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FAIR VALUE | 3 Months Ended
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Mar. 31, 2020
FAIR VALUE. |
FAIR VALUE | 5. FAIR VALUE The Company adopted ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities during the first quarter of 2018. FASB ASC No. 820‑10 defines fair value as 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. FASB ASC 820‑10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability. The following tables summarize assets and liabilities measured at fair value on a recurring basis:
|  | March 31, 2020
|  |  |  | 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)
Financial assets: |  |  |  |  |  |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 59,999 |  |  |  | $ | 59,999 |  |
State and municipal obligations |  |  | 37,946 |  |  |  |  | 37,946 |  |
U.S. GSE residential mortgage-backed securities |  |  | 81,654 |  |  |  |  | 81,654 |  |
U.S. GSE residential collateralized mortgage obligations |  |  | 205,492 |  |  |  |  | 205,492 |  |
U.S. GSE commercial mortgage-backed securities |  |  | 17,049 |  |  |  |  | 17,049 |  |
U.S. GSE commercial collateralized mortgage obligations |  |  | 83,380 |  |  |  |  | 83,380 |  |
Other asset-backed securities |  |  | 22,552 |  |  |  |  | 22,552 |  |
Corporate bonds |  |  | 45,206 |  |  |  |  | 45,206 |  |
Total available for sale securities |  | $ | 553,278 |  |  |  | $ | 553,278 |  |
Derivatives |  | $ | 57,874 |  |  |  | $ | 57,874 |  |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 68,839 |  |  |  | $ | 68,839 |  |
|  | December 31, 2019
|  |  |  | 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)
Financial assets: |  |  |  |  |  |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 50,822 |  |  |  | $ | 50,822 |  |
U.S. GSE securities |  |  | 4,995 |  |  |  |  | 4,995 |  |
State and municipal obligations |  |  | 34,964 |  |  |  |  | 34,964 |  |
U.S. GSE residential mortgage-backed securities |  |  | 84,691 |  |  |  |  | 84,691 |  |
U.S. GSE residential collateralized mortgage obligations |  |  | 277,851 |  |  |  |  | 277,851 |  |
U.S. GSE commercial mortgage-backed securities |  |  | 13,609 |  |  |  |  | 13,609 |  |
U.S. GSE commercial collateralized mortgage obligations |  |  | 104,156 |  |  |  |  | 104,156 |  |
Other asset-backed securities |  |  | 23,401 |  |  |  |  | 23,401 |  |
Corporate bonds |  |  | 43,802 |  |  |  |  | 43,802 |  |
Total available for sale securities |  | $ | 638,291 |  |  |  | $ | 638,291 |  |
Derivatives |  | $ | 15,437 |  |  |  | $ | 15,437 |  |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 16,645 |  |  |  | $ | 16,645 |  |
The following tables summarize assets measured at fair value on a non-recurring basis:
|  | March 31, 2020
|  |  |  | 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)
Loans held for sale |  | $ | 12,643 |  |  |  |  |  | $ | 12,643
Collateral dependent loans |  | $ | 2,902 |  |  |  |  |  | $ | 2,902
|  | December 31, 2019
|  |  |  | 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)
Loans held for sale |  | $ | 12,643 |  |  |  |  |  | $ | 12,643
Impaired loans |  | $ | 6,981 |  |  |  |  |  | $ | 6,981
Loans held for sale at March 31, 2020 and December 31, 2019 had a carrying amount of $12.6 million with no valuation allowance recorded. Collateral dependent loans with an allowance for credit losses at March 31, 2020 had a carrying amount of $2.9 million, which is made up of the outstanding balance of $7.3 million, net of a valuation allowance of $4.4 million. Impaired loans (prior to the adoption of CECL standard) with an allowance for credit losses at December 31, 2019 had a carrying amount of $7.0 million, which is made up of the outstanding balance of $11.7 million, net of a valuation allowance of $4.7 million. There was no other real estate owned at March 31, 2020 and December 31, 2019. The Company used the following methods and assumptions in estimating the fair value of its financial instruments: Securities Available for Sale and Held to Maturity: If available, the estimated fair values are based on independent dealer quotations on nationally recognized securities exchanges and are classified as Level 1. For securities where quoted prices are not available, fair value is based on matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities resulting in a Level 2 classification. Derivatives: Represents interest rate swaps for which the estimated fair values are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification. Loans Held for Sale: Loans held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is initially determined using the price we expect to receive for the loans based on commitments received from third-party investors. Thereafter, loans held for sale are re-evaluated quarterly to determine if a valuation allowance is required to adjust for a decline in fair value below the carrying amount, resulting in a Level 3 classification. Collateral Dependent Loans with an ACL (Impaired Loans with and ACL prior to the adoption of the CECL Standard) and Other Real Estate Owned: For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. The fair value of real estate collateral is determined based on recent appraised values. The fair value of other real estate owned is also determined based on recent appraised values less the estimated cost to sell. 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 the independent appraisers to adjust for differences between the comparable sales and income data available. Adjustments may relate to location, square footage, condition, amenities, market rate of leases as well as timing of comparable sales. All appraisals undergo a second review process to ensure that the methodology employed and the values derived are reasonable. Non-real estate collateral may be valued using an appraisal, net book value per 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 borrower and its business. These valuation methods result in a Level 3 classification. Appraisals for 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 Company. Once received, the Appraisal and Credit Departments review the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Management also considers the appraisal values for commercial properties associated with current loan origination activity. Collectively, this information is reviewed to help assess current trends in commercial property values. For each collateral dependent loan, management considers information that relates to the type of property to determine if such properties may have appreciated or depreciated in value since the date of the most recent appraisal. Adjustments to fair value are made only when the analysis indicates a probable decline in collateral values. Adjustments made in the appraisal process are not deemed material to the overall consolidated financial statements given the level of collateral dependent loans measured at fair value on a non-recurring basis. The following tables summarize the estimated fair values and recorded carrying amounts of the Company's financial instruments at March 31, 2020 and December 31, 2019:
|  | March 31, 2020
|  |  |  | Fair Value Measurements Using: |  |
|  |  |  |  |  | Significant |  |  |  |
|  |  |  | Quoted Prices In |  | Other |  | Significant |  |
|  |  |  | Active Markets for |  | Observable |  | Unobservable |  |
|  | Carrying |  | Identical Assets |  | Inputs |  | Inputs |  | Total
(In thousands) |  | Amount |  | (Level 1) |  | (Level 2) |  | (Level 3) |  | Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 61,352 |  | $ | 61,352 |  | $ | — |  | $ | — |  | $ | 61,352
Interest-bearing deposits with banks |  |  | 172,830 |  |  | 172,830 |  |  | — |  |  | — |  |  | 172,830
Securities available for sale |  |  | 553,278 |  |  | — |  |  | 553,278 |  |  | — |  |  | 553,278
Securities restricted |  |  | 26,354 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Securities held to maturity |  |  | 124,231 |  |  | — |  |  | 127,653 |  |  | — |  |  | 127,653
Loans held for sale |  |  | 12,643 |  |  | — |  |  | — |  |  | 12,643 |  |  | 12,643
Loans, net |  |  | 3,722,915 |  |  | — |  |  | — |  |  | 3,755,669 |  |  | 3,755,669
Derivatives |  |  | 57,874 |  |  | — |  |  | 57,874 |  |  | — |  |  | 57,874
Accrued interest receivable |  |  | 11,070 |  |  | — |  |  | 2,105 |  |  | 8,965 |  |  | 11,070
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit |  |  | 310,077 |  |  | — |  |  | 312,965 |  |  | — |  |  | 312,965
Demand and other deposits |  |  | 3,745,658 |  |  | 3,745,658 |  |  | — |  |  | — |  |  | 3,745,658
FHLB advances |  |  | 290,000 |  |  | — |  |  | 300,760 |  |  | — |  |  | 300,760
Repurchase agreements |  |  | 1,195 |  |  | — |  |  | 1,195 |  |  | — |  |  | 1,195
Subordinated debentures |  |  | 78,955 |  |  | — |  |  | 89,678 |  |  | — |  |  | 89,678
Derivatives |  |  | 68,839 |  |  | — |  |  | 68,839 |  |  | — |  |  | 68,839
Accrued interest payable |  |  | 387 |  |  | — |  |  | 387 |  |  | — |  |  | 387
|  | December 31, 2019
|  |  |  | Fair Value Measurements Using: |  |
|  |  |  |  |  | Significant |  |  |  |
|  |  |  | Quoted Prices In |  | Other |  | Significant |  |
|  |  |  | Active Markets for |  | Observable |  | Unobservable |  |
|  | Carrying |  | Identical Assets |  | Inputs |  | Inputs |  | Total
(In thousands) |  | Amount |  | (Level 1) |  | (Level 2) |  | (Level 3) |  | Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 77,693 |  | $ | 77,693 |  | $ | — |  | $ | — |  | $ | 77,693
Interest-bearing deposits with banks |  |  | 39,501 |  |  | 39,501 |  |  | — |  |  | — |  |  | 39,501
Securities available for sale |  |  | 638,291 |  |  | — |  |  | 638,291 |  |  | — |  |  | 638,291
Securities restricted |  |  | 32,879 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Securities held to maturity |  |  | 133,638 |  |  | — |  |  | 135,027 |  |  | — |  |  | 135,027
Loans held for sale |  |  | 12,643 |  |  | — |  |  | — |  |  | 12,643 |  |  | 12,643
Loans, net |  |  | 3,647,499 |  |  | — |  |  | — |  |  | 3,685,770 |  |  | 3,685,770
Derivatives |  |  | 15,437 |  |  | — |  |  | 15,437 |  |  | — |  |  | 15,437
Accrued interest receivable |  |  | 10,908 |  |  | — |  |  | 2,181 |  |  | 8,727 |  |  | 10,908
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Certificates of deposit |  |  | 307,977 |  |  | — |  |  | 308,660 |  |  | — |  |  | 308,660
Demand and other deposits |  |  | 3,506,670 |  |  | 3,506,670 |  |  | — |  |  | — |  |  | 3,506,670
FHLB advances |  |  | 435,000 |  |  | 195,000 |  |  | 239,622 |  |  | — |  |  | 434,622
Repurchase agreements |  |  | 999 |  |  | — |  |  | 999 |  |  | — |  |  | 999
Subordinated debentures |  |  | 78,920 |  |  | — |  |  | 81,010 |  |  | — |  |  | 81,010
Derivatives |  |  | 16,645 |  |  | — |  |  | 16,645 |  |  | — |  |  | 16,645
Accrued interest payable |  |  | 1,467 |  |  | — |  |  | 1,467 |  |  | — |  |  | 1,467

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- References No definition available. + Details
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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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