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FAIR VALUE
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE

8. 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.

Individually Evaluated Loans: The fair value of collateral dependent loans with specific allocations of the allowance for credit 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. Individually evaluated loans may, in some cases, also be measured by the discounted cash flow methodology where payments are anticipated. 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, 2024.

The following tables summarize, at the dates indicated, assets measured at fair value on a recurring basis, including financial assets for which the Company 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)

 

2024

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government-sponsored agencies

 

$

195,002

 

 

$

—

 

 

$

195,002

 

 

$

—

 

Mortgage-backed securities-residential

 

 

363,032

 

 

 

—

 

 

 

363,032

 

 

 

—

 

SBA pool securities

 

 

21,683

 

 

 

—

 

 

 

21,683

 

 

 

—

 

Corporate bond

 

 

12,167

 

 

 

—

 

 

 

12,167

 

 

 

—

 

CRA investment fund

 

 

12,971

 

 

 

12,971

 

 

 

—

 

 

 

—

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

9,461

 

 

 

—

 

 

 

9,461

 

 

 

—

 

Loan level swaps

 

 

27,633

 

 

 

—

 

 

 

27,633

 

 

 

—

 

Total

 

$

641,949

 

 

$

12,971

 

 

$

628,978

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Loan level swaps

 

 

27,633

 

 

 

—

 

 

 

27,633

 

 

 

—

 

Total

 

$

27,633

 

 

$

—

 

 

$

27,633

 

 

$

—

 

 

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)

 

2023

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government-sponsored agencies

 

$

197,691

 

 

$

—

 

 

$

197,691

 

 

$

—

 

Mortgage-backed securities-residential

 

 

320,796

 

 

 

—

 

 

 

320,796

 

 

 

—

 

SBA pool securities

 

 

23,404

 

 

 

—

 

 

 

23,404

 

 

 

—

 

Corporate bond

 

 

8,726

 

 

 

—

 

 

 

8,726

 

 

 

—

 

CRA investment fund

 

 

13,166

 

 

 

13,166

 

 

 

—

 

 

 

—

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

6,814

 

 

 

—

 

 

 

6,814

 

 

 

—

 

Loan level swaps

 

 

23,826

 

 

 

—

 

 

 

23,826

 

 

 

—

 

Total

 

$

594,423

 

 

$

13,166

 

 

$

581,257

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Loan level swaps

 

$

23,826

 

 

$

—

 

 

$

23,826

 

 

$

—

 

Total

 

$

23,826

 

 

$

—

 

 

$

23,826

 

 

$

—

 

 

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 or on nonaccrual as of June 30, 2024 and December 31, 2023.

 

The following table presents residential loans held for sale, at fair value, at the dates indicated:

 

(In thousands)

 

June 30, 2024

 

 

December 31, 2023

 

Residential loans contractual balance

 

$

225

 

 

$

98

 

Fair value adjustment

 

 

3

 

 

 

2

 

Total fair value of residential loans held for sale

 

$

228

 

 

$

100

 

 

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)

 

2024

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Primary residential mortgage

 

$

544

 

 

$

—

 

 

$

—

 

 

$

544

 

Multifamily property

 

 

11,049

 

 

 

—

 

 

 

—

 

 

 

11,049

 

Investment commercial real estate

 

 

11,219

 

 

 

—

 

 

 

—

 

 

 

11,219

 

Commercial and industrial

 

 

20,753

 

 

 

—

 

 

 

—

 

 

 

20,753

 

Lease financing

 

 

604

 

 

 

—

 

 

 

—

 

 

 

604

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

 

Significant

 

 

 

 

 

 

 

 

 

Markets For

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

 

December 31,

 

 

Assets

 

 

Inputs

 

 

Inputs

 

(In thousands)

 

2023

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

22,947

 

 

$

—

 

 

$

—

 

 

$

22,947

 

Lease financing

 

 

1,036

 

 

 

—

 

 

 

—

 

 

 

1,036

 

 

The carrying amounts and estimated fair values of financial instruments at June 30, 2024 are as follows:

 

 

 

 

 

 

Fair Value Measurements at June 30, 2024 using

 

 

 

Carrying

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

315,729

 

 

$

315,729

 

 

$

—

 

 

$

—

 

 

$

315,729

 

Securities available for sale

 

 

591,884

 

 

 

—

 

 

 

591,884

 

 

 

—

 

 

 

591,884

 

Securities held to maturity

 

 

105,013

 

 

 

—

 

 

 

90,863

 

 

 

—

 

 

 

90,863

 

CRA investment fund

 

 

12,971

 

 

 

12,971

 

 

 

—

 

 

 

—

 

 

 

12,971

 

FHLB and FRB stock

 

 

12,478

 

 

 

—

 

 

 

—

 

 

 

—

 

 

N/A

 

Loans held for sale, at fair value

 

 

228

 

 

 

—

 

 

 

228

 

 

 

—

 

 

 

228

 

Loans held for sale, at lower of cost or fair value

 

 

8,076

 

 

 

—

 

 

 

8,321

 

 

 

—

 

 

 

8,321

 

Loans, net of allowance for credit losses

 

 

5,193,010

 

 

 

—

 

 

 

—

 

 

 

4,965,858

 

 

 

4,965,858

 

Accrued interest receivable

 

 

33,534

 

 

 

—

 

 

 

3,086

 

 

 

30,448

 

 

 

33,534

 

Accrued interest receivable loan level swaps (A)

 

 

1,207

 

 

 

—

 

 

 

1,207

 

 

 

—

 

 

 

1,207

 

Cash flow hedges

 

 

9,461

 

 

 

—

 

 

 

9,461

 

 

 

—

 

 

 

9,461

 

Loan level swaps

 

 

27,633

 

 

 

—

 

 

 

27,633

 

 

 

—

 

 

 

27,633

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

5,656,206

 

 

$

5,119,942

 

 

$

533,134

 

 

$

—

 

 

$

5,653,076

 

Subordinated debt

 

 

133,417

 

 

 

—

 

 

 

—

 

 

 

115,757

 

 

 

115,757

 

Accrued interest payable

 

 

8,915

 

 

 

6,205

 

 

 

2,529

 

 

 

181

 

 

 

8,915

 

Accrued interest payable loan level swaps (B)

 

 

1,207

 

 

 

—

 

 

 

1,207

 

 

 

—

 

 

 

1,207

 

Loan level swap

 

 

27,633

 

 

 

—

 

 

 

27,633

 

 

 

—

 

 

 

27,633

 

 

(A)
Included in other assets in the Consolidated Statement of Condition.
(B)
Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.

 

The carrying amounts and estimated fair values of financial instruments at December 31, 2023 are as follows:

 

 

 

 

 

 

Fair Value Measurements at December 31, 2023 using

 

 

 

Carrying

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

187,671

 

 

$

187,671

 

 

$

—

 

 

$

—

 

 

$

187,671

 

Securities available for sale

 

 

550,617

 

 

 

—

 

 

 

550,617

 

 

 

—

 

 

 

550,617

 

Securities held to maturity

 

 

107,755

 

 

 

—

 

 

 

94,415

 

 

 

—

 

 

 

94,415

 

CRA investment fund

 

 

13,166

 

 

 

13,166

 

 

 

—

 

 

 

—

 

 

 

13,166

 

FHLB and FRB stock

 

 

31,044

 

 

 

—

 

 

 

—

 

 

 

—

 

 

N/A

 

Loans held for sale, at fair value

 

 

100

 

 

 

—

 

 

 

100

 

 

 

—

 

 

 

100

 

Loans held for sale, at lower of cost or fair value

 

 

6,695

 

 

 

—

 

 

 

7,201

 

 

 

—

 

 

 

7,201

 

Loans, net of allowance for loan and lease losses

 

 

5,363,437

 

 

 

—

 

 

 

—

 

 

 

5,294,942

 

 

 

5,294,942

 

Accrued interest receivable

 

 

30,676

 

 

 

—

 

 

 

2,868

 

 

 

27,808

 

 

 

30,676

 

Accrued interest receivable loan level swaps (A)

 

 

1,373

 

 

 

—

 

 

 

1,373

 

 

 

—

 

 

 

1,373

 

Cash flow hedges

 

 

6,814

 

 

 

—

 

 

 

6,814

 

 

 

—

 

 

 

6,814

 

Loan level swaps

 

 

23,826

 

 

 

—

 

 

 

23,826

 

 

 

—

 

 

 

23,826

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

5,274,114

 

 

$

4,702,012

 

 

$

567,696

 

 

$

—

 

 

$

5,269,708

 

Short-term borrowings

 

 

403,814

 

 

 

—

 

 

 

403,814

 

 

 

—

 

 

 

403,814

 

Subordinated debt

 

 

133,274

 

 

 

—

 

 

 

—

 

 

 

111,924

 

 

 

111,924

 

Accrued interest payable

 

 

7,115

 

 

 

4,989

 

 

 

1,968

 

 

 

158

 

 

 

7,115

 

Accrued interest payable loan level swaps (B)

 

 

1,373

 

 

 

—

 

 

 

1,373

 

 

 

—

 

 

 

1,373

 

Loan level swaps

 

 

23,826

 

 

 

—

 

 

 

23,826

 

 

 

—

 

 

 

23,826

 
(A)
Included in other assets in the Consolidated Statement of Condition.
(B)
Included in accrued expenses and other liabilities in the Consolidated Statement of Condition.