Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow the Company to sell its ownership interest back to the fund at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds.

Level 3: Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques using unobservable inputs, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The fair values of all investment securities are based upon the assumptions that market participants would use in pricing the security. If available, fair values of investment securities are determined by quoted market prices (Level 1). For investment securities where quoted market prices are not available, fair values are calculated based on market prices on similar securities (Level 2). For investment securities where quoted prices or market prices of similar securities are not available, fair values are calculated by using observable and unobservable inputs such as discounted cash flows or other market indicators (Level 3). Investment security valuations are obtained from third-party pricing services.

Collateral-dependent loans are identified for the calculation of the ACL on loans. The fair value used to measure credit loss for this type of loan is commonly based on recent real estate appraisals which are generally obtained at least every 18 months or earlier if there are changes to risk characteristics of the underlying loan. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. The Bank also incorporates an estimate of cost to sell the collateral when the sale is probable. Such adjustments may be significant and result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value based on the borrower’s financial statements or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the customer and customer’s business (Level 3). Individually evaluated loans are analyzed for credit loss on a quarterly basis and the ACL on loans is adjusted as required based on the results.

Appraisals on collateral-dependent loans are performed by certified general appraisers for commercial properties or certified residential appraisers for residential properties whose qualifications and licenses have been reviewed and verified by the Bank. Once received, the Bank's internal appraisal department reviews and approves the assumptions and approaches utilized in the appraisal as well as the resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

The Bank obtains broker or dealer quotes to value its interest rate derivative contracts, which use valuation models using observable market data as of the measurement date (Level 2), and incorporates credit valuation adjustments to reflect nonperformance risk in the measurement of fair value (Level 3). Although the Bank has determined that the majority of the inputs used to value its interest rate swap derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as borrower risk ratings, to evaluate the likelihood of default by itself and its counterparties. As of June 30, 2022 and December 31, 2021, the Bank assessed the significance of the impact of the credit valuation adjustment on the overall valuation of its interest rate swap derivatives and determined the credit valuation adjustment was not significant to the overall valuation of its interest rate swap derivatives. As a result, the Bank has classified its interest rate swap derivative valuations in Level 2 of the fair value hierarchy.

Branches held for sale are recorded at fair value less costs to sell when transferred from premises and equipment, net to prepaid expenses and other assets on the unaudited Condensed Consolidated Statements of Financial Condition with any valuation adjustment recorded within other noninterest expense on the unaudited Condensed Consolidated Statements of Income. The fair value of branches held for sale is determined based on a real estate appraisal or broker price opinion. Adjustments are routinely made in the appraisal and broker price opinion process by independent appraisers and commercial real estate brokers, respectively, to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value. Additionally, the fair value of branches held for sale can be adjusted based on executed agreements of sale to be completed at a future date.


	June 30, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Commercial CMO and MBS	493,620		—		493,620		—
Corporate obligations	5,978		—		5,978		—
Other asset-backed securities	24,156		—		24,156		—
Total investment securities available for sale	1,187,588		19,939		1,167,649		—
Equity security	186		186		—		—
Derivative assets - interest rate swaps	19,842		—		19,842		—
Liabilities
Derivative liabilities - interest rate swaps	$	19,842	$	—	$	19,842	$	—


	December 31, 2021
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Investment securities available for sale:
U.S. government and agency securities	$	21,373	$	—	$	21,373	$	—
Municipal securities	221,212		—		221,212		—
Residential CMO and MBS	306,884		—		306,884		—
Commercial CMO and MBS	315,861		—		315,861		—
Corporate obligations	2,014		—		2,014		—
Other asset-backed securities	26,991		—		26,991		—
Total investment securities available for sale	894,335		—		894,335		—
Equity security	240		240		—		—
Derivative assets - interest rate swaps	15,219		—		15,219		—
Liabilities
Derivative liabilities - interest rate swaps	$	15,286	$	—	$	15,286	$	—

The Company may be required to measure certain financial assets and liabilities at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following tables represent assets measured at fair value on a nonrecurring basis at the dates indicated:


			Fair Value at June 30, 2022
	Basis(1)		Total		Level 1		Level 2		Level 3
	(In thousands)
Collateral-dependent loans:
Commercial business:
Commercial and industrial	$	1,054	$	969	$	—	$	—	$	969
Owner-occupied CRE	613		186		—		—		186











Total assets measured at fair value on a nonrecurring basis	$	1,667	$	1,155	$	—	$	—	$	1,155


			Fair Value at December 31, 2021
	Basis(1)		Total		Level 1		Level 2		Level 3
	(In thousands)
Collateral-dependent loans:
Commercial business:
Commercial and industrial	$	1,911	$	1,049	$	—	$	—	$	1,049
Owner-occupied CRE	613		189		—		—		189

Total commercial business	2,524		1,238		—		—		1,238


Real estate construction and land development:

Commercial and multifamily	991		$	534	—		—		534


Total	3,515		1,772		—		—		1,772
Prepaid expenses and other assets:
Branch held for sale (2)	698		698		—		—		698
Total assets measured at fair value on a nonrecurring basis	$	4,213	$	2,470	$	—	$	—	$	2,470


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Collateral-dependent loans:
Commercial business:
Commercial and industrial	$	35	$	6	$	23	$	(28)
Owner-occupied CRE	(3)		(76)		(3)		(76)

Total commercial business	32		(70)		20		(104)

Real estate construction and land development:

Commercial and multifamily	—		(23)		—		(38)



Net loss from nonrecurring fair value adjustments	$	32	$	(93)	$	20	$	(142)

December 31, 2021

Fair
Value

Valuation
Technique(s)

Unobservable Input(s)

Range of Inputs; Weighted
Average

(Dollars in thousands)

Collateral-dependent loans

1,772

Market approach

Adjustment for differences between the comparable sales

35.0% - (11.0%); 13.8%

Branch held for sale

698

Market approach

Sale agreement

Not applicable

Broadly traded markets do not exist for most of the Company’s financial instruments; therefore, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. These determinations are subjective in nature, involve uncertainties and matters of significant judgment and do not include tax ramifications; therefore, the results cannot be determined with precision, substantiated by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments. There may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should not be construed to represent, the underlying value of the Company.


	June 30, 2022
	Carrying Value		Fair Value		Fair Value Measurements Using:
					Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	994,055	$	994,055	$	994,055	$	—	$	—
Investment securities available for sale	1,187,588		1,187,588		19,939		1,167,649		—
Investment securities held to maturity	615,653		559,312		—		559,312		—
Loans held for sale	1,311		1,353		—		1,353		—
Loans receivable, net	3,834,368		3,760,294		—		—		3,760,294
Accrued interest receivable	15,908		15,908		272		6,185		9,451
Derivative assets - interest rate swaps	19,842		19,842		—		19,842		—
Equity security	186		186		186		—		—
Financial Liabilities:
Non-maturity deposits	$	6,019,421	$	6,019,421	$	6,019,421	$	—	$	—
Certificates of deposit	310,769		311,481		—		311,481		—

Securities sold under agreement to repurchase	41,827		41,827		41,827		—		—
Junior subordinated debentures	21,326		19,250		—		—		19,250
Accrued interest payable	83		83		31		16		36
Derivative liabilities - interest rate swaps	19,842		19,842		—		19,842		—


	December 31, 2021
	Carrying Value		Fair Value		Fair Value Measurements Using:
					Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	1,723,292	$	1,723,292	$	1,723,292	$	—	$	—
Investment securities available for sale	894,335		894,335		—		894,335		—
Investment securities held to maturity	383,393		376,331		—		376,331		—
Loans held for sale	1,476		1,527		—		1,527		—
Loans receivable, net	3,773,301		3,849,602		—		—		3,849,602
Accrued interest receivable	14,657		14,657		14		4,582		10,061
Derivative assets - interest rate swaps	15,219		15,219		—		15,219		—
Equity security	240		240		240		—		—
Financial Liabilities:
Non-maturity deposits	$	6,038,498	$	6,038,498	$	6,038,498	$	—	$	—
Certificates of deposit	342,839		344,025		—		344,025		—

Securities sold under agreement to repurchase	50,839		50,839		50,839		—		—
Junior subordinated debentures	21,180		18,750		—		—		18,750
Accrued interest payable	73		73		33		19		21
Derivative liabilities - interest rate swaps	15,286		15,286		—		15,286		—