Note

- Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are

three

levels of inputs that

may

be used to measure fair values:

Level

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level

Significant other observable inputs other than Level

prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are

not

active; or other inputs that are observable or can be corroborated by observable market data.

Level

Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

Securities available-for-sale:

When available, the fair values of available-for-sale securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level

inputs). For securities where quoted market prices are

not

available, fair values are calculated based on market prices of similar securities (Level

inputs). For securities where quoted prices or market prices of similar securities are

not

available, fair values are calculated using discounted cash flows or other unobservable inputs (Level

inputs).

Assets and liabilities measured at fair value on a recurring basis are summarized below, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

			Fair Value Measurements at December 31, 2018 Using
	Balance at December 31, 2018		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	18,248	$	—	$	18,248	$	—
Obligations of states and political subdivisions		57,502		—		57,502		—
Mortgage-backed securities – residential		59,922		—		59,922		—
Mortgage-backed securities – commercial		1,406		—		1,406		—
Collateralized mortgage obligations - residential		6,755		—		6,755		—

			Fair Value Measurements at June 30, 2018 Using
	Balance at June 30, 2018		Level 1		Level 2		Level 3
Assets:
Obligations of U.S. government-sponsored entities and agencies	$	16,122	$	—	$	16,122	$	—
Obligations of states and political subdivisions		56,590		—		56,590		—
Mortgage-backed securities - residential		63,408		—		63,408		—
Mortgage-backed securities - commercial		1,415		—		1,415		—
Collateralized mortgage obligations - residential		5,766		—		5,766		—
Pooled trust preferred security		727		—		727		—

There were

transfers between Level

and Level

during the

three

- or

six

-month periods ended

December 31, 2018

2017.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are

not

measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Financial assets and financial liabilities measured at fair value on a non-recurring basis include the following:

Impaired Loans:

At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses or are charged down to their fair value. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals

may

utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level

classification of the inputs for determining fair value.

Other Real Estate Owned:

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly. There was

other real estate owned being carried at fair value as of

December 31, 2018

June 30, 2018.

There were

financial assets measured at fair value on a non-recurring basis at

June 30, 2018.

Financial assets measured at fair value on a non-recurring basis at

December 31, 2018

are summarized below:

			Fair Value Measurements at December 31, 2018 Using
	Balance at December 31, 2018		Level 1		Level 2		Level 3
Impaired loans:
Commercial Real Estate - Other	$	105	$	—	$	—	$	105

The resulting impact to the provision for loan losses was an increase of

$55

being recorded for the

three

- and

six

-month periods ended

December 31, 2018.

There was

impact to the provision for loan losses for the

three

months ended

December 31, 2017.

The resulting impact to the provision for loan losses was a decrease of

$17

being recorded for the

six

months ended

December 31, 2017.

The following table shows the estimated fair values of financial instruments that are reported at amortized cost in the Corporation’s consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	December 31 , 2018				June 30, 201 8
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	9,749	$	9,749	$	7,772	$	7,772
Level 2 inputs:
Certificates of deposits in other financial institutions		2,473		2,466		2,973		2,976
Loans held for sale		1,068		1,094		1,448		1,474
Accrued interest receivable		1,485		1,485		1,404		1,404
Level 3 inputs:
Securities held-to-maturity		3,824		3,852		4,024		4,048
Loans, net		329,993		326,602		315,087		311,642
Financial Liabilities:
Level 2 inputs:
Demand and savings deposits		350,293		350,293		351,422		351,422
Time deposits		92,237		93,059		78,541		78,332
Short-term borrowings		3,777		3,777		13,367		13,367
Federal Home Loan Bank advances		20,922		20,538		11,756		11,146
Accrued interest payable		92		92		68		68

The assumptions used to estimate fair value are described as follows:

Cash and cash equivalents:

The carrying value of cash, deposits in other financial institutions and federal funds sold were considered to approximate fair value resulting in a Level

classification.

Certificates of deposits in other financial institutions

: Fair value of certificates of deposits in other financial institutions was estimated using current rates for deposits of similar remaining maturities resulting in a Level

classification.

Accrued interest receivable and payable, demand and savings deposits and short-term borrowings

The carrying value of accrued interest receivable and payable, demand and savings deposits and short-term borrowings were considered to approximate fair value due to their short-term duration resulting in a Level

classification.

Loans held for sale:

The fair value of loans held for sale is estimated based upon binding contracts and quotes from

third

party investors resulting in a Level

classification.

Loans:

Effective for the period ended

September 30, 2018,

the fair value of loans were determined using an exit price methodology as prescribed by ASU

2016

01.

The exit price estimation of fair value is based on the future value of expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a current market rate based on the relative credit risk of the loan. In addition, an incremental liquidity discount is applied resulting in a Level

classification. In comparison, loan fair values as of

June 30, 2018

were estimated based on an entrance price methodology. As a result, the fair value adjustments as of

December 31, 2018

and

June 30, 2018

are

not

comparable.

Securities held-to-maturity:

The held-to-maturity securities are general obligation and revenue bonds made to local municipalities. The fair values of these securities are estimated using a spread to the applicable municipal fair market curve resulting in a Level

classification.

Time deposits:

Fair value of fixed-maturity certificates of deposit was estimated using the rates offered at

December 31, 2018

and

June 30, 2018,

for deposits of similar remaining maturities, resulting in a Level

classification. Estimated fair value does

not

include the benefit that results from low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.

Federal Home Loan Bank advances:

Fair value of Federal Home Loan Bank advances was estimated using current rates at

December 31, 2018

and

June 30, 2018

for similar financing resulting in a Level

classification.

Federal bank and other restricted stocks, at cost:

Federal bank and other restricted stocks include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock that are accounted for at cost due to restrictions placed on their transferability; and therefore, are

not

subject to the fair value disclosure requirements.

Off-balance sheet commitments:

The Corporation’s lending commitments have variable interest rates and “escape” clauses if the customer’s credit quality deteriorates. Therefore, the fair values of these items are

not

significant and are

not

included in the above table.