Audited Financial Statements NOTE 18: FAIR VALUE OF FINANCIAL INSTRUMENTS  Cash and cash equivalents  Securities available-for-sale Loans held for sale  Loans, net  Deposits  Short-term borrowings  Long-term debt  page 73 The fair value of the Company’s fixed rate long-term debt is estimated using discounted cash flows based on estimated  current market rates for similar types of borrowing arrangements. The carrying amount of the Company’s variable rate  long-term debt approximates its fair value.  The fair value of federal funds purchased, securities sold under agreements to repurchase, and other short–term  borrowings approximate their carrying value.  Under FASB ASC 825, the fair value of deposits with no stated maturity, such as noninterest bearing demand deposits,  interest bearing demand deposits and savings and certain types of money market accounts, is equal to the amount  payable on demand at the reporting date (i.e., their carrying amount). The carrying amounts of variable-rate, fixed-term  money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for  fixed-rate certificates of deposit are estimated using discounted cash flows. The discount rates used are based on  estimated market rates for deposits of similar remaining maturities.  The fair value of loans is calculated using discounted cash flows. The discount rates used to determine the present  value of the loan portfolio are estimated market discount rates that reflect the credit and interest rate risk inherent in the loan portfolio. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed  by FASB ASC 820 and generally produces a higher value than an exit-price approach. The estimated maturities are  based on the Company’s historical experience with repayments adjusted to estimate the effect of current market  conditions.  Loans held for sale are carried at the lower of cost or estimated fair value and are subjected to nonrecurring fair value  adjustments. Estimated fair value is determined on the basis of the current market value of similar loans.  Fair value measurement is based upon quoted prices if available. If quoted market prices are not available, estimated  fair values are based on quoted market prices of comparable instruments. See Note 5, Securities, and Note 17, Fair  Value Disclosures, for additional disclosure related to fair value measurements for securities. Due to their short-term nature, the carrying amounts reported in the balance sheet are assumed to approximate fair  value for these assets. For purposes of disclosure, cash equivalents include federal funds sold and other interest bearing  bank deposits.  The following methods and assumptions were used by the Company in estimating the fair value of its financial  instruments:  Where quoted market prices are not available, fair values are based on estimates using discounted cash flow and other  valuation techniques. Discounted cash flows can be significantly affected by the assumptions used, including the discount  rate and estimates of future cash flows. In that regard, the fair value estimates derived for those assets and liabilities cannot be  necessarily substantiated by comparison to independent markets and should not be considered representative of the  liquidation value of the Company’s financial instruments, but rather a good–faith estimate of the fair value of financial  instruments held by the Company. FASB ASC 825 excludes certain financial instruments and all nonfinancial instruments  from its disclosure requirements.  FASB ASC 825,  Financial Instruments , requires disclosure of fair value information about financial instruments,  whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions  used in the estimation of the fair value of the Company’s financial instruments are explained below. 