Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Values of Financial Instruments [Abstract]

Fair Value of Financial Instruments

10. FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amounts and estimated fair values of financial instruments were as follows as of September 30, 2011 and December 31, 2010:

	September 30, 2011				December 31, 2010
	Carrying Values		Fair Values		Carrying Values		Fair Values
Financial assets
Cash and cash equivalents	$	125,703,000	$	125,703,000	$	64,198,000	$	64,198,000
Securities available for sale		173,134,000		173,134,000		220,830,000		220,830,000
Federal Home Loan Bank stock		11,961,000		11,961,000		14,345,000		14,345,000
Loans, net		1,054,686,000		1,061,270,000		1,217,262,000		1,223,911,000
Bank owned life insurance		48,083,000		48,083,000		46,743,000		46,743,000
Accrued interest receivable		4,887,000		4,887,000		5,942,000		5,942,000
Purchased interest rate cap		347,000		347,000		0		0
Financial liabilities
Deposits		1,185,333,000		1,193,486,000		1,273,832,000		1,284,767,000
Securities sold under agreements to repurchase		69,340,000		69,340,000		116,979,000		116,979,000
Federal Home Loan Bank advances		45,000,000		46,355,000		65,000,000		67,668,000
Subordinated debentures		32,990,000		33,061,000		32,990,000		33,006,000
Accrued interest payable		5,007,000		5,007,000		4,749,000		4,749,000
Sold interest rate cap		62,000		62,000		0		0

Carrying amount is the estimated fair value for cash and cash equivalents, Federal Home Loan Bank stock, accrued interest receivable and payable, bank owned life insurance, demand deposits, securities sold under agreements to repurchase, and variable rate loans and deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer. For fixed rate loans and deposits and for variable rate loans and deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of subordinated debentures and Federal Home Loan Bank advances is based on current rates for similar financing. Fair value of interest rate caps is determined primarily utilizing market-consensus forecasted yield curves. Fair value of off-balance sheet items is estimated to be nominal.

Current accounting pronouncements require disclosure of the estimated fair value of financial instruments as disclosed in Note 11. Given current market conditions, a portion of our loan portfolio is not readily marketable and market prices do not exist. We have not attempted to market our loans to potential buyers, if any exist, to determine the fair value of those instruments. Since negotiated prices in illiquid markets depend upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Accordingly, the fair value measurements for loans included in the table above are unlikely to represent the instruments’ liquidation values.