Fair Value Measurements

9 Months Ended

Sep. 30, 2023

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 2022 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, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall:


($ in thousands)	Fair Value Hierarchy	Sep 30, 2023		Dec 31, 2022
Assets
AFS investment securities:
U.S. Treasury securities	Level 1	$	109,024	$	109,378
Agency securities	Level 2	13,590		13,532
Obligations of state and political subdivisions (municipal securities)	Level 2	210,317		230,714
Residential mortgage-related securities:
FNMA / FHLMC	Level 2	1,436,759		1,604,610
GNMA	Level 2	1,384,670		497,596

Commercial mortgage-related securities:
FNMA / FHLMC	Level 2	16,154		17,142
GNMA	Level 2	176,474		110,462
Asset backed securities:
FFELP	Level 2	138,514		151,191
SBA	Level 2	3,261		4,477
Other debt securities	Level 2	2,915		2,922

Total AFS investment securities	Level 1	$	109,024	$	109,378
Total AFS investment securities	Level 2	3,382,655		2,632,647

Equity securities with readily determinable fair values	Level 1	6,701		5,991
Residential loans held for sale	Level 2	54,790		20,383
Mortgage servicing rights, net	Level 3	89,131		77,351
Interest rate-related instruments designated as hedging instruments(a)	Level 2	2,109		4,349
Foreign currency exchange forwards designated as hedging instruments(a)	Level 2	2,886		416
Interest rate-related and other instruments not designated as hedging instruments(a)	Level 2	140,414		62,401
Foreign currency exchange forwards not designated as hedging instruments(a)	Level 2	1,751		437


Interest rate lock commitments to originate residential mortgage loans held for sale	Level 3	407		86
Forward commitments to sell residential mortgage loans	Level 3	806		—

Liabilities
Interest rate-related instruments designated as hedging instruments(a)	Level 2	$	21,520	$	1,260
Foreign currency exchange forwards designated as hedging instruments(a)	Level 2	134		972
Interest rate-related and other instruments not designated as hedging instruments(a)	Level 2	294,062		251,398
Foreign currency exchange forwards not designated as hedging instruments(a)	Level 2	1,393		402




Forward commitments to sell residential mortgage loans	Level 3	—		46

The table below presents a rollforward of the consolidated balance sheets amounts for the nine months ended September 30, 2023 and the year ended December 31, 2022, 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, 2021	$	2,617	$	(30)	$	2,647
New production	10,442		(2,028)		12,470
Closed loans / settlements	(913)		24,766		(25,679)
Other	(12,060)		(22,662)		10,603
Change in mortgage derivative	(2,531)		76		(2,607)

Balance December 31, 2022	$	86	$	46	$	40
New production	$	4,681	$	(1,274)	$	5,955
Closed loans / settlements	(2,417)		1,969		(4,386)
Other	(1,943)		(1,547)		(396)
Change in mortgage derivative	321		(853)		1,173

Balance September 30, 2023	$	407	$	(806)	$	1,213

The following table presents the carrying value of equity securities without readily determinable fair values still held as of September 30, 2023 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, 2023:


($ in thousands)
Equity securities without readily determinable fair values
Carrying value as of December 31, 2022	$	19,225

Purchases	10,011


Carrying value as of September 30, 2023	$	29,236

Cumulative upward carrying value changes between January 1, 2018 and September 30, 2023	$	19,134
Cumulative downward carrying value changes/impairment between January 1, 2018 and September 30, 2023	$	—

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:

($ in thousands)

Fair Value Hierarchy

Fair Value

Consolidated Statements of Income Category of Adjustment Recognized in Income

Adjustment Recognized on the Consolidated Statements of Income(a)

September 30, 2023

Assets

Individually evaluated loans

Level 3

56,506

Provision for credit losses

28,926

OREO(b)

Level 2

1,315

Other noninterest expense / provision for credit losses(c)

1,124

December 31, 2022

Assets

Individually evaluated loans

Level 3

23,584

Provision for credit losses

4,405

OREO(b)

Level 2

2,196

Other noninterest expense / provision for credit losses(c)

971

Equity securities without readily determinable fair values

Level 3

19,134

Investment securities gains (losses), net

5,690

(a) Includes the full year impact on the consolidated statements of income.
(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) 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 table below presents the unobservable inputs that are readily quantifiable pertaining to Level 3 measurements:


September 30, 2023	Valuation Technique	Significant Unobservable Input	Range of Inputs			Weighted Average Input Applied
Mortgage servicing rights	Discounted cash flow	Option adjusted spread	6%	-	8%	6%
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	—%	-	100%	6%
Individually evaluated loans	Appraisals / Discounted cash flow	Collateral / Discount factor	22%	-	36%	34%
Interest rate lock commitments to originate residential mortgage loans held for sale	Discounted cash flow	Closing Ratio	48%	-	100%	84%

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, 2023				Dec 31, 2022
($ in thousands)	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Financial assets
Cash and due from banks	Level 1	$	388,694	$	388,694	$	436,952	$	436,952
Interest-bearing deposits in other financial institutions	Level 1	323,130		323,130		156,693		156,693
Federal funds sold and securities purchased under agreements to resell	Level 1	965		965		27,810		27,810
AFS investment securities	Level 1	109,024		109,024		109,378		109,378
AFS investment securities	Level 2	3,382,655		3,382,655		2,632,647		2,632,647
HTM investment securities, net	Level 1	999		948		999		936
HTM investment securities, net	Level 2	3,899,416		3,144,883		3,959,399		3,400,028

Equity securities with readily determinable fair values	Level 1	6,701		6,701		5,991		5,991
Equity securities without readily determinable fair values	NAV	10,000		10,000		—		—
Equity securities without readily determinable fair values	Level 3	19,236		19,236		19,225		19,225
FHLB and Federal Reserve Bank stocks	Level 2	268,698		268,698		295,496		295,496
Residential loans held for sale	Level 2	54,790		54,790		20,383		20,383

Loans, net	Level 3	29,847,392		28,705,298		28,486,849		27,481,426
Bank and corporate owned life insurance	Level 2	679,775		679,775		676,530		676,530

Mortgage servicing rights, net	Level 3	89,131		89,131		77,351		77,351
Derivatives (other assets)(a)	Level 2	147,160		147,160		67,603		67,603
Interest rate lock commitments to originate residential mortgage loans held for sale (other assets)	Level 3	407		407		86		86
Forward commitments to sell residential mortgage loans (other assets)	Level 3	806		806		—		—

Financial liabilities
Noninterest-bearing demand, savings, interest-bearing demand, and money market accounts	Level 3	$	26,056,389	$	26,056,389	$	27,705,996	$	27,705,996
Brokered CDs and other time deposits(b)	Level 2	6,066,937		6,066,937		1,930,158		1,930,158
Short-term funding	Level 2	451,644		451,624		605,937		605,205
FHLB advances	Level 2	3,733,041		3,734,775		4,319,861		4,322,264
Other long-term funding	Level 2	529,459		519,337		248,071		242,151

Standby letters of credit(c)	Level 2	2,691		2,691		2,881		2,881

Derivatives (accrued expenses and other liabilities)(a)	Level 2	317,109		317,109		254,033		254,033


Forward commitments to sell residential mortgage loans (accrued expenses and other liabilities)	Level 3	—		—		46		46

(a) Figures are presented gross before netting. See Note 9 and Note 10 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 $247 million at September 30, 2023 and $271 million at December 31, 2022. See Note 11 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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