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13. Fair Value of Financial Instruments
 3 Months Ended
Jun. 30, 2013
Notes  
13. Fair Value of Financial Instruments

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The following disclosure of the estimated fair value of financial instruments is made in accordance with applicable accounting standards. The Company, using available market information and appropriate valuation methodologies, has determined the estimated fair value amounts. However, considerable judgment is necessary to interpret market data in the development of the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in the future. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

 

The estimated fair value of financial instruments is as follows (in thousands):

 

 

 

June 30, 2013

Carry value

 

Quoted prices in active markets for identical assets (Level 1)

  

Other observable inputs

(Level 2)

  

Significant unobservable inputs

(Level 3)

 

 

Fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$

111,878

 

$

111,878

 

$

-

 

$

-

 

$

111,878

Certificates of deposit held for investment

 

42,652

 

 

-

 

 

42,861

 

 

-

 

 

42,861

Investment securities available for sale

 

14,590

 

 

-

 

 

12,523

 

 

2,067

 

 

14,590

Mortgage-backed securities held to maturity

 

122

 

 

-

 

 

125

 

 

-

 

 

125

Mortgage-backed securities available for sale

 

6,068

 

 

-

 

 

6,068

 

 

-

 

 

6,068

Loans receivable, net

 

511,692

 

 

-

 

 

-

 

 

477,078

 

 

477,078

Loans held for sale

 

1,258

 

 

-

 

 

1,258

 

 

-

 

 

1,258

Federal Home Loan Bank stock

 

7,089

 

 

-

 

 

7,089

 

 

-

 

 

7,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand – savings deposits

$

479,511

 

$

479,511

 

$

-

 

$

-

 

$

479,511

Time deposits

 

179,984

 

 

-

 

 

179,886

 

 

-

 

 

179,886

Junior subordinated debentures

 

22,681

 

 

-

 

 

-

 

 

10,210

 

 

10,210

 

March 31, 2013

Carry value

 

Quoted prices in active markets for identical assets (Level 1)

 

Other observable inputs

(Level 2)

 

Significant unobservable inputs

(Level 3)

 

 

Fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$

115,415

 

$

115,415

 

$

-

 

$

-

 

$

115,415

Certificates of deposit held for investment

 

44,635

 

 

-

 

 

45,078

 

 

-

 

 

45,078

Investment securities available for sale

 

6,216

 

 

-

 

 

4,978

 

 

1,238

 

 

6,216

Mortgage-backed securities held to maturity

 

125

 

 

-

 

 

129

 

 

-

 

 

129

Mortgage-backed securities available for sale

 

431

 

 

-

 

 

431

 

 

-

 

 

431

Loans receivable, net

 

520,369

 

 

-

 

 

-

 

 

495,312

 

 

495,312

Loans held for sale

 

831

 

 

-

 

 

831

 

 

-

 

 

831

Federal Home Loan Bank stock

 

7,154

 

 

-

 

 

7,154

 

 

-

 

 

7,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand – savings deposits

$

475,688

 

$

 

 

$

475,688

 

$

-

 

$

475,688

Time deposits

 

188,118

 

 

-

 

 

189,289

 

 

-

 

 

189,289

Junior subordinated debentures

 

22,681

 

 

-

 

 

-

 

 

9,433

 

 

9,433

 

 

 

Fair value estimates were based on existing financial instruments without attempting to estimate the value of anticipated future business. The fair value was not estimated for assets and liabilities that were not considered financial instruments.

 

Fair value estimates, methods and assumptions are set forth below.

 

Cash – Fair value approximates the carrying amount.

 

Certificates of Deposit held for investment – The fair value of certificates of deposit with stated maturity was based on the discounted value of contractual cash flows. The discount rate was estimated using rates currently available in the local market.

 

Investments and Mortgage-Backed Securities – Fair values were based on quoted market rates and dealer quotes. The fair value of the trust preferred investment was determined using a discounted cash flow method (see also Note 11 – Fair Value Measurements).

 

Loans Receivable and Loans Held for Sale – Loans were priced using a discounted cash flow analysis. The fair value of loans held for sale was based on the loans carrying value as the agreements to sell these loans are short term fixed rate commitments and no material difference between the carrying value is likely.

 

Federal Home Loan Bank stock – The carrying amount approximates the estimated fair value of this investment.

 

Deposits – The fair value of deposits with no stated maturity such as non-interest-bearing demand deposits, interest checking, money market and savings accounts was equal to the amount payable on demand. The fair value of time deposits with stated maturity was based on the discounted value of contractual cash flows. The discount rate was estimated using rates currently available in the local market.

 

Junior Subordinated Debentures – The fair value of the Debentures was based on the discounted cash flow method. Management believes that the discount rate utilized is indicative of those that would be used by market participants for similar types of debentures.

 

Off-Balance Sheet Financial Instruments – The estimated fair value of loan commitments approximates fees recorded associated with such commitments. Since the majority of the Company’s off-balance-sheet instruments consist of non-fee producing, variable rate commitments, the Company has determined they do not have a distinguishable fair value.