FINANCIAL INSTRUMENTS

The following table presents a summary of the carrying amounts and fair values of the Company’s financial assets and liabilities at December 31:



	2011			2010
	Carrying Amount		Estimated Fair Value	Carrying Amount		Estimated Fair Value
	(in thousands)
Financial assets:
Cash and cash equivalents	$	92,918	92,918	$	229,780	$	229,780
Investment securities	330,422		330,422	298,002		298,002
Loans and loans held-for-sale, net	1,437,610		1,365,586	1,613,206		1,541,071
Accrued interest receivable	6,745		6,745	7,947		7,947
Federal Home Loan Bank stock	6,130		6,130	9,416		9,416
Investment in Bank-owned life insurance	25,934		25,934	25,278		25,278
Forward loan sale commitments	57		57	161		161
Interest rate lock commitments	130		130	105		105
Financial liabilities:
Demand deposits, NOW, savings and money market accounts	$	855,455	855,455	$	805,951	$	805,951
Time deposits	875,886		885,903	1,214,455		1,227,628
Borrowed funds	105,539		106,923	116,768		117,741
Accrued interest payable	2,619		2,619	3,302		3,302

The carrying amounts of cash and cash equivalents approximate their fair value.

The fair value of marketable securities is based on quoted market prices and prices obtained from independent pricing services.

For certain categories of loans, such as installment and commercial loans, the fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The cost of fixed rate mortgage loans held‑for‑sale approximates the fair values as these loans are typically sold within 60 days of origination. Fair values for adjustable-rate mortgages are based on quoted market prices of similar loans adjusted for differences in loan characteristics. The Company applied an additional illiquidity discount in the amount of 5.0% in 2011 and 2010.

The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB stock.

The investment in bank-owned life insurance represents the cash value of the policies at December 31, 2011 and 2010. The rates are adjusted annually thereby minimizing market fluctuations.

The fair value of demand deposits and savings accounts is the amount payable on demand at December 31, 2011 and 2010, respectively. The fair value of fixed‑maturity certificates of deposit and individual retirement accounts is estimated using the present value of the projected cash flows using rates currently offered for similar deposits with similar maturities.

The fair values of borrowings are based on discounting expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements. The carrying values of short-term borrowings, including overnight, securities sold under agreements to repurchase, federal funds purchased and FHLB advances, approximates the fair values due to the short maturities of those instruments. The Company’s credit risk is not material to calculation of fair value.

The carrying values of accrued interest receivable and accrued interest payable approximates fair values due to the short-term duration.

The fair values of forward loan sales commitments and interest rate lock commitments are based on changes in the reference price for similar instruments as quoted by secondary market investors.