The Company follows a uniform framework for estimating and classifying the fair value of financial instruments. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a representation of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair value. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the three months ended March 31, 2024 or the year ended December 31, 2023.

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. Level 2 securities include government sponsored agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level 2 fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Interest rate derivative contracts are used by the Company to mitigate risk associated with changes in interest rates. The fair value of these contracts is based on information obtained from third-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party valuations. The Company classifies these derivative assets within Level 2 of the valuation hierarchy.

The following table presents assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023.


	Fair Value Measurements as of March 31, 2024 Using
	Totals At March 31, 2024		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	42,553	$	—	$	42,553	$	—
Commercial		14,279		—		14,279		—
Obligations of U.S. government-sponsored agencies		11,009		—		11,009		—
Obligations of states and political subdivisions		1,545		—		1,545		—
Corporate notes		14,843		—		14,843		—
U.S. Treasury securities		41,151		41,151		—		—
Interest rate derivative contracts:
Other assets - interest rate swaps		273		—		273		—
Other assets - interest rate floors		75		—		75		—


	Fair Value Measurements as of December 31, 2023 Using
	Totals At December 31, 2023		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	44,728	$	—	$	44,728	$	—
Commercial		9,040		—		9,040		—
Obligations of U.S. government-sponsored agencies		11,280		—		11,280
Obligations of states and political subdivisions		1,558		—		1,558		—
Corporate notes		14,957				14,957		—
U.S. Treasury securities		54,002		54,002		—		—
Interest rate derivative contracts:
Other liabilities - interest rate swaps		119		—		119		—

Loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due under the contractual terms of the loan agreement. These loans are evaluated separately in accordance with the Company’s policies for calculating the allowance for credit losses on loans and leases. The fair value of impaired loans with specific allocations of the allowance for credit losses on loans and leases is typically 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 independent appraisers to adjust for differences between the comparable sales and income data available. Appraised values are discounted by management for estimated costs to sell and may be discounted further based on management’s knowledge of the collateral, changes in market conditions since the most recent appraisal and/or management’s knowledge of the borrower and the borrower’s business. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge of the borrower’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

OREO consists of properties obtained through foreclosure or in satisfaction of loans and is recorded at net realizable value, less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.

As of March 31, 2024 and December 31, 2023, included within OREO were certain assets that were formerly included as premises and equipment but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Company that have been closed. When an asset is designated as held-for-sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.

The following table presents the balances of impaired loans, OREO and other assets held-for-sale measured at fair value on a non-recurring basis as of March 31, 2024 and December 31, 2023:


	Fair Value Measurements as of March 31, 2024 Using
	Totals At March 31, 2024		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	—	$	—	$	—	$	—
OREO and other assets held-for-sale		572		—		—		572


	Fair Value Measurements as of December 31, 2023 Using
	Totals At December 31, 2023		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Impaired loans	$	51	$	—	$	—	$	51
OREO and other assets held-for-sale		602		—		—		602

The following tables present information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of March 31, 2024 and December 31, 2023. The tables includes the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of March 31, 2024 and December 31, 2023 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

         
        Level 3 Significant Unobservable Input Assumptions

         
        Fair Value
March 31, 2024

        Valuation Technique

        Unobservable Input

        Quantitative Range
of Unobservable
Inputs
(Weighted Average)

         
        (Dollars in Thousands)

        Non-recurring fair value measurements:

Impaired loans

—

Multiple data points,
including discount to
appraised value of
collateral based on
recent market activity

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

OREO and other assets held-for-sale

572

Discount to appraised
value of property
based on recent
market activity for
sales of similar
properties

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

         
        Level 3 Significant Unobservable Input Assumptions

         
        Fair Value
December 31, 2023

        Valuation Technique

        Unobservable Input

        Quantitative Range
of Unobservable
Inputs
(Weighted Average)

         
        (Dollars in Thousands)

        Non-recurring fair value measurements:

Impaired loans

51

Multiple data points,
including discount to
appraised value of
collateral based on
recent market activity

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

OREO and other assets held-for-sale

602

Discount to appraised
value of property
based on recent
market activity for
sales of similar
properties

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

Impaired loans are valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.

OREO under a binding contract for sale is valued based on contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Assets designated as held-for-sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash, due from banks and federal funds sold: The carrying amount of cash, due from banks and federal funds sold approximates fair value.

Federal Home Loan Bank stock: Based on the redemption provision of the FHLB, the stock has no quoted market value and is carried at cost.

Investment securities: Fair values of investment securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Derivative instruments: The fair value of derivative instruments is based on information obtained from a third-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party information.

Accrued interest receivable and payable: The carrying amount of accrued interest approximates fair value.

Loans, net: The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayment discount spreads, credit loss and liquidity premiums.

Demand and savings deposits: The fair values of demand deposits are equal to the carrying value of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts.

Time deposits: The fair values of relatively short-term time deposits are equal to their carrying values. Discounted cash flows are used to value long-term time deposits. The discount rate used is based on interest rates currently offered by the Company on comparable deposits as to amount and term.

Short-term borrowings: These borrowings may consist of federal funds purchased, securities sold under agreements to repurchase and the floating rate borrowings from the FHLB account. Due to the short-term nature of these borrowings, fair values approximate carrying values.

Long-term debt: The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of the determination date.

Off-balance sheet instruments: The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The carrying amount of the off-balance sheet financial instruments is based on fees currently charged to enter into such agreements.

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	60,242	$	60,242	$	60,242	$	—	$	—
Investment securities available-for-sale		125,380		125,380		41,151		84,229		—
Investment securities held-to-maturity		983		921		—		921		—
Federal funds sold		5,532		5,532		—		5,532		—
Federal Home Loan Bank stock		1,494		1,494		—		—		1,494
Loans, net of allowance for credit losses		812,505		771,776		—		—		771,776
Other assets - interest rate swaps		273		273		—		273		—
Other assets - interest rate floors		75		75		—		75		—
Liabilities:
Deposits		943,268		873,743		—		873,743		—
Short-term borrowings		15,000		15,000		—		15,000		—
Long-term borrowings		10,817		9,560		—		9,560		—


	December 31, 2023
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	50,279	$	50,279	$	50,279	$	—	$	—
Investment securities available-for-sale		135,565		135,565		54,002		81,563		—
Investment securities held-to-maturity		1,104		1,041		—		1,041		—
Federal funds sold		9,475		9,475		—		9,475		—
Federal Home Loan Bank stock		1,201		1,201		—		—		1,201
Loans, net of allowance for loan and lease losses		811,284		773,800		—		—		773,800
Liabilities:
Deposits		950,191		882,746		—		882,746		—
Short-term borrowings		10,000		10,000		—		10,000		—
Long-term borrowings		10,799		9,814				9,814
Other liabilities - interest rate swaps		119		119				119