Accounting guidance on fair value measurements uses a hierarchy intended to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy includes three levels and is based upon the valuation techniques used to measure assets and liabilities. The three levels are as follows:

Assets measured at fair value on a recurring basis comprised the following at December 31, 2020 and 2019:


			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

	(dollars in thousands)
December 31, 2020:
Securities AFS:
U.S. govt. sponsored agency securities	$	15,336	$	—	$	15,336	$	—
Residential mortgage-backed and related securities		132,842		—		132,842		—
Municipal securities		152,408		—		152,408		—
Asset-backed securities		40,683		—		40,683		—
Other securities		20,697		—		20,697		—
Derivatives		222,757		—		222,757		—
Total assets measured at fair value	$	584,723	$	—	$	584,723	$	—

Derivatives	$	229,270	$	—	$	229,270	$	—
Total liabilities measured at fair value	$	229,270	$	—	$	229,270	$	—


December 31, 2019:
Securities AFS:
U.S. govt. sponsored agency securities	$	20,078	$	—	$	20,078	$	—
Residential mortgage-backed and related securities		120,587		—		120,587		—
Municipal securities		48,257		—		48,257		—
Asset-backed securities		16,887		—		16,887		—
Other securities		4,886		—		4,886		—
Derivatives		87,827		—		87,827		—
Total assets measured at fair value	$	298,522	$	—	$	298,522	$	—

Derivatives	$	88,437	$	—	$	88,437	$	—
Total liabilities measured at fair value	$	88,437	$	—	$	88,437	$	—

The securities AFS portfolio consists of securities whereby the Company obtains fair values from an independent pricing service. The fair values are determined by pricing models that consider observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems (Level 2 inputs).

Note 22. Fair Value (continued)

Interest rate caps are used for the purpose of hedging interest rate risk. See Note 7 to the Consolidated Financial Statements for the details of these instruments. The fair values are determined by pricing models that consider observable market data for derivative instruments with similar structures (Level 2 inputs).

Interest rate swaps are used for the purpose of hedging interest rate risk on junior subordinated debt. See Note 7 to the Consolidated Financial Statements for the details of these instruments. The fair values are determined by comparing the contract rate on the swap with the then-current market rate for the remaining term of the transaction (Level 2 inputs).

Interest rate swaps are also executed for select commercial customers. See Note 7 to the Consolidated Financial Statements for the detail of these instruments. The fair values are determined by comparing the contractual rate on the swap with the then-current market rate for the remaining term of the transaction (Level 2 inputs).

Certain financial assets are measured at fair value on a non-recurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Assets measured at fair value on a non-recurring basis comprised the following at December 31, 2020 and 2019:


			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		Level 1		Level 2		Level 3

	(dollars in thousands)
December 31, 2020:
Impaired loans/leases	$	9,926	$	—	$	—	$	9,926
OREO		22		—		—		22
	$	9,948	$	—	$	—	$	9,948

December 31, 2019:
Impaired loans/leases	$	3,394	$	—	$	—	$	3,394
OREO		4,459		—		—		4,459
	$	7,853	$	—	$	—	$	7,853

Impaired loans/leases are evaluated and valued at the time the loan/lease is identified as impaired, at the lower of cost or fair value, and are classified as a Level 3 in the fair value hierarchy. Fair value is measured based on the value of the collateral securing these loans/leases. Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable and is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business.

OREO in the table above consists of property acquired through foreclosures and settlements of loans. Property acquired is carried at the estimated fair value of the property, less disposal costs, and is classified as a Level 3 in the fair value hierarchy. The estimated fair value of the property is determined based on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values are discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the property.

Note 22. Fair Value (continued)

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:


	Quantitative Information about Level Fair Value Measurements
	Fair Value		Fair Value
	December 31,		December 31,
	2020		2019		Valuation Technique	Unobservable Input	Range

	(dollars in thousands)

Impaired loans/leases	$	9,926	$	3,394	Appraisal of collateral	Appraisal adjustments	-10.00	%	to	-30.00	%
OREO		22		4,459	Appraisal of collateral	Appraisal adjustments	0.00	%	to	-35.00	%

For impaired loans/leases and OREO, the Company records carrying value at fair value less disposal or selling costs. The amounts reported in the tables above are fair values before the adjustment for disposal or selling costs.

There have been no changes in valuation techniques used for any assets measured at fair value during the years ended December 31, 2020 or 2019.

The following table presents the carrying values and estimated fair values of financial assets and liabilities carried on the Company’s consolidated balance sheet, including those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis:


	Fair Value	As of December 31, 2020				As of December 31, 2019
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Value		Fair Value		Value		Fair Value

		(dollars in thousands)

Cash and due from banks	Level 1	$	61,329	$	61,329	$	76,254	$	76,254
Federal funds sold	Level 2		9,080		9,080		9,800		9,800
Interest-bearing deposits at financial institutions	Level 2		86,596		86,596		147,891		147,891
Investment securities:
HTM	Level 2		476,165		521,277		400,646		426,545
AFS	Level 2		361,966		361,966		210,695		210,695
Loans/leases receivable, net	Level 3		9,191		9,926		3,143		3,394
Loans/leases receivable, net	Level 2		4,157,562		4,112,735		3,651,061		3,606,520
Derivatives	Level 2		222,757		222,757		87,827		87,827

Deposits:
Nonmaturity deposits	Level 2		4,138,478		4,138,478		3,184,726		3,184,726
Time deposits	Level 2		460,659		465,681		726,325		742,444
Short-term borrowings	Level 2		5,430		5,430		13,423		13,423
FHLB advances	Level 2		15,000		14,998		159,300		159,193
Subordinated notes	Level 2		118,691		122,406		68,394		68,563
Junior subordinated debentures	Level 2		37,993		30,618		37,838		30,477
Derivatives	Level 2		229,270		229,270		88,437		88,437