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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2024

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, 2024
(In thousands)	Level 1		Level 2		Level 3		Total
Available for sale securities:
Traditional securities:
GSE certificates & CMOs	$	—	$	465,788	$	—	$	465,788
Non-GSE certificates & CMOs	—		186,453		—		186,453
ABS	—		668,290		—		668,290
Corporate	—		121,373		—		121,373
Other	198		3,691		—		3,889

PACE assessments:
Residential PACE assessments	—		—		82,258		82,258





Total assets carried at fair value	$	198	$	1,445,595	$	82,258	$	1,528,051


	December 31, 2023
(In thousands)	Level 1		Level 2		Level 3		Total
Available for sale securities:
Traditional securities:
GSE certificates & CMOs	$	—	$	480,615	$	—	$	480,615
Non-GSE certificates & CMOs	—		196,860		—		196,860
ABS	—		627,635		—		627,635
Corporate	—		120,741		—		120,741
Other	199		3,689		—		3,888
PACE assessments:
Residential PACE assessments	—		—		53,303		53,303






Total assets carried at fair value	$	199	$	1,429,540	$	53,303	$	1,483,042

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2024 and March 31, 2023:


	Residential PACE Assessments
	March 31, 2024		March 31, 2023
(In thousands)
Balance of recurring Level 3 assets at January 1	$	53,303	$	—
Amortization included in interest income	261		—
Change in unrealized holding gains/losses included in other comprehensive income	536		—
Purchases	34,879		—
Sales	(6,284)		—
Principal paydowns	(437)		—

Balance of recurring Level 3 assets at March 31	$	82,258	$	—

The fair value of the Company's PACE assessments are determined internally by calculating discounted cash flows using expected conditional prepayment rates, market spreads, and the Treasury yield curve. Qualitative assessments from recent commentary from dealers or investors or issuers, information revealed from secondary market trades of clean energy senior asset-backed securities, and volatility in the marketplace are reviewed and incorporated into the calculations.

The following table presents quantitative information about recurring Level 3 fair value measurements at March 31, 2024 and December 31, 2023:

March 31, 2024

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

(In thousands)

Residential PACE assessments

82,258

Discounted cash flow

Conditional prepayment rate

7.0%-26.0% (18.2%)

December 31, 2023

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

(In thousands)

Residential PACE assessments

53,303

Discounted cash flow

Conditional prepayment rate

7.0%-26.0% (18.2%)

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, 2024
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value
Fair Value Measurements:
Individually analyzed loans	$	1,498	$	—	$	—	$	1,498	$	1,498

	$	1,498	$	—	$	—	$	1,498	$	1,498

At December 31, 2023, there were no individually analyzed collateral-dependent loans.

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, 2023.

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, 2024
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value

Financial assets:
Cash and cash equivalents	$	155,204	$	155,204	$	—	$	—	$	155,204


Held-to-maturity securities	1,673,962		—		571,999		949,622		1,521,621
Loans held for sale	2,137		—		—		2,137		2,137
Loans receivable, net	4,359,380		—		—		4,026,693		4,026,693

Resell agreements	131,242		—		—		131,242		131,242
Accrued interest receivable	53,436		281		13,111		40,044		53,436




Financial liabilities:
Deposits payable on demand	$	6,946,272	$	—	$	6,946,272	$	—	$	6,946,272
Time deposits and brokered CDs	359,493		—		357,684		—		357,684
FHLBNY advances	9,135		—		8,818		—		8,818
Other borrowings	60,000		—		59,958		—		59,958
Subordinated debt, net	70,570		—		56,456		—		56,456
Accrued interest payable	6,640		—		6,640		—		6,640


	December 31, 2023
(In thousands)	Carrying Value		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	90,570	$	90,570	$	—	$	—	$	90,570


Held-to-maturity securities	1,696,834		—		575,418		974,091		1,549,509
Loans held for sale	1,817		—				1,817		1,817
Loans receivable, net	4,345,628		—		—		4,029,142		4,029,142

Resell agreements	50,000		—		—		50,000		50,000
Accrued interest receivable	55,484		43		12,645		42,796		55,484


Financial liabilities:
Deposits payable on demand	$	6,582,321	$	—	$	6,582,321	$	—	$	6,582,321
Time deposits and brokered CDs	429,667		—		428,116		—		428,116
FHLBNY advances	4,381		—		4,381		—		4,381
Other borrowings	230,000		—		229,711		—		229,711
Subordinated debt, net	70,546		—		56,790		—		56,790
Accrued interest payable	12,270		—		12,270		—		12,270

- 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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