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FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES | 9 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES | 12. 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 September 30, 2024 and December 31, 2023 by level in the valuation hierarchy (as described above):
|  | September 30, 2024
(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 |  | $ | — |  |  | $ | 455,483 |  |  | $ | — |  |  | $ | 455,483 |
FNMA MBS |  | — |  |  | 2,939,887 |  |  | — |  |  | 2,939,887 |
FHLMC MBS |  | — |  |  | 111,807 |  |  | — |  |  | 111,807 |
GNMA MBS |  | — |  |  | 43,823 |  |  | — |  |  | 43,823 |
GSE agency notes |  | — |  |  | 186,119 |  |  | — |  |  | 186,119 |
Other assets |  | — |  |  | 166,339 |  |  | 56 |  |  | 166,395 |
Total assets measured at fair value on a recurring basis |  | $ | — |  |  | $ | 3,903,458 |  |  | $ | 56 |  |  | $ | 3,903,514 |
Liabilities measured at fair value on a recurring basis: |  |  |  |  |  |  |  |
Other liabilities |  | $ | — |  |  | $ | 133,020 |  |  | $ | 8,285 |  |  | $ | 141,305 |
Assets measured at fair value on a nonrecurring basis: |  |  |  |  |  |  |  |
Other investments |  | $ | — |  |  | $ | — |  |  | $ | 14,322 |  |  | $ | 14,322 |
Other real estate owned |  | — |  |  | — |  |  | 1,301 |  |  | 1,301 |
Loans held for sale |  | — |  |  | 42,121 |  |  | — |  |  | 42,121 |
Total assets measured at fair value on a nonrecurring basis |  | $ | — |  |  | $ | 42,121 |  |  | $ | 15,623 |  |  | $ | 57,744 |
|  | December 31, 2023
(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 |  | $ | — |  |  | $ | 464,619 |  |  | $ | — |  |  | $ | 464,619 |
FNMA MBS |  | — |  |  | 3,042,350 |  |  | — |  |  | 3,042,350 |
FHLMC MBS |  | — |  |  | 115,532 |  |  | — |  |  | 115,532 |
GNMA MBS |  | — |  |  | 43,340 |  |  | — |  |  | 43,340 |
GSE agency notes |  | — |  |  | 180,696 |  |  | — |  |  | 180,696 |
Other assets |  | — |  |  | 153,569 |  |  | 78 |  |  | 153,647 |
Total assets measured at fair value on a recurring basis |  | $ | — |  |  | $ | 4,000,106 |  |  | $ | 78 |  |  | $ | 4,000,184 |
Liabilities measured at fair value on a recurring basis: |  |  |  |  |  |  |  |
Other liabilities |  | $ | — |  |  | $ | 137,616 |  |  | $ | 14,026 |  |  | $ | 151,642 |
Assets measured at fair value on a nonrecurring basis |  |  |  |  |  |  |  |
Other investments |  | $ | — |  |  | $ | — |  |  | $ | 15,206 |  |  | $ | 15,206 |
Other real estate owned |  | — |  |  | — |  |  | 1,569 |  |  | 1,569 |
Loans held for sale |  | — |  |  | 29,268 |  |  | — |  |  | 29,268 |
Total assets measured at fair value on a nonrecurring basis |  | $ | — |  |  | $ | 29,268 |  |  | $ | 16,775 |  |  | $ | 46,043 |
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 GSEs and GNMA 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, which are categorized as Level 3. The Company’s equity investments without readily determinable fair values are held at cost, and are adjusted for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer during the reporting period. 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, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, and risk participation agreements. 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. Valuation of foreign exchange forward contracts and risk participation agreements are obtained from an independent pricing service. Other liabilities Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, risk participation agreements, and derivative related to the sale of certain Visa Class B common shares. 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. Valuation of foreign exchange forward contracts and risk participation agreements are obtained from an independent pricing service. 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, cash equivalents, and restricted cash 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) as well as equity method investments. 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 Loans and leases are segregated by portfolio segments with similar financial characteristics. The fair values of loans and leases, 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, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, and risk participation agreements (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 $6.0 million at September 30, 2024 and $7.3 million at December 31, 2023, 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, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, risk participation agreements, 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). Financial instruments measured at fair value using significant unobservable inputs (Level 3) The following tables provide a description of the valuation techniques and significant unobservable inputs for the Company's financial instruments classified as Level 3 as of September 30, 2024 and December 31, 2023:
(Dollars in thousands) |  | September 30, 2024
Financial Instrument |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average)
Other investments |  | $ | 14,322 |  |  | Observed market comparable transactions |  | Period of observed transactions |  | December 2023
Other real estate owned |  | 1,301 |  |  | Fair market value of collateral |  | Costs to sell |  | 10.0%-20.0% (19.3%)
Other assets (Risk participation agreements purchased) |  | 56 |  | Credit Valuation Adjustment |  | CDS Spread and Loss Given Default (LGD) |  | CDS spread: 110 - 360 bps (189 bps) LGD: –% - 30% (30%)
Other liabilities (Risk participation agreements sold) |  | 112 |  |  | Credit Valuation Adjustment |  | CDS Spread and Loss Given Default (LGD) |  | CDS spread: 1 - 250 bps (213 bps) LGD: 30%
Other liabilities (Financial derivative related to sales of certain Visa Class B shares) |  | 8,173 |  |  | Discounted cash flow |  | Timing of Visa litigation resolution |  | 2.75 years or 2Q 2027
(Dollars in thousands) |  | December 31, 2023
Financial Instrument |  | Fair Value |  | Valuation Technique(s) |  | Unobservable Input |  | Range (Weighted Average)
Other investments |  | $ | 15,206 |  |  | Observed market comparable transactions |  | Period of observed transactions |  | December 2023
Other real estate owned |  | 1,569 |  |  | Fair market value of collateral |  | Costs to sell |  | 10.0% - 20.0% (18.1%)
Other assets (Risk participation agreements purchased) |  | 78 |  | Credit Valuation Adjustment |  | CDS Spread and Loss Given Default (LGD) |  | CDS spread: 110 - 360 bps (195 bps) LGD: –% - 30% (30%)
Other liabilities (Risk participation agreements sold) |  | 3 |  |  | Credit Valuation Adjustment |  | CDS Spread and Loss Given Default (LGD) |  | CDS spread: 1 - 250 bps (95 bps) LGD: 30%
Other liabilities (Financial derivative related to sales of certain Visa Class B shares) |  | 14,023 |  |  | Discounted cash flow |  | Timing of Visa litigation resolution |  | 1.00 - 4.75 years (3.06 years or 4Q 2025)
The book value and estimated fair value of the Company's financial instruments are as follows:
|  |  |  | September 30, 2024 |  | December 31, 2023
(Dollars in thousands) |  | Fair Value Measurement |  | Book Value |  | Fair Value |  | Book Value |  | Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash, cash equivalents, and restricted cash |  | Level 1 |  | $ | 990,918 |  |  | $ | 990,918 |  |  | $ | 1,092,900 |  |  | $ | 1,092,900 |
Investment securities available-for-sale |  | Level 2 |  | 3,737,119 |  |  | 3,737,119 |  |  | 3,846,537 |  |  | 3,846,537 |
Investment securities held-to-maturity, net |  | Level 2 |  | 1,026,305 |  |  | 958,969 |  |  | 1,058,557 |  |  | 985,931 |
Other investments |  | Level 3 |  | 16,976 |  |  | 16,976 |  |  | 17,434 |  |  | 17,434 |
Loans, held for sale |  | Level 2 |  | 42,121 |  |  | 42,121 |  |  | 29,268 |  |  | 29,268 |
Loans and leases, net(1) |  | Level 3 |  | 13,124,684 |  |  | 13,360,280 |  |  | 12,583,202 |  |  | 12,514,431 |
Stock in FHLB of Pittsburgh |  | Level 2 |  | 17,497 |  |  | 17,497 |  |  | 15,398 |  |  | 15,398 |
Accrued interest receivable |  | Level 2 |  | 87,360 |  |  | 87,360 |  |  | 85,979 |  |  | 85,979 |
Other assets |  | Levels 2, 3 |  | 166,395 |  |  | 166,395 |  |  | 153,647 |  |  | 153,647 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Deposits |  | Level 2 |  | $ | 16,427,031 |  |  | $ | 16,418,398 |  |  | $ | 16,474,086 |  |  | $ | 16,449,198 |
Borrowed funds |  | Level 2 |  | 1,075,161 |  |  | 1,093,335 |  |  | 895,076 |  |  | 912,760 |
Standby letters of credit |  | Level 3 |  | 675 |  |  | 675 |  |  | 814 |  |  | 814 |
Accrued interest payable |  | Level 2 |  | 73,418 |  |  | 73,418 |  |  | 46,684 |  |  | 46,684 |
Other liabilities |  | Levels 2, 3 |  | 141,305 |  |  | 141,305 |  |  | 151,642 |  |  | 151,642 |
(1) Includes reverse mortgage loans. At September 30, 2024 and December 31, 2023 the Company had no commitments to extend credit measured at fair value.

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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/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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