Note 19: Fair Value 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 December 31, 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 fair value of mortgage banking derivatives is discussed in Note 17: Mortgage Banking Derivatives, above.

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


	December 31, 2018
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	38,599	$	38,599	$	38,599	$	-	$	-
Interest bearing deposits with financial institutions		16,636		16,636		16,636		-		-
Securities available-for-sale		541,248		541,248		3,923		529,160		8,165
FHLBC and FRBC Stock		13,433		13,433		-		13,433		-
Loans held-for-sale		2,984		2,984		-		2,984		-
Net loans		1,878,021		1,867,594		-		-		1,867,594
Accrued interest receivable		10,940		10,940		-		10,940		-

Financial liabilities:
Noninterest bearing deposits	$	618,830	$	618,830	$	618,830	$	-	$	-
Interest bearing deposits		1,497,843		1,495,614		-		1,495,614		-
Securities sold under repurchase agreements		46,632		46,632		-		46,632		-
Other short-term borrowings		149,500		149,500		-		149,500		-
Junior subordinated debentures		57,686		47,625		32,989		14,636		-
Senior notes		44,158		45,008		45,008		-		-
Note payable and other borrowings		15,379		18,050		-		18,050		-
Interest rate swap agreements		58		58		-		58		-
Borrowing interest payable		281		281		-		281		-
Deposit interest payable		973		973		-		973		-


	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		-
Senior notes		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		-