FASB ASC 820, Fair Value Measurement ("ASC 820") defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

The Company has established and documented the process for determining the fair values of its assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, fair value is determined using valuation models or third-party appraisals. The following is a description of the valuation methodologies used to measure and report the fair value of financial assets and liabilities on a recurring or nonrecurring basis.

Securities available for sale are recorded at fair value on a recurring basis. The fair value of debt securities are priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and under GAAP are considered a Level 2 input method. Securities that are traded on active exchanges are measured using the closing price in an active market and are considered a Level 1 input method.

The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time, the Company enters into the opposite trade with a counter party to offset its interest rate risk. The Company has also entered into commercial loan hedges, mortgage pool hedges and borrowings hedges using interest rate swaps. The fair value of these interest rate swaps are estimated by a third party pricing service using a discounted cash flow technique. These are considered a Level 2 input method.


	June 30, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:

U.S. government and agency securities	$	—	$	669,905	$	—	$	669,905
Municipal bonds	—		38,041		—		38,041

Corporate debt securities	—		322,000		—		322,000
Mortgage-backed securities
Agency pass-through certificates	—		1,034,014		—		1,034,014

Total available-for-sale securities	—		2,063,960		—		2,063,960
Client swap program hedges	—		47,972		—		47,972



Total financial assets	$	—	$	2,111,932	$	—	$	2,111,932

Financial Liabilities
Client swap program hedges	$	—	$	47,972	$	—	$	47,972
Commercial loan fair value hedges	—		9,090		—		9,090
Mortgage loan fair value hedges	—		17,605		—		17,605
Borrowings cash flow hedges	—		25,235		—		25,235
Total financial liabilities	$	—	$	99,902	$	—	$	99,902


	September 30, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:

U.S. government and agency securities	$	—	$	270,778	$	—	$	270,778
Municipal bonds	—		22,642		—		22,642

Corporate debt securities	—		209,763		—		209,763
Mortgage-backed securities
Agency pass-through certificates	—		982,559		—		982,559

Total available-for-sale securities	—		1,485,742		—		1,485,742
Client swap program hedges	—		20,381		—		20,381

Mortgage loan fair value hedges	—		1,608		—		1,608

Total financial assets	$	—	$	1,507,731	$	—	$	1,507,731

Financial Liabilities
Client swap program hedges	$	—	$	20,381	$	—	$	20,381
Commercial loan fair value hedges	—		4,288		—		4,288

Borrowings cash flow hedges	—		7,877		—		7,877
Total financial liabilities	$	—	$	32,546	$	—	$	32,546

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as collateral dependent loans and real estate owned ("REO"). REO consists principally of properties acquired through foreclosure. From time to time, and on a nonrecurring basis, adjustments using fair value measurements are recorded to reflect increases or decreases based on the discounted cash flows, the current appraisal or estimated value of the collateral or REO property.

When management determines that the fair value of the collateral or the real estate owned requires additional adjustments, either as a result of an updated appraised value or when there is no observable market price, the Company classifies the collateral dependent loan or real estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis at June 30, 2020 included loans for which an allowance was established or a partial charge-off was recorded based on the fair value of collateral, as well as real estate owned where the fair value of the property was less than the cost basis.

The following tables present the aggregated balance of assets that were measured at fair value on a nonrecurring basis at June 30, 2020 and June 30, 2019, and the total gains (losses) resulting from those fair value adjustments during the respective periods. The estimated fair value measurements are shown gross of estimated selling costs.


	June 30, 2020												Three Months Ended June 30, 2020	Nine Months Ended June 30, 2020
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(In thousands)												(In thousands)
Loans (1)	$	—	$	—	$	2,277	$	2,277	$	(3,260)	$	(3,805)
Real estate owned (2)	—		—		3,882		3,882		(284)		(141)
Balance at end of period	$	—	$	—	$	6,159	$	6,159	$	(3,544)	$	(3,946)


	June 30, 2019												Three Months Ended June 30, 2019	Nine Months Ended June 30, 2019
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(In thousands)												(In thousands)
Impaired loans (1)	$	—	$	—	$	6,007	$	6,007	$	(4,383)	$	(5,619)
Real estate owned (2)	—		—		3,084		3,084		(5)		394
Balance at end of period	$	—	$	—	$	9,091	$	9,091	$	(4,388)	$	(5,225)

FASB ASC 825, Financial Instruments ("ASC 825") requires disclosure of fair value information about financial instruments, whether or not recognized on the statement of financial condition, for which it is practicable to estimate those values. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect the underlying fair value of the Company. Although management is not aware of any factors that would materially affect the estimated fair value amounts presented below, such amounts have not been comprehensively revalued for purposes of these financial statements since the dates shown, and therefore, estimates of fair value subsequent to those dates may differ significantly from the amounts presented below.


		June 30, 2020						September 30, 2019
	Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
		($ in thousands)
Financial assets
Cash and cash equivalents	1	$	1,218,240	$	1,218,240	$	419,158	$	419,158
Available-for-sale securities

U.S. government and agency securities	2	669,905		669,905		270,778		270,778
Municipal bonds	2	38,041		38,041		22,642		22,642

Corporate debt securities	2	322,000		322,000		209,763		209,763
Mortgage-backed securities
Agency pass-through certificates	2	1,034,014		1,034,014		982,559		982,559

Total available-for-sale securities		2,063,960		2,063,960		1,485,742		1,485,742
Held-to-maturity securities





Mortgage-backed securities
Agency pass-through certificates	2	820,304		847,510		1,428,480		1,448,088
Commercial MBS	2	7,012		6,907		15,000		15,007
Total held-to-maturity securities		827,316		854,417		1,443,480		1,463,095

Loans receivable	3	12,733,426		13,318,026		11,930,575		12,617,600

FHLB and FRB stock	2	145,990		145,990		123,990		123,990
Other assets - client swap program hedges	2	47,972		47,972		20,381		20,381

Other assets - mortgage loan fair value hedges	2	—		—		1,608		1,608


Financial liabilities
Time deposits	2	4,209,146		4,200,715		4,906,963		4,937,847
FHLB advances	2	2,800,000		2,808,567		2,250,000		2,282,887
Other liabilities - client swap program hedges	2	47,972		47,972		20,381		20,381
Other liabilities - mortgage loan fair value hedges	2	17,605		17,605		—		—
Other liabilities - commercial loan fair value hedges	2	9,090		9,090		4,288		4,288
Other liabilities - borrowings cash flow hedges	2	25,235		25,235		7,877		7,877

Available-for-sale securities and held-to-maturity securities – Securities at fair value are primarily priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and are considered a Level 2 input method. Equity securities that are exchange traded are considered a Level 1 input method.

Loans receivable – Fair values are estimated first by stratifying the portfolios of loans with similar financial characteristics. Loans are segregated by type such as multi-family real estate, residential mortgage, construction, commercial, consumer and land loans. Each loan category is further segmented into fixed- and adjustable-rate interest terms. For residential mortgages and multi-family loans, the bank determined that its best exit price was by securitization. MBS benchmark prices are used as a base price, with further loan level pricing adjustments made based on individual loan characteristics such as FICO score, LTV, Property Type and occupancy. For all other loan categories an estimate of fair value is then calculated based on discounted cash flows using a discount rate offered and observed in the market on similar products, plus an adjustment for liquidity to reflect the non-homogeneous nature of the loans, as well as, a annual loss rate based on historical losses to arrive at an estimated exit price fair value. Fair value for impaired loans is also based on recent appraisals or estimated cash flows discounted using rates

Interest rate swaps – The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time, the Company enters into the opposite trade with a counterparty to offset its interest rate risk. The Company also uses interest rate swaps for various fair value hedges and cash flow hedges. The fair value of these interest rate swaps is estimated by a third party pricing service using a discounted cash flow technique.


	June 30, 2020
	Amortized Cost		Gross Unrealized						Fair Value		Yield
					Gains		Losses
	($ in thousands)
Available-for-sale securities
U.S. government and agency securities due


5 to 10 years	$	59,799	$	416	$	(2,203)	$	58,012	1.26	%
Over 10 years	616,095		74		(4,276)		611,893		1.18




Corporate debt securities due
Within 1 year	71,064		66		(63)		71,067		0.68
1 to 5 years	128,325		3,256		(849)		130,732		2.04
5 to 10 years	117,000		3,201		—		120,201		1.70

Municipal bonds due

1 to 5 years	1,453		41		—		1,494		—

Over 10 years	36,066		534		(53)		36,547		5.40
Mortgage-backed securities
Agency pass-through certificates	992,612		42,125		(723)		1,034,014		2.96

	2,022,414		49,713		(8,167)		2,063,960		2.20
Held-to-maturity securities







Mortgage-backed securities
Agency pass-through certificates	820,304		27,206		—		847,510		3.16
Commercial MBS	7,012		—		(105)		6,907		1.06
	827,316		27,206		(105)		854,417		3.14
	$	2,849,730	$	76,919	$	(8,272)	$	2,918,377	2.47	%


	September 30, 2019
	Amortized Cost		Gross Unrealized							Fair Value		Yield
					Gains		Losses
	($ in thousands)
Available-for-sale securities
U.S. government and agency securities due


5 to 10 years	$	65,287	$	39	$	(629)		$	64,697	2.43	%
Over 10 years	207,067		1		(987)			206,081		3.02




Corporate debt securities due
Within 1 year	43,903		411		—			44,314		3.65
1 to 5 years	70,000		689		(50)			70,639		3.29
5 to 10 years	92,931		1,879		—			94,810		3.27

Municipal bonds due

1 to 5 years	1,430		14		—			1,444		1.94

Over 10 years	20,303		895		—			21,198		6.45
Mortgage-backed securities
Agency pass-through certificates	957,150		26,533		(1,124)			982,559		3.29

	1,458,071		30,461		(2,790)			1,485,742		3.27
Held-to-maturity securities







Mortgage-backed securities
Agency pass-through certificates	1,428,480		19,945		(337)			1,448,088		3.15
Commercial MBS	15,000		7		—			15,007		2.89
	1,443,480		19,952		(337)			1,463,095		3.15
	$	2,901,551	$	50,413	$	(3,127)		$	2,948,837	3.21	%

During the quarter ended March 31, 2020, as permitted in conjunction with the adoption of ASU 2019-04, the Company reclassified $374,680,000 of prepayable debt securities from held-to-maturity to available-for-sale. For available-for-sale investment securities, there were purchases of $684,292,000 during the nine months ended June 30, 2020 and purchases of $327,670,000 during the nine months ended June 30, 2019. There were sales totaling $204,351,000 of available-for-sale investment securities during the nine months ended June 30, 2020 and sales of $491,000 during the nine months ended June 30, 2019. For held-to-maturity investment securities, there were no purchases during the nine months ended June 30, 2020 and no purchases during the nine months ended June 30, 2019. There were no sales of held-to-maturity investment securities during either period. Substantially all of the agency mortgage-backed securities have contractual due dates that exceed 10 years.

The Company elected to exclude AIR from the amortized cost basis of debt securities disclosed throughout this footnote. For AFS securities, AIR totaled $4,154,000 and $3,712,000 as of June 30, 2020 and September 30, 2019, respectively. For HTM debt securities, AIR totaled $2,126,000 and $3,716,000 as of June 30, 2020 and September 30, 2019, respectively. AIR is included in the “accrued interest receivable” line item on the Company’s consolidated statements of financial condition.

The following tables show the gross unrealized losses and fair value of securities as of June 30, 2020 and September 30, 2019, by length of time that individual securities in each category have been in a continuous loss position. There were 51 and 41 securities with an unrealized loss as of June 30, 2020 and September 30, 2019, respectively. The decline in fair value since purchase is attributable to changes in interest rates. Because the Company does not intend to sell these securities and does not consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis, which may be upon maturity, the Company does not consider these investments to be other-than-temporarily impaired.


June 30, 2020	Less than 12 months						12 months or more						Total
	Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value
	(In thousands)
Available-for-sale securities
Corporate debt securities	$	(200)	$	71,304	$	(712)	$	49,288	$	(912)	$	120,592
Municipal bonds	(53)		9,905		—		—		(53)		9,905
U.S. government and agency securities	(2,647)		276,942		(3,832)		160,648		(6,479)		437,590

Mortgage-backed securities	(145)		49,214		(578)		103,179		(723)		152,393
	(3,045)		407,365		(5,122)		313,115		(8,167)		720,480
Held-to-maturity securities
Mortgage-backed securities	(105)		6,907		—		—		(105)		6,907
	$	(3,150)	$	414,272	$	(5,122)	$	313,115	$	(8,272)	$	727,387


September 30, 2019	Less than 12 months						12 months or more						Total
	Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value
	(In thousands)
Available-for-sale securities
Corporate debt securities	$	—	$	—	$	(50)	$	24,950	$	(50)	$	24,950

U.S. government and agency securities	(656)		152,715		(960)		77,391		(1,616)		230,106

Mortgage-backed securities	(148)		87,895		(976)		155,620		(1,124)		243,515
	(804)		240,610		(1,986)		257,961		(2,790)		498,571
Held-to-maturity securities
Mortgage-backed securities	—		—		(337)		115,182		(337)		115,182
	$	(804)	$	240,610	$	(2,323)	$	373,143	$	(3,127)	$	613,753

Substantially all of the Company’s held-to-maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Therefore, the Company did not record an allowance for credit losses for these securities upon adoption of ASC 326 on October 1, 2019 or as of June 30, 2020.

The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position have any credit loss impairment upon adoption of ASC 326 on October 1, 2019 or as of June 30, 2020. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. Available-for-sale debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Corporate debt securities and municipal bonds are considered to have issuer(s) of high credit quality (rated AA or higher) and the decline in fair value is due to changes in interest rates and other market conditions. The issuer(s) continues to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bond(s) approach maturity.