16. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value hierarchy established under ASC 820-10 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 – Significant unobservable inputs for the asset or liability. Significant 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). Significant 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 segmented 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, 2015
			Fair Value Measurements Using
Description	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Gains (Losses) for the Year Ended December 31, 2015
Trading securities (Registered Mutual Funds):
Domestic Equity Mutual Funds	$	1,053	$	1,053	$	-	$	-	$	(27	)
International Equity Mutual Funds		281		281		-		-		(31	)
Fixed Income Mutual Funds		8,867		8,867		-		-		(53	)
Investment securities available-for-sale:
Registered Mutual Funds:
Domestic Equity Mutual Funds		1,253		1,253		-		-		9
International Equity Mutual Funds		383		383		-		-		-
Fixed Income Mutual Funds		2,120		2,120		-		-		(5	)
Pass-through MBS issued by GSEs		431		-		431		-		1,389

Assets Measured at Fair Value on a Recurring Basis at December 31, 2014
			Fair Value Measurements Using
Description	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Gains (Losses) for the Year Ended December 31, 2014
Trading securities (Registered Mutual Funds):
Domestic Equity Mutual Funds	$	1,399	$	1,399	$	-	$	-	$	1
International Equity Mutual Funds		159		159		-		-		(7	)
Fixed Income Mutual Funds		7,001		7,001		-		-		19
Investment securities available-for-sale:
Agency notes		70		-		70		-		-
Registered Mutual Funds:
Domestic Equity Mutual Funds		2,160		2,160		-		-		918
International Equity Mutual Funds		415		415		-		-		56
Fixed Income Mutual Funds		1,161		1,161		-		-		23
Pass-through MBS issued by GSEs		25,607		-		25,607		-		-
Private issuer pass through MBS		455		-		455		-		-
Private issuer CMOs		347		-		347		-		-

The Company's available-for-sale investment securities and MBS are reported at fair value, which were 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, bids, 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 pass-through MBS issued by GSEs all possessed the highest possible credit rating published by at least one established credit rating agency as of December 31, 2015 and December 31, 2014. Obtaining market values as of December 31, 2015 and December 31, 2014 for these securities utilizing significant observable inputs was not difficult due to their considerable demand. The agency notes, private issuer pass through MBS and private issuer CMOs owned by the Company at December 31, 2014 were sold during the year ended December 31, 2015. For each security classification, the value received from the sale approximated the most recently obtained pricing utilizing the methodology indicated above.

There were no assets measured at fair value on a non-recurring basis as of December 31, 2015. The following table summarizes assets measured at fair value on a non-recurring basis as of December 31, 2014:

Assets Measured at Fair Value on a Non-Recurring Basis at December 31, 2014
			Fair Value Measurements Using
Description	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Impaired loans:
Commercial Mixed Use Real Estate	$	4,400	$	-	$	-	$	4,400

Loans Held for Sale - Loans held for sale are valued at the contractual sales price negotiated and agreed to by the Bank and a third party purchaser (deemed a Level 2 input).

Impaired Loans - Loans with certain characteristics are evaluated individually for impairment. A loan is considered impaired under ASC 310-10-35 when, based upon then 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, 2015 and December 31, 2014 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 price (Level 3 input), or, more commonly, a recent real estate appraisal (Level 3 input). The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

An appraisal is generally ordered for all impaired multifamily residential, mixed use and 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.

As of December 31, 2015, there were no impaired loans measured at fair value. As of December 31, 2014, impaired loans measured for impairment using the estimated fair value of the collateral had an aggregate principal balance of $4,400, and no valuation allowance within the allowance for loan losses. Impaired loans measured at fair value using the estimated fair value of the collateral had no impact upon the provision for loan losses during the years ended either December 31, 2015 or 2014.

The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis at December 31, 2014:

Fair Value Derived

Valuation Technique Utilized

Significant Unobservable Input(s)

Minimum Value

Maximum Value

Weighted Average Value

4,400

Income approach only

Capitalization rate

N/A

(1)

N/A

(1)

7.5

(1) Only one loan in this population.

The carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or non-recurring basis at December 31, 2015 and December 31, 2014 were as follows:

			Fair Value at December 31, 2015 Using
At December 31, 2015	Carrying Amount		Level 1 Inputs			Level 2 Inputs			Level 3 Inputs			Total
Assets:
Cash and due from banks	$	64,154	$	64,154		$	-		$	-		$	64,154
Federal funds sold and other short-term investments		-		-			-			-			-
Investment securities held to maturity (TRUPS)		5,242		-			-			7,051			7,051
Loans, net (excluding impaired loans carried at fair value)		4,678,262		-			-			4,722,803			4,722,803
Accrued interest receivable		13,486		-			19			13,467			13,486
FHLBNY capital stock		58,713		N/	A		N/	A		N/	A		N/	A
Liabilities:
Savings, money market and checking accounts		2,325,463		2,325,463			-			-			2,325,463
CDs		858,847		-			865,581			-			865,581
Escrow and other deposits		77,130		77,130			-			-			77,130
FHLBNY Advances		1,166,725		-			1,170,274			-			1,170,274
Trust Preferred securities payable		70,680		-			69,973			-			69,973
Accrued interest payable		2,259		-			2,259			-			2,259

			Fair Value at December 31, 2014 Using
At December 31, 2014	Carrying Amount		Level 1 Inputs			Level 2 Inputs			Level 3 Inputs			Total
Assets:
Cash and due from banks	$	78,187	$	78,187		$	-		$	-		$	78,187
Federal funds sold and other short-term investments		250		250			-			-			250
Investment securities held to maturity (TRUPS)		5,367		-			-			6,315			6,315
Loans, net (excluding impaired loans carried at fair value)		4,096,347		-			-			4,188,137			4,188,137
Accrued interest receivable		12,664		2			104			12,558			12,664
FHLBNY capital stock		58,407		N/	A		N/	A		N/	A		N/	A
Liabilities:
Savings, money market and checking accounts		1,733,474		1,733,474			-			-			1,733,474
CDs		926,318		-			934,324			-			934,324
Escrow and other deposits		91,921		91,921			-			-			91,921
FHLBNY Advances		1,173,725		-			1,186,069			-			1,186,069
Trust Preferred securities payable		70,680		-			70,680			-			70,680
Accrued interest payable		2,729		-			2,729			-			2,729

Cash and Due From Banks – The fair value is assumed to be equal to their carrying value as these amounts are due upon demand (deemed a Level 1 valuation).

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 (deemed a Level 1 valuation).

TRUPS Held to Maturity – At both December 31, 2015 and December 31, 2014, the Company owned seven TRUPS classified as held-to-maturity.

At December 31, 2014, their estimated fair value was obtained utilizing the following weighted valuation sources: 1) broker quotations (10% valuation weighting), which were deemed to meet the criteria of "distressed sale" pricing under the guidance of ASC 820-10-65-4 (deemed to be a Level 3 valuation for which the Company was not provided detailed information regarding the significant unobservable inputs utilized by the third parties); 2) an internally created cash flow valuation model (45% valuation weighting) 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") (deemed to be a Level 3 valuation); and 3) the average of a minimum of two of three available independent cash flow valuation models (45% valuation weighting) (deemed to be a Level 3 valuation for which the Company was not provided detailed information regarding the significant unobservable inputs utilized by the third parties).

The major assumptions utilized in the Internal Cash Flow Valuation (each of which represents a significant unobservable input as defined by ASC 820-10) at December 31, 2014 were as follows:

(i) 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 credit 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." The existing discount rates utilized to compute fair value as of December 31, 2014 ranged from 4.0% to 10.0%, with a weighted average value of 5.8%.

(ii) Defaults – The Company utilized the most recently published measures of capital adequacy and/or problematic assets to estimate potential defaults in the collateral pool of performing issuers underlying the seven securities. In instances where problematic assets equaled or exceeded the issuer's regulatory capital, or the issuer's capital level fell below the limits established by the regulatory agencies, defaults were deemed probable to occur. Based upon the application of this methodology, the computed default rates utilized in the determination of the fair value of the TRUPS as of December 31, 2014 ranged from 0% to 7.8% of the performing security pool balance, with a weighted average rate of 0.8%. The Company additionally utilized a standard default rate of 1.2% every three years, which was applied uniformly.

(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 assumed an estimated recovery rate of 10% per annum to occur one year after initial default, which was applied uniformly.

As discussed above, in addition to the Internal Cash Flow Valuation and broker quotations, at December 31, 2014 the Company utilized two additional independent cash flow valuation models in order to estimate the fair value of TRUPS. The two independent cash flow valuation models utilized a methodology similar to the Internal Cash Flow Valuation, differing only in the underlying assumptions utilized to derive estimated cash flows, individual bank defaults and discount rate. Weighting was applied, as deemed appropriate, to all valuations utilized at each period end, including the Internal Cash Flow Valuation.

As a result of improved marketplace stability and enhanced trading activity, broker quotations became the sole valuation source utilized to estimate the fair value of TRUPS as of December 31, 2015. Despite improvement in the overall marketplace conditions, unobservable data was still deemed to have been utilized in the broker quotation pricing, warranting a determination of Level 3 valuation for these securities at December 31, 2015.

Loans, Net (Excluding Impaired Loans Carried at Fair Value) – For adjustable rate loans repricing monthly or quarterly, and with no significant change in credit risk, fair values are based on carrying values. The fair value of all remaining 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 to borrowers of similar credit quality. The valuation method used for loans does not necessarily represent an exit price valuation methodology as defined under ASC 820. However, since the valuation methodology is deemed to be comparable to a Level 3 input, the fair value of loans receivable other than impaired loans measured at fair value is shown under the Level 3 valuation column.

Accrued Interest Receivable – The estimated fair value of accrued interest receivable approximates its carrying amount, and is deemed to be valued at an input level comparable to its underlying financial asset.

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

Deposits – The fair value of savings, money market, and checking accounts is, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount), which has been deemed a Level 1 valuation. 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 (deemed a Level 2 valuation).

Escrow and Other Deposits – The fair value of escrow and other deposits is, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount), which has been deemed a Level 1 valuation.

FHLBNY Advances – The fair value of FHLBNY Advances 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 (deemed a Level 2 valuation). The carrying amount of accrued interest payable on FHLBNY Advances is its fair value and is deemed a Level 2 valuation.

Trust Preferred Securities Payable – The fair value of trust preferred securities payable is estimated using discounted cash flow analyses based on then current borrowing rates for similar types of borrowing arrangements (deemed a Level 2 valuation), and is provided to the Company quarterly independently by a market maker in the underlying security.

Accrued Interest Payable – The estimated fair value of accrued interest payable approximates its carrying amount, and is deemed to be valued at an input level comparable to its underlying financial liability.