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). Security valuations are obtained from third-party pricing services.

Collateral-dependent loans are identified as part of 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. Such adjustments are usually significant and typically 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.

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less costs to sell. Fair value is commonly based on recent real estate appraisals which are generally obtained at least every 18 months or earlier. 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. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent loans and other real estate owned 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 Company reviews 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. On a quarterly basis, the Company compares the actual selling price of collateral that has been

The Company 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 December 31, 2020, 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 that 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. The Bank did not recognize a credit valuation adjustment in the valuation of its interest rate swap derivatives as of December 31, 2019; therefore, the interest rate swap derivatives are also classified in Level 2 of the fair value hierarchy for the comparative period end.

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 Consolidated Statements of Financial Condition with any valuation adjustment recorded within Other noninterest expense on the 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.


	December 31, 2020
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Investment securities available for sale:
U.S. government and agency securities	$	45,660	$	—	$	45,660	$	—
Municipal securities	209,968		—		209,968		—
Residential CMO and MBS	201,872		—		201,872		—
Commercial CMO and MBS	303,746		—		303,746		—

Corporate obligations	11,096		—		11,096		—
Other asset-backed securities	29,821				29,821		—
Total investment securities available for sale	802,163		—		802,163		—
Equity security	131		131		—		—
Derivative assets - interest rate swaps	25,740		—		25,740		—
Liabilities
Derivative liabilities - interest rate swaps	$	26,162	$	—	$	26,162	$	—


	December 31, 2019
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Investment securities available for sale:
U.S. government and agency securities	$	105,223	$	—	$	105,223	$	—
Municipal securities	133,014		—		133,014		—
Residential CMO and MBS	339,608		—		339,608		—
Commercial CMO and MBS	327,095		—		327,095		—

Corporate obligations	24,194		—		24,194		—
Other asset-backed securities	23,178		—		23,178		—
Total investment securities available for sale	952,312		—		952,312		—
Equity security	148		148		—		—
Derivative assets - interest rate swaps	8,318		—		8,318		—
Liabilities
Derivative liabilities - interest rate swaps	$	8,318	$	—	$	8,318	$	—


	Basis(1)		Fair Value at December 31, 2020
			Total		Level 1		Level 2		Level 3
	(In thousands)
Collateral-dependent loans:
Commercial business:
Commercial and industrial	$	1,305	$	1,289	$	—	$	—	$	1,289










Prepaid expenses and other assets:
Branch held for sale (2)	1,330		1,330		—		—		1,330
Total assets measured at fair value on a nonrecurring basis	$	2,635	$	2,619	$	—	$	—	$	2,619


	Basis(1)		Fair Value at December 31, 2019
			Total		Level 1		Level 2		Level 3
	(In thousands)
Impaired loans:
Commercial business:
Commercial and industrial	$	4,111	$	3,380	$	—	$	—	$	3,380










Total assets measured at fair value on a nonrecurring basis	$	4,111	$	3,380	$	—	$	—	$	3,380


	Year ended December 31,
	2020		2019		2018
	(In thousands)
Collateral-dependent loans:
Commercial business:
Commercial and industrial	$	8	$	78	$	10

Non-owner occupied CRE	—		—		150
Total commercial business	8		78		160





Consumer	—		—		8

Prepaid expenses and other assets:
Branch held for sale	$	630	$	—	$	—
Net losses recorded in earnings resulting from nonrecurring fair value adjustments	$	638	$	78	$	168

December 31, 2020

Fair
Value

Valuation
Technique(s)

Unobservable Input(s)

Range of Inputs; Weighted
Average

(Dollars in thousands)

Collateral-dependent loans

1,289

Market approach

Adjustment for differences between the comparable sales

0.6% - (40.1%); (24.1%)

Branch held for sale

1,330

Market approach

Adjustment for differences between the comparable sales

140.7% - (40.3%); 33.2%

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.


	December 31, 2020
	Carrying Value		Fair Value		Fair Value Measurements Using:
					Level 1		Level 2		Level 3
Investment securities available for sale	802,163		802,163		—		802,163		—
Loans held for sale	4,932		5,156		—		—		5,156
Loans receivable, net	4,398,462		4,556,862		—		—		4,556,862
Accrued interest receivable	19,418		19,418		2		3,648		15,768
Bank owned life insurance	107,580		107,580		107,580		—		—
Derivative assets - interest rate swaps	25,740		25,740		—		25,740		—
Equity security	131		131		131		—		—
Financial Liabilities:
Noninterest deposits, interest bearing demand deposits, money market accounts and savings accounts	$	5,198,456	$	5,198,456	$	5,198,456	$	—	$	—
Certificates of deposit	399,534		402,071		—		402,701		—

Securities sold under agreement to repurchase	35,683		35,683		35,683		—		—
Junior subordinated debentures	20,887		18,500		—		—		18,500
Accrued interest payable	94		94		42		33		19
Derivative liabilities - interest rate swaps	26,162		26,162		—		26,162		—


	December 31, 2019
	Carrying Value		Fair Value		Fair Value Measurements Using:
					Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	228,568	$	228,568	$	228,568	$	—	$	—
Investment securities available for sale	952,312		952,312		—		952,312		—
Loans held for sale	5,533		5,704		—		—		5,704
Loans receivable, net	3,731,708		3,791,557		—		—		3,791,557
Accrued interest receivable	14,446		14,446		79		3,668		10,699
Bank owned life insurance	103,616		103,616		103,616
Derivative assets - interest rate swaps	8,318		8,318		—		8,318		—
Equity security	148		148		148		—		—
Financial Liabilities:
Noninterest deposits, interest bearing demand deposits, money market accounts and savings accounts	$	4,058,098	$	4,058,098	$	4,058,098	$	—	$	—
Certificates of deposit	524,578		529,679		—		529,679		—

Securities sold under agreement to repurchase	20,169		20,169		20,169		—		—
Junior subordinated debentures	20,595		20,000		—		—		20,000
Accrued interest payable	199		199		95		64		40
Derivative liabilities - interest rate swaps	8,318		8,318		—		8,318		—