Fair Value Disclosures (Tables)

6 Months Ended

Jun. 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 June 30, 2022 and December 31, 2021, classified using the fair value hierarchy:

	At June 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	$	—	$	2,305	$	—	$	2,305
Residential mortgage-backed securities	—		262,943		—		262,943
Collateralized mortgage obligations	—		2,705		—		2,705
Corporate bonds	—		83,429		—		83,429
Total available-for-sale securities	—		351,382		—		351,382
Equity securities:
Equity securities - financial services industry	782		—		—		782
Money market mutual funds	2,152		—		—		2,152
Total equity securities	2,934		—		—		2,934
Loans held for sale	—		8,352		—		8,352
Interest rate swaps*	—		882		—		882
Interest rate locks with customers*	—		438		—		438
Forward loan sale commitments*	—		30		—		30
Total assets	$	2,934	$	361,084	$	—	$	364,018
Liabilities:
Contingent consideration liability	$	—	$	—	$	1,698	$	1,698
Credit derivatives*	—		—		447		447
Total liabilities	$	—	$	—	$	2,145	$	2,145

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

The $447 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which was obtained from real-time financial market data, of 128 interest rate swaps with a notional amount of $791.6 million. The June 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 six months ended June 30, 2022 and 2021:

	Six Months Ended June 30, 2022
(Dollars in thousands)	Balance at December 31, 2021		Additions		Payments received		Increase (decrease) in value		Balance at June 30, 2022
Loans	$	48	$	—	$	(48)	$	—	$	—
Credit derivatives	(381)		(1,106)		—		1,040		(447)
Net total	$	(333)	$	(1,106)	$	(48)	$	1,040	$	(447)

	Six Months Ended June 30, 2021
(Dollars in thousands)	Balance at December 31, 2020		Additions		Payments received		Increase (decrease) in value		Balance at June 30, 2021
Corporate bonds	$	9,600	$	—	$	—	$	100	$	9,700
Loans	187		—		(65)		(4)		118
Credit derivatives	(535)		(1,213)		—		1,379		(369)
Net total	$	9,252	$	(1,213)	$	(65)	$	1,475	$	9,449

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 six months ended June 30, 2022 and 2021:

	Six Months Ended June 30, 2022
(Dollars in thousands)	Balance at December 31, 2021		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at June 30, 2022
Paul I. Sheaffer Insurance Agency	$	1,629	$	—	$	69	$	1,698
Total contingent consideration liability	$	1,629	$	—	$	69	$	1,698

	Six Months Ended June 30, 2021
(Dollars in thousands)	Balance at December 31, 2020		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at June 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 June 30, 2022 and December 31, 2021:

	At June 30, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	12,053	$	12,053
Other real estate owned	—		—		18,604		18,604
Total	$	—	$	—	$	30,657	$	30,657

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

	At June 30, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	94,777	$	—	$	—	$	94,777	$	94,777
Held-to-maturity securities	—		145,792		—		145,792		159,808
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		29,116
Net loans and leases held for investment	—		—		5,562,620		5,562,620		5,577,713
Servicing rights	—		—		16,731		16,731		8,372
Total assets	$	94,777	$	145,792	$	5,579,351	$	5,819,920	$	5,869,786
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,138,438	$	—	$	—	$	5,138,438	$	5,138,438
Time deposits	—		415,301		—		415,301		424,610
Total deposits	5,138,438		415,301		—		5,553,739		5,563,048
Short-term borrowings	—		97,606		—		97,606		97,606
Long-term debt	—		92,491		—		92,491		95,000
Subordinated notes	—		98,750		—		98,750		99,030
Total liabilities	$	5,138,438	$	704,148	$	—	$	5,842,586	$	5,854,684

	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