The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, other real estate, and repossessed assets. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets.

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model- based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded or disclosed at fair value.

For disclosure purposes, for cash, due from banks, interest-bearing deposits, and federal funds sold, the carrying amount is a reasonable estimate of fair value.

For disclosure purposes, for certificates of deposits in banks, the carrying amount is a reasonable estimate of fair value.

Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange. Level 2 securities include U.S. Treasury Securities, mortgage-backed securities issued by government sponsored enterprises and municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets.

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for credit losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered individually evaluated. When a loan is identified as individually evaluated, management measures impairment using one of three methods. These methods include collateral value, market value of similar debt, and discounted cash flows. Those individually evaluated loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2023 and 2022, individually evaluated /impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral, or loans that are charged down according to the fair value of collateral, require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price, the Company records the impaired loan as nonrecurring Level 2. When the fair value is based on an appraised value, the Company records the impaired loan as nonrecurring Level 3.

For disclosure purposes, the fair value of fixed-rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Mortgage loans held-for-sale are carried at cost, which is a reasonable estimate of fair value.

For disclosure purposes, the fair value of the accrued interest on investments and loans is the carrying value.

For disclosure purposes, the fair value of the cash surrender value of life insurance policies is equivalent to the carrying value.

Other real estate properties and miscellaneous repossessed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price, the Company records the foreclosed asset as nonrecurring Level 2. When fair value is based on an appraised value or management’s estimate of value, the Company records the foreclosed asset as nonrecurring Level 3.

It is not practical to determine the fair value of restricted equity securities due to restrictions placed on transferability.

For disclosure purposes, the fair value of demand deposits, interest-bearing demand deposits, money market accounts, and savings accounts is the amount payable on demand at the reporting date. The fair value of fixed-rate maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

For disclosure purposes, the carrying amounts of securities sold under agreements to repurchase approximate their fair values.

For disclosure purposes, the fair value of Federal Home Loan Bank advances is estimated using discounted cash flow analyses using interest rates offered for borrowings with similar maturities.

For disclosure purposes, the fair value of the Federal Reserve Bank discount window borrowings is based on the quoted value for similar remaining maturities provided by the Federal Reserve Bank.

For disclosure purposes, the fair value is estimated using a discounted cash flow calculation that applies interest rates currently being offered for similar subordinated debenture offerings.

For disclosure purposes, the fair value of the accrued interest payable on deposits is the carrying value.

Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial.

The tables below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands). There were 7 transfers between levels during both 2023 and 2022 (in thousands).


	Fair Value Measurements At Reporting Date Using:
			Quoted Prices
			In Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2023:	Fair Value		(Level 1)		(Level 2)		(Level 3)
Securities available-for-sale:
Residential mortgage -backed	$	357,300	$	-	$	357,300	$	-
U.S. treasuries		120,052		-		120,052		-
U.S. government agencies		63,566		-		63,566		-
State, county, and municipal		64,661		-		64,661		-
Corporate obligations		15,512		-		15,512		-
Totals	$	621,091	$	-	$	621,091	$	-


	Fair Value Measurements At Reporting Date Using:
			Quoted Prices
			In Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2022:	Fair Value		(Level 1)		(Level 2)		(Level 3)
Securities available-for-sale:
Residential mortgage -backed	$	390,037	$	-	$	390,037	$	-
U.S. treasuries		117,629		-		117,629		-
U.S. government agencies		66,362		-		66,362		-
State, county, and municipal		75,863		-		75,863		-
Corporate obligations		15,996		-		10,375		5,621
Totals	$	665,887	$	-	$	660,266	$	5,621

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of December 31, 2023 and 2022 (in thousands).


	Fair Value Measurements At Reporting Date Using:
			Quoted Prices
			In Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2023:	Fair Value		(Level 1)		(Level 2)		(Level 3)
Individually evaluated loans	$	5,360	$	-	$	-	$	5,360
Foreclosed assets		92		-		-		92
Totals	$	5,452	$	-	$	-	$	5,452


	Fair Value Measurements At Reporting Date Using:
			Quoted Prices
			In Active		Significant
			Markets For		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
December 31, 2022:	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	8,255	$	-	$	-	$	8,255
Foreclosed assets		609		-		-		609
Totals	$	8,864	$	-	$	-	$	8,864

The Company has estimated the fair values of these assets using Level 3 inputs, specifically the appraised value of the collateral. In determining the estimated net realizable value of the underlying collateral of individually evaluated loans and foreclosed assets, the Company primarily uses third-party appraisals or broker opinions which 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 and include consideration of variations in location, size, and income production capacity of the property. Additionally, the appraisals are periodically further adjusted by the Company in consideration of charges that may be incurred in the event of foreclosure and are based on management’s historical knowledge, changes in business factors and changes in market conditions. Because of the high degree of judgment required in estimating the fair value of collateral underlying individually evaluated loans and foreclosed assets and because of the relationship between fair value and general economic conditions, the Company considers the fair value of individually evaluated loans and foreclosed assets to be highly sensitive to changes in market conditions. For the significant unobservable input, we used appraisal discounts and the weighted average input of 15-20% was used. As of December 31, 2022 under the incurred methodology ASC 310-10-35, Receivables, the individually evaluated loans were known as impaired loans.

The estimated fair values and related carrying values of the Company’s financial instruments at December 31, 2023 and 2022 were as follows (amounts in thousands):


			Estimated Fair Value
	Carrying
December 31, 2023:	Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	72,547	$	72,547	$	-	$	-
Certificates of deposit in banks		4,218		-		4,218		-
Securities held-to-maturity		126,793		-		103,174		-
Securities available-for-sale		621,091		-		621,091		-
Loans held for sale		4,595		-		4,595		-
Loans receivable		2,211,015		-		2,180,082		5,360
Accrued interest receivable		14,091		-		14,091		-
Bank owned life insurance		47,001		-		47,001		-
Restricted equity securities		13,433		-		-		13,433
Financial liabilities:
Deposits		2,730,655		-		2,574,801		-
Securities sold under agreements to repurchase		16,731		-		16,731		-
Federal Home Loan Bank advances		230,000		-		229,430
Subordinated debentures, net of loan costs		39,492				30,944
Accrued interest payable		2,178		-		2,178


			Estimated Fair Value
	Carrying
December 31, 2022:	Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	74,826	$	74,826	$	-	$	-
Certificates of deposit in banks		4,165		-		4,165		-
Securities held-to-maturity		131,581		-		105,277		-
Securities available-for-sale		665,887		-		660,266		5,621
Loans held for sale		3,413		-		3,413		-
Loans receivable		1,778,817		-		1,708,410		8,255
Accrued interest receivable		10,083		-		10,083		-
Bank owned life insurance		46,395		-		46,395		-
Restricted equity securities		5,685		-		-		5,685
Financial liabilities:
Deposits		2,514,199		-		2,307,026		-
Securities sold under agreements to repurchase		8,181		-		8,181		-
Federal Home Loan Bank advances		95,000		-		95,091		-
Federal Reserve Bank discount window borrowings		25,000		-		25,000		-
Subordinated debentures, net of loan costs		39,419		-		31,039		-
Accrued interest payable		1,296		-		1,296		-

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 at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include mortgage banking operations, deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.