Financial Transactions with Off-Balance-Sheet Risk and Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Financial Transactions with Off-Balance-Sheet Risk and Concentrations of Credit Risk

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Statements of Financial Condition.

At December 31, 2021 and 2020, the following commitments existed which are not reflected in the Consolidated Statements of Financial Condition:


	December 31,
	2021		2020
	(In thousands)
Loan commitments:
Residential real estate	$	115,998	$	149,847
Multifamily and commercial real estate	73,948		98,910
Commercial business	27,773		16,842
Construction	58,069		13,335
Consumer including home equity loans and advances	9,154		3,264
Total loan commitments	$	284,942	$	282,198

Unused lines of credit consisting of home equity lines, and undisbursed business and construction lines totaled approximately $899.2 million and $894.5 million as of December 31, 2021 and 2020, respectively. Amounts drawn on the unused lines of credit are predominantly assessed interest at rates that fluctuate with the base rate.

The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance-sheet loans. Commitments to extend credit are agreements to lend customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower.

The Company principally grants residential real estate loans, multifamily and commercial real estate loans, construction loans, commercial business loans, home equity loans and advances and other consumer loans to borrowers primarily throughout New Jersey, New York and Pennsylvania, and to a much lesser extent in a few other east coast states. Its borrowers' abilities to repay their obligations are dependent upon various factors, including the borrowers' income and net worth, cash flows generated by the underlying collateral, if any, or from business operations, value of the underlying collateral and priority of the Company's lien on the property. These factors are dependent on various economic conditions and circumstances beyond the Company's control, and as a result, the Company is subject to the risk of loss. The Company believes that its lending policies and procedures adequately minimize the potential exposure to such risks and adequate provisions for loan losses are provided for all probable and estimable losses. In the normal course of business, the Company sells residential real estate loans to third parties. These loan sales are subject to customary representations and warranties. In the event that the Company is found to be in breach of these representations and warranties, it may be obligated to repurchase certain of these loans.

The Company has entered into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments principally related to the Company's borrowings. These derivatives were used to hedge the variability in cash flows associated with certain short-term funding transactions. The fair value of the derivatives as of December 31, 2021 and 2020 was a net liability of $7.9 million and $23.0 million, respectively, net of accrued interest and variation margin posted in accordance with the Chicago Mercantile Exchange.

(16) Financial Transactions with Off-Balance-Sheet Risk and Concentrations of Credit Risk (continued)

In connection with its mortgage banking activities, at December 31, 2021 the Company had no commitments to sell loans, with servicing retained by Columbia Bank. At December 31, 2021, the Company had no commitments classified as held-for-sale.

In addition to the commitments noted above, the Company is party to standby letters of credit which are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees generally extend for a term of up to one year and may be secured or unsecured. Outstanding letters of credit totaled $12.9 million and $9.4 million at December 31, 2021 and 2020, respectively.

The FHLB also has issued an irrevocable standby letter of credit totaling $600,000 at December 31, 2021, for the purposes of collateralizing Freehold Bank's retention of New Jersey public funds on deposit as required by the New Jersey Governmental Unit Deposit Protection Act. This letter is renewable on an annual basis and is securitized by Freehold Bank's available borrowing line at the FHLB.

The Company and subsidiaries are also party to litigation which arises primarily in the ordinary course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company's financial condition.