(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB ASC Topic 825, “Financial Instruments,” requires disclosure of fair value information about certain financial instruments, whether assets, liabilities, or off-balance-sheet commitments, if practicable. The following methods and assumptions were used to estimate the fair value of each class of financial instrument. Fair value estimates that were derived from broker quotes cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

(a) Cash – Book value equals market value.

(b) Equity securities – The Company’s equity securities are recorded at cost less impairment, which approximated fair value.

(c) Investment securities – The Company’s investments are recorded at the estimated fair value of such investments.

(d) Loans receivable – The Company’s loans are recorded at book value which approximated fair value.

(e) Floating rate borrowings – Due to the short-term nature of these instruments, the carrying amount approximates fair value.

(f) Commitments to extend credit – The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and present creditworthiness of the counter parties. For fixed rate loan commitments, fair value also includes a consideration of the difference between the current levels of interest rates and the committed rates. At September 30, 2018 and December 31, 2017, the estimated fair value of these off-balance-sheet instruments was not material.

(g) Fixed rate borrowings – The fair value of the debentures payable to the SBA is estimated based on current market interest rates for similar debt.


	Bank Holding Company Accounting September 30, 2018				Investment Company Accounting December 31, 2017
(Dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and federal funds sold⁽¹⁾	$	143,560	$	143,560	$	12,690	$	12,690
Equity investments		10,752		10,752		—		—
Investment securities		45,757		45,757		—		—
Loans receivable		1,060,061		1,060,061		—		—
Investments		—		—		610,135		610,135
Accrued interest receivable⁽²⁾		7,005		7,005		547		547
Financial liabilities
Funds borrowed⁽³⁾		1,265,074		1,266,016		327,623		330,084
Accrued interest payable		6,118		6,118		3,831		3,831

(1)	Categorized as level 1 within the fair value hierarchy.

(2)	Categorized as level 3 within the fair value hierarchy.

(3)	As of September 30, 2018 and December 31, 2017, publicly traded retail notes traded at a premium to par of $942 and $2,461.