12.	FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values:

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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Securities

The Company's marketable equity securities and available-for-sale securities 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.

All securities available-for-sale are guaranteed either implicitly or explicitly by GSEs as of September 30, 2019 and December 31, 2018. Obtaining market values as of September 30, 2019 and December 31, 2018 for these securities utilizing significant observable inputs was not difficult due to their considerable demand.

Loans Held for Sale

The fair value of loans held for sale is determined using quoted prices, adjusted for specific attributes of a loan classified as held for sale, which approximates carrying value.

Derivatives

Derivatives represent interest rate swaps and estimated fair values are based on valuation models using observable market data as of the measurement date.

The following tables present financial assets liabilities measured at fair value on a recurring basis as of the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements at September 30, 2019 Using
	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets
Marketable equity securities (Registered Mutual Funds):
Domestic equity mutual funds	$	1,564	$	1,564	$	—	$	—
International equity mutual funds		395		395		—		—
Fixed income mutual funds		3,876		3,876		—		—
Securities available-for-sale:
Agency Notes		40,047		—		40,047		—
Corporate Securities		26,543		—		26,543		—
Pass-through MBS issued by GSEs		247,431		—		247,431		—
Agency CMOs		205,587		—		205,587		—
Loans Held for Sale		1,839		—		1,839		—
Derivative – cash flow hedges		730		—		730		—
Derivative – freestanding derivatives		1,696		—		1,696		—

Financial Liabilities
Derivative – cash flow hedges		9,842		—		9,842		—
Derivative – freestanding derivatives		1,696		—		1,696		—

			Fair Value Measurements at December 31, 2018 Using
	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets
Marketable equity securities (Registered Mutual Funds)
Domestic equity mutual funds	$	1,420	$	1,420	$	—	$	—
International equity mutual funds		377		377		—		—
Fixed income mutual funds		3,870		3,870		—		—
Securities available-for-sale:
Agency Notes		25,145		—		25,145		—
Corporate Securities		11,135		—		11,135		—
Pass-through MBS issued by GSEs		354,613		—		354,613		—
Agency CMOs		111,992		—		111,992		—
Loans Held for Sale		1,097		—		1,097		—
Derivative – cash flow hedges		4,669		—		4,669		—

Financial Liabilities
Derivative – cash flow hedges		2,097		—		2,097		—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis. That is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.

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. Impaired loans are collateralized by real estate and accounts receivable, and are 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) or discounted valuation of underlying collateral, such as accounts receivable. Types of discounts considered include aging of receivables, condition of the collateral, potential market for the collateral and estimated disposal costs. These discounts will vary from loan to loan and may be discounted based on management's opinions concerning market developments or the client's business.

At December 31, 2018, there were no impaired loans measured at fair value. The following table presents impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral during the reported period.

					Fair Value Measurements at September 30, 2019 Using
	Carrying Amount Before Allocation		Specific Valuation Allowance Allocation		Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Impaired Loans
C&I	$	15,000	$	7,500	$	7,500	$	—	$	—	$	7,500

Financial Instruments Not Measured at Fair Value

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 23 to the Company's Consolidated Financial Statements included in the Annual Report on Form 10-K. Other borrowings consists of overnight or short-term borrowings carried at amortized cost, equal to the amount payable on demand at the reporting date (deemed a Level 1 valuation).

The following tables present the carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or non-recurring is as follows for the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value Measurements at September 30, 2019 Using
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total

Financial Assets
Cash and due from banks	$	112,541	$	112,541	$	—	$	—	$	112,541
Loans, net (excluding impaired loans carried at fair value)		5,448,235		—		—		5,443,562		5,443,562
Accrued interest receivable		19,329		19		1,751		17,559		19,329
Financial Liabilities
Savings, money market and checking accounts		2,740,718		2,740,718		—		—		2,740,718
Certificates of Deposits ("CDs")		1,650,688		—		1,652,396		—		1,652,396
Escrow and other deposits		110,233		110,233		—		—		110,233
FHLBNY Advances		1,056,750		—		1,040,395		—		1,040,395
Subordinated debt, net		113,869		—		114,732		—		114,732
Other borrowings		60,000		60,000		—		—		60,000
Accrued interest payable		5,646		12		5,634		—		5,646

			Fair Value Measurements at December 31, 2018 Using
	Carrying Amount		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total
Financial Assets
Cash and due from banks	$	147,256	$	147,256	$	—	$	—	$	147,256
Loans, net		5,372,036		—		—		5,301,281		5,301,281
Accrued interest receivable		17,875		—		1,296		16,579		17,875
Financial Liabilities
Savings, money market and checking accounts		2,946,717		2,946,717		—		—		2,946,717
CDs		1,410,037		—		1,407,747		—		1,407,747
Escrow and other deposits		85,234		85,234		—		—		85,234
FHLBNY Advances		1,125,350		—		1,119,548		—		1,119,548
Subordinated debt, net		113,759		—		110,346		—		110,346
Accrued interest payable		2,710		—		2,710		—		2,710