Note 14 – 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. For September 30, 2018, the fair values of loans and leases are estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors. This is not comparable with the fair value disclosures for December 31, 2017, which were estimated using an entrance price basis. For December 31, 2017, fair values of variable rate loans and leases with no significant change in credit risk were based on carrying values. The fair values of other loans and leases were estimated using discounted cash flow analyses which used interest rates being offered for loans and leases with similar terms to borrowers of similar credit quality. 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, 2018
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	34,366	$	34,366	$	34,366	$	-	$	-
Interest bearing deposits with financial institutions		15,956		15,956		15,956		-		-
Securities available-for-sale		542,338		542,338		3,854		527,409		11,075
FHLBC and FRBC Stock		10,511		10,511		-		10,511		-
Loans held-for-sale		2,911		2,911		-		2,911		-
Net loans		1,815,621		1,801,489		-		-		1,801,489
Interest rate swap agreements		1,135		1,135		-		1,135
Accrued interest receivable		10,460		10,460		-		10,460		-

Financial liabilities:
Noninterest bearing deposits	$	621,580	$	621,580	$	621,580	$	-	$	-
Interest bearing deposits		1,510,790		1,583,984		-		1,583,984		-
Securities sold under repurchase agreements		44,333		44,333		-		44,333		-
Other short-term borrowings		81,875		81,875		-		81,875		-
Junior subordinated debentures		57,674		59,104		33,336		25,769		-
Senior notes		44,133		45,693		-		45,693		-
Note payable and other borrowings		18,050		18,050		-		18,050		-
Borrowing interest payable		801		801		-		801		-
Deposit interest payable		924		924		-		924		-


	December 31, 2017
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	37,444	$	37,444	$	37,444	$	-	$	-
Interest bearing deposits with financial institutions		18,389		18,389		18,389		-		-
Securities available-for-sale		541,439		541,439		3,947		520,963		16,529
FHLBC and FRBC Stock		10,168		10,168		-		10,168		-
Loans held-for-sale		4,067		4,067		-		4,067		-
Net loans		1,600,161		1,586,722		-		-		1,586,722
Accrued interest receivable		8,595		8,595		-		8,595		-

Financial liabilities:
Noninterest bearing deposits	$	572,404	$	572,404	$	572,404	$	-	$	-
Interest bearing deposits		1,350,521		1,346,339		-		1,346,339		-
Securities sold under repurchase agreements		29,918		29,918		-		29,918		-
Other short-term borrowings		115,000		115,000		-		115,000		-
Junior subordinated debentures		57,639		59,471		33,267		26,204		-
Subordinated debenture		44,058		46,743		-		46,743		-
Interest rate swap agreements		1,287		1,287		-		1,287		-
Borrowing interest payable		140		140		-		140		-
Deposit interest payable		631		631		-		631		-