ASC Subtopic
820-10 “Fair
Value
Measurements
and Disclosures”
establishes
a fair
value
hierarchy
that prioritizes
the inputs
to
valuation techniques
used to
measure fair
value
into three
levels
in order
to increase
consistency
and comparability
in fair
value
measurements and disclosures. The hierarchy is broken down into three levels based on the reliability of inputs as
follows:
●
Level 1
- Unadjusted quoted prices in
active markets for identical assets
or liabilities that the Corporation
has the ability to
access at
the measurement
date. Valuation
on these
instruments does
not necessitate
a significant
degree of
judgment
since valuations are based on quoted prices that are readily available in an active market.
●
Level 2
- Quoted prices other than
those included in Level 1
that are observable either directly
or indirectly.
Level 2 inputs
include
quoted
prices
for
similar
assets
or
liabilities
in
active
markets,
quoted
prices
for
identical
or
similar
assets
or
liabilities
in
markets
that
are
not
active,
or
other
inputs
that
are
observable
or
that
can
be
corroborated
by
observable
market data for substantially the full term of the financial instrument.
●
-
Inputs
are
unobservable
and
significant
to
the
fair
value
measurement.
Unobservable
inputs
reflect
the
Corporation’s own judgements about assumptions that market participants would use in pricing the asset
or liability.
The
Corporation
maximizes
the
use
of
observable
inputs
and
minimizes
the
use
of
unobservable
inputs
by
requiring
that
the
observable inputs be
used when available.
Fair value is
based upon quoted
market prices when
available. If listed
prices or quotes
are
not
available,
the
Corporation
employs
internally-developed
models
that
primarily
use
market-based
inputs
including
yield
curves, interest
rates, volatilities,
and credit
curves, among
others. Valuation
adjustments are
limited to
those necessary
to ensure
that the financial
instrument’s fair value
is adequately representative
of the price
that would be
received or paid
in the marketplace.
These adjustments include
amounts that reflect counterparty
credit quality,
the Corporation’s credit
standing, constraints on liquidity
and unobservable parameters that
are applied consistently.
There have been no changes
in the Corporation’s
methodologies used
to estimate the fair value of assets and liabilities from those disclosed in the 2024 Form 10-K.
The estimated
fair value
may be
subjective in
nature and
may involve
uncertainties and
matters of
significant judgment
for certain
financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect
the results.