12. Fair Values of Financial Instruments

Most of our assets and liabilities are considered financial instruments. Many of these financial instruments lack an available trading market and it is our general practice and intent to hold the majority of our financial instruments to maturity. Significant estimates and assumptions were used to determine the fair value of financial instruments. These estimates are subjective in nature, involving uncertainties and matters of judgment, and therefore, fair values may not be a precise estimate. Changes in assumptions could significantly affect the estimates.

Estimated fair values have been determined using available data and methodologies that are considered suitable for each category of financial instrument. For instruments with adjustable interest rates which reprice frequently and without significant credit risk, it is presumed that estimated fair values approximate the recorded book balances.

The estimated recorded book balances and fair values follow:

					Fair Value Using
	Recorded Book Balance		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Un- observable Inputs (Level 3)
	(In thousands)
June 30, 2019
Assets
Cash and due from banks	$	34,461	$	34,461	$	34,461	$	-	$	-
Interest bearing deposits		20,676		20,676		20,676		-		-
Interest bearing deposits - time		498		498		-		498		-
Securities available for sale		430,305		430,305		-		430,305		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,743,506		2,747,828		-		62,883		2,684,945
Accrued interest receivable		10,816		10,816		1		1,634		9,181
Derivative financial instruments		6,233		6,233		-		6,233		-

Liabilities
Deposits with no stated maturity (1)	$	2,294,255	$	2,294,255	$	2,294,255	$	-	$	-
Deposits with stated maturity (1)		684,630		683,547		-		683,547		-
Other borrowings		41,144		41,271		-		41,271		-
Subordinated debentures		39,422		33,214		-		33,214		-
Accrued interest payable		1,668		1,668		128		1,540		-
Derivative financial instruments		4,217		4,217		-		4,217		-

December 31, 2018
Assets
Cash and due from banks	$	23,350	$	23,350	$	23,350	$	-	$	-
Interest bearing deposits		46,894		46,894		46,894		-		-
Interest bearing deposits - time		595		594		-		594		-
Equity securities at fair value		393		393		393		-		-
Securities available for sale		427,926		427,926		-		427,926		-
Federal Home Loan Bank and Federal Reserve Bank Stock		18,359	NA		NA		NA		NA
Net loans and loans held for sale		2,643,856		2,606,256		41,471		44,753		2,520,032
Accrued interest receivable		10,164		10,164		22		1,789		8,353
Derivative financial instruments		5,155		5,155		-		5,155		-

Liabilities
Deposits with no stated maturity (1)	$	2,197,494	$	2,197,494	$	2,197,494	$	-	$	-
Deposits with stated maturity (1)		715,934		711,312		-		711,312		-
Other borrowings		25,700		25,706		-		25,706		-
Subordinated debentures		39,388		35,021		-		35,021		-
Accrued interest payable		1,646		1,646		114		1,532		-
Derivative financial instruments		2,326		2,326		-		2,326		-

(1)

Deposits with no stated maturity include reciprocal deposits with a recorded book balance of $270.864 million and $123.080 million at June 30, 2019 and December 31, 2018, respectively. Deposits with a stated maturity include reciprocal deposits with a recorded book balance of $55.462 million and $58.992 million at June 30, 2019 and December 31, 2018, respectively.

The fair values for commitments to extend credit and standby letters of credit are estimated to approximate their aggregate book balance, which is nominal and therefore are not disclosed.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale the entire holdings of a particular financial instrument.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business, the value of future earnings attributable to off-balance sheet activities and the value of assets and liabilities that are not considered financial instruments.

Fair value estimates for deposit accounts do not include the value of the core deposit intangible asset resulting from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.