Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2022 and December 31, 2021, classified using the fair value hierarchy:

	At September 30, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:
State and political subdivisions	$	—	$	2,258	$	—	$	2,258
Residential mortgage-backed securities	—		260,566		—		260,566
Collateralized mortgage obligations	—		2,451		—		2,451
Corporate bonds	—		82,204		—		82,204
Total available-for-sale securities	—		347,479		—		347,479
Equity securities:
Equity securities - financial services industry	771		—		—		771
Money market mutual funds	2,223		—		—		2,223
Total equity securities	2,994		—		—		2,994
Loans held for sale	—		9,087		—		9,087
Forward loan sale commitments*	—		671		—		671
Total assets	$	2,994	$	357,237	$	—	$	360,231
Liabilities:
Contingent consideration liability	$	—	$	—	$	1,734	$	1,734
Interest rate swaps*	—		8,958		—		8,958
Credit derivatives*	—		—		358		358
Interest rate locks with customers*	—		424		—		424
Total liabilities	$	—	$	9,382	$	2,092	$	11,474

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

The $358 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which was obtained from real-time financial market data, of 127 interest rate swaps with a notional amount of $795.0 million. The September 30, 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 nine months ended September 30, 2022 and 2021:

	Nine Months Ended September 30, 2022
(Dollars in thousands)	Balance at December 31, 2021		Additions		Payments received		Increase in value		Balance at September 30, 2022
Loans	$	48	$	—	$	(48)	$	—	$	—
Credit derivatives	(381)		(1,332)		—		1,355		(358)
Net total	$	(333)	$	(1,332)	$	(48)	$	1,355	$	(358)

	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

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, 2022 and 2021:

	Nine Months Ended September 30, 2022
(Dollars in thousands)	Balance at December 31, 2021		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2022
Paul I. Sheaffer Insurance Agency	$	1,629	$	—	$	105	$	1,734
Total contingent consideration liability	$	1,629	$	—	$	105	$	1,734

	Nine Months Ended September 30, 2021
(Dollars in thousands)	Balance at December 31, 2020		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	$	—

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, 2022 and December 31, 2021:

	At September 30, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	11,899	$	11,899
Other real estate owned	—		—		18,960		18,960
Total	$	—	$	—	$	30,859	$	30,859

	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 September 30, 2022 and December 31, 2021. The disclosed fair values are classified using the fair value hierarchy.

	At September 30, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	113,310	$	—	$	—	$	113,310	$	113,310
Held-to-maturity securities	—		136,456		—		136,456		159,170
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		29,475
Net loans and leases held for investment	—		—		5,697,612		5,697,612		5,762,431
Servicing rights	—		—		18,505		18,505		8,569
Total assets	$	113,310	$	136,456	$	5,716,117	$	5,965,883	$	6,072,955
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,381,058	$	—	$	—	$	5,381,058	$	5,381,058
Time deposits	—		390,579		—		390,579		405,918
Total deposits	5,381,058		390,579		—		5,771,637		5,786,976
Short-term borrowings	—		80,711		—		80,711		80,711
Long-term debt	—		91,629		—		91,629		95,000
Subordinated notes	—		97,000		—		97,000		99,107
Total liabilities	$	5,381,058	$	659,919	$	—	$	6,040,977	$	6,061,794

	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