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 2025 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.