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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements 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 2021 Annual Report on Form 10-K. There has been one significant change to the methodologies for assets and liabilities measured at fair value on a recurring basis: Mortgage Servicing Rights: The Corporation sells residential mortgage loans in the secondary market and typically retains the rights to service the loans sold. Upon sale, a MSRs asset is capitalized, which represents the then current fair value of future net cash flows expected to be realized for performing servicing activities. On January 1, 2022, the Corporation made the irrevocable election to account for its MSRs asset under the fair value measurement method. Under this methodology, changes in the fair value are recognized in earnings as they occur through mortgage banking, net on the consolidated statements of income. MSRs are not traded in active markets. A cash flow model is used to determine fair value. Key assumptions and estimates, including projected prepayment speeds, assumed servicing costs, ancillary income, costs to service delinquent loans, costs of foreclosure, and discount rates with option-adjusted spreads, used by this model are based on current market sources. Assumptions used to value MSRs are considered significant unobservable inputs. A separate third-party model is used to estimate prepayment speeds based on interest rates, housing turnover rates, estimated loan curtailment, anticipated defaults and other relevant factors. Fair value estimates from outside sources are received periodically to corroborate the results of the valuation model. Due to the nature of the valuation inputs, MSRs are classified within Level 3 of the fair value hierarchy. See Note 8 for additional disclosures about the Corporation's MSRs. The table below presents the Corporation’s financial instruments measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall:
($ in Thousands) | Fair Value Hierarchy | Mar 31, 2022 | Dec 31, 2021
Assets |  |  |
Investment securities AFS |  |  |
U.S. Treasury securities | Level 1 | $ | 116,132 |  | $ | 122,957 |
Agency securities | Level 2 | 14,200 |  | 14,897 |
Obligations of state and political subdivisions (municipal securities) | Level 2 | 372,401 |  | 400,457 |
Residential mortgage-related securities |  |  |
FNMA / FHLMC | Level 2 | 1,894,819 |  | 2,691,879 |
GNMA | Level 2 | 58,909 |  | 67,780 |
Private-label | Level 2 | — |  | 329,724 |
Commercial mortgage-related securities |  |  |
FNMA / FHLMC | Level 2 | 19,786 |  | 350,623 |
GNMA | Level 2 | 126,760 |  | 166,799 |
Asset backed securities |  |  |
FFELP | Level 2 | 168,978 |  | 177,325 |
SBA | Level 2 | 5,845 |  | 6,580 |
Other debt securities | Level 2 | 2,973 |  | 2,994 |
Total investment securities AFS | Level 1 | $ | 116,132 |  | $ | 122,957 |
Total investment securities AFS | Level 2 | 2,664,671 |  | 4,209,058 |
Equity securities with readily determinable fair values | Level 1 | 5,025 |  | 4,810 |
Residential loans held for sale | Level 2 | 91,582 |  | 136,638 |
Mortgage servicing rights, net(a) | Level 3 | 67,015 |  | N/A
Interest rate-related instruments(b) | Level 2 | 31,728 |  | 83,626 |
Foreign currency exchange forwards(b) | Level 2 | 1,986 |  | 5,490 |
Commodity contracts(b) | Level 2 | — |  | 1,264 |
Interest rate lock commitments to originate residential mortgage loans held for sale | Level 3 | — |  | 2,617 |
Forward commitments on residential mortgage loans | Level 3 | 4,796 |  | 30 |
Liabilities |  |  |
Interest rate-related instruments(b) | Level 2 | $ | 112,029 |  | $ | 26,231 |
Foreign currency exchange forwards(b) | Level 2 | 1,815 |  | 5,441 |
Commodity contracts(b) | Level 2 | — |  | 1,248 |
Interest rate lock commitments to originate residential mortgage loans held for sale | Level 3 | 224 |  | — |
Forward commitments on TBA securities | Level 3 | 9 |  | — |
(a) MSRs at December 31, 2021 were carried at LOCOM. On January 1, 2022, the Corporation made the irrevocable election to account for MSRs at fair value on a recurring basis. (b) 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. The table below presents a rollforward of the consolidated balance sheets amounts for the three months ended March 31, 2022 and the year ended December 31, 2021, 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 on residential mortgage loans and TBA securities | Total
Balance December 31, 2020 | $ | 9,624 |  | $ | 2,046 |  | $ | 7,579 |
New production | 53,686 |  | (3,281) |  | 56,966 |
Closed loans / settlements | (53,477) |  | 3,740 |  | (57,217) |
Other | (7,216) |  | (2,535) |  | (4,680) |
Mortgage derivative (loss) | (7,007) |  | (2,076) |  | (4,932) |
Balance December 31, 2021 | $ | 2,617 |  | $ | (30) |  | $ | 2,647 |
New production | $ | 5,002 |  | $ | (887) |  | $ | 5,890 |
Closed loans / settlements | (455) |  | 9,099 |  | (9,554) |
Other | (7,389) |  | (12,969) |  | 5,580 |
Mortgage derivative gain (loss) | (2,842) |  | (4,757) |  | 1,916 |
Balance March 31, 2022 | $ | (224) |  | $ | (4,787) |  | $ | 4,563 |
The closing ratio on interest rate lock commitments to originate residential mortgage loans held for sale is a Level 3 measurement, and was 79% at March 31, 2022. The following table presents the carrying value of equity securities without readily determinable fair values as of March 31, 2022 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 March 31, 2022:
($ in Thousands) |
Equity securities without readily determinable fair values |
Carrying value as of December 31, 2021 | $ | 13,542 |
Additions | 1 |
Sales | (8) |
Carrying value as of March 31, 2022 | $ | 13,535 |
Cumulative upward carrying value changes between January 1, 2018 and March 31, 2022 | $ | 13,444 |
Cumulative downward carrying value changes/impairment between January 1, 2018 and March 31, 2022 | $ | — |
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)
March 31, 2022 |  |  |  |
Assets |  |  |
Individually evaluated loans(a) | Level 3 | $ | 43,882 |  | Provision for credit losses | $ | (397) |
OREO(b) | Level 2 | 985 |  | Other noninterest expense / provision for credit losses(d) | 102 |
December 31, 2021 |  |  |  |
Assets |  |  |  |
Individually evaluated loans(a) | Level 3 | $ | 69,917 |  | Provision for credit losses | $ | (3,045) |
OREO(b) | Level 2 | 21,299 |  | Other noninterest expense / provision for credit losses(d) | 7,345 |
Mortgage servicing rights(e) | Level 3 | 57,259 |  | Mortgage banking, net | 16,186 |
(a) Includes probable TDRs which are individually analyzed, net of the related ACLL. (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. (e) MSRs at December 31, 2021 were carried at LOCOM. On January 1, 2022, the Corporation made the irrevocable election to account for MSRs at fair value on a recurring basis. 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 individually evaluated loans. The table below presents information about these inputs and further discussion is found above:
March 31, 2022 | Valuation Technique | Significant Unobservable Input | Range of Inputs | Weighted Average Input Applied
Individually evaluated loans | Appraisals / Discounted cash flow | Collateral / Discount factor | 21% | - | 21% | 21%
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:
|  | Mar 31, 2022 | Dec 31, 2021
($ in Thousands) | Fair Value Hierarchy Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value
Financial assets |  |  |  |  |
Cash and due from banks | Level 1 | $ | 334,138 |  | $ | 334,138 |  | $ | 343,831 |  | $ | 343,831 |
Interest-bearing deposits in other financial institutions | Level 1 | 166,929 |  | 166,929 |  | 681,684 |  | 681,684 |
Investment securities AFS | Level 1 | 116,132 |  | 116,132 |  | 122,957 |  | 122,957 |
Investment securities AFS | Level 2 | 2,664,671 |  | 2,664,671 |  | 4,209,058 |  | 4,209,058 |
Investment securities HTM, net | Level 1 | 998 |  | 964 |  | 1,000 |  | 1,001 |
Investment securities HTM, net | Level 2 | 3,938,857 |  | 3,763,872 |  | 2,237,947 |  | 2,347,608 |
Equity securities with readily determinable fair values | Level 1 | 5,025 |  | 5,025 |  | 4,810 |  | 4,810 |
Equity securities without readily determinable fair values | Level 3 | 13,535 |  | 13,535 |  | 13,542 |  | 13,542 |
FHLB and Federal Reserve Bank stocks | Level 2 | 168,281 |  | 168,281 |  | 168,281 |  | 168,281 |
Residential loans held for sale | Level 2 | 91,582 |  | 91,582 |  | 136,638 |  | 136,638 |
Loans, net | Level 3 | 24,252,867 |  | 23,485,798 |  | 23,944,934 |  | 23,980,330 |
Bank and corporate owned life insurance | Level 2 | 679,538 |  | 679,538 |  | 680,021 |  | 680,021 |
Mortgage servicing rights, net(a) | Level 3 | 67,015 |  | 67,015 |  | 54,862 |  | 57,259 |
Derivatives (other assets)(b) | Level 2 | 33,715 |  | 33,715 |  | 90,379 |  | 90,379 |
Interest rate lock commitments to originate residential mortgage loans held for sale (other assets) | Level 3 | — |  | — |  | 2,617 |  | 2,617 |
Forward commitments to sell residential mortgage loans (other assets) | Level 3 | 4,796 |  | 4,796 |  | 30 |  | 30 |
Financial liabilities |  |  |  |  |
Noninterest-bearing demand, savings, interest-bearing demand, and money market accounts | Level 3 | $ | 27,116,495 |  | $ | 27,116,495 |  | $ | 27,119,167 |  | $ | 27,119,167 |
Time deposits(c) | Level 2 | 1,288,913 |  | 1,288,913 |  | 1,347,262 |  | 1,347,262 |
Short-term funding | Level 2 | 399,361 |  | 399,270 |  | 354,262 |  | 354,248 |
FHLB advances | Level 2 | 1,537,948 |  | 1,546,821 |  | 1,621,047 |  | 1,680,814 |
Other long-term funding | Level 2 | 249,797 |  | 254,355 |  | 249,324 |  | 265,545 |
Standby letters of credit(d) | Level 2 | 2,473 |  | 2,473 |  | 2,367 |  | 2,367 |
Derivatives (accrued expenses and other liabilities)(b) | Level 2 | 113,844 |  | 113,844 |  | 32,921 |  | 32,921 |
Interest rate lock commitments to originate residential mortgage loans held for sale (accrued expenses and other liabilities) | Level 3 | 224 |  | 224 |  | — |  | — |
Forward commitments on TBA securities (accrued expenses and other liabilities) | Level 3 | 9 |  | 9 |  | — |  | — |
(a) MSRs at December 31, 2021 were carried at LOCOM. On January 1, 2022, the Corporation made the irrevocable election to account for MSRs at fair value. (b) 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. (c) When the estimated fair value is less than the carrying value, the carrying value is reported as the fair value. (d) The commitment on standby letters of credit was $257 million at March 31, 2022 and $248 million at December 31, 2021. See Note 12 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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