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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Financial assets and liabilities measured at fair value on a recurring basis

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.

			Fair Value Measurements at September 30, 2012 Using
Description	Balance as of September 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,092	$	---	$	2,092	$	---
U.S. Government agencies and corporations		127,619		---		127,619		---
States and political subdivisions		40,256		---		40,256		---
Mortgage-backed securities		5,297		---		5,297		---
Corporate debt securities		18,688		---		18,688		---
Other securities		2,439		---		2,439		---
Total Securities Available for Sale	$	196,391	$	---	$	196,391	$	---

			Fair Value Measurements at December 31, 2011 Using
Description	Balance as of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury	$	2,150	$	---	$	2,150	$	---
U.S. Government agencies and corporations		96,003		---		96,003		---
States and political subdivisions		49,122		---		49,122		---
Mortgage-backed securities		7,725		---		7,725		---
Corporate debt securities		16,077		---		16,077		---
Other securities		2,175		---		2,175		---
Total Securities Available for Sale	$	173,252	$	---	$	173,252	$	---

Impaired loans and other real estate owned (OREO) measured at fair value on nonrecurring basis

The following table summarizes the Company's impaired loans that were measured at fair value on a nonrecurring basis at September 30, 2012 and at December 31, 2011.

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2012	Impaired loans net of valuation allowance	$	575		$	---		$	---		$	575
December 31, 2011	Impaired loans net of valuation allowance		5,968			---			---			5,968

The following table summarizes the Company's other real estate owned that was measured at fair value on a nonrecurring basis at September 30, 2012 and at December 31, 2011.

				Carrying Value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	Assets:
September 30, 2012	Other real estate owned net of valuation allowance	$	1,894		$	---		$	---		$	1,894
December 31, 2011	Other real estate owned net of valuation allowance		1,489			---			---			1,489

Summary of impaired loans and other real estate owned (OREO) activities

The following table summarizes the activity in Company's impaired loans that were valued using Level 3 inputs for the nine months ended September 30, 2012.

	Principal Balance, December 31, 2011			Additions			Deletions due to Foreclosure			Change in Balance (1)			Impaired Loans Removed from Level 3 (2)			Principal Balance, September 30, 2012
Impaired loans
Principal balance	$	7,091		$	1,846		$	(2,222	)	$	(555	)	$	(5,258	)	$	902
Impairment allocation		(1,123	)		(272	)		449			163			456			(327	)
Net impaired loans	$	5,968		$	1,574		$	(1,773	)	$	(392	)	$	(4,802	)	$	575

(1) The reported amounts represent changes in the balance due to principal payments by borrowers.

(2) The reported amount represents loans that were valued using Level 3 inputs as of December 31, 2011 that no longer have impairment allocations based on Level 3 valuation, or for which Level 3 impairment allocations were reduced due to an updated valuation analysis.

The following table summarizes the activity in the Company's other real estate owned that were valued using Level 3 inputs for the nine months ended September 30, 2012.

		Carrying Value, December 31, 2011				Additions				Sale of Property				Change in Valuation Allowance				Carrying Value, September 30, 2012
Other real estate owned		$	1,489			$	1,608			$	(1,144	)		$	(59	)		$	1,894

Summary of information about level 3 fair value measurements

The following table presents information about Level 3 Fair Value Measurements for September 30, 2012.

	Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans	Discounted appraised value	Selling cost	0% - 10.00% (10.00%)
Impaired loans	Discounted appraised value	Discount for lack of marketability and age of appraisal	0% - 40.00% (29.67%)
Impaired loans	Present value of cash flows	Discount rate	6.00%(1)

(1) Of the Company's impaired loans with specific allocations based on Level 3 inputs, only one loan was valued using present value of cash flows.

The following table presents information about Level 3 Fair Value Measurements for September 30, 2012.

	Valuation Technique	Unobservable Input	Range (Weighted Average)
Other real estate owned	Discounted appraised value	Selling cost	0.00%(1) - 6.25% (6.06%)
Other real estate owned	Discounted appraised value	Discount for lack of marketability and age of appraisal	0.00% - 29.72% (7.12%)

(1) The Company markets other real estate owned both independently and with local realtors. Properties marketed by realtors are discounted by selling costs. Properties that the Company markets independently are not discounted by selling costs.

Estimated fair values and related carrying amounts of financial instruments

The estimated fair values and related carrying amounts of the Company's financial instruments follow.

	September 30, 2012
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Estimated Fair Value
Financial Assets:
Cash and due from banks	$	12,445	$	12,445	$	---	$	---	$	12,445
Interest-bearing deposits		67,394		67,394		---		---		67,394
Securities		358,119		---		368,554		---		370,242
Mortgage loans held for sale		3,015		---		3,015		---		3,015
Loans, net		583,207		---		574,455		575		575,030
Accrued interest receivable		6,291		---		6,291		---		6,291
BOLI		20,346		---		20,346		---		20,346
Financial Liabilities:
Deposits	$	924,383	$	---	$	922,017	$	---	$	922,017
Accrued interest payable		178		---		178		---		178

	December 31, 2011
	Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	11,897	$	11,897
Interest-bearing deposits		98,355		98,355
Securities		318,913		326,347
Mortgage loans held for sale		2,623		2,623
Loans, net		580,402		572,357
Accrued interest receivable		6,304		6,304
Bank-owned life insurance		19,812		19,812
Financial Liabilities:
Deposits	$	919,333	$	913,882
Accrued interest payable		206		206

- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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- Definition

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

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

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-Name Statement of Financial Accounting Standard (FAS)

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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