Disclosures About Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Disclosures About Fair Value of Financial Instruments

ASC 825 “Financial Instruments” defines the fair value of a financial instrument as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation or sale.  As the majority of the Bank’s financial instruments lack an available trading market, significant estimates, assumptions and present value calculations are required to determine estimated fair value.  Estimated fair value and the carrying value of financial instruments at September 30, 2011 and December 31, 2010 are as follows (in thousands):

	September 30, 2011				December 31, 2010
	Estimated		Carrying		Estimated		Carrying
	Fair Value		Value		Fair Value		Value
Financial Assets
Cash	$	5,827	$	5,827	$	4,586	$	4,586
Interest bearing deposits		2,403		2,403		2,927		2,927
Federal funds sold		-		-		16,338		16,338
Securities available for sale		11,088		11,088		15,247		15,247
Securities held to maturity		108		108		109		109
Other investments		7,836		7,836		8,789		8,789
Loans		485,237		452,758		475,166		445,147
Loans held for sale		64,953		64,953		23,764		23,764
Bank owned life insurance		7,104		7,104		6,883		6,883
Accrued interest receivable		1,682		1,682		2,001		2,001
Financial Liabilities
Demand Deposits:
Non-interest bearing		68,752		68,752		58,497		58,497
Interest bearing		117,459		117,459		116,889		116,889
Savings deposits		39,181		39,181		35,760		35,760
Time deposits		222,488		220,395		216,199		213,905
Accrued interest payable		2,778		2,778		2,707		2,707
Short-term debt		15,789		15,789		5,355		5,355
Subordinated debt		10,191		10,191		9,944		9,944
Long-term debt		45,143		42,714		51,566		49,035

The carrying value of cash and cash equivalents, other investments, deposits with no stated maturities, short-term borrowings, and accrued interest approximate fair value. The fair value of securities was calculated using the most recent transaction price or a pricing model, which takes into consideration maturity, yields and quality.  The remaining financial instruments were valued based on the present value of estimated future cash flows, discounted at various rates in effect for similar instruments entered into as of the end of each respective period shown above.