Loans Held -  for -Sale ( Carried at Fair Value)  The fair value of loans held - for -sale is determined, when possible, using quoted secondary- market prices. If no such quotes prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan.  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans ( e. g.,  residential real estate and consumer loans) are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.  Impaired loans are those that are accounted for under FASB AC 310- 10 -35, in which the Bank has measured impairment generally based on the fair value of the loan’ s collateral.  Fair value is generally determined based upon independent third -party appraisals of the properties,  or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.  The fair value of impaired loans with an impairment allowance were $ 1, 169, 000 and $ 3, 656, 000,  net of valuation allowances, of $ 296, 000 and $ 524, 000 as of December 31,  2013 and 2012,  respectively.  The carrying amount of restricted investment in bank stock approximates fair value.  The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.  Derivative financial instruments include interest rate locks and forward commitments to sell mortgage loans. Fair values are based on the underlying mortgage loans and the probability of commitments being exercised.  Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell at the time of acquisition thereby establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at lower of carrying amount or fair value less cost to sell. Fair value is based upon independent market prices, appraised value or management’ s estimation of the value of the property. These assets are included in Level 3 assets.  The fair values disclosed for demand deposits ( e. g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date ( i. e.,  their carrying amounts).  Fair values for fixed -rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.  Loans Receivable (Generally Carried at Cost)  Restricted Investment in Bank Stock (Carried at Cost)  Accrued Interest Receivable and Payable ( Carried at Cost)  Derivative Financial Instruments (Carried at Fair Value)  Foreclosed Real Estate (Generally Carried at Cost)  Deposit Liabilities (Carried at Cost)  39