Fair values of financial instruments are management's estimate of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including deferred tax assets, premises, equipment and intangibles. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of the estimates.

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of June 30, 2021 and December 31, 2020 are reflected below.

	(In Thousands)
	June 30, 2021
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	151,119	$	151,119	$	151,119	$	-	$	-
Interest-bearing time deposits		18,597		18,635		-		18,635		-
Securities - available-for-sale		407,500		407,500		63,360		340,192		3,948
Other securities		6,419		6,419		-		-		6,419
Loans held for sale		8,041		8,041		-		-		8,041
Loans, net		1,443,336		1,402,959		-		-		1,402,959
Interest receivable		6,495		6,495		-		-		6,495

Financial Liabilities:
Interest bearing deposits	$	1,153,765	$	1,153,807	$	-	$	-	$	1,153,807
Non-interest bearing deposits		443,863		443,863		-		443,863		-
Time deposits		256,445		258,344		-		-		258,344
Total Deposits		1,854,073		1,856,014		-		443,863		1,412,151

Federal funds purchased and securities sold under agreement to repurchase		29,882		29,882		-		-		29,882
Federal Home Loan Bank advances		17,868		17,869		-		-		17,869
Interest payable		379		379		-		-		379

	(In Thousands)
	December 31, 2020
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	175,706	$	175,706	$	175,706	$	-	$	-
Interest-bearing time deposits		4,653		4,677		-		4,677		-
Securities - available-for-sale		307,812		307,812		-		306,250		1,562
Other securities		5,939		5,939		-		-		5,939
Loans held for sale		7,740		7,740		-		-		7,740
Loans, net		1,289,318		1,261,440		-		-		1,261,440
Interest receivable		6,188		6,188		-		-		6,188

Financial Liabilities:
Interest bearing deposits	$	997,462	$	1,004,608	$	-	$	-	$	1,004,608
Non-interest bearing deposits		351,147		351,147		-		351,147		-
Time deposits		247,553		250,135		-		-		250,135
Total Deposits		1,596,162		1,605,890		-		351,147		1,254,743

Federal funds purchased and securities sold under agreement to repurchase		30,239		30,239		-		-		30,239
Federal Home Loan Bank advances		17,861		17,872		-		-		17,872
Interest payable		338		338		-		-		338

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access.

Available-for-sale securities, when quoted prices are available in an active market, securities are valued using the quoted price and are classified as Level 1.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Available-for-sale securities classified as Level 2 are valued using the prices obtained from an independent pricing service. The prices are not adjusted. Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. The Bank holds some local municipals that the Bank evaluates based on the credit strength of the underlying project. The fair value is determined by valuing similar credit payment streams at similar rates.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

The following summarizes financial assets measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured at Fair Value on a Recurring Basis (In Thousands)
June 30, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets - (Securities Available-for-Sale)
U.S. Treasury	$	63,360	$	-	$	-
U.S. Government agencies		-		150,604		-
Mortgage-backed securities		-		128,573		-
State and local governments		-		61,015		3,948
Total Securities Available-for-Sale	$	63,360	$	340,192	$	3,948

December 31, 2020	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets - (Securities Available-for-Sale)
U.S. Treasury	$	-	$	-	$	-
U.S. Government agencies		-		124,241		-
Mortgage-backed securities		-		113,056		-
State and local governments		-		68,953		1,562
Total Securities Available-for-Sale	$	-	$	306,250	$	1,562

The following tables represent the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of the three and six month periods ended June 30, 2021 and June 30, 2020.

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at April 1, 2021	$	-		$	1,539		$	1,539

Change in Market Value		(8	)		(1	)		(9	)

Purchases		2,418			-			2,418

Payments & Maturities		-			-			-

Balance at June 30, 2021	$	2,410		$	1,538		$	3,948

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt		State and Local Governments Taxable		State and Local Governments Total
Balance at April 1, 2020	$	-	$	1,537	$	1,537

Change in Market Value		-		13		13

Payments & Maturities		-		-		-

Balance at June 30, 2020	$	-	$	1,550	$	1,550

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2021	$	-		$	1,562		$	1,562

Change in Market Value		(8	)		(24	)		(32	)
							.
Purchases		2,418			-			2,418

Payments & Maturities		-			-			-

Balance at June 30, 2021	$	2,410		$	1,538		$	3,948

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt		State and Local Governments Taxable		State and Local Governments Total
Balance at January 1, 2020	$	-	$	1,490	$	1,490

Change in Market Value		-		60		60

Payments & Maturities		-		-		-

Balance at June 30, 2020	$	-	$	1,550	$	1,550

Most of the Company's available-for-sale securities, including any bonds issued by local municipalities, have CUSIP numbers or have similar characteristics of those in the municipal markets, making them marketable and comparable as Level 2.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At June 30, 2021 and December 31, 2020, such assets consist primarily of collateral dependent impaired loans. Collateral dependent impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management's best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals.)

At June 30, 2021 and December 31, 2020, fair value of collateral dependent impaired loans categorized as Level 3 was $7.5 million and $7.7 million, respectively. The specific allocation for impaired loans was $961.3 thousand and $1.7 million as of June 30, 2021 and December 31, 2020, respectively, which are accounted for in the allowance for loan losses (see Note 4).

Other real estate is reported at either the lower of the fair value of the real estate minus the estimated costs to sell the asset or the cost of the asset. The determination of fair value of the real estate relies primarily on appraisals from third parties. If the fair value of the real estate, minus the estimated costs to sell the asset, is less than the asset's cost, the deficiency is recognized as a valuation allowance against the asset through a charge to expense. The valuation allowance is therefore increased or decreased, through charges or credits to expense, for changes in the asset's fair value or estimated selling costs.

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

	(In Thousands)				Range
	Fair Value at				(Weighted
	June 30, 2021		Valuation Technique	Unobservable Inputs	Average)
State and local government	$	3,948	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0.34-1.34% (0.86%)

Collateral dependent impaired loans		7,516	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	34.54-81.41% (47.96%)

Other real estate owned - residential		137	Appraisals	Discount to reflect current market	0-7.32% (7.32%)

	(In Thousands)				Range
	Fair Value at				(Weighted
	December 31, 2020		Valuation Technique	Unobservable Inputs	Average)
State and local government	$	1,562	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	1.19-1.19% (1.19%)

Collateral dependent impaired loans		7,703	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0.71-100% (17.71%)

Other real estate owned - residential		-	Appraisals	Discount to reflect current market	— % ( — )

The following table presents impaired loans as recorded at fair value on June 30, 2021 and December 31, 2020: