Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

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 March 31, 2022 and December 31, 2021, classified using the fair value hierarchy:

	At March 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:
State and political subdivisions	$	—	$	2,312	$	—	$	2,312
Residential mortgage-backed securities	—		256,688		—		256,688
Collateralized mortgage obligations	—		2,947		—		2,947
Corporate bonds	—		88,047		—		88,047
Total available-for-sale securities	—		349,994		—		349,994
Equity securities:
Equity securities - financial services industry	980		—		—		980
Money market mutual funds	1,589		—		—		1,589
Total equity securities	2,569		—		—		2,569
Loans*	—		—		13		13
Loans held for sale	—		14,521		—		14,521
Forward loan sale commitments*	—		806		—		806
Total assets	$	2,569	$	365,321	$	13	$	367,903
Liabilities:
Contingent consideration liability	$	—	$	—	$	1,663	$	1,663
Interest rate swaps*	—		59		—		59
Credit derivatives*	—		—		457		457
Interest rate locks with customers*	—		245		—		245
Total liabilities	$	—	$	304	$	2,120	$	2,424

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

The $457 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which was obtained from real-time financial market data, of 126 interest rate swaps with a notional amount of $769.3 million. The March 31, 2022 CVA assumed a zero-deal recovery percentage based on the most recent index credit curve.

The contingent consideration liability resulting from the Sheaffer acquisition was $1.6 million, which was calculated using a discount rate of 8.3%. The potential cash payments that could result from the contingent consideration arrangement for the acquisition ranged from $0 to a maximum of $1.9 million over the three-year period ending November 30, 2024.

	At December 31, 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	—		221,105		—		221,105
Collateralized mortgage obligations	—		3,278		—		3,278
Corporate bonds	—		90,291		—		90,291
Total available-for-sale securities	—		317,007		—		317,007
Equity securities:
Equity securities - financial services industry	979		—		—		979
Money market mutual funds	2,020		—		—		2,020
Total equity securities	2,999		—		—		2,999
Loans*	—		—		48		48
Loans held for sale	—		21,600		—		21,600
Interest rate locks with customers*	—		765		—		765
Forward loan sale commitments*	—		87		—		87
Total assets	$	2,999	$	339,459	$	48	$	342,506
Liabilities:
Contingent consideration liability	$	—	$	—	$	1,629	$	1,629
Interest rate swaps*	—		204		—		204
Credit derivatives*	—		—		381		381
Total liabilities	$	—	$	204	$	2,010	$	2,214

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

The $381 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which was obtained from real-time financial market data, of 125 interest rate swaps with a notional amount of $755.6 million. The December 31, 2021 CVA assumed a zero-deal recovery percentage based on the most recent index credit curve.

The contingent consideration liability resulting from the Sheaffer acquisition was $1.6 million, which was calculated using a discount rate of 8.3%. The potential cash payments that could result from the contingent consideration arrangement for the acquisition ranged from $0 to a maximum of $1.9 million over the three-year period ending November 30, 2024.

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

The following table includes a roll forward 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 three months ended March 31, 2022 and 2021:

	Three Months Ended March 31, 2022
(Dollars in thousands)	Balance at December 31, 2021		Additions		Payments received		Increase (decrease) in value		Balance at March 31, 2022
Loans	$	48	$	—	$	(35)	$	—	$	13
Credit derivatives	(381)		(526)		—		450		(457)
Net total	$	(333)	$	(526)	$	(35)	$	450	$	(444)

	Three Months Ended March 31, 2021
(Dollars in thousands)	Balance at December 31, 2020		Additions		Payments received		Increase (decrease) in value		Balance at March 31, 2021
Corporate bonds	$	9,600	$	—	$	—	$	—	$	9,600
Loans	187		—		(33)		(2)		152
Credit derivatives	(535)		(843)		—		1,107		(271)
Net total	$	9,252	$	(843)	$	(33)	$	1,105	$	9,481

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 three months ended March 31, 2022 and 2021:

	Three Months Ended March 31, 2022
(Dollars in thousands)	Balance at December 31, 2021		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at March 31, 2022
Paul I. Sheaffer Insurance Agency	$	1,629	$	—	$	34	$	1,663
Total contingent consideration liability	$	1,629	$	—	$	34	$	1,663

	Three Months Ended March 31, 2021
(Dollars in thousands)	Balance at December 31, 2020		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at March 31, 2021
Girard Partners	$	55	$	29	$	2	$	28
Total contingent consideration liability	$	55	$	29	$	2	$	28

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 March 31, 2022 and December 31, 2021:

	At March 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	29,773	$	29,773
Other real estate owned	—		—		279		279
Total	$	—	$	—	$	30,052	$	30,052

	At December 31, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	33,118	$	33,118
Other real estate owned	—		—		279		279
Total	$	—	$	—	$	33,397	$	33,397

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 March 31, 2022 and December 31, 2021. The disclosed fair values are classified using the fair value hierarchy.

	At March 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	773,781	$	—	$	—	$	773,781	$	773,781
Held-to-maturity securities	—		157,924		—		157,924		166,339
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		26,330
Net loans and leases held for investment	—		—		5,290,440		5,290,440		5,302,714
Servicing rights	—		—		15,106		15,106		8,122
Total assets	$	773,781	$	157,924	$	5,305,546	$	6,237,251	$	6,277,286
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,581,657	$	—	$	—	$	5,581,657	$	5,581,657
Time deposits	—		460,580		—		460,580		466,275
Total deposits	5,581,657		460,580		—		6,042,237		6,047,932
Short-term borrowings	—		18,976		—		18,976		18,976
Long-term debt	—		93,343		—		93,343		95,000
Subordinated notes	—		102,250		—		102,250		98,952
Total liabilities	$	5,581,657	$	675,149	$	—	$	6,256,806	$	6,260,860

	At December 31, 2021
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	890,150	$	—	$	—	$	890,150	$	890,150
Held-to-maturity securities	—		178,402		—		178,402		176,983
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		28,186
Net loans and leases held for investment	—		—		5,244,504		5,244,504		5,204,927
Servicing rights	—		—		11,331		11,331		7,878
Total assets	$	890,150	$	178,402	$	5,255,835	$	6,324,387	$	6,308,124
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,570,958	$	—	$	—	$	5,570,958	$	5,570,958
Time deposits	—		487,874		—		487,874		484,166
Total deposits	5,570,958		487,874		—		6,058,832		6,055,124
Short-term borrowings	—		20,106		—		20,106		20,106
Long-term debt	—		95,707		—		95,707		95,000
Subordinated notes	—		107,000		—		107,000		98,874
Total liabilities	$	5,570,958	$	710,687	$	—	$	6,281,645	$	6,269,104