Fair Values of Financial Instruments

3 Months Ended

Mar. 31, 2012

Fair Values of Financial Instruments/ Fair Values [Abstract]

FAIR VALUES OF FINANCIAL INSTRUMENTS

10. FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amount, estimated fair value and level within the fair value hierarchy of financial instruments were as follows as of March 31, 2012 and December 31, 2011 (dollars in thousands):

	Level in Fair Value Hierarchy	March 31, 2012				December 31, 2011
		Carrying Values		Fair Values		Carrying Values		Fair Values
Financial assets:
Cash	Level 1	$	1,451	$	1,451	$	1,311	$	1,311
Cash equivalents	Level 2		83,557		83,557		75,061		75,061
Securities available for sale	(1)		149,981		149,981		172,992		172,992
Federal Home Loan Bank stock	Level 2		11,961		11,961		11,961		11,961
Loans, net	Level 3		1,020,731		1,016,931		1,035,890		1,035,164
Bank owned life insurance	Level 2		48,927		48,927		48,520		48,520
Accrued interest receivable	Level 2		4,427		4,427		4,403		4,403
Purchased interest rate cap	(1)		113		113		312		312
Interest rate swap	(1)		145		145		0		0
Financial liabilities:
Deposits	Level 2		1,093,434		1,096,568		1,112,075		1,117,803
Securities sold under agreements to repurchase	Level 2		57,440		57,440		72,569		72,569
Federal Home Loan Bank advances	Level 2		45,000		45,548		45,000		46,019
Subordinated debentures	Level 2		32,990		32,912		32,990		33,096
Accrued interest payable	Level 2		2,103		2,103		2,839		2,839
Sold interest rate cap	(1)		10		10		55		55

(1) See Note 11 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities.

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 and interest rate swap 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.