Equity securities – health care		204			204		0			0
Equity securities – utilities		197			197		0			0
Large cap growth mutual funds		145			145		0			0
Equity securities – consumer staples		145			145		0			0
Equity securities – consumer discretionary		126			126		0			0
Large cap value mutual funds		105			105		0			0
Corporate notes and bonds		100			0		100			0
Equity securities – technology		75			75		0			0
Equity securities – energy		72			72		0			0
Real estate investment trust mutual funds		68			68		0			0
U.S. Government sponsored entities		55			0		55			0
Equity securities – materials		37			37		0			0
Small cap mutual funds		25			25		0			0
Mid cap mutual funds		23			23		0			0
Total Trading Securities	$	3,233		$	3,078	$	155		$	0
Liabilities:
Interest rate swaps	$	(1,669	)	$	0	$	(1,669	)	$	0

Securities available for sale measured at fair value on recurring basis using significant unobservable inputs (Level 3)

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2012:

	Corporate notes and bonds		Pooled trust preferred
Balance, April 1, 2012	$	2,040	$	340
Total gains or losses:
Included in other comprehensive income (unrealized)		31		20
Balance, June 30, 2012	$	2,071	$	360

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2012:

	Corporate notes and bonds		Pooled trust preferred
Balance, January 1, 2012	$	2,060	$	340
Total gains or losses:
Included in other comprehensive income (unrealized)		11		20
Balance, June 30, 2012	$	2,071	$	360

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2011:

	Residential mortgage and asset backed			Corporate notes and bonds			Pooled trust preferred
Balance, April 1, 2011	$	4,106		$	1,895		$	1,402
Total gains or losses:
Included in other comprehensive income (unrealized)		0			(35	)		(40	)
Purchases, issuances, sales, and settlements:
Settlements		(118	)		0			0
Balance, June 30, 2011	$	3,988		$	1,860		$	1,362

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2011:

	Residential mortgage and asset backed			Corporate notes and bonds		U.S. Gov’t Sponsored Entities			Pooled trust preferred
Balance, January 1, 2011	$	2,269		$	1,240	$	2,000		$	1,292
Transfers out of Level 3 (a)(b)		0			0		(2,000	)		0
Total gains or losses:
Included in earnings (realized)		0			0		0			(398	)
Included in other comprehensive income (unrealized)		0			620		0			468
Purchases, issuances, sales, and settlements:
Purchases		1,917			0		0			0
Settlements		(198	)		0		0			0
Balance, June 30, 2011	$	3,988		$	1,860	$	0		$	1,362

(a) Transferred from Level 3 to Level 2 since observable market data became available to value the security.

(b) The Corporation’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that caused the transfer.

Quantitative information about Level 3 fair value measurements

The following table presents quantitative information about Level 3 fair value measurements at June 30, 2012:

	Fair value		Valuation Technique	Unobservable Inputs	Input Utilized
Corporate notes and bonds		$2,071	Discounted cash flow	Constant prepayment rate Probability of default Discount rate	0%    0% 9.2%
Pooled trust preferred		$360	Discounted cash flow	Collateral default rate Discount rate Recovery probability Prepayment rate	2% annually for 2 years; 0.36% thereafter 19% 10%, lagged 2 years 5% for next 5 years

Sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category

During the three months ended June 30, 2012 and 2011, the following available for sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category:

	2012		2011
U.S. Treasury	$	0	$	4,053
U.S. Government sponsored entities		26,034		16,124
States and political subdivisions		3,771		4,929
Residential mortgage and asset backed		40,473		37,659
Commercial mortgage and asset backed		0		2,085
Total	$	70,278	$	64,850

During the six months ended June 30, 2012 and 2011, the following available for sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category:

	2012		2011
U.S. Government sponsored entities	$	2,000	$	2,000
States and political subdivisions		4,655		4,750
Residential mortgage and asset backed		8,577		20,405
Total	$	15,232	$	27,155

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

Assets and liabilities measured at fair value on a non-recurring basis are as follows at June 30, 2012 and December 31, 2011:

			Fair Value Measurements at June 30, 2012 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial mortgages	$	7,907	$	0	$	0	$	7,907
Commercial, industrial, and agricultural		3,986		0		0		3,986
Residential real estate		437		0		0		437

			Fair Value Measurements at December 31, 2011 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial mortgages	$	7,219	$	0	$	0	$	7,219
Commercial, industrial, and agricultural		3,190		0		0		3,190
Residential real estate		105		0		0		105

Quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012:

	Fair value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans – commercial mortgages	$	7,907	Sales comparison approach	Negative adjustment for selling costs and changes in market conditions since appraisal	10% -65% (15%)
Impaired loans – commercial, industrial, and agricultural		3,986	Income approach	Negative adjustment for selling costs and changes in net operating income expectations since appraisal	5% - 65% (29%)
Impaired loans – residential real estate		437	Sales comparison approach	Negative adjustment for selling costs and changes in market conditions since appraisal	10% -19% (16%)

Carrying amount and fair value of financial instruments

The following table presents the carrying amount and fair value of financial instruments at June 30, 2012:

	Carrying			Fair Value Measurement Using:									Total
	Amount			Level 1			Level 2			Level 3			Fair Value
ASSETS
Cash and cash equivalents	$	24,228		$	24,228		$	0		$	0		$	24,228
Interest bearing time deposits with other banks		275			0			281			0			281
Securities available for sale		715,452			49,574			663,447			2,431			715,452
Trading securities		3,560			3,403			157			0			3,560
Loans held for sale		1,499			0			1,554			0			1,554
Net loans		893,077			0			0			918,918			918,918
FHLB and other equity interests		6,848			N/A			N/A			N/A			N/A
Accrued interest receivable		6,903			264			3,527			3,112			6,903
LIABILITIES
Deposits	$	(1,455,421	)	$	(1,231,487	)	$	(227,042	)	$	0		$	(1,458,529	)
FHLB and other borrowings		(82,182	)		0			(91,059	)		0			(91,059	)
Subordinated debentures		(20,620	)		0			0			(10,865	)		(10,865	)
Interest rate swaps		(1,779	)		0			(1,779	)		0			(1,779	)
Accrued interest payable		(1,121	)		(321	)		(783	)		(17	)		(1,121	)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2011:

	Carrying Amount			Fair Value
ASSETS
Cash and cash equivalents	$	39,703		$	39,703
Interest bearing time deposits with other banks		224			229
Securities available for sale		638,107			638,107
Trading securities		3,233			3,233
Loans held for sale		1,442			1,470
Net loans		837,268			862,389
FHLB and other equity interests		6,537			N/A
Accrued interest receivable		6,567			6,567
LIABILITIES
Deposits	$	(1,353,851	)	$	(1,357,415	)
FHLB and other borrowings		(74,456	)		(83,042	)
Subordinated debentures		(20,620	)		(10,906	)
Interest rate swaps		(1,669	)		(1,669	)
Accrued interest payable		(1,308	)		(1,308	)

XML

Derivative Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments [Abstract]

DERIVATIVE INSTRUMENTS

8.    DERIVATIVE INSTRUMENTS

The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as cash flow hedges, the effective portion of the changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified into earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Corporation assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction.

On August 1, 2008, the Corporation executed an interest rate swap agreement with a 5 year term and an effective date of September 15, 2008 in order to hedge $10 million of a subordinated note that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from August 1, 2008 to September 15, 2013 without exchange of the underlying notional amount. At June 30, 2012, the variable rate on the subordinated debt was 2.02% (LIBOR plus 155 basis points) and the Corporation was paying 5.84% (4.29% fixed rate plus 155 basis points).

In anticipation of the expiration of the 5 year interest rate swap agreement discussed immediately above, on May 3, 2011, the Corporation executed an interest rate swap agreement with a 5 year term and an effective date of September 15, 2013 which as of that effective date, will hedge $10 million of the subordinated note discussed immediately above. As with the prior interest rate swap agreement, the Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2013 to September 15, 2018 without exchange of the underlying notional amount. On the effective date, the variable rate on the subordinated debt will be LIBOR plus 155 basis points and the Corporation will be paying 5.57% (4.02% fixed rate plus 155 basis points).

As of June 30, 2012, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s consolidated balance sheet and statement of income as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Liability Derivative
		Fair value
	Balance Sheet Location	June 30, 2012			December 31, 2011
As of June 30, 2012:
Interest rate contracts	Accrued interest and other liabilities	($	1,779	)	($	1,669	)

For the Three Months Ended June 30, 2012	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	135	)	Interest expense – subordinated debentures	($	98	)	Other income		0

For the Six Months Ended June 30, 2012	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	72	)	Interest expense – subordinated debentures	($	192	)	Other income		0

For the Three Months Ended June 30, 2011	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	145	)	Interest expense – subordinated debentures	($	101	)	Other income	$	0

For the Six Months Ended June 30, 2011	(a)			(b)	(c)			(d)	(e)
Interest rate contracts	($	78	)	Interest expense – subordinated debentures	($	201	)	Other income	$	0

(a) Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax

(b) Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(c) Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

(d) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

(e) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

Amounts reported in accumulated other comprehensive loss related to the interest rate swap will be reclassified to interest expense as interest payments are made on the subordinated debentures. Such amounts reclassified from accumulated other comprehensive loss to interest expense in the next twelve months are expected to be $372.

XML

Deposits

6 Months Ended

Jun. 30, 2012

Deposits [Abstract]

DEPOSITS

6.    DEPOSITS

Total deposits at June 30, 2012 and December 31, 2011 are summarized as follows (in thousands):

	Percentage Change			June 30, 2012		December 31, 2011
Checking, non-interest bearing		6.8	%	$	163,153	$	152,732
Checking, interest bearing		1.4	%		310,155		305,960
Savings accounts		20.9	%		758,179		627,106
Certificates of deposit		(16.5	%)		223,934		268,053
		7.5	%	$	1,455,421	$	1,353,851

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

EARNINGS PER SHARE

7.    EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per share is computed using the weighted average number of shares determined for the basic computation plus the dilutive effect of potential common shares issuable under certain stock compensation plans. For the three and six months ended June 30, 2012, 75,500 shares issuable pursuant to outstanding stock options under stock compensation plans were excluded from the diluted earnings per share calculations because the strike prices associated with the options exceeded the market price of the Corporation’s common stock thus making the shares anti-dilutive. For the three and six months ended June 30, 2011, 84,250 shares issuable pursuant to outstanding stock options were excluded from the diluted earnings per share calculations because the strike prices associated with the options exceeded the market price of the Corporation’s common stock thus making the shares anti-dilutive.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Corporation has determined that its outstanding non-vested stock awards are participating securities.

The computation of basic and diluted earnings per share is shown below (in thousands except per share data):

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net income per consolidated statements of income	$	4,336		$	3,891		$	8,683		$	7,168
Net earnings allocated to participating securities		(17	)		(12	)		(33	)		(23	)
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,650		$	7,145
Basic earnings per common share computation:
Distributed earnings allocated to common stock	$	2,044		$	2,021		$	4,084		$	4,038
Undistributed earnings allocated to common stock		2,275			1,858			4,565			3,107
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,649		$	7,145
Weighted average common shares outstanding, including shares considered participating securities		12,440			12,291			12,421			12,277
Less: Average participating securities		(46	)		(36	)		(43	)		(37	)
Weighted average shares		12,394			12,255			12,378			12,240
Basic earnings per common share	$	0.35		$	0.32		$	0.70		$	0.58
Diluted earnings per common share computation:
Net earnings allocated to common stock	$	4,319		$	3,879		$	8,650		$	7,145
Weighted average common shares outstanding for basic earnings per common share		12,394			12,255			12,378			12,240
Add: Dilutive effects of assumed exercises of stock options		3			6			3			7
Weighted average shares and dilutive potential common shares		12,397			12,261			12,381			12,247
Diluted earnings per common share	$	0.35		$	0.32		$	0.70		$	0.58

XML

Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

9.    RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued Accounting Standards Update No. 2011-4, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” Some amendments in this update clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this update are effective during interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In June 2011, the FASB issued Accounting Standards Update No. 2011-5, “Comprehensive Income (Topic 220), Presentation of Comprehensive Income.” This update amends the FASB Accounting Standards Codification (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and retrospective application is required. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.” The amendments in the update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than fifty percent. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

In December 2011, the FASB issued Accounting Standards Update No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately within their respective components of net income and other comprehensive income. As such, the amendments in this update supersede only those paragraphs in Accounting Standards Update No. 2011-05 that pertain to how and where reclassification adjustments are presented. The amendments were effective at the same time as the amendments in Accounting Standards Update 2011-05. The effect of adopting this new guidance did not have a material effect on the Corporation’s financial statements.

XML

Fair Value (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended			6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2011 Pooled SBA [Member] Securities	Dec. 31, 2010 Pooled SBA [Member]	Jun. 30, 2012 Collateral Dependent Loans [Member]	Jun. 30, 2011 Collateral Dependent Loans [Member]	Jun. 30, 2012 Collateral Dependent Loans [Member]	Dec. 31, 2011 Collateral Dependent Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities transferred to the Level 1 Fair value							$ 3,437
Impaired loans, principal balance	32,744		32,744					14,476	22,384	14,476
Impaired loans allowance	2,456		2,456		1,493			2,146		2,146	1,493
Impaired loans, additional provisions				263				1,196	345	1,597
Number of Pooled SBA securities, transferred from level 2 to level 1						2
Fair Value Measurement (Textual) [Abstract]
Fair value changes attributed to unrealized gains (losses)	(164)	(16)	24	87
Realized gains (losses) on sale of securities	24	0	156	10
Dividend Income, Operating	$ 18	$ 8	$ 31	$ 15

XML

Loans (Details Textual) (USD $)	3 Months Ended					6 Months Ended
	Jun. 30, 2012 Contract Person	Mar. 31, 2012	Sep. 30, 2011	Jun. 30, 2011	Sep. 30, 2010	Jun. 30, 2012 Contract Person	Jun. 30, 2011	Dec. 31, 2011
Loans (Textual) [Abstract]
Net unamortized loan costs and fees	$ 71					$ 71		$ (7)
Interest rate on original loan				6.60%			6.60%
Reduced interest rate		5.75%	4.07%		4.19%
Outstanding Balance of Semi Annual Loans						Greater than $1 million
Out standing balance of Annual Loans						Less Than $1 million
Provision for loan losses	1,746,000			992,000		2,850,000	1,769,000
Loans modified in a troubled debt restructuring	10,450,000					10,450,000		7,688,000
Number of loans whose terms have been modified	2					2
Number of commercial mortgage customer	1					1
Commercial mortgages [Member]
Loans (Textual) [Abstract]
Loans modified in a troubled debt restructuring	10,153,000					10,153,000		7,688,000
Trouble Debt Restructuring [Member] | Commercial mortgages [Member]
Loans (Textual) [Abstract]
Recorded investment in loans	1,832,000					1,832,000
Provision for loan losses	101,000			0		101,000	0
Trouble Debt Restructuring [Member] | Commercial customer [Member]
Loans (Textual) [Abstract]
Recorded investment in loans	297,000					297,000
Customer1 [Member]
Loans (Textual) [Abstract]
Interest rate on original loan	6.60%					6.60%
Customer1 [Member] | Trouble Debt Restructuring [Member] | Commercial mortgages [Member]
Loans (Textual) [Abstract]
Recorded investment in loans	1,657,000					1,657,000		1,662,000
Loan specific reserve	209,000					209,000		228,000
Customer 2 [Member] | Trouble Debt Restructuring [Member] | Commercial mortgages [Member]
Loans (Textual) [Abstract]
Recorded investment in loans	712,000					712,000		728,000
Loan specific reserve	463,000					463,000		465,000
Provision for loan losses	0					0
Customer 3 [Member] | Trouble Debt Restructuring [Member] | Commercial mortgages [Member]
Loans (Textual) [Abstract]
Recorded investment in loans	4,547,000					4,547,000		4,588,000
Customer4 [Member] | Trouble Debt Restructuring [Member] | Commercial mortgages [Member]
Loans (Textual) [Abstract]
Recorded investment in loans	$ 1,405,000					$ 1,405,000		$ 1,438,000
Loans 1 [Member] | Customer 2 [Member]
Loans (Textual) [Abstract]
Interest rate on original loan	6.45%					6.45%
Loans 2 [Member] | Customer 2 [Member]
Loans (Textual) [Abstract]
Interest rate on original loan	6.47%					6.47%

XML

Loans (Tables)

6 Months Ended

Jun. 30, 2012

Loans [Abstract]

Schedule of net loans

Total net loans at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012			December 31, 2011
Commercial, industrial, and agricultural	$	266,122		$	253,324
Commercial mortgages		260,788			242,511
Residential real estate		325,200			298,628
Consumer		54,251			54,677
Credit cards		3,239			3,206
Overdrafts		284			423
Less: unearned discount		(3,117	)		(2,886	)
allowance for loan losses		(13,690	)		(12,615	)
Loans, net	$	893,077		$	837,268

Allowance for loan losses

Transactions in the allowance for loan losses for the three months ended June 30, 2012 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, April 1, 2012	$	4,942		$	4,377		$	1,997		$	1,435		$	96		$	168		$	13,015
Charge-offs		(422	)		(121	)		(137	)		(382	)		(14	)		(50	)		(1,126	)
Recoveries		5			0			0			22			6			22			55
Provision (benefit) for loan losses		590			297			365			493			(7	)		8			1,746
Allowance for loan losses, June 30, 2012	$	5,115		$	4,553		$	2,225		$	1,568		$	81		$	148		$	13,690

Transactions in the allowance for loan losses for the six months ended June 30, 2012 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2012	$	4,511		$	4,470		$	1,991		$	1,404		$	71		$	168		$	12,615
Charge-offs		(647	)		(236	)		(224	)		(638	)		(33	)		(117	)		(1,895	)
Recoveries		8			0			0			49			7			56			120
Provision for loan losses		1,243			319			458			753			36			41			2,850
Allowance for loan losses, June 30, 2012	$	5,115		$	4,553		$	2,225		$	1,568		$	81		$	148		$	13,690

Transactions in the allowance for loan losses for the three months ended June 30, 2011 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, April 1, 2011	$	3,732		$	3,879		$	1,879		$	1,507		$	96		$	131		$	11,224
Charge-offs		(173	)		(41	)		(63	)		(202	)		(7	)		(62	)		(548	)
Recoveries		3			0			0			21			3			20			47
Provision (benefit) for loan losses		208			561			84			74			12			53			992
Allowance for loan losses, June 30, 2011	$	3,770		$	4,399		$	1,900		$	1,400		$	104		$	142		$	11,715

Transactions in the allowance for loan losses for the six months ended June 30, 2011 were as follows:

	Commercial, Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2011	$	3,517		$	3,511		$	1,916		$	1,561		$	96		$	219		$	10,820
Charge-offs		(215	)		(88	)		(77	)		(462	)		(25	)		(115	)		(982	)
Recoveries		4			0			0			45			5			54			108
Provision (benefit) for loan losses		464			976			61			256			28			(16	)		1,769
Allowance for loan losses, June 30, 2011	$	3,770		$	4,399		$	1,900		$	1,400		$	104		$	142		$	11,715

Allowance for loan losses and the recorded investment in loans by portfolio segment

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and is based on the Corporation’s impairment method as of June 30, 2012 and December 31, 2011:

June 30, 2012	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,282	$	347	$	55	$	0	$	0	$	0	$	1,684
Collectively evaluated for impairment		3,833		3,434		2,170		1,568		81		148		11,234
Modified in a troubled debt restructuring		0		772		0		0		0		0		772
Total ending allowance balance	$	5,115	$	4,553	$	2,225	$	1,568	$	81	$	148	$	13,690
Loans:
Loans individually evaluated for impairment	$	7,778	$	8,343	$	628	$	0	$	0	$	0	$	16,749
Loans collectively evaluated for impairment		258,047		242,292		324,572		54,251		3,239		284		882,685
Loans modified in a troubled debt restructuring		297		10,153		0		0		0		0		10,450
Total ending loans balance	$	266,122	$	260,788	$	325,200	$	54,251	$	3,239	$	284	$	909,884

December 31, 2011	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	329	$	917	$	19	$	0	$	0	$	0	$	1,265
Collectively evaluated for impairment		4,182		3,325		1,972		1,404		71		168		11,122
Modified in a troubled debt restructuring		—		228		0		0		0		0		228
Total ending allowance balance	$	4,511	$	4,470	$	1,991	$	1,404	$	71	$	168	$	12,615
Loans:
Loans individually evaluated for impairment	$	6,115	$	8,457	$	124	$	0	$	0	$	0	$	14,696
Loans collectively evaluated for impairment		247,209		226,366		298,504		54,677		3,206		423		830,385
Loans modified in a troubled debt restructuring		—		7,688		0		0		0		0		7,688
Total ending loans balance	$	253,324	$	242,511	$	298,628	$	54,677	$	3,206	$	423	$	852,769

Loans individually evaluated for impairment by portfolio

The following tables present information related to loans individually evaluated for impairment by portfolio segment as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011:

June 30, 2012	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	6,636	$	4,525	$	1,282
Commercial mortgage		7,004		6,292		1,119
Residential real estate		598		492		55
With no related allowance recorded:
Commercial, industrial, and agricultural		8,812		8,097		0
Commercial mortgage		9,558		7,657		0
Residential real estate		136		136		0
Total	$	32,744	$	27,199	$	2,456

December 31, 2011	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	4,329	$	2,815	$	462
Commercial mortgage		4,724		4,065		1,012
Residential real estate		187		124		19
With no related allowance recorded:
Commercial, industrial, and agricultural		3,892		3,300		0
Commercial mortgage		13,839		12,080		0
Residential real estate		0		0		0
Total	$	26,971	$	22,384	$	1,493

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	3,528	$	4	$	4	$	3,290	$	4	$	4
Commercial mortgage		6,031		0		0		5,376		0		0
Residential real estate		353		4		4		277		8		8
With no related allowance recorded:
Commercial, industrial, and agricultural		3,537		0		0		3,458		0		0
Commercial mortgage		12,123		0		0		12,108		0		0
Residential real estate		68		0		0		45		0		0
Total	$	25,640	$	8	$	8	$	24,554	$	12	$	12

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	1,183	$	0	$	0	$	1,660	$	0	$	0
Commercial mortgage		8,835		14		14		8,810		16		16
Residential real estate		185		0		0		202		0		0
With no related allowance recorded:
Commercial, industrial, and agricultural		2,411		0		0		1,607		0		0
Commercial mortgage		4,584		0		0		3,506		0		0
Residential real estate		0		0		0		0		0		0
Total	$	17,198	$	14	$	14	$	15,785	$	16	$	16

Nonaccrual loans and loans past due over 90 days still on accrual by portfolio segment

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still accruing interest by class of loans as of June 30, 2012 and December 31, 2011:

	June 30, 2012				December 31, 2011
	Nonaccrual		Past Due Over 90 Days Still on Accrual		Nonaccrual		Past Due Over 90 Days Still on Accrual
Commercial, industrial, and agricultural	$	7,354	$	0	$	6,949	$	10
Commercial mortgages		8,530		0		8,359		122
Residential real estate		2,221		82		1,254		157
Consumer		4		187		5		125
Credit cards		0		15		0		27
Total	$	18,109	$	284	$	16,567	$	441

Aging of the recorded investment in past due loans

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 and December 31, 2011 by class of loans. The recorded investment in loans excludes accrued interest and loan origination fees, net due to their insignificance.

June 30, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	246	$	56	$	4,946	$	5,248	$	260,874	$	266,122
Commercial mortgages		813		422		8,530		9,765		251,023		260,788
Residential real estate		1,696		420		2,021		4,137		321,063		325,200
Consumer		587		132		191		910		53,341		54,251
Credit cards		11		28		15		54		3,185		3,239
Overdrafts		0		0		0		0		284		284
Total	$	3,353	$	1,058	$	15,703	$	20,114	$	889,770	$	909,884

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	239	$	53	$	6,959	$	7,251	$	246,073	$	253,324
Commercial mortgages		1,064		2,620		7,043		10,727		231,784		242,511
Residential real estate		1,816		682		1,411		3,909		294,719		298,628
Consumer		392		185		130		707		53,970		54,677
Credit cards		34		19		27		80		3,126		3,206
Overdrafts		—		—		—		—		423		423
Total	$	3,545	$	3,559	$	15,570	$	22,674	$	830,095	$	852,769

Schedule of loan assigned a risk rating within 12 months of the balance sheet date

All loans included in the following tables have been assigned a risk rating within 12 months of the balance sheet date.

June 30, 2012	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	250,151	$	1,566	$	14,228	$	177	$	266,122
Commercial mortgages		236,706		1,385		21,985		712		260,788
Total	$	486,857	$	2,951	$	36,213	$	889	$	526,910

December 31, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	223,457	$	4,176	$	25,490	$	201	$	253,324
Commercial mortgages		214,098		3,172		24,513		728		242,511
Total	$	437,555	$	7,348	$	50,003	$	929	$	495,835

Summary of holiday's loan portfolio

Holiday’s loan portfolio is summarized as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
Consumer	$	19,134		$	18,176
Residential real estate		1,020			1,056
Less: unearned discount		(3,117	)		(2,886	)
Total	$	17,037		$	16,346

Recorded investment in residential and consumer loan based on payment activity

The following table presents the recorded investment in residential and consumer loans based on payment activity as of June 30, 2012 and December 31, 2011:

	June 30, 2012						December 31, 2011
	Residential Real Estate		Consumer		Credit Cards		Residential Real Estate		Consumer		Credit Cards
Performing	$	322,897	$	54,060	$	3,224	$	297,217	$	54,547	$	3,179
Non-performing		2,303		191		15		1,411		130		27
Total	$	325,200	$	54,251	$	3,239	$	298,628	$	54,677	$	3,206

XML

Stock Compensation (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended		3 Months Ended		6 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Restricted Stock Awards [Member]	Jun. 30, 2011 Restricted Stock Awards [Member]	Jun. 30, 2012 Restricted Stock Awards [Member]	Jun. 30, 2011 Restricted Stock Awards [Member]	Jun. 30, 2012 Unvested Restricted Stock Awards [Member]	Jun. 30, 2012 Key Employees [Member]	Jun. 30, 2012 Key Employees [Member] Maximum [Member]	Jun. 30, 2012 Key Employees [Member] Minimum [Member]	Jun. 30, 2012 Independent Directors [Member]	Jun. 30, 2012 Independent Directors [Member] Maximum [Member]	Jun. 30, 2012 Independent Directors [Member] Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate grant, maximum, shares				500,000		500,000
Compensation Expenses				$ 73	$ 49	$ 132	$ 102
Total unrecognized compensation cost								681
Stock incentive plan, vesting per year, percentage									0.25%			0.33%
Vested period										4 years	1 year		3 years	1 year
Vesting percentage on fourth anniversary of grant for key employees									100.00%
Vesting percentage on third anniversary of grant for independent directors												100.00%
Unrecognized compensation cost related to nonvested stock options granted								0
Stock Compensation (Textual) [Abstract]
Vesting rights		For key employees, the plan vesting is one-fourth of the granted options or restricted stock per year beginning one year after the grant date, with 100% vested on the fourth anniversary of the grant. For independent directors, the vesting schedule is one-third of the granted options per year beginning one year after the grant date, with 100% vested on the third anniversary of the grant.
Employee service share based compensation nonvested awards compensation cost not yet recognized share based awards options	$ 0	$ 0
Stock options that were fully vested and exercisable	107,375	107,375	107,375

XML

Loans (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Summary of holiday's loan portfolio
Consumer	$ 54,251	$ 54,677
Residential real estate	325,200	298,628
Less: unearned discount	(3,117)	(2,886)
Holiday Financial Services Corporation [Member]
Summary of holiday's loan portfolio
Consumer	19,134	18,176
Residential real estate	1,020	1,056
Less: unearned discount	(3,117)	(2,886)
Total	$ 17,037	$ 16,346

XML

Securities (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Adjusted amortized cost of one structured pooled trust preferred security held by the corporation			$ 692,365	$ 618,911
Fair value of one structured pooled trust preferred security held by the corporation			715,452	638,107
Number of securities holdings			0
Securities (Textual) [Abstract]
Shareholders' equity percentage			10.00%
Securities			250,338	264,166
Additional credit loss for which other-than-temporary impairment was previously recognized	0	398
Number of structured pooled trust preferred securities deemed to be other-than-temporarily impaired			4	4
Pooled Trust Corporation [Member]
Schedule of Available-for-sale Securities [Line Items]
Adjusted amortized cost of one structured pooled trust preferred security held by the corporation			800
Fair value of one structured pooled trust preferred security held by the corporation			360
Pooled trust preferred [Member]
Schedule of Available-for-sale Securities [Line Items]
Adjusted amortized cost of one structured pooled trust preferred security held by the corporation			800	800
Fair value of one structured pooled trust preferred security held by the corporation			$ 360	$ 340
Number of securities holdings			1

XML

Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
NET INCOME	$ 4,336	$ 3,891	$ 8,683	$ 7,168
Other comprehensive income, net of tax:
Change in fair value of interest rate swap agreements designated as cash flow hedges, net of tax of $73 and $78 for the three months ended June 30, 2012 and 2011, and $39 and $42 for the six months ended June 30, 2012 and 2011	(135)	(145)	(72)	(78)
Unrealized gains (losses) on other-than-temporarily impaired securities available for sale:
Unrealized gains arising during the period, net of tax of ($7) for the three months ended June 30, 2012, and ($7) and ($32) for the six months ended June 30, 2012 and 2011	13	0	13	60
Reclassification adjustment for losses included in net income, net of tax of ($139) for the six months ended June 30, 2011.	0	0	0	259
Other comprehensive income, available-for-sale securities adjustment, net of tax, total	13	0	13	319
Unrealized gains (losses) on other securities available for sale:
Unrealized gains arising during the period, net of tax of ($2,455) and ($3,881) for the three months ended June 30, 2012 and 2011, and ($1,809) and ($4,556) for the six months ended June 30, 2012 and 2011	4,560	7,208	3,359	8,462
Reclassification adjustment for accumulated gains included in net income, net of tax of $256 for the three months ended June 30, 2012 and $454 and $26 for the six months ended June 30, 2012 and 2011	(475)	0	(843)	(48)
Unrealized gains on other securities available for sale net of reclassification adjustment for accumulated gains included in net income	4,085	7,208	2,516	8,414
Other comprehensive income	3,963	7,063	2,457	8,655
COMPREHENSIVE INCOME	$ 8,299	$ 10,954	$ 11,140	$ 15,823

XML

Fair Value

6 Months Ended

Jun. 30, 2012

Fair Value [Abstract]

FAIR VALUE

3.    FAIR VALUE

Fair Value Option

Management elected to adopt the fair value option for its investment in certain equity securities in order to provide financial statement users with greater visibility into the Corporation’s financial instruments that do not have a defined maturity date.

Fair value changes attributable to unrealized gains (losses) that were included in earnings for the three and six months ended June 30, 2012 were $(164) and $24, respectively. Fair value changes attributable to unrealized losses that were included in earnings for the three and six month ended June 30, 2011 were ($16) and $87, respectively. Realized gains on the sale of securities for which the fair value option was elected were $24 and $156 during the three and six months ended June 30, 2012. Realized gains on the sale of securities for which the fair value option was elected were $0 and $10 during the three and six months ended June 30, 2011.

Dividend income is recorded based on cash dividends and comprises the “Dividends” line item in the accompanying consolidated statement of income. Dividend income was $18 and $31 for the three and six months ended June 30, 2012 and $8 and $15 for the three and six months ended June 30, 2011.

Fair Value Measurement

Fair value is defined 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. A fair value hierarchy has also been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs are used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other 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.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of most trading securities and securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value of one corporate bond held by the Corporation has been determined by using Level 3 inputs. The Corporation has engaged a valuation expert to price this security using a proprietary model, which incorporates assumptions about certain factors that market participants would use in pricing the securities, including bid/ask spreads and liquidity and credit premiums.

Trust preferred securities which are issued by financial institutions and insurance companies are priced using Level 3 inputs. The decline in the level of observable inputs and market activity in this class of investments by the measurement date has been significant and resulted in unreliable external pricing. Broker pricing and bid/ask spreads, when available, vary widely, and the once-active market has become comparatively inactive. The Corporation engaged a third party consultant who has developed a model for pricing these securities. Information such as historical and current performance of the underlying collateral, deferral and default rates, collateral coverage ratios, break in yield calculations, cash flow projections, liquidity and credit premiums required by a market participant, and financial trend analysis with respect to the individual issuing financial institutions and insurance companies are utilized in determining individual security valuations. Due to the current market conditions as well as the limited trading activity of these securities, the market value of the securities is highly sensitive to assumption changes and market volatility.

The Corporation’s derivative instrument is an interest rate swap that is similar to those that trade in liquid markets. As such, significant fair value inputs can generally be verified and do not typically involve significant management judgments (Level 2 inputs).

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals prepared by third-parties. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also adjusts appraised values based on the length of time that has passed since the appraisal and other factors. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2012 and December 31, 2011:

				Fair Value Measurements at June 30, 2012 Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities Available For Sale:
U.S. Treasury	$	6,069		$	0	$	6,069		$	0
U.S. Government sponsored entities		113,030			0		113,030			0
States and political subdivisions		161,583			0		161,583			0
Residential mortgage and asset backed		372,436			3,148		369,288			0
Commercial mortgage and asset backed		2,132			0		2,132			0
Corporate notes and bonds		13,416			0		11,345			2,071
Pooled trust preferred		360			0		0			360
Pooled SBA		44,883			44,883		0			0
Other securities		1,543			1,543		0			0
Total Securities Available For Sale	$	715,452		$	49,574	$	663,447		$	2,431
Trading Securities:
Equity securities – financial services	$	654		$	654	$	0		$	0
Equity securities – industrials		476			476		0			0
Equity securities – health care		428			428		0			0
Certificates of deposit		382			382		0			0
International mutual funds		252			252		0			0
Equity securities – energy		209			209		0			0
Equity securities – materials		162			162		0			0
Equity securities – technology		158			158		0			0
Equity securities – consumer discretionary		156			156		0			0
Large cap growth mutual funds		147			147		0			0
Money market mutual funds		108			108		0			0
Large cap value mutual funds		103			103		0			0
Corporate notes and bonds		101			0		101			0
Real estate investment trust mutual funds		64			64		0			0
U.S. Government sponsored entities		56			0		56			0
Equity securities – consumer staples		54			54		0			0
Small cap mutual funds		25			25		0			0
Mid cap mutual funds		25			25		0			0
Total Trading Securities	$	3,560		$	3,403	$	157		$	0
Liabilities:
Interest rate swaps	$	(1,779	)	$	0	$	(1,779	)	$	0

				Fair Value Measurements at December 31, 2011 Using
Description	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Securities Available For Sale:
U.S. Treasury	$	8,130		$	0	$	8,130		$	0
U.S. Government sponsored entities		107,492			2,000		105,492			0
States and political subdivisions		158,437			4,655		153,782			0
Residential mortgage and asset backed		300,126			8,577		291,549			0
Commercial mortgage and asset backed		2,122			0		2,122			0
Corporate notes and bonds		13,860			0		11,800			2,060
Pooled trust preferred		340			0		0			340
Pooled SBA		46,056			46,056		0			0
Other securities		1,544			1,544		0			0
Total Securities Available For Sale	$	638,107		$	62,832	$	572,875		$	2,400
Trading Securities:
Equity securities – financial services	$	779		$	779	$	0		$	0
Equity securities – industrials		324			324		0			0
International mutual funds		257			257		0			0
Certificates of deposit		255			255		0			0
Money market mutual funds		241			241		0			0
Equity securities – health care		204			204		0			0
Equity securities – utilities		197			197		0			0
Large cap growth mutual funds		145			145		0			0
Equity securities – consumer staples		145			145		0			0
Equity securities – consumer discretionary		126			126		0			0
Large cap value mutual funds		105			105		0			0
Corporate notes and bonds		100			0		100			0
Equity securities – technology		75			75		0			0
Equity securities – energy		72			72		0			0
Real estate investment trust mutual funds		68			68		0			0
U.S. Government sponsored entities		55			0		55			0
Equity securities – materials		37			37		0			0
Small cap mutual funds		25			25		0			0
Mid cap mutual funds		23			23		0			0
Total Trading Securities	$	3,233		$	3,078	$	155		$	0
Liabilities:
Interest rate swaps	$	(1,669	)	$	0	$	(1,669	)	$	0

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2012:

	Corporate notes and bonds		Pooled trust preferred
Balance, April 1, 2012	$	2,040	$	340
Total gains or losses:
Included in other comprehensive income (unrealized)		31		20
Balance, June 30, 2012	$	2,071	$	360

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2012:

	Corporate notes and bonds		Pooled trust preferred
Balance, January 1, 2012	$	2,060	$	340
Total gains or losses:
Included in other comprehensive income (unrealized)		11		20
Balance, June 30, 2012	$	2,071	$	360

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2011:

	Residential mortgage and asset backed			Corporate notes and bonds			Pooled trust preferred
Balance, April 1, 2011	$	4,106		$	1,895		$	1,402
Total gains or losses:
Included in other comprehensive income (unrealized)		0			(35	)		(40	)
Purchases, issuances, sales, and settlements:
Settlements		(118	)		0			0
Balance, June 30, 2011	$	3,988		$	1,860		$	1,362

The table below presents a reconciliation and income statement classification of gains and losses for all securities available for sale measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2011:

	Residential mortgage and asset backed			Corporate notes and bonds		U.S. Gov’t Sponsored Entities			Pooled trust preferred
Balance, January 1, 2011	$	2,269		$	1,240	$	2,000		$	1,292
Transfers out of Level 3 (a)(b)		0			0		(2,000	)		0
Total gains or losses:
Included in earnings (realized)		0			0		0			(398	)
Included in other comprehensive income (unrealized)		0			620		0			468
Purchases, issuances, sales, and settlements:
Purchases		1,917			0		0			0
Settlements		(198	)		0		0			0
Balance, June 30, 2011	$	3,988		$	1,860	$	0		$	1,362

(a) Transferred from Level 3 to Level 2 since observable market data became available to value the security.

(b) The Corporation’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that caused the transfer.

The unrealized losses reported in earnings for the six months ended June 30, 2011 for Level 3 assets that are still held at the balance sheet date relate to pooled trust preferred securities deemed to be other-than-temporarily impaired.

The following table presents quantitative information about Level 3 fair value measurements at June 30, 2012:

	Fair value		Valuation Technique	Unobservable Inputs	Input Utilized
Corporate notes and bonds		$2,071	Discounted cash flow	Constant prepayment rate Probability of default Discount rate	0%    0% 9.2%
Pooled trust preferred		$360	Discounted cash flow	Collateral default rate Discount rate Recovery probability Prepayment rate	2% annually for 2 years; 0.36% thereafter 19% 10%, lagged 2 years 5% for next 5 years

The significant unobservable inputs used in the fair value measurement of the Corporation’s corporate notes and bonds are prepayment rates, probability of default, and discount rate. Significant increases/(decreases) in any of those inputs in isolation would result in a significantly lower/(higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of the Corporation’s pooled trust preferred securities are collateral default rate, discount rate, recovery probability, and prepayment rate. Significant increases in specific-issuer default assumptions or decreases in specific-issuer recovery assumptions would result in a significantly lower fair value measurement. Conversely, decreases in specific-issuer default assumptions or increases in specific-issuer recovery assumptions would result in a higher fair value measurement.

During the three months ended June 30, 2012 and 2011, the following available for sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category:

	2012		2011
U.S. Treasury	$	0	$	4,053
U.S. Government sponsored entities		26,034		16,124
States and political subdivisions		3,771		4,929
Residential mortgage and asset backed		40,473		37,659
Commercial mortgage and asset backed		0		2,085
Total	$	70,278	$	64,850

During the six months ended June 30, 2012 and 2011, the following available for sale securities reported as Level 1 securities as of the beginning of the period were transferred to the Level 2 category:

	2012		2011
U.S. Government sponsored entities	$	2,000	$	2,000
States and political subdivisions		4,655		4,750
Residential mortgage and asset backed		8,577		20,405
Total	$	15,232	$	27,155

These securities were transferred from the Level 1 category to the Level 2 category since there were no longer quoted prices for identical assets in active markets that the Corporation had the ability to access. During the six months ended June 30, 2011, two pooled SBA securities that were classified as Level 2 securities at December 31, 2010 were transferred to the Level 1 category. The fair value on the date of transfer was $3,437. There were no transfers of securities from the Level 2 category to the Level 1 category during the three months ended June 30, 2011. There were no transfers of securities from the Level 2 category to the Level 1 category during the three and six months ended June 30, 2012. The Corporation’s policy for determining when a transfer between the Level 1 and Level 2 categories has occurred is to monitor and report such transfers as of each quarterly reporting period.

Assets and liabilities measured at fair value on a non-recurring basis are as follows at June 30, 2012 and December 31, 2011:

			Fair Value Measurements at June 30, 2012 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial mortgages	$	7,907	$	0	$	0	$	7,907
Commercial, industrial, and agricultural		3,986		0		0		3,986
Residential real estate		437		0		0		437

			Fair Value Measurements at December 31, 2011 Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Commercial mortgages	$	7,219	$	0	$	0	$	7,219
Commercial, industrial, and agricultural		3,190		0		0		3,190
Residential real estate		105		0		0		105

Impaired loans, which are measured for impairment using the fair value of collateral for collateral dependent loans, had a principal balance of $14,476 with a valuation allowance of $2,146 as of June 30, 2012, resulting in an additional provision for loan losses of $1,196 and $1,597 for the corresponding three and six months then ended. Impaired loans had a principal balance of $22,384 with a valuation allowance of $1,493 as of December 31, 2011, and an additional provision for loan losses of $345 and $263 for the corresponding three and six months ended June 30, 2011.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2012:

	Fair value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Impaired loans – commercial mortgages	$	7,907	Sales comparison approach	Negative adjustment for selling costs and changes in market conditions since appraisal	10% -65% (15%)
Impaired loans – commercial, industrial, and agricultural		3,986	Income approach	Negative adjustment for selling costs and changes in net operating income expectations since appraisal	5% - 65% (29%)
Impaired loans – residential real estate		437	Sales comparison approach	Negative adjustment for selling costs and changes in market conditions since appraisal	10% -19% (16%)

Fair Value of Financial Instruments

The following table presents the carrying amount and fair value of financial instruments at June 30, 2012:

	Carrying			Fair Value Measurement Using:									Total
	Amount			Level 1			Level 2			Level 3			Fair Value
ASSETS
Cash and cash equivalents	$	24,228		$	24,228		$	0		$	0		$	24,228
Interest bearing time deposits with other banks		275			0			281			0			281
Securities available for sale		715,452			49,574			663,447			2,431			715,452
Trading securities		3,560			3,403			157			0			3,560
Loans held for sale		1,499			0			1,554			0			1,554
Net loans		893,077			0			0			918,918			918,918
FHLB and other equity interests		6,848			N/A			N/A			N/A			N/A
Accrued interest receivable		6,903			264			3,527			3,112			6,903
LIABILITIES
Deposits	$	(1,455,421	)	$	(1,231,487	)	$	(227,042	)	$	0		$	(1,458,529	)
FHLB and other borrowings		(82,182	)		0			(91,059	)		0			(91,059	)
Subordinated debentures		(20,620	)		0			0			(10,865	)		(10,865	)
Interest rate swaps		(1,779	)		0			(1,779	)		0			(1,779	)
Accrued interest payable		(1,121	)		(321	)		(783	)		(17	)		(1,121	)

The following table presents the carrying amount and fair value of financial instruments at December 31, 2011:

	Carrying Amount			Fair Value
ASSETS
Cash and cash equivalents	$	39,703		$	39,703
Interest bearing time deposits with other banks		224			229
Securities available for sale		638,107			638,107
Trading securities		3,233			3,233
Loans held for sale		1,442			1,470
Net loans		837,268			862,389
FHLB and other equity interests		6,537			N/A
Accrued interest receivable		6,567			6,567
LIABILITIES
Deposits	$	(1,353,851	)	$	(1,357,415	)
FHLB and other borrowings		(74,456	)		(83,042	)
Subordinated debentures		(20,620	)		(10,906	)
Interest rate swaps		(1,669	)		(1,669	)
Accrued interest payable		(1,308	)		(1,308	)

The methods and assumptions, not otherwise presented, used to estimate fair values are described as follows:

Cash and cash equivalents: The carrying amounts of cash and cash equivalents approximate fair values and are classified as Level 1.

Interest bearing time deposits with other banks: The fair value of interest bearing time deposits with other banks is estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly maturities, resulting in a Level 2 classification.

Loans held for sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Loans: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values, resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

FHLB and other equity interests: It is not practical to determine the fair value of Federal Home Loan Bank stock and other equity interests due to restrictions placed on the transferability of these instruments.

Accrued interest receivable: The carrying amount of accrued interest receivable approximates fair value resulting in a classification that is consistent with the asset with which it is associated.

Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amount), resulting in a Level 1 classification. Fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits, resulting in a Level 2 classification.

FHLB and other borrowings: The fair values of the Corporation’s FHLB and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements, resulting in a Level 2 classification.

Subordinated debentures: The fair value of the Corporation’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of arrangements, resulting in a Level 3 classification.

Accrued interest payable: The carrying amount of accrued interest payable approximates fair value resulting in a classification that is consistent with the liability with which it is associated.

While estimates of fair value are based on management’s judgment of the most appropriate factors as of the balance sheet date, there is no assurance that the estimated fair values would have been realized if the assets had been disposed of or the liabilities settled at that date, since market values may differ depending on various circumstances. The estimated fair values would also not apply to subsequent dates.

In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the disclosures. Also, non-financial assets such as, among other things, the estimated earnings power of core deposits, the earnings potential of trust accounts, the trained workforce, and customer goodwill, which typically are not recognized on the balance sheet may have value but are not included in the fair value disclosures.

XML

Fair Value (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	$ 715,452	$ 638,107
Trading securities	3,560	3,233
Interest Rate Derivative Liabilities, at Fair Value	(1,779)
U.S. Treasury [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	6,069	8,130
U.S. Government sponsored entities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	113,030	107,492
Trading securities	56	55
States and political subdivisions [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	161,583	158,437
Residential mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	372,436	300,126
Commercial mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	2,132	2,122
Corporate notes and bonds [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	13,416	13,860
Trading securities	101	100
Pooled trust preferred [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	360	340
Pooled SBA [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	44,883	46,056
Other Securities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	1,543	1,544
Equity securities - financial services [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	654	779
Equity securities - industrials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	476	324
Equity securities - health care [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	428	204
Equity securities - utilities [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		197
Large cap growth mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	147	145
Certificates of deposit [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	382	255
International mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	252	257
Equity securities - energy [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	209	72
Equity Securities - technology [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	158	75
Equity securities - Consumer Discretionary [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	156	126
Large Cap Value Mutual Fund [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	103
Money market mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	108	241
Large Cap Value mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		105
Real estate investment trust mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	64	68
Equity securities - Consumer Staples [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	54	145
Small cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	25	25
Mid cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	25	23
Equity securities - materials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	162	37
Interest rate swap [Member]
Assets and liabilities measured at fair value on a recurring basis
Interest Rate Derivative Liabilities, at Fair Value		(1,669)
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	49,574	62,832
Trading securities	3,403	3,078
Interest Rate Derivative Liabilities, at Fair Value	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Government sponsored entities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	2,000
Trading securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | States and political subdivisions [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	4,655
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	3,148	8,577
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate notes and bonds [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Trading securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Pooled trust preferred [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Pooled SBA [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	44,883	46,056
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other Securities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	1,543	1,544
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - financial services [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	654	779
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - industrials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	476	324
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - health care [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	428	204
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - utilities [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		197
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Large cap growth mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	147	145
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Certificates of deposit [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	382	255
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | International mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	252	257
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - energy [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	209	72
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity Securities - technology [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	158	75
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - Consumer Discretionary [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	156	126
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Large Cap Value Mutual Fund [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	103
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money market mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	108	241
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Large Cap Value mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		105
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Real estate investment trust mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	64	68
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - Consumer Staples [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	54	145
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Small cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	25	25
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mid cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	25	23
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities - materials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	162	37
Significant Other Observable Inputs (Level 2) [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	663,447	572,875
Trading securities	157	155
Interest Rate Derivative Liabilities, at Fair Value	(1,779)
Significant Other Observable Inputs (Level 2) [Member] | U.S. Treasury [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	6,069	8,130
Significant Other Observable Inputs (Level 2) [Member] | U.S. Government sponsored entities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	113,030	105,492
Trading securities	56	55
Significant Other Observable Inputs (Level 2) [Member] | States and political subdivisions [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	161,583	153,782
Significant Other Observable Inputs (Level 2) [Member] | Residential mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	369,288	291,549
Significant Other Observable Inputs (Level 2) [Member] | Commercial mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	2,132	2,122
Significant Other Observable Inputs (Level 2) [Member] | Corporate notes and bonds [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	11,345	11,800
Trading securities	101	100
Significant Other Observable Inputs (Level 2) [Member] | Pooled trust preferred [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Other Observable Inputs (Level 2) [Member] | Pooled SBA [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Other Observable Inputs (Level 2) [Member] | Other Securities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - financial services [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - industrials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - health care [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - utilities [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		0
Significant Other Observable Inputs (Level 2) [Member] | Large cap growth mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Certificates of deposit [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | International mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - energy [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity Securities - technology [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - Consumer Discretionary [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Large Cap Value Mutual Fund [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0
Significant Other Observable Inputs (Level 2) [Member] | Money market mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Large Cap Value mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		0
Significant Other Observable Inputs (Level 2) [Member] | Real estate investment trust mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - Consumer Staples [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Small cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Mid cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Equity securities - materials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Other Observable Inputs (Level 2) [Member] | Interest rate swap [Member]
Assets and liabilities measured at fair value on a recurring basis
Interest Rate Derivative Liabilities, at Fair Value		(1,669)
Significant Unobservable Inputs (Level 3) [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	2,431	2,400
Trading securities	0	0
Interest Rate Derivative Liabilities, at Fair Value	0	0
Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | U.S. Government sponsored entities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | States and political subdivisions [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Residential mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Commercial mortgage and asset backed [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Corporate notes and bonds [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	2,071	2,060
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Pooled trust preferred [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	360	340
Significant Unobservable Inputs (Level 3) [Member] | Pooled SBA [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Other Securities [Member]
Assets and liabilities measured at fair value on a recurring basis
Securities available for sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - financial services [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - industrials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - health care [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - utilities [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		0
Significant Unobservable Inputs (Level 3) [Member] | Large cap growth mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Certificates of deposit [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | International mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - energy [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity Securities - technology [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - Consumer Discretionary [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Large Cap Value Mutual Fund [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0
Significant Unobservable Inputs (Level 3) [Member] | Money market mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Large Cap Value mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities		0
Significant Unobservable Inputs (Level 3) [Member] | Real estate investment trust mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - Consumer Staples [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Small cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Mid cap mutual funds [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Equity securities - materials [Member]
Assets and liabilities measured at fair value on a recurring basis
Trading securities	$ 0	$ 0

XML

Securities (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
A roll-forward of the other-than-temporary impairment amount related to credit losses
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$ 4,054	$ 4,054	$ 4,054	$ 3,656
Additional credit loss for which other-than-temporary impairment was not previously recognized	0	0	0	0
Additional credit loss for which other-than-temporary impairment was previously recognized	0	0	0	398
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$ 4,054	$ 4,054	$ 4,054	$ 4,054

XML

Securities (Tables)

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Securities available for sale

Securities available for sale at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012									December 31, 2011
	Amortized Cost		Unrealized					Fair Value		Amortized Cost		Unrealized					Fair Value
			Gains		Losses							Gains		Losses
U.S. Treasury	$	6,036	$	33	$	0		$	6,069	$	8,064	$	66	$	0		$	8,130
U.S. Gov’t sponsored entities		107,398		5,641		(9	)		113,030		102,258		5,249		(15	)		107,492
State & political subdivisions		151,321		10,316		(54	)		161,583		149,685		8,844		(92	)		158,437
Residential mortgage & asset backed		363,792		8,923		(279	)		372,436		292,297		8,043		(214	)		300,126
Commercial mortgage & asset backed		2,071		61		0			2,132		2,077		45		0			2,122
Corporate notes & bonds		16,364		62		(3,010	)		13,416		17,358		50		(3,548	)		13,860
Pooled trust preferred		800		0		(440	)		360		800		0		(460	)		340
Pooled SBA		43,062		1,830		(9	)		44,883		44,851		1,282		(77	)		46,056
Other securities		1,521		22		0			1,543		1,521		23		0			1,544
Total	$	692,365	$	26,888	$	(3,801	)	$	715,452	$	618,911	$	23,602	$	(4,406	)	$	638,107

Trading securities accounted for under the fair value option

Trading securities accounted for under the fair value option at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
Corporate equity securities	$	2,297	$	1,959
Certificates of deposit		382		255
International mutual funds		252		257
Large cap growth mutual funds		147		145
Money market mutual funds		108		241
Large cap value mutual funds		103		105
Corporate notes and bonds		101		100
Real estate investment trust mutual funds		64		68
U.S. Government sponsored entities		56		55
Small cap mutual funds		25		25
Mid cap mutual funds		25		23
Total	$	3,560	$	3,233

Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position

Securities with unrealized losses at June 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows (in thousands):

June 30, 2012	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury	$	0	$	0		$	0	$	0		$	0	$	0
U.S. Gov’t sponsored entities		5,989		(9	)		0		0			5,989		(9	)
State & political subdivisions		5,046		(53	)		1,591		(1	)		6,637		(54	)
Residential mortgage & asset backed		42,816		(276	)		743		(3	)		43,559		(279	)
Commercial mortgage & asset backed		0		0			0		0			0		0
Corporate notes & bonds		1,949		(51	)		9,492		(2,959	)		11,441		(3,010	)
Pooled trust preferred		0		0			360		(440	)		360		(440	)
Pooled SBA		2,022		(9	)		0		0			2,022		(9	)
Other securities		0		0			0		0			0		0
	$	57,822	$	(398	)	$	12,186	$	(3,403	)	$	70,008	$	(3,801	)
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2011
U.S. Treasury	$	0	$	0		$	0	$	0		$	0	$	0
U.S. Gov’t sponsored entities		7,671		(15	)		0		0			7,671		(15	)
State & political subdivisions		5,314		(92	)		0		0			5,314		(92	)
Residential mortgage & asset backed		36,626		(162	)		9,485		(52	)		46,111		(214	)
Commercial mortgage & asset backed		0		0			0		0			0		0
Corporate notes & bonds		2,860		(139	)		8,841		(3,409	)		11,701		(3,548	)
Pooled trust preferred		0		0			340		(460	)		340		(460	)
Pooled SBA		8,139		(77	)		0		0			8,139		(77	)
Other securities		0		0			0		0			0		0
	$	60,610	$	(485	)	$	18,666	$	(3,921	)	$	79,276	$	(4,406	)

A roll-forward of the other-than-temporary impairment amount related to credit losses

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three and six months ended June 30, 2012 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		0
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three months ended June 30, 2011 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		0
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the six months ended June 30, 2011 is as follows:

Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	3,656
Additional credit loss for which other-than-temporary impairment was not previously recognized		0
Additional credit loss for which other-than-temporary impairment was previously recognized		398
Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

Information pertaining to security sales

Information pertaining to security sales is as follows:

	Proceeds		Gross Gains		Gross Losses
Three months ended June 30, 2012	$	46,468	$	810	$	(79	)
Six months ended June 30, 2012		88,617		1,446		(149	)
Three months ended June 30, 2011		0		0		0
Six months ended June 30, 2011		23,610		146		(72	)

Schedule of the contractual maturity of securities available for sale, excluding equity securities

The following is a schedule of the contractual maturity of securities available for sale, excluding equity securities, at June 30, 2012:

	Amortized Cost		Fair Value
1 year or less	$	22,131	$	22,295
1 year – 5 years		80,606		83,067
5 years – 10 years		128,463		138,447
After 10 years		93,781		95,532
		324,981		339,341
Residential mortgage & asset backed securities		363,792		372,436
Commercial mortgage & asset backed securities		2,071		2,132
Total debt securities	$	690,844	$	713,909