FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2014

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2014 were as follows:

				Fair Value Measurements at June 30, 2014 Using
	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets
Cash and due from banks	$	93,377		$	93,377		$	-		$	-	$	93,377
Federal funds sold		3,548			3,548			-			-		3,548
Securities available for sale		269,770			-			269,630			140		269,770
Loans held for sale		487			-			-			487		487
Loans, net		822,964			-			-			825,813		825,813
Federal Home Loan Bank stock		3,895			n/a			n/a			n/a		n/a
Interest receivable		3,386			-			807			2,579		3,386

Financial liabilities
Deposits	$	(1,089,561	)	$	(716,889	)	$	(373,389	)	$	-	$	(1,090,278	)
Securities sold under agreements to repurchase		(11,003	)		-			(11,003	)		-		(11,003	)
Other borrowed funds		(12,937	)		-			(12,984	)		-		(12,984	)
Interest payable		(461	)		(6	)		(455	)		-		(461	)

The carrying amounts and estimated fair values of financial instruments at December 31, 2013 were as follows:

				Fair Value Measurements at December 31, 2013 Using
	Carrying Amount			Level 1			Level 2			Level 3		Total
Financial assets
Cash and due from banks	$	63,984		$	63,984		$	-		$	-	$	63,984
Federal funds sold		12,777			12,777			-			-		12,777
Securities available for sale		218,066			-			217,926			140		218,066
Loans held for sale		77			-			-			77		77
Loans, net		729,743			-			-			725,588		725,588
Federal Home Loan Bank stock		4,183			n/a			n/a			n/a		n/a
Interest receivable		3,132			-			593			2,539		3,132

Financial liabilities
Deposits	$	(924,023	)	$	(592,664	)	$	(332,475	)	$	-	$	(925,139	)
Securities sold under agreements to repurchase		(11,319	)		-			(11,319	)		-		(11,319	)
Other borrowed funds		(13,800	)		-			(13,811	)		-		(13,811	)
Interest payable		(383	)		(5	)		(378	)		-		(383	)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at June 30, 2014 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	59,490	$	-	$	59,490	$	-
U. S. agency CMO’s - residential		163,049		-		163,049		-
Total mortgage-backed securities of government sponsored agencies		222,539		-		222,539		-
U. S. government sponsored agency securities		36,145		-		36,145		-
Obligations of states and political subdivisions		11,086		-		10,946		140
Total available for sale	$	269,770	$	-	$	269,630	$	140

			Fair Value Measurements at December 31, 2013 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale
Mortgage-backed securities
U. S. agency MBS - residential	$	27,823	$	-	$	27,823	$	-
U. S. agency CMO’s		176,722		-		176,722		-
Total mortgage-backed securities of government sponsored agencies		204,545		-		204,545		-
U. S. government sponsored agency securities		6,981		-		6,981		-
Obligations of states and political subdivisions		6,540		-		6,400		140
Total securities available for sale	$	218,066	$	-	$	217,926	$	140
Mortgage-backed securities

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

Assets and liabilities measured at fair value on a non-recurring basis at June 30, 2014 are summarized below:

			Fair Value Measurements at June 30, 2014 Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	839	$	-	$	-	$	839
Multifamily Residential		332		-		-		332
Commercial Real Estate
Owner Occupied		346		-		-		346
Commercial and Industrial		737		-		-		737
All Other		4,165		-		-		4,165
Total impaired loans		6,419	$	-	$	-	$	6,419

Other real estate owned:
Commercial Real Estate
Non-owner Occupied	$	290		-		-	$	290
All Other		8,448		-		-		8,448
Total OREO	$	8,738	$	-	$	-	$	8,738

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2013 are summarized below:

			Fair Value Measurements at December 31, 2013 Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans:
Residential Real Estate	$	1,518	$	-	$	-	$	1,518
Commercial Real Estate
Owner Occupied		345		-		-		345
Non-owner Occupied		428		-		-		428
Commercial and Industrial		3,384		-		-		3,384
All Other		4,133		-		-		4,133
Total impaired loans		9,808	$	-	$	-	$	9,808

Other real estate owned:
Commercial Real Estate
Non-owner Occupied		290		-		-		290
All Other		8,496		-		-		8,496
Total OREO	$	8,786	$	-	$	-	$	8,786

Fair Value Inputs, Assets, Quantitative Information

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at June 30, 2014 are summarized below:

	June 30, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential Real Estate	$	839	sales comparison	adjustment for differences between the comparable sales		3.3%-3.3%(3.3%)
Multifamily Residential		332	sales comparison	adjustment for differences between the comparable sales		36.8%-36.8%(36.8%)
Commercial Real Estate
Owner Occupied		346	sales comparison	adjustment for limited salability of specialized property		65.5%-72.4%(66.9%)
Commercial and Industrial		737	sales comparison	adjustment for limited salability of specialized property		16.4%-41.2%(27.7%)
All Other		4,165	sales comparison	adjustment for percentage of completion of construction		57.2%-57.2%(57.2%)
Total impaired loans		6,419

Other real estate owned:
Commercial Real Estate
Non-owner Occupied		290	sales comparison	adjustment for differences between the comparable sales		42.7%-42.7%(42.7%)
All Other		8,448	sales comparison	adjustment for estimated realizable value		24.6%-49.1%(44.2%)
Total OREO	$	8,738

The significant unobservable inputs related to assets and liabilities measured at fair value on a non-recurring basis at December 31, 2013 are summarized below:

	December 31, 2013		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Impaired loans:
Residential Real Estate	$	1,518	sales comparison	adjustment for differences between the comparable sales		0.8%-63.5%(11.9%)
Commercial Real Estate
Owner Occupied		345	sales comparison	adjustment for limited salability of specialized property		62.5%-70.0%(64.0%)
Non-owner Occupied		428	sales comparison	adjustment for limited salability of specialized property		50.6%-50.6%(50.6%)
Commercial and Industrial		3,384	sales comparison	adjustment for limited salability of specialized property		25.0%-65.5%(57.8%)
All Other		4,133	sales comparison	adjustment for percentage of completion of construction		57.6%-99.3%(57.7%)
Total impaired loans		9,808

Other real estate owned:
Commercial Real Estate
Non-owner Occupied		290	sales comparison	adjustment for differences between the comparable sales		42.7%-42.7%(42.7%)
All Other		8,496	sales comparison	adjustment for estimated realizable value		9.5%-24.6%(12.5%)
Total OREO	$	8,786

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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