Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data (for example, interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, credit risks, and default rates).

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available-for sale-are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the

industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of interest-only (“I/O”) strip receivable assets is based on a valuation model used by a third party. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness (Level 2 inputs).

There were no transfers between Level 1 and Level 2 during the period for assets measured at fair value on a recurring basis.

The fair value of collateral dependent loans individually evaluated with specific allocations of the allowance for credit losses on loans is generally based on recent real estate appraisals. The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. There were no material collateral dependent loans carried at fair value on a non-recurring basis at March 31, 2023 or December 31, 2022.

Foreclosed assets are valued at the time the loan is foreclosed upon and the asset is transferred to foreclosed assets. The fair value is based primarily on third party appraisals, less costs to sell. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. At March 31, 2023 and December 31, 2022, there were no foreclosed assets on the balance sheet.

The carrying amounts and estimated fair values of financial instruments at March 31, 2023 are as follows:

(1) Before allowance for credit losses on loans of $47,273,000.

The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2022:


				Estimated Fair Value
						Significant
				Quoted Prices in		Other		Significant
				Active Markets for		Observable		Unobservable
	Carrying			Identical Assets		Inputs		Inputs
	Amounts			(Level 1)		(Level 2)		(Level 3)		Total

	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	306,603		$	306,603	$	—	$	—	$	306,603
Securities available-for-sale		489,596			418,474		71,122		—		489,596
Securities held-to-maturity		714,990			—		614,452		—		614,452
Loans (including loans held-for-sale)		3,301,006	⁽¹⁾		—		2,456		3,080,485		3,082,941
FHLB stock, FRB stock, and other
investments		32,522			—		—		—		N/A
Accrued interest receivable		15,047			1,328		1,836		11,883		15,047
I/O strips receivables		152			—		152		—		152
Liabilities:
Time deposits	$	143,958		$	—	$	144,702	$	—	$	144,702
Other deposits		4,245,646			—		4,245,646		—		4,245,646
Subordinated debt		39,350			—		36,025		—		36,025
Accrued interest payable		600			—		600		—		600

(1) Before allowance for credit losses on loans of $47,512,000.