NYCB 2017 Annual Report

133 For Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows: (dollars in thousands) Fair Value at Dec. 31, 2017 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value Mortgage servicing rights $2,729 Discounted Cash Flow Weighted Average Constant Prepayment Rate (1) 9.81% Weighted Average Discount Rate 12.00 (1) Represents annualized loan repayment rate assumptions. The significant unobservable inputs used in the fair value measurement of the Company’s MSRs are the weighted average constant prepayment rate and the weighted average discount rate. Significant increases or decreases in either of those inputs in isolation could result in significantly lower or higher fair value measurements. Although the constant prepayment rate and the discount rate are not directly interrelated, they generally move in opposite directions. Assets Measured at Fair Value on a Non-Recurring Basis Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g., when there is evidence of impairment). The following tables present assets and liabilities that were measured at fair value on a non-recurring basis as of December 31, 2017 and 2016, and that were included in the Company’s Consolidated Statements of Condition at those dates: Fair Value Measurements at December 31, 2017 Using (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Certain impaired loans (1) $-- $-- $45,837 $45,837 Other assets (2) -- -- 4,357 4,357 Total $-- $-- $50,194 $50,194 (1) Represents the fair value of impaired loans, based on the value of the collateral. (2) Represents the fair value of OREO, based on the appraised value of the collateral subsequent to its initial classification as OREO. Fair Value Measurements at December 31, 2016 Using (in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Certain impaired loans (1) $-- $-- $15,635 $15,635 Other assets (2) -- -- 5,684 5,684 Total $-- $-- $21,319 $21,319 (1) Represents the fair value of impaired loans, based on the value of the collateral. (2) Represents the fair value of OREO, based on the appraised value of the collateral subsequent to its initial classification as OREO. The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate market data. Other Fair Value Disclosures GAAP requires the disclosure of fair value information about the Company’s on - and off-balance sheet financial instruments. When available, quoted market prices are used as the measure of fair value. In cases where quoted market prices are not available, fair values are based on present-value estimates or other valuation techniques. Such fair values are significantly affected by the assumptions used, the timing of future cash flows, and the discount rate. Because assumptions are inherently subjective in nature, estimated fair values cannot be substantiated by comparison to independent market quotes. Furthermore, in many cases, the estimated fair values provided would not necessarily be realized in an immediate sale or settlement of such instruments.