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Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2024

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, 2024 and December 31, 2023, classified using the fair value hierarchy:


	At March 31, 2024
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:


State and political subdivisions	$	—	$	1,269	$	—	$	1,269
Residential mortgage-backed securities	—		264,148		—		264,148
Collateralized mortgage obligations	—		1,927		—		1,927
Corporate bonds	—		83,475		—		83,475
Total available-for-sale securities	—		350,819		—		350,819
Equity securities:
Equity securities - financial services industry	727		—		—		727
Money market mutual funds	2,628		—		—		2,628
Total equity securities	3,355		—		—		3,355

Loans held for sale	—		13,188		—		13,188

Interest rate locks with customers*	—		511		—		511

Total assets	$	3,355	$	364,518	$	—	$	367,873
Liabilities:
Contingent consideration liability	$	—	$	—	$	601	$	601
Interest rate swaps*	—		8,206		—		8,206
Credit derivatives*	—		—		120		120

Forward loan sale commitments*	—		46		—		46
Total liabilities	$	—	$	8,252	$	721	$	8,973

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

The $120 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of 136 interest rate swaps with a notional amount of $878.5 million. The March 31, 2024 CVA is calculated using a 40% loss given default rate on the most recent investment grade credit curve.

The contingent consideration liability resulting from the Sheaffer acquisition was calculated using a discount rate of 8.3% on the acquisition date. During the three months ended March 31, 2024, the Corporation paid $635 thousand in contingent consideration related to this acquisition. The contingent consideration liability was $601 thousand at March 31, 2024. The remaining potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of $635 thousand through the period ending November 30, 2024.


	At December 31, 2023
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:


State and political subdivisions	$	—	$	2,301	$	—	$	2,301
Residential mortgage-backed securities	—		264,552		—		264,552
Collateralized mortgage obligations	—		2,001		—		2,001
Corporate bonds	—		82,699		—		82,699
Total available-for-sale securities	—		351,553		—		351,553
Equity securities:
Equity securities - financial services industry	764		—		—		764
Money market mutual funds	2,529		—		—		2,529
Total equity securities	3,293		—		—		3,293

Loans held for sale	—		11,637		—		11,637
Interest rate locks with customers*	—		717		—		717

Total assets	$	3,293	$	363,907	$	—	$	367,200
Liabilities:
Contingent consideration liability	$	—	$	—	$	1,224	$	1,224
Interest rate swaps*	—		5,779		—		5,779
Credit derivatives*	—		—		186		186
Forward loan sale commitments*	—		427		—		427
Total liabilities	$	—	$	6,206	$	1,410	$	7,616

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

The $186 thousand of credit derivatives liability represented the CVA, which is obtained from real-time financial market data, of 133 interest rate swaps with a notional amount of $862.8 million. The December 31, 2023 CVA is calculated using a 40% loss given default rate on the most recent investment grade credit curve.

The contingent consideration liability resulting from the Sheaffer acquisition was calculated using a discount rate of 8.3% on the acquisition date. During the year ended December 31, 2023, the Corporation paid $653 thousand in contingent consideration related to this acquisition. The contingent consideration liability was $1.2 million at December 31, 2023. The remaining potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of $1.3 million through the 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 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, 2024 and 2023:


	Three Months Ended March 31, 2024
(Dollars in thousands)	Balance at December 31, 2023		Additions		Payments received		Increase in value		Balance at March 31, 2024


Credit derivatives	$	(186)	$	(161)	$	—	$	227	$	(120)
Net total	$	(186)	$	(161)	$	—	$	227	$	(120)


	Three Months Ended March 31, 2023
(Dollars in thousands)	Balance at December 31, 2022		Additions		Payments received		Increase in value		Balance at March 31, 2023


Credit derivatives	$	(360)	$	(57)	$	—	$	87	$	(330)
Net total	$	(360)	$	(57)	$	—	$	87	$	(330)

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, 2024 and 2023:


	Three Months Ended March 31, 2024
(Dollars in thousands)	Balance at December 31, 2023		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at March 31, 2024
Paul I. Sheaffer Insurance Agency	$	1,224	$	635	$	12	$	601
Total contingent consideration liability	$	1,224	$	635	$	12	$	601


	Three Months Ended March 31, 2023
(Dollars in thousands)	Balance at December 31, 2022		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at March 31, 2023
Paul I. Sheaffer Insurance Agency	$	1,765	$	635	$	24	$	1,154
Total contingent consideration liability	$	1,765	$	635	$	24	$	1,154

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 individual assets. The following table represents assets measured at fair value on a non-recurring basis at March 31, 2024 and December 31, 2023:


	At March 31, 2024
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	17,725	$	17,725

Other real estate owned	—		—		19,220		19,220
Repossessed assets	—		—		167		167
Total	$	—	$	—	$	37,112	$	37,112


	At December 31, 2023
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	18,960	$	18,960

Other real estate owned	—		—		19,032		19,032
Total	$	—	$	—	$	37,992	$	37,992

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, 2024 and December 31, 2023. The disclosed fair values are classified using the fair value hierarchy.


	At March 31, 2024
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	201,606	$	—	$	—	$	201,606	$	201,606

Held-to-maturity securities	—		124,022		—		124,022		143,474
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		37,394
Net loans and leases held for investment	—		—		6,399,696		6,399,696		6,475,729
Servicing rights	—		—		10,427		10,427		5,681
Total assets	$	201,606	$	124,022	$	6,410,123	$	6,735,751	$	6,863,884
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,012,964	$	—	$	—	$	5,012,964	$	5,012,964
Time deposits	—		1,386,996		—		1,386,996		1,392,394
Total deposits	5,012,964		1,386,996		—		6,399,960		6,405,358
Short-term borrowings	4,816		—		—		4,816		4,816
Long-term debt	—		249,389		—		249,389		250,000
Subordinated notes	—		141,250		—		141,250		148,886
Total liabilities	$	5,017,780	$	1,777,635	$	—	$	6,795,415	$	6,809,060


	At December 31, 2023
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	249,799	$	—	$	—	$	249,799	$	249,799
Held-to-maturity securities	—		128,277		—		128,277		145,777
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		40,499
Net loans and leases held for investment	—		—		6,290,455		6,290,455		6,462,867
Servicing rights	—		—		17,724		17,724		8,982
Total assets	$	249,799	$	128,277	$	6,308,179	$	6,686,255	$	6,907,924
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,221,989	$	—	$	—	$	5,221,989	$	5,221,989
Time deposits	—		1,153,775		—		1,153,775		1,153,792
Total deposits	5,221,989		1,153,775		—		6,375,764		6,375,781
Short-term borrowings	6,306		—		—		6,306		6,306
Long-term debt	—		310,817		—		310,817		310,000
Subordinated notes	—		140,500		—		140,500		148,761
Total liabilities	$	5,228,295	$	1,605,092	$	—	$	6,833,387	$	6,840,848

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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