NOTE 14 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amount, estimated fair value and level within the fair value hierarchy of financial instruments were as follows at year-end (dollars in thousands):


	Level in	2013				2012
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy	Amount		Value		Amount		Value
Financial assets
Cash	Level 1	$	1,464	$	1,464	$	1,576	$	1,576
Cash equivalents	Level 2		145,501		145,501		134,427		134,427
Securities available for sale	(1)		131,178		131,178		138,314		138,314
Federal Home Loan Bank stock	(2)		11,961		11,961		11,961		11,961
Loans, net	Level 3		1,030,422		1,027,300		1,012,512		1,004,541
Bank owned life insurance	Level 2		51,377		51,377		50,048		50,048
Accrued interest receivable	Level 2		3,649		3,649		3,874		3,874
Financial liabilities
Deposits	Level 2		1,118,911		1,120,576		1,135,204		1,135,614
Securities sold under agreements to repurchase	Level 2		69,305		69,305		64,765		64,765
Federal Home Loan Bank advances	Level 2		45,000		45,139		35,000		35,000
Subordinated debentures	Level 2		32,990		32,974		32,990		32,943
Accrued interest payable	Level 2		2,041		2,041		2,314		2,314
Interest rate swap	(1)		264		264		1,113		1,113

(1)	See Note 15 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities.

(2)	It is not practical to determine the fair value of FHLB stock due to transferability restrictions.

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 the interest rate swap is determined primarily utilizing market-consensus forecasted yield curves. Fair value of off-balance sheet items is estimated to be nominal.