FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company provides disclosures about assets and liabilities carried at fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. The three broad levels of the fair value hierarchy are described below:

Level I:	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level II:	Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by corroborated or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.
Level III:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value as of June 30, 2014 and December 31, 2013 by level within the fair value hierarchy. No liabilities are carried at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Equity securities and U.S. Treasury Notes are valued at the closing price reported on the active market on which the individual securities are traded. Obligations of U.S. government agencies, mortgage-backed securities, asset-backed securities, obligations of states and political subdivisions and corporate bonds are valued at observable market data for similar assets.

(Dollars in thousands)	Level I		Level II		Level III		Total
June 30, 2014
ASSETS:
Securities available-for-sale:
U.S. Treasury securities	$	999	$	—	$	—	$	999
U.S. Government agencies		—		19,722		—		19,722
Mortgage-backed securities of government agencies		—		48,725		—		48,725
Asset-backed securities of government agencies		—		2,691		—		2,691
States and political subdivisions		—		16,563		—		16,563
Corporate bonds		—		4,564		—		4,564
Total debt securities		999		92,265		—		93,264
Equity securities		125		—		—		125
Total securities available-for-sale		1,124		92,265		—		93,389
Loans held for sale		562		—		—		562
Total Assets	$	1,686	$	92,265	$	—	$	93,951
December 31, 2013
ASSETS:
Securities available-for-sale:
U.S. Treasury securities	$	997	$	—	$	—	$	997
U.S. Government agencies		—		22,301		—		22,301
Mortgage-backed securities of government agencies		—		54,535		—		54,535
Asset-backed securities of government agencies		—		2,775		—		2,775
States and political subdivisions		—		16,447		—		16,447
Corporate bonds		—		4,539		—		4,539
Total debt securities		997		100,597		—		101,594
Equity securities		128		—		—		128
Total securities available-for-sale	$	1,125	$	100,597	$	—	$	101,722

The following table presents the assets measured on a nonrecurring basis on the Consolidated Balance Sheets at their fair value as of June 30, 2014 and December 31, 2013, by level within the fair value hierarchy. Impaired loans and other real estate are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral that secure the impaired loans include: quoted market prices for identical assets classified as Level I inputs; and observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs.

The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates discounted cash flow and repayment assumptions based on management’s best judgment. As a result, these rights are measured at fair value on a nonrecurring basis and are classified within Level III of the fair value hierarchy.

(Dollars in thousands)	Level I		Level II		Level III		Total
June 30, 2014
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	—	$	11,359	$	11,359
Mortgage servicing rights		—		—		228		228
December 31, 2013
Impaired loans	$	—	$	—	$	9,856	$	9,856
Mortgage servicing rights		—		—		225		225

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level III inputs to determine fair value:

	Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2014
Impaired loans	$	10,695	Discounted cash flow	Remaining term Discount rate	1 mos to 28 yrs/(69 months) 4.3% to 12% / (6.8%)
		664	Appraisal of collateral (1),(3)	Appraisal adjustments (2) Liquidation expense (2)	-20% to -25% -10%
Mortgage servicing rights		228	Discounted cash flow	Remaining term Discount rate	6 mos to 30 yrs 1.5% / (1.5%)
December 31, 2013
Impaired loans	$	8,663	Discounted cash flow	Remaining term Discount rate	3 mos to 29 yrs/(62 mos) 7.1% to 12% / (7.5%)
		1,193	Appraisal of collateral (1),(3 )	Appraisal adjustments (2 ) Liquidation expense (2 )	-20% to -25% -10%
Mortgage servicing rights		225	Discounted cash flow	Remaining term Discount rate	12 mos to 30 yrs/(244 mos) 1.5% / (1.5%)

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various inputs which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3) Includes qualitative adjustments by management and estimated liquidation expenses.