FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2022

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 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, CMOs, treasury securities, and agency notes are guaranteed either implicitly or explicitly by GSEs as of March 31, 2022 and December 31, 2021. 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 March 31, 2022 and December 31, 2021 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 March 31, 2022 Using
			Level 1		Level 2		Level 3
(In thousands)	Total		Inputs		Inputs		Inputs
Financial Assets:
Securities available-for-sale:
Treasury securities	$	234,531	$	—	$	234,531	$	—
Corporate securities		147,425		—		147,425		—
Pass-through MBS issued by GSEs		418,116		—		418,116		—
Agency CMOs		440,183		—		440,183		—
State and municipal obligations		36,781		—		36,781		—
Derivative – cash flow hedges		11,240		—		11,240		—
Derivative – freestanding derivatives, net		60,586		—		60,586		—
Financial Liabilities:
Derivative – freestanding derivatives, net		60,586		—		60,586		—

			Fair Value Measurements
			at December 31, 2021 Using
			Level 1		Level 2		Level 3
(In thousands)	Total		Inputs		Inputs		Inputs
Financial Assets:
Securities available-for-sale:
Agency notes	$	80,254	$	—	$	80,254	$	—
Treasury securities		244,769		—		244,769		—
Corporate securities		152,030		—		152,030		—
Pass-through MBS issued by GSEs		526,454		—		526,454		—
Agency CMOs		521,258		—		521,258		—
State and municipal obligations		38,946		—		38,946		—
Derivative – cash flow hedges		4,358		—		4,358		—
Derivative – freestanding derivatives, net		40,728		—		40,728		—
Financial Liabilities:
Derivative – freestanding derivatives, net		40,728		—		40,728		—

Assets and Liabilities Measured at Fair Value on a Non-recurring 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 non-recurring 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.

	March 31, 2022
				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	$	1,179	$	—	$	—	$	1,179

	December 31, 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	$	1,900	$	—	$	—	$	1,900

Individually evaluated loans with an allowance for credit losses at March 31, 2022 had a carrying amount of $1.2 million, which is made up of the outstanding balance of $2.5 million, net of a valuation allowance of $1.3 million. Collateral dependent individually analyzed loans as of March 31, 2022 resulted in a credit loss provision of $757 thousand, which is included in the amounts reported in the consolidated statements of income for the three months ended March 31, 2022.

Individually evaluated loans with an allowance for credit losses at December 31, 2021 had a carrying amount of $1.9 million, which is made up of the outstanding balance of $2.5 million, net of a valuation allowance of $600 thousand.

Financial Instruments Not Measured at Fair Value

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 basis 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 March 31, 2022 Using
	Carrying		Level 1		Level 2		Level 3
(In thousands)	Amount		Inputs		Inputs		Inputs		Total
Financial Assets:
Cash and due from banks	$	432,994	$	432,994	$	—	$	—	$	432,994
Securities held-to-maturity		383,922		—		358,689		—		358,689
Loans held for investment, net		9,169,055		—		—		9,095,834		9,095,834
Accrued interest receivable		38,456		—		4,483		33,973		38,456
Financial Liabilities:
Savings, money market and checking accounts		9,648,328		9,648,328		—		—		9,648,328
Certificates of Deposits ("CDs")		781,775		—		782,385		—		782,385
FHLBNY advances		50,000		—		50,039		—		50,039
Subordinated debt, net		197,050		—		198,650		—		198,650
Other short-term borrowings		2,853		2,853		—		—		2,853
Accrued interest payable		1,611		—		1,611		—		1,611

			Fair Value Measurements
			at December 31, 2021 Using
	Carrying		Level 1		Level 2		Level 3
(In thousands)	Amount		Inputs		Inputs		Inputs		Total
Financial Assets:
Cash and due from banks	$	393,722	$	393,722	$	—	$	—	$	393,722
Securities held-to-maturity		179,309		—		177,354		—		177,354
Loans held for investment, net		9,158,908		—		—		9,169,872		9,169,872
Accrued interest receivable		40,149		—		4,481		35,668		40,149
Financial Liabilities:
Savings, money market and checking accounts		9,605,731		9,605,731		—		—		9,605,731
CDs		853,242		—		857,342		—		857,342
FHLBNY advances		25,000		—		25,014		—		25,014
Subordinated debt, net		197,096		—		202,334		—		202,334
Other short-term borrowings		1,862		1,862		—		—		1,862
Accrued interest payable		870		—		870		—		870