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Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
| Level 1 | Quoted prices in active markets for identical assets or liabilities | ||||
| Level 2 | 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 for substantially the full term of the assets or liabilities | ||||
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities | ||||
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers of financial instruments between levels within the fair value hierarchy are recognized on the date management determines that the underlying circumstances or assumptions have changed.
Available-for-sale securities - Available-for-sale securities are the only material instruments valued on a recurring basis which are held by the Company at fair value. The Company's available-for-sale securities are primarily considered to be Level 2 securities. The Level 2 securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. There were no material transfers between hierarchy levels during the periods ended 2025, 2024 or 2023.
The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio securities with complicated structures. Pricing for the Company’s investment securities is fairly generic and is easily obtained. The Company uses a third-party comparison pricing vendor in order to reflect consistency in the fair values of the investment securities sampled by the Company each quarter. See footnote 2 for further detail related to the fair value of the Company's available-for-sale investment portfolio.
For securities valued using valuation models and other valuation techniques that use significant unobservable inputs and are therefore classified within level 3 of the fair value hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2. The lack of observability of certain significant inputs requires management to assess relevant empirical data in deriving valuation inputs including, for example, transaction details, yield curves, interest rates, prepayment speeds, credit spreads, volatilities, correlations, and valuations of comparable instruments.
The following table presents the Company's financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis during the periods ended December 31, 2025 and December 31, 2024 (in thousands):
December 31, 2025 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| U.S. government-sponsored enterprises | $ | 240,782 | $ | — | $ | 240,782 | $ | — | |||||||||||||||
| U.S. government-sponsored mortgage-backed securities | 1,212,948 | — | 1,212,948 | — | |||||||||||||||||||
| Private mortgage-backed securities | 145,720 | — | 145,720 | — | |||||||||||||||||||
| Non-government-sponsored asset backed securities | 157,844 | — | 157,844 | — | |||||||||||||||||||
| State and political subdivisions | 887,838 | — | 872,522 | 15,316 | |||||||||||||||||||
| Other securities | 226,799 | — | 212,004 | 14,795 | |||||||||||||||||||
| Total | $ | 2,871,931 | $ | — | $ | 2,841,820 | $ | 30,111 | |||||||||||||||
December 31, 2024 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| U.S. government-sponsored enterprises | $ | 284,790 | $ | — | $ | 284,790 | $ | — | |||||||||||||||
| U.S. government-sponsored mortgage-backed securities | 1,324,684 | — | 1,324,684 | — | |||||||||||||||||||
| Private mortgage-backed securities | 171,394 | — | 171,394 | — | |||||||||||||||||||
| Non-government-sponsored asset backed securities | 225,648 | — | 225,648 | — | |||||||||||||||||||
| State and political subdivisions | 870,361 | — | 853,699 | 16,662 | |||||||||||||||||||
| Other securities | 195,762 | — | 190,895 | 4,867 | |||||||||||||||||||
| Total | $ | 3,072,639 | $ | — | $ | 3,051,110 | $ | 21,529 | |||||||||||||||
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Assets and liabilities measured at fair value on a nonrecurring basis include the following:
Individually Evaluated Loans - Individually evaluated loans are the only material financial assets valued on a non-recurring basis which are held by the Company at fair value. When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when the repayment of a loan is expected to be substantially dependent upon the liquidation of the underlying collateral, the loan relationship is considered to be collateral dependent. Fair value of the loan is determined by establishing an allowance for credit loss for any exposure based on the valuation of the underlying collateral. The valuation of the collateral is determined by either an independent third-party appraisal or other collateral analysis. Discounts can be made by the Company based upon the overall evaluation of the independent appraisal. Collateral-dependent loans are classified within Level 3 of the fair value hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower’s underlying financial condition. Collateral values supporting the individually assessed loans are evaluated quarterly for updates to appraised values or adjustments due to non-current valuations. The Company reversed $2.1 million and $3.0 million of accrued interest receivable when impaired loans were put on non-accrual status during the years ended December 31, 2025 and 2024, respectively.
Foreclosed assets held for sale - Foreclosed assets held for sale are the only material non-financial assets valued on a non-recurring basis which are held by the Company at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for credit losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. Regulatory guidelines require the Company to reevaluate the fair value of foreclosed assets held for sale on at least an annual basis. The Company’s policy is to comply with the regulatory guidelines.
The following table presents the Company's assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis during the periods ended December 31, 2025 and December 31, 2024 (in thousands):
| Fair Value Measurements | |||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
December 31, 2025 | (in thousands) | ||||||||||||||||||||||
Individually evaluated loans (collateral-dependent)(1)(2) | $ | 186,484 | $ | — | $ | — | $ | 186,484 | |||||||||||||||
December 31, 2024 | |||||||||||||||||||||||
Individually evaluated loans (collateral-dependent)(1)(2) | $ | 209,799 | $ | — | $ | — | $ | 209,799 | |||||||||||||||
Foreclosed assets and other real estate owned(1)(3) | 17,882 | — | — | 17,882 | |||||||||||||||||||
(1) These amounts represent the resulting carrying amounts on the consolidated balance sheets for collateral-dependent loans and foreclosed assets and other real estate owned for which fair value re-measurements took place during the period.
(2) Specific reserves of $17.0 million and $23.8 million were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended December 31, 2025 and December 31, 2024, respectively.
(3) Remeasurements of foreclosed assets held for sale resulted in a $2.5 million reduction in fair value for the year ended December 31, 2024.
The significant unobservable (Level 3) inputs used in the fair value measurement of collateral for collateral-dependent impaired loans and foreclosed assets primarily relate to customized discounting criteria applied to the customer’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the underlying collateral. As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the reported periods, collateral discounts ranged from approximately 10% to 50%.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents and federal funds sold - For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment securities - held-to-maturity securities – These securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
Loans receivable, net of impaired loans and allowance — For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are assumed to approximate the carrying amounts. The fair values for fixed-rate loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. Fair values for acquired loans are based on a discounted cash flow methodology that considers factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan is amortizing. Loans are grouped together according to similar characteristics and are treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows.
Accrued interest receivable and payable - The carrying amounts of accrued interest approximates fair value.
FHLB, FRB & FNBB stock; other equity investments; marketable equity securities - The carrying amount of these investments approximate fair value.
Deposits and securities sold under agreements to repurchase — The fair values of demand deposits, savings deposits and securities sold under agreements to repurchase are, by definition, equal to the amount payable on demand and, therefore, approximate their carrying amounts. The fair values for time deposits are estimated using a discounted cash flow calculation that utilizes interest rates currently being offered on time deposits with similar contractual maturities.
FHLB and other borrowed funds - For short-term instruments, the carrying amount is a reasonable estimate of fair value. The fair value of long-term debt is estimated based on the current rates available to the Company for debt with similar terms and remaining maturities.
Subordinated debentures - The fair value of subordinated debentures is estimated using the rates that would be charged for subordinated debentures of similar remaining maturities.
Commitments to extend credit, letters of credit and lines of credit – The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of these commitments is not material and are therefore, omitted from this disclosure.
The following table presents the estimated fair values of the Company’s financial instruments. 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.
| December 31, 2025 | |||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||
| Carrying Amount | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 667,337 | $ | 667,337 | $ | — | $ | — | 667,337 | ||||||||||||||||||||
| Federal funds sold | 3,000 | 3,000 | — | 3,000 | |||||||||||||||||||||||||
| Investment securities - held-to-maturity | 1,259,262 | 27,457 | 1,133,595 | — | 1,161,052 | ||||||||||||||||||||||||
| Loans receivable, net of impaired loans and allowance | 15,186,203 | — | — | 15,205,769 | 15,205,769 | ||||||||||||||||||||||||
| Accrued interest receivable | 108,939 | 108,939 | — | — | 108,939 | ||||||||||||||||||||||||
| FHLB, FRB & FNBB stock; other equity investments | 225,288 | — | — | 225,288 | 225,288 | ||||||||||||||||||||||||
| Marketable equity securities | 53,921 | 53,921 | — | — | 53,921 | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||
| Demand and non-interest bearing | $ | 3,868,405 | $ | 3,868,405 | $ | — | $ | — | 3,868,405 | ||||||||||||||||||||
| Savings and interest-bearing transaction accounts | 11,792,828 | 11,792,828 | — | — | 11,792,828 | ||||||||||||||||||||||||
| Time deposits | 1,818,724 | — | — | 1,807,002 | 1,807,002 | ||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 155,803 | 155,803 | — | — | 155,803 | ||||||||||||||||||||||||
| FHLB and other borrowed funds | 500,250 | — | 474,663 | — | 474,663 | ||||||||||||||||||||||||
| Accrued interest payable | 14,868 | 14,868 | — | — | 14,868 | ||||||||||||||||||||||||
| Subordinated debentures | 279,265 | — | — | 265,170 | 265,170 | ||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||
| Carrying Amount | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 910,347 | $ | 910,347 | $ | — | $ | — | 910,347 | ||||||||||||||||||||
| Federal funds sold | 3,725 | 3,725 | — | — | 3,725 | ||||||||||||||||||||||||
| Investment securities - held-to-maturity | 1,275,204 | — | 1,142,940 | — | 1,142,940 | ||||||||||||||||||||||||
| Loans receivable, net of impaired loans and allowance | 14,244,458 | — | — | 14,207,935 | 14,207,935 | ||||||||||||||||||||||||
| Accrued interest receivable | 120,129 | 120,129 | — | — | 120,129 | ||||||||||||||||||||||||
| FHLB, FRB & FNBB stock; other equity investments | 226,910 | — | — | 226,910 | 226,910 | ||||||||||||||||||||||||
| Marketable equity securities | 48,954 | 48,954 | — | — | 48,954 | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||
| Demand and non-interest bearing | $ | 4,006,115 | $ | 4,006,115 | $ | — | $ | — | 4,006,115 | ||||||||||||||||||||
| Savings and interest-bearing transaction accounts | 11,347,850 | 11,347,850 | — | — | 11,347,850 | ||||||||||||||||||||||||
| Time deposits | 1,792,332 | — | — | 1,781,156 | 1,781,156 | ||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 162,350 | 162,350 | — | — | 162,350 | ||||||||||||||||||||||||
| FHLB and other borrowed funds | 600,750 | — | 556,095 | — | 556,095 | ||||||||||||||||||||||||
| Accrued interest payable | 20,186 | 20,186 | — | — | 20,186 | ||||||||||||||||||||||||
| Subordinated debentures | 439,246 | — | — | 375,887 | 375,887 | ||||||||||||||||||||||||
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.