Fair Value

9 Months Ended

Sep. 30, 2011

Fair Value [Abstract]

Fair Value

6. Fair Value

The carrying value of certain financial assets and liabilities is impacted by the application of fair value measurements, either directly or indirectly. In certain cases, an asset or liability is measured and reported at fair value on a recurring basis, such as available-for-sale investment securities. In other cases, management must rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established. Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the financial statements, from period to period.

The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and Cash Equivalents: The carrying amount reported in the consolidated statements of financial condition for cash and cash equivalents is deemed to approximate fair value.

Investment Securities: Fair value for investment securities is based on quoted market prices and dealer quotes. When quoted market prices are not available, fair value is estimated using prices for similar assets or other observable inputs.

Loans Held for Sale: Fair value for loans held for sale is the contracted sales price of loans committed for delivery, which is determined on the date of sale commitment.

Loans Receivable: The loan portfolio has been segregated into categories with similar characteristics, such as one- to four-family residential real estate, multi-family residential real estate, installment and other. These loan categories were further delineated into fixed-rate and adjustable-rate loans. The fair values for the resultant loan categories were computed via discounted cash flow analysis, using current interest rates offered for loans with similar terms to borrowers of similar credit quality.

Federal Home Loan Bank Stock: The carrying amount presented in the consolidated statements of financial condition is deemed to approximate fair value.

Accrued Interest Receivable and Payable: The carrying value for accrued interest approximates fair value.

Deposits: The fair values of deposits with no stated maturity, such as money market demand deposits, savings and NOW accounts have been analyzed by management and assigned estimated maturities and cash flows which are then discounted to derive a value. The fair value of fixed-rate certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Advances from the Federal Home Loan Bank: The fair value of these advances is estimated using the rates currently offered for similar advances of similar remaining maturities or, when available, quoted market prices.

Repurchase Agreements: The fair value of repurchase agreements is based on the discounted value of contractual cash flows using rates currently offered for similar maturities.

Subordinated Debentures: The fair value of subordinated debentures is based on the discounted value of contractual cash flows using rates currently offered for smaller maturities.

Advances by Borrowers for Taxes and Insurance: The carrying amount of advances by borrowers for taxes and insurance is deemed to approximate fair value.

Based on the foregoing methods and assumptions, the carrying value and fair value of the Corporation’s financial instruments are as follows:

		September 30,		September 30,		September 30,		September 30,
	September 30, 2011				December 31, 2010
	Carrying value		Fair value		Carrying value		Fair value
	(In thousands)
Financial assets
Cash and cash equivalents	$	69,707	$	69,707	$	29,114	$	29,114
Investment securities available for sale		10,996		10,996		30,768		30,768
Investment securities held to maturity		3,493		3.547		3,948		3,993
Loans held for sale		10,445		10,635		2,208		2,254
Loans receivable		634,788		635,612		667,840		643,646
Federal Home Loan Bank stock		9,888		9,888		29,888		29,888
Accrued interest receivable		3,030		3,030		3,521		3,521
Financial liabilities
Deposits	$	624,327	$	617,378	$	651,816	$	642,893
Advances from the Federal Home Loan Bank		101,186		106,010		92,934		97,711
Repurchase agreements		5,672		5,672		6,530		6,530
Subordinated debentures		5,000		4,906		5,000		4,839
Advances by borrowers for taxes and insurance		1,393		1,393		2,413		2,413
Accrued interest payable		1,627		1,627		1,646		1,646

Listed below are three levels of inputs that Camco uses to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices.

Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting, etc.

Fair value is defined as the price that would be received to sell an asset or transfer a liability between market participants at the balance sheet date. When possible, the Corporation looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Corporation looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Camco must use other valuation methods to develop a fair value. The fair value of impaired loans is based on the fair value of the underlying collateral, which is estimated through third party appraisals or internal estimates of collateral values.

The following table presents financial assets and liabilities measured on a recurring basis:

		September 30,		September 30,		September 30,		September 30,
			Fair Value Measurements at Reporting Date Using
(in thousands)	Balance		Level 1		Level 2		Level 3
September 30, 2011
Securities available for sale:
U.S. government sponsored enterprises	$	9,312	$	—	$	9,312	$	—
Corporate equity securities		51		—		8		43
Mortgage-backed securities		1,633		—		1,633		—
December 31, 2010
Securities available for sale:
U.S. government sponsored enterprises	$	2,065	$	—	$	2,065	$	—
Corporate equity securities		98		—		55		43
Mortgage-backed securities		28,605		—		28,605		—
The following table presents financial assets and liabilities measured on a non-recurring basis:
			Fair Value Measurements at Reporting Date Using
(in thousands)	Balance		Level 1		Level 2		Level 3
September 30, 2011
Impaired loans	$	23,695		—		—	$	23,695
Real estate acquired through foreclosure		12,592		—		—		12,592
December 31, 2010
Impaired loans	$	20,518		—		—	$	20,518
Real estate acquired through foreclosure		10,096		—		—		10,096

Impaired loans are measured and reported at fair value when management believes collection of contractual interest and principal payments is doubtful. Management’s determination of the fair value for these loans represents the estimated net proceeds to be received from the sale of the collateral based on observable market prices and market value provided by independent, licensed or certified appraisers.

Fair value for real estate acquired through foreclosure is generally determined by obtaining recent appraisals on the properties. Other types of valuing include broker price opinions and valuations pertaining to the current and anticipated deterioration in the regional economy and real estate market, as evidenced by, among other things, changes in the local population, unemployment rates, increasing vacancy rates, borrower delinquencies, declining property values and rental prices, differences between foreclosure appraisals and real estate owned sales prices, and an increase in concessions and other forms of discounting or other items approved by our asset classification committee. The fair value under such appraisals is determined by using one of the following valuation techniques: income, cost or comparable sales. The fair value is then reduced by management’s estimate for the direct costs expected to be incurred in order to sell the property. Holding costs or maintenance expenses are recorded as period costs when occurred and are not included in the fair value estimate.