Note 18: Fair Values of Financial Instruments

The estimated fair values approximate carrying amount for all items except those described in the following table. Investment security fair values are based upon market prices or dealer quotes, and if no such information is available, on the rate and term of the security. The carrying value of FHLBC stock approximates fair value as the stock is nonmarketable and can only be sold to the FHLBC or another member institution at par. During the years ended December 31, 2015, and 2014, the Company participated in redemptions and a purchase with the FHLBC and, using these transactions values as the carrying value, FHLBC stock is carried at a Level 2 fair value. Fair values of loans were estimated for portfolios of loans with similar financial characteristics, such as type and fixed or variable interest rate terms. Cash flows were discounted using current rates at which similar loans would be made to borrowers with similar ratings and for similar maturities. The fair value of time deposits is estimated using discounted future cash flows at current rates offered for deposits of similar remaining maturities. The fair values of borrowings were estimated based on interest rates available to the Company for debt with similar terms and remaining maturities. The fair value of off balance sheet volume is not considered material. The fair value of mortgage banking derivatives is discussed above in Note 16.

The carrying amount and estimated fair values of financial instruments were as follows:


	December 31, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	26,975	$	26,975	$	26,975	$	-	$	-
Interest bearing deposits with financial institutions		13,363		13,363		13,363		-		-
Securities available-for-sale		456,066		456,066		1,509		454,446		111
Securities held-to-maturity		247,746		251,675		-		251,675		-
FHLBC and Reserve Bank Stock		8,518		8,518		-		8,518		-
Bank-owned life insurance		58,028		58,028		-		58,028		-
Loans held-for-sale		2,849		2,849		-		2,849		-
Loans, net		1,117,492		1,126,959		-		-		1,126,959
Accrued interest receivable		4,464		4,464		-		4,464		-

Financial liabilities:
Noninterest bearing deposits	$	442,639	$	442,639	$	442,639	$	-	$	-
Interest bearing deposits		1,316,447		1,316,550		-		1,316,550		-
Securities sold under repurchase agreements		34,070		34,070		-		34,070		-
Other short-term borrowings		15,000		15,000		-		15,000		-
Junior subordinated debentures		58,378		54,686		32,441		22,245		-
Subordinated debenture		45,000		41,101		-		41,101		-
Note payable and other borrowings		500		445		-		445		-
Interest rate swap agreements		631		631				631
Borrowing interest payable		75		75		-		75		-
Deposit interest payable		445		445		-		445		-


	December 31, 2014
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	30,101	$	30,101	$	30,101	$	-	$	-
Interest bearing deposits with financial institutions		14,096		14,096		14,096		-		-
Securities available-for-sale		385,486		385,486		1,527		330,900		53,059
Securities held-to-maturity		259,670		263,266		-		263,266		-
FHLBC and Reserve Bank Stock		9,058		9,058		-		9,058		-
Bank-owned life insurance		56,807		56,807		-		56,807		-
Loans held-for-sale		5,072		5,072		-		5,072		-
Loans, net		1,137,695		1,151,223		-		-		1,151,223
Accrued interest receivable		4,888		4,888		-		4,888		-

Financial liabilities:
Noninterest bearing deposits	$	400,447	$	400,447	$	400,447	$	-	$	-
Interest bearing deposits		1,284,608		1,284,887		-		1,284,887		-
Securities sold under repurchase agreements		21,036		21,036		-		21,036		-
Other short-term borrowings		45,000		45,000		-		45,000		-
Junior subordinated debentures		58,378		54,686		32,441		22,245		-
Subordinated debenture		45,000		39,366		-		39,366		-
Note payable and other borrowings		500		422		-		422		-
Borrowing interest payable		75		75		-		75		-
Deposit interest payable		467		467		-		467		-