Note 14 – 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, 2014, and 2013, the Company participated in multiple redemptions with the FHLBC and, using the redemption values as the carrying value, FHLBC stock is carried at a Level 2 fair value since December 31, 2012. The Company had redemptions of $1.2 million in the year 2014. The Company redeemed $787,000 in April of 2015. 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 carrying amount and estimated fair values of financial instruments were as follows:


	September 30, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	35,443	$	35,443	$	35,443	$	-	$	-
Interest bearing deposits with financial institutions		18,329		18,329		18,329		-		-
Securities available-for-sale		408,836		408,836		1,515		407,203		118
Securities held-to-maturity		250,044		258,208		-		258,208		-
FHLBC and Reserve Bank Stock		8,271		8,271		-		8,271		-
Bank-owned life insurance		57,647		57,647		-		57,647		-
Loans held-for-sale		3,899		3,899		-		3,899		-
Loans, net		1,116,299		1,128,288		-		-		1,128,288
Accrued interest receivable		4,402		4,402		-		4,402		-

Financial liabilities:
Noninterest bearing deposits	$	430,810	$	430,810	$	430,810	$	-	$	-
Interest bearing deposits		1,289,669		1,291,259		-		1,291,259		-
Securities sold under repurchase agreements		27,074		27,074		-		27,074		-
Other short-term borrowings		35,000		35,000		-		35,000		-
Junior subordinated debentures		58,378		54,192		32,148		22,044		-
Subordinated debenture		45,000		40,433		-		40,433		-
Note payable and other borrowings		500		437		-		437		-
Borrowing interest payable		74		74		-		74		-
Deposit interest payable		427		427		-		427		-


	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		-