Note 14: Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate fair value. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of the Company.

The following describes the methods and significant assumptions used by the Company in estimating the fair values of significant financial instruments:

Cash and Cash Equivalents: For cash and cash equivalents, including cash and due from banks and other short-term investments with maturities of 90 days or less, the carrying amounts reported on the consolidated balance sheet approximate fair values.

Federal Home Loan Bank stock: For Federal Home Loan Bank stock, the carrying amounts report on the consolidated balance sheet approximate fair values.

Loans: For variable rate loans that re-price frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits: The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash flows, applying interest rates currently being offered on wholesale funding products of similar maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding ("deposit base intangibles").

Borrowings: For borrowings that mature or re-price in 90 days or less, carrying value approximates fair value. The fair value of the Company's remaining borrowings is estimated by using discounted cash flows based on current rates available for similar types of borrowing arrangements taking into account any optionality.

Accrued Interest Receivable and Payable: The carrying amounts of accrued interest receivable and payable approximate their fair values.

Off-Balance Sheet Financial Instruments: The Company's off-balance sheet instruments consist of loan commitments and standby letters of credit. Fair values for standby letters of credit were insignificant.

A summary of the carrying values and estimated fair values of the Company's significant financial instruments at March 31, 2016 and December 31, 2015, follows:

		Carrying		Level 1		Level 2		Level 3		Total
March 31, 2016		Value		Inputs		Inputs		Inputs		Fair Value
Financial Assets:
Cash and cash equivalents	$	7,345	$	7,345	$	--	$	--	$	7,345
Federal Home Loan Bank stock		23,051		--		23,051		--		23,051
Loans, net		996,748		--		--		995,566		995,566
Interest receivable		6,061		--		6,061		--		6,061

Financial liabilities:
Deposits (with no stated maturity)	$	561,851	$	--	$	561,851	$	--	$	561,851
Time deposits		400,724		--		405,858		--		405,858
Borrowings		492,253		--		493,427		--		493,427
Interest payable		564		--		564		--		564



		Carrying		Level 1		Level 2		Level 3		Total
December 31, 2015		Value		Inputs		Inputs		Inputs		Fair Value
Financial Assets:
Cash and cash equivalents	$	9,720	$	9,720	$	--	$	--	$	9,720
Federal Home Loan Bank stock		21,479		--		21,479		--		21,479
Loans, net		980,631		--		--		975,610		975,610
Interest receivable		5,420		--		5,420		--		5,420

Financial liabilities:
Deposits (with no stated maturity)	$	546,058	$	--	$	546,058	$	--	$	546,058
Time deposits		396,729		--		399,146		--		399,146
Borrowings		474,791		--		473,404		--		473,404
Interest payable		527		--		527		--		527