Published: 2021-08-09 00:00:00 ET

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    The accompanying unaudited consolidated financial statements include the accounts of Columbia Financial, Inc., its wholly-owned subsidiary Columbia Bank (the "Bank"), and the Bank's wholly-owned subsidiaries (collectively, the “Company”). In consolidation, all intercompany accounts and transactions are eliminated.

    Columbia Financial, Inc. is a majority-owned subsidiary of Columbia Bank, MHC (the "MHC"). The accounts of the MHC are not consolidated in the accompanying consolidated financial statements of the Company.

    

    In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the Consolidated Statements of Financial Condition and Consolidated Statements of Income for the periods presented. Actual results could differ from these estimates. Material estimates that are particularly susceptible to change are the determination of the adequacy of the allowance for credit losses, evaluation of the need for valuation allowances on deferred tax assets, and determination of liabilities related to retirement and other post-retirement benefits. These estimates and assumptions are evaluated on an ongoing basis and are adjusted when facts and circumstances dictate.

    The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and six month periods ended June 30, 2021 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year or any other period. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.

    The interim unaudited consolidated financial statements of the Company presented herein have been prepared in accordance with the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and U.S. generally accepted accounting principles (“GAAP”). Certain information and note disclosures have been condensed or omitted pursuant to the rules and regulations of the SEC.

Stewardship Financial Corporation

    On November 1, 2019, the Company completed its acquisition of Stewardship Financial Corporation ("Stewardship"), pursuant to the Agreement and Plan of Merger, dated as of June 6, 2019 (the "Merger Agreement"), by and among Columbia Financial, Broadway Acquisition Corp. (a wholly owned subsidiary of Columbia Financial) and Stewardship. Under the terms of the merger agreement, each outstanding share of Stewardship common stock was converted into the right to received $15.75 in cash at the effective time of the merger. The aggregate merger consideration paid was $136.3 million. The deposits initially acquired from Stewardship were held across a network of 12 branches located in New Jersey throughout Bergen, Morris, and Passaic Counties. During the six months ended June 30, 2020, four of these branches were closed, and the Bank recorded a loss of $770,000 related to these branch closures. During both the three and six months ended June 30, 2021, the Bank recorded additional losses of $314,000 related to these branches.

    Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the Stewardship acquisition totaled $102,000 and $1.1 million during the three and six months ended June 30, 2020, respectively. There were no merger expenses recorded for the three and six months ended June 30, 2021.

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2.    Acquisitions (continued)

Roselle Bank

On April 1, 2020, the Company completed its acquisition of RSB Bancorp, MHC, RSB Bancorp, Inc. and Roselle Bank (collectively, the "Roselle Entities" or "Roselle"). Pursuant to the terms of the Merger Agreement, RSB Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; RSB Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and Roselle Bank merged with and into the Bank, with the Bank as the surviving institution. Under the terms of the merger agreement, depositors of Roselle Bank became depositors of the Bank and have the same rights and privileges in the MHC as if their accounts had been established at the Bank on the date established at Roselle Bank. The Company issued 4,759,048 shares of its common stock to the MHC, representing an amount equal to the fair value of the Roselle Entities as determined by an independent appraiser, at the effective time of the merger.

Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the Roselle acquisition totaled $335,000 and $443,000 during the three and six months ended June 30, 2020. There were no merger expenses recorded for the three and six months ended June 30, 2021.

    The following table sets forth assets acquired and liabilities assumed in the Roselle acquisition, at their estimated fair values as of the closing date of the transaction:

			April 1, 2020
			(In thousands)
Assets acquired:
Cash and cash equivalents			$	155,248
Debt securities available for sale			51,479
Debt securities held to maturity			13,418
Equity securities			1,796
Federal Home Loan Bank stock			2,010
Loans receivable			171,593
Accrued interest receivable			679
Office properties and equipment, net			5,774
Bank-owned life insurance			17,245
Deferred tax asset, net			1,334
Other assets			1,489
Total assets acquired			$	422,065
Liabilities assumed:
Deposits			$	333,234
Borrowings			37,728
Advance payments by borrowers for taxes and insurance			982
Accrued expenses and other liabilities			5,400
Total liabilities assumed			$	377,344
Net assets acquired			44,721
Fair market value of stock issued to Columbia Bank MHC for purchase			68,530
Goodwill recorded at merger			$	23,809

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2.    Acquisitions (continued)

Roselle Bank (continued)

    The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities were recorded at their fair values as of April 1, 2020, and resulted in the recognition of goodwill of $23.8 million. The determination of the fair value of assets acquired and liabilities assumed required management to make estimates about discount rates, future expected cash flows, market condition, and other future events that are highly subjective in nature and subject to change. During the fourth quarter of 2020, the Company completed all tax returns related to the operation of the acquired entity and its impact on the Company's income taxes, which resulted in a $5.1 million adjustment to deferred income taxes, net, and a decrease in goodwill. During the quarter ended March 31, 2021, the Company recorded a final adjustment of $1.1 million to deferred income taxes, net, and a decrease in goodwill. At June 30, 2021, goodwill related to the Roselle acquisition totaled $17.6 million.

Freehold Bank

On June 17, 2021, the MHC, Columbia Financial, Inc. and the Bank (collectively, “Columbia”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Freehold MHC, Freehold Bancorp and Freehold Bank (collectively, “Freehold”), pursuant to which Columbia will acquire Freehold, with Freehold MHC and Freehold Bancorp merging into the MHC and Columbia Financial, respectively. At the effective time of these mergers, Freehold Bank will convert to a federal savings bank and operate as a wholly-owned subsidiary of Columbia Financial. As a subsidiary of Columbia Financial, current depositors of Freehold Bank will become members of, and will have the same rights and privileges in the MHC, the mutual holding company parent of Columbia Bank, as if their accounts had been established in Columbia Bank on the date established at Freehold. As part of the transaction, Columbia Financial will issue additional shares of its common stock to the MHC in an amount equal to the fair value of Freehold as determined by an independent appraiser. These shares are expected to be issued immediately prior to completion of the mergers. The Merger Agreement has been unanimously approved by the Boards of Directors of each of Columbia Financial, the MHC and the Bank and the Boards of Directors of each of Freehold MHC, Freehold Bancorp and Freehold Bank. Subject to the receipt of all required regulatory and other approvals, and the satisfaction or waiver of other customary closing conditions, the parties anticipate that the transactions contemplated by the Merger Agreement is anticipated to close in the fourth quarter of 2021.

Merger-related expenses are recorded in the Consolidated Statements of Income and are expensed as incurred. Direct acquisition and other charges incurred in connection with the Freehold acquisition totaled $75,000 during the three and six months ended June 30, 2021. There were no merger expenses recorded for the three and six months ended June 30, 2020.

    Basic earnings per share ("EPS") is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. For purposes of calculating basic EPS, weighted average common shares outstanding excludes treasury stock, unallocated employee stock ownership plan shares that have not been committed for release and deferred compensation obligations required to be settled in shares of Company stock.

    Diluted EPS is computed using the same method as basic EPS and reflects the potential dilution which could occur if stock options and unvested shares were exercised and converted into common stock. The potentially diluted shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method.

    

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and six months ended June 30, 2021 and 2020:

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3.        Earnings per Share (continued)

			For the Three Months Ended June 30,												For the Six Months Ended June 30,
			2021						2020						2021						2020
			(Dollars in thousands, except per share data)
Net income			$	26,688					$	15,097					$	47,733					$	21,862
Shares:
Weighted average shares outstanding - basic			104,537,656						111,102,306						105,253,661						109,770,239
Weighted average dilutive shares outstanding			—						—						—						—
Weighted average shares outstanding - diluted			104,537,656						111,102,306						105,253,661						109,770,239
Earnings per share:
Basic			$	0.26					$	0.14					$	0.45					$	0.20
Diluted			$	0.26					$	0.14					$	0.45					$	0.20

    During the three and six months ended June 30, 2021, the average number of stock options which were anti-dilutive and were not included in the computation of diluted earnings per share totaled 466,265 and 321,263, respectively. During the three and six months ended June 30, 2020, the average number of stock options which were anti-dilutive and were not included in the computation of diluted earnings per share totaled 1,494,367 and 1,101,780, respectively.

On June 11, 2019, the Company announced that its Board of Directors authorized the Company's first stock repurchase program since the completion of its minority public offering in April 2018. This program, which commenced on June 13, 2019, authorized the purchase of up to 4,000,000 shares, or approximately 3.5%, of the Company's then issued and outstanding common stock. On December 5, 2019, the Company announced that the Board of Directors had expanded its stock repurchase program to authorize the purchase of an additional 3,000,000 shares of the Company's outstanding common stock in addition to the shares remaining under the repurchase program announced on June 11, 2019. On April 23, 2020, the Company completed the repurchases under these stock repurchase programs.

On September 10, 2020, the Company announced that its Board of Directors authorized the Company's second stock repurchase program for the purchase of up to 5,000,000 shares, or approximately 4.3%, of the Company's issued and outstanding common stock, commencing on September 15, 2020. On February 1, 2021, the Company announced that its Board of Directors authorized the Company's third stock repurchase program to acquire up to 5,000,000 shares, or approximately 4.5%, of the Company's then issued and outstanding common stock, commencing upon completion of the Company's second stock repurchase program. On February 5, 2021, the Company completed the repurchases under the second stock repurchase program.

Accounting Pronouncement Adopted in 2021

    In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures, and adding disclosure requirements identified as relevant. Among other changes, the ASU adds disclosure requirements to Topic 715-20 for the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an

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5.    Summary of Significant Accounting Policies

Accounting Pronouncement Adopted in 2021 (continued)

explanation of the reasons for significant gains and losses related to changes in benefit obligation for the period. The amendments remove disclosure requirements for the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, and the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for post-retirement health care benefits. ASU 2018-14 is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within that reporting period, with early adoption permitted. The Company adopted this ASU effective January 1, 2021. The update will be applied on a retrospective basis to disclosures with regard to employee benefit plans. The adoption of this update did not have a significant impact on the Company's consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"), further amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. Topic 326 pertains to the measurement of credit losses on financial instruments. This update requires the measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better determine their credit loss estimates. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This update is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2019.

    The Company elected to defer the adoption of the CECL methodology until December 31, 2020 as permitted by the enacted Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). In late December 2020, the Consolidated Appropriations Act, 2021 was enacted, and extended certain provisions of the CARES Act, which allowed the Company to extend the adoption of CECL until January 1, 2022. The Company elected to extend its adoption of CECL in accordance with this legislation, and will adopt the above mentioned ASUs related to Financial Instruments -Credit Losses (Topic 326) using a modified retrospective approach. Our CECL methodology includes the following key factors and assumptions for all loan portfolio segments:

•a historical loss period, which represents a full economic credit cycle utilizing internal loss experience, as well as industry and peer historical loss data;

•a single economic scenario with a reasonable and supportable forecast period of four to six quarters based on management’s current review of macroeconomic factors and the reliability of extended economic forecasts over different time horizons;

•a reversion to historical mean period (after the reasonable and supportable forecast period) using a straight-line approach that extends through the shorter of six quarters or the end of the remaining contractual term; and

•expected prepayment rates based on a combination of our historical experience and market observations.

    Based on several analyses performed, as well as an implementation analysis utilizing existing exposures and forecasts of macroeconomic conditions at June 30, 2021, we currently expect the adoption of ASU 2016-13 will result in a decrease between 15% and 25% in our allowance for loan losses and our reserves for unfunded commitments.

    As part of the implementation of the ASU, the Company will reconcile historical loan data, determine segmentation of the loan portfolio for application of the CECL calculation, determine the key assumptions, select calculation methods, and establish an internal control framework. We are currently finalizing the execution of our implementation controls and enhancing process documentation.

    The expected decrease in the allowance for loan losses and reserve for unfunded commitments is a result of the change from an incurred loss model, which encompasses allowances for current known and inherent losses within the portfolio, to an expected loss model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13

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5.    Summary of Significant Accounting Policies

Accounting Pronouncements Not Yet Adopted (continued)

will necessitate that we establish an allowance for expected credit losses for certain debt securities and other financial assets; however, we do not expect these allowances to be significant.

    Future amounts of provision expense related to our allowance for loan losses and reserves for unfunded commitments will depend on the size and composition of our loan portfolio, future economic conditions and borrowers’ payment performance. Future amounts of provision related our debt securities will depend on the composition of our securities portfolio and current market conditions.

    The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

    

    Debt securities available for sale at June 30, 2021 and December 31, 2020 are summarized as follows:

			June 30, 2021
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
									(In thousands)
U.S. government and agency obligations			$	39,023					$	913					$	(80)					$	39,856
Mortgage-backed securities and collateralized mortgage obligations			1,495,440						28,231						(5,396)						1,518,275
Municipal obligations			19,281						22						—						19,303
Corporate debt securities			62,705						2,424						(150)						64,979
			$	1,616,449					$	31,590					$	(5,626)					$	1,642,413

			December 31, 2020
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
									(In thousands)
U.S. government and agency obligations			$	24,425					$	1,124					$	—					$	25,549
Mortgage-backed securities and collateralized mortgage obligations			1,163,613						37,343						(562)						1,200,394
Municipal obligations			16,845						17						—						16,862
Corporate debt securities			67,628						2,264						(415)						69,477
Trust preferred securities			5,000						—						(330)						4,670
			$	1,277,511					$	40,748					$	(1,307)					$	1,316,952

    The amortized cost and fair value of debt securities available for sale at June 30, 2021, by contractual final maturity, is shown below. Expected maturities may differ from contractual maturities due to prepayment or early call options exercised by the issuer.

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6.    Debt Securities Available for Sale (continued)

			June 30, 2021
			Amortized Cost						Fair Value
			(In thousands)
One year or less			$	15,118					$	15,118
More than one year to five years			69,279						71,911
More than five years to ten years			36,612						37,109
			$	121,009					$	124,138
Mortgage-backed securities and collateralized mortgage obligations			1,495,440						1,518,275
			$	1,616,449					$	1,642,413

    Mortgage-backed securities and collateralized mortgage obligations totaling $1.5 billion at amortized cost and fair value, respectively, are not classified by maturity in the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

    

    During the three months ended June 30, 2021, the sale of one debt security available for sale totaled $4.7 million, resulting in a gross loss of $281,000. There were no calls or matured debt securities available for sale during the quarter.

During the six months ended June 30, 2021, the sale of a debt security available for sale totaled $4.7 million, resulting in a gross loss of $281,000. Proceeds from called debt securities available for sale totaled $5.0 million, resulting in no gross gains or losses. Proceeds from matured debt securities available for sale totaled $210,000.

    During the three months ended June 30, 2020, there were no sales of debt securities available for sale. Proceeds from called debt securities available for sale totaled $5.5 million, resulting in no gross gains or losses. Proceeds from matured debt securities available for sale totaled $5.1 million.

During the six months ended June 30, 2020, proceeds from the sale of debt securities available for sale totaled $20.8 million, resulting in $369,000 of gross gains and no gross losses. Proceeds from called debt securities available for sale totaled $6.6 million, resulting in $1,000 of gross gains and no gross losses. Proceeds from matured debt securities available for sale totaled $5.8 million.

Debt securities available for sale having a carrying value of $626.4 million and $822.2 million, at June 30, 2021 and December 31, 2020, respectively, were pledged as security for public funds on deposit at the Bank as required and permitted by law, pledged for outstanding borrowings at the Federal Home Loan Bank, and pledged for potential borrowings at the Federal Reserve Bank of New York.

    The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at June 30, 2021 and December 31, 2020 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:

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6.    Debt Securities Available for Sale (continued)    

			June 30, 2021
			Less Than 12 Months												12 Months or Longer												Total
			Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)
			(In thousands)
U.S. government and agency obligations			$	4,902					$	(80)					$	—					$	—					$	4,902					$	(80)
Mortgage-backed securities and collateralized mortgage obligations			382,594						(5,006)						21,245						(390)						403,839						(5,396)
Corporate debt securities			—						—						4,850						(150)						4,850						(150)
Trust preferred securities			—						—						—						—						—						—
			$	387,496					$	(5,086)					$	26,095					$	(540)					$	413,591					$	(5,626)

			December 31, 2020
			Less Than 12 Months												12 Months or Longer												Total
			Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)
			(In thousands)
Mortgage-backed securities and collateralized mortgage obligations			$	117,978					$	(481)					$	24,018					$	(81)					$	141,996					$	(562)
Corporate debt securities			9,845						(155)						5,740						(260)						15,585						(415)
Trust preferred securities			—						—						4,670						(330)						4,670						(330)
			$	127,823					$	(636)					$	34,428					$	(671)					$	162,251					$	(1,307)

The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. The temporary loss position associated with debt securities available for sale was the result of changes in market interest rates relative to the coupon of the individual security and changes in credit spreads. The Company does not have the intent to sell securities in a temporary loss position at June 30, 2021, nor is it more likely than not that the Company will be required to sell the securities before the anticipated recovery.

The number of securities in an unrealized loss position at June 30, 2021 totaled 65, compared with 40 at December 31, 2020. All temporarily impaired securities were investment grade as of June 30, 2021 and December 31, 2020.

    The Company did not record an other-than-temporary impairment charge on debt securities available for sale during the three and six months ended June 30, 2021 and 2020.

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    Debt securities held to maturity at June 30, 2021 and December 31, 2020 are summarized as follows:

			June 30, 2021
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
			(In thousands)
U.S. government and agency obligations			$	34,870					$	2					$	(183)					$	34,689
Mortgage-backed securities and collateralized mortgage obligations			367,275						13,280						(211)						380,344
			$	402,145					$	13,282					$	(394)					$	415,033

			December 31, 2020
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
			(In thousands)
U.S. government and agency obligations			$	5,000					$	1					$	—					$	5,001
Mortgage-backed securities and collateralized mortgage obligations			257,720						14,372						(2)						272,090
			$	262,720					$	14,373					$	(2)					$	277,091

    

The amortized cost and fair value of debt held to maturity at June 30, 2021, by contractual final maturity, is shown below. Expected maturities may differ from contractual maturities due to prepayment or early call options exercised by the issuer.

			June 30, 2021
			Amortized Cost						Fair Value
			(In thousands)
More than one year to five years			$	14,875					$	14,877
More than five years to ten years			19,995						19,812
			34,870						34,689
Mortgage-backed securities and collateralized mortgage obligations			367,275						380,344
			$	402,145					$	415,033

    

Mortgage-backed securities and collateralized mortgage obligations totaling $367.3 million at amortized cost, and $380.3 million at fair value at June 30, 2021, are not classified by maturity as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

    During the three and six months ended June 30, 2021, there were no sales or maturities of debt securities held to maturity. During the three months ended June 30, 2021, proceeds from one called debt security held to maturity totaled $125,000, resulting in no gross gain or loss. During the six months ended June 30, 2021, proceeds from called debt securities held to maturity totaled $5.1 million, resulting in no gross gains or losses.

    During the three and six months ended June 30, 2020, there were no sales or maturities of debt securities held to maturity. During the three and six months ended June 30, 2020, proceeds from called debt securities held to maturity totaled $20.0 million, resulting in no gross gains or losses.

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7.    Debt Securities Held to Maturity (continued)

Debt securities held to maturity having a carrying value of $187.9 million and $220.5 million, at June 30, 2021 and December 31, 2020, respectively, were pledged as security for public funds on deposit at the Bank as required and permitted by law, pledged for outstanding borrowings at the Federal Home Loan Bank, and pledged for potential borrowings at the Federal Reserve Bank of New York.

The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at June 30, 2021 and December 31, 2020 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:

			June 30, 2021
			Less Than 12 Months												12 Months or Longer												Total
			Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)
			(In thousands)
U.S. government and agency obligations			$	19,812					$	(183)					$	—					$	—					$	19,812					$	(183)
Mortgage-backed securities and collateralized mortgage obligations			11,347						(211)						—						—						11,347						(211)
			$	31,159					$	(394)					$	—					$	—					$	31,159					$	(394)

			December 31, 2020
			Less Than 12 Months												12 Months or Longer												Total
			Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)						Fair Value						Gross Unrealized (Losses)
			(In thousands)
Mortgage-backed securities and collateralized mortgage obligations			$	2,176					$	(2)					$	—					$	—					$	2,176					$	(2)

    

    The Company evaluates securities for other-than-temporary impairment at each reporting period and more frequently when economic or market conditions warrant such evaluation. The temporary loss position associated with debt securities held to maturity was the result of changes in market interest rates relative to the coupon of the individual security and changes in credit spreads. The Company does not have the intent to sell securities in a temporary loss position at June 30, 2021, nor is it more likely than not that the Company will be required to sell the securities before the anticipated recovery.

    The number of securities in an unrealized loss position at June 30, 2021 totaled seven, compared with two at December 31, 2020. All temporarily impaired securities were investment grade as of June 30, 2021 and December 31, 2020.

    The Company did not record an other-than-temporary impairment charge on debt securities held to maturity during the three and six months ended June 30, 2021 and 2020.

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    The Company has an equity securities portfolio which consists of stock in other financial institutions, a payment technology company, a community bank correspondent services company, and preferred stock in U.S. Government agencies which are reported at fair value on the Company's Consolidated Statements of Financial Condition. The fair value of the equities portfolio at June 30, 2021 and December 31, 2020 was $4.1 million and $5.4 million, respectively.

    The Company recorded a net decrease in the fair value of equity securities of $778,000 and $1.4 million, during the three and six months ended June 30, 2021, respectively, as a component of non-interest income. During the three and six months ended June 30, 2020, the Company recorded a net increase in fair value of equity securities of $643,000 and $59,000, respectively, as a component of non-interest income.

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    Loans receivable at June 30, 2021 and December 31, 2020 are summarized as follows:

			June 30,						December 31,
			2021						2020
			(In thousands)
Real estate loans:
One-to-four family			$	1,867,924					$	1,940,327
Multifamily and commercial			3,115,054						2,817,965
Construction			261,159						328,711
Commercial business loans			471,700						752,870
Consumer loans:
Home equity loans and advances			278,078						321,177
Other consumer loans			1,158						1,497
Total gross loans			5,995,073						6,162,547
Purchased credit-impaired ("PCI") loans			3,116						6,345
Net deferred loan costs, fees and purchased premiums and discounts			19,613						12,878
Loans receivable			$	6,017,802					$	6,181,770

    The Company had no loans held-for-sale at June 30, 2021. The Company had $4.1 million of SBA loans held-for-sale at December 31, 2020. During the three months ended June 30, 2021, the Company sold $14.4 million of one-to-four family real estate loans and home equity loans held-for-sale, resulting in gross gains of $277,000 and no gross losses. During the three months ended June 30, 2021, the Company sold $244.7 million of SBA loans held-for-sale included in commercial business loans, resulting in gross gains of $7.7 million and no gross losses. During the three months ended June 30, 2021, the Company also sold a $31,000 construction loan held-for-sale resulting in no gross gain or loss. During the six months ended June 30, 2021, the Company sold $15.6 million, $4.1 million, $248.9 million, and $6.4 million of one-to-four family real estate loans and home equity loans, multifamily and commercial real estate loans, commercial business and SBA loans, and construction loans held-for-sale, respectively, resulting in gross gains of $8.4 million and no gross losses.

During the three months ended June 30, 2020, the Company sold $52.4 million of one-to-four family real estate loans held-for-sale resulting in gross gains of $740,000 and no gross losses. During the six months ended June 30, 2020, the Company sold $104.0 million of one-to-four family real estate loans held-for-sale resulting in gross gains of $1.4 million and no gross losses.

During the three and six months ended June 30, 2021, no loans included in loans receivable were sold by the Company. During the three months ended June 30, 2020, the Company sold a construction loan totaling $6.7 million included in loans receivable, resulting in no gross gain or loss. During the six months ended June 30, 2020, the Company sold $8.8 million and $7.3 million of one-to-four family real estate and home equity loans, and commercial business loans, respectively, included in loans receivable, resulting in gross gains of $82,000 and $55,000, respectively, and no gross losses.

    During the three and six months ended June 30, 2021, the Company purchased $71.6 million of multifamily and commercial real estate loans from third parties. During the three and six months ended June 30, 2020, no loans were purchased by the Company.

    

At June 30, 2021 and December 31, 2020, commercial business loans included $91.1 million and $344.4 million, respectively, in SBA Payroll Protection Program ("PPP") loans and net deferred fees related to these loans totaling $2.3 million and $6.6 million, respectively.

    The Company has entered into guarantor swaps with Freddie Mac which results in improved liquidity. During the three months ended June 30, 2021, the Company exchanged $35.6 million of loans for Freddie Mac mortgage participation certificates, resulting in gross gains of $544,000 and no gross losses. During the six months ended June 30, 2021, the Company exchanged $99.6 million of loans for Freddie Mac mortgage participation certificates, resulting in gross gains of $2.3 million and no gross losses. The Company retained the servicing of these loans. During the three and six months ended June 30, 2020, no loans were sold.

At June 30, 2021 and December 31, 2020, the carrying value of loans serviced by the Company for investors was $581.0 million and $598.0 million, respectively. These loans are not included in the Consolidated Statements of Financial Condition.

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9.    Loans Receivable and Allowance for Loan Losses (continued)

    The following tables summarize the aging of loans receivable by portfolio segment, including non-accrual loans and excluding PCI loans at June 30, 2021 and December 31, 2020:

			June 30, 2021
			30-59 Days						60-89 Days						90 Days or More						Total Past Due						Non-accrual						Current						Total
			(In thousands)
Real estate loans:
One-to-four family			$	1,471					$	957					$	316					$	2,744					$	862					$	1,864,318					$	1,867,924
Multifamily and commercial			3,893						392						2,433						6,718						2,433						3,105,903						3,115,054
Construction			—						—						—						—						—						261,159						261,159
Commercial business loans			1,617						434						349						2,400						383						468,917						471,700
Consumer loans:
Home equity loans and advances			355						192						395						942						636						276,500						278,078
Other consumer loans			—						—						—						—						—						1,158						1,158
Total loans			$	7,336					$	1,975					$	3,493					$	12,804					$	4,314					$	5,977,955					$	5,995,073

			December 31, 2020
			30-59 Days						60-89 Days						90 Days or More						Total Past Due						Non-accrual						Current						Total
			(In thousands)
Real estate loans:
One-to-four family			$	3,068					$	912					$	1,901					$	5,881					$	2,637					$	1,931,809					$	1,940,327
Multifamily and commercial			15,645						—						1,238						16,883						1,873						2,799,209						2,817,965
Construction			550						—						—						550						—						328,161						328,711
Commercial business loans			2,343						1,056						2,453						5,852						2,968						744,050						752,870
Consumer loans:
Home equity loans and advances			1,156						696						394						2,246						678						318,253						321,177
Other consumer loans			4						—						—						4						—						1,493						1,497
Total loans			$	22,766					$	2,664					$	5,986					$	31,416					$	8,156					$	6,122,975					$	6,162,547

    The Company considers a loan to be delinquent when we have not received a payment within 30 days of its contractual due date. Generally, a loan is designated as a non-accrual loan when the payment of interest is 90 days or more in arrears of its contractual due date. Non-accruing loans are returned to accrual status after there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The Company identifies loans that may need to be charged-off as a loss, by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectability. At June 30, 2021 and December 31, 2020, non-accrual loans totaled $4.3 million and $8.2 million, respectively. Included in non-accrual loans at June 30, 2021, are nine loans totaling $821,000 which are less than 90 days in arrears. At December 31, 2020, 19 loans totaling $2.2 million were less than 90 days in arrears.

    At June 30, 2021 and December 31, 2020, there were no loans past due 90 days or more still accruing interest other than COVID-19 related loan forbearance and deferrals. In accordance with the CARES Act, these loans are not included in the aging of loans receivable by portfolio segment in the table above, and the Bank continues to accrue interest income during the forbearance or deferral period. If adverse information indicating that the borrower's capability of repaying all amounts due is unlikely, the interest accrual will cease.

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9.    Loans Receivable and Allowance for Loan Losses (continued)

PCI loans are loans acquired at a discount primarily due to deteriorated credit quality. These loans are initially recorded at fair value at acquisition, based upon the present value of expected future cash flows, with no related allowance for loan losses. PCI loans acquired in the Stewardship acquisition totaled $2.9 million at June 30, 2021 and $6.1 million at December 31, 2020. PCI loans acquired in the Roselle acquisition totaled $242,000 at June 30, 2021 and $246,000 at December 31, 2020.

    The following table presents changes in accretable yield for PCI loans for the three and six months ended June 30, 2021 and 2020.

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(In thousands)
Balance at beginning of period			$	408					$	463					$	418					$	511
Acquisition			—						58						—						58
Accretion			(32)						(49)						(64)						(98)
Net change in expected cash flows			(1)						(1)						21						—
Balance at end of period			$	375					$	471					$	375					$	471

    We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. At June 30, 2021 and December 31, 2020, the Company had no real estate owned. At June 30, 2021 we had one residential mortgage loan with a carrying value of $87,000 collateralized by residential real estate which was in the process of foreclosure. At December 31, 2020 we had two residential mortgage loans with carrying values totaling $398,000 collateralized by residential real estate which were in the process of foreclosure. The states of New Jersey, New York and Pennsylvania issued executive orders which declared moratoriums on removing individuals from a residential property until at least two months after the COVID health crisis had ended. In response to these orders, in March 2020, the Company temporarily suspended residential property foreclosure sales and evictions. These moratoriums expire in these states beginning on August 31, 2021 through January 1, 2022.

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9.    Loans Receivable and Allowance for Loan Losses (continued)

    The following tables summarize loans receivable (including PCI loans) and allowance for loan losses by portfolio segment and impairment method at June 30, 2021 and December 31, 2020:

			June 30, 2021
			One-to-Four Family						Multifamily and Commercial						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Total
			(In thousands)
Allowance for loan losses:
Individually evaluated for impairment			$	274					$	148					$	—					$	14					$	14					$	—					$	450
Collectively evaluated for impairment			16,834						26,108						9,160						15,884						1,457						5						69,448
Loans acquired with deteriorated credit quality			—						—						—						—						—						—						—
Total			$	17,108					$	26,256					$	9,160					$	15,898					$	1,471					$	5					$	69,898
Total loans:
Individually evaluated for impairment			$	5,668					$	33,995					$	—					$	2,124					$	1,475					$	—					$	43,262
Collectively evaluated for impairment			1,862,256						3,081,059						261,159						469,576						276,603						1,158						5,951,811
Loans acquired with deteriorated credit quality			295						1,797						—						1,024						—						—						3,116
Total loans			$	1,868,219					$	3,116,851					$	261,159					$	472,724					$	278,078					$	1,158					$	5,998,189

			December 31, 2020
			One-to-Four Family						Multifamily and Commercial						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Total
			(In thousands)
Allowance for loan losses:
Individually evaluated for impairment			$	391					$	601					$	—					$	84					$	12					$	—					$	1,088
Collectively evaluated for impairment			13,195						30,080						11,271						17,300						1,736						6						73,588
Loans acquired with deteriorated credit quality			—						—						—						—						—						—						—
Total			$	13,586					$	30,681					$	11,271					$	17,384					$	1,748					$	6					$	74,676
Total loans:
Individually evaluated for impairment			$	7,257					$	32,792					$	—					$	3,447					$	1,651					$	—					$	45,147
Collectively evaluated for impairment			1,933,070						2,785,173						328,711						749,423						319,526						1,497						6,117,400
Loans acquired with deteriorated credit quality			309						4,893						—						1,143						—						—						6,345
Total loans			$	1,940,636					$	2,822,858					$	328,711					$	754,013					$	321,177					$	1,497					$	6,168,892

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9.    Loans Receivable and Allowance for Loan Losses (continued)

    Loan modifications to borrowers experiencing financial difficulties that are considered troubled debt restructurings ("TDRs") primarily involve the lowering of the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, the Company attempts to obtain additional collateral or guarantor support when modifying such loans. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

    Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” allows banks to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. The Bank elected to account for modifications on certain loans under Section 4013 of the CARES Act or, if the loan modification was not eligible under Section 4013, used the criteria in the COVID-19 guidance to determine when the loan modification was not a TDR in accordance with ASC 310-40. Guidance noted that modification or deferral programs mandated by the federal or a state government related to COVID-19 would not be in the scope of ASC 310-40, such as a state program that requires all institutions within that state to suspend mortgage payments for a specified period. These short-term loan modifications were not treated as a troubled debt restructuring during the short-term modification period if the loan was not in arrears at December 31, 2019. Furthermore, based on current evaluations, generally, we have continued the accrual of interest on these loans during the short-term modification period. The Consolidated Appropriations Act, 2021, which was enacted in late December 2020, extended certain provisions of the CARES Act, including provisions permitting loan deferral extension requests to not be treated as troubled debt restructurings.

    The following tables present the number of loans modified as TDRs during the three and six months ended June 30, 2021 and 2020, along with their balances immediately prior to the modification date and post-modification. Post-modification recorded investment represents the net book balance immediately following modification.

			For the Three Months Ended June 30,
			2021																		2020
			No. of Loans						Pre-modification Recorded Investment						Post-modification Recorded Investment						No. of Loans						Pre-modification Recorded Investment						Post-modification Recorded Investment
			(Dollars in thousands)
Troubled Debt Restructurings
Real Estate loans:
One-to-four family			1						$	221					$	322					—						$	—					$	—
Multifamily and commercial			1						192						211						—						—						—
Total restructured loans			2						$	413					$	533					—						$	—					$	—

			For the Six Months Ended June 30,
			2021																		2020
			No. of Loans						Pre-modification Recorded Investment						Post-modification Recorded Investment						No. of Loans						Pre-modification Recorded Investment						Post-modification Recorded Investment
			(Dollars in thousands)
Troubled Debt Restructurings
Real Estate loans:
One-to-four family			1						$	221					$	322					—						$	—					$	—
Multifamily and commercial			1						192						211						1						10,212						11,507
Total restructured loans			2						$	413					$	533					1						$	10,212					$	11,507

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9.    Loans Receivable and Allowance for Loan Losses (continued)

The activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2021 and 2020 are as follows:

			For the Three Months Ended June 30,
			One-to-Four Family						Multifamily and Commercial						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans												Total
			(In thousands)
2021
Balance at beginning of period			$	19,850					$	23,849					$	11,464					$	14,804					$	1,931					$	6											$	71,904
Provision charged (credited)			(2,463)						1,872						(2,304)						1,600						(465)						(1)												(1,761)
Recoveries			11						931						—						111						34						—												1,087
Charge-offs			(290)						(396)						—						(617)						(29)						—												(1,332)
Balance at end of period			$	17,108					$	26,256					$	9,160					$	15,898					$	1,471					$	5											$	69,898
2020
Balance at beginning of period			$	16,798					$	26,085					$	9,399					$	17,191					$	1,718					$	9											$	71,200
Provision charged (credited)			(51)						1,243						817						3,911						(183)						(1)												5,736
Recoveries			239						2						1						12						9						—												263
Charge-offs			(353)						—						—						(2,800)						(30)						(1)												(3,184)
Balance at end of period			$	16,633					$	27,330					$	10,217					$	18,314					$	1,514					$	7											$	74,015

			For the Six Months Ended June 30,
			One-to-Four Family						Multifamily and Commercial						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans												Total
			(In thousands)
2021
Balance at beginning of period			$	13,586					$	30,681					$	11,271					$	17,384					$	1,748					$	6											$	74,676
Provision charged (credited)			4,014						(4,800)						(2,112)						91						(235)						1												(3,041)
Recoveries			14						937						1						127						45						—												1,124
Charge-offs			(506)						(562)						—						(1,704)						(87)						(2)												(2,861)
Balance at end of period			$	17,108					$	26,256					$	9,160					$	15,898					$	1,471					$	5											$	69,898
2020
Balance at beginning of period			$	13,780					$	22,980					$	7,435					$	15,836					$	1,669					$	9											$	61,709
Provision charged (credited)			3,050						4,339						2,781						5,258						(124)						—												15,304
Recoveries			242						12						1						83						23						—												361
Charge-offs			(439)						(1)						—						(2,863)						(54)						(2)												(3,359)
Balance at end of period			$	16,633					$	27,330					$	10,217					$	18,314					$	1,514					$	7											$	74,015

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9.    Loans Receivable and Allowance for Loan Losses (continued)

    The following tables present loans individually evaluated for impairment by loan segment, excluding PCI loans, at June 30, 2021 and December 31, 2020:

			At June 30, 2021
			Recorded Investment						Unpaid Principal Balance						Specific Allowance
			(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family			$	2,524					$	3,064					$	—
Multifamily and commercial			16,331						17,147						—
Commercial business loans			632						632						—
Consumer loans:
Home equity loans and advances			530						636						—
			20,017						21,479						—
With a specific allowance recorded:
Real estate loans:
One-to-four family			3,144						3,162						274
Multifamily and commercial			17,664						17,667						148
Commercial business loans			1,492						1,491						14
Consumer loans:
Home equity loans and advances			945						945						14
			23,245						23,265						450
Total:
Real estate loans:
One-to-four family			5,668						6,226						274
Multifamily and commercial			33,995						34,814						148
Commercial business loans			2,124						2,123						14
Consumer loans:
Home equity loans and advances			1,475						1,581						14
Total loans			$	43,262					$	44,744					$	450

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9.    Loans Receivable and Allowance for Loan Losses (continued)

			At December 31, 2020
			Recorded Investment						Unpaid Principal Balance						Specific Allowance
			(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family			$	3,344					$	3,898					$	—
Multifamily and commercial			13,058						13,094						—
Commercial business loans			1,945						1,945						—
Consumer loans:
Home equity loans and advances			714						851						—
			19,061						19,788						—
With a specific allowance recorded:
Real estate loans:
One-to-four family			3,913						3,919						391
Multifamily and commercial			19,734						20,350						601
Commercial business loans			1,502						1,502						84
Consumer loans:
Home equity loans and advances			937						937						12
			26,086						26,708						1,088
Total:
Real estate loans:
One-to-four family			7,257						7,817						391
Multifamily and commercial			32,792						33,444						601
Commercial business loans			3,447						3,447						84
Consumer loans:
Home equity loans and advances			1,651						1,788						12
			$	45,147					$	46,496					$	1,088

    Specific allocations of the allowance for loan losses attributable to impaired loans totaled $450,000 and $1.1 million at June 30, 2021 and December 31, 2020, respectively. At June 30, 2021 and December 31, 2020, impaired loans for which there was no related allowance for loan losses totaled $20.0 million and $19.1 million, respectively.

    The recorded investment in TDRs totaled $40.6 million at June 30, 2021, of which one loan with a balance of $409,000 was 60-89 days past due. The remaining loans modified were current at the time of restructuring and have complied with the terms of their restructure agreement at June 30, 2021. The recorded investment in TDRs totaled $45.4 million at December 31, 2020, of which one loan with a balance of $91,000 was over 90 days past due, and three loans totaling $11.9 million were 30-59 days past due. The remaining loans modified were current at the time of restructuring and have complied with the terms of their restructure agreement at December 31, 2020.

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9.    Loans Receivable and Allowance for Loan Losses (continued)

    The following tables present interest income recognized for loans individually evaluated for impairment, by loan segment, excluding PCI loans for the three and six months ended June 30, 2021 and 2020:

			For the Three Months Ended June 30,
			2021												2020
			Average Recorded Investment						Interest Income Recognized						Average Recorded Investment						Interest Income Recognized
			(In thousands)
Real estate loans:
One-to-four family			$	6,149					$	102					$	8,647					$	81
Multifamily and commercial			33,264						375						14,960						32
Commercial business loans			2,295						41						5,871						157
Consumer loans:
Home equity loans and advances			1,523						18						2,062						29
Total loans			$	43,231					$	536					$	31,540					$	299

			For the Six Months Ended June 30,
			2021												2020
			Average Recorded Investment						Interest Income Recognized						Average Recorded Investment						Interest Income Recognized
			(In thousands)
Real estate loans:
One-to-four family			$	6,518					$	170					$	8,728					$	188
Multifamily and commercial			33,107						811						10,840						198
Commercial business loans			2,679						70						5,640						224
Consumer loans:
Home equity loans and advances			1,565						38						2,089						58
Total loans			$	43,869					$	1,089					$	27,297					$	668

    The Company utilizes an eight-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4 (Pass), with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (Special Mention) or 6 (Substandard). Loans with adverse classifications are rated 7 (Doubtful) or 8 (Loss). The risk ratings are also confirmed through periodic loan review examinations which are currently performed by both an independent third-party and the Company's credit risk review department. The Company requires an annual review be performed above certain dollar thresholds, depending on loan type, to help determine the appropriate risk ratings. Results from examinations are presented to the Audit Committee of the Board of Directors.

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9.    Loans Receivable and Allowance for Loan Losses (continued)

    The following tables present loans receivable by credit quality risk indicator and by loan segment, excluding PCI loans at June 30, 2021 and December 31, 2020:

			June 30, 2021
			One-to-Four Family						Multifamily and Commercial						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Total
			(In thousands)
Pass			$	1,863,129					$	3,047,108					$	261,159					$	462,592					$	277,354					$	1,158					$	5,912,500
Special mention			393						50,860						—						5,663						—						—						56,916
Substandard			4,402						17,086						—						3,445						724						—						25,657
Doubtful			—						—						—						—						—						—						—
Loss			—						—						—						—						—						—						—
Total			$	1,867,924					$	3,115,054					$	261,159					$	471,700					$	278,078					$	1,158					$	5,995,073

			December 31, 2020
			One-to-Four Family						Multifamily and Commercial						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Total
			(In thousands)
Pass			$	1,935,032					$	2,758,905					$	328,711					$	740,010					$	320,092					$	1,497					$	6,084,247
Special mention			404						40,392						—						6,718						—						—						47,514
Substandard			4,891						18,668						—						6,142						1,085						—						30,786
Doubtful			—						—						—						—						—						—						—
Loss			—						—						—						—						—						—						—
Total			$	1,940,327					$	2,817,965					$	328,711					$	752,870					$	321,177					$	1,497					$	6,162,547

    Effective January 1, 2020, the Company adopted ASU 2016-02 Leases (Topic 842) and all subsequent ASU's that modified Topic 842. The Company's leases primarily relate to real estate property for branches and office space. At June 30, 2021 and December 31, 2020, all of the Company's leases are classified as operating leases.

    The Company determines if an arrangement is a lease at inception. Topic 842 requires lessees to recognize a right-of-use asset and a lease liability, measured at the present value of the future minimum lease payments, at the lease commencement date. At the time of adoption, an operating lease right-of-use asset of $22.2 million and operating lease liabilities of $23.3 million were recorded in other assets and other liabilities, respectively on our Consolidated Statements of Financial Condition. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments. As the Company's leases do not provide an implicit rate, the discount rate used in determining the lease liability for each individual lease was the Company's incremental borrowing rate at the time of adoption of ASU 2016-02, on a collateralized basis, over a similar term. Certain leases include options to renew, with one or more renewal terms usually ranging from 3 years to 10 years. For each lease, these extension options were evaluated, and those which were considered reasonably certain of renewal were included in the lease term.

    At June 30, 2021 and December 31, 2020, the weighted average remaining lease term for operating leases was 7.0 years and 7.5 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 2.17%, and 2.26%, respectively.

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10.    Leases (continued)

    The Company elected to account for the lease and non-lease components separately since such amounts are readily determinable under the Company's lease contracts. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Variable lease payments include common area maintenance charges, real estate taxes, repairs and maintenance costs and utilities. Operating and variable lease expenses are recorded in occupancy expense in the Consolidated Statements of Income. During the three months ended June 30, 2021 and 2020, operating and variable lease expenses totaled approximately $563,000 and $601,000, respectively. During the six months ended June 30, 2021 and 2020, operating and variable lease expenses totaled approximately $1.2 million and $1.3 million, respectively.

    There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the three and six months ended June 30, 2021 and 2020. At June 30, 2021, the Company had no leases that had not yet commenced.

    The following table summarizes lease payment obligations for each of the next five years and thereafter as follows:

At June 30, 2021						Lease Payment Obligations
						(In thousands)
2021						$	2,053
2022						3,971
2023						3,590
2024						2,866
2025						2,194
Thereafter						6,402
Total undiscounted cash flows						21,076
Discount on cash flows						(1,736)
Total lease liability						$	19,340

    Deposits at June 30, 2021 and December 31, 2020 are summarized as follows:

			June 30,						December 31,
			2021						2020
			(In thousands)
Non-interest-bearing demand			$	1,513,197					$	1,354,605
Interest-bearing demand			2,355,819						2,189,164
Money market accounts			645,590						588,180
Savings and club deposits			749,531						688,309
Certificates of deposit			1,815,139						1,958,366
Total deposits			$	7,079,276					$	6,778,624

Included in the above balances at June 30, 2021 and December 31, 2020 are certificates of deposit obtained through brokers, totaling $16.2 million and $26.3 million, respectively, that were acquired from Stewardship.

    The aggregate amount of certificates of deposit that meet or exceed $100,000 totaled approximately $937.6 million and $1.0 billion at June 30, 2021 and December 31, 2020, respectively. Interest expense on deposits for the three months ended June 30, 2021 and 2020 totaled $7.9 million and $14.9 million, respectively. Interest expense on deposits for the six months ended June 30, 2021 and 2020 totaled $16.7 million and $31.7 million, respectively.

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11.    Deposits (continued)

    Scheduled maturities of certificates of deposit accounts at June 30, 2021 and December 31, 2020 are summarized as follows:

			June 30,						December 31,
			2021						2020
			(In thousands)
One year or less			$	1,364,245					$	1,494,129
After one year to two years			277,629						337,579
After two years to three years			74,863						52,809
After three years to four years			27,845						23,018
After four years			70,557						50,831
			$	1,815,139					$	1,958,366

    At the Company's annual meeting of stockholders held on June 6, 2019, stockholders approved the Columbia Financial, Inc. 2019 Equity Incentive Plan ("2019 Plan") which provides for the issuance of up to 7,949,996 shares (2,271,427 restricted stock awards and 5,678,569 stock options) of common stock.

    

     On July 23, 2019, 1,389,570 shares of restricted stock were awarded, with a grant date fair value of $15.60 per share. To fund the grant of restricted common stock, the Company issued shares from authorized but unissued shares.

On December 16, 2019, 74,673 shares of restricted stock were awarded, with a grant date fair value of $17.00 per share. To fund the grant of restricted common stock, the Company reissued shares from treasury stock.

On December 14, 2020, 33,160 shares of restricted stock were awarded, with a grant date fair value of $15.08 per share. To fund the grant of restricted common stock, the Company reissued shares from treasury stock.

On March 22, 2021, 50,203 shares of restricted stock were awarded, with a grant date fair value of $17.86 per share. To fund the grant of restricted common stock, the Company reissued shares from treasury stock.

    Restricted shares granted under the 2019 Plan generally vest in equal installments, over performance or service periods ranging from 1 year to 5 years, beginning 1 year from the date of grant. A portion of restricted shares awarded are performance vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. Management recognizes compensation expense for the fair value of restricted shares on a straight line basis over the requisite performance or service period. During the three months ended June 30, 2021 and 2020, approximately $1.6 million and $1.4 million in expense was recognized in regard to these awards. The expected future compensation expense related to the 1,299,398 non-vested restricted shares outstanding at June 30, 2021 is approximately $12.3 million over a weighted average period of 2.5 years. During the six months ended June 30, 2021 and 2020, approximately $3.0 million and $2.8 million in expense was recognized in regard to these awards.

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12.    Stock Based Compensation (continued)

    The following is a summary of the Company's restricted stock activity during the three and six months ended June 30, 2021 and 2020:

			Number of Restricted Shares						Weighted Average Grant Date Fair Value
Non-vested at January 1, 2021			1,263,169						$	15.66
Grants			50,203						17.86
Forfeited			(13,846)						15.60
Non-vested at March 31, 2021			1,299,526						$	15.74
Forfeited			(128)						15.60
Non-vested at June 30, 2021			1,299,398						$	15.74

    

			Number of Restricted Shares						Weighted Average Grant Date Fair Value
Non-vested at January 1, 2020			1,420,012						$	15.67
Forfeited			(881)						15.60
Non-vested at March 31, 2020			1,419,131						$	15.67
Forfeited			(240)						15.60
Non-vested at June 30, 2020			1,418,891						$	15.67

On July 23, 2019, options to purchase 3,707,901 shares of Company common stock were awarded with a grant date fair value of $4.25 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of five years beginning one year from the date of grant. Stock options were granted at an exercise price of $15.60, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of 6.5 years, risk-free rate of return of 1.90%, volatility of 22.12%, and a dividend yield of 0.00%.

     On December 16, 2019, options to purchase 184,378 shares of Company common stock were awarded with a grant date fair value of $4.59 per option. Stock options granted under the 2019 Plan generally vest in equal installments over the service period of five years beginning one year from the date of grant. Stock options were granted at an exercise price of $17.00, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of approximately 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of 6.5 years, risk-free rate of return of 1.79%, volatility of 22.23%, and a dividend yield of 0.00%.

On March 22, 2021, options to purchase 109,654 shares of Company common stock were awarded with a grant date fair value of $4.91 per option. Stock options granted under the 2019 Plan vest in equal installments over the service period of three years beginning one year from the date of grant. Stock options were granted at an exercise price of $17.86, which represents the fair value of the Company's common stock price on the grant date based on the closing market price, and have an expiration period of approximately 10 years. The fair value of stock options granted was estimated utilizing the Black-Scholes option pricing model using the following assumptions: expected life of 6.0 years, risk-free rate of return of 1.11%, volatility of 25.98%, and a dividend yield of 0.00%.

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12.    Stock Based Compensation (continued)

    The expected life of the options represents the period of time that stock options are expected to be outstanding and is estimated using the simplified approach, which assumes that all outstanding options will be exercised at the midpoint of the vesting date and full contractual term. The risk-free rate of return is based on the rates on the grant date of a U.S. Treasury Note with a term equal to the expected option life. Since the Company recently became a public company and does not have sufficient historical price data, the expected volatility is based on the historical daily stock prices of Company stock plus a peer group of similar entities based on factors such as industry, stage of life cycle, size and financial leverage. The Company has not paid any cash dividends on its common stock.

    Management recognizes expense for the fair value of these awards on a straight line basis over the requisite service period. During the three months ended June 30, 2021 and 2020, approximately $822,000 and $804,000 in expense was recognized in regard to these awards. During the six months ended June 30, 2021 and 2020, approximately $1.6 million and $1.6 million in expense was recognized in regard to these awards. The expected future compensation expense related to the 3,043,454 non-vested options outstanding at June 30, 2021 is $10.1 million over a weighted average period of 3.1 years.

    The following is a summary of the Company's option activity during the three and six months ended June 30, 2021 and 2020:

			Number of Stock Options						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value
Outstanding, January 1, 2021			3,708,628						$	15.66					8.6						$	—
Granted			109,654						17.86						—						—
Expired			(2,029)						15.60						—						—
Forfeited			(30,118)						15.60						—						—
Outstanding, March 31, 2021			3,786,135						$	15.73					8.4						$	6,673,328
Exercised			(1,661)						15.60						—						—
Expired			(7,529)						15.60						—						—
Forfeited			(1,412)						15.60						—						—
Outstanding, June 30, 2021			3,775,533						$	15.73					8.1						$	5,700,258
Options exercisable at June 30, 2021			732,079						$	15.67					8.1						$	1,138,280

			Number of Stock Options						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value
Outstanding, January 1, 2020			3,784,044						$	15.67					9.6						$	4,812,490
Forfeited			(9,707)						15.60						—						—
Outstanding, March 31, 2020			3,774,337						$	15.67					9.3						$	—
Forfeited			(2,647)						15.60						—						—
Outstanding, June 30, 2020			3,771,690						$	15.67					9.1						$	—
Options exercisable at June 30, 2020			—						$	—					—						$	—

    The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options.

    During both the three and six months ended June 30, 2021, the aggregate intrinsic value of options exercised was $3,805. There were no stock option exercises during the three and six months ended June 30, 2020.

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    Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") and Post-retirement Plan

    The Company maintains a single employer, tax-qualified defined benefit pension plan (the "Pension Plan") which covers full-time employees that satisfy the Pension Plan's eligibility requirements. The benefits are based on years of service and the employee's average compensation for the highest five consecutive years of employment. Effective October 1, 2018, employees hired by the Bank are not eligible to participate in the Bank's Pension Plan as the plan has been closed to new employees as of that date.

    

    The Company also has a Retirement Income Maintenance Plan (the "RIM "Plan) which is a non-qualified defined benefit plan which provides benefits to all employees of the Company if their benefits under the Pension Plan are limited by Internal Revenue Code 415 and 401(a)(17).    

    In addition, the Company provides certain health care and life insurance benefits to eligible retired employees under a Post-retirement Plan. The Company accrues the cost of retiree health care and other benefits during the employees’ period of active service. Effective January 1, 2019, the Post-retirement Plan has been closed to new hires. The Company also provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program.

    Net periodic benefit (income) cost for Pension Plan, RIM Plan, Post-retirement Plan and Split-dollar Life Insurance plan benefits for the three and six months ended June 30, 2021 and 2020, includes the following components:

			For the Three Months Ended June 30,
			Pension Plan												RIM Plan												Post-retirement Plan												Split-Dollar Life Insurance
			2021						2020						2021						2020						2021						2020						2021						2020						Affected Line Item in the Consolidated Statements of Income
			(In thousands)
Service cost			$	2,150					$	1,937					$	100					$	67					$	130					$	99					$	141					$	120					Compensation and employee benefits
Interest cost			1,756						2,031						86						102						141						171						125						131						Other non-interest expense
Expected return on plan assets			(6,318)						(5,737)						—						—						—						—						—						—						Other non-interest expense
Amortization:
Prior service cost			—						—						—						—						—						—						14						14						Other non-interest expense
Net loss			1,000						781						166						99						153						77						191						113						Other non-interest expense
Net periodic (income) benefit cost			$	(1,412)					$	(988)					$	352					$	268					$	424					$	347					$	471					$	378

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13.    Components of Net Periodic Benefit Cost

    

			For the Six Months Ended June 30,
			Pension Plan												RIM Plan												Post-retirement Plan												Split-Dollar Life Insurance
			2021						2020						2021						2020						2021						2020						2021						2020						Affected Line Item in the Consolidated Statements of Income
			(In thousands)
Service cost			$	4,300					$	3,874					$	200					$	134					$	260					$	198					$	282					$	226					Compensation and employee benefits
Interest cost			3,512						4,062						172						204						282						342						250						245						Other non-interest expense
Expected return on plan assets			(12,636)						(11,474)						—						—						—						—						—						—						Other non-interest expense
Amortization:
Prior service cost			—						—						—						—						—						—						28						28						Other non-interest expense
Net loss			2,000						1,562						332						198						306						154						382						226						Other non-interest expense
Net periodic (income) benefit cost			$	(2,824)					$	(1,976)					$	704					$	536					$	848					$	694					$	942					$	725

    

For the three and six months ended June 30, 2021, no contributions were made to the Pension Plan. The net periodic cost (income) for pension benefits, other post-retirement and split dollar life insurance benefits for the three and six months ended June 30, 2021 were calculated using the most recent available benefit valuations.

    

    Through the acquisition of the Roselle entities, the Company acquired a non-contributory defined benefit supplemental executive retirement plan with the only participant being a former president of Roselle Bank. For the three and six months ended June 30, 2021 and 2020, the Company recorded a net periodic benefit cost of $2,000 and $4,000, and $4,000 and $4,000, respectively, in connection with this plan.

    The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. Where quoted market values in an active market are not readily available, the Company utilizes various valuation techniques to estimate fair value.

    In January 2016, the FASB issued ASU 2016-01- "Financial Instruments". This guidance amended existing guidance to improve accounting standards for financial instruments including clarification and simplification of the accounting and disclosure requirements and the requirement to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The Company adopted the guidance effective January 1, 2019, and the fair value of the Company's loan portfolio is now presented using an exit price method.

    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: Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access on the measurement date.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in markets that are active or not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

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14.    Fair Value Measurements (continued)

Level 3: Prices or valuation techniques that require unobservable inputs that are both significant to the fair value measurement and unobservable (i.e., supported by minimal or no market activity). Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

    A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

    The methods described below were used to measure fair value of financial instruments as reflected in the tables below on a recurring basis at June 30, 2021 and December 31, 2020.

Debt Securities Available for Sale, at Fair Value

    For debt securities available for sale, fair value was estimated using a market approach. The majority of these securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to a benchmark or to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service. The Company may hold debt instruments issued by the U.S. government and U.S. government-sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs.

Equity Securities, at Fair Value

    The Company holds equity securities that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs. A trust preferred security that is not traded in an active market and Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA") preferred stock are considered Level 2 instruments. In addition, Level 2 instruments include Atlantic Community Bankers Bank ("ACCB") stock, which is based on redemption at par value and can only be sold to the issuing ACBB or another institution that holds ACBB stock.

Derivatives

    The Company records all derivatives included in other assets and liabilities on the Consolidated Statements of Financial Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. See note 16 for disclosures related to the accounting treatment for derivatives.

    The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.

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14.    Fair Value Measurements (continued)

    The following tables present the assets and liabilities reported on the Consolidated Statements of Financial Condition at their fair values at June 30, 2021 and December 31, 2020, by level within the fair value hierarchy:

			June 30, 2021
									Fair Value Measurements
			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(In thousands)
Debt securities available for sale:
U.S. government and agency obligations			$	39,856					$	35,318					$	4,538					$	—
Mortgage-backed securities and collateralized mortgage obligations			1,518,275						—						1,518,275						—
Municipal obligations			19,303						—						19,303						—
Corporate debt securities			64,979						—						64,979						—
Trust preferred securities			—						—						—						—
Total debt securities available for sale			1,642,413						35,318						1,607,095						—
Equity securities			4,053						3,707						346						—
Derivative assets			12,741						—						12,741						—
			$	1,659,207					$	39,025					$	1,620,182					$	—
Derivative liabilities			$	28,347					$	—					$	28,347					$	—

			December 31, 2020
									Fair Value Measurements
			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(In thousands)
Debt securities available for sale:
U.S. government and agency obligations			$	25,549					$	25,549					$	—					$	—
Mortgage-backed securities and collateralized mortgage obligations			1,200,394						—						1,200,394						—
Municipal obligations			16,862						—						16,862						—
Corporate debt securities			69,477						—						69,477						—
Trust preferred securities			4,670						—						4,670						—
Total debt securities available for sale			1,316,952						25,549						1,291,403						—
Equity securities			5,418						5,072						346
Derivative assets			19,425						—						19,425						—
			$	1,341,795					$	30,621					$	1,311,174					$	—
Derivative liabilities			$	42,384					$	—					$	42,384					$	—

    

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14.    Fair Value Measurements (continued)

There were no Level 3 assets measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020.

Assets Measured at Fair Value on a Non-Recurring Basis

    The valuation techniques described below were used to estimate fair value of financial instruments measured on a non-recurring basis at June 30, 2021 and December 31, 2020.

Impaired Loans

    Loans which meet certain criteria are evaluated individually for impairment. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. For loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case-by-case basis, to comparable assets based on the appraisers’ market knowledge and experience, as well as adjustments for estimated costs to sell between 6.0% and 8.0%. The Company classifies these loans as Level 3 within the fair value hierarchy.

Mortgage Servicing Rights, Net ("MSR's")

    

    Mortgage servicing rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSRs is obtained through an analysis of future cash flows, incorporating assumptions that market participants would use in determining fair value including market discount rates, prepayments speeds, servicing income, servicing costs, default rates and other market driven data, including the market's perception of future interest rate movements. The prepayment speed and the discount rate are considered two of the most significant inputs in the model. A significant degree of judgment is involved in valuing the mortgage servicing rights using Level 3 inputs. The use of different assumptions could have a significant effect on this fair value estimate.

The following tables present the assets and liabilities reported on the Consolidated Statements of Financial Condition at their fair values on a non-recurring basis at June 30, 2021 and December 31, 2020, by level within the fair value hierarchy:

			June 30, 2021
									Fair Value Measurements
			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(In thousands)
Impaired loans			$	1,232					$	—					$	—					$	1,232
Mortgage servicing rights			2,319						—						—						2,319
			$	3,551					$	—					$	—					$	3,551

			December 31, 2020
									Fair Value Measurements
			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(In thousands)
Mortgage servicing rights			1,338						—						—						1,338
			$	1,338					$	—					$	—					$	1,338

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14.    Fair Value Measurements (continued)

The following table presents information for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2021 and December 31, 2020:

			June 30, 2021
			Fair Value						Valuation Methodology						Unobservable Inputs						Range of Inputs						Weighted Average
			(Dollars in thousands)
Impaired loans			$	1,232					Other						Contracted sale price of collateral						—		%				—		%
Mortgage servicing rights			2,319						Discounted cash flow						Prepayment speeds and discount rates (1)						8.1% - 24.3%						11.3		%

December 31, 2020

Fair Value

Valuation Methodology

Unobservable Inputs

Range of Inputs

Weighted Average

(Dollars in thousands)

Mortgage servicing rights

1,338

Discounted cash flow

Prepayment speeds and discount rates (1)

9.7% - 26.2%

16.7%

(1) Value of SBA servicing rights based on a discount rate of 10.25%.

Other Fair Value Disclosures

    The Company is required to disclose estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. A description of the valuation methodologies used for those assets and liabilities not recorded at fair value on a recurring or non-recurring basis are set forth below.

Cash and Cash Equivalents

    For cash and due from banks, federal funds sold and short-term investments, the carrying amount approximates fair value due to their nature and short-term maturities.

Debt Securities Held to Maturity

    For debt securities held to maturity, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to a benchmark or to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As the Company is responsible for the determination of fair value, it performs quarterly analysis on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to assess the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in an adjustment in the prices obtained from the pricing service.

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14.    Fair Value Measurements (continued)

The Company also holds debt instruments issued by the U.S. government and U.S. government-sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs within the fair value hierarchy.

Federal Home Loan Bank Stock ("FHLB")

    The fair value of FHLB stock is based on redemption at par value and can only be sold to the issuing FHLB, to other FHLBs, or to other member banks. As such, the Company's FHLB stock is recorded at cost, or par value, and is evaluated for impairment each reporting period by considering the ultimate recoverability of the investment rather than temporary declines in value. The Company classifies the estimated fair value as Level 2 within the fair value hierarchy.

Loans Receivable

    Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial mortgage, residential mortgage, commercial, construction, and consumer and other. Each loan category is further segmented into fixed and adjustable rate interest terms and into performing and non-performing categories.

    The fair value of performing loans was estimated using a combination of techniques, including a discounted cash flow model that utilizes a discount rate that reflects the Company's current pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date. The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable. The Company classifies the estimated fair value of its loan portfolio as Level 3.

    The fair value for non-performing loans deemed significant was based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows. The Company classifies the estimated fair value of its non-performing loan portfolio as Level 3.

    

Deposits

    The fair value of deposits with no stated maturity, such as demand, money market, and savings and club deposits are payable on demand at each reporting date and classified as Level 2. The estimated fair value of certificates of deposit was based on the discounted value of contractual cash flows. The discount rate was estimated using the Company’s current rates offered for deposits with similar remaining maturities. The Company classifies the estimated fair value of its certificates of deposit portfolio as Level 2.

Borrowings

    The fair value of borrowings was estimated by discounting future cash flows using rates available for debt with similar terms and maturities and is classified by the Company as Level 2 within the fair value hierarchy.

Commitments to Extend Credit and Letters of Credit

    The fair value of commitments to extend credit and letters of credit was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter-parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value estimates of commitments to extend credit and letters of credit are deemed immaterial.

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14.    Fair Value Measurements (continued)

    The following tables present the assets and liabilities reported on the Consolidated Statements of Financial Condition at their fair values at June 30, 2021 and December 31, 2020:

			June 30, 2021
									Fair Value Measurements
			Carrying Value						Total Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(In thousands)
Financial assets:
Cash and cash equivalents			$	387,231					$	387,231					$	387,231					$	—					$	—
Debt securities available for sale			1,642,413						1,642,413						35,318						1,607,095						—
Debt securities held to maturity			402,145						415,033						—						415,033						—
Equity securities			4,053						4,053						3,707						346						—
Federal Home Loan Bank stock			40,922						40,922						—						40,922						—
Loans receivable, net			5,947,904						6,206,197						—						—						6,206,197
Derivative assets			12,741						12,741						—						12,741						—
Financial liabilities:
Deposits			$	7,079,276					$	7,084,350					$	—					$	7,084,350					$	—
Borrowings			749,683						755,076						—						755,076						—
Derivative liabilities			28,347						28,347						—						28,347						—

			December 31, 2020
									Fair Value Measurements
			Carrying Value						Total Fair Value						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)
			(In thousands)
Financial assets:
Cash and cash equivalents			$	422,957					$	422,957					$	422,957					$	—					$	—
Debt securities available for sale			1,316,952						1,316,952						25,549						1,291,403						—
Debt securities held to maturity			262,720						277,091						5,001						272,090						—
Equity securities			5,418						5,418						5,072						346						—
Federal Home Loan Bank stock			43,759						43,759						—						43,759						—
Loans receivable, net			6,107,094						6,394,524						—						—						6,394,524
Derivative assets			19,425						19,425						—						19,425						—
Financial liabilities:
Deposits			$	6,778,624					$	6,793,034					$	—					$	6,793,034					$	—
Borrowings			799,364						808,853						—						808,853						—
Derivative liabilities			42,384						42,384						—						42,384						—

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14.    Fair Value Measurements (continued)

Limitations

    Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because limited markets exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. 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.

    Fair value estimates are based on existing on and off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include goodwill and intangibles assets, deferred tax assets, office properties and equipment, and bank-owned life insurance.

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    The following tables present the components of other comprehensive income (loss), both gross and net of tax, for the three and six months ended June 30, 2021 and 2020:

			For the Three Months Ended June 30,
			2021																		2020
			Before Tax						Tax Effect						After Tax						Before Tax						Tax Effect						After Tax
			(In thousands)
Components of other comprehensive income (loss):
Unrealized gains on debt securities available for sale:			$	6,645					$	(1,857)					$	4,788					$	8,041					$	(1,689)					$	6,352
Accretion of unrealized gain on debt securities reclassified as held to maturity			(17)						5						(12)						(2)						—						(2)
Reclassification adjustment for (loss) included in net income			(281)						79						(202)						—						—						—
			6,347						(1,773)						4,574						8,039						(1,689)						6,350
Derivatives:
Unrealized gain (loss) on swap contracts accounted for as cash flow hedges			1,315						(367)						948						(945)						195						(750)
			1,315						(367)						948						(945)						195						(750)
Employee benefit plans:
Amortization of prior service cost included in net income			(14)						3						(11)						(14)						3						(11)
Reclassification adjustment of actuarial net (loss) included in net income			(1,511)						422						(1,089)						(1,071)						226						(845)
Change in funded status of retirement obligations			34,441						(9,623)						24,818						2,170						(456)						1,714
			32,916						(9,198)						23,718						1,085						(227)						858
Total other comprehensive income (loss)			$	40,578					$	(11,338)					$	29,240					$	8,179					$	(1,721)					$	6,458

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15.    Other Comprehensive Income (Loss) (continued)

			For the Six Months Ended June 30,
			2021																		2020
			Before Tax						Tax Effect						After Tax						Before Tax						Tax Effect						After Tax
			(In thousands)
Components of other comprehensive income (loss):
Unrealized (loss) gains on debt securities available for sale:			$	(13,196)					$	950					$	(12,246)					$	32,425					$	(6,806)					$	25,619
Accretion of unrealized (loss) gain on debt securities reclassified as held to maturity			(21)						23						2						5						(1)						4
Reclassification adjustment for (loss) gain included in net income			(281)						79						(202)						370						(81)						289
			(13,498)						1,052						(12,446)						32,800						(6,888)						25,912
Derivatives:
Unrealized gain (loss) on swap contracts accounted for as cash flow hedges			7,147						(516)						6,631						(15,306)						3,207						(12,099)
			7,147						(516)						6,631						(15,306)						3,207						(12,099)
Employee benefit plans:
Amortization of prior service cost included in net income			(28)						8						(20)						(28)						6						(22)
Reclassification adjustment of actuarial net (loss) included in net income			(3,022)						844						(2,178)						(2,142)						450						(1,692)
Change in funded status of retirement obligations			37,491						(3,120)						34,371						4,340						(911)						3,429
			34,441						(2,268)						32,173						2,170						(455)						1,715
Total other comprehensive income (loss)			$	28,090					$	(1,732)					$	26,358					$	19,664					$	(4,136)					$	15,528

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15.    Other Comprehensive Income (Loss) (continued)

    The following tables present the changes in the components of accumulated other comprehensive income (loss), net of tax, for the three and six months ended June 30, 2021 and 2020:

			For the Three Months Ended June 30,
			2021																								2020
			Unrealized Gains on Debt Securities Available for Sale						Unrealized (Losses) on Swaps						Employee Benefit Plans						Accumulated Other Comprehensive (Loss)						Unrealized Gains on Debt Securities Available for Sale						Unrealized (Losses) on Swaps						Employee Benefit Plans						Accumulated Other Comprehensive (Loss)
			(In thousands)
Balance at beginning of period			$	14,008					$	(11,173)					$	(75,342)					$	(72,507)					$	28,875					$	(19,823)					$	(68,717)					$	(59,665)
Current period changes in other comprehensive income (loss)			4,574						948						23,718						29,240						6,350						(750)						858						6,458
Total other comprehensive income (loss)			$	18,582					$	(10,225)					$	(51,624)					$	(43,267)					$	35,225					$	(20,573)					$	(67,859)					$	(53,207)

			For the Six Months Ended June 30,
			2021																								2020
			Unrealized Gains on Debt Securities Available for Sale						Unrealized (Losses) on Swaps						Employee Benefit Plans						Accumulated Other Comprehensive (Loss)						Unrealized Gains on Debt Securities Available for Sale						Unrealized (Losses) on Swaps						Employee Benefit Plans						Accumulated Other Comprehensive (Loss)
			(In thousands)
Balance at beginning of period			$	31,028					$	(16,856)					$	(83,797)					$	(69,625)					$	9,313					$	(8,474)					$	(69,574)					$	(68,735)
Current period changes in other comprehensive income (loss)			(12,446)						6,631						32,173						26,358						25,912						(12,099)						1,715						15,528
Total other comprehensive income (loss)			$	18,582					$	(10,225)					$	(51,624)					$	(43,267)					$	35,225					$	(20,573)					$	(67,859)					$	(53,207)

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15.    Other Comprehensive Income (Loss) (continued)

    The following tables reflect amounts reclassified from accumulated other comprehensive income (loss) to the Consolidated Statements of Income and the affected line item in the statement where net income is presented for the three and six months ended June 30, 2021 and 2020:

						Accumulated Other Comprehensive Income (Loss) Components
						For the Three Months Ended June 30,												Affected Line Items in the Consolidated Statements of Income
						2021						2020
						(In thousands)
Reclassification adjustment for (loss) included in net income						$	(281)					$	—					(Loss) gain on securities transactions
Reclassification adjustment of actuarial net (loss) included in net income						(1,511)						(1,071)						Other non-interest expense
Total before tax						(1,792)						(1,071)
Income (tax) benefit						501						226
Net of tax						$	(1,291)					$	(845)

						Accumulated Other Comprehensive Income (Loss) Components
						For the Six Months Ended June 30,												Affected Line Items in the Consolidated Statements of Income
						2021						2020
						(In thousands)
Reclassification adjustment for (loss) gain included in net income						$	(281)					$	370					(Loss) gain on securities transactions
Reclassification adjustment of actuarial net (loss) included in net income						(3,022)						(2,142)						Other non-interest expense
Total before tax						(3,303)						(1,772)
Income (tax) benefit						923						369
Net of tax						$	(2,380)					$	(1,403)

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    The Company uses derivative financial instruments as components of its market risk management, principally to manage interest rate risk. Certain derivatives are entered into in connection with transactions with commercial customers. Derivatives are not used for speculative purposes. All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Financial Condition, reported at fair value and presented on a gross basis. Until a derivative is settled, a favorable change in fair value results in an unrealized gain that is recognized as an asset, while an unfavorable change in fair value results in an unrealized loss that is recognized as a liability. 

The Company generally applies hedge accounting to its derivatives used for market risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exists between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recognized in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income (loss) until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.

The Company formally documents at inception all relationships between the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions. This process includes linking all derivatives that are designated as hedges to specific assets and liabilities, or to specific firm commitments. The Company also formally assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. If it is determined that a derivative is not highly effective or has ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively. Gains or losses resulting from the termination of a derivative accounted for as a cash flow hedge remain in other comprehensive income (loss) and is (accreted) amortized to earnings over the remaining period of the former hedging relationship.

Certain derivative financial instruments are offered to certain commercial banking customers to manage their risk of exposure and risk management strategies. These derivative instruments consist primarily of currency forward contracts and interest rate swap contracts. The risk associated with these transactions is mitigated by simultaneously entering into similar transactions having essentially offsetting terms with a third party. In addition, the Company executes interest rate swaps with third parties in order to hedge the interest rate risk of short-term FHLB advances.

    Currency Forward Contracts. At June 30, 2021 and December 31, 2020, the Company had no currency forward contracts in place with commercial banking customers.

    Interest Rate Swaps. At both June 30, 2021 and December 31, 2020, the Company had interest rate swaps in place with 48 commercial banking customers executed by offsetting interest rate swaps with third parties, with an aggregated notional amount of $175.1 million. These derivatives are not designated as hedges and are not speculative. These interest rate swaps do not meet hedge accounting requirements.

    

    At June 30, 2021 and December 31, 2020, the Company had 28 and 31 interest rate swaps with notional amounts of $400.0 million and $430.0 million, respectively, hedging certain FHLB advances. These interest rate swaps meet the cash flow hedge accounting requirements. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.

    For the three and six months ended June 30, 2021 and 2020, the Company did not record any hedge ineffectiveness associated with these contracts.

    

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16.    Derivatives and Hedging Activities (continued)

    The tables below present the fair value of the Company’s derivative financial instruments as well as their classification in the Consolidated Statements of Financial Condition at June 30, 2021 and December 31, 2020:

June 30, 2021

Asset Derivative

Liability Derivative

Consolidated Statements of Financial Condition

Fair Value

Consolidated Statements of Financial Condition

Fair Value

(In thousands)

Derivatives:

Interest rate swaps

Other Assets

$

12,741

Other Liabilities

$

28,347

Total derivative instruments

$

12,741

$

28,347

December 31, 2020

Asset Derivative

Liability Derivative

Consolidated Statements of Financial Condition

Fair Value

Consolidated Statements of Financial Condition

Fair Value

(In thousands)

Derivatives:

Interest rate swaps

Other Assets

$

19,425

Other Liabilities

$

42,384

Total derivative instruments

$

19,425

$

42,384

    For the three months ended June 30, 2021 and 2020, losses of $167,000 and $24,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties. For the six months ended June 30, 2021 and 2020, (gains)/losses of $(201,000) and $450,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties.

    At both June 30, 2021 and December 31, 2020, accrued interest was $1.0 million.

    The Company has agreements with counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of its derivative obligations.

    On January 1, 2019, the Company adopted ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified Topic 606. The Company performed a review and assessment of all revenue streams, the related contracts with customers, and the underlying performance obligations in those contracts. This guidance does not apply to revenue associated with financial instruments, including interest income on loans and securities, which comprise the majority of the Company's revenue. Revenue-generating activities that are within the scope of Topic 606, are components of non-interest income. These revenue streams can generally be classified as demand deposit account fees, title insurance fees and other fees.

    

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17.     Revenue Recognition (continued)

    The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2021 and 2020.

			For the Three Months Ended June 30,												For the Six Months Ended June 30,
			2021						2020						2021						2020
			(In thousands)
Non-interest income
In-scope of Topic 606:
Demand deposit account fees			$	858					$	620					$	1,696					$	1,919
Title insurance fees			1,503						996						3,123						2,227
Other non-interest income			1,956						1,527						3,697						2,944
Total in-scope non-interest income			4,317						3,143						8,516						7,090
Total out-of-scope non-interest income			10,074						3,865						14,470						6,309
Total non-interest income			$	14,391					$	7,008					$	22,986					$	13,399

    Demand deposit account fees include monthly maintenance fees and service charges. These fees are generally derived as a result of either transaction-based or serviced-based services. The Company's performance obligation for these services is generally satisfied, and revenue recognized, at the time the transaction is completed or the service rendered. Fees for these services are generally received from the customer either at the time of the transaction or monthly.

    Title insurance fees are generally recognized at the time the transaction closes or when the service is rendered.

    Other non-interest income includes check printing fees, traveler's check fees, gift card fees, branch service fees, overdraft fees, account analysis fees, other deposit related fees, wealth management related fee income which includes annuity fees, brokerage commissions, and asset management fees. Wealth management related fee income represent fees earned from customers as consideration for asset management and investment advisory services provided by a third party. The Company's performance obligation is generally satisfied monthly and the resulting fees are recognized monthly based upon the month-end market value of the assets under management and the applicable fee rate. The Company does not earn performance-based incentives. The Company's performance obligation for these transaction-based services are generally satisfied, and related revenue recognized, at the time the transaction closes or when the service is rendered or a point in time when the service is completed.

     Also included in other fees are debit card and ATM fees which are transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at time of transaction or monthly.

    Out-of-scope non-interest income primarily consists of income from bank-owned life insurance, loan prepayment and servicing fees, net fees on loan level interest rate swaps, gains and losses on the sale of loans and securities, and changes in the fair value of equity securities. None of these revenue streams are subject to the requirements of Topic 606.

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