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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2022

Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective reporting dates and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end.

Fair value measurement and disclosure guidance defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.

Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the

volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with fair value measurement and disclosure guidance.

This guidance further clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The guidance provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

Fair value measurement and disclosure guidance establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For assets measured at fair value, the fair value measurements by level within the fair value hierarchy, and the basis of measurement used at December 31, 2022 and 2021, are as follows:


		Fair Value Measurements at December 31, 2022
In thousands	Basis	Total		Level 1		Level 2		Level 3
U.S. Government and agencies		$	210,999	$	—	$	210,999	$	—
Mortgage-backed securities, residential		295,718		—		295,718		—
State and municipal		15,235		—		15,235		—
Corporate bonds		31,602		—		31,602		—
Total securities available for sale	Recurring	$	553,554	$	—	$	553,554	$	—
Equity securities with readily determinable fair values	Recurring	$	1,719	$	1,719	$	—	$	—
Collateral dependent impaired loans	Non-recurring	$	3,773	$	—	$	—	$	3,773


		Fair Value Measurements at December 31, 2021
In thousands	Basis	Total		Level 1		Level 2		Level 3
U.S. Government and agencies		$	245,041	$	—	$	245,041	$	—
Mortgage-backed securities, residential		133,496		—		133,496		—
State and municipal		44,611		—		44,611		—
Corporate bonds		13,950		—		13,950		—
Total securities available for sale	Recurring	$	437,098	$	—	$	437,098	$	—
Equity securities with readily determinable fair values	Recurring	$	2,609	$	2,609	$	—	$	—
Collateral dependent impaired loans	Non-recurring	$	5,275	$	—	$	—	$	5,275

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:

Quantitative Information about Level 3 Fair Value Measurements

Dollars in thousands

Fair Value Estimate

Valuation Technique

Unobservable Input

Range

Weighted Average

December 31, 2022

Impaired loans

3,773

Appraisal of collateral(1)

Appraisal adjustments(2)

(10) – (50)%

(48)

December 31, 2021

Impaired loans

5,275

Appraisal of collateral(1)

Appraisal adjustments(2)

(10) – (50)%

(50)

_______________________________

(1)Fair value is generally determined through management’s estimate or independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.

(2)Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received, and/or age of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Corporation’s financial instruments at December 31, 2022:


	December 31, 2022
In thousands	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	40,067	$	40,067	$	6,977	$	33,090	$	—
Interest-bearing deposits with banks	128,094		128,094		128,094		—		—
Equity securities with readily determinable fair values	1,719		1,719		1,719		—		—
Debt securities available for sale	553,554		553,554		—		553,554		—
Securities held to maturity	64,977		58,078		—		58,078		—
Loans held for sale	123		123		—		123		—
Loans, less allowance for loan losses	1,520,749		1,458,556		—		—		1,458,556
Accrued interest receivable	6,915		6,915		—		6,915		—
Restricted investment in bank stocks	1,629		1,629		—		1,629		—

Financial liabilities:
Demand deposits and savings	1,905,845		1,905,845		—		1,905,845		—
Time deposits	293,130		276,182		—		276,182		—
Short-term borrowings	41,954		41,954		—		41,954		—
Long-term borrowings	—		—		—		—		—
Trust preferred and subordinated debt	21,000		18,648		—		18,648		—
Accrued interest payable	51		51		—		51		—

Off-balance sheet financial instruments	—		—		—		—		—

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Corporation’s financial instruments at December 31, 2021:


	December 31, 2021
In thousands	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and due from banks	$	14,912	$	14,912	$	7,992	$	6,920	$	—
Interest-bearing deposits with banks	695,219		695,219		695,219		—		—
Equity securities with readily determinable fair values	2,609		2,609		2,609		—		—
Debt securities available for sale	437,098		437,098		—		437,098		—
Securities held to maturity	6,454		6,652		—		6,652		—
Loans held for sale	2,193		2,193		—		2,193		—
Loans, less allowance for loan losses	1,449,394		1,459,900		—		—		1,459,900
Accrued interest receivable	5,520		5,520		—		5,520		—
Restricted investment in bank stocks	2,303		2,303		—		2,303		—

Financial liabilities:
Demand deposits and savings	1,996,337		1,996,337		—		1,996,337		—
Time deposits	430,052		428,718		—		428,718		—
Short-term borrowings	35,202		35,202		—		35,202		—
Long-term borrowings	13,700		13,764		—		13,764		—
Trust preferred and subordinated debt	21,000		19,991		—		19,991		—
Accrued interest payable	109		109		—		109		—

Off-balance sheet financial instruments	—		—		—		—		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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