Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31,September 30, 2019
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
(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) (973924-5100
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
CommonISBCThe 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 every Interactive Data File required to be submitted 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 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 filero 
Non-accelerated filer o    Smaller reporting companyo 
      Emerging growth companyo 
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
CommonISBCThe NASDAQ Stock Market
As of May 3,November 8, 2019, the registrant had 359,070,852 shares of common stock, par value $0.01 per share, issued and 278,715,537274,753,702 outstanding. 

INVESTORS BANCORP, INC.
FORM 10-Q


Index


Part I. Financial Information
  Page
Item 1.Financial Statements 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II. Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 



Part IFinancial Information
ITEM 1.FINANCIAL STATEMENTS


INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31,September 30, 2019 (Unaudited) and December 31, 2018
March 31,
2019
 December 31,
2018
September 30,
2019
 December 31,
2018
(In thousands)(In thousands)
ASSETS      
Cash and cash equivalents$186,083
 196,891
$195,400
 196,891
Equity securities5,880
 5,793
6,030
 5,793
Debt securities available-for-sale, at estimated fair value2,156,340
 2,122,162
2,644,024
 2,122,162
Debt securities held-to-maturity, net (estimated fair value of $1,536,684 and $1,558,564 at March 31, 2019 and December 31, 2018, respectively)1,516,600
 1,555,137
Debt securities held-to-maturity, net (estimated fair value of $1,158,769 and $1,558,564 at September 30, 2019 and December 31, 2018, respectively)1,117,699
 1,555,137
Loans receivable, net21,503,110
 21,378,136
21,516,234
 21,378,136
Loans held-for-sale6,827
 4,074
31,373
 4,074
Federal Home Loan Bank stock258,949
 260,234
273,996
 260,234
Accrued interest receivable82,417
 77,501
83,951
 77,501
Other real estate owned6,989
 6,911
Other real estate owned and other repossessed assets12,675
 6,911
Office properties and equipment, net177,465
 177,432
171,266
 177,432
Operating lease right-of-use assets187,560
 
179,632
 
Net deferred tax asset101,499
 104,411
108,634
 104,411
Bank owned life insurance213,491
 211,914
216,925
 211,914
Goodwill and intangible assets98,551
 99,063
97,566
 99,063
Other assets43,879
 29,349
69,758
 29,349
Total assets$26,545,640
 26,229,008
$26,725,163
 26,229,008
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Liabilities:      
Deposits$17,629,999
 17,580,269
$17,672,756
 17,580,269
Borrowed funds5,549,587
 5,435,681
5,694,553
 5,435,681
Advance payments by borrowers for taxes and insurance148,277
 129,891
147,359
 129,891
Operating lease liabilities197,281
 
189,927
 
Other liabilities64,666
 77,837
89,201
 77,837
Total liabilities23,589,810
 23,223,678
23,793,796
 23,223,678
Commitments and contingencies
 

 

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 March 31, 2019 and December 31, 2018; 280,066,465 and 286,273,114 outstanding at March 31, 2019 and December 31, 2018, respectively3,591
 3,591
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 359,070,852 issued at September 30, 2019 and December 31, 2018; 274,756,421 and 286,273,114 outstanding at September 30, 2019 and December 31, 2018, respectively3,591
 3,591
Additional paid-in capital2,810,832
 2,805,423
2,817,668
 2,805,423
Retained earnings1,191,020
 1,173,897
1,227,294
 1,173,897
Treasury stock, at cost; 79,004,387 and 72,797,738 shares at March 31, 2019 and December 31, 2018, respectively(958,425) (884,750)
Treasury stock, at cost; 84,314,431 and 72,797,738 shares at September 30, 2019 and December 31, 2018, respectively(1,017,276) (884,750)
Unallocated common stock held by the employee stock ownership plan(80,513) (81,262)(79,015) (81,262)
Accumulated other comprehensive loss(10,675) (11,569)(20,895) (11,569)
Total stockholders’ equity2,955,830
 3,005,330
2,931,367
 3,005,330
Total liabilities and stockholders’ equity$26,545,640
 26,229,008
$26,725,163
 26,229,008
See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended September 30,
2019 20182019 2018 2019 2018
(Dollars in thousands, except per share data)(Dollars in thousands, except per share data)
Interest and dividend income:          
Loans receivable and loans held-for-sale$224,890
 204,722
$231,734
 216,516
 684,086
 633,029
Securities:          
Equity37
 35
36
 32
 108
 100
Government-sponsored enterprise obligations266
 274
343
 266
 876
 813
Mortgage-backed securities23,630
 20,022
23,978
 19,624
 71,491
 59,279
Municipal bonds and other debt2,522
 2,258
3,186
 2,615
 8,442
 7,305
Interest-bearing deposits535
 455
821
 677
 1,965
 1,541
Federal Home Loan Bank stock4,337
 3,801
4,456
 4,296
 12,871
 11,928
Total interest and dividend income256,217
 231,567
264,554
 244,026
 779,839
 713,995
Interest expense:          
Deposits65,422
 36,376
67,972
 51,923
 201,222
 130,366
Borrowed funds28,117
 22,707
32,130
 25,177
 92,319
 72,918
Total interest expense93,539
 59,083
100,102
 77,100
 293,541
 203,284
Net interest income162,678
 172,484
164,452
 166,926
 486,298
 510,711
Provision for loan losses3,000
 2,500
(2,500) 2,000
 (2,500) 8,500
Net interest income after provision for loan losses159,678
 169,984
166,952
 164,926
 488,798
 502,211
Non-interest income          
Fees and service charges6,176
 5,458
5,796
 5,506
 16,785
 16,194
Income on bank owned life insurance1,577
 1,286
1,832
 1,596
 4,949
 4,425
Gain on loans, net433
 257
1,679
 478
 3,127
 1,398
Gain (loss) on securities, net64
 (46)30
 97
 (5,523) 1,198
Gain on sale of other real estate owned, net224
 153
358
 13
 863
 350
Other income2,720
 2,002
5,085
 2,597
 12,754
 7,310
Total non-interest income11,194
 9,110
14,780
 10,287
 32,955
 30,875
Non-interest expense          
Compensation and fringe benefits60,998
 59,061
63,603
 59,279
 184,455
 179,139
Advertising and promotional expense3,612
 2,087
2,994
 3,229
 10,888
 9,123
Office occupancy and equipment expense16,171
 16,578
15,702
 15,151
 47,296
 46,446
Federal deposit insurance premiums3,300
 4,500
3,300
 4,935
 9,900
 13,960
General and administrative484
 500
487
 509
 1,663
 1,702
Professional fees2,940
 4,402
6,010
 3,578
 12,411
 11,781
Data processing and communication7,999
 6,123
8,348
 7,090
 23,989
 20,319
Other operating expenses7,905
 7,834
8,274
 8,017
 25,329
 22,987
Total non-interest expenses103,409
 101,085
108,718
 101,788
 315,931
 305,457
Income before income tax expense67,463
 78,009
73,014
 73,425
 205,822
 227,629
Income tax expense19,305
 20,084
21,042
 19,201
 59,068
 58,383
Net income$48,158
 57,925
$51,972
 54,224
 146,754
 169,246
Basic earnings per share$0.18
 0.20
$0.20
 0.19
 0.56
 0.60
Diluted earnings per share$0.18
 0.20
$0.20
 0.19
 0.55
 0.59
Weighted average shares outstanding
  
      
Basic267,664,063
 287,685,531
261,678,994
 280,755,898
 264,104,402
 284,289,363
Diluted268,269,730
 289,131,916
261,812,970
 281,172,921
 264,422,265
 285,376,003
See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months Ended March 31,For the Three Months Ended September 30, For the Nine Months Ended September 30,
2019 20182019 2018 2019 2018
(In thousands)(In thousands)
Net income$48,158
 57,925
$51,972
 54,224
 146,754
 169,246
Other comprehensive income (loss), net of tax:   
Other comprehensive loss, net of tax:       
Change in funded status of retirement obligations13
 103
13
 102
 40
 308
Unrealized gains (losses) on debt securities available-for-sale16,239
 (22,723)6,798
 (7,310) 39,605
 (36,330)
Accretion of loss on debt securities reclassified to held to maturity113
 167
41
 149
 472
 475
Reclassification adjustment for security losses included in net income
 
 4,221
 
Other-than-temporary impairment accretion on debt securities180
 216
228
 216
 589
 647
Net (losses) gains on derivatives arising during the period(15,651) 12,442
Total other comprehensive income (loss)894
 (9,795)
Net (losses) gains on derivatives(9,564) 5,266
 (54,253) 23,728
Total other comprehensive loss(2,484) (1,577) (9,326) (11,172)
Total comprehensive income$49,052
 48,130
$49,488
 52,647
 137,428
 158,074




See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity
ThreeNine Months Ended March 31,September 30, 2019 and 2018
(Unaudited)
Common
stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Treasury
stock
 
Unallocated
common stock
held by ESOP
 
Accumulated
other
comprehensive
loss
 
Total
stockholders’
equity
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)(In thousands)
Balance at December 31, 2017$3,591
 2,784,390
 1,084,177
 (633,110) (84,258) (29,339) 3,125,451
$3,591
 2,784,390
 1,084,177
 (633,110) (84,258) (29,339) 3,125,451
Net income
 
 57,925
 
 
 
 57,925

 
 169,246
 
 
 
 169,246
Other comprehensive loss, net of tax
 
 
 
 
 (9,795) (9,795)
 
 
 
 
 (11,172) (11,172)
Reclassification due to the adoption of ASU No. 2016-01
 
 606
 
 
 (606) 

 
 606
 
 
 (606) 
Purchase of treasury stock (4,525,023 shares)
 
 
 (61,859) 
 
 (61,859)
Treasury stock allocated to restricted stock plan (18,947 shares)
 (257) 27
 230
 
 
 
Purchase of treasury stock (14,477,965 shares)
 
 
 (191,003) 
 
 (191,003)
Treasury stock allocated to restricted stock plan (71,982 shares)
 (935) 58
 877
 
 
 
Compensation cost for stock options and restricted stock
 3,370
 
 
 
 
 3,370

 13,798
 
 
 
 
 13,798
Exercise of stock options
 (2,428) 
 5,142
 
 
 2,714

 (4,023) 
 9,347
 
 
 5,324
Restricted stock forfeitures (250,000 shares)
 3,135
 (216) (2,919) 
 
 
Cash dividend paid ($0.09 per common share)
 
 (27,366) 
 
 
 (27,366)
Restricted stock forfeitures (368,946 shares)
 4,626
 (306) (4,320) 
 
 
Cash dividend paid ($0.27 per common share)
 
 (81,166) 
 
 
 (81,166)
ESOP shares allocated or committed to be released
 892
 
 
 749
 
 1,641

 2,496
 
 
 2,247
 
 4,743
Balance at March 31, 2018$3,591
 2,789,102
 1,115,153
 (692,516) (83,509) (39,740) 3,092,081
Balance at September 30, 2018$3,591
 2,800,352
 1,172,615
 (818,209) (82,011) (41,117) 3,035,221
                          
Balance at December 31, 2018$3,591
 2,805,423
 1,173,897
 (884,750) (81,262) (11,569) 3,005,330
$3,591
 2,805,423
 1,173,897
 (884,750) (81,262) (11,569) 3,005,330
Net income
 
 48,158
 
 
 
 48,158

 
 146,754
 
 
 
 146,754
Other comprehensive income, net of tax
 
 
 
 
 894
 894
Purchase of treasury stock (6,208,379 shares)
 
 
 (73,732) 
 
 (73,732)
Treasury stock allocated to restricted stock plan (119,663 shares)
 (1,511) 50
 1,461
 
 
 
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
 4,573
 
 
 
 
 4,573

 15,875
 
 
 
 
 15,875
Exercise of stock options
 (65) 
 233
 
 
 168

 (573) 
 1,386
 
 
 813
Restricted stock forfeitures (137,066 shares)
 1,731
 (94) (1,637) 
 
 
Cash dividend paid ($0.11 per common share)
 
 (30,991) 
 
 
 (30,991)
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
 681
 
 
 749
 
 1,430

 1,850
 
 
 2,247
 
 4,097
Balance at March 31, 2019$3,591
 2,810,832
 1,191,020
 (958,425) (80,513) (10,675) 2,955,830
Balance at September 30, 2019$3,591
 2,817,668
 1,227,294
 (1,017,276) (79,015) (20,895) 2,931,367
See accompanying notes to consolidated financial statements.



INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,Nine Months Ended September 30,
2019 20182019 2018
(In thousands)(In thousands)
Cash flows from operating activities:      
Net income$48,158
 57,925
$146,754
 169,246
Adjustments to reconcile net income to net cash provided by operating activities:      
ESOP and stock-based compensation expense6,003
 5,012
19,972
 18,541
Amortization of premiums and accretion of discounts on securities, net1,822
 2,971
7,262
 8,712
Amortization of premiums and accretion of fees and costs on loans, net(2,063) (2,126)(3,479) (5,297)
Amortization of other intangible assets399
 513
1,220
 1,514
Provision for loan losses3,000
 2,500
(2,500) 8,500
Depreciation and amortization of office properties and equipment4,667
 4,569
14,175
 13,613
(Gain) loss on securities, net(64) 46
Loss (gain) on securities, net5,523
 (1,198)
Mortgage loans originated for sale(27,556) (5,271)(160,297) (44,246)
Proceeds from mortgage loan sales25,226
 9,690
164,249
 46,112
Gain on sales of mortgage loans, net(423) (245)(2,879) (951)
Gain on sale of other real estate owned(224) (153)(863) (350)
Income on bank owned life insurance(1,577) (1,286)(4,949) (4,425)
Amortization of operating lease right-of-use assets3,180
 
12,869
 
Increase in accrued interest receivable(4,916) (1,345)(6,450) (5,428)
Deferred tax expense (benefit)3,637
 (1,379)2,521
 (7,146)
Increase in other assets(11,152) (3,866)
(Increase) decrease in other assets(38,879) 15,344
(Decrease) increase in other liabilities(31,565) 15,994
(67,364) 20,417
Total adjustments(31,606) 25,624
(59,869) 63,712
Net cash provided by operating activities16,552
 83,549
86,885
 232,958
Cash flows from investing activities:      
Purchases of loans receivable(91,265) (86,198)(349,766) (363,339)
Net originations of loans receivable(36,517) (83,095)
Net payoffs (originations) of loans receivable29,729
 (190,805)
Proceeds from disposition of loans receivable636
 12
148,505
 447
Gain on disposition of loans receivable(10) (12)(248) (447)
Net proceeds from sale of other real estate owned1,308
 1,620
5,817
 3,149
Proceeds from principal repayments/calls/maturities of debt securities available for sale69,023
 85,522
304,765
 295,651
Proceeds from sales of debt securities available for sale399,435
 
Proceeds from principal repayments/calls/maturities of debt securities held to maturity57,219
 85,983
210,115
 233,202
Purchases of equity securities(23) (22)(72) (67)
Purchases of debt securities available for sale(83,282) (77,065)(786,011) (353,821)
Purchases of debt securities held to maturity(18,501) (4,885)(166,338) (46,805)
Proceeds from redemptions of Federal Home Loan Bank stock71,276
 55,016
244,632
 194,201
Purchases of Federal Home Loan Bank stock(69,991) (88,391)(258,394) (205,060)
Purchases of office properties and equipment(4,700) (1,706)(8,009) (8,769)
Death benefit proceeds from bank owned life insurance
 3,619
Death benefit proceeds from bank owned life insurance, net
 3,619
Purchases of bank owned life insurance
 (125,000)
 (125,000)
Proceeds from surrender of bank owned life insurance contract
 71,029
Cash paid for acquisition
 (340,183)
 (340,183)
Net cash used in investing activities(104,827) (574,785)(225,840) (832,998)
Cash flows from financing activities:      
Net increase (decrease) in deposits49,730
 (811,372)
Net increase in deposits92,486
 40,115
Funds borrowed under other repurchase agreements197,758
 120,000
Net increase in borrowed funds113,906
 899,727
61,115
 272,241
Net increase in advance payments by borrowers for taxes and insurance18,386
 24,437
Dividends paid(30,991) (27,366)
Exercise of stock options168
 2,714

Net increase in advance payments by borrowers for taxes and insurance17,468
 26,730
Dividends paid(91,935) (81,166)
Exercise of stock options813
 5,324
Purchase of treasury stock(73,732) (61,859)(140,241) (191,003)
Net cash provided by financing activities77,467
 26,281
137,464
 192,241
Net decrease in cash and cash equivalents(10,808) (464,955)(1,491) (407,799)
Cash and cash equivalents at beginning of period196,891
 618,394
196,891
 618,394
Cash and cash equivalents at end of period$186,083
 153,439
$195,400
 210,595
Supplemental cash flow information:      
Non-cash investing activities:      
Real estate acquired through foreclosure$1,245
 564
Real estate acquired through foreclosure and other assets repossessed$11,289
 4,938
Cash paid during the year for:      
Interest95,114
 57,022
294,669
 196,000
Income taxes3,921
 
36,220
 57,861
Significant non-cash transactions:      
Initial recognition of operating lease right-of-use assets193,290
 
Initial recognition of operating lease liabilities200,694
 
Debt securities transferred from held-to-maturity to available-for-sale393,067
 
Loans transferred to held-for-sale portfolio28,373
 
Right-of-use assets obtained in exchange for new lease liabilities2,358
 
Acquisitions:      
Non-cash assets acquired:      
Loans
 330,747

 330,747
Goodwill and other intangible assets, net
 4,975

 4,975
Total non-cash assets acquired
 335,722

 335,722
See accompanying notes to consolidated financial statements.

INVESTORS BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
 
1.     Basis of Presentation
The consolidated financial statements are comprised of the accounts of Investors Bancorp, Inc. and its wholly owned 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 March 31,September 30, 2019 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, 2018 Annual Report on Form 10-K. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.


2.     Stock Transactions
Stock Repurchase ProgramsProgram
On March 16, 2015, the Company announced it had received approval from the Board of Governors of the Federal Reserve System to commence its first repurchase program since completion of its second step conversion. On June 30, 2015, the Company’s second repurchase program began upon completion of the first program. On June 17, 2016, the Company’s third share repurchase program began upon completion of the second program. On October 25, 2018, the Company announced its fourth share repurchase program, which authorized the purchase of 10% of its publicly-held outstanding shares of common stock, or 28,886,780 shares. The fourth program commenced immediately upon completion of the third program on December 10, 2018 and remains the Company’s current program as of March 31,September 30, 2019.
During the threenine months ended March 31,September 30, 2019, the Company purchased 6,208,37912,042,876 shares at a cost of $73.7$140.2 million, or approximately $11.88$11.65 per share. During the threenine months ended March 31,September 30, 2019, shares repurchased included 128,379383,836 shares 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.


3.     Business Combinations
Gold Coast Bancorp
On July 24, 2019, the Company and Gold Coast Bancorp, Inc. (“Gold Coast”) signed a definitive merger agreement under which the Company will acquire Gold Coast. Consideration will be paid to Gold Coast stockholders in a combination of stock and cash. Under the terms of the merger agreement, 50% of the common shares of Gold Coast will be converted into Investors Bancorp common stock and the remaining 50% will be exchanged for cash. For each share of Gold Coast Bancorp common stock, Gold Coast shareholders will have the 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 is subject to proration to ensure that, in the aggregate, 50% of Gold Coast’s shares will be converted into Investors Bancorp common stock. As of September 30, 2019, Gold Coast had assets of $562.2 million, loans of $461.5 million and deposits of $463.5 million and operated six branches in Nassau and Suffolk counties in suburban Long Island and one branch in Brooklyn, NY. Required approvals to complete this transaction include Gold Coast shareholder approval, regulatory approvals, the effectiveness of the registration statement filed by Investors Bancorp with respect to the common stock to be issued in the transaction and other customary closing conditions. The merger is expected to be completed in the first quarter of 2020. As the merger has not been completed, the transaction is not reflected in the Consolidated Financial Statements.
Equipment Finance Portfolio
On February 2, 2018, the Company completed the acquisition of a $345.8 million equipment finance portfolio. The acquisition included a seven-person7-person team of financing professionals to lead the Company’s Equipment Finance Group, which is a part of the Company’s business lending group and is classified within our commercial and industrial loan portfolio. The purchase price of $340.2 million was paid using available cash.
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 $5.0 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 calculation of goodwill is subject to change for up to one year after the closing date of the transaction as additional information relative to closing date estimates and uncertainties becomes available. The accounting for the acquisition of the equipment finance portfolio is complete and is reflected in our Consolidated Financial Statements.
    

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,
 2019 2018
 (Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share   
Earnings applicable to common stockholders$51,972
 $54,224
    
Shares   
Weighted-average common shares outstanding - basic261,678,994
 280,755,898
Effect of dilutive common stock equivalents (1)
133,976
 417,023
Weighted-average common shares outstanding - diluted261,812,970
 281,172,921
    
Earnings per common share   
Basic$0.20
 $0.19
Diluted$0.20
 $0.19
 For the Three Months Ended March 31,
 2019 2018
 (Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share   
Earnings applicable to common stockholders$48,158
 $57,925
    
Shares   
Weighted-average common shares outstanding - basic267,664,063
 287,685,531
Effect of dilutive common stock equivalents (1)
605,667
 1,446,385
Weighted-average common shares outstanding - diluted268,269,730
 289,131,916
    
Earnings per common share   
Basic$0.18
 $0.20
Diluted$0.18
 $0.20

(1) For the three months ended March 31,September 30, 2019 and 2018, there were 10,278,9758,142,370 and 9,673,42310,059,247 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,
 2019 2018
 (Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share   
Earnings applicable to common stockholders$146,754
 $169,246
    
Shares   
Weighted-average common shares outstanding - basic264,104,402
 284,289,363
Effect of dilutive common stock equivalents (1)
317,863
 1,086,640
Weighted-average common shares outstanding - diluted264,422,265
 285,376,003
    
Earnings per common share   
Basic$0.56
 $0.60
Diluted$0.55
 $0.59

(1) For the nine months ended September 30, 2019 and 2018, there were 6,723,858 and 9,796,551 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.


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 $5.9$6.0 million and $5.8 million as of March 31,September 30, 2019 and December 31, 2018, 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 (losses) on equity securities reported in the Consolidated Statements of Income:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
 (In thousands)
Net gains recognized on equity securities$30
 97
 $165
 104
Less: Net gains recognized on equity securities sold
 
 
 
Unrealized gains recognized on equity securities$30
 97
 $165
 $104
 For the Three Months Ended March 31,
 2019 2018
 (In thousands)
Net gains (losses) recognized on equity securities$64
 (46)
Less: Net gains (losses) recognized on equity securities sold
 
Unrealized gains (losses) recognized on equity securities$64
 (46)


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 for held-to-maturity debt securities as of the dates indicated:indicated. During the second quarter of 2019, the Company early adopted ASU 2019-04 and reclassified $393.1 million of debt securities held-to-maturity to debt securities available-for-sale. See Note 17, Recent Accounting Pronouncements, for further details regarding the adoption of ASU 2019-04.
 At March 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$1,009,142
 11,015
 3,639
 1,016,518
Federal National Mortgage Association974,499
 6,958
 7,027
 974,430
Government National Mortgage Association163,128
 2,264
 
 165,392
Total debt securities available-for-sale$2,146,769
 20,237
 10,666
 2,156,340
 At March 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$41,262
 
 41,262
 
 405
 40,857
Municipal bonds21,013
 
 21,013
 955
 
 21,968
Corporate and other debt securities66,402
 15,603
 50,799
 34,635
 
 85,434
Total debt securities held-to-maturity128,677
 15,603
 113,074
 35,590
 405
 148,259
Mortgage-backed securities:           
Federal Home Loan Mortgage Corporation398,597
 526
 398,071
 322
 4,840
 393,553
Federal National Mortgage Association926,662
 600
 926,062
 1,672
 11,888
 915,846
Government National Mortgage Association79,393
 
 79,393
 
 367
 79,026
Total mortgage-backed securities held-to-maturity1,404,652
 1,126
 1,403,526
 1,994
 17,095
 1,388,425
Total debt securities held-to-maturity$1,533,329
 16,729
 1,516,600
 37,584
 17,500
 1,536,684
 At September 30, 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$1,170,764
 21,250
 492
 1,191,522
Federal National Mortgage Association1,131,545
 20,351
 174
 1,151,722
Government National Mortgage Association295,831
 4,949
 
 300,780
Total debt securities available-for-sale$2,598,140
 46,550
 666
 2,644,024

 At September 30, 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$50,453
 
 50,453
 722
 
 51,175
Municipal bonds99,273
 
 99,273
 4,234
 
 103,507
Corporate and other debt securities77,062
 15,035
 62,027
 23,130
 199
 84,958
Total debt securities held-to-maturity226,788
 15,035
 211,753
 28,086
 199
 239,640
Mortgage-backed securities:           
Federal Home Loan Mortgage Corporation273,488
 154
 273,334
 4,670
 201
 277,803
Federal National Mortgage Association559,607
 436
 559,171
 7,930
 359
 566,742
Government National Mortgage Association73,441
 
 73,441
 1,143
 
 74,584
Total mortgage-backed securities held-to-maturity906,536
 590
 905,946
 13,743
 560
 919,129
Total debt securities held-to-maturity$1,133,324
 15,625
 1,117,699
 41,829
 759
 1,158,769

(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.
(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.
 At December 31, 2018
 Carrying value 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
 (In thousands)
Available-for-sale:       
Mortgage-backed securities:       
Federal Home Loan Mortgage Corporation$988,348
 6,492
 8,190
 986,650
Federal National Mortgage Association980,546
 3,560
 15,550
 968,556
Government National Mortgage Association165,211
 1,745
 
 166,956
Total debt securities available-for-sale$2,134,105
 11,797
 23,740
 2,122,162


 At December 31, 2018
 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$41,258
 
 41,258
 
 1,236
 40,022
Municipal bonds25,513
 
 25,513
 942
 
 26,455
Corporate and other debt securities66,295
 15,854
 50,441
 36,592
 
 87,033
Total debt securities held-to-maturity133,066
 15,854
 117,212
 37,534
 1,236
 153,510
Mortgage-backed securities:           
Federal Home Loan Mortgage Corporation402,231
 595
 401,636
 112
 9,413
 392,335
Federal National Mortgage Association955,237
 689
 954,548
 535
 22,687
 932,396
Government National Mortgage Association81,741
 
 81,741
 
 1,418
 80,323
Total mortgage-backed securities held-to-maturity1,439,209
 1,284
 1,437,925
 647
 33,518
 1,405,054
Total debt securities held-to-maturity$1,572,275
 17,138
 1,555,137
 38,181
 34,754
 1,558,564

 At December 31, 2018
 Carrying value 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
 (In thousands)
Available-for-sale:       
Mortgage-backed securities:       
Federal Home Loan Mortgage Corporation$988,348
 6,492
 8,190
 986,650
Federal National Mortgage Association980,546
 3,560
 15,550
 968,556
Government National Mortgage Association165,211
 1,745
 
 166,956
Total debt securities available-for-sale$2,134,105
 11,797
 23,740
 2,122,162
 At December 31, 2018
 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$41,258
 
 41,258
 
 1,236
 40,022
Municipal bonds25,513
 
 25,513
 942
 
 26,455
Corporate and other debt securities66,295
 15,854
 50,441
 36,592
 
 87,033
Total debt securities held-to-maturity133,066
 15,854
 117,212
 37,534
 1,236
 153,510
Mortgage-backed securities:           
Federal Home Loan Mortgage Corporation402,231
 595
 401,636
 112
 9,413
 392,335
Federal National Mortgage Association955,237
 689
 954,548
 535
 22,687
 932,396
Government National Mortgage Association81,741
 
 81,741
 
 1,418
 80,323
Total mortgage-backed securities held-to-maturity1,439,209
 1,284
 1,437,925
 647
 33,518
 1,405,054
Total debt securities held-to-maturity$1,572,275
 17,138
 1,555,137
 38,181
 34,754
 1,558,564


(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.
(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.
At March 31,September 30, 2019, corporate and other debt securities include a portfolio of collateralized debt obligations backed by pooled trust preferred securities (“TruPS”), principally issued by banks and to a lesser extent insurance companies and real estate investment trusts. At March 31,September 30, 2019, the TruPS had a carrying value and estimated fair value of $45.8$47.0 million and $80.4$69.7 million, respectively. While all were investment grade at purchase, securities classified as non-investment grade at March 31,September 30, 2019 had a carrying value and estimated fair value of $43.9$45.2 million and $75.7$65.3 million, respectively. Fair value is derived from considering specific assumptions, including terms of the TruPS structure, events of deferrals, defaults and liquidations, the projected cash flow for principal and interest payments, and discounted cash flow modeling.
Debt securities with a carrying value of $706.0$905.1 million and an estimated fair value of $700.7$921.2 million are pledged to secure 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 amortized cost and estimated fair value of debt securities other than mortgage-backed securities at March 31,September 30, 2019, by contractual maturity, are shown below.

 September 30, 2019
 
Carrying
value
 
Estimated
fair value
 (In thousands)
Due in one year or less$10,129
 10,129
Due after one year through five years
 
Due after five years through ten years45,460
 47,148
Due after ten years156,164
 182,363
Total$211,753
 239,640

 March 31, 2019
 
Carrying
value
 
Estimated
fair value
 (In thousands)
Due in one year or less$16,993
 16,993
Due after one year through five years
 
Due after five years through ten years50,282
 50,850
Due after ten years45,799
 80,416
Total$113,074
 148,259


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 March 31,September 30, 2019 and December 31, 2018, were as follows:
 March 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$1,584
 2
 335,311
 3,637
 336,895
 3,639
Federal National Mortgage Association555
 1
 573,343
 7,026
 573,898
 7,027
Total debt securities available-for-sale2,139
 3
 908,654
 10,663
 910,793
 10,666
Held-to-maturity:           
Debt securities:           
Government-sponsored enterprises
 
 40,857
 405
 40,857
 405
Mortgage-backed securities:           
Federal Home Loan Mortgage Corporation
 
 360,580
 4,840
 360,580
 4,840
Federal National Mortgage Association
 
 744,965
 11,888
 744,965
 11,888
Government National Mortgage Association
 
 79,026
 367
 79,026
 367
Total mortgage-backed securities held-to-maturity
 
 1,184,571
 17,095
 1,184,571
 17,095
Total debt securities held-to-maturity
 
 1,225,428
 17,500
 1,225,428
 17,500
Total$2,139
 3
 2,134,082
 28,163
 2,136,221
 28,166


December 31, 2018September 30, 2019
Less than 12 months 12 months or more TotalLess than 12 months 12 months or more Total
Estimated
fair value
 
Unrealized
losses
 
Estimated
fair value
 
Unrealized
losses
 
Estimated
fair value
 
Unrealized
losses
Estimated
fair value
 
Unrealized
losses
 
Estimated
fair value
 
Unrealized
losses
 
Estimated
fair value
 
Unrealized
losses
(In thousands)(In thousands)
Available-for-sale:                      
Mortgage-backed securities:                     

Federal Home Loan Mortgage Corporation$97,137
 994
 288,916
 7,196
 386,053
 8,190
$117,655
 332
 10,060
 160
 127,715
 492
Federal National Mortgage Association125,389
 2,098
 489,337
 13,452
 614,726
 15,550
29,282
 102
 37,257
 72
 66,539
 174
Total mortgage-backed securities available-for-sale146,937
 434
 47,317
 232
 194,254
 666
Total debt securities available-for-sale222,526
 3,092
 778,253
 20,648
 1,000,779
 23,740
146,937
 434
 47,317
 232
 194,254
 666
Held-to-maturity:                      
Debt securities:                      
Government-sponsored enterprises
 
 40,022
 1,236
 40,022
 1,236
Corporate and other debt securities2,766
 199
 
 
 2,766
 199
Total debt securities held-to-maturity2,766
 199
 
 
 2,766
 199
Mortgage-backed securities:                      
Federal Home Loan Mortgage Corporation51,045
 553
 339,534
 8,860
 390,579
 9,413
9,098
 28
 31,254
 173
 40,352
 201
Federal National Mortgage Association214,400
 2,449
 663,671
 20,238
 878,071
 22,687
3,132
 12
 51,680
 347
 54,812
 359
Government National Mortgage Association35,499
 492
 44,824
 926
 80,323
 1,418
Total mortgage-backed securities held-to-maturity300,944
 3,494
 1,048,029
 30,024
 1,348,973
 33,518
12,230
 40
 82,934
 520
 95,164
 560
Total debt securities held-to-maturity300,944
 3,494
 1,088,051
 31,260
 1,388,995
 34,754
14,996
 239
 82,934
 520
 97,930
 759
Total$523,470
 6,586
 1,866,304
 51,908
 2,389,774
 58,494
$161,933
 673
 130,251
 752
 292,184
 1,425

 December 31, 2018
 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$97,137
 994
 288,916
 7,196
 386,053
 8,190
Federal National Mortgage Association125,389
 2,098
 489,337
 13,452
 614,726
 15,550
Total mortgage-backed securities available-for-sale222,526
 3,092
 778,253
 20,648
 1,000,779
 23,740
Total debt securities available-for-sale222,526
 3,092
 778,253
 20,648
 1,000,779
 23,740
Held-to-maturity:           
Debt securities:           
Government-sponsored enterprises
 
 40,022
 1,236
 40,022
 1,236
Total debt securities held-to-maturity
 
 40,022
 1,236
 40,022
 1,236
Mortgage-backed securities:           
Federal Home Loan Mortgage Corporation51,045
 553
 339,534
 8,860
 390,579
 9,413
Federal National Mortgage Association214,400
 2,449
 663,671
 20,238
 878,071
 22,687
Government National Mortgage Association35,499
 492
 44,824
 926
 80,323
 1,418
Total mortgage-backed securities held-to-maturity300,944
 3,494
 1,048,029
 30,024
 1,348,973
 33,518
Total debt securities held-to-maturity300,944
 3,494
 1,088,051
 31,260
 1,388,995
 34,754
Total$523,470
 6,586
 1,866,304
 51,908
 2,389,774
 58,494

At March 31,September 30, 2019, the majority of gross unrealized losses relate to our mortgage-backed-security portfolio which is comprised of debt securities issued by U.S. Government Sponsored Enterprises. The fair values of these securities have been negativelypositively impacted by changes in interest rates.rates as compared to December 31, 2018.

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 (loss), net of tax.
With the assistance of a valuation specialist, we evaluate the credit and performance of each issuer underlying our pooled TruPS. Cash flows for each security are forecasted using assumptions for defaults, recoveries, pre-payments and amortization. At March 31,September 30, 2019 and 2018, 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 March 31,September 30, 2019 and 2018. At March 31,September 30, 2019, non-credit related OTTI recorded on the previously impaired TruPS was $15.6$15.0 million ($11.210.8 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,
 2019 2018 2019 2018
 (In thousands)
Balance of credit related OTTI, beginning of period$78,831
 83,923
 80,595
 85,768
Additions:       
Initial credit impairments
 
 
 
Subsequent credit impairments
 
 
 
Reductions:       
Accretion of credit loss impairment due to an increase in expected cash flows(883) (923) (2,647) (2,768)
Reductions for securities sold or paid off during the period
 
 
 
Balance of credit related OTTI, end of period$77,948
 83,000
 77,948
 83,000

 For the Three Months Ended March 31,
 2019 2018
 (In thousands)
Balance of credit related OTTI, beginning of period$80,595
 85,768
Additions:   
Initial credit impairments
 
Subsequent credit impairments
 
Reductions:   
Accretion of credit loss impairment due to an increase in expected cash flows(882) (923)
Reductions for securities sold or paid off during the period
 
Balance of credit related OTTI, end of period$79,713
 84,845


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 months ended March 31,September 30, 2019, and 2018, there were no0 sales of equity or debt 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 sales of equity securities or debt securities held-to-maturity for the nine months ended September 30, 2019. The Company recognized unrealized gains on equity securities of $64,000$30,000 and $165,000, respectively, for the three and nine months ended September 30, 2019.
For the three and nine months ended September 30, 2018, there were 0 sales of equity or debt securities; however, in the second quarter of 2018, the Company received proceeds of $1.5 million from the payoff of a TruP security which resulted in a gain of $1.1 million. The Company recognized net unrealized lossesgains on equity securities of $46,000,$97,000 and $104,000, respectively, for the three and nine months ended March 31, 2019 andSeptember 30, 2018.


6.    Loans Receivable, Net
The detail of the loan portfolio as of March 31,September 30, 2019 and December 31, 2018 was as follows:


 September 30,
2019
 December 31,
2018
 (In thousands)
Multi-family loans$7,995,095
 8,165,187
Commercial real estate loans4,768,370
 4,783,095
Commercial and industrial loans2,681,577
 2,389,756
Construction loans289,857
 227,015
Total commercial loans15,734,899
 15,565,053
Residential mortgage loans5,306,912
 5,350,504
Consumer and other loans700,267
 707,746
Total loans excluding PCI loans21,742,078
 21,623,303
PCI loans4,132
 4,461
Deferred fees, premiums and other, net (1)
(1,991) (13,811)
Allowance for loan losses(227,985) (235,817)
Net loans$21,516,234
 21,378,136
 March 31,
2019
 December 31,
2018
 (In thousands)
Multi-family loans$8,174,342
 8,165,187
Commercial real estate loans4,848,729
 4,783,095
Commercial and industrial loans2,430,540
 2,389,756
Construction loans232,170
 227,015
Total commercial loans15,685,781
 15,565,053
Residential mortgage loans5,366,455
 5,350,504
Consumer and other loans691,136
 707,746
Total loans excluding PCI loans21,743,372
 21,623,303
PCI loans4,281
 4,461
Deferred fees, premiums and other, net (1)
(9,826) (13,811)
Allowance for loan losses(234,717) (235,817)
Net loans$21,503,110
 21,378,136

(1) Included in deferred fees and premiums are accretable purchase accounting adjustments in connection with loans acquired and an adjustment to the carrying amount of the residential loans hedged.


Allowance for Loan Losses
An analysis of the allowance for loan losses is summarized as follows:


 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (In thousands)
Balance at beginning of the period$231,937
 230,838
 235,817
 230,969
Loans charged off(3,354) (6,014) (10,980) (20,157)
Recoveries1,902
 3,994
 5,648
 11,506
Net charge-offs(1,452) (2,020) (5,332) (8,651)
Provision for loan losses(2,500) 2,000
 (2,500) 8,500
Balance at end of the period$227,985
 230,818
 227,985
 230,818
 Three Months Ended March 31,
 2019 2018
 (In thousands)
Balance at beginning of the period$235,817
 230,969
Loans charged off(5,445) (7,107)
Recoveries1,345
 4,782
Net charge-offs(4,100) (2,325)
Provision for loan losses3,000
 2,500
Balance at end of the period$234,717
 231,144

The allowance for loan losses is the estimated amount considered necessary 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 estimates 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 for the timely 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 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 threenine months ended March 31,September 30, 2019 and 2018, the Company recorded charge-offs of $15,000$7,000 and $88,000,$343,000, respectively, 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: collectively evaluated for impairment and individually evaluated.evaluated for impairment. 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 allowance for loans collectively evaluated componentfor impairment is determined by segregatingapplying quantitative loss factors to the remaining loans collectively evaluated for impairment segregated 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. ReservesQuantitative loss factors for each loan segment or the loss factors are generally determined based on the Company’s historical loss experience over aan appropriate look-back period determined to provide the appropriate amount of data to accurately estimate expected losses as of period end.period. Additionally, management assesses the loss emergence period for the expected losses of each loan segment and adjusts each historicalquantitative 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 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 quantitative loss factors may also be adjusted to account for qualitative or environmental factors, both internal and external to the Company, 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 determine 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.
The Company obtains an appraisal for all commercial loans that are collateral dependent upon origination. An updated appraisal isUpdated appraisals are generally obtained annually for loans rated substandard or worse with a balance ofloans $1.0 million or greater. An updated appraisal is obtained biennially for loans ratedgreater and special mention with a balance ofloans $2.0 million or greater.greater in the process of collection by the Company’s special assets department. 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 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 based on the growth and composition of the loan portfolio, the level of loan delinquency and the economic conditions in our lending area. 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 March 31,September 30, 2019 and December 31, 2018:


March 31, 2019September 30, 2019
Multi-
Family Loans
 
Commercial
Real Estate Loans
 
Commercial
and Industrial
Loans
 
Construction
Loans
 
Residential
Mortgage Loans
 
Consumer
and Other
Loans
 Unallocated Total
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)(Dollars in thousands)
Allowance for loan losses:                              
Beginning balance-December 31, 2018$82,876
 48,449
 71,084
 7,486
 20,776
 3,102
 2,044
 235,817
$82,876
 48,449
 71,084
 7,486
 20,776
 3,102
 2,044
 235,817
Charge-offs(1,463) (8) (2,946) 
 (823) (205) 
 (5,445)(2,854) (121) (5,183) 
 (1,905) (917) 
 (10,980)
Recoveries
 542
 331
 
 432
 40
 
 1,345
1,244
 2,137
 1,002
 
 1,186
 79
 
 5,648
Provision(5,841) (1,356) 10,376
 (183) 172
 54
 (222) 3,000
(5,490) (2,323) 4,542
 1,476
 (834) 215
 (86) (2,500)
Ending balance-March 31, 2019$75,572
 47,627
 78,845
 7,303
 20,557
 2,991
 1,822
 234,717
Ending balance-September 30, 2019$75,776
 48,142
 71,445
 8,962
 19,223
 2,479
 1,958
 227,985
                              
Individually evaluated for impairment$
 
 
 
 1,986
 72
 
 2,058
$
 
 
 
 1,897
 76
 
 1,973
Collectively evaluated for impairment75,572
 47,627
 78,845
 7,303
 18,571
 2,919
 1,822
 232,659
75,776
 48,142
 71,445
 8,962
 17,326
 2,403
 1,958
 226,012
Loans acquired with deteriorated credit quality
 
 
 
 
 
 
 

 
 
 
 
 
 
 
Balance at March 31, 2019$75,572
 47,627
 78,845
 7,303
 20,557
 2,991
 1,822
 234,717
Balance at September 30, 2019$75,776
 48,142
 71,445
 8,962
 19,223
 2,479
 1,958
 227,985
                              
Loans:                              
Individually evaluated for impairment$32,346
 5,173
 17,152
 
 28,297
 846
 
 83,814
$17,429
 8,140
 10,882
 
 26,939
 906
 
 64,296
Collectively evaluated for impairment8,141,996
 4,843,556
 2,413,388
 232,170
 5,338,158
 690,290
 
 21,659,558
7,977,666
 4,760,230
 2,670,695
 289,857
 5,279,973
 699,361
 
 21,677,782
Loans acquired with deteriorated credit quality
 3,673
 
 
 515
 93
 
 4,281

 3,558
 
 
 500
 74
 
 4,132
Balance at March 31, 2019$8,174,342
 4,852,402
 2,430,540
 232,170
 5,366,970
 691,229
 
 21,747,653
Balance at September 30, 2019$7,995,095
 4,771,928
 2,681,577
 289,857
 5,307,412
 700,341
 
 21,746,210

 December 31, 2018
 
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, 2017$81,469
 56,137
 54,563
 11,609
 21,835
 3,099
 2,257
 230,969
Charge-offs(2,603) (7,200) (7,078) 
 (5,246) (1,963) 
 (24,090)
Recoveries17
 5,213
 9,478
 
 2,193
 37
 
 16,938
Provision3,993
 (5,701) 14,121
 (4,123) 1,994
 1,929
 (213) 12,000
Ending balance-December 31, 2018$82,876
 48,449
 71,084
 7,486
 20,776

3,102
 2,044
 235,817
                
Individually evaluated for impairment$
 
 
 
 2,082
 72
 
 2,154
Collectively evaluated for impairment82,876
 48,449
 71,084
 7,486
 18,694
 3,030
 2,044
 233,663
Loans acquired with deteriorated credit quality
 
 
 
 
 
 
 
Balance at December 31, 2018$82,876
 48,449
 71,084
 7,486
 20,776

3,102
 2,044
 235,817
                
Loans:               
Individually evaluated for impairment$32,046
 6,623
 19,624
 
 27,884
 570
 
 86,747
Collectively evaluated for impairment8,133,141
 4,776,472
 2,370,132
 227,015
 5,322,620
 707,176
 
 21,536,556
Loans acquired with deteriorated credit quality
 3,730
 
 
 611
 120
 
 4,461
Balance at December 31, 2018$8,165,187
 4,786,825
 2,389,756
 227,015
 5,351,115

707,866
 
 21,627,764
 December 31, 2018
 
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, 2017$81,469
 56,137
 54,563
 11,609
 21,835
 3,099
 2,257
 230,969
Charge-offs(2,603) (7,200) (7,078) 
 (5,246) (1,963) 
 (24,090)
Recoveries17
 5,213
 9,478
 
 2,193
 37
 
 16,938
Provision3,993
 (5,701) 14,121
 (4,123) 1,994
 1,929
 (213) 12,000
Ending balance-December 31, 2018$82,876
 48,449
 71,084
 7,486
 20,776

3,102
 2,044
 235,817
                
Individually evaluated for impairment$
 
 
 
 2,082
 72
 
 2,154
Collectively evaluated for impairment82,876
 48,449
 71,084
 7,486
 18,694
 3,030
 2,044
 233,663
Loans acquired with deteriorated credit quality
 
 
 
 
 
 
 
Balance at December 31, 2018$82,876
 48,449
 71,084
 7,486
 20,776

3,102
 2,044
 235,817
                
Loans:               
Individually evaluated for impairment$32,046
 6,623
 19,624
 
 27,884
 570
 
 86,747
Collectively evaluated for impairment8,133,141
 4,776,472
 2,370,132
 227,015
 5,322,620
 707,176
 
 21,536,556
Loans acquired with deteriorated credit quality
 3,730
 
 
 611
 120
 
 4,461
Balance at December 31, 2018$8,165,187
 4,786,825
 2,389,756
 227,015
 5,351,115

707,866
 
 21,627,764

The Company categorizes loans into risk categories 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, the Company analyzes the loans individually by classifying the loans as to credit risk and assesses the probability of collection for each type of class. In assessing and classifying our commercial loan portfolio, the Company places significant emphasis on the borrower’s ability to service its debt. This analysis is performed on a quarterly basis. The Company uses the following definitions for 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.
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.
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 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.
The following tables present the risk category of loans as of March 31,September 30, 2019 and December 31, 2018 by class of loans, excluding PCI loans:


March 31, 2019September 30, 2019
Pass Watch 
Special
Mention
 Substandard Doubtful Loss TotalPass Watch 
Special
Mention
 Substandard Doubtful Loss Total
(In thousands)(In thousands)
Commercial loans:                          
Multi-family$6,568,139
 981,139
 291,225
 333,839
 
 
 8,174,342
$6,553,284
 962,053
 146,866
 332,892
 
 
 7,995,095
Commercial real estate4,027,646
 516,444
 150,022
 154,617
 
 
 4,848,729
4,102,142
 403,818
 54,799
 207,611
 
 
 4,768,370
Commercial and industrial1,625,810
 607,526
 57,203
 140,001
 
 
 2,430,540
1,851,024
 638,736
 48,164
 143,653
 
 
 2,681,577
Construction156,986
 56,663
 
 18,521
 
 
 232,170
190,412
 80,735
 399
 18,311
 
 
 289,857
Total commercial loans12,378,581
 2,161,772
 498,450
 646,978
 
 
 15,685,781
12,696,862
 2,085,342
 250,228
 702,467
 
 
 15,734,899
Residential mortgage5,285,603
 15,110
 6,132
 59,610
 
 
 5,366,455
5,232,790
 12,437
 10,192
 51,493
 
 
 5,306,912
Consumer and other676,901
 10,173
 1,135
 2,927
 
 
 691,136
691,421
 5,280
 1,524
 2,042
 
 
 700,267
Total$18,341,085
 2,187,055
 505,717
 709,515
 
 
 21,743,372
$18,621,073
 2,103,059
 261,944
 756,002
 
 
 21,742,078


 December 31, 2018
 Pass Watch 
Special
Mention
 Substandard Doubtful Loss Total
 (In thousands)
Commercial loans:             
Multi-family$6,462,056
 1,061,168
 313,498
 328,465
 
 
 8,165,187
Commercial real estate3,910,282
 552,080
 162,488
 158,245
 
 
 4,783,095
Commercial and industrial1,647,130
 571,620
 53,861
 117,145
 
 
 2,389,756
Construction163,503
 35,774
 9,200
 18,538
 
 
 227,015
Total commercial loans12,182,971
 2,220,642
 539,047
 622,393
 
 
 15,565,053
Residential mortgage5,268,234
 12,082
 7,712
 62,476
 
 
 5,350,504
Consumer and other694,432
 8,443
 1,650
 3,221
 
 
 707,746
Total$18,145,637
 2,241,167
 548,409
 688,090
 
 
 21,623,303
 December 31, 2018
 Pass Watch 
Special
Mention
 Substandard Doubtful Loss Total
 (In thousands)
Commercial loans:             
Multi-family$6,462,056
 1,061,168
 313,498
 328,465
 
 
 8,165,187
Commercial real estate3,910,282
 552,080
 162,488
 158,245
 
 
 4,783,095
Commercial and industrial1,647,130
 571,620
 53,861
 117,145
 
 
 2,389,756
Construction163,503
 35,774
 9,200
 18,538
 
 
 227,015
Total commercial loans12,182,971
 2,220,642
 539,047
 622,393
 
 
 15,565,053
Residential mortgage5,268,234
 12,082
 7,712
 62,476
 
 
 5,350,504
Consumer and other694,432
 8,443
 1,650
 3,221
 
 
 707,746
Total$18,145,637
 2,241,167
 548,409
 688,090
 
 
 21,623,303

    

The following tables present the payment status of the recorded investment in past due loans as of March 31,September 30, 2019 and December 31, 2018 by class of loans, excluding PCI loans:
 
March 31, 2019September 30, 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:                      
Multi-family$29,637
 3,621
 31,420
 64,678
 8,109,664
 8,174,342
$16,006
 3,517
 19,507
 39,030
 7,956,065
 7,995,095
Commercial real estate5,579
 314
 644
 6,537
 4,842,192
 4,848,729
17,955
 4,385
 6,158
 28,498
 4,739,872
 4,768,370
Commercial and industrial11,322
 3,810
 10,291
 25,423
 2,405,117
 2,430,540
5,927
 4,694
 5,350
 15,971
 2,665,606
 2,681,577
Construction
 
 210
 210
 231,960
 232,170

 
 
 
 289,857
 289,857
Total commercial loans46,538
 7,745
 42,565
 96,848
 15,588,933
 15,685,781
39,888
 12,596
 31,015
 83,499
 15,651,400
 15,734,899
Residential mortgage15,822
 6,555
 35,685
 58,062
 5,308,393
 5,366,455
14,029
 10,644
 28,746
 53,419
 5,253,493
 5,306,912
Consumer and other10,173
 1,215
 2,100
 13,488
 677,648
 691,136
5,282
 1,523
 1,233
 8,038
 692,229
 700,267
Total$72,533
 15,515
 80,350
 168,398
 21,574,974
 21,743,372
$59,199
 24,763
 60,994
 144,956
 21,597,122
 21,742,078
 
 December 31, 2018
 30-59 Days 60-89 Days 
Greater
than 90
Days
 
Total Past
Due
 Current 
Total
Loans
Receivable
 (In thousands)
Commercial loans:           
Multi-family$23,098
 2,572
 33,683
 59,353
 8,105,834
 8,165,187
Commercial real estate5,491
 3,511
 2,415
 11,417
 4,771,678
 4,783,095
Commercial and industrial2,988
 867
 4,560
 8,415
 2,381,341
 2,389,756
Construction9,200
 
 227
 9,427
 217,588
 227,015
Total commercial loans40,777
 6,950
 40,885
 88,612
 15,476,441
 15,565,053
Residential mortgage13,811
 7,712
 39,255
 60,778
 5,289,726
 5,350,504
Consumer and other8,524
 1,650
 2,830
 13,004
 694,742
 707,746
Total$63,112
 16,312
 82,970
 162,394
 21,460,909
 21,623,303
 December 31, 2018
 30-59 Days 60-89 Days 
Greater
than 90
Days
 
Total Past
Due
 Current 
Total
Loans
Receivable
 (In thousands)
Commercial loans:           
Multi-family$23,098
 2,572
 33,683
 59,353
 8,105,834
 8,165,187
Commercial real estate5,491
 3,511
 2,415
 11,417
 4,771,678
 4,783,095
Commercial and industrial2,988
 867
 4,560
 8,415
 2,381,341
 2,389,756
Construction9,200
 
 227
 9,427
 217,588
 227,015
Total commercial loans40,777
 6,950
 40,885
 88,612
 15,476,441
 15,565,053
Residential mortgage13,811
 7,712
 39,255
 60,778
 5,289,726
 5,350,504
Consumer and other8,524
 1,650
 2,830
 13,004
 694,742
 707,746
Total$63,112
 16,312
 82,970
 162,394
 21,460,909
 21,623,303

The following table presents non-accrual loans, excluding PCI loans, at the dates indicated:
 
 September 30, 2019 December 31, 2018
 # of loans Amount # of loans Amount
 (Dollars in thousands)
Non-accrual: 
Multi-family6
 $19,564
 15
 $33,940
Commercial real estate30
 12,310
 35
 12,391
Commercial and industrial16
 12,024
 14
 19,394
Construction
 
 1
 227
Total commercial loans52
 43,898
 65
 65,952
Residential mortgage and consumer261
 48,171
 320
 58,961
Total non-accrual loans313
 $92,069
 385
 $124,913
 March 31, 2019 December 31, 2018
 # of loans Amount # of loans Amount
 (Dollars in thousands)
Non-accrual: 
Multi-family14
 $34,069
 15
 $33,940
Commercial real estate32
 9,854
 35
 12,391
Commercial and industrial14
 17,184
 14
 19,394
Construction1
 210
 1
 227
Total commercial loans61
 61,317
 65
 65,952
Residential mortgage and consumer296
 56,370
 320
 58,961
Total non-accrual loans357
 $117,687
 385
 $124,913


Included in the non-accrual table 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 March 31,September 30, 2019 and December 31, 2018, these loans are comprised of the following:
March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
# of loans Amount # of loans Amount# of loans Amount # of loans Amount
(Dollars in thousands)(Dollars in thousands)
TDR with payment status current classified as non-accrual:              
Commercial real estate2
 $2,845
 2
 $2,817
1
 $65
 2
 $2,817
Commercial and industrial1
 3,109
 2
 9,762

 
 2
 9,762
Total commercial loans3
 5,954
 4
 12,579
1
 65
 4
 12,579
Residential mortgage and consumer34
 5,378
 26
 4,006
31
 5,059
 26
 4,006
Total TDR with payment status current classified as non-accrual37
 $11,332
 30
 $16,585
32
 $5,124
 30
 $16,585
The following table presents TDR loans which were also 30-89 days delinquent and classified as non-accrual at the dates indicated:indicated. Not included in the table is a commercial and industrial TDR loan in the amount of $954,000 which was 30-89 days delinquent at September 30, 2019, classified as accruing while the Company underwrites an extension of the borrower’s credit facilities.
 September 30, 2019 December 31, 2018
 # of loans Amount # of loans Amount
 (Dollars in thousands)
TDR 30-89 days delinquent classified as non-accrual:       
Residential mortgage and consumer12
 $2,045
 11
 $1,810
Total TDR 30-89 days delinquent classified as non-accrual12
 $2,045
 11
 $1,810
 March 31, 2019 December 31, 2018
 # of loans Amount # of loans Amount
 (Dollars in thousands)
TDR 30-89 days delinquent classified as non-accrual:       
Residential mortgage and consumer8
 $1,215
 11
 $1,810
Total TDR 30-89 days delinquent classified as non-accrual8
 $1,215
 11
 $1,810

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 March 31,September 30, 2019, PCI loans with a carrying value of $4.3$4.1 million included $4.2$3.9 million of which were current, none$31,000 of which were 30-89 days delinquent and $140,000$133,000 of which were 90 days or more delinquent. As of December 31, 2018, PCI loans with a carrying value of $4.5 million included $4.1 million of which were current, $229,000 of which were 30-89 days delinquent and $248,000 of which were 90 days or more delinquent.
At March 31,September 30, 2019 and December 31, 2018, loans meeting the Company’s definition of an impaired loan were primarily collateral dependent loans which totaled $83.8$64.3 million and $86.7 million, respectively, with allocations of the allowance for loan losses of $2.1$2.0 million and $2.2 million as of March 31,September 30, 2019 and December 31, 2018, respectively. During the threenine months ended March 31,September 30, 2019 and 2018, interest income received and recognized on these loans totaled $268,000$831,000 and $242,000,$513,000, respectively.



The following tables present loans individually evaluated for impairment by portfolio segment as of March 31,September 30, 2019 and December 31, 2018:

 September 30, 2019
 
Recorded
Investment
 
Unpaid Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 (In thousands)
With no related allowance:         
Multi-family$17,429
 18,801
 
 18,860
 21
Commercial real estate8,140
 11,170
 
 8,323
 240
Commercial and industrial10,882
 18,225
 
 12,097
 259
Construction
 
 
 
 
Total commercial loans36,451
 48,196
 
 39,280
 520
Residential mortgage and consumer12,869
 16,992
 
 12,904
 174
With an allowance recorded:         
Multi-family
 
 
 
 
Commercial real estate
 
 
 
 
Commercial and industrial
 
 
 
 
Construction
 
 
 
 
Total commercial loans
 
 
 
 
Residential mortgage and consumer14,976
 15,684
 1,973
 14,989
 137
Total:         
Multi-family17,429
 18,801
 
 18,860
 21
Commercial real estate8,140
 11,170
 
 8,323
 240
Commercial and industrial10,882
 18,225
 
 12,097
 259
Construction
 
 
 
 
Total commercial loans36,451
 48,196
 
 39,280
 520
Residential mortgage and consumer27,845
 32,676
 1,973
 27,893
 311
Total impaired loans$64,296
 80,872
 1,973
 67,173
 831

 December 31, 2018
 
Recorded
Investment
 
Unpaid Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 (In thousands)
With no related allowance:         
Multi-family$32,046
 34,199
 
 33,656
 146
Commercial real estate6,623
 11,896
 
 6,611
 79
Commercial and industrial19,624
 26,323
 
 20,218
 232
Construction
 
 
 
 
Total commercial loans58,293
 72,418
 
 60,485
 457
Residential mortgage and consumer12,626
 17,130
 
 11,907
 167
With an allowance recorded:         
Multi-family
 
 
 
 
Commercial real estate
 
 
 
 
Commercial and industrial
 
 
 
 
Construction
 
 
 
 
Total commercial loans
 
 
 
 
Residential mortgage and consumer15,828
 16,498
 2,154
 15,627
 280
Total:         
Multi-family32,046
 34,199
 
 33,656
 146
Commercial real estate6,623
 11,896
 
 6,611
 79
Commercial and industrial19,624
 26,323
 
 20,218
 232
Construction
 
 
 
 
Total commercial loans58,293
 72,418
 
 60,485
 457
Residential mortgage and consumer28,454
 33,628
 2,154
 27,534
 447
Total impaired loans$86,747
 106,046
 2,154
 88,019
 904
 March 31, 2019
 
Recorded
Investment
 
Unpaid Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 (In thousands)
With no related allowance:         
Multi-family$32,346
 35,851
 
 34,094
 21
Commercial real estate5,173
 9,957
 
 5,707
 84
Commercial and industrial17,152
 25,527
 
 16,833
 74
Construction
 
 
 
 
Total commercial loans54,671
 71,335
 
 56,634
 179
Residential mortgage and consumer13,765
 18,464
 
 12,189
 48
With an allowance recorded:         
Multi-family
 
 
 
 
Commercial real estate
 
 
 
 
Commercial and industrial
 
 
 
 
Construction
 
 
 
 
Total commercial loans
 
 
 
 
Residential mortgage and consumer15,378
 16,073
 2,058
 15,723
 41
Total:         
Multi-family32,346
 35,851
 
 34,094
 21
Commercial real estate5,173
 9,957
 
 5,707
 84
Commercial and industrial17,152
 25,527
 
 16,833
 74
Construction
 
 
 
 
Total commercial loans54,671
 71,335
 
 56,634
 179
Residential mortgage and consumer29,143
 34,537
 2,058
 27,912
 89
Total impaired loans$83,814
 105,872
 2,058
 84,546
 268

 December 31, 2018
 
Recorded
Investment
 
Unpaid Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 (In thousands)
With no related allowance:         
Multi-family$32,046
 34,199
 
 33,656
 146
Commercial real estate6,623
 11,896
 
 6,611
 79
Commercial and industrial19,624
 26,323
 
 20,218
 232
Construction
 
 
 
 
Total commercial loans58,293
 72,418
 
 60,485
 457
Residential mortgage and consumer12,626
 17,130
 
 11,907
 167
With an allowance recorded:         
Multi-family
 
 
 
 
Commercial real estate
 
 
 
 
Commercial and industrial
 
 
 
 
Construction
 
 
 
 
Total commercial loans
 
 
 
 
Residential mortgage and consumer15,828
 16,498
 2,154
 15,627
 280
Total:         
Multi-family32,046
 34,199
 
 33,656
 146
Commercial real estate6,623
 11,896
 
 6,611
 79
Commercial and industrial19,624
 26,323
 
 20,218
 232
Construction
 
 
 
 
Total commercial loans58,293
 72,418
 
 60,485
 457
Residential mortgage and consumer28,454
 33,628
 2,154
 27,534
 447
Total impaired loans$86,747
 106,046
 2,154
 88,019
 904

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.



The following tables present the total TDR loans at March 31,September 30, 2019 and December 31, 2018. There were five5 residential loans that were previously designated as PCI classified as TDRs for the periods ended March 31,September 30, 2019 and December 31, 2018.
 
 September 30, 2019
 Accrual Non-accrual Total
 # of loans Amount # of loans Amount # of loans Amount
 (Dollars in thousands)
Commercial loans:           
Commercial real estate
 $
 3
 $2,548
 3
 $2,548
Commercial and industrial3
 1,669
 2
 5,194
 5
 6,863
Total commercial loans3
 1,669
 5
 7,742
 8
 9,411
Residential mortgage and consumer55
 10,769
 81
 17,078
 136
 27,847
Total58
 $12,438
 86
 $24,820
 144
 $37,258

 March 31, 2019
 Accrual Non-accrual Total
 # of loans Amount # of loans Amount # of loans Amount
 (Dollars in thousands)
Commercial loans:           
Commercial real estate
 $
 3
 $2,855
 3
 $2,855
Commercial and industrial2
 1,970
 2
 6,146
 4
 8,116
Total commercial loans2
 1,970
 5
 9,001
 7
 10,971
Residential mortgage and consumer52
 11,676
 82
 17,470
 134
 29,146
Total54
 $13,646
 87
 $26,471
 141
 $40,117


 December 31, 2018
 Accrual Non-accrual Total
 # of loans Amount # of loans Amount # of loans Amount
 (Dollars in thousands)
Commercial loans:           
Multi-family
 $
 1
 $892
 1
 $892
Commercial real estate
 
 3
 2,859
 3
 2,859
Commercial and industrial2
 2,070
 4
 13,479
 6
 15,549
Total commercial loans2
 2,070
 8
 17,230
 10
 19,300
Residential mortgage and consumer52
 11,550
 79
 16,908
 131
 28,458
Total54
 $13,620
 87
 $34,138
 141
 $47,758

 December 31, 2018
 Accrual Non-accrual Total
 # of loans Amount # of loans Amount # of loans Amount
 (Dollars in thousands)
Commercial loans:           
Multi-family
 $
 1
 $892
 1
 $892
Commercial real estate
 
 3
 2,859
 3
 2,859
Commercial and industrial2
 2,070
 4
 13,479
 6
 15,549
Total commercial loans2
 2,070
 8
 17,230
 10
 19,300
Residential mortgage and consumer52
 11,550
 79
 16,908
 131
 28,458
Total54
 $13,620
 87
 $34,138
 141
 $47,758


The following tables present information about TDRs that occurred during the three and nine months ended March 31,September 30, 2019 and 2018:

 Three Months Ended September 30,
 2019 2018
 
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 estate1
 $96
 $96
 
 $
 $
Commercial and industrial1
 $270
 $270
 1
 $3,711
 $3,711
Residential mortgage and consumer4
 453
 453
 3
 1,215
 1,215


 Nine Months Ended September 30,
 2019 2018
 
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 estate1
 $96
 $96
 2
 $788
 $616
Commercial and industrial1
 270
 270
 4
 13,682
 13,682
Residential mortgage and consumer14
 2,850
 2,850
 15
 2,715
 2,715
 Three Months Ended March 31,
 2019 2018
 
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)
Commercial real estate
 $
 $
 2
 $788
 $616
Commercial and industrial
 
 
 1
 435
 435
Residential mortgage and consumer6
 1,664
 1,664
 6
 712
 712

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 $477,000$156,000 and $729,000 in charge-offs for a TDRTDRs of an unsecured commercial and industrial loanloans during the three and nine months ended September 30, 2019, respectively. There were 0 charge-offs for TDRs during the three months ended March 31, 2019. There were $172,000September 30, 2018 and $214,000 in charge-offs for collateral dependent TDRs during the threenine months ended March 31,September 30, 2018. ThisOf the amount was fully recovered fromcharged off in the first nine months of 2018, one borrower during 2018.subsequently repaid the full amount of outstanding loan principal which resulted in a recovery of $172,000. The allowance for loan losses associated with the TDRs presented in the above tables totaled $2.1$2.0 million and $2.2 million as of March 31,September 30, 2019 and December 31, 2018, respectively.
Loan modifications generally involve the reduction in loan interest rate 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 residential loans

deemed to be TDRs were modified to reflect a reduction in interest rates to current market rates. The commercial loan modifications which qualified as TDRs in the threenine months ended March 31,September 30, 2019 and 2018 had their maturity extended and one loan was modified to reflect a reduction in interest rate.extended.
The following tables present information about pre and post modification interest yield for TDRs which occurred during the three and nine months ended March 31,September 30, 2019 and 2018:
 Three Months Ended September 30,
 2019 2018
 
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 estate1
 5.75% 5.75% 
 % %
Commercial and industrial1
 6.25% 6.25% 1
 5.75% 5.75%
Residential mortgage and consumer4
 4.00% 3.82% 3
 4.37% 4.45%
 Three Months Ended March 31,
 2019 2018
 
Number of
Loans
 
Pre-modification
Interest Yield
 
Post-
modification
Interest Yield
 
Number of
Loans
 
Pre-modification
Interest Yield
 
Post-
modification
Interest Yield
Commercial real estate
 % % 2
 4.68% 4.68%
Commercial and industrial
 % % 1
 4.75% 4.50%
Residential mortgage and consumer6
 5.26% 4.90% 6
 4.70% 3.28%

 Nine Months Ended September 30,
 2019 2018
 
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 estate1
 5.75% 5.75% 2
 4.68% 4.68%
Commercial and industrial1
 6.25% 6.25% 4
 5.94% 5.94%
Residential mortgage and consumer14
 5.07% 4.96% 15
 4.60% 3.78%

Payment defaults for loans modified as a TDR in the previous 12 months to March 31,September 30, 2019 consisted of 1 residential loan and 1 commercial real estate loan with a recorded investment of $270,000,$132,000 and $2.5 million, respectively, at March 31,September 30, 2019. Payment defaults for loans modified as a TDR in the previous 12 months to March 31,September 30, 2018 consisted of 69 residential loans, 2 commercial real estate loan and 1 multi familymulti-family loan with a recorded investment of $436,000$651,000, $568,000 and $918,000,$898,000, respectively, at March 31,September 30, 2018.



7.     Deposits
Deposits are summarized as follows:


 September 30, 2019 December 31, 2018
 (In thousands)
Non-interest bearing:   
Checking accounts$2,433,152
 2,535,848
Interest bearing:   
Checking accounts5,103,007
 4,783,563
Money market deposits3,674,032
 3,641,070
Savings1,963,724
 2,048,941
Certificates of deposit4,498,841
 4,570,847
Total deposits$17,672,756
 17,580,269

 March 31, 2019 December 31, 2018
 (In thousands)
Non-interest bearing:   
Checking accounts$2,477,079
 2,535,848
Interest bearing:   
Checking accounts4,700,483
 4,783,563
Money market deposits3,619,546
 3,641,070
Savings1,976,798
 2,048,941
Certificates of deposit4,856,093
 4,570,847
Total deposits$17,629,999
 17,580,269



8.    Goodwill and Other Intangible Assets
The following table summarizes goodwill and intangible assets at March 31,September 30, 2019 and December 31, 2018:
  September 30, 2019 December 31, 2018
  (In thousands)
Mortgage servicing rights $11,454
 11,712
Core deposit premiums 2,876
 4,050
Other 690
 755
Total other intangible assets 15,020
 16,517
Goodwill 82,546
 82,546
Goodwill and intangible assets $97,566
 99,063

  March 31, 2019 December 31, 2018
  (In thousands)
Mortgage servicing rights $11,621
 11,712
Core deposit premiums 3,651
 4,050
Other 733
 755
Total other intangible assets 16,005
 16,517
Goodwill 82,546
 82,546
Goodwill and intangible assets $98,551
 99,063


The following table summarizes other intangible assets as of March 31,September 30, 2019 and December 31, 2018:
  Gross Intangible Asset Accumulated Amortization Valuation Allowance Net Intangible Assets
  (In thousands)
September 30, 2019        
Mortgage servicing rights $18,406
 (6,729) (223) 11,454
Core deposit premiums 20,561
 (17,685) 
 2,876
Other 1,150
 (460) 
 690
Total other intangible assets $40,117
 (24,874) (223) 15,020
         
December 31, 2018        
Mortgage servicing rights $19,808
 (7,921) (175) 11,712
Core deposit premiums 25,058
 (21,008) 
 4,050
Other 1,150
 (395) 
 755
Total other intangible assets $46,016
 (29,324) (175) 16,517
  Gross Intangible Asset Accumulated Amortization Valuation Allowance Net Intangible Assets
  (In thousands)
March 31, 2019        
Mortgage servicing rights $18,701
 (6,905) (175) 11,621
Core deposit premiums 25,058
 (21,407) 
 3,651
Other 1,150
 (417) 
 733
Total other intangible assets $44,909
 (28,729) (175) 16,005
         
December 31, 2018        
Mortgage servicing rights $19,808
 (7,921) (175) 11,712
Core deposit premiums 25,058
 (21,008) 
 4,050
Other 1,150
 (395) 
 755
Total other intangible assets $46,016
 (29,324) (175) 16,517

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 $1.60$1.61 billion and $1.62 billion at March 31,September 30, 2019 and December 31, 2018, respectively, all of which relate to residential mortgage loans. At March 31,September 30, 2019 and December 31, 2018, the servicing asset, included in other intangible assets, had an estimated fair value of $14.0$13.3 million and $14.9 million, respectively. At March 31,September 30, 2019, fair value was based on expected future cash flows considering a weighted average

discount rate of 12.50%12.05%, a weighted average constant prepayment rate on mortgages of 9.48%12.06% and a weighted average life of 6.86.0 years. See Note 1415 for additional details.
Core deposit premiums are amortized using an accelerated method and having a weighted average amortization period of 10 years.



9.     Leases
The Company adopted ASU 2016-02, “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842 on January 1, 2019.  Topic 842 requires 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. We have operating leases for corporate offices, branch locations and certain equipment. Our leases have remaining lease terms of up to 17 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 leases:
 September 30, 2019
 (Dollars in thousands)
Operating lease right-of-use assets$179,632
Operating lease liabilities189,927
Weighted average remaining lease term9.9 years
Weighted average discount rate2.74%

 March 31, 2019
 (Dollars in thousands)
Operating lease right-of-use assets$187,560
Operating lease liabilities197,281
Weighted average remaining lease term10.3 years
Weighted average discount rate2.73%
TheIn determining the present value of lease payments, the discount rate used in determining the lease liability for each individual lease wasis the Company’srate 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 in determiningdate. For leases that existed at adoption, the present value of lease payments. This corresponded withCompany used the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of2019. For its incremental borrowing rate, the lease commencement date for leases subsequently entered into.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 lease cost recognized in the Consolidated StatementStatements of Income:
Three Months Ended March 31,Three Months Ended September 30, Nine Months Ended September 30,
20192019 2019
(In thousands)(In thousands)
Included in office occupancy and equipment expense:    
Operating lease cost$6,320
$6,320
 18,963
Short-term lease cost83
74
 229
Variable lease cost

 (1)
Included in other income:    
Sublease income67
67
 201
The following table presents supplemental cash flow information related to leases:
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2019
 (In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases$6,173
 18,470
Operating lease liabilities arising from obtaining right-of-use assets (non-cash):
Operating leases577
 2,358
 Three Months Ended March 31,
 2019
 (In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases$6,138
Operating lease liabilities arising from obtaining right-of-use assets (non-cash):
Operating leases18


Future minimum operating lease payments and reconciliation to operating lease liabilities at March 31,September 30, 2019:
 September 30, 2019
 (In thousands)
Remainder of 2019$6,026
202024,067
202123,817
202222,077
202321,032
Thereafter121,539
Total lease payments218,558
Less: Imputed interest(28,631)
Total operating lease liabilities$189,927

 March 31, 2019
 (In thousands)
Remainder of 2019$18,295
202023,791
202123,481
202221,751
202320,709
Thereafter119,901
Total lease payments227,928
Less: Imputed interest(30,647)
Total operating lease liabilities$197,281


At December 31, 2018, the Company’s minimum operating lease payments for non-cancelable operating leases were $24.4 million, $23.8 million, $23.4 million, $21.7 million and $20.7 million for 2019 through 2023, respectively, and $119.9 million in the aggregate for all years thereafter.


10.     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 threenine months ended March 31,September 30, 2019 and March 31,September 30, 2018, the Company granted 119,6632,345,919 and 18,94771,982 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. For the threenine months ended March 31,September 30, 2019 and March 31,September 30, 2018, the Company granted 25,000995,216 and 15,00050,000 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 2018
Weighted average expected life (in years)4.83
 6.50
Weighted average risk-free rate of return1.86% 2.80%
Weighted average volatility19.92% 17.71%
Dividend yield3.96% 2.78%
Weighted average fair value of options granted$0.89
 $1.94
Total stock options granted995,216
 50,000
 Three Months Ended March 31,
 2019 2018
Weighted average expected life (in years)6.50
 6.50
Weighted average risk-free rate of return2.55% 2.74%
Weighted average volatility18.59% 18.29%
Dividend yield3.49% 2.64%
Weighted average fair value of options granted$1.65
 $2.15
Total stock options granted25,000
 15,000

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 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 compensation expense for the 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 as the source for shares.

The following table presents the share based compensation expense for the three and nine months ended March 31,September 30, 2019 and 2018:
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (In thousands)
Stock option expense$2,285
 1,326
 4,937
 4,226
Restricted stock expense4,026
 3,338
 10,933
 9,488
Total share based compensation expense$6,311
 4,664
 15,870
 13,714

 Three Months Ended March 31,
 2019 2018
 (In thousands)
Stock option expense$1,302
 1,430
Restricted stock expense3,271
 1,940
Total share based compensation expense$4,573
 3,370


The following is a summary of the Company’s stock option activity and related information for the threenine months ended March 31,September 30, 2019:
  
Number of
Stock
Options
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual
Life (in years)
 
Aggregate
Intrinsic Value
Outstanding at December 31, 2018 10,216,047
 $12.43
 6.5 $522
Granted(1)
 995,216
 12.53
 5.9  
Exercised (111,802) 7.28
 3.3  
Forfeited(1)
 (5,169,858) 12.53
    
Expired (174,000) 12.43
    
Outstanding at September 30, 2019 5,755,603
 12.46
 5.8 287
Exercisable at September 30, 2019 3,038,063
 $12.40
 5.7 $286

  
Number of
Stock
Options
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual
Life (in years)
 
Aggregate
Intrinsic Value
Outstanding at December 31, 2018 10,216,047
 $12.43
 6.5 $522
Granted 25,000
 12.59
 9.9  
Exercised (19,125) 8.80
 4.6  
Forfeited (184,286) 12.30
    
Expired (21,000) 12.71
    
Outstanding at March 31, 2019 10,016,636
 12.44
 6.2 812
Exercisable at March 31, 2019 5,093,217
 $12.35
 6.2 $807
(1) Reflects the impact of the shareholder litigation settlement as noted below.    
Expected future expense relating to the non-vested options outstanding as of March 31,September 30, 2019 is $14.0$10.4 million over a weighted average period of 2.592.26 years.
The following is a summary of the status of the Company’s restricted shares as of March 31,September 30, 2019 and changes therein during the threenine months ended:
  Number of Shares Awarded Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018 3,477,747
 $12.69
Granted(1)
 2,345,919
 12.42
Vested (1,011,670) 12.67
Forfeited(1)(2)
 (1,912,400) 12.55
Outstanding and non vested at September 30, 2019 2,899,596
 $12.58

  Number of Shares Awarded Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018 3,477,747
 $12.69
Granted 119,663
 12.62
Vested (282,114) 13.03
Forfeited (137,066) 12.63
Outstanding and non vested at March 31, 2019 3,178,230
 $12.66
(1) Reflects the impact of the shareholder litigation settlement as noted below.    
(2) Excludes 19,138 shares forfeited in connection with the shareholder litigation settlement which had vested prior to December 31, 2018.
Expected future expense relating to the non-vested restricted shares outstanding as of March 31,September 30, 2019 is $32.1$30.7 million over a weighted average period of 2.983.04 years.

Shareholder Litigation Settlement
On March 6, 2019, a Stipulation and Agreement of Compromise, Settlement and Release was filed in the Court of Chancery of the State of Delaware (the “Court”) in relation to a lawsuit involving the Company and certain of its current and former directors entitled In re Investors Bancorp Inc. Stockholder Litigation, C.A. No. 12327-VCS (the “Settlement”). The Settlement resolves a lawsuit challenging the equity compensation granted on or about June 23, 2015 to persons who were then-directors of the Company.

On June 21, 2019, the Court entered an order approving the Settlement. Following the expiration of a thirty-day appeal period, the Settlement became effective. Accordingly, pursuant to the Settlement (i) all of the stock options granted to non-employee directors (excluding Brendan J. Dugan who is deceased) and stock options granted to Paul Stathoulopoulos (who was not a director of the Company at the time of the equity grant on or about June 23, 2015), have been surrendered; (ii) a total of 95,694 shares of the restricted stock granted to the then non-employee directors of the Company (excluding Brendan J. Dugan) and to then non-director Paul Stathoulopoulos scheduled to vest in 2020 have been surrendered; and (iii) 925,000 shares of restricted stock and 1,333,333 stock options granted to the Company’s Chief Executive Officer and 740,000 shares of restricted stock and 1,066,667 stock options granted to the Company’s President have been surrendered. As a result of the Settlement, the Company recorded $2.0 million of accelerated stock compensation expense during the third quarter of 2019.
The Compensation and Benefits Committee, with the assistance of its independent legal advisor and compensation consultant, considered the issuance of equity grants to both the Company’s Chief Executive Officer and President to replace those being surrendered pursuant to the Settlement. On May 20, 2019, the Compensation and Benefits Committee authorized and approved, and recommended to the Board of Directors (the “Board”), the issuance of (i) 925,000 shares of restricted stock and 525,120 stock options to the Company’s Chief Executive Officer, and (ii) 740,000 shares of restricted stock and 420,096 stock options to the Company’s President (the “Replacement Awards”). The Board, excluding both the Company’s Chief Executive Officer and President, determined that it was advisable and in the best interests of the Company to approve and issue the Replacement Awards, subject to the surrender of awards pursuant to the Settlement.
The Replacement Awards were subsequently issued to both the Company’s Chief Executive Officer and President on July 22, 2019. The Replacement Awards were issued from the 2015 Equity Incentive Plan and were accounted for as a modification of the original awards, which resulted in no incremental expense as the compensation cost of the Replacement Awards was less than the compensation cost of the original awards. The stock options have an exercise price of $12.54 per share and vested 25% on July 22, 2019 with the remaining to vest ratably over a three-year period. Approximately 59% of the restricted shares vested on July 22, 2019 with the remainder to vest on the same vesting schedule as applicable to the June 23, 2015 award.

On September 26, 2019, a related shareholder derivative action was filed in the Delaware Chancery Court. The complaint claims breach of fiduciary duty on the part of the Company’s Board of Directors in the issuance of the replacement awards to both the Company’s Chief Executive Officer and President in connection with the settlement of the case referenced above.
11.     Net Periodic Benefit Plan Expense
The Company has an Executive Supplemental Retirement Wage Replacement Plan (“SERP II”) and the Supplemental ESOP and Retirement Plan (“SERP I”) (collectively, the “SERPs”). The 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 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 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 SERP II was amended to freeze future benefit accruals, and for certain participants, structure the benefits payable attributable solely to the participants’ 2016 year of service to vest over a two-year period such that the participants had a right to 50% of their accrued benefits attributable to their 2016 year of service as of December 31, 2016, which became 100% vested as of December 31, 2017.
The 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 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 SERP II are as follows:
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (In thousands)
Interest cost$397
 355
 1,191
 1,064
Amortization of:       
Net loss
 126
 
 379
Total net periodic benefit cost$397
 481
 1,191
 1,443
 Three Months Ended March 31,
 2019 2018
 (In thousands)
Interest cost$397
 355
Amortization of:   
Net loss
 126
Total net periodic benefit cost$397
 481

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 threenine months ended March 31,September 30, 2019.
The Company also maintains the Pentegra DB Plan. Since it is a 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 was frozen by an amendment to the plan. Freezing the plan eliminated all future benefit accruals and each participant’s frozen accrued benefit was determined as of December 31, 2016 with no further benefits accrued subsequent to December 31, 2016. There was no0 contribution required during the threenine months ended March 31,September 30, 2019. We anticipate contributing funds to the plan to meet any minimum funding requirements for the remainder of 2019.


12.    Derivatives and Hedging Activities
The Company 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 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 known or expected cash payments principally related to the Company’s floating rate borrowings and pools of 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.  Changes in the fair value of derivatives designated and that qualify as cash flow hedges are initially recorded in other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Such derivatives were used to hedge the variability in cash flows associated with borrowings.
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 $4.4$9.1 million will be reclassified as a decreasean increase to interest expense.


Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed-ratefixed- and adjustable-rate assets due to changes in benchmark interest rates. The Company uses 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 ratefixed- and adjustable-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 3 interest rate swaps with an aggregate notional amount of $1.00 billion during the quarter ended September 30, 2019. The terminated swaps were due to mature in February 2020.

Derivatives Not Designated as Hedges
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 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
  Asset Derivatives Liability Derivatives
 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
 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$2,475
Other assets$91
 $
Other assets$
 $
Other liabilities$
 $2,605
Other liabilities$432
Total derivatives designated as hedging instruments
 $91
 
 $
   $
   $432
                
Derivatives not designated as hedging instruments:               
Interest Rate Swaps$306
Other assets$6,305
 $
Other assets$
 $
Other liabilities$
 $
Other liabilities$
Other Contracts
Other assets
 
Other assets
 22
Other liabilities178
 18
Other liabilities66
Total derivatives not designated as hedging instruments
 $6,305
 
 $
   $178
   $66

  Asset Derivatives Liability Derivatives
 March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018
 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$
Other assets$
 $
Other assets$
 $3,055
Other liabilities$527
 $2,605
Other liabilities$432
Total derivatives designated as hedging instruments
 $
 
 $
   $527
   $432
                
Derivatives not designated as hedging instruments:               
Interest Rate Swaps$36
Other assets$1,534
 $
Other assets$
 $36
Other liabilities$14
 $
Other liabilities$
Other Contracts
Other assets
 
Other assets
 22
Other liabilities91
 18
Other liabilities66
Total derivatives not designated as hedging instruments
 $1,534
 
 $
   $105
   $66


The Chicago Mercantile Exchange (“CME”) legally characterizes the variation margin posted between counterparties as settlements of the outstanding derivative contracts instead of cash collateral.


Effect of Derivative Instruments on Accumulated Other Comprehensive Income (Loss)
The following table presents the effect of the Company’s derivative financial instruments on Accumulated Other Comprehensive Income (Loss) for the three months ended March 31,September 30, 2019 and 2018.
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
 (In thousands)
Cash Flow Hedges - Interest rate swaps       
Amount of (loss) gain recognized in other comprehensive income (loss)$(12,794) 8,147
 (71,139) 34,065
Amount of gain reclassified from accumulated other comprehensive income (loss) to interest expense509
 822
 4,327
 1,059
 Three Months Ended March 31,
 2019 2018
 (In thousands)
Cash Flow Hedges - Interest rate swaps   
Amount of (loss) gain recognized in other comprehensive income (loss)$(19,681) 16,938
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) to interest expense2,090
 (369)



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 Statements of Income as of March 31,September 30, 2019 and 2018.
  For the Three Months Ended September 30, For the Nine Months Ended September 30,
  2019 2018 2019 2018
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 itemsInterest income on loans$1,179
 (1,581) 7,398
 (1,581)
Derivatives designated as hedging instruments [1]
Interest income on loans(1,268) 1,518
 (7,550) 1,518
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20        
Interest contracts        
Amount of gain reclassified from accumulated other comprehensive income (loss)Interest expense on borrowings509
 822
 4,327
 1,059
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) as a result that a forecasted transaction is no longer probable of occurringInterest expense on borrowings
 
 
 
Total amounts of income and expense line items presented in the income statement in which the effects of fair value are recorded $420
 759
 4,175
 996

  For the Three Months Ended March 31,
  2019 2018
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 itemsInterest income on loans$922
 
Derivatives designated as hedging instrumentsInterest income on loans(1,021) 
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20    
Interest contracts    
Amount of gain or (loss) reclassified from accumulated other comprehensive incomeInterest expense on borrowings2,090
 (369)
Amount of gain or (loss) reclassified from accumulated other comprehensive income as a result that a forecasted transaction is no longer probable of occurringInterest expense on borrowings
 
Total amounts of income and expense line items presented in the income statement in which the effects of fair value are recorded $1,991
 (369)


[1] The amount includes gains on both active fair value hedging relationships and relationships which have been terminated

As of MarchSeptember 30, 2019 and December 31, 2019,2018, the following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustment for fair value hedges. There were no fair value hedges at March 31, 2018:hedges:
Balance sheet locationCarrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
March 31, 2019December 31, 2018 March 31, 2019December 31, 2018September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
(In thousands)(In thousands)
Loans receivable, net (1)(2)
$1,256,215
1,005,294
 $1,215
294
$479,231
 1,005,294
 $7,741
 294
(1) At March 31,September 30, 2019, the amortized cost basis of the closed portfolios used in these hedging relationships was $2.18$1.50 billion; the cumulative basis adjustments associated with these hedging relationships was $1.2$7.7 million; and the amounts of the designated hedged items were $1.26 billion.$479.2 million.

(2) The balance of Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) as of September 30, 2019 includes $3.5 million of hedging adjustment on discontinued hedging relationships.

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 March 31,for the three and nine months ended September 30, 2019. There were no derivative financial instruments that are not designated as hedging instruments as of March 31, 2018:for the three and nine months ended September 30, 2018.
 Consolidated Statements of Income locationAmount of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivative
  For the Three Months Ended September 30, For the Nine Months Ended September 30,
  2019 2018 2019 2018
  (In thousands)
Other ContractsOther income / (expense)$(47) 
 $(57) 
Total $(47) 
 $(57) 
 Consolidated Statements of Income locationAmount of Gain or (Loss) Recognized in Income on Derivative
  For the Three Months Ended March 31,
  2019
  (In thousands)
Other ContractsOther income / (expense)$29
Total $29


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 March 31,September 30, 2019 and December 31, 2018. The net amounts of derivative assets and liabilities can be reconciled to the tabular disclosure of the fair value hierarchy, see Note 14,15, 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, 2019           
Assets:           
Derivative contracts$106
 
 106
 
 
 106
Liabilities:           
Derivative contracts178
 
 178
 
 
 178
            
December 31, 2018           
Liabilities:           
Derivative contracts$498
 
 498
 
 
 498

       Gross Amounts Not Offset  
 Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Financial Instruments Cash Collateral Posted Net Amount
 (In thousands)
March 31, 2019           
Liabilities:           
Derivative contracts$632
 
 632
 
 
 632
Total$632
 
 632
 
 
 632
            
December 31, 2018           
Liabilities:           
Derivative contracts$498
 
 498
 
 
 498
Total$498
 
 498
 
 
 498


13.    Comprehensive Income


The components of comprehensive income, gross and net of tax, are as follows:
 Three Months Ended September 30,
 2019 2018
 Gross Tax Net Gross Tax Net
 (Dollars in thousands)
Net income$73,014
 (21,042) 51,972
 73,425
 (19,201) 54,224
Other comprehensive loss:           
Change in funded status of retirement obligations19
 (6) 13
 142
 (40) 102
Unrealized gains (losses) on debt securities available-for-sale8,856
 (2,058) 6,798
 (9,725) 2,415
 (7,310)
Accretion of loss on debt securities reclassified to held-to-maturity from available-for-sale94
 (53) 41
 208
 (59) 149
Other-than-temporary impairment accretion on debt securities317
 (89) 228
 300
 (84) 216
Net (losses) gains on derivatives(13,303) 3,739
 (9,564) 7,325
 (2,059) 5,266
Total other comprehensive loss(4,017) 1,533
 (2,484) (1,750) 173
 (1,577)
Total comprehensive income$68,997
 (19,509) 49,488
 71,675
 (19,028) 52,647
 Three Months Ended March 31,
 2019 2018
 Gross Tax Net Gross Tax Net
 (Dollars in thousands)
Net income$67,463
 (19,305) 48,158
 78,009
 (20,084) 57,925
Other comprehensive income (loss):           
Change in funded status of retirement obligations18
 (5) 13
 143
 (40) 103
Unrealized gains (losses) on debt securities available-for-sale21,514
 (5,275) 16,239
 (30,535) 7,812
 (22,723)
Accretion of loss on debt securities reclassified to held-to-maturity from available-for-sale157
 (44) 113
 233
 (66) 167
Other-than-temporary impairment accretion on debt securities251
 (71) 180
 300
 (84) 216
Net (losses) gains on derivatives(21,771) 6,120
 (15,651) 17,307
 (4,865) 12,442
Total other comprehensive income (loss)169
 725
 894
 (12,552) 2,757
 (9,795)
Total comprehensive income$67,632
 (18,580) 49,052
 65,457
 (17,327) 48,130


 Nine Months Ended September 30,
 2019 2018
 Gross Tax Net Gross Tax Net
 (Dollars in thousands)
Net income$205,822
 (59,068) 146,754
 227,629
 (58,383) 169,246
Other comprehensive loss:           
Change in funded status of retirement obligations56
 (16) 40
 428
 (120) 308
Unrealized gains (losses) on debt securities available-for-sale52,137
 (12,532) 39,605
 (48,419) 12,089
 (36,330)
Accretion of loss on securities reclassified to held-to-maturity from available-for-sale694
 (222) 472
 662
 (187) 475
Reclassification adjustment for security losses included in net income5,690
 (1,469) 4,221
 
 
 
Other-than-temporary impairment accretion on debt securities819
 (230) 589
 900
 (253) 647
Net (losses) gains on derivatives(75,466) 21,213
 (54,253) 33,006
 (9,278) 23,728
Total other comprehensive loss(16,070) 6,744
 (9,326) (13,423) 2,251
 (11,172)
Total comprehensive income$189,752
 (52,324) 137,428
 214,206
 (56,132) 158,074


The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the threenine months ended March 31,September 30, 2019 and 2018:


Change in
funded status of
retirement
obligations
 Accretion of loss on debt securities reclassified to held-to-maturity 
Unrealized (losses) gains
on debt 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
Change in
funded status of
retirement
obligations
 Accretion of loss on debt securities reclassified to held-to-maturity 
Unrealized (losses) gains
on debt 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)(Dollars in thousands)
Balance - December 31, 2018$(3,018) (921) (8,884) (11,397) 12,651
 (11,569)$(3,018) (921) (8,884) (11,397) 12,651
 (11,569)
Net change13
 113
 16,239
 180
 (15,651) 894
40
 472
 43,826
 589
 (54,253) (9,326)
Balance - March 31, 2019$(3,005) (808) 7,355
 (11,217) (3,000) (10,675)
Balance - September 30, 2019$(2,978) (449) 34,942
 (10,808) (41,602) (20,895)
                      
Balance - December 31, 2017$(5,640) (1,520) (21,184) (14,482) 13,487
 (29,339)$(5,640) (1,520) (21,184) (14,482) 13,487
 (29,339)
Net change103
 167
 (22,723) 216
 12,442
 (9,795)308
 475
 (36,330) 647
 23,728
 (11,172)
Reclassification due to the adoption of ASU No. 2016-01
 
 (606) 
 
 (606)
 
 (606) 
 
 (606)
Balance - March 31, 2018$(5,537) (1,353) (44,513) (14,266) 25,929
 (39,740)
Balance - September 30, 2018$(5,332) (1,045) (58,120) (13,835) 37,215
 (41,117)


The following table presents information about amounts reclassified from accumulated other comprehensive loss to the consolidated 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,
 2019 2018 2019 2018
 (In thousands)
Reclassification adjustment for losses included in net income       
Loss on securities, net$
 
 5,690
 
Change in funded status of retirement obligations       
Amortization of net (gain) loss(2) 129
 (6) 388
Interest expense       
Reclassification adjustment for unrealized gains on derivatives(509) (822) (4,327) (1,059)
Total before tax(511) (693) 1,357
 (671)
Income tax benefit (expense)147
 181
 (225) 172
Net of tax$(364) (512) 1,132
 (499)



14.    Stockholders’ Equity
 Three Months Ended March 31,
 2019 2018
 (In thousands)
Change in funded status of retirement obligations   
Amortization of net (gain) loss$(2) 129
Interest expense   
Reclassification adjustment for unrealized (gains) losses on derivatives(2,090) 369
Total before tax(2,092) 498
Income tax benefit (expense)599
 (128)
Net of tax$(1,493) 370


The changes in the components of stockholders’ equity for the three months ended September 30, 2019 and 2018 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, 2018$3,591
 2,794,507
 1,145,129
 (729,944) (82,760) (39,540) 3,090,983
Net income
 
 54,224
 
 
 
 54,224
Other comprehensive loss, net of tax
 
 
 
 
 (1,577) (1,577)
Purchase of treasury stock (6,891,729 shares)
 
 
 (87,983) 
 
 (87,983)
Treasury stock allocated to restricted stock plan (46,876 shares)
 (594) 22
 572
 
 
 
Compensation cost for stock options and restricted stock
 4,665
 
 
 
 
 4,665
Exercise of stock options
 (23) 
 126
 
 
 103
Restricted stock forfeitures (82,946 shares)
 1,040
 (60) (980) 
 
 
Cash dividend paid ($0.09 per common share)
 
 (26,700) 
 
 
 (26,700)
ESOP shares allocated or committed to be released
 757
 
 
 749
 
 1,506
Balance at September 30, 2018$3,591
 2,800,352
 1,172,615
 (818,209) (82,011) (41,117) 3,035,221
              
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
 
 
 
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) 
 
 
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


14.15.    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 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.

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
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 are based upon quoted prices for similar instruments in active markets (Level 2). 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.

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 March 31,September 30, 2019 and December 31, 2018.
Carrying Value at March 31, 2019Carrying Value at September 30, 2019
Total Level 1 Level 2 Level 3Total Level 1 Level 2 Level 3
(In thousands)(In thousands)
Assets:              
Equity securities$5,880
 5,880
 
 
$6,030
 6,030
 
 
Debt securities available for sale:              
Mortgage-backed securities:              
Federal Home Loan Mortgage Corporation$1,016,518
 
 1,016,518
 
$1,191,522
 
 1,191,522
 
Federal National Mortgage Association974,430
 
 974,430
 
1,151,722
 
 1,151,722
 
Government National Mortgage Association165,392
 
 165,392
 
300,780
 
 300,780
 
Total debt securities available-for-sale$2,156,340
 
 2,156,340
 
$2,644,024
 
 2,644,024
 
Interest rate swaps$1,534
 
 1,534
 
$6,396
 
 6,396
 
Liabilities:              
Derivatives:              
Interest rate swaps$541
 
 541
 
Other contracts91
 
 91
 
$178
 
 178
 
Total derivatives$632
 
 632
 
 Carrying Value at December 31, 2018
 Total Level 1 Level 2 Level 3
 (In thousands)
Assets:       
Equity securities$5,793
 5,793
 
 
Debt securities available for sale:       
Mortgage-backed securities:       
Federal Home Loan Mortgage Corporation$986,650
 
 986,650
 
Federal National Mortgage Association968,556
 
 968,556
 
Government National Mortgage Association166,956
 
 166,956
 
Total debt securities available-for-sale$2,122,162
 
 2,122,162
 
Liabilities:       
Derivatives:       
Interest rate swaps$432
 
 432
 
Other contracts66
 
 66
 
Total derivatives$498
 
 498
 

 Carrying Value at December 31, 2018
 Total Level 1 Level 2 Level 3
 (In thousands)
Assets:       
Equity securities$5,793
 5,793
 
 
Debt securities available for sale:       
Mortgage-backed securities:       
Federal Home Loan Mortgage Corporation$986,650
 
 986,650
 
Federal National Mortgage Association968,556
 
 968,556
 
Government National Mortgage Association166,956
 
 166,956
 
Total debt securities available-for-sale$2,122,162
 
 2,122,162
 
Liabilities:       
Derivatives:       
Interest rate swaps$432
 
 432
 
Other contracts66
 
 66
 
Total derivatives$498
 
 498
 
There have been no changes in the methodologies used at March 31,September 30, 2019 from December 31, 2018, and there were no transfers between Level 1 and Level 2 during the threenine months ended March 31,September 30, 2019.
There were no Level 3 assets measured at fair value on a recurring basis for the threenine months ended March 31,September 30, 2019 and December 31, 2018.

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 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 March 31,September 30, 2019, the fair value model used prepayment speeds ranging from 5.40%6.60% to 27.12%42.00% and a discount rate of 12.50%12.05% for the valuation of the mortgage servicing rights. At December 31, 2018, the fair value model used prepayment speeds ranging from 4.98% to 27.30% and a discount rate of 12.50% 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.
Impaired Loans Receivable
Loans which meet certain criteria are evaluated individually for impairment. 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, 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 loans are generally collateral dependent and, as such, are carried at the estimated fair value of the collateral less estimated selling costs. Estimated fair value is calculated using an independent third-party appraiser for collateral-dependent loans. 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. Appraisals were generally discounted in a range of 0% to 25%. For 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 Repossessed Assets
Other Real Estate Owned and Repossessed Assets is recorded at estimated fair value, less estimated selling costs when acquired, thus establishing a new cost basis. Fair value 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 occur, a writedown is recorded through expense. The valuation of foreclosed 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 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.

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 March 31,September 30, 2019 and December 31, 2018. For the three months ended March 31,September 30, 2019 and December 31, 2018 there was no change to the carrying value of MSR or loans held for sale.
Security TypeValuation TechniqueUnobservable InputRangeWeighted Average Input Carrying Value at March 31, 2019Valuation TechniqueUnobservable InputRangeWeighted Average Input Carrying Value at September 30, 2019
 MinimumMaximum Total Level 1 Level 2 Level 3 MinimumMaximum Total Level 1 Level 2 Level 3
 (In thousands) (In thousands)
Impaired loansMarket comparableLack of marketability1.0%51.0%11.20% $27,594
 
 
 27,594
Estimated cash flowProbability of default1.0%83.0%8.10% $2,853
 
 
 2,853
Other real estate ownedMarket comparableLack of marketability0.0%25.0%4.30% 697
 
 
 697
Market comparableLack of marketability0.0%25.0%18.00% 49
 
 
 49
 $28,291
 
 
 28,291
 $2,902
 
 
 2,902
 
 Security TypeValuation TechniqueUnobservable InputRangeWeighted Average Input Carrying Value at December 31, 2018
   MinimumMaximum  Total Level 1 Level 2 Level 3
       (In thousands)
Impaired loansMarket comparable and estimated cash flowLack of marketability and probability of default1.0%83.0%11.20% $15,148
 
 
 15,148
Other real estate ownedMarket comparableLack of marketability0.0%25.0%10.50% 241
 
 
 241
       $15,389
 
 
 15,389
 Security TypeValuation TechniqueUnobservable InputRangeWeighted Average Input Carrying Value at December 31, 2018
   MinimumMaximum  Total Level 1 Level 2 Level 3
       (In thousands)
Impaired loansMarket comparable and estimated cash flowLack of marketability and probability of default1.0%83.0%11.20% $15,148
 
 
 15,148
Other real estate ownedMarket comparableLack of marketability0.0%25.0%10.50% 241
 
 
 241
       $15,389
 
 
 15,389

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 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. 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.

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 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 estimates are made at a specific point in time based on relevant market information. They do not reflect any premium or discount that could result from offering for sale a particular financial instrument. Fair value estimates are based on 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.

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.
March 31, 2019September 30, 2019
Carrying Estimated Fair ValueCarrying Estimated Fair Value
value Total Level 1 Level 2 Level 3value Total Level 1 Level 2 Level 3
(In thousands)(In thousands)
Financial assets:                  
Cash and cash equivalents$186,083
 186,083
 186,083
 
 
$195,400
 195,400
 195,400
 
 
Equities5,880
 5,880
 5,880
 
 
6,030
 6,030
 6,030
 
 
Debt securities available-for-sale2,156,340
 2,156,340
 
 2,156,340
 
2,644,024
 2,644,024
 
 2,644,024
 
Debt securities held-to-maturity1,516,600
 1,536,684
 
 1,456,268
 80,416
1,117,699
 1,158,769
 
 1,089,032
 69,737
FHLB stock258,949
 258,949
 258,949
 
 
273,996
 273,996
 273,996
 
 
Loans held for sale6,827
 6,827
 
 6,827
 
31,373
 31,373
 
 31,373
 
Net loans21,503,110
 21,451,866
 
 
 21,451,866
21,516,234
 21,677,960
 
 
 21,677,960
Derivative financial instruments1,534
 1,534
 
 1,534
 
6,396
 6,396
 
 6,396
 
Financial liabilities:                  
Deposits, other than time deposits$12,773,906
 12,773,906
 12,773,906
 
 
$13,173,915
 13,173,915
 13,173,915
 
 
Time deposits4,856,093
 4,840,838
 
 4,840,838
 
4,498,841
 4,498,964
 
 4,498,964
 
Borrowed funds5,549,587
 5,531,399
 
 5,531,399
 
5,694,553
 5,702,437
 
 5,702,437
 
Derivative financial instruments632
 632
 
 632
 
178
 178
 
 178
 
 December 31, 2018
 Carrying Estimated Fair Value
 value Total Level 1 Level 2 Level 3
 (In thousands)
Financial assets:         
Cash and cash equivalents$196,891
 196,891
 196,891
 
 
Equities5,793
 5,793
 5,793
 
 
Debt securities available-for-sale2,122,162
 2,122,162
 
 2,122,162
 
Debt securities held-to-maturity1,555,137
 1,558,564
 
 1,476,565
 81,999
FHLB stock260,234
 260,234
 260,234
 
 
Loans held for sale4,074
 4,074
 
 4,074
 
Net loans21,378,136
 21,085,185
 
 
 21,085,185
Financial liabilities:         
Deposits, other than time deposits$13,009,422
 13,009,422
 13,009,422
 
 
Time deposits4,570,847
 4,546,991
 
 4,546,991
 
Borrowed funds5,435,681
 5,398,553
 
 5,398,553
 
Derivative financial instruments498
 498
 
 498
 
 December 31, 2018
 Carrying Estimated Fair Value
 value Total Level 1 Level 2 Level 3
 (In thousands)
Financial assets:         
Cash and cash equivalents$196,891
 196,891
 196,891
 
 
Equities5,793
 5,793
 5,793
 
 
Debt securities available-for-sale2,122,162
 2,122,162
 
 2,122,162
 
Debt securities held-to-maturity1,555,137
 1,558,564
 
 1,476,565
 81,999
FHLB stock260,234
 260,234
 260,234
 
 
Loans held for sale4,074
 4,074
 
 4,074
 
Net loans21,378,136
 21,085,185
 
 
 21,085,185
Financial liabilities:         
Deposits, other than time deposits$13,009,422
 13,009,422
 13,009,422
 
 
Time deposits4,570,847
 4,546,991
 
 4,546,991
 
Borrowed funds5,435,681
 5,398,553
 
 5,398,553
 
Derivative financial instruments498
 498
 
 498
 

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, 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.


15.16.    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,
 2019 2018 2019 2018
 (Dollars in thousands)
Revenue from contracts with customers included in:       
Fees and service charges$4,337
 3,408
 11,350
 9,860
Other income2,230
 1,925
 6,961
 6,131
Total revenue from contracts with customers$6,567
 5,333
 18,311
 15,991
 Three Months Ended March 31,
 March 31, 2019 March 31, 2018
 (Dollars in thousands)
Revenue from contracts with customers included in:   
Fees and service charges$3,283
 3,122
Other income2,223
 1,769
Total revenue from contracts with customers$5,506
 4,891

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.






















































16.17.    Recent Accounting Pronouncements
StandardDescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Standards Adopted in 2019
Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial InstrumentsThis ASU makes clarifications and corrections to the application of the guidance contained in each of the amended topics. Regarding Topic 815, ASU 2019-04 amends guidance pertaining to partial-term fair value hedges of interest rate risk, disclosure of fair value hedge basis adjustments, and scope for not-for-profit entities. For Topic 825, the amendments provide scope clarifications for Subtopics 320-10, Investments-Debt and Equity Securities-Overall, and 321-10, Investments-Equity Securities-Overall, held-to-maturity debt securities fair value disclosures, and remeasurement of equity securities at historical exchange rates. Improvements to Topic 326 include, among others, conforming amendments to Subtopics 310-40, Receivables-Troubled Debt Restructurings by Creditors, and 323-10, Investments-Equity Method and Joint Ventures-Overall, clarification that reinsurance recoverables are within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost, and consideration of estimated costs to sell when foreclosure is probable.
January 1, 2020

Early adoption permitted
The Company early adopted ASU 2019-04 on June 13, 2019. Since the Company has already adopted ASUs 2016-01 and 2017-12, the related amendments are effective as of June 13, 2019. As part of the adoption, the Company reclassified $393.1 million of debt securities held-to-maturity to debt securities available-for-sale. The Company did not reclassify debt securities from held-to-maturity to available-for-sale upon adoption of the amendments in ASU 2017-12. Entities that did not reclassify debt securities from held-to-maturity to available-for-sale upon adoption of the amendments in ASU 2017-12 and elect to reclassify debt securities upon adoption of the amendments in this update are required to reflect the reclassification as of the date of adoption of this update. Entities that reclassified debt securities from held to-maturity to available-for-sale upon adoption of the amendments in ASU 2017-12 are not permitted to make any additional reclassifications.
Leases (Topic 842)The amendment 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. ASU 2018-01 provides an optional practical expedient to not evaluate land easements which were existing or expired before the adoption of Topic 842 that were not accounted for as leases under Topic 840. ASU 2018-10 provides an optional transition method under which comparative periods presented in the financial statements will continue to be in accordance with current Topic 840, Leases, and a practical expedient to not separate non-lease components from the associated lease component. ASU 2018-20 provides an accounting policy election for lessors related to sales and other similar taxes collected from lessees and addresses lessor accounting for variable payments. ASU 2019-01 addresses three issues related to (i) determination of the fair value of the underlying assets by lessors, (ii) presentation of sales-type and direct financing leases in the statement of cash flows and (iii) transition disclosures related to accounting changes and error corrections.January 1, 2019Upon adoption, the Company recognized operating lease right-of-use assets and related operating lease liabilities totaling $193.3 million and $200.7 million, respectively. The Company adopted this amendment utilizing a modified retrospective approach and the optional transition method under which we use the effective date as the date of initial application of the amendments. The modified retrospective approach includes practical expedients such that we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. See Note 9 for expanded disclosures.
Derivatives and Hedging (Topic 815)-Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes The amendment permits the use of the Overnight Index Swap (OIS) Rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes.January 1, 2019The Company is applying the amendments in this update prospectively for qualifying new or redesignated hedging relationships entered into on or after the effective date.


StandardDescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment AccountingThe amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and to apply the guidance therein except for specific guidance on inputs to an option pricing model and the attribution of cost; i.e., the period of time over which share based payment awards vest and the pattern of cost recognition over that period. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide financing to the issuer or awards granted in conjunction with selling goods and services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. Upon adoption, an entity should remeasure liability-classified awards that have not been settled at date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the first day of the fiscal year of adoption. Upon transition, an entity should measure these nonemployee awards at fair value as of the adoption date but must not remeasure assets that are completed.January 1, 2019The Company had applied the guidance of Topic 718 to its accounting for share-based payment awards to its Board of Directors prior to adoption of the amendments, and, therefore, this update did not have an impact on the Company’s Consolidated Financial Statements.

StandardDescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt SecuritiesThe 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.January 1, 2019The adoption of the amendments did not have an impact on the Company’s Consolidated Financial Statements.


StandardDescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Standards Not Yet Adopted
Measurement of Credit Losses on Financial Instruments
This ASU changes how entities will report credit losses for financial assets held at amortized cost and available-for-sale debt securities. The amendments replace today’s “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 will 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. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”, which clarifies the scope of the guidance in the amendments in ASU 2016-13 with respect to operating lease receivables. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, which clarifies and corrects certain unintended applications of the guidance contained in each of the amended Topics. Among other amendments, ASU 2019-04 provides measurement alternatives for the allowance on the accrued interest component of amortized cost and clarifies the process to transfer loans or debt securities between measurement categories. The update also provides guidance on the inclusion of expected recoveries in the determination of the allowance, the disclosure of line of credit arrangements in the vintage disclosure table and the effect of extension or renewal options on expected credit losses. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326): TargetedTransition Relief.” The amendments provide an option to irrevocable elect the fair value option for certain financial assets previously measured at amortized cost. The election does not apply to held-to-maturity securities.
January 1, 2020The Company will adopt the standard’s provisions as a cumulative-effect adjustment to retained earnings as of January 1, 2020 on a modified retrospective basis. The Company has established a cross departmental working group including Accounting, Finance, Treasury, Credit Risk, Information Technology and Internal Audit. The implementation plan is comprised of multiple items focused on credit models, data management and treasury and accounting considerations. The Company is finalizing model validation as it runs its credit models in parallel and is finalizing its methodology and policy documentation as well as the required disclosures. While the Company is currently unable to reasonably estimate the impact of adopting ASU 2016-13, it is expected that the impact upon adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.
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 amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company does not expect ASU No. 2018-15 to have a material impact on the Company’s 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.


StandardDescriptionRequired date of adoptionEffect on 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 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 will not have a material impact on the Company’s Consolidated Financial Statements.
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill ImpairmentThis 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 update is to be applied prospectively. The Company does not expect ASU No. 2017-04 to have a material impact on the Company’s Consolidated Financial Statements.


StandardDescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Measurement of Credit Losses on Financial Instruments
This ASU changes how entities will report credit losses for financial assets held at amortized cost and available-for-sale debt securities. The amendments replace today’s “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 will 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. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”, which clarifies the scope of the guidance in the amendments in ASU 2016-13 with respect to operating lease receivables.
January 1, 2020

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 losses - will have an offsetting impact on retained earnings.

17.18.    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 April 24,October 23, 2019, the Company declared a cash dividend of $0.11 per share. The $0.11 dividend per share will be paid to stockholders on May 24,November 25, 2019, with a record date of May 10,November 11, 2019.


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. Reference is made to Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2018 and the additional risk factor included in Part II, Item 1A of this 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. As of March 31,September 30, 2019, we consider the following to be our critical accounting policies.
Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary 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. 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. generally accepted accounting principles, under which we are required to maintain an allowance for probable losses at the balance sheet date. We are responsible for the timely 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.
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: collectively evaluated for impairment and individually evaluated.evaluated for impairment. 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 it 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 allowance for loans collectively evaluated componentfor impairment is determined by segregatingapplying quantitative loss factors to the remaining loans collectively evaluated for impairment segregated 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. ReservesQuantitative loss factors for each loan segment or the loss factors are generally determined

based on the Company’s historical loss experience over aan appropriate look-back period determined to provide the appropriate amount of data to accurately estimate expected losses as of period end.period. Additionally, management assesses the loss

emergence period for the expected losses of each loan segment and adjusts each historicalquantitative 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 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 quantitative loss factors may also be adjusted to account for qualitative or environmental factors, both internal and external to the Company, 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.
Purchased Credit-Impaired (“PCI”) loans, are loans acquired at a discount 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 (i.e., the allowance for loan losses). The difference between the undiscounted cash flows expected at 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 process, specific loans are analyzed to determine 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.
The Company obtains an appraisal for all commercial loans that are collateral dependent upon origination. An updated appraisal isUpdated appraisals are generally obtained annually for loans rated substandard or worse with a balance ofloans $1.0 million or greater. An updated appraisal is obtained biennially for loans ratedgreater and special mention with a balance ofloans $2.0 million or greater.greater in the process of collection by the Company’s special assets department. 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 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 based on the growth and composition of the loan portfolio, the level of loan delinquency and the economic conditions in our lending area. 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.
Derivative Financial Instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and 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.  Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in 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 the Company’s initial public offering in 2005, we have 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 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, as well as product expansion. We believe the attractive markets we operate in, namely, New Jersey and the greater New York metropolitan area, will continue to provide us with growth opportunities. Our primary focus is to build and develop profitable customer relationships across all lines of business, both consumer and commercial.
Our results of operations depend primarily on net interest income, which is directly impacted by the interest rate environment. Net interest income is the difference between the interest income we earn on our interest-earning assets, primarily loans 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 rate of prepayments on our mortgage-related assets.
A flattening of theThe flat yield curve, caused primarily by rising short-term interest rates combined with competitive pricing in both the loan and deposit markets, continues to create a challenging net interest margin environment.  We continue to manage our interest rate risk against a backdrop of interest rate uncertainty.  If short-term interest rates and related deposit competition increase further, we may be subject to additional 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. If short-term interest rates and related deposit competition increase, further.we may be subject to net interest margin compression.  
Our results of operations are also significantly affected by general economic conditions.  While the domestic consumer continues to generally benefit from improved housing and employment metrics, the velocity of economic growth, domestically and internationally, is challenged by global trade discord and pockets of socioeconomic and political unrest. OurIn addition, our tax rate was

negatively impacted by the enacted State of New Jersey legislation that created a temporary surtax effective for tax years 2018 through 2021 and will require companies to file combined tax returns beginning for 2019.legislation.

Total assets increased by $316.6$496.2 million, or 1.2%1.9%, to $26.55$26.73 billion at March 31,September 30, 2019 from $26.23 billion at December 31, 2018. Effective January 1, 2019, we adopted new accounting guidance that requires leases to be recognized on our Consolidated Balance SheetSheets as a right-of-use asset and a lease liability. Our operating lease right-of-use assets and operating lease liabilities were $187.6$179.6 million and $197.3$189.9 million, respectively, at March 31,September 30, 2019. Net loans increased by $125.0$138.1 million, or 0.6%, to $21.50$21.52 billion at March 31,September 30, 2019 from $21.38 billion at December 31, 2018. Our ongoing strategy is to continue to work towards becoming more commercial bank-like and maintain a well-diversified loan portfolio.portfolio and offer enhanced commercial products to continue to be competitive in our markets as we continue to focus on higher yielding commercial and industrial loans and deemphasis lower yielding real estate loans. We understand the heightened regulatory sensitivity around commercial real estate and multi-family concentrations, and continue to be diligent in our underwriting and credit risk monitoring of these portfolios.  The overall level of non-performing loans remains low compared to our national and regional peers; however, our commercial real estate concentration is above 300% of regulatory capital and therefore subjects us to heightened regulatory scrutiny.
On July 24, 2019, we announced the signing of a definitive merger agreement with Gold Coast Bancorp, Inc. (“Gold Coast”). As of September 30, 2019, Gold Coast had assets of $562.2 million, loans of $461.5 million and deposits of $463.5 million and operated six branches in Nassau and Suffolk counties in suburban Long Island as well as one branch in Brooklyn, NY. The transaction is subject to customary closing conditions. See Note 3, Business Combinations, for further details regarding the merger agreement.
Capital management is a key component of our business strategy. We continue to manage our capital through a combination of organic growth, acquisitions, stock repurchases and cash dividends. Effective capital management and prudent growth allows us to effectively leverage the capital from the Company’s public offerings,capital, while being mindful of tangible book value for stockholders. Our capital to total assets ratio has decreased to 11.13%10.97% at March 31,September 30, 2019 from 11.46% at December 31, 2018. Since the commencement of our first stock repurchase plan in March 2015 through March 31,September 30, 2019, the Company has repurchased a total of 94.099.8 million shares at an average cost of $12.10$12.06 per share, totaling $1.14$1.20 billion. For the threenine months ended March 31,September 30, 2019, stockholders’ equity was impacted by the repurchase of 6.212.0 million shares of common stock for $73.7$140.2 million and cash dividends paid of $0.11$0.33 per share totaling $31.0$91.9 million. These reductions to stockholders’ equity were partially offset by net income of $48.2$146.8 million and $6.2$20.8 million of share-based plan activity.
During 2019, we have made investments in our digital and technology platforms which will enhance sales practices and improve efficiencies in our business. We continue to enhance our employee training and development programs, build additionalas well as our risk management and operational infrastructure and add personnel as our Company grows and our business evolves. 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 by successfully attracting deposits, identifying favorable loan and investment opportunities, acquiring other banks and non-bank entities, enhancing our market presence and product offerings as well as continuing to invest in our people.
Comparison of Financial Condition at March 31,September 30, 2019 and December 31, 2018
Total Assets. Total assets increased by $316.6$496.2 million, or 1.2%1.9%, to $26.55$26.73 billion at March 31,September 30, 2019 from $26.23 billion at December 31, 2018. Net loans increased by $125.0$138.1 million, or 0.6%, to $21.50$21.52 billion at March 31,September 30, 2019 from $21.38 billion at December 31, 2018. Total securities decreasedincreased by $4.3$84.7 million, or 0.1%2.3%, to $3.68$3.77 billion at March 31,September 30, 2019 from December 31, 2018. Operating lease right-of-use assets were $187.6$179.6 million at March 31,September 30, 2019.

Net Loans. Net loans increased by $125.0$138.1 million, or 0.6%, to $21.50$21.52 billion at March 31,September 30, 2019 from $21.38 billion at December 31, 2018. The detail of the loan portfolio (including PCI loans) is below:


March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
(Dollars in thousands)(Dollars in thousands)
Commercial loans:      
Multi-family loans$8,174,342
 8,165,187
$7,995,095
 8,165,187
Commercial real estate loans4,852,402
 4,786,825
4,771,928
 4,786,825
Commercial and industrial loans2,430,540
 2,389,756
2,681,577
 2,389,756
Construction loans232,170
 227,015
289,857
 227,015
Total commercial loans15,689,454
 15,568,783
15,738,457
 15,568,783
Residential mortgage loans5,366,970
 5,351,115
5,307,412
 5,351,115
Consumer and other691,229
 707,866
700,341
 707,866
Total loans21,747,653
 21,627,764
21,746,210
 21,627,764
Deferred fees, premiums and other, net(9,826) (13,811)(1,991) (13,811)
Allowance for loan losses(234,717) (235,817)(227,985) (235,817)
Net loans$21,503,110
 21,378,136
$21,516,234
 21,378,136
During the threenine months ended March 31,September 30, 2019, we originated $213.4$794.3 million in commercial and industrial loans, $634.1 million in multi-family loans, $461.3 million in commercial real estate loans, $197.7 million in commercial and industrial loans, $186.0 million in multi-family loans, $85.5$355.2 million in residential loans, $16.8$61.0 million in consumer and other loans and $1.5$27.6 million in construction loans. The growth in the loan portfolio reflects our continued focus on growing and diversifying our loan portfolio. 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 the Bank’s key operating objectives has been, and continues to be, maintaining a high level of asset quality. The Bank maintains 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 loan portfolio contains interest-only and no income verification residential mortgage loans. At September 30, 2019, interest-only residential and consumer loans intotaled $33.4 million, which the borrower makes only interest payments 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 to the required amortization of the principal amount after the interest-only period. These payment increases could affect the borrower’s ability to repay the loan. At March 31, 2019, interest-only residential and consumer loans represented less than 1% of the residential and consumer portfolio.portfolios. We no longer originate residential mortgage loans without verifying income. At September 30, 2019, these loans totaled $151.7 million. From time to time and for competitive purposes, we originate interest-only commercial real estate and multi-family loans. As of March 31,At September 30, 2019, these loans represented less than 10%totaled $1.10 billion. As part of its underwriting, these loans are evaluated as fully amortizing for risk classification purposes, with the total commercial loan portfolio. We maintain stricter underwriting criteria for these interest-only loans than for amortizing loans.period ranging from one to ten years. In addition, the Company evaluates its policy limits on a regular basis. We believe these criteria adequately control the potential exposure torisks of such risksloans and that adequate provisions for loan losses are provided for all known and inherent risks.
We also purchase mortgage loans from correspondent entities including other banks and mortgage bankers. During the threenine months ended March 31,September 30, 2019, we purchased loans totaling $84.7$258.0 million from these entities. In addition to the loans originated for our portfolio, we originated residential mortgage loans for sale to third parties totaling $27.6$160.3 million during the threenine months ended March 31,September 30, 2019.

    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:


March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018 September 30, 2018
# of Loans Amount # of Loans Amount # of Loans Amount # of Loans Amount # of Loans Amount# of Loans Amount # of Loans Amount # of Loans Amount # of Loans Amount # of Loans Amount
(dollars in millions)(dollars in millions)
                                      
Multi-family14
 $34.1
 15
 $33.9
 3
 $2.6
 9
 $19.5
 8
 $20.2
6
 $19.6
 14
 $34.1
 14
 $34.1
 15
 $33.9
 3
 $2.6
Commercial real estate32
 9.8
 35
 12.4
 39
 15.5
 36
 16.7
 38
 19.7
30
 12.3
 27
 8.1
 32
 9.8
 35
 12.4
 39
 15.5
Commercial and industrial14
 17.2
 14
 19.4
 14
 19.8
 13
 28.9
 19
 23.3
16
 12.0
 13
 18.0
 14
 17.2
 14
 19.4
 14
 19.8
Construction1
 0.2
 1
 0.2
 1
 0.2
 1
 0.3
 1
 0.3

 
 1
 0.2
 1
 0.2
 1
 0.2
 1
 0.2
Total commercial loans61
 61.3
 65
 65.9
 57
 38.1
 59
 65.4
 66
 63.5
52
 43.9
 55
 60.4
 61
 61.3
 65
 65.9
 57
 38.1
Residential and consumer296
 56.4
 320
 59.0
 347
 66.3
 375
 69.2
 390
 72.5
261
 48.2
 275
 51.2
 296
 56.4
 320
 59.0
 347
 66.3
Total non-accrual loans357
 $117.7
 385
 $124.9
 404
 $104.4
 434
 $134.6
 456
 $136.0
313
 $92.1
 330
 $111.6
 357
 $117.7
 385
 $124.9
 404
 $104.4
Accruing troubled debt restructured loans54
 $13.6
 54
 $13.6
 59
 $13.2
 56
 $12.8
 54
 $12.4
58
 $12.5
 56
 $12.2
 54
 $13.6
 54
 $13.6
 59
 $13.2
Non-accrual loans to total loans  0.54%   0.58%   0.50%   0.65%   0.66%  0.42%   0.51%   0.54%   0.58%   0.50%
Allowance for loan losses as a percent of non-accrual loans  199.44%   188.78%   221.06%   171.46%   169.97%  247.62%   207.83%   199.44%   188.78%   221.06%
Allowance for loan losses as a percent of total loans  1.08%   1.09%   1.10%   1.11%   1.12%  1.05%   1.05%   1.08%   1.09%   1.10%
Total non-accrual loans were $117.7$92.1 million at March 31,September 30, 2019 compared to $111.6 million at June 30, 2019 and $124.9 million at December 31, 2018 and $136.0 million at March 31, 2018. Included in non-accrual loans at March 31,September 30, 2019 were $8.6$8.4 million of loans that were classified

as non-accrual which were performing in accordance with their contractual terms. Classified (substandard) loans as a percent of total loans increased to 3.26%3.48% at March 31,September 30, 2019 from 3.18% at December 31, 2018. We continue to proactively and diligently work to resolve our troubled loans.
At March 31,September 30, 2019, there were $40.1$37.3 million of loans deemed as TDRs, of which $29.1$27.8 million were residential and consumer loans, $8.1$6.9 million were commercial and industrial loans and $2.9$2.6 million were commercial real estate loans. TDRs of $13.6$12.5 million were classified as accruing and $26.5$24.8 million were classified as non-accrual at March 31,September 30, 2019.
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 March 31,September 30, 2019, the Company has deemed potential problem loans, excluding PCI loans, totaling $50.3$55.1 million, which is comprised of 1210 commercial real estate loans totaling $21.0 million, 11 multi-family loans totaling $30.7$19.5 million 22and 16 commercial and industrial loans totaling $15.1 million and 4 commercial real estate loans totaling $4.5$14.6 million. Management is actively monitoring all of these loans.
The ratio of non-accrual loans to total loans was 0.54%0.42% at March 31,September 30, 2019 compared to 0.58% at December 31, 2018. The allowance for loan losses as a percentage of non-accrual loans was 199.44%247.62% at March 31,September 30, 2019 compared to 188.78% at December 31, 2018. At March 31,September 30, 2019, our allowance for loan losses as a percentage of total loans was 1.08%1.05% compared to 1.09% at December 31, 2018.
At March 31,September 30, 2019, loans meeting the Company’s definition of an impaired loan were primarily collateral dependent loans totaling $83.8$64.3 million, of which $15.4$15.0 million had a specific allowance for credit losses of $2.1$2.0 million and $68.4$49.3 million had no specific allowance for credit losses. At December 31, 2018, loans meeting the Company’s definition of an impaired loan

were primarily collateral dependent loans totaling $86.7 million, of which $15.8 million had a related allowance for credit losses of $2.2 million and $70.9 million had no related allowance for credit losses.
The allowance for loan losses decreased by $1.1$7.8 million to $234.7$228.0 million at March 31,September 30, 2019 from $235.8 million at December 31, 2018. Our allowance for loan losses isat September 30, 2019 was positively impacted by the inherentimproved credit risk, growth and composition of our overall portfolio, as well asquality, including the level of non-accrual loans and charge-offs.charge-offs/recoveries, and modest loan growth. 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 March 31,September 30, 2019 and December 31, 2018 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.
 
March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
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
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)(Dollars in thousands)
End of period allocated to:              
Multi-family loans$75,572
 37.6% $82,876
 37.7%$75,776
 36.8% $82,876
 37.7%
Commercial real estate loans47,627
 22.3% 48,449
 22.1%48,142
 22.0% 48,449
 22.1%
Commercial and industrial loans78,845
 11.2% 71,084
 11.1%71,445
 12.3% 71,084
 11.1%
Construction loans7,303
 1.0% 7,486
 1.1%8,962
 1.3% 7,486
 1.1%
Residential mortgage loans20,557
 24.7% 20,776
 24.7%19,223
 24.4% 20,776
 24.7%
Consumer and other loans2,991
 3.2% 3,102
 3.3%2,479
 3.2% 3,102
 3.3%
Unallocated1,822
 
 2,044
 
1,958
 
 2,044
 
Total allowance$234,717
 100.0% $235,817
 100.0%$227,985
 100.0% $235,817
 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 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 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 March 31,September 30, 2019, our securities portfolio represented 13.9%14.1% of our total assets. Securities, in the aggregate, decreasedincreased by $4.3$84.7 million, or 0.1%2.3%, to $3.68$3.77 billion at March 31,September 30, 2019 from December 31, 2018. This decreaseincrease was primarily a result of paydowns,purchases, partially offset by purchases.sales and paydowns.
Stock in the Federal Home Loan Bank, Bank Owned Life Insurance and Other Assets. The amount of stock we own in the FHLB decreasedincreased by $1.3$13.8 million, or 0.5%5.3%, to $258.9$274.0 million at March 31,September 30, 2019 from $260.2 million at December 31, 2018. 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 $213.5$216.9 million at March 31,September 30, 2019 and $211.9 million at December 31, 2018. Other assets were $43.9$69.8 million at March 31,September 30, 2019 and $29.3 million at December 31, 2018.
Deposits.  At March 31,September 30, 2019, deposits totaled $17.63$17.67 billion, representing 74.7%74.3% 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. Although recent increases in interest rates has resulted in consumer preference for and growth in time deposits, weWe 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 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 $49.7$92.5 million, or 0.3%0.5%, from $17.58 billion at December 31, 2018 to $17.63$17.67 billion at March 31,September 30, 2019 primarily driven by an increaseincreases in time deposits,interest-bearing checking and money market accounts, partially offset by decreases in non-interest checking, savings and savingstime deposit accounts. Checking accounts decreased $141.8increased $216.7 million to $7.18$7.54 billion at March 31,September 30, 2019 from $7.32 billion at December 31, 2018. Core deposits represented approximately 72%75% of our total deposit portfolio at March 31,September 30, 2019 compared to 74% at December 31, 2018.
The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated:
March 31, 2019 December 31, 2018September 30, 2019 December 31, 2018
Balance Percent of Total Deposit Balance Percent of Total DepositBalance Percent of Total Deposit Balance Percent of Total Deposit
(Dollars in thousands)(Dollars in thousands)
Non-interest bearing:              
Checking accounts$2,477,079
 14.1% $2,535,848
 14.4%$2,433,152
 13.8% $2,535,848
 14.4%
Interest-bearing:              
Checking accounts4,700,483
 26.7% 4,783,563
 27.2%5,103,007
 28.9% 4,783,563
 27.2%
Money market deposits3,619,546
 20.5% 3,641,070
 20.7%3,674,032
 20.8% 3,641,070
 20.7%
Savings1,976,798
 11.2% 2,048,941
 11.7%1,963,724
 11.1% 2,048,941
 11.7%
Certificates of deposit4,856,093
 27.5% 4,570,847
 26.0%4,498,841
 25.4% 4,570,847
 26.0%
Total Deposits$17,629,999
 100.0% $17,580,269
 100.0%$17,672,756
 100.0% $17,580,269
 100.0%
Borrowed Funds.  Borrowings are primarily with the FHLB and are collateralized by our residential and commercial mortgage portfolios. Borrowed funds increased by $113.9$258.9 million, or 2.1%4.8%, to $5.55$5.69 billion at March 31,September 30, 2019 from $5.44 billion at December 31, 2018 to help fund the growth of the loan portfolio.
Stockholders’ Equity. Stockholders’ equity decreased by $49.5$74.0 million to $2.96$2.93 billion at March 31,September 30, 2019 from $3.01 billion at December 31, 2018. The decrease was primarily attributed to the repurchase of 6.212.0 million shares of common stock for $73.7$140.2 million and cash dividends paid of $0.11$0.33 per share totaling $31.0$91.9 million during the threenine months ended March 31,September 30, 2019. These reductions to stockholders’ equity were partially offset by net income of $48.2$146.8 million and share-based plan activity of $6.2$20.8 million for the threenine months ended March 31,September 30, 2019.

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 table setstables 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 that are amortized or accreted to interest income or expense.


 Three Months Ended March 31, Three Months Ended September 30,
 2019 2018 2019 2018
 
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-bearing deposits $175,281
 $535
 1.22% $199,283
 $455
 0.91% $224,882
 $821
 1.46% $227,346
 $677
 1.19%
Equity securities 5,811
 37
 2.55% 5,702
 35
 2.46% 6,001
 36
 2.40% 5,802
 32
 2.21%
Debt securities available-for-sale 2,111,832
 15,416
 2.92% 2,020,833
 10,852
 2.15% 2,591,055
 18,167
 2.80% 2,015,096
 11,122
 2.21%
Debt securities held-to-maturity 1,532,764
 11,002
 2.87% 1,759,737
 11,702
 2.66% 1,131,194
 9,340
 3.30% 1,638,722
 11,383
 2.78%
Net loans 21,452,923
 224,890
 4.19% 20,011,353
 204,722
 4.09% 21,722,751
 231,734
 4.27% 20,644,566
 216,516
 4.20%
Stock in FHLB 260,543
 4,337
 6.66% 239,100
 3,801
 6.36% 279,356
 4,456
 6.38% 246,037
 4,296
 6.98%
Total interest-earning assets 25,539,154
 256,217
 4.01% 24,236,008
 231,567
 3.82% 25,955,239
 264,554
 4.08% 24,777,569
 244,026
 3.94%
Non-interest-earning assets 942,523
     697,486
     992,118
     708,904
    
Total assets $26,481,677
     $24,933,494
     $26,947,357
     $25,486,473
    
Interest-bearing liabilities:                        
Savings deposits $2,039,919
 $4,370
 0.86% $2,331,475
 $3,290
 0.56% $1,958,748
 $4,377
 0.89% $2,142,642
 $3,462
 0.65%
Interest-bearing checking 4,975,209
 22,082
 1.78% 4,812,897
 13,579
 1.13% 4,894,643
 21,094
 1.72% 4,449,767
 15,736
 1.41%
Money market accounts 3,630,708
 14,246
 1.57% 4,091,149
 9,292
 0.91% 3,750,846
 16,065
 1.71% 3,747,501
 13,043
 1.39%
Certificates of deposit 4,752,700
 24,724
 2.08% 3,398,732
 10,215
 1.20% 4,756,086
 26,436
 2.22% 4,562,549
 19,682
 1.73%
Total interest-bearing deposits 15,398,536
 65,422
 1.70% 14,634,253
 36,376
 0.99% 15,360,323
 67,972
 1.77% 14,902,459
 51,923
 1.39%
Borrowed funds 5,229,663
 28,117
 2.15% 4,667,160
 22,707
 1.95% 5,756,197
 32,130
 2.23% 4,897,119
 25,177
 2.06%
Total interest-bearing liabilities 20,628,199
 93,539
 1.81% 19,301,413
 59,083
 1.22% 21,116,520
 100,102
 1.90% 19,799,578
 77,100
 1.56%
Non-interest-bearing liabilities 2,868,166
     2,508,888
     2,892,067
     2,610,074
    
Total liabilities 23,496,365
     21,810,301
     24,008,587
     22,409,652
    
Stockholders’ equity 2,985,312
     3,123,193
     2,938,770
     3,076,821
    
Total liabilities and stockholders’ equity $26,481,677
     $24,933,494
     $26,947,357
     $25,486,473
    
Net interest income   $162,678
     $172,484
     $164,452
     $166,926
  
Net interest rate spread(1)
     2.20%     2.60%     2.18%     2.38%
Net interest-earning assets(2)
 $4,910,955
     $4,934,595
     $4,838,719
     $4,977,991
    
Net interest margin(3)
     2.55%     2.85%     2.53%     2.69%
Ratio of interest-earning assets to total interest-bearing liabilities 1.24
     1.26
     1.23
     1.25
    


(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.

  Nine Months Ended September 30,
  2019 2018
  
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 $193,427
 $1,965
 1.35% $201,743
 $1,541
 1.02%
Equity securities 5,905
 108
 2.44% 5,740
 100
 2.32%
Debt securities available-for-sale 2,317,685
 49,801
 2.86% 2,008,724
 32,803
 2.18%
Debt securities held-to-maturity 1,379,982
 31,008
 3.00% 1,696,718
 34,594
 2.72%
Net loans 21,596,000
 684,086
 4.22% 20,337,264
 633,029
 4.15%
Stock in FHLB 273,885
 12,871
 6.27% 246,858
 11,928
 6.44%
Total interest-earning assets 25,766,884
 779,839
 4.04% 24,497,047
 713,995
 3.89%
Non-interest-earning assets 964,031
     716,163
    
Total assets $26,730,915
     $25,213,210
    
Interest-bearing liabilities:            
Savings deposits $1,966,427
 $12,556
 0.85% $2,206,307
 $9,705
 0.59%
Interest-bearing checking 4,912,085
 65,295
 1.77% 4,581,974
 43,372
 1.26%
Money market accounts 3,691,378
 46,126
 1.67% 3,897,632
 32,832
 1.12%
Certificates of deposit 4,757,446
 77,245
 2.16% 3,997,059
 44,457
 1.48%
Total interest-bearing deposits 15,327,336
 201,222
 1.75% 14,682,972
 130,366
 1.18%
Borrowed funds 5,566,273
 92,319
 2.21% 4,875,857
 72,918
 1.99%
Total interest-bearing liabilities 20,893,609
 293,541
 1.87% 19,558,829
 203,284
 1.39%
Non-interest-bearing liabilities 2,881,242
     2,551,722
    
Total liabilities 23,774,851
     22,110,551
    
Stockholders’ equity 2,956,064
     3,102,659
    
Total liabilities and stockholders’ equity $26,730,915
     $25,213,210
    
Net interest income   $486,298
     $510,711
  
Net interest rate spread(1)
     2.17%     2.50%
Net interest-earning assets(2)
 $4,873,275
     $4,938,218
    
Net interest margin(3)
     2.52%     2.78%
Ratio of interest-earning assets to total interest-bearing liabilities 1.23
     1.25
    

(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.




Comparison of Operating Results for the Three and Nine Months Ended March 31,September 30, 2019 and 2018
Net Income. Net income for the three months ended March 31,September 30, 2019 was $48.2$52.0 million compared to net income of $57.9$54.2 million for the three months ended March 31,September 30, 2018. Net income for the nine months ended September 30, 2019 was $146.8 million compared to net income of $169.2 million for the nine months ended September 30, 2018.
Net Interest Income. Net interest income decreased by $9.8$2.5 million, or 5.7%1.5%, to $162.7$164.5 million for the three months ended March 31,September 30, 2019 from $172.5$166.9 million for the three months ended March 31,September 30, 2018. The net interest margin decreased 3016 basis points to 2.55%2.53% for the three months ended March 31,September 30, 2019 from 2.85%2.69% for the three months ended March 31,September 30, 2018.
Net interest income decreased by $24.4 million, or 4.8%, to $486.3 million for the nine months ended September 30, 2019 from $510.7 million for the nine months ended September 30, 2018. The net interest margin decreased 26 basis points to 2.52% for the nine months ended September 30, 2019 from 2.78% for the nine months ended September 30, 2018.
Total interest and dividend income increased by $24.7$20.5 million, or 10.6%8.4%, to $256.2$264.6 million for the three months ended March 31,September 30, 2019. Interest income on loans increased by $20.2$15.2 million, or 9.9%7.0%, to $224.9$231.7 million for the three months ended March 31,September 30, 2019 as a result of a $1.44$1.08 billion increase in the average balance of net loans to $21.45$21.72 billion, primarily attributed to loan originations, partially offset by paydowns and payoffs. The weighted average yield on net loans increased 107 basis points to 4.19%4.27%. Prepayment penalties, which are included in interest income, totaled $3.7 million for the three months ended March 31, 2019 compared to $5.2 million for the three months ended March 31,September 30, 2019 compared to $4.6 million for the three months ended September 30, 2018. Interest income on all other interest-earning assets, excluding loans, increased by $4.5$5.3 million, or 16.7%19.3%, to $31.3$32.8 million for the three months ended March 31,September 30, 2019 which is attributed to an increase in the weighted average yield on interest-earning assets, excluding loans, of 5344 basis points to 3.07%3.10%. The average balance of all other interest-earning assets, excluding loans, decreased $138.4increased $99.5 million to $4.09$4.23 billion for the three months ended March 31,September 30, 2019.
Total interest and dividend income increased by $65.8 million, or 9.2%, to $779.8 million for the nine months ended September 30, 2019. Interest income on loans increased by $51.1 million, or 8.1%, to $684.1 million for the nine months ended September 30, 2019 as a result of a $1.26 billion increase in the average balance of net loans to $21.60 billion, primarily attributed to loan originations, partially offset by paydowns and payoffs. The weighted average yield on net loans increased 7 basis points to 4.22%. Prepayment penalties, which are included in interest income, totaled $11.4 million for the nine months ended September 30, 2019 compared to $15.4 million for the nine months ended September 30, 2018. Interest income on all other interest-earning assets, excluding loans, increased by $14.8 million, or 18.3%, to $95.8 million for the nine months ended September 30, 2019 which is attributed to an increase in the weighted average yield on interest-earning assets, excluding loans, of 46 basis points to 3.06%. The average balance of all other interest-earning assets, excluding loans, increased $11.1 million to $4.17 billion for the nine months ended September 30, 2019.
Total interest expense increased by $34.5$23.0 million, or 58.3%29.8%, to $93.5$100.1 million for the three months ended March 31,September 30, 2019. Interest expense on interest-bearing deposits increased $29.0$16.0 million, or 79.9%30.9%, to $65.4$68.0 million for the three months ended March 31,September 30, 2019. The weighted average cost of interest-bearing deposits increased 7138 basis points to 1.70%1.77% for the three months ended March 31,September 30, 2019. In addition, the average balance of total interest-bearing deposits increased $764.3$457.9 million, or 5.2%3.1%, to $15.40$15.36 billion for the three months ended March 31,September 30, 2019. Interest expense on borrowed funds increased by $5.4$7.0 million, or 23.8%27.6%, to $28.1$32.1 million for the three months ended March 31,September 30, 2019. The average balance of borrowed funds increased $562.5$859.1 million, or 12.1%17.5%, to $5.23$5.76 billion for the three months ended March 31,September 30, 2019. In addition, the weighted average cost of borrowings increased 2017 basis points to 2.15%2.23% for the three months ended March 31,September 30, 2019.
Total interest expense increased by $90.3 million, or 44.4%, to $293.5 million for the nine months ended September 30, 2019. Interest expense on interest-bearing deposits increased $70.9 million, or 54.4%, to $201.2 million for the nine months ended September 30, 2019. The weighted average cost of interest-bearing deposits increased 57 basis points to 1.75% for the nine months ended September 30, 2019. In addition, the average balance of total interest-bearing deposits increased $644.4 million, or 4.4%, to $15.33 billion for the nine months ended September 30, 2019. Interest expense on borrowed funds increased by $19.4 million, or 26.6%, to $92.3 million for the nine months ended September 30, 2019. The average balance of borrowed funds increased $690.4 million, or 14.2%, to $5.57 billion for the nine months ended September 30, 2019. In addition, the weighted average cost of borrowings increased 22 basis points to 2.21% for the nine months ended September 30, 2019.
Provision for Loan Losses. Our provision for loan losses is primarily a result of the inherent credit risk in our overall portfolio, the growth and composition of the loan portfolio, and the level of non-accrual loans and charge-offs.charge-offs/recoveries. At September 30, 2019, our allowance for loan losses and related year-to-date provision were positively impacted by improved credit quality, including the level of non-accrual loans and charge-offs/recoveries, and modest loan growth. For the three months ended March 31,September 30, 2019, our provision for loan losses was $3.0a $2.5 million reduction to the allowance for loan losses, compared to $2.5an addition to the allowance for loan losses of $2.0 million for the three months ended March 31,September 30, 2018. For the three months

ended March 31,September 30, 2019, net charge-offs were $4.1$1.5 million compared to $2.3$2.0 million for the three months ended March 31,September 30, 2018. Our provision for loan losses was a $2.5 million reduction to the allowance for loan losses for the nine months ended September 30, 2019 and an $8.5 million addition to the allowance for loan losses for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, net charge-offs were $5.3 million compared to $8.7 million for the nine months ended September 30, 2018.
Non-Interest Income. Total non-interest income increased $4.5 million, or 43.7%, to $14.8 million for the three months ended September 30, 2019. This increase was primarily due to an increase of $2.5 million in other income primarily attributed to customer swap fee income and an increase of $1.2 million in gain on loans.
Total non-interest income increased $2.1 million, or 22.9%6.7%, to $11.2$33.0 million for the threenine months ended March 31,September 30, 2019. FeesThe increase is primarily due to an increase of $5.4 million in other income primarily attributed to customer swap fee income, a sale-leaseback transaction and non-depository investment products. In addition, gain on loans, fees and service charges, income on bank owned life insurance and gain on the sale of other real estate owned increased $718,000$1.7 million, $591,000, $524,000 and other income attributed to non-depository investment products and gains on our equipment finance portfolio increased $718,000 for the three months ended March 31, 2019.
Non-Interest Expenses. Total non-interest expenses were $103.4 million for the three months ended March 31, 2019, an increase of $2.3 million, or 2.3%, compared to the three months ended March 31, 2018. Compensation and fringe benefits increased $1.9 million due to additions to our staff to support our growth as well as merit increases, data processing and communication expense increased $1.9 million and advertising and promotional expense increased $1.5 million.$513,000, respectively. These increases were partially offset by a decrease of $1.5$6.7 million in non-interest income on securities primarily resulting from a $5.7 million loss on the sale of securities during the second quarter of 2019.
Non-Interest Expenses. Total non-interest expenses were $108.7 million for the three months ended September 30, 2019, an increase of $6.9 million, or 6.8%, compared to the three months ended September 30, 2018. The increase was due to an increase of $4.3 million in compensation and benefit expense, of which $2.0 million was accelerated stock compensation expense related to the settlement of our shareholder litigation and $1.3 million was employee severance expense related to a workforce reduction. In addition, professional fees increased $2.4 million due primarily to costs associated with implementing enhanced commercial treasury management and online banking products, as well as costs to improve risk management process efficiency.
Total non-interest expenses were $315.9 million for the nine months ended September 30, 2019, an increase of $10.5 million, or 3.4%, as compared to the nine months ended September 30, 2018. This increase is due to an increase of $5.3 million in compensation and fringe benefit expense, an increase of $3.7 million in data processing and communication expense, an increase of $2.6 million in other non-interest expense and an increase of $1.8 million in advertising and promotional expense. These increases were partially offset by a decrease of $1.2$4.1 million in federal insurance premiums.
Income Taxes. Income tax expense for the firstthird quarter of 2019 was $19.3$21.0 million compared to $20.1$19.2 million for the firstthird quarter 2018.  The effective tax rate was 28.6%28.8% for the three months ended March 31,September 30, 2019 and 25.7%26.2% for the three months ended March 31,September 30, 2018.
Our Income tax rateexpense for the nine months ended September 30, 2019 was negatively impacted by$59.1 million compared to $58.4 million for the enacted State of New Jersey legislation that created a temporary surtax effective for tax years 2018 through 2021 and will require companies to file combined tax returns beginning for 2019.
nine months ended September 30, 2018.  The effective tax rate was 28.7% for the nine months ended September 30, 2019 and 25.6% for the nine months ended September 30, 2018. The increase in the tax rate is primarily related to the change in New Jersey tax law. The effective tax rate is also 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. TheIn addition, the effective tax rate is also affected by the level of income allocated to the various state and local jurisdictions where the Company operates, because tax rates differ among such jurisdictions. In addition, the effective tax rate can be impacted by any large 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, FHLB and other borrowings and, to a lesser extent, proceeds from the sale of loans and investment maturities. While scheduled amortization of loans is a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. 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. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits and other borrowings from correspondent banks.
At March 31,September 30, 2019, the Company had $675.0$325.0 million of overnight borrowings outstanding. The Company had $686.0 million of overnight borrowings outstanding at December 31, 2018. The Company borrows directly from the FHLB and various financial institutions. The Company had total borrowings of $5.55$5.69 billion at March 31,September 30, 2019, an increase of $113.9$258.9 million from $5.44 billion at December 31, 2018.
In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination of loans. At March 31,September 30, 2019, outstanding commitments to originate loans totaled $393.2$588.8 million; outstanding unused lines of credit totaled $1.46$1.39 billion; standby letters of credit totaled $37.6$30.6 million and outstanding commitments to sell loans totaled $19.0$57.0 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 $3.94$3.95 billion at March 31,September 30, 2019. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.

Regulatory Matters. 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%.
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 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 commenced on January 1, 2016 at 0.625% and increased in annual increments to 2.5% on January 1, 2019. The rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum Conservation Buffer is not met. As of March 31,September 30, 2019 the Company and the Bank met the currently applicable Conservation Buffer of 2.5%.

As of March 31,September 30, 2019, the Bank and the Company were considered “well capitalized” under applicable regulations and exceeded all regulatory capital requirements as follows:
As of March 31, 2019 (1)
As of September 30, 2019 (1)
Actual Minimum Capital Requirement with Conservation Buffer 
To be Well Capitalized under Prompt Corrective Action Provisions (2)
Actual Minimum Capital Requirement with Conservation Buffer 
To be Well Capitalized under Prompt Corrective Action Provisions (2)
Amount Ratio Amount Ratio Amount RatioAmount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)(Dollars in thousands)
Bank:                      
Tier 1 Leverage Ratio$2,586,512
 9.85% $1,050,188
 4.00% $1,312,735
 5.00%$2,582,445
 9.68% $1,066,626
 4.00% $1,333,283
 5.00%
Common Equity Tier 1 Risk-Based Capital2,586,512
 12.87% 1,406,376
 7.00% 1,305,921
 6.50%2,582,445
 12.95% 1,395,550
 7.00% 1,295,868
 6.50%
Tier 1 Risk Based Capital2,586,512
 12.87% 1,707,743
 8.50% 1,607,287
 8.00%2,582,445
 12.95% 1,694,596
 8.50% 1,594,914
 8.00%
Total Risk-Based Capital2,822,188
 14.05% 2,109,564
 10.50% 2,009,109
 10.00%2,811,279
 14.10% 2,093,325
 10.50% 1,993,643
 10.00%
                      
Investors Bancorp, Inc.:                      
Tier 1 Leverage Ratio$2,876,322
 10.86% $1,059,719
 4.00% n/a n/a$2,864,284
 10.65% $1,076,080
 4.00% n/a n/a
Common Equity Tier 1 Risk-Based Capital2,876,322
 14.28% 1,409,798
 7.00% n/a n/a2,864,284
 14.32% 1,400,073
 7.00% n/a n/a
Tier 1 Risk Based Capital2,876,322
 14.28% 1,711,898
 8.50% n/a n/a2,864,284
 14.32% 1,700,089
 8.50% n/a n/a
Total Risk-Based Capital3,111,997
 15.45% 2,114,697
 10.50% n/a n/a3,093,118
 15.46% 2,100,110
 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.
The following table shows the contractual obligations of the Company by expected payment period as of March 31,September 30, 2019:
Contractual Obligations Total Less than One Year One-Two Years Two-Three Years More than Three Years Total Less than One Year One-Two Years Two-Three Years More than Three Years
 (In thousands) (In thousands)
Debt obligations (excluding capitalized leases) $5,549,587
 1,719,074
 1,000,000
 1,000,000
 1,830,513
 $5,694,553
 1,500,000
 550,000
 1,273,952
 2,370,601
Commitments to originate and purchase loans $393,191
 393,191
 
 
 
 $588,807
 588,807
 
 
 
Commitments to sell loans $19,000
 19,000
 
 
 
 $56,950
 56,950
 
 
 


Debt obligations include borrowings from the FHLB and other borrowings. The borrowings have defined terms and, under certain circumstances, $5.0 million of the borrowings are callable at the option of the lender. Additionally, at March 31,September 30, 2019, the Company’s commitments to fund unused lines of credit totaled $1.46$1.39 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 includes $197.3$189.9 million of operating lease liabilities. While the contractual obligations as of March 31,September 30, 2019 have not changed significantly from December 31, 2018, the accounting for such obligations required changes effective January 1, 2019 in accordance with the Company’s adoption of Topic 842 which requires these liabilities to be recorded.
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 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 known or expected cash payments principally related to the Company’s

borrowings and loans. During the three and nine months ended March 31,September 30, 2019, such derivatives were used (i) to hedge the variability in cash flows associated with borrowings and (ii) to hedge changes in the fair value of certain pools of prepayable fixed-ratefixed- and adjustable-rate assets. These derivatives had an aggregate notional amount of $3.06$2.48 billion as of March 31,September 30, 2019. The fair value of derivatives designated as hedging activities as of March 31,September 30, 2019 was a a liabilityan asset of $527,000,$91,000, inclusive of accrued interest and variation margin posted in accordance with the Chicago Mercantile Exchange.
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 economically hedged by 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, 2018 Annual Report on Form 10-K.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Qualitative Analysis. 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; potential differences in the behavior of lending and funding rates arising from the use of different indices; and “yield curve risk” arising from 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 policies.that risk appetite. Our Asset Liability Committee, which consists of senior management and executives, evaluates the interest rate risk inherent in our balance sheet, 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 various Asset Liability Committee reports that estimate the sensitivity toof the economic value of equity and net interest income of assets and liabilities and off-balance sheet contracts 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 instrumentsitems can be either assets or liabilities. As of March 31,September 30, 2019 and December 31, 2018, the Company had cash flow and fair value hedges with aggregate notional amounts of $3.06$2.48 billion and $2.61 billion, respectively. Included in the fair value hedges are $1.25 billion$475.0 million in asset swap transactions where fixed rate loan payments are exchanged for variable rate payments. These transactions were executed in an effort to reduce the Company’s exposure to rising rates. During the three months ended September 30, 2019, the Company terminated three interest rate swaps with an aggregate notional amount of $1.00 billion which had been included in asset swap transactions.
We actively evaluate interest rate risk in connection with our lending, investing and deposit activities which also includes the evaluation ofand our off-balance sheet positions. At March 31,September 30, 2019, 24.7%24.4% of our total loan portfolio was comprised of residential mortgages, of which approximately 30.9%29.2% was in variable rate products, while 69.1%70.8% 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. Long term fixed-rate products may adversely impact our net interest income in a rising rate environment. The origination of commercial real estate loans, particularly 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 securities which 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 liabilitiesoff-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 actual 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 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 material contracts that are indexed to USD-LIBOR and is monitoring this activity and evaluating the related risks.
Quantitative Analysis. The table below sets forth, as of March 31,September 30, 2019, 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 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 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) (2)
 
Net Interest Income (3)
 
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) 
Estimated
EVE
 Estimated Increase (Decrease) 
Estimated
Net
Interest
Income
 Estimated Increase (Decrease)
Amount Percent Amount PercentAmount Percent Amount Percent
 (Dollars in thousands) (Dollars in thousands)
+ 200bp $3,787,062
 (425,988) (10.1)% $594,867
 (39,336) (6.2)% $3,615,871
 (359,474) (9.0)% $615,802
 (41,014) (6.2)%
0bp $4,213,050
 
 
 $634,203
 
 
 $3,975,345
 
 
 $656,816
 
 
-100bp $4,350,241
 137,191
 3.3 % $657,552
 23,349
 3.7 % $4,243,179
 267,834
 6.7 % $680,391
 23,575
 3.6 %
(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.
The table set forth above indicates that at March 31,September 30, 2019, in the event of a 200 basis pointspoint increase in interest rates, we would be expected to experience an 10.1%9.0% decrease in EVE and a $39.3$41.0 million, or 6.2%, decrease in net interest income. In the event of a 100 basis pointspoint decrease in interest rates, we would be expected to experience a 3.3%6.7% increase in EVE and a $23.3$23.6 million, or 3.7%3.6%, 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 interest rate risk measurements. Modeling changes in EVE and net interest income requiresensitivity requires certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The EVE and net interest income table 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 periodthe 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 table provide an indication of our sensitivity to interest rate changes at a particular point in time, such measurement is not intended to and does 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 March 31,September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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 material changes inThe following additional risk factor supplements the “Risk Factors”risk factors disclosed in the Company’sItem 1A., Risk Factors, in our December 31, 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission.


The performance of our multi-family loan portfolio could be adversely impacted by regulation.
On June 14, 2019, the State of New York enacted legislation increasing restrictions on rent increases in a rent-regulated apartment building, including, among other provisions, (i) repealing the “vacancy bonus” and “longevity bonus”, which allowed a property owner to raise rents as much as 20% each time a rental unit became vacant, (ii) eliminating high rent vacancy deregulation and high-income deregulation, which allowed a rental unit to be removed from rent stabilization once it crossed a statutory high-rent threshold and became vacant, or the tenant’s income exceeded the statutory amount in the preceding two years, and (iii) eliminating an exception that allowed a property owner who offered preferential rents to tenants to raise the rent to the full legal rent upon renewal.  As a result of this new legislation as well as previously existing laws and regulations, which are outside the control of the borrower or the Bank, the value of the collateral for our multi-family loans or the future cash flow of such properties could be impaired. It is possible that rental income might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses (e.g., utilities, taxes, etc.).  In addition, if the cash flow from a collateral property is reduced or constrained, the borrower’s ability to repay the loan and the value of the collateral for the loan may be impaired.  Approximately half of our multi-family loans are to borrowers with underlying property collateral based in the State of New York.

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 March 31,September 30, 2019 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)
January 1, 2019 through January 31, 20193,233,141
 $11.47
 3,230,000
 23,036,834
February 1, 2019 through February 28, 20191,168,272
 12.71
 1,050,000
 21,986,834
March 1, 2019 through March 31, 20191,806,966
 12.07
 1,800,000
 20,186,834
Total6,208,379
 $11.88
 6,080,000
 20,186,834
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, 2019 through July 31, 2019128
 $11.13
 
 16,607,794
August 1, 2019 through August 31, 2019954,315
 11.03
 952,000
 15,655,794
September 1, 2019 through September 30, 20191,050,274
 11.39
 1,048,000
 14,607,794
Total2,004,717
 $11.22
 2,000,000
 14,607,794
(1) On October 25, 2018, the Company announced its fourth share repurchase program, which authorized the purchase of 10% of its publicly-held outstanding shares of common stock, or approximately 28,886,780 shares. The plan commenced upon the completion of the third repurchase plan on December 10, 2018. This program has no expiration date and has 20,186,83414,607,794 shares yet to be repurchased as of March 31,September 30, 2019.
(2) 128,3794,717 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.



ITEM 6.EXHIBITS
The following exhibits are either filed as part of this report or are incorporated herein by reference:

 
   

  
   

  
   

  
   

  
   

  
   
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(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.
(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.



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: May 10,November 12, 2019 By: /s/  Kevin Cummings
    
Kevin Cummings
Chief Executive Officer
(Principal Executive Officer)
     
  By: /s/  Sean Burke
    
Sean Burke
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)






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