Northwest Bancshares, Inc.NWBI
Northwest Bancshares, Inc. Fair Value Disclosure
Disclosures About Fair Value of Financial Instruments
(1) Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent.
We are required to disclose fair value information about financial instruments whether or not recognized in the Consolidated Statement of Financial Condition. Fair value information of certain financial instruments and all nonfinancial instruments is not required to be disclosed. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.
Financial assets and liabilities recognized or disclosed at fair value on a recurring basis and certain financial assets and liabilities on a non-recurring basis are accounted for using a three-level hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. This hierarchy gives the highest priority to quoted prices with readily available
independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest level input that has a significant impact on fair value measurement is used.
Financial assets and liabilities are categorized based upon the following characteristics or inputs to the valuation techniques:
•Level 1 — Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in actively traded markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.
•Level 2 — Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets or liabilities that are actively traded. Level 2 also includes pricing models in which the inputs are corroborated by market data, for example, matrix pricing.
•Level 3 — Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include the following:
◦Quotes from brokers or other external sources that are not considered binding;
◦Quotes from brokers or other external sources where it cannot be determined that market participants would in fact transact for the asset or liability at the quoted price; and
◦Quotes and other information from brokers or other external sources where the inputs are not deemed observable.
We are responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. We perform due diligence to understand the inputs used or how the data was calculated or derived. We also corroborate the reasonableness of external inputs in the valuation process.
The carrying amounts reported in the Consolidated Statement of Financial Condition approximate fair value for the following financial instruments: cash and cash equivalents, marketable securities available-for-sale, loans held-for-sale, accrued interest receivable, interest rate lock commitments, forward commitments, interest rate swaps, savings and checking deposits, foreign exchange swaps, risk participation agreements, and accrued interest payable.
Marketable Securities
Where available, market values are based on quoted market prices, dealer quotes, and prices obtained from independent pricing services.
Debt Securities — available-for-sale - Generally, debt securities are valued using pricing for similar securities, recently executed transactions and other pricing models utilizing observable inputs. The valuation for most debt securities is classified as Level 2. Securities within Level 2 include corporate bonds, municipal bonds, mortgage-backed securities and U.S. government and agency debt securities.
Debt Securities — held-to-maturity - The fair value of debt securities held-to-maturity is determined in the same manner as debt securities available-for-sale.
Loans Receivable
Loans with comparable characteristics including collateral and re-pricing structures are segregated for valuation purposes. Each loan pool is separately valued utilizing a discounted cash flow analysis. Projected monthly cash flows are discounted to present value using a market rate for comparable loans, which is not considered an exit price. Characteristics of comparable loans include remaining term, coupon interest, and estimated prepayment speeds. Delinquent loans are separately evaluated given the impact delinquency has on the projected future cash flow of the loan including the approximate discount or market rate, which is not considered an exit price.
Loans Held-for-Sale
The estimated fair value of loans held-for-sale is based on market bids obtained from potential buyers.
FHLB Stock
Due to the restrictions placed on transferability of FHLB stock, it is not practical to determine the fair value. FHLB stock is recorded at cost.
Deposit Liabilities
The estimated fair value of deposits with no stated maturity, which includes demand deposits, money market, and other savings accounts, is the amount payable on demand. Although market premiums paid for depository institutions reflect an additional value for these low-cost deposits, adjusting fair value for any value expected to be derived from retaining those deposits for a future period of time or from the benefit that results from the ability to fund interest-earning assets with these deposit liabilities is prohibited. The fair value estimates of deposit liabilities do not include the benefit that results from the low-cost funding provided by these deposits compared to the cost of borrowing funds in the market. Fair values for time deposits are estimated using a discounted cash flow calculation that applies contractual cost currently being offered in the existing portfolio to current market rates being offered locally for deposits of similar remaining maturities. The valuation adjustment for the portfolio consists of the present value of the difference of these two cash flows, discounted at the assumed market rate of the corresponding maturity.
Borrowed Funds
Fixed rate advances are valued by comparing their contractual cost to the prevailing market cost. The carrying amount of repurchase agreements approximates their fair value.
Subordinated Debentures
The fair value of our subordinated debentures is calculated using the discounted cash flows at rates observable for other similarly traded liabilities with consideration given to early call provisions.
Junior Subordinated Debentures
The fair value of junior subordinated debentures is calculated using the discounted cash flows at the prevailing rate of interest.
Interest Rate Lock Commitments and Forward Commitments
The fair value of interest rate lock commitments is based on the value of underlying loans held-for-sale which is based on quoted prices for similar loans in the secondary market. This value is then adjusted based on the probability of the loan closing (i.e., the “pull-through” amount, a significant unobservable input). The fair value of forward sale commitments is based on quoted prices from the secondary market based on the settlement date of the contracts.
Cash Flow Hedges, Interest Rate and Foreign Exchange Swap Agreements and Risk Participation Agreements
The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the SOFR discount curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using SOFR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable. The fair value of the foreign exchange swap is derived from proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable. Risk participation agreements are entered into when Northwest purchases a portion of a commercial loan that has an interest rate swap. Northwest assumes credit risk on its portion of the interest rate swap should the borrower fail to pay as agreed. The value of risk participation agreements is determined based on the value of the swap after considering the credit quality, probability of default, and loss given default of the borrower.
Off-Balance Sheet Financial Instruments
These financial instruments generally are not sold or traded, and estimated fair values are not readily available. However, the fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. Commitments to extend credit are generally short-term in nature and, if drawn upon, are issued under current market terms. At December 31, 2025 and 2024, there was no significant unrealized appreciation or depreciation on these financial instruments.
The following table sets forth the carrying amount and estimated fair value of our financial instruments included in the Consolidated Statement of Financial Condition at December 31, 2025 and 2024:
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Carrying amount | Estimated fair value | Level 1 | Level 2 | Level 3 | Netting Adjustments (1) | ||||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 233,647 | 233,647 | 233,647 | — | — | — | ||||||||||||||||||||||||||||
| Securities available-for-sale | 1,586,382 | 1,586,382 | — | 1,586,382 | — | — | |||||||||||||||||||||||||||||
| Securities held-to-maturity | 683,369 | 605,929 | — | 605,929 | — | — | |||||||||||||||||||||||||||||
| Loans receivable, net | 12,857,104 | 12,418,154 | — | — | 12,418,154 | — | |||||||||||||||||||||||||||||
| Loans held-for-sale | 22,437 | 22,437 | — | — | 22,437 | — | |||||||||||||||||||||||||||||
| Accrued interest receivable | 56,291 | 56,291 | 56,291 | — | — | — | |||||||||||||||||||||||||||||
| Interest rate lock commitments | 617 | 617 | — | — | 617 | — | |||||||||||||||||||||||||||||
| Forward commitments | 95 | 95 | — | 95 | — | — | |||||||||||||||||||||||||||||
| Foreign exchange swaps | 4 | 4 | — | 4 | — | — | |||||||||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | — | — | 51 | — | (51) | |||||||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | 11,775 | 11,775 | — | 25,155 | — | (13,380) | |||||||||||||||||||||||||||||
| FHLB stock | 36,628 | 36,628 | — | — | — | — | |||||||||||||||||||||||||||||
| Total financial assets | $ | 15,488,349 | 14,971,959 | 289,938 | 2,217,616 | 12,441,208 | (13,431) | ||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||
| Savings and checking deposits | $ | 11,026,319 | 11,026,319 | 11,026,319 | — | — | — | ||||||||||||||||||||||||||||
| Time deposits | 2,916,698 | 2,909,139 | — | — | 2,909,139 | — | |||||||||||||||||||||||||||||
| Borrowed funds | 446,283 | 444,936 | 446,836 | — | — | (1,900) | |||||||||||||||||||||||||||||
| Subordinated debt | 114,800 | 114,800 | — | 114,800 | — | — | |||||||||||||||||||||||||||||
| Junior subordinated debentures | 130,093 | 120,237 | — | — | 120,237 | — | |||||||||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | — | — | 1,280 | — | (1,280) | |||||||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | 15,115 | 15,115 | — | 25,366 | — | (10,251) | |||||||||||||||||||||||||||||
| Risk participation agreements | 27 | 27 | — | 27 | — | — | |||||||||||||||||||||||||||||
| Accrued interest payable | 6,846 | 6,846 | 6,846 | — | — | — | |||||||||||||||||||||||||||||
| Total financial liabilities | $ | 14,656,181 | 14,637,419 | 11,480,001 | 141,473 | 3,029,376 | (13,431) | ||||||||||||||||||||||||||||
(1) Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Carrying amount | Estimated fair value | Level 1 | Level 2 | Level 3 | Netting adjustments (1) | ||||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 288,378 | 288,378 | 288,378 | — | — | — | ||||||||||||||||||||||||||||
| Securities available-for-sale | 1,108,944 | 1,108,944 | — | 1,108,944 | — | — | |||||||||||||||||||||||||||||
| Securities held-to-maturity | 750,586 | 637,948 | — | 637,948 | — | — | |||||||||||||||||||||||||||||
| Loans receivable, net | 11,063,195 | 10,431,355 | — | — | 10,431,355 | — | |||||||||||||||||||||||||||||
| Loans held-for-sale | 76,331 | 76,331 | — | 68,620 | 7,711 | — | |||||||||||||||||||||||||||||
| Accrued interest receivable | 46,356 | 46,356 | 46,356 | — | — | — | |||||||||||||||||||||||||||||
| Interest rate lock commitments | 342 | 342 | — | — | 342 | — | |||||||||||||||||||||||||||||
| Forward commitments | 34 | 34 | — | 34 | — | — | |||||||||||||||||||||||||||||
| Foreign exchange swaps | 199 | 199 | — | 199 | — | — | |||||||||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | 1,497 | 1,497 | — | 1,529 | — | (32) | |||||||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | 3,493 | 3,493 | — | 37,697 | — | (34,204) | |||||||||||||||||||||||||||||
| FHLB stock | 21,006 | 21,006 | — | — | — | — | |||||||||||||||||||||||||||||
| Total financial assets | $ | 13,360,361 | 12,615,883 | 334,734 | 1,854,971 | 10,439,408 | (34,236) | ||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||
| Savings and checking accounts | $ | 9,466,909 | 9,466,909 | 9,466,909 | — | — | — | ||||||||||||||||||||||||||||
| Time deposits | 2,677,645 | 2,677,070 | — | — | 2,677,070 | — | |||||||||||||||||||||||||||||
| Borrowed funds | 200,331 | 196,277 | 228,119 | — | — | (31,842) | |||||||||||||||||||||||||||||
| Subordinated debt | 114,538 | 115,982 | — | 115,982 | — | — | |||||||||||||||||||||||||||||
| Junior subordinated debentures | 129,834 | 128,122 | — | — | 128,122 | — | |||||||||||||||||||||||||||||
| Foreign exchange swaps | 4 | 4 | — | 4 | — | — | |||||||||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | — | — | 32 | — | (32) | |||||||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | 35,405 | 35,405 | — | 37,767 | — | (2,362) | |||||||||||||||||||||||||||||
| Risk participation agreements | 16 | 16 | — | 16 | — | — | |||||||||||||||||||||||||||||
| Accrued interest payable | 6,935 | 6,935 | 6,935 | — | — | — | |||||||||||||||||||||||||||||
| Total financial liabilities | $ | 12,631,617 | 12,626,720 | 9,701,963 | 153,801 | 2,805,192 | (34,236) | ||||||||||||||||||||||||||||
(1) Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
Fair value estimates are made at a point-in-time, based on relevant market data and information about the instrument. The preceding methods and assumptions were used in estimating the fair value of financial instruments at December 31, 2025 and 2024.
The following table represents assets and liabilities measured at fair value on a recurring basis as of December 31, 2025:
| Level 1 | Level 2 | Level 3 | Netting Adjustments (1) | Total at fair value | |||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||
| U.S. government and agencies | $ | — | 35,912 | — | — | 35,912 | |||||||||||||||||||||||
| Government sponsored enterprises | — | 2,047 | — | — | 2,047 | ||||||||||||||||||||||||
| States and political subdivisions | — | 83,268 | — | — | 83,268 | ||||||||||||||||||||||||
| Corporate | — | 57,034 | — | — | 57,034 | ||||||||||||||||||||||||
| Total debt securities | — | 178,261 | — | — | 178,261 | ||||||||||||||||||||||||
| Residential mortgage-backed securities: | |||||||||||||||||||||||||||||
| GNMA | — | 96,344 | — | — | 96,344 | ||||||||||||||||||||||||
| FNMA | — | 139,786 | — | — | 139,786 | ||||||||||||||||||||||||
| FHLMC | — | 167,647 | — | — | 167,647 | ||||||||||||||||||||||||
| Non-agency | — | 3 | — | — | 3 | ||||||||||||||||||||||||
| Collateralized mortgage obligations: | |||||||||||||||||||||||||||||
| GNMA | — | 708,908 | — | — | 708,908 | ||||||||||||||||||||||||
| FNMA | — | 97,672 | — | — | 97,672 | ||||||||||||||||||||||||
| FHLMC | — | 197,761 | — | — | 197,761 | ||||||||||||||||||||||||
| Total mortgage-backed securities | — | 1,408,121 | — | — | 1,408,121 | ||||||||||||||||||||||||
| Interest rate lock commitments | — | — | 617 | — | 617 | ||||||||||||||||||||||||
| Forward commitments | — | 95 | — | — | 95 | ||||||||||||||||||||||||
| Foreign exchange swaps | — | 4 | — | — | 4 | ||||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | 51 | — | (51) | — | ||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | — | 25,155 | — | (13,380) | 11,775 | ||||||||||||||||||||||||
| Total assets | $ | — | 1,611,687 | 617 | (13,431) | 1,598,873 | |||||||||||||||||||||||
| Foreign exchange swaps | $ | — | — | — | — | — | |||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | 1,280 | — | (1,280) | — | ||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | — | 25,366 | — | (10,251) | 15,115 | ||||||||||||||||||||||||
| Risk participation agreements | — | 27 | — | — | 27 | ||||||||||||||||||||||||
| Total liabilities | $ | — | 26,673 | — | (11,531) | 15,142 | |||||||||||||||||||||||
(1) Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
The following table represents assets and liabilities measured at fair value on a recurring basis as of December 31, 2024:
| Level 1 | Level 2 | Level 3 | Netting adjustments (1) | Total at fair value | |||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||
| U.S. government and agencies | $ | — | 35,391 | — | — | 35,391 | |||||||||||||||||||||||
| Government sponsored enterprises | — | 118 | — | — | 118 | ||||||||||||||||||||||||
| States and political subdivisions | — | 58,627 | — | — | 58,627 | ||||||||||||||||||||||||
| Corporate | — | 26,101 | — | — | 26,101 | ||||||||||||||||||||||||
| Total debt securities | — | 120,237 | — | — | 120,237 | ||||||||||||||||||||||||
| Residential mortgage-backed securities: | |||||||||||||||||||||||||||||
| GNMA | — | 50,149 | — | — | 50,149 | ||||||||||||||||||||||||
| FNMA | — | 84,212 | — | — | 84,212 | ||||||||||||||||||||||||
| FHLMC | — | 89,840 | — | — | 89,840 | ||||||||||||||||||||||||
| Non-agency | — | 5 | — | — | 5 | ||||||||||||||||||||||||
| Collateralized mortgage obligations: | |||||||||||||||||||||||||||||
| GNMA | — | 562,948 | — | — | 562,948 | ||||||||||||||||||||||||
| FNMA | — | 74,395 | — | — | 74,395 | ||||||||||||||||||||||||
| FHLMC | — | 127,158 | — | — | 127,158 | ||||||||||||||||||||||||
| Total mortgage-backed securities | — | 988,707 | — | — | 988,707 | ||||||||||||||||||||||||
| Interest rate lock commitments | — | — | 342 | — | 342 | ||||||||||||||||||||||||
| Forward commitments | — | 34 | — | — | 34 | ||||||||||||||||||||||||
| Foreign exchange swaps | — | 199 | — | — | — | ||||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | 1,529 | — | (32) | 1,497 | ||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | — | 37,697 | — | (34,204) | 3,493 | ||||||||||||||||||||||||
| Total assets | $ | — | 1,148,403 | 342 | (34,236) | 1,114,509 | |||||||||||||||||||||||
| Foreign exchange swaps | $ | — | 4 | — | — | 4 | |||||||||||||||||||||||
| Interest rate swaps designated as hedging instruments | — | 32 | — | (32) | — | ||||||||||||||||||||||||
| Interest rate swaps not designated as hedging instruments | — | 37,767 | — | (2,362) | 35,405 | ||||||||||||||||||||||||
| Risk participation agreements | — | 16 | — | — | 16 | ||||||||||||||||||||||||
| Total liabilities | $ | — | 37,819 | — | (2,362) | 35,425 | |||||||||||||||||||||||
(1) Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2025 and 2024:
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Beginning balance January 1, | $ | 342 | 641 | ||||||||
| Net activity | 275 | (299) | |||||||||
| Transfers from Level 3 | — | — | |||||||||
| Transfers into of Level 3 | — | — | |||||||||
| Ending balance December 31, | $ | 617 | 342 | ||||||||
Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans individually assessed, real estate owned, and MSRs.
The following table represents the fair market measurement for only those nonrecurring assets that had a fair market value below the carrying amount as of December 31, 2025:
| Level 1 | Level 2 | Level 3 | Total assets at fair value | ||||||||||||||||||||
| Loans individually assessed | $ | — | — | 38,698 | 38,698 | ||||||||||||||||||
| Real estate owned, net | — | — | 76 | 76 | |||||||||||||||||||
| Total assets | $ | — | — | 38,774 | 38,774 | ||||||||||||||||||
The following table represents the fair market measurement for only those nonrecurring assets that had a fair market value below the carrying amount as of December 31, 2024:
| Level 1 | Level 2 | Level 3 | Total assets at fair value | ||||||||||||||||||||
| Loans individually assessed | $ | — | — | 9,801 | 9,801 | ||||||||||||||||||
| Real estate owned, net | — | — | 35 | 35 | |||||||||||||||||||
| Total assets | $ | — | — | 9,856 | 9,856 | ||||||||||||||||||
Individually Assessed Loans — A loan is considered to be individually assessed as described in Note 1(f). We classify loans individually assessed as nonrecurring Level 3.
Real Estate Owned — Real estate owned is comprised of property acquired through foreclosure or voluntarily conveyed by borrowers. These assets are recorded on the date acquired at the lower of the related loan balance or fair value, less estimated disposition costs, with the fair value being determined by appraisal. Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or fair value, less estimated disposition costs. We classify real estate owned as nonrecurring Level 3.
The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at December 31, 2025:
| Fair value ($) | Valuation techniques | Significant unobservable inputs | Range (weighted average) | ||||||||||||||||||||
| Loans individually assessed | 38,698 | Appraisal value (1) | Estimated cost to sell | 10% | |||||||||||||||||||
| Real estate owned, net | 76 | Appraisal value (1) | Estimated cost to sell | 10% | |||||||||||||||||||
| Loans held for sale | 22,437 | Quoted prices for similar loans in active markets adjusted by an expected pull-through rate | Estimated pull-through rate | 100% | |||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
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.