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Fair Value Measurements
 6 Months Ended
Jun. 30, 2022
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 June 30, 2022, and December 31, 2021, 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 2021 Annual Report on Form 10-K.

 
Fair Value Measurements at June 30, 2022 Using:
 Carrying ValueQuoted 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$74,803 $— $74,803 $— 
Mortgage-backed securities:    
Pass-through certificates:
GSE513,426 — 513,426 — 
REMICs:
GSE307,813 — 307,813 — 
821,239 — 821,239 — 
Other debt securities:    
Municipal bonds52 — 52 — 
Corporate bonds190,774 — 190,774 — 
190,826 — 190,826 — 
Total debt securities available-for-sale1,086,868 — 1,086,868 — 
Trading securities10,401 10,401 — — 
Equity securities (1)
296 296 — — 
Total$1,097,565 $10,697 $1,086,868 $— 
Measured on a non-recurring basis:    
Assets:    
Loans individually evaluated for impairment:    
Real estate loans:    
Commercial real estate$2,812 $— $— $2,812 
Home equity and lines of credit26 — — 26 
Total individually evaluated real estate loans2,838 — — 2,838 
Commercial and industrial loans64 — — 64 
Total$2,902 $— $— $2,902 
(1) Excludes investment measured at net asset value of $7.5 million at June 30, 2022, which has not been classified in the fair value hierarchy.
 Fair Value Measurements at December 31, 2021 Using:
 Carrying ValueQuoted 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 securities$2,290 $— $2,290 $— 
Mortgage-backed securities:    
Pass-through certificates:
GSE581,406 — 581,406 — 
REMICs:
GSE391,710 — 391,710 — 
973,116 — 973,116 — 
Other debt securities:    
Municipal bonds72 — 72 — 
Corporate bonds232,759 — 232,759 — 
232,831 — 232,831 — 
Total debt securities available-for-sale1,208,237 — 1,208,237 — 
Trading securities13,461 13,461 — — 
Equity securities (1)
328 328 — — 
Total$1,222,026 $13,789 $1,208,237 $— 
Measured on a non-recurring basis:    
Assets:    
Loans individually evaluated for impairment:    
Real estate loans:    
Commercial real estate$3,599 $— $— $3,599 
One-to-four family residential mortgage169 — — 169 
Home equity and lines of credit27 — — 27 
Total impaired real estate loans3,795 — — 3,795 
Commercial and industrial loans12 — — 12 
Other real estate owned100 — — 100 
Total$3,907 $— $— $3,907 
(1) Excludes investment measured at net asset value of $5.0 million at December 31, 2021, 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 June 30, 2022 and December 31, 2021 (dollars in thousands):
Fair ValueValuation MethodologyUnobservable
Inputs		Range of Inputs
 June 30, 2022December 31, 2021  June 30, 2022December 31, 2021
Individually evaluated loans$2,902 $3,807 AppraisalsDiscount for costs to sell7.0%7.0%
  Discount for quick sale10.0%10.0%
 Discounted cash flowsInterest rates
4.88% to 7.50%
4.88% to 6.25%
Other real estate owned— 100 AppraisalsDiscount for costs to sell7.0%7.0%
    
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 June 30, 2022, and December 31, 2021.
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 six months ended June 30, 2022 or June 30, 2021.     
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 June 30, 2022 and December 31, 2021, the Company had loans individually evaluated for impairment (excluding PCD loans) with outstanding principal balances of $4.4 million and $5.8 million, respectively, which were recorded at their estimated fair value of $2.9 million and $3.8 million, respectively. The Company recorded a net increase in the specific reserve for impaired loans of $6,000 and a net decrease of $5,000 for the six months ended June 30, 2022 and June 30, 2021, respectively. Net charge-offs of $494,000 and $2.4 million were recorded for the six months ended June 30, 2022 and June 30, 2021, 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 June 30, 2022, the Company had no assets acquired through foreclosure. At December 31, 2021, the Company had other real estate owned of approximately $100,000, recorded at estimated fair value, less estimated selling costs when acquired, thus establishing a new cost basis. The property was located in New Jersey and was sold during the second quarter of 2022 for a small gain. Estimated fair value is generally based on independent appraisals. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3 inputs. When an asset is acquired, the excess of the loan balance over fair value, less estimated selling costs, is charged to the allowance for credit losses. If the estimated fair value of the asset declines, a write-down is recorded through non-interest expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in the economic conditions.
 
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
The fair value for Federal Home Loan Bank of New York ("FHLBNY") stock is its carrying value, since this is the amount for which it could be redeemed and 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 June 30, 2022 and December 31, 2021, are presented in the following tables (in thousands):
 June 30, 2022
  Estimated Fair Value
 Carrying ValueLevel 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$110,232 $110,232 $— $— $110,232 
Trading securities10,401 10,401 — — 10,401 
Debt securities available-for-sale1,086,868 — 1,086,868 — 1,086,868 
Debt securities held-to-maturity5,201 — 4,977 — 4,977 
Equity securities (1)
296 296 — — 296 
FHLBNY stock, at cost19,942 — 19,942 — 19,942 
Net loans held-for-investment4,072,826 — — 3,952,108 3,952,108 
Derivative assets3,872 — 3,872 — 3,872 
Financial liabilities:     
Deposits$4,418,002 $— $4,418,885 $— $4,418,885 
Borrowed funds347,016 — 336,183 — 336,183 
Subordinated debentures60,917 — 56,003 — 56,003 
Advance payments by borrowers for taxes and insurance29,458 — 29,458 — 29,458 
Derivative liabilities3,873 — 3,873 — 3,873 
(1) Excludes investment measured at net asset value of $7.5 million at June 30, 2022, which has not been classified in the fair value hierarchy.
 December 31, 2021
  Estimated Fair Value
 Carrying ValueLevel 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$91,068 $91,068 $— $— $91,068 
Trading securities13,461 13,461 — — 13,461 
Debt securities available-for-sale1,208,237 — 1,208,237 — 1,208,237 
Debt securities held-to-maturity5,283 — 5,475 — 5,475 
Equity securities (1)
328 328 — — 328 
FHLBNY stock, at cost22,336 — 22,336 — 22,336 
Net loans held-for-investment3,767,644 — — 3,904,026 3,904,026 
Derivative assets923 — 923 — 923 
Financial liabilities:     
Deposits$4,169,334 $— $4,172,125 $— $4,172,125 
Borrowed funds421,755 — 426,235 — 426,235 
Advance payments by borrowers for taxes and insurance24,909 — 24,909 — 24,909 
Derivative liabilities925 — 925 — 925 
(1) Excludes investment measured at net asset value of $5.0 million at December 31, 2021, 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.