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FAIR VALUE | 6 Months Ended
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Jun. 30, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE | FAIR VALUE Fair value is the exchange price that would be received for an asset or paid to transfer a liability 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 value: 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 Corporation used the following methods and significant assumptions to estimate fair value on a recurring basis: Available for Sale Securities: The fair value of securities available for sale are usually determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs), or matrix pricing, which is a mathematical technique widely used 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 (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair value is calculated using discounted cash flows or other market indicators (Level 3 inputs). Equity Investments: Securities that are held to fund a deferred compensation plan and securities that have a readily determinable fair market value are recorded at fair value with changes in fair value included in earnings. The fair value of equity investments are determined by quoted market prices (Level 1 inputs). Individually Analyzed Loans: At the time a loan is considered individually analyzed, it is valued at the lower of cost or fair value. Individually analyzed loans carried at fair value have been partially charged-off or receive specific allocations as part of the allowance for credit loss accounting. For collateral dependent loans, fair value is commonly based on 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 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 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 client and client’s business, typically resulting in a Level 3 fair value classification. Individually analyzed loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. OREO: Assets acquired through or in lieu of loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Fair value is commonly 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 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 loans and OREO are performed by certified general appraisers (commercial properties) or certified residential appraisers (residential properties) whose qualifications and licenses have been reviewed and verified by the Corporation. Once received, appraisals are reviewed for reasonableness of assumptions, approaches utilized, Uniform Standards of Professional Appraisal Practice and other regulatory compliance, as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. Appraisals are generally completed within the twelve month period prior to a property being placed into OREO. For individually analyzed loans, appraisal values are adjusted based on the age of the appraisal, the position of the lien, the type of the property, and its condition. Derivatives: The fair value of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2 inputs). Derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair value 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 Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counter-party's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation has considered the impact of any applicable credit enhancements, such as collateral postings. Although the Corporation has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize credit default rate assumptions (Level 3 inputs). Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
|  | Fair Value Measurement at June 30, 2024 Using
Financial Assets: | Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds | $ | 55,474 |  |  | $ | 55,474 |  |  | $ | — |  |  | $ | — |
Mortgage-backed securities, residential | 379,749 |  |  | — |  |  | 379,749 |  |  | — |
Obligations of states and political subdivisions | 35,780 |  |  | — |  |  | 35,780 |  |  | — |
Corporate bonds and notes | 21,408 |  |  | — |  |  | 15,233 |  |  | 6,175 |
SBA loan pools | 58,516 |  |  | — |  |  | 58,516 |  |  | — |
Total available for sale securities | $ | 550,927 |  |  | $ | 55,474 |  |  | $ | 489,278 |  |  | $ | 6,175 |
Equity investments, at fair value | $ | 2,597 |  |  | $ | 2,597 |  |  | $ | — |  |  | $ | — |
Derivative assets | $ | 25,424 |  |  | $ | — |  |  | $ | 25,424 |  |  | $ | — |
Financial Liabilities: |  |  |  |  |  |  |
Derivative liabilities | $ | 25,432 |  |  | $ | — |  |  | $ | 25,432 |  |  | $ | — |
There were no transfers between Level 1 and Level 2 during the three and six month periods ended June 30, 2024.
|  | Fair Value Measurement at December 31, 2023 Using
Financial Assets: | Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
U.S. Treasury notes and bonds | $ | 55,332 |  |  | $ | 55,332 |  |  | $ | — |  |  | $ | — |
Mortgage-backed securities, residential | 403,824 |  |  | — |  |  | 403,824 |  |  | — |
Obligations of states and political subdivisions | 38,686 |  |  | — |  |  | 38,686 |  |  | — |
Corporate bonds and notes | 20,669 |  |  | — |  |  | 13,139 |  |  | 7,530 |
SBA loan pools | 65,482 |  |  | — |  |  | 65,482 |  |  | — |
Total available for sale securities | $ | 583,993 |  |  | $ | 55,332 |  |  | $ | 521,131 |  |  | $ | 7,530 |
Equity investments, at fair value | $ | 2,552 |  |  | $ | 2,552 |  |  | $ | — |  |  | $ | — |
Derivative assets | $ | 23,942 |  |  | $ | — |  |  | $ | 23,942 |  |  | $ | — |
Financial Liabilities: |  |  |  |  |  |  |
Derivative liabilities | $ | 23,981 |  |  | $ | — |  |  | $ | 23,981 |  |  | $ | — |
There were no transfers between Level 1 and Level 2 during the three and six month periods ended June 30, 2023. The Corporation transfers assets and liabilities between Level 2 and Level 3 of the fair value hierarchy when the methodology to obtain fair value changes such that there are either more or fewer unobservable inputs as of the end of the reporting period, compared to the prior reporting period. Illiquidity in new issuances of comparable bonds and the size of issuances may lead to pricing difficulties, particularly for smaller corporate bond issuances, and may warrant transfer into Level 3 of assets previously measured using Level 2 inputs. The Corporation utilizes a "beginning of reporting period" timing assumption when recognizing transfers between hierarchy levels, consistent with ASC 820-10-50-2. One corporate subordinated debt issuance was transferred from Level 3 to Level 2 during the three and six month period ended June 30, 2024, due to availability of market data. There were no transfers between Level 2 and Level 3 during the three month period ended June 30, 2023. The Corporation transferred its investment in eight corporate subordinated debt issuances from Level 2 to Level 3 during the six month period ended June 30, 2023, due to a lack of observable market data relative to the issuance of similarly sized corporate debenture insurances. The following tables present a reconciliation of assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three and six month periods ended June 30, 2024 and June 30, 2023 (in thousands):
Level 3 Financial Assets: |  | For the Three Months Ended
Corporate bonds and notes |  | June 30, 2024 |  | June 30, 2023
Balance of recurring Level 3 assets as of April 1, |  | $ | 7,721 |  |  | $ | 8,666 |
Total gains or losses for the period: |  |  |  |
Included in Other Comprehensive Income |  | 203 |  |  | (73) |
Transfers into Level 3 |  | — |  |  | — |
Transfers out of Level 3 |  | (1,749) |  |  |
Balance of recurring Level 3 assets as of June 30, |  | $ | 6,175 |  |  | $ | 8,593 |
Level 3 Financial Assets: |  | For the Six Months Ended
Corporate bonds and notes |  | June 30, 2024 |  | June 30, 2023
Balance of recurring Level 3 assets at January 1, |  | $ | 7,530 |  |  | $ | — |
Total gains and losses for the period: |  |  |  |
Included in other comprehensive income |  | 394 |  |  | (1,362) |
Transfers into Level 3 |  | — |  |  | 9,955 |
Transfers out of Level 3 |  | (1,749) |  |  | — |
Balance of recurring Level 3 assets as of June 30, |  | $ | 6,175 |  |  | $ | 8,593 |
The following tables present quantitative information about recurring Level 3 fair value measurements as of June 30, 2024 and December 31, 2023 (in thousands):
June 30, 2024 | Fair Value |  | Valuation Techniques |  | Unobservable Input |  | Range [Weighted Average] at June 30, 2024
Corporate bonds and notes | $ | 6,175 |  |  | Discounted cash flow |  | Market discount rate |  | 12.00% -12.00% [12.00%]
December 31, 2023 | Fair Value |  | Valuation Techniques |  | Unobservable Input |  | Range [Weighted Average] at December 31, 2023
Corporate bonds and notes | $ | 7,530 |  |  | Discounted cash flow |  | Market discount rate |  | 12.50% - 12.50% [12.50%]
Assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2024 and December 31, 2023 are summarized below (in thousands):
|  |  | Fair Value Measurement at June 30, 2024 Using |  |
Financial Assets: | Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Gains (Losses)
Individually analyzed loans: |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 13 |  |  | $ | — |  |  | $ | — |  |  | $ | 13 |  |  | $ | — |
Total individually analyzed loans | $ | 13 |  |  | $ | — |  |  | $ | — |  |  | $ | 13 |  |  | $ | — |
Other real estate owned: |  |  |  |  |  |  |  |  |
Residential mortgages | $ | 228 |  |  | $ | — |  |  | $ | — |  |  | $ | 228 |  |  | $ | — |
Consumer loans: |  |  |  |  |  |  |  |  |
Home equity lines and loans | 318 |  |  | — |  |  | — |  |  | 318 |  |  | — |
Total other real estate owned, net | $ | 546 |  |  | $ | — |  |  | $ | — |  |  | $ | 546 |  |  | $ | — |
|  |  | Fair Value Measurement at December 31, 2023 Using |  |
Financial Assets: | Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Gains (Losses)
Individually analyzed loans: |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 64 |  |  | $ | — |  |  | $ | — |  |  | $ | 64 |  |  | $ | — |
Total individually analyzed loans | $ | 64 |  |  | $ | — |  |  | $ | — |  |  | $ | 64 |  |  | $ | — |
Other real estate owned: |  |  |  |  |  |  |  |  |
Residential mortgages | $ | 116 |  |  | $ | — |  |  | $ | — |  |  | $ | 116 |  |  | $ | — |
Consumer loans: |  |  |  |  |  |  |  |  |
Home equity lines and loans | 211 |  |  | — |  |  | — |  |  | 211 |  |  | — |
Total other real estate owned, net | $ | 327 |  |  | $ | — |  |  | $ | — |  |  | $ | 327 |  |  | $ | — |
The following tables present information related to Level 3 non-recurring fair value measurement as of June 30, 2024 and December 31, 2023 (in thousands):
Description |  | Fair Value at June 30, 2024 |  | Valuation Technique |  | Unobservable Inputs |  | Range [Weighted Average] at June 30, 2024
Individually analyzed loans: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 13 |  |  | Net present value |  | Present value of cash flows |  | 42.00% - 42.00% [42.00%]
Total individually analyzed loans |  | $ | 13 |  |  |  |  |  |  |
Other real estate owned: |  |  |  |  |  |  |  |
Residential mortgages |  | $ | 228 |  |  | Sales comparison |  | Discount to appraised value |  | 20.80% - 20.80% [20.80%]
Consumer loans: |  |  |  |  |  |  |  |
Home equity lines and loans |  | 318 |  |  | Sales comparison |  | Discount to appraised value |  | 20.80% - 20.80% [20.80%]
Total other real estate owned, net |  | $ | 546 |  |  |  |  |  |  |
Description |  | Fair Value at December 31, 2023 |  | Valuation Technique |  | Unobservable Inputs |  | Range [Weighted Average] at December 31, 2023
Individually analyzed loans: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 64 |  |  | Net present value |  | Present value of cash flows |  | 47.30% - 56.80% [54.80%]
Total individually analyzed loans |  | $ | 64 |  |  |  |  |  |  |
Other real estate owned: |  |  |  |  |  |  |  |
Residential mortgages |  | $ | 116 |  |  | Sales comparison |  | Discount to appraised value |  | 20.80% - 20.80% [20.80%]
Consumer loans: |  |  |  |  |  |  |  |
Home equity lines and loans |  | 211 |  |  | Sales comparison |  | Discount to appraised value |  | 20.80% - 20.80% [20.80%]
Total other real estate owned, net |  | $ | 327 |  |  |  |  |  |  |
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts and estimated fair values of financial instruments, as of June 30, 2024 and December 31, 2023, are as follows (in thousands):
| June 30, 2024
Financial assets: | Carrying Amount |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Estimated Fair Value (1)
Cash and due from financial institutions | $ | 23,184 |  |  | $ | 23,184 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,184 |
Interest-earning deposits in other financial institutions | 47,033 |  |  | 47,033 |  |  | — |  |  | — |  |  | 47,033 |
Equity investments | 3,090 |  |  | 3,090 |  |  | — |  |  | — |  |  | 3,090 |
Securities available for sale | 550,927 |  |  | 55,474 |  |  | 489,278 |  |  | 6,175 |  |  | 550,927 |
Securities held to maturity | 657 |  |  | — |  |  | — |  |  | 657 |  |  | 657 |
FHLBNY and FRBNY stock | 5,506 |  |  | — |  |  | — |  |  | — |  |  | N/A
Loans, net and loans held for sale | 2,011,853 |  |  | — |  |  | — |  |  | 1,913,709 |  |  | 1,913,709 |
Derivative assets | 25,424 |  |  | — |  |  | 25,424 |  |  | — |  |  | 25,424 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |
Demand, savings, and insured money market deposits | $ | 1,809,221 |  |  | $ | 1,809,221 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,809,221 |
Time deposits | 606,700 |  |  | — |  |  | 605,968 |  |  | — |  |  | 605,968 |
FHLBNY and FRB advances | 80,000 |  |  | — |  |  | 79,844 |  |  | — |  |  | 79,844 |
Derivative liabilities | 25,432 |  |  | — |  |  | 25,432 |  |  | — |  |  | 25,432 |
(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
| December 31, 2023
Financial assets: | Carrying Amount |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Estimated Fair Value (1)
Cash and due from financial institutions | $ | 22,247 |  |  | $ | 22,247 |  |  | $ | — |  |  | $ | — |  |  | $ | 22,247 |
Interest-earning deposits in other financial institutions | 14,600 |  |  | 14,600 |  |  | — |  |  | — |  |  | 14,600 |
Equity investments | 3,046 |  |  | 3,046 |  |  | — |  |  | — |  |  | 3,046 |
Securities available for sale | 583,993 |  |  | 55,332 |  |  | 521,131 |  |  | 7,530 |  |  | 583,993 |
Securities held to maturity | 785 |  |  | — |  |  | — |  |  | 785 |  |  | 785 |
FHLBNY and FRBNY stock | 5,498 |  |  | — |  |  | — |  |  | — |  |  | N/A
Loans, net and loans held for sale | 1,972,664 |  |  | — |  |  | — |  |  | 1,875,390 |  |  | 1,875,390 |
Derivative assets | 23,942 |  |  | — |  |  | 23,942 |  |  | — |  |  | 23,942 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |
Demand, savings, and insured money market deposits | $ | 1,817,162 |  |  | $ | 1,817,162 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,817,162 |
Time deposits | 612,265 |  |  | — |  |  | 609,863 |  |  | — |  |  | 609,863 |
FHLBNY overnight advances | 31,920 |  |  | — |  |  | 31,925 |  |  | — |  |  | 31,925 |
Derivative liabilities | 23,981 |  |  | — |  |  | 23,981 |  |  | — |  |  | 23,981 |
(1) Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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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/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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