NYCB 2017 Annual Report

129 The Company had no liabilities that were measured at fair value on a recurring basis at December 31, 2017. Fair Value Measurements at December 31, 2016 (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Netting Adjustments (1) Total Fair Value Assets: Mortgage-Related Securities Available for Sale: GSE certificates $ -- $ 7,326 $ -- $ -- $ 7,326 Total mortgage-related securities $ -- $ 7,326 $ -- $ -- $ 7,326 Other Securities Available for Sale: Municipal bonds $ -- $ 631 $ -- $ -- $ 631 Capital trust notes -- 7,243 -- -- 7,243 Preferred stock 42,724 29,260 -- -- 71,984 Mutual funds and common stock -- 17,097 -- -- 17,097 Total other securities $ 42,724 $ 54,231 $ -- $ -- $ 96,955 Total securities available for sale $ 42,724 $ 61,557 $ -- $ -- $104,281 Other Assets: Loans held for sale $ -- $409,152 $ -- $ -- $409,152 Mortgage servicing rights -- -- 228,099 -- 228,099 Interest rate lock commitments -- -- 982 -- 982 Derivative assets-other (2) 2,611 16,829 -- (17,861) 1,579 Liabilities: Derivative liabilities $(6,009) $ (17,719) $ -- $ 16,588 $ (7,140) (1) Includes cash collateral received from, and paid to, counterparties. (2) Includes $1.9 million to purchase Treasury options. The Company reviews and updates the fair value hierarchy classifications for its assets on a quarterly basis. Changes from one quarter to the next that are related to the observability of inputs for a fair value measurement may result in a reclassification from one hierarchy level to another. A description of the methods and significant assumptions utilized in estimating the fair values of available-for- sale securities follows: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities, exchange-traded securities, and derivatives. If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, models incorporate transaction details such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy, and primarily include such instruments as mortgage-related and corporate debt securities. Periodically, the Company uses fair values supplied by independent pricing services to corroborate the fair values derived from the pricing models. In addition, the Company reviews the fair values supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness. The Company challenges pricing service valuations that appear to be unusual or unexpected. The Company carries loans held for sale at fair value. The fair value of loans held for sale is primarily based on quoted market prices for securities backed by similar types of loans. Changes in the fair value of these assets are largely driven by changes in interest rates subsequent to loan funding, and changes in the fair value of servicing associated with the mortgage loans held for sale. Loans held for sale are classified within Level 2 of the valuation hierarchy.