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FAIR VALUE | 6 Months Ended
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Jun. 30, 2021
Fair Value Disclosures [Abstract] |
FAIR VALUE | 7. FAIR VALUE 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: | 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 company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value: Investment Securities: The fair values for investment securities are determined by quoted market prices (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Loans Held for Sale, at Fair Value: The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2). Derivatives: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan and lease losses is generally based on recent real estate appraisals. 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. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use 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. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Appraisals for both collateral-dependent impaired 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 Management. Once received, a third party conducts a review of the appraisal for compliance with the Uniform Standards of Professional Appraisal Practice and appropriate analysis methods for the type of property. Subsequently, a member of the Credit Department reviews 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. Appraisals on collateral dependent impaired loans and other real estate owned (consistent for all loan types) are obtained on an annual basis, unless a significant change in the market or other factors warrants a more frequent appraisal. On an annual basis, Management compares the actual selling price of any collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value for other properties. The most recent analysis performed indicated that a discount up to 15 percent should be applied to appraisals on properties. The discount is determined based on the nature of the underlying properties, aging of appraisals and other factors. For each collateral-dependent impaired loan, we consider other factors, such as certain indices or other market information, as well as property specific circumstances to determine if an adjustment to the appraised value is needed. In situations where there is evidence of change in value, the Bank will determine if there is a need for an adjustment to the specific reserve on the collateral dependent impaired loans. When the Bank applies an interim adjustment, it generally shows the adjustment as an incremental specific reserve against the loan until it has received the full updated appraisal. All collateral-dependent impaired loans and other real estate owned valuations were supported by an appraisal less than 12 months old or in the process of obtaining an appraisal as of June 30, 2021. The following table summarizes, at the dates indicated, assets measured at fair value on a recurring basis, including financial assets for which the Corporation has elected the fair value option: Assets Measured on a Recurring Basis
|  |  |  |  |  | Fair Value Measurements Using |
|  |  |  |  |  | Quoted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Prices in |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Markets For |  |  | Other |  |  | Significant |
|  |  |  |  |  | Identical |  |  | Observable |  |  | Unobservable |
|  | June 30, |  |  | Assets |  |  | Inputs |  |  | Inputs |
(In thousands) |  | 2021 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government-sponsored agencies |  | $ | 210,940 |  |  | $ | — |  |  | $ | 210,940 |  |  | $ | — |
Mortgage-backed securities-residential |  |  | 555,273 |  |  |  | — |  |  |  | 555,273 |  |  |  | — |
SBA pool securities |  |  | 45,268 |  |  |  | — |  |  |  | 45,268 |  |  |  | — |
State and political subdivisions |  |  | 6,775 |  |  |  | — |  |  |  | 6,775 |  |  |  | — |
Corporate bond |  |  | 5,564 |  |  |  | — |  |  |  | 5,564 |  |  |  | — |
CRA investment fund |  |  | 14,894 |  |  |  | 14,894 |  |  |  | — |  |  |  | — |
Loans held for sale, at fair value |  |  | 3,974 |  |  |  | — |  |  |  | 3,974 |  |  |  | — |
Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loan level swaps |  |  | 51,855 |  |  |  | — |  |  |  | 51,855 |  |  |  | — |
Total |  | $ | 894,543 |  |  | $ | 14,894 |  |  | $ | 879,649 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges |  | $ | 6,203 |  |  | $ | — |  |  | $ | 6,203 |  |  | $ | — |
Loan level swaps |  |  | 51,855 |  |  |  | — |  |  |  | 51,855 |  |  |  | — |
Total |  | $ | 58,058 |  |  | $ | — |  |  | $ | 58,058 |  |  | $ | — |
Assets Measured on a Recurring Basis
|  |  |  |  |  | Fair Value Measurements Using |
|  |  |  |  |  | Quoted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Prices in |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Markets For |  |  | Other |  |  | Significant |
|  |  |  |  |  | Identical |  |  | Observable |  |  | Unobservable |
|  | December 31, |  |  | Assets |  |  | Inputs |  |  | Inputs |
(In thousands) |  | 2020 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 2,613 |  |  | $ | — |  |  | $ | 2,613 |  |  | $ | — |
U.S. government-sponsored agencies |  |  | 83,771 |  |  |  | — |  |  |  | 83,771 |  |  |  | — |
Mortgage-backed securities-residential |  |  | 476,058 |  |  |  | — |  |  |  | 476,058 |  |  |  | — |
SBA pool securities |  |  | 49,129 |  |  |  | — |  |  |  | 49,129 |  |  |  | — |
State and political subdivisions |  |  | 8,089 |  |  |  | — |  |  |  | 8,089 |  |  |  | — |
Corporate bond |  |  | 3,029 |  |  |  | — |  |  |  | 3,029 |  |  |  | — |
CRA investment fund |  |  | 15,117 |  |  |  | 15,117 |  |  |  | — |  |  |  | — |
Loans held for sale, at fair value |  |  | 13,588 |  |  |  | — |  |  |  | 13,588 |  |  |  | — |
Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loan level swaps |  |  | 79,529 |  |  |  | — |  |  |  | 79,529 |  |  |  | — |
Total |  | $ | 730,923 |  |  | $ | 15,117 |  |  | $ | 715,806 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges |  | $ | 9,616 |  |  | $ | — |  |  | $ | 9,616 |  |  | $ | — |
Loan level swaps |  |  | 79,529 |  |  |  | — |  |  |  | 79,529 |  |  |  | — |
Total |  | $ | 89,145 |  |  | $ | — |  |  | $ | 89,145 |  |  | $ | — |
The Company has elected the fair value option for certain loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of June 30, 2021 and December 31, 2020. The following tables present residential loans held for sale, at fair value at the dates indicated:
(In thousands) |  | June 30, 2021 |  |  | December 31, 2020 |
Residential loans contractual balance |  | $ | 3,911 |  |  | $ | 13,295 |
Fair value adjustment |  |  | 63 |  |  |  | 293 |
Total fair value of residential loans held for sale |  | $ | 3,974 |  |  | $ | 13,588 |
There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2021. The following tables summarize, at the dates indicated, assets measured at fair value on a non-recurring basis:
|  |  |  |  |  | Fair Value Measurements Using |
|  |  |  |  |  | Quoted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Prices in |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Markets For |  |  | Other |  |  | Significant |
|  |  |  |  |  | Identical |  |  | Observable |  |  | Unobservable |
|  | June 30, |  |  | Assets |  |  | Inputs |  |  | Inputs |
(In thousands) |  | 2021 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Primary residential mortgage |  | $ | 765 |  |  | $ | — |  |  | $ | — |  |  | $ | 765 |
|  |  |  |  |  | Fair Value Measurements Using |
|  |  |  |  |  | Quoted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Prices in |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Markets For |  |  | Other |  |  | Significant |
|  |  |  |  |  | Identical |  |  | Observable |  |  | Unobservable |
|  | December 31, |  |  | Assets |  |  | Inputs |  |  | Inputs |
(In thousands) |  | 2020 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 2,300 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,300 |
The carrying amounts and estimated fair values of financial instruments at June 30, 2021 are as follows:
|  |  |  |  |  | Fair Value Measurements at June 30, 2021 using |
|  | Carrying |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  | Amount |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 203,462 |  |  | $ | 203,462 |  |  | $ | — |  |  | $ | — |  |  | $ | 203,462 |
Securities available for sale |  |  | 823,820 |  |  |  | — |  |  |  | 823,820 |  |  |  | — |  |  |  | 823,820 |
CRA investment fund |  |  | 14,894 |  |  |  | 14,894 |  |  |  | — |  |  |  | — |  |  |  | 14,894 |
FHLB and FRB stock |  |  | 12,901 |  |  |  | — |  |  |  | — |  |  |  | — |  |  | N/A |
Loans held for sale, at fair value |  |  | 3,974 |  |  |  | — |  |  |  | 3,974 |  |  |  | — |  |  |  | 3,974 |
Loans held for sale, at lower of cost or fair value |  |  | 11,179 |  |  |  | — |  |  |  | 11,844 |  |  |  | — |  |  |  | 11,844 |
Loans, net of allowance for loan and lease losses |  |  | 4,505,328 |  |  |  | — |  |  |  | — |  |  |  | 4,697,207 |  |  |  | 4,697,207 |
Accrued interest receivable |  |  | 23,117 |  |  |  | — |  |  |  | 2,190 |  |  |  | 20,927 |  |  |  | 23,117 |
Accrued interest receivable loan level swaps (A) |  |  | 4,716 |  |  |  | — |  |  |  | 4,716 |  |  |  | — |  |  |  | 4,716 |
Loan level swaps |  |  | 51,855 |  |  |  | — |  |  |  | 51,855 |  |  |  | — |  |  |  | 51,855 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 4,895,775 |  |  | $ | 4,384,210 |  |  | $ | 516,107 |  |  | $ | — |  |  | $ | 4,900,317 |
Paycheck Protection Program Liquidity Facility |  |  | 83,586 |  |  |  | — |  |  |  | 83,586 |  |  |  | — |  |  |  | 83,586 |
Subordinated debt |  |  | 132,557 |  |  |  | — |  |  |  | — |  |  |  | 130,523 |  |  |  | 130,523 |
Accrued interest payable |  |  | 1,028 |  |  |  | 126 |  |  |  | 827 |  |  |  | 75 |  |  |  | 1,028 |
Accrued interest payable loan level swaps |  |  | 4,716 |  |  |  | — |  |  |  | 4,716 |  |  |  | — |  |  |  | 4,716 |
Cash flow hedges |  |  | 6,203 |  |  |  | — |  |  |  | 6,203 |  |  |  | — |  |  |  | 6,203 |
Loan level swap |  |  | 51,855 |  |  |  | — |  |  |  | 51,855 |  |  |  | — |  |  |  | 51,855 |
| (A) | Included in other assets in the Consolidated Statement of Condition.
The carrying amounts and estimated fair values of financial instruments at December 31, 2020 are as follows:
|  |  |  |  |  | Fair Value Measurements at December 31, 2020 using |
|  | Carrying |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  | Amount |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 653,322 |  |  | $ | 653,322 |  |  | $ | — |  |  | $ | — |  |  | $ | 653,322 |
Securities available for sale |  |  | 622,689 |  |  |  | — |  |  |  | 622,689 |  |  |  | — |  |  |  | 622,689 |
CRA investment fund |  |  | 15,117 |  |  |  | 15,117 |  |  |  | — |  |  |  | — |  |  |  | 15,117 |
FHLB and FRB stock |  |  | 13,709 |  |  |  | — |  |  |  | — |  |  |  | — |  |  | N/A |
Loans held for sale, at fair value |  |  | 13,588 |  |  |  | — |  |  |  | 13,588 |  |  |  | — |  |  |  | 13,588 |
Loans held for sale, at lower of cost or fair value |  |  | 18,520 |  |  |  | — |  |  |  | 19,115 |  |  |  | — |  |  |  | 19,115 |
Loans, net of allowance for loan and lease losses |  |  | 4,305,128 |  |  |  | — |  |  |  | — |  |  |  | 4,462,243 |  |  |  | 4,462,243 |
Accrued interest receivable |  |  | 22,495 |  |  |  | — |  |  |  | 1,653 |  |  |  | 20,842 |  |  |  | 22,495 |
Loan level swaps |  |  | 79,529 |  |  |  | — |  |  |  | 79,529 |  |  |  | — |  |  |  | 79,529 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 4,818,484 |  |  | $ | 4,222,370 |  |  | $ | 604,036 |  |  | $ | — |  |  | $ | 4,826,406 |
Short-term borrowings |  |  | 15,000 |  |  |  | — |  |  |  | 15,000 |  |  |  | — |  |  |  | 15,000 |
Paycheck Protection Program Liquidity Facility |  |  | 177,086 |  |  |  | — |  |  |  | 177,086 |  |  |  | — |  |  |  | 177,086 |
Subordinated debt |  |  | 181,794 |  |  |  | — |  |  |  | — |  |  |  | 183,348 |  |  |  | 183,348 |
Accrued interest payable |  |  | 1,650 |  |  |  | 150 |  |  |  | 1,347 |  |  |  | 153 |  |  |  | 1,650 |
Cash flow hedges |  |  | 9,616 |  |  |  | — |  |  |  | 9,616 |  |  |  | — |  |  |  | 9,616 |
Loan level swaps |  |  | 79,529 |  |  |  | — |  |  |  | 79,529 |  |  |  | — |  |  |  | 79,529 |

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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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