FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2011

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

17.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value hierarchy established under GAAP is summarized as follows:

Level 1 Inputs - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs - Significant other observable inputs such as any of the following: (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 Inputs - Unobservable inputs for the asset or liability. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).  Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following tables present the assets that are reported on the consolidated statements of financial condition at fair value as of the date indicated by level within the fair value hierarchy.  Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Assets Measured at Fair Value on a Recurring Basis at December 31, 2011
			Fair Value Measurements Using
Description	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Losses for the Year Ended December 31, 2011
Investment securities available-for-sale	$	174,868	$	4,559	$	170,309	$	-	$	-
MBS available-for-sale		93,877		-		93,877		-		-
Trading Securities (Registered Mutual Funds)
Domestic Equity		780		780		-		-		-
International Equity		108		108		-		-		-
Fixed Income		886		886		-		-		-

Assets Measured at Fair Value on a Recurring Basis at December 31, 2010
			Fair Value Measurements Using
Description	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Losses for the Year Ended December 31, 2010
Investment securities available-for-sale	$	85,642	$	4,883	$	80,759	$	-	$	-
MBS available-for-sale		144,518		-		144,518		-		-
Trading Securities (Registered Mutual Funds)										-
Domestic Equity		672		672		-		-		-
International Equity		108		108		-		-		-
Fixed Income		710		710		-		-		-

The Company's available-for-sale investment securities and MBS are reported at fair value, which is determined utilizing prices obtained from independent parties. The valuations obtained are based upon market data, and often utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (obtained only from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable.  Prioritization of inputs may vary on any given day based on market conditions.

The Company's available-for-sale investment securities and MBS at December 31, 2011 were categorized as follows:

Description	Percentage of Total			Valuation Level
Agency notes		63.4	%	Two
Pass Through MBS or CMOs issued by Government Sponsored Entities ("GSEs")		33.8		Two
Mutual fund investments		1.7		One
Pass Through MBS or CMOs issued by entities other than GSEs		1.1		Two

The Company's available-for-sale investment securities and MBS at December 31, 2010 were categorized as follows:

Description	Percentage of Total			Valuation Level
Pass Through MBS or CMOs issued by GSEs		60.9	%	Two
Agency notes		35.1		Two
Mutual fund investments		2.1		One
Pass Through MBS or CMOs issued by entities other than GSEs		1.9		Two

The agency notes owned by the Company possessed the highest possible credit rating published by at least one established credit rating agency as of both December 31, 2011 and 2010.  Obtaining market values as of December 31, 2011 and 2010 for these securities utilizing significant observable inputs was not difficult due to their continued marketplace demand.  The pass-through MBS and CMOs issued by GSEs all possessed the highest possible credit rating published by at least one established credit rating agency as of December 31, 2011 and 2010.  Obtaining market values as of December 31, 2011 and 2010 for these securities utilizing significant observable inputs was not difficult due to their considerable demand.

As of December 31, 2011 and 2010, the Company owned one pass through MBS issued by an entity other than a GSE.  This security had an amortized cost basis of $1,614 at December 31, 2011.  The Company's investment is within the senior tranche of this security, and the contractual interest rate on the security was 5.0% at both December 31, 2011 and 2010.  The assets underlying this security are a pool of 15-year fixed rate amortizing prime mortgages on residential properties located throughout the United States.  The underlying mortgages were originated in 2005, and, as of December 31, 2011, had a weighted average coupon of 5.24% and a weighted average loan-to-value ratio of 43%.  Approximately 22% of the underlying mortgages are located in California, while the remainder are diversified geographically, and less than 12% of the total underlying mortgage pool was delinquent at December 31, 2011.   The credit ratings on this security ranged from Caa1 to CC at December 31, 2011.  As a result of the overall credit quality of this investment, marketplace demand was deemed sufficient at December 31, 2011 to permit it to be valued utilizing estimated sales determined under benchmarking and matrix pricing.  The Company obtained such values from at least two credible independent market sources, and verified that the values were prepared utilizing significant observable inputs as defined under ASC 820-10.

As of December 31, 2011 and 2010, the Company owned one CMO issued by an entity other than a GSE.  This security had an amortized cost basis of $1,400 at December 31, 2011.  The Company's investment is within the senior tranche of this security, and its weighted average contractual interest rate was 4.5% at both December 31, 2011 and 2010.  The assets underlying this security are a pool of 15-year fixed rate amortizing prime mortgages on residential properties located throughout the United States.  The underlying mortgages were originated in 2003, and, as of December 31, 2011, had a weighted average coupon of 5.39% and a weighted average loan-to-value ratio approximating 28%. Approximately 45% of the underlying mortgages are located in California, while the remainder are diversified geographically.  Approximately one percent of the total underlying mortgage pool was delinquent at December 31, 2011.   This security possessed the highest possible credit rating published by at least one established credit rating agency at December 31, 2011.  As a result of the overall credit quality of this investment, marketplace demand was deemed sufficient  at December 31, 2011 to permit it to be valued utilizing estimated sales determined under benchmarking and matrix pricing.  The Company obtained such values from at least two credible market sources, and verified that these values were prepared utilizing significant observable inputs as defined under ASC 820-10.

Assets Measured at Fair Value on a Non-Recurring Basis at December 31, 2011
			Fair Value Measurements Using
Description	Total		Level 1		Level 2		Level 3		Losses for the Year Ended December 31, 2011
TRUPS(1)	$	285	$	-	$	-	$	285	$	752	(1)
Impaired loans		15,377		-		-		15,377		5,807	(2)

(1) Amount represents the fair value of one TRUP that was deemed to have credit-related OTTI at December 31, 2011.  At December 31, 2011, four additional TRUPS with an aggregate fair value of $1,427 were not carried at fair value despite previously meeting the OTTI criteria. Under ASC 320-10-65, these held-to-maturity securities are only carried at fair value in the event that they incur additional credit-related impairment at period end, which did not occur at December 31, 2011.  Losses for the period represent the total OTTI recognized on three TRUPs (credit or non-credit related) during the period.

(2)  Amount represents charge-offs recognized on impaired loans during the year ended December 31, 2011.

Assets Measured at Fair Value on a Non-Recurring Basis at December 31, 2010
			Fair Value Measurements Using
Description	Total		Level 1		Level 2		Level 3		Losses for the Year Ended December 31, 2010
TRUPS(1)	$	650	$	-	$	-	$	650	$	2,757	(1)
Impaired loans		44,097		-		-		44,097		13,541	(2)

(1)  Amount represents the fair value of two TRUPS that were deemed to have credit-related OTTI at December 31, 2010.  At December 31, 2010, three additional TRUPS with an aggregate fair value of $655 were not carried at fair value despite meeting the OTTI criteria. Under ASC 320-10-65, these held-to-maturity securities are only carried at fair value in the event that they incur additional credit-related impairment at period end, which did not occur at December 31, 2010.  Losses for the period represent the total OTTI recognized on six TRUPS (credit or non-credit related) during the period.

(2) Amount represents charge-offs recognized on impaired loans during the year ended December 31, 2010.

TRUPS Held to Maturity - At December 31, 2011 and December 31, 2010, the Company owned eight TRUPS classified as held-to-maturity.  Late in 2008, the market for these securities became illiquid, and continued to be deemed illiquid as of December 31, 2011.  As a result, at both December 31, 2011 and December 31, 2010, their estimated fair value was obtained utilizing a blended valuation approach (Level 3 pricing).  Under the blended valuation approach, the Bank utilized the following valuation sources: 1) broker quotations, which were deemed to meet the criteria of "distressed sale" pricing under the guidance of ASC 820-10-65-4, were given a minor 10% weighting; 2) An internally created cash flow valuation model that considered the creditworthiness of each individual issuer underlying the collateral pools, and utilized default, cash flow and discount rate assumptions determined by the Company's management (the "Internal Cash Flow Valuation"), was given a 45% weighting; and 3) a minimum of two of three available independent cash flow model valuations were averaged and given a 45% weighting.

The major assumptions utilized in the Internal Cash Flow Valuation (each of which represents a significant unobservable input as defined by ASC 820-10) were as follows:

(i) Discount Rate - Pursuant to ASC 320-10-65, the Company utilized two different discount rates for discounting the cash flows for each of the eight TRUPS, as follows:

(1)   Purchase discount rate - the rate used to determine the "credit" based valuation of the security.

(2)  Current discount rate - the current discount rate utilized was derived from the Bloomberg fair market value curve for debt offerings of similar credit rating.  In the event that a security had a split investment rating, separate cash flow valuations were made utilizing the appropriate discount rate and were averaged in order to determine the Internal Cash Flow Valuation.  In addition, the discount rate was interpolated from the Bloomberg fair market value curve for securities possessing a credit rating below "B."

(ii) Defaults - The Company utilized the most recently published Fitch bank scores to identify potential defaults in the collateral pool of performing issuers underlying the eight securities.  Using a rating scale of 1 to 5 (best-to-worst), all underlying issuers with a Fitch bank rating of 5.0 were assumed to default.  Underlying issuers with a Fitch bank rating of 3.5 through 4.5 were assumed to default at levels ranging from 5% to 75% based upon both their rating as well as whether they had been granted approval to receive funding under the U.S. Department of Treasury's Troubled Asset Relief Program Capital Purchase Program.   In addition to the defaults derived from the Fitch bank scores, the Company utilized a standard default rate of 1.2% every three years.

(iii) Cash Flows - The expected payments for the tranche of each security owned by the Company, as adjusted to assume that all estimated defaults occur immediately.  The cash flows further assume an estimated recovery rate of 6% per annum to occur one year after initial default.

As discussed above, in addition to the Internal Cash Flow Valuation and broker quotations, the Company utilizes a minimum of two of three additional cash flow model valuations in order to estimate the fair value of TRUPS.  Two of the three independent cash flow model valuations utilized a methodology similar to the Internal Cash Flow Valuation, differing only in the underlying assumptions deriving estimated cash flows, individual bank defaults and discount rate.  The third independent cash flow valuation was derived from a different methodology in which the actual cash flow estimate based upon the underlying collateral of the securities (including default estimates) was not considered.  Instead, this cash flow valuation utilized a discount rate determined from the Bloomberg fair market value curve for similar assets that continued to trade actively, with adjustments made for the illiquidity of the TRUPS market.  Because of the significant judgment underlying each of the pricing assumptions, management elected to recognize each of the independent valuations and apply a weighting system to all of the valuations, including the Internal Cash Flow Valuation, as all of these valuations were determined utilizing a valid and objective pricing methodology.

Impaired Loans - Loans with certain characteristics are evaluated individually for impairment. A loan is considered impaired under ASC 310-10-35 when, based upon existing information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The Bank's impaired loans at December 31, 2011 were collateralized by real estate and were thus carried at the lower of the outstanding principal balance or the estimated fair value of the collateral.  Fair value is estimated through either a negotiated note sale value, or, more commonly, either a current independent appraisal or a drive-by inspection combined with a comparison of the collateral with similar properties in the area by either a licensed appraiser or real estate broker.  An appraisal is generally ordered for all impaired multifamily residential, mixed use or commercial real estate loans for which the most recent appraisal is more than one year old.  The Bank never adjusts independent appraisal data upward.  Occasionally, management will adjust independent appraisal data downward based upon its own lending expertise and/or experience with the subject property, utilizing such factors as potential note sale values, or a more refined estimate of costs to repair and time to lease the property.  Adjustments for potential disposal costs are also considered when determining the final appraised value.  In instances in which foreclosure and sale of the collateral property are deemed to provide the likely ultimate realizable value, an aggregate discount of 10% is often applied against the realizable value, which relates to both the recognition that the asset is being disposed in a distressed manner, and estimated disposal costs.  Of the 52 impaired loans at December 31, 2011, management utilized a likely negotiated note sale value as the valuation for two of the loans and reduced the independent appraisal value in determining the fair value of nine of the loans.

Methods and assumptions used to estimate fair values for financial assets and liabilities that are not valued utilizing formal marketplace quotations (other than those previously discussed) are summarized as follows:

Cash and Due From Banks - The fair value is assumed to be equal to their carrying value as these amounts are due upon demand.

Federal Funds Sold and Other Short Term Investments - As a result of their short duration to maturity, the fair value of these assets, principally overnight deposits, is assumed to be equal to their carrying value due.

FHLBNY Capital Stock - It is not practicable to determine the fair value of FHLBNY capital stock due to restrictions placed on transferability.

Loans, Net - The fair value of loans receivable is determined by discounting anticipated future cash flows of the loans, net of anticipated prepayments, using a discount rate reflecting current market rates for loans with similar terms.  This methodology is applied to all loans, inclusive of non-accrual loans, as well as impaired loans for which a write-down to the current fair market value of the underlying collateral is not determined to be warranted (generally loans that are sufficiently collateralized).  In addition, the valuation of loans reflects the consideration of sale pricing for loan types that have traditionally been subject to marketplace sales (over 80% of the outstanding loan portfolio).  Due to significant market dislocation, secondary market prices were given little weighting in deriving loan valuation at December 31, 2011 and 2010.

Deposits - The fair value of savings, money market, and checking accounts is assumed to be their carrying amount. The fair value of CDs is based upon the present value of contractual cash flows using current interest rates for instruments of the same remaining maturity.

Escrow and Other Deposits - The estimated fair value of escrow and other deposits is assumed to be their carrying amount payable.

REPOs and FHLBNY Advances - REPOsare accounted for as financing transactions.  Their fair value is measured by the discounted anticipated cash flows through contractual maturity or next interest repricing date, or an earlier call date if, as of the valuation date, the borrowing is expected to be called.  The carrying amount of accrued interest payable on REPOs and FHLBNY Advances is its fair value.

Trust Preferred Securities Payable - The fair value of trust preferred securities payable was measured by an independent market quotation obtained from a market maker in the underlying security.

Commitments to Extend Credit - The fair value of commitments to extend 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 interest rates and the committed rates.

Based upon the aforementioned valuation methodologies, the estimated carrying amount and estimated fair values of all of the Company's financial instruments were as follows:

At December 31, 2011	Carrying Amount		Fair Value
Assets:
Cash and due from banks	$	43,309	$	43,309
Investment securities held to maturity (TRUPS)		6,511		4,924
Investment securities available-for-sale		174,868		174,868
MBS available-for-sale		93,877		93,877
Loans, net		3,440,611		3,578,599
Loans held for sale		3,022		3,022
MSR		1,604		2,139
Federal funds sold and other short-term investments		951		951
FHLBNY capital stock		49,489		N/A
Liabilities:
Savings, money market and checking accounts		1,366,150		1,366,150
CDs		977,551		996,022
Escrow and other deposits		71,812		71,812
REPOS		195,000		223,728
FHLBNY Advances		939,775		991,117
Trust Preferred securities payable		70,680		67,146
Commitments to extend credit		917		917

At December 31, 2010	Carrying Amount		Fair Value
Assets:
Cash and due from banks	$	86,193	$	86,193
Investment securities held to maturity (TRUPS)		6,641		4,408
Investment securities available-for-sale		85,642		85,642
MBS available-for-sale		144,518		144,518
Loans, net		3,451,018		3,598,027
Loans held for sale		3,308		3,309
MSR		2,271		2,840
Federal funds sold and other short-term investments		4,536		4,536
FHLBNY capital stock		51,718		N/A
Liabilities:
Savings, money market and checking accounts		1,290,929		1,290,929
CDs		1,059,652		1,074,114
Escrow and other deposits		68,542		68,542
REPOs		195,000		217,735
FHLBNY Advances		990,525		1,032,555
Trust Preferred securities payable		70,680		63,612
Commitments to extend credit		631		631