b'NOTE 26.FAIR VALUE OF FINANCIAL INSTRUMENTSThe FASB ASC Topic 820, Financial Instruments, requires the disclosure of the estimated fair value of certain financial instruments.Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are most transparent or reliable.Level 1inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2inputs 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.Level 3inputs to the valuation methodology are unobservable and significant to the fair value measurement.The following describes the valuation techniques used by CNB to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:Securities available for sale Securities available for sale are recorded at fair value on a recurring basis.Fair value measurement is based upon quoted market prices, when available (Level 1).If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data.Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data (Level 2).In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.At December 31, 2018 and 2017, all of the Banks securities are considered to be Level 1 or Level 2 investments.The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis as of December 31:Valuation of our Financial Instruments by Fair Value Hierarchy Levels - Recurring BasisDecember 31, 2018Description Total Level 1Level 2 Level 3Assets: U.S. government agencies and corporations $ 1,126,145 $ -$ 1,126,145 $ -Corporate bonds1,998,090 -1,998,090-State and municipal securities36,535,738 -36,535,738-Residential mortgage-backed securities5,660,988 -5,660,988 - Collateralized mortgage obligations13,128,915- 13,128,915 - Small business obligations5,527,260- 5,527,260 -December 31, 2017Description Total Level 1Level 2 Level 3Assets: U.S. government agencies and corporations $ 1,129,129 $ -$ 1,129,129 $ -Corporate bonds2,034,935 -2,034,935-State and municipal securities37,356,150 595,34936,760,801-Residential mortgage-backed securities7,928,635 -7,928,635 - Collateralized mortgage obligations11,559,728 -11,559,728-Small business obligations6,333,579 -6,333,579 -Certain financial assets are measured at fair value on a nonrecurring basis in accordance with accounting principles generally accepted in the United States (GAAP).Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. 42'