not exceed the estimated amounts. We believe that we use the best information available to determine the allowance for loan losses; however, unforeseen market conditions could result in adjustment to the allowance for loan losses. In addition, net earnings could be significantly affected if circumstances differ substantially from the assumptions used in establishing the allowance for loan losses. Further deterioration in the local economy or real estate values may create additional problem loans for us and require further adjustment to our allowance for loan losses. 

LIABILITY DISTRIBUTION. Our primary ongoing sources of funds are deposits, FHLB borrowings, proceeds from principal and interest payments on loans and investment securities and proceeds from the sale of mortgage loans and investment securities. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates and economic conditions. We experienced a $28.4 increase in total deposits during 2012, to $482.5 million at December 31, 2012, from $454.1 million at December 31, 2011. The growth occurred in our non-interest-bearing demand, money market and NOW and savings accounts, while our time deposit balances declined. The increase in deposits was primarily attributable to $35.0 million of deposits assumed in the acquisition of The Wellsville Bank. Total borrowings decreased $16.6 million to $60.0 million at December 31, 2012, from $76.6 million at December 31, 2011. The decrease was primarily a result of a decrease in borrowings on our FHLB line of credit and in outstanding balances on our repurchase agreements. 

Non-interest-bearing deposits at December 31, 2012 were $75.9 million, or 15.7% of deposits, compared to $66.1 million, or 14.5%, at December 31, 2011. Money market and NOW deposit accounts were 39.5% of our deposit portfolio and totaled $190.3 million at December 31, 2012, compared to $171.5 million, or 37.8%, at December 31, 2011. Savings accounts increased to $45.4 million, or 9.4% of deposits, at December 31, 2012, from $36.7 million, or 8.1%, at December 31, 2011. Certificates of deposit decreased to $170.9 million, or 35.4% of deposits, at December 31, 2012, from $179.8 million, or 39.6%, at December 31, 2011. 

Certificates of deposit at December 31, 2012, scheduled to mature in one year or less totaled $115.8 million. Historically, maturing deposits have generally remained with the Bank and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity. 

CASH FLOWS. During 2012, our cash and cash equivalents decreased by $2.6 million. Our operating activities provided net cash of $12.4 million in 2012, primarily from the proceeds of sales of one-to-four family residential real estate loans held for sale as our loans held for sale balance declined during 2012. Our investing activities provided net cash of $10.4 million during 2012 as our investment securities and loan portfolios decreased during 2012, excluding the effects of The Wellsville Bank acquisition,. Our financing activities used net cash of $25.3 million during 2012, primarily as a result of a decline in deposit balances, excluding the effect of The Wellsville Bank acquisition, and lower borrowings. We received net cash of $4.0 million as a result of assuming $35.1 million of liabilities and acquiring $31.1 million of assets in The Wellsville Bank acquisition. 

LIQUIDITY. Our most liquid assets are cash and cash equivalents and investment securities available for sale. The levels of these assets are dependent on the operating, financing, lending and investing activities during any given year. These liquid assets totaled $228.2 million at December 31, 2012 and $215.7 million at December 31, 2011. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we increase our liquid assets by investing in short-term, high-grade investments. 

Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through sales of investment securities. At December 31, 2012, we had outstanding FHLB advances of $35.7 million and $2.7 million in borrowings against our line of credit with the FHLB. At December 31, 2012, we had collateral pledged to the FHLB that would allow us to borrow an additional $13.5 million, subject to FHLB credit requirements and policies. At December 31, 2012, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $15.8 million. We also have various other fed funds agreements, both secured and unsecured, with correspondent banks totaling approximately $109.2 million in available credit under which we had no outstanding borrowings at December 31, 2012. We had other borrowings of $21.5 million at December 31, 2012, which included $16.5 million of subordinated debentures and $5.0 million in repurchase agreements. The Company has a $7.5 million line of credit from an unrelated financial institution maturing on November 5, 2013, with an interest rate that adjusts daily based on 

