Note 13 – Fair Values of Financial Instruments

The estimated fair values approximate carrying amount for all items except those described in the following table. Securities available-for-sale 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. FHLBC stock is carried at cost and considered 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 carrying amount and estimated fair values of financial instruments were as follows:


	September 30, 2016
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	29,203	$	29,203	$	29,203	$	-	$	-
Interest bearing deposits with financial institutions		160,744		160,744		160,744		-		-
Securities available-for-sale		531,057		531,057		-		531,057		-
FHLBC and Reserve Bank Stock		7,918		7,918		-		7,918		-
Loans held-for-sale		3,750		3,750		-		3,750		-
Loans		1,202,852		1,187,889		-		-		1,187,889
Accrued interest receivable		4,402		4,402		-		4,402		-

Financial liabilities:
Noninterest bearing deposits	$	473,477	$	473,477	$	473,477	$	-	$	-
Interest bearing deposits		1,303,905		1,304,543		-		1,304,543		-
Securities sold under repurchase agreements		46,606		46,606		-		46,606		-
Other short-term borrowings		-		-		-		-		-
Junior subordinated debentures		57,579		56,388		33,452		22,936		-
Subordinated debenture		45,000		42,626		-		42,626		-
Note payable and other borrowings		500		465		-		465		-
Interest rate swap agreements		4,910		4,910				4,910
Borrowing interest payable		73		73		-		73		-
Deposit interest payable		500		500		-		500		-


	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		-
Loans held-for-sale		2,849		2,849		-		2,849		-
Loans		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		57,543		53,851		31,606		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		-