The following is a summary of the carrying values and estimated fair values of the Company’s significant financial instruments as of the dates indicated:


	September 30, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(dollars in thousands)
Financial assets
Cash and cash equivalents	$	25,353	$	25,353	$	30,719	$	30,719
Securities available for sale		136,253		136,253		153,416		153,416
Securities held to maturity		980,591		784,636		1,051,997		885,586
Loans, net		3,989,773		3,574,502		4,025,082		3,783,051
FHLB of Boston stock		12,321		12,321		6,264		6,264
Accrued interest receivable		15,255		15,255		14,118		14,118
Mortgage servicing rights		1,511		2,345		1,665		2,336
Interest rate contracts - cash flow hedge		799		799		1,966		1,966
Loan level interest rate swaps		59,287		59,287		50,784		50,784
Risk participation agreements out to counterparties		6		6		23		23
Interest rate contracts - fair value hedge		6,329		6,329		—		—

Financial liabilities
Deposits, excluding wholesale deposits		4,082,582		4,078,271		4,433,817		4,429,190
Wholesale deposits		483,344		483,028		381,559		381,505
Borrowings		233,905		232,431		105,212		105,202
Loan level interest rate swaps		59,287		59,287		50,784		50,784
Risk participation agreements in with counterparties		18		18		43		43

The Company follows ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) for financial assets and liabilities. ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. ASC Topic 820, among other things, emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions the market participants would use in pricing the asset or liability. In addition, ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the types of valuation information (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Under ASC Topic 820, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When available, the Company uses quoted market prices to determine fair value. If quoted prices are not available, fair value is based upon valuation techniques, such as matrix pricing or other models that use, where possible, current market-based or independently sourced market parameters, such as interest rates. If observable market-based inputs are not available, the Company uses unobservable inputs to determine appropriate valuation adjustments using methodologies applied consistently over time.

Valuation techniques based on unobservable inputs are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows and the selection of discount rates that may appropriately reflect market and credit risks.

Changes in these judgments often have a material impact on the fair value estimates. In addition, since these estimates are as of a specific point in time, they are susceptible to material near-term changes. The fair values disclosed do not reflect any premium or discount that could result from offering significant holdings of financial instruments at bulk sale, nor do they reflect the possible tax ramifications or estimated transaction costs. Changes in economic conditions may also dramatically affect the estimated fair values.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, derivative instruments, and hedges are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, mortgage servicing rights, other real estate owned, and individually evaluated collateral dependent loans. The Company uses an exit price notion for its fair value disclosures.

The following tables summarize certain assets and liabilities reported at fair value on a recurring basis:


	Fair Value as of September 30, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Measured on a recurring basis
Securities available for sale
U.S. GSE obligations	$	—	$	19,486	$	—	$	19,486
Mortgage-backed securities		—		116,767		—		116,767
Other assets
Interest rate swaps with clients		—		59,287		—		59,287
Risk participation agreements -out to counterparties		—		6		—		6
Interest rate contracts - cash flow hedge		—		799		—		799
Interest rate contracts - fair value hedge		—		6,329		—		6,329
Other liabilities
Interest rate swaps with counterparties		—		59,287		—		59,287
Risk participation agreements-in with counterparties		—		18		—		18


	Fair Value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Measured on a recurring basis
Securities available for sale
U.S. GSE obligations	$	—	$	19,733	$	—	$	19,733
Mortgage-backed securities		—		132,683		—		132,683
Corporate debt securities		—		1,000		—		1,000
Other assets
Interest rate swaps with clients		—		50,784		—		50,784
Risk participation agreements-out to counterparties		—		23		—		23
Interest rate contracts		—		1,966		—		1,966
Other liabilities
Interest rate swaps with counterparties		—		50,784		—		50,784
Risk participation agreements-in with counterparties		—		43		—		43

The following tables present the carrying value of assets held at September 30, 2023 and December 31, 2022, which were measured at fair value on a non-recurring basis:


	September 30, 2023
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Items recorded at fair value on a non-recurring basis
Assets
Individually evaluated collateral dependent loans	$	—	$	—	$	9,321	$	9,321
Total	$	—	$	—	$	9,321	$	9,321


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Items recorded at fair value on a non-recurring basis
Assets
Individually evaluated collateral dependent loans	$	—	$	—	$	103	$	103
Total	$	—	$	—	$	103	$	103

Individually evaluated collateral dependent loans. Collateral dependent loans are carried at the lower of cost or fair value of the collateral less estimated costs to sell which approximates fair value. The Company uses the appraisal value of the collateral and applies certain adjustments depending on the nature, quality, and type of collateral securing the loan.

There were no transfers between levels for the three and nine months ended September 30, 2023 or September 30, 2022.

The following is a description of the principal valuation methodologies used by the Company to estimate the fair values of its financial instruments:

For investment securities, fair values are primarily based upon valuations obtained from a national pricing service which uses matrix pricing with inputs that are observable in the market or can be derived from, or corroborated by, observable market data. When available, quoted prices in active markets for identical securities are utilized.

For loans held for sale, fair values are estimated using projected future cash flows, discounted at rates based upon either trades of similar loans or mortgage-backed securities, or at current rates at which similar loans would be made to borrowers with similar credit ratings and for similar remaining maturities.

For most categories of loans, fair values are estimated using projected future cash flows, discounted at rates based upon current rates at which similar loans would be made to borrowers with similar credit ratings, and for similar remaining maturities. Projected estimated cash flows are adjusted for prepayment assumptions, liquidity premium assumptions, and credit loss assumptions. Loans that are deemed to be impaired in accordance with ASC 310, Receivables, are valued based upon the lower of cost or fair value of the underlying collateral.

The fair value of FHLB of Boston stock equals its carrying value since such stock is only redeemable at its par value.

The fair value of non-maturity deposit accounts is the amount payable on demand at the reporting date. This amount does not take into account the value of the Bank’s long-term relationships with core depositors. The fair value of fixed-maturity certificates of deposit is estimated using a replacement cost of funds approach and is based upon rates currently offered for deposits of similar remaining maturities.

For long-term borrowings, fair values are estimated using future cash flows, discounted at rates based upon current costs for debt securities with similar terms and remaining maturities.

Cash and cash equivalents, accrued interest receivable, and short-term borrowings have fair values which approximate their respective carrying values because these instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

In the course of originating loans and extending credit, the Company will charge fees in exchange for its commitment. While these commitment fees have value, the Company has not estimated their value due to the short-term nature of the underlying commitments and their immateriality.

In accordance with ASC Topic 820, the Company has not estimated fair values for non-financial assets, such as banking premises and equipment, goodwill, the intangible value of the Company’s portfolio of loans serviced for itself, and the intangible value inherent in the Company’s deposit relationships (i.e., core deposits), among others. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.