21. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Disclosures include estimated fair values for financial instruments for which it is practicable to estimate fair value. These estimates are made at a specific point in time based on relevant market data and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the fair values presented. The following methods and assumptions were used by the Company to estimate the fair value of its financial instruments at December 31, 2019 and 2018:

Cash and cash equivalents, and fed funds sold: For cash and cash equivalents and fed funds sold, the carrying amount is estimated to be fair value.

Securities: The fair values of investment securities are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities when quoted prices for specific securities are not readily available.

Loans and leases: Fair values of loans, excluding loans held for sale, are based on the exit price notion set forth by ASU 2016‑01 effective January 1, 2018 and estimated using discounted cash flow analyses. The estimation of fair values of loans results in a Level 3 classification as it requires various assumptions and considerable judgement to incorporate factors relevant when selling loans to market participants, such as funding costs, return requirements of likely buyers and performance expectations of the loans given the current market environment and quality of loans.

Loans held for sale: Since loans designated by the Company as available-for-sale are typically sold shortly after making the decision to sell them, realized gains or losses are usually recognized within the same period and fluctuations in fair values are thus not relevant for reporting purposes. If available-for-sale loans stay on our books for an extended period of time, the fair value of those loans is determined using quoted secondary-market prices.

Deposits: Fair values for non-maturity deposits are equal to the amount payable on demand at the reporting date, which is the carrying amount. Fair values for fixed-rate certificates of deposit are estimated using a cash flow analysis, discounted at interest rates being offered at each reporting date by the Bank for certificates with similar remaining maturities.

Short-term borrowings: The carrying amounts approximate fair values for federal funds purchased, overnight FHLB advances, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days of the reporting dates. Fair values of other short-term borrowings are estimated by discounting projected cash flows at the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Long-term borrowings: The fair values of the Company’s long-term borrowings are estimated using projected cash flows discounted at the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Subordinated debentures: The fair values of subordinated debentures are determined based on the current market value for like instruments of a similar maturity and structure.

Carrying amount and estimated fair values of financial instruments were as follows (dollars in thousands):


	Year Ended December 31, 2019
			Estimated Fair Value
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	80,077	$	80,076	$	—	$	—	$	80,076
Securities available for sale		600,799		—		600,799		—		600,799
Loans and leases held for investment		1,753,846		—		—		1,761,461		1,761,461
Collateral dependent impaired loans		1,692		—		1,692		—		1,692

Financial Liabilities:
Deposits:
Non-interest-bearing	$	690,950	$	690,950	$	—	$	—	$	690,950
Interest-bearing		1,477,424		—		1,477,497		—		1,477,497
Fed funds purchased and repurchase agreements		25,711		—		25,711		—		25,711
Short-term borrowings		20,000		—		20,000		—		20,000
Subordinated debentures		34,945		—		30,564		—		30,564


	Notional Amount
Off-balance-sheet financial instruments:
Commitments to extend credit	$	492,040
Standby letters of credit		8,619

Carrying amount and estimated fair values of financial instruments were as follows (dollars in thousands):


	Year Ended December 31, 2018
			Estimated Fair Value
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	74,132	$	74,132	$	—	$	—	$	74,132
Securities available for sale		560,479		—		560,479		—		560,479
Loans and leases held for investment		1,724,575		—		—		1,707,463		1,707,463
Collateral dependent impaired loans		205		—		205		—		205

Financial Liabilities:
Deposits:
Noninterest-bearing	$	662,527	$	662,527	$	—	$	—	$	662,527
Interest-bearing		1,453,813		—		1,453,048		—		1,453,048
Fed funds purchased and repurchase agreements		16,359		—		16,359		—		16,359
Short-term borrowings		56,100		—		56,100		—		56,100
Subordinated debentures		34,767		—		30,311		—		30,311


	Notional Amount
Off-balance-sheet financial instruments:
Commitments to extend credit	$	781,987
Standby letters of credit		8,966