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Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2021

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the assets and liabilities measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020, classified using the fair value hierarchy:


	At September 30, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:


State and political subdivisions	$	—	$	2,333	$	—	$	2,333
Residential mortgage-backed securities	—		180,842		—		180,842
Collateralized mortgage obligations	—		3,708		—		3,708
Corporate bonds	—		81,265		9,625		90,890
Total available-for-sale securities	—		268,148		9,625		277,773
Equity securities:
Equity securities - financial services industry	982		—		—		982
Money market mutual funds	1,979		—		—		1,979
Total equity securities	2,961		—		—		2,961
Loans*	—		—		82		82
Loans held for sale	—		29,093		—		29,093

Interest rate locks with customers*	—		1,256		—		1,256
Forward loan sale commitments*	—		167		—		167
Total assets	$	2,961	$	298,664	$	9,707	$	311,332
Liabilities:

Interest rate swaps*	$	—	$	311	$	—	$	311
Credit derivatives*	—		—		350		350


Total liabilities	$	—	$	311	$	350	$	661

* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."

The $9.6 million of corporate bonds was comprised of one investment grade bond and the Corporation utilizes a third party to estimate fair value. The value is derived from a discounted cash flow analysis which utilizes a probability of default input. The $350 thousand of credit derivatives liability represents the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of 123 interest rate swaps with a current notional amount of $762.4 million. The September 30, 2021 CVA assumes a zero-deal recovery percentage based on the most recent index credit curve.

Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Level 3 Rollforward

The following table includes a rollforward of corporate bonds, loans and credit derivatives for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the nine months ended September 30, 2021 and 2020:


	Nine Months Ended September 30, 2021
(Dollars in thousands)	Balance at December 31, 2020		Additions		Payments received		Increase (decrease) in value		Balance at September 30, 2021
Corporate bonds	$	9,600	$	—	$	—	$	25	$	9,625
Loans	187		—		(100)		(5)		82
Credit derivatives	(535)		(1,681)		—		1,866		(350)
Net total	$	9,252	$	(1,681)	$	(100)	$	1,886	$	9,357


	Nine Months Ended September 30, 2020
(Dollars in thousands)	Balance at December 31, 2019		Additions		Payments received		Increase (decrease) in value		Balance at September 30, 2020
Corporate bonds	$	—	$	—	$	—	$	—	$	—
Loans	317		—		(91)		(5)		221
Credit derivatives	(176)		(4,683)		—		4,143		(716)
Net total	$	141	$	(4,683)	$	(91)	$	4,138	$	(495)

Contingent Consideration Liability Change In Amount

The following table presents the change in the balance of the contingent consideration liability related to acquisitions for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the nine months ended September 30, 2021 and 2020:


	Nine Months Ended September 30, 2021
(Dollars in thousands)	Balance at December 31, 2020		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2021
Girard Partners	$	55	$	—	$	58	$	3	$	—
Total contingent consideration liability	$	55	$	—	$	58	$	3	$	—


	Nine Months Ended September 30, 2020
(Dollars in thousands)	Balance at December 31, 2019		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2020
Girard Partners	$	160	$	—	$	91	$	14	$	83
Total contingent consideration liability	$	160	$	—	$	91	$	14	$	83

Assets Measured at Fair Value on Non-Recurring Basis

The Corporation may be required to periodically measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market accounting or changes in the value of loans held for investment analyzed on an individual basis. The following table represents assets measured at fair value on a non-recurring basis at September 30, 2021 and December 31, 2020:


	At September 30, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	34,483	$	34,483

Other real estate owned	—		—		279		279
Total	$	—	$	—	$	34,762	$	34,762


	At December 31, 2020
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	30,900	$	30,900

Other real estate owned	—		—		7,355		7,355
Total	$	—	$	—	$	38,255	$	38,255

Assets, Liabilities and Off-Balance Sheet Items Not Measured at Fair Value

The following table presents assets and liabilities not measured at fair value on a recurring or non-recurring basis in the Corporation’s condensed consolidated balance sheets but for which the fair value is required to be disclosed at September 30, 2021 and December 31, 2020. The disclosed fair values are classified using the fair value hierarchy.


	At September 30, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	902,357	$	—	$	—	$	902,357	$	902,357

Held-to-maturity securities	—		115,661		—		115,661		112,643
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		28,679
Net loans and leases held for investment	—		—		5,223,709		5,223,709		5,147,334
Servicing rights	—		—		10,336		10,336		7,610
Total assets	$	902,357	$	115,661	$	5,234,045	$	6,252,063	$	6,198,623
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,444,114	$	—	$	—	$	5,444,114	$	5,444,114
Time deposits	—		500,192		—		500,192		494,040
Total deposits	5,444,114		500,192		—		5,944,306		5,938,154
Short-term borrowings	—		14,101		—		14,101		14,101
Long-term debt	—		96,762		—		96,762		95,000
Subordinated notes	—		105,500		—		105,500		98,797
Total liabilities	$	5,444,114	$	716,555	$	—	$	6,160,669	$	6,146,052


	At December 31, 2020
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	219,858	$	—	$	—	$	219,858	$	219,858
Held-to-maturity securities	—		156,325		—		156,325		151,257
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		28,183
Net loans and leases held for investment	—		—		5,338,782		5,338,782		5,192,710
Servicing rights	—		—		6,783		6,783		6,408
Total assets	$	219,858	$	156,325	$	5,345,565	$	5,721,748	$	5,598,416
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	4,678,940	$	—	$	—	$	4,678,940	$	4,678,940
Time deposits	—		574,018		—		574,018		563,775
Total deposits	4,678,940		574,018		—		5,252,958		5,242,715
Short-term borrowings	—		17,906		—		17,906		17,906
Long-term debt	—		112,968		—		112,968		110,000
Subordinated notes	—		190,045		—		190,045		183,515
Total liabilities	$	4,678,940	$	894,937	$	—	$	5,573,877	$	5,554,136