FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2021

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

11.FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for 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 on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Significant other observable inputs such as any of the following: (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 Inputs – Significant unobservable inputs for the asset or liability. Significant unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Significant unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Securities

The Company’s marketable equity securities and available-for-sale securities are reported at fair value, which were determined utilizing prices obtained from independent parties. The valuations obtained are based upon market data, and often utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (obtained only from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Prioritization of inputs may vary on any given day based on market conditions.

All MBS, CMO, treasury securities and agency notes available-for-sale are guaranteed either implicitly or explicitly by GSEs as of June 30, 2021 and December 31, 2020. In accordance with the Company’s investment policy, corporate securities are rated "investment grade" at the time of purchase and the financials of the issuers are reviewed quarterly. Obtaining market values as of June 30, 2021 and December 31, 2020 for these securities utilizing significant observable inputs was not difficult due to their liquid nature.

Derivatives

Derivatives represent interest rate swaps and estimated fair values are based on valuation models using observable market data as of the measurement date.

The following tables present financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements
			at June 30, 2021 Using
			Level 1		Level 2		Level 3
(In thousands)	Total		Inputs		Inputs		Inputs
Financial Assets:
Securities available-for-sale:
Agency notes	$	81,035	$	—	$	81,035	$	—
Treasury securities		167,998		—		167,998		—
Corporate securities		108,064		—		108,064		—
Pass-through MBS issued by GSEs		331,749		—		331,749		—
Agency CMOs		531,490		—		531,490		—
State and municipal obligations		41,452		—		41,452		—
Derivative – cash flow hedges		2,547		—		2,547		—
Derivative – freestanding derivatives, net		42,892		—		42,892		—
Financial Liabilities:
Derivative – freestanding derivatives, net		42,892		—		42,892		—

			Fair Value Measurements
			at December 31, 2020 Using
			Level 1		Level 2		Level 3
(In thousands)	Total		Inputs		Inputs		Inputs
Financial Assets:
Marketable equity securities (Registered mutual funds)
Domestic equity mutual funds	$	1,769	$	1,769	$	—	$	—
International equity mutual funds		468		468		—		—
Fixed income mutual funds		3,733		3,733		—		—
Securities available-for-sale:
Agency notes		47,421		—		47,421		—
Corporate securities		64,461		—		64,461		—
Pass-through MBS issued by GSEs		143,483		—		143,483		—
Agency CMOs		283,496		—		283,496		—
Derivative – freestanding derivatives		30,596		—		30,596		—
Financial Liabilities:
Derivative – cash flow hedges		18,442		—		18,442		—
Derivative – freestanding derivatives		30,596		—		30,596		—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances. Financial assets measured at fair value on a nonrecurring basis include certain individually evaluated loans (or impaired loans prior to the adoption of ASC 326) reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.

	June 30, 2021
				Fair Value Measurements Using:
			Quoted Prices
			In Active		Significant
			Markets for		Other	Significant
			Identical		Observable	Unobservable
	Carrying		Assets		Inputs	Inputs
(In thousands)	Value		(Level 1)		(Level 2)	(Level 3)
Individually evaluated loans	$	47,951				$	47,951

Individually evaluated loans with an allowance for credit losses at June 30, 2021 had a carrying amount of $48.0 million, which is made up of the outstanding balance of $71.6 million, net of a valuation allowance of $23.7 million. This resulted in an additional provision for credit losses of $0.5 million and $0.4 million that is included in the amount reported on the consolidated statements of income for the three and six months ended June 30, 2021, respectively. There were no impaired loans (prior to the adoption of CECL standard) with an allowance for credit losses at December 31, 2020.

Financial Instruments Not Measured at Fair Value

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 24 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K.

The following tables present the carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or nonrecurring is as follows for the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements
			at June 30, 2021 Using
	Carrying		Level 1		Level 2		Level 3
(In thousands)	Amount		Inputs		Inputs		Inputs		Total
Financial Assets
Cash and due from banks	$	1,184,183	$	1,184,183	$	—	$	—	$	1,184,183
Loans, net		9,453,871		—		—		9,523,466		9,523,466
Accrued interest receivable		47,209		—		3,415		43,794		47,209
Financial Liabilities
Savings, money market and checking accounts		9,765,228		9,765,228		—		—		9,765,228
Certificates of Deposits ("CDs")		1,300,965		—		1,307,876		—		1,307,876
FHLBNY Advances		25,000		—		25,013		—		25,013
Subordinated debt, net		197,188		—		203,201		—		203,201
Other borrowings		1,841		1,841		—		—		1,841
Accrued interest payable		1,068		—		1,068		—		1,068

			Fair Value Measurements
			at December 31, 2020 Using
	Carrying		Level 1		Level 2		Level 3
(In thousands)	Amount		Inputs		Inputs		Inputs		Total
Financial Assets
Cash and due from banks	$	243,603	$	243,603	$	—	$	—	$	243,603
Loans, net		5,580,583		—		—		5,598,787		5,598,787
Accrued interest receivable		34,815		2		1,584		33,229		34,815
Financial Liabilities
Savings, money market and checking accounts		3,212,495		3,212,495		—		—		3,212,495
CDs		1,322,638		—		1,328,554		—		1,328,554
FHLBNY Advances		1,204,010		—		1,207,890		—		1,207,890
Subordinated debt, net		114,052		—		114,340		—		114,340
Other borrowings		120,000		120,000		—		—		120,000
Accrued interest payable		1,734		—		1,734		—		1,734