v3.25.2
Fair Values of Assets and Liabilities
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Values of Assets and Liabilities Fair Value of Assets and Liabilities
The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. These financial assets and financial liabilities are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the inputs used to determine fair value. These levels are:

•Level 1—unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2—inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These 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, inputs other than quoted prices that are observable for the asset or liability or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3—significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the above valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the assets or liabilities. The following is a description of the valuation methodologies used for the Company’s assets and liabilities measured at fair value on a recurring basis.

Available-for-sale debt securities, trading account securities and equity securities with readily determinable fair value—Fair values for available-for-sale debt securities, trading account securities and equity securities with readily determinable fair value are typically based on prices obtained from independent pricing vendors. Securities measured with these valuation techniques are generally classified as Level 2 of the fair value hierarchy. Typically, standard inputs such as benchmark yields, reported trades for similar securities, issuer spreads, benchmark securities, bids, offers and reference data including market research publications are used to determine the fair value of these securities. When these inputs are not available, broker/dealer quotes may be obtained by the vendor to determine the fair value of the security. We review the vendor’s pricing methodologies to determine if observable market information is being used, versus unobservable inputs. Fair value measurements using
significant inputs that are unobservable in the market due to limited activity or a less liquid market are classified as Level 3 in the fair value hierarchy. The fair value of U.S. Treasury securities and certain equity securities with readily determinable fair value are based on unadjusted quoted prices in active markets for identical securities. As such, these securities are classified as Level 1 in the fair value hierarchy.

The Company’s Investment Operations Department is responsible for the valuation of Level 3 available-for-sale debt securities. The methodology and variables used as inputs in pricing Level 3 securities are derived from a combination of observable and unobservable inputs. The unobservable inputs are determined through internal assumptions that may vary from period to period due to external factors, such as market movement and credit rating adjustments.

At June 30, 2025, the Company classified $116.1 million of municipal securities as Level 3. These municipal securities are bond issues for various municipal government entities primarily located in the Chicago metropolitan area, southern Wisconsin and west Michigan and are privately placed, non-rated bonds without CUSIP numbers. The Company’s methodology for pricing these securities focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated investment debt security, the Investment Operations Department references a rated, publicly issued bond by the same issuer if available. A reduction is then applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one complete rating grade (i.e. a “AA” rating for a comparable bond would be reduced to “A” for the Company’s valuation). For bond issues without comparable bond proxies, a rating of “BBB” was assigned. In the second quarter of 2025, all of the ratings derived by the Investment Operations Department using the above process were “BBB” or better. The fair value measurement noted above is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined in the above process, Investment Operations obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets. Certain municipal bonds held by the Company at June 30, 2025 are continuously callable. When valuing these bonds, the fair value is capped at par value as the Company assumes a market participant would not pay more than par for a continuously callable bond.

Mortgage loans held-for-sale—The fair value of mortgage loans held-for-sale is typically determined by reference to investor price sheets for loan products with similar characteristics. Loans measured with this valuation technique are classified as Level 2 in the fair value hierarchy.

At June 30, 2025, the Company classified $27.2 million of certain delinquent mortgage loans held-for-sale as Level 3. For such delinquent loans in which investor interest may be limited, the Company estimates fair value by discounting future scheduled cash flows for the specific loan through its life, adjusted for estimated credit losses. The Company uses a discount rate based on prevailing market coupon rates on loans with similar characteristics. The assumed weighted average discount rate used as an input to value these loans at June 30, 2025 was 5.44%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. Additionally, the weighted average credit discount used as an input to value the specific loans was 0.80% with credit loss discount ranging from 0%-24% at June 30, 2025.

Loans held-for-investment—The fair value of loans held-for-investment is typically determined by reference to investor price sheets for loan products with similar characteristics. Loans measured with this valuation technique are classified as Level 2 in the fair value hierarchy.

The fair value for certain loans in which the Company previously elected the fair value option is estimated by discounting future scheduled cash flows for the specific loan through maturity, adjusted for estimated credit losses and prepayment or life assumptions. These loans primarily consist of early buyout loans guaranteed by U.S. government agencies that are delinquent and, as a result, investor interest may be limited. The Company uses a discount rate based on the actual coupon rate of the underlying loan. At June 30, 2025, the Company classified $53.0 million of loans held-for-investment carried at fair value as Level 3. The assumed weighted average discount rate used as an input to value these loans at June 30, 2025 was 5.49%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. As noted above, the fair value estimate also includes assumptions of prepayment speeds and average life as well as credit losses. The weighted average prepayments speed used as an input to value current loans was 9.34% at June 30, 2025. Prepayment speeds are inversely related to the fair value of these loans as an increase in prepayment speeds results in a decreased valuation. For delinquent loans in which performance is not assumed and there is a higher probability of resolution of the loan ending in foreclosure, the weighted average life of such loans was 5.7 years. Average life is inversely related to the fair value of these loans as an increase in estimated life results in a decreased valuation. Additionally, the weighted average credit discount used as an input to value the specific loans was 1.26% with credit loss discounts ranging from 0%-18% at June 30, 2025.
MSRs—Fair value for MSRs is determined utilizing a valuation model which calculates the fair value of each servicing right based on the present value of estimated future cash flows. The Company uses a discount rate commensurate with the risk associated with each servicing right, given current market conditions. At June 30, 2025, the Company classified $193.1 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at June 30, 2025 was 10.43% with discount rates applied ranging from 5%-27%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. The fair value of MSRs was also estimated based on other assumptions including prepayment speeds and the cost to service. Prepayment speeds ranged from 0%-91% or a weighted average prepayment speed of 9.34%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of $76 and $390, respectively, per loan. Prepayment speeds and the cost to service are both inversely related to the fair value of MSRs as an increase in prepayment speeds or the cost to service results in a decreased valuation. See Note (9) “Mortgage Servicing Rights (“MSRs”)” in Item 1 of this report for further discussion of MSRs.

Derivative instruments—The Company’s derivative instruments include interest rate swaps, caps and collars, commitments to fund mortgages for sale into the secondary market (interest rate locks), forward commitments to end investors for the sale of mortgage loans, commodity future contracts and foreign currency contracts. Interest rate swaps, caps and collars and commodity future contracts are valued by a third party, using models that primarily use market observable inputs, such as yield curves and commodity prices prevailing at the measurement date, and are classified as Level 2 in the fair value hierarchy. The credit risk associated with derivative financial instruments that are subject to master netting agreements is measured on a net basis by counterparty portfolio. The fair value for mortgage-related derivatives is based on changes in mortgage rates from the date of the commitments. The fair value of foreign currency derivatives is computed based on change in foreign currency rates stated in the contract compared to those prevailing at the measurement date.

At June 30, 2025, the Company classified $5.5 million of derivative assets related to interest rate locks as Level 3. The fair value of interest rate locks is based on prices obtained for loans with similar characteristics from third parties, adjusted for the pull-through rate, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund. The weighted-average pull-through rate at June 30, 2025 was 80.62% with pull-through rates applied ranging from 3% to 100%. Pull-through rates are directly related to the fair value of interest rate locks as an increase in the pull-through rate results in an increased valuation.

Nonqualified deferred compensation assets—The underlying assets relating to the nonqualified deferred compensation plan are included in a trust and primarily consist of non-exchange traded institutional funds which are priced based by an independent third party service. These assets are classified as Level 2 in the fair value hierarchy.
The following tables present the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented:
June 30, 2025
(In thousands)TotalLevel 1Level 2Level 3
Available-for-sale securities
U.S. Treasury$13,018 $13,018 $— $— 
U.S. government agencies45,824 — 45,824 — 
Municipal180,644 — 64,569 116,075 
Corporate notes 79,799 — 79,799 — 
Mortgage-backed4,566,430 — 4,566,430 — 
Trading account securities— — — — 
Equity securities with readily determinable fair value273,722 265,656 8,066 — 
Mortgage loans held-for-sale299,606 — 272,438 27,168 
Loans held-for-investment136,884 — 83,847 53,037 
MSRs193,061 — — 193,061 
Nonqualified deferred compensation assets17,283 — 17,283 — 
Derivative assets221,106 — 215,558 5,548 
Total$6,027,377 $278,674 $5,353,814 $394,889 
Derivative liabilities$161,402 $— $161,402 $— 

December 31, 2024
(In thousands)TotalLevel 1Level 2Level 3
Available-for-sale securities
U.S. Treasury$37,907 $37,907 $— $— 
U.S. government agencies44,945 — 44,945 — 
Municipal184,593 — 62,986 121,607 
Corporate notes 81,162 — 81,162 — 
Mortgage-backed3,792,875 — 3,792,875 — 
Trading account securities4,072 — 4,072 — 
Equity securities with readily determinable fair value215,412 207,346 8,066 — 
Mortgage loans held-for-sale331,261 — 270,862 60,399 
Loans held-for-investment158,795 — 123,899 34,896 
MSRs203,788 — — 203,788 
Nonqualified deferred compensation assets16,653 — 16,653 — 
Derivative assets200,027 — 198,077 1,950 
Total$5,271,490 $245,253 $4,603,597 $422,640 
Derivative liabilities$241,750 $— $241,750 $— 

June 30, 2024
(In thousands)TotalLevel 1Level 2Level 3
Available-for-sale securities
U.S. Treasury$102,712 $102,712 $— $— 
U.S. government agencies45,192 — 45,192 — 
Municipal146,608 — 50,816 95,792 
Corporate notes 77,975 — 77,975 — 
Mortgage-backed3,957,470 — 3,957,470 — 
Trading account securities4,134 — 4,134 — 
Equity securities with readily determinable fair value112,173 104,107 8,066 — 
Mortgage loans held-for-sale411,851 — 371,306 40,545 
Loans held-for-investment135,834 — 90,113 45,721 
MSRs204,610 — — 204,610 
Nonqualified deferred compensation assets16,041 — 16,041 — 
Derivative assets243,860 — 239,065 4,795 
Total$5,458,460 $206,819 $4,860,178 $391,463 
Derivative liabilities$317,659 $— $317,659 $— 
The aggregate remaining contractual principal balance outstanding as of June 30, 2025, December 31, 2024 and June 30, 2024 for mortgage loans held-for-sale measured at fair value under ASC 825 was $313.4 million, $335.9 million and $414.1 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was $299.6 million, $331.3 million and $411.9 million, for the same respective periods, as shown in the above tables. At June 30, 2025, $200,000 of mortgage loans held-for-sale were classified as nonaccrual compared to $4.0 million as of December 31, 2024 and $2.1 million as of June 30, 2024. Additionally, there were $27.5 million of loans past due greater than 90 days and still accruing in the mortgage loans held-for-sale portfolio as of June 30, 2025 compared to $59.3 million as of December 31, 2024 and $39.4 million as of June 30, 2024. All of the nonaccrual loans and loans past due greater than 90 days and still accruing within the mortgage loans held-for-sale portfolio at June 30, 2025, December 31, 2024, and June 30, 2024 were individual delinquent mortgage loans bought back from GNMA at the unconditional option of the Company as servicer for those loans.

The aggregate remaining contractual principal balance outstanding as of June 30, 2025, December 31, 2024 and June 30, 2024 for loans held-for-investment measured at fair value under ASC 825 was $136.1 million, $157.8 million and $136.1 million, respectively, while the aggregate fair value of loans held-for-investment was $136.9 million, $158.8 million and $135.8 million, respectively, as shown in the above tables.

The changes in Level 3 assets measured at fair value on a recurring basis during the three and six months ended June 30, 2025 and 2024 are summarized as follows:
Mortgage loans held-for-saleLoans held-for- investmentMortgage
servicing rights		Derivative assets
(In thousands)Municipal
Balance at April 1, 2025$121,844 $56,324 $34,002 $196,307 $5,493 
Total net (losses) gains included in:
Net income (1)
— 479 565 (3,246)55 
Other comprehensive income or loss(2,353)— — — — 
Purchases— — — — — 
Settlements(3,416)(44,819)(7,778)— — 
Net transfers into Level 3
— 15,184 26,248 — — 
Balance at June 30, 2025$116,075 $27,168 $53,037 $193,061 $5,548 

Mortgage loans held-for-saleLoans held-for- investmentMortgage
servicing rights		Derivative assets
(In thousands)Municipal
Balance at April 1, 2024$88,219 $33,726 $49,317 $201,044 $6,212 
Total net (losses) gains included in:
Net income (1)
— 205 66 3,566 (1,417)
Other comprehensive income or loss(680)— — — — 
Purchases9,682 — — — — 
Settlements(1,429)(10,269)(7,709)— — 
Net transfers into Level 3— 16,883 4,047 — — 
Balance at June 30, 2024$95,792 $40,545 $45,721 $204,610 $4,795 
(1)Changes in the balance of mortgage loans held-for-sale, MSRs, and derivative assets related to fair value adjustments are recorded as components of mortgage banking revenue. Changes in the balance of loans held-for-investment related to fair value adjustments are recorded as other non-interest income.
Mortgage loans held-for-saleLoans held-for- investmentMortgage
servicing rights		Derivative Assets
(In thousands)Municipal
Balance at January 1, 2025
$121,607 $60,399 $34,896 $203,788 $1,950 
Total net (losses) gains included in:
Net income (1)
— 1,452 836 (10,727)3,598 
Other comprehensive income or loss(7,431)— — — — 
Purchases15,282 — — — — 
Issuances— — — — — 
Sales— — — — — 
Settlements(13,383)(69,420)(12,725)— — 
Net transfers into Level 3
— 34,737 30,030 — — 
Balance at June 30, 2025$116,075 $27,168 $53,037 $193,061 $5,548 

Mortgage loans held-for-saleLoans held-for- investmentMortgage
servicing rights		Derivative Assets
(In thousands)Municipal
Balance at January 1, 2024
$86,237 $26,835 $60,670 $192,456 $4,510 
Total net (losses) gains included in:
Net income (1)
— 272 (251)12,154 285 
Other comprehensive income or loss(2,668)— — — — 
Purchases18,066 — — — — 
Sales— — — — — 
Settlements(5,843)(20,609)(23,512)— — 
Net transfers into Level 3— 34,047 8,814 — — 
Balance at June 30, 2024$95,792 $40,545 $45,721 $204,610 $4,795 
(1)Changes in the balance of mortgage loans held-for-sale, MSRs and derivative assets related to fair value adjustments are recorded as components of mortgage banking revenue. Changes in the balance of loans held-for-investment related to fair value adjustments are recorded as other non-interest income.
Also, the Company may be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from impairment charges on individual assets. For assets measured at fair value on a non-recurring basis that were still held in the balance sheet at the end of the period, the following table provides the carrying value of the related individual assets or portfolios at June 30, 2025:
June 30, 2025
Three Months Ended June 30, 2025
Fair Value Losses Recognized, net
Six Months Ended June 30, 2025
Fair Value Losses Recognized, net
(In thousands)TotalLevel 1Level 2Level 3
Individually assessed loans - foreclosure probable and collateral-dependent$143,486 $— $— $143,486 $11,075 $21,155 
Other real estate owned (1)
23,615 — — 23,615 325 816 
Total$167,101 $— $— $167,101 $11,400 $21,971 
(1)Net fair value losses recognized on other real estate owned include valuation adjustments and charge-offs during the respective period.

Individually assessed loans—In accordance with ASC 326, the allowance for credit losses for loans and other financial assets held at amortized cost should be measured on a collective or pooled basis when such assets exhibit similar risk characteristics. In instances in which a financial asset does not exhibit similar risk characteristics to a pool, the Company is required to measure such allowance for credit losses on an individual asset basis. For the Company’s loan portfolio, nonaccrual loans are considered to not exhibit similar risk characteristics as pools and thus are individually assessed. Credit losses are measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the fair value of the underlying collateral. Individually assessed loans are considered a fair value measurement where an allowance for credit loss is established based on the fair value of collateral. Appraised values on relevant real estate properties, which may require adjustments to market-based valuation inputs, are generally used on foreclosure probable and collateral-dependent loans within the real estate portfolios.
The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs of individually assessed loans. For more information on individually assessed loans refer to Note (7) “Allowance for Credit Losses” in Item 1 of this report. At June 30, 2025, the Company had $143.5 million of individually assessed loans classified as Level 3. All of the $143.5 million of individually assessed loans were measured at fair value based on the underlying collateral of the loan as shown in the table above.

Other real estate owned —Other real estate owned is comprised of real estate acquired in partial or full satisfaction of loans and is included in other assets. Other real estate owned is recorded at its estimated fair value less estimated selling costs at the date of transfer, with any excess of the related loan balance over the fair value less expected selling costs charged to the allowance for loan losses. Subsequent changes in value are reported as adjustments to the carrying amount and are recorded in other non-interest expense. Gains and losses upon sale, if any, are also charged to other non-interest expense. Fair value is generally based on third party appraisals and internal estimates that are adjusted by a discount representing the estimated cost of sale and is therefore considered a Level 3 valuation.

The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs for other real estate owned. At June 30, 2025, the Company had $23.6 million of other real estate owned classified as Level 3. The unobservable input applied to other real estate owned relates to the 10% reduction to the appraisal value representing the estimated cost of sale of the foreclosed property. A higher discount for the estimated cost of sale results in a decreased carrying value.

The valuation techniques and significant unobservable inputs used to measure both recurring and non-recurring Level 3 fair value measurements at June 30, 2025 were as follows:
(Dollars in thousands)Fair ValueValuation MethodologySignificant Unobservable InputInput / Range of InputsWeighted
Average
of Inputs		Impact to valuation
from an increased or
higher input value
Measured at fair value on a recurring basis:
Municipal securities$116,075 Bond pricingEquivalent ratingBBB-AA+N/AIncrease
Mortgage loans held-for-sale27,168 Discounted cash flowsDiscount rate
5.44%
5.44%Decrease
Credit discount
0% - 24%
0.80%Decrease
Loans held-for-investment53,037 Discounted cash flowsDiscount rate
5.44% - 6.38%
5.49%Decrease
Credit discount
0% - 18%
1.26%Decrease
Constant prepayment rate (CPR) - current loans
9.34%
9.34%Decrease
Average life - delinquent loans (in years)
1.2 years - 11.5 years
5.7 yearsDecrease
MSRs193,061 Discounted cash flowsDiscount rate
5% - 27%
10.43%Decrease
Constant prepayment rate (CPR)
0% - 91%
9.34%Decrease
Cost of servicing
$70 - $200
$76 Decrease
Cost of servicing - delinquent
$200 - 1,000
$390 Decrease
Derivatives5,548 Discounted cash flowsPull-through rate
3% - 100%
80.62 %Increase
Measured at fair value on a non-recurring basis:
Individually assessed loans - foreclosure probable and collateral-dependent143,486 Appraisal valueAppraisal adjustment - cost of sale10%10.00%Decrease
Other real estate owned23,615 Appraisal valueAppraisal adjustment - cost of sale10%10.00%Decrease
The Company is required under applicable accounting guidance to report the fair value of all financial instruments on the Consolidated Statements of Condition, including those financial instruments carried at cost. The table below presents the carrying amounts and estimated fair values of the Company’s financial instruments as of the dates shown:

At June 30, 2025At December 31, 2024At June 30, 2024
CarryingFairCarryingFairCarryingFair
(In thousands)ValueValueValueValueValueValue
Financial Assets:
Cash and cash equivalents$695,564 $695,564 $458,536 $458,536 $415,524 $415,524 
Interest-bearing deposits with banks4,569,618 4,569,618 4,409,753 4,409,753 2,824,314 2,824,314 
Available-for-sale securities4,885,715 4,885,715 4,141,482 4,141,482 4,329,957 4,329,957 
Held-to-maturity securities3,502,186 2,869,415 3,613,263 2,910,550 3,755,924 3,060,467 
Trading account securities— — 4,072 4,072 4,134 4,134 
Equity securities with readily determinable fair value273,722 273,722 215,412 215,412 112,173 112,173 
FHLB and FRB stock, at cost282,087 282,087 281,407 281,407 256,495 256,495 
Brokerage customer receivables— — 18,102 18,102 13,682 13,682 
Mortgage loans held-for-sale, at fair value299,606 299,606 331,261 331,261 411,851 411,851 
Loans held-for-investment, at fair value136,884 136,884 158,795 158,795 135,834 135,834 
Loans held-for-investment, at amortized cost50,904,795 50,121,351 47,896,242 47,070,249 44,539,697 43,461,319 
Nonqualified deferred compensation assets17,283 17,283 16,653 16,653 16,041 16,041 
Derivative assets221,106 221,106 200,027 200,027 243,860 243,860 
Accrued interest receivable and other576,813 576,813 563,625 563,625 505,504 505,504 
Total financial assets$66,365,379 $64,949,164 $62,308,630 $60,779,924 $57,564,990 $55,791,155 
Financial Liabilities:
Non-maturity deposits$45,484,115 $45,484,115 $43,092,318 $43,092,318 $38,778,256 $38,778,256 
Deposits with stated maturities10,332,696 10,319,942 9,420,031 9,423,976 9,270,770 9,248,374 
FHLB advances3,151,309 3,185,868 3,151,309 3,153,524 3,176,309 3,195,138 
Other borrowings625,392 625,402 534,803 534,406 606,579 605,305 
Subordinated notes298,458 292,668 298,283 286,683 298,113 273,666 
Junior subordinated debentures253,566 253,573 253,566 253,588 253,566 253,571 
Derivative liabilities161,402 161,402 241,750 241,750 317,659 317,659 
Accrued interest payable57,470 57,470 48,364 48,364 66,373 66,373 
Total financial liabilities$60,364,408 $60,380,440 $57,040,424 $57,034,609 $52,767,625 $52,738,342 

Not all the financial instruments listed in the table above are subject to the disclosure provisions of ASC Topic 820, as certain assets and liabilities result in their carrying value approximating fair value. These include cash and cash equivalents, interest-bearing deposits with banks, brokerage customer receivables, FHLB and FRB stock, accrued interest receivable and accrued interest payable and non-maturity deposits.

The following methods and assumptions were used by the Company in estimating fair values of financial instruments that were not previously disclosed.

Held-to-maturity securities — Held-to-maturity securities include U.S. government-sponsored agency securities, municipal bonds issued by various municipal government entities primarily located in the Chicago metropolitan area, southern Wisconsin, and west Michigan and mortgage-backed securities. Fair values for held-to-maturity securities are typically based on prices obtained from independent pricing vendors. In accordance with ASC 820, the Company has generally categorized these held-to-maturity securities as a Level 2 fair value measurement. Fair values for certain other held-to-maturity securities are based on the bond pricing methodology discussed previously related to certain available-for-sale securities. In accordance with ASC 820, the Company has categorized these held-to-maturity securities as a Level 3 fair value measurement.

Loans held-for-investment, at amortized cost — Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are analyzed by type (commercial, residential real estate, etc.) and category within each type (construction, non-construction, franchise lending etc.). Each category is further segmented by interest rate type (fixed and variable). The fair value of both fixed and variable rate loans is estimated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect credit and interest rate risks inherent in the loan. In accordance with ASC 820, the Company has categorized loans as a Level 3 fair value measurement.
Deposits with stated maturities — The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently in effect for deposits of similar remaining maturities. In accordance with ASC 820, the Company has categorized deposits with stated maturities as a Level 3 fair value measurement.

FHLB advances — The fair value of FHLB advances is calculated using a discounted cash flow analysis based on current market rates of similar maturity debt securities to discount cash flows. In accordance with ASC 820, the Company has categorized FHLB advances as a Level 3 fair value measurement.

Subordinated notes — The fair value of the subordinated notes is based on a market price obtained from an independent pricing vendor. In accordance with ASC 820, the Company has categorized subordinated notes as a Level 2 fair value measurement.
Junior subordinated debentures — The fair value of the junior subordinated debentures is based on the discounted value of contractual cash flows. In accordance with ASC 820, the Company has categorized junior subordinated debentures as a Level 3 fair value measurement.