Note 18: Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate fair value. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of the Company.

The following describes the methods and significant assumptions used by the Company in estimating the fair values of significant financial instruments:

Cash and cash equivalents: For cash and cash equivalents, including cash and due from banks and other short-term investments with maturities of 90 days or less, the carrying amounts reported on the consolidated balance sheet approximate fair values.

Federal Home Loan Bank Stock: For Federal Home Loan Bank stock, the carrying amounts reported on the balance sheet approximate fair values.

Loans: For variable rate loans that re-price frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits: The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash flows, applying interest rates currently being offered on wholesale funding products of similar maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding (deposit base intangibles).

Borrowings: For borrowings that mature or re-price in 90 days or less, carrying value approximates fair value. The fair value of the Companys remaining borrowings is estimated by using discounted cash flows based on current rates available for similar types of borrowing arrangements taking into account any optionality.

Accrued interest receivable and payable: The carrying amounts of accrued interest receivable and payable approximate their fair values.

Off-balance sheet financial instruments: The Companys off-balance sheet instruments consist of loan commitments and standby letters of credit. Fair values for standby letters of credit and loan commitments were insignificant.

A summary of the carrying values and estimated fair values of the Companys significant financial instruments at December 31, 2014 and 2013 follows:


												Total
		Carrying		Level 1			Level 2			Level 3		Fair
		Value		Inputs			Inputs			Inputs		Value
December 31, 2014

Financial Assets:
Cash and cash equivalents	$	9,800	$	9,800	$	-	--	$	-	--	$	9,800
Federal Home Loan Bank stock		21,354	-	--			21,354		-	--		21,354
Loans, net		910,055	-	--		-	--			913,784		913,784
Interest receivable		4,795		4,795		-	--		-	--		4,795

Financial liabilities:
Deposits (with no stated maturity)	$	479,986	$	---	$		479,986	$	-	--	$	479,986
Time deposits		378,063	-	--			379,132		-	--		379,132
Borrowings		447,020	-	--			447,637		-	--		447,637
Interest payable		499		499		-	--		-	--		499


												Total
		Carrying		Level 1			Level 2			Level 3		Fair
		Value		Inputs			Inputs			Inputs		Value
December 31, 2013

Financial Assets:
Cash and cash equivalents	$	9,200	$	9,200	$	-	--	$	-	--	$	9,200
Federal Home Loan Bank stock		18,370	-	--			18,370		-	--		18,370
Loans, net		844,382	-	--		-	--			850,190		850,190
Interest receivable		4,788		4,788		-	--		-	--		4,788

Financial liabilities:
Deposits (with no stated maturity)	$	440,063	$	---	$		440,063	$	-	--	$	440,063
Time deposits		395,588	-	--			398,668		-	--		398,668
Borrowings		409,445	-	--			411,298		-	--		411,298
Interest payable		514		514		-	--		-	--		514