Page 48 - Annual Report 2017

TEXAS GULF BANCSHARES, INC. AND SUBSIDIARY

Notes to Financial Statements
December 31, 2016 and 2015

NOTE Q FAIR VALUE DISCLOSURES (CONTINUED)

Loans - Fair values of loans are estimated for segregated groupings of loans with similar
financial characteristics. Loans are segregated by segment such as real estate, commercial
and agricultural, consumer, and other loans. Each of these categories is further subdivided
into fixed and adjustable rate loans and performing and nonperforming loans. The fair value
of performing loans is calculated by discounting scheduled cash flows through the estimated
maturity using estimated market discount rates that reflect the credit and interest rate risk
inherent in the various types of loans. Impaired loans are valued based upon management’s
estimate of realizable value by considering certain observable market data, typically in the
case of real estate collateral, or customizing discounting criteria in the case of non-real estate
assets pledged as collateral.

Deposits - The fair value of deposits with no stated maturity, such as noninterest-bearing
demand deposits, savings, NOW accounts and money market accounts is equal to the
amount payable on demand at the reporting date (that is, their carrying amounts). The fair
value of certificates of deposit is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for deposits of similar
remaining maturities.

FHLB advances - For these liabilities, the fair value is estimated using the rates currently
offered for borrowings of similar terms and remaining maturities.

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