Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair value represents the estimated price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept).

The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Corporation’s 2020 Annual Report on Form 10-K.

The table below presents the Corporation’s financial instruments measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall:


($ in Thousands)	Fair Value Hierarchy	Sep 30, 2021		Dec 31, 2020
Assets
Investment securities AFS
U.S. Treasury securities	Level 1	$	123,981	$	26,531
Agency securities	Level 2	14,998		25,038
Obligations of state and political subdivisions (municipal securities)	Level 2	414,020		450,662
Residential mortgage-related securities
FNMA / FHLMC	Level 2	2,377,408		1,461,241
GNMA	Level 2	79,696		235,537
Private-label	Level 2	76,033		—
Commercial mortgage-related securities
FNMA / FHLMC	Level 2	353,175		22,904
GNMA	Level 2	231,096		524,756
Asset backed securities
FFELP	Level 2	212,797		327,189
SBA	Level 2	7,179		8,584
Other debt securities	Level 2	2,999		3,000

Total investment securities AFS	Level 1	$	123,981	$	26,531
Total investment securities AFS	Level 2	3,769,399		3,058,910

Equity securities with readily determinable fair values	Level 1	4,109		1,661
Residential loans held for sale	Level 2	158,202		129,158
Interest rate-related instruments(a)	Level 2	110,898		192,518
Foreign currency exchange forwards(a)	Level 2	4,637		4,909

Commodity contracts(a)	Level 2	6,546		12,486


Interest rate lock commitments to originate residential mortgage loans held for sale	Level 3	5,187		9,624
Forward commitments to sell residential mortgage loans	Level 3	972		—
Liabilities
Interest rate-related instruments(a)	Level 2	$	24,322	$	25,680
Foreign currency exchange forwards(a)	Level 2	4,454		4,836
Commodity contracts(a)	Level 2	6,471		11,155


Forward commitments to sell residential mortgage loans	Level 3	—		2,046

The table below presents a rollforward of the consolidated balance sheets amounts for the nine months ended September 30, 2021 and the year ended December 31, 2020, for the Corporation's mortgage derivatives measured on a recurring basis and classified within Level 3 of the fair value hierarchy:


($ in Thousands)	Interest rate lock commitments to originate residential mortgage loans held for sale		Forward commitments to sell residential mortgage loans		Total
Balance December 31, 2019	$	2,527	$	710	$	1,817
New production	72,659		(3,505)		76,164
Closed loans / settlements	(76,001)		(12,587)		(63,414)
Other	10,439		17,427		(6,988)
Mortgage derivative gain (loss)	7,097		1,335		5,762

Balance December 31, 2020	$	9,624	$	2,046	$	7,579
New production	$	45,586	$	(2,496)	$	48,082
Closed loans / settlements	(44,543)		217		(44,760)
Other	(5,481)		(739)		(4,742)
Mortgage derivative gain (loss)	(4,437)		(3,017)		(1,420)

Balance September 30, 2021	$	5,187	$	(972)	$	6,159

The closing ratio on interest rate lock commitments to originate residential mortgage loans held for sale is a Level 3 measurement, and was 82% at September 30, 2021.

The following table presents the carrying value of equity securities without readily determinable fair values still held as of September 30, 2021 that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable. Also shown are the cumulative upward and downward adjustments for the Corporation's equity securities without readily determinable fair values as of September 30, 2021:


($ in Thousands)
Equity securities without readily determinable fair values
Carrying value as of December 31, 2020	$	13,444

Additions	552
Sales	(33)
Donations	(134)
Carrying value as of September 30, 2021	$	13,830

Cumulative upward carrying value changes between January 1, 2018 and September 30, 2021	$	13,444
Cumulative downward carrying value changes/impairment between January 1, 2018 and September 30, 2021	$	—

The table below presents the Corporation’s assets measured at fair value on a nonrecurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall:

Consolidated Statements of Income
Category of Adjustment
Recognized in Income

($ in Thousands)

Fair Value Hierarchy

Fair Value

Adjustment Recognized on the Consolidated Statements of Income(c)

September 30, 2021

Assets

Individually evaluated loans(a)

Level 3

78,139

Provision for credit losses

(4,227)

OREO(b)

Level 2

21,847

Other noninterest expense / provision for credit losses(d)

6,449

Mortgage servicing rights

Level 3

50,373

Mortgage banking, net

12,231

December 31, 2020

Assets

Individually evaluated loans(a)

Level 3

138,752

Provision for credit losses

97,519

OREO(b)

Level 2

6,125

Other noninterest expense

3,747

Mortgage servicing rights

Level 3

41,990

Mortgage banking, net

(17,704)

(a) Includes probable TDRs which are individually analyzed, net of the related allowance for credit losses.
(b) If the fair value of the collateral exceeds the carrying amount of the asset, no charge off or adjustment is necessary, the asset is not considered to be carried at fair value, and is therefore not included in the table.
(c) Includes the full year impact on the consolidated statements of income
(d) When a property's value is written down at the time it is transferred to OREO, the charge off is booked to the provision for credit losses. When a property is already in OREO and subsequently written down, the charge off is booked to other noninterest expense.

Certain nonfinancial assets and nonfinancial liabilities measured at fair value on a nonrecurring basis include the fair value analysis in the goodwill impairment test as well as intangible assets and other nonfinancial long-lived assets measured at fair value for the purpose of impairment assessment.

The Corporation's significant Level 3 measurements which employ unobservable inputs that are readily quantifiable pertain to MSRs and individually evaluated loans.

The table below presents information about these inputs and further discussion is found above:


September 30, 2021	Valuation Technique	Significant Unobservable Input	Range of Inputs			Weighted Average Input Applied
Mortgage servicing rights	Discounted cash flow	Discount rate	9%	-	15%	9%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	8%	-	40%	15%
Individually evaluated loans	Appraisals / Discounted cash flow	Collateral / Discount factor	33%	-	51%	36%

Fair Value of Financial Instruments

The Corporation is required to disclose estimated fair values for its financial instruments.

Fair value estimates are set forth below for the Corporation’s financial instruments:


		Sep 30, 2021				Dec 31, 2020
($ in Thousands)	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Financial assets
Cash and due from banks	Level 1	$	378,927	$	378,927	$	416,154	$	416,154
Interest-bearing deposits in other financial institutions	Level 1	1,281,916		1,281,916		298,759		298,759
Federal funds sold and securities purchased under agreements to resell	Level 1	25,000		25,000		1,135		1,135
Investment securities AFS	Level 1	123,981		123,981		26,531		26,531
Investment securities AFS	Level 2	3,769,399		3,769,399		3,058,910		3,058,910
Investment securities HTM, net	Level 1	1,000		1,007		999		1,024
Investment securities HTM, net	Level 2	1,928,735		2,034,803		1,877,939		2,027,852

Equity securities with readily determinable fair values	Level 1	4,109		4,109		1,661		1,661
Equity securities without readily determinable fair values	Level 3	13,830		13,830		13,444		13,444
FHLB and Federal Reserve Bank stocks	Level 2	168,281		168,281		168,280		168,280
Residential loans held for sale	Level 2	158,202		158,202		129,158		129,158

Loans, net	Level 3	23,330,676		23,447,728		24,068,022		24,012,738
Bank and corporate owned life insurance	Level 2	683,610		683,610		679,647		679,647

Derivatives (other assets)(a)	Level 2	122,082		122,082		209,913		209,913
Interest rate lock commitments to originate residential mortgage loans held for sale (other assets)	Level 3	5,187		5,187		9,624		9,624
Forward commitments to sell residential mortgage loans (other assets)	Level 3	972		972		—		—
Financial liabilities
Noninterest-bearing demand, savings, interest-bearing demand, and money market accounts	Level 3	$	26,440,380	$	26,440,380	$	24,725,451	$	24,725,451
Brokered CDs and other time deposits(b)	Level 2	1,410,886		1,412,950		1,757,030		1,766,200
Short-term funding	Level 2	322,496		322,486		252,317		252,303
FHLB advances	Level 2	1,620,880		1,701,512		1,632,723		1,760,727
Other long-term funding	Level 2	249,160		270,526		549,465		578,233

Standby letters of credit(c)	Level 2	2,549		2,549		2,731		2,731

Derivatives (accrued expenses and other liabilities)(a)	Level 2	35,247		35,247		41,671		41,671
Forward commitments to sell residential mortgage loans (accrued expenses and other liabilities)	Level 3	—		—		2,046		2,046

(a) Figures are presented gross before netting. See Note 10 and Note 11 for information relating to the impact of offsetting derivative assets and liabilities and cash collateral with the
same counterparty where there is a legally enforceable master netting agreement in place.
(b) When the estimated fair value is less than the carrying value, the carrying value is reported as the fair value.
(c) The commitment on standby letters of credit was $264 million at September 30, 2021 and $279 million at December 31, 2020. See Note 12 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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