NOTE

– FAIR VALUE

Accounting guidance on fair value measurement uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy includes

three

levels and is based upon the valuation techniques used to measure assets and liabilities. The

three

levels are as follows:

●

Level

– Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in markets;

●

Level

– Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

●

Level

– Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring basis comprise the following at

March 31, 2018

and

December 31, 2017:

			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

March 31, 2018:
Securities AFS:
U.S. govt. sponsored agency securities	$	36,867,510	$	-	$	36,867,510	$	-
Residential mortgage-backed and related securities		157,289,043		-		157,289,043		-
Municipal securities		61,201,804		-		61,201,804		-
Other securities		4,286,583		-		4,286,583		-
Interest rate caps		657,178		-		657,178		-
Interest rate swaps - assets		4,500,318		-		4,500,318		-
Total assets measured at fair value	$	264,802,436	$	-	$	264,802,436	$	-

Interest rate swaps - liabilities	$	4,500,318	$	-	$	4,500,318	$	-
Total liabilities measured at fair value	$	4,500,318	$	-	$	4,500,318	$	-


December 31, 2017 :
Securities AFS:
U.S. govt. sponsored agency securities	$	38,096,534	$	-	$	38,096,534	$	-
Residential mortgage-backed and related securities		163,301,304		-		163,301,304		-
Municipal securities		66,625,496		-		66,625,496		-
Other securities		4,884,573		1,028		4,883,545		-
Interest rate caps		506,700		-		506,700		-
Interest rate swaps - assets		4,397,238		-		4,397,238		-
Total assets measured at fair value	$	277,811,845	$	1,028	$	277,810,817	$	-

Interest rate swaps - liabilities	$	4,397,238	$	-	$	4,397,238	$	-
Total liabilities measured at fair value	$	4,397,238	$	-	$	4,397,238	$	-

There were

transfers of assets or liabilities between Levels

and

of the fair value hierarchy for the

three

months ended

March 31, 2018

2017.

A small portion of the securities AFS portfolio consists of common stock issued by various unrelated bank holding companies. The fair values used by the Company are obtained from an independent pricing service and represent quoted market prices for the identical securities (Level

inputs).

The securities AFS portfolio consists of securities whereby the Company obtains fair values from an independent pricing service. The fair values are determined by pricing models that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems (Level

inputs).

Interest rate caps are used for the purpose of hedging interest rate risk. The fair values are determined by pricing models that consider observable market data for derivative instruments with similar structures (Level

inputs).

Interest rate swaps are executed for select commercial customers. The interest rate swaps are further described in Note

to the Consolidated Financial Statements included in the Company’s Annual Report on Form

-K for the year ended

December 31, 2017.

The fair values are determined by comparing the contract rate on the swap with the then-current market rate for the remaining term of the transaction (Level

inputs).

Certain financial assets are measured at fair value on a non-recurring basis; that is, the assets are

not

measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Assets measured at fair value on a non-recurring basis comprise the following at

March 31, 2018

and

December 31, 2017:

			Fair Value Measurements at Reporting Date Using
	Fair Value		Level 1		Level 2		Level 3
March 31, 2018:
Impaired loans/leases	$	5,564,760	$	-	$	-	$	5,564,760
OREO		13,770,025		-		-		13,770,025
	$	19,334,785	$	-	$	-	$	19,334,785

December 31, 2017:
Impaired loans/leases	$	8,972,337	$	-	$	-	$	8,972,337
OREO		14,642,973		-		-		14,642,973
	$	23,615,310	$	-	$	-	$	23,615,310

Impaired loans/leases are evaluated and valued at the time the loan/lease is identified as impaired, at the lower of cost or fair value, and are classified as Level

in the fair value hierarchy. Fair value is measured based on the value of the collateral securing these loans/leases. Collateral

may

be real estate and/or business assets, including equipment, inventory and/or accounts receivable, and is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business.

OREO in the table above consists of property acquired through foreclosures and settlements of loans. Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as Level

in the fair value hierarchy. The estimated fair value of the property is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the property.

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level

inputs to determine fair value:

	Quantitative Information about Level Fair Value Measurements
	Fair Value March 31, 2018		Fair Value December 31, 2017		Valuation Technique	Unobservable Input	Range

Impaired loans/leases	$	5,564,760	$	8,972,337	Appraisal of collateral	Appraisal adjustments		-10.00%	to	-30.00%
OREO		13,770,025		14,642,973	Appraisal of collateral	Appraisal adjustments		0.00%	to	-35.00%

For the impaired loans/leases and OREO, the Company records carrying value at fair value less disposal or selling costs. The amounts reported in the tables above are fair values before the adjustment for disposal or selling costs.

There have been

changes in valuation techniques used for any assets measured at fair value during the

three

months ended

March 31, 2018

and

2017.

The following table presents the carrying values and estimated fair values of financial assets and liabilities carried on the Company’s consolidated balance sheets, including those financial assets and liabilities that are

not

measured and reported at fair value on a recurring basis or non-recurring basis:

	Fair Value	As of March 31, 2018				As of December 31, 2017
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Value		Fair Value		Value		Fair Value

Cash and due from banks	Level 1	$	61,845,988	$	61,845,988	$	75,721,663	$	75,721,663
Federal funds sold	Level 2		14,505,000		14,505,000		30,197,000		30,197,000
Interest-bearing deposits at financial institutions	Level 2		45,051,555		45,051,555		55,765,012		55,765,012
Investment securities:
HTM	Level 2		378,584,337		375,792,683		379,474,205		379,749,804
AFS	See Previous Table		259,644,940		259,644,940		272,907,907		272,907,907
Loans/leases receivable, net	Level 3		5,152,556		5,564,760		8,307,719		8,972,337
Loans/leases receivable, net	Level 2		3,013,217,281		2,948,650,000		2,921,821,953		2,892,963,000
Interest rate caps	Level 2		657,178		657,178		506,700		506,700
Interest rate swaps - assets	Level 2		4,500,318		4,500,318		4,397,238		4,397,238
Deposits:
Nonmaturity deposits	Level 2		2,603,999,039		2,603,999,039		2,670,583,178		2,670,583,178
Time deposits	Level 2		676,002,453		670,297,000		596,071,878		591,772,000
Short-term borrowings	Level 2		16,859,753		16,859,753		13,993,122		13,993,122
FHLB advances	Level 2		216,345,000		216,397,000		192,000,000		192,115,000
Other borrowings	Level 2		64,062,500		64,583,000		66,000,000		66,520,000
Junior subordinated debentures	Level 2		37,534,402		29,318,931		37,486,487		29,253,624
Interest rate swaps - liabilities	Level 2		4,500,318		4,500,318		4,397,238		4,397,238