Note 17 - Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2016

NOTE

– FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amount, estimated fair value and level within the fair value hierarchy of financial instruments were as follows at year-end (dollars in thousands):

	Level in	2016				2015
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy	Amount		Value		Amount		Value
Financial assets
Cash	Level 1	$	11,493	$	11,493	$	12,496	$	12,496
Cash equivalents	Level 2		172,103		172,103		77,395		77,395
Securities available for sale	(1)		328,060		328,060		346,992		346,992
Federal Home Loan Bank stock	(2)		8,026		8,026		7,567		7,567
Loans, net	Level 3		2,360,659		2,354,311		2,262,046		2,261,026
Bank owned life insurance	Level 2		67,198		67,198		58,971		58,971
Accrued interest receivable	Level 2		7,714		7,714		7,836		7,836

Financial liabilities
Deposits	Level 2		2,374,985		2,286,548		2,275,382		2,208,724
Securities sold under agreements to repurchase	Level 2		131,710		131,710		154,771		154,771
Federal Home Loan Bank advances	Level 2		175,000		174,734		68,000		68,858
Subordinated debentures	Level 2		44,835		45,220		55,154		55,760
Accrued interest payable	Level 2		1,592		1,592		1,479		1,479
Interest rate swap	(1)		84		84		253		253

(1)	See Note 18 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities.

(2)	It is not practical to determine the fair value of FHLBI stock due to transferability restrictions.

Carrying amount is the estimated fair value for cash and cash equivalents, FHLBI stock, accrued interest receivable and payable, bank owned life insurance, demand deposits, securities sold under agreements to repurchase, and variable rate loans and deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer. For fixed rate loans and deposits and for variable rate loans and deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of subordinated debentures and Federal Home Loan Bank advances is based on current rates for similar financing. Fair value of the interest rate swap is determined primarily utilizing market-consensus forecasted yield curves. Fair value of off-balance sheet items is estimated to be nominal.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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