Published: 2022-05-10 00:00:00 ET

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    The accompanying consolidated financial statements include the accounts of Columbia Financial, Inc. ("Columbia Financial"), its wholly-owned subsidiaries, Columbia Bank ("Columbia") and Freehold Bank ("Freehold") and Columbia's wholly-owned subsidiaries, Columbia Investment Services, Inc., 2500 Broadway Corp. 1901 Residential Management Co. LLC, Plaza Financial Services, Inc., First Jersey Title Services, Inc., Real Estate Management Corp. LLC, 1901 Commercial Management Co. LLC, Stewardship Realty LLC, and CSB Realty Corp., and Freehold's wholly-owned inactive subsidiary, Freehold S & L Service Corporation (collectively, the “Company”). In consolidation, all intercompany accounts and transactions are eliminated. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.

    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 month period ended March 31, 2022 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.

Freehold Bank

On December 1, 2021, the Company completed its acquisition of Freehold Bancorp, MHC, Freehold Bancorp, Inc. and Freehold Bank (collectively, the "Freehold Entities"). Pursuant to the terms of the Merger Agreement, Freehold Bancorp, MHC merged with and into the MHC, with the MHC as the surviving entity; and Freehold Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity. In connection with the merger, Freehold Bank converted to a federal savings bank and will operate as a wholly-owned subsidiary of Columbia Financial for at least two years following the effective time of the merger, or no later than December 31, 2023. Under the terms of the merger agreement, depositors of Freehold Bank became depositors of the Columbia Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at Freehold Bank. The Company issued 2,591,007 shares of its common stock to the MHC, representing an amount equal to the fair value of the Freehold 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 acquisition of the Freehold Entities totaled $7,000 during the three months ended March 31, 2022. There were no related merger expenses associated with the acquisition of the Freehold Entities recorded for the three months ended March 31, 2021.

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2.    Acquisitions (continued)

RSI Bank

On May 1, 2022, the Company completed its acquisition of RSI Bancorp, M.H.C., RSI Bancorp, Inc. and RSI Bank (collectively, the “RSI Entities”). Pursuant to the terms of the merger agreement, RSI Bancorp, M.H.C. merged with and into the MHC, with the MHC as the surviving entity; RSI Bancorp, Inc. merged with and into Columbia Financial, with Columbia Financial as the surviving entity; and RSI Bank merged with and into Columbia Bank, with Columbia Bank as the surviving institution. Under the terms of the merger agreement, depositors of RSI Bank became depositors of Columbia Bank and have the same rights and privileges in the MHC as if their accounts had been established at Columbia Bank on the date established at RSI Bank. The transaction closed on May 1, 2022, and the Company issued 6,086,314 shares of its common stock to the MHC, representing an amount equal to the fair value of the RSI 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 RSI acquisition totaled $144,000 during the three months ended March 31, 2022. There were no related merger expenses associated with the acquisition of the RSI Entities recorded for the three months ended March 31, 2021.

    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 months ended March 31, 2022 and 2021:

			For the Three Months Ended March 31,
			2022						2021
			(Dollars in thousands, except per share data)
Net income			$	20,404					$	21,045
Shares:
Weighted average shares outstanding - basic			103,148,417						105,977,621
Weighted average dilutive shares outstanding			588,835						—
Weighted average shares outstanding - diluted			103,737,252						105,977,621
Earnings per share:
Basic			$	0.20					$	0.20
Diluted			$	0.20					$	0.20

    During the three months ended March 31, 2022 and March 31, 2021, the average number of stock options which could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive totaled 16,005 and 3,719,688, respectively.

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4.    Stock Repurchase Program (continued)

common stock, commencing on September 15, 2020. On February 5, 2021, the Company completed the repurchases under the second stock repurchase program.

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 December 6, 2021, the Company announced that its Board of Directors authorized the Company's fourth stock repurchase program to acquire up to 5,000,000 shares, or approximately 4.6%, of the Company's then issued and outstanding common stock, commencing upon the completion of the Company's third stock repurchase program.

Accounting Pronouncement Adopted in 2022

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 was 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 adopted the above mentioned ASUs related to Financial Instruments -Credit Losses (Topic 326) using a modified retrospective approach.

The Company adopted ASU 2016-13 on January 1, 2022 for all financial assets measured at amortized cost and off balance sheet credit exposures. Results for the three months ended March 31, 2022 are presented under Accounting Standards Codification 326, Financial Instruments - Credit Losses, while prior period amounts continue to be reported with previously applicable GAAP and have not been restated. Effective January 1, 2022, the Company recorded a $12.1 million decrease in the allowance for credit losses on loans (previously allowance for loan losses), established a $353,000 allowance for credit losses on debt securities available for sale, and recorded a $5.5 million increase in the liability for off balance sheet credit exposures, which resulted in a total cumulative effect adjustment of $6.2 million, net of tax, and an increase to retained earnings.

Accounting Pronouncement Not Yet Adopted    

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13, this ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

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    Debt securities available for sale at March 31, 2022 and December 31, 2021 are summarized as follows:

			March 31, 2022
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Allowance for Credit Losses						Fair Value
			(In thousands)
U.S. government and agency obligations			$	43,185					$	80					$	(1,178)					$	—					$	42,087
Mortgage-backed securities and collateralized mortgage obligations			1,488,048						2,075						(75,981)						—						1,414,142
Municipal obligations			4,157						—						(5)						(11)						4,141
Corporate debt securities			122,720						1,085						(3,545)						(1,133)						119,127
			$	1,658,110					$	3,240					$	(80,709)					$	(1,144)					$	1,579,497

			December 31, 2021
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
									(In thousands)
U.S. government and agency obligations			$	34,711					$	404					$	(236)					$	34,879
Mortgage-backed securities and collateralized mortgage obligations			1,553,491						14,141						(13,273)						1,554,359
Municipal obligations			4,159						20						—						4,179
Corporate debt securities			109,018						2,378						(966)						110,430
			$	1,701,379					$	16,943					$	(14,475)					$	1,703,847

    The amortized cost and fair value of debt securities available for sale at March 31, 2022, 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.

			March 31, 2022
			Amortized Cost						Fair Value
			(In thousands)
One year or less			$	16,907					$	16,947
More than one year to five years			73,239						72,878
More than five years to ten years			79,916						75,530
			$	170,062					$	165,355
Mortgage-backed securities and collateralized mortgage obligations			1,488,048						1,414,142
			$	1,658,110					$	1,579,497

    

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6.    Debt Securities Available for Sale (continued)

Mortgage-backed securities and collateralized mortgage obligations totaling $1.5 billion at amortized cost, and $1.4 billion at fair value, 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 March 31, 2022, there were no sales, calls or matured debt securities available for sale.

During the three months ended March 31, 2021, there were no sales of debt securities available for sale. During the three months ended March 31, 2021, proceeds from one called debt security available for sale totaled $5.0 million, resulting in no gross gain or losses, and proceeds from two matured debt securities available for sale totaled $210,000.

Debt securities available for sale having a carrying value of $610.8 million and $587.7 million, at March 31, 2022 and December 31, 2021, respectively, were pledged as security for public funds on deposit at Columbia 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. Debt securities available for sale having a carrying value of $37.9 million and $44.1 million, at March 31, 2022 and December 31, 2021, respectively, were pledged by Freehold Bank for outstanding borrowings at the Federal Home Loan Bank, and 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 March 31, 2022 and December 31, 2021 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:

			March 31, 2022
			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			$	22,400					$	(806)					$	4,613					$	(372)					$	27,013					$	(1,178)
Mortgage-backed securities and collateralized mortgage obligations			1,010,976						(52,254)						265,384						(23,727)						1,276,360						(75,981)
Municipal obligations			452						(5)						—						—						452						(5)
Corporate debt securities			63,295						(3,222)						4,632						(323)						67,927						(3,545)
			$	1,097,123					$	(56,287)					$	274,629					$	(24,422)					$	1,371,752					$	(80,709)

			December 31, 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			$	14,488					$	(236)					$	—					$	—					$	14,488					$	(236)
Mortgage-backed securities and collateralized mortgage obligations			$	820,746					$	(11,892)					$	62,407					$	(1,381)					$	883,153					$	(13,273)
Corporate debt securities			29,221						(671)						4,705						(295)						33,926						(966)
			$	864,455					$	(12,799)					$	67,112					$	(1,676)					$	931,567					$	(14,475)

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6.    Debt Securities Available for Sale (continued)    

The number of securities in an unrealized loss position at March 31, 2022 totaled 393, compared with 219 at December 31, 2021. All temporarily impaired securities were investment grade as of March 31, 2022 and December 31, 2021.

For available for sale securities, the Company assesses whether a loss is from credit or other factors and considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost, a credit loss would be recorded through an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis.    

The following table presents the activity in the allowance for credit losses on debt securities available for sale for the three months ended March 31, 2022:

			Three Months Ended March 31, 2022
			(In thousands)
Allowance for Credit Losses:
Balance at December 31, 2021			$	—
Impact of adopting ASU 2016-13 (CECL) effective January 1, 2022			490,000
Provision for credit losses			654,000
Balance at March 31, 2022			$	1,144,000

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of debt securities available for sale. Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Consolidated Statement of Financial Condition, which totaled $3.3 million at March 31, 2022, and is excluded from the estimate of credit losses.

    Debt securities held to maturity at March 31, 2022 and December 31, 2021 are summarized as follows:

			March 31, 2022
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Allowance for Credit Losses						Fair Value
			(In thousands)
U.S. government and agency obligations			$	44,871					$	—					$	(3,358)					$	—					$	41,513
Mortgage-backed securities and collateralized mortgage obligations			374,162						177						(16,828)						—						357,511
			$	419,033					$	177					$	(20,186)					$	—					$	399,024

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7.    Debt Securities Held to Maturity (continued)

			December 31, 2021
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized (Losses)						Fair Value
			(In thousands)
U.S. government and agency obligations			$	44,870					$	—					$	(759)					$	44,111
Mortgage-backed securities and collateralized mortgage obligations			384,864						6,741						(927)						390,678
			$	429,734					$	6,741					$	(1,686)					$	434,789

    

The amortized cost and fair value of debt securities held to maturity at March 31, 2022, 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.

			March 31, 2022
			Amortized Cost						Fair Value
			(In thousands)
More than one year to five years			$	14,875					$	14,113
More than five years to ten years			19,996						18,381
More than ten years			10,000						9,019
			44,871						41,513
Mortgage-backed securities and collateralized mortgage obligations			374,162						357,511
			$	419,033					$	399,024

    

Mortgage-backed securities and collateralized mortgage obligations totaling $374.2 million at amortized cost, and $357.5 million at fair value at March 31, 2022, 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 months ended March 31, 2022, there were no sales, calls or maturities of debt securities held to maturity.

    During the three months ended March 31, 2021, there were no sales, calls or maturities of debt securities held to maturity. During the three months ended March 31, 2021, proceeds from one called debt securities held to maturity totaled $5.0 million, resulting in no gross gain or losses.

Debt securities held to maturity having a carrying value of $241.1 million and $252.4 million, at March 31, 2022 and December 31, 2021, respectively, were pledged as security for public funds on deposit at Columbia 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.

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7.    Debt Securities Held to Maturity (continued)

The following tables summarize the fair value and gross unrealized losses of those securities that reported an unrealized loss at March 31, 2022 and December 31, 2021 and if the unrealized loss position was continuous for the twelve months prior to those respective dates:

			March 31, 2022
			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			$	23,132					$	(1,743)					$	18,381					$	(1,615)					$	41,513					$	(3,358)
Mortgage-backed securities and collateralized mortgage obligations			336,055						(16,043)						6,121						(785)						342,176						(16,828)
			$	359,187					$	(17,786)					$	24,502					$	(2,400)					$	383,689					$	(20,186)

			December 31, 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			$	44,111					$	(759)					$	—					$	—					$	44,111					$	(759)
Mortgage-backed securities and collateralized mortgage obligations			79,036						(927)						—						—						79,036						(927)
			$	123,147					$	(1,686)					$	—					$	—					$	123,147					$	(1,686)

    

    

    The number of securities in an unrealized loss position at March 31, 2022 totaled 95, compared with 25 at December 31, 2021. All temporarily impaired securities were investment grade as of March 31, 2022 and December 31, 2021.

For held to maturity securities, management measures expected credit losses on a collective basis by major security type. All of the mortgage-backed securities are issued by U.S. government agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses and, therefore, the expectation of non-payment is zero and the Company is not required to estimate an allowance for credit losses on these securities under the CECL standard. All these securities reflect a credit quality rating of AAA by Moody's Investors Service.

The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of debt held to maturity. Accrued interest receivable on debt securities held to maturity is reported as a component of accrued interest receivable on the Consolidated Statement of Financial Condition, which totaled $832,000 at March 31, 2022, and is excluded from the estimate of credit losses.

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8.    Equity Securities at Fair Value (continued)

    The Company recorded a net increase (decrease) in the fair value of equity securities of $79,000 and $(588,000), during the three months ended March 31, 2022 and 2021, respectively, as a component of non-interest income.

On January 1, 2022, the Company adopted CECL (ASC Topic 326), which replaced the historical incurred loss methodology with an expected loss methodology. The loan portfolio segmentation was expanded to seven portfolio segments taking into consideration common loan attributes and risk characteristics, as well as historical reporting metrics and data availability. Disclosures at and for the periods ended December 31, 2021 and March 31, 2021, are presented in accordance with the expanded segmentation adopted in conjunction with CECL, when appropriate. The Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans receivable. Accrued interest receivable on loans receivable is reported as a component of accrued interest receivable on the Consolidated Statement of Financial Condition, which totaled $23.3 million at March 31, 2022, and is excluded from the estimate of credit losses.

The allowance for credit losses is a valuation account that reflects management’s evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged to income. Charge-offs against the allowance for credit losses are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for credit losses.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate through the use of segment-specific loss given default risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical probability of default ("PD") curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.

Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using an externally developed economic forecast. This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four quarter reversion period to historical average macroeconomic factors.

The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each segment is measured using an economic forecast, discounted cash flow modeling methodology in which distinct, segment-specific multi-variate regression models are applied to an external economic forecast. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals, and modifications. After quantitative considerations, management applies additional qualitative adjustments so that the allowance for credit loss is reflective of the estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating loss based on type of borrower and collateral, which is generally based upon federal call report segmentation. The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled.

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

The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s loan monitoring process. This process includes the review of delinquent, restructured, and charged-off loans.

    Management believes the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment, and increases in interest rates in the absence of economic improvement. Any one or a combination of these events may adversely affect a borrower's ability to repay its loan, resulting in increased delinquencies and loan losses. Accordingly, the Company has recorded loan losses at a level which is estimated to represent the current risk in its loan portfolio. Management considers it important to maintain the ratio of the allowance for credit losses to total loans at an acceptable level considering the current composition of the loan portfolio.

    Loans receivable at March 31, 2022 and December 31, 2021 are summarized as follows:

			March 31,						December 31,
			2022						2021
			(In thousands)
Real estate loans:
One-to-four family			$	2,179,698					$	2,092,317
Multifamily			1,077,938						1,041,108
Commercial real estate			2,183,704						2,170,236
Construction			261,674						295,047
Commercial business loans			466,517						452,232
Consumer loans:
Home equity loans and advances			270,709						276,563
Other consumer loans			1,659						1,428
Total gross loans			6,441,899						6,328,931
Purchased credit-deteriorated ("PCD") loans			6,655						6,791
Net deferred loan costs, fees and purchased premiums and discounts			28,201						24,879
Loans receivable			$	6,476,755					$	6,360,601

    The Company had no loans held-for-sale at March 31, 2022 and December 31, 2021. During the three months ended March 31, 2022, the Company sold $1.3 million and $905,000 of SBA loans included in commercial business loans, and construction loans held-for-sale, respectively, resulting in gross gains of $110,000 and no gross losses.

During the three months ended March 31, 2021, the Company sold $1.2 million, $4.1 million, and $6.4 million of one-to-four family real estate loans and home equity loans, commercial real estate loans, and construction loans held-for-sale, respectively, resulting in no gross gains or losses. During the three months ended March 31, 2021, the Company sold $4.2 million of commercial business loans held-for-sale, resulting in gross gains of $435,000 and no gross losses.

During the three months ended March 31, 2022 and 2021, no loans were purchased by the Company.

    

At March 31, 2022 and December 31, 2021, commercial business loans included $24.3 million and $44.9 million, respectively, in SBA Payroll Protection Program ("PPP") loans and net deferred fees related to these loans totaling $628,000 and $1.2 million, respectively.

The Company has entered into guarantor swaps with Freddie Mac which results in improved liquidity. During the three months ended March 31, 2022, no loans were exchanged for Freddie Mac mortgage participation certificates. During the three months ended March 31, 2021, the Company exchanged $64.0 million of loans for Freddie Mac mortgage participation certificates, resulting in gross gains of $1.7 million and no gross losses. The Company retained the servicing of these loans.

At March 31, 2022 and December 31, 2021, the carrying value of loans serviced by the Company for investors was $492.8 million and $519.5 million, respectively. These loans are not included in the Consolidated Statements of Financial Condition.

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

    The following tables summarize the aging of loans receivable by portfolio segment, including non-accrual loans and excluding PCD loans at March 31, 2022 and December 31, 2021:

			March 31, 2022
			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			$	2,284					$	1,863					$	594					$	4,741					$	1,409					$	2,174,957					$	2,179,698
Multifamily			—						—						—						—						—						1,077,938						1,077,938
Commercial real estate			4,381						—						2,855						7,236						2,855						2,176,468						2,183,704
Construction			—						—						—						—						—						261,674						261,674
Commercial business loans			411						—						175						586						195						465,931						466,517
Consumer loans:
Home equity loans and advances			245						—						136						381						136						270,328						270,709
Other consumer loans			—						14						—						14						—						1,645						1,659
Total loans			$	7,321					$	1,877					$	3,760					$	12,958					$	4,595					$	6,428,941					$	6,441,899

			December 31, 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			$	3,131					$	1,976					$	373					$	5,480					$	1,416					$	2,086,837					$	2,092,317
Multifamily			—						—						—						—						—						1,041,108						1,041,108
Commercial real estate			2,189						—						1,561						3,750						1,561						2,166,486						2,170,236
Construction			—						—						—						—						—						295,047						295,047
Commercial business loans			412						—						203						615						761						451,617						452,232
Consumer loans:
Home equity loans and advances			108						53						81						242						201						276,321						276,563
Other consumer loans			—						4						—						4						—						1,424						1,428
Total loans			$	5,840					$	2,033					$	2,218					$	10,091					$	3,939					$	6,318,840					$	6,328,931

    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 March 31, 2022 and December 31, 2021, non-accrual loans totaled $4.6 million and $3.9 million, respectively. Included in non-accrual loans at March 31, 2022, are five loans totaling $835,000 which are less than 90 days in arrears. At December 31, 2021, 10 loans totaling $1.7 million were less than 90 days in arrears.

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

    

At March 31, 2022 and December 31, 2021, 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 Company 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.

Purchased credit impaired loans ("PCI") 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 credit losses. In connection with the adoption of CECL on January 1, 2022, all loans considered PCI loans prior to that date were converted to purchase credit-deteriorated ("PCD") loans. Loans acquired in a business combination after January 1, 2022 will be recorded in accordance with ASC Topic 326, which requires loans as of the acquisition date, that have experienced a more than insignificant deterioration in credit quality since origination will be classified as PCD loans.

At March 31, 2022 and December 31, 2021, PCD loans acquired in the Stewardship Financial Corporation ("Stewardship") acquisition totaled $2.6 million and $2.7 million, respectively, and PCD loans acquired in the Roselle acquisition totaled $185,000 and $184,000, respectively. At both March 31, 2022 and December 31, 2021, PCD loans acquired in the Freehold acquisition totaled $3.9 million.

    We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. At March 31, 2022 and December 31, 2021, the Company had no real estate owned. At both March 31, 2022 and December 31, 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.

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

    The following tables summarize loans receivable (including PCD loans) and allowance for credit losses by portfolio segment and impairment method at March 31, 2022 and December 31, 2021:

			March 31, 2022
			One-to-Four Family						Multifamily						Commercial Real Estate						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Total
			(In thousands)
Allowance for credit losses:
Individually evaluated for impairment			$	255					$	5					$	97					$	—					$	11					$	29					$	—					$	397
Collectively evaluated for impairment			8,557						11,198						13,384						4,974						7,117						1,478						8						46,716
Loans acquired with deteriorated credit quality			2						—						32						—						15						—						—						49
Total			$	8,814					$	11,203					$	13,513					$	4,974					$	7,143					$	1,507					$	8					$	47,162
Total loans:
Individually evaluated for impairment			$	4,876					$	741					$	17,014					$	—					$	1,444					$	887					$	—					$	24,962
Collectively evaluated for impairment			2,174,822						1,077,197						2,166,690						261,674						465,073						269,822						1,659						6,416,937
Loans acquired with deteriorated credit quality			423						—						5,399						—						833						—						—						6,655
Total loans			$	2,180,121					$	1,077,938					$	2,189,103					$	261,674					$	467,350					$	270,709					$	1,659					$	6,448,554

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

			December 31, 2021
			One-to-Four Family						Multifamily						Commercial Real Estate						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Total
			(In thousands)
Allowance for credit losses:
Individually evaluated for impairment			$	258					$	—					$	97					$	—					$	16					$	7					$	—					$	378
Collectively evaluated for impairment			8,540						7,741						16,017						8,943						20,198						866						6						62,311
Loans acquired with deteriorated credit quality			—						—						—						—						—						—						—						—
Total			$	8,798					$	7,741					$	16,114					$	8,943					$	20,214					$	873					$	6					$	62,689
Total loans:
Individually evaluated for impairment			$	5,184					$	762					$	15,830					$	—					$	1,806					$	705					$	—					$	24,287
Collectively evaluated for impairment			2,087,133						1,040,346						2,154,406						295,047						450,426						275,858						1,428						6,304,644
Loans acquired with deteriorated credit quality			431						—						5,426						—						934						—						—						6,791
Total loans			$	2,092,748					$	1,041,108					$	2,175,662					$	295,047					$	453,166					$	276,563					$	1,428					$	6,335,722

    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 Company 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 through January 1, 2022, including provisions permitting loan deferral extension requests to not be treated as troubled debt restructurings. Subsequent modifications to these loans will be evaluated for troubled debt restructuring accounting treatment.

    

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

The following tables present the number of loans modified as TDRs during the three months ended March 31, 2022 and 2021, 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 March 31,
			2022																		2021
			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
Consumer loans:
Home equity loans and advances			1						$	119					$	119					—						$	—					$	—
Total restructured loans			1						$	119					$	119					—						$	—					$	—

The activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2022 and 2021 are as follows:

			For the Three Months Ended March 31,
			One-to-Four Family						Multifamily						Commercial Real Estate						Construction						Commercial Business						Home Equity Loans and Advances						Other Consumer Loans						Totals
			(In thousands)
2022
Balance at beginning of period			$	8,798					$	7,741					$	16,114					$	8,943					$	20,214					$	873					$	6					$	62,689
Effect of adopting ASU No. 2016-13 ("CECL")			(2,308)						(2,030)						(4,227)						(2,346)						(5,302)						(229)						(1)						(16,443)
Provision for (reversal of) credit losses			2,185						5,492						1,626						(1,623)						(7,767)						886						6						805
Recoveries			139						—						—						—						25						4						—						168
Charge-offs			—						—						—						—						(27)						(27)						(3)						(57)
Balance at end of period			$	8,814					$	11,203					$	13,513					$	4,974					$	7,143					$	1,507					$	8					$	47,162
2021
Balance at beginning of period			$	13,586					$	8,897					$	21,784					$	11,271					$	17,384					$	1,748					$	6					$	74,676
Provision for (reversal of) credit losses			6,477						(1,942)						(4,730)						192						(1,509)						230						2						(1,280)
Recoveries			3						—						6						1						16						11						—						37
Charge-offs			(216)						—						(166)						—						(1,087)						(58)						(2)						(1,529)
Balance at end of period			$	19,850					$	6,955					$	16,894					$	11,464					$	14,804					$	1,931					$	6					$	71,904

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

The following tables present loans individually evaluated for impairment by loan segment, excluding PCD loans, at March 31, 2022 and December 31, 2021:

			At March 31, 2022
			Recorded Investment						Unpaid Principal Balance						Specific Allowance
			(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family			$	1,706					$	2,246					$	—
Multifamily			66						70						—
Commercial real estate			15,064						15,753						—
Commercial business loans			163						191						—
Consumer loans:
Home equity loans and advances			270						376						—
			17,269						18,636						—
With a specific allowance recorded:
Real estate loans:
One-to-four family			3,170						3,189						255
Multifamily			675						675						5
Commercial real estate			1,950						1,952						97
Commercial business loans			1,281						1,281						11
Consumer loans:
Home equity loans and advances			617						617						29
			7,693						7,714						397
Total:
Real estate loans:
One-to-four family			4,876						5,435						255
Multifamily			741						745						5
Commercial real estate			17,014						17,705						97
Commercial business loans			1,444						1,472						11
Consumer loans:
Home equity loans and advances			887						993						29
Total loans			$	24,962					$	26,350					$	397

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

			At December 31, 2021
			Recorded Investment						Unpaid Principal Balance						Specific Allowance
			(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family			$	1,882					$	2,421					$	—
Multifamily			762						765						—
Commercial real estate			13,861						14,586						—
Commercial business loans			573						573						—
Consumer loans:
Home equity loans and advances			202						308						—
			17,280						18,653						—
With a specific allowance recorded:
Real estate loans:
One-to-four family			3,302						3,321						258
Commercial real estate			1,969						1,971						97
Commercial business loans			1,233						1,233						16
Consumer loans:
Home equity loans and advances			503						503						7
			7,007						7,028						378
Total:
Real estate loans:
One-to-four family			5,184						5,742						258
Multifamily			762						765						—
Commercial real estate			15,830						16,557						97
Commercial business loans			1,806						1,806						16
Consumer loans:
Home equity loans and advances			705						811						7
			$	24,287					$	25,681					$	378

    Specific allocations of the allowance for credit losses attributable to impaired loans totaled $397,000 and $378,000 at March 31, 2022 and December 31, 2021, respectively. At both March 31, 2022 and December 31, 2021, impaired loans for which there was no related allowance for credit losses totaled $17.3 million.

    The recorded investment in TDRs totaled $21.7 million at March 31, 2022, of which one loan with a balance of $32,000 was 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 March 31, 2022. The recorded investment in TDRs totaled $22.4 million at December 31, 2021, of which one loan with a balance of $36,000 was 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, 2021.

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

    The following table present interest income recognized for loans individually evaluated for impairment, by loan segment, excluding PCD loans for the three months ended March 31, 2022 and 2021:

			For the Three Months Ended March 31,
			2022												2021
			Average Recorded Investment						Interest Income Recognized						Average Recorded Investment						Interest Income Recognized
			(In thousands)
Real estate loans:
One-to-four family			$	5,030					$	55					$	6,944					$	74
Multifamily			752						11						16,060						173
Commercial real estate			16,423						242						16,603						252
Commercial business loans			1,626						22						2,957						29
Consumer loans:
Home equity loans and advances			796						11						1,611						22
Total loans			$	24,627					$	341					$	44,175					$	550

    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 Credit Losses (continued)

The following table summarizes the Company's loans by year of origination and internally assigned credit risk rating, excluding PCD loans at March 31, 2022 and December 31, 2021:

			Loans by Year of Origination at March 31, 2022
			2022						2021						2020						2019						2018						Prior						Revolving Loans						Revolving Loans to Term Loans						Total
			(In thousands)
One-to-Four Family
Pass			$	134,350					$	820,062					$	288,339					$	185,150					$	130,336					$	618,808					$	—					$	—					$	2,177,045
Special mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						—						507						846						1,300						—						—						2,653
Total One-to-Four Family			134,350						820,062						288,339						185,657						131,182						620,108						—						—						2,179,698
Multifamily
Pass			68,228						306,862						176,040						232,509						49,825						239,916						—						—						1,073,380
Special mention			—						—						—						—						—						4,558						—						—						4,558
Substandard			—						—						—						—						—						—						—						—						—
Total Multifamily			68,228						306,862						176,040						232,509						49,825						244,474						—						—						1,077,938
Commercial Real Estate
Pass			94,039						375,274						158,456						273,193						243,264						963,793						—						—						2,108,019
Special mention			—						—						—						1,077						15,959						30,767						—						—						47,803
Substandard			—						—						1,677						—						1,561						24,644						—						—						27,882
Total Commercial Real Estate			94,039						375,274						160,133						274,270						260,784						1,019,204						—						—						2,183,704
Construction
Pass			25,018						103,661						60,343						26,936						12,370						33,239						—						—						261,567
Special mention			—						—						—						107						—						—						—						—						107
Substandard			—						—						—						—						—						—						—						—						—
Total Construction			25,018						103,661						60,343						27,043						12,370						33,239						—						—						261,674

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

			Loans by Year of Origination at March 31, 2022
			2022						2021						2020						2019						2018						Prior						Revolving Loans						Revolving Loans to Term Loans						Total
			(In thousands)
Commercial Business
Pass			11,417						61,122						34,612						24,236						28,606						44,945						246,199						—						451,137
Special mention			—						235						—						1,412						1,181						44						2,806						—						5,678
Substandard			—						171						68						321						2,787						570						5,785						—						9,702
Total Commercial Business			11,417						61,528						34,680						25,969						32,574						45,559						254,790						—						466,517
Home Equity Loans and Advances
Pass			7,473						22,217						15,097						14,303						12,162						103,868						94,865						457						270,442
Special mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						—						—						—						177						90						—						267
Total Home Equity Loans and Advances			7,473						22,217						15,097						14,303						12,162						104,045						94,955						457						270,709
Other Consumer Loans
Pass			877						116						54						229						49						10						324						—						1,659
Special mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						—						—						—						—						—						—						—
Total Other Consumer Loans			877						116						54						229						49						10						324						—						1,659
Total Loans			$	341,402					$	1,689,720					$	734,686					$	759,980					$	498,946					$	2,066,639					$	350,069					$	457					$	6,441,899

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

			Loans by Year of Origination at December 31, 2021
			2021						2020						2019						2018						2017						Prior						Revolving Loans						Revolving Loans to Term Loans						Total
			(In thousands)
One-to-Four Family
Pass			$	793,848					$	298,815					$	196,244					$	138,215					$	134,811					$	525,615					$	—					$	—					$	2,087,548
Special mention			—						—						—						—						—						203						—						—						203
Substandard			—						—						1,463						1,420						360						1,323						—						—						4,566
Total One-to-Four family			793,848						298,815						197,707						139,635						135,171						527,141						—						—						2,092,317
Multifamily
Pass			312,738						181,285						231,252						47,024						131,169						137,640						—						—						1,041,108
Special mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						—						—						—						—						—						—						—
Total Multifamily			312,738						181,285						231,252						47,024						131,169						137,640						—						—						1,041,108
Commercial Real Estate
Pass			381,222						161,136						278,581						241,669						222,752						803,945						—						—						2,089,305
Special mention			—						—						1,303						16,070						1,885						34,788						—						—						54,046
Substandard			—						386						—						1,561						1,276						23,662						—						—						26,885
Total Commercial Real Estate			381,222						161,522						279,884						259,300						225,913						862,395						—						—						2,170,236
Construction
Pass			107,070						77,549						37,498						41,591						28,814						2,418						—						—						294,940
Special mention			—						—						107						—						—						—						—						—						107
Substandard			—						—						—						—						—						—						—						—						—
Total Construction			107,070						77,549						37,605						41,591						28,814						2,418						—						—						295,047

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

			Loans by Year of Origination at December 31, 2021
			2021						2020						2019						2018						2017						Prior						Revolving Loans						Revolving Loans to Term Loans						Total
			(In thousands)
Commercial Business
Pass			84,113						36,115						25,156						30,670						21,762						26,515						210,597						—						434,928
Special mention			246						15						1,729						1,369						18						46						3,291						—						6,714
Substandard			192						71						352						1,084						371						609						7,911						—						10,590
Total Commercial Business			84,551						36,201						27,237						33,123						22,151						27,170						221,799						—						452,232
Home Equity Loans and Advances
Pass			22,393						15,977						15,906						13,146						12,023						100,870						95,484						426						276,225
Special mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						—						—						—						246						92						—						338
Total Home Equity Loans and Advances			22,393						15,977						15,906						13,146						12,023						101,116						95,576						426						276,563
Other Consumer Loans
Pass			659						58						284						60						9						5						353						—						1,428
Special mention			—						—						—						—						—						—						—						—						—
Substandard			—						—						—						—						—						—						—						—						—
Total Other Consumer Loans			659						58						284						60						9						5						353						—						1,428
Total Loans			$	1,702,481					$	771,407					$	789,875					$	533,879					$	555,250					$	1,657,885					$	317,728					$	426					$	6,328,931

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

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancellable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. The allowance for credit losses on off balance sheet exposures is reported in other liabilities in the Consolidated Statements of Financial Condition. The liability represents an estimate of expected credit losses arising from off balance sheet exposures such as unfunded commitments. At March 31, 2022, the balance of the allowance for credit loss on unfunded commitments, included in other liabilities, totaled $8.8 million. The Company recorded a provision for credit losses on unfunded commitments, included in other non-interest expense in the Consolidated Statements of Income, of $648,000 during the three months ended March 31, 2022.

The following table presents the activity in the allowance for credit losses on off balance sheet exposures for the three months ended March 31, 2022:

			Three Months Ended March 31, 2022
			(In thousands)
Allowance for Credit Losses:
Balance at December 31, 2021			$	524
Impact of adopting ASU 2016-13 ("CECL") effective January 1, 2022			7,674
Provision for credit losses			648
Balance at March 31, 2022			$	8,846

    The Company's leases real estate property for branches and office space. At March 31, 2022 and December 31, 2021, 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. 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.

    At March 31, 2022 and December 31, 2021, the weighted average remaining lease term for operating leases was 6.8 years and 7.0 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 2.15% and 2.13%, respectively.

    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 March 31, 2022 and 2021, operating and variable lease expenses totaled approximately $731,000 and $681,000, respectively.

    There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the three months ended March 31, 2022 and 2021. At March 31, 2022, the Company had entered into a lease related to an additional branch office location which had not yet commenced. The Company will record a right of use asset and lease liability for this lease obligation.

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10.    Leases (continued)

    

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

			Lease Payment Obligations at
			March 31, 2022						December 31, 2021
			(In thousands)
One year or less			$	3,190					$	4,198
After one year to two years			4,089						3,950
After two years to three years			3,288						3,150
After three years to four years			2,617						2,479
After four years to five years			2,315						2,177
Thereafter			5,466						5,340
Total undiscounted cash flows			20,965						21,294
Discount on cash flows			(1,647)						(1,709)
Total lease liability			$	19,318					$	19,585

    Deposits at March 31, 2022 and December 31, 2021 are summarized as follows:

			March 31,						December 31,
			2022						2021
			(In thousands)
Non-interest-bearing demand			$	1,658,533					$	1,712,061
Interest-bearing demand			2,653,126						2,599,987
Money market accounts			696,157						657,156
Savings and club deposits			851,446						822,833
Certificates of deposit			1,735,726						1,778,179
Total deposits			$	7,594,988					$	7,570,216

Included in the above balance at December 31, 2021 are certificates of deposit obtained through brokers totaling $5.0 million that were acquired from Stewardship.

    The aggregate amount of certificates of deposit that meet or exceed $100,000 totaled approximately $915.2 million and $932.4 million at March 31, 2022 and December 31, 2021, respectively. Interest expense on deposits for the three months ended March 31, 2022 and 2021 totaled $4.7 million and $8.9 million, respectively.

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11.    Deposits (continued)

    

Scheduled maturities of certificates of deposit accounts at March 31, 2022 and December 31, 2021 are summarized as follows:

			March 31,						December 31,
			2022						2021
			(In thousands)
One year or less			$	1,075,139					$	1,087,631
After one year to two years			374,415						418,515
After two years to three years			163,092						143,950
After three years to four years			35,547						36,277
After four years			87,533						91,806
			$	1,735,726					$	1,778,179

    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.

At March 31, 2022, there were 830,632 shares remaining available for future restricted stock awards and 1,944,927 shares for future stock option grants under the 2019 plan

    

     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.

On March 2, 2022, 51,746 shares of restricted stock were awarded, with a grant date fair value of $21.79 per share. To fund the grant of restricted common stock, the Company issued shares from authorized but unissued shares.

    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 March 31, 2022 and 2021, approximately $1.2 million and $1.4 million in expense was recognized in regard to these awards. The expected future compensation expense related to the 1,046,736 non-vested restricted shares outstanding at March 31, 2022 is approximately $8.2 million over a weighted average period of 1.6 years.

    The following is a summary of the Company's restricted stock activity during the three months ended March 31, 2022 and 2021:

			Number of Restricted Shares						Weighted Average Grant Date Fair Value
Non-vested at January 1, 2022			1,054,335						$	15.78
Grants			51,746						21.79
Vested			(27,775)						17.86
Forfeited			(31,570)						16.91
Non-vested at March 31, 2022			1,046,736						$	15.98

    

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12.    Stock Based Compensation (continued)

			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

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%.

On March 21, 2022, options to purchase 130,951 shares of Company common stock were awarded with a grant date fair value of $6.51 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 $21.79, 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 2.34%, volatility of 25.31%, and a dividend yield of 0.00%.

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 March 31, 2022 and 2021, approximately $756,300 and $761,000 in expense was recognized in regard to these awards. The expected future compensation expense related to the 2,243,815 non-vested options outstanding at March 31, 2022 is $7.9 million over a weighted average period of 2.2 years.

    The following is a summary of the Company's option activity during the three months ended March 31, 2022 and 2021:

			Number of Stock Options						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value
Outstanding, January 1, 2022			3,637,542						$	15.78					7.6						$	18,654,905
Granted			130,951						21.79						0						—
Exercised			(62,859)						16.42
Expired			(1,412)						15.60						0						—
Forfeited			(61,961)						16.84						0						—
Outstanding, March 31, 2022			3,642,261						$	15.92					7.5						$	20,401,381
Options exercisable at March 31, 2022			1,398,446						$	15.69					7.3						$	8,140,661

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12.    Stock Based Compensation (continued)

			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
Options exercisable at March 31, 2021			741,269						$	15.66					8.2						$	1,345,897

    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 the three months ended March 31, 2022 the aggregate intrinsic value of options exercised was $360,469. There were no option exercises during the three months ended March 31, 2021.

    Pension Plan, Retirement Income Maintenance Plan (the "RIM Plan") Post-retirement Plan, and Split-Dollar Life Insurance Plans

    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 are not eligible to participate in the Columbia 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.

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13.    Components of Net Periodic Benefit Cost (continued)

    Net periodic benefit (income) cost for Pension Plan, RIM Plan, Post-retirement Plan and Split-Dollar Life Insurance plan benefits for the three months ended March 31, 2022 and 2021, includes the following components:

			For the Three Months Ended March 31,
			Pension Plan												RIM Plan												Post-retirement Plan												Split-Dollar Life Insurance
			2022						2021						2022						2021						2022						2021						2022						2021						Affected Line Item in the Consolidated Statements of Income
			(In thousands)
Service cost			$	1,966					$	2,150					$	93					$	100					$	87					$	130					$	125					$	141					Compensation and employee benefits
Interest cost			2,031						1,756						97						86						150						141						142						125						Other non-interest expense
Expected return on plan assets			(7,559)						(6,318)						—						—						—						—						—						—						Other non-interest expense
Amortization:
Prior service cost			—						—						—						—						—						—						14						14						Other non-interest expense
Net loss			—						1,000						111						166						78						153						151						191						Other non-interest expense
Net periodic (income) benefit cost			$	(3,562)					$	(1,412)					$	301					$	352					$	315					$	424					$	432					$	471

For the three months ended March 31, 2022, no contribution was made to the Pension Plan. The net periodic (income) cost for pension benefits, other post-retirement and split dollar life insurance benefits for the three months ended March 31, 2022 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 months ended March 31, 2022 and 2021, the Company recorded a net periodic benefit cost of $3,000 and $2,000, respectively, in connection with this plan.

Freehold Bank has a non-contributory defined benefit supplemental executive plan with the only participant being the former

president of Freehold Bank. For the three months ended March 31, 2022, the Company recorded a net periodic benefit cost of $2,000 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.

    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 March 31, 2022 and December 31, 2021.

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 March 31, 2022 and December 31, 2021, by level within the fair value hierarchy:

			March 31, 2022
									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			$	42,087					$	33,821					$	8,266					$	—
Mortgage-backed securities and collateralized mortgage obligations			1,414,142						—						1,414,142						—
Municipal obligations			4,141						—						4,141						—
Corporate debt securities			119,127						—						119,127						—
Total debt securities available for sale			1,579,497						33,821						1,545,676						—
Equity securities			2,789						2,445						344						—
Derivative assets			4,226						—						4,226						—
			$	1,586,512					$	36,266					$	1,550,246					$	—
Derivative liabilities			$	7,306					$	—					$	7,306					$	—

			December 31, 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			$	34,879					$	34,879					$	—					$	—
Mortgage-backed securities and collateralized mortgage obligations			1,554,359						—						1,554,359						—
Municipal obligations			4,179						—						4,179						—
Corporate debt securities			110,430						—						110,430						—
Total debt securities available for sale			1,703,847						34,879						1,668,968						—
Equity securities			2,710						2,364						346
Derivative assets			9,492						—						9,492						—
			$	1,716,049					$	37,243					$	1,678,806					$	—
Derivative liabilities			$	17,366					$	—					$	17,366					$	—

There were no Level 3 assets measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

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14.    Fair Value Measurements (continued)

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 March 31, 2022 and December 31, 2021.

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 March 31, 2022 and December 31, 2021, by level within the fair value hierarchy:

			March 31, 2022
									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			$	1,980					$	—					$	—					$	1,980
			$	1,980					$	—					$	—					$	1,980

			December 31, 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			$	1,213					$	—					$	—					$	1,213
Mortgage servicing rights			1,906						—						—						1,906
			$	3,119					$	—					$	—					$	3,119

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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 March 31, 2022 and December 31, 2021:

March 31, 2022

Fair Value

Valuation Methodology

Unobservable Inputs

Range of Inputs

Weighted Average

(Dollars in thousands)

Mortgage servicing rights

$

1,980

Discounted cash flow

Prepayment speeds and discount rates (1)

5.8% - 24.0%

10.8

%

			December 31, 2021
			Fair Value						Valuation Methodology						Unobservable Inputs						Range of Inputs						Weighted Average
			(Dollars in thousands)
Impaired loans			$	1,213					Other						Contracted sales price of collateral						—		%				—		%
Mortgage servicing rights			$	1,906					Discounted cash flow						Prepayment speeds and discount rates (2)						7.5% - 24.9%						12.7		%
(1) Value of SBA servicing rights based on a discount rate of 10.50%.
(2) 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. 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.

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14.    Fair Value Measurements (continued)

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 significant non-performing loans 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 March 31, 2022 and December 31, 2021:

			March 31, 2022
									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			$	95,997					$	95,997					$	95,997					$	—					$	—
Debt securities available for sale			1,579,497						1,579,497						33,821						1,545,676						—
Debt securities held to maturity			419,033						399,024						—						399,024						—
Equity securities			2,789						2,789						2,445						344						—
Federal Home Loan Bank stock			25,618						25,618						—						25,618						—
Loans receivable, net			6,429,593						6,249,831						—						—						6,249,831
Derivative assets			4,226						4,226						—						4,226						—
Financial liabilities:
Deposits			$	7,594,988					$	7,565,522					$	—					$	7,565,522					$	—
Borrowings			432,755						430,220						—						430,220						—
Derivative liabilities			7,306						7,306						—						7,306						—

			December 31, 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			$	70,963					$	70,963					$	70,963					$	—					$	—
Debt securities available for sale			1,703,847						1,703,847						34,879						1,668,968						—
Debt securities held to maturity			429,734						434,789						—						434,789						—
Equity securities			2,710						2,710						2,364						346						—
Federal Home Loan Bank stock			23,141						23,141						—						23,141						—
Loans receivable, net			6,297,912						6,457,766						—						—						6,457,766
Derivative assets			9,492						9,492						—						9,492						—
Financial liabilities:
Deposits			$	7,570,216					$	7,564,210					$	—					$	7,564,210					$	—
Borrowings			377,309						378,810						—						378,810						—
Derivative liabilities			17,366						17,366						—						17,366						—

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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 months ended March 31, 2022 and 2021:

			For the Three Months Ended March 31,
			2022																		2021
			Before Tax						Tax Effect						After Tax						Before Tax						Tax Effect						After Tax
			(In thousands)
Components of other comprehensive income (loss):
Unrealized (loss) on debt securities available for sale:			$	(80,181)					$	22,366					$	(57,815)					$	(19,840)					$	2,806					$	(17,034)
Accretion of unrealized (loss) on debt securities reclassified as held to maturity			(4)						1						(3)						(4)						18						14
			(80,185)						22,367						(57,818)						(19,844)						2,824						(17,020)
Derivatives:
Unrealized gain on swap contracts accounted for as cash flow hedges			4,382						(1,225)						3,157						5,832						(149)						5,683
			4,382						(1,225)						3,157						5,832						(149)						5,683
Employee benefit plans:
Amortization of prior service cost included in net income			(14)						3						(11)						(14)						4						(10)
Reclassification adjustment of actuarial net (loss) included in net income			(339)						95						(244)						(1,511)						422						(1,089)
Change in funded status of retirement obligations			706						(226)						480						3,050						6,504						9,554
			353						(128)						225						1,525						6,930						8,455
Total other comprehensive (loss)			$	(75,450)					$	21,014					$	(54,436)					$	(12,487)					$	9,605					$	(2,882)

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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 months ended March 31, 2022 and 2021:

			For the Three Months Ended March 31,
			2022																								2021
			Unrealized Gains (Losses) 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			$	1,644					$	(4,917)					$	(42,646)					$	(45,919)					$	31,028					$	(16,856)					$	(83,797)					$	(69,625)
Current period changes in other comprehensive (loss) income			(57,818)						3,157						225						(54,436)						(17,020)						5,683						8,455						(2,882)
Total other comprehensive (loss) income			$	(56,174)					$	(1,760)					$	(42,421)					$	(100,355)					$	14,008					$	(11,173)					$	(75,342)					$	(72,507)

    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 months ended March 31, 2022 and 2021:

						Accumulated Other Comprehensive Income (Loss) Components
						For the Three Months Ended March 31,												Affected Line Items in the Consolidated Statements of Income
						2022						2021
						(In thousands)
Reclassification adjustment of actuarial net (loss) included in net income						$	(339)					$	(1,511)					Other non-interest expense
Income tax benefit						95						422
Net of tax						$	(244)					$	(1,089)

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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 March 31, 2022 and December 31, 2021, the Company had no currency forward contracts in place with commercial banking customers.

    Interest Rate Swaps. At both March 31, 2022 and December 31, 2021, the Company had interest rate swaps in place with 52 commercial banking customers executed by offsetting interest rate swaps with third parties, with aggregated notional amounts of $183.4 million. These derivatives are not designated as hedges and are not speculative. These interest rate swaps do not meet hedge accounting requirements.

    

    At March 31, 2022 and December 31, 2021, the Company had 13 and 14 interest rate swaps with notional amounts of $180.0 million and $190.0 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.

At March 31, 2022, the Company had two interest rate swaps hedged against pools of floating rate commercial loans with notional amounts totaling $100.0 million. These 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. At December 31, 2021, the Company had no interest rate swaps hedged against pools of floating rate commercial loans.

    For the three months ended March 31, 2022 and 2021, 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 March 31, 2022 and December 31, 2021:

March 31, 2022

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

$

4,226

Other Liabilities

$

7,306

Total derivative instruments

$

4,226

$

7,306

December 31, 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

$

9,492

Other Liabilities

$

17,366

Total derivative instruments

$

9,492

$

17,366

    For the three months ended March 31, 2022 and 2021, gains of $250,000 and $368,000, respectively, were recorded for changes in fair value of interest rate swaps with third parties.

    At March 31, 2022 and December 31, 2021, accrued interest was $405,000 and $567,000.

    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.

The Company's revenue includes net interest income on financial instruments and non-interest income. Most of the Company's revenue is not within the scope of Accounting Standards Codification Topic 606 which 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 this guidance 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 months ended March 31, 2022 and 2021.

			For the Three Months Ended March 31,
			2022						2021
			(In thousands)
Non-interest income
In-scope of Topic 606:
Demand deposit account fees			$	1,170					$	838
Title insurance fees			957						1,620
Other non-interest income			2,031						1,744
Total in-scope non-interest income			4,158						4,202
Total out-of-scope non-interest income			2,883						4,393
Total non-interest income			$	7,041					$	8,595

    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 loan level swaps, gains and losses on the sale of loans and securities, credit card interchange income, 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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