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Fair Value Disclosures of Financial Assets and Liabilities
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES
19. FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
ASC 820-10, Fair Value Measurement (ASC 820-10) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
•Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.
•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The following tables present financial instruments carried at fair value as of December 31, 2020 and December 31, 2019 by level in the valuation hierarchy (as described above):
 
December 31, 2020
(Dollars in thousands)
Quoted Prices in Active Markets
for Identical Asset (Level 1)
Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Total Fair
Value
Assets measured at fair value on a recurring basis:
Available-for-sale securities:
CMO$— $471,325 $— $471,325 
FNMA MBS— 1,598,970 — 1,598,970 
FHLMC MBS— 202,893 — 202,893 
GNMA MBS— 23,762 — 23,762 
GSE agency notes— 232,107 — 232,107 
Other assets— 14,448 — 14,448 
Total assets measured at fair value on a recurring basis$— $2,543,505 $— $2,543,505 
Liabilities measured at fair value on a recurring basis:
Other liabilities$— $8,218 $24,039 $32,257 
Assets measured at fair value on a nonrecurring basis:
Other investments$— $— $9,541 $9,541 
Other real estate owned— — 3,061 3,061 
Loans held for sale— 197,541 — 197,541 
Total assets measured at fair value on a nonrecurring basis$— $197,541 $12,602 $210,143 
December 31, 2019
(Dollars in thousands)Quoted Prices in Active Markets
for Identical Asset (Level 1)		Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total Fair
Value
Assets measured at fair value on a recurring basis:
Available-for-sale securities:
CMO$— $340,230 $— $340,230 
FNMA MBS— 1,242,453 — 1,242,453 
FHLMC MBS— 328,946 — 328,946 
GNMA MBS— 33,285 — 33,285 
Other assets— 4,884 — 4,884 
Total assets measured at fair value on a recurring basis$— $1,949,798 $— $1,949,798 
Liabilities measured at fair value on a recurring basis:
Other liabilities$— $3,918 $— $3,918 
Assets measured at fair value on a nonrecurring basis:
Other investments$— $— $70,046 $70,046 
Other real estate owned— — 2,605 2,605 
Loans held for sale— 83,872 — 83,872 
Total assets measured at fair value on a nonrecurring basis$— $83,872 $72,651 $156,523 

Fair value is based on quoted market prices, where available. If such quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include unobservable parameters. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-sale securities
Securities classified as available-for-sale are reported at fair value using Level 2 inputs. The Company believes that this Level 2 designation is appropriate under ASC 820-10, as these securities are government sponsored enterprises (GSEs) and Ginnie Mae securities with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.
Other investments
Other investments includes equity investments without readily determinable fair values and equity method investments, which are both categorized as Level 3. The Company's equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the reporting period and its equity method investments are initially recorded at cost based on the Company’s percentage ownership in the investee, and are adjusted to reflect the recognition of the Company’s proportionate share of income or loss of the investee based on the investee’s earnings.
Other real estate owned
Other real estate owned consists of loan collateral which has been repossessed through foreclosure or other measures. Initially, foreclosed assets are recorded at the fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically and the assets may be marked down further, reflecting a new cost basis. The fair value of other real estate owned was estimated using Level 3 inputs based on appraisals obtained from third parties.
Loans held for sale
The fair value of loans held for sale is based on estimates using Level 2 inputs. These inputs are based on pricing information obtained from wholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities.
Other assets
Other assets include the fair value of interest rate products and derivatives on the residential mortgage held for sale loan pipeline. Valuation of interest rate products is obtained from an independent pricing service and also from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale.
Other liabilities
Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline and derivative related to the sale of certain Visa Class B common shares. Valuation of interest rate products and risk participation agreements is obtained from an independent pricing service and also from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale. Valuation of the derivative related to the sale of certain Visa Class B common shares is based on: (i) the agreed upon graduated fee structure; (ii) the length of time until the resolution of the Visa covered litigation; and (iii) the estimated impact of dilution in the conversion ratio of Class B shares resulting from changes in the Visa covered litigation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety of factors. In certain cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions regarding the amount and timing of estimated future cash flows that are discounted to reflect current market rates and varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents
For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.
Investment securities
Investment securities include debt securities classified as held-to-maturity or available-for-sale. Fair value is estimated using quoted prices for similar securities, which the Company obtains from a third party vendor. The Company uses one of the largest providers of securities pricing to the industry and management periodically assesses the inputs used by this vendor to price the various types of securities owned by the Company to validate the vendor’s methodology as described above in available-for-sale securities.
Other investments
Other investments includes equity investments without readily determinable fair values (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans held for sale
Loans held for sale are carried at their fair value (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans and leases
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans and leases are segregated by portfolio segments (see Note 2). For loans that reprice frequently, the book value approximates fair value. The fair values of other types of loans, with the exception of reverse mortgages, are estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities. The fair values of reverse mortgages are based on the net present value of the expected cash flows using a discount rate specific to the reverse mortgages portfolio. The fair value of nonperforming loans is based on recent external appraisals of the underlying collateral, if the loan is collateral dependent. Estimated cash flows, discounted using a rate commensurate with current rates and the risk associated with the estimated cash flows, are used if appraisals are not available. This technique does contemplate an exit price.
Stock in the Federal Home Loan Bank (FHLB) of Pittsburgh
The fair value of FHLB stock is assumed to be equal to its cost basis, since the stock is non-marketable but redeemable at its par value.
Accrued interest receivable
The carrying amounts of interest receivable approximate fair value.
Other assets
Other assets include the fair value of interest rate products and derivatives on the residential mortgage held for sale loan pipeline (see discussion in “Fair Value of Financial Assets and Liabilities” section above).

Deposits
The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, money market and interest-bearing demand deposits, is assumed to be equal to the amount payable on demand. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using rates currently offered for deposits with comparable remaining maturities.
Borrowed funds
Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.
Off-balance sheet instruments
The fair value of off-balance sheet instruments, including swap guarantees of $12.8 million and $8.8 million at December 31, 2020 and December 31, 2019, respectively, and standby letters of credit, approximates the recorded net deferred fee amounts. Because letters of credit are generally not assignable by either the Company or the borrower, they only have value to the Company and the borrower. In determining the fair value of the swap guarantees, the Company assesses the underlying credit risk exposure for each borrower in a paying position to the third-party financial institution.
Accrued interest payable
The carrying amounts of interest payable approximate fair value.
Other liabilities
Other liabilities include the fair value of interest rate products, risk participation agreements, derivatives on the residential mortgage held for sale loan pipeline, and derivative related to the sale of certain Visa Class B common shares (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Assets measured at fair value using significant unobservable inputs (Level 3)
The following table provides a description of the valuation technique and significant unobservable inputs for the Company's assets classified as Level 3 and measured at fair value on a nonrecurring basis:
December 31, 2020
Financial InstrumentFair ValueValuation Technique(s)Unobservable InputRange (Weighted Average)
Other investments$9,541 Observed market comparable transactionsPeriod of observed transactions
July 2020
Other real estate owned$3,061 Fair market value of collateralCosts to sell
5.0% - 10.0% (10.0%)
Other liabilities$24,039 Discounted cash flowTiming of the resolution of the Visa litigation
2.75 - 7.75 years (5.50 years or 4Q 2025)
The book value and estimated fair value of the Company's financial instruments are as follows:
 
December 31,
Fair Value
Measurement
20202019
(Dollars in thousands)Book ValueFair ValueBook ValueFair Value
Financial assets:
Cash, cash equivalents and restricted cashLevel 1$1,654,735 $1,654,735 $571,752 $571,752 
Investment securities, available for saleLevel 22,529,057 2,529,057 1,944,914 1,944,914 
Investment securities, held to maturity, netLevel 2111,741 116,421 133,601 136,625 
Other investmentsLevel 39,541 9,541 70,046 70,046 
Loans, held for saleLevel 2197,541 197,541 83,872 83,872 
Loans and leases, net(1)
Level 38,795,935 9,130,003 8,424,464 8,580,015 
Stock in FHLB of PittsburghLevel 25,771 5,771 21,097 21,097 
Accrued interest receivableLevel 244,335 44,335 38,094 38,094 
Other assetsLevel 214,448 14,448 4,884 4,884 
Financial liabilities:
DepositsLevel 2$11,856,664 $11,868,897 $9,586,857 $9,575,394 
Borrowed fundsLevel 2340,641 340,106 489,288 489,561 
Standby letters of creditLevel 3630 630 623 623 
Accrued interest payableLevel 21,450 1,450 3,103 3,103 
Other liabilitiesLevels 2, 332,257 32,257 3,918 3,918 
(1)Includes reverse mortgage loans.
At December 31, 2020 and December 31, 2019 the Company had no commitments to extend credit measured at fair value.