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Note 10 - Fair Values of Financial Instruments
9 Months Ended
Sep. 30, 2018
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
10.
FAIR VALUES OF FINANCIAL INSTRUMENTS
 
The carrying amounts, estimated fair values and level within the fair value hierarchy of financial instruments were as follows as of
September 30, 2018
and
December 31, 2017 (
dollars in thousands):
 
   
Level in
   
September 30, 2018
   
December 31, 2017
 
   
Fair Value
Hierarchy
   
Carrying
Values
   
Fair
Values
   
Carrying
Values
   
Fair
Values
 
                                       
Financial assets:
                                     
Cash
 
Level 1
    $
11,743
    $
11,743
    $
11,565
    $
11,565
 
Cash equivalents
 
Level 2
     
68,274
     
68,274
     
188,536
     
188,536
 
Securities available for sale
 
(1)
     
326,531
     
326,531
     
335,744
     
335,744
 
FHLBI stock
 
(2)
     
11,072
     
11,072
     
11,036
     
11,036
 
Loans, net
 
Level 3
     
2,673,955
     
2,660,428
     
2,536,498
     
2,520,063
 
Loans held for sale
 
Level 2
     
1,770
     
1,770
     
2,553
     
2,553
 
Mortgage servicing rights
 
Level 2
     
4,619
     
7,951
     
5,106
     
8,373
 
Accrued interest receivable
 
Level 2
     
9,987
     
9,987
     
8,770
     
8,770
 
                                       
Financial liabilities:
                                     
Deposits
 
Level 2
     
2,508,810
     
2,300,629
     
2,522,365
     
2,368,188
 
Repurchase agreements
 
Level 2
     
112,378
     
112,378
     
118,748
     
118,748
 
FHLBI advances
 
Level 2
     
240,000
     
231,455
     
220,000
     
217,130
 
Subordinated debentures
 
Level 2
     
46,029
     
46,147
     
45,517
     
45,732
 
Accrued interest payable
 
Level 2
     
2,175
     
2,175
     
1,919
     
1,919
 
Interest rate swap
 
(1)
     
0
     
0
     
2
     
2
 
 
 
(
1
)
See Note
11
for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities.
 
 
(
2
)
It is
not
practical to determine the fair value of FHLBI stock due to transferability restrictions.
 
Carrying amount is the estimated fair value for cash and cash equivalents, FHLBI stock, accrued interest receivable and payable, noninterest-bearing checking accounts and securities sold under agreements to repurchase. Security fair values are based on market prices or dealer quotes, and if
no
such information is available, on the rate and term of the security and information about the issuer. Fair value for loans as of
September 30, 2018
is based on an exit price model as required by ASU
2016
-
01,
taking into account inputs such as discounted cash flows, probability of default and loss given default assumptions. As of
December 31, 2017,
the fair value of floating rate loans was primarily based on carrying value, while fair value of other loans was estimated using discounted cash flow analysis using interest rates being offered for loans with similar terms to borrowers of similar credit quality. Fair value for deposits accounts other than noninterest-bearing checking accounts is based on discounted cash flows using current market rates applied to the estimated life. The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. The fair values of subordinated debentures and FHLBI advances are based on current rates for similar financing. The fair value of the interest rate swap was determined primarily utilizing market-consensus forecasted yield curves. The fair value of off-balance sheet items is estimated to be nominal.