FirstCaribbean International Bank (Bahamas) Limited

Notes to Consolidated Financial StatementsFor the year ended October 31, 2009(Expressed in thousands of Bahamian dollars)26. Financial Risk Management (Continued)H. Fair values of financial assets and liabilities (continued)Due from banksDue from banks include inter-bank placements and items in the course of collection. The fair value of floating rateplacements and overnight deposits is their carrying amount. The estimated fair value of fixed interest bearing depositsis based on discounted cash flows using prevailing money market interest rates for debts with similar credit risk andremaining maturity. Their carrying values approximate their fair values.Loans and advances to customersThe estimated fair value of loans and advances represents the discounted amount of estimated future cash inflows.Expected cash flows are discounted at current market rates to determine fair value. The balances are net of specific andother provisions for impairment and their net carrying amounts reflect their fair values.Investment securitiesFair value for investments designated as loans and advances is based on market prices or broker/dealer price quotations.Where this information is not available, fair value has been estimated using quoted market prices for securities withsimilar credit, maturity and yield characteristics. Where fair values still cannot be measured reliably, these securities arecarried at cost less impairment. Available-for-sale securities are measured at fair value.Customer deposits and other borrowed fundsThe estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amountrepayable on demand. The estimated fair value of fixed interest bearing deposits and other borrowings without quotedmarket price is based on discounted cash flows using interest rates for new debts with similar remaining maturity.27. Critical Accounting Estimates and Judgements in Applying Accounting PoliciesEstimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances. The estimates and judgementsthat have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the nextfinancial year are discussed below.i) Fair value of financial instrumentsWhere the fair values of financial assets and financial liabilities recorded on the consolidated balance sheet cannotbe derived from active markets, they are determined using a variety of valuation techniques that include the use ofmathematical models. The input for these models is taken from observable markets where possible, but where this isnot possible, a degree of judgement is required in establishing fair values. The judgement includes considerations ofliquidity and model inputs such as correlation and volatility for longer dated derivatives.ii)Loan fee recognition estimateIn accordance with IAS 18 Revenue, loan origination fees, relating to loans that have a high probability of being drawndown, are to be deferred (together with related direct costs) and recognized as an adjustment to the effective interestyield on the loan. As a result of this change, $18,853 (2008: $19,156) has been reclassified between other liabilitiesand loans and advances.28. Fiduciary ActivitiesThe Bank provides custody and trustee discretionary investment management services to third parties. Those assets thatare held in a fiduciary capacity are not included in these financial statements. At the balance sheet date, the Bank hadinvestment assets under administration on behalf of third parties amounting to $3,275 (2008: $4,366).66