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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2020
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: __________ to ___________
Commission file number: 001-36441 
Investors Bancorp , Inc.
(Exact name of registrant as specified in its charter)
Delaware 46-4702118
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification Number)
101 JFK Parkway,Short Hills,New Jersey 07078
(Address of Principal Executive Offices) Zip Code
(973) 924-5100
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each 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  ☑    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  ☑    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 ☑   Accelerated filer☐
Non-accelerated filer ☐   Smaller reporting company☐
Emerging growth company☐
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  ☑
As of October 30, 2020, the registrant had 361,869,872 shares of common stock, par value $0.01 per share, issued and 249,918,163 outstanding. 

Table of Contents
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.


Table of Contents

Part I Financial Information
ITEM 1.FINANCIAL STATEMENTS
INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)  
September 30,
2020		December 31,
2019
 (In thousands)
ASSETS
Cash and cash equivalents$557,749 174,915 
Equity securities8,703 6,039 
Debt securities available-for-sale, at estimated fair value2,828,959 2,695,390 
Debt securities held-to-maturity, net (estimated fair value of $1,304,693 and $1,190,104 at September 30, 2020 and December 31, 2019, respectively)
1,236,610 1,148,815 
Loans receivable, net20,698,057 21,476,056 
Loans held-for-sale19,984 29,797 
Federal Home Loan Bank stock214,255 267,219 
Accrued interest receivable84,317 79,313 
Other real estate owned and other repossessed assets8,884 13,538 
Office properties and equipment, net164,220 169,614 
Operating lease right-of-use assets171,781 175,143 
Net deferred tax asset116,347 64,220 
Bank owned life insurance223,576 218,517 
Goodwill and intangible assets110,068 97,869 
Other assets163,467 82,321 
Total assets$26,606,977 26,698,766 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits$19,103,535 17,860,338 
Borrowed funds4,307,523 5,827,111 
Advance payments by borrowers for taxes and insurance144,212 121,719 
Operating lease liabilities184,281 185,827 
Other liabilities197,669 81,821 
Total liabilities23,937,220 24,076,816 
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; 361,869,872 and 359,070,852 issued at September 30, 2020 and December 31, 2019, respectively; 249,919,417 and 247,439,902 outstanding at September 30, 2020 and December 31, 2019, respectively
3,619 3,591 
Additional paid-in capital2,854,844 2,822,364 
Retained earnings1,293,840 1,245,793 
Treasury stock, at cost; 111,950,455 and 111,630,950 shares at September 30, 2020 and December 31, 2019, respectively
(1,355,459)(1,352,910)
Unallocated common stock held by the employee stock ownership plan(76,019)(78,266)
Accumulated other comprehensive loss(51,068)(18,622)
Total stockholders’ equity2,669,757 2,621,950 
Total liabilities and stockholders’ equity$26,606,977 26,698,766 
See accompanying notes to consolidated financial statements.
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INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale$215,221 231,734 657,483 684,086 
Securities:
Equity45 36 110 108 
Government-sponsored enterprise obligations378 343 994 876 
Mortgage-backed securities18,095 23,978 61,251 71,491 
Municipal bonds and other debt3,277 3,186 9,928 8,442 
Interest-bearing deposits233 821 1,367 1,965 
Federal Home Loan Bank stock3,452 4,456 11,881 12,871 
Total interest and dividend income240,701 264,554 743,014 779,839 
Interest expense:
Deposits34,109 67,972 126,279 201,222 
Borrowed funds24,970 32,130 79,843 92,319 
Total interest expense59,079 100,102 206,122 293,541 
Net interest income181,622 164,452 536,892 486,298 
Provision for credit losses8,336 (2,500)72,840 (2,500)
Net interest income after provision for credit losses173,286 166,952 464,052 488,798 
Non-interest income
Fees and service charges5,579 5,796 12,981 16,785 
Income on bank owned life insurance2,067 1,832 5,059 4,949 
Gain on loans, net5,285 1,679 10,688 3,127 
(Loss) gain on securities, net(8)30 249 (5,523)
Gain on sale of other real estate owned, net133 358 784 863 
Other income6,870 5,085 14,965 12,754 
Total non-interest income19,926 14,780 44,726 32,955 
Non-interest expense
Compensation and fringe benefits59,896 63,603 176,079 184,455 
Advertising and promotional expense2,344 2,994 6,906 10,888 
Office occupancy and equipment expense16,882 15,702 49,303 47,296 
Federal deposit insurance premiums2,925 3,300 10,726 9,900 
General and administrative551 487 1,678 1,663 
Professional fees4,097 6,010 12,386 12,411 
Data processing and communication8,998 8,348 26,698 23,989 
Other operating expenses8,367 8,274 22,862 25,329 
Total non-interest expenses104,060 108,718 306,638 315,931 
Income before income tax expense89,152 73,014 202,140 205,822 
Income tax expense24,840 21,042 55,705 59,068 
Net income$64,312 51,972 146,435 146,754 
Basic earnings per share$0.27 0.20 0.62 0.56 
Diluted earnings per share$0.27 0.20 0.62 0.55 
Weighted average shares outstanding
Basic236,833,099 261,678,994 235,453,133 264,104,402 
Diluted236,872,505 261,812,970 235,550,801 264,422,265 
See accompanying notes to consolidated financial statements.
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INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
 (In thousands)
Net income$64,312 51,972 146,435 146,754 
Other comprehensive income (loss), net of tax:
Change in funded status of retirement obligations300 13 619 40 
Unrealized (losses) gains on debt securities available-for-sale(1,606)6,798 35,025 39,605 
Accretion of loss on debt securities reclassified to held to maturity48 41 160 472 
Reclassification adjustment for security losses included in net income— — — 4,221 
Other-than-temporary impairment accretion on debt securities recorded prior to January 1, 2020184 228 641 589 
Net gains (losses) on derivatives9,242 (9,564)(68,891)(54,253)
Total other comprehensive income (loss)8,168 (2,484)(32,446)(9,326)
Total comprehensive income$72,480 49,488 113,989 137,428 


See accompanying notes to consolidated financial statements.
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INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity
Nine Months Ended September 30, 2020 and 2019
(Unaudited)
Common
stock		Additional
paid-in
capital		Retained
earnings		Treasury
stock		Unallocated
common stock
held by ESOP		Accumulated
other
comprehensive
loss		Total
stockholders’
equity
 (In thousands)
Balance at December 31, 2018$3,591 2,805,423 1,173,897 (884,750)(81,262)(11,569)3,005,330 
Net income— — 146,754 — — — 146,754 
Other comprehensive loss, net of tax— — — — — (9,326)(9,326)
Purchase of treasury stock (12,042,876 shares)
— — — (140,241)— — (140,241)
Treasury stock allocated to restricted stock plan (2,345,919 shares)
— (29,140)33 29,107 — — — 
Compensation cost for stock options and restricted stock— 15,875 — — — — 15,875 
Exercise of stock options— (573)— 1,386 — — 813 
Restricted stock forfeitures (1,931,538 shares)
— 24,233 (1,455)(22,778)— — — 
Cash dividend paid ($0.33 per common share)
— — (91,935)— — — (91,935)
ESOP shares allocated or committed to be released— 1,850 — — 2,247 — 4,097 
Balance at September 30, 2019$3,591 2,817,668 1,227,294 (1,017,276)(79,015)(20,895)2,931,367 
Balance at December 31, 2019$3,591 2,822,364 1,245,793 (1,352,910)(78,266)(18,622)2,621,950 
Cumulative effect of adopting ASU No. 2016-13
— — (8,491)— — — (8,491)
Net income— — 146,435 — — — 146,435 
Other comprehensive loss, net of tax— — — — — (32,446)(32,446)
Common stock issued to finance acquisition28 20,853 — — — — 20,881 
Purchase of treasury stock (390,712 shares)
— — — (3,418)— — (3,418)
Treasury stock allocated to restricted stock plan (90,067 shares)
— (903)(195)1,098 — — — 
Compensation cost for stock options and restricted stock— 11,329 — — — — 11,329 
Restricted stock forfeitures (18,860 shares)
— 230 (1)(229)— — — 
Cash dividend paid ($0.36 per common share)
— — (89,701)— — — (89,701)
ESOP shares allocated or committed to be released— 971 — — 2,247 — 3,218 
Balance at September 30, 2020$3,619 2,854,844 1,293,840 (1,355,459)(76,019)(51,068)2,669,757 
See accompanying notes to consolidated financial statements.

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INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended September 30,
 20202019
 (In thousands)
Cash flows from operating activities:
Net income$146,435 146,754 
Adjustments to reconcile net income to net cash provided by operating activities:
ESOP and stock-based compensation expense14,547 19,972 
Amortization of premiums and accretion of discounts on securities, net8,449 7,262 
Amortization of premiums and accretion of fees and costs on loans, net1,933 (3,479)
Amortization of other intangible assets1,077 1,220 
Amortization of debt modification costs and premium on borrowings1,679 — 
Provision for credit losses72,840 (2,500)
Loss from extinguishment of debt1,291 — 
Depreciation and amortization of office properties and equipment16,130 14,175 
(Gain) loss on securities, net(249)5,523 
Mortgage loans originated for sale(410,486)(160,297)
Proceeds from mortgage loan sales430,618 164,249 
Gain on sales of mortgage loans, net(10,320)(2,879)
Gain on sale of other real estate owned(784)(863)
Income on bank owned life insurance(5,059)(4,949)
Amortization of lease right-of-use assets15,430 12,869 
Increase in accrued interest receivable(3,721)(6,450)
Deferred tax (benefit) expense(29,675)2,521 
Increase in other assets(87,985)(38,879)
Increase (decrease) in other liabilities1,021 (67,364)
Net cash provided by operating activities163,171 86,885 
Cash flows from investing activities:
Purchases of loans receivable(90,000)(349,766)
Net payoffs of loans receivable1,191,116 29,729 
Proceeds from disposition of loans receivable51,623 148,505 
Gain on disposition of loans receivable(368)(248)
Gain on disposition of leased equipment(1,842)— 
Net proceeds from sale of other real estate owned6,255 5,817 
Proceeds from principal repayments/calls/maturities of debt securities available for sale709,764 304,765 
Proceeds from sales of debt securities available for sale— 399,435 
Proceeds from principal repayments/calls/maturities of debt securities held to maturity191,011 210,115 
Purchases of equity securities(2,565)(72)
Purchases of debt securities available for sale(753,011)(786,011)
Purchases of debt securities held to maturity(273,416)(166,338)
Proceeds from redemptions of Federal Home Loan Bank stock113,627 244,632 
Purchases of Federal Home Loan Bank stock(60,042)(258,394)
Purchases of office properties and equipment(10,251)(8,009)
Cash received, net of cash consideration paid for acquisitions7,274 — 
Net cash provided by (used in) investing activities1,079,175 (225,840)
Cash flows from financing activities:
Net increase in deposits753,316 92,486 
Repayments of principal under finance leases(1,182)— 
Funds borrowed under other repurchase agreements— 197,758 
Net (repayments) proceeds of borrowed funds(1,537,291)61,115 
Principal applied on affordable housing project advance(118)— 
Net increase (decrease) in advance payments by borrowers for taxes and insurance18,882 17,468 
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Dividends paid(89,701)(91,935)
Exercise of stock options— 813 
Purchase of treasury stock(3,418)(140,241)
Net cash (used in) provided by financing activities(859,512)137,464 
Net increase (decrease) in cash and cash equivalents382,834 (1,491)
Cash and cash equivalents at beginning of period174,915 196,891 
Cash and cash equivalents at end of period$557,749 195,400 
Supplemental cash flow information:
Non-cash investing activities:
Real estate acquired through foreclosure and other assets repossessed$1,050 11,289 
Cash paid during the year for:
Interest212,889 294,669 
Income taxes12,518 36,220 
Significant non-cash transactions:
Debt securities transferred from held-to-maturity to available-for-sale— 393,067 
Loans transferred to held-for-sale portfolio— 28,373 
Right-of-use assets obtained in exchange for new lease liabilities9,050 2,358 
Acquisition:
Non-cash assets acquired:
Debt securities available-for-sale51,524 — 
Debt securities held to maturity8,402 — 
Loans receivable, net443,499 — 
Office properties and equipment, net485 — 
Accrued interest receivable1,283 — 
Right of use assets - leases3,697 — 
Deferred tax asset3,915 — 
Intangible assets, net14,491 — 
Other assets705 — 
Total non-cash assets acquired 528,001 — 
Liabilities assumed:
Deposits489,881 — 
Borrowed funds14,851 — 
Advance payment by borrowers3,611 — 
Other liabilities6,051 — 
Total liabilities assumed514,394 — 
Common stock issued for acquisitions20,881 — 
See accompanying notes to consolidated financial statements.
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INVESTORS BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
 
1.     Summary of Significant Accounting Principles

Basis of Presentation
    The consolidated financial statements are comprised of the accounts of Investors Bancorp, Inc. and its wholly owned subsidiary, Investors Bank (the “Bank”) and the Bank’s wholly-owned subsidiaries (collectively, the “Company”). In the opinion of management, all the adjustments (consisting of normal and recurring adjustments) necessary for the fair presentation of the consolidated financial condition and the consolidated results of operations for the unaudited periods presented have been included. The results of operations and other data presented for the three and nine months ended September 30, 2020 are not necessarily indicative of the results of operations that may be expected for subsequent periods or the full year results.
    Certain information and note disclosures usually included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the preparation of the Form 10-Q. The consolidated financial statements presented should be read in conjunction with the Company’s audited consolidated financial statements and notes to the audited consolidated financial statements included in the Company’s December 31, 2019 Annual Report on Form 10-K. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.

Adoption of New Accounting Standards
    On January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The Company adopted ASU 2016-13 using a modified retrospective approach. Results for reporting periods beginning after January 1, 2020 are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. At adoption, the Company increased its allowance for credit losses by $11.7 million, comprised of $12.7 million and $2.6 million, respectively, for unfunded commitments and held-to-maturity debt securities, partially offset by a decrease of $3.6 million for loans. Upon adoption the Company recorded a cumulative effect adjustment that reduced stockholders’ equity by $8.5 million, net of tax.
Allowance for Credit Losses    
    The allowance for credit losses includes both the allowance for loan and lease losses and the reserve for unfunded lending commitments and represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through the provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses. The allowance for loan and security losses is reported separately as contra-assets to loans and securities on the consolidated balance sheet. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheet in other liabilities. The provision for credit losses related to loans, unfunded commitments and debt securities is reported on the consolidated statement of income.
Allowance for Credit Losses on Loans Receivable
    The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the allowance on an individual basis. The Company evaluates the segmentation at least annually to determine whether loans continue to share similar risk characteristics. Loans are charged off against the allowance when the Company believes the loan balances become uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.
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    The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit. The Company’s segments for loans include multi-family, commercial real estate, commercial and industrial, construction, residential and consumer.
    
    The Company calculates estimated credit loss on its loan portfolio typically using a probability of default and loss given default quantitative model methodology. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount. For a small portion of the loan portfolio, i.e. unsecured consumer loans, small business loans and loans to individuals, the Company utilizes a loss rate method to calculate the expected credit loss of that asset segment.
    The Company estimates the allowance for credit losses on loans using relevant available information from internal and external sources related to past events and current conditions as well as the incorporation of reasonable and supportable forecasts. The Company evaluates the use of multiple economic scenarios and the weighting of those scenarios on a quarterly basis. The scenarios that are chosen and the amount of weighting given to each scenario depend on a variety of factors including third party economists and firms, industry trends and other available published economic information.
    After the reasonable and supportable forecast period, the Company reverts to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.
    Also included in the allowance for loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative method or the economic assumptions described above. For example, factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, the effect of external factors such as competition, and the legal and regulatory requirements, among other. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built on historical data.
Individually evaluated
    On a case-by-case basis, the Company may conclude a loan should be evaluated on an individual basis based on its disparate risk characteristics. The Company individually evaluates loans that meet the following criteria for expected credit loss, as the Company has determined that these loans generally do not share similar risk characteristics with other loans in the portfolio:
•Commercial loans with an outstanding balance greater than $1.0 million and on non-accrual status;
•Troubled debt restructured loans; and
•Other commercial loans with greater than $1.0 million in outstanding principal, if management has specific information that it is probable they will not collect all principal amounts due under the contractual terms of the loan agreement.
    When the Company determines that the loan no longer shares similar risk characteristics of other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable, to ensure that the credit loss is not delayed until actual loss. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.
Acquired assets
    Acquired assets are included in the Company's calculation of the allowance for credit losses. How the allowance on an acquired asset is recorded depends on whether it has been classified as a Purchased Financial Asset with Credit Deterioration (“PCD”). PCD assets are assets acquired at a discount that is due, in part, to credit quality. PCD assets are accounted for in accordance with ASC Subtopic 326-20 and are initially recorded at fair value as determined by the sum of the present value of expected future cash flows and an allowance for credit losses at acquisition. The allowance for PCD assets is recorded through a gross-up effect, while the allowance for acquired non-PCD assets such as loans is recorded through provision expense, consistent with originated loans. Thus, the determination of which assets are PCD and non-PCD can have a significant effect on the accounting for these assets.
    Subsequent to acquisition, the allowance for PCD loans will generally follow the same estimation, provision and
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charge-off process as non-PCD acquired and originated loans. Additionally, TDR identification for acquired loans (PCD and non-PCD) will be consistent with the TDR identification for originated loans.
Allowance for Credit Losses on Debt Securities
    Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed residential securities, municipal bonds, trust preferred securities (“TruPS”) and other. Nearly all of the mortgage-backed securities in the Company's portfolio are issued by U.S. government agencies and are either explicitly or implicitly guaranteed by the U.S government, are highly rated by major rating agencies and have a long history of no credit losses and therefore the expectation of non-payment is zero. Other securities consist primarily of investments in pooled trust preferred securities.
    At each reporting period, the Company evaluates whether the securities in a segment continue to exhibit similar risk characteristics as the other securities in the segment. If the risk characteristics of a security change, such that they are no longer similar to other securities in the segment, the Company will evaluate the security with a different segment that shares more similar risk characteristics.
    In estimating the net amount expected to be collected for mortgage-backed residential securities and municipal bonds, a range of historical losses method is utilized.  In estimating the net amount expected to be collected for TruPS, the Company employs a single scenario forecast methodology.  The scenario is informed by historical industry default data as well as current and near term operating conditions for the banks and other financial institutions that are the underlying issuers. In addition, prepayment assumptions are included in the analysis of the individually assessed TruPS applied at the collateral level.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
     The Company is required to include the unfunded commitment that is expected to be funded in the future within the allowance calculation. The Company participates in lending that results in an off-balance sheet unfunded commitment balance. The Company currently underwrites funding commitments with conditionally cancelable language. To determine the expected funding balance remaining, the Company uses a historical utilization rate for each of the segments to calculate the expected commitment balance. The reserve percentage for each respective loan portfolio is applied to the remaining unused portion of the expected commitment balance and the expected funded commitment in determining the allowance for credit loss on off-balance sheet credit exposures.
Section 4013 of the CARES Act
    The Company implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19. In accordance with the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the Company elected to not apply troubled debt restructuring classification to any COVID-19 related loan modifications that occurred after March 1, 2020 to borrowers who were current as of December 31, 2019. Accordingly, these modifications are exempt from troubled debt restructuring classification under U.S. generally accepted accounting principles (“U.S. GAAP”) and were not classified as troubled debt restructurings (“TDRs”). In addition, for loans modified in response to the COVID-19 pandemic that did not meet the above criteria (e.g., current payment status at December 31, 2019), the Company applied the guidance included in an interagency statement issued by the bank regulatory agencies. This guidance states that loan modifications performed in light of the COVID-19 pandemic, including loan payment deferrals that are up to six months in duration, that were granted to borrowers who were current as of the implementation date of a loan modification program or modifications granted under government mandated modification programs, are not TDRs. For loan modifications that include a payment deferral and are not TDRs, the borrower’s past due and non-accrual status have not been impacted during the deferral period. The majority of our deferrals initially consisted of 90-day principal and interest deferrals with additional deferral periods granted on a case by case basis at the Bank’s option. Interest income has continued to be recognized over the contractual life of the loan. At September 30, 2020, loans with an aggregate outstanding balance of approximately $1.02 billion were in COVID-19 related deferment. For the nine months ended September 30, 2020, interest income on deferred loans totaled $44.3 million, of which $9.3 million was included in accrued interest receivable as of September 30, 2020.

2.     Stock Transactions
Stock Repurchase 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 September 30, 2020.
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    During the nine months ended September 30, 2020, the Company purchased 390,712 shares at a cost of $3.4 million, or $8.75 per share. All shares purchased during the nine months ended September 30, 2020 were purchased in connection with the vesting of shares of restricted stock under our 2015 Equity Incentive Plan and the withholding of shares to pay income taxes. These shares are repurchased pursuant to the terms of the 2015 Equity Incentive Plan and therefore are not part of the Company’s repurchase program.

3.     Business Combinations
Gold Coast Bancorp    
    As of the close of business on April 3, 2020, the Company completed its acquisition of Gold Coast Bancorp (“Gold Coast”) pursuant to the Agreement and Plan of Merger, dated as of July 24, 2019 by and between the Company and Gold Coast. As a result of the completion of the acquisition, the Company issued approximately 2.8 million shares to the former stockholders of Gold Coast and paid approximately $31.0 million in cash to the former stockholders of Gold Coast. Under the terms of the merger agreement, 50% of the common shares of Gold Coast were converted into Investors Bancorp common stock and the remaining 50% was exchanged for cash. For each share of Gold Coast Bancorp common stock, Gold Coast shareholders were given an option to receive either (i) 1.422 shares of Investors Bancorp common stock, $0.01 par value per share, (ii) a cash payment of $15.75, or (iii) a combination of Investors Bancorp common stock and cash. The foregoing was subject to proration to ensure that, in the aggregate, 50% of Gold Coast’s shares would be converted into Investors Bancorp common stock.
    The acquisition was accounted for under the acquisition method of accounting as prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”, as amended. Under this method of accounting, the purchase price has been allocated to the respective assets acquired based on their estimated fair values, net of applicable income tax effects. The excess cost over fair value of assets acquired, or $12.0 million, has been recorded as goodwill.
    The acquired portfolio was fair valued on the date of acquisition based on guidance from ASC 820-10 which defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The valuation methods utilized took into consideration adjustments for interest rate risk, funding cost, servicing cost, residual risk, credit and liquidity risk.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for Gold Coast, net of cash consideration paid:
At April 3, 2020
(In millions)
Cash and cash equivalents$7.3 
Debt securities available-for-sale51.5 
Debt securities held to maturity8.4 
Loans receivable, net443.5 
Accrued interest receivable1.3 
Right-of-use assets3.7 
Net deferred tax asset3.9 
Intangible assets14.5 
Other assets1.2 
Total assets acquired535.3 
Deposits489.9 
Borrowed funds14.9 
Other liabilities9.7 
Total liabilities assumed514.5 
Net assets acquired$20.8 
    As the Company finalizes its analysis of these assets, there may be adjustments to the recorded carrying values. Any adjustments to carrying values will be recorded in goodwill. The calculation of goodwill is subject to change for up to one year after closing date of the transaction as additional information relative to closing date estimates and uncertainties becomes available. For the three months ended September 30, 2020, there was no change to the amount of goodwill recorded for this acquisition.
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    Financial assets acquired in a business combination after January 1, 2020 are recorded in accordance with ASC Topic 326, after which acquired assets are separated into two types. PCD assets are acquired assets that, as of the acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. Non-PCD assets are acquired assets that have experienced no or insignificant deterioration in credit quality since origination. To distinguish between the two types of acquired assets, the Company evaluates risk characteristics that have been determined to be indicators of deteriorated credit quality. In the case of loans, the determining criteria may involve general characteristics, such as loan payment history or changes in creditworthiness since the loan was originated, while others are relevant to recent economic conditions, such as borrowers in industries impacted by the pandemic.
In its acquisition of Gold Coast, the Company has purchased loans which have been determined to be PCD. The carrying amount of those loans was as follows:
At April 3, 2020
(In millions)
Purchase price of loans at acquisition$244.7 
Allowance for credit losses at acquisition4.2 
Non-credit discount (premium) at acquisition2.6 
Par value of acquired loans at acquisition$251.5 
There were no PCD securities in the acquisition.

Fair Value Measurement of Assets Acquired and Liabilities Assumed
    Described below are the methods used to determine the fair values of the significant assets acquired and liabilities assumed in the Gold Coast acquisition based on guidance from ASC 820-10 which defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date.
Securities. The securities acquired are bought and sold in active markets. The estimated fair values of securities were calculated using external third party broker opinions of the market values. Due to the instability of the market at the time of acquisition as well as the odd lot position sizes of the securities, the Company reviewed the data and assumptions used in pricing the securities by third-parties and made qualitative adjustments to reflect the odd lot size of the securities and the price that would be received in an orderly transaction.
Loans. The estimated fair values of the loan portfolio generally consider adjustments for interest rate risk, required funding costs, servicing costs, prepayments, credit and liquidity. Level 3 inputs were utilized to determine the fair value of the acquired loan portfolio and included the use of present value techniques employing cash flow estimates and incorporated assumptions that market participants would use in estimating fair values. In instances where reliable market information was not available, the Company used its own assumptions in an effort to determine fair value. The primary approach to determining the fair value of the loan portfolio was a discounted cash flow methodology that considered factors including the type of loan, underlying collateral, classification status or grade, interest rate structure (fixed or variable interest rate), and remaining term. For the non-credit component, loans were grouped together according to similar characteristics when applying the various valuations techniques. For the credit component, loans were also grouped based on whether they had more than insignificant deterioration in credit since origination (purchase credit deteriorated “PCD” as defined by ASC 326-20). The expected life of loan loss estimates were calculated based on an annual loss rate developed by using the historical annual average charge-off percentages for New York institutions as a proxy for how a market participant acquirer would value the portfolio. Additionally, a qualitative credit adjustment was applied to the historical annual loss rates, due to COVID-19 and the uncertainty of future losses.
Deposits / Core Deposit Intangible. The core deposit intangible represents the value assigned to the stable and below market rate funding sources within the acquired deposit base; typically demand deposits, interest checking, money market and savings accounts. The core deposit intangible value represents the value of the relationships with deposit customers as a below market rate funding source. The fair value was based on a discounted cash flow methodology that gave appropriate consideration to expected deposit attrition rates, net maintenance costs of the deposit base, projected interest costs and the alternative cost of funds. Certificates of deposit (time deposits) are not considered to be core deposits as they are less stable and do not have an “all-in” favorable funding advantage to the alternative cost of funds. The fair value of certificates of deposit represents the present value of the certificates’ expected contractual payments discounted by market rates for similar certificates and is determined utilizing Level 2 inputs.
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Borrowed Funds. A discounted cash flow approach was used to determine the fair value of the debt acquired. The fair value of the liability represents the present value of the expected payments discounted using a risk adjusted discount rate. The discount rate was developed based on comparable rated securities, as that backed by companies with similar credit ratings as the Company.

4.     Earnings Per Share
The following is a summary of our earnings per share calculations and reconciliation of basic to diluted earnings per share.
 For the Three Months Ended September 30,
 20202019
 (Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share
Earnings applicable to common stockholders$64,312 $51,972 
Shares
Weighted-average common shares outstanding - basic236,833,099 261,678,994 
Effect of dilutive common stock equivalents (1)
39,406 133,976 
Weighted-average common shares outstanding - diluted 236,872,505 261,812,970 
Earnings per common share
Basic$0.27 $0.20 
Diluted $0.27 $0.20 
(1) For the three months ended September 30, 2020 and 2019, there were 7,504,227 and 8,142,370 equity awards, respectively, that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented.
 For the Nine Months Ended September 30,
 20202019
 (Dollars in thousands, except per share data)
Earnings for basic and diluted earnings per common share
Earnings applicable to common stockholders$146,435 $146,754 
Shares
Weighted-average common shares outstanding - basic235,453,133 264,104,402 
Effect of dilutive common stock equivalents (1)
97,668 317,863 
Weighted-average common shares outstanding - diluted 235,550,801 264,422,265 
Earnings per common share
Basic$0.62 $0.56 
Diluted $0.62 $0.55 
(1) For the nine months ended September 30, 2020 and 2019, there were 7,433,286 and 6,723,858 equity awards, respectively, that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented.

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5.     Securities
Equity Securities
    Equity securities are reported at fair value on the Company’s Consolidated Balance Sheets. The Company’s portfolio of equity securities had an estimated fair value of $8.7 million and $6.0 million as of September 30, 2020 and December 31, 2019, respectively. Realized gains and losses from sales of equity securities as well as changes in fair value of equity securities still held at the reporting date are recognized in the Consolidated Statements of Income.
The following table presents the disaggregated net gains on equity securities reported in the Consolidated Statements of Income:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
(In thousands)
Net (losses) gains recognized on equity securities$(8)30 99 165 
Less: Net gains recognized on equity securities sold— — — — 
Unrealized (losses) gains recognized on equity securities$(8)30 99 165 
Debt Securities
The following tables present the carrying value, gross unrealized gains and losses, and estimated fair value for available-for-sale debt securities and the amortized cost, net unrealized losses, carrying value, gross unrecognized gains and losses, estimated fair value and allowance for credit losses for held-to-maturity debt securities as of the dates indicated.
 At September 30, 2020
 Carrying valueGross
unrealized
gains 		Gross
unrealized
losses 		Estimated
fair value
 (In thousands)
Available-for-sale:
Debt securities:
Government-sponsored enterprises$4,501 240 — 4,741 
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation1,312,343 33,927 10 1,346,260 
Federal National Mortgage Association1,175,909 44,010 276 1,219,643 
Government National Mortgage Association251,447 6,957 89 258,315 
Total mortgage-backed securities available-for-sale2,739,699 84,894 375 2,824,218 
Total debt securities available-for-sale$2,744,200 85,134 375 2,828,959 
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 At September 30, 2020
 Amortized cost
Net unrealized losses (1)
Carrying value
Gross
unrecognized
gains (2)
Gross
unrecognized
losses (2)
Estimated
fair value
 (In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises$81,690 — 81,690 4,263 64 85,889 
Municipal bonds249,141 — 249,141 10,777 222 259,696 
Corporate and other debt securities128,643 13,894 114,749 17,708 2,033 130,424 
Total debt securities held-to-maturity459,474 13,894 445,580 32,748 2,319 476,009 
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation288,394 82 288,312 9,871 22 298,161 
Federal National Mortgage Association455,310 214 455,096 22,515 — 477,611 
Government National Mortgage Association50,717 — 50,717 2,195 — 52,912 
Total mortgage-backed securities held-to-maturity794,421 296 794,125 34,581 22 828,684 
Total debt securities held-to-maturity$1,253,895 14,190 1,239,705 67,329 2,341 1,304,693 
Allowance for credit losses 3,095 
Total debt securities held-to-maturity, net of allowance for credit losses1,236,610 

(1) Net unrealized losses of held-to-maturity corporate and other debt securities represent the previously recorded other than temporary charge related to other non-credit factors and is being amortized through accumulated other comprehensive income over the remaining life of the securities. For mortgage-backed securities, it represents the net loss on previously designated available-for sale debt securities transferred to held-to-maturity at fair value and is being amortized through accumulated other comprehensive income over the remaining life of the securities.
(2) Unrecognized gains and losses of held-to-maturity debt securities are not reflected in the financial statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as held-to-maturity; or (ii) the date that an other than temporary impairment charge is recognized on a held-to-maturity security, through the date of the balance sheet. Effective January 1, 2020, held-to-maturity debt securities are evaluated for credit losses to determine if an allowance is necessary. Any allowance required is recorded through the provision for credit losses.
 At December 31, 2019
 Carrying valueGross
unrealized
gains 		Gross
unrealized
losses 		Estimated
fair value
 (In thousands)
Available-for-sale:
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation$1,223,587 17,528 736 1,240,379 
Federal National Mortgage Association1,159,446 18,917 314 1,178,049 
Government National Mortgage Association273,676 3,333 47 276,962 
Total debt securities available-for-sale$2,656,709 39,778 1,097 2,695,390 
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 At December 31, 2019
 Amortized cost
Net unrealized losses (1)
Carrying
value
Gross
unrecognized
gains (2)
Gross
unrecognized
losses (2)
Estimated
fair value
 (In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises$58,624 — 58,624 188 500 58,312 
Municipal bonds143,151 — 143,151 3,797 43 146,905 
Corporate and other debt securities87,322 14,785 72,537 26,158 — 98,695 
Total debt securities held-to-maturity289,097 14,785 274,312 30,143 543 303,912 
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation262,079 134 261,945 3,533 129 265,349 
Federal National Mortgage Association542,583 373 542,210 7,959 307 549,862 
Government National Mortgage Association70,348 — 70,348 633 — 70,981 
Total mortgage-backed securities held-to-maturity875,010 507 874,503 12,125 436 886,192 
Total debt securities held-to-maturity$1,164,107 15,292 1,148,815 42,268 979 1,190,104 

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

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Gross unrealized losses on debt securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2020 and December 31, 2019, were as follows:
 September 30, 2020
 Less than 12 months12 months or moreTotal
 Estimated
fair value		Unrealized
losses		Estimated
fair value		Unrealized
losses		Estimated
fair value		Unrealized
losses
 (In thousands)
Available-for-sale:
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation$40,309 10 — — 40,309 10 
Federal National Mortgage Association100,557 276 — — 100,557 276 
Government National Mortgage Association43,399 89 — — 43,399 89 
Total debt securities available-for-sale184,265 375 — — 184,265 375 
Held-to-maturity:
Debt securities:
Government-sponsored enterprises9,743 64 — — 9,743 64 
Municipal bonds8,044 222 — — 8,044 222 
Corporate and other debt securities33,676 2,033 — — 33,676 2,033 
Total debt securities held-to-maturity51,463 2,319 — — 51,463 2,319 
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation12,096 22 — — 12,096 22 
Total debt securities held-to-maturity63,559 2,341 — — 63,559 2,341 
Total$247,824 2,716 — — 247,824 2,716 

 December 31, 2019
 Less than 12 months12 months or moreTotal
 Estimated
fair value		Unrealized
losses		Estimated
fair value		Unrealized
losses		Estimated
fair value		Unrealized
losses
 (In thousands)
Available-for-sale:
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation$215,160 736 — — 215,160 736 
Federal National Mortgage Association80,298 297 12,972 17 93,270 314 
Government National Mortgage Association20,078 47 — — 20,078 47 
Total debt securities available-for-sale315,536 1,080 12,972 17 328,508 1,097 
Held-to-maturity:
Debt securities:
Government-sponsored enterprises
31,696 500 — — 31,696 500 
Municipal bonds23,596 43 — — 23,596 43 
Total debt securities held-to-maturity55,292 543 — — 55,292 543 
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation20,860 64 11,065 65 31,925 129 
Federal National Mortgage Association7,911 52 37,316 255 45,227 307 
Total mortgage-backed securities held-to-maturity28,771 116 48,381 320 77,152 436 
Total debt securities held-to-maturity84,063 659 48,381 320 132,444 979 
Total$399,599 1,739 61,353 337 460,952 2,076 
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    We conduct periodic reviews of individual securities to assess whether an allowance for credit loss is required. Held-to-maturity debt securities are evaluated for expected credit loss utilizing a historical loss methodology, or a discounted cash flows approach which is assessed against the book value of the investment security excluding accrued interest. Refer to Note 1, Summary of Significant Accounting Principles, for additional information. Available-for-sale debt securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment related to credit factors would be recorded through an allowance for credit losses. The allowance is limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the consolidated statement of income when management intends to sell (or may be required to sell) the securities before they recover in value.
    The majority of our held-to-maturity debt securities portfolio is comprised of agency mortgage-backed securities. For agency (FNMA, FHLMC and GNMA) mortgage-backed securities, and other agency debt instruments, the expectation of non-payment is zero. The timely payment of principal and interest on FNMA and FHLMC securities is guaranteed by each corporation. As each of these corporations is in conservatorship with the federal government, the payment guarantees are considered implicit obligations of the US government. GNMA securities carry the full faith and credit guarantee of the federal government. Because of the existence of government guarantees of timely payment of principal and interest, expected losses on agency securities are assumed to be zero. Changes in the fair value of agency securities in this portfolio are primarily driven by changes in interest rates and other non-credit related factors. At September 30, 2020, our held-to-maturity debt securities portfolio had an allowance for credit losses of $3.1 million. The allowance is related to non-agency corporate and other debt securities. The majority of the allowance is related to a portfolio of collateralized debt obligations backed by pooled TruPS, principally issued by banks and to a lesser extent insurance companies and real estate investment trusts. At September 30, 2020, the TruPS had a carrying value before allowance for credit losses and estimated fair value of $49.3 million and $64.1 million, respectively. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost.
    At September 30, 2020, the available-for-sale debt securities portfolio was almost entirely comprised of agency securities. As such, the unrealized losses in this portfolio are primarily driven by changes in interest rates and other non-credit related factors. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. As of September 30, 2020, there is no allowance for credit losses related to the Company’s available-for-sale debt securities as the decline in fair value did not result from credit issues.
    For additional information about the review of securities under previous other-than-temporary impairment guidance, refer to page 82 in Note 4 to the consolidated financial statements included under Item 15. Exhibits and Financial Statement Schedules in the Company’s December 31, 2019 Form 10-K.
    Debt securities with a carrying value before allowance for credit losses of $1.57 billion and an estimated fair value of $1.62 billion 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; therefore, mortgage-backed securities are not included in the following table. Excluding the allowance for credit losses, the amortized cost and estimated fair value of debt securities other than mortgage-backed securities at September 30, 2020, by contractual maturity, are shown below. 
 September 30, 2020
 Carrying
value 		Estimated
fair value
 (In thousands)
Due in one year or less$58,975 58,975 
Due after one year through five years10,294 10,534 
Due after five years through ten years107,658 110,853 
Due after ten years268,653 295,647 
Total$445,580 476,009 
Gains and Losses
    Gains and losses on the sale of all securities are determined using the specific identification method. For the three and nine months ended September 30, 2020, there were no sales of securities; however, for the nine months ended September 30,
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2020, the Company received proceeds of $16.5 million from the call of a held-to-maturity debt security which resulted in a gain of $124,000 and received a principal payment of $26,000 on a held-to-maturity debt security. The Company recognized net unrealized losses on equity securities of $8,000 and net unrealized gains of $99,000, respectively, for the three and nine months ended September 30, 2020.
    For the three months ended September 30, 2019, there were no sales of securities. For the nine months ended September 30, 2019, the Company received proceeds of $399.4 million on securities sold from the debt securities available-for-sale portfolio resulting in a loss of $5.7 million recognized in non-interest income. Proceeds from the sale were reinvested in higher yielding debt securities. There were no other sales of securities for the nine months ended September 30, 2019. The Company recognized net unrealized gains on equity securities of $30,000 and $165,000, respectively, for the three and nine months ended September 30, 2019.

6.    Loans Receivable, Net
The Company adopted the CECL methodology for measuring credit losses as of January 1, 2020. All disclosures as of and for the three and nine months ended September 30, 2020 are presented in accordance with Topic 326. The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP. The detail of the loan portfolio as of September 30, 2020 and December 31, 2019 was as follows:
September 30,
2020		December 31,
2019
 (In thousands)
Multi-family loans$7,256,015 7,813,236 
Commercial real estate loans4,912,155 4,831,347 
Commercial and industrial loans3,399,059 2,951,306 
Construction loans341,449 262,866 
Total commercial loans15,908,678 15,858,755 
Residential mortgage loans4,407,224 5,144,718 
Consumer and other loans681,940 699,796 
Total loans20,997,84221,703,269 
Deferred fees, premiums and other, net (1)
(12,274)907 
Allowance for credit losses(287,511)(228,120)
Net loans$20,698,057 21,476,056 
(1) Included in deferred fees and premiums are accretable purchase accounting adjustments in connection with loans acquired.
Credit Quality Indicators
    The Company has lending policies and procedures that provide target market, underwriting and other criteria for identified lending segments to codify the level of credit risk the Company is willing to accept. Approval authority levels are delegated to qualified individuals and approval bodies for the extension of credit within the guidance of these policies and procedures. In addition, the Company maintains an independent loan review department that reviews and validates risk assessment on a continual basis.
    The Company assigns ratings to borrowers and transactions based on the assessment of a borrower’s ability to service their debt based on relevant information such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.
    In connection with the adoption of Topic 326 on January 1, 2020, the Company implemented new risk rating models for borrowers and transactions within its commercial loan portfolio. The risk rating methodology transitioned to a dual risk rating framework which bifurcates ratings into probability of default (PD) and loss given default (LGD). Relevant risks are evaluated prior to approving a transaction to determine if the transaction is within the Company’s risk appetite and the appropriate rating. Strong credit analysis requires current, reliable financial information and documented assessment of the customer’s:
•ability to perform in accordance with the terms of the credit, including adherence to covenants;
•assets and liabilities, liquidity, net worth, and contingent and other off-balance sheet items;
•tax liabilities;
•cash reserves and ability to convert assets to cash;
•income statement and the sources, level, stability, and quality of earnings:
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•projected performance, sensitized for stressed circumstances; and
•industry performance relative to peers and industry.
    Each commercial credit facility is assigned a PD and LGD rating for the purpose of informing a credit decision, facilitating the determination of the expected level of credit loss and other portfolio management activities (as well as relationship profitability). The dual risk rating framework and risk rating methodologies allow for consistent determination of risk across the Commercial business as indicated by the risk rating assigned. The methodology used by the Bank applies the same criteria for identification of a credit as for the regulatory definitions of risk ratings:
Pass - “Pass” assets are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.
Watch - A “Watch” asset has all the characteristics of a Pass asset but warrants more than the normal level of supervision. These loans may require more detailed reporting to management because some aspects of underwriting may not conform to policy or adverse events may have affected or could affect the cash flow or ability to continue operating profitably, provided, however, the events do not constitute an undue credit risk. Residential and consumer loans delinquent 30-59 days are considered watch if not a troubled debt restructuring (“TDR”). In addition, any residential or consumer loan currently on deferment in accordance with the CARES Act or the interagency statement issued by bank regulatory agencies are considered watch.
Special Mention - A “Special Mention” asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Residential and consumer loans delinquent 60-89 days are considered special mention if not a TDR.
Substandard - A “Substandard” asset is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Residential and consumer loans delinquent 90 days or greater as well as TDRs are considered substandard.
Doubtful - An asset classified “Doubtful” has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.
Loss - An asset or portion thereof, classified “Loss” is considered uncollectible and of such little value that its continuance on the institution’s books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery will occur. As such, it is not practical or desirable to defer the write-off.

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The following table presents the risk category of loans as of September 30, 2020 by class of loan and vintage year:
 Term Loans by Origination Year
 20202019201820172016PriorRevolving LoansTotal
 (In thousands)
Multi-family
Pass$714,438 584,165 1,173,766 691,828 1,094,102 1,502,917 9,202 5,770,418 
Watch15,890 118,314 214,485 117,757 136,394 250,427 — 853,267 
Special mention4,578 — 60,203 12,823 91,279 94,057 — 262,940 
Substandard— 5,053 — 11,415 83,298 268,233 1,391 369,390 
Total Multi-family
734,906 707,532 1,448,454 833,823 1,405,073 2,115,634 10,593 7,256,015 
Commercial real estate
Pass356,538 769,134 698,811 503,280 501,682 1,257,028 23,468 4,109,941 
Watch5,196 98,135 83,156 42,028 32,543 88,866 3,449 353,373 
Special mention9,000 4,948 15,595 16,684 82,123 97,628 5,534 231,512 
Substandard— — 5,512 39,833 46,784 125,200 — 217,329 
Total Commercial real estate
370,734 872,217 803,074 601,825 663,132 1,568,722 32,451 4,912,155 
Commercial and industrial
Pass767,028 629,363 329,700 147,277 196,927 394,161 171,026 2,635,482 
Watch36,337 103,990 32,748 92,865 16,428 36,531 48,772 367,671 
Special mention1,167 108,694 91,743 24,436 21,388 78,678 6,054 332,160 
Substandard563 5,995 7,659 4,504 6,693 24,227 14,105 63,746 
Total Commercial and industrial
805,095 848,042 461,850 269,082 241,436 533,597 239,957 3,399,059 
Construction
Pass42,328 65,457 23,375 — — — 159,486 290,646 
Watch6,360 — — — — — 17,214 23,574 
Special mention— — 15,099 — — — — 15,099 
Substandard— — — — — — 12,130 12,130 
Total Construction
48,688 65,457 38,474 — — — 188,830 341,449 
Residential mortgage
Pass350,568 531,692 495,300 617,633 446,886 1,778,689 — 4,220,768 
Watch2,100 16,913 15,577 15,188 11,175 65,589 — 126,542 
Special mention— — 713 — — 3,258 — 3,971 
Substandard340 1,523 1,294 1,342 247 51,098 99 55,943 
Total residential mortgage
353,008 550,128 512,884 634,163 458,308 1,898,634 99 4,407,224 
Consumer and other
Pass4,345 8,115 6,520 8,023 5,890 61,947 570,363 665,203 
Watch— 119 160 56 274 1,002 11,718 13,329 
Special mention— — — — — — 1,124 1,124 
Substandard— — — — — 1,817 467 2,284 
Total Consumer and other
4,345 8,234 6,680 8,079 6,164 64,766 583,672 681,940 
Total$2,316,776 3,051,610 3,271,416 2,346,972 2,774,113 6,181,353 1,055,602 20,997,842 
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The following table presents the risk category of loans as of December 31, 2019 by class of loan:
 PassWatch Special 
Mention		SubstandardDoubtfulLossTotal
 (In thousands)
Commercial loans:
Multi-family$6,326,412 942,438 167,748 376,638 — — 7,813,236 
Commercial real estate4,023,642 489,514 118,426 199,765 — — 4,831,347 
Commercial and industrial2,031,148 693,397 111,389 115,372 — — 2,951,306 
Construction169,236 75,319 — 18,311 — — 262,866 
Total commercial loans 12,550,438 2,200,668 397,563 710,086 — — 15,858,755 
Residential mortgage5,074,334 14,414 5,429 50,541 — — 5,144,718 
Consumer and other687,302 9,157 1,174 2,163 — — 699,796 
Total$18,312,074 2,224,239 404,166 762,790 — — 21,703,269 
Delinquent and Non-Accrual Loans
In the absence of other intervening factors, loans granted payment deferrals related to COVID-19 are not reported as past due or placed on non-accrual status provided the borrowers have met the criteria in the CARES Act or otherwise have met the criteria included in an interagency statement issued by bank regulatory agencies. See Note 1, Summary of Significant Accounting Principles.
The following tables present the payment status of the recorded investment in past due loans as of September 30, 2020 and December 31, 2019 by class of loans:
 September 30, 2020
 30-59 Days60-89 DaysGreater
than 90
Days		Total Past
Due		CurrentTotal
Loans
Receivable
 (In thousands)
Commercial loans:
Multi-family$5,327 2,103 48,402 55,832 7,200,183 7,256,015 
Commercial real estate8,881 26,632 5,035 40,548 4,871,607 4,912,155 
Commercial and industrial3,707 2,191 2,894 8,792 3,390,267 3,399,059 
Construction— — — — 341,449 341,449 
Total commercial loans17,915 30,926 56,331 105,172 15,803,506 15,908,678 
Residential mortgage 11,112 4,092 35,601 50,805 4,356,419 4,407,224 
Consumer and other7,463 1,124 1,686 10,273 671,667 681,940 
Total$36,490 36,142 93,618 166,250 20,831,592 20,997,842 
 
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 December 31, 2019
 30-59 Days60-89 DaysGreater
than 90
Days		Total Past
Due		CurrentTotal
Loans
Receivable
 (In thousands)
Commercial loans:
Multi-family$45,606 1,946 22,055 69,607 7,743,629 7,813,236 
Commercial real estate7,958 525 3,787 12,270 4,819,077 4,831,347 
Commercial and industrial7,774 2,767 5,053 15,594 2,935,712 2,951,306 
Construction— — — — 262,866 262,866 
Total commercial loans61,338 5,238 30,895 97,471 15,761,284 15,858,755 
Residential mortgage16,980 6,195 27,729 50,904 5,093,814 5,144,718 
Consumer and other9,157 1,174 1,330 11,661 688,135 699,796 
Total$87,475 12,607 59,954 160,036 21,543,233 21,703,269 
The following table presents non-accrual loans at the date indicated:
 September 30, 2020December 31, 2019
 # of loansAmount# of loansAmount
 (Dollars in thousands)
Non-accrual:
Multi-family13 $51,132 8 $23,322 
Commercial real estate28 17,756 22 11,945 
Commercial and industrial19 10,901 18 12,482 
Construction— — — — 
Total commercial loans60 79,789 48 47,749 
Residential mortgage and consumer250 52,251 260 47,566 
Total non-accrual loans310 $132,040 308 $95,315 

The Company recognized $1.2 million of interest income on non-accrual loans during the nine months ended September 30, 2020.
Individually Evaluated Loans
    Loans which do not share common risk characteristics with other loans are individually evaluated as part of the process of calculating the allowance for credit losses. The evaluation is determined on an individual basis using the present value of expected cash flows or the fair value of the collateral as of the reporting date. When management determines that the fair value of collateral securing a collateral dependent loan inadequately covers the balance of net principal, the net principal balance is written down to the fair value of the collateral, net of estimated selling costs as applicable, rather than assigning an allowance. See Note 16, Fair Value Measurements, for information regarding the valuation process for collateral dependent loans.
The following table presents individually evaluated collateral-dependent loans by class of loans at the date indicated:
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 September 30, 2020
 Real EstateOtherTotal
 (Dollars in thousands)
Multi-family$49,571 — 49,571 
Commercial real estate11,749 — 11,749 
Commercial and industrial3,019 4,611 7,630 
Construction— — — 
Total commercial loans64,339 4,611 68,950 
Residential mortgage and consumer26,401 109 26,510 
Total collateral-dependent loans$90,740 4,720 95,460 

TDR Loans Included in Non-Accrual
Included in the non-accrual tables above are TDR loans whose payment status is current, but the Company has classified as non-accrual as the loans have not maintained their current payment status for six consecutive months under the restructured terms and therefore do not meet the criteria for accrual status. As of September 30, 2020 and December 31, 2019, these loans are comprised of the following:
September 30, 2020December 31, 2019
# of loansAmount# of loansAmount
(Dollars in thousands)
TDR with payment status current classified as non-accrual:
Commercial real estate3 $5,378 2 $2,360 
Residential mortgage and consumer32 4,828 25 4,218 
Total TDR with payment status current classified as non-accrual35 $10,206 27 $6,578 
The following table presents TDR loans which were also 30-89 days delinquent and classified as non-accrual at the dates indicated:
September 30, 2020December 31, 2019
# of loansAmount# of loansAmount
(Dollars in thousands)
TDR 30-89 days delinquent classified as non-accrual:
Residential mortgage and consumer9 $1,296 18 $3,331 
Total TDR 30-89 days delinquent classified as non-accrual9 $1,296 18 $3,331 
    The Company has no loans past due 90 days or more delinquent that are still accruing interest.
Troubled Debt Restructurings    
    On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a TDR.
    Substantially all of our TDR loan modifications involve lowering the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. Restructured loans remain on non-accrual status until there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.
    Consistent with the CARES Act and interagency guidance which allows temporary relief for current borrowers affected by COVID-19, we are working with borrowers and granting certain modifications through programs related to
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COVID-19 relief. At September 30, 2020, loans with an aggregate outstanding balance of approximately $1.02 billion have been granted modifications as a result of financial disruptions associated with the COVID-19 pandemic. Also, consistent with the CARES Act and the interagency guidelines, such modifications that met the criteria discussed in Note 1 are not included in our TDR totals and discussion below. For more information on the criteria for classifying loans as TDRs, see Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act.

The following tables present the total TDR loans at September 30, 2020 and December 31, 2019:
 
September 30, 2020
 AccrualNon-accrualTotal
 # of loansAmount# of loansAmount# of loansAmount
 (Dollars in thousands)
Commercial loans:
Commercial real estate— $— 3 $5,379 3 $5,379 
Commercial and industrial1 480 2 3,381 3 3,861 
Total commercial loans1 480 5 8,760 6 9,240 
Residential mortgage and consumer50 9,329 84 17,181 134 26,510 
Total51 $9,809 89 $25,941 140 $35,750 
December 31, 2019
 AccrualNon-accrualTotal
 # of loansAmount# of loansAmount# of loansAmount
 (Dollars in thousands)
Commercial loans:
Commercial real estate— $— 3 $2,362 3 $2,362 
Commercial and industrial3 2,535 2 4,682 5 7,217 
Total commercial loans3 2,535 5 7,044 8 9,579 
Residential mortgage and consumer54 10,549 78 16,458 132 27,007 
Total57 $13,084 83 $23,502 140 $36,586 

The following tables present information about TDRs that occurred during the three and nine months ended September 30, 2020 and 2019:
 Three Months Ended September 30,
20202019
 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 $1,780 $1,780 1 $96 $96 
Commercial and industrial— — — 1 270 270 
Residential mortgage and consumer7 1,813 1,813 4 453 453 
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 Nine Months Ended September 30,
20202019
 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 estate2 $3,110 $3,110 1 $96 $96 
Commercial and industrial1 933 933 1 270 270 
Residential mortgage and consumer7 1,813 1,813 14 2,850 2,850 
    Post-modification recorded investment represents the net book balance immediately following modification.
    Collateral dependent loans classified as TDRs were written down to the estimated fair value of the collateral. There were no charge offs for TDRs during the three months ended September 30, 2020. There were $163,000 in charge-offs for a TDR of an unsecured commercial and industrial loan during the nine months ended September 30, 2020. There were $156,000 and $729,000 in charge-offs for TDRs of unsecured commercial and industrial loans during the three and nine months ended September 30, 2019, respectively. The allowance for loan losses associated with the TDRs presented in the above tables totaled $1.6 million and $1.8 million as of September 30, 2020 and December 31, 2019, 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. Prior to 2020, all residential loans deemed to be TDRs were modified to reflect a reduction in interest rates to current market rates. Residential loans modified in 2020 and deemed to be TDRs were granted a payment deferral related to COVID-19 but did not meet the criteria to be excluded from TDR as described in Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act. Two of the commercial loan modifications which qualified as a TDR in the nine months ended September 30, 2020 were loans which had already been on non-accrual status and were granted a deferral of payment due to circumstances related to COVID-19. Another commercial loan modification which qualified as a TDR in the first quarter of 2020 had its maturity extended. The commercial loan modifications which qualified as TDRs in the nine months ended September 30, 2019 had their maturity extended.
    The following tables present information about pre and post modification interest yield for TDRs which occurred during the three and nine months ended September 30, 2020 and 2019:
 Three Months Ended September 30,
20202019
 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 4.25 %4.25 %1 5.75 %5.75 %
Commercial and industrial— — %— %1 6.25 %6.25 %
Residential mortgage and consumer7 5.94 %5.94 %4 4.00 %3.82 %
 Nine Months Ended September 30,
20202019
 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 estate2 4.09 %4.09 %1 5.75 %5.75 %
Commercial and industrial1 4.75 %4.75 %1 6.25 %6.25 %
Residential mortgage and consumer7 5.94 %5.94 %14 5.07 %4.96 %
    There were no payment defaults for loans modified as a TDR in the previous 12 months to September 30, 2020. Payment defaults for loans modified as a TDR in the previous 12 months to September 30, 2019 consisted of one residential
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loan and one commercial real estate loan with a recorded investment of $132,000 and $2.5 million, respectively, at September 30, 2019.
Impaired Loans
The following table presents, under previously applicable GAAP, loans individually evaluated for impairment by portfolio segment as of December 31, 2019:
 December 31, 2019
 Recorded
Investment		Unpaid Principal
Balance		Related
Allowance		Average
Recorded
Investment		Interest
Income
Recognized
 (In thousands)
With no related allowance:
Multi-family$22,169 23,581 — 23,298 47 
Commercial real estate7,875 10,913 — 8,127 199 
Commercial and industrial12,476 21,090 — 14,860 351 
Construction— — — — — 
Total commercial loans42,520 55,584 — 46,285 597 
Residential mortgage and consumer13,783 18,066 — 13,811 267 
With an allowance recorded:
Multi-family— — — — — 
Commercial real estate— — — — — 
Commercial and industrial— — — — — 
Construction— — — — — 
Total commercial loans— — — — — 
Residential mortgage and consumer13,220 13,881 1,763 13,321 153 
Total:
Multi-family22,169 23,581 — 23,298 47 
Commercial real estate7,875 10,913 — 8,127 199 
Commercial and industrial12,476 21,090 — 14,860 351 
Construction— — — — — 
Total commercial loans42,520 55,584 — 46,285 597 
Residential mortgage and consumer 27,003 31,947 1,763 27,132 420 
Total impaired loans$69,523 87,531 1,763 73,417 1,017 
    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.

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7.    Allowance for Credit Losses
    On January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. See Note 1, Summary of Significant Accounting Principles.
An analysis of the provision for credit losses is summarized as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (In thousands)
Provision for loan losses$14,859 (2,500)71,535 (2,500)
Provision for debt securities held-to-maturity(149)— 531 — 
Provision for off-balance sheet credit exposures(6,374)— 774 — 
Total provision for credit losses$8,336 (2,500)72,840 (2,500)
Allowance for Credit Losses on Loans Receivable
An analysis of the allowance for credit losses for loans receivable is summarized as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (In thousands)
Balance at beginning of period$273,319 231,937 228,120 235,817 
Adjustment for adoption of ASC 326
— — (3,551)— 
Gross charge offs(1,472)(3,354)(17,459)(10,980)
Recoveries805 1,902 4,686 5,648 
Net charge-offs(667)(1,452)(12,773)(5,332)
Allowance at acquisition on loans purchased with credit deterioration— — 4,180 — 
Provision for credit loss expense14,859 (2,500)71,535 (2,500)
Balance at end of the period$287,511 227,985 287,511 227,985 
    Accrued interest receivable on loans, reported as a component of accrued interest receivable on the balance sheet, totaled $74.3 million at September 30, 2020. For the period ended September 30, 2020, the Company recorded a provision for loan loss related to interest accrued on residential and consumer loans in payment deferral.

    The lifetime estimate considers multiple economic scenarios, including recessionary scenarios that assume deterioration in key economic variables such as gross domestic product, unemployment rate and real estate prices.  As of January 1, 2020, the Company’s economic outlook was weighted to include a moderate potential of a recession with some expectation of tail risk similar to the severely adverse scenario used in stress testing. During the nine months ended September 30, 2020, there was a significant change in the economic outlook impacting the allowance for credit losses, with key economic factors such as the unemployment rate and gross domestic product severely affected by the impact of COVID-19. For the three months ended September 30, 2020, there was improvement in the U.S. and global macroeconomic consensus outlooks, which resulted in an improvement in the economic outlook used to determine the allowance for credit losses when compared to June 30, 2020. In response to these changes, the Company continues to assess the selection and probability weightings of the economic scenarios.  Multiple economic outlooks were used for the September 30, 2020 estimate of the allowance for credit losses that included a base or consensus case, a downside recessionary case and an upside scenario to reflect the potential for continued improvement in the economic outlook.  In addition, the allowance for credit losses at September 30, 2020 included qualitative reserves for certain segments that may not be fully recognized through its quantitative models.  There are still many unknowns including the duration of the impact of COVID-19 on the economy and the results of the government fiscal and monetary actions along with recently implemented payment deferral programs, and the Company will continue to evaluate the allowance for credit losses and the related economic outlook each quarter.
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The following tables present the balance in the allowance for credit losses for loans by portfolio segment as of September 30, 2020 and December 31, 2019:
 September 30, 2020
 Multi-
Family Loans		Commercial
Real Estate Loans		Commercial
and Industrial
Loans		Construction
Loans		Residential
Mortgage Loans		Consumer
and Other
Loans		UnallocatedTotal
 (Dollars in thousands)
Allowance for credit losses:
Balance as of December 31, 2019$74,099 50,925 74,396 6,816 17,391 2,548 1,945 228,120 
Adjustment for adoption of ASC 326
(9,741)(4,631)(7,511)(1,901)20,089 2,089 (1,945)(3,551)
Balance as of January 1, 202064,358 46,294 66,885 4,915 37,480 4,637 — 224,569 
Charge-offs(4,490)(235)(11,767)— (932)(35)— (17,459)
Recoveries30 352 3,457 — 632 215 — 4,686 
Allowance at acquisition on loans purchased with credit deterioration209 3,208 287 127 344 5 — 4,180 
Provision for credit loss expense(3,226)62,139 19,847 501 (7,344)(382)— 71,535 
Ending balance-September 30, 2020$56,881 111,758 78,709 5,543 30,180 4,440 — 287,511 
 December 31, 2019
 Multi-
Family Loans		Commercial
Real Estate Loans		Commercial
and Industrial
Loans		Construction
Loans		Residential
Mortgage Loans		Consumer
and Other
Loans		UnallocatedTotal
 (Dollars in thousands)
Allowance for credit losses:
Beginning balance-December 31, 2018$82,876 48,449 71,084 7,486 20,776 3,102 2,044 235,817 
Charge-offs(2,973)(151)(6,833)— (2,241)(934)— (13,132)
Recoveries1,244 2,204 1,203 — 1,448 336 — 6,435 
Provision for credit loss expense(7,048)423 8,942 (670)(2,592)44 (99)(1,000)
Ending balance-December 31, 2019$74,099 50,925 74,396 6,816 17,391 2,548 1,945 228,120 
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Allowance for Credit Losses on Debt Securities
An analysis of the allowance for credit losses for debt securities held-to-maturity is summarized as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 20202020
 (In thousands)
Balance at beginning of the period$3,244 — 
Impact of adopting ASC 326
— 2,564 
Provision for credit losses(149)531 
Balance at end of the period$3,095 3,095 

The following tables present the balance in the allowance for credit losses for debt securities held-to-maturity by portfolio segment as of September 30, 2020:
 September 30, 2020
 Municipal BondsCorporate and Other Debt SecuritiesTotal
 (Dollars in thousands)
Allowance for credit losses:
Beginning balance-December 31, 2019$— — — 
Impact of adopting ASC 326
17 2,547 2,564 
Provision for credit loss25 506 531 
Ending balance-September 30, 2020$42 3,053 3,095 
Accrued interest receivable on debt securities held-to-maturity totaled $4.9 million at September 30, 2020 and is excluded from the estimate of credit losses.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
An analysis of the allowance for credit losses for off-balance sheet credit exposures is as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 20202020
 (In thousands)
Balance at beginning of the period$20,247 425 
Impact of adopting ASC 326
— 12,674 
Provision for credit losses(6,374)774 
Balance at end of the period$13,873 13,873 

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8.     Deposits
Deposits are summarized as follows:
September 30, 2020December 31, 2019
 (In thousands)
Non-interest bearing:
Checking accounts$3,345,011 2,472,232 
Interest bearing:
Checking accounts5,696,645 5,512,979 
Money market deposits4,369,733 3,817,718 
Savings2,008,540 2,050,101 
Certificates of deposit3,683,606 4,007,308 
Total deposits$19,103,535 17,860,338 

9.    Goodwill and Other Intangible Assets
The following table summarizes goodwill and intangible assets at September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
(In thousands)
Mortgage servicing rights$10,976 12,125 
Core deposit premiums3,954 2,530 
Other603 668 
Total other intangible assets15,533 15,323 
Goodwill 94,535 82,546 
Goodwill and intangible assets$110,068 97,869 
For the nine months ended September 30, 2020, the increase in goodwill reflects the acquisition of Gold Coast Bancorp. See Note 3, Business Combinations.
The following table summarizes other intangible assets as of September 30, 2020 and December 31, 2019:
Gross Intangible AssetAccumulated AmortizationValuation AllowanceNet Intangible Assets
(In thousands)
September 30, 2020
Mortgage servicing rights$18,004 (5,570)(1,458)10,976 
Core deposit premiums23,063 (19,109)— 3,954 
Other1,150 (547)— 603 
Total other intangible assets$42,217 (25,226)(1,458)15,533 
December 31, 2019
Mortgage servicing rights$19,368 (7,140)(103)12,125 
Core deposit premiums20,561 (18,031)— 2,530 
Other1,150 (482)— 668 
Total other intangible assets$41,079 (25,653)(103)15,323 
    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 $1.74 billion and $1.67 billion at September 30, 2020 and December 31, 2019, respectively, all of which relate to mortgage loans. At September 30, 2020 and December 31, 2019, the servicing asset, included in other intangible assets, had an estimated fair value of $11.2 million and $14.1 million, respectively. At September 30, 2020, fair value was based on expected future cash flows considering a weighted average discount rate of 12.03%, a weighted average constant prepayment rate on mortgages of 19.14%
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and a weighted average life of 4.2 years. Based on an analysis of fair values as of September 30, 2020, the Company determined that a $1.5 million valuation allowance for mortgage servicing rights was required, a decrease of $1.2 million from the previous quarter. See Note 16 for additional details.
    Core deposit premiums are amortized using an accelerated method and having a weighted average amortization period of 10 years. For the nine months ended September 30, 2020, the Company recorded $2.5 million in core deposit premiums resulting from the acquisition of Gold Coast.

10.     Leases
    The Company has operating leases for corporate offices, branch locations and certain equipment. For these operating leases, the Company recognizes a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. The Company’s leases have remaining lease terms of up to 16 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Certain of our operating leases for branch locations contain variable lease payments related to consumer price index adjustments.
The following table presents the balance sheet information related to our operating leases:
September 30, 2020December 31, 2019
(Dollars in thousands)
Operating lease right-of-use assets$171,781 175,143 
Operating lease liabilities184,281 185,827 
Weighted average remaining lease term9.0 years9.7 years
Weighted average discount rate2.66 %2.74 %
    In determining the present value of lease payments, the discount rate used for each individual lease is the rate implicit in the lease, unless that rate cannot be readily determined, in which case the Company is required to use its incremental borrowing rate based on the information available at commencement date. For its incremental borrowing rate, the Company uses the borrowing rates offered to the Company by the Federal Home Loan Bank, which reflects the rates a lender would charge the Company to obtain a collateralized loan.
The following table presents the components of total operating lease cost recognized in the Consolidated Statements of Income:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(In thousands)
Included in office occupancy and equipment expense:
Operating lease cost$6,589 6,320 19,396 18,963 
Short-term lease cost104 74 293 229 
Variable lease cost— — (1)(1)
Included in other income:
Sublease income67 67 185 201 
The following table presents supplemental cash flow information related to operating leases:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases$6,419 6,173 17,998 18,470 
Operating lease liabilities arising from obtaining right-of-use assets (non-cash):
Operating leases4,909 577 12,746 2,358 
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    Future minimum operating lease payments and reconciliation to operating lease liabilities at September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
(In thousands)
2020$6,716 24,013 
202125,950 23,888 
202224,412 22,270 
202323,312 21,227 
202423,252 21,162 
Thereafter104,967 100,662 
Total lease payments208,609 213,222 
Less: Imputed interest(24,328)(27,395)
Total operating lease liabilities$184,281 185,827 

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

11.     Equity Incentive Plan
    At the annual meeting held on June 9, 2015, stockholders of the Company approved the Investors Bancorp, Inc. 2015 Equity Incentive Plan (“2015 Plan”) which provides for the issuance or delivery of up to 30,881,296 shares (13,234,841 restricted stock awards and 17,646,455 stock options) of Investors Bancorp, Inc. common stock.
    Restricted shares granted under the 2015 Plan vest in equal installments, over the service period generally ranging from 5 to 7 years beginning one year from the date of grant. Additionally, certain restricted shares awarded are performance vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. The vesting of restricted stock may accelerate in accordance with the terms of the 2015 Plan. The product of the number of shares granted and the grant date closing market price of the Company’s common stock determine the fair value of restricted shares under the 2015 Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period. For the nine months ended September 30, 2020 and September 30, 2019, the Company granted 90,067 and 2,345,919 shares of restricted stock awards under the 2015 Plan, respectively.
    Stock options granted under the 2015 Plan vest in equal installments, over the service period generally ranging from 5 to 7 years beginning one year from the date of grant. The vesting of stock options may accelerate in accordance with the terms of the 2015 Plan. Stock options were granted at an exercise price equal to the fair value of the Company’s common stock on the grant date based on the closing market price and have an expiration period of 10 years. For the nine months ended September 30, 2020 and September 30, 2019, the Company granted no stock options and 995,216 stock options under the 2015 Plan, respectively.
    The fair value of stock options granted as part of the 2015 Plan was estimated utilizing the Black-Scholes option pricing model using the following assumptions for the periods presented below:
Nine Months Ended September 30,
2019
Weighted average expected life (in years) 4.83
Weighted average risk-free rate of return1.86 %
Weighted average volatility19.92 %
Dividend yield3.96 %
Weighted average fair value of options granted$0.89 
Total stock options granted 995,216 
    The weighted average expected life of the stock option represents the period of time that stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is
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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 September 30, 2020 and 2019:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(In thousands)
Stock option expense$941 2,285 2,940 4,937 
Restricted stock expense2,539 4,026 8,383 10,933 
Total share-based compensation expense (1)
$3,480 6,311 11,323 15,870 
(1) Included in share-based compensation expense for the three months and nine months ended September 30, 2019 was $2.0 million of accelerated stock compensation expense resulting from the settlement of shareholder litigation during the third quarter of 2019. There was no incremental expense resulting from the modification of the original awards associated with the settlement. For additional information about the settlement, refer to page 105 in Note 12 to the consolidated financial statements included under Item 15. Exhibits and Financial Statement Schedules in the Company’s December 31, 2019 Form 10-K.

    The following is a summary of the Company’s stock option activity and related information for the nine months ended September 30, 2020:
Number of
Stock
Options		Weighted Average
Exercise Price		Weighted Average
Remaining
Contractual
Life (in years)		Aggregate
Intrinsic Value
Outstanding at December 31, 20195,654,461 $12.46 5.5$363 
Granted— — — 
Exercised— — — 
Forfeited(10,802)12.55 
Expired(47,087)12.54 
Outstanding at September 30, 20205,596,572 12.46 4.8— 
Exercisable at September 30, 20203,810,659 $12.42 4.7$— 
    Expected future expense relating to the non-vested options outstanding as of September 30, 2020 is $6.5 million over a weighted average period of 1.45 years.
    The following is a summary of the status of the Company’s restricted shares as of September 30, 2020 and changes therein during the nine months ended:
Number of Shares AwardedWeighted Average Grant Date Fair Value
Outstanding at December 31, 20192,894,352 $12.57 
Granted90,067 10.02 
Vested(974,221)12.61 
Forfeited(18,860)12.18 
Outstanding and non-vested at September 30, 20201,991,338 $12.44 
    Expected future expense relating to the non-vested restricted shares outstanding as of September 30, 2020 is $20.1 million over a weighted average period of 2.28 years.
    
12.     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
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participant’s credited service period) reduced by the sum of the benefits provided under the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra DB Plan”) and the SERP I. Effective as of the close of business of December 31, 2016, the SERP II was amended to freeze future benefit accruals subsequent to the 2016 year of service.
    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,
 2020201920202019
(In thousands)
Interest cost$325 397 973 1,191 
Amortization of:
Net loss298 — 896 — 
Total net periodic benefit cost$623 397 1,869 1,191 
    Due to the unfunded nature of the SERPs and the Directors’ Plan, no contributions have been made or were expected to be made during the nine months ended September 30, 2020.
    The Company also maintains the Pentegra DB Plan. As of December 31, 2016, the annual benefit provided under the Pentegra DB plan was frozen by an amendment to the plan. Freezing the plan eliminates all future benefit accruals and each participant’s frozen accrued benefit was determined as of December 31, 2016 and no further benefits will accrue beyond such date. Since it is a multi-employer plan, costs of the pension plan are based on contributions required to be made to the pension plan. There was no contribution required during the nine months ended September 30, 2020. We anticipate contributing funds to the plan to meet any minimum funding requirements for the remainder of 2020.

13.    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. The Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of fourteen months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).
    Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate borrowings. During the next twelve months, the Company estimates that an additional $46.7 million will be reclassified as an increase to interest expense.

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Fair Value Hedges of Interest Rate Risk
    The Company is exposed to changes in the fair value of certain of its pools of fixed-rate assets due to changes in benchmark interest rates. The Company may use interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Such derivatives were used to hedge the changes in fair value of certain of its pools of prepayable fixed-rate assets.
    For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.
    The Company terminated two interest rate swaps with an aggregate notional of $475.0 million during the nine months ended September 30, 2020. The Company terminated three interest rate swaps with an aggregate notional amount of $1.00 billion during the year ended December 31, 2019. The terminated swaps were due to mature in February 2020. There were no interest rate swaps designated as fair value hedges as of September 30, 2020.
Derivatives Not Designated as Hedges
    The Company has credit derivatives resulting from participation in interest rate swaps provided to external lenders as part of loan participation arrangements which are, therefore, not used to manage interest rate risk in the Company’s assets or liabilities. Additionally, the Company provides interest rate risk management services to commercial customers, primarily interest rate swaps. The Company’s market risk from unfavorable movements in interest rates related to these derivative contracts is economically hedged by concurrently entering into offsetting derivative contracts that have identical notional values, terms and indices.
    Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans and commercial customers.

Fair Values of Derivative Instruments on the Balance Sheet
Asset DerivativesLiability Derivatives
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Notional AmountBalance
Sheet
Location		Fair ValueNotional AmountBalance
Sheet
Location		Fair ValueNotional AmountBalance
Sheet
Location		Fair ValueNotional AmountBalance
Sheet
Location		Fair Value
(in millions)(In thousands)(in millions)(In thousands)(in millions)(In thousands)(in millions)(In thousands)
Derivatives designated as hedging instruments:
Interest Rate Swaps$3,525 Other assets$153 $2,675 Other assets$559 $— Other liabilities$— $— Other liabilities$— 
Total derivatives designated as hedging instruments$153 $559 $— $— 
Derivatives not designated as hedging instruments:
Interest Rate Swaps$933 Other assets$36,399 $652 Other assets$5,430 $17 Other liabilities$452 $— Other liabilities$— 
Other Contracts— Other assets— — Other assets— 22 Other liabilities230 22 Other liabilities125 
Total derivatives not designated as hedging instruments$36,399 $5,430 $682 $125 

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

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Effect of Derivative Instruments on Accumulated Other Comprehensive Income (Loss)
The following table presents the effect of the Company’s derivative financial instruments on the Accumulated Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019.
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(In thousands)
Cash Flow Hedges - Interest rate swaps
Amount of loss recognized in other comprehensive income (loss)$1,698 (12,794)(115,703)(71,139)
Amount of (loss) gain reclassified from accumulated other comprehensive income (loss) to interest expense(11,158)509 (19,875)4,327 
Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
The following table presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income as of September 30, 2020 and 2019.
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
The effects of fair value and cash flow hedging:Income statement location(In thousands)
Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged itemsInterest income on loans$— 1,179 4,529 7,398 
Derivatives designated as hedging instruments [1]
Interest income on loans(411)(1,268)(7,734)(7,550)
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest contracts
Amount of (loss) gain reclassified from accumulated other comprehensive income (loss)Interest expense on borrowings(11,158)509 (19,875)4,327 
Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) as a result that a forecasted transaction is no longer probable of 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$(11,569)420 (23,080)4,175 

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

As of September 30, 2020 and December 31, 2019, the following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustment for fair value hedges:
Balance sheet locationCarrying Amount of the Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
(In thousands)
Loans receivable, net (1)
$— 478,120 $9,150 6,426 
(1) The balance of Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) as of September 30, 2020 represents $9.1 million of hedging adjustment on discontinued hedging relationships.

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Location and Amount of Gain or (Loss) Recognized in Income on Derivatives Not Designated as Hedging Instruments
The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income as of September 30, 2020:
Consolidated Statements of Income locationAmount of Gain (Loss) Recognized in Income on Derivative
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
(In thousands)
Other ContractsOther income / (expense)$19 (47)(106)(57)
Total$19 (47)(106)(57)
Offsetting Derivatives
The following table presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives in the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019. The net amounts of derivative assets and liabilities can be reconciled to the tabular disclosure of the fair value hierarchy, see Note 16, Fair Value Measurements. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Company’s Consolidated Balance Sheets.
Gross Amounts Not Offset
Gross Amounts RecognizedGross Amounts OffsetNet Amounts PresentedFinancial InstrumentsCash Collateral PostedNet Amount
(In thousands)
September 30, 2020
Assets:
Derivative contracts$179 — 179 — — 179 
Liabilities:
Derivative contracts$682 — 682 — 450 232 
December 31, 2019
Assets:
Derivative contracts$821 — 821 — — 821 
Liabilities:
Derivative contracts$125 — 125 — — 125 

14.    Comprehensive Income

 The components of comprehensive income, gross and net of tax, are as follows:
 Three Months Ended September 30,
20202019
 GrossTaxNetGrossTaxNet
(Dollars in thousands)
Net income$89,152 (24,840)64,312 73,014 (21,042)51,972 
Other comprehensive income (loss):
Change in funded status of retirement obligations417 (117)300 19 (6)13 
Unrealized (losses) gains on debt securities available-for-sale(2,115)509 (1,606)8,856 (2,058)6,798 
Accretion of loss on debt securities reclassified to held-to-maturity from available-for-sale63 (15)48 94 (53)41 
Other-than-temporary impairment accretion on debt securities recorded prior to January 1, 2020257 (73)184 317 (89)228 
Net gains (losses) on derivatives12,856 (3,614)9,242 (13,303)3,739 (9,564)
Total other comprehensive income (loss)11,478 (3,310)8,168 (4,017)1,533 (2,484)
Total comprehensive income$100,630 (28,150)72,480 68,997 (19,509)49,488 
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Nine Months Ended September 30,
20202019
 GrossTaxNetGrossTaxNet
(Dollars in thousands)
Net income$202,140 (55,705)146,435 205,822 (59,068)146,754 
Other comprehensive loss:
Change in funded status of retirement obligations861 (242)619 56 (16)40 
Unrealized gains on debt securities available-for-sale46,078 (11,053)35,025 52,137 (12,532)39,605 
Accretion of loss on securities reclassified to held-to-maturity from available-for-sale210 (50)160 694 (222)472 
Reclassification adjustment for security losses included in net income— — — 5,690 (1,469)4,221 
Other-than-temporary impairment accretion on debt securities recorded prior to January 1, 2020892 (251)641 819 (230)589 
Net losses on derivatives(95,828)26,937 (68,891)(75,466)21,213 (54,253)
Total other comprehensive loss(47,787)15,341 (32,446)(16,070)6,744 (9,326)
Total comprehensive income$154,353 (40,364)113,989 189,752 (52,324)137,428 

The following table presents the after-tax changes in the balances of each component of accumulated other comprehensive loss for the nine months ended September 30, 2020 and 2019:
Change in
funded status of
retirement
obligations		Accretion of loss on debt securities reclassified to held-to-maturityUnrealized gains (losses) on debt securities
available-for-sale and gains included in net income 		Other-than-
temporary
impairment
accretion on debt
securities		Unrealized (losses) gains on derivativesTotal
accumulated
other
comprehensive
loss
(Dollars in thousands)
Balance - December 31, 2019$(6,690)(386)29,456 (10,629)(30,373)(18,622)
Net change619 160 35,025 641 (68,891)(32,446)
Balance - September 30, 2020$(6,071)(226)64,481 (9,988)(99,264)(51,068)
Balance - December 31, 2018$(3,018)(921)(8,884)(11,397)12,651 (11,569)
Net change40 472 43,826 589 (54,253)(9,326)
Balance - September 30, 2019$(2,978)(449)34,942 (10,808)(41,602)(20,895)

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,
2020201920202019
(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 loss (gain)299 (2)898 (6)
Interest expense
Reclassification adjustment for unrealized losses (gains) on derivatives9,450 (509)17,631 (4,327)
Total before tax9,749 (511)18,529 1,357 
Income tax (expense) benefit(2,716)147 (5,106)(225)
Net of tax$7,033 (364)13,423 1,132 

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15.    Stockholders’ Equity

 The changes in the components of stockholders’ equity for the three months ended September 30, 2020 and 2019 are as follows:
Common
stock		Additional
paid-in
capital		Retained
earnings		Treasury
stock		Unallocated
common
stock held
by ESOP		Accumulated
other
comprehensive
loss		Total
stockholders’
equity
 (In thousands)
Balance at June 30, 2019$3,591 2,809,851 1,206,873 (995,265)(79,764)(18,411)2,926,875 
Net income— — 51,972 — — — 51,972 
Other comprehensive loss, net of tax— — — — — (2,484)(2,484)
Purchase of treasury stock (2,004,717 shares)
— — — (22,486)— — (22,486)
Treasury stock allocated to restricted stock plan (1,687,500 shares)
— (21,129)101 21,028 — — — 
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 
Balance at June 30, 2020$3,619 2,851,306 1,259,605 (1,355,626)(76,768)(59,236)2,622,900 
Net income— — 64,312 — — — 64,312 
Other comprehensive income, net of tax— — — — — 8,168 8,168 
Purchase of treasury stock (7,346 shares)
— — — (57)— — (57)
Treasury stock allocated to restricted stock plan (21,144 shares)
— (167)(92)259 — — — 
Compensation cost for stock options and restricted stock— 3,479 — — — — 3,479 
Restricted stock forfeitures (2,887 shares)
— 33 2 (35)— — — 
Cash dividend paid ($0.12 per common share)
— — (29,987)— — — (29,987)
ESOP shares allocated or committed to be released— 193 — — 749 — 942 
Balance at September 30, 2020$3,619 2,854,844 1,293,840 (1,355,459)(76,019)(51,068)2,669,757 

16.    Fair Value Measurements
    We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Our debt securities available-for-sale and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets or liabilities on a non-recurring basis, such as held-to-maturity debt securities, mortgage servicing rights (“MSR”), loans receivable and other real estate owned. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets. Additionally, in connection with our mortgage banking activities we have commitments to fund loans held-for-sale and commitments to sell loans, which are considered free-standing derivative instruments, the fair values of which are not material to our financial condition or results of operations.
    In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures”, we group our assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:
•Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.
•Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
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•Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.
    We base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Assets Measured at Fair Value on a Recurring Basis
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.
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Derivatives
    Derivatives are reported at fair value utilizing Level 2 inputs. The fair values of interest rate swap and risk participation agreements are based on a valuation model that uses primarily observable inputs, such as benchmark yield curves and interest rate spreads.
    The following tables provide the level of valuation assumptions used to determine the carrying value of our assets and liabilities measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019.
 Carrying Value at September 30, 2020
 TotalLevel 1Level 2Level 3
 (In thousands)
Assets:
Equity securities$8,703 8,703 — — 
Debt securities available for sale:
Government-sponsored enterprises$4,741 — 4,741 — 
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation1,346,260 — 1,346,260 — 
Federal National Mortgage Association1,219,643 — 1,219,643 — 
Government National Mortgage Association258,315 — 258,315 — 
Total debt securities available-for-sale$2,828,959 — 2,828,959 — 
Interest rate swaps$36,552 — 36,552 — 
Liabilities:
Derivatives:
Interest rate swaps$452 — 452 — 
Other contracts230 — 230 — 
Total derivatives$682 — 682 — 
 Carrying Value at December 31, 2019
 TotalLevel 1Level 2Level 3
 (In thousands)
Assets:
Equity securities$6,039 6,039 — — 
Debt securities available for sale:
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation$1,240,379 — 1,240,379 — 
Federal National Mortgage Association1,178,049 — 1,178,049 — 
Government National Mortgage Association276,962 — 276,962 — 
Total debt securities available-for-sale$2,695,390 — 2,695,390 — 
Interest rate swaps$5,989 — 5,989 — 
Liabilities:
Derivatives:
Other contracts$125 — 125 — 
Total derivatives$125 — 125 — 
    There have been no changes in the methodologies used at September 30, 2020 from December 31, 2019, and there were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2020.
    There were no Level 3 assets measured at fair value on a recurring basis for the nine months ended September 30, 2020 and December 31, 2019.
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Assets Measured at Fair Value on a Non-Recurring Basis
Mortgage Servicing Rights, Net
    Mortgage servicing rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSR is obtained through independent third-party valuations through an analysis of future cash flows, incorporating assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, including the market’s perception of future interest rate movements. The prepayment speed and the discount rate are considered two of the most significant inputs in the model.  At September 30, 2020, the fair value model used prepayment speeds ranging from 14.88% to 32.40% and a discount rate of 12.03% for the valuation of the mortgage servicing rights. At December 31, 2019, the fair value model used prepayment speeds ranging from 6.60% to 29.10% and a discount rate of 12.05% for the valuation of the mortgage servicing rights. A significant degree of judgment is involved in valuing the mortgage servicing rights using Level 3 inputs. The use of different assumptions could have a significant positive or negative effect on the fair value estimate.
Collateral-Dependent Loans/Impaired Loans Receivable
    With the adoption of ASU 2016-13, loans which meet certain criteria are individually evaluated as part of the process of calculating the allowance for credit losses. Prior to adoption, such loans were evaluated for impairment. However, the valuation method remains unchanged. A loan is individually evaluated when it is a commercial loan with an outstanding balance greater than $1.0 million and on non-accrual status, loans modified in a troubled debt restructuring, and other commercial loans with $1.0 million in outstanding principal if management has specific information that it is probable they will not collect all amounts due under the contractual terms of the loan agreement. Collateral-dependent loans secured by property 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. 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 Other Repossessed Assets
    Other Real Estate Owned and Other Repossessed Assets are recorded at estimated fair value, less estimated selling costs when acquired, thus establishing a new cost basis. Fair value of foreclosed real estate property is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience and are discounted an additional 0% to 25% for estimated costs to sell. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for loan losses. If further declines in the estimated fair value of the asset occur, a writedown is recorded through expense. The valuation of foreclosed and repossessed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions. Operating costs after acquisition are generally expensed.
Loans Held for Sale
    Residential mortgage loans held for sale are recorded at the lower of cost or fair value and are therefore measured at fair value on a non-recurring basis. When available, the Company uses observable secondary market data, including pricing on recent closed market transactions for loans with similar characteristics.
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    The following tables provide the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a non-recurring basis at September 30, 2020 and December 31, 2019. For the three months ended September 30, 2020, there was no change to the carrying value of collateral-dependent loans, other real estate owned or loans held for sale. For the three months ended December 31, 2019, there was no change to the carrying value of impaired loans or loans held for sale.
 Security TypeValuation TechniqueUnobservable InputRangeWeighted Average InputCarrying Value at September 30, 2020
MinimumMaximumTotalLevel 1Level 2Level 3
 (In thousands)
MSR, netEstimated cash flowPrepayment speeds14.9%32.4%19.14%$10,871 — — 10,871 
$10,871 — — 10,871 
 
 Security TypeValuation TechniqueUnobservable InputRangeWeighted Average InputCarrying Value at December 31, 2019
MinimumMaximumTotalLevel 1Level 2Level 3
 (In thousands)
MSR, netEstimated cash flowPrepayment speeds6.6%29.1%11.04%$10,409 — — 10,409 
Other real estate owned Market comparableLack of marketability0.0%25.0%2.70%262 — — 262 
$10,671 — — 10,671 
Other Fair Value Disclosures
    Fair value estimates, methods and assumptions for the Company’s financial instruments not recorded at fair value on a recurring or non-recurring basis are set forth below.
Cash and Cash Equivalents
    For cash, short-term U.S. Treasury securities and due from banks, the carrying amount approximates fair value.
Debt Securities Held-to-Maturity
    Our debt securities held-to-maturity portfolio, consisting primarily of mortgage-backed securities and other debt securities for which we have a positive intent and ability to hold to maturity, is carried at amortized cost less any allowance for credit losses. Management utilizes various inputs to determine the fair value of the portfolio. The Company obtains one price for each security primarily from a third-party pricing service, which generally uses quoted or other observable inputs for the determination of fair value. The pricing service normally derives the security prices through recently reported trades for identical or similar securities, making adjustments through the reporting date based upon available observable market information. For securities not actively traded, the pricing service may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, credit spreads, default rates, prepayment speeds and non-binding broker quotes. In the absence of quoted prices and in an illiquid market, valuation techniques, which require inputs that are both significant to the fair value measurement and unobservable, are used to determine fair value of the investment. Valuation techniques are based on various assumptions, including, but not limited to forecasted cash flows, discount rates, rate of return, adjustments for nonperformance and liquidity, and liquidation values. As the Company is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has not historically resulted in adjustment in the prices obtained from the pricing service.
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FHLB Stock
    The fair value of the Federal Home Loan Bank of New York (“FHLB”) stock is its carrying value, since this is the amount for which it could be redeemed. There is no active market for this stock and the Bank is required to hold a minimum investment based upon the balance of mortgage related assets held by the member 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.
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Commitments to Extend Credit
    The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For commitments to originate fixed rate loans, fair value also considers the difference between current levels of interest rates and the committed rates. Due to the short-term nature of our outstanding commitments, the fair values of these commitments are immaterial to our financial condition.
The carrying values and estimated fair values of the Company’s financial instruments are presented in the following table.
 September 30, 2020
 CarryingEstimated Fair Value
 valueTotalLevel 1Level 2Level 3
 (In thousands)
Financial assets:
Cash and cash equivalents$557,749 557,749 557,749 — — 
Equities8,703 8,703 8,703 — — 
Debt securities available-for-sale2,828,959 2,828,959 — 2,828,959 — 
Debt securities held-to-maturity, net1,236,610 1,304,693 — 1,240,586 64,107 
FHLB stock214,255 214,255 214,255 — — 
Loans held for sale19,984 19,984 — 19,984 — 
Net loans20,698,057 20,975,033 — — 20,975,033 
Derivative financial instruments36,552 36,552 — 36,552 — 
Financial liabilities:
Deposits, other than time deposits$15,419,929 15,419,929 15,419,929 — — 
Time deposits3,683,606 3,697,232 — 3,697,232 — 
Borrowed funds4,307,523 4,391,922 — 4,391,922 — 
Derivative financial instruments682 682 — 682 — 
 December 31, 2019
 CarryingEstimated Fair Value
 valueTotalLevel 1Level 2Level 3
 (In thousands)
Financial assets:
Cash and cash equivalents$174,915 174,915 174,915 — — 
Equities6,039 6,039 6,039 — — 
Debt securities available-for-sale2,695,390 2,695,390 — 2,695,390 — 
Debt securities held-to-maturity1,148,815 1,190,104 — 1,116,771 73,333 
FHLB stock267,219 267,219 267,219 — — 
Loans held for sale29,797 29,797 — 29,797 — 
Net loans21,476,056 21,563,627 — — 21,563,627 
Derivative financial instruments5,989 5,989 — 5,989 — 
Financial liabilities:
Deposits, other than time deposits$13,853,030 13,853,030 13,853,030 — — 
Time deposits4,007,308 4,007,342 — 4,007,342 — 
Borrowed funds5,827,111 5,834,895 — 5,834,895 — 
Derivative financial instruments125 125 — 125 — 
Limitations
    Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience,
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current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
    Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets that are not considered financial assets include deferred tax assets, premises and equipment and bank owned life insurance. Liabilities for pension and other postretirement benefits are not considered financial liabilities. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

17.    Revenue Recognition
    The Company’s contracts with customers in the scope of Topic 606, Revenue from Contracts with Customers, are contracts for deposit accounts and contracts for non-deposit investment accounts through a third-party service provider.  Both types of contracts result in non-interest income being recognized.  The revenue resulting from deposit accounts, which includes fees such as insufficient funds fees, wire transfer fees and out-of-network ATM transaction fees, is included as a component of fees and service charges on the consolidated statements of income.  The revenue resulting from non-deposit investment accounts is included as a component of other income on the Consolidated Statements of Income. 
Revenue from contracts with customers included in fees and service charges and other income was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(Dollars in thousands)
Revenue from contracts with customers included in:
Fees and service charges$3,369 4,337 10,227 11,350 
Other income3,444 2,230 8,428 6,961 
Total revenue from contracts with customers$6,813 6,567 18,655 18,311 
    For our contracts with customers, we satisfy our performance obligations each day as services are rendered.  For our deposit account revenue, we receive payment on a daily basis as services are rendered and for our non-deposit investment account revenue, we receive payment on a monthly basis from our third-party service provider as services are rendered.


























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18.    Recent Accounting Pronouncements
Standard
DescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Standards Adopted in 2020
Measurement of Credit Losses on Financial InstrumentsThis ASU changes how entities report credit losses for financial assets held at amortized cost and available-for-sale debt securities. The amendments replace the “incurred loss” approach with a methodology that incorporates macroeconomic forecast assumptions and management judgments applicable to and through the expected life of the portfolios based on relevant information about past events, including historical loss experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The amendments apply to financial assets such as loans, leases and held-to-maturity investments; and certain off-balance sheet credit exposures. The amendments expand credit quality disclosure requirements.January 1, 2020
The Company adopted the standard’s provisions and all of its related updates on January 1, 2020. The amendments were applied on a modified retrospective basis. See Note 1 - Summary of Significant Accounting Principles for information on the impact of the adoption of ASU 2016-13 on the Company’s Consolidated Financial Statements.
Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Specifically, where a cloud computing arrangement includes a license to internal-use software, the software license is accounted for by the customer in accordance with Subtopic 350-40, “Intangibles- Goodwill and Other-Internal-Use Software”.
January 1, 2020

Early adoption permitted
The Company will apply the amendments in this Update prospectively to all implementation costs incurred after January 1, 2020. The adoption of ASU No. 2018-15 did not have an impact on the Company’s Consolidated Financial Statements.
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement
The amendments remove the requirement to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of such transfers and the valuation processes for Level 3 fair value measurements. The ASU modifies the disclosure requirements for investments in certain entities that calculate net asset value and clarify the purpose of the measurement uncertainty disclosure. The ASU adds disclosure requirements about the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.
January 1, 2020

Early adoption permitted to any removed or modified disclosures and delay of adoption of additional disclosures until the effective date
Changes should be applied retrospectively to all periods presented upon the effective date with the exception of the following, which should be applied prospectively: disclosures relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the disclosures for uncertainty measurement. The adoption of ASU 2018-13 did not have an impact on the Company’s Consolidated Financial Statements.
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Standard
DescriptionRequired date of adoptionEffect on 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 Company is applying the amendments in ASU 2017-04 prospectively for goodwill impairment testing conducted after January 1, 2020.
Standards Not Yet Adopted
Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own EquityThe amendments simplify the accounting for certain financial instruments with the characteristics of liabilities and equity by reducing the number of models for convertible debt instruments and convertible preferred stock and amends how convertible instruments and equity contracts with an option to be settled in cash or shares affect the EPS calculation. The update also amends the derivatives scope exception for contracts in an entity’s own equity.
January 1, 2022

Early adoption permitted not earlier than fiscal years beginning 2021
The update is not expected to have a material impact on the Company’s Consolidated Financial Statements.
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ReportingThe amendments provide expedients and exceptions for applying GAAP to contracts or hedging relationships affected by the discontinuance of LIBOR as a benchmark rate to alleviate the burden and cost of such modifications. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments also provide a one-time election to sell and/or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.Effective for a limited time as of March 12, 2020 through December 31, 2022
The Company is evaluating its financial instruments indexed to USD-LIBOR for which the amendments provide expedients and administrative relief.
Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force)This update clarifies the application of the alternative provided in ASU 2016-01 to measure certain equity securities without a readily determinable fair value. The amendments in this update clarify that a company should consider observable transactions that require it to either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments further provide clarification related to the accounting for certain forward contracts and purchased options.
January 1, 2021

Early adoption permitted
The update is to be applied prospectively. The Company does not expect ASU 2020-01 to have a material impact on its Consolidated Financial Statements.
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Standard
DescriptionRequired date of adoptionEffect on Consolidated Financial Statements
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
The amendments simplify the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and also clarify and amend existing guidance.
January 1, 2021

Early adoption permitted

This update will be effective for the Company January 1, 2021 with early adoption permitted. The Company does not expect ASU No. 2019-12 to have a material impact on its Consolidated Financial Statements.
Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans
The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures, and adding disclosure requirements identified as relevant.
January 1, 2021

Early adoption permitted
The update is to be applied on a retrospective basis. The Company will evaluate the effect of ASU 2018-14 on disclosures with regard to employee benefit plans but does not expect a material impact on the Company’s Consolidated Financial Statements.

19.    Subsequent Events
    As defined in FASB ASC 855, “Subsequent Events”, subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or available to be issued. Financial statements are considered issued when they are widely distributed to stockholders and other financial statement users for general use and reliance in a form and format that complies with U.S. GAAP.
Dividend
    On October 28, 2020, the Company declared a cash dividend of $0.12 per share. The $0.12 dividend per share will be paid to stockholders on November 25, 2020, with a record date of November 10, 2020.
Sale-Leaseback Transactions
On August 3, 2020, the Bank entered into an agreement for the sale-leaseback of 15 branch locations, subject to buyer due diligence. The transaction was not completed as of September 30, 2020 and therefore, was not reflected in the Consolidated Financial Statements as of September 30, 2020. As of November 6, 2020, a portion of the transaction has been completed and the remainder of the transaction is expected to be completed in the fourth quarter of 2020. The Company expects to realize an after-tax gain of approximately $7 million net of transaction related expenses in the fourth quarter of 2020.
On November 3, 2020, the Bank entered into an agreement for the sale-leaseback of a corporate office location, subject to buyer due diligence. The transaction is expected to close in the fourth quarter of 2020 and the Company expects to realize an after-tax gain of approximately $10 million net of transaction related expenses.
Non-Performing Loan Sale
On October 30, 2020, the Company sold a non-performing multi-family loan with a net unpaid principal balance of $18.1 million as of September 30, 2020. The Company expects to recognize a recovery of approximately $2 million in the allowance for credit losses in connection with the sale.
Debt Extinguishment
During October 2020, the Company extinguished approximately $600 million of borrowings, which resulted in a cost of approximately $8.6 million.
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
    Certain statements contained herein are not based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which Investors Bancorp, Inc. (the “Company”) operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations or interpretations of regulations affecting financial institutions, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity. In addition, the COVID-19 pandemic is having an adverse impact on us, our customers and the communities we serve. The adverse effect of the COVID-19 pandemic on us, our customers and the communities where we operate may adversely affect our business, results of operations and financial condition for an indefinite period of time. Reference is made to Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as well as the Company’s subsequent quarterly reports on Form 10-Q 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 September 30, 2020, we consider the following to be our critical accounting policies.
Allowance for Credit Losses. The allowance for credit losses includes both the allowance for loan and lease losses and the reserve for unfunded lending commitments and represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. The measurement of expected credit losses is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through the provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses. The allowance for loan and security losses is reported separately as contra-assets to loans and securities on the consolidated balance sheet. The expected credit loss for unfunded lending commitments and unfunded loan commitments is reported on the consolidated balance sheet in other liabilities. The provision for credit losses related to loans, unfunded commitments and debt securities is reported on the consolidated statement of income.
Allowance for Credit Losses on Loans Receivable
    The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether the loans in a pool continue to exhibit similar risk characteristics as the other loans in the pool. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the allowance on an individual basis. The Company evaluates the segmentation at least annually to determine whether loans continue to share similar risk characteristics. Loans are charged off against the allowance when the Company believes the loan balances become
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uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged off or expected to be charged off.
    The Company has chosen to segment its portfolio consistent with the manner in which it manages the risk of the type of credit. The Company’s segments for loans include multi-family, commercial real estate, commercial and industrial, construction, residential and consumer.
    
    The Company calculates estimated credit loss on its loan portfolio typically using a probability of default and loss given default quantitative model methodology. The point in time probability of default and loss given default are then conditioned by macroeconomic scenarios to incorporate reasonable and supportable forecasts that affect the collectability of the reported amount. For a small portion of the loan portfolio, i.e. unsecured consumer loans, small business loans and loans to individuals, the Company utilizes a loss rate method to calculate the expected credit loss of that asset segment.
    The Company estimates the allowance for credit losses on loans using relevant available information from internal and external sources related to past events and current conditions as well as the incorporation of reasonable and supportable forecasts. The Company evaluates the use of multiple economic scenarios and the weighting of those scenarios on a quarterly basis. The scenarios that are chosen and the amount of weighting given to each scenario depend on a variety of factors including third party economists and firms, industry trends and other available published economic information.
    After the reasonable and supportable forecast period, the Company reverts to average historical losses. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.
    Also included in the allowance for loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative method or the economic assumptions described above. For example, factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due loans and non-accrual loans, the effect of external factors such as competition, and the legal and regulatory requirements, among other. Furthermore, the Company considers the inherent uncertainty in quantitative models that are built on historical data.
Individually evaluated
    On a case-by-case basis, the Company may conclude a loan should be evaluated on an individual basis based on its disparate risk characteristics. The Company individually evaluates loans that meet the following criteria for expected credit loss, as the Company has determined that these loans generally do not share similar risk characteristics with other loans in the portfolio:
•Commercial loans with an outstanding balance greater than $1.0 million and on non-accrual status;
•Troubled debt restructured loans; and
•Other commercial loans with greater than $1.0 million in outstanding principal, if management has specific information that it is probable they will not collect all principal amounts due under the contractual terms of the loan agreement.
    When the Company determines that the loan no longer shares similar risk characteristics of other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable, to ensure that the credit loss is not delayed until actual loss. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.
Acquired assets
    Acquired assets are included in the Company's calculation of the allowance for credit losses. How the allowance on an acquired asset is recorded depends on whether or not it has been classified as a Purchased Financial Asset with Credit Deterioration (“PCD”). PCD assets are assets acquired at a discount that is due, in part, to credit quality. PCD assets are accounted for in accordance with ASC Subtopic 326-20 and are initially recorded at fair value as determined by the sum of the present value of expected future cash flows and an allowance for credit losses at acquisition. The allowance for PCD assets is recorded through a gross-up effect, while the allowance for acquired non-PCD assets such as loans is recorded through provision expense, consistent with originated loans. Thus, the determination of which assets are PCD and non-PCD can have a
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significant effect on the accounting for these assets.
    Subsequent to acquisition, the allowance for PCD loans will generally follow the same estimation, provision and charge-off process as non-PCD acquired and originated loans. Additionally, TDR identification for acquired loans (PCD and non-PCD) will be consistent with the TDR identification for originated loans.
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
COVID-19 Pandemic
    Beginning in March 2020, the impacts of the COVID-19 pandemic, including social distancing guidelines, closure of non-essential businesses and shelter-at-home mandates, caused a global economic downturn. The economic downturn has included a decline in gross domestic product and an increase in unemployment. During the third quarter of 2020, the unemployment rate continued to decline but remained significantly elevated above the pre-pandemic unemployment rate. The COVID-19 pandemic and its impact on the economy have led to actions including the enactment of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), including the establishment of the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”).
    We continue to monitor developments related to COVID-19, including, but not limited to, its impact on our employees, customers, communities and results of operations. During the first quarter of 2020, the majority of our corporate workforce had transitioned to working remotely and we successfully transitioned to a “limited service” branch model including drive-thru operations and ATM services, as well as in-branch services available by appointment only. During the second quarter of 2020, all of our branches resumed normal operating hours and all lobbies re-opened for our clients. In addition, the majority of our corporate workforce have returned to our corporate offices in some capacity and the remainder continues to work remotely in an effective manner. Proper protocols have been put in place in our branches and corporate offices to ensure the continued safety of our employees and customers.
    While we have continued to support our customers by granting second payment deferrals for those experiencing continued hardship because of the pandemic, we have also worked diligently with our customers to ensure a return to current payment status for a significant portion of our clients who have ended their initial deferral period. At October 20, 2020, loans with an aggregate outstanding balance of approximately $730 million, or 3% of total loans, were in COVID-19 related deferment. Based on information available as of October 20, 2020, approximately $300 million of deferments are expected to expire during the fourth quarter of 2020.

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The following table presents the Company’s loan portfolio at September 30, 2020 by industry sector and the balance of deferrals by loan portfolio as of October 20, 2020:
Segment/Industry
Loan Balance
(in millions)
Active Deferrals
(in millions)
Active Deferrals / Loans
Commercial and industrial:
Accommodation and Food Service$297 $205 69 %
Administrative and Support and Waste Management114 10 9 %
Agriculture, Forestry, Fishing and Hunting20 — 0 %
Arts, Entertainment, and Recreation56 18 32 %
Construction276 — 0 %
Educational Service110 — 0 %
Finance and Insurance149 — 0 %
Health Care and Social Assistance655 11 2 %
Information76 — 0 %
Management of Companies and Enterprises6 — 0 %
Manufacturing187 15 8 %
Mining, Quarrying, and Oil and Gas Extraction51 — 0 %
Professional, Scientific, and Technical Services133 — 0 %
Public Administration1 — 0 %
Real Estate and Rental568 20 4 %
Retail Trade - clothing, home, gasoline, health104 — 0 %
Retail Trade - sporting, hobby, vending, e-commerce31 — 0 %
Transportation - air, rail, truck, water, pipeline233 — 0 %
Utilities6 — 0 %
Wholesale Trade139 — 0 %
Other187 3 2 %
Total Commercial and Industrial$3,399 $282 8 %
Commercial real estate:
Accommodation and Food Service$111 $61 55 %
Arts, Entertainment, and Recreation18 — 0 %
Health Care and Social Assistance 54 — 0 %
Mixed Use Property 476 11 2 %
Office1,208 10 1 %
Retail Store 947 6 1 %
Shopping Center891 13 1 %
Warehouse 761 1 0 %
Other 446 6 1 %
Total Commercial Real Estate$4,912 $108 2 %
Multi-Family7,256 188 3 %
Construction342 15 4 %
Residential and Consumer5,089 137 3 %
Total Loans$20,998 $730 3 %
    Given the unprecedented uncertainty and continually evolving economic effects and social impacts of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations and financial condition are highly uncertain. Should current economic conditions persist or continue to deteriorate, we expect that this macroeconomic environment will have a continued adverse effect on our business and results of operations, including additional borrower deferral requests, delinquent loans and non-accrual loans. For more information on how the risks related to COVID-19 may adversely affect our business, results of operations and financial condition, see the additional risk factor included in Part II, Item 1A of this Quarterly Report on Form 10-Q.
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Third Quarter of 2020 Results Summary
    During the third quarter of 2020, we demonstrated financial strength as previously deteriorated economic conditions continued to improve. 
•We reported net income of $64.3 million, or $0.27 per diluted share, for the three months ended September 30, 2020 as compared to $42.6 million, or $0.18 per diluted share, for the three months ended June 30, 2020 and $52.0 million, or $0.20 per diluted share, for the three months ended September 30, 2019. For the nine months ended September 30, 2020, net income totaled $146.4 million, or $0.62 per diluted share, compared to $146.8 million, or $0.55 per diluted share, for the nine months ended September 30, 2019.
•Net interest margin increased six basis points to 2.79% for the three months ended September 30, 2020 compared to the three months ended June 30, 2020. Net interest margin continued to be negatively impacted by an elevated cash position during the quarter.
•Cash and cash equivalents were $557.7 million at September 30, 2020 as compared to $735.2 million at June 30, 2020. Average interest-earning cash and cash equivalents were $978.0 million for the three months ended September 30, 2020 compared with $1.29 billion for the three months ended June 30, 2020.
•Non-interest-bearing deposits increased $304.6 million, or 10.0%, during the three months ended September 30, 2020. The cost of interest-bearing deposits decreased 9 basis points to 0.84% for the three months ended September 30, 2020 compared to the three months ended June 30, 2020.
•Total loans decreased $364.2 million, or 1.7%, to $21.00 billion at September 30, 2020 from $21.36 billion at June 30, 2020.
•Provision for credit losses was $8.3 million for the three months ended September 30, 2020 compared with $33.3 million for the three months ended June 30, 2020.
•Total non-interest income was $19.9 million for the three months ended September 30, 2020, an increase of $9.8 million compared to the three months ended June 30, 2020.
•Total non-interest expenses were $104.1 million for the three months ended September 30, 2020, an increase of $4.0 million, or 4.0%, compared to the three months ended June 30, 2020. Included in total non-interest expenses were $965,000 of costs from the early extinguishment of $200 million of borrowings during the three months ended September 30, 2020. The efficiency ratio declined to 51.63% for the three months ended September 30, 2020 from 52.06% for the three months ended June 30, 2020.
•As of October 20, 2020, COVID-19 related loan deferrals totaled $730 million, or 3% of loans, compared to $2.7 billion, or 13% of loans, as of July 22, 2020.
•Non-accrual loans were $132.0 million, or 0.63% of total loans, at September 30, 2020 as compared to $126.8 million, or 0.59% of total loans, at June 30, 2020 and $92.1 million, or 0.42% of total loans, at September 30, 2019.
•Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based and Total Risk-Based Capital Ratios were 9.76%, 13.24%, 13.24% and 14.49%, respectively, at September 30, 2020.
Comparison of Operating Results for the Three and Nine Months Ended September 30, 2020 and 2019
    Net Income. Net income for the three months ended September 30, 2020 was $64.3 million compared to net income of $52.0 million for the three months ended September 30, 2019. Net income for the nine months ended September 30, 2020 was $146.4 million compared to net income of $146.8 million for the nine months ended September 30, 2019.
    Net Interest Income. Net interest income increased by $17.2 million, or 10.4%, to $181.6 million for the three months ended September 30, 2020 from $164.5 million for the three months ended September 30, 2019. The net interest margin increased 26 basis points to 2.79% for the three months ended September 30, 2020 from 2.53% for the three months ended September 30, 2019.
    Net interest income increased by $50.6 million, or 10.4%, to $536.9 million for the nine months ended September 30, 2020 from $486.3 million for the nine months ended September 30, 2019. The net interest margin increased 22 basis points to 2.74% for the nine months ended September 30, 2020 from 2.52% for the nine months ended September 30, 2019.
    Total interest and dividend income decreased by $23.9 million, or 9.0%, to $240.7 million for the three months ended September 30, 2020. Interest income on loans decreased by $16.5 million, or 7.1%, to $215.2 million for the three months ended September 30, 2020, primarily as a result of a 15 basis point decrease in the weighted average yield on net loans to 4.12%. In addition, the average balance of net loans decreased $843.1 million to $20.88 billion, driven by paydowns and
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payoffs, partially offset by loan originations, including $334.7 million of PPP loans, and $453.3 million of loans acquired from Gold Coast. Prepayment penalties, which are included in interest income, totaled $7.4 million for the three months ended September 30, 2020 compared to $5.2 million for the three months ended September 30, 2019. Interest income on all other interest-earning assets, excluding loans, decreased by $7.3 million, or 22.4%, to $25.5 million for the three months ended September 30, 2020 which is attributed to the weighted average yield on interest-earning assets, excluding loans, which decreased 113 basis points to 1.97%. Partially offsetting this decrease, the average balance of all other interest-earning assets, excluding loans, increased $935.4 million to $5.17 billion for the three months ended September 30, 2020.
    Total interest and dividend income decreased by $36.8 million, or 4.7%, to $743.0 million for the nine months ended September 30, 2020. Interest income on loans decreased by $26.6 million, or 3.9%, to $657.5 million for the nine months ended September 30, 2020, primarily as a result of an 8 basis point decrease in the weighted average yield on net loans to 4.14%. In addition, the average balance of net loans decreased $438.9 million to $21.16 billion, driven by paydowns and payoffs, partially offset by loan originations, including $334.7 million of PPP loans, and $453.3 million of loans acquired from Gold Coast. Prepayment penalties, which are included in interest income, totaled $23.2 million for the nine months ended September 30, 2020 compared to $11.4 million for the nine months ended September 30, 2019. Interest income on all other interest-earning assets, excluding loans, decreased by $10.2 million, or 10.7%, to $85.5 million for the nine months ended September 30, 2020 which is attributed to the weighted average yield on interest-earning assets, excluding loans, which decreased 76 basis points to 2.30%. Partially offsetting this decrease, the average balance of all other interest-earning assets, excluding loans, increased $778.8 million to $4.95 billion for the nine months ended September 30, 2020.
    Total interest expense decreased by $41.0 million, or 41.0%, to $59.1 million for the three months ended September 30, 2020. Interest expense on interest-bearing deposits decreased $33.9 million, or 49.8%, to $34.1 million for the three months ended September 30, 2020. The weighted average cost of interest-bearing deposits decreased 93 basis points to 0.84% for the three months ended September 30, 2020. Partially offsetting this decrease, the average balance of total interest-bearing deposits increased $848.1 million, or 5.5%, to $16.21 billion for the three months ended September 30, 2020. Interest expense on borrowed funds decreased by $7.2 million, or 22.3%, to $25.0 million for the three months ended September 30, 2020. The average balance of borrowed funds decreased $1.26 billion, or 21.9%, to $4.49 billion for the three months ended September 30, 2020. In addition, the weighted average cost of borrowings decreased 1 basis point to 2.22% for the three months ended September 30, 2020.
    Total interest expense decreased by $87.4 million, or 29.8%, to $206.1 million for the nine months ended September 30, 2020. Interest expense on interest-bearing deposits decreased $74.9 million, or 37.2%, to $126.3 million for the nine months ended September 30, 2020. The weighted average cost of interest-bearing deposits decreased 70 basis points to 1.05% for the nine months ended September 30, 2020. Partially offsetting this decrease, the average balance of total interest-bearing deposits increased $753.2 million, or 4.9%, to $16.08 billion for the nine months ended September 30, 2020. Interest expense on borrowed funds decreased by $12.5 million, or 13.5%, to $79.8 million for the nine months ended September 30, 2020. The average balance of borrowed funds decreased $500.0 million, or 9.0%, to $5.07 billion for the nine months ended September 30, 2020. In addition, the weighted average cost of borrowings decreased 11 basis points to 2.10% for the nine months ended September 30, 2020.
    
Provision for Credit Losses. Our provision for credit losses is primarily a result of the expected credit losses on our loans, unfunded commitments and held-to-maturity debt securities over the life of these financial instruments, including the inherent credit risk in these financial instruments, the composition of and changes in our portfolios of these financial instruments, and the level of charge-offs. At September 30, 2020, our allowance for credit losses and related provision continued to be affected by the impact of COVID-19 on the current and forecasted economic conditions. For the three months ended September 30, 2020, there was improvement in the U.S. and global macroeconomic consensus outlooks, which resulted in an improvement in the economic outlook used to determine the provision for credit losses when compared to June 30, 2020. For the three months ended September 30, 2020, our provision for credit losses was $8.3 million, compared to a negative provision of $2.5 million for the three months ended September 30, 2019. For the three months ended September 30, 2020, net charge-offs were $667,000 compared to $1.5 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, our provision for credit losses was $72.8 million, compared to a negative provision of $2.5 million for the nine months ended September 30, 2019. For the nine months ended September 30, 2020, net charge-offs were $12.8 million compared to $5.3 million for the nine months ended September 30, 2019.
    Non-Interest Income. Total non-interest income increased $5.1 million to $19.9 million for the three months ended September 30, 2020. This increase was primarily due to gain on loans, which increased $3.6 million due to a higher volume of mortgage banking loan sales to third parties.
    Total non-interest income increased $11.8 million to $44.7 million for the nine months ended September 30, 2020. This increase was primarily due to gain on loans, which increased $7.6 million as a result of a higher volume of mortgage
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banking loan sales to third parties. In addition, the Company recognized a $5.7 million loss on the sale of securities during the second quarter of 2019.
    Non-Interest Expenses. Total non-interest expenses were $104.1 million for the three months ended September 30, 2020, a decrease of $4.7 million, or 4.3%, compared to the three months ended September 30, 2019. The decrease was due to a decrease of $3.7 million in compensation and benefit expense driven by lower headcount, stock-based compensation expense and benefits expense. Included in non-interest expenses for the three months ended September 30, 2020 were $965,000 of costs from the early extinguishment of $200 million of borrowings.
    Total non-interest expenses were $306.6 million for the nine months ended September 30, 2020, a decrease of $9.3 million, or 2.9%, compared to the nine months ended September 30, 2019. This decrease was due to a decrease of $8.4 million in compensation and fringe benefit expense, a decrease of $4.0 million in advertising and promotional expense and a decrease of $2.5 million in other non-interest expense. These decreases were partially offset by an increase of $2.7 million in data processing and communication expense and an increase of $2.0 million in occupancy expense. Included in non-interest expenses for the nine months ended September 30, 2020 were $3.6 million of Gold Coast acquisition-related expenses.
    Income Taxes. Income tax expense for the third quarter of 2020 was $24.8 million compared to $21.0 million for the third quarter 2019.  The effective tax rate was 27.9% for the three months ended September 30, 2020 and 28.8% for the three months ended September 30, 2019. Income tax expense for the nine months ended September 30, 2020 was $55.7 million compared to $59.1 million the nine months ended September 30, 2019.  The effective tax rate was 27.6% for the nine months ended September 30, 2020 and 28.7% for the nine months ended September 30, 2019. The effective tax rate is affected by the level of income earned that is exempt from tax relative to the overall level of pre-tax income and the level of expenses not deductible for tax purposes relative to the overall level of pre-tax income. In addition, the effective tax rate is affected by the level of income allocated to the various state and local jurisdictions where we operate, because tax rates differ among such jurisdictions.
Analysis of Net Interest Income
Net interest income represents the difference between income we earn on our interest-earning assets and the expense we pay on interest-bearing liabilities. Net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned on such assets and paid on such liabilities.
Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, however interest receivable on these loans have been fully reserved for and not included in interest income. The yields set forth below include the effect of deferred fees, discounts and premiums, and purchase accounting adjustments and other adjustments that are amortized or accreted to interest income or expense.

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 Three Months Ended September 30,
 20202019
 Average
Outstanding
Balance		Interest
Earned/
Paid		Average
Yield/
Rate 		Average
Outstanding
Balance		Interest
Earned/
Paid		Average
Yield/
Rate
 (Dollars in thousands)
Interest-earning assets:
Interest-bearing deposits$978,037 $233 0.10 %$224,882 $821 1.46 %
Equity securities7,177 45 2.51 %6,001 36 2.40 %
Debt securities available-for-sale2,758,679 13,473 1.95 %2,591,055 18,167 2.80 %
Debt securities held-to-maturity1,200,933 8,277 2.76 %1,131,194 9,340 3.30 %
Net loans20,879,661 215,221 4.12 %21,722,751 231,734 4.27 %
Stock in FHLB223,032 3,452 6.19 %279,356 4,456 6.38 %
Total interest-earning assets26,047,519 240,701 3.70 %25,955,239 264,554 4.08 %
Non-interest-earning assets1,157,358 992,118 
Total assets$27,204,877 $26,947,357 
Interest-bearing liabilities:
Savings deposits$2,033,495 $2,690 0.53 %$1,958,748 $4,377 0.89 %
Interest-bearing checking5,901,759 8,658 0.59 %4,894,643 21,094 1.72 %
Money market accounts4,349,536 8,520 0.78 %3,750,846 16,065 1.71 %
Certificates of deposit3,923,651 14,241 1.45 %4,756,086 26,436 2.22 %
Total interest-bearing deposits16,208,441 34,109 0.84 %15,360,323 67,972 1.77 %
Borrowed funds4,493,591 24,970 2.22 %5,756,197 32,130 2.23 %
Total interest-bearing liabilities20,702,032 59,079 1.14 %21,116,520 100,102 1.90 %
Non-interest-bearing liabilities3,856,553 2,892,067 
Total liabilities24,558,585 24,008,587 
Stockholders’ equity2,646,292 2,938,770 
Total liabilities and stockholders’ equity$27,204,877 $26,947,357 
Net interest income$181,622 $164,452 
Net interest rate spread(1)
2.56 %2.18 %
Net interest-earning assets(2)
$5,345,487 $4,838,719 
Net interest margin(3)
2.79 %2.53 %
Ratio of interest-earning assets to total interest-bearing liabilities1.261.23

(1)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)Net interest margin represents net interest income divided by average total interest-earning assets.
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 Nine Months Ended September 30,
 20202019
 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$880,015 $1,367 0.21 %$193,427 $1,965 1.35 %
Equity securities6,480 110 2.26 %5,905 108 2.44 %
Debt securities available-for-sale2,657,564 46,371 2.33 %2,317,685 49,801 2.86 %
Debt securities held-to-maturity1,158,357 25,802 2.97 %1,379,982 31,008 3.00 %
Net loans21,157,077 657,483 4.14 %21,596,000 684,086 4.22 %
Stock in FHLB247,260 11,881 6.41 %273,885 12,871 6.27 %
Total interest-earning assets26,106,753 743,014 3.79 %25,766,884 779,839 4.04 %
Non-interest-earning assets1,080,136 964,031 
Total assets$27,186,889 $26,730,915 
Interest-bearing liabilities:
Savings deposits$2,039,596 $9,505 0.62 %$1,966,427 $12,556 0.85 %
Interest-bearing checking5,786,659 34,191 0.79 %4,912,085 65,295 1.77 %
Money market accounts4,172,144 32,624 1.04 %3,691,378 46,126 1.67 %
Certificates of deposit4,082,118 49,959 1.63 %4,757,446 77,245 2.16 %
Total interest-bearing deposits16,080,517 126,279 1.05 %15,327,336 201,222 1.75 %
Borrowed funds5,066,253 79,843 2.10 %5,566,273 92,319 2.21 %
Total interest-bearing liabilities21,146,770 206,122 1.30 %20,893,609 293,541 1.87 %
Non-interest-bearing liabilities3,402,930 2,881,242 
Total liabilities24,549,700 23,774,851 
Stockholders’ equity2,637,189 2,956,064 
Total liabilities and stockholders’ equity$27,186,889 $26,730,915 
Net interest income$536,892 $486,298 
Net interest rate spread(1)
2.49 %2.17 %
Net interest-earning assets(2)
$4,959,983 $4,873,275 
Net interest margin(3)
2.74 %2.52 %
Ratio of interest-earning assets to total interest-bearing liabilities1.231.23

(1)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3)Net interest margin represents net interest income divided by average total interest-earning assets.

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Comparison of Financial Condition at September 30, 2020 and December 31, 2019
    Total Assets. Total assets decreased by $91.8 million, or 0.3%, to $26.61 billion at September 30, 2020 from December 31, 2019. Cash and cash equivalents increased by $382.8 million to $557.7 million at September 30, 2020 from December 31, 2019 and securities increased by $224.0 million, or 5.8%, to $4.07 billion at September 30, 2020 from December 31, 2019. Net loans decreased by $778.0 million, or 3.6%, to $20.70 billion at September 30, 2020 from December 31, 2019.
    Net Loans. Net loans decreased by $778.0 million, or 3.6%, to $20.70 billion at September 30, 2020 from $21.48 billion at December 31, 2019. The detail of the loan portfolio is below:
September 30, 2020December 31, 2019
(Dollars in thousands)
Commercial loans:
Multi-family loans$7,256,015 7,813,236 
Commercial real estate loans4,912,155 4,831,347 
Commercial and industrial loans3,399,059 2,951,306 
Construction loans341,449 262,866 
Total commercial loans15,908,678 15,858,755 
Residential mortgage loans4,407,224 5,144,718 
Consumer and other681,940 699,796 
Total loans20,997,842 21,703,269 
Deferred fees, premiums and other, net(12,274)907 
Allowance for loan losses(287,511)(228,120)
Net loans $20,698,057 21,476,056 
    During the nine months ended September 30, 2020, we originated or funded $814.3 million in commercial and industrial loans (including $334.7 million of PPP loans), $733.9 million in multi-family loans, $447.8 million in residential loans, $368.9 million in commercial real estate loans, $67.3 million in consumer and other loans and $59.0 million in construction loans. Our originations reflect our continued focus on diversifying our loan portfolio. In addition, we acquired $453.3 million of loans from Gold Coast on April 3, 2020. A significant portion of our commercial loan portfolio, including commercial and industrial loans, are secured by commercial real estate and are primarily on properties and businesses located in New Jersey and New York.
    One of our key operating objectives has been, and continues to be, maintaining a high level of asset quality. We maintain sound credit standards for new loan originations and purchases. We do not originate or purchase sub-prime loans, negative amortization loans or option ARM loans. Our portfolio contains interest-only and no income verification residential mortgage loans. At September 30, 2020, interest-only residential and consumer loans totaled $35.4 million, which represented less than 1% of the residential and consumer portfolios. We no longer originate residential mortgage loans without verifying income. At September 30, 2020, these loans totaled $116.4 million. From time to time and for competitive purposes, we originate interest-only commercial real estate and multi-family loans. At September 30, 2020, these loans totaled $1.32 billion. As part of our underwriting, these loans are evaluated as fully amortizing for risk classification purposes, with the interest-only period ranging from one to ten years. In addition, we evaluate our policy limits on a regular basis. We believe these criteria adequately control the potential risks of such loans and that adequate provisions for loan losses are provided for all known and inherent risks.
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    The following table sets forth non-accrual loans (excluding loans held-for-sale) on the dates indicated as well as certain asset quality ratios:
 September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019
 # of LoansAmount# of LoansAmount# of LoansAmount# of LoansAmount# of LoansAmount
(dollars in millions)
 
Multi-family13 $51.1 14$48.3 9$23.4 8$23.3 6$19.6 
Commercial real estate28 17.8 2212.3 2111.4 2212.0 3012.3 
Commercial and industrial19 10.9 2915.6 2217.0 1812.5 1612.0 
Construction — — — — — — — — — — 
Total commercial loans60 79.8 6576.2 5251.8 4847.8 5243.9 
Residential and consumer250 52.2 25550.6 25846.6 25547.4 26148.2 
Total non-accrual loans310 $132.0 320$126.8 310$98.4 303$95.2 313$92.1 
Accruing troubled debt restructured loans51 $9.8 52$12.2 55$12.8 57$13.1 58$12.5 
Non-accrual loans to total loans0.63 %0.59 %0.46 %0.44 %0.42 %
Allowance for loan losses as a percent of non-accrual loans217.75 %215.48 %247.22 %239.66 %247.62 %
Allowance for loan losses as a percent of total loans1.37 %1.28 %1.14 %1.05 %1.05 %
    Total non-accrual loans were $132.0 million at September 30, 2020 compared to $126.8 million at June 30, 2020 and $92.1 million at September 30, 2019. At September 30, 2020 there were $7.1 million of commercial real estate loans, $5.4 million of commercial and industrial loans and $1.6 million of multi-family loans that were classified as non-accrual which were performing in accordance with their contractual terms. Criticized and classified loans as a percent of total loans increased to 7.47% at September 30, 2020 from 5.36% at December 31, 2019. We continue to proactively and diligently work to resolve our troubled loans.
On October 30, 2020, the Company sold a non-performing multi-family loan with a net unpaid principal balance of $18.1 million as of September 30, 2020. The Company expects to recognize a recovery of approximately $2 million in the allowance for credit losses in connection with the sale.
    At September 30, 2020, there were $35.7 million of loans deemed as TDRs, of which $26.5 million were residential and consumer loans, $5.4 million were commercial real estate loans and $3.8 million were commercial and industrial loans. TDRs of $9.8 million were classified as accruing and $25.9 million were classified as non-accrual at September 30, 2020. Included are $1.8 million of residential loans deemed to be TDRs as the borrower was granted a payment deferral related to COVID-19 but did not meet the criteria to be excluded from TDR as described in Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act.
    In addition to non-accrual loans, we continue to monitor our portfolio for potential problem loans. Potential problem loans are defined as loans about which we have concerns as to the ability of the borrower to comply with the current loan repayment terms and which may cause the loan to be placed on non-accrual status. As of September 30, 2020, the Company has deemed potential problem loans totaling $192.1 million, which is comprised of 16 commercial and industrial loans totaling $119.5 million, 15 commercial real estate loans totaling $65.2 million and 7 multi-family loans totaling $7.4 million. In addition, we continue to support our customers by deferring payments for borrowers experiencing hardship because of the COVID-19 pandemic. As of October 20, 2020, $730 million, or 3%, of loans were deferring principal and/or interest payments. For further information, please refer to the Executive Summary above and the additional risk factor included in Part II, Item 1A of this Quarterly Report on Form 10-Q. Management is actively monitoring all of these loans.
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    The ratio of non-accrual loans to total loans was 0.63% at September 30, 2020 compared to 0.44% at December 31, 2019. The allowance for loan losses as a percentage of non-accrual loans was 217.75% at September 30, 2020 compared to 239.66% at December 31, 2019. At September 30, 2020, our allowance for loan losses as a percentage of total loans was 1.37% compared to 1.05% at December 31, 2019.
    The allowance for loan losses increased by $59.4 million to $287.5 million at September 30, 2020 from $228.1 million at December 31, 2019. The increase reflects an increase of $71.5 million from the provision for credit losses related to our loan portfolio and an increase of $4.2 million from the initial allowance on PCD loans upon acquisition, partially offset by a decrease of $12.8 million resulting from net charge-offs and a decrease of $3.6 million upon CECL adoption. Our allowance for loan losses at September 30, 2020 continued to be affected by the impact of COVID-19 on current and forecasted economic conditions. Future increases in the allowance for loan losses may be necessary based on the composition of and change in the loan portfolio, the level of loan delinquency and the current and forecasted economic condition over the life of our loans.
    The following table sets forth the allowance for loan losses at September 30, 2020 and December 31, 2019 allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
 
 September 30, 2020December 31, 2019
 Allowance for
Loan Losses		Percent of Loans
in Each Category
to Total Loans		Allowance for
Loan Losses		Percent of Loans
in Each Category
to Total Loans
 (Dollars in thousands)
End of period allocated to:
Multi-family loans$56,881 34.6 %$74,099 36.0 %
Commercial real estate loans111,758 23.4 %50,925 22.3 %
Commercial and industrial loans78,709 16.2 %74,396 13.6 %
Construction loans5,543 1.6 %6,816 1.2 %
Residential mortgage loans30,180 21.0 %17,391 23.7 %
Consumer and other loans4,440 3.2 %2,548 3.2 %
Unallocated— — 1,945 — 
Total allowance$287,511 100.0 %$228,120 100.0 %
Securities. Securities are held primarily for liquidity, interest rate risk management and yield enhancement. Our Investment Policy requires that investment transactions conform to Federal and State investment regulations. Our investments purchased may include, but are not limited to, U.S. Treasury obligations, securities issued by various Federal Agencies, State and Municipal subdivisions, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, investment grade corporate debt instruments, and mutual funds. In addition, the Company may invest in equity securities subject to certain limitations. Purchase decisions are based upon a thorough analysis of each security to determine if it conforms to our overall asset/liability management objectives. The analysis must consider its effect on our risk-based capital measurement, prospects for yield and/or appreciation and other risk factors. Debt securities are classified as held-to-maturity or available-for-sale when purchased.
    At September 30, 2020, our securities portfolio represented 15.3% of our total assets. Securities, in the aggregate, increased by $224.0 million, or 5.8%, to $4.07 billion at September 30, 2020 from December 31, 2019. This increase was primarily a result of purchases, partially offset by paydowns. At September 30, 2020, our allowance for credit losses on held-to-maturity debt securities was $3.1 million.
Stock in the Federal Home Loan Bank, Bank Owned Life Insurance and Other Assets. The amount of stock we own in the FHLB decreased by $53.0 million, or 19.8%, to $214.3 million at September 30, 2020 from $267.2 million at December 31, 2019. The amount of stock we own in the FHLB is primarily related to the balance of our outstanding borrowings from the FHLB. Bank owned life insurance was $223.6 million at September 30, 2020 and $218.5 million at December 31, 2019. Other assets were $163.5 million at September 30, 2020 and $82.3 million at December 31, 2019. The increase in other assets was primarily driven by hedge-related assets.
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Deposits.  At September 30, 2020, deposits totaled $19.10 billion, representing 79.8% of our total liabilities. Our long-term deposit strategy is focused on attracting core deposits (savings, checking and money market accounts), resulting in a deposit mix of lower cost core products. We remain committed to our plan of attracting more core deposits because core deposits represent a more stable source of low cost funding and may be less sensitive to changes in market interest rates than other types of funding including borrowed funds.
We have a suite of commercial deposit products, designed to appeal to small and mid-sized businesses and non-profit organizations. Interest rates, maturity terms, service fees and withdrawal penalties are all reviewed on a periodic basis. Deposit rates and terms are based primarily on our current operating strategies, market rates, liquidity requirements, competitive forces and growth goals. We also rely on personalized customer service, long-standing relationships with customers and an active marketing program to attract and retain deposits.
Deposits increased by $1.24 billion, or 7.0%, to $19.10 billion at September 30, 2020 from $17.86 billion at December 31, 2019 primarily driven by increases in checking and money market deposits, offset by a decrease in time deposits. Checking accounts increased $1.06 billion to $9.04 billion at September 30, 2020 from $7.99 billion at December 31, 2019. Core deposits represented approximately 81% of our total deposit portfolio at September 30, 2020 compared to 78% at December 31, 2019.
The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated:
September 30, 2020December 31, 2019
BalancePercent of Total DepositBalancePercent of Total Deposit
(Dollars in thousands)
Non-interest bearing:
Checking accounts$3,345,011 17.5 %$2,472,232 13.8 %
Interest-bearing:
Checking accounts5,696,645 29.8 %5,512,979 30.9 %
Money market deposits4,369,733 22.9 %3,817,718 21.4 %
Savings2,008,540 10.5 %2,050,101 11.5 %
Certificates of deposit3,683,606 19.3 %4,007,308 22.4 %
Total Deposits$19,103,535 100.0 %$17,860,338 100.0 %
Borrowed Funds.  Borrowings are primarily with the FHLB and are collateralized by our residential and commercial mortgage portfolios. Borrowed funds decreased by $1.52 billion, or 26.1%, to $4.31 billion at September 30, 2020 from $5.83 billion at December 31, 2019 primarily driven by the increase in deposits. The decrease includes the early extinguishment of $400 million of borrowings during the second and third quarters of 2020. The extinguishments resulted in the recognition of $326,000 and $965,000 of costs during the second and third quarter, respectively, included in Other operating expenses on the Consolidated Statement of Income.
Other Liabilities. Other liabilities increased by $115.8 million, or 141.6%, to $197.7 million at September 30, 2020 from $81.8 million at December 31, 2019 primarily driven by increases in income taxes payable and our allowance for credit losses on unfunded commitments, as well as a commitment to purchase investment securities. At September 30, 2020, our allowance for credit losses on unfunded commitments was $13.9 million.
Stockholders’ Equity. Stockholders’ equity increased by $47.8 million to $2.67 billion at September 30, 2020 from $2.62 billion at December 31, 2019. The increase was primarily attributed to net income of $146.4 million, common stock issued to finance the Gold Coast acquisition of $20.9 million and share-based plan activity of $14.5 million for the nine months ended September 30, 2020. These increases were partially offset by other comprehensive loss of $32.4 million and cash dividends paid of $0.36 per share totaling $89.7 million during the nine months ended September 30, 2020. In addition, stockholders’ equity decreased by $8.5 million on January 1, 2020 in connection with the adoption of CECL.
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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 usually a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits and other borrowings from correspondent banks. Available borrowing capacity and other available liquidity sources totaled approximately $11.27 billion at September 30, 2020. Our Asset Liability Committee is responsible for establishing and monitoring our liquidity targets and strategies to ensure that sufficient liquidity exists for meeting the needs of our customers as well as unanticipated contingencies. These liquidity risk management practices have allowed us to effectively manage the market stress that began in the first quarter of 2020 from the COVID-19 pandemic.
    At September 30, 2020, the Company had no overnight borrowings outstanding. The Company had $461.0 million of overnight borrowings outstanding at December 31, 2019. The Company borrows directly from the FHLB and various financial institutions. The Company had total borrowings of $4.31 billion at September 30, 2020, a decrease of $1.52 billion from $5.83 billion at December 31, 2019.
    In the normal course of business, the Company routinely enters into various commitments, primarily relating to the origination of loans. At September 30, 2020, outstanding commitments to originate loans totaled $260.2 million; outstanding unused lines of credit totaled $1.90 billion; standby letters of credit totaled $39.8 million and outstanding commitments to sell loans totaled $69.0 million. The Company expects to have sufficient funds available to meet current commitments in the normal course of business. Time deposits scheduled to mature in one year or less totaled $3.34 billion at September 30, 2020. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.
    Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities. On May 4, 2020, S&P revised our rating outlook to negative due to economic downturn from COVID-19.
    Regulatory Capital and Developments.
    CECL. On January 1, 2020, the Company adopted the new accounting standard that requires the measurement of the allowance for credit loss to be based on the best estimate of lifetime expected credit losses inherent in the Company’s relevant financial asset. For more information, see Note 1, Summary of Significant Accounting Principles. On March 27, 2020, in response to the COVID-19 pandemic, U.S. banking regulators issued an interim final rule that the Company adopted to delay for two years the initial adoption impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during 2020 and 2021 (i.e. a five-year transition period). During the two-year delay, the Company will add back to common equity tier 1 capital (“CET1”) 100% of the initial adoption impact of CECL plus 25% of the cumulative quarterly changes in the allowance for credit losses (i.e., quarterly transitional amounts). After two years, starting on January 1, 2022, the quarterly transitional amounts along with the initial adoption impact of CECL will be phased out of CET1 capital over the three-year period.
    Paycheck Protection Program. On April 9, 2020, in response to the economic impact of the COVID-19 pandemic, the Federal Reserve, OCC and FDIC issued an interim final rule that excludes loans pledged as collateral to the Federal Reserve’s PPP Lending Facility from supplemental leverage ratio exposure, average total consolidated assets and Advanced and Standardized risk-weighted assets. Additionally, PPP loans, which are guaranteed by the Small Business Administration, will receive a zero percent risk weight under the Basel 3 Advanced and Standardized approaches regardless of whether they are pledged as collateral to the PPP Lending Facility.
    Minimum Capital Requirements. In July 2013, the Federal Deposit Insurance Corporation and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The Final Capital Rules also revised the quantity and quality of required minimum risk-based and leverage capital requirements, consistent with the Reform Act and the Third Basel Accord adopted by the Basel Committee on Banking Supervision, or Basel III capital standards. In doing so, the Final Capital Rules:
•Established a new minimum Common equity tier 1 risk-based capital ratio (common equity tier 1 capital to total risk-weighted assets) of 4.5% and increased the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%, while maintaining the minimum Total risk-based capital ratio of 8.0% and the minimum Tier 1 leverage capital ratio of 4.0%.
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•Revised the rules for calculating risk-weighted assets to enhance their risk sensitivity.
•Phased out trust preferred securities and cumulative perpetual preferred stock as Tier 1 capital.
•Added a requirement to maintain a minimum Conservation Buffer, composed of Common equity tier 1 capital, of 2.5% of risk-weighted assets, to be applied to the new Common equity tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio and the Total risk-based capital ratio, which means that banking organizations, on a fully phased in basis as of January 1, 2019, must maintain a minimum Common equity tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5% and a minimum Total risk-based capital ratio of 10.5% or have restrictions imposed on capital distributions and discretionary cash bonus payments.
•Changed the definitions of capital categories for insured depository institutions for purposes of the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions. Under these revised definitions, to be considered well-capitalized, an insured depository institution must have a Tier 1 leverage capital ratio of at least 5.0%, a Common equity tier 1 risk-based capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8.0% and a Total risk-based capital ratio of at least 10.0%.
    The new minimum regulatory capital ratios and changes to the calculation of risk-weighted assets became effective for the Bank and Company on January 1, 2015. The required minimum Conservation Buffer commenced on January 1, 2016 at 0.625% and increased in annual increments to 2.5% on January 1, 2019, which is the fully phased in Conservation Buffer. The rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum Conservation Buffer is not met. As of September 30, 2020, the Company and the Bank met the required Conservation Buffer of 2.5%.
As of September 30, 2020, the Bank and the Company were considered “well capitalized” under applicable regulations and exceeded all regulatory capital requirements as follows:
 
As of September 30, 2020 (1)
 ActualMinimum Capital Requirement with Conservation Buffer
To be Well Capitalized under Prompt Corrective Action Provisions (2)
 AmountRatioAmountRatioAmountRatio
 (Dollars in thousands)
Bank:
Tier 1 Leverage Ratio$2,387,419 8.83 %$1,082,087 4.00 %$1,352,609 5.00 %
Common Equity Tier 1 Risk-Based Capital2,387,419 11.97 %1,395,774 7.00 %1,296,076 6.50 %
Tier 1 Risk Based Capital2,387,419 11.97 %1,694,868 8.50 %1,595,170 8.00 %
Total Risk-Based Capital2,637,043 13.23 %2,093,660 10.50 %1,993,962 10.00 %
Investors Bancorp, Inc.:
Tier 1 Leverage Ratio$2,644,342 9.76 %$1,084,229 4.00 %n/an/a
Common Equity Tier 1 Risk-Based Capital2,644,342 13.24 %1,398,352 7.00 %n/an/a
Tier 1 Risk Based Capital2,644,342 13.24 %1,697,998 8.50 %n/an/a
Total Risk-Based Capital2,894,423 14.49 %2,097,527 10.50 %n/an/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 September 30, 2020:
Contractual ObligationsTotalLess than One YearOne-Two YearsTwo-Three YearsMore than Three Years
 (In thousands)
Debt obligations (excluding capitalized leases)$4,307,523 350,000 1,198,975 1,199,363 1,559,185 
Commitments to originate and purchase loans$260,157 260,157 — — — 
Commitments to sell loans$69,000 69,000 — — — 

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    Debt obligations include borrowings from the FHLB and other borrowings. The borrowings have defined terms, and none of the borrowings were callable at the option of the lender as of September 30, 2020. Additionally, at September 30, 2020, the Company’s commitments to fund unused lines of credit totaled $1.90 billion. Commitments to originate loans, commitments to fund unused lines of credit and standby letters of credit are agreements to lend additional funds to customers as long as there have been no violations of any of the conditions established in the agreements. Commitments generally have a fixed expiration or other termination clauses which may or may not require a payment of a fee. Since some of these loan commitments are expected to expire without being drawn upon, total commitments do not necessarily represent future cash requirements.
    In addition to the contractual obligations previously discussed, we have other liabilities which include $184.3 million of operating lease liabilities of which $3.6 million was acquired from Gold Coast during the three months ended June 30, 2020. We have $2.8 million of finance lease liabilities. These contractual obligations as of September 30, 2020 have not changed significantly from December 31, 2019.
    In the normal course of business, the Company sells residential mortgage loans to third parties. These loan sales are subject to customary representations and warranties. In the event that we are found to be in breach of these representations and warranties, we may be obligated to repurchase certain of these loans.
    The Company has entered into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Derivative financial instruments present on the Company’s balance sheet as of September 30. 2020 are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. During the three and nine months ended September 30, 2020, such derivatives were used to hedge the variability in cash flows associated with borrowings. These derivatives had an aggregate notional amount of $3.53 billion as of September 30, 2020. The fair value of derivatives designated as hedging activities as of September 30, 2020 was an asset of $153,000, inclusive of accrued interest and variation margin posted in accordance with the Chicago Mercantile Exchange. Derivatives with an aggregate notional amount of $475.0 million that had been used to hedge changes in the fair value of certain pools of prepayable fixed- and adjustable-rate assets were terminated during the three months ended September 30, 2020.
    The Company has credit derivatives resulting from participations in interest rate swaps provided to external lenders as part of loan participation arrangements which are, therefore, not used to manage interest rate risk in the Company’s assets or liabilities. Additionally, the Company provides interest rate risk management services to commercial customers, primarily interest rate swaps. The Company’s market risk from unfavorable movements in interest rates related to these derivative contracts is minimized by 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, 2019 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 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 of the economic value of equity and net interest income under various interest rate scenarios.
    Our tactics and strategies may include the use of various financial instruments, including derivatives, to manage our exposure to interest rate risk. Certain derivatives are designated as hedging instruments in a qualifying hedge accounting relationship (fair value or cash flow hedge). Hedged items can be either assets or liabilities. As of September 30, 2020, the
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Company had cash flow hedges with aggregate notional amounts of $3.53 billion. As of December 31, 2019, the Company had cash flow and fair value hedges with aggregate notional amounts of $2.68 billion. Included in the fair value hedges at December 31, 2019 were $475.0 million in asset swap transactions where fixed rate loan payments were exchanged for variable rate payments executed in an effort to reduce the Company’s exposure to rising rates. During the nine months ended September 30, 2020, the Company terminated such asset swap transactions.
    We actively evaluate interest rate risk in connection with our lending, investing and deposit activities and our off-balance sheet positions. At September 30, 2020, 21.0% of our total loan portfolio was comprised of residential mortgages, of which approximately 28.3% was in variable rate products, while 71.7% was in fixed rate products. Our variable rate and short term fixed rate mortgage related assets have helped to reduce our exposure to interest rate fluctuations. Long term fixed-rate products may adversely impact our net interest income in a rising rate environment. The origination of commercial loans, particularly commercial and industrial loans, commercial real estate loans and multi-family 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 off-balance sheet positions over various horizons. This asset and liability analysis includes expected cash flows from loans and securities, using forecasted prepayment rates, reinvestment rates, as well as contractual and forecasted liability cash flows. This analysis identifies mismatches in the timing of asset and liability cash flows but does not necessarily provide an accurate indicator of interest rate risk because the rate forecasts and assumptions used in the analysis may not reflect 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 approximately $7.10 billion in financial instruments which are indexed to USD-LIBOR for which it is monitoring the activity and evaluating the related risks.
    Quantitative Analysis. The table below sets forth, as of September 30, 2020, the estimated changes in our EVE and our net interest income that would result from the designated changes in interest rates. Such changes to interest rates are calculated as an immediate and permanent change for the purposes of computing EVE and a gradual change over a one-year 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, deposit decay, and funding dynamics in a potential negative rate environment, and should not be relied upon as indicative of actual results. The following table reflects management’s expectations of the changes in EVE and net interest income for an interest rate decrease of 100 basis points and increase of 200 basis points.
 
EVE (1)
Net Interest Income (2)
Change in
Interest Rates
(basis points)		Estimated
EVE		Estimated Increase (Decrease) Estimated
Net
Interest
Income		Estimated Increase (Decrease)
AmountPercentAmountPercent
 (Dollars in thousands)
+ 200bp$3,353,226 88,119 2.7 %$690,219 (37,834)(5.2)%
0bp$3,265,107 — — $728,053 — — 
-100bp$3,071,156 (193,951)(5.9)%$735,677 7,624 1.0 %
(1)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
(2)Assumes a gradual change in interest rates over a one-year period at all maturities.
    The table above indicates that at September 30, 2020, in the event of a 200 basis point increase in interest rates, we would be expected to experience a 2.7% increase in EVE and a $37.8 million, or 5.2%, decrease in net interest income. In the
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event of a 100 basis point decrease in interest rates, we would be expected to experience a 5.9% decrease in EVE and a $7.6 million, or 1.0%, increase in net interest income. This data does not reflect any future actions we may take in response to changes in interest rates, such as changing the mix in or growth of our assets and liabilities, which could change the results of the EVE and net interest income calculations.
    As mentioned above, we use an internally developed asset liability model to compute our quarterly interest rate risk reports. Certain shortcomings are inherent in any methodology used to calculate interest rate risk. Modeling EVE and net interest income sensitivity requires certain assumptions that may or may not reflect the manner in which actual yields and market values respond to changes in market interest rates. The EVE and net interest income results presented above assumes no balance sheet growth and that generally the composition of our interest-rate sensitive assets and liabilities existing at the beginning of the analysis remains constant over the period being measured and, accordingly, the data does not reflect any actions we may take in response to changes in interest rates. The EVE and net interest income results presented in the table above provide an indication of our sensitivity to interest rate changes at a point in time. The results as presented are not intended to, and do not, provide a precise forecast of the effects of changes in market interest rates on our EVE and net interest income.

ITEM 4.CONTROLS AND PROCEDURES
    Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
    There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II Other 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
    In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material update and addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the Securities and Exchange Commission. To the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

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

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

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

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

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

    Certain industries have been particularly hard-hit by the COVID-19 pandemic, including the travel and hospitality industry, the restaurant industry and the retail industry. Refer to the Executive Summary included in Part I, Item 2 of this Quarterly Report on Form 10-Q for details on the Company’s loan portfolio by industry as of September 30, 2020. In addition, the spread of COVID-19 has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.
    
    Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the spread of COVID-19 can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, results of operations, risk-weighted assets and regulatory capital:
•because the incidence of reported COVID-19 cases and related hospitalizations and deaths varies significantly by state and locality, the economic downturn caused by the pandemic may be deeper and more sustained in certain areas, including those in which we do business relative to other areas of the country;
•our ability to market our products and services maybe impaired by a variety of external factors, including a prolonged reduction in economic activity and continued economic and financial market volatility, which could cause demand for our products and services to decline, in turn making it difficult for us to grow assets and income;
•if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;
•collateral for loans, especially real estate, may decline in value, which may reduce our ability to liquidate such collateral and could cause loan losses to increase and impair our ability over the long run to maintain our targeted loan origination volume;
•our delinquent and non-accrual loans could increase substantially if borrowers continue to experience financial difficulties beyond forbearance/payment deferral periods resulting in adversely impacted asset quality, capital and earnings. As of October 20, 2020, we had $730 million, or 3%, of loans deferring principal and/or interest payments as a result of COVID-19;
•our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;
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•an increase in non-performing loans due to the COVID-19 pandemic would result in a corresponding increase in the risk-weighting of assets and therefore an increase in required regulatory capital;
•the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;
•as the result of the reduction of the Federal Reserve’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;
•deposits, including municipal deposits, could decline if customers need to draw on available balances as a result of the economic downturn;
•a material decrease in net income or a net loss over several quarters could result in a decrease in our quarterly cash dividend;
•we face heightened cybersecurity risk in connection with our operation of a remote working environment, which risks include, among others, greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems, increased risk of unauthorized dissemination of confidential information, limited ability to restore our systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions--all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers;
•we rely on third party vendors for certain services and the unavailability of a critical service or limitations on the business capacities of our vendors for extended periods of time due to the COVID-19 pandemic could have an adverse effect on our operations; and
•as a result of the COVID-19 pandemic, there may be unexpected developments in financial markets, legislation, regulations and consumer and customer behavior.
    
    The Company is not a traditional SBA lender however, we are an active participant in the PPP. The PPP authorizes financial institutions to make federally-guaranteed loans to qualifying small businesses and non-profits organizations. These loans carry an interest rate of 1% per annum and a maturity of two years if originated before June 5, 2020 and five years if originated on or after June 5, 2020. The PPP provides that such loans may be forgiven if the borrowers meet certain requirements with respect to maintaining employee headcount and payroll and the use of the loan proceeds after the loan is originated. If not forgiven, these loans will be guaranteed by the SBA under the SBA’s section 7(a) program. We had approximately $333.4 million of PPP outstanding as of September 30, 2020.

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

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

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) The following table reports information regarding repurchases of our common stock during the quarter ended September 30, 2020 and the stock repurchase plans approved by our Board of Directors.
Period
Total Number of Shares Purchased (1)(2)
Average Price paid Per ShareAs part of Publicly Announced Plans or Programs
Yet to be Purchased Under the Plans or Programs (1)
July 1, 2020 through July 31, 2020606 $8.12 — 14,607,794 
August 1, 2020 through August 31, 20203,443 8.11 — 14,607,794 
September 1, 2020 through September 30, 20203,297 7.26 — 14,607,794 
Total7,346 $7.73 — 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 14,607,794 shares yet to be repurchased as of September 30, 2020.
(2) 7,346 shares were withheld to cover income taxes related to restricted stock vesting under our 2015 Equity Incentive Plan. Shares withheld to pay income taxes are repurchased pursuant to the terms of the 2015 Equity Incentive Plan and not under our share repurchase program.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
Not applicable.

ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5.OTHER INFORMATION
Not applicable.

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ITEM 6.EXHIBITS
The following exhibits are either filed as part of this report or are incorporated herein by reference:
 
  
  
  
  
  
101.INS  The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document
101.PREInline XBRL Taxonomy Presentation Linkbase Document
104 Inline XBRL Cover Page Interactive Data File
 
(1)Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Investors Bancorp, Inc. (Commission File no. 001-36441), originally filed with the Securities and Exchange Commission on July 30, 2019.
(2)Incorporated by reference to the Registration Statement on Form S-1 of Investors Bancorp, Inc. (Commission File no. 333-192966), originally filed with the Securities and Exchange Commission on December 20, 2013.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
    INVESTORS BANCORP, INC.
Date: November 6, 2020 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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