Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following tables present the assets reported on the consolidated balance sheets at their estimated fair value as of September 30, 2024, and December 31, 2023, by level within the fair value hierarchy as required by the Fair Value Measurements and Disclosures Topic of the FASB ASC. Financial assets and liabilities are classified in their entirety based on the level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

•Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means.

•Level 3 Inputs – Significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities.

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 16 to the Consolidated Financial Statements of the Company’s 2023 Annual Report on Form 10-K.

	Fair Value Measurements at September 30, 2024 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Measured on a recurring basis:
Assets:
Investment securities:
Debt securities available-for-sale:
U.S. Government agency	$	74,901	$	—	$	74,901	$	—
Mortgage-backed securities:
Pass-through certificates:
GSE	277,649		—		277,649		—
REMICs:
GSE	591,761		—		591,761		—
Total mortgage-backed securities	869,410		—		869,410		—
Other debt securities:
Municipal bonds	684		—		684		—
Corporate bonds	118,491		—		118,491		—
	119,175		—		119,175		—
Total debt securities available-for-sale	1,063,486		—		1,063,486		—
Trading securities	13,759		13,759		—		—
Equity securities (1)	699		699		—		—
Total	$	1,077,944	$	14,458	$	1,063,486	$	—
Measured on a non-recurring basis:
Assets:
Loans individually evaluated for impairment:
Real estate loans:
Commercial real estate	$	2,033	$	—	$	—	$	2,033
Multifamily	1,738		—		—		1,738
Home equity and lines of credit	18		—		—		18
Total individually evaluated real estate loans	3,789		—		—		3,789
Commercial and industrial loans	11,307		—		—		11,307
Total	$	15,096	$	—	$	—	$	15,096

(1) Excludes investment measured at net asset value of $10.0 million at September 30, 2024, which has not been classified in the fair value hierarchy.

	Fair Value Measurements at December 31, 2023 Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Measured on a recurring basis:
Assets:
Investment securities:
Debt securities available-for-sale:
U.S. Treasuries	$	44,379	$	44,379	$	—	$	—
U.S. Government agency securities	73,908		—		73,908		—
Mortgage-backed securities:
Pass-through certificates:
GSE	337,540		—		337,540		—
REMICs:
GSE	213,100		—		213,100		—
Total mortgage-backed securities	550,640		—		550,640		—
Other debt securities:
Municipal bonds	763		—		763		—
Corporate bonds	125,774		—		125,774		—
	126,537		—		126,537		—
Total debt securities available-for-sale	795,464		44,379		751,085		—
Trading securities	12,549		12,549		—		—
Equity securities (1)	330		330		—		—
Total	$	808,343	$	57,258	$	751,085	$	—
Measured on a non-recurring basis:
Assets:
Loans individually evaluated for impairment:
Real estate loans:
Commercial real estate	$	2,291	$	—	$	—	$	2,291
Multifamily	1,906		—		—		1,906
Home equity and lines of credit	21		—		—		21
Total impaired real estate loans	4,218		—		—		4,218
Commercial and industrial loans	59		—		—		59
Total	$	4,277	$	—	$	—	$	4,277

(1) Excludes investment measured at net asset value of $10.3 million at December 31, 2023, which has not been classified in the fair value hierarchy.

The following table presents qualitative information for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2024 and December 31, 2023 (dollars in thousands):

	Fair Value				Valuation Methodology	Unobservable Inputs	Range of Inputs
	September 30, 2024		December 31, 2023				September 30, 2024	December 31, 2023
Individually evaluated loans	$	15,096	$	4,277	Appraisals	Discount for costs to sell	7.0%	7.0%
						Discount for quick sale	10.0%	10.0%
					Discounted cash flows	Interest rates	4.88% to 7.50%	4.88% to 7.50%

    

The valuation techniques described below were used to measure fair value of financial instruments in the tables below on a recurring basis and a non-recurring basis at September 30, 2024, and December 31, 2023.

Debt Securities Available for Sale: The estimated fair values for mortgage-backed securities, corporate, and other debt securities are obtained from an independent nationally recognized third-party pricing service. The estimated fair values are derived primarily from cash flow models, which include assumptions for interest rates, credit losses, and prepayment speeds. Broker/dealer quotes are utilized as well, when such quotes are available and deemed representative of the market. The significant inputs utilized in the cash flow models are based on market data obtained from sources independent of the Company (Observable Inputs), and are therefore classified as Level 2 within the fair value hierarchy. There were no transfers of securities between Level 1 and Level 2 during the nine months ended September 30, 2024 or September 30, 2023.     

Trading Securities: Fair values are derived from quoted market prices in active markets. The assets consist of publicly traded mutual funds.

Equity Securities: Fair values of equity securities consisting of publicly traded mutual funds are derived from quoted market prices in active markets.

Loans Individually Evaluated for Impairment: At September 30, 2024 and December 31, 2023, the Company had loans individually evaluated for impairment (excluding PCD loans) with outstanding principal balances of $19.0 million and $6.0 million, respectively, which were recorded at their estimated fair value of $15.1 million and $4.3 million, respectively. The Company recorded a net increase in the specific reserve for impaired loans of $1.2 million and $7,100 for the nine months ended September 30, 2024 and September 30, 2023, respectively. Net charge-offs of $4.7 million and $5.2 million were recorded for the nine months ended September 30, 2024 and September 30, 2023, respectively, utilizing Level 3 inputs. For purposes of estimating the fair value of impaired loans, management utilizes independent appraisals, if the loan is collateral-dependent, adjusted downward by management, as necessary, for changes in relevant valuation factors subsequent to the appraisal date, or the present value of expected future cash flows for non-collateral dependent loans and TDRs.

Other Real Estate Owned: At September 30, 2024 and December 31, 2023, the Company had no assets acquired through foreclosure.

In addition, the Company may be required, from time to time, to measure the fair value of certain other financial assets on a nonrecurring basis in accordance with U.S. GAAP. The adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets.

Fair Value of Financial Instruments:

The FASB ASC Topic for Financial Instruments requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following methods and assumptions were used to estimate the fair value of other financial assets and financial liabilities not already discussed above:

(a)     Cash and Cash Equivalents

Cash and cash equivalents are short-term in nature with original maturities of three months or less; the carrying amount approximates fair value. Certificates of deposit having original terms of six-months or less; the carrying value generally approximates fair value. Certificates of deposit with an original maturity of six months or greater; the fair value is derived from discounted cash flows.

(b)    Debt Securities (Held-to-Maturity)

The estimated fair values for substantially all of our securities are obtained from an independent nationally recognized pricing service. The independent pricing service utilizes market prices of same or similar securities whenever such prices are available. Prices involving distressed sellers are not utilized in determining fair value. Where necessary, the independent third-party pricing service estimates fair value using models employing techniques such as discounted cash flow analysis. The assumptions used in these models typically include assumptions for interest rates, credit losses, and prepayments, utilizing market observable data where available.

(c)    Investments in Equity Securities at Net Asset Value Per Share

The Company uses net asset value as a practical expedient to record its investment in a private SBA Loan Fund since the shares in the fund are not publicly traded, do not have a readily determinable fair value and the net asset value per share is calculated in a manner consistent with the measurement principles of an investment company.

(d)    Federal Home Loan Bank of New York Stock

Federal Home Loan Bank of New York (“FHLBNY”) stock is carried at cost since this is the amount for which it could be redeemed. Due to restrictions placed on the transferability of FHLBNY stock it is not practical to determine the fair value as there is no active market for this stock.

(e)    Loans (Held-for-Investment)

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as originated and purchased, and further segregated by residential mortgage, construction, land, multifamily, commercial and consumer. Each loan category is further segmented into amortizing and non-amortizing and fixed and adjustable-rate interest terms and by performing and non-performing categories. The fair value of loans is estimated using a discounted cash flow analysis. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and non-performance risk of the loans.

(f)    Loans (Held-for-Sale)

Held-for-sale loans are carried at the lower of aggregate cost or estimated fair value, less costs to sell, and therefore fair value is equal to carrying value.

(g)    Deposits

The fair value of deposits with no stated maturity, such as interest and non-interest bearing demand deposits, savings, NOW 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 currently offered for deposits of similar remaining maturities.

(h)    Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of 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 fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of off-balance sheet commitments is insignificant and therefore not included in the following table.

 (i)    Borrowings

The fair value of borrowed funds is estimated by discounting future cash flows based on rates currently available for debt with similar terms and remaining maturity.

(j)    Advance Payments by Borrowers for Taxes and Insurance

Advance payments by borrowers for taxes and insurance have no stated maturity; the fair value is equal to the amount currently payable.

(k)    Derivatives

The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.

The estimated fair values of the Company’s significant financial instruments at September 30, 2024 and December 31, 2023, are presented in the following tables (in thousands):

	September 30, 2024
			Estimated Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	232,926	$	232,926	$	—	$	—	$	232,926
Trading securities	13,759		13,759		—		—		13,759
Debt securities available-for-sale	1,063,486		—		1,063,486		—		1,063,486
Debt securities held-to-maturity	9,681		—		9,519		—		9,519
Equity securities (1)	699		699		—		—		699
FHLBNY stock	37,269		N/A		N/A		N/A		N/A
Loans held-for-sale	4,897		—		—		4,897		4,897
Net loans held-for-investment	4,023,909		—		—		3,840,026		3,840,026
Derivative assets	4,271		—		4,271		—		4,271
Financial liabilities:
Deposits	$	3,875,569	$	—	$	3,876,514	$	—	$	3,876,514
FHLB advances and other borrowings (including securities sold under agreements to repurchase)	990,871		—		988,739		—		988,739
Subordinated debentures, net of issuance costs	61,386		—		45,659		—		45,659
Advance payments by borrowers for taxes and insurance	22,492		—		22,492		—		22,492
Derivative liabilities	4,273		—		4,273		—		4,273

(1) Excludes investment measured at net asset value of $10.0 million at September 30, 2024, which has not been classified in the fair value hierarchy.

	December 31, 2023
			Estimated Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	229,506	$	229,506	$	—	$	—	$	229,506
Trading securities	12,549		12,549		—		—		12,549
Debt securities available-for-sale	795,464		44,379		751,085		—		795,464
Debt securities held-to-maturity	9,866		—		9,586		—		9,586
Equity securities (1)	330		330		—		—		330
FHLBNY stock, at cost	39,667		N/A		N/A		N/A		N/A
Net loans held-for-investment	4,166,119		—		—		3,887,033		3,887,033
Derivative assets	4,903		—		4,903		—		4,903
Financial liabilities:
Deposits	$	3,878,435	$	—	$	3,879,286	$	—	$	3,879,286
FHLB advances and other borrowings (including securities sold under agreements to repurchase)	859,272		—		844,766		—		844,766
Subordinated debentures, net of issuance costs	61,219		—		45,531		—		45,531
Advance payments by borrowers for taxes and insurance	25,102		—		25,102		—		25,102
Derivative liabilities	4,905		—		4,905		—		4,905

(1) Excludes investment measured at net asset value of $10.3 million at December 31, 2023, which has not been classified in the fair value hierarchy.

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 significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected losses, 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. 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.