Note 9 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2012

Financial Instruments Disclosure [Text Block]

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The estimated fair values of financial instruments that are reported at amortized cost in the Company’s statement of financial condition, segregated by the level of valuation inputs within the fair value hierarchy used to measure fair value, are as follows (in thousands):

	March 31, 2012				December 31, 2011
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
FINANCIAL ASSETS:
Level 1 inputs:
Cash and cash equivalents	$	74,306	$	74,306	$	79,799	$	79,799
Level 2 inputs:
Interest bearing time deposits in banks		27,609		28,016		27,113		27,572
Federal Home Loan Bank stock		577		577		576		576
Loans held for sale		3,679		3,679		3,339		3,339
Cash surrender value of life insurance		22,406		22,406		22,213		22,213
Accrued interest receivable		1,773		1,773		1,516		1,516
Level 3 inputs:
Loans receivable—net		328,884		330,036		331,453		333,006
FINANCIAL LIABILITIES:
Level 2 inputs:
Checking, money market and savings accounts		208,456		208,456		207,015		207,015
Other borrowings		6,502		6,680		6,679		6,889
Accrued interest payable		35		35		54		54
Advance payments by borrowers for taxes and insurance		928		928		816		816
Level 3 inputs:
Certificates of deposit		281,920		282,263		291,566		293,198

For cash and cash equivalents, the carrying amount approximates fair value (level 1).  For Federal Home Loan Bank stock, loans held for sale, cash surrender value of life insurance and accrued interest receivable, the carrying value is a reasonable estimate of fair value, primarily because of the short-term nature of the instruments or, as to Federal Home Loan Bank stock, the ability to sell the stock back to the Federal Home Loan Bank at cost (level 2).  Interest bearing time deposits in banks were valued using discounted cash flows based on current rates for similar types of deposits (level 2). Fair values of impaired loans are estimated as described in Note 8.  Non-impaired loans were valued using discounted cash flows. The discount rates used to determine the present value of these loans were based on interest rates currently being charged by the Bank on comparable loans (level 3).

The fair value of checking accounts, savings accounts and money market deposits is the amount payable on demand at the reporting date (level 2). The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered by the Bank for deposits of similar terms (level 3).  The fair value of Federal Home Loan Bank advances is estimated using the rates for advances of similar remaining maturities at the reporting date (level 2). For advance payments by borrowers for taxes and insurance and for accrued interest payable the carrying value is a reasonable estimate of fair value, primarily because of the short-term nature of the instruments (level 2).

The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2012 and December 31, 2011. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since the reporting date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.