b'The following describes the valuation techniques used by CNB to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements:Impaired loansLoans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected.The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral.Fair value is measured based on the value of the collateral securing the loans.Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable.The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data.If the collateral is a house or building in the process of construction or if an appraisal of the real estate property or the underlying comparables are over two years old, then the fair value is considered Level 3.The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business financial statements if not considered significant using observable market data.Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3).Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis.Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.Other Real Estate OwnedCertain assets such as other real estate owned (OREO) are measured at fair value less cost to sell.Gains and losses are measured net of any write-downs.The following table summarizes CNBs financial and nonfinancial assets that were measured at fair value on a nonrecurring basis during the periods:Valuation of our Financial Instruments by Fair Value Hierarchy Levels - Non-recurring BasisDecember 31, 2019Recognized Gains Description Total Level 1Level 2 Level 3 (Losses)Assets: Impaired loans, net of government agency guarantees and reserve for losses $ 2,621,163 $ -$- $ 2,621,163 $- Other real estate owned2,666,8122,666,812 20,779Description December 31, 2018Recognized Gains Total Level 1Level 2 Level 3 (Losses)Assets: Impaired loans, net of government agency guarantees and reserve for losses $ 3,247,923 $- $ -$ 3,247,923 $ -Other real estate owned 191,070 191,070(35,230) The following table provides a listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing Level 3 techniques:43'