Fair Value

6 Months Ended

Jun. 30, 2011

Fair Value

Note 6.   Fair Value

Accounting Standards Codification (ASC) 820, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

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

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

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement

The following sections provide a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Impaired Loans: ASC 820 applies to loans measured for impairment using the practical expedients permitted by ASC 310 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral.

Other Real Estate Owned: Certain assets such as other real estate owned (OREO) are measured at the lower of carrying amount or fair value less cost to sell. We believe that the fair value component in its valuation follows the provisions of ASC 820.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

June 30, 2011	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	10,038	$	-	$	10,038
Mortgage-backed obligations of federal agencies		3,229		-		3,229
Marketable Equities		2,490		2,490		-
Investment securities available for sale	$	15,757	$	2,490	$	13,267
Total assets at fair value	$	15,757	$	2,490	$	13,267
Total liabilities at fair value	$	-	$	-	$	-

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

December 31, 2010	Total		Level 1		Level 2		Level 3
Government sponsored enterprises	$	8,001	$	-	$	8,001
Mortgage-backed obligations of federal agencies		3,931		-		3,931
Marketable Equities		3,315		3,315		-
Investment securities available for sale	$	15,247	$	3,315	$	11,932
Total assets at fair value	$	15,247	$	3,315	$	11,932
Total liabilities at fair value	$	-	$	-	$	-

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a non-recurring basis.

June 30, 2011	Total		Level 1	Level 2		Level 3
Loans Held for Sale	$	42,679		$	42,679
Other Real Estate Owned		2,884			2,884
Real Estate		4,983			4,983
Commercial		119			119
Consumer		481			481
Home Equity		297			297
Impaired loans		5,880			5,880
Total assets at fair value	$	51,443		$	51,443
Total liabilities at fair value

December 31, 2010	Total		Level 1	Level 2		Level 3
Loans Held for Sale	$	23,764		$	23,764
Other Real Estate Owned		1,513			1,513
Real Estate		5,938			5,938
Commercial		988			988
Consumer		7			7
Home Equity		321			321
Impaired loans		7,254			7,254
Total assets at fair value	$	32,531		$	32,531
Total liabilities at fair value

There were no significant transfers between levels 1 and 2.