Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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 1 — Quoted market prices (unadjusted) for identical instruments traded in active markets that the entity has the ability to access as of the measurement date.

Level 2 —Significant other observable inputs other than Level 1 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 3 — Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, we report the transfer at the beginning of the reporting period.


	December 31, 2023
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	30,017	$	30,017	$	—	$	—	$	30,017
Interest-earning deposits in other banks	23,711		23,711		—		—		23,711


Held-to-maturity investment securities	302,442		—		277,003		—		277,003

Loans, net	1,276,144		—		—		1,213,098		1,213,098

Accrued interest receivable	10,898		—		6,146		4,752		10,898
Financial liabilities:
Time deposits	162,085		—		160,839		—		160,839
Short-term borrowings	80,000		—		79,991		—		79,991
Senior debt and subordinated debentures	69,744		—		—		61,121		61,121
Accrued interest payable	778		—		594		184		778


	December 31, 2022
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	25,485	$	25,485	$	—	$	—	$	25,485
Interest-earning deposits in other banks	5,685		5,685		—		—		5,685



Held-to-maturity investment securities	305,107		—		271,249		—		271,249
Loans, net	1,245,456		—		—		1,113,849		1,113,849

Accrued interest receivable	10,547		—		6,035		4,512		10,547
Financial liabilities:
Time deposits	67,923		—		67,047		—		67,047
Short-term borrowings	46,000		—		46,000		—		46,000
Senior debt and subordinated debentures	69,599		—		—		62,504		62,504
Accrued interest payable	794		—		83		711		794

(a) Cash and Cash Equivalents — The carrying amounts of cash and due from banks, interest-earning deposits in other banks, and Federal funds sold approximate fair values and are classified as Level 1.

(b) Investment securities — The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 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 market indicators (Level 3).

(c) Loans — Fair values of loans are estimated as follows: fixed and variable loans are estimated using discounted cash flow analyses, taking into consideration various factors including loan type, credit loss and prepayment expectations. The loan cash flows are discounted to present value using a combination of existing market rates and liquidity spreads as well as underlying index rates and margins on variable rate loans resulting in a Level 3 classification.

(d) Time Deposits — Fair value for fixed and variable rate certificates of deposit are estimated using discounted cash flow analyses using interest rates offered at each reporting date by the Company for certificates with similar remaining maturities resulting in a Level 2 classification.

(e) Short-Term Borrowings — The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, maturing within one year, approximate their fair values resulting in a Level 2 classification.

(f) Subordinated Debentures and Senior Debt — The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(g) Accrued Interest Receivable/Payable — The fair value of accrued interest receivable and payable is based on the fair value hierarchy of the related asset or liability.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2023 and 2022:

The Company is required or permitted to record the following assets at fair value on a recurring basis under other accounting pronouncements (in thousands):


	Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2023
Available-for-sale debt securities:

U.S. Treasury securities	$	8,954	$	—	$	8,954	$	—
U.S. Government agencies	95		—		95		—
Obligations of states and political subdivisions	180,222		—		180,222		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	83,352		—		83,352		—
Private label mortgage and asset backed securities	324,573		—		324,573		—

Equity Securities	6,649		6,649		—		—
Total assets measured at fair value on a recurring basis	$	603,845	$	6,649	$	597,196	$	—


	Fair Value Measurements Using
	Fair Value		Level 1		Level 2		Level 3
December 31, 2022
Available-for-sale debt securities:

U.S. Treasury securities	$	8,707	$	—	$	8,707	$	—
U.S. Government agencies	98		—		98		—
Obligations of states and political subdivisions	174,985		—		174,985		—
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	109,493		—		109,493		—
Private label residential mortgage and asset backed securities	355,542		—		355,542		—
Corporate debt securities	—		—		—		—
Equity Securities	6,558		6,558		—		—
Total assets measured at fair value on a recurring basis	$	655,383	$	6,558	$	648,825	$	—

Securities in Level 1 are mutual funds and fair values are based on quoted market prices for identical instruments traded in active markets. Fair values for available-for-sale investment securities in Level 2 are based on quoted market prices for similar securities in active markets. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators.

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings. During the years ended December 31, 2023 and 2022, no transfers between levels occurred.

There were no Level 3 assets measured at fair value on a recurring basis at December 31, 2023 or December 31, 2022. Also there were no liabilities measured at fair value on a recurring basis at December 31, 2023 or December 31, 2022.