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Disclosures About Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Estimated Fair Values of Financial Instruments

The estimated fair values of Customers' financial instruments at September 30, 2019 and December 31, 2018 were as follows.

															Fair Value Measurements at September 30, 2019
(amounts in thousands)			Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents			$	182,218					$	182,218					$	182,218					$	—					$	—
Debt securities, available for sale			589,541						589,541						—						589,541						—
Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities, reported at fair value based on a fair value option election			17,078						17,078						—						—						17,078
Equity securities			2,095						2,095						2,095						—						—
Loans held for sale			502,854						502,854						—						1,755						501,099
Total loans and leases receivable, net of allowance for loan and lease losses			9,723,714						9,991,132						—						2,438,530						7,552,602
FHLB, Federal Reserve Bank and other restricted stock			81,853						81,853						—						81,853						—
Derivatives			29,174						29,174						—						29,024						150
Liabilities:
Deposits			$	8,925,685					$	8,929,025					$	6,502,812					$	2,426,213					$	—
Federal funds purchased			373,000						373,000						373,000						—						—
FHLB advances			1,040,800						1,042,813						190,800						852,013						—
Other borrowings			123,528						124,961						—						124,961						—
Subordinated debt			109,050						114,686						—						114,686						—
Derivatives			58,316						58,316						—						58,316						—

															Fair Value Measurements at December 31, 2018
(amounts in thousands)			Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents			$	62,135					$	62,135					$	62,135					$	—					$	—
Debt securities, available for sale			663,294						663,294						—						663,294						—
Equity securities			1,718						1,718						1,718						—						—
Loans held for sale			1,507						1,507						—						1,507						—
Total loans and leases receivable, net of allowance for loan and lease losses			8,503,522						8,481,128						—						1,405,420						7,075,708
FHLB, Federal Reserve Bank and other restricted stock			89,685						89,685						—						89,685						—
Derivatives			14,693						14,693						—						14,624						69
Liabilities:
Deposits			$	7,142,236					$	7,136,009					$	5,408,055					$	1,727,954					$	—
Federal funds purchased			187,000						187,000						187,000						—						—
FHLB advances			1,248,070						1,248,046						998,070						249,976						—
Other borrowings			123,871						121,718						—						121,718						—
Subordinated debt			108,977						110,550						—						110,550						—
Derivatives			16,286						16,286						—						16,286						—

Summary of Financial Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

For financial assets and liabilities measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2019 and December 31, 2018 were as follows:

			September 30, 2019
			Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Measured at Fair Value on a Recurring Basis:
Assets
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities			$	—					$	292,343					$	—					$	292,343
Corporate notes			—						297,198						—						297,198
Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities, reported at fair value based on a fair value option election			—						—						17,078						17,078
Equity securities			2,095						—						—						2,095
Derivatives			—						29,024						150						29,174
Loans held for sale – fair value option			—						1,755						—						1,755
Loans receivable, mortgage warehouse – fair value option			—						2,438,530						—						2,438,530
Total assets – recurring fair value measurements			$	2,095					$	3,058,850					$	17,228					$	3,078,173
Liabilities
Derivatives			$	—					$	58,316					$	—					$	58,316
Measured at Fair Value on a Nonrecurring Basis:
Assets
Impaired loans, net of reserves of $395			—						—						12,754						12,754
Other real estate owned			—						—						78						78
Total assets – nonrecurring fair value measurements			$	—					$	—					$	12,832					$	12,832

			December 31, 2018
			Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Measured at Fair Value on a Recurring Basis:
Assets
Available-for-sale securities:
Agency-guaranteed residential mortgage–backed securities			$	—					$	305,374					$	—					$	305,374
Corporate notes			—						357,920						—						357,920
Equity securities			1,718						—						—						1,718
Derivatives			—						14,624						69						14,693
Loans held for sale – fair value option			—						1,507						—						1,507
Loans receivable, mortgage warehouse – fair value option			—						1,405,420						—						1,405,420
Total assets – recurring fair value measurements			$	1,718					$	2,084,845					$	69					$	2,086,632
Liabilities
Derivatives			$	—					$	16,286					$	—					$	16,286
Measured at Fair Value on a Nonrecurring Basis:
Assets
Impaired loans, net of reserves of $845			$	—					$	—					$	10,876					$	10,876
Other real estate owned			—						—						621						621
Total assets – nonrecurring fair value measurements			$	—					$	—					$	11,497					$	11,497

Statement of Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis

The changes in residential mortgage loan commitments (Level 3 assets) measured at fair value on a recurring basis for the three and nine months ended September 30, 2019 and 2018 are summarized in the tables below. Additional information about residential mortgage loan commitments can be found in NOTE 11 - DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES.

			Residential Mortgage Loan Commitments
			Three Months Ended September 30,
(amounts in thousands)			2019						2018
Balance at June 30			$	145					$	133
Issuances			150						122
Settlements			(145)						(133)
Balance at September 30			$	150					$	122

			Residential Mortgage Loan Commitments
			Nine Months Ended September 30,
(amounts in thousands)			2019						2018
Balance at December 31			$	69					$	60
Issuances			372						338
Settlements			(291)						(276)
Balance at September 30			$	150					$	122

Summary of Financial Assets and Financial Liabilities Measured at Fair Value on Recurring and Nonrecurring Basis

The following table summarizes financial assets and financial liabilities measured at fair value as of September 30, 2019 and December 31, 2018 on a recurring and nonrecurring basis for which Customers utilized Level 3 inputs to measure fair value. The unobservable Level 3 inputs noted below contain a level of uncertainty that may differ from what is realized in an immediate settlement of the assets. Therefore, Customers may realize a value higher or lower than the current estimated fair value of the assets. On June 28, 2019, Customers obtained ownership of interest-only GNMA securities that served as the primary collateral for loans made to one commercial mortgage warehouse customer through a Uniform Commercial Code ("UCC") private sale transaction. On June 28, 2019, Customers elected the fair value option for these interest-only GNMA securities acquired on such date. The fair value of these securities at June 30, 2019 was $17.2 million which reflects the valuation obtained from the third party binding bids obtained through the UCC private sale transaction. At September 30, 2019 Customers used an internally developed discounted cash flow model to value the interest-only GNMA securities. The significant unobservable input used in the discounted cash flow model includes prepayment speed. Significant increases (decreases) in this input would result in a significantly lower (higher) fair value measurement.

Quantitative Information about Level 3 Fair Value Measurements

September 30, 2019

Fair Value Estimate

Valuation Technique

Unobservable Input

Range  (Weighted Average)

(amounts in thousands)

Impaired loans - real estate

$

11,207

Collateral appraisal (1)

Liquidation expenses (2)

8% - 8% (8%)

Impaired loans - commercial & industrial

1,547

Business asset valuation (3)

Business asset valuation adjustments (4)

8% - 20% (15%)

Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities, reported at fair value based on a fair value option election

17,078

Discounted cash flow

Constant prepayment rate

9% - 14% (12%)

Other real estate owned

78

Collateral appraisal (1)

Liquidation expenses (2)

8% - 9% (9%)

Residential mortgage loan commitments

150

Adjusted market bid

Pull-through rate

83% - 83% (83%)

(1)Obtained from approved independent appraisers. Appraisals are current and in compliance with credit policy. Customers does not generally discount appraisals.

(2)Appraisals are adjusted by management for liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percentage of the appraisal.

(3)Business asset valuation obtained from independent party.

(4)Business asset valuations may be adjusted by management for qualitative factors including economic conditions and the condition of the business assets. The range and weighted average of the business asset adjustments are presented as a percent of the business asset valuation.

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2018

Fair Value Estimate

Valuation Technique

Unobservable Input

Range  (Weighted Average)

(amounts in thousands)

Impaired loans - real estate

$

10,260

Collateral appraisal (1)

Liquidation expenses (2)

8% - 8% (8%)

Impaired loans - commercial & industrial

616

Business asset valuation (3)

Business asset valuation adjustments (4)

8% - 50% (26%)

Other real estate owned

621

Collateral appraisal (1)

Liquidation expenses (2)

8% - 8% (8%)

Residential mortgage loan commitments

69

Adjusted market bid

Pull-through rate

90% - 90% (90%)

(1)Obtained from approved independent appraisers. Appraisals are current and in compliance with credit policy. Customers does not generally discount appraisals.

(2)Appraisals are adjusted by management for liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percentage of the appraisal.

(3)Business asset valuation obtained from independent party.

(4)Business asset valuations may be adjusted by management for qualitative factors including economic conditions and the condition of the business assets. The range and weighted average of the business asset adjustments are presented as a percentage of the business asset valuation.

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- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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