Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the financial instrument fair value disclosure requirements, including the Company’s common stock, OREO, premises and equipment and other assets and liabilities.

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Therefore, any aggregate unrealized gains or losses should not be interpreted as a forecast of future earnings or cash flows. Furthermore, the fair values disclosed should not be interpreted as the aggregate current value of the Company.

In 2018, the Company implemented “ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires public business entities to use the exit prices when measuring the fair value of financial instruments for disclosure purposes.

The exit price notion uses a similar approach as the Company’s previous methodology for valuations that used discounted cash flows, but also incorporates other factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The implementation of ASU 2016-01 was most impactful to the Company’s loan portfolio because the Company’s other financial instruments have one or several other compensating factors (e.g., quoted market prices, lower credit risk, limited liquidity risk, short durations, etc.).

Investment securities - Fair values are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans receivable - The fair values for non-impaired loans are estimated using discounted cash flow analysis, applying interest rates currently being offered for loans with similar terms and credit quality. Internal prepayment risk models are used to adjust contractual cash flows.

Management estimates the fair value of impaired loans using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. After evaluating the underlying collateral, the fair value is determined

Long-term debt and short-term borrowings - These were valued using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar borrowings.

Guaranteed preferred beneficial interest in junior subordinated securities ("TRUPs") - These were valued using discounted cash flows. The discount rate was equal to the rate currently offered on similar borrowings.

Off-balance sheet instruments - The Company charges fees for commitments to extend credit. Interest rates on loans for which these commitments are extended are normally committed for periods of less than one month. Fees charged on standby letters of credit and other financial guarantees are deemed to be immaterial and these guarantees are expected to be settled at face amount or expire unused. It is impractical to assign any fair value to these commitments.


December 31, 2022	Carrying Amount		Fair Value		Fair Value Measurements
Description of Asset (dollars in thousands)					Level 1		Level 2		Level 3
Assets
Investment securities - AFS	$	462,746	$	462,746	$	—	$	462,746	$	—

Equity securities carried at fair value through income	4,286		4,286		—		4,286		—
Non-marketable equity securities in other financial institutions	207		207		—		207		—
FHLB Stock	4,584		4,584		—		4,584		—
Net loans receivable	1,798,517		1,743,574		—		—		1,743,574
Accrued Interest Receivable	8,335		8,335		—		8,335		—
Investment in BOLI	39,802		39,802		—		39,802		—


Liabilities
Savings, NOW and money market accounts	$	1,741,401	$	1,741,401	$	—	$	1,741,401	$	—
Time deposits	347,062		346,261		—		346,261		—
Short-term borrowings	79,000		79,087		—		79,087		—

TRUPs	12,000		10,296		—		10,296		—
Subordinated notes	19,566		18,745		—		18,745		—


December 31, 2021	Carrying Amount		Fair Value		Fair Value Measurements
Description of Asset (dollars in thousands)					Level 1		Level 2		Level 3
Assets
Investment securities - AFS	$	497,839	$	497,839	$	—	$	497,839	$	—

Equity securities carried at fair value through income	4,772		4,772		—		4,772		—
Non-marketable equity securities in other financial institutions	207		207		—		207		—
FHLB Stock	1,472		1,472		—		1,472		—
Net loans receivable	1,586,791		1,578,032		—		—		1,578,032
Accrued Interest Receivable	5,588		5,588		—		5,588		—
Investment in BOLI	38,932		38,932		—		38,932		—
Mortgage banking derivatives	28		28		—		—		28

Liabilities
Savings, NOW and money market accounts	$	1,728,743	$	1,728,743	$	—	$	1,728,743	$	—
Time deposits	327,421		328,083		—		328,083		—

Long-term debt	12,231		12,391		—		12,391		—
TRUPs	12,000		11,589		—		11,589		—
Subordinated notes	19,510		20,979		—		20,979		—

At December 31, 2022 and 2021, the Company had outstanding loan commitments of $44.9 million and $64.4 million, respectively, and standby letters of credit of $25.0 million and $22.0 million, respectively. Additionally, at December 31, 2022 and 2021, customers had $278.1 million and $241.7 million, respectively, of available and unused on lines of credit, which include lines of credit for commercial customers, home equity loans as well as builder and construction lines. Based on the short-term lives of these instruments, the Company does not believe that the fair value of these instruments differs significantly from their carrying values.

The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2022 and 2021, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these Consolidated Financial Statements since that date and, therefore, current estimates of fair value may differ significantly from the amount presented herein.