BLUE RIDGE BANKSHARES, EVC.  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  December 31,2012  Note 12. Disclosures About Fair Value of Financial Instruments (Continued)  Loans held for investment: The fair value of loans held for investment is based on a discounted value of  the estimated fiiture cash flow expected to be received through the earlier ofthe loan payout or the loan  repricing date. The interest rate applied in the discounted cash flow method reflects average current  rates on similar loans adjusted for relative risk and maturity. Fair values of impaired loans are estimated  based on estimates of net realization of underlying collateral.  Loans held for sale: Loans held for sale are usually held for a short period of time ranging from 10 to  60 days. The canying value of these loans approximates their fair value.  Deposits: The carrying amount is considered a reasonable estimate of fair value for demand and  savings deposits and other variable rate deposit accounts. The fair value of fixed maturity certificates of  deposit is estimated by a discounted cash flow method using the interest rates currently offered for  deposits of similar remaining maturities.  Accrued interest receivable and payable: The carrying amounts of accmed interest receivable and  payable approximate their fair values.  Bank-owned life insurance: The carrying and fair value amount of bank-owned life insurance is based  on the present value of the receivable from the executive. The cash surrender values of the policies  exceed the canying amounts as ofthe balance sheet date.  Off-balance sheet instruments: The fair value of commitments is estimated using the fees currently  charged to enter into similar agreements, taking into account the remaining terms ofthe agreements and  the present credit standing ofthe customers. The amount of fees currently charged on commitments is  determined to be insignificant and therefore the fair value and carrying value of off-balance sheet  instmments are not shown.  U.S. GAAP defines fair value, establishes a framework for measuring fair value, establishes a three- level valuation hierarchy for disclosure of fair value measurement and enhances disclosure  requirements for fair value measurements. The valuation hierarchy is based upon the transparency of  inputs to the valuation of an asset or liability as ofthe measurement date. The three levels are defined  as follows:  Note 13. Fair Value Measurements  Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical  assets or liabilities in active markets.  Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and  liabilities in active markets, and inputs that are observable for the asset or  liabilities, either directly or indirectly, for substantially the full term ofthe financial  instrument.  Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair  value measurement.  28 (Continued)