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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2023

Fair value is defined as 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. Assumptions are developed based on prioritizing information within a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. A description of the disclosure hierarchy and the types of financial instruments recorded at fair value that management believes would generally qualify for each category are as follows:

Level 1 - Valuations are based on quoted prices in active markets for identical assets or liabilities. Accordingly, valuation of these assets and liabilities does not entail a significant degree of judgment. Examples include most U.S. Government securities and exchange-traded equity securities.

Level 2 - Valuations are based on either quoted prices in markets that are not considered to be active or significant inputs to the methodology that are observable, either directly or indirectly. Financial instruments in this level would generally include mortgage-related securities and other debt issued by GSEs, non-GSE mortgage-related securities, corporate debt, certain redeemable fund investments and certain trust preferred securities.

Level 3 - Valuations are based on inputs to the methodology that are unobservable and significant to the fair value measurement. These inputs reflect management’s own judgments about the assumptions that market participants would use in pricing the assets and liabilities.

Assets Measured at Fair Value on a Recurring Basis

Available for sale securities

The Company’s available for sale securities are reported at fair value. Investments in fixed income securities are generally valued based on evaluations provided by an independent pricing service. These evaluations represent an exit price or their opinion as to what a buyer would pay for a security, typically in an institutional round lot position, in a current sale. The pricing service utilizes evaluated pricing techniques that vary by asset class and incorporate available market information and, because many fixed income securities do not trade on a daily basis, applies available information through processes such as benchmark curves, benchmarking of available securities, sector groupings and matrix pricing. Model processes, such as option adjusted spread models, are used to value securities that have prepayment features. In those limited cases where pricing service evaluations are not available for a fixed income security, management will typically value those instruments using observable market inputs in a discounted cash flow analysis.

The following summarizes those financial instruments measured at fair value on a recurring basis in the Consolidated Statements of Financial Condition as of the dates indicated, categorized by the relevant class of investment and level of the fair value hierarchy:


	March 31, 2023
(In thousands)	Level 1		Level 2		Level 3		Total
Available for sale securities:
Mortgage-related:

GSE residential CMOs	$	—	$	383,394	$	—	$	383,394
GSE commercial certificates & CMOs	—		167,840		—		167,840
Non-GSE residential certificates	—		105,549		—		105,549
Non-GSE commercial certificates	—		97,266		—		97,266

Other debt:
U.S. Treasury	193		—		—		193
ABS	—		756,184		—		756,184
Trust preferred	—		10,078		—		10,078
Corporate	—		118,601		—		118,601


Total assets carried at fair value	$	193	$	1,638,912	$	—	$	1,639,105


	December 31, 2022
(In thousands)	Level 1		Level 2		Level 3		Total
Available for sale securities:
Mortgage-related:

GSE residential CMOs	$	—	$	389,260	$	—	$	389,260
GSE commercial certificates & CMOs	—		213,786		—		213,786
Non-GSE residential certificates	—		107,080		—		107,080
Non-GSE commercial certificates	—		97,482		—		97,482
Other Debt:
U.S. Treasury	192		—		—		192
ABS	—		862,163		—		862,163
Trust preferred	—		10,143		—		10,143
Corporate	—		132,370		—		132,370



Total assets carried at fair value	$	192	$	1,812,284	$	—	$	1,812,476

Assets Measured at Fair Value on a Non-recurring Basis

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis. That is, they are subject to fair value adjustments in certain circumstances. Financial assets measured at fair value on a non-recurring basis include certain individually evaluated loans (or impaired loans prior to the adoption of ASU 2016-13) reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.

The following tables summarize assets measured at fair value on a non-recurring basis in the Consolidated Statements of Financial Condition as of the dates indicated, categorized by the relevant class of investment and level of the fair value hierarchy:





	March 31, 2023
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value
Fair Value Measurements:
Individually analyzed loans	$	1,852	$	—	$	—	$	1,852	$	1,852

	$	1,852	$	—	$	—	$	1,852	$	1,852

















	December 31, 2022
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value
Fair Value Measurements:
Impaired loans	$	3,315	$	—	$	—	$	3,315	$	3,315

	$	3,315	$	—	$	—	$	3,315	$	3,315

Financial Instruments Not Measured at Fair Value

For those financial instruments that are not recorded at fair value in the consolidated statements of financial condition, but are measured at fair value for disclosure purposes, management follows the same fair value measurement principles and guidance as for instruments recorded at fair value. For a description of the methods, factors and significant assumptions utilized in estimating the fair values for significant categories of financial instruments not measured at fair value, refer to footnote 14, Fair Value of Financial Instruments, included in the Annual Report on Form 10-K for the year ended December 31, 2022. An additional category of financial instrument not measured at fair value that was not previously included in the Annual Report on Form 10-K is summarized below:

•Other borrowings - Other borrowings are valued using a present value technique that incorporates current rates offered on borrowings of comparable remaining maturity. Other borrowings are categorized as Level 2.

There are significant limitations in estimating the fair value of financial instruments for which an active market does not exist. Due to the degree of management judgment that is often required, such estimates tend to be subjective, sensitive to changes in assumptions and imprecise. Such estimates are made as of a point in time and are impacted by then-current observable market conditions; also such estimates do not give consideration to transaction costs or tax effects if estimated unrealized gains or losses were to become realized in the future. Because of inherent uncertainties of valuation, the estimated fair value may differ significantly from the value that would have been used had a ready market for the investment existed and the difference could be material. Lastly, consideration is not given to nonfinancial instruments, including various intangible assets, which could represent substantial value. Fair value estimates are not necessarily representative of the Company’s total enterprise value.

The following table summarizes the financial statement basis and estimated fair values for significant categories of financial instruments:







	March 31, 2023
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value

Financial assets:
Cash and cash equivalents	$	130,897	$	130,897	$	—	$	—	$	130,897


Held-to-maturity securities	1,618,507		—		575,904		913,251		1,489,155
Loans held for sale	5,653		—		—		5,653		5,653
Loans receivable, net	4,130,847		—		—		3,743,621		3,743,621

Resell agreements	15,431		—		—		15,431		15,431
Accrued interest and dividends receivable	40,844		138		12,679		28,027		40,844




Financial liabilities:
Deposits payable on demand	6,288,780		—		6,288,780		—		6,288,780
Time deposits and brokered CDs	752,581		—		750,820		—		750,820

Other borrowings	140,000		—		139,420		—		139,420
Subordinated debt	73,737		—		59,358		—		59,358
Accrued interest payable	3,365		—		3,365		—		3,365


	December 31, 2022
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	63,540	$	63,540	$	—	$	—	$	63,540


Held-to-maturity securities	1,541,301		—		574,609		840,262		1,414,871
Loans held for sale	7,943		—				7,943		7,943
Loans receivable, net	4,060,971		—		—		3,718,308		3,718,308

Resell agreements	25,754		—		—		25,754		25,754
Accrued interest and dividends receivable	41,441		17		12,197		29,227		41,441


Financial liabilities:
Deposits payable on demand	6,369,087		—		6,369,087		—		6,369,087
Time deposits and brokered CDs	225,950		—		225,805		—		225,805
FHLBNY advances	580,000		—		580,000		—		580,000
Subordinated debt	77,708		—		68,966		—		68,966
Accrued interest payable	1,218		—		1,218		—		1,218

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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