UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, ~~2017~~2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: __________ to ___________

Commission file number: 001-36441

Investors Bancorp , Inc.

(Exact name of registrant as specified in its charter)

Delaware

46-4702118

~~Delaware~~

~~46-4702118~~

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

101 JFK Parkway,

Short Hills,

New Jersey

07078

(Address of Principal Executive Offices)

Zip Code

(973) 924-5100

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common

ISBC

The NASDAQ Stock Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. Yes þ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ☑ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

þ☑

Accelerated filer

o☐

Non-accelerated filer

o☐

~~(Do not check if a smaller reporting company)~~

Smaller reporting company

o☐

Emerging growth company

o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No þ

☑

As of ~~November 3, 2017,~~October 30, 2020, the registrant had ~~359,070,852~~361,869,872 shares of common stock, par value $0.01 per share, issued and ~~306,157,554~~249,918,163 outstanding.

Table of Contents

INVESTORS BANCORP, INC.

FORM 10-Q

Index



Part I. Financial Information
		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, ~~2017 (unaudited)~~2020 and December 31, ~~2016~~201 9 (unaudited)	1
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	21
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	32
	Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	43
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	54
	Notes to Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4249
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5664
Item 4.	Controls and Procedures	5866
Part II. Other Information
Item 1.	Legal Proceedings	5867
Item 1A.	Risk Factors	5867
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5870
Item 3.	Defaults Upon Senior Securities	5870
Item 4.	Mine Safety Disclosures	5970
Item 5.	Other Information	5970
Item 6.	Exhibits	6071
	Signature Page	6172

Table of Contents

Part IFinancial Information



ITEM 1.			FINANCIAL STATEMENTS

INVESTORS BANCORP, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

Consolidated Balance Sheets

~~September 30, 2017~~ (Unaudited) ~~and December 31, 2016~~


	September 30, 2017			December 31, 2016			September 30, 2020		December 31, 2019
	(In thousands)						(In thousands)
ASSETS						ASSETS
Cash and cash equivalents	$	413,322		164,178		Cash and cash equivalents	$	557,749	174,915
Securities available-for-sale, at estimated fair value	1,949,429			1,660,433
Securities held-to-maturity, net (estimated fair value of $1,769,179 and $1,782,801 at September 30, 2017 and December 31, 2016, respectively)	1,733,751			1,755,556
Equity securities						Equity securities	8,703		6,039
Debt securities available-for-sale, at estimated fair value						Debt securities available-for-sale, at estimated fair value	2,828,959		2,695,390
Debt securities held-to-maturity, net (estimated fair value of $1,304,693 and $1,190,104 at September 30, 2020 and December 31, 2019, respectively)						Debt securities held-to-maturity, net (estimated fair value of $1,304,693 and $1,190,104 at September 30, 2020 and December 31, 2019, respectively)	1,236,610		1,148,815
Loans receivable, net	19,707,157			18,569,855		Loans receivable, net	20,698,057		21,476,056
Loans held-for-sale	6,975			38,298		Loans held-for-sale	19,984		29,797
Federal Home Loan Bank stock	232,814			237,878		Federal Home Loan Bank stock	214,255		267,219
Accrued interest receivable	73,203			65,969		Accrued interest receivable	84,317		79,313
Other real estate owned	4,336			4,492
Other real estate owned and other repossessed assets						Other real estate owned and other repossessed assets	8,884		13,538
Office properties and equipment, net	177,569			177,417		Office properties and equipment, net	164,220		169,614
Operating lease right-of-use assets						Operating lease right-of-use assets	171,781		175,143
Net deferred tax asset	222,573			222,277		Net deferred tax asset	116,347		64,220
Bank owned life insurance	154,719			161,940		Bank owned life insurance	223,576		218,517
Goodwill and intangible assets	99,567			101,839		Goodwill and intangible assets	110,068		97,869
Other assets	6,588			14,543		Other assets	163,467		82,321
Total assets	$	24,782,003		23,174,675		Total assets	$	26,606,977	26,698,766
LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:						Liabilities:
Deposits	$	16,876,469		15,280,833		Deposits	$	19,103,535	17,860,338
Borrowed funds	4,484,869			4,546,251		Borrowed funds	4,307,523		5,827,111
Advance payments by borrowers for taxes and insurance	125,505			105,851		Advance payments by borrowers for taxes and insurance	144,212		121,719
Operating lease liabilities						Operating lease liabilities	184,281		185,827
Other liabilities	140,028			118,495		Other liabilities	197,669		81,821
Total liabilities	21,626,871			20,051,430		Total liabilities	23,937,220		24,076,816
Commitments and contingencies						Commitments and contingencies
Stockholders’ equity:						Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 authorized shares; none issued	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 359,070,852 issued at September 30, 2017 and December 31, 2016; 306,176,459 and 309,449,388 outstanding at September 30, 2017 and December 31, 2016, respectively	3,591			3,591
Preferred stock, $0.01 par value, 100,000,000 authorized shares; NaN issued						Preferred stock, $0.01 par value, 100,000,000 authorized shares; NaN issued	0		0
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 361,869,872 and 359,070,852 issued at September 30, 2020 and December 31, 2019, respectively; 249,919,417 and 247,439,902 outstanding at September 30, 2020 and December 31, 2019, respectively						Common stock, $0.01 par value, 1,000,000,000 shares authorized; 361,869,872 and 359,070,852 issued at September 30, 2020 and December 31, 2019, respectively; 249,919,417 and 247,439,902 outstanding at September 30, 2020 and December 31, 2019, respectively	3,619		3,591
Additional paid-in capital	2,776,971			2,765,732		Additional paid-in capital	2,854,844		2,822,364
Retained earnings	1,111,856			1,053,750		Retained earnings	1,293,840		1,245,793
Treasury stock, at cost; 52,894,393 and 49,621,464 shares at September 30, 2017 and December 31, 2016, respectively	(632,394		)	(587,974	)
Treasury stock, at cost; 111,950,455 and 111,630,950 shares at September 30, 2020 and December 31, 2019, respectively						Treasury stock, at cost; 111,950,455 and 111,630,950 shares at September 30, 2020 and December 31, 2019, respectively	(1,355,459)		(1,352,910)
Unallocated common stock held by the employee stock ownership plan	(85,007		)	(87,254	)	Unallocated common stock held by the employee stock ownership plan	(76,019)		(78,266)
Accumulated other comprehensive loss	(19,885		)	(24,600	)	Accumulated other comprehensive loss	(51,068)		(18,622)
Total stockholders’ equity	3,155,132			3,123,245		Total stockholders’ equity	2,669,757		2,621,950
Total liabilities and stockholders’ equity	$	24,782,003		23,174,675		Total liabilities and stockholders’ equity	$	26,606,977	26,698,766

See accompanying notes to consolidated financial statements.

Table of Contents

INVESTORS BANCORP, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

Consolidated Statements of Income

(Unaudited)


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale	$	215,221	231,734	657,483	684,086
Securities:
Equity	45		36	110	108
Government-sponsored enterprise obligations	378		343	994	876
Mortgage-backed securities	18,095		23,978	61,251	71,491
Municipal bonds and other debt	3,277		3,186	9,928	8,442

Interest-bearing deposits	233		821	1,367	1,965
Federal Home Loan Bank stock	3,452		4,456	11,881	12,871
Total interest and dividend income	240,701		264,554	743,014	779,839
Interest expense:
Deposits	34,109		67,972	126,279	201,222
Borrowed funds	24,970		32,130	79,843	92,319
Total interest expense	59,079		100,102	206,122	293,541
Net interest income	181,622		164,452	536,892	486,298
Provision for credit losses	8,336		(2,500)	72,840	(2,500)
Net interest income after provision for credit losses	173,286		166,952	464,052	488,798
Non-interest income
Fees and service charges	5,579		5,796	12,981	16,785
Income on bank owned life insurance	2,067		1,832	5,059	4,949
Gain on loans, net	5,285		1,679	10,688	3,127
(Loss) gain on securities, net	(8)		30	249	(5,523)




Gain on sale of other real estate owned, net	133		358	784	863
Other income	6,870		5,085	14,965	12,754
Total non-interest income	19,926		14,780	44,726	32,955
Non-interest expense
Compensation and fringe benefits	59,896		63,603	176,079	184,455
Advertising and promotional expense	2,344		2,994	6,906	10,888
Office occupancy and equipment expense	16,882		15,702	49,303	47,296
Federal deposit insurance premiums	2,925		3,300	10,726	9,900
General and administrative	551		487	1,678	1,663
Professional fees	4,097		6,010	12,386	12,411
Data processing and communication	8,998		8,348	26,698	23,989

Other operating expenses	8,367		8,274	22,862	25,329
Total non-interest expenses	104,060		108,718	306,638	315,931
Income before income tax expense	89,152		73,014	202,140	205,822
Income tax expense	24,840		21,042	55,705	59,068
Net income	$	64,312	51,972	146,435	146,754
Basic earnings per share	$	0.27	0.20	0.62	0.56
Diluted earnings per share	$	0.27	0.20	0.62	0.55
Weighted average shares outstanding
Basic	236,833,099		261,678,994	235,453,133	264,104,402
Diluted	236,872,505		261,812,970	235,550,801	264,422,265

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale $ 201,069
179,234
579,921
527,989
Securities:
Equity 30
49
108
147
Government-sponsored enterprise obligations 175
8
211
27
Mortgage-backed securities 17,829
14,653
51,812
44,581
Municipal bonds and other debt 2,229
2,039
8,433
6,048
Interest-bearing deposits 875
76
1,159
253
Federal Home Loan Bank stock 3,557
2,315
9,722
6,396
Total interest and dividend income 225,764
198,374
651,366
585,441
Interest expense:
Deposits 32,300
20,326
79,820
61,639
Borrowed funds 22,553
18,442
66,460
52,328
Total interest expense 54,853
38,768
146,280
113,967
Net interest income 170,911
159,606
505,086
471,474
Provision for loan losses 1,750
5,000
11,750
15,000
Net interest income after provision for loan losses 169,161
154,606
493,336
456,474
Non-interest income
Fees and service charges 5,076
4,108
14,966
12,925
Income on bank owned life insurance 935
1,006
2,826
3,267
Gain on loans, net 726
1,401
2,924
3,516
Gain on securities transactions, net —
72
1,275
3,100
Gain (loss) on sale of other real estate owned, net 446
35
871
(67 )
Other income 1,212
1,898
4,556
5,956
Total non-interest income 8,395
8,520
27,418
28,697
Non-interest expense
Compensation and fringe benefits 57,052
53,051
168,207
158,475
Advertising and promotional expense 4,355
1,495
10,956
5,640
Office occupancy and equipment expense 14,589
14,099
43,769
41,612
Federal deposit insurance premiums 4,500
3,600
12,110
8,800
General and administrative 691
641
2,267
2,407
Professional fees 8,140
5,673
30,141
14,493
Data processing and communication 5,719
5,299
17,493
15,821
Other operating expenses 8,228
7,540
24,157
22,304
Total non-interest expenses 103,274
91,398
309,100
269,552
Income before income tax expense 74,282
71,728
211,654
215,619
Income tax expense 28,437
21,878
80,156
75,958
Net income $ 45,845
49,850
131,498
139,661
Basic earnings per share $ 0.16
0.17
0.45
0.47
Diluted earnings per share $ 0.16
0.17
0.45
0.46
Weighted average shares outstanding

Basic 289,715,414
292,000,061
290,670,601
299,873,985
Diluted 290,890,307
294,673,452
292,489,906
303,297,117

See accompanying notes to consolidated financial statements.

Table of Contents

INVESTORS BANCORP, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

Consolidated Statements of Comprehensive Income

(Unaudited)


	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Net income	$	64,312	51,972	146,435	146,754
Other comprehensive income (loss), net of tax:
Change in funded status of retirement obligations	300		13	619	40
Unrealized (losses) gains on debt securities available-for-sale	(1,606)		6,798	35,025	39,605



Accretion of loss on debt securities reclassified to held to maturity	48		41	160	472

Reclassification adjustment for security losses included in net income	0		0	0	4,221

Other-than-temporary impairment accretion on debt securities recorded prior to January 1, 2020	184		228	641	589
Net gains (losses) on derivatives	9,242		(9,564)	(68,891)	(54,253)

Total other comprehensive income (loss)	8,168		(2,484)	(32,446)	(9,326)
Total comprehensive income	$	72,480	49,488	113,989	137,428

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Net income $ 45,845
49,850
131,498
139,661
Other comprehensive income (loss), net of tax:
Change in funded status of retirement obligations 82
318
249
952
Unrealized gains (losses) on securities available-for-sale 525
(1,655 ) 5,205
11,966
Accretion of loss on securities reclassified to held to maturity 180
279
580
847
Reclassification adjustment for security gains included in net income —
(43 ) (765 ) (1,358 )
Other-than-temporary impairment accretion on debt securities 186
315
770
698
Net gains (losses) on derivatives arising during the period 560
(631 ) (1,324 ) (631 )
Total other comprehensive income (loss) 1,533
(1,417 ) 4,715
12,474
Total comprehensive income $ 47,378
48,433
136,213
152,135

See accompanying notes to consolidated financial statements.

Table of Contents

INVESTORS BANCORP, INC. ~~& SUBSIDIARIES~~AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019

(Unaudited)

Common
stock

Additional
paid-in
capital

Retained
earnings

Treasury
stock

Unallocated
common stock
held by ESOP

Accumulated
other
comprehensive
loss

Total
stockholders’
equity
(In thousands)
Balance at December 31, 2015 $ 3,591
2,785,503
936,040
(295,412 ) (90,250 ) (27,825 ) 3,311,647
Cumulative effect of adopting ASU No. 2016-09 —
(8,051 ) 8,051
—
—
—
—
Net income —
—
139,661
—
—
—
139,661
Other comprehensive income, net of tax —
—
—
—
—
12,474
12,474
Purchase of treasury stock (29,184,897 shares) —
—
—
(337,487 ) —
—
(337,487 )
Treasury stock allocated to restricted stock plan (271,890 shares) —
(3,167 ) (94 ) 3,261
—
—
—
Compensation cost for stock options and restricted stock —
15,156
—
—
—
—
15,156
Option exercise —
(27,501 ) —
54,636
—
—
27,135
Restricted stock forfeitures (17,500 shares) —
220
(35 ) (185 ) —
—
—
Cash dividend paid ($0.18 per common share) —
—
(57,607 ) —
—
—
(57,607 )
ESOP shares allocated or committed to be released —
1,863
—
—
2,247
—
4,110
Balance at September 30, 2016 $ 3,591
2,764,023
1,026,016
(575,187 ) (88,003 ) (15,351 ) 3,115,089

Balance at December 31, 2016 $ 3,591
2,765,732
1,053,750
(587,974 ) (87,254 ) (24,600 ) 3,123,245
Net income —
—
131,498
—
—
—
131,498
Other comprehensive income, net of tax —
—
—
—
—
4,715
4,715
Purchase of treasury stock (4,371,647 shares) —
—
—
(57,842 ) —
—
(57,842 )
Treasury stock allocated to restricted stock plan (430,000 shares) —
(6,186 ) 1,008
5,178
—
—
—
Compensation cost for stock options and restricted stock —
14,967
—
—
—
—
14,967
Option exercise —
(3,533 ) —
11,254
—
—
7,721
Restricted stock forfeitures (268,163 shares) —
3,352
(342 ) (3,010 ) —
—
—
Cash dividend paid ($0.24 per common share) —
—
(74,058 ) —
—
—
(74,058 )
ESOP shares allocated or committed to be released —
2,639
—
—
2,247
—
4,886
Balance at September 30, 2017 $ 3,591
2,776,971
1,111,856
(632,394 ) (85,007 ) (19,885 ) 3,155,132


	Common stock		Additional paid-in capital	Retained earnings	Treasury stock	Unallocated common stock held by ESOP	Accumulated other comprehensive loss	Total stockholders’ equity
	(In thousands)
Balance at December 31, 2018	$	3,591	2,805,423	1,173,897	(884,750)	(81,262)	(11,569)	3,005,330

Net income	—		—	146,754	—	—	—	146,754
Other comprehensive loss, net of tax	—		—	—	—	—	(9,326)	(9,326)

Purchase of treasury stock (12,042,876 shares)	—		—	—	(140,241)	—	—	(140,241)
Treasury stock allocated to restricted stock plan (2,345,919 shares)	—		(29,140)	33	29,107	—	—	—
Compensation cost for stock options and restricted stock	—		15,875	—	—	—	—	15,875
Exercise of stock options	—		(573)	—	1,386	—	—	813
Restricted stock forfeitures (1,931,538 shares)	—		24,233	(1,455)	(22,778)	—	—	—
Cash dividend paid ($0.33 per common share)	—		—	(91,935)	—	—	—	(91,935)
ESOP shares allocated or committed to be released	—		1,850	—	—	2,247	—	4,097
Balance at September 30, 2019	$	3,591	2,817,668	1,227,294	(1,017,276)	(79,015)	(20,895)	2,931,367

Balance at December 31, 2019	$	3,591	2,822,364	1,245,793	(1,352,910)	(78,266)	(18,622)	2,621,950
Cumulative effect of adopting ASU No. 2016-13	—		—	(8,491)	—	—	—	(8,491)

Net income	—		—	146,435	—	—	—	146,435
Other comprehensive loss, net of tax	—		—	—	—	—	(32,446)	(32,446)

Common stock issued to finance acquisition	28		20,853	—	—	—	—	20,881
Purchase of treasury stock (390,712 shares)	—		—	—	(3,418)	—	—	(3,418)
Treasury stock allocated to restricted stock plan (90,067 shares)	—		(903)	(195)	1,098	—	—	—
Compensation cost for stock options and restricted stock	—		11,329	—	—	—	—	11,329

Restricted stock forfeitures (18,860 shares)	—		230	(1)	(229)	—	—	—
Cash dividend paid ($0.36 per common share)	—		—	(89,701)	—	—	—	(89,701)
ESOP shares allocated or committed to be released	—		971	—	—	2,247	—	3,218
Balance at September 30, 2020	$	3,619	2,854,844	1,293,840	(1,355,459)	(76,019)	(51,068)	2,669,757

See accompanying notes to consolidated financial statements.

Table of Contents

INVESTORS BANCORP, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
	(In thousands)
Cash flows from operating activities:
Net income	$	146,435	146,754
Adjustments to reconcile net income to net cash provided by operating activities:

ESOP and stock-based compensation expense	14,547		19,972
Amortization of premiums and accretion of discounts on securities, net	8,449		7,262
Amortization of premiums and accretion of fees and costs on loans, net	1,933		(3,479)
Amortization of other intangible assets	1,077		1,220
Amortization of debt modification costs and premium on borrowings	1,679		0
Provision for credit losses	72,840		(2,500)
Loss from extinguishment of debt	1,291		0
Depreciation and amortization of office properties and equipment	16,130		14,175
(Gain) loss on securities, net	(249)		5,523

Mortgage loans originated for sale	(410,486)		(160,297)
Proceeds from mortgage loan sales	430,618		164,249
Gain on sales of mortgage loans, net	(10,320)		(2,879)
Gain on sale of other real estate owned	(784)		(863)


Income on bank owned life insurance	(5,059)		(4,949)

Amortization of lease right-of-use assets	15,430		12,869
Increase in accrued interest receivable	(3,721)		(6,450)
Deferred tax (benefit) expense	(29,675)		2,521
Increase in other assets	(87,985)		(38,879)

Increase (decrease) in other liabilities	1,021		(67,364)
Net cash provided by operating activities	163,171		86,885
Cash flows from investing activities:
Purchases of loans receivable	(90,000)		(349,766)
Net payoffs of loans receivable	1,191,116		29,729
Proceeds from disposition of loans receivable	51,623		148,505
Gain on disposition of loans receivable	(368)		(248)

Gain on disposition of leased equipment	(1,842)		0
Net proceeds from sale of other real estate owned	6,255		5,817

Proceeds from principal repayments/calls/maturities of debt securities available for sale	709,764		304,765
Proceeds from sales of debt securities available for sale	0		399,435
Proceeds from principal repayments/calls/maturities of debt securities held to maturity	191,011		210,115

Purchases of equity securities	(2,565)		(72)
Purchases of debt securities available for sale	(753,011)		(786,011)
Purchases of debt securities held to maturity	(273,416)		(166,338)

















Proceeds from redemptions of Federal Home Loan Bank stock	113,627		244,632
Purchases of Federal Home Loan Bank stock	(60,042)		(258,394)
Purchases of office properties and equipment	(10,251)		(8,009)





Cash received, net of cash consideration paid for acquisitions	7,274		0
Net cash provided by (used in) investing activities	1,079,175		(225,840)
Cash flows from financing activities:
Net increase in deposits	753,316		92,486


Repayments of principal under finance leases	(1,182)		0
Funds borrowed under other repurchase agreements	0		197,758
Net (repayments) proceeds of borrowed funds	(1,537,291)		61,115
Principal applied on affordable housing project advance	(118)		0
Net increase (decrease) in advance payments by borrowers for taxes and insurance	18,882		17,468

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Nine Months Ended September 30,
2017 2016
(In thousands)
Cash flows from operating activities:
Net income $ 131,498
139,661
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense 19,853
19,266
Amortization of premiums and accretion of discounts on securities, net 11,942
10,372
Amortization of premiums and accretion of fees and costs on loans, net (3,248 ) (3,191 )
Amortization of other intangible assets 1,854
2,194
Provision for loan losses 11,750
15,000
Depreciation and amortization of office properties and equipment 12,670
11,732
Gain on securities transactions, net (1,275 ) (3,100 )
Mortgage loans originated for sale (126,792 ) (166,469 )
Proceeds from mortgage loan sales 160,582
152,670
Gain on sales of mortgage loans, net (2,467 ) (3,010 )
(Gain) loss on sale of other real estate owned (871 ) 67
Income on bank owned life insurance (2,826 ) (3,267 )
Increase in accrued interest receivable (7,234 ) (7,485 )
Deferred tax (benefit) expense (3,092 ) 397
Decrease in other assets 8,868
1,353
Increase in other liabilities 19,248
2,346
Total adjustments 98,962
28,875
Net cash provided by operating activities 230,460
168,536
Cash flows from investing activities:
Purchases of loans receivable (345,715 ) (92,828 )
Net originations of loans receivable (851,418 ) (1,335,186 )
Proceeds from disposition of loans held for investment 48,556
7,583
Gain on disposition of loans held for investment (457 ) (506 )
Net proceeds from sale of foreclosed real estate 4,228
3,395
Proceeds from principal repayments/calls/maturities of securities available for sale 252,173
216,161
Proceeds from sales of securities available for sale 102,120
57,879
Proceeds from principal repayments/calls/maturities of securities held to maturity 246,373
282,718
Proceeds from sales of securities held to maturity —
14,348
Purchases of securities available for sale (642,165 ) (468,168 )
Purchases of securities held to maturity (227,029 ) (247,568 )
Proceeds from redemptions of Federal Home Loan Bank stock 175,279
161,772
Purchases of Federal Home Loan Bank stock (170,215 ) (205,897 )
Purchases of office properties and equipment (12,822 ) (17,836 )
Death benefit proceeds from bank owned life insurance 10,047
472
Net cash used in investing activities (1,411,045 ) (1,623,661 )
Cash flows from financing activities:
Net increase in deposits 1,595,636
888,086
Net (decrease) increase in other borrowings (61,382 ) 940,621
Net increase in advance payments by borrowers for taxes and insurance 19,654
14,102


Dividends paid	(74,058		)	(57,607	)	Dividends paid	(89,701)		(91,935)
Exercise of stock options	7,721			27,135		Exercise of stock options	0		813
Purchase of treasury stock	(57,842		)	(337,487	)	Purchase of treasury stock	(3,418)		(140,241)
Net cash provided by financing activities	1,429,729			1,474,850
Net increase in cash and cash equivalents	249,144			19,725
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(859,512)		137,464
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	382,834		(1,491)
Cash and cash equivalents at beginning of period	164,178			148,904		Cash and cash equivalents at beginning of period	174,915		196,891
Cash and cash equivalents at end of period	$	413,322		168,629		Cash and cash equivalents at end of period	$	557,749	195,400
Supplemental cash flow information:						Supplemental cash flow information:
Non-cash investing activities:						Non-cash investing activities:
Real estate acquired through foreclosure	$	3,230		2,078
Real estate acquired through foreclosure and other assets repossessed						Real estate acquired through foreclosure and other assets repossessed	$	1,050	11,289

Cash paid during the year for:						Cash paid during the year for:
Interest	143,054			114,419		Interest	212,889		294,669
Income taxes	70,123			83,876		Income taxes	12,518		36,220
Significant non-cash transactions:						Significant non-cash transactions:
Debt securities transferred from held-to-maturity to available-for-sale						Debt securities transferred from held-to-maturity to available-for-sale	0		393,067
Loans transferred to held-for-sale portfolio						Loans transferred to held-for-sale portfolio	0		28,373

Right-of-use assets obtained in exchange for new lease liabilities						Right-of-use assets obtained in exchange for new lease liabilities	9,050		2,358
Acquisition:						Acquisition:
Non-cash assets acquired:						Non-cash assets acquired:
Debt securities available-for-sale						Debt securities available-for-sale	51,524		0
Debt securities held to maturity						Debt securities held to maturity	8,402		0
Loans receivable, net						Loans receivable, net	443,499		0
Office properties and equipment, net						Office properties and equipment, net	485		0
Accrued interest receivable						Accrued interest receivable	1,283		0
Right of use assets - leases						Right of use assets - leases	3,697		0
Deferred tax asset						Deferred tax asset	3,915		0
Intangible assets, net						Intangible assets, net	14,491		0
Other assets						Other assets	705		0
Total non-cash assets acquired						Total non-cash assets acquired	528,001		0
Liabilities assumed:						Liabilities assumed:
Deposits						Deposits	489,881		0
Borrowed funds						Borrowed funds	14,851		0
Advance payment by borrowers						Advance payment by borrowers	3,611		0
Other liabilities						Other liabilities	6,051		0
Total liabilities assumed						Total liabilities assumed	514,394		0

Common stock issued for acquisitions						Common stock issued for acquisitions	20,881		0

See accompanying notes to consolidated financial statements.

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INVESTORS BANCORP, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Principles

Basis of Presentation

The consolidated financial statements are comprised of the accounts of Investors Bancorp, Inc. and its wholly owned ~~subsidiaries, including~~subsidiary, Investors Bank (the “Bank”) and the Bank’s wholly-owned subsidiaries (collectively, the “Company”). In the opinion of management, all the adjustments (consisting of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included. The results of operations and other data presented for the three and nine months ended September 30, ~~2017~~2020 are not necessarily indicative of the results of operations that may be expected for subsequent periods or the full year results.

Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of the Form 10-Q. The consolidated financial statements presented should be read in conjunction with the Company’s audited consolidated financial statements and notes to the audited consolidated financial statements included in the Company’s December 31, ~~2016~~2019 Annual Report on Form 10-K. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.

Adoption of New Accounting Standards

On January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The Company adopted ASU 2016-13 using a modified retrospective approach. Results for reporting periods beginning after January 1, 2020 are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. At adoption, the Company increased its allowance for credit losses by $11.7 million, comprised of $12.7 million and $2.6 million, respectively, for unfunded commitments and held-to-maturity debt securities, partially offset by a decrease of $3.6 million for loans. Upon adoption the Company recorded a cumulative effect adjustment that reduced stockholders’ equity by $8.5 million, net of tax.

Allowance for Credit Losses

The allowance for credit losses includes both the allowance for loan and lease losses and the reserve for unfunded lending commitments and represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through the provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses. The allowance for loan and security losses is reported separately as contra-assets to loans and securities on the consolidated balance sheet. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheet in other liabilities. The provision for credit losses related to loans, unfunded commitments and debt securities is reported on the consolidated statement of income.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the allowance on an individual basis.The Company evaluates the segmentation at least annually to determine whether loans continue to share similar risk characteristics. Loans are charged off against the allowance when the Company believes the loan balances become uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

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The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit. The Company’s segments for loans include multi-family, commercial real estate, commercial and industrial, construction, residential and consumer.

The Company calculates estimated credit loss on its loan portfolio typically using a probability of default and loss given default quantitative model methodology. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount. For a small portion of the loan portfolio, i.e. unsecured consumer loans, small business loans and loans to individuals, the Company utilizes a loss rate method to calculate the expected credit loss of that asset segment.

The Company estimates the allowance for credit losses on loans using relevant available information from internal and external sources related to past events and current conditions as well as the incorporation of reasonable and supportable forecasts. The Company evaluates the use of multiple economic scenarios and the weighting of those scenarios on a quarterly basis. The scenarios that are chosen and the amount of weighting given to each scenario depend on a variety of factors including third party economists and firms, industry trends and other available published economic information.

After the reasonable and supportable forecast period, the Company reverts to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.

Also included in the allowance for loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative method or the economic assumptions described above. For example, factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, the effect of external factors such as competition, and the legal and regulatory requirements, among other. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built on historical data.

Individually evaluated

On a case-by-case basis, the Company may conclude a loan should be evaluated on an individual basis based on its disparate risk characteristics. The Company individually evaluates loans that meet the following criteria for expected credit loss, as the Company has determined that these loans generally do not share similar risk characteristics with other loans in the portfolio:

•Commercial loans with an outstanding balance greater than $1.0 million and on non-accrual status;

•Troubled debt restructured loans; and

•Other commercial loans with greater than $1.0 million in outstanding principal, if management has specific information that it is probable they will not collect all principal amounts due under the contractual terms of the loan agreement.

When the Company determines that the loan no longer shares similar risk characteristics of other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable, to ensure that the credit loss is not delayed until actual loss. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

Acquired assets

Acquired assets are included in the Company's calculation of the allowance for credit losses. How the allowance on an acquired asset is recorded depends on whether it has been classified as a Purchased Financial Asset with Credit Deterioration (“PCD”). PCD assets are assets acquired at a discount that is due, in part, to credit quality. PCD assets are accounted for in accordance with ASC Subtopic 326-20 and are initially recorded at fair value as determined by the sum of the present value of expected future cash flows and an allowance for credit losses at acquisition. The allowance for PCD assets is recorded through a gross-up effect, while the allowance for acquired non-PCD assets such as loans is recorded through provision expense, consistent with originated loans. Thus, the determination of which assets are PCD and non-PCD can have a significant effect on the accounting for these assets.

Subsequent to acquisition, the allowance for PCD loans will generally follow the same estimation, provision and

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charge-off process as non-PCD acquired and originated loans. Additionally, TDR identification for acquired loans (PCD and non-PCD) will be consistent with the TDR identification for originated loans.

Allowance for Credit Losses on Debt Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed residential securities, municipal bonds, trust preferred securities (“TruPS”) and other. Nearly all of the mortgage-backed securities in the Company's portfolio 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. Other securities consist primarily of investments in pooled trust preferred securities.

At each reporting period, the Company evaluates whether the securities in a segment continue to exhibit similar risk characteristics as the other securities in the segment. If the risk characteristics of a security change, such that they are no longer similar to other securities in the segment, the Company will evaluate the security with a different segment that shares more similar risk characteristics.

In estimating the net amount expected to be collected for mortgage-backed residential securities and municipal bonds, a range of historical losses method is utilized. In estimating the net amount expected to be collected for TruPS, the Company employs a single scenario forecast methodology. The scenario is informed by historical industry default data as well as current and near term operating conditions for the banks and other financial institutions that are the underlying issuers. In addition, prepayment assumptions are included in the analysis of the individually assessed TruPS applied at the collateral level.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company is required to include the unfunded commitment that is expected to be funded in the future within the allowance calculation. The Company participates in lending that results in an off-balance sheet unfunded commitment balance. The Company currently underwrites funding commitments with conditionally cancelable language. To determine the expected funding balance remaining, the Company uses a historical utilization rate for each of the segments to calculate the expected commitment balance. The reserve percentage for each respective loan portfolio is applied to the remaining unused portion of the expected commitment balance and the expected funded commitment in determining the allowance for credit loss on off-balance sheet credit exposures.

Section 4013 of the CARES Act

The Company implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19. In accordance with the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the Company elected to not apply troubled debt restructuring classification to any COVID-19 related loan modifications that occurred after March 1, 2020 to borrowers who were current as of December 31, 2019. Accordingly, these modifications are exempt from troubled debt restructuring classification under U.S. generally accepted accounting principles (“U.S. GAAP”) and were not classified as troubled debt restructurings (“TDRs”). In addition, for loans modified in response to the COVID-19 pandemic that did not meet the above criteria (e.g., current payment status at December 31, 2019), the Company applied the guidance included in an interagency statement issued by the bank regulatory agencies. This guidance states that loan modifications performed in light of the COVID-19 pandemic, including loan payment deferrals that are up to six months in duration, that were granted to borrowers who were current as of the implementation date of a loan modification program or modifications granted under government mandated modification programs, are not TDRs. For loan modifications that include a payment deferral and are not TDRs, the borrower’s past due and non-accrual status have not been impacted during the deferral period. The majority of our deferrals initially consisted of 90-day principal and interest deferrals with additional deferral periods granted on a case by case basis at the Bank’s option. Interest income has continued to be recognized over the contractual life of the loan. At September 30, 2020, loans with an aggregate outstanding balance of approximately $1.02 billion were in COVID-19 related deferment. For the nine months ended September 30, 2020, interest income on deferred loans totaled $44.3 million, of which $9.3 million was included in accrued interest receivable as of September 30, 2020.

2. Stock Transactions

Stock Repurchase ~~Programs~~Program

On March 16, 2015, the Company announced it had received approval from the Board of Governors of the Federal Reserve System to commence a 5% buyback program prior to the one-year anniversary of the completion of its second step conversion. Accordingly, the Board of Directors authorized the repurchase of 17,911,561 shares. The first program was completed on June 30, 2015.

~~On June 9, 2015,~~October 25, 2018, the Company announced its ~~second~~fourth share repurchase program, which authorized the purchase of ~~an additional~~ 10% of its publicly-held outstanding shares of common stock, or ~~34,779,211~~28,886,780 shares. The ~~second repurchase~~fourth program commenced immediately upon completion of the ~~first repurchase plan~~third program on ~~June~~December 10, 2018 and remains the Company’s current program as of September 30, ~~2015. The second program was completed on June 17, 2016.~~2020.

~~On April 28, 2016, the Company announced its third share repurchase program, which authorized the purchase~~

Table of an additional 10% of its publicly-held outstanding shares of common stock, or 31,481,189 shares. The new repurchase program commenced immediately upon completion of the second repurchase plan on June 17, 2016.Contents

During the nine months ended September 30, ~~2017,~~2020, the Company purchased ~~(including withholding of shares for payment of taxes with respect to vesting of equity transactions) 4,371,647~~390,712 shares at a cost of ~~$57.8~~$3.4 million, or ~~approximately $13.23~~$8.75 per share. All shares purchased during the nine months ended September 30, 2020 were purchased in connection with the vesting of shares of restricted stock under our 2015 Equity Incentive Plan and the withholding of shares to pay income taxes. These shares are repurchased pursuant to the terms of the 2015 Equity Incentive Plan and therefore are not part of the Company’s repurchase program.

3. Business Combinations

Gold Coast Bancorp

As of the close of business on April 3, 2020, the Company completed its acquisition of Gold Coast Bancorp (“Gold Coast”) pursuant to the Agreement and Plan of Merger, dated as of July 24, 2019 by and between the Company and Gold Coast. As a result of the completion of the acquisition, the Company issued approximately 2.8 million shares to the former stockholders of Gold Coast and paid approximately $31.0 million in cash to the former stockholders of Gold Coast. Under the terms of the merger agreement, 50% of the common shares of Gold Coast were converted into Investors Bancorp common stock and the remaining 50% was exchanged for cash. For each share of Gold Coast Bancorp common stock, Gold Coast shareholders were given an option to receive either (i) 1.422 shares of Investors Bancorp common stock, $0.01 par value per share, (ii) a cash payment of $15.75, or (iii) a combination of Investors Bancorp common stock and cash. The foregoing was subject to proration to ensure that, in the aggregate, 50% of Gold Coast’s shares would be converted into Investors Bancorp common stock.

The acquisition was accounted for under the acquisition method of accounting as prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”, as amended. Under this method of accounting, the purchase price has been allocated to the respective assets acquired based on their estimated fair values, net of applicable income tax effects. The excess cost over fair value of assets acquired, or $12.0 million, has been recorded as goodwill.

The acquired portfolio was fair valued on the date of acquisition based on guidance from ASC 820-10 which defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The valuation methods utilized took into consideration adjustments for interest rate risk, funding cost, servicing cost, residual risk, credit and liquidity risk.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for Gold Coast, net of cash consideration paid:


	At April 3, 2020
	(In millions)
Cash and cash equivalents	$	7.3
Debt securities available-for-sale	51.5
Debt securities held to maturity	8.4
Loans receivable, net	443.5
Accrued interest receivable	1.3
Right-of-use assets	3.7
Net deferred tax asset	3.9
Intangible assets	14.5
Other assets	1.2
Total assets acquired	535.3
Deposits	489.9
Borrowed funds	14.9
Other liabilities	9.7
Total liabilities assumed	514.5
Net assets acquired	$	20.8

As the Company finalizes its analysis of these assets, there may be adjustments to the recorded carrying values. Any adjustments to carrying values will be recorded in goodwill. The calculation of goodwill is subject to change for up to one year after closing date of the transaction as additional information relative to closing date estimates and uncertainties becomes available. For the three months ended September 30, 2020, there was no change to the amount of goodwill recorded for this acquisition.

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Financial assets acquired in a business combination after January 1, 2020 are recorded in accordance with ASC Topic 326, after which acquired assets are separated into two types. PCD assets are acquired assets that, as of the acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. Non-PCD assets are acquired assets that have experienced no or insignificant deterioration in credit quality since origination. To distinguish between the two types of acquired assets, the Company evaluates risk characteristics that have been determined to be indicators of deteriorated credit quality. In the case of loans, the determining criteria may involve general characteristics, such as loan payment history or changes in creditworthiness since the loan was originated, while others are relevant to recent economic conditions, such as borrowers in industries impacted by the pandemic.

In its acquisition of Gold Coast, the Company has purchased loans which have been determined to be PCD. The carrying amount of those loans was as follows:


	At April 3, 2020
	(In millions)
Purchase price of loans at acquisition	$	244.7
Allowance for credit losses at acquisition	4.2
Non-credit discount (premium) at acquisition	2.6
Par value of acquired loans at acquisition	$	251.5

There were no PCD securities in the acquisition.

Fair Value Measurement of Assets Acquired and Liabilities Assumed

Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in the Gold Coast acquisition based on guidance from ASC 820-10 which defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date.

Securities. The securities acquired are bought and sold in active markets. The estimated fair values of securities were calculated using external third party broker opinions of the market values. Due to the instability of the market at the time of acquisition as well as the odd lot position sizes of the securities, the Company reviewed the data and assumptions used in pricing the securities by third-parties and made qualitative adjustments to reflect the odd lot size of the securities and the price that would be received in an orderly transaction.

Loans. The estimated fair values of the loan portfolio generally consider adjustments for interest rate risk, required funding costs, servicing costs, prepayments, credit and liquidity. Level 3 inputs were utilized to determine the fair value of the acquired loan portfolio and included the use of present value techniques employing cash flow estimates and incorporated assumptions that market participants would use in estimating fair values. In instances where reliable market information was not available, the Company used its own assumptions in an effort to determine fair value. The primary approach to determining the fair value of the loan portfolio was a discounted cash flow methodology that considered factors including the type of loan, underlying collateral, classification status or grade, interest rate structure (fixed or variable interest rate), and remaining term. For the non-credit component, loans were grouped together according to similar characteristics when applying the various valuations techniques. For the credit component, loans were also grouped based on whether they had more than insignificant deterioration in credit since origination (purchase credit deteriorated “PCD” as defined by ASC 326-20). The expected life of loan loss estimates were calculated based on an annual loss rate developed by using the historical annual average charge-off percentages for New York institutions as a proxy for how a market participant acquirer would value the portfolio. Additionally, a qualitative credit adjustment was applied to the historical annual loss rates, due to COVID-19 and the uncertainty of future losses.

Deposits / Core Deposit Intangible. The core deposit intangible represents the value assigned to the stable and below market rate funding sources within the acquired deposit base; typically demand deposits, interest checking, money market and savings accounts. The core deposit intangible value represents the value of the relationships with deposit customers as a below market rate funding source. The fair value was based on a discounted cash flow methodology that gave appropriate consideration to expected deposit attrition rates, net maintenance costs of the deposit base, projected interest costs and the alternative cost of funds. Certificates of deposit (time deposits) are not considered to be core deposits as they are less stable and do not have an “all-in” favorable funding advantage to the alternative cost of funds. The fair value of certificates of deposit represents the present value of the certificates’ expected contractual payments discounted by market rates for similar certificates and is determined utilizing Level 2 inputs.

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Borrowed Funds. A discounted cash flow approach was used to determine the fair value of the debt acquired. The fair value of the liability represents the present value of the expected payments discounted using a risk adjusted discount rate. The discount rate was developed based on comparable rated securities, as that backed by companies with similar credit ratings as the Company.

4. Earnings Per Share

The following is a summary of our earnings per share calculations and reconciliation of basic to diluted earnings per share.


	For the Three Months Ended September 30,					For the Three Months Ended September 30,
	2017		2016			2020		2019
	(Dollars in thousands, except per share data)					(Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share					Earnings for basic and diluted earnings per common share
Earnings applicable to common stockholders	$	45,845	$	49,850	Earnings applicable to common stockholders	$	64,312	$	51,972

Shares					Shares
Weighted-average common shares outstanding - basic	289,715,414		292,000,061		Weighted-average common shares outstanding - basic	236,833,099		261,678,994

Effect of dilutive common stock equivalents (1)	1,174,893		2,673,391		Effect of dilutive common stock equivalents (1)	39,406		133,976
Weighted-average common shares outstanding - diluted	290,890,307		294,673,452		Weighted-average common shares outstanding - diluted	236,872,505		261,812,970

Earnings per common share					Earnings per common share
Basic	$	0.16	$	0.17	Basic	$	0.27	$	0.20
Diluted	$	0.16	$	0.17	Diluted	$	0.27	$	0.20

(1) For the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, there were ~~10,952,744~~7,504,227 and ~~16,372,523~~8,142,370 equity awards, respectively, that 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 for the periods presented.


	For the Nine Months Ended September 30,					For the Nine Months Ended September 30,
	2017		2016			2020		2019
	(Dollars in thousands, except per share data)					(Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share					Earnings for basic and diluted earnings per common share
Earnings applicable to common stockholders	$	131,498	$	139,661	Earnings applicable to common stockholders	$	146,435	$	146,754

Shares					Shares
Weighted-average common shares outstanding - basic	290,670,601		299,873,985		Weighted-average common shares outstanding - basic	235,453,133		264,104,402
Effect of dilutive common stock equivalents (1)	1,819,305		3,423,132		Effect of dilutive common stock equivalents (1)	97,668		317,863
Weighted-average common shares outstanding - diluted	292,489,906		303,297,117		Weighted-average common shares outstanding - diluted	235,550,801		264,422,265

Earnings per common share					Earnings per common share
Basic	$	0.45	$	0.47	Basic	$	0.62	$	0.56
Diluted	$	0.45	$	0.46	Diluted	$	0.62	$	0.55

(1) For the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, there were ~~11,041,315~~7,433,286 and ~~11,819,014~~6,723,858 equity awards, respectively, that 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 for the periods presented.

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5. Securities

Equity Securities

Equity securities are reported at fair value on the Company’s Consolidated Balance Sheets. The Company’s portfolio of equity securities had an estimated fair value of $8.7 million and $6.0 million as of September 30, 2020 and December 31, 2019, respectively. Realized gains and losses from sales of equity securities as well as changes in fair value of equity securities still held at the reporting date are recognized in the Consolidated Statements of Income.

The following table presents the disaggregated net gains on equity securities reported in the Consolidated Statements of Income:


	For the Three Months Ended September 30,			For the Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Net (losses) gains recognized on equity securities	$	(8)	30	99	165
Less: Net gains recognized on equity securities sold	0		0	0	0
Unrealized (losses) gains recognized on equity securities	$	(8)	30	99	165

Debt Securities

The following tables present the carrying value, gross unrealized gains and losses, and estimated fair value for available-for-sale debt securities and the amortized cost, net unrealized losses, carrying value, gross unrecognized gains and losses, ~~and~~ estimated fair value and allowance for credit losses for held-to-maturity debt securities as of the dates ~~indicated:~~indicated.


	At September 30, 2020
	Carrying value		Gross unrealized gains	Gross unrealized losses	Estimated fair value
	(In thousands)
Available-for-sale:
Debt securities:
Government-sponsored enterprises	$	4,501	240	0	4,741

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	1,312,343		33,927	10	1,346,260
Federal National Mortgage Association	1,175,909		44,010	276	1,219,643
Government National Mortgage Association	251,447		6,957	89	258,315
Total mortgage-backed securities available-for-sale	2,739,699		84,894	375	2,824,218
Total debt securities available-for-sale	$	2,744,200	85,134	375	2,828,959

At September 30, 2017
Carrying value
Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value
(In thousands)
Available-for-sale:
Equity securities $ 4,889
834
77
5,646
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 656,728
1,803
4,537
653,994
Federal National Mortgage Association 1,258,212
2,600
11,702
1,249,110
Government National Mortgage Association 41,642
—
963
40,679
Total mortgage-backed securities available-for-sale 1,956,582
4,403
17,202
1,943,783
Total available-for-sale securities $ 1,961,471
5,237
17,279
1,949,429

At September 30, 2017
Amortized cost Net unrealized losses (1) Carrying value
Gross
unrecognized
gains (2)

Gross
unrecognized
losses (2)

Estimated
fair value
(In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises $ 43,300
—
43,300
2
739
42,563
Municipal bonds 30,907
—
30,907
1,415
—
32,322
Corporate and other debt securities 67,411
20,458
46,953
37,776
—
84,729
Total debt securities held-to-maturity 141,618
20,458
121,160
39,193
739
159,614
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 441,464
1,091
440,373
1,530
2,397
439,506
Federal National Mortgage Association 1,120,171
1,289
1,118,882
5,968
7,835
1,117,015
Government National Mortgage Association 53,336
—
53,336
19
311
53,044
Total mortgage-backed securities held-to-maturity 1,614,971
2,380
1,612,591
7,517
10,543
1,609,565
Total held-to-maturity securities $ 1,756,589
22,838
1,733,751
46,710
11,282
1,769,179

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	At September 30, 2020
	Amortized cost		Net unrealized losses (1)	Carrying value	Gross unrecognized gains (2)	Gross unrecognized losses (2)	Estimated fair value
	(In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	$	81,690	0	81,690	4,263	64	85,889
Municipal bonds	249,141		0	249,141	10,777	222	259,696
Corporate and other debt securities	128,643		13,894	114,749	17,708	2,033	130,424
Total debt securities held-to-maturity	459,474		13,894	445,580	32,748	2,319	476,009
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	288,394		82	288,312	9,871	22	298,161
Federal National Mortgage Association	455,310		214	455,096	22,515	0	477,611
Government National Mortgage Association	50,717		0	50,717	2,195	0	52,912

Total mortgage-backed securities held-to-maturity	794,421		296	794,125	34,581	22	828,684
Total debt securities held-to-maturity	$	1,253,895	14,190	1,239,705	67,329	2,341	1,304,693
Allowance for credit losses				3,095
Total debt securities held-to-maturity, net of allowance for credit losses				1,236,610

(1) Net unrealized losses of held-to-maturity corporate and other debt securities represent the previously recorded other than temporary charge related to other non-credit factors and is being amortized through accumulated other comprehensive income over the remaining life of the securities. For mortgage-backed securities, it represents the net loss on previously designated available-for sale debt securities transferred to held-to-maturity at fair value and is being amortized through accumulated other comprehensive income over the remaining life of the securities.

(2) Unrecognized gains and losses of held-to-maturity debt securities are not reflected in the financial statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as held-to-maturity; or (ii) the date that an other than temporary impairment charge is recognized on a held-to-maturity security, through the date of the balance sheet. Effective January 1, 2020, held-to-maturity debt securities are evaluated for credit losses to determine if an allowance is necessary. Any allowance required is recorded through the provision for credit losses.


	At December 31, 2019
	Carrying value		Gross unrealized gains	Gross unrealized losses	Estimated fair value
	(In thousands)
Available-for-sale:



Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	$	1,223,587	17,528	736	1,240,379
Federal National Mortgage Association	1,159,446		18,917	314	1,178,049
Government National Mortgage Association	273,676		3,333	47	276,962


Total debt securities available-for-sale	$	2,656,709	39,778	1,097	2,695,390

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	At December 31, 2019
	Amortized cost		Net unrealized losses (1)	Carrying value	Gross unrecognized gains (2)	Gross unrecognized losses (2)	Estimated fair value
	(In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	$	58,624	0	58,624	188	500	58,312
Municipal bonds	143,151		0	143,151	3,797	43	146,905
Corporate and other debt securities	87,322		14,785	72,537	26,158	0	98,695
Total debt securities held-to-maturity	289,097		14,785	274,312	30,143	543	303,912
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	262,079		134	261,945	3,533	129	265,349
Federal National Mortgage Association	542,583		373	542,210	7,959	307	549,862
Government National Mortgage Association	70,348		0	70,348	633	0	70,981


Total mortgage-backed securities held-to-maturity	875,010		507	874,503	12,125	436	886,192
Total debt securities held-to-maturity	$	1,164,107	15,292	1,148,815	42,268	979	1,190,104

(1) Net unrealized losses of held-to-maturity corporate and other debt securities represent the other than temporary charge related to other non-credit factors and is being amortized through accumulated other comprehensive income over the remaining life of the securities. For mortgage-backed securities, it represents the net loss on previously designated available-for sale debt securities transferred to held-to-maturity at fair value and is being amortized through accumulated other comprehensive income over the remaining life of the securities.

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At December 31, 2016
Carrying value
Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value
(In thousands)
Available-for-sale:
Equity securities $ 5,825
918
83
6,660
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 603,774
1,971
7,306
598,439
Federal National Mortgage Association 1,022,383
2,678
16,474
1,008,587
Government National Mortgage Association 47,538
—
791
46,747
Total mortgage-backed securities available-for-sale 1,673,695
4,649
24,571
1,653,773
Total available-for-sale securities $ 1,679,520
5,567
24,654
1,660,433

At December 31, 2016
Amortized cost Net unrealized losses (1) Carrying Value
Gross
unrecognized
gains (2)

Gross
unrecognized
losses (2)

Estimated
fair value
(In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises $ 2,128
—
2,128
12
—
2,140
Municipal bonds 37,978
—
37,978
1,515
—
39,493
Corporate and other debt securities 65,852
21,760
44,092
40,153
—
84,245
Total debt securities held-to-maturity 105,958
21,760
84,198
41,680
—
125,878
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 411,692
1,559
410,133
793
3,502
407,424
Federal National Mortgage Association 1,246,635
1,802
1,244,833
3,635
15,389
1,233,079
Government National Mortgage Association 16,392
—
16,392
28
—
16,420
Total mortgage-backed securities held-to-maturity 1,674,719
3,361
1,671,358
4,456
18,891
1,656,923
Total held-to-maturity securities $ 1,780,677
25,121
1,755,556
46,136
18,891
1,782,801

~~(1) Net~~Gross unrealized losses on debt securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2020 and December 31, 2019, were as follows:


	September 30, 2020
	Less than 12 months			12 months or more		Total
	Estimated fair value		Unrealized losses	Estimated fair value	Unrealized losses	Estimated fair value	Unrealized losses
	(In thousands)
Available-for-sale:



Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	$	40,309	10	0	0	40,309	10
Federal National Mortgage Association	100,557		276	0	0	100,557	276
Government National Mortgage Association	43,399		89	0	0	43,399	89

Total debt securities available-for-sale	184,265		375	0	0	184,265	375
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	9,743		64	0	0	9,743	64
Municipal bonds	8,044		222	0	0	8,044	222
Corporate and other debt securities	33,676		2,033	0	0	33,676	2,033
Total debt securities held-to-maturity	51,463		2,319	0	0	51,463	2,319
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	12,096		22	0	0	12,096	22



Total debt securities held-to-maturity	63,559		2,341	0	0	63,559	2,341
Total	$	247,824	2,716	0	0	247,824	2,716


	December 31, 2019
	Less than 12 months			12 months or more		Total
	Estimated fair value		Unrealized losses	Estimated fair value	Unrealized losses	Estimated fair value	Unrealized losses
	(In thousands)
Available-for-sale:



Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	$	215,160	736	0	0	215,160	736
Federal National Mortgage Association	80,298		297	12,972	17	93,270	314
Government National Mortgage Association	20,078		47	0	0	20,078	47

Total debt securities available-for-sale	315,536		1,080	12,972	17	328,508	1,097
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	31,696		500	0	0	31,696	500
Municipal bonds	23,596		43	0	0	23,596	43

Total debt securities held-to-maturity	55,292		543	0	0	55,292	543
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	20,860		64	11,065	65	31,925	129
Federal National Mortgage Association	7,911		52	37,316	255	45,227	307

Total mortgage-backed securities held-to-maturity	28,771		116	48,381	320	77,152	436
Total debt securities held-to-maturity	84,063		659	48,381	320	132,444	979
Total	$	399,599	1,739	61,353	337	460,952	2,076

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We conduct periodic reviews of individual securities to assess whether an allowance for credit loss is required. Held-to-maturity debt securities are evaluated for expected credit loss utilizing a historical loss methodology, or a discounted cash flows approach which is assessed against the book value of the investment security excluding accrued interest. Refer to Note 1, Summary of Significant Accounting Principles, for additional information. Available-for-sale debt securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the consolidated statement of income when management intends to sell (or may be required to sell) the securities before they recover in value.

The majority of our held-to-maturity debt securities portfolio is comprised of agency mortgage-backed securities. For agency (FNMA, FHLMC and GNMA) mortgage-backed securities, and other agency debt instruments, the expectation of non-payment is zero. The timely payment of principal and interest on FNMA and FHLMC securities is guaranteed by each corporation. As each of these corporations is in conservatorship with the federal government, the payment guarantees are considered implicit obligations of the US government. GNMA securities carry the full faith and credit guarantee of the federal government. Because of the existence of government guarantees of timely payment of principal and interest, expected losses on agency securities are assumed to be zero. Changes in the fair value of agency securities in this portfolio are primarily driven by changes in interest rates and other non-credit related factors. At September 30, 2020, our held-to-maturity debt securities portfolio had an allowance for credit losses of $3.1 million. The allowance is related to non-agency corporate and other debt ~~securities represent the other than temporary charge related to other non-credit factors and is being amortized through accumulated other comprehensive income over the remaining life~~securities. The majority of the ~~securities. For mortgage-backed securities, it represents the net loss on previously designated available-for sale securities transferred~~allowance is related to ~~held-to-maturity at fair value and is being amortized through accumulated other comprehensive income over the remaining life of the securities.~~

(2) Unrecognized gains and losses of held-to-maturity securities are not reflected in the financial statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as held-to-maturity; or (ii) the date that an other than temporary impairment charge is recognized on a held-to-maturity security, through the date of the balance sheet.

~~At September 30, 2017, corporate and other debt securities include~~ a portfolio of collateralized debt obligations backed by pooled ~~trust preferred securities (“TruPS”),~~TruPS, principally issued by banks and to a lesser extent insurance companies and real estate investment ~~trusts, and collateralized debt obligations.~~trusts. At September 30, ~~2017,~~2020, the TruPS had a carrying value before allowance for credit losses and estimated fair value of ~~$42.0~~$49.3 million and ~~$79.6~~$64.1 million, respectively. ~~While all were investment grade at purchase,~~The Company does not have the intent to sell these securities ~~classified as non-investment grade at~~and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost.

At September 30, ~~2017 had an~~2020, the available-for-sale debt securities portfolio was almost entirely comprised of agency securities. As such, the unrealized losses in this portfolio are primarily driven by changes in interest rates and other non-credit related factors. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized ~~cost and estimated~~cost. As of September 30, 2020, there is no allowance for credit losses related to the Company’s available-for-sale debt securities as the decline in fair value did not result from credit issues.

For additional information about the review of ~~$39.9 million~~securities under previous other-than-temporary impairment guidance, refer to page 82 in Note 4 to the consolidated financial statements included under Item 15. Exhibits and ~~$73.2 million, respectively. Fair value is derived from considering specific assumptions, including terms of~~Financial Statement Schedules in the ~~TruPS structure, events of deferrals, defaults and liquidations, the projected cashflow for principal and interest payments, and discounted cash flow modeling.~~Company’s December 31, 2019 Form 10-K.

~~Investment~~ Debt securities with a carrying value before allowance for credit losses of ~~$1.14~~$1.57 billion and an estimated fair value of ~~$1.13~~$1.62 billion are pledged to secure ~~borrowings.~~borrowings and municipal deposits. The contractual maturities of the Bank’s mortgage-backed securities are generally less than 20 years with effective lives expected to be shorter due to prepayments. Expected maturities may differ from contractual maturities due to underlying loan prepayments or early call privileges of the ~~issuer,~~issuer; therefore, mortgage-backed securities are not included in the following table. ~~The~~Excluding the allowance for credit losses, the amortized cost and estimated fair value of debt securities other than mortgage-backed securities at September 30, ~~2017,~~2020, by contractual maturity, are shown below.


	September 30, 2020
	Carrying value		Estimated fair value
	(In thousands)
Due in one year or less	$	58,975	58,975
Due after one year through five years	10,294		10,534
Due after five years through ten years	107,658		110,853
Due after ten years	268,653		295,647
Total	$	445,580	476,009

September 30, 2017
Carrying Value
Estimated
fair value
(In thousands)
Due in one year or less $ 28,337
28,339
Due after one year through five years 75
75
Due after five years through ten years 46,240
45,582
Due after ten years 46,508
85,618
Total $ 121,160
159,614

Gross unrealized losses on securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2017 and December 31, 2016, was as follows:

September 30, 2017
Less than 12 months 12 months or more Total

Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses
(In thousands)
Available-for-sale:
Equity Securities $ 4,792
77
—
—
4,792
77
Mortgage-backed securities:

Federal Home Loan Mortgage Corporation 291,595
2,732
56,408
1,805
348,003
4,537
Federal National Mortgage Association 678,795
7,951
150,569
3,751
829,364
11,702
Government National Mortgage Association 40,679
963
—
—
40,679
963
Total mortgage-backed securities available-for-sale 1,011,069
11,646
206,977
5,556
1,218,046
17,202
Total available-for-sale securities 1,015,861
11,723
206,977
5,556
1,222,838
17,279
Held-to-maturity:
Debt securities:
Government-sponsored enterprises 40,517
739
—
—
40,517
739
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 243,530
2,333
2,820
64
246,350
2,397
Federal National Mortgage Association 571,368
6,294
43,891
1,541
615,259
7,835
Government National Mortgage Association 39,524
311
—
—
39,524
311
Total mortgage-backed securities held-to-maturity 854,422
8,938
46,711
1,605
901,133
10,543
Total held-to-maturity securities 894,939
9,677
46,711
1,605
941,650
11,282
Total $ 1,910,800
21,400
253,688
7,161
2,164,488
28,561

December 31, 2016
Less than 12 months 12 months or more Total

Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses
(In thousands)
Available-for-sale:
Equity Securities $ 4,722
83
—
—
4,722
83
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 406,878
7,220
12,756
86
419,634
7,306
Federal National Mortgage Association 762,272
15,977
25,089
497
787,361
16,474
Government National Mortgage Association 46,747
791
—
—
46,747
791
Total mortgage-backed securities available-for-sale 1,215,897
23,988
37,845
583
1,253,742
24,571
Total available-for-sale securities 1,220,619
24,071
37,845
583
1,258,464
24,654
Held-to-maturity:
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 339,666
3,354
3,623
148
343,289
3,502
Federal National Mortgage Association 970,194
15,389
—
—
970,194
15,389
Total held-to-maturity securities 1,309,860
18,743
3,623
148
1,313,483
18,891
Total $ 2,530,479
42,814
41,468
731
2,571,947
43,545

At September 30, 2017, the majority of gross unrealized losses primarily relate to our mortgage-backed-security portfolio which is comprised of securities issued by U.S. Government Sponsored Enterprises. The fair values of these securities have been negatively impacted by the recent increase in intermediate-term market interest rates.

~~Other-Than-Temporary Impairment (“OTTI”)~~

We conduct a quarterly review and evaluation of the securities portfolio to determine if the value of any security has declined below its cost or amortized cost, and whether such decline is other-than-temporary. If a determination is made that a debt security is other-than-temporarily impaired, the Company will estimate the amount of the unrealized loss that is attributable to credit and all other non-credit related factors. The credit related component will be recognized as an other-than-temporary impairment charge in non-interest income. The non-credit related component will be recorded as an adjustment to accumulated other comprehensive income, net of tax.

With the assistance of a valuation specialist, we evaluate the credit and performance of each issuer underlying our TruPS. Cash flows for each security are forecasted using assumptions for defaults, recoveries, pre-payments and amortization. At September 30, 2017 and 2016, management deemed that the present value of projected cash flows for each security was greater than the book value and did not recognize any additional OTTI charges for the three and nine months ended September 30, 2017 and 2016. At September 30, 2017, non-credit related OTTI recorded on the previously impaired TruPS was $20.5 million ($12.1 million after-tax). This amount is being accreted into income over the estimated remaining life of the securities.

The following table presents the changes in the credit loss component of the impairment loss of debt securities that the Company has written down for such loss as an other-than-temporary impairment recognized in earnings.

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Balance of credit related OTTI, beginning of period $ 87,921
97,977
95,743
100,200
Additions:
Initial credit impairments —
—
—
—
Subsequent credit impairments —
—
—
—
Reductions:
Accretion of credit loss impairment due to an increase in expected cash flows (1,077 ) (1,112 ) (5,088 ) (3,335 )
Reductions for securities sold or paid off during the period —
—
(3,811 ) —
Balance of credit related OTTI, end of period $ 86,844
96,865
86,844
96,865

The credit loss component of the impairment loss represents the difference between the present value of expected future cash flows and the amortized cost basis of the securities prior to considering credit losses. The beginning balance represents the credit loss component for debt securities for which OTTI occurred prior to the period presented. If OTTI is recognized in earnings for credit impaired debt securities, they would be presented as additions based upon whether the current period is the first time a debt security was credit impaired (initial credit impairment) or is not the first time a debt security was credit impaired (subsequent credit impairments). The credit loss component is reduced if the Company sells, intends to sell or believes it will be required to sell previously credit impaired debt securities. Additionally, the credit loss component is reduced if (i) the Company receives cash flows in excess of what it expected to receive over the remaining life of the credit impaired debt security, (ii) the security matures or (iii) the security is fully written down.

~~Realized~~ Gains and Losses

Gains and losses on the sale of all securities are determined using the specific identification method. For the three and nine months ended September 30, ~~2017,~~2020, there were ~~no proceeds from~~0 sales of ~~securities in the available-for-sale portfolio. For~~securities; however, for the nine months ended September 30, ~~2017,~~

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2020, the Company received ~~sale~~ proceeds of ~~$102.1~~$16.5 million ~~on pools of mortgage-backed securities~~ from the ~~available-for-sale portfolio resulting~~call of a held-to-maturity debt security which resulted in a ~~gross realized~~ gain of ~~$1.3 million.~~

~~There were no proceeds from sales~~$124,000 and received a principal payment of $26,000 on a held-to-maturity debt security. The Company recognized net unrealized losses on equity securities ~~in the held-to-maturity portfolio~~of $8,000 and net unrealized gains of $99,000, respectively, for the three and nine months ended September 30, ~~2017; however,~~2020.

For the three months ended September 30, 2019, there were 0 sales of securities. For the nine months ended September 30, 2019, the Company received proceeds of $399.4 million on securities sold from the debt securities available-for-sale portfolio resulting in a loss of $5.7 million recognized in non-interest income. Proceeds from the sale were reinvested in higher yielding debt securities. There were 0 other sales of securities for the nine months ended September 30, ~~2017, the~~2019. The Company ~~received proceeds~~recognized net unrealized gains on equity securities of ~~$3.1 million from the liquidation of a TruP security. As a result, $1.9 million was recognized as interest income from securities in the Consolidated Statements of Income.~~

~~For~~$30,000 and $165,000, respectively, for the three and nine months ended September 30, ~~2016,~~2019.

6. Loans Receivable, Net

The Company adopted the ~~Company received proceeds~~CECL methodology for measuring credit losses as of ~~$122,200~~January 1, 2020. All disclosures as of and $57.9 million, respectively, on equity securities and pools of mortgage-backed securities sold from the available-for-sale portfolio resulting in a gross realized gain of $72,200 and $2.3 million, respectively. Forfor the three ~~months ended September 30, 2016, there were no sale proceeds from the held-to-maturity portfolio. For the~~and nine months ended September 30, ~~2016, the~~2020 are presented in accordance with Topic 326. The Company received sale proceeds of $14.3 million on a pool of mortgage-backed securities from the held-to-maturity portfolio resulting in a gross realized gain of $836,000. These securities met the criteria of principal pay downs under 85% of the original investment amount and therefore did not result in a tainting of the held-to-maturity portfolio. The Company sells securities when, in management’s assessment, market pricing presents an economic benefit that outweighs holding such securities,recast comparative financial periods and ~~when securities with smaller balances become cost prohibitive to carry.~~

~~5. Loans Receivable, Net~~

has presented those disclosures under previously applicable GAAP. The detail of the loan portfolio as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 was as follows:


	September 30, 2017			December 31, 2016			September 30, 2020		December 31, 2019
	(In thousands)						(In thousands)
Multi-family loans	$	7,854,759		7,459,131		Multi-family loans	$	7,256,015	7,813,236
Commercial real estate loans	4,660,268			4,445,194		Commercial real estate loans	4,912,155		4,831,347
Commercial and industrial loans	1,501,235			1,275,283		Commercial and industrial loans	3,399,059		2,951,306
Construction loans	397,929			314,843		Construction loans	341,449		262,866
Total commercial loans	14,414,191			13,494,451		Total commercial loans	15,908,678		15,858,755
Residential mortgage loans	4,871,460			4,710,373		Residential mortgage loans	4,407,224		5,144,718
Consumer and other loans	654,701			596,922		Consumer and other loans	681,940		699,796
Total loans excluding PCI loans	19,940,352			18,801,746
PCI loans	8,577			8,956
Net unamortized premiums and deferred loan costs (1)	(11,701		)	(12,474	)
Allowance for loan losses	(230,071		)	(228,373	)
Total loans						Total loans	20,997,842		21,703,269
Deferred fees, premiums and other, net (1)						Deferred fees, premiums and other, net (1)	(12,274)		907
Allowance for credit losses						Allowance for credit losses	(287,511)		(228,120)
Net loans	$	19,707,157		18,569,855		Net loans	$	20,698,057	21,476,056

(1) Included in ~~unamortized~~deferred fees and premiums ~~and deferred loan costs~~ are accretable purchase accounting adjustments in connection with loans acquired.

Credit Quality Indicators

~~Allowance~~ The Company has lending policies and procedures that provide target market, underwriting and other criteria for ~~Loan Losses~~

~~An analysis~~identified lending segments to codify the level of credit risk the ~~allowance for loan losses~~Company is ~~summarized as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in thousands)
Balance at beginning of the period $ 230,028
220,316
228,373
218,505
Loans charged off (3,022 ) (2,972 ) (14,519 ) (13,379 )
Recoveries 1,315
1,206
4,467
3,424
Net charge-offs (1,707 ) (1,766 ) (10,052 ) (9,955 )
Provision for loan losses 1,750
5,000
11,750
15,000
Balance at end of the period $ 230,071
223,550
230,071
223,550

~~The allowance for loan losses is the estimated amount considered necessary~~willing to cover credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses that is charged against income. In determining the allowance for loan losses, we make significant estimatesaccept. Approval authority levels are delegated to qualified individuals and therefore, have identified the allowance as a critical accounting policy. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.

~~The allowance for loan losses has been determined in accordance with U.S. GAAP, under which we are required to maintain an allowance for probable losses at the balance sheet date. We are responsible~~approval bodies for the ~~timely~~extension of credit within the guidance of these policies and periodic determination of the amount of the allowance required. We believe that our allowance for loan losses is adequate to cover specifically identifiable losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable. Loans acquired are marked to fair value on the date of acquisition with no valuation allowance reflected in the allowance for loan losses. In conjunction with the quarterly evaluation of the adequacy of the allowance for loan losses, the Company performs an analysis on acquired loans to determine whether or not an allowance should be ascribed to those loans. Purchased Credit-Impaired (“PCI”) loans, are loans acquired at a discount that is due, in part, to credit quality. PCI loans are accounted for in accordance with Accounting Standards Codification (“ASC”) Subtopic 310-30 and are initially recorded at fair value as determined by the present value of expected future

cash flows with no valuation allowance reflected in the allowance for loan losses. For the nine months ended September 30, 2017, the Company recorded charge-offs of $92,000 related to PCI loans acquired.

Management performs a quarterly evaluation of the adequacy of the allowance for loan losses. The analysis of the allowance for loan losses has two components: specific and general allocations. Specific allocations are made for loans determined to be impaired. A loan is deemed to be impaired if it is a commercial loan with an outstanding balance greater than ~~$1.0 million~~ and on non-accrual status, loans modified in a troubled debt restructuring (“TDR”), and other commercial loans greater than $1.0 million if management has specific information that it is probable they will not collect all amounts due under the contractual terms of the loan agreement. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk rating (if applicable) and payment history.procedures. In addition, the ~~Company’s residential portfolio is subdivided between fixed~~Company maintains an independent loan review department that reviews and ~~adjustable rate loans as adjustable rate loans are deemed~~validates risk assessment on a continual basis.

The Company assigns ratings to ~~be subject to more credit risk if interest rates rise. Reserves for each loan segment or the loss factors are generally determined~~borrowers and transactions based on the Company’s historical loss experience over a look-back period determined to provide the appropriate amount of data to accurately estimate expected losses as of period end. Additionally, management assesses the loss emergence period for the expected losses of each loan segment and adjusts each historical loss factor accordingly. The loss emergence period is the estimated time from the dateassessment of a ~~loss event (such as a personal bankruptcy)~~borrower’s ability to the actual recognition of the loss (typically via the first full or partial loan charge-off), and is determined based upon a study of the Company’s past loss experience by loan segment. The loss factors may also be adjusted to account for qualitative or environmental factors that are likely to cause estimated credit losses inherent in the portfolio to differ from historical loss experience. This evaluation is based on among other things, loan and delinquency trends, general economic conditions, credit concentrations, industry trends and lending and credit management policies and procedures, but is inherently subjective as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions. Actual loan losses may be different than the allowance for loan losses we have established which could have a material negative effect on our financial results.

On a quarterly basis, management reviews the current status of various loan assets in order to evaluate the adequacy of the allowance for loan losses. In this evaluation process, specific loans are analyzed to determineservice their potential risk of loss. Loans determined to be impaired are evaluated for potential loss exposure. Any shortfall results in a recommendation of a specific allowance or charge-off if the likelihood of loss is evaluated as probable. To determine the adequacy of collateral on a particular loan, an estimate of the fair value of the collateral is based on the most current appraised value available for real property or a discounted cash flow analysis on a business. The appraised value for real property is then reduced to reflect estimated liquidation expenses.

The allowance contains reserves identified as unallocated. These reserves reflect management’s attempt to provide for the imprecision and the uncertainty that is inherent in estimates of probable credit losses.

Our lending emphasis has been the origination of multi-family loans, commercial real estate loans, commercial and industrial loans, one- to four-family residential mortgage loans secured by one- to four-family residential real estate, construction loans and consumer loans, the majority of which are home equity loans, home equity lines of credit and cash surrender value lending on life insurance contracts. These activities resulted in a concentration of loans secured by real estate property and businesses located in New Jersey and New York. Based on the composition of our loan portfolio, we believe the primary risks to our loan portfolio are increases in interest rates, a decline in the general economy, and declines in real estate market values in New Jersey, New York and surrounding states. Any one or combination of these events may adversely affect our loan portfolio resulting in increased delinquencies, loan losses and future levels of loan loss provisions. As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisal valuations are instrumental in determining the value of properties. Negative changes to appraisal assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals are carefully reviewed to determine that the resulting values reasonably reflect amounts realizable on the related loans.

For commercial real estate, multi-family and construction loans, the Company obtains an appraisal for all collateral dependent loans upon origination. An updated appraisal is obtained annually for loans rated substandard or worse with a balance of $500,000 or greater. An updated appraisal is obtained biennially for loans rated special mention with a balance of $2.0 million or greater. This is done in order to determine the specific reserve or charge off needed. As part of the allowance for loan losses process, the Company reviews each collateral dependent commercial real estate loan classified as non-accrual and/or impaired and assesses whether there has been an adverse change in the collateral value supporting the loan. The Company utilizes information from its commercial lending officers and its credit department and special assets department’s knowledge of changes in real estate conditions in our lending area to identify if possible deterioration of collateral value has occurred. Based on the severity of the changes in market conditions, management determines if an updated appraisal is warranted or if downward adjustments to the previous appraisal are warranted. If it is determined that the deterioration of the collateral value is significant enough to warrant ordering a new appraisal, an estimate of the downward adjustments to the existing appraised value is used in assessing if additional specific reserves are necessary until the updated appraisal is received.

For homogeneous residential mortgage loans, the Company’s policy is to obtain an appraisal upon the origination of the loan and an updated appraisal in the event a loan becomes 90 days delinquent. Thereafter, the appraisal is updated every two years if the loan remains in non-performing status and the foreclosure process has not been completed. Management adjusts the appraised value of residential loans to reflect estimated selling costs and declines in the real estate market.

Management believes the potential risk for outdated appraisals for impaired and other non-performing loans has been mitigated due to the fact that the loans are individually assessed to determine that the loan’s carrying value is not in excess of the fair value of the collateral. Loans are generally charged off after an analysis is completed which indicates that collectability of the full principal balance is in doubt.

Although we believe we have established and maintained the allowance for loan losses at adequate levels, additions may be necessary if the current economic environment deteriorates. Management uses relevant information available; however, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. In addition, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance, as an integral part of their examination process, will periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2017 and December 31, 2016:

September 30, 2017

Multi-
Family Loans

Commercial
Real Estate Loans

Commercial
and Industrial
Loans

Construction
Loans

Residential
Mortgage Loans

Consumer
and Other
Loans
Unallocated Total
(Dollars in thousands)
Allowance for loan losses:
Beginning balance-December 31, 2016 $ 95,561
52,796
43,492
11,653
19,831
2,850
2,190
228,373
Charge-offs (5 ) (6,818 ) (3,242 ) (100 ) (4,205 ) (149 ) —
(14,519 )
Recoveries 1,178
500
177
—
2,492
120
—
4,467
Provision (9,795 ) 13,205
6,862
(1,771 ) 2,913
116
220
11,750
Ending balance-September 30, 2017 $ 86,939
59,683
47,289
9,782
21,031
2,937
2,410
230,071

Individually evaluated for impairment $ —
—
—
—
1,630
88
—
1,718
Collectively evaluated for impairment 86,939
59,683
47,289
9,782
19,401
2,849
2,410
228,353
Loans acquired with deteriorated credit quality —
—
—
—
—
—
—
—
Balance at September 30, 2017 $ 86,939
59,683
47,289
9,782
21,031
2,937
2,410
230,071

Loans:
Individually evaluated for impairment $ 13,929
32,499
1,317
—
26,827
861
—
75,433
Collectively evaluated for impairment 7,840,830
4,627,769
1,499,918
397,929
4,844,633
653,840
—
19,864,919
Loans acquired with deteriorated credit quality —
6,845
—
—
1,412
320
—
8,577
Balance at September 30, 2017 $ 7,854,759
4,667,113
1,501,235
397,929
4,872,872
655,021
—
19,948,929

December 31, 2016

Multi-
Family Loans

Commercial
Real Estate Loans

Commercial
and Industrial
Loans

Construction
Loans

Residential
Mortgage Loans

Consumer
and Other
Loans
Unallocated Total
(Dollars in thousands)
Allowance for loan losses:
Beginning balance-December 31, 2015 $ 88,223
46,999
40,585
6,794
31,443
3,155
1,306
218,505
Charge-offs (161 ) (455 ) (4,485 ) (52 ) (9,425 ) (419 ) —
(14,997 )
Recoveries 1,885
689
541
267
1,631
102
—
5,115
Provision 5,614
5,563
6,851
4,644
(3,818 ) 12
884
19,750
Ending balance-December 31, 2016 $ 95,561
52,796
43,492
11,653
19,831

2,850
2,190
228,373

Individually evaluated for impairment $ —
—
—
—
1,581
20
—
1,601
Collectively evaluated for impairment 95,561
52,796
43,492
11,653
18,250
2,830
2,190
226,772
Loans acquired with deteriorated credit quality —
—
—
—
—
—
—
—
Balance at December 31, 2016 $ 95,561
52,796
43,492
11,653
19,831

2,850
2,190
228,373

Loans:
Individually evaluated for impairment $ 248
5,962
3,370
—
24,453
371
—
34,404
Collectively evaluated for impairment 7,458,883
4,439,232
1,271,913
314,843
4,685,920
596,551
—
18,767,342
Loans acquired with deteriorated credit quality —
7,106
—
—
1,507
343
—
8,956
Balance at December 31, 2016 $ 7,459,131
4,452,300
1,275,283
314,843
4,711,880

597,265
—
18,810,702

~~The Company categorizes loans into risk categories~~debt based on relevant information ~~about the ability of borrowers to service their debt~~ such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. ~~For non-homogeneous loans, such as commercial and commercial real estate loans,~~

In connection with the adoption of Topic 326 on January 1, 2020, the Company ~~analyzes the loans individually by classifying the loans as~~implemented new risk rating models for borrowers and transactions within its commercial loan portfolio. The risk rating methodology transitioned to ~~credit~~a dual risk ~~and assesses the~~rating framework which bifurcates ratings into probability of ~~collection~~default (PD) and loss given default (LGD). Relevant risks are evaluated prior to approving a transaction to determine if the transaction is within the Company’s risk appetite and the appropriate rating. Strong credit analysis requires current, reliable financial information and documented assessment of the customer’s:

•ability to perform in accordance with the terms of the credit, including adherence to covenants;

•assets and liabilities, liquidity, net worth, and contingent and other off-balance sheet items;

•tax liabilities;

•cash reserves and ability to convert assets to cash;

•income statement and the sources, level, stability, and quality of earnings:

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•projected performance, sensitized for ~~each type~~stressed circumstances; and

•industry performance relative to peers and industry.

Each commercial credit facility is assigned a PD and LGD rating for the purpose of ~~class. This analysis is performed on~~informing a ~~quarterly basis.~~credit decision, facilitating the determination of the expected level of credit loss and other portfolio management activities (as well as relationship profitability). The ~~Company uses~~dual risk rating framework and risk rating methodologies allow for consistent determination of risk across the ~~following~~Commercial business as indicated by the risk rating assigned. The methodology used by the Bank applies the same criteria for identification of a credit as for the regulatory definitions ~~for~~of risk ratings:

Pass - “Pass” assets are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

Watch - A “Watch” asset has all the characteristics of a Pass asset but warrants more than the normal level of supervision. These loans may require more detailed reporting to management because some aspects of underwriting may not conform to policy or adverse events may have affected or could affect the cash flow or ability to continue operating profitably, provided, however, the events do not constitute an undue credit risk. Residential and consumer loans delinquent 30-59 days are considered watch if not ~~already identified as impaired.~~a troubled debt restructuring (“TDR”). In addition, any residential or consumer loan currently on deferment in accordance with the CARES Act or the interagency statement issued by bank regulatory agencies are considered watch.

Special Mention- A “Special Mention” asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to

warrant adverse classification. Residential and consumer loans delinquent 60-89 days are considered special mention if not ~~already identified as impaired.~~a TDR.

Substandard- A “Substandard” asset is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Residential and consumer loans delinquent 90 days or greater as well as ~~those identified as impaired~~TDRs are considered substandard.

Doubtful- An asset classified “Doubtful” has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.

Loss- An asset or portion thereof, classified “Loss” is considered uncollectible and of such little value that its continuance on the institution’s books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery will occur. As such, it is not practical or desirable to defer the write-off.

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The following ~~tables present~~table presents the risk category of loans as of September 30, ~~2017 and December 31, 2016~~2020 by class of ~~loans, excluding PCI loans:~~loan and vintage year:


	Term Loans by Origination Year
	2020		2019	2018	2017	2016	Prior	Revolving Loans	Total
	(In thousands)

Multi-family
Pass	$	714,438	584,165	1,173,766	691,828	1,094,102	1,502,917	9,202	5,770,418
Watch	15,890		118,314	214,485	117,757	136,394	250,427	0	853,267
Special mention	4,578		0	60,203	12,823	91,279	94,057	0	262,940
Substandard	0		5,053	0	11,415	83,298	268,233	1,391	369,390

Total Multi-family	734,906		707,532	1,448,454	833,823	1,405,073	2,115,634	10,593	7,256,015
Commercial real estate
Pass	356,538		769,134	698,811	503,280	501,682	1,257,028	23,468	4,109,941
Watch	5,196		98,135	83,156	42,028	32,543	88,866	3,449	353,373
Special mention	9,000		4,948	15,595	16,684	82,123	97,628	5,534	231,512
Substandard	0		0	5,512	39,833	46,784	125,200	0	217,329

Total Commercial real estate	370,734		872,217	803,074	601,825	663,132	1,568,722	32,451	4,912,155
Commercial and industrial
Pass	767,028		629,363	329,700	147,277	196,927	394,161	171,026	2,635,482
Watch	36,337		103,990	32,748	92,865	16,428	36,531	48,772	367,671
Special mention	1,167		108,694	91,743	24,436	21,388	78,678	6,054	332,160
Substandard	563		5,995	7,659	4,504	6,693	24,227	14,105	63,746

Total Commercial and industrial	805,095		848,042	461,850	269,082	241,436	533,597	239,957	3,399,059
Construction
Pass	42,328		65,457	23,375	0	0	0	159,486	290,646
Watch	6,360		0	0	0	0	0	17,214	23,574
Special mention	0		0	15,099	0	0	0	0	15,099
Substandard	0		0	0	0	0	0	12,130	12,130

Total Construction	48,688		65,457	38,474	0	0	0	188,830	341,449
Residential mortgage
Pass	350,568		531,692	495,300	617,633	446,886	1,778,689	0	4,220,768
Watch	2,100		16,913	15,577	15,188	11,175	65,589	0	126,542
Special mention	0		0	713	0	0	3,258	0	3,971
Substandard	340		1,523	1,294	1,342	247	51,098	99	55,943

Total residential mortgage	353,008		550,128	512,884	634,163	458,308	1,898,634	99	4,407,224
Consumer and other
Pass	4,345		8,115	6,520	8,023	5,890	61,947	570,363	665,203
Watch	0		119	160	56	274	1,002	11,718	13,329
Special mention	0		0	0	0	0	0	1,124	1,124
Substandard	0		0	0	0	0	1,817	467	2,284

Total Consumer and other	4,345		8,234	6,680	8,079	6,164	64,766	583,672	681,940
Total	$	2,316,776	3,051,610	3,271,416	2,346,972	2,774,113	6,181,353	1,055,602	20,997,842

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September 30, 2017
Pass Watch
Special
Mention
Substandard Doubtful Loss Total
(In thousands)
Commercial loans:
Multi-family $ 6,884,230
678,668
158,101
133,760
—
—
7,854,759
Commercial real estate 3,828,406
528,965
135,840
167,057
—
—
4,660,268
Commercial and industrial 1,026,038
395,166
64,815
15,216
—
—
1,501,235
Construction 284,554
106,798
6,577
—
—
—
397,929
Total commercial loans 12,023,228
1,709,597
365,333
316,033
—
—
14,414,191
Residential mortgage 4,772,466
15,174
7,615
76,205
—
—
4,871,460
Consumer and other 640,416
7,048
353
6,884
—
—
654,701
Total $ 17,436,110
1,731,819
373,301
399,122
—
—
19,940,352
The following table presents the risk category of loans as of December 31, 2019 by class of loan:


	Pass		Watch	Special Mention	Substandard	Doubtful	Loss	Total
	(In thousands)
Commercial loans:
Multi-family	$	6,326,412	942,438	167,748	376,638	0	0	7,813,236
Commercial real estate	4,023,642		489,514	118,426	199,765	0	0	4,831,347
Commercial and industrial	2,031,148		693,397	111,389	115,372	0	0	2,951,306
Construction	169,236		75,319	0	18,311	0	0	262,866
Total commercial loans	12,550,438		2,200,668	397,563	710,086	0	0	15,858,755
Residential mortgage	5,074,334		14,414	5,429	50,541	0	0	5,144,718
Consumer and other	687,302		9,157	1,174	2,163	0	0	699,796
Total	$	18,312,074	2,224,239	404,166	762,790	0	0	21,703,269

Delinquent and Non-Accrual Loans

December 31, 2016
Pass Watch
Special
Mention
Substandard Doubtful Loss Total
(In thousands)
Commercial loans:
Multi-family $ 6,961,809
276,858
165,948
54,516
—
—
7,459,131
Commercial real estate 3,900,988
373,319
134,154
36,733
—
—
4,445,194
Commercial and industrial 900,190
344,628
23,588
6,877
—
—
1,275,283
Construction 230,630
76,773
3,200
4,240
—
—
314,843
Total commercial loans 11,993,617
1,071,578
326,890
102,366
—
—
13,494,451
Residential mortgage 4,600,611
21,873
10,239
77,650
—
—
4,710,373
Consumer and other 583,140
5,627
719
7,436
—
—
596,922
Total $ 17,177,368
1,099,078
337,848
187,452
—
—
18,801,746

In the absence of other intervening factors, loans granted payment deferrals related to COVID-19 are not reported as past due or placed on non-accrual status provided the borrowers have met the criteria in the CARES Act or otherwise have met the criteria included in an interagency statement issued by bank regulatory agencies. See Note 1, Summary of Significant Accounting Principles.

The following tables present the payment status of the recorded investment in past due loans as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 by class of ~~loans, excluding PCI~~ loans:


	September 30, 2020
	30-59 Days		60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable
	(In thousands)
Commercial loans:
Multi-family	$	5,327	2,103	48,402	55,832	7,200,183	7,256,015
Commercial real estate	8,881		26,632	5,035	40,548	4,871,607	4,912,155
Commercial and industrial	3,707		2,191	2,894	8,792	3,390,267	3,399,059
Construction	0		0	0	0	341,449	341,449
Total commercial loans	17,915		30,926	56,331	105,172	15,803,506	15,908,678
Residential mortgage	11,112		4,092	35,601	50,805	4,356,419	4,407,224
Consumer and other	7,463		1,124	1,686	10,273	671,667	681,940
Total	$	36,490	36,142	93,618	166,250	20,831,592	20,997,842

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September 30, 2017
30-59 Days 60-89 Days
Greater
than 90
Days

Total Past
Due
Current
Total
Loans
Receivable
(In thousands)
Commercial loans:
Multi-family $ 15,785
—
207
15,992
7,838,767
7,854,759
Commercial real estate 32,663
979
14,546
48,188
4,612,080
4,660,268
Commercial and industrial 611
1,384
336
2,331
1,498,904
1,501,235
Construction —
—
—
—
397,929
397,929
Total commercial loans 49,059
2,363
15,089
66,511
14,347,680
14,414,191
Residential mortgage 16,851
8,386
54,101
79,338
4,792,122
4,871,460
Consumer and other 7,048
353
6,025
13,426
641,275
654,701
Total $ 72,958
11,102
75,215
159,275
19,781,077
19,940,352


	December 31, 2016								December 31, 2019
	30-59 Days		60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable		30-59 Days		60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable
	(In thousands)								(In thousands)
Commercial loans:								Commercial loans:
Multi-family	$	5,272	1,099	234	6,605	7,452,526	7,459,131	Multi-family	$	45,606	1,946	22,055	69,607	7,743,629	7,813,236
Commercial real estate	6,568		31,964	6,445	44,977	4,400,217	4,445,194	Commercial real estate	7,958		525	3,787	12,270	4,819,077	4,831,347
Commercial and industrial	864		885	2,971	4,720	1,270,563	1,275,283	Commercial and industrial	7,774		2,767	5,053	15,594	2,935,712	2,951,306
Construction	—		—	—	—	314,843	314,843	Construction	0		0	0	0	262,866	262,866
Total commercial loans	12,704		33,948	9,650	56,302	13,438,149	13,494,451	Total commercial loans	61,338		5,238	30,895	97,471	15,761,284	15,858,755
Residential mortgage	24,052		10,930	58,119	93,101	4,617,272	4,710,373	Residential mortgage	16,980		6,195	27,729	50,904	5,093,814	5,144,718
Consumer and other	5,627		719	7,065	13,411	583,511	596,922	Consumer and other	9,157		1,174	1,330	11,661	688,135	699,796
Total	$	42,383	45,597	74,834	162,814	18,638,932	18,801,746	Total	$	87,475	12,607	59,954	160,036	21,543,233	21,703,269

The following table presents non-accrual loans ~~excluding PCI~~at the date indicated:


	September 30, 2020			December 31, 2019
	# of loans	Amount		# of loans	Amount
	(Dollars in thousands)
Non-accrual:
Multi-family	13	$	51,132	8	$	23,322
Commercial real estate	28	17,756		22	11,945
Commercial and industrial	19	10,901		18	12,482
Construction	0	0		0	0
Total commercial loans	60	79,789		48	47,749
Residential mortgage and consumer	250	52,251		260	47,566
Total non-accrual loans	310	$	132,040	308	$	95,315

The Company recognized $1.2 million of interest income on non-accrual loans during the nine months ended September 30, 2020.

Individually Evaluated Loans

Loans which do not share common risk characteristics with other loans are individually evaluated as part of the process of calculating the allowance for credit losses. The evaluation is determined on an individual basis using the present value of expected cash flows or the fair value of the collateral as of the reporting date. When management determines that the fair value of collateral securing a collateral dependent loan inadequately covers the balance of net principal, the net principal balance is written down to the fair value of the collateral, net of estimated selling costs as applicable, rather than assigning an allowance. See Note 16, Fair Value Measurements, for information regarding the valuation process for collateral dependent loans.

The following table presents individually evaluated collateral-dependent loans by class of loans at the ~~dates~~date indicated:

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								September 30, 2020
	September 30, 2017			December 31, 2016				Real Estate		Other	Total
	# of loans	Amount		# of loans	Amount			(Dollars in thousands)
	(Dollars in thousands)
Non-accrual:
Multi-family	4	$	14,137	2	$	482	Multi-family	$	49,571	0	49,571
Commercial real estate	31	35,329		24	9,205		Commercial real estate	11,749		0	11,749
Commercial and industrial	6	1,926		8	4,659		Commercial and industrial	3,019		4,611	7,630
Construction							Construction	0		0	0
Total commercial loans	41	51,392		34	14,346		Total commercial loans	64,339		4,611	68,950
Residential mortgage and consumer	417	74,270		478	79,928		Residential mortgage and consumer	26,401		109	26,510
Total non-accrual loans	458	$	125,662	512	$	94,274
Total collateral-dependent loans							Total collateral-dependent loans	$	90,740	4,720	95,460

TDR Loans Included in Non-Accrual

Included in the non-accrual ~~table~~tables above are TDR loans whose payment status is current, but the Company has classified as non-accrual as the loans have not maintained their current payment status for six consecutive months under the restructured terms and therefore do not meet the criteria for accrual status. As of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, these loans are comprised of the following:

September 30, 2017 December 31, 2016
# of loans Amount # of loans Amount
(Dollars in thousands)
Current TDR classified as non-accrual:
Multi-family —
$ —
1
$ 248
Commercial real estate 1
396
1
63
Commercial and industrial —
—
1
286
Total commercial loans 1
396
3
597
Residential mortgage and consumer 24
4,815
23
5,721
Total current TDR classified as non-accrual 25
$ 5,211
26
$ 6,318


	September 30, 2020			December 31, 2019
	# of loans	Amount		# of loans	Amount
	(Dollars in thousands)
TDR with payment status current classified as non-accrual:

Commercial real estate	3	$	5,378	2	$	2,360



Residential mortgage and consumer	32	4,828		25	4,218
Total TDR with payment status current classified as non-accrual	35	$	10,206	27	$	6,578

The following table presents TDR loans which were also 30-89 days delinquent and classified as non-accrual at the dates indicated:


	September 30, 2020			December 31, 2019
	# of loans	Amount		# of loans	Amount
	(Dollars in thousands)
TDR 30-89 days delinquent classified as non-accrual:





Residential mortgage and consumer	9	$	1,296	18	$	3,331
Total TDR 30-89 days delinquent classified as non-accrual	9	$	1,296	18	$	3,331

September 30, 2017 December 31, 2016
# of loans Amount # of loans Amount
(Dollars in thousands)
TDR 30-89 days delinquent classified as non-accrual:
Commercial real estate 1
$ 56
2
$ 169
Residential mortgage and consumer 12
2,447
14
2,869
Total TDR 30-89 days delinquent classified as non-accrual 13
$ 2,503
16
$ 3,038

The Company has no0 loans past due 90 days or more delinquent that are still accruing interest.

PCI loans are excluded from non-accrual loans, as they are recorded at fair value based on the present value of expected future cash flows. As of September 30, 2017, PCI loans with a carrying value of $8.6 million included $7.4 million of which were current, $75,000 of which were 30-89 days delinquent and $1.1 million of which were 90 days or more delinquent. As of December 31, 2016, PCI loans with a carrying value of $9.0 million included $7.7 million of which were current, none of which were 30-89 days delinquent and $1.3 million of which were 90 days or more delinquent.

At ~~September 30, 2017~~ and December 31, 2016, loans meeting the Company’s definition of an impaired loan were primarily collateral dependent loans which totaled $75.4 million and $34.4 million, respectively, with allocations of the allowance for loan losses of $1.7 million and $1.6 million for the periods ending September 30, 2017 and December 31, 2016, respectively. During the nine months ended September 30, 2017 and 2016, interest income received and recognized on these loans totaled $1.2 million and $1.0 million, respectively.

~~The following tables present loans individually evaluated for impairment by portfolio segment as of~~ ~~September 30, 2017~~ ~~and December 31, 2016:~~

September 30, 2017

Recorded
Investment

Unpaid Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
(In thousands)
With no related allowance:
Multi-family $ 13,929
13,977
—
14,318
121
Commercial real estate 32,499
42,362
—
32,910
284
Commercial and industrial 1,317
1,896
—
1,343
28
Construction —
—
—
—
—
Total commercial loans 47,745
58,235
—
48,571
433
Residential mortgage and consumer 12,877
16,830
—
11,785
398
With an allowance recorded:
Multi-family —
—
—
—
—
Commercial real estate —
—
—
—
—
Commercial and industrial —
—
—
—
—
Construction —
—
—
—
—
Total commercial loans —
—
—
—
—
Residential mortgage and consumer 14,811
15,422
1,718
14,338
332
Total:
Multi-family 13,929
13,977
—
14,318
121
Commercial real estate 32,499
42,362
—
32,910
284
Commercial and industrial 1,317
1,896
—
1,343
28
Construction —
—
—
—
—
Total commercial loans 47,745
58,235
—
48,571
433
Residential mortgage and consumer 27,688
32,252
1,718
26,123
730
Total impaired loans $ 75,433
90,487
1,718
74,694
1,163

December 31, 2016

Recorded
Investment

Unpaid Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
(In thousands)
With no related allowance:
Multi-family $ 248
248
—
252
20
Commercial real estate 5,962
9,265
—
5,790
301
Commercial and industrial 3,370
3,972
—
3,953
169
Construction —
—
—
—
—
Total commercial loans 9,580
13,485
—
9,995
490
Residential mortgage and consumer 11,030
14,565
—
9,899
483
With an allowance recorded:
Multi-family —
—
—
—
—
Commercial real estate —
—
—
—
—
Commercial and industrial —
—
—
—
—
Construction —
—
—
—
—
Total commercial loans —
—
—
—
—
Residential mortgage and consumer 13,794
14,382
1,601
13,689
479
Total:
Multi-family 248
248
—
252
20
Commercial real estate 5,962
9,265
—
5,790
301
Commercial and industrial 3,370
3,972
—
3,953
169
Construction —
—
—
—
—
Total commercial loans 9,580
13,485
—
9,995
490
Residential mortgage and consumer 24,824
28,947
1,601
23,588
962
Total impaired loans $ 34,404
42,432
1,601
33,583
1,452

The average recorded investment is the annual average calculated based upon the ending quarterly balances. The interest income recognized is the year to date interest income recognized on a cash basis.

Troubled Debt Restructurings

On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a TDR.

Substantially all of our TDR loan modifications involve lowering 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, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. Restructured loans remain on non-accrual status until there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

Consistent with the CARES Act and interagency guidance which allows temporary relief for current borrowers affected by COVID-19, we are working with borrowers and granting certain modifications through programs related to

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COVID-19 relief. At September 30, 2020, loans with an aggregate outstanding balance of approximately $1.02 billion have been granted modifications as a result of financial disruptions associated with the COVID-19 pandemic. Also, consistent with the CARES Act and the interagency guidelines, such modifications that met the criteria discussed in Note 1 are not included in our TDR totals and discussion below. For more information on the criteria for classifying loans as TDRs, see Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act.

The following tables present the total TDR loans at September 30, ~~2017~~2020 and December 31, 2016. There were four residential PCI loans that were classified as TDRs for the period ended September 30, 2017. There were three residential PCI loans that were classified as TDRs for the period ended December 31, 2016.2019:


	September 30, 2020
	Accrual			Non-accrual			Total
	# of loans	Amount		# of loans	Amount		# of loans	Amount
	(Dollars in thousands)
Commercial loans:

Commercial real estate	0	$	0	3	$	5,379	3	$	5,379
Commercial and industrial	1	480		2	3,381		3	3,861

Total commercial loans	1	480		5	8,760		6	9,240
Residential mortgage and consumer	50	9,329		84	17,181		134	26,510
Total	51	$	9,809	89	$	25,941	140	$	35,750


	September 30, 2017										December 31, 2019
	Accrual			Non-accrual			Total				Accrual			Non-accrual			Total
	# of loans	Amount		# of loans	Amount		# of loans	Amount			# of loans	Amount		# of loans	Amount		# of loans	Amount
	(Dollars in thousands)										(Dollars in thousands)
Commercial loans:										Commercial loans:

Commercial real estate	2	$	171	4	$	17,930	6	$	18,101	Commercial real estate	0	$	0	3	$	2,362	3	$	2,362
Commercial and industrial	—	—		1	1,316		1	1,316		Commercial and industrial	3	2,535		2	4,682		5	7,217

Total commercial loans	2	171		5	19,246		7	19,417		Total commercial loans	3	2,535		5	7,044		8	9,579
Residential mortgage and consumer	56	13,187		64	14,502		120	27,689		Residential mortgage and consumer	54	10,549		78	16,458		132	27,007
Total	58	$	13,358	69	$	33,748	127	$	47,106	Total	57	$	13,084	83	$	23,502	140	$	36,586

December 31, 2016
Accrual Non-accrual Total
# of loans Amount # of loans Amount # of loans Amount
(Dollars in thousands)
Commercial loans:
Multi-family —
$ —
1
$ 248
1
$ 248
Commercial real estate 2
352
4
3,240
6
3,592
Commercial and industrial —
—
2
1,688
2
1,688
Total commercial loans 2
352
7
5,176
9
5,528
Residential mortgage and consumer 40
9,093
61
15,731
101
24,824
Total 42
$ 9,445
68
$ 20,907
110
$ 30,352

The following tables present information about TDRs that occurred during the three and nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:


	Three Months Ended September 30,
	2020					2019
	Number of Loans	Pre-modification Recorded Investment		Post- modification Recorded Investment		Number of Loans	Pre-modification Recorded Investment		Post- modification Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings:

Commercial real estate	1	$	1,780	$	1,780	1	$	96	$	96

Commercial and industrial	0	0		0		1	270		270
Residential mortgage and consumer	7	1,813		1,813		4	453		453

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	Three Months Ended September 30,											Nine Months Ended September 30,
	2017					2016						2020					2019
	Number of Loans	Pre-modification Recorded Investment		Post- modification Recorded Investment		Number of Loans	Pre-modification Recorded Investment		Post- modification Recorded Investment			Number of Loans	Pre-modification Recorded Investment		Post- modification Recorded Investment		Number of Loans	Pre-modification Recorded Investment		Post- modification Recorded Investment
	(Dollars in thousands)											(Dollars in thousands)
Troubled Debt Restructurings:											Troubled Debt Restructurings:

Commercial real estate	—	$	—	$	—	2	$	468	$	468	Commercial real estate	2	$	3,110	$	3,110	1	$	96	$	96

Commercial and industrial											Commercial and industrial	1	933		933		1	270		270
Residential mortgage and consumer	6	1,673		1,673		6	1,051		1,051		Residential mortgage and consumer	7	1,813		1,813		14	2,850		2,850

Nine Months Ended September 30,
2017 2016

Number of
Loans

Pre-modification
Recorded
Investment

Post-
modification
Recorded
Investment

Number of
Loans

Pre-modification
Recorded
Investment

Post-
modification
Recorded
Investment
(Dollars in thousands)
Troubled Debt Restructurings:
Commercial real estate 3
$ 20,225
$ 15,787
5
$ 1,039
$ 1,039
Residential mortgage and consumer 23
4,924
4,824
20
2,600
2,600

Post-modification recorded investment represents the net book balance immediately following modification.

~~All TDRs are impaired loans, which are individually evaluated for impairment, as discussed above.~~ Collateral dependent ~~impaired~~ loans classified as TDRs were written down to the estimated fair value of the collateral. There were ~~no charge-offs~~0 charge offs for ~~collateral dependent~~ TDRs during the three months ended September 30, ~~2017 and 2016.~~2020. There were $163,000 in charge-offs for a TDR of ~~$4.5 million for collateral dependent TDRs~~an unsecured commercial and industrial loan during the nine months ended September 30, ~~2017.~~2020. There were no$156,000 and $729,000 in charge-offs for ~~collateral dependent~~ TDRs of unsecured commercial and industrial loans during the three and nine months ended September 30, ~~2016.~~2019, respectively. The allowance for loan losses associated with the TDRs presented in the above tables totaled ~~$1.7~~$1.6 million and ~~$1.6~~$1.8 million atas of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

~~Residential mortgage loan~~ Loan modifications generally involve the reduction in loan interest rate ~~and~~and/or extension of loan maturity dates and also may include step up interest rates in their modified terms which will impact their weighted average yield in the future. ~~All~~Prior to 2020, all residential loans deemed to be TDRs were modified to reflect a reduction in interest rates to current market rates. Residential loans modified in 2020 and deemed to be TDRs were granted a payment deferral related to COVID-19 but did not meet the criteria to be excluded from TDR as described in Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act. NaN of the commercial loan modifications which qualified as a TDR in the nine months ended September 30, 2020 were loans which had already been on non-accrual status and were granted a deferral of payment due to circumstances related to COVID-19. Another commercial loan modification which qualified as a TDR in the first quarter of 2020 had its maturity extended. The commercial loan modifications which qualified as TDRs in the nine months ended September 30, 2019 had their maturity extended.

The following tables present information about pre and post modification interest yield for ~~troubled debt restructurings~~TDRs which occurred during the three and nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:


	Three Months Ended September 30,
	2020					2019
	Number of Loans	Pre-modification Interest Yield		Post- modification Interest Yield		Number of Loans	Pre-modification Interest Yield		Post- modification Interest Yield
Troubled Debt Restructurings:

Commercial real estate	1	4.25	%	4.25	%	1	5.75	%	5.75	%

Commercial and industrial	0	0	%	0	%	1	6.25	%	6.25	%

Residential mortgage and consumer	7	5.94	%	5.94	%	4	4.00	%	3.82	%


	Three Months Ended September 30,											Nine Months Ended September 30,
	2017					2016						2020					2019
	Number of Loans	Pre-modification Interest Yield		Post- modification Interest Yield		Number of Loans	Pre-modification Interest Yield		Post- modification Interest Yield			Number of Loans	Pre-modification Interest Yield		Post- modification Interest Yield		Number of Loans	Pre-modification Interest Yield		Post- modification Interest Yield
Troubled Debt Restructurings:											Troubled Debt Restructurings:

Commercial real estate	—	—	%	—	%	2	4.93	%	4.89	%	Commercial real estate	2	4.09	%	4.09	%	1	5.75	%	5.75	%

Commercial and industrial											Commercial and industrial	1	4.75	%	4.75	%	1	6.25	%	6.25	%

Residential mortgage and consumer	6	3.75	%	2.98	%	6	6.30	%	2.86	%	Residential mortgage and consumer	7	5.94	%	5.94	%	14	5.07	%	4.96	%

Nine Months Ended September 30,
2017 2016

Number of
Loans

Pre-modification
Interest Yield

Post-
modification
Interest Yield

Number of
Loans

Pre-modification
Interest Yield

Post-
modification
Interest Yield
Troubled Debt Restructurings:
Commercial real estate 3
4.67 % 4.67 % 5
4.38 % 4.50 %
Residential mortgage and consumer 23
4.15 % 3.39 % 20
6.31 % 3.42 %

There were 0 payment defaults for loans modified as a TDR in the previous 12 months to September 30, 2020. Payment defaults for loans modified as a TDR in the previous 12 months to September 30, ~~2017~~2019 consisted of 81 residential ~~loans~~

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loan and 1 commercial real estate loan with a recorded investment of ~~$1.0~~$132,000 and $2.5 million, ~~and $160,000,~~ respectively, at September 30, ~~2017. Payment defaults~~2019.

Impaired Loans

The following table presents, under previously applicable GAAP, loans individually evaluated for impairment by portfolio segment as of December 31, 2019:


	December 31, 2019
	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
	(In thousands)
With no related allowance:
Multi-family	$	22,169	23,581	—	23,298	47
Commercial real estate	7,875		10,913	—	8,127	199
Commercial and industrial	12,476		21,090	—	14,860	351
Construction	0		0	—	0	0
Total commercial loans	42,520		55,584	—	46,285	597
Residential mortgage and consumer	13,783		18,066	—	13,811	267
With an allowance recorded:
Multi-family	0		0	0	0	0
Commercial real estate	0		0	0	0	0
Commercial and industrial	0		0	0	0	0
Construction	0		0	0	0	0
Total commercial loans	0		0	0	0	0
Residential mortgage and consumer	13,220		13,881	1,763	13,321	153
Total:
Multi-family	22,169		23,581	0	23,298	47
Commercial real estate	7,875		10,913	0	8,127	199
Commercial and industrial	12,476		21,090	0	14,860	351
Construction	0		0	0	0	0
Total commercial loans	42,520		55,584	0	46,285	597
Residential mortgage and consumer	27,003		31,947	1,763	27,132	420
Total impaired loans	$	69,523	87,531	1,763	73,417	1,017

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7. Allowance for Credit Losses

An analysis of the provision for credit losses is summarized as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Provision for loan losses	$	14,859	(2,500)	71,535	(2,500)
Provision for debt securities held-to-maturity	(149)		0	531	0
Provision for off-balance sheet credit exposures	(6,374)		0	774	0
Total provision for credit losses	$	8,336	(2,500)	72,840	(2,500)

Allowance for Credit Losses on Loans Receivable

An analysis of the allowance for credit losses for loans ~~modified~~receivable is summarized as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Balance at beginning of period	$	273,319	231,937	228,120	235,817
Adjustment for adoption of ASC 326	—		—	(3,551)	—
Gross charge offs	(1,472)		(3,354)	(17,459)	(10,980)
Recoveries	805		1,902	4,686	5,648
Net charge-offs	(667)		(1,452)	(12,773)	(5,332)
Allowance at acquisition on loans purchased with credit deterioration	0		0	4,180	0
Provision for credit loss expense	14,859		(2,500)	71,535	(2,500)
Balance at end of the period	$	287,511	227,985	287,511	227,985

Accrued interest receivable on loans, reported as a ~~TDR in~~component of accrued interest receivable on the ~~previous 12 months to September 30, 2016 consisted of 6 residential loans, 4 commercial real estate loans and 1 construction loan with a recorded investment of $1.0~~balance sheet, totaled $74.3 million ~~$588,000 and $132,000, respectively,~~ at September 30, ~~2016.~~2020. For the period ended September 30, 2020, the Company recorded a provision for loan loss related to interest accrued on residential and consumer loans in payment deferral.

~~Non Performing Loan Sales~~

~~For~~ The lifetime estimate considers multiple economic scenarios, including recessionary scenarios that assume deterioration in key economic variables such as gross domestic product, unemployment rate and real estate prices. As of January 1, 2020, the Company’s economic outlook was weighted to include a moderate potential of a recession with some expectation of tail risk similar to the severely adverse scenario used in stress testing. During the nine months ended September 30, ~~2017,~~2020, there was a significant change in the ~~Company sold $48.1 million~~economic outlook impacting the allowance for credit losses, with key economic factors such as the unemployment rate and gross domestic product severely affected by the impact of ~~non-performing commercial real estate and multi-family loans, resulting in no charge-off recorded through~~COVID-19. For the ~~allowance. There were no sales of non-performing loans during the nine~~three months ended September 30, ~~2016.~~2020, there was improvement in the U.S. and global macroeconomic consensus outlooks, which resulted in an improvement in the economic outlook used to determine the allowance for credit losses when compared to June 30, 2020. In response to these changes, the Company continues to assess the selection and probability weightings of the economic scenarios. Multiple economic outlooks were used for the September 30, 2020 estimate of the allowance for credit losses that included a base or consensus case, a downside recessionary case and an upside scenario to reflect the potential for continued improvement in the economic outlook. In addition, the allowance for credit losses at September 30, 2020 included qualitative reserves for certain segments that may not be fully recognized through its quantitative models. There are still many unknowns including the duration of the impact of COVID-19 on the economy and the results of the government fiscal and monetary actions along with recently implemented payment deferral programs, and the Company will continue to evaluate the allowance for credit losses and the related economic outlook each quarter.

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The following tables present the balance in the allowance for credit losses for loans by portfolio segment as of September 30, 2020 and December 31, 2019:


	September 30, 2020
	Multi- Family Loans		Commercial Real Estate Loans	Commercial and Industrial Loans	Construction Loans	Residential Mortgage Loans	Consumer and Other Loans	Unallocated	Total
	(Dollars in thousands)
Allowance for credit losses:
Balance as of December 31, 2019	$	74,099	50,925	74,396	6,816	17,391	2,548	1,945	228,120
Adjustment for adoption of ASC 326	(9,741)		(4,631)	(7,511)	(1,901)	20,089	2,089	(1,945)	(3,551)
Balance as of January 1, 2020	64,358		46,294	66,885	4,915	37,480	4,637	0	224,569
Charge-offs	(4,490)		(235)	(11,767)	0	(932)	(35)	0	(17,459)
Recoveries	30		352	3,457	0	632	215	0	4,686
Allowance at acquisition on loans purchased with credit deterioration	209		3,208	287	127	344	5	0	4,180
Provision for credit loss expense	(3,226)		62,139	19,847	501	(7,344)	(382)	0	71,535
Ending balance-September 30, 2020	$	56,881	111,758	78,709	5,543	30,180	4,440	0	287,511


	December 31, 2019
	Multi- Family Loans		Commercial Real Estate Loans	Commercial and Industrial Loans	Construction Loans	Residential Mortgage Loans	Consumer and Other Loans	Unallocated	Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance-December 31, 2018	$	82,876	48,449	71,084	7,486	20,776	3,102	2,044	235,817
Charge-offs	(2,973)		(151)	(6,833)	0	(2,241)	(934)	0	(13,132)
Recoveries	1,244		2,204	1,203	0	1,448	336	0	6,435
Provision for credit loss expense	(7,048)		423	8,942	(670)	(2,592)	44	(99)	(1,000)
Ending balance-December 31, 2019	$	74,099	50,925	74,396	6,816	17,391	2,548	1,945	228,120

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Allowance for Credit Losses on Debt Securities

An analysis of the allowance for credit losses for debt securities held-to-maturity is summarized as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2020
	(In thousands)
Balance at beginning of the period	$	3,244	0
Impact of adopting ASC 326	—		2,564



Provision for credit losses	(149)		531
Balance at end of the period	$	3,095	3,095

The following tables present the balance in the allowance for credit losses for debt securities held-to-maturity by portfolio segment as of September 30, 2020:


	September 30, 2020
	Municipal Bonds		Corporate and Other Debt Securities	Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance-December 31, 2019	$	0	0	0
Impact of adopting ASC 326	17		2,547	2,564



Provision for credit loss	25		506	531
Ending balance-September 30, 2020	$	42	3,053	3,095

Accrued interest receivable on debt securities held-to-maturity totaled $4.9 million at September 30, 2020 and is excluded from the estimate of credit losses.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

An analysis of the allowance for credit losses for off-balance sheet credit exposures is as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2020
	(In thousands)
Balance at beginning of the period	$	20,247	425
Impact of adopting ASC 326	—		12,674
Provision for credit losses	(6,374)		774
Balance at end of the period	$	13,873	13,873

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8. Deposits

Deposits are summarized as follows:


	September 30, 2020		December 31, 2019
	(In thousands)
Non-interest bearing:
Checking accounts	$	3,345,011	2,472,232
Interest bearing:
Checking accounts	5,696,645		5,512,979
Money market deposits	4,369,733		3,817,718
Savings	2,008,540		2,050,101

Certificates of deposit	3,683,606		4,007,308
Total deposits	$	19,103,535	17,860,338

September 30, 2017 December 31, 2016
(In thousands)
Non-interest bearing:
Checking accounts $ 2,263,198
2,173,493
Interest bearing:
Checking accounts 4,633,096
3,916,208
Money market deposits 4,298,171
4,150,583
Savings 2,049,509
2,092,989
Certificates of deposit 3,632,495
2,947,560
Total deposits $ 16,876,469
15,280,833

7.9. Goodwill and Other Intangible Assets

The following table summarizes ~~net~~goodwill and intangible assets ~~and goodwill~~ at September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:


	September 30, 2020		December 31, 2019
	(In thousands)
Mortgage servicing rights	$	10,976	12,125
Core deposit premiums	3,954		2,530
Other	603		668
Total other intangible assets	15,533		15,323
Goodwill	94,535		82,546
Goodwill and intangible assets	$	110,068	97,869

September 30, 2017 December 31, 2016
(In thousands)
Mortgage servicing rights $ 14,536
14,889
Core deposit premiums 6,597
8,451
Other 863
928
Total other intangible assets 21,996
24,268
Goodwill 77,571
77,571
Goodwill and intangible assets $ 99,567
101,839

For the nine months ended September 30, 2020, the increase in goodwill reflects the acquisition of Gold Coast Bancorp. See Note 3, Business Combinations.

The following table summarizes other intangible assets as of September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:


	Gross Intangible Asset		Accumulated Amortization	Valuation Allowance	Net Intangible Assets
	(In thousands)
September 30, 2020
Mortgage servicing rights	$	18,004	(5,570)	(1,458)	10,976
Core deposit premiums	23,063		(19,109)	0	3,954
Other	1,150		(547)	0	603
Total other intangible assets	$	42,217	(25,226)	(1,458)	15,533

December 31, 2019
Mortgage servicing rights	$	19,368	(7,140)	(103)	12,125
Core deposit premiums	20,561		(18,031)	0	2,530
Other	1,150		(482)	0	668
Total other intangible assets	$	41,079	(25,653)	(103)	15,323

Gross Intangible Asset Accumulated Amortization Valuation Allowance Net Intangible Assets
(In thousands)
September 30, 2017
Mortgage servicing rights $ 23,237
(8,579 ) (122 ) 14,536
Core deposit premiums 25,058
(18,461 ) —
6,597
Other 1,150
(287 ) —
863
Total other intangible assets $ 49,445
(27,327 ) (122 ) 21,996

December 31, 2016
Mortgage servicing rights $ 24,340
(9,286 ) (165 ) 14,889
Core deposit premiums 25,058
(16,607 ) —
8,451
Other 1,150
(222 ) —
928
Total other intangible assets $ 50,548
(26,115 ) (165 ) 24,268

Mortgage servicing rights are accounted for using the amortization method. Under this method, the Company amortizes the loan servicing asset in proportion to, and over the period of, estimated net servicing revenues. The Company sells loans on a servicing-retained basis. Loans that were sold on this basis had an unpaid principal balance of ~~$1.91~~$1.74 billion and ~~$1.98~~$1.67 billion at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively, all of which relate to ~~residential~~ mortgage loans. At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the servicing asset, included in other intangible assets, had an estimated fair value of ~~$15.6~~$11.2 million and ~~$16.2~~$14.1 million, respectively. At September 30, ~~2017,~~2020, fair value was based on expected future cash flows considering a weighted

average discount rate of ~~14.24%~~12.03%, a weighted average constant prepayment rate on mortgages of ~~9.78%~~ 19.14%

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and a weighted average life of ~~6.8 years, see~~4.2 years. Based on an analysis of fair values as of September 30, 2020, the Company determined that a $1.5 million valuation allowance for mortgage servicing rights was required, a decrease of $1.2 million from the previous quarter. See Note 1216 for additional details.

Core deposit premiums are amortized using an accelerated method and having a weighted average amortization period of 10 years. For the nine months ended September 30, 2020, the Company recorded $2.5 million in core deposit premiums resulting from the acquisition of Gold Coast.

8.10. Leases

The Company has operating leases for corporate offices, branch locations and certain equipment. For these operating leases, the Company recognizes a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. The Company’s leases have remaining lease terms of up to 16 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Certain of our operating leases for branch locations contain variable lease payments related to consumer price index adjustments.

The following table presents the balance sheet information related to our operating leases:


	September 30, 2020			December 31, 2019
	(Dollars in thousands)
Operating lease right-of-use assets	$	171,781		175,143
Operating lease liabilities	184,281			185,827
Weighted average remaining lease term	9.0 years			9.7 years
Weighted average discount rate	2.66		%	2.74	%

In determining the present value of lease payments, the discount rate used for each individual lease is the rate implicit in the lease, unless that rate cannot be readily determined, in which case the Company is required to use its incremental borrowing rate based on the information available at commencement date. For its incremental borrowing rate, the Company uses the borrowing rates offered to the Company by the Federal Home Loan Bank, which reflects the rates a lender would charge the Company to obtain a collateralized loan.

The following table presents the components of total operating lease cost recognized in the Consolidated Statements of Income:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Included in office occupancy and equipment expense:
Operating lease cost	$	6,589	6,320	19,396	18,963
Short-term lease cost	104		74	293	229
Variable lease cost	0		0	(1)	(1)
Included in other income:
Sublease income	67		67	185	201

The following table presents supplemental cash flow information related to operating leases:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	6,419	6,173	17,998	18,470
Operating lease liabilities arising from obtaining right-of-use assets (non-cash):
Operating leases	4,909		577	12,746	2,358

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Future minimum operating lease payments and reconciliation to operating lease liabilities at September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019
	(In thousands)
2020	$	6,716	24,013
2021	25,950		23,888
2022	24,412		22,270
2023	23,312		21,227
2024	23,252		21,162
Thereafter	104,967		100,662
Total lease payments	208,609		213,222
Less: Imputed interest	(24,328)		(27,395)
Total operating lease liabilities	$	184,281	185,827

The Company also has finance leases for certain equipment. The Company’s right-of-use assets and lease liabilities for finance leases were $2.7 million and $2.8 million, respectively, at September 30, 2020. The finance lease right-of-use assets and finance lease liabilities are included within Other assets and Other liabilities, respectively, on the Consolidated Balance Sheet.

11. Equity Incentive Plan

At the annual meeting held on June 9, 2015, stockholders of the Company approved the Investors Bancorp, Inc. 2015 Equity Incentive Plan (“2015 Plan”) which provides for the issuance or delivery of up to 30,881,296 shares (13,234,841 restricted stock awards and 17,646,455 stock options) of Investors Bancorp, Inc. common stock.

Restricted shares granted under the 2015 Plan vest in equal installments, over the service period generally ranging from 5 to 7 years beginning one year from the date of grant. Additionally, certain restricted shares awarded are performance vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. The vesting of restricted stock may accelerate in accordance with the terms of the 2015 Plan. The product of the number of shares granted and the grant date closing market price of the Company’s common stock determine the fair value of restricted shares under the 2015 Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period. For the nine months ended September 30, ~~2017~~2020 and September 30, ~~2016,~~2019, the Company granted ~~430,000~~90,067 and ~~271,890~~2,345,919 shares of restricted stock awards under the 2015 Plan, respectively.

Stock options granted under the 2015 Plan vest in equal installments, over the service period generally ranging from 5 to 7 years beginning one year from the date of grant. The vesting of stock options may accelerate in accordance with the terms of the 2015 Plan. Stock options were granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on the closing market price and have an expiration period of 10 years. ~~Upon exercise of vested options, management expects to draw on treasury stock as the source for shares.~~ For the nine months ended September 30, ~~2017~~2020 and September 30, ~~2016,~~2019, the Company granted ~~83,800~~0 stock options and ~~201,440~~995,216 stock options under the 2015 Plan, respectively.

The fair value of stock options granted as part of the 2015 Plan was estimated utilizing the Black-Scholes option pricing model using the following assumptions for the periods presented below:


	Nine Months Ended September 30,
	2019
Weighted average expected life (in years)	4.83
Weighted average risk-free rate of return	1.86		%
Weighted average volatility	19.92		%
Dividend yield	3.96		%
Weighted average fair value of options granted	$	0.89
Total stock options granted	995,216

The weighted average expected life of the stock option represents the period of time that stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is

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Nine Months Ended September 30,
2017 2016
Weighted average expected life (in years) 6.50
7.00
Weighted average risk-free rate of return 2.04 % 1.67 %
Weighted average volatility 24.73 % 24.05 %
Dividend yield 2.44 % 1.93 %
Weighted average fair value of options granted $ 3.00
$ 2.80
Total stock options granted 83,800
201,440

based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatility of the Company’s stock. The Company recognizes ~~the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards in accordance with ASC 718, “Compensation-Stock Compensation”. The Company estimates the per share fair value of option grants on the date of grant using the Black-Scholes option pricing model using assumptions~~compensation expense for the ~~expected dividend yield, expected~~fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards. Upon exercise of vested options, management expects to draw on treasury stock ~~price volatility, risk-free interest rate and expected option term. These assumptions are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision.~~

Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718), requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits are classified as an operating activity. In accordance with SEC Staff Accounting Bulletin No. 107, the Company classifies share-based compensation for employees and outside directors within “compensation and fringe benefits” in the consolidated statements of income to correspond with the same line item as the ~~cash compensation paid.~~source for shares.

The following table presents the ~~share based~~share-based compensation expense for the three and nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Stock option expense	$	941	2,285	2,940	4,937
Restricted stock expense	2,539		4,026	8,383	10,933
Total share-based compensation expense (1)	$	3,480	6,311	11,323	15,870

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in thousands)
Stock option expense $ 1,469
1,508
4,373
4,498
Restricted stock expense 3,471
3,954
10,594
10,658
Total share based compensation expense $ 4,940
5,462
14,967
15,156
(1) Included in share-based compensation expense for the three months and nine months ended September 30, 2019 was $2.0 million of accelerated stock compensation expense resulting from the settlement of shareholder litigation during the third quarter of 2019. There was no incremental expense resulting from the modification of the original awards associated with the settlement. For additional information about the settlement, refer to page 105 in Note 12 to the consolidated financial statements included under Item 15. Exhibits and Financial Statement Schedules in the Company’s December 31, 2019 Form 10-K.

The following is a summary of the Company’s stock option activity and related information for the nine months ended September 30, ~~2017:~~2020:


	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2019	5,654,461	$	12.46	5.5	$	363
Granted	0	0		—
Exercised	0	0		—
Forfeited	(10,802)	12.55
Expired	(47,087)	12.54
Outstanding at September 30, 2020	5,596,572	12.46		4.8	0
Exercisable at September 30, 2020	3,810,659	$	12.42	4.7	$	0

Number of
Stock
Options

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual
Life (in years)

Aggregate
Intrinsic Value
Outstanding at December 31, 2016 13,165,333

$11.74
8.2
$29,101
Granted 83,800
13.12
9.8
Exercised (936,881 ) 8.24
3.8
Forfeited (495,248 ) 12.53

Expired (1,429 ) 12.54

Outstanding at September 30, 2017 11,815,575

$11.99
7.7
$19,453
Exercisable at September 30, 2017 4,603,154

$11.16
6.9
$11,426

Expected future expense relating to the non-vested options outstanding as of September 30, ~~2017~~2020 is ~~$22.3~~$6.5 million over a weighted average period of ~~4.0~~1.45 years.

The following is a summary of the status of the Company’s restricted shares as of September 30, ~~2017~~2020 and changes therein during the nine months ended:


	Number of Shares Awarded	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2019	2,894,352	$	12.57
Granted	90,067	10.02
Vested	(974,221)	12.61
Forfeited	(18,860)	12.18
Outstanding and non-vested at September 30, 2020	1,991,338	$	12.44

Number of Shares Awarded Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016 5,876,491
$ 12.51
Granted 430,000
14.39
Vested (960,564 ) 12.51
Forfeited (268,163 ) 12.50
Outstanding and non vested at September 30, 2017 5,077,764
$ 12.67

Expected future expense relating to the non-vested restricted shares outstanding as of September 30, ~~2017~~2020 is ~~$56.6~~$20.1 million over a weighted average period of ~~4.1~~2.28 years.

9.12. Net Periodic Benefit Plan Expense

The Company has an Executive Supplemental Retirement Wage Replacement Plan (“~~Wage Replacement Plan”~~SERP II”) and the Supplemental ESOP and Retirement Plan (“SERP I”) (collectively, the “SERPs”). The ~~Wage Replacement Plan~~SERP II is a nonqualified, defined benefit plan which provides benefits to certain executives as designated by the Compensation and Benefits Committee of the Board of Directors. More specifically, the ~~Wage Replacement Plan~~SERP II was designed to provide participants with a normal retirement benefit equal to an annual benefit of 60% of the participant’s highest annual base salary and cash incentive (over a consecutive 36-month period within the

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participant’s credited service period) reduced by the sum of the benefits provided under the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra DB Plan”) and the SERP I.

Effective as of the close of business of December 31, 2016, the ~~Wage Replacement Plan~~SERP II was amended to freeze future benefit accruals ~~and for certain participants, structure the benefits payable attributable solely~~subsequent to the ~~participants’~~ 2016 year of service to vest over a two-year period such that the participants would have a right to 50% of their accrued benefits attributable to their 2016 year of service as of December 31, 2016, which will become 100% vested provided the participants remained continuously employed through and including December 31, 2017.service.

The ~~Supplemental ESOP~~SERP I compensates certain executives (as designated by the Compensation and Benefits Committee of the Board of Directors) participating in the ESOP whose contributions are limited by the Internal Revenue Code. The Company also maintains the Amended and Restated Director Retirement Plan (“Directors’ Plan”) for certain directors, which is a nonqualified, defined benefit plan. The Directors’ Plan was frozen on November 21, 2006 such that no new benefits accrued under, and no new directors were eligible to participate in the plan. The ~~Wage Replacement Plan, Supplemental ESOP~~SERPs and the Directors’ Plan are unfunded and the costs of the plans are recognized over the period that services are provided.

The components of net periodic benefit cost for the Directors’ Plan and the ~~Wage Replacement Plan~~SERP II are as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)

Interest cost	$	325	397	973	1,191
Amortization of:

Net loss	298		0	896	0
Total net periodic benefit cost	$	623	397	1,869	1,191

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Service cost $ 371
894
1,114
2,681
Interest cost 379
474
1,135
1,422
Amortization of:
Prior service cost —
—
—
—
Net loss 115
514
344
1,542
Total net periodic benefit cost $ 865
1,882
2,593
5,645

Due to the unfunded nature of the SERPs and the Directors’ Plan, no contributions have been made or were expected to be made during the nine months ended September 30, ~~2017.~~2020.

The Company also maintains the Pentegra DB Plan. As of December 31, 2016, the annual benefit provided under the Pentegra DB plan was frozen by an amendment to the plan. Freezing the plan eliminates all future benefit accruals and each participant’s frozen accrued benefit was determined as of December 31, 2016 and no further benefits will accrue beyond such date. Since it is a ~~multiemployer~~multi-employer plan, costs of the pension plan are based on contributions required to be made to the pension plan. As of December 31, 2016, the annual benefit provided under the Pentegra DB plan has been amended to freeze the plan. Freezing the plan eliminates all future benefit accruals and each participants frozen accrued benefit will be determined as of December 31, 2016 and no further benefits will accrue beyond such date. There was no0 contribution required during the nine months ended September 30, ~~2017.~~2020. We anticipate contributing funds to the plan to meet any minimum funding requirements for the remainder of ~~2017.~~2020.

~~10.~~13. Derivatives and Hedging Activities

The Company ~~uses various~~is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments ~~including derivatives,~~ to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its ~~exposure~~known or expected cash payments principally related to ~~interest~~the Company’s floating rate ~~risk. Certain derivatives are designated as hedging instruments in a qualifying hedge accounting relationship (fair value or cash flow hedge). As~~borrowings and pools of ~~September 30, 2017 and December 31, 2016, the Company has cash flow hedges with aggregate notional amounts of $900.0 million and $400.0 million, respectively.~~fixed-rate assets.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are primarily to reduce cost and add stability to interest expense in an effort to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of amounts subject to variability caused by changes in interest rates from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. ~~The effective portion of changes~~Changes in the fair value of derivatives designated and that qualify as cash flow hedges isare initially recorded in other comprehensive income and isare subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. ~~The Company did not have any derivatives outstanding prior to the third quarter of 2016.~~

~~During the three and nine months ended September 30, 2017 and the three months ended September 30, 2016, such~~Such derivatives were used to hedge the variability in cash flows associated with ~~certain short term wholesale funding transactions. During~~borrowings. The Company is hedging its exposure to the ~~three and nine~~variability in future cash flows for forecasted transactions over a maximum period of fourteen months ~~ended September 30, 2017 and~~(excluding forecasted transactions related to the ~~three months ended September 30, 2016, the Company did not record any hedge ineffectiveness. The ineffective portion~~payment of ~~the change in fair value of the derivatives would be recognized directly in earnings.~~variable interest on existing financial instruments).

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate borrowings. During the next twelve months, the Company estimates that an additional ~~$2.0~~$46.7 million will be reclassified as an increase to interest expense.

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Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its pools of fixed-rate assets due to changes in benchmark interest rates. The Company may use interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Such derivatives were used to hedge the changes in fair value of certain of its pools of prepayable fixed-rate assets.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

The Company terminated 2 interest rate swaps with an aggregate notional of $475.0 million during the nine months ended September 30, 2020. The Company terminated 3 interest rate swaps with an aggregate notional amount of $1.00 billion during the year ended December 31, 2019. The terminated swaps were due to mature in February 2020. There were no interest rate swaps designated as fair value hedges as of September 30, 2020.

Derivatives Not Designated as Hedges

The Company has credit derivatives resulting from participation in interest rate swaps provided to external lenders as part of loan participation arrangements which are, therefore, not used to manage interest rate risk in the Company’s assets or liabilities. Additionally, the Company provides interest rate risk management services to commercial customers, primarily interest rate swaps. The Company’s market risk from unfavorable movements in interest rates related to these derivative contracts is economically hedged by concurrently entering into offsetting derivative contracts that have identical notional values, terms and indices.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans and commercial customers.

Fair Values of Derivative Instruments on the Balance Sheet

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016:


	Asset Derivatives										Liability Derivatives
	September 30, 2020					December 31, 2019					September 30, 2020					December 31, 2019
	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value
	(in millions)			(In thousands)		(in millions)			(In thousands)		(in millions)			(In thousands)		(in millions)			(In thousands)
Derivatives designated as hedging instruments:
Interest Rate Swaps	$	3,525	Other assets	$	153	$	2,675	Other assets	$	559	$	0	Other liabilities	$	0	$	0	Other liabilities	$	0
Total derivatives designated as hedging instruments				$	153				$	559				$	0				$	0

Derivatives not designated as hedging instruments:
Interest Rate Swaps	$	933	Other assets	$	36,399	$	652	Other assets	$	5,430	$	17	Other liabilities	$	452	$	0	Other liabilities	$	0
Other Contracts	0		Other assets	0		0		Other assets	0		22		Other liabilities	230		22		Other liabilities	125
Total derivatives not designated as hedging instruments				$	36,399				$	5,430				$	682				$	125

Asset Derivatives Liability Derivatives

September 30, 2017 ⁽¹⁾
December 31, 2016
September 30, 2017 ⁽¹⁾
December 31, 2016

Balance
Sheet
Location
Fair Value
Balance
Sheet
Location
Fair Value
Balance
Sheet
Location
Fair Value
Balance
Sheet
Location
Fair Value
(In thousands)
Derivatives designated as hedging instruments:
Interest Rate Swaps Other assets $ —
Other assets $ 12,550
Other liabilities $ 467
Other liabilities $ —
Total derivatives designated as hedging instruments $ —
$ 12,550
$ 467
$ —

~~(1) In accordance with the~~ The Chicago Mercantile Exchange (“CME”) ~~rulebook changes effective January 3, 2017, the fair value is inclusive of accrued interest and variation margin posted by the CME.~~

~~The CME amended their rules to~~ legally ~~characterize~~characterizes the variation margin posted between counterparties ~~to be classified~~ as settlements of the outstanding derivative contracts instead of cash collateral. ~~The Company adopted the new rule on a prospective basis to include the accrued interest and variation margin posted by the CME in the fair value.~~

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Effect of Derivative Instruments on Accumulated Other Comprehensive Income (Loss)

The following table presents the effect of the Company’s derivative financial instruments on the Accumulated Comprehensive Income ~~Statement~~(Loss) for the three and nine months ended September 30, 2020 and 2019.


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Cash Flow Hedges - Interest rate swaps
Amount of loss recognized in other comprehensive income (loss)	$	1,698	(12,794)	(115,703)	(71,139)
Amount of (loss) gain reclassified from accumulated other comprehensive income (loss) to interest expense	(11,158)		509	(19,875)	4,327

Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships

The following table presents the effect of the Company’s derivative financial instruments on the Consolidated ~~Statement~~Statements of Income as of September 30, ~~2017~~2020 and ~~2016.~~2019.


		For the Three Months Ended September 30,			For the Nine Months Ended September 30,
		2020		2019	2020	2019
The effects of fair value and cash flow hedging:	Income statement location	(In thousands)
Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged items	Interest income on loans	$	0	1,179	4,529	7,398
Derivatives designated as hedging instruments [1]	Interest income on loans	(411)		(1,268)	(7,734)	(7,550)
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest contracts
Amount of (loss) gain reclassified from accumulated other comprehensive income (loss)	Interest expense on borrowings	(11,158)		509	(19,875)	4,327
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) as a result that a forecasted transaction is no longer probable of occurring	Interest expense on borrowings	0		0	0	0
Total amounts of income and expense line items presented in the income statement in which the effects of fair value are recorded		$	(11,569)	420	(23,080)	4,175

[1] The amount includes reclassification of ineffectiveness and gains on fair value hedging relationships which have been terminated.

As of September 30, 2020 and December 31, 2019, the following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustment for fair value hedges:


Balance sheet location	Carrying Amount of the Hedged Assets/(Liabilities)			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
	September 30, 2020		December 31, 2019	September 30, 2020		December 31, 2019
	(In thousands)
Loans receivable, net (1)	$	0	478,120	$	9,150	6,426

(1) The balance of Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) as of September 30, 2020 represents $9.1 million of hedging adjustment on discontinued hedging relationships.

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Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Cash Flow Hedges - Interest rate swaps (In thousands)
Amount of gain (loss) recognized in other comprehensive income $ (201 ) (1,109 ) (5,472 ) (1,109 )
Amount of gain (loss) reclassified from accumulated other comprehensive loss to interest expense (1,147 ) (42 ) (3,233 ) (42 )
Amount of gain (loss) recognized in other non-interest income (ineffective portion) —
—
—
—
Location and Amount of Gain or (Loss) Recognized in Income on Derivatives Not Designated as Hedging Instruments

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income as of September 30, 2020:


	Consolidated Statements of Income location	Amount of Gain (Loss) Recognized in Income on Derivative
		For the Three Months Ended September 30,			For the Nine Months Ended September 30,
		2020		2019	2020	2019
		(In thousands)
Other Contracts	Other income / (expense)	$	19	(47)	(106)	(57)
Total		$	19	(47)	(106)	(57)

Offsetting Derivatives

The following table presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives in the Consolidated Balance Sheets as of September 30, ~~2017~~2020 and December 31, ~~2016.~~2019. The net amounts of derivative assets and liabilities can be reconciled to the tabular disclosure of the fair ~~value.~~value hierarchy, see Note 16, Fair Value Measurements. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Company’s Consolidated Balance Sheets.


					Gross Amounts Not Offset
	Gross Amounts Recognized		Gross Amounts Offset	Net Amounts Presented	Financial Instruments	Cash Collateral Posted	Net Amount
	(In thousands)
September 30, 2020
Assets:
Derivative contracts	$	179	0	179	0	0	179
Liabilities:
Derivative contracts	$	682	0	682	0	450	232


December 31, 2019
Assets:
Derivative contracts	$	821	0	821	0	0	821
Liabilities:
Derivative contracts	$	125	0	125	0	0	125

Gross Amounts Not Offset
Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Financial Instruments Cash Collateral Posted Net Amount
(In thousands)
September 30, 2017
Liabilities:
Interest Rate Swaps ⁽¹⁾
$ 467
—
467
�� —
—
467
Total $ 467
—
467
—
—
467

December 31, 2016
Assets:
Interest Rate Swaps $ 12,550
—
12,550
—
12,550
—
Total $ 12,550
—
12,550
—
12,550
—

~~(1) In accordance with the CME rulebook changes effective January 3, 2017, the gross amounts recognized are inclusive of accrued interest and variation margin posted by the CME.~~

~~Credit-risk-related Contingent Features~~

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty. The Company has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well capitalized institution, then the Company could be required to terminate its derivative positions with the counterparty.

The Company has minimum collateral posting thresholds with certain of its derivative counterparties and posts collateral on a daily basis as required by the clearing house against the Company’s obligations, as required by these agreements.

~~11.~~14. Comprehensive Income

The components of comprehensive income, ~~both~~ gross and net of tax, are as follows:


	Three Months Ended September 30,
	2020				2019
	Gross		Tax	Net	Gross	Tax	Net
	(Dollars in thousands)
Net income	$	89,152	(24,840)	64,312	73,014	(21,042)	51,972
Other comprehensive income (loss):
Change in funded status of retirement obligations	417		(117)	300	19	(6)	13
Unrealized (losses) gains on debt securities available-for-sale	(2,115)		509	(1,606)	8,856	(2,058)	6,798


Accretion of loss on debt securities reclassified to held-to-maturity from available-for-sale	63		(15)	48	94	(53)	41



Other-than-temporary impairment accretion on debt securities recorded prior to January 1, 2020	257		(73)	184	317	(89)	228
Net gains (losses) on derivatives	12,856		(3,614)	9,242	(13,303)	3,739	(9,564)

Total other comprehensive income (loss)	11,478		(3,310)	8,168	(4,017)	1,533	(2,484)
Total comprehensive income	$	100,630	(28,150)	72,480	68,997	(19,509)	49,488

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Three Months Ended September 30,
2017 2016
Gross Tax Net Gross Tax Net
(Dollars in thousands)
Net income $ 74,282
(28,437 ) 45,845
71,728
(21,878 ) 49,850
Other comprehensive income (loss):
Change in funded status of retirement obligations 140
(58 ) 82
537
(219 ) 318
Unrealized gains (losses) on securities available-for-sale 869
(344 ) 525
(2,708 ) 1,053
(1,655 )
Accretion of loss on securities reclassified to held to maturity from available for sale 305
(125 ) 180
472
(193 ) 279
Reclassification adjustment for security gains included in net income —
—
—
(72 ) 29
(43 )
Other-than-temporary impairment accretion on debt securities 315
(129 ) 186
533
(218 ) 315
Net gains (losses) on derivatives arising during the period 946
(386 ) 560
(1,067 ) 436
(631 )
Total other comprehensive income (loss) 2,575
(1,042 ) 1,533
(2,305 ) 888
(1,417 )
Total comprehensive income $ 76,857
(29,479 ) 47,378
69,423
(20,990 ) 48,433


	Nine Months Ended September 30,
	2020				2019
	Gross		Tax	Net	Gross	Tax	Net
	(Dollars in thousands)
Net income	$	202,140	(55,705)	146,435	205,822	(59,068)	146,754
Other comprehensive loss:
Change in funded status of retirement obligations	861		(242)	619	56	(16)	40
Unrealized gains on debt securities available-for-sale	46,078		(11,053)	35,025	52,137	(12,532)	39,605

Accretion of loss on securities reclassified to held-to-maturity from available-for-sale	210		(50)	160	694	(222)	472

Reclassification adjustment for security losses included in net income	0		0	0	5,690	(1,469)	4,221

Other-than-temporary impairment accretion on debt securities recorded prior to January 1, 2020	892		(251)	641	819	(230)	589
Net losses on derivatives	(95,828)		26,937	(68,891)	(75,466)	21,213	(54,253)

Total other comprehensive loss	(47,787)		15,341	(32,446)	(16,070)	6,744	(9,326)
Total comprehensive income	$	154,353	(40,364)	113,989	189,752	(52,324)	137,428

Nine Months Ended September 30,
2017 2016
Gross Tax Net Gross Tax Net
(Dollars in thousands)
Net income $ 211,654
(80,156 ) 131,498
215,619
(75,958 ) 139,661
Other comprehensive income:
Change in funded status of retirement obligations 422
(173 ) 249
1,610
(658 ) 952
Unrealized gains on securities available-for-sale 8,320
(3,115 ) 5,205
19,652
(7,686 ) 11,966
Accretion of loss on securities reclassified to held to maturity from available for sale 981
(401 ) 580
1,433
(586 ) 847
Reclassification adjustment for security gains included in net income (1,275 ) 510
(765 ) (2,264 ) 906
(1,358 )
Other-than-temporary impairment accretion on debt securities 1,302
(532 ) 770
1,179
(481 ) 698
Net losses on derivatives arising during the period (2,239 ) 915
(1,324 ) (1,067 ) 436
(631 )
Total other comprehensive income 7,511
(2,796 ) 4,715
20,543
(8,069 ) 12,474
Total comprehensive income $ 219,165
(82,952 ) 136,213
236,162
(84,027 ) 152,135

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the nine months ended September 30, ~~2017~~2020 and ~~2016~~:2019:


	Change in funded status of retirement obligations		Accretion of loss on debt securities reclassified to held-to-maturity	Unrealized gains (losses) on debt securities available-for-sale and gains included in net income	Other-than- temporary impairment accretion on debt securities	Unrealized (losses) gains on derivatives	Total accumulated other comprehensive loss
	(Dollars in thousands)
Balance - December 31, 2019	$	(6,690)	(386)	29,456	(10,629)	(30,373)	(18,622)
Net change	619		160	35,025	641	(68,891)	(32,446)

Balance - September 30, 2020	$	(6,071)	(226)	64,481	(9,988)	(99,264)	(51,068)

Balance - December 31, 2018	$	(3,018)	(921)	(8,884)	(11,397)	12,651	(11,569)
Net change	40		472	43,826	589	(54,253)	(9,326)

Balance - September 30, 2019	$	(2,978)	(449)	34,942	(10,808)	(41,602)	(20,895)

Change in
funded status of
retirement
obligations
Accretion of loss on securities reclassified to held to maturity
Unrealized (losses) gains
on securities
available-for-sale and gains included in net income

Other-than-
temporary
impairment
accretion on debt
securities
Unrealized gains (losses) on derivatives
Total
accumulated
other
comprehensive
loss
(Dollars in thousands)
Balance - December 31, 2016 $ (4,895 ) (1,988 ) (12,271 ) (12,870 ) 7,424
(24,600 )
Net change 249
580
4,440
770
(1,324 ) 4,715
Balance - September 30, 2017 $ (4,646 ) (1,408 ) (7,831 ) (12,100 ) 6,100
(19,885 )

Balance - December 31, 2015 $ (12,366 ) (3,080 ) 1,371
(13,750 ) —
(27,825 )
Net change 952
847
10,608
698
(631 ) 12,474
Balance - September 30, 2016 $ (11,414 ) (2,233 ) 11,979
(13,052 ) (631 ) (15,351 )

The following table presents information about amounts reclassified from accumulated other comprehensive loss to the consolidated ~~statement~~statements of income and the affected line item in the statement where net income is presented.


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(In thousands)
Reclassification adjustment for losses included in net income
Loss on securities, net	$	0	0	0	5,690

Change in funded status of retirement obligations




Amortization of net loss (gain)	299		(2)	898	(6)

Interest expense
Reclassification adjustment for unrealized losses (gains) on derivatives	9,450		(509)	17,631	(4,327)
Total before tax	9,749		(511)	18,529	1,357
Income tax (expense) benefit	(2,716)		147	(5,106)	(225)
Net of tax	$	7,033	(364)	13,423	1,132

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Reclassification adjustment for gains included in net income
Gain on security transactions, net $ —
(72 ) (1,275 ) (2,264 )
Change in funded status of retirement obligations
Amortization of net loss 120
537
359
1,610
Interest Expense
Reclassification adjustment for unrealized losses on derivatives 1,147
42
3,233
42
Total before tax 1,267
507
2,317
(612 )
Income tax (expense) benefit (497 ) (190 ) (887 ) 248
Net of tax $ 770
317
1,430
(364 )

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15. Stockholders’ Equity

~~12.~~The changes in the components of stockholders’ equity for the three months ended September 30, 2020 and 2019 are as follows:


	Common stock		Additional paid-in capital	Retained earnings	Treasury stock	Unallocated common stock held by ESOP	Accumulated other comprehensive loss	Total stockholders’ equity
	(In thousands)
Balance at June 30, 2019	$	3,591	2,809,851	1,206,873	(995,265)	(79,764)	(18,411)	2,926,875

Net income	—		—	51,972	—	—	—	51,972
Other comprehensive loss, net of tax	—		—	—	—	—	(2,484)	(2,484)

Purchase of treasury stock (2,004,717 shares)	—		—	—	(22,486)	—	—	(22,486)
Treasury stock allocated to restricted stock plan (1,687,500 shares)	—		(21,129)	101	21,028	—	—	0
Compensation cost for stock options and restricted stock	—		6,309	—	—	—	—	6,309
Exercise of stock options	—		(287)	—	441	—	—	154
Restricted stock forfeitures (1,782,205 shares)	—		22,348	(1,354)	(20,994)	—	—	0
Cash dividend paid ($0.11 per common share)	—		—	(30,298)	—	—	—	(30,298)
ESOP shares allocated or committed to be released	—		576	—	—	749	—	1,325
Balance at September 30, 2019	$	3,591	2,817,668	1,227,294	(1,017,276)	(79,015)	(20,895)	2,931,367

Balance at June 30, 2020	$	3,619	2,851,306	1,259,605	(1,355,626)	(76,768)	(59,236)	2,622,900
Net income	—		—	64,312	—	—	—	64,312
Other comprehensive income, net of tax	—		—	—	—	—	8,168	8,168

Purchase of treasury stock (7,346 shares)	—		—	—	(57)	—	—	(57)
Treasury stock allocated to restricted stock plan (21,144 shares)	—		(167)	(92)	259	—	—	0
Compensation cost for stock options and restricted stock	—		3,479	—	—	—	—	3,479

Restricted stock forfeitures (2,887 shares)	—		33	2	(35)	—	—	0
Cash dividend paid ($0.12 per common share)	—		—	(29,987)	—	—	—	(29,987)
ESOP shares allocated or committed to be released	—		193	—	—	749	—	942
Balance at September 30, 2020	$	3,619	2,854,844	1,293,840	(1,355,459)	(76,019)	(51,068)	2,669,757

16. Fair Value Measurements

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Our debt securities available-for-sale and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity debt securities, mortgage servicing rights (“MSR”), loans receivable and other real estate owned. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets. Additionally, in connection with our mortgage banking activities we have commitments to fund loans held-for-sale and commitments to sell loans, which are considered free-standing derivative instruments, the fair values of which are not material to our financial condition or results of operations.

In accordance with ~~Financial Accounting Standards Board (“FASB”)~~FASB ASC 820, “Fair Value Measurements and Disclosures”, we group our assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

•Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

•Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

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•Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

We base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets Measured at Fair Value on a Recurring Basis

~~Securities~~Equity securities

Our equity securities portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses recognized in the Consolidated Statements of Income. The fair values of equity securities are based on quoted market prices (Level 1).

Debt securities available-for-sale

Our debt securities available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income (loss) in stockholders’ equity. The fair values of debt securities available-for-sale ~~securities~~ are based onupon quoted ~~market~~ prices ~~(Level 1), where available. The Company obtains one price~~ for each security primarily from a third-party pricing service (pricing service), which generally uses quoted or other observable inputs for the determination of fair value. The pricing service normally derives the security prices through recently reported trades for identical or similar ~~securities, making adjustments through the reporting date based upon available observable market information. For securities not actively traded~~instruments in active markets (Level 2)~~, the~~. The pricing service may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, credit spreads, default rates, prepayment speeds and non-binding broker quotes. As the Company is responsible for the determination of fair value, it performs quarterly analyses 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 test 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 adjustment in the prices obtained from the pricing service.

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Derivatives

Derivatives are reported at fair value utilizing Level 2 inputs. The fair values of interest rate swap and risk participation agreements are based on a valuation model that uses primarily observable inputs, such as benchmark yield curves and interest rate spreads.

The following tables provide the level of valuation assumptions used to determine the carrying value of our assets and liabilities measured at fair value on a recurring basis at September 30, ~~2017~~2020 and December 31, ~~2016~~.2019.


	Carrying Value at September 30, 2020
	Total		Level 1	Level 2	Level 3
	(In thousands)
Assets:
Equity securities	$	8,703	8,703	0	0
Debt securities available for sale:

Government-sponsored enterprises	$	4,741	0	4,741	0

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	1,346,260		0	1,346,260	0
Federal National Mortgage Association	1,219,643		0	1,219,643	0
Government National Mortgage Association	258,315		0	258,315	0

Total debt securities available-for-sale	$	2,828,959	0	2,828,959	0
Interest rate swaps	$	36,552	0	36,552	0
Liabilities:
Derivatives:
Interest rate swaps	$	452	0	452	0
Other contracts	230		0	230	0
Total derivatives	$	682	0	682	0


	Carrying Value at September 30, 2017						Carrying Value at December 31, 2019
	Total		Level 1	Level 2	Level 3		Total		Level 1	Level 2	Level 3
	(In thousands)						(In thousands)
Assets:						Assets:
Securities available for sale:
Equity securities	$	5,646	5,646	—	—	Equity securities	$	6,039	6,039	0	0
Debt securities available for sale:						Debt securities available for sale:

Mortgage-backed securities:						Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	653,994		—	653,994	—	Federal Home Loan Mortgage Corporation	$	1,240,379	0	1,240,379	0
Federal National Mortgage Association	1,249,110		—	1,249,110	—	Federal National Mortgage Association	1,178,049		0	1,178,049	0
Government National Mortgage Association	40,679		—	40,679	—	Government National Mortgage Association	276,962		0	276,962	0
Total mortgage-backed securities available-for-sale	1,943,783		—	1,943,783	—
Total securities available-for-sale	$	1,949,429	5,646	1,943,783	—

Total debt securities available-for-sale						Total debt securities available-for-sale	$	2,695,390	0	2,695,390	0
Interest rate swaps						Interest rate swaps	$	5,989	0	5,989	0
Liabilities:						Liabilities:
Derivative financial instruments (1)	$	467	—	467	—
Derivatives:						Derivatives:

Other contracts						Other contracts	$	125	0	125	0
Total derivatives						Total derivatives	$	125	0	125	0

~~(1) In accordance with the CME rulebook changes effective January 3, 2017, the gross amounts recognized are inclusive of accrued interest and variation margin posted by the CME.~~

Carrying Value at December 31, 2016
Total Level 1 Level 2 Level 3
(In thousands)
Assets:
Securities available for sale:
Equity securities $ 6,660
6,660
—
—
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation 598,439
—
598,439
—
Federal National Mortgage Association 1,008,587
—
1,008,587
—
Government National Mortgage Association 46,747
—
46,747
—
Total mortgage-backed securities available-for-sale 1,653,773
—
1,653,773
—
Total securities available-for-sale $ 1,660,433
6,660
1,653,773
—
Derivative financial instruments $ 12,550
—
12,550
—

There have been no changes in the methodologies used at September 30, ~~2017~~2020 from December 31, ~~2016~~,2019, and there were no transfers between Level 1 and Level 2 during the nine months ended September 30, ~~2017~~.2020.

There were no Level 3 assets measured at fair value on a recurring basis for the nine months ended September 30, ~~2017.~~2020 and December 31, 2019.

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Assets Measured at Fair Value on a Non-Recurring Basis

Mortgage Servicing Rights, Net

Mortgage servicing rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSR is obtained through independent ~~third party~~third-party valuations through an analysis of future cash flows, incorporating assumptions market participants would use in determining fair value including market discount rates, prepayment 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. At September 30, ~~2017,~~2020, the fair value model used prepayment speeds ranging from ~~1.74%~~14.88% to ~~26.28%~~32.40% and a discount rate of ~~14.24%~~12.03% for the valuation of the mortgage servicing rights. At December 31, ~~2016,~~2019, the fair value model used prepayment speeds ranging from ~~3.15%~~6.60% to ~~24.18%~~29.10% and a discount rate of ~~14.27%~~12.05% for the valuation of the mortgage servicing rights. 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 positive or negative effect on the fair value estimate.

Collateral-Dependent Loans/Impaired Loans Receivable

~~Loans~~ With the adoption of ASU 2016-13, loans which meet certain criteria are individually evaluated ~~individually~~as part of the process of calculating the allowance for credit losses. Prior to adoption, such loans were evaluated for impairment. However, the valuation method remains unchanged. A loan is ~~deemed to be impaired if~~individually evaluated when it is a commercial loan with an outstanding balance greater than $1.0 million and on non-accrual status, loans modified in a troubled debt restructuring, and other commercial loans with $1.0 million in outstanding principal if management has specific information that it is probable they will not collect all amounts due under the contractual terms of the loan agreement. ~~Our impaired~~Collateral-dependent loans ~~are generally collateral dependent and, as such,~~secured by property are carried at the estimated fair value of the collateral less estimated selling costs. Estimated fair value is calculated using ~~the fair value of collateral based on~~an independent third-party ~~appraisals for collateral-dependent loans.~~appraiser. In the event the most recent appraisal does not reflect the current market conditions due to the passage of time and other factors, management will obtain an updated appraisal or make downward adjustments to the existing appraised value based on their knowledge of the property, local real estate market conditions, recent real estate transactions, and for estimated selling costs, if applicable. ~~At September 30, 2017, appraisals~~Appraisals were generally discounted in a range of 0%~~-25% for estimated costs~~ to ~~sell.~~25%. For ~~non collateral-dependent~~non-collateral-dependent loans management estimates the fair value using discounted cash flows based on inputs that are largely unobservable and instead reflect management’s own estimates of the assumptions as a market participant would in pricing such loans.

Other Real Estate Owned and Other Repossessed Assets

Other Real Estate Owned isand Other Repossessed Assets are recorded at estimated fair value, less estimated selling costs when acquired, thus establishing a new cost basis. Fair value of foreclosed real estate property is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience and are discounted an additional 0%- to 25% for estimated costs to sell. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses. If further declines in the estimated fair value of the asset ~~declines,~~occur, a writedown is recorded through expense. The valuation

of foreclosed and repossessed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions. Operating costs after acquisition are generally expensed.

Loans Held ~~For~~for Sale

Residential mortgage loans held for sale are recorded at the lower of cost or fair value and are therefore measured at fair value on a non-recurring basis. When available, the Company uses observable secondary market data, including pricing on recent closed market transactions for loans with similar characteristics.

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The following tables provide the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a non-recurring basis at September 30, ~~2017~~2020 and December 31, ~~2016.~~2019. For the three months ended September 30, ~~2017~~2020, there was no change to the carrying value of collateral-dependent loans, other real estate owned ~~and~~or loans held for ~~sale measured at fair value on a non-recurring basis.~~sale. For the ~~year~~three months ended December 31, ~~2016~~,2019, there was no change to the carrying value of ~~other real estate owned measured at fair value on a non-recurring basis.~~impaired loans or loans held for sale.


Security Type										Security Type	Valuation Technique	Unobservable Input	Range		Weighted Average Input	Carrying Value at September 30, 2020
													Minimum	Maximum		Total		Level 1	Level 2	Level 3
																(In thousands)
MSR, net										MSR, net	Estimated cash flow	Prepayment speeds	14.9%	32.4%	19.14%	$	10,871	0	0	10,871

					Carrying Value at September 30, 2017
Security Type	Valuation Technique	Unobservable Input	Range	Weighted Average	Total		Level 1	Level 2	Level 3
					(In thousands)											$	10,871	0	0	10,871
MSR, net	Estimated cash flow	Prepayment speeds	1.74% - 26.28%	9.78%	$	12,372	—	—	12,372
Impaired loans	Market comparable	Lack of marketability	1.0% - 45.0%	31.72%	4,496		—	—	4,496
					$	16,868	—	—	16,868


					Carrying Value at December 31, 2016
Security Type	Valuation Technique	Unobservable Input	Range	Weighted Average	Total		Level 1	Level 2	Level 3	Security Type	Valuation Technique	Unobservable Input	Range		Weighted Average Input	Carrying Value at December 31, 2019
					(In thousands)								Minimum	Maximum		Total		Level 1	Level 2	Level 3
																(In thousands)
MSR, net	Estimated cash flow	Prepayment speeds	3.15% - 24.18%	9.84%	$	12,877	—	—	12,877	MSR, net	Estimated cash flow	Prepayment speeds	6.6%	29.1%	11.04%	$	10,409	0	0	10,409
Impaired loans	Estimated cash flow	Lack of marketability and probability of default	22.0% - 29.0%	26.00%	1,403		—	—	1,403
Loans held for sale	Market comparable	Lack of marketability	2.5% - 4.5%	3.45%	313		—	—	313
					$	14,593	—	—	14,593
Other real estate owned										Other real estate owned	Market comparable	Lack of marketability	0.0%	25.0%	2.70%	262		0	0	262

																$	10,671	0	0	10,671

Other Fair Value Disclosures

Fair value estimates, methods and assumptions for the Company’s financial instruments not recorded at fair value on a recurring or non-recurring basis are set forth below.

Cash and Cash Equivalents

For cash, short-term U.S. Treasury securities and due from banks, the carrying amount approximates fair value.

Debt Securities Held-to-Maturity

Our debt securities held-to-maturity portfolio, consisting primarily of mortgage-backed securities and other debt securities for which we have a positive intent and ability to hold to maturity, is carried at amortized ~~cost.~~cost less any allowance for credit losses. Management utilizes various inputs to determine the fair value of the portfolio. The Company obtains one price for each security primarily from a third-party pricing service, which generally uses quoted or other observable inputs for the determination of fair value. The pricing service normally derives the security prices through recently reported trades for identical or similar securities, making adjustments through the reporting date based upon available observable market information. For securities not actively traded, the pricing service may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, credit spreads, default rates, prepayment speeds and non-binding broker quotes. In the absence of quoted prices and in an illiquid market, valuation techniques, which require inputs that are both significant to the fair value measurement and

unobservable, are used to determine fair value of the investment. Valuation techniques are based on various assumptions, including, but not limited to forecasted cash flows, discount rates, rate of return, adjustments for nonperformance and liquidity, and liquidation values. As the Company is responsible for the determination of fair value, it performs quarterly analyses 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 test 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 adjustment in the prices obtained from the pricing service.

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FHLB Stock

The fair value of the Federal Home Loan Bank of New York (“FHLB”) stock is its carrying value, since this is the amount for which it could be redeemed. There is no active market for this stock and the Bank is required to hold a minimum investment based upon the balance of mortgage related assets held by the ~~member.~~member and or FHLB advances outstanding.

Loans

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

The fair value ~~of performing loans is calculated by discounting forecasted cash flows through the estimated maturity date using estimated~~estimates are made at a specific point in time based on relevant market information. They do not reflect any premium or discount ~~rates~~ that ~~reflect the credit and interest rate risk inherent in the loan.~~could result from offering for sale a particular financial instrument. Fair value for significant non-performing loans is based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows. Fair values estimated in this manner do not fully incorporate an exit price approach to fair value, but insteadestimates are based on ~~a comparison to current market rates for comparable loans.~~judgments regarding future expected loss experience, risk characteristics and economic conditions. These estimates are subjective, involve uncertainties, and cannot be determined with precision.

Deposit Liabilities

The fair value of deposits with no stated maturity, such as savings, checking accounts and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates which approximate currently offered for deposits of similar remaining maturities.

Borrowings

The fair value of borrowings are based on securities dealers’ estimated fair values, when available, or estimated using discounted contractual cash flows using rates which approximate the rates offered for borrowings of similar remaining maturities.

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Commitments to Extend Credit

The fair value of commitments to extend credit is 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 counterparties. For commitments to originate fixed rate loans, fair value also considers the difference between current levels of interest rates and the committed rates. Due to the short-term nature of our outstanding commitments, the fair values of these commitments are immaterial to our financial condition.

The carrying values and estimated fair values of the Company’s financial instruments are presented in the following table.


	September 30, 2020
	Carrying		Estimated Fair Value
	value		Total	Level 1	Level 2	Level 3
	(In thousands)
Financial assets:
Cash and cash equivalents	$	557,749	557,749	557,749	0	0
Equities	8,703		8,703	8,703	0	0
Debt securities available-for-sale	2,828,959		2,828,959	0	2,828,959	0
Debt securities held-to-maturity, net	1,236,610		1,304,693	0	1,240,586	64,107
FHLB stock	214,255		214,255	214,255	0	0
Loans held for sale	19,984		19,984	0	19,984	0
Net loans	20,698,057		20,975,033	0	0	20,975,033
Derivative financial instruments	36,552		36,552	0	36,552	0
Financial liabilities:
Deposits, other than time deposits	$	15,419,929	15,419,929	15,419,929	0	0
Time deposits	3,683,606		3,697,232	0	3,697,232	0
Borrowed funds	4,307,523		4,391,922	0	4,391,922	0
Derivative financial instruments	682		682	0	682	0

September 30, 2017
Carrying Estimated Fair Value
value Total Level 1 Level 2 Level 3
(In thousands)
Financial assets:
Cash and cash equivalents $ 413,322
413,322
413,322
—
—
Securities available-for-sale 1,949,429
1,949,429
5,646
1,943,783
—
Securities held-to-maturity 1,733,751
1,769,179
—
1,689,531
79,648
Stock in FHLB 232,814
232,814
232,814
—
—
Loans held for sale 6,975
6,975
—
6,975
—
Net loans 19,707,157
19,776,775
—
—
19,776,775
Financial liabilities:
Deposits, other than time deposits $ 13,243,974
13,243,974
13,243,974
—
—
Time deposits 3,632,495
3,619,747
—
3,619,747
—
Borrowed funds 4,484,869
4,488,058
—
4,488,058
—


	December 31, 2016							December 31, 2019
	Carrying		Estimated Fair Value					Carrying		Estimated Fair Value
	value		Total	Level 1	Level 2	Level 3		value		Total	Level 1	Level 2	Level 3
	(In thousands)							(In thousands)
Financial assets:							Financial assets:
Cash and cash equivalents	$	164,178	164,178	164,178	—	—	Cash and cash equivalents	$	174,915	174,915	174,915	0	0
Securities available-for-sale	1,660,433		1,660,433	6,660	1,653,773	—
Securities held-to-maturity	1,755,556		1,782,801	—	1,703,559	79,242
Stock in FHLB	237,878		237,878	237,878	—	—
Equities							Equities	6,039		6,039	6,039	0	0
Debt securities available-for-sale							Debt securities available-for-sale	2,695,390		2,695,390	0	2,695,390	0
Debt securities held-to-maturity							Debt securities held-to-maturity	1,148,815		1,190,104	0	1,116,771	73,333
FHLB stock							FHLB stock	267,219		267,219	267,219	0	0
Loans held for sale	38,298		38,298	—	38,298	—	Loans held for sale	29,797		29,797	0	29,797	0
Net loans	18,569,855		18,391,018	—	—	18,391,018	Net loans	21,476,056		21,563,627	0	0	21,563,627
Derivative financial instruments							Derivative financial instruments	5,989		5,989	0	5,989	0
Financial liabilities:							Financial liabilities:
Deposits, other than time deposits	$	12,333,273	12,333,273	12,333,273	—	—	Deposits, other than time deposits	$	13,853,030	13,853,030	13,853,030	0	0
Time deposits	2,947,560		2,938,137	—	2,938,137	—	Time deposits	4,007,308		4,007,342	0	4,007,342	0
Borrowed funds	4,546,251		4,545,745	—	4,545,745	—	Borrowed funds	5,827,111		5,834,895	0	5,834,895	0
Derivative financial instruments							Derivative financial instruments	125		125	0	125	0

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 no market exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience,

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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. Significant assets that are not considered financial assets include deferred tax assets, premises and equipment and bank owned life insurance.

Liabilities for pension and other postretirement benefits are not considered financial liabilities. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

~~13.~~17. Revenue Recognition

The Company’s contracts with customers in the scope of Topic 606, Revenue from Contracts with Customers, are contracts for deposit accounts and contracts for non-deposit investment accounts through a third-party service provider. Both types of contracts result in non-interest income being recognized. The revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer fees and out-of-network ATM transaction fees, is included as a component of fees and service charges on the consolidated statements of income. The revenue resulting from non-deposit investment accounts is included as a component of other income on the Consolidated Statements of Income.

Revenue from contracts with customers included in fees and service charges and other income was as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(Dollars in thousands)
Revenue from contracts with customers included in:
Fees and service charges	$	3,369	4,337	10,227	11,350
Other income	3,444		2,230	8,428	6,961
Total revenue from contracts with customers	$	6,813	6,567	18,655	18,311

For our contracts with customers, we satisfy our performance obligations each day as services are rendered. For our deposit account revenue, we receive payment on a daily basis as services are rendered and for our non-deposit investment account revenue, we receive payment on a monthly basis from our third-party service provider as services are rendered.

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18. Recent Accounting Pronouncements

~~In August 2017,~~


Standard	Description	Required date of adoption	Effect on Consolidated Financial Statements
Standards Adopted in 2020
Measurement of Credit Losses on Financial Instruments	This ASU changes how entities report credit losses for financial assets held at amortized cost and available-for-sale debt securities. The amendments replace the “incurred loss” approach with a methodology that incorporates macroeconomic forecast assumptions and management judgments applicable to and through the expected life of the portfolios based on relevant information about past events, including historical loss experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The amendments apply to financial assets such as loans, leases and held-to-maturity investments; and certain off-balance sheet credit exposures. The amendments expand credit quality disclosure requirements.	January 1, 2020	The Company adopted the standard’s provisions and all of its related updates on January 1, 2020. The amendments were applied on a modified retrospective basis. See Note 1 - Summary of Significant Accounting Principles for information on the impact of the adoption of ASU 2016-13 on the Company’s Consolidated Financial Statements.
Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)	This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Specifically, where a cloud computing arrangement includes a license to internal-use software, the software license is accounted for by the customer in accordance with Subtopic 350-40, “Intangibles- Goodwill and Other-Internal-Use Software”.	January 1, 2020 Early adoption permitted	The Company will apply the amendments in this Update prospectively to all implementation costs incurred after January 1, 2020. The adoption of ASU No. 2018-15 did not have an impact on the Company’s Consolidated Financial Statements.
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement	The amendments remove the requirement to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of such transfers and the valuation processes for Level 3 fair value measurements. The ASU modifies the disclosure requirements for investments in certain entities that calculate net asset value and clarify the ~~FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 718): Targeted Improvements to Accounting for Hedging Activities”. The~~ purpose of the measurement uncertainty disclosure. The ASU adds disclosure requirements about the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.	January 1, 2020 Early adoption permitted to any removed or modified disclosures and delay of adoption of additional disclosures until the effective date	Changes should be applied retrospectively to all periods presented upon the effective date with the exception of the following, which should be applied prospectively: disclosures relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the disclosures for uncertainty measurement. The adoption of ASU 2018-13 did not have an impact on the Company’s Consolidated Financial Statements.

Table of this guidance is to better align a company’s financial reporting for hedging relationships with the company’s risk management activities by expanding strategies that qualify for hedge accounting, modifying the presentationContents


Standard	Description	Required date of adoption	Effect on Consolidated Financial Statements
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	This ASU simplifies subsequent measurement of goodwill by eliminating Step 2 of the impairment test while retaining the option to perform the qualitative assessment for a reporting unit to determine whether the quantitative impairment test is necessary. The ASU also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units.	January 1, 2020 Early adoption permitted for interim or annual goodwill impairment testing dates beginning after January 1, 2017	The Company is applying the amendments in ASU 2017-04 prospectively for goodwill impairment testing conducted after January 1, 2020.
Standards Not Yet Adopted
Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity	The amendments simplify the accounting for certain financial instruments with the characteristics of liabilities and equity by reducing the number of models for convertible debt instruments and convertible preferred stock and amends how convertible instruments and equity contracts with an option to be settled in cash or shares affect the EPS calculation. The update also amends the derivatives scope exception for contracts in an entity’s own equity.	January 1, 2022 Early adoption permitted not earlier than fiscal years beginning 2021	The update is not expected to have a material impact on the Company’s Consolidated Financial Statements.
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments provide expedients and exceptions for applying GAAP to contracts or hedging relationships affected by the discontinuance of LIBOR as a benchmark rate to alleviate the burden and cost of such modifications. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments also provide a one-time election to sell and/or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.	Effective for a limited time as of March 12, 2020 through December 31, 2022	The Company is evaluating its financial instruments indexed to USD-LIBOR for which the amendments provide expedients and administrative relief.
Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force)	This update clarifies the application of the alternative provided in ASU 2016-01 to measure certain equity securities without a readily determinable fair value. The amendments in this update clarify that a company should consider observable transactions that require it to either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments further provide clarification related to the accounting for certain forward contracts and purchased options.	January 1, 2021 Early adoption permitted	The update is to be applied prospectively. The Company does not expect ASU 2020-01 to have a material impact on its Consolidated Financial Statements.

Table of certain hedging relationships in the financial statements and simplifying the application of hedge accounting in certain situations. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted in any interim or annual period before the effective date. ASU 2017-12 will be applied using a modified retrospective approach through a cumulative-effect adjustment related to the elimination of the separate measurement of ineffectiveness to the balance of accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year in which the amendments in this update are adopted. The amended presentation and disclosure guidance is required only prospectively. The Company is currently assessing the impact that the new guidance will have on the Company’s Consolidated Financial Statements.Contents

In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”. This update provides guidance about changes to terms or conditions of a share-based payment award which would require modification accounting. In particular, an entity is required to account for the effects of a modification if the fair value, vesting condition or the equity/liability classification of the modified award is not the same immediately before and after a change to the terms and conditions of the award. ASU No. 2017-09 is effective on a prospective basis for fiscal years beginning after December 15, 2017, with early adoption permitted. Due to prospective application, the new guidance is not expected to have an impact on the Company’s Consolidated Financial Statements upon adoption.


Standard	Description	Required date of adoption	Effect on Consolidated Financial Statements
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	The amendments simplify the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and also clarify and amend existing guidance.	January 1, 2021 Early adoption permitted	This update will be effective for the Company January 1, 2021 with early adoption permitted. The Company does not expect ASU No. 2019-12 to have a material impact on its Consolidated Financial Statements.
Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans	The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures, and adding disclosure requirements identified as relevant.	January 1, 2021 Early adoption permitted	The update is to be applied on a retrospective basis. The Company will evaluate the effect of ASU 2018-14 on disclosures with regard to employee benefit plans but does not expect a material impact on the Company’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. The amendments in this update require the premium on callable debt securities to be amortized to the earliest call date rather than the maturity date; however, securities held at a discount continue to be amortized to maturity. The amendments apply only to debt securities purchased at a premium that are callable at fixed prices and on preset dates. The amendments more closely align interest income recorded on debt securities held at a premium or discount with the economics of the underlying instrument. ASU No. 2017-08 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which requires that companies disaggregate the service cost component from other components of net benefit cost. This update calls for companies that offer postretirement benefits to present the service cost, which is the amount an employer has to set aside each quarter or fiscal year to cover the benefits, in the same line item with other current employee compensation costs. Other components of net benefit cost will be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. ASU No. 2017-07 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the provisions of ASU No. 2017-07 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU simplifies subsequent measurement of goodwill by eliminating Step 2 of the impairment test while retaining the option to perform the qualitative assessment for a reporting unit to determine whether the quantitative impairment test is necessary. The ASU also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment testing dates beginning after January 1, 2017. The Company is currently evaluating the provisions of ASU No. 2017-04 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update)”, which amends certain paragraphs in the ASC to give effect to announcements made by the SEC observer at two recent Emerging Issues Task Force meetings. SEC registrants are required to reasonably estimate the impact that adoption of the standards on revenue recognition, leases, and measurement of credit losses on financial instruments is expected to have on financial statements. If such estimate is indeterminate, registrants

should consider providing additional qualitative disclosures to assess the effect on financial statements as a result of adopting of these new standards. There is no effective date or transition requirements for this standard.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in this ASU provide a practical way to determine when a set of assets and activities is not a business. The screen provided in this ASU requires that when all or substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. The amendments also provide other considerations to determine whether a set is a business if the screen is not met. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the provisions of ASU No. 2017-01 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This ASU addresses the recognition of current and deferred taxes for an intra-entity asset transfer and amends current U.S. GAAP by eliminating the exception for intra-entity transfers of assets other than inventory to defer such recognition until sale to an outside party. ASU No. 2016-16 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been made available for issuance. The Company is currently evaluating the provisions of ASU No. 2016-16 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, a new standard which addresses diversity in practice related to eight specific cash flow issues: debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities will apply the standard’s provisions using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the provisions of ASU No. 2016-15 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). While early adoption is permitted, the Company does not expect to elect that option. The Company has begun its evaluation of the amended guidance including the potential impact on its Consolidated Financial Statements. The extent of the change is indeterminable at this time as it will be dependent upon portfolio composition and credit quality at the adoption date, as well as economic conditions and forecasts at that time. Upon adoption, any impact to the allowance for credit losses - currently allowance for loan and lease losses - will have an offsetting impact on retained earnings.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date for leases classified as operating leases as well as finance leases. The update also requires new quantitative disclosures related to leases in the Consolidated Financial Statements. There are practical expedients in this update that relate to leases that commenced

before the effective date, initial direct costs and the use of hindsight to extend or terminate a lease or purchase the leased asset. Lessor accounting remains largely unchanged under the new guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, with early adoption permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company continues to evaluate the impact of the guidance, including determining whether other contracts exist that are deemed to be in scope. As such, no conclusions have yet been reached regarding the potential impact on adoption on the Company’s Consolidated Financial Statements and regulatory capital and risk-weighted assets; however, the Company does not expect the amendment to have a material impact on its results of operations.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This amendment supersedes the guidance to classify equity securities with readily determinable fair values into different categories, requires equity securities to be measured at fair value with changes in the fair value recognized through net income, and simplifies the impairment assessment of equity investments without readily determinable fair values. The amendment requires public business entities that are required to disclose the fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion. The amendment requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option. The amendment requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. The amendment reduces diversity in current practice by clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets. This amendment is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities should apply the amendment by means of a cumulative effect adjustment as of the beginning of the fiscal year of adoption, with the exception of the amendment related to equity securities without readily determinable fair values, which should be applied prospectively to equity investments that exist as of the date of adoption. The Company intends to adopt the accounting standard during the first quarter of 2018, as required, and is currently evaluating the impact on its results of operations, financial position, and liquidity. Due to the Company’s proportionately small portfolio of equity securities, the update is not expected to have a material impact on the Company’s results of operations.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The objective of this amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS. This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are in the scope of other standards. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017, and early adoption is permitted. Subsequently, the FASB issued the following standards related to ASU 2014-09: ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” ; ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”; ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”; ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”; and ASU 2017-05, “Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” These amendments are intended to improve and clarify the implementation guidance of ASU 2014-09 and have the same effective date as the original standard. The Company will adopt the guidance in the first quarter of 2018. As the guidance does not apply to revenue associated with financial instruments, including loans, leases, securities and derivatives that are accounted for under other U.S. GAAP, the new revenue recognition standard does not have a material impact on the Company’s Consolidated Financial Statements. The Company’s implementation efforts have included the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts. While we have not identified any material changes related to the timing or amount of revenue recognition, the Company will continue to evaluate the need for additional disclosures.

~~14.~~19. Subsequent Events

As defined in FASB ASC 855, “Subsequent Events”, subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or available to be issued. Financial statements are considered issued when they are widely distributed to stockholders and other financial statement users for general use and reliance in a form and format that complies with U.S. GAAP.

Dividend

On October ~~26, 2017,~~28, 2020, the Company declared a cash dividend of ~~$0.09~~$0.12 per share. The ~~$0.09~~$0.12 dividend per share will be paid to stockholders on November ~~24, 2017,~~25, 2020, with a record date of November 10, ~~2017.~~2020.

Sale-Leaseback Transactions

On August 3, 2020, the Bank entered into an agreement for the sale-leaseback of 15 branch locations, subject to buyer due diligence. The transaction was not completed as of September 30, 2020 and therefore, was not reflected in the Consolidated Financial Statements as of September 30, 2020. As of November 6, 2020, a portion of the transaction has been completed and the remainder of the transaction is expected to be completed in the fourth quarter of 2020. The Company expects to realize an after-tax gain of approximately $7 million net of transaction related expenses in the fourth quarter of 2020.

On November 3, 2020, the Bank entered into an agreement for the sale-leaseback of a corporate office location, subject to buyer due diligence. The transaction is expected to close in the fourth quarter of 2020 and the Company expects to realize an after-tax gain of approximately $10 million net of transaction related expenses.

Non-Performing Loan Sale

On October 30, 2020, the Company sold a non-performing multi-family loan with a net unpaid principal balance of $18.1 million as of September 30, 2020. The Company expects to recognize a recovery of approximately $2 million in the allowance for credit losses in connection with the sale.

Debt Extinguishment

During October 2020, the Company extinguished approximately $600 million of borrowings, which resulted in a cost of approximately $8.6 million.

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ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

Certain statements contained herein are not based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which Investors Bancorp, Inc. (the “Company”) operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations or interpretations of regulations affecting financial institutions, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity. In addition, the COVID-19 pandemic is having an adverse impact on us, our customers and the communities we serve. The adverse effect of the COVID-19 pandemic on us, our customers and the communities where we operate may adversely affect our business, results of operations and financial condition for an indefinite period of time. Reference is made to Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 as well as the Company’s subsequent quarterly reports on Form 10-Q and the additional risk ~~factors~~factor included in Part II, Item 1A of this ~~quarterly report.~~Quarterly Report on Form 10-Q.

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events except as may be required by law.

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. WeAs of September 30, 2020, we consider the following to be our critical accounting policies.

Allowance for ~~Loan~~Credit Losses. The allowance for credit losses includes both the allowance for loan and lease losses isand the reserve for unfunded lending commitments and represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in ~~the loan portfolio~~financial assets at the balance sheet date. The measurement of expected credit losses is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through the provision for ~~loan~~credit losses that is charged against income. The methodology for determining the allowance for ~~loan~~credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for ~~loan~~credit losses.

The allowance for loan and security losses ~~has been determined~~is reported separately as contra-assets to loans and securities on the consolidated balance sheet. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheet in ~~accordance with U.S. generally accepted accounting principles, under which we are required~~other liabilities. The provision for credit losses related to ~~maintain an~~loans, unfunded commitments and debt securities is reported on the consolidated statement of income.

Allowance for Credit Losses on Loans Receivable

The allowance for ~~probable~~credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the allowance on an individual basis.The Company evaluates the segmentation at least annually to determine whether loans continue to share similar risk characteristics. Loans are charged off against the ~~balance sheet date. We~~allowance when the Company believes the loan balances become

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uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.

The Company calculates estimated credit loss on its loan portfolio typically using a probability of default and loss given default quantitative model methodology. The point in time probability of default and loss given default are ~~responsible~~then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount. For a small portion of the loan portfolio, i.e. unsecured consumer loans, small business loans and loans to individuals, the Company utilizes a loss rate method to calculate the expected credit loss of that asset segment.

The Company estimates the allowance for credit losses on loans using relevant available information from internal and external sources related to past events and current conditions as well as the ~~timely~~incorporation of reasonable and ~~periodic determination~~supportable forecasts. The Company evaluates the use of multiple economic scenarios and the weighting of those scenarios on a quarterly basis. The scenarios that are chosen and the amount of weighting given to each scenario depend on a variety of factors including third party economists and firms, industry trends and other available published economic information.

After the ~~allowance required. We believe that our allowance for loan losses is adequate~~reasonable and supportable forecast period, the Company reverts to ~~cover specifically identifiable losses, as well as estimated losses inherent in our portfolio for which certain~~average historical losses. Expected credit losses are ~~probable but~~estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not ~~specifically identifiable. Loans acquired are marked to fair value on~~unconditionally cancelable by the ~~date of acquisition with no valuation allowance reflected~~Company.

Also included in the allowance for ~~loan losses. In conjunction with~~loans are qualitative reserves to cover losses that are expected but, in the ~~quarterly evaluation~~Company’s assessment, may not be adequately represented in the quantitative method or the economic assumptions described above. For example, factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the ~~adequacy~~portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, the ~~allowance for loan losses,~~effect of external factors such as competition, and the legal and regulatory requirements, among other. Furthermore, the Company ~~performs an analysis~~considers the inherent uncertainty in quantitative models that are built on ~~acquired loans to determine whether or not an allowance~~historical data.

Individually evaluated

On a case-by-case basis, the Company may conclude a loan should be ~~ascribed to those loans.~~evaluated on an individual basis based on its disparate risk characteristics. The Company individually evaluates loans that meet the following criteria for expected credit loss, as the Company has determined that these loans generally do not share similar risk characteristics with other loans in the portfolio:

•Troubled debt restructured loans; and

•Other commercial loans ~~modified in a troubled debt restructuring (“TDR”), and other commercial loans~~with greater than $1.0 million in outstanding principal, if management has specific information that it is probable itthey will not collect all principal amounts due under the contractual terms of the loan agreement. ~~Impairment is measured by determining~~

When the Company determines that the loan no longer shares similar risk characteristics of other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected ~~future~~ cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk rating (if applicable) and payment history. In addition, the Company’s residential portfolio is subdivided between fixed and adjustable rate loans as adjustable rate loans are deemed to be subject to more credit risk if interest rates rise. Reserves for each loan segment or the loss factors are generally determined based on the Company’s historical loss experience over a look-back period determined to provide the appropriate amount of data to

~~accurately estimate expected losses~~ as of ~~period end. Additionally, management assesses~~ the reporting date, less estimated selling costs, as applicable, to ensure that the credit loss ~~emergence period for~~is not delayed until actual loss. If the expected losses of each loan segment and adjusts each historical loss factor accordingly. The loss emergence period is the estimated time from the date of a loss event (such as a personal bankruptcy) to the actual recognitionfair value of the ~~loss (typically via~~collateral is less than the ~~first full or partial loan charge-off), and is determined based upon a study~~amortized cost basis of the ~~Company’s past loss experience by~~ loan, ~~segment. The loss factors may also be adjusted~~the Company will charge off the difference between the fair value of the collateral, less costs to ~~account for qualitative or environmental factors that~~sell at the reporting date and the amortized cost basis of the loan.

Acquired assets

Acquired assets are ~~likely to cause estimated credit losses inherent~~included in the portfolio to differ from historical loss experience. This evaluation is based on among other things, loan and delinquency trends, general economic conditions, credit concentrations, industry trends and lending and credit management policies and procedures, but is inherently subjective as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions. Actual loan losses may be different thanCompany's calculation of the allowance for ~~loan losses we have established which could have~~credit losses. How the allowance on an acquired asset is recorded depends on whether or not it has been classified as a ~~material negative effect on our financial results.~~

Purchased ~~Credit-Impaired~~Financial Asset with Credit Deterioration (“~~PCI”~~PCD”) ~~loans,~~. PCD assets are ~~loans~~assets acquired at a discount that is due, in part, to credit quality. ~~PCI loans~~PCD assets are accounted for in accordance with ~~Accounting Standards Codification (“ASC”)~~ASC Subtopic ~~310-30~~326-20 and are initially recorded at fair value ~~(as~~as determined by the sum of the present value of expected future cash ~~flows) with no valuation~~flows and an allowance ~~(i.e.,~~for credit losses at acquisition. The allowance for PCD assets is recorded through a gross-up effect, while the allowance for ~~loan losses). The difference between~~acquired non-PCD assets such as loans is recorded through provision expense, consistent with originated loans. Thus, the ~~undiscounted cash flows expected at~~determination of which assets are PCD and non-PCD can have a

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significant effect on the accounting for these assets.

Subsequent to acquisition, and the initial carrying amount (fair value) of the PCI loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of the loans. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non-accretable difference,” are not recognized as a yield adjustment, as a loss accrual or a valuation allowance. Reclassifications of the non-accretable difference to the accretable yield may occur subsequent to the loan acquisition dates due to increases in expected cash flows of the loans and would result in an increase in yield on a prospective basis. The Company analyzes the actual cash flow versus the forecasts and any adjustments to credit loss expectations are made based on actual loss recognized as well as changes in the probability of default. For a period in which cash flows aren’t reforecasted, prior period’s estimated cash flows are adjusted to reflect the actual cash received and credit events that occurred during the current reporting period.

~~On a quarterly basis, management reviews the current status of various loan assets in order to evaluate the adequacy of~~ the allowance for ~~loan losses. In this evaluation~~PCD loans will generally follow the same estimation, provision and charge-off process ~~specific~~as non-PCD acquired and originated loans. Additionally, TDR identification for acquired loans ~~are analyzed to determine their potential risk of loss. Loans determined to~~(PCD and non-PCD) will be ~~impaired are evaluated~~consistent with the TDR identification for ~~potential loss exposure. Any shortfall results in a recommendation of a specific allowance or charge-off if~~originated loans.

Derivative Financial Instruments. As required by ASC 815, the ~~likelihood of loss is evaluated as probable. To determine the adequacy of collateral on a particular loan, an estimate of the fair value of the collateral is based~~Company records all derivatives on the most current appraised value available for real property or a discounted cash flow analysis on a business. This appraised value for real property is then reduced to reflect estimated liquidation expenses.

~~a new appraisal, an estimate of the downward adjustments to the existing appraised value is used in assessing if additional specific reserves are necessary until the updated appraisal is received.~~

~~Deferred Income Taxes. The Company records income taxes in accordance with ASC 740, “Income Taxes~~,” as amended, using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods in which those temporary differences and carryforwards became deductible. Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period of enactment. The valuation allowance is adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant.

~~Asset Impairment Judgments.~~ Certain of our assets are carried on our consolidated balance sheets at cost, fair value or at the lower of cost or fair value. Valuation allowances or write-downs are established when necessary to recognize impairment of such assets. We periodically perform analyses to test for impairment of such assets. In addition to the impairment analyses related to our loans discussed above, another significant impairment analysis is the determination of whether there has been an other-than-temporary decline in the value of one or more of our securities.

Our available-for-sale portfolio is carried at estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. While the Company does not intend to sell these securities, and it is more likely than not that we will not be required to sell these securities before their anticipated recovery of the remaining carrying value, we have the ability to sell the securities. Our held-to-maturity portfolio, consisting primarily of mortgage- backed securities and other debt securities for which we have a positive intent and ability to hold to maturity, is carried at carrying value. We conduct a periodic review and evaluation of the securities portfolio to determine if the value of any security has declined below its cost or amortized cost, and whether such decline is other-than-temporary. Management utilizes various inputs to determine the fair value of the portfolio. The use of different assumptions could have a positive or negative effect on our consolidated financial condition or results of operations.

If a determination is made that a debt security is other-than-temporarily impaired, the Company will estimate the amount of the unrealized loss that is attributable to credit and all other non-credit related factors. The credit related component will be recognized as an other-than-temporary impairment charge in non-interest income as a component of gain (loss) on securities, net. The non-credit related component will be recorded as an adjustment to accumulated other comprehensive income, net of tax.

~~Goodwill Impairment.~~ Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. Impairment exists when the carrying amount of goodwill exceeds its implied fair value. For purposes of our goodwill impairment testing, we have identified the Bank as a single reporting unit.

~~In connection with our annual impairment assessment we applied the guidance in Financial Accounting Standards Board Accounting Standards Update 2011-08,~~ ~~Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment,~~ which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. The Company performed its annual impairment assessment for goodwill testing as of November 1, 2016 and concluded that it was not more likely than not that the fair value of the reporting unit is less than its carrying amount.

~~Valuation of Mortgage Servicing Rights (“MSR”).~~ ~~The initial asset recognized for originated MSR is measured~~sheet at fair value. The fair value of MSR is estimated by reference to current market values of similar loans sold with servicing released. MSR are amortized in proportion to and over the period of estimated net servicing income. We apply the amortization methodaccounting for measurements of our MSR. MSR are assessed for impairment based on fair value at each reporting date. MSR impairment, if any, is recognized in a valuation allowance through charges to earnings as a component of fees and service charges. Subsequent increases in the fair value of impaired MSR are recognized only up to the amount of the previously recognized valuation allowance. Fees earned for servicing loans are reported as income when the related mortgage loan payments are collected.

The estimated fair value of MSR is obtained through independent third party valuations through an analysis of future cash flows, incorporating assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, including the market’s perception of future interest rate movements. The valuation allowance is then adjusted in subsequent periods to reflect changes in the measurement of impairment. All assumptions are reviewed for reasonableness on a quarterly basis to ensure they reflect current and anticipated market conditions.

The fair value of MSR is highly sensitive to changes in assumptions. Changes in prepayment speed assumptions generally have the most significant impact on the fair value of our MSR. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSR. As interest rates rise, mortgage loan prepayments slow down, which results in an increase in the fair value of MSR. Thus, any measurement of the fair value of our MSR is limited by the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different point in time.

~~Stock-Based Compensation.~~ ~~We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards in accordance with ASC 718, “Compensation-Stock Compensation~~”. We estimate the per share fair value of option grants on the date of grant using the Black-Scholes option pricing model using assumptions for the expected dividend yield, expected stock price volatility, risk-free interest rate and expected option term. These assumptions are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. The per share fair value of options is highly sensitive to changes in assumptions. In general, the per share fair value of options will move in the same direction as changes in the expected stock price volatility, risk-free interest rate and expected option term, and in the opposite direction as changes in the expected dividend yield. For example, the per share fair value of options will generally increase as expected stock price volatility increases, risk-free interest rate increases, expected option term increases and expected dividend yield decreases. The use of different assumptions or different option pricing models could result in materially different per share fair values of options.

~~Derivative Financial Instruments.~~ As part of our interest rate risk management, we may utilize, from time-to-time, derivative financial instruments which are recorded as either assets or liabilities in the consolidated balance sheets at fair value. The effective portion of 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. Derivatives designated and ~~that qualify~~qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow ~~hedges is initially recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in~~hedges. Hedge accounting generally provides for the ~~period that the hedged forecasted transaction affects earnings. The ineffective portion~~matching of the ~~change~~timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the ~~derivatives would be recognized directly~~hedged asset or liability that are attributable to the hedged risk in ~~earnings.~~a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

Executive Summary

~~Since~~COVID-19 Pandemic

Beginning in March 2020, the ~~Company’s initial public offering~~impacts of the COVID-19 pandemic, including social distancing guidelines, closure of non-essential businesses and shelter-at-home mandates, caused a global economic downturn. The economic downturn has included a decline in ~~2005,~~gross domestic product and an increase in unemployment. During the third quarter of 2020, the unemployment rate continued to decline but remained significantly elevated above the pre-pandemic unemployment rate. The COVID-19 pandemic and its impact on the economy have led to actions including the enactment of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), including the establishment of the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”).

We continue to monitor developments related to COVID-19, including, but not limited to, its impact on our employees, customers, communities and results of operations. During the first quarter of 2020, the majority of our corporate workforce had transitioned to working remotely and we ~~have~~successfully transitioned ~~from a wholesale thrift business~~ to a ~~retail commercial bank. This transition has been primarily accomplished by increasing the amount of our commercial loans~~“limited service” branch model including drive-thru operations and core deposits (savings, checking and money market accounts). Our transformation can be attributed to a number of factors, including organic growth, de novo branch openings, bank and branch acquisitions,ATM services, as well as ~~product expansion. We believe~~in-branch services available by appointment only. During the ~~attractive markets we operate~~second quarter of 2020, all of our branches resumed normal operating hours and all lobbies re-opened for our clients. In addition, the majority of our corporate workforce have returned to our corporate offices in ~~namely, New Jersey~~some capacity and the ~~greater New York metropolitan area, will continue~~remainder continues to ~~provide us~~work remotely in an effective manner. Proper protocols have been put in place in our branches and corporate offices to ensure the continued safety of our employees and customers.

While we have continued to support our customers by granting second payment deferrals for those experiencing continued hardship because of the pandemic, we have also worked diligently with ~~growth opportunities. Our primary focus is~~our customers to ~~build~~ensure a return to current payment status for a significant portion of our clients who have ended their initial deferral period. At October 20, 2020, loans with an aggregate outstanding balance of approximately $730 million, or 3% of total loans, were in COVID-19 related deferment. Based on information available as of October 20, 2020, approximately $300 million of deferments are expected to expire during the fourth quarter of 2020.

Table of Contents

The following table presents the Company’s loan portfolio at September 30, 2020 by industry sector and ~~develop profitable customer relationships across all lines~~the balance of ~~business, both consumer~~deferrals by loan portfolio as of October 20, 2020:


Segment/Industry	Loan Balance (in millions)		Active Deferrals (in millions)		Active Deferrals / Loans
Commercial and industrial:
Accommodation and Food Service	$	297	$	205	69	%
Administrative and Support and Waste Management	114		10		9	%
Agriculture, Forestry, Fishing and Hunting	20		—		0	%
Arts, Entertainment, and Recreation	56		18		32	%
Construction	276		—		0	%
Educational Service	110		—		0	%
Finance and Insurance	149		—		0	%
Health Care and Social Assistance	655		11		2	%
Information	76		—		0	%
Management of Companies and Enterprises	6		—		0	%
Manufacturing	187		15		8	%
Mining, Quarrying, and Oil and Gas Extraction	51		—		0	%
Professional, Scientific, and Technical Services	133		—		0	%
Public Administration	1		—		0	%
Real Estate and Rental	568		20		4	%
Retail Trade - clothing, home, gasoline, health	104		—		0	%
Retail Trade - sporting, hobby, vending, e-commerce	31		—		0	%
Transportation - air, rail, truck, water, pipeline	233		—		0	%
Utilities	6		—		0	%
Wholesale Trade	139		—		0	%
Other	187		3		2	%
Total Commercial and Industrial	$	3,399	$	282	8	%

Commercial real estate:
Accommodation and Food Service	$	111	$	61	55	%
Arts, Entertainment, and Recreation	18		—		0	%
Health Care and Social Assistance	54		—		0	%
Mixed Use Property	476		11		2	%
Office	1,208		10		1	%
Retail Store	947		6		1	%
Shopping Center	891		13		1	%
Warehouse	761		1		0	%
Other	446		6		1	%
Total Commercial Real Estate	$	4,912	$	108	2	%

Multi-Family	7,256		188		3	%
Construction	342		15		4	%
Residential and Consumer	5,089		137		3	%
Total Loans	$	20,998	$	730	3	%

Given the unprecedented uncertainty and ~~commercial.~~

~~Our~~continually evolving economic effects and social impacts of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations ~~depend primarily on net interest income, which is directly impacted by the market interest rate environment. Net interest income is the difference between the interest income~~and financial condition are highly uncertain. Should current economic conditions persist or continue to deteriorate, we ~~earn~~expect that this macroeconomic environment will have a continued adverse effect on our ~~interest-earning assets, primarily loans~~business and investment securities, and the interest we pay on our interest-bearing liabilities, primarily interest-bearing transaction accounts, time deposits, and borrowed funds. Net interest income is affected by the level and direction of interest rates, the shape of the market yield curve, the timing of the placement and the repricing of interest-earning assets and interest-bearing liabilities on our balance sheet, and the prepayment rates on our mortgage-related assets.

A flattening of the yield curve, caused primarily by rising short term interest rates, combined with competitive pricing in both the loan and deposit markets continue to create a challenging net interest margin environment. We continue to actively manage our interest rate risk against a backdrop of slow but positive economic growth and the potential for additional increases in short-term rates. If short-term interest rates increase, we may be subject to near-term net interest margin compression. Should

~~the yield curve steepen, we may experience an improvement in net interest income, particularly if short-term interest rates do not increase further.~~

~~Our~~ results of operations, ~~are also significantly affected by general~~including additional borrower deferral requests, delinquent loans and non-accrual loans. For more information on how the risks related to COVID-19 may adversely affect our business, results of operations and financial condition, see the additional risk factor included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Table of Contents

Third Quarter of 2020 Results Summary

During the third quarter of 2020, we demonstrated financial strength as previously deteriorated economic ~~conditions. While the consumer continues~~conditions continued to ~~benefit from lower energy costs and improved housing and employment metrics, the velocity~~improve.

•We reported net income of ~~economic growth, domestically and internationally, remains sluggish.~~

Total assets increased by $1.61 billion, or 6.9%, to $24.78 billion at September 30, 2017 from $23.17 billion at December 31, 2016. Net loans increased $1.14 billion, or 6.1%, to $19.71 billion at September 30, 2017 from $18.57 billion at December 31, 2016, and securities increased by $267.2$64.3 million, or ~~7.8%, to $3.68 billion at September 30, 2017 from $3.42 billion at December 31, 2016. During~~$0.27 per diluted share, for the ~~nine~~three months ended September 30, 2017, we originated $999.7 million in multi-family loans, $637.3 million in commercial real estate loans, $444.2 million in commercial and industrial loans, $388.5 million in residential loans, $344.6 million in construction loans and $101.5 million in consumer and other loans. Our ongoing strategy is to continue to work towards becoming more commercial bank-like and maintain a well-diversified loan portfolio. We understand the heightened regulatory sensitivity around commercial real estate and multi-family concentration and continue to be diligent in our underwriting and credit risk monitoring of these portfolios. The overall level of non-performing loans remains low2020 as compared to ~~our national~~$42.6 million, or $0.18 per diluted share, for the three months ended June 30, 2020 and ~~regional peers, however our commercial real estate concentration is above 300% of regulatory capital and therefore subjects us to heightened regulatory scrutiny.~~

Capital management is a key component of our business strategy. We continue to manage our capital through a combination of organic growth, stock repurchases and cash dividends. Effective capital management and prudent growth allows us to effectively leverage$52.0 million, or $0.20 per diluted share, for the ~~capital from the Company’s public offerings, while being mindful of tangible book value for stockholders. Our capital to total assets ratio has decreased to 12.73% at~~three months ended September 30, 2017 from 13.48% at December 31, 2016. Since the commencement of our first stock repurchase plan in March 2015 through September 30, 2017, the Company has repurchased a total of 67.3 million shares at an average cost of $11.95 per share totaling $804.2 million.2019. For the nine months ended September 30, ~~2017, stockholders’ equity was impacted by~~2020, net income of $131.5 million and $27.6 million of share-based plan activity. These increases were partially offset by cash dividends of $0.24 per share totaling $74.1 million and the repurchase of 4.4 million shares of common stock for $57.8 million.

We will continue to execute our business strategies with a focus on prudent and opportunistic growth while striving to produce financial results that will create value for our stockholders. We intend to continue to grow our business and strengthen our market share through planned de novo branch expansion, opportunistic acquisitions in our market area when appropriate, enhanced product offerings and investments in our people. We continue to enhance our employee training and development programs, build additional risk management and operational infrastructure and add personnel as our Company grows and our business changes. In August 2016 we entered into an informal agreement with the FDIC and NJDOBI with regard to Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) compliance matters. Our BSA/AML team continues to work diligently to enhance the risk infrastructure procedures and technology, while ensuring its long term sustainability for the Company.

~~Comparison of Financial Condition at September 30, 2017 and December 31, 2016~~

~~Total Assets.~~ Total assets increased by $1.61 billion, or 6.9%, to $24.78 billion at September 30, 2017 from $23.17 billion at December 31, 2016. Net loans increased $1.14 billion, or 6.1%, to $19.71 billion at September 30, 2017 from $18.57 billion at December 31, 2016, while securities increased by $267.2totaled $146.4 million, or ~~7.8%,~~$0.62 per diluted share, compared to ~~$3.68 billion at September 30, 2017 from $3.42 billion at December 31, 2016.~~

~~Net Loans.~~ ~~Net loans increased by $1.14 billion,~~$146.8 million, or ~~6.1%, to $19.71 billion at September 30, 2017 from $18.57 billion at December 31, 2016. The detail of the loan portfolio (including PCI loans) is below:~~

September 30, 2017 December 31, 2016
(Dollars in thousands)
Commercial loans:
Multi-family loans $ 7,854,759
7,459,131
Commercial real estate loans 4,667,113
4,452,300
Commercial and industrial loans 1,501,235
1,275,283
Construction loans 397,929
314,843
Total commercial loans 14,421,036
13,501,557
Residential mortgage loans 4,872,872
4,711,880
Consumer and other 655,021
597,265
Total loans 19,948,929
18,810,702
Net unamortized premiums and deferred loan costs (11,701 ) (12,474 )
Allowance for loan losses (230,071 ) (228,373 )
Net loans $ 19,707,157
18,569,855

~~During~~$0.55 per diluted share, for the nine months ended September 30, 2017, we originated $999.7 million in multi-family loans, $637.3 million in commercial real estate loans, $444.2 million in commercial and industrial loans, $388.5 million in residential loans, $344.6 million in construction loans and $101.5 million in consumer and other loans. This increase in loans reflects our continued focus on generating multi-family loans, commercial real estate loans and commercial and industrial loans, which was partially offset by pay downs and payoffs of loans. A significant portion of our commercial loan portfolio, including commercial and industrial loans, are secured by commercial real estate and are primarily on properties and businesses located in New Jersey and New York.2019.

~~Our loan portfolio contains interest-only residential and consumer loans in which the borrower makes only~~•Net interest ~~payments~~margin increased six basis points to 2.79% for the ~~first five, seven or ten years of the mortgage loan term. This feature will result in future increases in the borrower’s contractually required payments due~~three months ended September 30, 2020 compared to the ~~required amortization~~three months ended June 30, 2020. Net interest margin continued to be negatively impacted by an elevated cash position during the quarter.

•Cash and cash equivalents were $557.7 million at September 30, 2020 as compared to $735.2 million at June 30, 2020. Average interest-earning cash and cash equivalents were $978.0 million for the three months ended September 30, 2020 compared with $1.29 billion for the three months ended June 30, 2020.

•Non-interest-bearing deposits increased $304.6 million, or 10.0%, during the three months ended September 30, 2020. The cost of interest-bearing deposits decreased 9 basis points to 0.84% for the ~~principal amount after~~three months ended September 30, 2020 compared to the ~~interest-only period. These payment increases could affect~~three months ended June 30, 2020.

•Total loans decreased $364.2 million, or 1.7%, to $21.00 billion at September 30, 2020 from $21.36 billion at June 30, 2020.

•Provision for credit losses was $8.3 million for the ~~borrower’s ability~~three months ended September 30, 2020 compared with $33.3 million for the three months ended June 30, 2020.

•Total non-interest income was $19.9 million for the three months ended September 30, 2020, an increase of $9.8 million compared to ~~repay~~ the ~~loan.~~three months ended June 30, 2020.

•Total non-interest expenses were $104.1 million for the three months ended September 30, 2020, an increase of $4.0 million, or 4.0%, compared to the three months ended June 30, 2020. Included in total non-interest expenses were $965,000 of costs from the early extinguishment of $200 million of borrowings during the three months ended September 30, 2020. The ~~amount~~efficiency ratio declined to 51.63% for the three months ended September 30, 2020 from 52.06% for the three months ended June 30, 2020.

•As of ~~interest-only residential and consumer~~October 20, 2020, COVID-19 related loan deferrals totaled $730 million, or 3% of loans, compared to $2.7 billion, or 13% of loans, as of July 22, 2020.

•Non-accrual loans were $132.0 million, or 0.63% of total loans, at September 30, ~~2017~~2020 as compared to $126.8 million, or 0.59% of total loans, at June 30, 2020 and ~~December 31, 2016 was $84.0~~$92.1 million, ~~and $124.2 million, respectively. From time to time and for competitive purposes, we originate commercial~~or 0.42% of total loans, ~~with limited interest only periods. As of~~at September 30, ~~2017, we had $276.7~~2019.

•Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital Ratios were 9.76%, 13.24%, 13.24% and 14.49%, respectively, at September 30, 2020.

Comparison of Operating Results for the Three and Nine Months Ended September 30, 2020 and 2019

Net Income. Net income for the three months ended September 30, 2020 was $64.3 million ~~commercial real estate interest only loans in our loan portfolio,~~compared to net income of ~~which $178.2~~$52.0 million ~~have twenty-four~~for the three months ~~or less remaining on the interest only term. We maintain stricter underwriting criteria~~ended September 30, 2019. Net income for these interest-only loans than for amortizing loans. We believe these criteria adequately control the potential exposure to such risks and that adequate provisions for loan losses are provided for all known and inherent risks.

In addition to the loans originated for our portfolio, our mortgage subsidiary, Investors Home Mortgage Co., originated residential mortgage loans for sale to third parties totaling $126.8 million during the nine months ended September 30, ~~2017.~~

~~The following table sets forth non-accrual loans (excluding PCI loans and loans held-for-sale) on the dates indicated as well as certain asset quality ratios:~~

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
# of Loans Amount # of Loans Amount # of Loans Amount # of Loans Amount # of Loans Amount
(dollars in millions)

Multi-family 4
$ 14.2
6
$ 19.0
2
$ 0.5
2
$ 0.5
1
$ 0.2
Commercial real estate 31
35.3
36
75.6
24
8.2
24
9.2
29
8.9
Commercial and industrial 6
1.9
5
1.8
4
2.2
8
4.7
6
2.3
Construction —
—
—
—
—
—
—
—
—
—
Total commercial loans 41
51.4
47
96.4
30
10.9
34
14.4
36
11.4
Residential and consumer 417
74.3
447
81.0
470
76.2
478
79.9
481
86.1
Total non-accrual loans 458
$ 125.7
494
$ 177.4
500
$ 87.1
512
$ 94.3
517
$ 97.5
Accruing troubled debt restructured loans 58
$ 13.4
45
$ 11.7
47
$ 12.2
42
$ 9.4
31
$ 8.8
Non-accrual loans to total loans 0.63 % 0.89 % 0.45 % 0.50 % 0.53 %
Allowance for loan losses as a percent of non-accrual loans 183.09 % 129.68 % 265.16 % 242.24 % 229.31 %
Allowance for loan losses as a percent of total loans 1.15 % 1.16 % 1.18 % 1.21 % 1.22 %

~~Total non-accrual loans decreased to $125.7~~2020 was $146.4 million ~~at September 30, 2017~~ compared to $177.4 million at June 30, 2017 and $97.5 million at September 30, 2016. Classified loans as a percent of total loans increased to 2.00% at September 30, 2017 from 1.00% at December 31, 2016. We continue to proactively and diligently work to resolve our troubled loans in light of the impact that low economic growth, rising interest rates and regional real estate market conditions may have on our portfolio. During the three months ended September 30, 2017, we sold a $48.1 million commercial loan relationship which was included in our non-accrual loans at June 30, 2017.

At September 30, 2017, there were $47.1 million of loans deemed as TDRs, of which $27.7 million were residential and consumer loans, $18.1 million were commercial real estate loans and $1.3 million were commercial and industrial loans. TDR loans of $13.4 million were classified as accruing and $33.7 million were classified as non-accrual at September 30, 2017.

In addition to non-accrual loans, we continue to monitor our portfolio for potential problem loans. Potential problem loans are defined as loans or relationships which we have concerns as to the ability of the borrower to comply with the current loan repayment terms and which may cause the loan to be placed on non-accrual status. As of September 30, 2017, the Company has deemed potential problem loans excluding PCI loans, totaling $36.2 million, which is comprised of 7 commercial real estate loans totaling $8.3 million, 10 multi-family loans totaling $15.8 million and 12 commercial and industrial loans totaling $12.1 million. Management is actively monitoring all of these loans.

The ratio of non-accrual loans to total loans was 0.63% at September 30, 2017 compared to 0.50% at December 31, 2016. The allowance for loan losses as a percentage of non-accrual loans was 183.09% at September 30, 2017 compared to 242.24% at December 31, 2016. At September 30, 2017, our allowance for loan losses as a percentage of total loans was 1.15% compared to 1.21% at December 31, 2016.

At September 30, 2017, loans meeting the Company’s definition of an impaired loan totaled $75.4 million, of which $14.8 million of impaired loans had a specific allowance for credit losses of $1.7 million and $60.6 million of impaired loans had

no specific allowance for credit losses. At December 31, 2016, loans meeting the Company’s definition of an impaired loan were primarily collateral dependent loans totaling $34.4 million, of which $13.8 million had a related allowance for credit losses of $1.6 million and $20.6 million had no related allowance for credit losses.

The allowance for loan losses increased by $1.7 million to $230.1 million at September 30, 2017 from $228.4 million at December 31, 2016. The increase in our allowance for loan losses from December 31, 2016 was due to the inherent credit risk in our overall portfolio, the growth of the loan portfolio, and the level of non-accrual loans and charge-offs. Future increases in the allowance for loan losses may be necessary based on the growth and composition of the loan portfolio, the level of loan delinquency and the economic conditions in our lending area.

The following table sets forth the allowance for loan losses at September 30, 2017 and December 31, 2016 allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

September 30, 2017 December 31, 2016

Allowance for
Loan Losses

Percent of Loans
in Each Category
to Total Loans

Allowance for
Loan Losses

Percent of Loans
in Each Category
to Total Loans
(Dollars in thousands)
End of period allocated to:
Multi-family loans $ 86,939
39.4 % $ 95,561
39.6 %
Commercial real estate loans 59,683
23.4 % 52,796
23.7 %
Commercial and industrial loans 47,289
7.5 % 43,492
6.8 %
Construction loans 9,782
2.0 % 11,653
1.7 %
Residential mortgage loans 21,031
24.4 % 19,831
25.0 %
Consumer and other loans 2,937
3.3 % 2,850
3.2 %
Unallocated 2,410
—
2,190
—
Total allowance $ 230,071
100.0 % $ 228,373
100.0 %

~~Securities.~~ Securities are held primarily for liquidity, interest rate risk management and long-term yield enhancement. Our Investment Policy requires that investment transactions conform to Federal and New Jersey State investment regulations. Our investments purchased may include, but are not limited to, U.S. Treasury obligations, securities issued by various Federal Agencies, State and Municipal subdivisions, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, investment grade corporate debt instruments, and mutual funds. In addition, the Company may invest in equity securities subject to certain limitations. Purchase decisions are based upon a thorough analysis of each security to determine it conforms to our overall asset/liability management objectives. The analysis must consider its effect on our risk-based capital measurement, prospects for yield and/or appreciation and other risk factors. Securities are classified as held-to-maturity or available-for-sale when purchased.

At September 30, 2017, our securities portfolio represented 14.9% of our total assets. Securities, in the aggregate, increased by $267.2 million, or 7.8%, to $3.68 billion at September 30, 2017 from $3.42 billion at December 31, 2016. This increase was a result of purchases partially offset by paydowns and sales.

~~Stock in the Federal Home Loan Bank, Bank Owned Life Insurance and Other Assets.~~ The amount of stock we own in the FHLB decreased by $5.1 million, or 2.1%, to $232.8 million at September 30, 2017 from $237.9 million at December 31, 2016. The amount of stock we own in the FHLB is primarily related to the balance of borrowings, therefore the decrease in borrowings has an impact on FHLB stock owned. Bank owned life insurance was $154.7 million at September 30, 2017 and $161.9 million at December 31, 2016. Other assets were $6.6 million at September 30, 2017 and $14.5 million at December 31, 2016.

~~Deposits.~~ At September 30, 2017, deposits totaled $16.88 billion, representing 78.0% of our total liabilities. Our deposit strategy is focused on attracting core deposits (savings, checking and money market accounts), resulting in a deposit mix of lower cost core products. We remain committed to our plan of attracting more core deposits because core deposits represent a more stable source of low cost funds and may be less sensitive to changes in market interest rates.

We have a suite of commercial deposit products, designed to appeal to small and mid-sized business owners and non-profit organizations. The interest rates we pay, our maturity terms, service fees and withdrawal penalties are all reviewed on a periodic basis. Deposit rates and terms are based primarily on our current operating strategies, market rates, liquidity requirements, rates paid by competitors and growth goals. We also rely on personalized customer service, long-standing relationships with customers and an active marketing program to attract and retain deposits.

Deposits increased by $1.60 billion, or 10.4%, from $15.28 billion at December 31, 2016 to $16.88 billion at September 30, 2017. The increase is partially attributed to the deposit campaign in the third quarter. Checking accounts increased $806.6 million to $6.90 billion at September 30, 2017 from $6.09 billion at December 31, 2016. Core deposits represented approximately 78% of our total deposit portfolio at September 30, 2017 compared to 81% of our total deposit portfolio at December 31, 2016.

~~The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated:~~

September 30, 2017 December 31, 2016
Balance Percent of Total Deposit Balance Percent of Total Deposit
(Dollars in thousands)
Non-interest bearing:
Checking accounts $ 2,263,198
13.4 % $ 2,173,493
14.2 %
Interest-bearing:
Checking accounts 4,633,096
27.5 % 3,916,208
25.6 %
Money market deposits 4,298,171
25.5 % 4,150,583
27.2 %
Savings 2,049,509
12.1 % 2,092,989
13.7 %
Certificates of deposit 3,632,495
21.5 % 2,947,560
19.3 %
Total Deposits $ 16,876,469
100.0 % $ 15,280,833
100.0 %

~~Borrowed Funds.~~ We borrow directly from the FHLB and various financial institutions. Our FHLB borrowings, frequently referred to as advances, are over collateralized by our residential and non-residential mortgage portfolios as well as qualified investment securities. Borrowed funds decreased by $61.4 million, or 1.4%, to $4.48 billion at September 30, 2017 from $4.55 billion at December 31, 2016. Short-term borrowings were reduced as a result of our deposit gathering efforts.

~~Stockholders’ Equity.~~ ~~Stockholders’ equity increased by $31.9 million to $3.16 billion at September 30, 2017 from $3.12 billion at December 31, 2016. The increase was primarily attributed~~ to net income of ~~$131.5 million and share-based plan activity of $27.6~~$146.8 million for the nine months ended September 30, ~~2017. These increases were partially offset~~2019.

Net Interest Income. Net interest income increased by ~~cash dividends of $0.24 per share totaling $74.1~~$17.2 million, ~~and~~or 10.4%, to $181.6 million for the ~~repurchase of 4.4~~three months ended September 30, 2020 from $164.5 million ~~shares of common stock~~ for ~~$57.8~~the three months ended September 30, 2019. The net interest margin increased 26 basis points to 2.79% for the three months ended September 30, 2020 from 2.53% for the three months ended September 30, 2019.

Net interest income increased by $50.6 million, ~~during~~or 10.4%, to $536.9 million for the nine months ended September 30, ~~2017.~~2020 from $486.3 million for the nine months ended September 30, 2019. The net interest margin increased 22 basis points to 2.74% for the nine months ended September 30, 2020 from 2.52% for the nine months ended September 30, 2019.

Total interest and dividend income decreased by $23.9 million, or 9.0%, to $240.7 million for the three months ended September 30, 2020. Interest income on loans decreased by $16.5 million, or 7.1%, to $215.2 million for the three months ended September 30, 2020, primarily as a result of a 15 basis point decrease in the weighted average yield on net loans to 4.12%. In addition, the average balance of net loans decreased $843.1 million to $20.88 billion, driven by paydowns and

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payoffs, partially offset by loan originations, including $334.7 million of PPP loans, and $453.3 million of loans acquired from Gold Coast. Prepayment penalties, which are included in interest income, totaled $7.4 million for the three months ended September 30, 2020 compared to $5.2 million for the three months ended September 30, 2019. Interest income on all other interest-earning assets, excluding loans, decreased by $7.3 million, or 22.4%, to $25.5 million for the three months ended September 30, 2020 which is attributed to the weighted average yield on interest-earning assets, excluding loans, which decreased 113 basis points to 1.97%. Partially offsetting this decrease, the average balance of all other interest-earning assets, excluding loans, increased $935.4 million to $5.17 billion for the three months ended September 30, 2020.

Total interest and dividend income decreased by $36.8 million, or 4.7%, to $743.0 million for the nine months ended September 30, 2020. Interest income on loans decreased by $26.6 million, or 3.9%, to $657.5 million for the nine months ended September 30, 2020, primarily as a result of an 8 basis point decrease in the weighted average yield on net loans to 4.14%. In addition, the average balance of net loans decreased $438.9 million to $21.16 billion, driven by paydowns and payoffs, partially offset by loan originations, including $334.7 million of PPP loans, and $453.3 million of loans acquired from Gold Coast. Prepayment penalties, which are included in interest income, totaled $23.2 million for the nine months ended September 30, 2020 compared to $11.4 million for the nine months ended September 30, 2019. Interest income on all other interest-earning assets, excluding loans, decreased by $10.2 million, or 10.7%, to $85.5 million for the nine months ended September 30, 2020 which is attributed to the weighted average yield on interest-earning assets, excluding loans, which decreased 76 basis points to 2.30%. Partially offsetting this decrease, the average balance of all other interest-earning assets, excluding loans, increased $778.8 million to $4.95 billion for the nine months ended September 30, 2020.

Total interest expense decreased by $41.0 million, or 41.0%, to $59.1 million for the three months ended September 30, 2020. Interest expense on interest-bearing deposits decreased $33.9 million, or 49.8%, to $34.1 million for the three months ended September 30, 2020. The weighted average cost of interest-bearing deposits decreased 93 basis points to 0.84% for the three months ended September 30, 2020. Partially offsetting this decrease, the average balance of total interest-bearing deposits increased $848.1 million, or 5.5%, to $16.21 billion for the three months ended September 30, 2020. Interest expense on borrowed funds decreased by $7.2 million, or 22.3%, to $25.0 million for the three months ended September 30, 2020. The average balance of borrowed funds decreased $1.26 billion, or 21.9%, to $4.49 billion for the three months ended September 30, 2020. In addition, the weighted average cost of borrowings decreased 1 basis point to 2.22% for the three months ended September 30, 2020.

Total interest expense decreased by $87.4 million, or 29.8%, to $206.1 million for the nine months ended September 30, 2020. Interest expense on interest-bearing deposits decreased $74.9 million, or 37.2%, to $126.3 million for the nine months ended September 30, 2020. The weighted average cost of interest-bearing deposits decreased 70 basis points to 1.05% for the nine months ended September 30, 2020. Partially offsetting this decrease, the average balance of total interest-bearing deposits increased $753.2 million, or 4.9%, to $16.08 billion for the nine months ended September 30, 2020. Interest expense on borrowed funds decreased by $12.5 million, or 13.5%, to $79.8 million for the nine months ended September 30, 2020. The average balance of borrowed funds decreased $500.0 million, or 9.0%, to $5.07 billion for the nine months ended September 30, 2020. In addition, the weighted average cost of borrowings decreased 11 basis points to 2.10% for the nine months ended September 30, 2020.

Provision for Credit Losses. Our provision for credit losses is primarily a result of the expected credit losses on our loans, unfunded commitments and held-to-maturity debt securities over the life of these financial instruments, including the inherent credit risk in these financial instruments, the composition of and changes in our portfolios of these financial instruments, and the level of charge-offs. At September 30, 2020, our allowance for credit losses and related provision continued to be affected by the impact of COVID-19 on the current and forecasted economic conditions. For the three months ended September 30, 2020, there was improvement in the U.S. and global macroeconomic consensus outlooks, which resulted in an improvement in the economic outlook used to determine the provision for credit losses when compared to June 30, 2020. For the three months ended September 30, 2020, our provision for credit losses was $8.3 million, compared to a negative provision of $2.5 million for the three months ended September 30, 2019. For the three months ended September 30, 2020, net charge-offs were $667,000 compared to $1.5 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, our provision for credit losses was $72.8 million, compared to a negative provision of $2.5 million for the nine months ended September 30, 2019. For the nine months ended September 30, 2020, net charge-offs were $12.8 million compared to $5.3 million for the nine months ended September 30, 2019.

Non-Interest Income. Total non-interest income increased $5.1 million to $19.9 million for the three months ended September 30, 2020. This increase was primarily due to gain on loans, which increased $3.6 million due to a higher volume of mortgage banking loan sales to third parties.

Total non-interest income increased $11.8 million to $44.7 million for the nine months ended September 30, 2020. This increase was primarily due to gain on loans, which increased $7.6 million as a result of a higher volume of mortgage

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banking loan sales to third parties. In addition, the Company recognized a $5.7 million loss on the sale of securities during the second quarter of 2019.

Non-Interest Expenses. Total non-interest expenses were $104.1 million for the three months ended September 30, 2020, a decrease of $4.7 million, or 4.3%, compared to the three months ended September 30, 2019. The decrease was due to a decrease of $3.7 million in compensation and benefit expense driven by lower headcount, stock-based compensation expense and benefits expense. Included in non-interest expenses for the three months ended September 30, 2020 were $965,000 of costs from the early extinguishment of $200 million of borrowings.

Total non-interest expenses were $306.6 million for the nine months ended September 30, 2020, a decrease of $9.3 million, or 2.9%, compared to the nine months ended September 30, 2019. This decrease was due to a decrease of $8.4 million in compensation and fringe benefit expense, a decrease of $4.0 million in advertising and promotional expense and a decrease of $2.5 million in other non-interest expense. These decreases were partially offset by an increase of $2.7 million in data processing and communication expense and an increase of $2.0 million in occupancy expense. Included in non-interest expenses for the nine months ended September 30, 2020 were $3.6 million of Gold Coast acquisition-related expenses.

Income Taxes. Income tax expense for the third quarter of 2020 was $24.8 million compared to $21.0 million for the third quarter 2019. The effective tax rate was 27.9% for the three months ended September 30, 2020 and 28.8% for the three months ended September 30, 2019. Income tax expense for the nine months ended September 30, 2020 was $55.7 million compared to $59.1 million the nine months ended September 30, 2019. The effective tax rate was 27.6% for the nine months ended September 30, 2020 and 28.7% for the nine months ended September 30, 2019. The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income and the level of expenses not deductible for tax purposes relative to the overall level of pre-tax income. In addition, the effective tax rate is affected by the level of income allocated to the various state and local jurisdictions where we operate, because tax rates differ among such jurisdictions.

Analysis of Net Interest Income

Net interest income represents the difference between income we earn on our interest-earning assets and the expense we pay on interest-bearing liabilities. Net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned on such assets and paid on such liabilities.

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, however interest receivable on these loans have been fully reserved for and not included in interest income. The yields set forth below include the effect of deferred fees, discounts and premiums, and purchase accounting adjustments and other adjustments that are amortized or accreted to interest income or expense.

Three Months Ended September 30,
2017 2016

Average
Outstanding
Balance

Interest
Earned/
Paid

Average
Yield/
Rate

Average
Outstanding
Balance

Interest
Earned/
Paid

Average
Yield/
Rate
(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits $ 379,670
$ 875
0.92 % $ 129,226
$ 76
0.24 %
Securities available-for-sale 1,901,626
9,674
2.03 % 1,424,338
6,315
1.77 %
Securities held-to-maturity 1,672,675
10,589
2.53 % 1,815,288
10,434
2.30 %
Net loans 19,633,388
201,069
4.10 % 17,707,883
179,234
4.05 %
Stock in FHLB 241,033
3,557
5.90 % 216,813
2,315
4.27 %
Total interest-earning assets 23,828,392
225,764
3.79 % 21,293,548
198,374
3.73 %
Non-interest-earning assets 759,203
778,244

Total assets $ 24,587,595
$ 22,071,792

Interest-bearing liabilities:
Savings deposits $ 2,076,769
$ 2,174
0.42 % $ 2,104,583
$ 1,577
0.30 %
Interest-bearing checking 4,422,930
10,883
0.98 % 3,472,472
4,451
0.51 %
Money market accounts 4,320,547
9,478
0.88 % 3,971,339
6,605
0.67 %
Certificates of deposit 3,481,135
9,765
1.12 % 3,009,330
7,693
1.02 %
Total interest-bearing deposits 14,301,381
32,300
0.90 % 12,557,724
20,326
0.65 %
Borrowed funds 4,633,628
22,553
1.95 % 4,074,743
18,442
1.81 %
Total interest-bearing liabilities 18,935,009
54,853
1.16 % 16,632,467
38,768
0.93 %
Non-interest-bearing liabilities 2,485,667
2,316,873

Total liabilities 21,420,676
18,949,340

Stockholders’ equity 3,166,919
3,122,452

Total liabilities and stockholders’ equity $ 24,587,595
$ 22,071,792

Net interest income $ 170,911
$ 159,606

Net interest rate spread⁽¹⁾
2.63 % 2.80 %
Net interest-earning assets⁽²⁾
$ 4,893,383
$ 4,661,081

Net interest margin⁽³⁾
2.87 % 3.00 %
Ratio of interest-earning assets to total interest-bearing liabilities 1.26
1.28

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	Three Months Ended September 30,
	2020						2019
	Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate		Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits	$	978,037	$	233	0.10	%	$	224,882	$	821	1.46	%
Equity securities	7,177		45		2.51	%	6,001��		36		2.40	%
Debt securities available-for-sale	2,758,679		13,473		1.95	%	2,591,055		18,167		2.80	%
Debt securities held-to-maturity	1,200,933		8,277		2.76	%	1,131,194		9,340		3.30	%
Net loans	20,879,661		215,221		4.12	%	21,722,751		231,734		4.27	%
Stock in FHLB	223,032		3,452		6.19	%	279,356		4,456		6.38	%
Total interest-earning assets	26,047,519		240,701		3.70	%	25,955,239		264,554		4.08	%
Non-interest-earning assets	1,157,358						992,118
Total assets	$	27,204,877					$	26,947,357
Interest-bearing liabilities:
Savings deposits	$	2,033,495	$	2,690	0.53	%	$	1,958,748	$	4,377	0.89	%
Interest-bearing checking	5,901,759		8,658		0.59	%	4,894,643		21,094		1.72	%
Money market accounts	4,349,536		8,520		0.78	%	3,750,846		16,065		1.71	%
Certificates of deposit	3,923,651		14,241		1.45	%	4,756,086		26,436		2.22	%
Total interest-bearing deposits	16,208,441		34,109		0.84	%	15,360,323		67,972		1.77	%
Borrowed funds	4,493,591		24,970		2.22	%	5,756,197		32,130		2.23	%
Total interest-bearing liabilities	20,702,032		59,079		1.14	%	21,116,520		100,102		1.90	%
Non-interest-bearing liabilities	3,856,553						2,892,067
Total liabilities	24,558,585						24,008,587
Stockholders’ equity	2,646,292						2,938,770
Total liabilities and stockholders’ equity	$	27,204,877					$	26,947,357
Net interest income			$	181,622					$	164,452
Net interest rate spread(1)					2.56	%					2.18	%
Net interest-earning assets(2)	$	5,345,487					$	4,838,719
Net interest margin(3)					2.79	%					2.53	%
Ratio of interest-earning assets to total interest-bearing liabilities	1.26						1.23


~~(1)~~	~~Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.~~


~~(2)~~	~~Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.~~


~~(3)~~	~~Net interest margin represents net interest income divided by average total interest-earning assets.~~

(1)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)Net interest margin represents net interest income divided by average total interest-earning assets.

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	Nine Months Ended September 30,													Nine Months Ended September 30,
	2017						2016							2020						2019
	Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate		Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate			Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate		Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate
	(Dollars in thousands)													(Dollars in thousands)
Interest-earning assets:													Interest-earning assets:
Interest-bearing deposits	$	229,729	$	1,159	0.67	%	$	141,230	$	253	0.24	%	Interest-bearing deposits	$	880,015	$	1,367	0.21	%	$	193,427	$	1,965	1.35	%
Securities available-for-sale	1,807,962		26,959		1.99	%	1,339,122		18,350		1.83	%
Securities held-to-maturity	1,689,790		33,605		2.65	%	1,856,318		32,453		2.33	%
Equity securities													Equity securities	6,480		110		2.26	%	5,905		108		2.44	%
Debt securities available-for-sale													Debt securities available-for-sale	2,657,564		46,371		2.33	%	2,317,685		49,801		2.86	%
Debt securities held-to-maturity													Debt securities held-to-maturity	1,158,357		25,802		2.97	%	1,379,982		31,008		3.00	%
Net loans	19,291,939		579,921		4.01	%	17,218,547		527,989		4.09	%	Net loans	21,157,077		657,483		4.14	%	21,596,000		684,086		4.22	%
Stock in FHLB	247,228		9,722		5.24	%	197,958		6,396		4.31	%	Stock in FHLB	247,260		11,881		6.41	%	273,885		12,871		6.27	%
Total interest-earning assets	23,266,648		651,366		3.73	%	20,753,175		585,441		3.76	%	Total interest-earning assets	26,106,753		743,014		3.79	%	25,766,884		779,839		4.04	%
Non-interest-earning assets	758,616						774,102						Non-interest-earning assets	1,080,136						964,031
Total assets	$	24,025,264					$	21,527,277					Total assets	$	27,186,889					$	26,730,915
Interest-bearing liabilities:													Interest-bearing liabilities:
Savings deposits	$	2,100,918	$	6,053	0.38	%	$	2,099,960	$	4,684	0.30	%	Savings deposits	$	2,039,596	$	9,505	0.62	%	$	1,966,427	$	12,556	0.85	%
Interest-bearing checking	4,265,758		25,712		0.80	%	3,207,413		11,198		0.47	%	Interest-bearing checking	5,786,659		34,191		0.79	%	4,912,085		65,295		1.77	%
Money market accounts	4,225,519		24,772		0.78	%	3,868,155		18,884		0.65	%	Money market accounts	4,172,144		32,624		1.04	%	3,691,378		46,126		1.67	%
Certificates of deposit	3,086,739		23,283		1.01	%	3,258,702		26,873		1.10	%	Certificates of deposit	4,082,118		49,959		1.63	%	4,757,446		77,245		2.16	%
Total interest-bearing deposits	13,678,934		79,820		0.78	%	12,434,230		61,639		0.66	%	Total interest-bearing deposits	16,080,517		126,279		1.05	%	15,327,336		201,222		1.75	%
Borrowed funds	4,744,701		66,460		1.87	%	3,667,473		52,328		1.90	%	Borrowed funds	5,066,253		79,843		2.10	%	5,566,273		92,319		2.21	%
Total interest-bearing liabilities	18,423,635		146,280		1.06	%	16,101,703		113,967		0.94	%	Total interest-bearing liabilities	21,146,770		206,122		1.30	%	20,893,609		293,541		1.87	%
Non-interest-bearing liabilities	2,436,893						2,234,692						Non-interest-bearing liabilities	3,402,930						2,881,242
Total liabilities	20,860,528						18,336,395						Total liabilities	24,549,700						23,774,851
Stockholders’ equity	3,164,736						3,190,882						Stockholders’ equity	2,637,189						2,956,064
Total liabilities and stockholders’ equity	$	24,025,264					$	21,527,277					Total liabilities and stockholders’ equity	$	27,186,889					$	26,730,915
Net interest income			$	505,086					$	471,474			Net interest income			$	536,892					$	486,298
Net interest rate spread⁽¹⁾					2.67	%					2.82	%	Net interest rate spread(1)					2.49	%					2.17	%
Net interest-earning assets⁽²⁾	$	4,843,013					$	4,651,472					Net interest-earning assets(2)	$	4,959,983					$	4,873,275
Net interest margin⁽³⁾					2.89	%					3.03	%	Net interest margin(3)					2.74	%					2.52	%
Ratio of interest-earning assets to total interest-bearing liabilities	1.26						1.29						Ratio of interest-earning assets to total interest-bearing liabilities	1.23						1.23


~~(1)~~	~~Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.~~


~~(2)~~	~~Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.~~


~~(3)~~	~~Net interest margin represents net interest income divided by average total interest-earning assets.~~

(1)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)Net interest margin represents net interest income divided by average total interest-earning assets.

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Comparison of ~~Operating Results for the Three and Nine Months Ended~~Financial Condition at September 30, ~~2017~~2020 and ~~2016~~December 31, 2019

~~Net Income.~~ ~~Net income for the three months ended~~ Total Assets. Total assets decreased by $91.8 million, or 0.3%, to $26.61 billion at September 30, ~~2017 was $45.8~~2020 from December 31, 2019. Cash and cash equivalents increased by $382.8 million ~~compared~~ to ~~net income of $49.9~~$557.7 million ~~for the three months ended~~at September 30, ~~2016.~~2020 from December 31, 2019 and securities increased by $224.0 million, or 5.8%, to $4.07 billion at September 30, 2020 from December 31, 2019. Net ~~income for~~loans decreased by $778.0 million, or 3.6%, to $20.70 billion at September 30, 2020 from December 31, 2019.

Net Loans. Net loans decreased by $778.0 million, or 3.6%, to $20.70 billion at September 30, 2020 from $21.48 billion at December 31, 2019. The detail of the loan portfolio is below:


	September 30, 2020		December 31, 2019
	(Dollars in thousands)
Commercial loans:
Multi-family loans	$	7,256,015	7,813,236
Commercial real estate loans	4,912,155		4,831,347
Commercial and industrial loans	3,399,059		2,951,306
Construction loans	341,449		262,866
Total commercial loans	15,908,678		15,858,755
Residential mortgage loans	4,407,224		5,144,718
Consumer and other	681,940		699,796
Total loans	20,997,842		21,703,269
Deferred fees, premiums and other, net	(12,274)		907
Allowance for loan losses	(287,511)		(228,120)
Net loans	$	20,698,057	21,476,056

During the nine months ended September 30, ~~2017~~2020, we originated or funded $814.3 million in commercial and industrial loans (including $334.7 million of PPP loans), $733.9 million in multi-family loans, $447.8 million in residential loans, $368.9 million in commercial real estate loans, $67.3 million in consumer and other loans and $59.0 million in construction loans. Our originations reflect our continued focus on diversifying our loan portfolio. In addition, we acquired $453.3 million of loans from Gold Coast on April 3, 2020. A significant portion of our commercial loan portfolio, including commercial and industrial loans, are secured by commercial real estate and are primarily on properties and businesses located in New Jersey and New York.

One of our key operating objectives has been, and continues to be, maintaining a high level of asset quality. We maintain sound credit standards for new loan originations and purchases. We do not originate or purchase sub-prime loans, negative amortization loans or option ARM loans. Our portfolio contains interest-only and no income verification residential mortgage loans. At September 30, 2020, interest-only residential and consumer loans totaled $35.4 million, which represented less than 1% of the residential and consumer portfolios. We no longer originate residential mortgage loans without verifying income. At September 30, 2020, these loans totaled $116.4 million. From time to time and for competitive purposes, we originate interest-only commercial real estate and multi-family loans. At September 30, 2020, these loans totaled $1.32 billion. As part of our underwriting, these loans are evaluated as fully amortizing for risk classification purposes, with the interest-only period ranging from one to ten years. In addition, we evaluate our policy limits on a regular basis. We believe these criteria adequately control the potential risks of such loans and that adequate provisions for loan losses are provided for all known and inherent risks.

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The following table sets forth non-accrual loans (excluding loans held-for-sale) on the dates indicated as well as certain asset quality ratios:


	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
	# of Loans	Amount			# of Loans	Amount			# of Loans	Amount			# of Loans	Amount			# of Loans	Amount
	(dollars in millions)

Multi-family	13	$	51.1		14	$	48.3		9	$	23.4		8	$	23.3		6	$	19.6
Commercial real estate	28	17.8			22	12.3			21	11.4			22	12.0			30	12.3
Commercial and industrial	19	10.9			29	15.6			22	17.0			18	12.5			16	12.0
Construction	—	—			—	—			—	—			—	—			—	—
Total commercial loans	60	79.8			65	76.2			52	51.8			48	47.8			52	43.9
Residential and consumer	250	52.2			255	50.6			258	46.6			255	47.4			261	48.2
Total non-accrual loans	310	$	132.0		320	$	126.8		310	$	98.4		303	$	95.2		313	$	92.1
Accruing troubled debt restructured loans	51	$	9.8		52	$	12.2		55	$	12.8		57	$	13.1		58	$	12.5
Non-accrual loans to total loans		0.63		%		0.59		%		0.46		%		0.44		%		0.42		%
Allowance for loan losses as a percent of non-accrual loans		217.75		%		215.48		%		247.22		%		239.66		%		247.62		%
Allowance for loan losses as a percent of total loans		1.37		%		1.28		%		1.14		%		1.05		%		1.05		%

Total non-accrual loans were $132.0 million at September 30, 2020 compared to $126.8 million at June 30, 2020 and $92.1 million at September 30, 2019. At September 30, 2020 there were $7.1 million of commercial real estate loans, $5.4 million of commercial and industrial loans and $1.6 million of multi-family loans that were classified as non-accrual which were performing in accordance with their contractual terms. Criticized and classified loans as a percent of total loans increased to 7.47% at September 30, 2020 from 5.36% at December 31, 2019. We continue to proactively and diligently work to resolve our troubled loans.

At September 30, 2020, there were $35.7 million of loans deemed as TDRs, of which $26.5 million were residential and consumer loans, $5.4 million were commercial real estate loans and $3.8 million were commercial and industrial loans. TDRs of $9.8 million were classified as accruing and $25.9 million were classified as non-accrual at September 30, 2020. Included are $1.8 million of residential loans deemed to be TDRs as the borrower was ~~$131.5~~granted a payment deferral related to COVID-19 but did not meet the criteria to be excluded from TDR as described in Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act.

In addition to non-accrual loans, we continue to monitor our portfolio for potential problem loans. Potential problem loans are defined as loans about which we have concerns as to the ability of the borrower to comply with the current loan repayment terms and which may cause the loan to be placed on non-accrual status. As of September 30, 2020, the Company has deemed potential problem loans totaling $192.1 million, which is comprised of 16 commercial and industrial loans totaling $119.5 million, 15 commercial real estate loans totaling $65.2 million and 7 multi-family loans totaling $7.4 million. In addition, we continue to support our customers by deferring payments for borrowers experiencing hardship because of the COVID-19 pandemic. As of October 20, 2020, $730 million, or 3%, of loans were deferring principal and/or interest payments. For further information, please refer to the Executive Summary above and the additional risk factor included in Part II, Item 1A of this Quarterly Report on Form 10-Q. Management is actively monitoring all of these loans.

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The ratio of non-accrual loans to total loans was 0.63% at September 30, 2020 compared to 0.44% at December 31, 2019. The allowance for loan losses as a percentage of non-accrual loans was 217.75% at September 30, 2020 compared to 239.66% at December 31, 2019. At September 30, 2020, our allowance for loan losses as a percentage of total loans was 1.37% compared to 1.05% at December 31, 2019.

The allowance for loan losses increased by $59.4 million to $287.5 million at September 30, 2020 from $228.1 million at December 31, 2019. The increase reflects an increase of $71.5 million from the provision for credit losses related to our loan portfolio and an increase of $4.2 million from the initial allowance on PCD loans upon acquisition, partially offset by a decrease of $12.8 million resulting from net charge-offs and a decrease of $3.6 million upon CECL adoption. Our allowance for loan losses at September 30, 2020 continued to be affected by the impact of COVID-19 on current and forecasted economic conditions. Future increases in the allowance for loan losses may be necessary based on the composition of and change in the loan portfolio, the level of loan delinquency and the current and forecasted economic condition over the life of our loans.

The following table sets forth the allowance for loan losses at September 30, 2020 and December 31, 2019 allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.


	September 30, 2020				December 31, 2019
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
End of period allocated to:
Multi-family loans	$	56,881	34.6	%	$	74,099	36.0	%
Commercial real estate loans	111,758		23.4	%	50,925		22.3	%
Commercial and industrial loans	78,709		16.2	%	74,396		13.6	%
Construction loans	5,543		1.6	%	6,816		1.2	%
Residential mortgage loans	30,180		21.0	%	17,391		23.7	%
Consumer and other loans	4,440		3.2	%	2,548		3.2	%
Unallocated	—		—		1,945		—
Total allowance	$	287,511	100.0	%	$	228,120	100.0	%

Securities. Securities are held primarily for liquidity, interest rate risk management and yield enhancement. Our Investment Policy requires that investment transactions conform to Federal and State investment regulations. Our investments purchased may include, but are not limited to, U.S. Treasury obligations, securities issued by various Federal Agencies, State and Municipal subdivisions, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, investment grade corporate debt instruments, and mutual funds. In addition, the Company may invest in equity securities subject to certain limitations. Purchase decisions are based upon a thorough analysis of each security to determine if it conforms to our overall asset/liability management objectives. The analysis must consider its effect on our risk-based capital measurement, prospects for yield and/or appreciation and other risk factors. Debt securities are classified as held-to-maturity or available-for-sale when purchased.

At September 30, 2020, our securities portfolio represented 15.3% of our total assets. Securities, in the aggregate, increased by $224.0 million, or 5.8%, to $4.07 billion at September 30, 2020 from December 31, 2019. This increase was primarily a result of purchases, partially offset by paydowns. At September 30, 2020, our allowance for credit losses on held-to-maturity debt securities was $3.1 million.

Stock in the Federal Home Loan Bank, Bank Owned Life Insurance and Other Assets. The amount of stock we own in the FHLB decreased by $53.0 million, or 19.8%, to $214.3 million at September 30, 2020 from $267.2 million at December 31, 2019. The amount of stock we own in the FHLB is primarily related to the balance of our outstanding borrowings from the FHLB. Bank owned life insurance was $223.6 million at September 30, 2020 and $218.5 million at December 31, 2019. Other assets were $163.5 million at September 30, 2020 and $82.3 million at December 31, 2019. The increase in other assets was primarily driven by hedge-related assets.

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Deposits. At September 30, 2020, deposits totaled $19.10 billion, representing 79.8% of our total liabilities. Our long-term deposit strategy is focused on attracting core deposits (savings, checking and money market accounts), resulting in a deposit mix of lower cost core products. We remain committed to our plan of attracting more core deposits because core deposits represent a more stable source of low cost funding and may be less sensitive to changes in market interest rates than other types of funding including borrowed funds.

We have a suite of commercial deposit products, designed to appeal to small and mid-sized businesses and non-profit organizations. Interest rates, maturity terms, service fees and withdrawal penalties are all reviewed on a periodic basis. Deposit rates and terms are based primarily on our current operating strategies, market rates, liquidity requirements, competitive forces and growth goals. We also rely on personalized customer service, long-standing relationships with customers and an active marketing program to attract and retain deposits.

Deposits increased by $1.24 billion, or 7.0%, to $19.10 billion at September 30, 2020 from $17.86 billion at December 31, 2019 primarily driven by increases in checking and money market deposits, offset by a decrease in time deposits. Checking accounts increased $1.06 billion to $9.04 billion at September 30, 2020 from $7.99 billion at December 31, 2019. Core deposits represented approximately 81% of our total deposit portfolio at September 30, 2020 compared to 78% at December 31, 2019.

The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated:


	September 30, 2020				December 31, 2019
	Balance		Percent of Total Deposit		Balance		Percent of Total Deposit
	(Dollars in thousands)
Non-interest bearing:
Checking accounts	$	3,345,011	17.5	%	$	2,472,232	13.8	%
Interest-bearing:
Checking accounts	5,696,645		29.8	%	5,512,979		30.9	%
Money market deposits	4,369,733		22.9	%	3,817,718		21.4	%
Savings	2,008,540		10.5	%	2,050,101		11.5	%

Certificates of deposit	3,683,606		19.3	%	4,007,308		22.4	%
Total Deposits	$	19,103,535	100.0	%	$	17,860,338	100.0	%

Borrowed Funds. Borrowings are primarily with the FHLB and are collateralized by our residential and commercial mortgage portfolios. Borrowed funds decreased by $1.52 billion, or 26.1%, to $4.31 billion at September 30, 2020 from $5.83 billion at December 31, 2019 primarily driven by the increase in deposits. The decrease includes the early extinguishment of $400 million of borrowings during the second and third quarters of 2020. The extinguishments resulted in the recognition of $326,000 and $965,000 of costs during the second and third quarter, respectively, included in Other operating expenses on the Consolidated Statement of Income.

Other Liabilities. Other liabilities increased by $115.8 million, or 141.6%, to $197.7 million at September 30, 2020 from $81.8 million at December 31, 2019 primarily driven by increases in income taxes payable and our allowance for credit losses on unfunded commitments, as well as a commitment to purchase investment securities. At September 30, 2020, our allowance for credit losses on unfunded commitments was $13.9 million.

Stockholders’ Equity. Stockholders’ equity increased by $47.8 million to $2.67 billion at September 30, 2020 from $2.62 billion at December 31, 2019. The increase was primarily attributed to net income of ~~$139.7~~$146.4 million, common stock issued to finance the Gold Coast acquisition of $20.9 million and share-based plan activity of $14.5 million for the nine months ended September 30, ~~2016.~~

~~Net Interest Income.~~ ~~Net interest income increased~~2020. These increases were partially offset by ~~$11.3~~other comprehensive loss of $32.4 million ~~or 7.1%, to $170.9~~and cash dividends paid of $0.36 per share totaling $89.7 million for the three months ended September 30, 2017 from $159.6 million for the three months ended September 30, 2016. The net interest margin decreased 13 basis points to 2.87% for the three months ended September 30, 2017 from 3.00% for the three months ended September 30, 2016.

~~Net interest income increased by $33.6 million, or 7.1%, to $505.1 million for~~during the nine months ended September 30, 2017 from $471.5 million for the nine months ended September 30, 2016. The net interest margin decreased 14 basis points to 2.89% for the nine months ended September 30, 2017 from 3.03% for the nine months ended September 30, 2016.

Total interest and dividend income increased by $27.4 million, or 13.8%, to $225.8 million for the three months ended September 30, 2017. Interest income on loans increased by $21.8 million, or 12.2%, to $201.1 million for the three months ended September 30, 2017 as a result of a $1.93 billion increase in the average balance of net loans to $19.63 billion, primarily attributable to growth in the commercial loan portfolio. The weighted average yield on net loans increased 5 basis points to 4.10%. Prepayment penalties, which are included in interest income, totaled $5.4 million for the three months ended September 30, 2017 compared to $4.0 million for the three months ended September 30, 2016. Interest income on all other interest-earning assets, excluding loans, increased by $5.6 million, or 29.0%, to $24.7 million for the three months ended September 30, 2017 which is attributable to a $609.3 million increase in the average balance of all other interest-earning assets, excluding loans, to $4.20 billion for the three months ended September 30, 2017. The weighted average yield on interest-earning assets, excluding loans, increased 21 basis points to 2.35%.

Total interest and dividend income increased by $65.9 million, or 11.3%, to $651.4 million for the nine months ended September 30, 2017. Interest income on loans increased by $51.9 million, or 9.8%, to $579.9 million for the nine months ended September 30, 2017 as a result of a $2.07 billion increase in the average balance of net loans to $19.29 billion, primarily attributable to growth in the commercial loan portfolio. This increase was offset by a decrease of 8 basis points in the weighted average yield on net loans to 4.01%. Prepayment penalties, which are included in interest income, totaled $11.6 million for the nine months ended September 30, 2017 compared to $14.6 million for the nine months ended September 30, 2016. Interest income on all other interest-earning assets, excluding loans, increased by $14.0 million, or 24.4%, to $71.4 million for the nine months ended September 30, 2017 which is attributable to a $440.1 million increase in the average balance of all other interest-earning assets, excluding loans, to $3.97 billion for the nine months ended September 30, 2017. The weighted average yield on interest-earning assets, excluding loans, increased 23 basis points to 2.40%.

Total interest expense increased by $16.1 million, or 41.5%, to $54.9 million for the three months ended September 30, 2017. Interest expense on interest-bearing deposits increased $12.0 million, or 58.9%, to $32.3 million for the three months ended September 30, 2017. The average balance of total interest-bearing deposits increased $1.74 billion, or 13.9%, to $14.30 billion for the three months ended September 30, 2017.2020. In addition, stockholders’ equity decreased by $8.5 million on January 1, 2020 in connection with the ~~weighted average cost~~adoption of interest-bearing deposits increased 25 basis points to 0.90% for the three months ended September 30, 2017. Interest expense on borrowed funds increased by $4.1 million, or 22.3%, to $22.6 million for the three months ended September 30, 2017. The average balanceCECL.

Table of borrowed funds increased $558.9 million, or 13.7%, to $4.63 billion for the three months ended September 30, 2017. In addition, the weighted average cost of borrowings increased 14 basis points to 1.95% for the three months ended September 30, 2017.Contents

Total interest expense increased by $32.3 million, or 28.4%, to $146.3 million for the nine months ended September 30, 2017. Interest expense on interest-bearing deposits increased $18.2 million, or 29.5%, to $79.8 million for the nine months ended September 30, 2017. The average balance of total interest-bearing deposits increased $1.24 billion, or 10.0%, to $13.68 billion for the nine months ended September 30, 2017. In addition, the weighted average cost of interest-bearing deposits increased 12 basis points to 0.78% for the nine months ended September 30, 2017. Interest expense on borrowed funds increased by $14.1 million, or 27.0%, to $66.5 million for the nine months ended September 30, 2017. The average balance of borrowed funds increased $1.08 billion, or 29.4%, to $4.74 billion for the nine months ended September 30, 2017. This increase was offset by a decrease of 3 basis points in the weighted average cost of borrowings to 1.87% for the nine months ended September 30, 2017.

~~Provision for Loan Losses.~~ Our provision is primarily a result of the inherent credit risk in our overall portfolio, the growth of the loan portfolio, and the level of non-accrual loans and charge-offs. For the three months ended September 30, 2017, our provision for loan losses was $1.8 million, compared to $5.0 million for the three months ended September 30, 2016. For the three months ended September 30, 2017, net charge-offs were $1.7 million, compared to $1.8 million for the three months ended September 30, 2016. Our provision for loan losses was $11.8 million for the nine months ended September 30, 2017 and $15.0

million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, net charge-offs were $10.1 million compared to $10.0 million for the nine months ended September 30, 2016.

~~Non-Interest Income.~~ Total non-interest income decreased $125,000, or 1.5%, to $8.4 million for the three months ended September 30, 2017. Other income and gain on loan sales decreased $686,000 and $675,000, respectively, for the three months ended September 30, 2017. These decreases were partially offset by an increase to fees and service charges of $968,000.

Total non-interest income decreased $1.3 million, or 4.5%, to $27.4 million for the nine months ended September 30, 2017. Gain on securities transactions and other income decreased $1.8 million and $1.4 million, respectively, for the nine months ended September 30, 2017. These decreases were partially offset by an increase to fees and service charges of $2.0 million.

~~Non-Interest Expenses.~~ Compared to the third quarter of 2016, total non-interest expenses increased $11.9 million, or 13.0%. For the three months ended September 30, 2017, compensation and fringe benefits increased $4.0 million due to additions to our staff to support continued growth and continued build out of our risk management and operating infrastructure. Additionally, advertising and promotional expenses increased $2.9 million due to our current advertising campaigns and professional fees increased $2.5 million largely attributable to our BSA remediation efforts. Federal insurance premiums increased $900,000 for the three months ended September 30, 2017.

Total non-interest expenses were $309.1 million for the nine months ended September 30, 2017, an increase of $39.5 million, or 14.7%, compared to the nine months ended September 30, 2016. Professional fees increased $15.6 million for the nine months ended September 30, 2017 as compared to the nine months of 2016, largely attributable to BSA remediation efforts and the continued risk management infrastructure enhancements. Compensation and fringe benefits increased $9.7 million for the nine months ended September 30, 2017 as a result of additions to our staff to support continued growth and infrastructure, especially in our risk management area, as well as normal merit increases, partially offset by lower pension costs. Advertising and promotional expenses increased $5.3 million due to our current advertising campaigns. Federal insurance premiums increased $3.3 million for the nine months ended September 30, 2017.

~~Income Taxes.~~ Income tax expense for the third quarter of 2017 was $28.4 million compared to $21.9 million for the third quarter 2016. The effective tax rate was 38.3% for the three months ended September 30, 2017 and 30.5% for the three months ended September 30, 2016. Income tax expense includes the excess tax benefits related to our stock plans of $127,000 for the three months ended September 30, 2017 and $6.4 million for the three months ended September 30, 2016.

Income tax expense for the nine months ended September 30, 2017 was $80.2 million compared to $76.0 million for the nine months ended September 30, 2016. The effective tax rate was 37.9% for the nine months ended September 30, 2017 and 35.2% for the nine months ended September 30, 2016. Income tax expense includes the excess tax benefits related to our stock plans of $1.6 million for the nine months ended September 30, 2017 and $8.2 million for the nine months ended September 30, 2016.

The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income, the level of expenses not deductible for tax purposes relative to the overall level of pre-tax income, the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions, and the impact of any large but infrequently occurring items.

Liquidity and Capital Resources

The Company’s primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, ~~proceeds from the sale of loans,~~ FHLB and other borrowings and, to a lesser extent, proceeds from the sale of loans and investment maturities. While scheduled amortization of loans is usually a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity, ~~if a need for additional funds arises,~~ including unsecured overnight lines of credit, brokered deposits and other borrowings from ~~the FHLB~~correspondent banks. Available borrowing capacity and other ~~correspondent banks.~~available liquidity sources totaled approximately $11.27 billion at September 30, 2020. Our Asset Liability Committee is responsible for establishing and monitoring our liquidity targets and strategies to ensure that sufficient liquidity exists for meeting the needs of our customers as well as unanticipated contingencies. These liquidity risk management practices have allowed us to effectively manage the market stress that began in the first quarter of 2020 from the COVID-19 pandemic.

At September 30, ~~2017,~~2020, the Company had no overnight borrowings outstanding. The Company had $461.0 million of overnight borrowings outstanding ~~as compared to $735.0 million~~ at December 31, ~~2016.~~2019. The Company borrows directly from the FHLB and various financial institutions. The Company had total borrowings of ~~$4.48~~$4.31 billion at September 30, ~~2017,~~2020, a decrease of ~~$61.4 million~~$1.52 billion from ~~$4.55~~$5.83 billion at December 31, ~~2016.~~2019.

In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination of loans. At September 30, ~~2017,~~2020, outstanding commitments to originate loans totaled ~~$390.5~~$260.2 million; outstanding unused lines of credit totaled ~~$1.15~~$1.90 billion; standby letters of credit totaled ~~$25.5~~$39.8 million and outstanding commitments to sell loans totaled ~~$7.0~~$69.0 million. The Company expects to have sufficient funds available to meet current commitments in the normal course of business. Time deposits scheduled to mature in one year or less totaled ~~$2.05~~$3.34 billion at September 30, ~~2017.~~2020. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.

Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities. On May 4, 2020, S&P revised our rating outlook to negative due to economic downturn from COVID-19.

Regulatory ~~Matters.~~ Capital and Developments.

CECL. On January 1, 2020, the Company adopted the new accounting standard that requires the measurement of the allowance for credit loss to be based on the best estimate of lifetime expected credit losses inherent in the Company’s relevant financial asset. For more information, see Note 1, Summary of Significant Accounting Principles. On March 27, 2020, in response to the COVID-19 pandemic, U.S. banking regulators issued an interim final rule that the Company adopted to delay for two years the initial adoption impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during 2020 and 2021 (i.e. a five-year transition period). During the two-year delay, the Company will add back to common equity tier 1 capital (“CET1”) 100% of the initial adoption impact of CECL plus 25% of the cumulative quarterly changes in the allowance for credit losses (i.e., quarterly transitional amounts). After two years, starting on January 1, 2022, the quarterly transitional amounts along with the initial adoption impact of CECL will be phased out of CET1 capital over the three-year period.

Paycheck Protection Program. On April 9, 2020, in response to the economic impact of the COVID-19 pandemic, the Federal Reserve, OCC and FDIC issued an interim final rule that excludes loans pledged as collateral to the Federal Reserve’s PPP Lending Facility from supplemental leverage ratio exposure, average total consolidated assets and Advanced and Standardized risk-weighted assets. Additionally, PPP loans, which are guaranteed by the Small Business Administration, will receive a zero percent risk weight under the Basel 3 Advanced and Standardized approaches regardless of whether they are pledged as collateral to the PPP Lending Facility.

Minimum Capital Requirements.In July 2013, the Federal Deposit Insurance Corporation and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The Final Capital Rules also revised the quantity and quality of required minimum risk-based and leverage capital requirements, consistent with the Reform Act and the Third Basel Accord adopted by the Basel Committee on Banking Supervision, or Basel III capital standards. In doing so, the Final Capital Rules:

•Established a new minimum Common equity tier 1 risk-based capital ratio (common equity tier 1 capital to total risk-weighted assets) of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%, while maintaining the minimum Total risk-based capital ratio of 8.0% and the minimum Tier 1 leverage capital ratio of 4.0%.

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•Revised the rules for calculating risk-weighted assets to enhance their risk sensitivity.

•Phased out trust preferred securities and cumulative perpetual preferred stock as Tier 1 capital.

•Added a requirement to maintain a minimum Conservation Buffer, composed of Common equity tier 1 capital, of 2.5% of risk-weighted assets, to be applied to the new Common equity tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio, which means that banking organizations, on a fully phased in basis ~~no later than~~as of January 1, 2019, must maintain a minimum Common equity tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5% and a minimum Total risk-based capital ratio of 10.5% or have restrictions imposed on capital distributions and discretionary cash bonus payments.

•Changed the definitions of capital categories for insured depository institutions for purposes of the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions. Under these revised definitions, to be considered well-capitalized, an insured depository institution must have a Tier 1 leverage capital ratio of at least 5.0%, a Common equity tier 1 risk-based capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8.0% and a Total risk-based capital ratio of at least 10.0%.

The new minimum regulatory capital ratios and changes to the calculation of risk-weighted assets became effective for the Bank and Company on January 1, 2015. The required minimum Conservation Buffer ~~was phased in incrementally, starting at 0.625%~~commenced on January 1, 2016 at 0.625% and increased in annual increments to ~~1.25% on January 1, 2017. The Conservation Buffer will increase to 1.875% on January 1, 2018 and~~ 2.5% on January 1, ~~2019.~~2019, which is the fully phased in Conservation Buffer. The rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum Conservation Buffer is not met. As of September 30, ~~2017~~2020, the Company and the Bank met the ~~currently applicable~~required Conservation Buffer of ~~1.25%~~2.5%.

As of September 30, ~~2017,~~2020, the Bank and the Company were considered “well capitalized” under applicable regulations and exceeded all regulatory capital requirements as follows:


	September 30, 2017													As of September 30, 2020 (1)
	Actual				Minimum Capital Requirement				To be Well Capitalized under Prompt Corrective Action Provisions ⁽¹⁾					Actual				Minimum Capital Requirement with Conservation Buffer				To be Well Capitalized under Prompt Corrective Action Provisions (2)
	Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)													(Dollars in thousands)
Bank:													Bank:
Tier 1 Leverage Ratio	$	2,789,460	11.38	%	$	980,717	4.00	%	$	1,225,897	5.00	%	Tier 1 Leverage Ratio	$	2,387,419	8.83	%	$	1,082,087	4.00	%	$	1,352,609	5.00	%
Common equity tier 1 risk-based	2,789,460		14.29	%	1,122,734		5.75	%	1,269,177		6.50	%
Common Equity Tier 1 Risk-Based Capital													Common Equity Tier 1 Risk-Based Capital	2,387,419		11.97	%	1,395,774		7.00	%	1,296,076		6.50	%
Tier 1 Risk Based Capital	2,789,460		14.29	%	1,415,621		7.25	%	1,562,064		8.00	%	Tier 1 Risk Based Capital	2,387,419		11.97	%	1,694,868		8.50	%	1,595,170		8.00	%
Total Risk-Based Capital	3,020,546		15.47	%	1,806,137		9.25	%	1,952,580		10.00	%	Total Risk-Based Capital	2,637,043		13.23	%	2,093,660		10.50	%	1,993,962		10.00	%

Company:
Investors Bancorp, Inc.:													Investors Bancorp, Inc.:
Tier 1 Leverage Ratio	$	3,093,359	12.61	%	$	981,113	4.00	%	n/a		n/a		Tier 1 Leverage Ratio	$	2,644,342	9.76	%	$	1,084,229	4.00	%	n/a		n/a
Common equity tier 1 risk-based	3,093,359		15.83	%	1,123,420		5.75	%	n/a		n/a
Common Equity Tier 1 Risk-Based Capital													Common Equity Tier 1 Risk-Based Capital	2,644,342		13.24	%	1,398,352		7.00	%	n/a		n/a
Tier 1 Risk Based Capital	3,093,359		15.83	%	1,416,486		7.25	%	n/a		n/a		Tier 1 Risk Based Capital	2,644,342		13.24	%	1,697,998		8.50	%	n/a		n/a
Total Risk-Based Capital	3,324,445		17.02	%	1,807,241		9.25	%	n/a		n/a		Total Risk-Based Capital	2,894,423		14.49	%	2,097,527		10.50	%	n/a		n/a

(1) For purposes of calculating Tier 1 leverage ratio, assets are based on adjusted total average assets. In calculating Tier 1 risk-based capital and Total risk-based capital, assets are based on total risk-weighted assets.

(2) Prompt corrective action provisions do not apply to the bank holding company.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

In the ordinary course of its operations, the Company engages in a variety of financial transactions that, in accordance with U.S. generally accepted accounting principles, are not recorded in the financial statements. ~~These transactions primarily relate to debt obligations and lending commitments.~~

The following table shows the contractual obligations of the Company by expected payment period as of September 30, ~~2017:~~2020:


Contractual Obligations	Total		Less than One Year	One-Two Years	Two-Three Years	More than Three Years
	(In thousands)
Debt obligations (excluding capitalized leases)	$	4,307,523	350,000	1,198,975	1,199,363	1,559,185
Commitments to originate and purchase loans	$	260,157	260,157	—	—	—
Commitments to sell loans	$	69,000	69,000	—	—	—

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Contractual Obligations Total Less than One Year One-Two Years Two-Three Years More than Three Years
(In thousands)
Debt obligations (excluding capitalized leases) $ 4,484,869
603,724
775,404
1,075,000
2,030,741
Commitments to originate and purchase loans $ 416,009
416,009
—
—
—
Commitments to sell loans $ 7,000
7,000
—
—
—

Debt obligations include borrowings from the FHLB and other borrowings. The borrowings have defined terms, and ~~under certain circumstances, $28.1 million~~none of the borrowings ~~are~~were callable at the option of the ~~lender.~~lender as of September 30, 2020. Additionally, at September 30, ~~2017,~~2020, the Company’s commitments to fund unused lines of credit totaled ~~$1.15~~$1.90 billion. Commitments to originate loans, commitments to fund unused lines of credit and standby letters of credit are agreements to lend additional funds to customers as long as there have been no violations of any of the conditions established in the agreements. Commitments generally have a fixed expiration or other termination clauses which may or may not require a payment of a fee. Since some of these loan commitments are expected to expire without being drawn upon, total commitments do not necessarily represent future cash requirements.

In addition to the contractual obligations previously discussed, we have other liabilities which include ~~capitalized and~~$184.3 million of operating lease ~~obligations.~~liabilities of which $3.6 million was acquired from Gold Coast during the three months ended June 30, 2020. We have $2.8 million of finance lease liabilities. These contractual obligations as of September 30, ~~2017~~2020 have not changed significantly from December 31, ~~2016.~~2019.

In the normal course of business, the Company sells residential mortgage loans to third parties. These loan sales are subject to customary representations and warranties. In the event that we are found to be in breach of these representations and warranties, we may be obligated to repurchase certain of these loans.

The Company has entered into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. ~~The~~Derivative financial instruments present on the Company’s ~~derivative financial instruments~~balance sheet as of September 30. 2020 are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. During the three and nine months ended September 30, ~~2017,~~2020, such derivatives were used to hedge the variability in cash flows associated with ~~certain short term wholesale funding transactions.~~borrowings. These derivatives had an aggregate notional amount of ~~$900.0 million~~$3.53 billion as of September 30, ~~2017.~~2020. The fair value of ~~the derivative~~derivatives designated as hedging activities as of September 30, ~~2017~~2020 was ~~a liability~~an asset of ~~$467,000. In accordance with the Chicago Mercantile Exchange (“CME”) rulebook changes effective January 3, 2017, the fair value is~~$153,000, inclusive of accrued interest and variation margin posted in accordance with the Chicago Mercantile Exchange. Derivatives with an aggregate notional amount of $475.0 million that had been used to hedge changes in the fair value of certain pools of prepayable fixed- and adjustable-rate assets were terminated during the three months ended September 30, 2020.

The Company has credit derivatives resulting from participations in interest rate swaps provided to external lenders as part of loan participation arrangements which are, therefore, not used to manage interest rate risk in the Company’s assets or liabilities. Additionally, the Company provides interest rate risk management services to commercial customers, primarily interest rate swaps. The Company’s market risk from unfavorable movements in interest rates related to these derivative contracts is minimized by ~~the CME.~~concurrently entering into offsetting derivative contracts that have identical notional values, terms and indices.

For further information regarding our off-balance sheet arrangements and contractual obligations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our December 31, ~~2016~~2019 Annual Report on Form 10-K.



ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Qualitative Analysis. ~~We believe one~~ One significant form of market risk is interest rate risk. Interest rate risk results from timing differences in the cash flow or re-pricing of our assets, liabilities and off-balance sheet contracts (i.e., loan commitments); the effect of loan prepayments, deposit activity; ~~the difference~~potential differences in the behavior of lending and funding rates arising from the ~~uses~~use of different indices; and “yield curve risk” arising from ~~changing interest rate relationships across~~changes in the term structure of interest rates. Changes in market interest rates can affect net interest income by influencing the amount and rate of new loan originations, the ability of borrowers to repay variable rate loans, the volume of loan prepayments and the mix and flow of deposits.

The general objective of our interest rate risk management process is to determine the appropriate level of risk given our business model and then to manage that risk in a manner consistent with ~~our policy to reduce, to the extent possible, the exposure of our net interest income to changes in market interest rates.~~that risk appetite. Our Asset Liability Committee, which consists of senior management and executives, evaluates the interest rate risk inherent in our balance sheet, ~~our~~the operating environment and capital and liquidity requirements and may modify our lending, investing and deposit gathering strategies accordingly. On a quarterly basis, our Board

of Directors reviews ~~the~~various Asset Liability Committee ~~report,~~reports that estimate the ~~aforementioned activities and strategies, the estimated effect~~sensitivity of ~~those strategies on our net interest margin and the estimated effect that changes in market interest rates may have on~~ the economic value of equity and net interest income under various interest rate scenarios.

Our tactics and strategies may include the use of various financial instruments, including derivatives, to manage our exposure to interest rate risk. Certain derivatives are designated as hedging instruments in a qualifying hedge accounting relationship (fair value or cash flow hedge). Hedged items can be either assets or liabilities. As of September 30, 2020, the

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Company had cash flow hedges with aggregate notional amounts of $3.53 billion. As of December 31, 2019, the Company had cash flow and fair value hedges with aggregate notional amounts of $2.68 billion. Included in the fair value hedges at December 31, 2019 were $475.0 million in asset swap transactions where fixed rate loan ~~and securities portfolios, as well as~~payments were exchanged for variable rate payments executed in an effort to reduce the ~~intrinsic value of our deposits and borrowings.~~Company’s exposure to rising rates. During the nine months ended September 30, 2020, the Company terminated such asset swap transactions.

We actively evaluate interest rate risk in connection with our lending, investing and deposit ~~activities.~~activities and our off-balance sheet positions. At September 30, ~~2017, 24%~~2020, 21.0% of our total loan portfolio was comprised of residential mortgages, of which approximately ~~35%~~28.3% was in variable rate products, while ~~65%~~71.7% was in fixed rate products. Our variable rate and short term fixed rate mortgage related assets have helped to reduce our exposure to interest rate fluctuations. ~~Fixed-rate~~Long term fixed-rate products may adversely impact our net interest income in a rising rate environment. The origination of commercial loans, particularly commercial and industrial loans, commercial real estate loans ~~particularly~~and multi-family ~~loans and commercial and industrial~~ loans, which have outpaced the growth in the residential portfolio in recent years, generally help reduce our interest rate risk due to their shorter term compared to fixed rate residential mortgage loans. In addition, we primarily invest in ~~relatively low risk~~ securities which ~~generally have shorter average lives and lower yields compared to longer term securities.~~display relatively conservative interest rate risk characteristics.

We use an internally managed and implemented industry standard asset/liability model to complete our quarterly interest rate risk reports. The model projects net interest income based on various interest rate scenarios and horizons. We use a combination of analyses to monitor our exposure to changes in interest rates.

Our net interest income sensitivity analysis determines the relative balance between the repricing of assets, liabilities and ~~liabilities~~off-balance sheet positions over various horizons. This asset and liability analysis includes expected cash flows from loans and securities, using forecasted prepayment rates, reinvestment rates, as well as contractual and forecasted liability cash flows. This analysis identifies mismatches in the timing of asset and liability cash flows but does not necessarily provide an accurate indicator of interest rate risk because the rate forecasts and assumptions used in the analysis may not reflect ~~the~~ actual ~~response of cash flows to market interest rate changes.~~experience. The economic value of equity (“EVE”) analysis estimates the change in the net present value (“NPV”) of assets and liabilities and off-balance sheet contracts over a range of ~~immediately changed~~immediate rate shock interest rate scenarios. In calculating changes in EVE, for the various scenarios we forecast loan and securities prepayment rates, reinvestment rates and deposit decay rates.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. The ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. The Company has approximately $7.10 billion in financial instruments which are indexed to USD-LIBOR for which it is monitoring the activity and evaluating the related risks.

Quantitative Analysis. The table below sets forth, as of September 30, ~~2017,~~2020, the estimated changes in our EVE and our net interest income that would result from the designated changes in interest rates. Such changes to interest rates are calculated as an immediate and permanent change for the purposes of computing EVE and a gradual change over a ~~one year~~one-year period for the purposes of computing net interest income. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments, ~~and~~ deposit decay, and funding dynamics in a potential negative rate environment, and should not be relied upon as indicative of actual results. The following table reflects management’s expectations of the changes in EVE and net interest income for an interest rate decrease of 100 basis points and increase of 200 basis points.


	EVE (1)					Net Interest Income (2)
Change in Interest Rates (basis points)	Estimated EVE		Estimated Increase (Decrease)			Estimated Net Interest Income		Estimated Increase (Decrease)
			Amount	Percent				Amount	Percent
	(Dollars in thousands)
+ 200bp	$	3,353,226	88,119	2.7	%	$	690,219	(37,834)	(5.2)	%
0bp	$	3,265,107	—	—		$	728,053	—	—
-100bp	$	3,071,156	(193,951)	(5.9)	%	$	735,677	7,624	1.0	%

EVE (1) (2) Net Interest Income (3)
Change in
Interest Rates
(basis points)

Estimated
EVE
Estimated Increase (Decrease)
Estimated Net
Interest
Income
Estimated Increase (Decrease)
Amount Percent Amount Percent
(Dollars in thousands)
+ 200bp $ 3,993,494
(433,633 ) (9.8 )% $ 630,750
(42,169 ) (6.3 )%
0bp $ 4,427,127
—
—
$ 672,919
—
—
-100bp $ 4,441,774
14,647
0.3 % $ 685,454
12,535
1.9 %
(1)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.


~~(1)~~	~~Assumes an instantaneous and parallel shift in interest rates at all maturities.~~


~~(2)~~	~~EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.~~


~~(3)~~	~~Assumes a gradual change in interest rates over a one year period at all maturities.~~

(2)Assumes a gradual change in interest rates over a one-year period at all maturities.

The table ~~set forth~~ above indicates that at September 30, ~~2017,~~2020, in the event of a 200 basis ~~points~~point increase in interest rates, we would be expected to experience a ~~9.8% decrease~~2.7% increase in EVE and a ~~$42.2~~$37.8 million, or ~~6.3%~~5.2%, decrease in net interest income. In the

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event of a 100 basis ~~points~~point decrease in interest rates, we would be expected to experience a ~~0.3% increase~~5.9% decrease in EVE and a ~~$12.5~~$7.6 million, or ~~1.9%~~1.0%, increase in net interest income. This data does not reflect any future actions we may take in response to changes in interest rates, such as changing the mix in or growth of our assets and liabilities, which could change the results of the EVE and net interest income calculations.

As mentioned above, we use an internally developed asset liability model to compute our quarterly interest rate risk reports. Certain shortcomings are inherent in any methodology used ~~in the above~~to calculate interest rate ~~risk measurements.~~risk. Modeling ~~changes in~~ EVE and net interest income ~~require~~sensitivity requires certain assumptions that may or may not reflect the manner in which actual yields and ~~costs~~market values respond to changes in market interest rates. The EVE and net interest income ~~table~~results presented above assumes no balance sheet growth and that generally the composition of our interest-rate sensitive assets and liabilities existing at the beginning of ~~a period~~the analysis remains constant over the period being measured and, accordingly, the data does not reflect any actions we may take in response to changes in interest rates. The ~~table also assumes a particular change in interest rates is reflected uniformly across the yield curve.~~

~~Accordingly, although the~~ EVE and net interest income results presented in the table above provide an indication of our sensitivity to interest rate changes at a ~~particular~~ point in ~~time, such measurement is~~time. The results as presented are not intended to, and ~~does~~do not, provide a precise forecast of the effects of changes in market interest rates on our EVE and net interest income.



ITEM 4.			CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part IIOther Information



ITEM 1.			LEGAL PROCEEDINGS

The Company, the Bank and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations.



ITEM 1A.			RISK FACTORS

~~There have been no~~ In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material ~~changes in~~update and addition to the ~~“Risk Factors”~~risk factors previously disclosed in ~~the Company’s December 31, 2016~~our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the Securities and Exchange Commission. To the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

The economic impact of the COVID-19 pandemic may have an adverse impact on our business and results of operations.

The COVID-19 pandemic, which was declared a national emergency in the United States in March 2020, continues to create extensive disruptions to the global economy and financial markets and to businesses and the lives of individuals throughout the world. Federal and state governments, including in New Jersey and New York, are taking unprecedented actions to contain the spread of the disease, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus, and legislation designed to deliver monetary aid and other relief to businesses and individuals impacted by the pandemic. Although in various locations certain activity restrictions have been relaxed with some level of success, including in New Jersey and New York, in many states and localities the number of individuals diagnosed with COVID-19 has increased significantly. Reporting of COVID-19 case data as of November 2, 2020 indicates that, on a national level, the number of average positive cases per day has increased by 44% since mid-October. This resurgence of positive cases across a number of jurisdictions has increased pressure on governmental officials to reverse the relaxation of activity restrictions, which could lead to the shutdown of certain businesses and operations and exacerbate economic uncertainty and instability related to the pandemic.

The governmental and social response to the COVID-19 pandemic has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the outbreak of COVID-19 in the United States, more than 60 million people nationwide have filed claims for unemployment, and stock markets have declined in value and in particular, bank stocks have significantly declined in value. As of the end of September 2020, the national unemployment rate was 7.9%. Although an improvement from the 11.1% national unemployment rate observed in June 2020, the current rate of unemployment is substantially higher than the 3.6% national unemployment rate observed in January 2020 prior to the outbreak of COVID-19 in the United States. Further, the Federal Pandemic Unemployment Compensation Program, which under Section 2104 of the CARES Act allows for additional payments to covered individuals of up to $600 per week, expired as of July 31, 2020 and it is uncertain whether this benefit will be renewed by Congress.

The COVID-19 pandemic, and related efforts to contain it, have caused significant disruptions in the functioning of the financial markets and have increased economic and market uncertainty and volatility. To help address these issues, the Federal Open Market Committee (“FOMC”) has reduced the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10- and 30-year U.S. Treasury notes have declined to historic lows. At its June and July meetings, the FOMC continued its commitment to this approach, indicating that the target federal funds rate would remain at current levels until the economy is in position to achieve the FOMC’s maximum-employment and price-stability goals. At its September meeting, the FOMC confirmed its commitment to maintaining this approach, indicating that, although financial conditions have improved in the months preceding its meeting, additional stimulus from the federal government is essential to the economy’s recovery. In addition, in order to support the flow of credit to households and businesses, the Federal Reserve indicated that it will continue to increase its holdings of U.S. Treasury securities and agency residential and commercial mortgage-backed securities to sustain proper functioning of the financial markets.

Congress and various state governments and federal agencies have taken actions to require lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers, and recently passed legislation has provided relief

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from reporting loan classifications due to modifications related to the COVID-19 pandemic. More specifically, through Section 4022 of the CARES Act, Congress provided relief to borrowers with federally-backed one-to-four family mortgage loans experiencing a financial hardship due to COVID-19 by allowing such borrowers to request forbearance, regardless of delinquency status, for up to 360 days. Such relief will be available until the earlier of December 31, 2020 and the date of termination of the national emergency declaration. Section 4022 of the CARES Act also prohibited servicers of federally-backed mortgage loans from initiating foreclosures during the 60-day period beginning March 18, 2020. In addition, on August 27, 2020, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac would extend their single-family moratorium on foreclosures and evicitions through December 31, 2020. At the same time, the Federal Housing Administration (“FHA”) announced an extension of its moratorium on foreclosures and evictions for homeowners with FHA-insured loans, also through December 31, 2020. Under Section 4023 of the CARES Act, until the earlier of December 31, 2020 and the date of termination of the national emergency declaration, borrowers with federally-backed multifamily mortgage loans whose payments were current as of February 1, 2020, but who have since experienced financial hardship due to COVID-19, may request a forbearance for up to 90 days. Borrowers receiving such forbearance may not evict or charge late fees to tenants during the duration of such forbearance.

Additionally, in many states in which we do business or in which our borrowers and loan collateral are located, temporary bans on evictions and foreclosures have been enacted through a mix of executive orders, regulations, and judicial orders. Certain such relief orders have since expired, although several states, including New York and New Jersey, have extended their temporary orders and may continue to do so for so long as the public health emergency persists. In addition, in New York, Governor Andrew Cuomo signed legislation on June 17, 2020 that expands mortgage forbearance available for those experiencing financial hardship during the crisis caused by the COVID-19 pandemic. The legislation applies to those who have mortgages with state-regulated financial institutions and is intended to be an expansion of the CARES Act’s mortgage forbearance provisions. The legislation provides up to one year of forbearance if the borrower’s hardship persists and provides flexible payment options. The New Jersey Legislature currently is debating several comparable legislative proposals.

Certain industries have been particularly hard-hit by the COVID-19 pandemic, including the travel and hospitality industry, the restaurant industry and the retail industry. Refer to the Executive Summary included in Part I, Item 2 of this Quarterly Report on Form 10-Q for details on the Company’s loan portfolio by industry as of September 30, 2020. In addition, the spread of COVID-19 has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the spread of COVID-19 can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, results of operations, risk-weighted assets and regulatory capital:

•because the incidence of reported COVID-19 cases and related hospitalizations and deaths varies significantly by state and locality, the economic downturn caused by the pandemic may be deeper and more sustained in certain areas, including those in which we do business relative to other areas of the country;

•our ability to market our products and services maybe impaired by a variety of external factors, including a prolonged reduction in economic activity and continued economic and financial market volatility, which could cause demand for our products and services to decline, in turn making it difficult for us to grow assets and income;

•if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

•collateral for loans, especially real estate, may decline in value, which may reduce our ability to liquidate such collateral and could cause loan losses to increase and impair our ability over the long run to maintain our targeted loan origination volume;

•our delinquent and non-accrual loans could increase substantially if borrowers continue to experience financial difficulties beyond forbearance/payment deferral periods resulting in adversely impacted asset quality, capital and earnings. As of October 20, 2020, we had $730 million, or 3%, of loans deferring principal and/or interest payments as a result of COVID-19;

•our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

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•an increase in non-performing loans due to the COVID-19 pandemic would result in a corresponding increase in the risk-weighting of assets and therefore an increase in required regulatory capital;

•the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

•as the result of the reduction of the Federal Reserve’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

•deposits, including municipal deposits, could decline if customers need to draw on available balances as a result of the economic downturn;

•a material decrease in net income or a net loss over several quarters could result in a decrease in our quarterly cash dividend;

•we face heightened cybersecurity risk in connection with our operation of a remote working environment, which risks include, among others, greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems, increased risk of unauthorized dissemination of confidential information, limited ability to restore our systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions--all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers;

•we rely on third party vendors for certain services and the unavailability of a critical service or limitations on the business capacities of our vendors for extended periods of time due to the COVID-19 pandemic could have an adverse effect on our operations; and

•as a result of the COVID-19 pandemic, there may be unexpected developments in financial markets, legislation, regulations and consumer and customer behavior.

The Company is not a traditional SBA lender however, we are an active participant in the PPP. The PPP authorizes financial institutions to make federally-guaranteed loans to qualifying small businesses and non-profits organizations. These loans carry an interest rate of 1% per annum and a maturity of two years if originated before June 5, 2020 and five years if originated on or after June 5, 2020. The PPP provides that such loans may be forgiven if the borrowers meet certain requirements with respect to maintaining employee headcount and payroll and the use of the loan proceeds after the loan is originated. If not forgiven, these loans will be guaranteed by the SBA under the SBA’s section 7(a) program. We had approximately $333.4 million of PPP outstanding as of September 30, 2020.

In light of the speed at which the PPP was implemented, particularly due to the “first come first served” nature of the program, the loans originated under this program may present potential fraud risk and operational risk, increasing the risk that loan forgiveness may not be obtained by the borrowers and that the guaranty may not be honored. In addition, there is risk that the borrowers may not qualify for the loan forgiveness feature due to the conduct of the borrower after the loan is originated. Further, although the SBA recently has streamlined the loan forgiveness process for loans of $50,000 or less, it has taken longer than initially anticipated for the SBA to finalize its forgiveness process. Accordingly, absent regulatory relief, extended forbearance waiting times due to SBA-related delays are likely. These factors may result in us having to hold a significant amount of these low-yield loans on our books for a significant period of time. We will continue to face operational demands and pressures as we monitor and service our book of PPP loans, process applications for loan forgiveness and pursue recourse under the SBA’s guarantees and against borrowers for PPP loan defaults. In addition, as a result of our participation in the PPP, we may be subject to litigation and claims by borrowers in connection with the PPP loans that we have made, as well as investigation and scrutiny by our regulators, Congress, the SBA, the U.S. Treasury Department and other governmental authorities. Regardless of whether these claims and investigations may be founded or unfounded, if such claims and investigations are not resolved in a timely and favorable manner for us, they may result in significant costs and liabilities (including increased legal and professional costs) and/or adversely affect the market perception of us and our products and services.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to COVID-19 pandemic could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability. Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

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ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

(c) The following table reports information regarding repurchases of our common stock during the quarter ended September 30, ~~2017~~2020 and the stock repurchase plans approved by our Board of Directors.

Period
Total Number of Shares Purchased ⁽¹⁾⁽²⁾
Average Price paid Per Share As part of Publicly Announced Plans or Programs
Yet to be Purchased under the Plans or Programs ⁽¹⁾
July 1, 2017 through July 31, 2017 953,100
$ 13.21
953,100
19,002,476
August 1, 2017 through August 31, 2017 520,000
13.01
520,000
18,482,476
September 1, 2017 through September 30, 2017 1,045,454
13.26
1,043,000
17,439,476
Total 2,518,554
$ 13.19
2,516,100
17,439,476


Period	Total Number of Shares Purchased (1)(2)	Average Price paid Per Share		As part of Publicly Announced Plans or Programs	Yet to be Purchased Under the Plans or Programs (1)
July 1, 2020 through July 31, 2020	606	$	8.12	—	14,607,794
August 1, 2020 through August 31, 2020	3,443	8.11		—	14,607,794
September 1, 2020 through September 30, 2020	3,297	7.26		—	14,607,794
Total	7,346	$	7.73	—	14,607,794

(1) On ~~April 28, 2016,~~October 25, 2018, the Company announced its ~~third~~fourth share repurchase program, which authorized the purchase of 10% of its publicly-held outstanding shares of common stock, or approximately ~~31,481,189 million~~28,886,780 shares. The plan commenced upon the completion of the ~~second~~third repurchase plan on ~~June 17, 2016.~~December 10, 2018. This program has no expiration date and has ~~17,439,476~~14,607,794 shares yet to be repurchased as of September 30, ~~2017.~~2020.

(2) ~~2,454~~7,346 shares were withheld to cover income taxes related to restricted stock vesting under our 2015 Equity Incentive Plan. Shares withheld to pay income taxes are repurchased pursuant to the terms of the 2015 Equity Incentive Plan and not under our share repurchase program.



ITEM 3.			DEFAULTS UPON SENIOR SECURITIES

Not applicable.



ITEM 4.			MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5.			OTHER INFORMATION

Not applicable.

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ITEM 6.			EXHIBITS

The following exhibits are either filed as part of this report or are incorporated herein by reference:


2.1						Agreement and Plan of Merger by and among Investors Bancorp, Inc. and Gold Coast Bancorp, Inc. dated as of July 24, 2019.(1)

3.1						Certificate of Incorporation of Investors Bancorp, Inc.⁽¹⁾(2)

3.2						Bylaws of Investors Bancorp, Inc.⁽¹⁾(2)

31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						The instance document does not appear in the interactive data file because its XBRL ~~Instance Document~~tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE						Inline XBRL Taxonomy Presentation Linkbase Document
104						Inline XBRL Cover Page Interactive Data File


(1)			Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Investors Bancorp, Inc. (Commission File no. 001-36441), originally filed with the Securities and Exchange Commission on July 30, 2019.

~~(1)~~(2)			Incorporated by reference to the Registration Statement on Form S-1 of Investors Bancorp, Inc. (Commission File no. 333-192966), originally filed with the Securities and Exchange Commission on December 20, 2013.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INVESTORS BANCORP, INC.

Date:

November ~~9, 2017~~6, 2020

By:

/s/ Kevin Cummings

Kevin Cummings

Chief Executive Officer ~~and President~~

(Principal Executive Officer)

~~By:~~

By:

/s/ Sean Burke

Sean Burke

~~Senior~~
Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)



	At September 30, 2017
	Carrying value		Gross unrealized gains	Gross unrealized losses	Estimated fair value
	(In thousands)
Available-for-sale:
Equity securities	$	4,889	834	77	5,646
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	656,728		1,803	4,537	653,994
Federal National Mortgage Association	1,258,212		2,600	11,702	1,249,110
Government National Mortgage Association	41,642		—	963	40,679
Total mortgage-backed securities available-for-sale	1,956,582		4,403	17,202	1,943,783
Total available-for-sale securities	$	1,961,471	5,237	17,279	1,949,429



	At December 31, 2016
	Carrying value		Gross unrealized gains	Gross unrealized losses	Estimated fair value
	(In thousands)
Available-for-sale:
Equity securities	$	5,825	918	83	6,660
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	603,774		1,971	7,306	598,439
Federal National Mortgage Association	1,022,383		2,678	16,474	1,008,587
Government National Mortgage Association	47,538		—	791	46,747
Total mortgage-backed securities available-for-sale	1,673,695		4,649	24,571	1,653,773
Total available-for-sale securities	$	1,679,520	5,567	24,654	1,660,433



	Number of Shares Awarded		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	5,876,491		$	12.51
Granted	430,000		14.39
Vested	(960,564	)	12.51
Forfeited	(268,163	)	12.50
Outstanding and non vested at September 30, 2017	5,077,764		$	12.67



	Asset Derivatives						Liability Derivatives
	September 30, 2017 ⁽¹⁾			December 31, 2016			September 30, 2017 ⁽¹⁾			December 31, 2016
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Derivatives designated as hedging instruments:
Interest Rate Swaps	Other assets	$	—	Other assets	$	12,550	Other liabilities	$	467	Other liabilities	$	—
Total derivatives designated as hedging instruments		$	—		$	12,550		$	467		$	—



	Change in funded status of retirement obligations			Accretion of loss on securities reclassified to held to maturity		Unrealized (losses) gains on securities available-for-sale and gains included in net income		Other-than- temporary impairment accretion on debt securities		Unrealized gains (losses) on derivatives		Total accumulated other comprehensive loss
	(Dollars in thousands)
Balance - December 31, 2016	$	(4,895	)	(1,988	)	(12,271	)	(12,870	)	7,424		(24,600	)
Net change	249			580		4,440		770		(1,324	)	4,715
Balance - September 30, 2017	$	(4,646	)	(1,408	)	(7,831	)	(12,100	)	6,100		(19,885	)

Balance - December 31, 2015	$	(12,366	)	(3,080	)	1,371		(13,750	)	—		(27,825	)
Net change	952			847		10,608		698		(631	)	12,474
Balance - September 30, 2016	$	(11,414	)	(2,233	)	11,979		(13,052	)	(631	)	(15,351	)



	September 30, 2017				June 30, 2017				March 31, 2017				December 31, 2016				September 30, 2016
	# of Loans	Amount			# of Loans	Amount			# of Loans	Amount			# of Loans	Amount			# of Loans	Amount
	(dollars in millions)

Multi-family	4	$	14.2		6	$	19.0		2	$	0.5		2	$	0.5		1	$	0.2
Commercial real estate	31	35.3			36	75.6			24	8.2			24	9.2			29	8.9
Commercial and industrial	6	1.9			5	1.8			4	2.2			8	4.7			6	2.3
Construction	—	—			—	—			—	—			—	—			—	—
Total commercial loans	41	51.4			47	96.4			30	10.9			34	14.4			36	11.4
Residential and consumer	417	74.3			447	81.0			470	76.2			478	79.9			481	86.1
Total non-accrual loans	458	$	125.7		494	$	177.4		500	$	87.1		512	$	94.3		517	$	97.5
Accruing troubled debt restructured loans	58	$	13.4		45	$	11.7		47	$	12.2		42	$	9.4		31	$	8.8
Non-accrual loans to total loans		0.63		%		0.89		%		0.45		%		0.50		%		0.53		%
Allowance for loan losses as a percent of non-accrual loans		183.09		%		129.68		%		265.16		%		242.24		%		229.31		%
Allowance for loan losses as a percent of total loans		1.15		%		1.16		%		1.18		%		1.21		%		1.22		%



	EVE (1) (2)						Net Interest Income (3)
Change in Interest Rates (basis points)	Estimated EVE		Estimated Increase (Decrease)				Estimated Net Interest Income		Estimated Increase (Decrease)
Change in Interest Rates (basis points)	Estimated EVE		Amount		Percent		Estimated Net Interest Income		Amount		Percent
	(Dollars in thousands)
+ 200bp	$	3,993,494	(433,633	)	(9.8	)%	$	630,750	(42,169	)	(6.3	)%
0bp	$	4,427,127	—		—		$	672,919	—		—
-100bp	$	4,441,774	14,647		0.3	%	$	685,454	12,535		1.9	%



Period	Total Number of Shares Purchased ⁽¹⁾⁽²⁾	Average Price paid Per Share		As part of Publicly Announced Plans or Programs	Yet to be Purchased under the Plans or Programs ⁽¹⁾
July 1, 2017 through July 31, 2017	953,100	$	13.21	953,100	19,002,476
August 1, 2017 through August 31, 2017	520,000	13.01		520,000	18,482,476
September 1, 2017 through September 30, 2017	1,045,454	13.26		1,043,000	17,439,476
Total	2,518,554	$	13.19	2,516,100	17,439,476