NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amount and estimated fair value of financial instruments, not previously presented, as of March 31, 2015 and December 31, 2014 were as follows:

					Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
March 31, 2015
Assets:
Cash and due from financial institutions	$	4,000	$	4,000	$	4,000	$	-	$	-
Short-term interest-earning deposits		14,124		14,124		14,124		-		-
Securities held-to-maturity		17,517		17,478		-		17,478		-
Portfolio loans, net		460,977		499,194		-		499,194		-
Loans held-for-sale		5,348		5,916		-		5,916		-
Warehouse loans held-for-investment		79,295		79,295		-		79,295		-
Federal Home Loan Bank stock, at cost		7,013		7,013		-		-		7,013
Accrued interest receivable		1,840		1,840		-		1,840		-
Liabilities:
Deposits		449,761		449,912		-		449,912		-
Securities sold under agreements to repurchase		66,300		72,189		-		72,189		-
Federal Home Loan Bank advances		150,000		157,163		-		157,163		-
Accrued interest payable (reported on consolidated balance sheets in accrued expenses and other liabilities)		783		783		-		783		-

December 31, 2014
Assets:
Cash and due from financial institutions	$	2,974	$	2,974	$	2,974	$	-	$	-
Short-term interest-earning deposits		19,424		19,424		19,424		-		-
Securities held-to-maturity		17,919		17,886		-		17,886		-
Portfolio loans, net		446,870		480,839		-		480,839		-
Loans held-for-sale		7,219		7,848		-		7,848		-
Warehouse loans held-for-investment		33,972		33,972		-		33,972		-
Federal Home Loan Bank stock, at cost		6,257		6,257		-		-		6,257
Accrued interest receivable		1,924		1,924		-		1,924		-
Liabilities:
Deposits		440,780		441,004		-		441,004		-
Securities sold under agreements to repurchase		66,300		72,533		-		72,533		-
Federal Home Loan Bank advances		123,667		131,005		-		131,005		-
Accrued interest payable (reported on consolidated balance sheets in accrued expenses and other liabilities)		806		806		-		806		-

Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest, demand and savings deposits and variable rate loans or deposits that re-price frequently and fully. Fair value of securities held-to-maturity is based on market prices of similar securities. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life without considering the need for adjustments for market illiquidity or credit risk. Fair value of loans held-for-sale is based on quoted market prices, where available, or is determined based on discounted cash flows using current market rates applied to the estimated life and credit risk. Carrying amount is the estimated fair value for warehouse loans held-for-investment, due to the rapid repayment of the loans (generally less than 30 days). Fair value of the Federal Home Loan Bank (FHLB) advances and securities sold under agreements to repurchase (repurchase agreements) is based on current rates for similar financing. It was not practicable to determine the fair value of the FHLB stock due to restrictions placed on its transferability. The estimated fair value of other financial instruments and off-balance-sheet commitments approximate cost and are not considered significant to this presentation.

The Bank is a member of the FHLB and as such, is required to maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from and sold to the FHLB based upon its $100.00 par value. The stock does not have a readily determinable fair value and, as such, is classified as restricted stock, carried at cost and evaluated for impairment. Accordingly, the stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time that such a situation has persisted, (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance, (c) the impact of legislative and regulatory changes on the customer base of the FHLB and (d) the liquidity position of the FHLB. The Company did not consider the FHLB stock to be impaired as of March 31, 2015.