UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to to
Commission File Number 1-31565
NEW YORK COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 06-1377322 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
102 Duffy Avenue, Hicksville, New York 11801
(Address of principal executive offices)
(Registrant’s telephone number, including area code) (516) 683-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 par value per share | NYCB | New York Stock Exchange | ||
Bifurcated Option Note Unit SecuritiES SM | NYCB PU | New York Stock Exchange | ||
Depository Shares each representing a 1/40th interest in a share of Fixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock, $0.01 par value | NYCB PA | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-Accelerated filer | ☐ | Smaller Reporting Company | ☐ |
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
465,033,012466,148,835
Number of shares of common stock outstanding at August 2, 20211, 2022
NEW YORK COMMUNITY BANCORP, INC.
FORM 10-Q
Quarter Ended June 30, 20212022
Page No. | ||
3 | ||
6 | ||
Part I. | 7 | |
Item 1. | 7 | |
Consolidated Statements of Condition as of June 30, | 7 | |
8 | ||
9 | ||
11 | ||
12 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Part II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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|
2
GLOSSARY
BASIS POINT
Throughout this filing, the year-over-year and quarter over quarter changes that occur in certain financial measures are reported in terms of basis points. Each basis point is equal to one hundredth of a percentage point, or 0.01%.
BOOK VALUE PER COMMON SHARE
Book value per common share refers to the amount of common stockholders’ equity attributable to each outstanding share of common stock, and is calculated by dividing total stockholders’ equity less preferred stock at the end of a period, by the number of shares outstanding at the same date.
BROKERED DEPOSITS
Refers to funds obtained, directly or indirectly, by or through deposit brokers that are then deposited into one or more deposit accounts at a bank.
CHARGE-OFF
Refers to the amount of a loan balance that has been written off against the allowance for credit losses on loans and leases.
COMMERCIAL REAL ESTATE LOAN
A mortgage loan secured by either an income-producing property owned by an investor and leased primarily for commercial purposes or, to a lesser extent, an owner-occupied building used for business purposes. The CRE loans in our portfolio are typically secured by either office buildings, retail shopping centers, light industrial centers with multiple tenants, or mixed-use properties.
COST OF FUNDS
The interest expense associated with interest-bearing liabilities, typically expressed as a ratio of interest expense to the average balance of interest-bearing liabilities for a given period.
CRE CONCENTRATION RATIO
Refers to the sum of multi-family, non-owner occupied CRE, and acquisition, development, and construction (“ADC”) loans divided by total risk-based capital.
DEBT SERVICE COVERAGE RATIO
An indication of a borrower’s ability to repay a loan, the DSCR generally measures the cash flows available to a borrower over the course of a year as a percentage of the annual interest and principal payments owed during that time.
DERIVATIVE
A term used to define a broad base of financial instruments, including swaps, options, and futures contracts, whose value is based upon, or derived from, an underlying rate, price, or index (such as interest rates, foreign currency, commodities, or prices of other financial instruments such as stocks or bonds).
DIVIDEND PAYOUT RATIO
The percentage of our earnings that is paid out to shareholders in the form of dividends. It is determined by dividing the dividend paid per share during a period by our diluted earnings per share during the same period of time.
EFFICIENCY RATIO
Measures total operating expenses as a percentage of the sum of net interest income and non-interest income.
3
GOODWILL
Refers to the difference between the purchase price and the fair value of an acquired company’s assets, net of the liabilities assumed. Goodwill is reflected as an asset on the balance sheet and is tested at least annually for impairment.
3
GOVERNMENT-SPONSORED ENTERPRISES
Refers to a group of financial services corporations that were created by the United States Congress to enhance the availability, and reduce the cost of, credit to certain targeted borrowing sectors, including home finance. The GSEs include, but are not limited to, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks (the “FHLBs”).
GSE OBLIGATIONS
Refers to GSE mortgage-related securities (both certificates and collateralized mortgage obligations) and GSE debentures.
INTEREST RATE SENSITIVITY
Refers to the likelihood that the interest earned on assets and the interest paid on liabilities will change as a result of fluctuations in market interest rates.
INTEREST RATE SPREAD
The difference between the yield earned on average interest-earning assets and the cost of average interest-bearing liabilities.
LOAN-TO-VALUE RATIO
Measures the balance of a loan as a percentage of the appraised value of the underlying property.
MULTI-FAMILY LOAN
A mortgage loan secured by a rental or cooperative apartment building with more than four units.
NET INTEREST INCOME
The difference between the interest income generated by loans and securities and the interest expense produced by deposits and borrowed funds.
NET INTEREST MARGIN
Measures net interest income as a percentage of average interest-earning assets.
NON-ACCRUAL LOAN
A loan generally is classified as a “non-accrual” loan when it is 90 days or more past due or when it is deemed to be impaired because we no longer expect to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, we cease the accrual of interest owed, and previously accrued interest is reversed and charged against interest income. A loan generally is returned to accrual status when the loan is current and we have reasonable assurance that the loan will be fully collectible.
NON-PERFORMING LOANS AND ASSETS
Non-performing loans consist of non-accrual loans and loans that are 90 days or more past due and still accruing interest. Non-performing assets consist of non-performing loans, OREO and other repossessed assets.
4
OREO AND OTHER REPOSSESSED ASSETS
Includes real estate owned by the Company which was acquired either through foreclosure or default. Repossessed assets are similar, except they are not real estate-related assets.
RENT-REGULATED APARTMENTS
In New York City, where the vast majority of the properties securing our multi-family loans are located, the amount of rent that tenants may be charged on the apartments in certain buildings is restricted under rent-stabilization laws. Rent-stabilized apartments are generally located in buildings with six or more units that were built between February 1947 and January 1974. Rent-regulated
4
apartments tend to be more affordable to live in because of the applicable regulations, and buildings with a preponderance of such rent-regulated apartments are therefore less likely to experience vacancies in times of economic adversity.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts for the sale of securities owned or borrowed by the Bank with an agreement to repurchase those securities at an agreed-upon price and date. The Bank’s repurchase agreements are primarily collateralized by GSE obligations and other mortgage-related securities, and are entered into with either the FHLBs or various brokerage firms.
SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION (“SIFI”)TROUBLED DEBT RESTRUCTURING
A bank holding company with total consolidated assets that average more than $250 billion overloan for which the four most recent quartersterms have been modified resulting in a concession, and for which the borrower is designated a “Systemically Important Financial Institution” under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) of 2010, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.experiencing financial difficulties.
WHOLESALE BORROWINGS
Refers to advances drawn by the Bank against its line(s) of credit with the FHLBs, their repurchase agreements with the FHLBs and various brokerage firms, and federal funds purchased.
YIELD
The interest income associated with interest-earning assets, typically expressed as a ratio of interest income to the average balance of interest-earning assets for a given period.
5
LIST OF ABBREVIATIONS AND ACRONYMS
ACL—Allowance for Credit Losses | FDIC—Federal Deposit Insurance Corporation | |||
ADC—Acquisition, development, and construction loan | FHLB—Federal Home Loan Bank | |||
ALCO—Asset and Liability Management Committee | FHLB-NY—Federal Home Loan Bank of New York | |||
AMT—Alternative minimum tax | FOMC—Federal Open Market Committee | |||
| ||||
AOCL—Accumulated other comprehensive loss | FRB—Federal Reserve Board | |||
| ||||
ASC—Accounting Standards Codification | FRB-NY—Federal Reserve Bank of New York | |||
| ||||
ASU—Accounting Standards | Freddie Mac—Federal Home Loan Mortgage Corporation | |||
| ||||
BaaS—Banking as a Service | FTEs—Full-time equivalent employees | |||
BOLI—Bank-owned life insurance | GAAP—U.S. generally accepted accounting principles | |||
BP—Basis point(s) | GLBA—The Gramm Leach Bliley Act | |||
CARES Security Act | GNMA—Government National Mortgage Association | |||
C&I—Commercial and industrial loan |
| |||
|
| |||
CDs—Certificates of deposit | LIBOR—London Interbank Offered Rate | |||
CECL—Current Expected Credit Loss |
| |||
| LTV—Loan-to-value ratio | |||
| ||||
CFPB—Consumer Financial Protection Bureau | MBS—Mortgage-backed securities | |||
CMOs—Collateralized mortgage obligations | MSRs—Mortgage servicing rights | |||
CMT—Constant maturity treasury rate | NIM—Net interest margin | |||
CPI—Consumer Price Index | NOL—Net operating loss | |||
CPR—Constant prepayment rate | NPAs—Non-performing assets | |||
CRA—Community Reinvestment Act | NPLs—Non-performing loans | |||
CRE—Commercial real estate loan | NPV—Net Portfolio Value | |||
| ||||
DIF—Deposit Insurance Fund | NYSDFS—New York State Department of Financial Services | |||
|
| |||
DFA—Dodd-Frank Wall Street Reform and Consumer Protection Act | NYSE—New York Stock Exchange | |||
DSCR—Debt service coverage ratio | OCC—Office of the Comptroller of the Currency | |||
| ||||
EAR—Earnings at Risk | OFAC—Office of Foreign Assets Control | |||
|
| |||
EPS—Earnings per common share |
| |||
ERM—Enterprise Risk Management | OTTI—Other-than-temporary impairment | |||
ESOP—Employee Stock Ownership Plan |
| |||
EVE—Economic Value of Equity at Risk |
| |||
Fannie Mae—Federal National Mortgage Association |
| |||
FASB—Financial Accounting Standards Board | SIFI—Systemically Important Financial Institution | |||
FCA—the United Kingdom's Financial Conduct Authority |
| |||
FDI Act—Federal Deposit Insurance Act | TDR—Troubled debt restructurings | |||
6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in millions, except share data)
|
| June 30, |
|
| December 31, |
| ||
|
| (unaudited) |
|
|
|
| ||
Assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 2,086 |
|
| $ | 1,948 |
|
Securities: |
|
|
|
|
|
| ||
Debt securities available-for-sale ($1,354 and $1,278 pledged at June 30, 2021 and |
|
| 6,077 |
|
|
| 5,813 |
|
Equity investments with readily determinable fair values, at fair value |
|
| 16 |
|
|
| 32 |
|
Total securities |
|
| 6,093 |
|
|
| 5,845 |
|
Loans held for sale |
|
| - |
|
|
| 117 |
|
Loans and leases held for investment, net of deferred loan fees and costs |
|
| 43,575 |
|
|
| 42,884 |
|
Less: Allowance for credit losses on loans and leases |
|
| (202 | ) |
|
| (194 | ) |
Total loans and leases held for investment, net |
|
| 43,373 |
|
|
| 42,690 |
|
Total loans and leases held for investment and held for sale, net |
|
| 43,373 |
|
|
| 42,807 |
|
Federal Home Loan Bank stock, at cost |
|
| 686 |
|
|
| 714 |
|
Premises and equipment, net |
|
| 278 |
|
|
| 287 |
|
Operating lease right-of-use assets |
|
| 256 |
|
|
| 267 |
|
Goodwill |
|
| 2,426 |
|
|
| 2,426 |
|
Bank-owned life insurance |
|
| 1,171 |
|
|
| 1,164 |
|
Other real estate owned and other repossessed assets |
|
| 8 |
|
|
| 8 |
|
Other assets |
|
| 1,092 |
|
|
| 840 |
|
Total assets |
| $ | 57,469 |
|
| $ | 56,306 |
|
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
| ||
Deposits: |
|
|
|
|
|
| ||
Interest-bearing checking and money market accounts |
| $ | 12,803 |
|
| $ | 12,610 |
|
Savings accounts |
|
| 7,890 |
|
|
| 6,416 |
|
Certificates of deposit |
|
| 8,949 |
|
|
| 10,331 |
|
Non-interest-bearing accounts |
|
| 4,535 |
|
|
| 3,080 |
|
Total deposits |
|
| 34,177 |
|
|
| 32,437 |
|
Borrowed funds: |
|
|
|
|
|
| ||
Wholesale borrowings: |
|
|
|
|
|
| ||
Federal Home Loan Bank advances |
|
| 14,003 |
|
|
| 14,628 |
|
Repurchase agreements |
|
| 800 |
|
|
| 800 |
|
Total wholesale borrowings |
|
| 14,803 |
|
|
| 15,428 |
|
Junior subordinated debentures |
|
| 360 |
|
|
| 360 |
|
Subordinated notes |
|
| 296 |
|
|
| 296 |
|
Total borrowed funds |
|
| 15,459 |
|
|
| 16,084 |
|
Operating lease liabilities |
|
| 256 |
|
|
| 267 |
|
Other liabilities |
|
| 661 |
|
|
| 676 |
|
Total liabilities |
|
| 50,553 |
|
|
| 49,464 |
|
Stockholders’ equity: |
|
|
|
|
|
| ||
Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares |
|
| 503 |
|
|
| 503 |
|
Common stock at par $0.01 (900,000,000 shares authorized; 490,439,070 and 490,439,070 |
|
| 5 |
|
|
| 5 |
|
Paid-in capital in excess of par |
|
| 6,111 |
|
|
| 6,123 |
|
Retained earnings |
|
| 617 |
|
|
| 494 |
|
Treasury stock, at cost (25,382,108 and 26,537,262 shares, respectively) |
|
| (245 | ) |
|
| (258 | ) |
Accumulated other comprehensive loss, net of tax: |
|
|
|
|
|
| ||
Net unrealized gain on securities available for sale, net of tax of $0 and ($25), |
|
| 1 |
|
|
| 67 |
|
Net unrealized loss on pension and post-retirement obligations, net of tax of $20 and |
|
| (54 | ) |
|
| (59 | ) |
Net unrealized loss on cash flow hedges, net of tax of $8 and $13, respectively |
|
| (22 | ) |
|
| (33 | ) |
Total accumulated other comprehensive loss, net of tax |
|
| (75 | ) |
|
| (25 | ) |
Total stockholders’ equity |
|
| 6,916 |
|
|
| 6,842 |
|
Total liabilities and stockholders’ equity |
| $ | 57,469 |
|
| $ | 56,306 |
|
See accompanying notes to the consolidated financial statements.
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
(in millions, except share data) |
| (unaudited) |
|
|
|
| ||
ASSETS: |
|
|
|
|
|
| ||
Cash, cash equivalents and due from banks |
| $ | 3,277 |
|
| $ | 2,211 |
|
Securities: |
|
|
|
|
|
| ||
Debt securities available-for-sale ($1,101 and $1,168 pledged at |
|
| 5,664 |
|
|
| 5,780 |
|
Equity investments with readily determinable fair values, at fair value |
|
| 14 |
|
|
| 16 |
|
Total securities |
|
| 5,678 |
|
|
| 5,796 |
|
Loans and leases held for investment, net of deferred loan fees and costs |
|
| 48,537 |
|
|
| 45,738 |
|
Less: Allowance for credit losses on loans and leases |
|
| (216 | ) |
|
| (199 | ) |
Total loans and leases, net |
|
| 48,321 |
|
|
| 45,539 |
|
Federal Home Loan Bank stock, at cost |
|
| 635 |
|
|
| 734 |
|
Premises and equipment, net |
|
| 252 |
|
|
| 270 |
|
Operating lease right-of-use assets |
|
| 232 |
|
|
| 249 |
|
Goodwill |
|
| 2,426 |
|
|
| 2,426 |
|
Bank-owned life insurance |
|
| 1,192 |
|
|
| 1,184 |
|
Other real estate owned and other repossessed assets |
|
| 6 |
|
|
| 8 |
|
Other assets |
|
| 1,074 |
|
|
| 1,110 |
|
Total assets |
| $ | 63,093 |
|
| $ | 59,527 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
| ||
Deposits: |
|
|
|
|
|
| ||
Interest-bearing checking and money market accounts |
| $ | 19,189 |
|
| $ | 13,209 |
|
Savings accounts |
|
| 9,580 |
|
|
| 8,892 |
|
Certificates of deposit |
|
| 8,090 |
|
|
| 8,424 |
|
Non-interest-bearing accounts |
|
| 4,385 |
|
|
| 4,534 |
|
Total deposits |
|
| 41,244 |
|
|
| 35,059 |
|
Borrowed funds: |
|
|
|
|
|
| ||
Wholesale borrowings: |
|
|
|
|
|
| ||
Federal Home Loan Bank advances |
|
| 12,850 |
|
|
| 15,105 |
|
Repurchase agreements |
|
| 800 |
|
|
| 800 |
|
Total wholesale borrowings |
|
| 13,650 |
|
|
| 15,905 |
|
Junior subordinated debentures |
|
| 361 |
|
|
| 361 |
|
Subordinated notes |
|
| 296 |
|
|
| 296 |
|
Total borrowed funds |
|
| 14,307 |
|
|
| 16,562 |
|
Operating lease liabilities |
|
| 232 |
|
|
| 249 |
|
Other liabilities |
|
| 486 |
|
|
| 613 |
|
Total liabilities |
|
| 56,269 |
|
|
| 52,483 |
|
Stockholders’ equity: |
|
|
|
|
|
| ||
Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares |
|
| 503 |
|
|
| 503 |
|
Common stock at par $0.01 (900,000,000 shares authorized; 490,439,070 and 490,439,070 |
|
| 5 |
|
|
| 5 |
|
Paid-in capital in excess of par |
|
| 6,114 |
|
|
| 6,126 |
|
Retained earnings |
|
| 893 |
|
|
| 741 |
|
Treasury stock, at cost (24,195,992 and 25,423,427 shares, respectively) |
|
| (238 | ) |
|
| (246 | ) |
Accumulated other comprehensive loss, net of tax: |
|
|
|
|
|
| ||
Net unrealized loss on securities available for sale, net of tax of $167 and |
|
| (436 | ) |
|
| (45 | ) |
Net unrealized loss on pension and post-retirement obligations, net of tax of $12 |
|
| (31 | ) |
|
| (31 | ) |
Net unrealized gain (loss) on cash flow hedges, net of tax of $(6) and $3, respectively |
|
| 14 |
|
|
| (9 | ) |
Total accumulated other comprehensive loss, net of tax |
|
| (453 | ) |
|
| (85 | ) |
Total stockholders’ equity |
|
| 6,824 |
|
|
| 7,044 |
|
Total liabilities and stockholders’ equity |
| $ | 63,093 |
|
| $ | 59,527 |
|
|
|
|
|
|
|
| ||
See accompanying notes to the consolidated financial statements. |
|
|
|
|
|
|
7
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in millions, except per share data)
(unaudited)
|
| For the |
|
| For the |
| ||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans and leases |
| $ | 386 |
|
| $ | 382 |
|
| $ | 769 |
|
| $ | 774 |
|
Securities and money market investments |
|
| 45 |
|
|
| 41 |
|
|
| 85 |
|
|
| 90 |
|
Total interest income |
|
| 431 |
|
|
| 423 |
|
|
| 854 |
|
|
| 864 |
|
Interest Expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing checking and money market accounts |
|
| 7 |
|
|
| 10 |
|
|
| 16 |
|
|
| 39 |
|
Savings accounts |
|
| 7 |
|
|
| 8 |
|
|
| 13 |
|
|
| 17 |
|
Certificates of deposit |
|
| 14 |
|
|
| 65 |
|
|
| 32 |
|
|
| 145 |
|
Borrowed funds |
|
| 72 |
|
|
| 74 |
|
|
| 144 |
|
|
| 153 |
|
Total interest expense |
|
| 100 |
|
|
| 157 |
|
|
| 205 |
|
|
| 354 |
|
Net interest income |
|
| 331 |
|
|
| 266 |
|
|
| 649 |
|
|
| 510 |
|
(Recovery of) provision for credit losses |
|
| (4 | ) |
|
| 18 |
|
|
| 0 |
|
|
| 38 |
|
Net interest income after (recovery of) provision for credit losses |
|
| 335 |
|
|
| 248 |
|
|
| 649 |
|
|
| 472 |
|
Non-Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fee income |
|
| 6 |
|
|
| 4 |
|
|
| 11 |
|
|
| 11 |
|
Bank-owned life insurance |
|
| 8 |
|
|
| 9 |
|
|
| 15 |
|
|
| 17 |
|
Net gain on securities |
|
| 0 |
|
|
| 1 |
|
|
| 0 |
|
|
| 1 |
|
Other |
|
| 2 |
|
|
| 1 |
|
|
| 4 |
|
|
| 3 |
|
Total non-interest income |
|
| 16 |
|
|
| 15 |
|
|
| 30 |
|
|
| 32 |
|
Non-Interest Expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Compensation and benefits |
|
| 74 |
|
|
| 75 |
|
|
| 152 |
|
|
| 155 |
|
Occupancy and equipment |
|
| 22 |
|
|
| 21 |
|
|
| 43 |
|
|
| 39 |
|
General and administrative |
|
| 33 |
|
|
| 27 |
|
|
| 66 |
|
|
| 55 |
|
Total operating expenses |
|
| 129 |
|
|
| 123 |
|
|
| 261 |
|
|
| 249 |
|
Merger-related expenses |
|
| 10 |
|
|
| 0 |
|
|
| 10 |
|
|
| 0 |
|
Total non-interest expense |
|
| 139 |
|
|
| 123 |
|
|
| 271 |
|
|
| 249 |
|
Income before income taxes |
|
| 212 |
|
|
| 140 |
|
|
| 408 |
|
|
| 255 |
|
Income tax expense |
|
| 60 |
|
|
| 35 |
|
|
| 111 |
|
|
| 50 |
|
Net income |
|
| 152 |
|
|
| 105 |
|
|
| 297 |
|
|
| 205 |
|
Preferred stock dividends |
|
| 8 |
|
|
| 8 |
|
|
| 16 |
|
|
| 16 |
|
Net income available to common shareholders |
| $ | 144 |
|
| $ | 97 |
|
| $ | 281 |
|
| $ | 189 |
|
Basic earnings per common share |
| $ | 0.30 |
|
| $ | 0.21 |
|
| $ | 0.60 |
|
| $ | 0.40 |
|
Diluted earnings per common share |
| $ | 0.30 |
|
| $ | 0.21 |
|
| $ | 0.60 |
|
| $ | 0.40 |
|
Net income |
| $ | 152 |
|
| $ | 105 |
|
| $ | 297 |
|
| $ | 205 |
|
Other comprehensive gain (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in net unrealized gain (loss) on securities available for sale, |
|
| 42 |
|
|
| 54 |
|
|
| (66 | ) |
|
| 42 |
|
Change in pension and post-retirement obligations, net of tax of |
|
| (1 | ) |
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
Change in net unrealized gain (loss) on cash flow hedges, net of tax |
|
| 0 |
|
|
| (5 | ) |
|
| 3 |
|
|
| (41 | ) |
Less: Reclassification adjustment for sales of available-for-sale |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
Reclassification adjustment for defined benefit pension plan, |
|
| 2 |
|
|
| 1 |
|
|
| 3 |
|
|
| 3 |
|
Reclassification adjustment for net gain on cash flow hedges |
|
| 4 |
|
|
| 1 |
|
|
| 8 |
|
|
| 0 |
|
Total other comprehensive gain (loss), net of tax |
|
| 47 |
|
|
| 51 |
|
|
| (50 | ) |
|
| 3 |
|
Total comprehensive income, net of tax |
| $ | 199 |
|
| $ | 156 |
|
| $ | 247 |
|
| $ | 208 |
|
|
| For the |
|
| For the |
| ||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(in millions, except per share data) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans and leases |
| $ | 424 |
|
| $ | 386 |
|
| $ | 817 |
|
| $ | 769 |
|
Securities and money market investments |
|
| 49 |
|
|
| 45 |
|
|
| 85 |
|
|
| 85 |
|
Total interest income |
|
| 473 |
|
|
| 431 |
|
|
| 902 |
|
|
| 854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing checking and money market accounts |
|
| 24 |
|
|
| 7 |
|
|
| 32 |
|
|
| 16 |
|
Savings accounts |
|
| 10 |
|
|
| 7 |
|
|
| 18 |
|
|
| 13 |
|
Certificates of deposit |
|
| 12 |
|
|
| 14 |
|
|
| 23 |
|
|
| 32 |
|
Borrowed funds |
|
| 68 |
|
|
| 72 |
|
|
| 138 |
|
|
| 144 |
|
Total interest expense |
|
| 114 |
|
|
| 100 |
|
|
| 211 |
|
|
| 205 |
|
Net interest income |
|
| 359 |
|
|
| 331 |
|
|
| 691 |
|
|
| 649 |
|
Provision for credit losses |
|
| 9 |
|
|
| (4 | ) |
|
| 7 |
|
|
| — |
|
Net interest income after provision for credit loan losses |
|
| 350 |
|
|
| 335 |
|
|
| 684 |
|
|
| 649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fee income |
|
| 6 |
|
|
| 6 |
|
|
| 12 |
|
|
| 11 |
|
Bank-owned life insurance |
|
| 7 |
|
|
| 8 |
|
|
| 14 |
|
|
| 15 |
|
Net loss on securities |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
Other |
|
| 5 |
|
|
| 2 |
|
|
| 7 |
|
|
| 4 |
|
Total non-interest income |
|
| 18 |
|
|
| 16 |
|
|
| 32 |
|
|
| 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NON-INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Compensation and benefits |
|
| 79 |
|
|
| 74 |
|
|
| 159 |
|
|
| 152 |
|
Occupancy and equipment |
|
| 22 |
|
|
| 22 |
|
|
| 45 |
|
|
| 43 |
|
General and administrative |
|
| 33 |
|
|
| 33 |
|
|
| 64 |
|
|
| 66 |
|
Total operating expense |
|
| 134 |
|
|
| 129 |
|
|
| 268 |
|
|
| 261 |
|
Merger-related expenses |
|
| 4 |
|
|
| 10 |
|
|
| 11 |
|
|
| 10 |
|
Total non-interest expense |
|
| 138 |
|
|
| 139 |
|
|
| 279 |
|
|
| 271 |
|
Income before income taxes |
|
| 230 |
|
|
| 212 |
|
|
| 437 |
|
|
| 408 |
|
Income tax expense |
|
| 59 |
|
|
| 60 |
|
|
| 111 |
|
|
| 111 |
|
Net income |
| $ | 171 |
|
| $ | 152 |
|
| $ | 326 |
|
| $ | 297 |
|
Preferred stock dividends |
|
| 8 |
|
|
| 8 |
|
|
| 16 |
|
|
| 16 |
|
Net income available to common stockholders |
| $ | 163 |
|
| $ | 144 |
|
| $ | 310 |
|
| $ | 281 |
|
Basic earnings per common share |
| $ | 0.34 |
|
| $ | 0.30 |
|
| $ | 0.66 |
|
| $ | 0.60 |
|
Diluted earnings per common share |
| $ | 0.34 |
|
| $ | 0.30 |
|
| $ | 0.66 |
|
| $ | 0.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 171 |
|
| $ | 152 |
|
| $ | 326 |
|
| $ | 297 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in net unrealized gain (loss) on securities available-for-sale, |
|
| (176 | ) |
|
| 42 |
|
|
| (391 | ) |
|
| (66 | ) |
Change in pension and post-retirement obligations, net of tax of |
|
| (1 | ) |
|
| (1 | ) |
|
| (1 | ) |
|
| 2 |
|
Change in net unrealized (loss) gain on cash flow hedges, net of tax |
|
| 6 |
|
|
| — |
|
|
| 18 |
|
|
| 3 |
|
Less: Reclassification adjustment for sales of available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Reclassification adjustment for defined benefit pension plan, |
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
|
| 3 |
|
Reclassification adjustment for net gain on cash flow hedges |
|
| 1 |
|
|
| 4 |
|
|
| 5 |
|
|
| 8 |
|
Total other comprehensive income (loss), net of tax |
|
| (169 | ) |
|
| 47 |
|
|
| (368 | ) |
|
| (50 | ) |
Total comprehensive income (loss), net of tax |
| $ | 2 |
|
| $ | 199 |
|
| $ | (42 | ) |
| $ | 247 |
|
See accompanying notes to the consolidated financial statements.
8
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions, except share data)
(unaudited)
|
|
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||
|
|
|
|
| Stock |
|
| Stock |
|
| Paid-in |
|
|
|
|
|
|
|
| Other |
|
| Total |
| ||||||||
Three Months Ended June 30, 2021 |
| Shares |
|
| (Par |
|
| (Par |
|
| Capital in |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Stockholders’ |
| ||||||||
Balance at March 31, 2021 |
|
| 465,074,384 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,103 |
|
| $ | 552 |
|
| $ | (245 | ) |
| $ | (122 | ) |
| $ | 6,796 |
|
Shares issued for restricted stock, net of forfeitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
Dividends paid on common stock ($0.17) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (79 | ) |
|
| — |
|
|
| — |
|
|
| (79 | ) |
Dividends paid on preferred stock ($15.94) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| (8 | ) |
Purchase of common stock |
|
| (17,422 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| 47 |
|
Balance at June 30, 2021 |
|
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Three Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at March 31, 2020 |
|
| 466,360,703 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,102 |
|
| $ | 344 |
|
| $ | (236 | ) |
| $ | (81 | ) |
| $ | 6,637 |
|
Shares issued for restricted stock, net of forfeitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
Dividends paid on common stock ($0.17) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (78 | ) |
|
| — |
|
|
| — |
|
|
| (78 | ) |
Dividends paid on preferred stock ($15.94) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
|
|
|
| — |
|
|
| (8 | ) | |
Purchase of common stock |
|
| (2,426,872 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21 | ) |
|
| — |
|
|
| (21 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51 |
|
|
| 51 |
|
Balance at June 30, 2020 |
|
| 463,933,831 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,109 |
|
| $ | 363 |
|
| $ | (257 | ) |
| $ | (30 | ) |
| $ | 6,693 |
|
(in millions, except share data) | Shares |
|
| Preferred |
|
| Common |
|
| Paid-in |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| ||||||||
Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at March 31, 2022 |
| 467,024,144 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,107 |
|
| $ | 809 |
|
| $ | (231 | ) |
| $ | (284 | ) |
| $ | 6,909 |
|
Shares issued for restricted stock, net of forfeitures |
| 28,930 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 171 |
|
|
| — |
|
|
| — |
|
|
| 171 |
|
Dividends paid on common stock ($0.17) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (79 | ) |
|
| — |
|
|
| — |
|
|
| (79 | ) |
Dividends paid on preferred stock ($15.94) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| (8 | ) |
Purchase of common stock |
| (809,996 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7 | ) |
|
| — |
|
|
| (7 | ) |
Other comprehensive income, net of tax |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (169 | ) |
|
| (169 | ) |
Balance at June 30, 2022 |
| 466,243,078 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,114 |
|
| $ | 893 |
|
| $ | (238 | ) |
| $ | (453 | ) |
| $ | 6,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Three Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at March 31, 2021 |
| 465,074,384 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,103 |
|
| $ | 552 |
|
| $ | (245 | ) |
| $ | (122 | ) |
| $ | 6,796 |
|
Shares issued for restricted stock, net of forfeitures |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
Dividends paid on common stock ($0.17) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (79 | ) |
|
| — |
|
|
| — |
|
|
| (79 | ) |
Dividends paid on preferred stock ($15.94) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| (8 | ) |
Purchase of common stock |
| (17,422 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive loss, net of tax |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| 47 |
|
Balance at June 30, 2021 |
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
9
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions, except share data)
(unaudited)
|
|
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||
|
|
|
|
| Stock |
|
| Stock |
|
| Paid-in |
|
|
|
|
|
|
|
| Other |
|
| Total |
| ||||||||
Six Months Ended June 30, 2021 |
| Shares |
|
| (Par |
|
| (Par |
|
| Capital in |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Stockholders’ |
| ||||||||
Balance at December 31, 2020 |
|
| 463,901,808 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,123 |
|
| $ | 494 |
|
| $ | (258 | ) |
| $ | (25 | ) |
| $ | 6,842 |
|
Shares issued for restricted stock, net of forfeitures |
|
| 2,515,942 |
|
|
| — |
|
|
| — |
|
|
| (28 | ) |
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
Dividends paid on common stock ($0.34) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (158 | ) |
|
| — |
|
|
| — |
|
|
| (158 | ) |
Dividends paid on preferred stock ($31.88) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| (16 | ) |
Purchase of common stock |
|
| (1,360,788 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15 | ) |
|
| — |
|
|
| (15 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| (50 | ) |
Balance at June 30, 2021 |
|
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Six Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2019 |
|
| 467,346,781 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,115 |
|
| $ | 342 |
|
| $ | (221 | ) |
| $ | (33 | ) |
| $ | 6,711 |
|
Opening retained earnings adjustment (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10 | ) |
|
|
|
|
| — |
|
|
| (10 | ) | |
Adjusted balance, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 332 |
|
|
|
|
|
|
|
|
| 6,701 |
| ||||||
Shares issued for restricted stock, net of forfeitures |
|
| 2,321,105 |
|
|
| — |
|
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 205 |
|
|
| — |
|
|
| — |
|
|
| 205 |
|
Dividends paid on common stock ($0.34) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (158 | ) |
|
| — |
|
|
| — |
|
|
| (158 | ) |
Dividends paid on preferred stock ($31.88) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| (16 | ) |
Purchase of common stock |
|
| (5,734,055 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (58 | ) |
|
| — |
|
|
| (58 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 3 |
|
Balance at June 30, 2020 |
|
| 463,933,831 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,109 |
|
| $ | 363 |
|
| $ | (257 | ) |
| $ | (30 | ) |
| $ | 6,693 |
|
(1) Amount represents a $10 million cumulative adjustment, net of tax, to retained earnings as of January 1, 2020, as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which became effective January 1, 2020.
(in millions, except share data) |
| Shares |
|
| Preferred |
|
| Common |
|
| Paid-in |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| ||||||||
Six Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2021 |
|
| 465,015,643 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,126 |
|
| $ | 741 |
|
| $ | (246 | ) |
| $ | (85 | ) |
| $ | 7,044 |
|
Shares issued for restricted stock, net of forfeitures |
|
| 2,939,365 |
|
|
| — |
|
|
| — |
|
|
| (27 | ) |
|
| — |
|
|
| 27 |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 326 |
|
|
| — |
|
|
| — |
|
|
| 326 |
|
Dividends paid on common stock ($0.17) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (158 | ) |
|
| — |
|
|
| — |
|
|
| (158 | ) |
Dividends paid on preferred stock ($15.94) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| (16 | ) |
Purchase of common stock |
|
| (1,711,930 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19 | ) |
|
| — |
|
|
| (19 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (368 | ) |
|
| (368 | ) |
Balance at June 30, 2022 |
|
| 466,243,078 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,114 |
|
| $ | 893 |
|
| $ | (238 | ) |
| $ | (453 | ) |
| $ | 6,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Six Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2020 |
|
| 463,901,808 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,123 |
|
| $ | 494 |
|
| $ | (258 | ) |
| $ | (25 | ) |
| $ | 6,842 |
|
Shares issued for restricted stock, net of forfeitures |
|
| 2,515,942 |
|
|
| — |
|
|
| — |
|
|
| (28 | ) |
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
Dividends paid on common stock ($0.17) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (158 | ) |
|
| — |
|
|
| — |
|
|
| (158 | ) |
Dividends paid on preferred stock ($15.94) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| (16 | ) |
Purchase of common stock |
|
| (1,360,788 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15 | ) |
|
| — |
|
|
| (15 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| (50 | ) |
Balance at June 30, 2021 |
|
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
10
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
|
| For the Six Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
| ||||||||||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||||||||||
(in millions) |
| 2022 |
|
| 2021 |
| ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||||||||||
Net income |
| $ | 297 |
| $ | 205 |
|
| $ | 326 |
|
| $ | 297 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Provision for credit losses |
| — |
| 38 |
| |||||||||||
(Recovery of) Provision for loan losses |
|
| 7 |
|
|
| — |
| ||||||||
Depreciation |
| 11 |
| 13 |
|
|
| 9 |
|
|
| 11 |
| |||
Amortization of discounts and premiums, net |
| (3 | ) |
| 10 |
|
|
| (2 | ) |
|
| (3 | ) | ||
Net loss (gain) on securities |
| — |
| (1 | ) | |||||||||||
Net gain on sales of loans |
| (1 | ) |
| — |
| ||||||||||
Net (gain) loss on securities |
|
| 1 |
|
|
| — |
| ||||||||
Gain on trading activity |
|
| — |
|
|
| — |
| ||||||||
Net loss (gain) on sales of loans |
|
| — |
|
|
| (1 | ) | ||||||||
Net gain on sales of fixed assets |
|
| (2 | ) |
|
| — |
| ||||||||
Stock-based compensation |
| 16 |
| 16 |
|
|
| 15 |
|
|
| 16 |
| |||
Deferred tax expense |
| 26 |
| 77 |
|
|
| (15 | ) |
|
| 26 |
| |||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Increase in other assets(1) |
| (255 | ) |
| (99 | ) | ||||||||||
Decrease in other liabilities(2) |
| (25 | ) |
| (9 | ) | ||||||||||
Decrease in other assets(1) |
|
| 42 |
|
|
| (255 | ) | ||||||||
Increase (decrease) in other liabilities(2) |
|
| 18 |
|
|
| (25 | ) | ||||||||
Purchases of securities held for trading |
| (60 | ) |
| — |
|
|
| (35 | ) |
|
| (60 | ) | ||
Proceeds from sales of securities held for trading |
| 60 |
| — |
|
|
| 35 |
|
|
| 60 |
| |||
Held for sale originations |
|
| (52 | ) |
|
| (103 | ) | ||||||||
Origination of loans held for sale |
|
| — |
|
|
| (52 | ) | ||||||||
Net cash provided by operating activities |
|
| 14 |
|
| 147 |
|
|
| 399 |
|
|
| 14 |
| |
Cash Flows from Investing Activities: |
|
|
|
|
|
| ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||||||||||
Proceeds from repayment of securities available for sale |
| 931 |
| 960 |
|
|
| 397 |
|
|
| 931 |
| |||
Proceeds from sales of securities available for sale |
| — |
|
| 442 |
|
|
| — |
|
|
| — |
| ||
Purchase of securities available for sale |
| (1,252 | ) |
| (735 | ) |
|
| (788 | ) |
|
| (1,252 | ) | ||
Redemption of Federal Home Loan Bank stock |
| 29 |
| 127 |
|
|
| 175 |
|
|
| 29 |
| |||
Purchases of Federal Home Loan Bank stock |
| (1 | ) |
| (148 | ) |
|
| (76 | ) |
|
| (1 | ) | ||
Proceeds from bank-owned life insurance, net |
| 7 |
| 2 |
| |||||||||||
Proceeds from (purchases of) bank-owned life insurance, net |
|
| 5 |
|
|
| 7 |
| ||||||||
Proceeds from sales of loans |
| 33 |
| 3 |
|
|
| — |
|
|
| 33 |
| |||
Purchases of loans |
| (66 | ) |
| (48 | ) |
|
| (144 | ) |
|
| (66 | ) | ||
Other changes in loans, net |
| (481 | ) |
| (379 | ) |
|
| (2,650 | ) |
|
| (481 | ) | ||
(Purchases) dispositions of premises and equipment, net |
|
| (2 | ) |
|
| 3 |
| ||||||||
Net cash (used in) provided by investing activities |
|
| (802 | ) |
|
| 227 |
| ||||||||
Cash Flows from Financing Activities: |
|
|
|
|
|
| ||||||||||
Dispositions (purchases) of premises and equipment, net |
|
| 11 |
|
|
| (2 | ) | ||||||||
Net cash used in investing activities |
|
| (3,070 | ) |
|
| (802 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||||||||||
Net increase in deposits |
| 1,740 |
| 72 |
|
|
| 6,185 |
|
|
| 1,740 |
| |||
Net increase in short-term borrowed funds |
| — |
| 1,450 |
| |||||||||||
Net decrease in short-term borrowed funds |
|
| (1,700 | ) |
|
| — |
| ||||||||
Proceeds from long-term borrowed funds |
| 624 |
| 3,125 |
|
|
| 2,955 |
|
|
| 624 |
| |||
Repayments of long-term borrowed funds |
| (1,249 | ) |
| (4,125 | ) |
|
| (3,510 | ) |
|
| (1,249 | ) | ||
Cash dividends paid on common stock |
| (158 | ) |
| (158 | ) |
|
| (158 | ) |
|
| (158 | ) | ||
Cash dividends paid on preferred stock |
| (16 | ) |
| (16 | ) |
|
| (16 | ) |
|
| (16 | ) | ||
Treasury stock repurchased |
| — |
|
| (50 | ) |
|
| (7 | ) |
|
| — |
| ||
Payments relating to treasury shares received for restricted stock award tax payments |
|
| (15 | ) |
|
| (9 | ) |
|
| (12 | ) |
|
| (15 | ) |
Net cash provided by financing activities |
|
| 926 |
|
| 289 |
|
|
| 3,737 |
|
|
| 926 |
| |
Net increase in cash, cash equivalents, and restricted cash |
| 138 |
| 663 |
| |||||||||||
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 1,948 |
|
| 742 |
| |||||||||
Cash, cash equivalents, and restricted cash at end of period |
| $ | 2,086 |
| $ | 1,405 |
| |||||||||
Net increase in cash, cash equivalents, due from banks and restricted cash |
|
| 1,066 |
|
|
| 138 |
| ||||||||
Cash, cash equivalents, due from banks, and restricted cash at beginning of year |
|
| 2,211 |
|
|
| 1,948 |
| ||||||||
Cash, cash equivalents, due from banks, and restricted cash at end of year |
| $ | 3,277 |
|
| $ | 2,086 |
| ||||||||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for interest |
| $ | 206 |
| $ | 370 |
|
| $ | 229 |
|
| $ | 206 |
| |
Cash paid for income taxes |
| 336 |
| 10 |
|
|
| 8 |
|
|
| 336 |
| |||
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Securitization of residential mortgage loans to mortgage-backed securities available for sale |
| 66 |
| 42 |
|
| $ | 144 |
|
|
| 66 |
| |||
Transfer of loans from held for investment to held for sale |
| 48 |
| — |
|
|
| — |
|
|
| 48 |
| |||
Transfer of loans from held for sale to held for investment |
| 94 |
| — |
|
|
| — |
|
|
| 94 |
| |||
Shares issued for restricted stock awards |
| 28 |
| 22 |
|
|
| 27 |
|
|
| 28 |
|
See accompanying notes to the consolidated financial statements.
11
NEW YORK COMMUNITY BANCORP, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization, Basis of Presentation, and Impact of Recent Accounting Pronouncements
Organization
New York Community Bancorp, Inc. (on a stand-alone basis, the “Parent Company” or, collectively with its subsidiaries, the “Company”) was organized under Delaware law on July 20, 1993 and is the holding company for New York Community Bank (hereinafter referred to as the “Bank”).
Founded on April 14, 1859 and formerly known as Queens County Savings Bank, the Bank converted from a state-chartered mutual savings bank to the capital stock form of ownership on November 23, 1993, at which date the Company issued its initial offering of common stock (par value: $0.01 per share) at a price of $25.00 per share ( ($$0.93 per share on a split-adjusted basis, reflecting the impact of nine stock splits between 1994 and 2004)2004).
The Bank currently operates 236237 branches, 1918 of which operate directly under the New York Community Bank name. The remaining 217219 Community Bank branches operate through eight divisional banks: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New York; Garden State Community Bank in New Jersey; AmTrust Bank in Florida and Arizona; and Ohio Savings Bank in Ohio.
Basis of Presentation
The following is a description of the significant accounting and reporting policies that the Company and its subsidiaries follow in preparing and presenting their consolidated financial statements, which conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices within the banking industry. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates that are particularly susceptible to change in the near term are used in connection with the determination of the allowance for credit losses and the evaluation of goodwill for impairment.
The accompanying consolidated financial statements include the accounts of the Company and other entities in which the Company has a controlling financial interest. All inter-company accounts and transactions are eliminated in consolidation. The Company currently has certain unconsolidated subsidiaries in the form of wholly-owned statutory business trusts, which were formed to issue guaranteed capital securities. See Note 7, Borrowed Funds, for additional information regarding these trusts.
Impact of Recent Accounting Pronouncements
Recently Adopted Accounting Standards
The Company adopted ASU No. 2020-042022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method in the first quarter of 20212022 upon issuance. The amendments provide optional expedients and exceptions for certain contracts, hedging relationships, and other transactionsexpand the current last-of-layer method of hedge accounting that reference LIBOR or another reference rate expectedpermits only one hedged layer to be discontinued becauseallow multiple hedged layers of rate reform. The guidancea single closed portfolio. To reflect that expansion, the last-of-layer method is effective fromrenamed the date of issuance until December 31, 2022. If certain criteria are met,portfolio layer method. In addition, the amendments allow exceptions toexpand the designation criteriascope of the portfolio layer method to include non-prepayable assets; specify eligible hedging relationshipinstruments in a single-layer hedge; provide additional guidance on the accounting for and the assessmentdisclosure of hedge effectiveness duringbasis adjustments; specify how hedge basis adjustments should be considered when determining credit losses for the transition period.assets included in the closed portfolio. To date, the guidance has not had a materialany impact on the Company’s Consolidated Statements of Condition, results of operations, or cash flows. The Company will continue to assess the impact as the reference rate transition occurs.
Note 2. Computation of Earnings per Common Share
Basic EPS is computed by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-money stock options were exercised and converted into common stock.
Unvested stock-based compensation awards containing non-forfeitable rights to dividends paid on the Company’s common stock are considered participating securities, and therefore are included in the two-class method for calculating EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends on the common stock. The Company grants restricted stock to certain employees under its stock-based compensation plan. Recipients receive cash dividends during the vesting periods of these awards, including on the unvested
12
portion of such awards. Since these dividends are non-forfeitable, the unvested awards are considered participating securities and
12
therefore have earnings allocated to them. The following table presents the Company’s computation of basic and diluted EPS for the periods indicated:
|
| For the Three Months Ended June 30, |
| For the Six Months Ended June 30, |
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| |||||||||||||||||||||
(amounts in millions, except share and per share amounts) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
Net income available to common shareholders |
| $ | 144 |
| $ | 97 |
| $ | 281 |
| $ | 189 |
| |||||||||||||||||||
(in millions, except share and per share amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
Net income available to common stockholders |
| $ | 163 |
|
| $ | 144 |
|
| $ | 310 |
|
| $ | 281 |
| ||||||||||||||||
Less: Dividends paid on and earnings allocated to |
|
| (3 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (3 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (4 | ) |
|
| (4 | ) |
Earnings applicable to common stock |
| $ | 141 |
|
| $ | 96 |
|
| $ | 277 |
|
| $ | 186 |
|
| $ | 161 |
|
| $ | 141 |
|
| $ | 306 |
|
| $ | 277 |
|
Weighted average common shares outstanding |
|
| 464,092,947 |
|
|
| 461,933,533 |
|
|
| 463,695,136 |
|
|
| 463,463,751 |
|
|
| 465,811,096 |
|
|
| 464,092,947 |
|
|
| 465,476,526 |
|
|
| 463,695,136 |
|
Basic earnings per common share |
| $ | 0.30 |
|
| $ | 0.21 |
|
| $ | 0.60 |
|
| $ | 0.40 |
|
| $ | 0.34 |
|
| $ | 0.30 |
|
| $ | 0.66 |
|
| $ | 0.60 |
|
Earnings applicable to common stock |
| $ | 141 |
|
| $ | 96 |
|
| $ | 277 |
|
| $ | 186 |
|
| $ | 161 |
|
| $ | 141 |
|
| $ | 306 |
|
| $ | 277 |
|
Weighted average common shares outstanding |
| 464,092,947 |
| 461,933,533 |
| 463,695,136 |
| 463,463,751 |
|
|
| 465,811,096 |
|
|
| 464,092,947 |
|
|
| 465,476,526 |
|
|
| 463,695,136 |
| |||||||
Potential dilutive common shares |
|
| 801,591 |
|
|
| 555,960 |
|
|
| 698,385 |
|
|
| 487,317 |
|
|
| 988,976 |
|
|
| 801,591 |
|
|
| 899,249 |
|
|
| 698,385 |
|
Total shares for diluted earnings per common share |
|
| 464,894,538 |
|
|
| 462,489,493 |
|
|
| 464,393,521 |
|
|
| 463,951,068 |
|
|
| 466,800,072 |
|
|
| 464,894,538 |
|
|
| 466,375,775 |
|
|
| 464,393,521 |
|
Diluted earnings per common share and common share |
| $ | 0.30 |
|
| $ | 0.21 |
|
| $ | 0.60 |
|
| $ | 0.40 |
|
| $ | 0.34 |
|
| $ | 0.30 |
|
| $ | 0.66 |
|
| $ | 0.60 |
|
|
|
|
|
|
|
|
|
|
|
Note 3: Reclassifications out of Accumulated Other Comprehensive Loss
( | For the Six Months Ended June 30, | ||||||||
Details about Accumulated Other Comprehensive Loss | Amount | Affected Line Item in the | |||||||
Unrealized gains | $ |
| Net gain | ||||||
0 |
| Income tax expense | |||||||
$ |
| Net gain | |||||||
Unrealized loss on cash flow hedges: | $ | ( | ) | Interest expense | |||||
2 |
| Income tax benefit | |||||||
$ | ( | ) | Net loss on cash flow hedges, net of tax | ||||||
Amortization of defined benefit pension plan items: | |||||||||
Past service liability | $ |
| Included in the computation of net periodic credit(2) | ||||||
Actuarial losses | ( | ) | Included in the computation of net periodic cost (2) | ||||||
( | ) | Total before tax | |||||||
0 |
| Income tax benefit | |||||||
$ | ( | ) | Amortization of defined benefit pension plan items, net of tax | ||||||
Total reclassifications for the period | $ | ( | ) |
13
Note 4. Securities
The following tables summarize the Company’s portfolio of debt securities available for sale and equity investments with readily determinable fair values at June 30, 20212022 and December 31, 2020:2021:
|
| June 30, 2021 |
|
|
| June 30, 2022 |
| |||||||||||||||||||||||||||||
(dollars in millions) |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||||||||||||||||||||||
(in millions) |
|
| Amortized |
|
|
| Gross |
|
|
| Gross |
|
|
| Fair |
| ||||||||||||||||||||
Debt securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Mortgage-Related Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
GSE certificates |
| $ | 1,037 |
| $ | 32 |
| $ | 9 |
| $ | 1,060 |
|
| $ |
| 1,161 |
|
| $ |
| 1 |
|
| $ |
| 112 |
|
| $ |
| 1,050 |
| |||
GSE CMOs |
|
| 1,940 |
|
| 25 |
|
| 32 |
|
| 1,933 |
|
|
|
| 1,611 |
|
|
|
| — |
|
|
|
| 195 |
|
|
|
| 1,416 |
| |||
Total mortgage-related debt securities |
| $ | 2,977 |
| $ | 57 |
| $ | 41 |
| $ | 2,993 |
|
| $ |
| 2,772 |
|
| $ |
| 1 |
|
| $ |
| 307 |
|
| $ |
| 2,466 |
| |||
Other Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U. S. Treasury obligations |
| $ | 65 |
| $ | — |
| $ | — |
| $ | 65 |
|
| $ |
| 295 |
|
| $ |
| — |
|
| $ |
| 1 |
|
| $ |
| 294 |
| |||
GSE debentures |
| 1,502 |
| 2 |
| 30 |
| 1,474 |
|
|
| 1,750 |
|
|
| — |
|
|
| 248 |
|
|
| 1,502 |
| |||||||||||
Asset-backed securities (1) |
| 507 |
| 4 |
| 2 |
| 509 |
|
|
| 422 |
|
|
| — |
|
|
| 15 |
|
|
| 407 |
| |||||||||||
Corporate bonds |
|
| 881 |
|
|
| 4 |
|
|
| 26 |
|
|
| 859 |
| ||||||||||||||||||||
Municipal bonds |
| 25 |
| — |
| — |
| 25 |
|
|
| 19 |
|
|
| — |
|
|
| 1 |
|
|
| 18 |
| |||||||||||
Corporate bonds |
| 871 |
| 21 |
| 2 |
| 890 |
| |||||||||||||||||||||||||||
Foreign notes |
| 25 |
| 1 |
| — |
| 26 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| 25 |
| |||||||||||
Capital trust notes |
|
| 96 |
|
| 7 |
|
| 8 |
|
| 95 |
|
|
|
| 96 |
|
|
|
| 6 |
|
|
|
| 9 |
|
|
|
| 93 |
| |||
Total other debt securities |
| $ | 3,091 |
| $ | 35 |
| $ | 42 |
| $ | 3,084 |
|
| $ |
| 3,488 |
|
| $ |
| 10 |
|
| $ |
| 300 |
|
| $ |
| 3,198 |
| |||
Total debt securities available for sale |
| $ | 6,068 |
| $ | 92 |
| $ | 83 |
| $ | 6,077 |
|
| $ |
| 6,260 |
|
| $ |
| 11 |
|
| $ |
| 607 |
|
| $ |
| 5,664 |
| |||
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Mutual funds |
|
| 16 |
|
| — |
|
| — |
|
| 16 |
|
| $ |
| 15 |
|
| $ |
| — |
|
| $ |
| 1 |
|
| $ |
| 14 |
| |||
Total equity securities |
| $ | 16 |
| $ | — |
| $ | — |
| $ | 16 |
|
| $ |
| 15 |
|
| $ |
| — |
|
| $ |
| 1 |
|
| $ |
| 14 |
| |||
Total securities (2) |
| $ | 6,084 |
| $ | 92 |
| $ | 83 |
| $ | 6,093 |
|
| $ |
| 6,275 |
|
| $ |
| 11 |
|
| $ |
| 608 |
|
| $ |
| 5,678 |
|
|
| December 31, 2021 |
| |||||||||||||
(in millions) |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair |
| ||||
Debt securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-Related Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates |
| $ | 1,102 |
|
| $ | 20 |
|
| $ | 15 |
|
| $ | 1,107 |
|
GSE CMOs |
|
| 1,717 |
|
|
| 11 |
|
|
| 45 |
|
|
| 1,683 |
|
Total mortgage-related debt securities |
| $ | 2,819 |
|
| $ | 31 |
|
| $ | 60 |
|
| $ | 2,790 |
|
Other Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U. S. Treasury obligations |
| $ | 45 |
|
| $ | — |
|
| $ | — |
|
| $ | 45 |
|
GSE debentures |
|
| 1,524 |
|
|
| 1 |
|
|
| 45 |
|
|
| 1,480 |
|
Asset-backed securities (1) |
|
| 479 |
|
|
| 3 |
|
|
| 3 |
|
|
| 479 |
|
Corporate bonds |
|
| 821 |
|
|
| 18 |
|
|
| 1 |
|
|
| 838 |
|
Municipal bonds |
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Foreign Notes |
|
| 25 |
|
|
| 1 |
|
|
| — |
|
|
| 26 |
|
Capital trust notes |
|
| 96 |
|
|
| 8 |
|
|
| 7 |
|
|
| 97 |
|
Total other debt securities |
| $ | 3,015 |
|
| $ | 31 |
|
| $ | 56 |
|
| $ | 2,990 |
|
Total other securities available for sale |
| $ | 5,834 |
|
| $ | 62 |
|
| $ | 116 |
|
| $ | 5,780 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mutual funds |
| $ | 16 |
|
| $ | — |
|
| $ | — |
|
| $ | 16 |
|
Total equity securities |
| $ | 16 |
|
| $ | — |
|
| $ | — |
|
| $ | 16 |
|
Total securities (2) |
| $ | 5,850 |
|
| $ | 62 |
|
| $ | 116 |
|
| $ | 5,796 |
|
|
| December 31, 2020 |
| |||||||||||||
(dollars in millions) |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||
Debt securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-Related Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates |
| $ | 1,155 |
|
| $ | 54 |
|
| $ | — |
|
| $ | 1,209 |
|
GSE CMOs |
|
| 1,787 |
|
|
| 45 |
|
|
| 3 |
|
|
| 1,829 |
|
Total mortgage-related debt securities |
| $ | 2,942 |
|
| $ | 99 |
|
| $ | 3 |
|
| $ | 3,038 |
|
Other Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury obligations |
| $ | 65 |
|
| $ | — |
|
| $ | — |
|
| $ | 65 |
|
GSE debentures |
|
| 1,158 |
|
|
| 4 |
|
|
| 4 |
|
|
| 1,158 |
|
Asset-backed securities (1) |
|
| 530 |
|
|
| 2 |
|
| �� | 6 |
|
|
| 526 |
|
Municipal bonds |
|
| 26 |
|
|
| 1 |
|
|
| — |
|
|
| 27 |
|
Corporate bonds |
|
| 871 |
|
|
| 18 |
|
|
| 6 |
|
|
| 883 |
|
Foreign notes |
|
| 25 |
|
|
| 1 |
|
|
| — |
|
|
| 26 |
|
Capital trust notes |
|
| 96 |
|
|
| 6 |
|
|
| 11 |
|
|
| 91 |
|
Total other debt securities |
| $ | 2,771 |
|
| $ | 32 |
|
| $ | 27 |
|
| $ | 2,776 |
|
Total other securities available for sale |
| $ | 5,713 |
|
| $ | 131 |
|
| $ | 30 |
|
| $ | 5,814 |
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock |
| $ | 15 |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
Mutual funds |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | 31 |
|
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
Total securities(2) |
| $ | 5,744 |
|
| $ | 131 |
|
| $ | 30 |
|
| $ | 5,845 |
|
14
At June 30, 20212022 and December 31, 2020,2021, respectively, the Company had $686635 million and $714734 million of FHLB-NY stock, at cost. The Company maintains an investment in FHLB-NY stock partly in conjunction with its membership in the FHLB and partly related to its access to the FHLB funding it utilizes.
The following table summarizes the gross proceeds, gross realized gains, and gross realized losses from the sale of available-for-sale securities during the six months ended June 30, 2021 and 2020:
|
| For the Six Months Ended |
| |||||
(dollars in millions) |
| 2021 |
|
| 2020 |
| ||
Gross proceeds |
|
| ��� |
|
| $ | 442 |
|
Gross realized gains |
|
| — |
|
|
| 2 |
|
Gross realized losses |
|
| — |
|
|
| 1 |
|
Net losses on equity securities recognized in earnings for the six months ended June 30, 20212022 and 20202021 were $01 and $10 million,, respectively.
The following table summarizes, by contractual maturity, the amortized cost of securities at June 30, 2021:2022:
|
| Mortgage- |
|
| Average |
|
| U.S. |
|
| Average |
|
| State, |
|
| Average |
|
| Other Debt |
|
| Average |
|
| Fair |
|
|
| Mortgage- |
|
|
| U.S. |
|
|
| State, |
|
|
| Other |
|
|
| Fair |
| ||||||||||||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Available-for-Sale Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Due within one year |
| $ | — |
| - |
| % | $ | 69 |
| 0.17 |
| % | $ | — |
| - |
| % | $ | 50 |
| 2.97 |
| % | $ | 119 |
|
| $ |
| 28 |
|
| $ |
| 295 |
|
| $ |
| — |
|
| $ |
| 5 |
|
| $ |
| 327 |
| ||||||||
Due from one to five years |
| 242 |
| 3.19 |
| 22 |
| 3.52 |
| — |
| — |
| 303 |
| 1.74 |
| 595 |
|
|
| 141 |
|
|
| 247 |
|
|
| — |
|
|
| 458 |
|
|
| 844 |
| ||||||||||||||||||||||
Due from five to ten years |
| 163 |
| 2.47 |
| 380 |
| 1.95 |
| 19 |
| 3.52 |
| 625 |
| 2.24 |
| 1,200 |
|
|
| 241 |
|
|
| 674 |
|
|
| 19 |
|
|
| 517 |
|
|
| 1,305 |
| ||||||||||||||||||||||
Due after ten years |
|
| 2,572 |
|
| 1.93 |
|
| 1,096 |
|
| 1.56 |
|
| 6 |
|
| 3.33 |
|
| 521 |
|
| 1.21 |
|
| 4,163 |
|
|
|
| 2,362 |
|
|
|
| 829 |
|
|
|
| — |
|
|
|
| 444 |
|
|
|
| 3,188 |
| ||||||||
Total debt securities available for sale |
| $ | 2,977 |
| 2.06 |
| % | $ | 1,567 |
| 1.62 |
| % | $ | 25 |
| 3.48 |
| % | $ | 1,499 |
| 1.81 |
| % | $ | 6,077 |
|
| $ |
| 2,772 |
|
| $ |
| 2,045 |
|
| $ |
| 19 |
|
| $ |
| 1,424 |
|
| $ |
| 5,664 |
|
(2) Includes corporate bonds, capital trust notes, foreign notes and asset-backed securities.
The following table presents securities with no related allowance having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of June 30, 2021:2022:
|
| Less than Twelve Months |
|
| Twelve Months or Longer |
|
| Total |
|
|
| Less than Twelve Months |
|
|
| Twelve Months or Longer |
|
|
| Total |
| |||||||||||||||||||||||||||||||||
(dollars in millions) |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||||||||||||||||||||||||||
(in millions) |
|
| Fair Value |
|
|
| Unrealized |
|
|
| Fair Value |
|
|
| Unrealized |
|
|
| Fair Value |
|
|
| Unrealized |
| ||||||||||||||||||||||||||||||
Temporarily Impaired Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
U. S. Treasury obligations |
| $ |
| 197 |
|
| $ |
| 1 |
|
| $ |
| — |
|
| $ |
| — |
|
| $ |
| 197 |
|
| $ |
| 1 |
| ||||||||||||||||||||||||
GSE certificates |
| $ | 336 |
| $ | 9 |
| $ | — |
| $ | — |
| $ | 336 |
| $ | 9 |
|
|
|
| 683 |
|
|
|
| 58 |
|
|
|
| 252 |
|
|
|
| 54 |
|
|
|
| 935 |
|
|
|
| 112 |
| |||||
US Treasuries |
| 65 |
| — |
| — |
| — |
| 65 |
| — |
| |||||||||||||||||||||||||||||||||||||||||
GSE CMOs |
| 913 |
| 32 |
| — |
| — |
| 913 |
| 32 |
|
|
|
| 800 |
|
|
|
| 73 |
|
|
|
| 596 |
|
|
|
| 122 |
|
|
|
| 1,396 |
|
|
|
| 195 |
| |||||||||||
GSE debentures |
| 1,132 |
| 30 |
| — |
| — |
| 1,132 |
| 30 |
| |||||||||||||||||||||||||||||||||||||||||
U.S. Government agency and GSE obligations |
|
|
| 421 |
|
|
|
| 44 |
|
|
|
| 959 |
|
|
|
| 204 |
|
|
|
| 1,380 |
|
|
|
| 248 |
| ||||||||||||||||||||||||
Asset-backed securities |
| 68 |
| — |
| 146 |
| 2 |
| 214 |
| 2 |
|
|
|
| 227 |
|
|
|
| 7 |
|
|
|
| 180 |
|
|
|
| 8 |
|
|
|
| 407 |
|
|
|
| 15 |
| |||||||||||
Corporate bonds |
|
|
| 713 |
|
|
|
| 21 |
|
|
|
| 95 |
|
|
|
| 5 |
|
|
|
| 808 |
|
|
|
| 26 |
| ||||||||||||||||||||||||
Municipal bonds |
| — |
| — |
| 8 |
| 2 |
| 8 |
| 2 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 7 |
|
|
|
| 1 |
|
|
|
| 7 |
|
|
|
| 1 |
| |||||||||||
Corporate bonds |
| — |
| — |
| 323 |
| — |
| 323 |
| — |
| |||||||||||||||||||||||||||||||||||||||||
Foreign notes |
|
|
| 5 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 5 |
|
|
|
| — |
| ||||||||||||||||||||||||
Capital trust notes |
| — |
| — |
| 36 |
| 8 |
| 36 |
| 8 |
|
|
|
| 46 |
|
|
|
| 1 |
|
|
|
| 36 |
|
|
|
| 8 |
|
|
|
| 82 |
|
|
|
| 9 |
| |||||||||||
Equity securities |
|
| 11,709 |
|
| — |
|
| — |
|
| — |
|
| 11,709 |
|
| — |
|
|
|
| 4 |
|
|
|
| — |
|
|
|
| 11 |
|
|
|
| 1 |
|
|
|
| 15 |
|
|
|
| 1 |
| |||||
Total temporarily impaired securities |
| $ | 14,223 |
| $ | 71 |
| $ | 513 |
| $ | 12 |
| $ | 14,736 |
| $ | 83 |
|
| $ |
| 3,096 |
|
| $ |
| 205 |
|
| $ |
| 2,136 |
|
| $ |
| 403 |
|
| $ |
| 5,232 |
|
| $ |
| 608 |
|
15
The following table presents securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2020:2021:
|
| Less than Twelve Months |
|
| Twelve Months or Longer |
|
| Total |
|
| Less than Twelve Months |
|
|
| Twelve Months or Longer |
|
|
| Total |
| |||||||||||||||||||||||||||||||||
(dollars in millions) |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| |||||||||||||||||||||||||||||||||||
(in millions) |
| Fair Value |
|
|
| Unrealized |
|
|
| Fair Value |
|
|
| Unrealized |
|
|
| Fair Value |
|
|
| Unrealized |
| ||||||||||||||||||||||||||||||
Temporarily Impaired Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
U. S. Treasury obligations |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ |
| 45 |
|
| $ |
| — |
|
| $ |
| — |
|
| $ |
| — |
|
| $ |
| 45 |
|
| $ |
| — |
| |||||
U. S. Government agency and GSE |
| 59 |
| — |
| — |
| — |
| 59 |
| — |
| ||||||||||||||||||||||||||||||||||||||||
U.S. Government agency and GSE obligations |
|
| 317 |
|
|
|
| 7 |
|
|
|
| 185 |
|
|
|
| 8 |
|
|
|
| 502 |
|
|
|
| 15 |
| ||||||||||||||||||||||||
GSE certificates |
| 442 |
| 3 |
| 74 |
| — |
| 516 |
| 3 |
|
|
| 846 |
|
|
|
| 28 |
|
|
|
| 293 |
|
|
|
| 17 |
|
|
|
| 1,139 |
|
|
|
| 45 |
| |||||||||||
GSE CMOs |
| 522 |
| 4 |
| — |
| — |
| 522 |
| 4 |
|
|
| 491 |
|
|
|
| 8 |
|
|
|
| 926 |
|
|
|
| 37 |
|
|
|
| 1,417 |
|
|
|
| 45 |
| |||||||||||
Asset-backed securities |
| — |
| — |
| 364 |
| 6 |
| 364 |
| 6 |
|
|
| 130 |
|
|
|
| 1 |
|
|
|
| 135 |
|
|
|
| 2 |
|
|
|
| 265 |
|
|
|
| 3 |
| |||||||||||
Corporate bonds |
|
| — |
|
|
|
| — |
|
|
|
| 99 |
|
|
|
| 1 |
|
|
|
| 99 |
|
|
|
| 1 |
| ||||||||||||||||||||||||
Municipal bonds |
| — |
| — |
| 9 |
| — |
| 9 |
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| 8 |
|
|
|
| — |
|
|
|
| 8 |
|
|
|
| — |
| |||||||||||
Corporate bonds |
| 72 |
| 3 |
| 246 |
| 3 |
| 318 |
| 6 |
| ||||||||||||||||||||||||||||||||||||||||
Foreign notes |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 5 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 5 |
|
|
|
| — |
| |||||||||||
Capital trust notes |
| — |
| — |
| 33 |
| 11 |
| 33 |
| 11 |
|
|
| — |
|
|
|
| — |
|
|
|
| 37 |
|
|
|
| 7 |
|
|
|
| 37 |
|
|
|
| 7 |
| |||||||||||
Equity securities |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 12 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 12 |
|
|
|
| — |
| |||||
Total temporarily impaired securities |
| $ | 1,095 |
| $ | 10 |
| $ | 726 |
| $ | 20 |
| $ | 1,821 |
| $ | 30 |
| $ |
| 1,846 |
|
| $ |
| 44 |
|
| $ |
| 1,683 |
|
| $ |
| 72 |
|
| $ |
| 3,529 |
|
| $ |
| 116 |
|
The investment securities designated as having a continuous loss position for twelve months or more at June 30, 20212022 consisted of50 agency MBS, 11 agency CMOs, 5 capital trusts notes, 45 asset-backed securities, 52 corporate bonds,24 U.S. government agency bonds, 1 municipal bond and 1 municipal bond.equity security. The investment securities designated as having a continuous loss position for twelve months or more at December 31, 20202021 consisted of 4 agency collateralized mortgage obligations, 5 capital trusts notes, 74 asset-backed securities, 32 corporate bonds,20 US government agency bonds, 21 agency mortgage-backed securities and 1 municipal bond.
The Company evaluates available-for-sale debt securities in unrealized loss positions at least quarterly to determine if an allowance for credit losses is required. Based on an evaluation of available information about past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability, the Company has concluded that it expects to receive all contractual cash flows from each security held in its available-for-sale securities portfolio.
We first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, any previously recognized allowances are charged off and the security’s amortized cost basis is written down to fair value through income. If neither of the aforementioned criteria is met, we evaluate whether the decline in fair value has resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security areis compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
None of the unrealized losses identified as of June 30, 20212022 or December 31, 20202021 relates to the marketability of the securities or the issuers’ ability to honor redemption obligations. Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment. Management based this conclusion on an analysis of each issuer including a detailed credit assessment of each issuer. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell the positions before the recovery of their amortized cost basis, which may be at maturity. As such, no allowance for credit losses was recorded with respect to debt securities as of or during the six months ended June 30, 2021.2022.
Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status.
16
Note 5. Loans and Leases
The following table sets forth the composition of the loan portfolio at the dates indicated:
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| |||||||||||||||||||
(dollars in millions) |
| Amount |
|
| Percent of |
|
| Amount |
|
| Percent of |
|
| Amount |
| Percent of |
|
| Amount |
| Percent of |
|
| |||||||||
Loans and Leases Held for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Mortgage Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Multi-family |
| $ | 32,540 |
| 74.77 |
| % | $ | 32,236 |
| 75.28 |
| % | $ | 36,772 |
| 75.84 |
| % |
| $ | 34,603 |
| 75.75 |
| % | ||||||
Commercial real estate |
| 6,813 |
| 15.66 |
| 6,836 |
| 15.96 |
|
|
| 6,712 |
| 13.84 |
|
|
| 6,698 |
| 14.66 |
|
| ||||||||||
One-to-four family |
| 190 |
| 0.44 |
| 236 |
| 0.55 |
|
| 129 |
| 0.27 |
|
|
| 160 |
| 0.35 |
|
| |||||||||||
Acquisition, development, and construction |
|
| 187 |
|
| 0.43 |
|
| 90 |
|
| 0.21 |
|
| 195 |
|
| 0.40 |
|
|
| 209 |
|
| 0.46 |
|
| |||||
Total mortgage loans held for investment(1) |
|
| 39,730 |
|
| 91.30 |
| $ | 39,398 |
|
| 92.00 |
|
| 43,808 |
|
| 90.35 |
|
|
| 41,670 |
|
| 91.22 |
|
| |||||
Other Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Commercial and industrial |
| 1,930 |
| 4.43 |
| 1,682 |
| 3.93 |
|
|
| 2,915 |
| 6.01 |
|
|
| 2,236 |
| 4.89 |
|
| ||||||||||
Lease financing, net of unearned income of |
|
| 1,846 |
|
| 4.24 |
|
| 1,735 |
|
| 4.05 |
|
| ||||||||||||||||||
Lease financing, net of unearned income |
| 1,756 |
|
| 3.63 |
|
|
| 1,770 |
|
| 3.88 |
|
| ||||||||||||||||||
Total commercial and industrial loans (2) |
| 3,776 |
| 8.67 |
| 3,417 |
| 7.98 |
|
| 4,671 |
| 9.64 |
|
|
| 4,006 |
| 8.77 |
|
| |||||||||||
Other |
|
| 12 |
|
| 0.03 |
|
| 7 |
|
| 0.02 |
|
|
| 6 |
|
| 0.01 |
|
|
| 5 |
|
| 0.01 |
|
| ||||
Total other loans held for investment |
|
| 3,788 |
|
| 8.70 |
|
| 3,424 |
|
| 8.00 |
|
| 4,677 |
|
| 9.65 |
|
|
| 4,011 |
|
| 8.78 |
|
| |||||
Total loans and leases held for investment |
| $ | 43,518 |
|
| 100.00 |
| % | $ | 42,822 |
|
| 100.00 |
| % | $ | 48,485 |
|
| 100.00 |
| % |
| $ | 45,681 |
|
| 100.00 |
| % | ||
Net deferred loan origination costs |
| 57 |
|
|
|
| 62 |
|
|
|
| 52 |
|
|
|
|
| 57 |
|
|
| |||||||||||
Allowance for credit losses loans and leases |
|
| (202 | ) |
|
|
|
|
| (194 | ) |
|
|
| ||||||||||||||||||
Total loans and leases held for investment, net |
| $ | 43,373 |
|
|
|
| $ | 42,690 |
|
|
| ||||||||||||||||||||
Loans held for sale (3) |
|
| - |
|
|
|
|
| 117 |
|
|
| ||||||||||||||||||||
Allowance for loan and lease losses |
| (216 | ) |
|
|
|
| (199 | ) |
|
|
| ||||||||||||||||||||
Total loans and leases, net |
| $ | 43,373 |
|
|
|
| $ | 42,807 |
|
|
| $ | 48,321 |
|
|
|
| $ | 45,539 |
|
|
|
|
(3) Includes deferred loan origination fees of $0 million and $2 million at June 30, 2021 and December 31, 2020, respectively.
Loans Held for Investment
The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized by non-luxury apartment buildings in New York City with rent-regulated units and below-market rents. In addition, the Company originates CRE loans, most of which are collateralized by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties that are located in New York City and on Long Island.
To a lesser extent, theThe Company also originates ADCOne-to-four family loans for investment. One-to-four family loans held for investment were primarily originated through the Company’s former mortgage banking operation and primarily consisted of jumbo adjustable rate mortgages made to borrowers with a solid credit history. These loan balances include certain mixed-use CRE loans with less than five residential units classified as one-to-four family loans.
ADC loans are primarily originated for multi-family and residential tract projects in New York City and on Long Island. C&I loans consist of asset-based loans, equipment loans and leases, and dealer floor-plan loans (together, specialty finance loans and leases) that generally are made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide; and other C&I loans that primarily are made to small and mid-size businesses in Metro New York. Other C&I loans are typically made for working capital, business expansion, and the purchase of machinery and equipment.
17
The repayment of multi-family and CRE loans generally depends on the income produced by the underlying properties which, in turn, depends on their successful operation and management. To mitigate the potential for credit losses, the Company underwrites its loans in accordance with credit standards it considers to be prudent, looking first at the consistency of the cash flows being produced by the underlying property. In addition, multi-family buildings, CRE properties, and ADC projects are inspected as a prerequisite to approval, and independent appraisers, whose appraisals are carefully reviewed by the Company’s in-house appraisers, perform appraisals on the collateral properties. In many cases, a second independent appraisal review is performed.
17
To further manage its credit risk, the Company’s lending policies limit the amount of credit granted to any one borrower and typically require conservative debt service coverage ratios and loan-to-value ratios. Nonetheless, the ability of the Company’s borrowers to repay these loans may be impacted by adverse conditions in the local real estate market and the local economy. Accordingly, there can be no assurance that its underwriting policies will protect the Company from credit-related losses or delinquencies.
ADC loans typically involve a higher degree of credit risk than loans secured by improved or owner-occupied real estate. Accordingly, borrowers are required to provide a guarantee of repayment and completion, and loan proceeds are disbursed as construction progresses, as certified by in-house inspectors or third-party engineers. The Company seeks to minimize the credit risk on ADC loans by maintaining conservative lending policies and rigorous underwriting standards. However, if the estimate of value proves to be inaccurate, the cost of completion is greater than expected, or the length of time to complete and/or sell or lease the collateral property is greater than anticipated, the property could have a value upon completion that is insufficient to assure full repayment of the loan. This could have a material adverse effect on the quality of the ADC loan portfolio, and could result in losses or delinquencies. In addition, the Company utilizes the same stringent appraisal process for ADC loans as it does for its multi-family and CRE loans.
To minimize the risk involved in specialty finance lending and leasing, the Company participates in syndicated loans that are brought to it, and equipment loans and leases that are assigned to it, by a select group of nationally recognized sources who have long-term relationships with its experienced lending officers. Each of these credits is secured with a perfected first security interest in or outright ownership of the underlying collateral, and structured as senior debt or as a non-cancelable lease. To further minimize the risk involved in specialty finance lending and leasing, each transaction is re-underwritten. In addition, outside counsel is retained to conduct a further review of the underlying documentation.
To minimize the risks involved in other C&I lending, the Company underwrites such loans on the basis of the cash flows produced by the business; requires that such loans be collateralized by various business assets, including inventory, equipment, and accounts receivable, among others; and typically requires personal guarantees. However, the capacity of a borrower to repay such a C&I loan is substantially dependent on the degree to which the business is successful. In addition, the collateral underlying such loans may depreciate over time, may not be conducive to appraisal, or may fluctuate in value, based upon the results of operations of the business.
Included in loans held for investment at June 30, 20212022 and December 31, 2020,2021 were loans of $76 million and $38 million, respectively, to certain officers, directors, and their related interests and parties. There were no loans to principal shareholders at that date. As of the second quarter of 2021, the Board of Directors adopted a revised policy in which the Bank shall no longer make loans or extensions of credit to executive officers and directors of the Company, and firms that employ directors. Any loans and extensions of credit made to an executive officer or director, or any firms that employ directors, prior to the adoption of these revisions have been grandfathered but remain subject to oversight and review of the Board of Directors.
Asset Quality
A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because the Company no longer expects to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At June 30, 20212022 and December 31, 2020,2021, all of our non-performing loans were non-accrual loans.
18
The following table presents information regarding the quality of the Company’s loans held for investment at June 30, 2021:2022:
(dollars in millions) |
| Loans |
|
| Non- |
|
| Loans |
|
| Total |
|
| Current |
|
| Total Loans |
| ||||||||||||||||||||||||||||||
(in millions) |
| Loans |
|
| Non- |
|
| Loans 90 |
|
| Total |
|
| Current |
|
| Total |
| ||||||||||||||||||||||||||||||
Multi-family |
| $ | 9 |
| $ | 9 |
| $ | — |
| $ | 18 |
| $ | 32,522 |
| $ | 32,540 |
|
| $ | 20 |
|
| $ | 18 |
|
| $ | — |
|
| $ | 38 |
|
| $ | 36,734 |
|
| $ | 36,772 |
| |||||
Commercial real estate |
| 15 |
| 12 |
| — |
| 27 |
| 6,786 |
| 6,813 |
|
|
| 1 |
|
|
| 27 |
|
|
| — |
|
|
| 28 |
|
|
| 6,684 |
|
|
| 6,712 |
| |||||||||||
One-to-four family |
| — |
| 2 |
| — |
| 2 |
| 188 |
| 190 |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| 122 |
|
|
| 129 |
| |||||||||||
Acquisition, development, and construction |
| — |
| — |
| — |
| — |
| 187 |
| 187 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 195 |
|
|
| 195 |
| |||||||||||
Commercial and industrial(1) (2) |
| 11 |
| — |
| — |
| 11 |
| 3,765 |
| 3,776 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
|
| 4,666 |
|
|
| 4,671 |
| |||||||||||
Other |
|
| — |
|
| 9 |
|
| — |
|
| 9 |
|
| 3 |
|
| 12 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 4 |
|
|
| 6 |
| |||||
Total loans and leases held for investment |
| $ | 35 |
| $ | 32 |
| $ | — |
| $ | 67 |
| $ | 43,451 |
| $ | 43,518 |
| |||||||||||||||||||||||||||||
Total |
| $ | 30 |
|
| $ | 50 |
|
| $ | — |
|
| $ | 80 |
|
| $ | 48,405 |
|
| $ | 48,485 |
|
The following table presents information regarding the quality of the Company’s loans held for investment at December 31, 2020:2021:
(dollars in millions) |
| Loans |
|
| Non- |
|
| Loans |
|
| Total |
|
| Current |
|
| Total Loans |
| ||||||||||||||||||||||||||||||
(in millions) |
| Loans |
|
| Non- |
|
| Loans 90 |
|
| Total |
|
| Current |
|
| Total |
| ||||||||||||||||||||||||||||||
Multi-family |
| $ | 4 |
| $ | 4 |
| $ | — |
| $ | 8 |
| $ | 32,228 |
| $ | 32,236 |
|
| $ | 57 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 67 |
|
| $ | 34,536 |
|
| $ | 34,603 |
| |||||
Commercial real estate |
| 10 |
| 12 |
| — |
| 22 |
| 6,814 |
| 6,836 |
|
|
| 2 |
|
|
| 16 |
|
|
| — |
|
|
| 18 |
|
|
| 6,680 |
|
|
| 6,698 |
| |||||||||||
One-to-four family |
| 2 |
| 2 |
| — |
| 4 |
| 232 |
| 236 |
|
|
| 8 |
|
|
| 1 |
|
|
| — |
|
|
| 9 |
|
|
| 151 |
|
|
| 160 |
| |||||||||||
Acquisition, development, and construction |
| — |
| — |
| — |
| — |
| 90 |
| 90 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 209 |
|
|
| 209 |
| |||||||||||
Commercial and industrial(1) (2) |
| — |
| 20 |
| — |
| 20 |
| 3,397 |
| 3,417 |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| 6 |
|
|
| 4,000 |
|
|
| 4,006 |
| |||||||||||
Other |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7 |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| 5 |
| |||||
Total |
| $ | 16 |
| $ | 38 |
| $ | — |
| $ | 54 |
| $ | 42,768 |
| $ | 42,822 |
|
| $ | 67 |
|
| $ | 33 |
|
| $ | — |
|
| $ | 100 |
|
| $ | 45,581 |
|
| $ | 45,681 |
|
The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at June 30, 2021:2022.
|
| Mortgage Loans |
| Other Loans |
|
| Mortgage Loans |
|
| Other Loans |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Multi- |
|
| Commercial |
|
| One-to- |
|
| Acquisition, |
|
| Total |
|
| Commercial |
|
| Other |
|
| Total Other |
| ||||||||||||||||||||||||||||||||||||||||
(in millions) |
| Multi- |
|
| Commercial |
|
| One-to- |
|
| Acquisition, |
|
| Total |
|
| Commercial |
|
| Other |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
Credit Quality Indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Pass |
| $ | 31,044 |
| $ | 5,906 |
| $ | 177 |
| $ | 176 |
| $ | 37,303 |
| $ | 3,719 |
| $ | 12 |
| $ | 3,731 |
|
| $ | 35,073 |
|
| $ | 5,776 |
|
| $ | 113 |
|
| $ | 191 |
|
| $ | 41,153 |
|
| $ | 4,667 |
|
| $ | 6 |
|
| $ | 4,673 |
| |||||||
Special mention |
| 879 |
| 682 |
| 5 |
| 11 |
| 1,577 |
| 2 |
| — |
| 2 |
|
|
| 1,008 |
|
|
| 695 |
|
|
| 8 |
|
|
| 4 |
|
|
| 1,715 |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||
Substandard |
| 617 |
| 225 |
| 8 |
| — |
| 850 |
| 55 |
| — |
| 55 |
|
|
| 691 |
|
|
| 241 |
|
|
| 8 |
|
|
| — |
|
|
| 940 |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
| |||||||||||||||
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Total |
| $ | 32,540 |
| $ | 6,813 |
| $ | 190 |
| $ | 187 |
| $ | 39,730 |
| $ | 3,776 |
| $ | 12 |
| $ | 3,788 |
|
| $ | 36,772 |
|
| $ | 6,712 |
|
| $ | 129 |
|
| $ | 195 |
|
| $ | 43,808 |
|
| $ | 4,671 |
|
| $ | 6 |
|
| $ | 4,677 |
|
19
The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at December 31, 2020:2021:
|
| Mortgage Loans |
|
| Other Loans |
|
| Mortgage Loans |
|
| Other Loans |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Multi- |
| Commercial |
| One-to- |
| Acquisition, |
| Total |
| Commercial |
| Other |
| Total Other |
| |||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| Multi- |
|
| Commercial |
|
| One-to- |
|
| Acquisition, |
|
| Total |
|
| Commercial |
|
| Other |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
Credit Quality Indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Pass |
| $ | 31,220 |
| $ | 5,884 |
| $ | 222 |
| $ | 68 |
| $ | 37,394 |
| $ | 3,388 |
| $ | 7 |
| $ | 3,395 |
|
| $ | 33,011 |
|
| $ | 5,874 |
|
| $ | 137 |
|
| $ | 204 |
|
| $ | 39,226 |
|
| $ | 3,959 |
|
| $ | 5 |
|
| $ | 3,964 |
| |||||||
Special mention |
| 567 |
| 637 |
| 12 |
| 22 |
| 1,238 |
| 3 |
| — |
| 3 |
|
|
| 981 |
|
|
| 643 |
|
|
| 14 |
|
|
| 5 |
|
|
| 1,643 |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
| |||||||||||||||
Substandard |
| 449 |
| 315 |
| 2 |
| — |
| 766 |
| 26 |
| — |
| 26 |
|
|
| 611 |
|
|
| 181 |
|
|
| 9 |
|
|
| — |
|
|
| 801 |
|
|
| 45 |
|
|
| — |
|
|
| 45 |
| |||||||||||||||
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Total |
| $ | 32,236 |
| $ | 6,836 |
| $ | 236 |
| $ | 90 |
| $ | 39,398 |
| $ | 3,417 |
| $ | 7 |
| $ | 3,424 |
|
| $ | 34,603 |
|
| $ | 6,698 |
|
| $ | 160 |
|
| $ | 209 |
|
| $ | 41,670 |
|
| $ | 4,006 |
|
| $ | 5 |
|
| $ | 4,011 |
|
The preceding classifications are the most current ones available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company will sustain some loss); and doubtful loans, based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. In addition, one-to-four family loans are classified based on the duration of the delinquency.
The following table presents, by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of June 30, 2021.2022.
(dollars in millions) |
| Vintage Year |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk Rating Group |
| 2021 |
| 2020 |
| 2019 |
| 2018 |
| 2017 |
| Prior To |
| Revolving |
| Total |
| |||||||||||||||||||||||||||||||||||||||||||||||
|
| Vintage Year |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior To |
|
| Revolving |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||
Pass |
| $ | 4,297 |
| $ | 9,536 |
| $ | 6,159 |
| $ | 5,305 |
| $ | 3,630 |
| $ | 8,383 |
| $ | 20 |
| $ | 37,330 |
|
| $ | 5,843 |
|
| $ | 9,291 |
|
| $ | 8,825 |
|
| $ | 5,060 |
|
| $ | 3,998 |
|
| $ | 8,145 |
|
| $ | 18 |
|
| $ | 41,180 |
| |||||||
Special Mention |
| — |
| 30 |
| 272 |
| 194 |
| 138 |
| 944 |
| — |
| 1,578 |
|
|
| — |
|
|
| — |
|
|
| 142 |
|
|
| 346 |
|
|
| 276 |
|
|
| 952 |
|
|
| — |
|
|
| 1,716 |
| |||||||||||||||
Substandard |
|
| — |
|
| 7 |
|
| 70 |
|
| 226 |
|
| 120 |
|
| 426 |
|
| 1 |
|
| 850 |
|
|
| — |
|
|
| — |
|
|
| 38 |
|
|
| 151 |
|
|
| 203 |
|
|
| 548 |
|
|
| — |
|
|
| 940 |
| |||||||
Total mortgage loans |
| $ | 4,297 |
| $ | 9,573 |
| $ | 6,501 |
| $ | 5,725 |
| $ | 3,888 |
| $ | 9,753 |
| $ | 21 |
| $ | 39,758 |
|
| $ | 5,843 |
|
| $ | 9,291 |
|
| $ | 9,005 |
|
| $ | 5,557 |
|
| $ | 4,477 |
|
| $ | 9,645 |
|
| $ | 18 |
|
| $ | 43,836 |
| |||||||
Pass |
| 612 |
| 931 |
| 632 |
| 139 |
| 184 |
| 217 |
| 1,045 |
| 3,760 |
|
|
| 474 |
|
|
| 769 |
|
|
| 531 |
|
|
| 464 |
|
|
| 75 |
|
|
| 264 |
|
|
| 2,120 |
|
|
| 4,697 |
| |||||||||||||||
Special Mention |
| — |
| — |
| — |
| — |
| — |
| — |
| 2 |
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||
Substandard |
|
| — |
|
| 2 |
|
| 3 |
|
| 2 |
|
| 8 |
|
| 14 |
|
| 26 |
|
| 55 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
|
|
| 4 |
| |||||||
Total other loans |
|
| 612 |
|
| 933 |
|
| 635 |
|
| 141 |
|
| 192 |
|
| 231 |
|
| 1,073 |
|
| 3,817 |
|
|
| 474 |
|
|
| 769 |
|
|
| 531 |
|
|
| 466 |
|
|
| 76 |
|
|
| 265 |
|
|
| 2,120 |
|
|
| 4,701 |
| |||||||
Total |
| $ | 4,909 |
| $ | 10,506 |
| $ | 7,136 |
| $ | 5,866 |
| $ | 4,080 |
| $ | 9,984 |
| $ | 1,094 |
| $ | 43,575 |
|
| $ | 6,317 |
|
| $ | 10,060 |
|
| $ | 9,536 |
|
| $ | 6,023 |
|
| $ | 4,553 |
|
| $ | 9,910 |
|
| $ | 2,138 |
|
| $ | 48,537 |
|
When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral adjusted for selling costs. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, the collateral-dependent practical expedient has been elected and expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For CRE loans, collateral properties include office buildings, warehouse/distribution buildings, shopping centers, apartment buildings, residential and commercial tract development. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. CRE loans are impacted by fluctuations in collateral values, as well as the ability of the borrower to obtain permanent financing.
20
The following table summarizes the extent to which collateral secures the Company’s collateral-dependent loans held for investment by collateral type as of June 30, 2021: 2022:
|
| Collateral Type |
| |||||
(in millions) |
| Real |
|
| Other |
| ||
Multi-family |
| $ | 17 |
|
| $ | — |
|
Commercial real estate |
|
| 43 |
|
|
| — |
|
One-to-four family |
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
Commercial and industrial |
|
| — |
|
|
| 4 |
|
Other |
|
| — |
|
|
| — |
|
Total collateral-dependent loans held for investment |
|
| 60 |
|
|
| 4 |
|
20
|
| Collateral |
| |||||
(dollars in millions) |
| Real |
|
| Other |
| ||
Multi-family |
| $ | 7 |
|
| $ | — |
|
Commercial real estate |
|
| 26 |
|
|
| — |
|
One-to-four family |
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
Commercial and industrial |
|
| — |
|
|
| 15 |
|
Other |
|
| — |
|
|
| — |
|
Total collateral-dependent loans held for investment |
| $ | 33 |
|
| $ | 15 |
|
Other collateral type consists of taxi medallions, cash, accounts receivable and inventory.
There were no significant changes in the extent to which collateral secures the Company’s collateral-dependent financial assets during the six months ended June 30, 2021.2022.
Troubled Debt Restructurings
The Company is required to account for certain loan modifications and restructurings as TDRs. In general, a modification or restructuring of a loan constitutes a TDR if the Company grants a concession to a borrower experiencing financial difficulty. A loan modified as a TDR generally is placed on non-accrual status until the Company determines that future collection of principal and interest is reasonably assured, which requires, among other things, that the borrower demonstrate performance according to the restructured terms for a period of at least six consecutive months. In determining the Company’s allowance for loan and lease losses, reasonably expected TDRs are individually evaluated and consist of criticized, classified, or maturing loans that will have a modification processed within the next three months.
In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of June 30, 2021,2022, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $3145 million.
The CARES Act was enacted on March 27, 2020. Under the CARES Act, the Company made the election to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease (“COVID-19”); (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. This includes short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency.
The following table presents information regarding the Company’s TDRs as of June 30, 2021 and December 31, 2020:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||
(dollars in millions) |
| Accruing |
|
| Non- |
|
| Total |
|
| Accruing |
|
| Non- |
|
| Total |
| ||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Multi-family |
| $ | — |
|
| $ | 7 |
|
| $ | 7 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 15 |
|
|
| — |
|
|
| 15 |
|
|
| 15 |
|
|
| — |
|
|
| 15 |
|
One-to-four family |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial and industrial(1) |
|
| — |
|
|
| 9 |
|
|
| 9 |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Total |
| $ | 15 |
|
| $ | 16 |
|
| $ | 31 |
|
| $ | 15 |
|
| $ | 19 |
|
| $ | 34 |
|
(1) Includes $9 million and $18 million of taxi medallion-related loans at June 30, 2021 and December 31, 2020, respectively.
21
The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances of each loan, which may change from period to period, and involves judgment by Company personnel regarding the likelihood that the concession will result in the maximum recovery for the Company.
The following table presents information regarding the Company's TDRs as of June 30, 2022 and December 31, 2021:
|
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||
(in millions) |
|
| Accruing |
|
|
| Non- |
|
|
| Total |
|
| Accruing |
|
| Non- |
|
| Total |
| ||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Multi-family |
| $ |
| — |
|
| $ |
| 6 |
|
| $ |
| 6 |
| $ |
| — |
| $ |
| 7 |
| $ |
| 7 |
|
Commercial real estate |
|
|
| 16 |
|
|
|
| 19 |
|
|
|
| 35 |
|
|
| 16 |
|
|
| — |
|
|
| 16 |
|
One-to-four family |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Acquisition, development, and |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial and industrial (1) |
|
|
| — |
|
|
|
| 4 |
|
|
|
| 4 |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
Total |
| $ |
| 16 |
|
| $ |
| 29 |
|
| $ |
| 45 |
| $ |
| 16 |
| $ |
| 13 |
| $ |
| 29 |
|
(1) Includes $4 million and $6 million of taxi medallion-related loans at June 30, 2022 and December 31, 2021, respectively.
The financial effects of the Company’s TDRs for the three months ended June 30, 20212022 and 20202021 are summarized as follows:
|
| For the Three Months Ended June 30, 2022 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| |||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial real estate |
|
| 1 |
|
| $ | — |
|
| $ | — |
|
| 4.75 | % | 9.75 | % |
| $ | — |
|
| $ | — |
|
21
| ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended June 30, 2020 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial real estate |
|
| 1 |
|
| $ | 15 |
|
| $ | 15 |
|
|
| 8.00 | % |
|
| 3.50 | % |
| $ | — |
|
| $ | — |
|
Commercial and industrial |
| 11 |
|
|
| 2 |
|
|
| 1 |
|
|
| 2.92 |
|
|
| 2.92 |
|
|
| 1 |
|
|
| — |
| |
Total |
|
| 12 |
|
|
| 17 |
|
|
| 16 |
|
|
| 7.28 |
|
|
| 3.45 |
|
| $ | 1 |
|
| $ | — |
|
|
| For the Three Months Ended June 30, 2021 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| |||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Multi-family |
|
| — |
|
| $ | — |
|
| $ | — |
|
| 0 | % | 0 | % |
| $ | — |
|
| $ | — |
|
The financial effects of the Company’s TDRs for the six months ended June 30, 20212022 and 20202021 are summarized as follows:
|
| For the Six Months Ended June 30, 2021 |
|
| For the Six Months Ended June 30, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
|
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| ||||||||||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Multi-family |
| 1 |
| 7 |
| 7 |
| 3.13 | % |
|
| 3.25 | % |
| $ | — |
| $ | — |
| ||||||||||||||||||||||||||||||||||||
Commercial real estate |
|
| 2 |
|
| $ | 22 |
|
| $ | 19 |
|
|
| 6.00 |
| % |
| 4.00 |
| % | $ | 3 |
|
| $ | — |
|
|
| For the Six Months Ended June 30, 2020 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial real estate |
|
| 1 |
|
| $ | 15 |
|
| $ | 15 |
|
|
| 8.00 | % |
|
| 3.50 | % |
| $ | — |
|
| $ | — |
|
Commercial and industrial |
|
| 19 |
|
|
| 4 |
|
|
| 3 |
|
|
| 3.08 |
|
|
| 3.03 |
|
|
| 1 |
|
|
| — |
|
Total |
|
| 20 |
|
| $ | 19 |
|
| $ | 18 |
|
|
| 6.89 |
|
|
| 3.42 |
|
| $ | 1 |
|
| $ | — |
|
|
| For the Six Months Ended June 30, 2021 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Multi-family |
|
| 1 |
|
| $ | 7 |
|
| $ | 7 |
|
|
| 3.13 |
| % |
| 3.25 |
| % | $ | — |
|
| $ | — |
|
At June 30, 2022, 0 loans have been modified as TDRs that were in payment default during the twelve months ended at that date. At June 30, 2021, 18 C&I loans in the aggregate amount of $2 million have been modified as TDRs during the twelve months ended at that date, and were in payment default. At June 30, 2020, 40 C&I loans in the aggregate amount of $6 million that had been modified as TDRs during the twelve months ended at that date and were in payment default.
The Company does not consider a payment to be in default when the loan is in forbearance, or otherwise granted a delay of payment, when the agreement to forebear or allow a delay of payment is part of a modification.
22
Subsequent to the modification, the loan is not considered to be in default until payment is contractually past due in accordance with the modified terms. However, the Company may consider a loan with multiple modifications or forbearance periods to be in default, and would consider a loan to be in default if the borrower were in bankruptcy or if the loan were partially charged off subsequent to modification. Management takes into consideration all TDR modifications in determining the appropriate level of the allowance.
Note 6. Allowance for Credit Losses on Loans and Leases
Allowance for Credit Losses on Loans and Leases
The following table summarizes activity in the allowance for credit losses on loans and leases for the periods indicated:
|
| For the Six Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Mortgage |
|
| Other |
|
| Total |
|
| Mortgage |
|
| Other |
|
| Total |
| ||||||||||||||||||||||||||||||
(in millions) |
| Mortgage |
|
| Other |
|
| Total |
|
| Mortgage |
|
| Other |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance, beginning of period |
| $ | 176 |
| $ | 18 |
| $ | 194 |
| $ | 123 |
| $ | 25 |
| $ | 148 |
|
| $ | 178 |
|
| $ | 21 |
|
| $ | 199 |
|
| $ | 176 |
|
| $ | 18 |
|
| $ | 194 |
| |||||
Impact of CECL adoption |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2 |
|
| 2 |
| |||||||||||||||||||||||||||||
Adjusted balance, beginning of period |
| 176 |
| 18 |
| 194 |
| 123 |
| 27 |
| 150 |
| |||||||||||||||||||||||||||||||||||
Charge-offs |
| (2 | ) |
|
| (3 | ) |
|
| (5 | ) |
| — |
| (14 | ) |
| (14 | ) |
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (5 | ) | |||||
Recoveries |
| 2 |
|
|
| 10 |
|
|
| 12 |
| — |
| — |
| — |
|
|
| 4 |
|
|
| 5 |
|
|
| 9 |
|
|
| 2 |
|
|
| 10 |
|
|
| 12 |
| |||||||
Provision for credit losses |
|
| 1 | �� |
|
| — |
|
| 1 |
|
| 34 |
|
| 4 |
|
| 38 |
| ||||||||||||||||||||||||||||
Provision for (recovery of) credit |
|
| 30 |
|
|
| (18 | ) |
|
| 12 |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
| ||||||||||||||||||||||||
Balance, end of period |
| $ | 177 |
| $ | 25 |
| $ | 202 |
| $ | 157 |
| $ | 17 |
| $ | 174 |
|
| $ | 208 |
|
| $ | 8 |
|
| $ | 216 |
|
| $ | 177 |
|
| $ | 25 |
|
| $ | 202 |
|
At June 30, 2021, the allowance for credit losses on loans and leases totaled $22202 million, up $8 million compared to December 31, 2020, driven by net recoveries of $7 million.
Separately, at June 30, 2021,2022, the Company had an allowance for unfunded commitments of $117 million.million, as compared to $12 million at December 31, 2021.
For the six months ended June 30, 2021,2022, the allowance for credit losses on loan and leases increased primarily as a result of growth across segments of the loan portfolio andgrowth combined with reduced prepayment estimates offset by macroeconomicimprovements in environmental factors surrounding the COVID-19 pandemic, specifically the resultant estimated decreases in property valuesthose affecting commercial real estate in the New York City area.
The macroeconomic forecast includes a temporarily significant increasefactors in increasing costs of higher global energy prices and tighter financial market conditions on the U.S. economy. Gross Domestic Product (“GDP”) is now expected to +6.9% in the second halfrise at an annualized rate of 2021 as the economy begins to recover from the systemic disruptions of the COVID-19 pandemic.2.8% and 2.7% respectively for 2022 and 2023. Unemployment continues to subside from the historic shock of 2020, but is not forecasted to return to pre-pandemic levels around 3.5% until 2023. Interestas peak unemployment rates are forecasted to begin to rise modestly and 10 Year-Baa spread widens slightly beginningbe approximately 3.5% in 2022 and levels off at 2.6% through3.4% in 2023. Federal Reserve continues to aggressively tighten monetary policy. As a result, the federal funds rate is now forecast to average 1.1% in 2022 and 2.7% in 2023, compared with 0.5% in 2022 and 1.5% in 2023 in the previous quarter Baseline scenario. The 10-year U.S. Treasury yield is expected to steadily increase over the next few years, reaching its estimated long-run equilibrium of 3.75% by mid-decade.
In addition to these quantitative inputs, several qualitative factors were considered in increasingestimating our allowance for loan and lease credit losses, including the risk that the economic decline proves to be more severe and/or prolonged than our baseline forecast. The impact of the unprecedented fiscal stimuluschanges in credit policies and changes to federalunderwriting guidelines and local laws and regulations including changesas well as other attributes related to various government sponsored loan programs, was also considered.a concentrated commercial real estate portfolio, specifically those affecting commercial real estate in the New York City area.
The Company charges off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter that the loan becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days past the date the Company received notification that the borrower has filed for bankruptcy.
23
The following table presents additional information about the Company’s nonaccrual loans at June 30, 2021:2022:
(in millions) |
| Recorded |
|
| Related |
|
| Interest |
| |||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 17 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 27 |
|
|
| — |
|
|
| 1 |
|
One-to-four family |
|
| — |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| 1 |
|
|
| — |
|
|
| — |
|
Other |
|
| 4 |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans with no related allowance |
| $ | 49 |
|
| $ | — |
|
| $ | 1 |
|
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 1 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| — |
|
|
| — |
|
|
| — |
|
One-to-four family |
|
| — |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans with an allowance recorded |
| $ | 1 |
|
| $ | — |
|
| $ | — |
|
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 18 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 27 |
|
|
| — |
|
|
| 1 |
|
One-to-four family |
|
| — |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| 1 |
|
|
| — |
|
|
| — |
|
Other |
|
| 4 |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans |
| $ | 50 |
|
| $ | — |
|
| $ | 1 |
|
23
(dollars in millions) |
| Recorded |
|
| Related |
|
| Interest |
| |||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 7 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 11 |
|
|
| - |
|
|
| - |
|
One-to-four family |
|
| - |
|
|
| - |
|
|
| - |
|
Acquisition, development, and construction |
|
| - |
|
|
| - |
|
|
| - |
|
Other |
|
| 9 |
|
|
| - |
|
|
| - |
|
Total nonaccrual loans with no related allowance |
| $ | 27 |
|
| $ | — |
|
| $ | — |
|
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 2 |
|
| $ | 1 |
|
| $ | — |
|
Commercial real estate |
|
| 1 |
|
|
| - |
|
|
| - |
|
One-to-four family |
|
| 2 |
|
|
| - |
|
|
| - |
|
Acquisition, development, and construction |
|
| - |
|
|
| - |
|
|
| - |
|
Other |
|
| - |
|
|
| - |
|
|
| - |
|
Total nonaccrual loans with an allowance recorded |
| $ | 5 |
|
| $ | 1 |
|
| $ | — |
|
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 9 |
|
| $ | 1 |
|
| $ | — |
|
Commercial real estate |
|
| 12 |
|
|
| - |
|
|
| - |
|
One-to-four family |
|
| 2 |
|
|
| - |
|
|
| - |
|
Acquisition, development, and construction |
|
| - |
|
|
| - |
|
|
| - |
|
Other |
|
| 9 |
|
|
| - |
|
|
| - |
|
Total nonaccrual loans |
| $ | 32 |
|
| $ | 1 |
|
| $ | — |
|
The following table presents additional information about the Company’s nonaccrual loans at December 31, 2020:2021:
(dollars in millions) |
| Recorded |
|
|
| Related |
|
|
| Interest |
| |||||||||||||||
(in millions) |
| Recorded |
|
| Related |
|
| Interest |
| |||||||||||||||||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Multi-family |
| $ | — |
| $ | — |
| $ | — |
|
| $ | 9 |
|
| $ | — |
|
| $ | 1 |
| ||||
Commercial real estate |
| 2 |
| — |
| — |
|
|
| 14 |
|
|
| — |
|
|
| — |
| |||||||
One-to-four family |
| 1 |
| — |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Acquisition, development, and construction |
| — |
| — |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Other |
|
| 20 |
|
|
| — |
|
|
| 1 |
|
|
| 6 |
|
|
| — |
|
|
| — |
| ||
Total nonaccrual loans with no related allowance |
| $ | 23 |
|
| $ | — |
|
| $ | 1 |
|
| $ | 29 |
|
| $ | — |
|
| $ | 1 |
| ||
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Multi-family |
| $ | 4 |
| $ | 1 |
| $ | — |
|
| $ | 1 |
|
| $ | — |
|
| $ | — |
| ||||
Commercial real estate |
| 10 |
| — |
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
| |||||||
One-to-four family |
| 1 |
| — |
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
| |||||||
Acquisition, development, and construction |
| — |
| — |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||
Total nonaccrual loans with an allowance recorded |
| $ | 15 |
|
| $ | 1 |
|
| $ | — |
|
| $ | 4 |
|
| $ | — |
|
| $ | — |
| ||
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Multi-family |
| $ | 4 |
| $ | 1 |
| $ | — |
|
| $ | 10 |
|
| $ | — |
|
| $ | 1 |
| ||||
Commercial real estate |
| 12 |
| — |
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
| |||||||
One-to-four family |
| 2 |
| — |
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
| |||||||
Acquisition, development, and construction |
| — |
| — |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Other |
|
| 20 |
|
|
| — |
|
|
| 1 |
|
|
| 6 |
|
|
| — |
|
|
| — |
| ||
Total nonaccrual loans |
| $ | 38 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 33 |
|
| $ | — |
|
| $ | 1 |
|
24
Note 7. Borrowed Funds
The following table summarizes the Company’s borrowed funds at the dates indicated:
(dollars in millions) |
| June 30, |
|
| December 31, |
| ||||||||||
Wholesale Borrowings: |
|
|
|
|
|
| ||||||||||
|
| June 30, |
| December 31, |
| |||||||||||
(in millions) |
| 2022 |
|
| 2021 |
| ||||||||||
Wholesale borrowings: |
|
|
|
|
|
| ||||||||||
FHLB advances |
| $ | 14,003 |
| $ | 14,628 |
|
| $ | 12,850 |
|
| $ | 15,105 |
| |
Repurchase agreements |
|
| 800 |
|
| 800 |
|
|
| 800 |
|
|
| 800 |
| |
Total wholesale borrowings |
| $ | 14,803 |
| $ | 15,428 |
|
| $ | 13,650 |
|
| $ | 15,905 |
| |
Junior subordinated debentures |
| 360 |
| 360 |
|
|
| 361 |
|
|
| 361 |
| |||
Subordinated notes |
|
| 296 |
|
| 296 |
|
|
| 296 |
|
|
| 296 |
| |
Total borrowed funds |
| $ | 15,459 |
| $ | 16,084 |
|
| $ | 14,307 |
|
| $ | 16,562 |
|
The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at June 30, 2021:2022:
|
| Remaining Contractual Maturity of the Agreements |
|
| Remaining Contractual Maturity of the Agreements |
| ||||||||||||||||||||||||||
(dollars in millions) |
| Overnight and |
|
| Up to |
|
| 30–90 Days |
|
| Greater than |
| ||||||||||||||||||||
(in millions) |
| Overnight and |
|
| Up to |
|
| 30–90 Days |
|
| Greater than |
| ||||||||||||||||||||
GSE obligations |
| $ | — |
| $ | — |
| $ | — |
| $ | 800 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 800 |
|
Subordinated Notes
At June 30, 20212022 and December 31, 2020,2021, the Company had $296 million of fixed-to-floating rate subordinated notes outstanding:
Date of Original Issue |
| Stated |
| Interest |
|
| Original Issue |
|
| Stated Maturity |
| Interest Rate(1) |
|
| Original Issue |
| ||||
(dollars in millions) | (dollars in millions) |
| (dollars in millions) |
| ||||||||||||||||
Nov. 6, 2018 |
| Nov. 6, 2028 |
| 5.90 | % |
| $ | 300 |
|
| Nov. 6, 2028 |
|
| 5.90 | % |
| $ | 300 |
|
24
Junior Subordinated Debentures
At June 30, 20212022 and December 31, 2020,2021, the Company had $360361 million of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by statutory business trusts (the “Trusts”) that issued guaranteed capital securities.
The Trusts are accounted for as unconsolidated subsidiaries, in accordance with GAAP. The proceeds of each issuance were invested in a series of junior subordinated debentures of the Company and the underlying assets of each statutory business trust are the relevant debentures. The Company has fully and unconditionally guaranteed the obligations under each trust’s capital securities to the extent set forth in a guarantee by the Company to each trust. The Trusts’ capital securities are each subject to mandatory redemption, in whole or in part, upon repayment of the debentures at their stated maturity or earlier redemption.
25
The following junior subordinated debentures were outstanding at June 30, 2021:2022:
Issuer | Interest |
|
| Junior |
|
| Capital |
|
| Date of |
| Stated |
| First | |||
(dollars in millions) | |||||||||||||||||
New York Community Capital Trust V |
| 6.00 | % |
| $ | 146 |
|
| $ | 140 |
|
| Nov. 4, 2002 |
| Nov. 1, 2051 |
| Nov. 4, 2007(1) |
New York Community Capital Trust X |
| 1.72 |
|
|
| 124 |
|
|
| 120 |
|
| Dec. 14, 2006 |
| Dec. 15, 2036 |
| Dec. 15, 2011 (2) |
PennFed Capital Trust III |
| 3.37 |
|
|
| 31 |
|
|
| 30 |
|
| June 2, 2003 |
| June 15, 2033 |
| June 15, 2008 (2) |
New York Community Capital Trust XI |
| 1.80 |
|
|
| 59 |
|
|
| 57 |
|
| April 16, 2007 |
| June 30, 2037 |
| June 30, 2012 (2) |
Total junior subordinated debentures |
|
|
| $ | 360 |
|
| $ | 347 |
|
|
|
|
|
|
|
Issuer |
| Interest Rate |
|
|
| Junior |
|
|
| Capital |
|
| Date of |
| Stated |
| First Optional | ||||
|
|
|
|
|
| (dollars in millions) |
|
|
|
|
|
|
| ||||||||
New York Community Capital |
|
| 6.00 | % |
| $ |
| 147 |
|
| $ |
| 140 |
|
| Nov. 4, 2002 |
| Nov. 1, 2051 |
| Nov. 4, 2007 | (1) |
New York Community Capital |
| 3.43 |
|
|
|
| 124 |
|
|
|
| 120 |
|
| Dec. 14, 2006 |
| Dec. 15, 2036 |
| Dec. 15, 2011 | (2) | |
PennFed Capital Trust III |
| 5.08 |
|
|
|
| 31 |
|
|
|
| 30 |
|
| June 2, 2003 |
| June 15, 2033 |
| June 15, 2008 | (2) | |
New York Community Capital |
| 3.90 |
|
|
|
| 59 |
|
|
|
| 58 |
|
| April 16, 2007 |
| June 30, 2037 |
| June 30, 2012 | (2) | |
Total junior subordinated debentures |
|
|
|
| $ |
| 361 |
|
| $ |
| 348 |
|
|
|
|
|
|
|
|
Note 8. Pension and Other Post-Retirement Benefits
The following table sets forth certain disclosures for the Company’s pension and post-retirement plans for the periods indicated:
|
| For the Three Months Ended June 30, |
|
| For the Three Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
(dollars in millions) |
| Pension |
|
| Post- |
|
| Pension |
|
| Post- |
| ||||||||||||||||||||
Components of net periodic (credit) expense: (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
| Post |
|
|
| Post |
| |||||||||||||||||||||||
|
| Pension |
| Retirement |
| Pension |
|
| Retirement |
| ||||||||||||||||||||||
(in millions) |
| Benefits |
| Benefits |
| Benefits |
|
| Benefits |
| ||||||||||||||||||||||
Components of net periodic pension expense (credit): |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Interest cost |
| $ | 1 |
| $ | — |
| $ | 1 |
| $ | — |
|
| $ | 1 |
|
| $ | — |
|
| $ | 1 |
|
| $ | — |
| |||
Expected return on plan assets |
| (4 | ) |
| — |
| (4 | ) |
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
|
| — |
| |||||
Amortization of prior-service liability |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||
Amortization of net actuarial loss |
|
| 2 |
|
| — |
|
| 2 |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 2 |
|
|
| — |
| |||
Net periodic (credit) expense |
| $ | (1 | ) |
| $ | — |
| $ | (1 | ) |
| $ | — |
|
| $ | (2 | ) |
| $ | — |
|
| $ | (1 | ) |
| $ | — |
|
|
| For the Six Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
(dollars in millions) |
| Pension |
|
| Post- |
|
| Pension |
|
| Post- |
| ||||||||||||||||||||
Components of net periodic (credit) expense: (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
| Post |
|
|
| Post |
| |||||||||||||||||||||||
|
| Pension |
| Retirement |
| Pension |
|
| Retirement |
| ||||||||||||||||||||||
(in millions) |
| Benefits |
| Benefits |
| Benefits |
|
| Benefits |
| ||||||||||||||||||||||
Components of net periodic pension expense (credit): |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Interest cost |
| $ | 2 |
| $ | — |
| $ | 2 |
| $ | — |
|
| $ | 2 |
|
| $ | — |
|
| $ | 2 |
|
| $ | — |
| |||
Expected return on plan assets |
| (8 | ) |
| — |
| (8 | ) |
| — |
|
|
| (8 | ) |
|
| — |
|
|
| (8 | ) |
|
| — |
| |||||
Amortization of prior-service liability |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||
Amortization of net actuarial loss |
|
| 4 |
|
| — |
|
| 4 |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 4 |
|
|
| — |
| |||
Net periodic (credit) expense |
| $ | (2 | ) |
| $ | — |
| $ | (2 | ) |
| $ | — |
|
| $ | (5 | ) |
| $ | — |
|
| $ | (2 | ) |
| $ | — |
|
25
The Company expects to contribute $1 million to its post-retirement plan to pay premiums and claims for the fiscal year ending December 31, 2021.2022. The Company does 0t expect to make any contributions to its pension plan in 2021.2022.
Note 9. Stock-Based Compensation
At June 30, 2021,2022, the Company had a total of 8,505,3035,305,407 shares available for grants as restricted stock, options, or other forms of related rights. The Company granted 3,045,9493,085,194 shares of restricted stock, with an average fair value of $11.1611.63 per share on the date of grant, during the six months ended June 30, 2021.2022. During the six months ended June 30, 2020,2021, the Company granted 2,390,3453,045,949 shares of restricted stock, with an average fair value of $11.6411.16 per share.
The shares of restricted stock that were granted during the six months ended June 30, 20212022 and 2020,2021, vest over a oneone- or five year period. Compensation and benefits expense related to the restricted stock grants is recognized on a straight-line basis over the
26
vesting period and totaled $1514 million and $1615 million for the six months ended June 30, 20212022 and 2020,2021, including $7 million and $7 million for the three months ended at those dates.June 30, 2022 and June 30, 2021.
The following table provides a summary of activity with regard to restricted stock awards in the six months ended June 30, 2021:2022:
| For the Six Months Ended |
| ||||||||||||||
|
| Number of |
|
| Weighted Average |
|
| Number of Shares |
|
| Weighted |
| ||||
Unvested at beginning of year |
| 6,228,048 |
| $ | 12.43 |
|
|
| 6,950,335 |
|
| $ | 11.68 |
| ||
Granted |
| 3,045,949 |
| 11.16 |
|
|
| 3,085,194 |
|
|
| 11.63 |
| |||
Vested |
| (2,015,702 | ) |
| 13.19 |
|
|
| (2,228,902 | ) |
|
| 12.28 |
| ||
Canceled |
|
| (172,900 | ) |
|
| 11.72 |
|
|
| (370,205 | ) |
|
| 11.48 |
|
Unvested at end of period |
|
| 7,085,395 |
|
| 11.68 |
| |||||||||
Unvested at end of year |
|
| 7,436,422 |
|
|
| 11.49 |
|
As of June 30, 2021,2022, unrecognized compensation cost relating to unvested restricted stock totaled $7073 million. This amount will be recognized over a remaining weighted average period of 3.4 years.
The following table provides a summary of activity with regard to Performance-Based Restricted Stock Units ("PSUs") in the six months ended June 30, 2021:2022:
Number of | Performance | Expected | ||||||||||
Outstanding at beginning of year | 834,612 |
| ||||||||||
Granted |
| 473,211 |
| |||||||||
Released |
| ) | ||||||||||
Canceled | (152,556 | ) | ||||||||||
Outstanding at end of period | 979,177 | January 1, 2021 - December 31, 2023 |
| March 31, 2023 and 2024 |
PSUs are subject to adjustment or forfeiture, based upon the achievement by the Company of certain performance standards. Compensation and benefits expense related to PSUs is recognized using the fair value as of the date the units were approved, on a straight-line basis over the vesting period and totaled $1 million for the three and six months ended June 30, 20212022 and June 30, 2020.2021. As of June 30, 2021,2022, unrecognized compensation cost relating to unvested restricted stock totaled $6 million. This amount will be recognized over a remaining weighted average period of 1.9 years. As of June 30, 2021,2022, the Company believes it is probable that the performance conditions will be met.
The Company matches a portion of employee 401(k) plan contributions. Such expense totaled $1 million and $3 million for the three and six months ended June 30, 20212022 and June 30, 2020.2021.
26
Note 10. Fair Value Measurements
GAAP sets forth a definition of fair value, establishes a consistent framework for measuring fair value, and requires disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. GAAP also clarifies that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
27
A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following tables present assets and liabilities that were measured at fair value on a recurring basis as of June 30, 20212022 and December 31, 2020,2021, and that were included in the Company’s Consolidated Statements of Condition at those dates:
|
| Fair Value Measurements at June 30, 2021 |
| Fair Value Measurements at June 30, 2022 |
| ||||||||||||||||||||||||||||||
(dollars in millions) |
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Netting |
|
| Total Fair |
| ||||||||||||||||||||
(in millions) | Quoted |
|
| Significant |
|
| Significant |
|
| Total |
| ||||||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Mortgage-Related Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Mortgage-related Debt Securities |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
GSE certificates |
| $ | — |
| $ | 1,060 |
| $ | — |
| $ | — |
| $ | 1,060 |
| $ | — |
|
| $ | 1,050 |
|
| $ | — |
|
| $ | 1,050 |
| ||||
GSE CMOs |
|
| — |
|
| 1,933 |
|
| — |
|
| — |
|
| 1,933 |
|
| — |
|
|
| 1,416 |
|
|
| — |
|
|
| 1,416 |
| ||||
Total mortgage-related debt securities |
| $ | — |
| $ | 2,993 |
| $ | — |
| $ | — |
| $ | 2,993 |
| $ | — |
|
| $ | 2,466 |
|
| $ | — |
|
| $ | 2,466 |
| ||||
Other Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
U. S. Treasury obligations |
| $ | 65 |
| $ | — |
| $ | — |
| $ | — |
| $ | 65 |
| $ | 294 |
|
| $ | — |
|
| $ | — |
|
| $ | 294 |
| ||||
GSE debentures |
| — |
| 1,474 |
| — |
| — |
| 1,474 |
|
| — |
|
|
| 1,502 |
|
|
| — |
|
|
| 1,502 |
| |||||||||
Asset-backed securities |
| — |
| 509 |
| — |
| — |
| 509 |
|
| — |
|
|
| 407 |
|
|
| — |
|
|
| 407 |
| |||||||||
Municipal bonds |
| — |
| 25 |
| — |
| — |
| 25 |
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| 18 |
| |||||||||
Corporate bonds |
| — |
| 890 |
| — |
| — |
| 890 |
|
| — |
|
|
| 859 |
|
|
| — |
|
|
| 859 |
| |||||||||
Foreign notes |
| — |
| 26 |
|
|
|
|
|
|
| 26 |
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
| |||||||
Capital trust notes |
|
| — |
|
| 95 |
|
| — |
|
| — |
|
| 95 |
|
| — |
|
|
| 93 |
|
|
| — |
|
|
| 93 |
| ||||
Total other debt securities |
| $ | 65 |
| $ | 3,019 |
| $ | — |
| $ | — |
| $ | 3,084 |
| $ | 294 |
|
| $ | 2,904 |
|
| $ | — |
|
| $ | 3,198 |
| ||||
Total debt securities available for sale |
| $ | 65 |
| $ | 6,012 |
| $ | — |
| $ | — |
| $ | 6,077 |
| $ | 294 |
|
| $ | 5,370 |
|
| $ | — |
|
| $ | 5,664 |
| ||||
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Mutual funds |
|
| — |
|
| 16 |
|
| — |
|
| — |
|
| 16 |
| |||||||||||||||||||
Preferred stock | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||
Mutual funds and common stock |
| — |
|
|
| 14 |
|
|
| — |
|
|
| 14 |
| ||||||||||||||||||||
Total equity securities |
| $ | — |
| $ | 16 |
| $ | — |
| $ | — |
| $ | 16 |
| $ | — |
|
| $ | 14 |
|
| $ | — |
|
| $ | 14 |
| ||||
Total securities |
| $ | 65 |
| $ | 6,028 |
| $ | — |
| $ | — |
| $ | 6,093 |
| $ | 294 |
|
| $ | 5,384 |
|
| $ | — |
|
| $ | 5,678 |
|
|
| Fair Value Measurements at December 31, 2020 |
| |||||||||||||||||
(dollars in millions) |
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Netting |
|
| Total Fair |
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-Related Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
GSE certificates |
| $ | — |
|
| $ | 1,209 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,209 |
|
GSE CMOs |
|
| — |
|
|
| 1,829 |
|
|
| — |
|
|
| — |
|
|
| 1,829 |
|
Total mortgage-related debt securities |
| $ | — |
|
| $ | 3,038 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,038 |
|
Other Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
U.S. Treasury obligations |
| $ | 65 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 65 |
|
GSE debentures |
|
| — |
|
|
| 1,158 |
|
|
| — |
|
|
| — |
|
|
| 1,158 |
|
Asset-backed securities |
|
| — |
|
|
| 526 |
|
|
| — |
|
|
| — |
|
|
| 526 |
|
Municipal bonds |
|
| — |
|
|
| 27 |
|
|
| — |
|
|
| — |
|
|
| 27 |
|
Corporate bonds |
|
| — |
|
|
| 883 |
|
|
| — |
|
|
| — |
|
|
| 883 |
|
Foreign notes |
|
| — |
|
|
| 26 |
|
|
|
|
|
|
|
|
| 26 |
| ||
Capital trust notes |
|
| — |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
Total other debt securities |
| $ | 65 |
|
| $ | 2,711 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,776 |
|
Total debt securities available for sale |
| $ | 65 |
|
| $ | 5,749 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,814 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Preferred stock |
| $ | 15 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
Mutual funds |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | 15 |
|
| $ | 16 |
|
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
Total securities |
| $ | 80 |
|
| $ | 5,765 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,845 |
|
2827
|
| Fair Value Measurements at December 31, 2021 |
| |||||||||||||
(in millions) |
| Quoted |
|
| Significant |
|
| Significant |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-Related Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates |
| $ | — |
|
| $ | 1,107 |
|
| $ | — |
|
| $ | 1,107 |
|
GSE CMOs |
|
| — |
|
|
| 1,683 |
|
|
| — |
|
|
| 1,683 |
|
Total mortgage-related debt securities |
| $ | — |
|
| $ | 2,790 |
|
| $ | — |
|
| $ | 2,790 |
|
Other Debt Securities Available |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury obligations |
| $ | 45 |
|
| $ | — |
|
| $ | — |
|
| $ | 45 |
|
GSE debentures |
|
| — |
|
|
| 1,480 |
|
|
| — |
|
|
| 1,480 |
|
Asset-backed securities |
|
| — |
|
|
| 479 |
|
|
| — |
|
|
| 479 |
|
Municipal bonds |
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
|
Corporate bonds |
|
| — |
|
|
| 838 |
|
|
| — |
|
|
| 838 |
|
Foreign notes |
|
| — |
|
|
| 26 |
|
|
| — |
|
|
| 26 |
|
Capital trust notes |
|
| — |
|
|
| 97 |
|
|
| — |
|
|
| 97 |
|
Total other debt securities |
| $ | 45 |
|
| $ | 2,945 |
|
| $ | — |
|
| $ | 2,990 |
|
Total debt securities available for sale |
| $ | 45 |
|
| $ | 5,735 |
|
| $ | — |
|
| $ | 5,780 |
|
Equity securities: |
|
|
|
|
|
|
|
| — |
|
|
|
| |||
Preferred stock |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Mutual funds and common stock |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | — |
|
| $ | 16 |
|
| $ | — |
|
| $ | 16 |
|
Total securities |
| $ | 45 |
|
| $ | 5,751 |
|
| $ | — |
|
| $ | 5,796 |
|
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 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 and exchange-traded securities.
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.
While the Company believes its valuation methods are appropriate, and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair values of certain financial instruments could result in different estimates of fair values at a reporting date.
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
28
measured at fair value on a non-recurring basis as of June 30, 20212022 and December 31, 2020,2021, and that were included in the Company’s Consolidated Statements of Condition at those dates:
|
| Fair Value Measurements at June 30, 2021 Using |
|
| Fair Value Measurements at June 30, 2022 Using |
| ||||||||||||||||||||||||||||
(dollars in millions) |
| Quoted Prices in |
|
| Significant Other |
|
| Significant |
|
| Total Fair |
| ||||||||||||||||||||||
Certain nonaccrual loans (1) |
| $ | — |
| $ | — |
| $ | 31 |
| $ | 31 |
| |||||||||||||||||||||
(in millions) |
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Total Fair |
| ||||||||||||||||||||||
Certain loans (1) |
| $ | — |
|
| $ | — |
|
| $ | 20 |
|
| $ | 20 |
| ||||||||||||||||||
Other assets(2) |
|
| — |
|
| — |
|
| 11 |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
|
| 37 |
| |||||
Total |
| $ | — |
| $ | — |
| $ | 42 |
| $ | 42 |
|
| $ | — |
|
| $ | — |
|
| $ | 57 |
|
| $ | 57 |
|
|
| Fair Value Measurements at December 31, 2021 Using |
| |||||||||||||
(in millions) |
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Total Fair |
| ||||
Certain loans (1) |
| $ | — |
|
| $ | — |
|
| $ | 32 |
|
| $ | 32 |
|
Other assets (2) |
|
| — |
|
|
| — |
|
|
| 32 |
|
|
| 32 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | 64 |
|
| $ | 64 |
|
|
| Fair Value Measurements at December 31, 2020 Using |
| |||||||||||||
(dollars in millions) |
| Quoted Prices in |
|
| Significant Other |
|
| Significant |
|
| Total Fair |
| ||||
Certain nonaccrual loans (1) |
| $ | — |
|
| $ | — |
|
| $ | 41 |
|
| $ | 41 |
|
Other assets (2) |
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | 47 |
|
| $ | 47 |
|
29
The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate and other market data.
Other Fair Value Disclosures
For 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.
29
The following tables summarize the carrying values, estimated fair values, and fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at June 30, 20212022 and December 31, 2020:2021:
|
| June 30, 2021 |
|
|
| June 30, 2022 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| Fair Value Measurement Using |
|
|
|
|
|
|
|
|
|
| Fair Value Measurement Using |
| |||||||||||||||||||||||||||
(dollars in millions) |
| Carrying Value |
|
| Estimated |
|
| Quoted Prices |
|
| Significant |
|
| Significant |
| |||||||||||||||||||||||||||||||
(in millions) |
|
| Carrying |
|
|
| Estimated |
|
|
| Quoted Prices |
|
| Significant |
|
|
| Significant |
| |||||||||||||||||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Cash and cash equivalents |
| $ | 2,086 |
| $ | 2,086 |
| $ | 2,086 |
| $ | — |
| $ | — |
| ||||||||||||||||||||||||||||||
Cash, cash equivalents and due from banks |
| $ |
| 3,277 |
|
| $ |
| 3,277 |
|
| $ |
| 3,277 |
|
| $ |
| — |
|
| $ | — |
| ||||||||||||||||||||||
FHLB stock (1) |
| 686 |
| 686 |
| — |
| 686 |
| — |
|
|
|
| 635 |
|
|
|
| 635 |
|
|
|
| — |
|
|
|
| 635 |
|
|
| — |
| |||||||||||
Loans, net |
| 43,373 |
| 42,913 |
| — |
| — |
| 42,913 |
| |||||||||||||||||||||||||||||||||||
Loans and leases, net |
|
|
| 48,321 |
|
|
|
| 45,794 |
|
|
|
| — |
|
|
|
| — |
|
|
| 45,794 |
| ||||||||||||||||||||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Deposits |
| $ | 34,177 |
| $ | 34,186 |
| $ | 25,228 |
| (2) | $ | 8,958 |
| (3) | $ | — |
|
| $ |
| 41,244 |
|
| $ |
| 41,091 |
|
| $ |
| 33,154 |
| (2) |
| $ |
| 7,937 |
| (3) |
| $ | — |
| ||
Borrowed funds |
| 15,459 |
| 16,243 |
| — |
| 16,243 |
| — |
|
|
|
| 14,307 |
|
|
|
| 14,235 |
|
|
|
| — |
|
|
|
| 14,235 |
|
|
| — |
|
|
| December 31, 2020 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Fair Value Measurement Using |
|
|
|
|
|
|
| Fair Value Measurement Using |
| |||||||||||||||||||||||||
(dollars in millions) |
| Carrying |
|
| Estimated |
|
| Quoted Prices |
| Significant |
| Significant |
| |||||||||||||||||||||||||||||
(in millions) |
| Carrying |
|
| Estimated |
|
| Quoted Prices |
| Significant |
| Significant |
| |||||||||||||||||||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Cash and cash equivalents |
| $ | 1,948 |
| $ | 1,948 |
| $ | 1,948 |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||||||
Cash, cash equivalents and due from banks |
| $ | 2,211 |
|
| $ | 2,211 |
|
| $ | 2,211 |
|
| $ | — |
|
| $ | — |
| ||||||||||||||||||||||
FHLB stock (1) |
| 714 |
| 714 |
| — |
|
|
| 714 |
|
|
| — |
|
|
| 734 |
|
|
| 734 |
|
|
| — |
|
|
| 734 |
|
|
| — |
| |||||||
Loans, net |
| 42,807 |
| 42,376 |
| — |
|
| $ | — |
|
|
| 42,376 |
| |||||||||||||||||||||||||||
Loans and leases, net |
|
| 45,539 |
|
|
| 44,748 |
|
|
| — |
|
|
| — |
|
|
| 44,748 |
| ||||||||||||||||||||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Deposits |
| $ | 32,437 |
| $ | 32,466 |
| $ | 22,106 |
| (2) | $ | 10,360 |
| (3) | $ | — |
|
| $ | 35,059 |
|
| $ | 35,051 |
|
| $ | 26,635 |
| (2) |
| $ | 8,416 |
| (3) |
| $ | — |
| ||
Borrowed funds |
| 16,084 |
| 16,794 |
| — |
|
|
| 16,794 |
|
|
| — |
|
|
| 16,562 |
|
|
| 17,169 |
|
|
| — |
|
|
| 17,169 |
|
|
| — |
|
The methods and significant assumptions used to estimate fair values for the Company’s financial instruments follow:
30
Cash, Cash Equivalents and Due From Banks
Cash, and Cash Equivalents
Cash and cash equivalents and due from banks include cash and due from banks and federal funds sold. The estimated fair values of cash, and cash equivalents and due from banks are assumed to equal their carrying values, as these financial instruments are either due on demand or have short-term maturities.
30
Securities
If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. 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, pricing models also incorporate transaction details such as maturities and cash flow assumptions.
Federal Home Loan Bank Stock
Ownership in equity securities of the FHLB-NY is generally restricted and there is no established liquid market for their resale. The carrying amount approximates the fair value.
Loans
The Company discloses the fair value of loans measured at amortized cost using an exit price notion. The Company determined the fair value on substantially all of its loans for disclosure purposes, on an individual loan basis. The discount rates reflect current market rates for loans with similar terms to borrowers having similar credit quality on an exit price basis. The estimated fair values of non-performing mortgage and other loans are based on recent collateral appraisals. For those loans where a discounted cash flow technique was not considered reliable, the Company used a quoted market price for each individual loan.
Deposits
The fair values of deposit liabilities with no stated maturity (i.e., interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values of CDs represent contractual cash flows, discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. These estimated fair values do not include the intangible value of core deposit (total deposits excluding CDs) relationships, which comprise a significant portion of the Company’s deposit base.
Borrowed Funds
The estimated fair value of borrowed funds is based either on bid quotations received from securities dealers or the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with similar maturities and structures.
Off-Balance Sheet Financial Instruments
The fair values of commitments to extend credit and unadvanced lines of credit are estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the creditworthiness of the potential borrowers. The estimated fair values of such off-balance sheet financial instruments were insignificant at June 30, 20212022 and December 31, 2020.2021.
Note 11. Leases
Lessor Arrangements
The Company is a lessor in the equipment finance business where it has executed direct financing leases (“lease finance receivables”). The Company produces lease finance receivables through a specialty finance subsidiary that participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide. Lease finance receivables are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any initial direct costs incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.
31
The standard leases are typically repayable on a level monthly basis with terms ranging from 24 to 120 months. At the end of the lease term, the lessee usually has the option to return the equipment, to renew the lease or purchase the equipment at the then fair market value (“FMV”) price. For leases with a FMV renewal/purchase option, the relevant residual value assumptions are based on the estimated value of the leased asset at the end of lease term, including evaluation of key factors, such as, the estimated remaining useful life of the leased asset, its historical secondary market value including history of the lessee executing the FMV option, overall credit evaluation and return provisions. The Company acquires the leased asset at fair market value and provides funding to the respective lessee at acquisition cost, less any volume or trade discounts, as applicable. Therefore, there is generally no selling profit or loss to recognize or defer at inception of a lease.
31
The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, and independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on an annual basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense. On certain lease financings, the Company obtains residual value insurance from third parties to manage and reduce the risk associated with the residual value of the leased assets. At June 30, 20212022 and December 31, 2020,2021, the carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $6340 million and $7161 million, respectively.
The Company uses the interest rate implicit in the lease to determine the present value of its lease financing receivables.
The components of lease income were as follows:
(dollars in millions) |
| For the |
|
| For the Six |
|
| For the |
|
| For the Six |
| ||||||||||||||||||||
(in millions) |
| For the |
|
| For the |
|
| For the |
|
| For the |
| ||||||||||||||||||||
Interest income on lease financing (1) |
| $ | 14 |
| $ | 28 |
| $ | 14 |
| $ | 26 |
|
| $ | 12 |
|
| $ | 24 |
|
| $ | 14 |
|
| $ | 28 |
|
At June 30, 20212022 and December 31, 2020,2021, the carrying value of net investment in leases was $1.8 billion and $1.9 billion.billion, respectively. The components of net investment in direct financing leases, including the carrying amount of the lease receivables, as well as the unguaranteed residual asset were as follows:
(dollars in millions) |
| June 30, |
|
| December 31, |
| ||||||||||
(in millions) |
| June 30, |
|
| December 31, |
| ||||||||||
Net investment in the lease - lease payments receivable |
| $ | 1,871 |
| $ | 1,771 |
|
| $ | 1,777 |
|
| $ | 1,790 |
| |
Net investment in the lease - unguaranteed |
|
| 78 |
|
| 80 |
|
|
| 64 |
|
|
| 75 |
| |
Total lease payments |
| $ | 1,949 |
| $ | 1,851 |
|
| $ | 1,841 |
|
| $ | 1,865 |
|
32
The following table presents the remaining maturity analysis of the undiscounted lease receivables as of June 30, 2021,2022, as well as the reconciliation to the total amount of receivables recognized in the Consolidated Statements of Condition:
(dollars in millions) |
| June 30, |
| ||||||
2021 |
| $ | 17 |
| |||||
(in millions) |
| June 30, |
| ||||||
2022 |
| 53 |
|
| $ |
| 6 |
| |
2023 |
| 287 |
|
|
| 141 |
| ||
2024 |
| 308 |
|
|
| 220 |
| ||
2025 |
| 404 |
|
|
| 418 |
| ||
2026 |
|
| 388 |
| |||||
Thereafter |
|
| 880 |
|
|
| 668 |
| |
Total lease payments |
| 1,949 |
|
|
| 1,841 |
| ||
Plus: deferred origination costs |
| 28 |
|
|
| 21 |
| ||
Less: unearned income |
|
| (103 | ) |
|
|
| (85 | ) |
Total lease finance receivables, net |
| $ | 1,874 |
|
| $ |
| 1,777 |
|
Lessee Arrangements
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the Consolidated Statements of Condition.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement
32
date based on the present value of lease payments over the lease term. As most leases do not provide an implicit rate, the incremental borrowing rate (FHLB borrowing rate) is used in determining the present value of lease payments. The implicit rate is used when readily determinable. The operating lease ROU asset is measured at cost, which includes the initial measurement of the lease liability, prepaid rent and initial direct costs incurred by the Company, less incentives received. The lease terms include options to extend the lease when it is reasonably certain that we will exercise that option. For the vast majority of the Company’s leases, we are reasonably certain we will exercise our options to renew to the end of all renewal option periods. As such, substantially all of our future options to extend the leases have been included in the lease liability and ROU assets.
Variable costs such as the proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Amortization of the ROU assets was $1016 million and $910 million for the six months ended June 30, 20212022 and June 30, 2020,2021, respectively. Included in these amounts was $11 million and $5 million for the three months ended June 30, 20212022 and June 30, 2020,2021, respectively.
The Company has operating leases for corporate offices, branch locations, and certain equipment. The Company’s leases have remaining lease terms of one year to approximately 25 yearsyears,, the vast majority of which include one or more options to extend the leases for up to five years resulting in lease terms up to 40 years.
The components of lease expense were as follows:
(dollars in millions) |
| For the |
|
| For the Six |
|
| For the |
|
| For the Six |
| ||||||||||||||||||||
(in millions) |
| For the Three |
|
| For the Six |
|
| For the Three |
|
| For the Six |
| ||||||||||||||||||||
Operating lease cost |
| $ | 7 |
| $ | 13 |
| $ | 7 |
| $ | 14 |
|
| $ | 7 |
|
| $ | 14 |
|
| $ | 7 |
|
| $ | 13 |
| |||
Sublease income |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||
Total lease cost |
| $ | 7 |
| $ | 13 |
| $ | 7 |
| $ | 14 |
|
| $ | 7 |
|
| $ | 14 |
|
| $ | 7 |
|
| $ | 13 |
|
33
Supplemental cash flow information related to the leases for the following periods:
(dollars in millions) |
| For the |
|
| For the Six |
|
| For the |
|
| For the Six |
| ||||
Cash paid for amounts included in the measurement |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating cash flows from operating leases |
| $ | 7 |
|
| $ | 13 |
|
| $ | 7 |
|
| $ | 14 |
|
(in millions) |
| For the Three |
|
| For the Six |
|
| For the Three |
|
| For the Six |
| ||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating cash flows from operating leases |
| $ | 7 |
|
| $ | 14 |
|
| $ | 7 |
|
| $ | 13 |
|
Supplemental balance sheet information related to the leases for the following periods:
(in millions, except lease term and discount rate) |
| June 30, |
|
| December 31, |
| ||
Operating Leases: |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
| $ | 232 |
|
| $ | 249 |
|
Operating lease liabilities |
| $ | 232 |
|
| $ | 249 |
|
Weighted average remaining lease term |
| 13 years |
|
| 16 years |
| ||
Weighted average discount rate% |
|
| 3.00 | % |
|
| 3.05 | % |
(in millions) |
| June 30, |
| ||
2022 |
| $ |
| 14 |
|
2023 |
|
|
| 27 |
|
2024 |
|
|
| 26 |
|
2025 |
|
|
| 25 |
|
2026 |
|
|
| 24 |
|
Thereafter |
|
|
| 171 |
|
Total lease payments |
|
|
| 287 |
|
Less: imputed interest |
|
|
| (55 | ) |
Total present value of lease liabilities |
| $ |
| 232 |
|
33
(in millions, except lease term and discount rate) |
| June 30, |
|
| December 31, |
| ||
Operating Leases: |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
|
| 256 |
|
| $ | 267 |
|
Operating lease liabilities |
|
| 256 |
|
|
| 267 |
|
Weighted average remaining lease term |
| 16 years |
|
| 16 years |
| ||
Weighted average discount rate |
|
| 3.07 | % |
|
| 3.12 | % |
Maturities of lease liabilities: |
| June 30, |
|
| |
(dollars in millions) |
|
|
|
| |
2021 |
| $ | 13 |
|
|
2022 |
|
| 26 |
|
|
2023 |
|
| 26 |
|
|
2024 |
|
| 25 |
|
|
2025 |
|
| 24 |
|
|
Thereafter |
|
| 218 |
|
|
Total lease payments |
|
| 332 |
|
|
Less: imputed interest |
|
| (76 | ) |
|
Total present value of lease liabilities |
| $ | 256 |
|
|
Note 12. Derivative and Hedging Activities
The Company’s derivative financial instruments consist of interest rate swaps. The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposure to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate and liquidity risks, primarily by managing the amount, sources, and duration of its assets and liabilities and, from time to time, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”)DFA requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties are the Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”). As of June 30, 2021,2022, all of the Company’s $4.31 billion notional derivative contracts were cleared on the LCH. Daily variation margin payments on derivatives cleared through the LCH are accounted for as legal settlement. For derivatives cleared through LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative, which includes accrued interest; therefore, those interest rate and derivative contracts the Company clears through the LCH are reported at a fair value of approximately zero at June 30, 2021.2022.
The Company’s exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At June 30, 2021,2022, the Company had a net negativepositive exposure.
34
Fair Value of Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Such derivatives were used to hedge the changes in fair value of certain of its pools of prepayable fixed rate assets. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.
The Company has entered into an interest rate swap with a notional amount of $2.0 billion to hedge certain real estate loans. This swap expired in February 2022 and was not renewed. For the six months ended June 30, 2022, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $6 million for the six months ended June 30, 2022. For the three and six months ended June 30, 2021, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $12 million and $24 million for the three and six months ended June 30, 2021. For the three and six months ended June 30, 2020, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $8 million and $12 million for the three and six months ended June 30, 2020, respectively.
As of June 30, 2022, and December 31, 2021 the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
(dollars in millions) |
| June 30, 2021 |
| |||||
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included |
| Carrying |
|
| Cumulative |
| ||
Total loans and leases, net (1) |
| $ | 2,050 |
|
| $ | 50 |
|
(in millions) |
| June 30, 2022 |
|
|
| December 31, 2021 |
| ||||||||||||
Line Item in the Consolidated Statements of |
| Carrying |
|
|
| Cumulative |
|
|
| Carrying |
|
|
| Cumulative |
| ||||
Total loans and leases, net (1) | $ |
| - |
|
| $ |
| - |
|
| $ |
| 2,025 |
|
| $ |
| 25 |
|
34
As of December 31, 2020, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
(dollars in millions) |
| December 31, 2020 |
| |||||
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included |
| Carrying |
|
| Cumulative |
| ||
Total loans and leases, net (1) |
| $ | 2,073 |
|
| $ | 73 |
|
(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At December 31, 2020 the amortized cost basis of the closed portfolios used in these hedging relationships was $3.6 billion; the cumulative basis adjustments associated with these hedging relationships was $73 million; and the amount of the designated hedged items was $2.0 billion.
35
The following table sets forth information regarding the Company’s derivative financial instruments at June 30, 2021 and December 31, 2020:
|
| Notional |
|
| Other |
|
| Other |
| |||
Derivatives designated as fair value hedging |
|
|
|
|
|
|
|
|
| |||
Interest rate swap |
| $ | 2,000 |
|
| $ | — |
|
| $ | — |
|
Total derivatives designated as fair value hedging |
| $ | 2,000 |
|
| $ | — |
|
| $ | — |
|
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the periods indicated.
(dollars in millions) |
| For the Three |
|
| For the Six |
|
| For the Three |
|
| For the Six |
| |||||||||||||||||||
(in millions) | For the Three |
|
| For the Six |
|
| For the Three |
|
| For the Six |
| ||||||||||||||||||||
Derivative – interest rate swap: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest income |
| $ | (2 | ) |
| $ | 24 |
| $ | (9 | ) |
| $ | (37 | ) | $ | 0 |
|
| $ | 25 |
|
| $ | (2 | ) |
| $ | 24 |
| |
Hedged item – loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest income |
| $ | 2 |
| $ | (24 | ) |
| $ | 9 |
| $ | 37 |
| $ | 0 |
|
| $ | (25 | ) |
| $ | 2 |
|
| $ | (24 | ) |
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of amounts subject to variability caused by changes in interest rates from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes in the fair value of derivatives designated and that qualify as cash flow hedges are initially recorded in other comprehensive income and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings.
Interest rate swaps with notional amounts totaling $1 billion and $2.3 billion as of June 30, 20212022 and December 31, 2020,2021, respectively, were designated as cash flow hedges of certain FHLB borrowings.
The following table summarizes information about the interest rate swaps designated as cash flow hedges at June 30, 20212022 and December 31, 2020:2021:
(dollars in millions) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
Notional amounts |
| $ | 2,250 |
| $ | 2,250 |
|
| $ | 1,000 |
|
| $ | 2,250 |
| |
Cash collateral posted |
| 30 |
| 46 |
| |||||||||||
Cash collateral received (posted) |
|
| 20 |
|
|
| (12 | ) | ||||||||
Weighted average pay rates |
| 1.27 | % |
| 1.27 | % |
|
| 1.05 | % |
|
| 1.27 | % | ||
Weighted average receive rates |
| 0.15 | % |
| 0.23 | % |
|
| 1.57 | % |
|
| 0.18 | % | ||
Weighted average maturity |
| 1.4 years |
|
| 1.9 years |
|
| 1.1 years |
|
| 0.9 years |
|
The following table presents the effect of the Company’sCompany's cash flow derivative instruments on AOCL for the six months ended June 30, 20212022 and 2020:2021:
(dollars in millions) |
| For the Six |
|
| For the Six |
| ||
Amount of gain (loss) recognized in AOCL |
| $ | 4 |
|
| $ | 57 |
|
Amount of gain (loss) reclassified from AOCL to interest expense |
|
| 11 |
|
|
| 1 |
|
(in millions) |
| For the Six |
|
| For the Six |
| ||
Amount of (loss) gain recognized in AOCL |
| $ | 25 |
|
| $ | 4 |
|
Amount of reclassified from AOCL to interest expense |
|
| 7 |
|
|
| 11 |
|
Gains (losses) included in the Consolidated Statements of Income related to interest rate derivatives designated as cash flow hedges during the six months ended June 30, 20212022 was $117 million. Amounts reported in AOCL related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate borrowings. During the next twelve months, the Company estimates that an additional $255 million will be reclassified to interest expense.
3635
Note 13. Pending Acquisition
AcquisitionExtension of Merger Agreement with Flagstar Bancorp, Inc. ("Flagstar")
On April 26, 2021, the Company announced that it had entered into a definitive merger agreement (the “Merger Agreement”"Merger Agreement") under which we would acquire Flagstar Bancorp, Inc. ("Flagstar") in a 100% stock transaction initially valued at the time at $2.6 billion (the “Merger”"Merger"). On April 27, 2022, both sides agreed to amend the agreement (the "Amendment"). Under terms of the Amendment, the Company and Flagstar have agreed to extend the merger agreement which was unanimously approved bytermination date to October 31, 2022. In connection with the Boards of Directors ofextension, both companies, Flagstar shareholdersparties amended the merger agreement to provide that the combined company's ongoing banking operations will receive seek to operate under a national bank charter. Under the Amendment, the only bank regulatory approvals required to consummate the merger are the OCC and the FRB.
4.0151 shares of New York Community common stock for eachState Department of Financial Services Approves Flagstar share they own. Following completion of theBancorp, Inc. Merger New York Community shareholders are expected to own 68% of the combined company, while Flagstar shareholders are expected to own 32% of the combined company.
The new company will have over $85 billion in total assets, operate nearly 400 traditional branches in 9 states, and 86 retail home lending offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, Michigan, including Flagstar's mortgage operations.
Results of Special Shareholder Meeting to Approve Merger with Flagstar
On August 4, 2021,April 27, 2022, the Company’s shareholders held a special meeting at whichNYSDFS notified the shareholdersCompany that it had approved the issuance of Company common stock to holders ofits pending merger with Flagstar Bancorp, Inc. common stock pursuantNotwithstanding this approval, both parties announced that the combined organization will seek to the Agreement and Plan of Merger, dated as of April 24, 2021 (the “Merger Agreement”), and on the same date Flagstar’s shareholders heldoperate under a special meeting at which its shareholders approved the Merger Agreement. The Merger is expected to close during the fourth quarter of 2021, subject to the satisfaction of certain closing conditions and the receipt of all necessary regulatory approvals.national bank charter.
Note 14. Legal Proceedings
Following the announcement of the Merger Agreement, the first of four lawsuits was filed on June 23, 2021 in United States Federal District Courts by alleged stockholders of NYCB against NYCB and the members of its board of directors challenging the accuracy or completeness of the disclosures contained in the Form S-4 filed on June 25, 2021 by NYCB with the SEC relating to the proposed Merger. Four additional lawsuits were filed by alleged Flagstar stockholders in state and federal courts against Flagstar and its board of directors (and, in one instance, NYCB and 615 Corp.) challenging the proposed Merger or Flagstar’s disclosures relating to the Merger.Merger, and those four lawsuits have since been resolved and dismissed. The complaints in the actions against NYCB allege, among other things, that the defendants caused a materially incomplete and misleading Form S-4 relating to the proposed Merger to be filed with the SEC in violation of Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder. Two of the lawsuits against NYCB have been voluntarily dismissed, without prejudice. In the two remaining actions, none of the NYCB defendants has been served with the complaint, and NYCB believes that these claims are without merit.
3736
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the purpose of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” and the “Company” are used to refer to New York Community Bancorp, Inc. and our consolidated subsidiary, New York Community Bank (the “Bank”).
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING LANGUAGE
This report, like many written and oral communications presented by New York Community Bancorp, Inc. and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of said safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. Although we believe that our plans, intentions, and expectations as reflected in these forward-looking statements are reasonable, we can give no assurance that they will be achieved or realized.
Our ability to predict results or the actual effects of our plans and strategies is inherently uncertain. Accordingly, actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained in this report.
There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described in our forward-looking statements. These factors include, but are not limited to:
37
38
38
In addition, the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control.
Furthermore, on an ongoing basis, we evaluate opportunities to expand through mergers and acquisitions and opportunities for strategic combinations with other banking organizations. Our evaluation of such opportunities involves discussions with other parties, due diligence, and negotiations. As a result, we may decide to enter into definitive arrangements regarding such opportunities at any time.
In addition to the risks and challenges described above, these types of transactions involve a number of other risks and challenges, including:
39
See Part II, Item 1A, Risk Factors, in this report and Part I, Item 1A, Risk Factors, in our Form 10-K for the year ended December 31, 20202021 for a further discussion of important risk factors that could cause actual results to differ materially from our forward-looking statements.
Readers should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this report. We do not assume any obligation to revise or update these forward-looking statements except as may be required by law.
4039
RECONCILIATIONS OF STOCKHOLDERS’ EQUITY, COMMON STOCKHOLDERS’ EQUITY,
AND TANGIBLE COMMON STOCKHOLDERS’ EQUITY;
TOTAL ASSETS AND TANGIBLE ASSETS; AND THE RELATED MEASURES
(unaudited)
While stockholders’ equity, common stockholders’ equity, total assets, and book value per common share are financial measures that are recorded in accordance with GAAP, tangible common stockholders’ equity, tangible assets, and tangible book value per common share are not. It is management’s belief that these non-GAAP measures should be disclosed in this report and others we issue for the following reasons:
Tangible common stockholders’ equity, tangible assets, and the related non-GAAP measures should not be considered in isolation or as a substitute for stockholders’ equity, common stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP measures may differ from that of other companies reporting non-GAAP measures with similar names.
Reconciliations of our stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity; our total assets and tangible assets; and the related financial measures for the respective periods follow:
| At or for the |
|
| At or for the |
| ||||||||||||||
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
| June 30, |
|
| March 31, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||
(dollars in millions) | 2022 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| |||||
Total Stockholders’ Equity | $ | 6,824 |
|
| $ | 6,909 |
|
| $ | 6,916 |
|
| $ | 6,824 |
|
| $ | 6,916 |
|
Less: Goodwill |
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Preferred stock |
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
Tangible common stockholders’ equity | $ | 3,895 |
|
| $ | 3,980 |
|
| $ | 3,987 |
|
| $ | 3,895 |
|
| $ | 3,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets | $ | 63,093 |
|
| $ | 61,005 |
|
| $ | 57,469 |
|
| $ | 63,093 |
|
| $ | 57,469 |
|
Less: Goodwill |
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Tangible Assets | $ | 60,667 |
|
| $ | 58,579 |
|
| $ | 55,043 |
|
| $ | 60,667 |
|
| $ | 55,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average common stockholders’ equity | $ | 6,398 |
|
| $ | 6,543 |
|
| $ | 6,368 |
|
| $ | 6,470 |
|
| $ | 6,369 |
|
Less: Average goodwill |
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Average tangible common stockholders’ equity | $ | 3,972 |
|
| $ | 4,117 |
|
| $ | 3,942 |
|
| $ | 4,044 |
|
| $ | 3,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average Assets | $ | 61,988 |
|
| $ | 59,894 |
|
| $ | 58,114 |
|
| $ | 60,946 |
|
| $ | 57,215 |
|
Less: Average goodwill |
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Average tangible assets | $ | 59,562 |
|
| $ | 57,468 |
|
| $ | 55,688 |
|
| $ | 58,520 |
|
| $ | 54,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
GAAP MEASURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average assets (1) |
| 1.10 | % |
|
| 1.04 | % |
|
| 1.04 | % |
|
| 1.07 | % |
|
| 1.04 | % |
Return on average common stockholders' equity (2) |
| 10.18 |
|
|
| 8.98 |
|
|
| 9.00 |
|
|
| 9.58 |
|
|
| 8.81 |
|
Book value per common share | $ | 13.56 |
|
| $ | 13.72 |
|
| $ | 13.79 |
|
| $ | 13.56 |
|
| $ | 13.79 |
|
Common stockholders’ equity to total assets |
| 10.02 |
|
|
| 10.50 |
|
|
| 11.16 |
|
|
| 10.02 |
|
|
| 11.16 |
|
NON-GAAP MEASURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average tangible assets (1) |
| 1.17 | % |
|
| 1.11 | % |
|
| 1.09 | % |
|
| 1.14 | % |
|
| 1.08 | % |
Return on average tangible common stockholders’ equity (2) |
| 16.73 |
|
|
| 14.76 |
|
|
| 14.54 |
|
|
| 15.73 |
|
|
| 14.23 |
|
Tangible book value per common share | $ | 8.35 |
|
| $ | 8.52 |
|
| $ | 8.57 |
|
| $ | 8.35 |
|
| $ | 8.57 |
|
Tangible common stockholders’ equity to tangible assets |
| 6.42 |
|
|
| 6.79 |
|
|
| 7.24 |
|
|
| 6.42 |
|
|
| 7.24 |
|
|
| At or for the |
|
| At or for the |
| ||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||
(dollars in millions) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Total Stockholders’ Equity |
| $ | 6,916 |
|
| $ | 6,796 |
|
| $ | 6,693 |
|
| $ | 6,916 |
|
| $ | 6,693 |
|
Less: Goodwill |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Preferred stock |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
Tangible common stockholders’ equity |
| $ | 3,987 |
|
| $ | 3,867 |
|
| $ | 3,764 |
|
| $ | 3,987 |
|
| $ | 3,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 57,469 |
|
| $ | 57,657 |
|
| $ | 54,210 |
|
| $ | 57,469 |
|
| $ | 54,210 |
|
Less: Goodwill |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Tangible Assets |
| $ | 55,043 |
|
| $ | 55,231 |
|
| $ | 51,784 |
|
| $ | 55,043 |
|
| $ | 51,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average common stockholders’ equity |
| $ | 6,368 |
|
| $ | 6,370 |
|
| $ | 6,153 |
|
| $ | 6,369 |
|
| $ | 6,171 |
|
Less: Average goodwill |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Average tangible common stockholders’ equity |
| $ | 3,942 |
|
| $ | 3,944 |
|
| $ | 3,727 |
|
| $ | 3,943 |
|
| $ | 3,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Average Assets |
| $ | 58,114 |
|
| $ | 56,306 |
|
| $ | 53,787 |
|
| $ | 57,215 |
|
| $ | 53,598 |
|
Less: Average goodwill |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
Average tangible assets |
| $ | 55,688 |
|
| $ | 53,880 |
|
| $ | 51,361 |
|
| $ | 54,789 |
|
| $ | 51,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income available to common stockholders |
| $ | 144 |
|
| $ | 137 |
|
| $ | 97 |
|
| $ | 281 |
|
| $ | 189 |
|
GAAP MEASURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average assets (1) |
|
| 1.04 | % |
|
| 1.03 | % |
|
| 0.78 | % |
|
| 1.04 | % |
|
| 0.77 | % |
Return on average common stockholders' equity (2) |
|
| 9.00 |
|
|
| 8.63 |
|
|
| 6.31 |
|
|
| 8.81 |
|
|
| 6.13 |
|
Book value per common share |
| $ | 13.79 |
|
| $ | 13.53 |
|
| $ | 13.34 |
|
| $ | 13.79 |
|
| $ | 13.34 |
|
Common stockholders’ equity to total assets |
|
| 11.16 |
|
|
| 10.92 |
|
|
| 11.42 |
|
|
| 11.16 |
|
|
| 11.42 |
|
NON-GAAP MEASURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average tangible assets (1) |
|
| 1.09 | % |
|
| 1.08 | % |
|
| 0.82 | % |
|
| 1.08 | % |
|
| 0.80 | % |
Return on average tangible common stockholders’ equity (2) |
|
| 14.54 |
|
|
| 13.93 |
|
|
| 10.42 |
|
|
| 14.23 |
|
|
| 10.11 |
|
Tangible book value per common share |
| $ | 8.57 |
|
| $ | 8.32 |
|
| $ | 8.11 |
|
| $ | 8.57 |
|
| $ | 8.11 |
|
Tangible common stockholders’ equity to tangible assets |
|
| 7.24 |
|
|
| 7.00 |
|
|
| 7.27 |
|
|
| 7.24 |
|
|
| 7.27 |
|
4140
Executive Summary
New York Community Bancorp, Inc. is the holding company for New York Community Bank, a New York State-chartered savings bank, headquartered in Hicksville, New York. The Bank is subject to regulation by the NYSDFS, the FDIC, and the CFPB. In addition, the holding company is subject to regulation by the FRB, the SEC, and to the requirements of the NYSE, where shares of our common stock trade under the symbol “NYCB” and shares of our preferred stock trade under the symbol “NYCB PA”.
Reflecting our growth through a series of acquisitions, the Company currently operates 236237 branch locations through eight local divisions, each with a history of service and strength. In New York, we operate as Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank; in New Jersey as Garden State Community Bank; in Ohio as the Ohio Savings Bank; and as AmTrust Bank in Arizona and Florida.
Second Quarter 20212022 Overview
At June 30, 2021, the Company had2022, total assets of $57.5were $63.1 billion, totalup $3.6 billion or 12% annualized compared to December 31, 2021, and up $2.1 billion or 14% annualized compared to March 31, 2022. Both the year-to-date and linked-quarter growth was driven by significant loan and deposit growth, offset partially by a decline in wholesale borrowings.
Total loans and leases held for investment of $43.6increased $2.8 billion or 12% annualized compared to December 31, 2021 and were up $1.8 billion or 15% annualized on a linked-quarter basis to $48.5 billion. This was driven by continued strong growth in the Company's core multi-family loan portfolio and a significant rebound in growth in the specialty finance loan portfolio.
On the liability side, total deposits of $34.2rose $6.2 billion or 35% annualized compared to December 31, 2021 and total stockholders’ equity of $6.9 billion. increased $3.3 billion during the second quarter, to $41.2 billion, also up 35% annualized on a linked-quarter basis. Once again, the deposit growth was driven by our BaaS business and loan-related deposits.
Given the strong deposit growth during the second quarter, wholesale borrowings declined to $13.7 billion at June 30, 2022, down $2.3 billion or 28% annualized compared to December 31, 2021, and down $1.0 billion on a linked-quarter basis, also down 28% annualized,
For the three months ended June 30, 2021,2022, the Company reported net income of $152$171 million, up 45%13% compared to the $105 million reported for the three months ended June 30, 2020. For the six months ended June 30, 2021, net income totaled $297 million, up 45% compared to $205 million reported for the six months ended June 30, 2020.
Net income available to common shareholders for the three months ended June 30, 2021 totaled $144 million, up 48% compared to the $97$152 million the Company reported for the three months ended June 30, 2020. For2021. Net income available to common stockholders for the sixthree months ended June 30, 2021, net income available to common shareholders was $2812022 totaled $163 million, also up 49%13% compared to $189the $144 million reported in the first six months of 2020.
On a per share basis, the Company reported diluted earnings per common share offor three months ended June 30, 2021. Diluted EPS were $0.34 for the three months ended June 30, 2022, up 13% compared to the $0.30 the Company reported for the three months ended June 30, 2021.
Included for the three months ended June 30, 2022 are $4 million in merger-related expenses compared to $10 million for the three months ended June 30, 2021. Also included for the three months ended June 30, 2021 up 43%was a revaluation on our deferred taxes related to a change in the New York State tax rate of $2 million compared to no such item in the $0.21 reported for the three months ended June 30, 2020. current second quarter.
For the six months ended June 30, 2022, net income totaled $326 million compared to $297 million for the six months ended June 30, 2021, up 10%. Net income available to common stockholders for the six months ended June 30, 2022 was $310 million, up 10% compared to $281 million the Company reported diluted earnings per common share of $0.60, up 50% compared to diluted earnings per common share of $0.40 reported for the six months ended June 30, 2020.2021. Diluted EPS for the six months ended June 30, 2022 totaled $0.66, up 10% compared to diluted EPS of $0.60 the Company reported for the six months ended June 30, 2021.
Included in both the three andsix months ended June 30, 2022 are $11 million in merger-related expenses compared to $10 million for the six months ended June 30, 2021. Also included in the six months ended June 30, 2021 are $10 million in merger-related expenses andwas the aforementioned $2 million related to the revaluation ofon our deferred taxes related to an increasea change in the New York State tax rate.
The key trends in the second quarter of 20212022 were:
Continued Net Interest IncomeRecord Growth and Net Interest Margin Expansionin Deposits
Total deposits at June 30, 2022 were $41.2 billion, up $3.3 billion or 35% annualized compared to March 31, 2022 and up $6.2 billion compared to December 31, 2021, also up 35%. The Company's net interest incometwo biggest contributors to this quarter's growth were our BaaS business and net interest margin continueddeposits from our borrowers.
BaaS-related deposits rose $2.3 billion or 43% on a linked-quarter basis and $5.8 billion on a year-to-date basis to increase$7.8 billion at June 30, 2022. Loan-related deposits totaled $4.9 billion at June 30, 2022, up $494 million or 44% annualized on a linked-quarter basis and $921 million or 46% annualized during the threefirst six months endedof the year. For all of 2021, loan-related deposits increased $475 million and all in, since re-focusing on this source of deposit funding during the first quarter of last year, loan-related deposits have grown $1.4 billion, up 39%.
41
Another Strong Quarter of Loan Growth
At June 30, 2021. Net interest income2022, total loans and leases held for investment increased to $48.5 billion, up $1.8 billion or 15% annualized on a linked-quarter basis and $2.8 billion or 12% annualized on a year-to-date basis. Loan growth during the second quarter of 20212022 was the Company's second best on record, second only to the $2.2 billion of loan growth during the fourth quarter of last year. Our loan growth during the current second quarter is attributable to continued strong growth in the multi-family portfolio and a significant rebound in specialty finance lending.
At June 30, 2022, the multi-family portfolio totaled $331$36.8 billion, representing $1.0 billion of growth or 11% annualized on a linked-quarter basis and $2.2 billion of growth or 13% annualized on a year-to-date basis. The growth in this segment continues to be driven by market share gains as abates, along with heightened refinancing activity as interest rates increased during the quarter, forcing many borrowers to refinance their properties sooner rather than later.
The other driver of this quarter's loan growth was the significant rebound in growth in the specialty finance portfolio, driven primarily by higher utilization rates. At June 30, 2022, the specialty finance segment totaled $4.1 billion, up $806 million or 97% annualized on a linked-quarter basis and $638 million or 36% annualized on a year-to-date basis. As of June 30, 2022, total commitments were $6.6 billion, up 24%16% compared to $5.7 billion at March 31, 2022. Of the June 30th amount, 75% or $5 billion are structured as floating-rate obligations, which have, and will continue to benefit the Company in a rising rate environment.
A Record Level of Loan Originations
Loan originations set a new record during the second quarter of 2020. The year-over-year improvement continues to be driven primarily by lower interest expense and secondarily by a modest increase in our interest income. Interest expense for the second quarter of 2021 totaled $100 million, down 36% compared to $157 million for the second quarter of 2020. Total interest income for the second quarter of 2021 was $431 million, up 2% compared to $423 million for the second quarter of 2020.
The Company's net interest income includes prepayment income. Prepayment income2022. Loan originations for the three months ended June 30, 20212022 totaled $27 million,$5.3 billion, up 125%$1.7 billion or 49% compared to the three months ended June 30, 2020.
At the same time, the Company's NIM also continued to improve. For the three months ended June 30, 2021, the NIM was 2.50%, up 32 bps on a year-over-year basis. As with net interest income, this improvement was driven mainly by a lower cost of funds. Our cost of funds for the three months ended June 30, 2021 totaled 0.88% compared to 1.46% for the three months ended June 30, 2020. This was the result of a significant decrease in the Company's average cost of deposits, which declined 78 bps to 0.38% for the three months ended June 30, 2021 compared to 1.16% for the three months ended June 30, 2020.
Prepayment income contributed 20 bps to the NIM this quarter. The NIM was also impacted by excess liquidity during the current second quarter given the strong increase in the average balance of cashMarch 31, 2022 and cash equivalents. This impacted the NIM by eight bps.
The Efficiency Ratio Continues to Trend Lower
During the three months ended June 30, 2021, our efficiency ratio declined to 37% compared to 44% during the three months ended June 30, 2020. This was primarily due to a much higher level of total revenue as compared to the year-ago quarter, while operating expenses were up on a year-over-year basis. Total revenues (total net interest income plus total non-interest income) rose
42
23% to $347 million during the current second quarter compared to $281 million during the year-ago second quarter. Total operating expenses increased 5% to $129 million during the current second quarter compared to $123 million during the second quarter of last year.
Loan Growth Rebounded
At June 30, 2021, total loans held for investment increased $449 million or 4% annualized on a linked-quarter basis to $43.6 billion. During the current second quarter, the Company transferred $94 million of Paycheck Protection Program ("PPP") loans from the held for sale category to the held for investment category. Excluding this transfer, total loans held for investment increased $355 million or 3% annualized on a linked-quarter basis. On a year-over-year basis, total loans held for investment grew $1.3$2.2 billion or 3%.
At June 30, 2021, the multi-family portfolio rose $345 million to $32.6 billion compared to March 31, 2021, up 4% annualized. On a year-over-year basis, the multi-family portfolio increased $945 million or 3%. The specialty finance portfolio increased $59 million to $3.3 billion compared to March 31, 2021 up 7% annualized. When72% compared to the three months ended June 30, 2020,2021. Second-quarter 2022 originations exceeded the specialty finance portfolio grew $334 million or 11%.
Strong Growth in Average Deposits
At June 30, 2021, total depositsprior quarter's pipeline of $34.2$2.5 billion remained flat on a linked-quarter basis, but they rose $2.4by $2.8 billion, or 8% on a year-over-year basis. However, on an average basis, deposits increased $2.3 billion or 7% comparedmore than double. Approximately 80% of our second quarter originations represented new money to the average for the three months ended March 31, 2021Bank. In addition, 37% of originations were internal refinances from our portfolio; 39% were external refinances; and they rose $2.8 billion or 9% compared to the average for the three months ended June 30, 2020. This growth was driven by growth in average non-interest bearing deposits due to our relationship with our technology partner, which began late during the first quarter of 2021. These deposits are related to the Economic Impact Payments ("EIP") associated with the Federal government's fiscal stimulus plans. Accordingly, average non-interest bearing deposits increased to $5.5 billion during the current second quarter, up 81% or $2.4 billion on a year-over-year basis and up 69% or $2.2 billion on a linked-quarter basis.
Asset Quality Continues to be Solid
The Company's asset quality metrics remained solid during the second quarter of the year, underscoring the strength of our core portfolio. At June 30, 2021, NPAs totaled $40 million compared to $41 million at March 31, 2021, down 2% and compared to $63 million at June 30, 2020, down 37%. The year-over-year improvement was primarily due to a significant improvement in other non-accrual loans. This category consists mainly of non-accrual taxi medallion-related loans. Other non-accrual loans declined 70% to $9 million at June 30, 2021, as non-accrual taxi medallion-related loans declined 65% to $9 million at June 30, 2021 compared to $26 million at June 30, 2020.
During the second quarter of 2020, the Company implemented various loan modification programs with some of its borrowers in accordance with the CARES Act and regulatory guidance. These modifications included both full-payment deferrals and principal deferrals (borrowers pay interest and escrow only). Since instituting these programs last year, total deferrals declined 86% to $1 billion compared to $7.4 billion at June 30, 2020. The remaining $1 billion are principal deferrals and are expected to decline further over the second half of 2021.24% represented property transactions.
Recent Events
Declaration of Dividend on Common Shares
On July 27, 2021,26, 2022, our Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.17 per share. The dividend is payable on August 17, 202118, 2022 to common shareholders of record as of August 7, 2021.8, 2022.
Acquisition of Flagstar Bancorp, Inc. ("Flagstar")
On April 26, 2021, the Company announced that it had entered into a definitive merger agreement (the “Merger Agreement”) under which we would acquire Flagstar Bancorp, Inc. ("Flagstar") in a 100% stock transaction valued at the time at $2.6 billion (the “Merger”). Under terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own. Following
43
completion of the Merger, New York Community shareholders are expected to own 68% of the combined company, while Flagstar shareholders are expected to own 32% of the combined company.
The new company will have over $85 billion in total assets, operate nearly 400 traditional branches in nine states, and 86 retail home lending offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, Michigan, including Flagstar's mortgage operations.
Results of Special Shareholder Meeting to Approve Merger with Flagstar
On August 4, 2021, the Company’s shareholders held a special meeting at which the shareholders approved the issuance of Company common stock to holders of Flagstar Bancorp, Inc. common stock pursuant to the Agreement and Plan of Merger, dated as of April 24, 2021 (the “Merger Agreement”), and on the same date Flagstar’s shareholders held a special meeting at which its shareholders approved the Merger Agreement. The Merger is expected to close during the fourth quarter of 2021, subject to the satisfaction of certain closing conditions and the receipt of all necessary regulatory approvals.
Critical Accounting Policies
We consider certain accounting policies to be critically important to the portrayal of our financial condition and results of operations, since they require management to make complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The inherent sensitivity of our consolidated financial statements to these critical accounting policies, and the judgments, estimates, and assumptions used therein, could have a material impact on our financial condition or results of operations.
We have identified the following to be critical accounting policies: the determination of the allowance for credit losses on loans and leases; and the determination of the amount, if any, of goodwill impairment.leases.
The judgments used by management in applying these critical accounting policies may be influenced by adverse changes in the economic environment, which may result in changes to future financial results.
Allowance for Credit Losses on Loans and Leases
The Company’s January 1, 2020, adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” resulted in a significant change to our methodology for estimating the allowance since December 31, 2019. ASU No. 2016-13 replacesreplaced the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loan receivables. It also applies to off-balance sheet exposures not accounted for as insurance and net investments in leases accounted for under ASC Topic 842. At December 31, 2019, the allowance for credit losses on loans and leases totaled $148 million. On January 1, 2020, the Company adopted the CECL methodology under ASU Topic 326 and recognized an increase in the allowance for credit losses on loans and leases of $2 million as a “Day 1” transition adjustment from changes in methodology, with a corresponding decrease in retained earnings. Separately, at December 31, 2019, the Company had an allowance for unfunded commitments of $1 million. Upon adoption, the Company recognized an increase in the allowance for unfunded commitments of $13 million as a “Day 1” transition adjustment with a corresponding decrease in retained earnings.
42
The allowance for loancredit losses on loans and lease lossesleases is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principalunpaid loan balance, outstanding, net of purchase premiums and discounts, fair value hedge accounting adjustments, and deferred fees and costs.expenses, and includes negative escrow. Subsequent changes (favorable and unfavorable) in expected credit losses are recognized immediately in net income as a credit loss expense or a reversal of credit loss expense. Management estimates the allowance by projecting and multiplying together the probability-of-default, loss-given-default and exposure-at-default depending on economic parameters for each month of the remaining contractual term. Economic parameters are developed using available information relating to past events, current conditions, and economic forecasts. The Company’s economic forecast period is 24 months, and afterwards reverts to a historical norm basedaverage loss rate on inputs after 24 months.a straight-line basis over a 12-month period. Historical credit experience provides the basis for the estimation of expected credit losses, with qualitative adjustments made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels and terms, as well as for changes in environmental conditions, such as changes in legislation, regulation, policies, administrative practices or other relevant factors. Expected credit losses are estimated over the contractual term of the loans, adjusted for forecasted prepayments when appropriate. The contractual term excludes potential extensions or renewals. The methodology used in the estimation of the allowance for creditloan and lease losses, on loans and leases, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Each quarter we reassessthe Company reassesses the appropriateness of the economic forecasting period, the reversion period and historical mean at the portfolio segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time.
44
The allowance for loancredit losses on loans and lease lossesleases is measured on a collective (pool) basis when similar risk characteristics exist. The portfolio segment represents the level at which a systematic methodology is applied to estimate credit losses. Management believes the products within each of the entity’s portfolio classessegments exhibit similar risk characteristics. Loans that are determined to have uniqueSmaller pools of homogenous financing receivables with homogeneous risk characteristics are evaluated on an individual basis by management. If a loan is determined to be collateral dependent, or meetswere modeled using the criteria to applymethodology selected for the collateral dependent practical expedient, expected credit losses are determined based on the fair value of the collateral at the reporting date, less costs to sell as appropriate.portfolio segment. The macroeconomic data used in the quantitative models are based on an economica reasonable and supportable forecast period of 24 months. The Company leverages economic projections including property market and prepayment forecasts from established independent third parties to inform its loss drivers in the forecast. Beyond this forecast period, we revertthe Company reverts to a historical average loss rate. This reversion to the historical average loss rate is performed on a straight-line basis over 12 months.
The portfolio segment represents the level at which a systematic methodology is applied to estimate credit losses. Smaller pools of homogenous financing receivables with homogeneous risk characteristics were modeled using the methodology selected for the portfolio segment to which factors in the qualitative scorecard include: concentration, modeling and forecast imprecision and limitations, policy and underwriting, prepayment uncertainty, external factors, nature and volume, management, and loan review. Each factor is subject to an evaluation of metrics, consistently applied, to measure adjustments needed for each reporting period.
Loans that do not share risk characteristics are evaluated on an individual basis. These include loans that are in nonaccrual status with balances above management determined materiality thresholds depending on loan class and also loans that are designated as TDR or “reasonably expected TDR” (criticized, classified, or maturing loans that will have a modification processed within the next three months). In addition, all taxi medallion loans are individually evaluated. If a loan is determined to be collateral dependent, or meets the criteria to apply the collateral dependent practical expedient, expected credit losses are determined based on the fair value of the collateral at the reporting date, less costs to sell as appropriate.
The Company maintains an allowance for credit losses on off-balance sheet credit exposures. At June 30, 2021,2022 and December 31, 2020,2021, the allowance for credit losses on off-balance sheet credit exposures was $11$7 million and $12 million, respectively. We estimateThe Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit losses expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated life. The Company examined historical credit conversion factor (“CCF”) trends to estimate utilization rates, and chose an appropriate mean CCF based on both management judgment and quantitative analysis. Quantitative analysis involved examination of CCFs over a range of fund-up windows (between 12 and 36 months) and comparison of the mean CCF for each fund-up window with management judgment determining whether the highest mean CCF across fund-up windows made business sense. The Company applies the same standards and estimated loss rates to the credit exposures as to the related class of loans.
When applying this critical accounting policy, we incorporate several inputs and judgments that may be influenced by changes period to period. These include, but are not limited to changes in the economic environment and forecasts, changes in the credit profile and characteristics of the loan portfolio, and changes in prepayment assumptions which will result in provisions to or recoveries from the balance of the allowance for credit losses.
For
While changes to the six months ended June 30, 2021economic environment forecasts, and portfolio characteristics will change from period to period, portfolio prepayments are an integral assumption in estimating the allowance for credit losses on our mortgage loan portfolio, are subject to estimation uncertainty and leases increased primarily aschanges in this assumption could have a result of growth across segmentsmaterial impact to our estimation process. Prepayment assumptions are sensitive to interest rates and existing loan terms and determine the weighted average life of the mortgage loan portfolio, and by macroeconomicportfolio. Excluding other factors, surrounding the COVID-19 pandemic, specifically the resultant estimated decreases in property values in the New York City area. The forecast includes a temporarily significant increase in Gross Domestic Product (“GDP”) to +6.9% in the second half of 2021 as the economy begins to recover from the systemic disruptionsweighted average life of the COVID-19 pandemic. Unemployment continues to subside fromportfolio increases or decreases, so will the historic shockrequired amount of 2020, but is not forecasted to return to pre-pandemic levels around 3.5% until 2023. Interest rates are forecasted to begin to rise modestly and 10 Year-Baa spread widens slightly beginning in 2022 and levels off at 2.6% through 2023. In addition to these quantitative inputs, several qualitative factors were considered in increasing ourthe allowance for loan and lease credit losses including the risk that the economic decline proves to be more severe and/or prolonged than our baseline forecast. The impact of the unprecedented fiscal stimulus and changes to federal and local laws and regulations, including changes to various government sponsored loan programs, was also considered.on mortgage loans.
Current Expected Credit Losses
At December 31, 2019, the allowance for loan and lease losses totaled $148 million. On January 1, 2020, the Company adopted the CECL methodology under ASU Topic 326. Upon adoption, we recognized an increase in the ACL of $2 million as a “Day 1” transition adjustment from changes in methodology, with a corresponding decrease in retained earnings. At June 30, 2021, the ACL totaled $202 million, up $8 million compared to December 31, 2020 driven by net recoveries of $7 million during the first six months of 2021 and a zero provision for credit losses.
4543
Separately, at December 31, 2019, the Company had an allowance for unfunded commitments of $461,000. With the adoption of CECL on January 1, 2020, we recognized a “Day 1” transition adjustment of $13 million. At June 30, 2021, the allowance for unfunded commitments totaled $11 million.
(dollars in millions) |
| Loans and |
|
| Unfunded |
| ||
Allowance for credit losses at December 31, 2020 |
| $ | 194 |
|
| $ | 12 |
|
2021 Provision for (recovery of) credit losses |
|
| 1 |
|
|
| (1 | ) |
2021 net recoveries |
|
| 7 |
|
|
| — |
|
Allowance for credit losses at June 30, 2021 |
| $ | 202 |
|
| $ | 11 |
|
See Note 6, Allowance for Credit Losses on Loans and Leases for a further discussion of our Allowance for Credit Losses.
Goodwill Impairment
The Company adopted, on a prospective basis, ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment on January 1, 2020. We have significant intangible assets as of June 30, 2021, including goodwill of $2.4 billion. In connection with our acquisitions, the assets acquired and liabilities assumed are recorded at their estimated fair values. Goodwill represents the excess of the purchase price of our acquisitions over the fair value of identifiable net assets acquired, including other identified intangible assets. We test our goodwill for impairment at the reporting unit level. We have identified one reporting unit which is the same as our operating segment and reportable segment. If we change our strategy or if market conditions shift, our judgments may change, which may result in adjustments to the recorded goodwill balance.
We perform our goodwill impairment test in the fourth quarter of each year, or more often if events or circumstances warrant. For annual goodwill impairment testing, we have the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If we conclude that this is the case, we would compare the fair value the reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized, however, would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, we would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
The Company assessed the environment in the second quarter of 2021, including the estimated impact of the COVID-19 pandemic on macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting unit. After consideration of the items above and the first six months of 2021 results, the Company determined it was not more-likely-than-not that the fair value of any reporting unit was below book value as of June 30, 2021. We will continue to monitor and evaluate the impact of COVID-19 and its impact on our market capitalization, overall economic conditions, and any triggering events that may indicate an impairment of goodwill in the future.
Balance Sheet Summary
At June 30, 2021,2022, total assets were $57.5$63.1 billion, up $1.2$3.6 billion or 4% on an annualized basis compared to December 31, 2020. The growth was driven by good loan growth and double-digit growth in total deposits.
The level of cash balances increased $138 million to $2.1 billion compared to year-end 2020. Total securities grew $248 million to $6.1 billion, or 8%12% annualized compared to December 31, 2020.2021 and up $2.1 billion or 14% annualized compared to March 31, 2022. Both the year-over-date and linked-quarter growth were driven by significant loan and deposit growth, an increase in cash balances, offset by a decline in wholesale borrowings, while total securities remained relatively unchanged.
Total loans and leases held for investment rose $691 million to $43.6increased $2.8 billion or 3%12% annualized compared to December 31, 2020. The2021 and $1.8 billion or 15% annualized on a linked-quarter basis. This was due to continued strong growth in the multi-family portfolio combined with a significant rebound in the specialty finance portfolio. Total multi-family loans at June 30, 2022 totaled $36.8 billion, representing growth of $2.2 billion compared to December 31, 2021 or 13% on an annualized basis and $1.0 billion of growth compared to March 31, 2022, up 11% annualized. Total specialty finance loans and leases totaled $4.1 billion at June 30, 2022, up $638 million or 36% annualized compared to December 31, 2021 and up $806 million or 97% compared to March 31, 2022. In addition, total specialty finance commitments increased 16% to $6.6 billion compared to $5.7 billion at March 31, 2022.
Cash balances increased $1.1 billion to $3.3 billion compared to the level at December 31, 2021 and approximately $400 million or 52% annualized compared to March 31, 2022.
Total securities at June 30, 2022 were $5.7 billion, relatively unchanged compared to both $5.8 billion at December 31, 2021 and $5.6 billion at March 31, 2022.
At June 30, 2022, deposits totaled $41.2 billion, up $6.2 billion or 35% annualized compared to December 31, 2021 and $3.3 billion during the current second quarter, wasalso up 35% on a linked-quarter basis. Both the linked-quarter and year-to-date increases were driven by our BaaS business and growth in our multi-family and specialty finance portfolios, while the CRE portfolio was relatively flat.
Atloan-related deposits. BaaS-related deposits totaled $7.8 billion at June 30, 2021, the multi-family portfolio increased $345 million to $32.62022, up $2.3 billion compared to March 31, 2021 up 4% annualized. On a year-over-year basis, multi-family loans increased $945 million or 3%. The specialty finance portfolio increased $59 million to $3.3 billion compared to March 31, 2021, up 7% annualized. Compared to the second quarter of 2020, the specialty finance portfolio grew $334 million or 11%. CRE loans declined $214 million compared to March 31, 2021 to $6.8 billion, down 12% annualized. The CRE portfolio declined $117 million or 2% on a year-over-year basis.
At June 30, 2021, total deposits of $34.2 billion were flat43% on a linked-quarter basis, butwhile loan-related deposits totaled $4.9 billion, up $2.4 billion or 8%$494 million on a year-over-yearlinked-quarter basis and $921 million on a year-to-date basis. The year-over-year growth was driven by our relationship with our technology partner,
BaaS-related deposits fall primarily under three categories: traditional BaaS, consisting primarily of fintech company deposits; government banking as a service, servicing various municipalities and the U.S. Treasury's prepaid debit card program; and mortgage as a service, which started late during the first quartercaters to mortgage banking and servicing companies and consists of this year. This relationship resulted in substantial growth in non-interest bearing accounts. Non-interest bearing accounts increasedescrow deposits for principal, interest, and tax payments. At June 30, 2022, traditional BaaS deposits totaled $5.5 billion; government banking as a service totaled $652 million; and mortgage as a service totaled $1.6 billion to $4.5 billion on a year-over-year basis.of deposits.
46
Totaled borrowed fundsWholesale borrowings at June 30, 2021 decreased $625 million2022 totaled $13.7 billion, down $2.3 billion or 8%28% annualized to $15.5 billion compared to December 31, 2020, but increased $451 million or 3% compared to June 30, 2020.2021 and down $1.0 billion on a linked-quarter basis, also down 28%.
Total stockholders' equity was $6.9 billion at June 30, 20212022 was $6.8 billion, down $220 million or 6% annualized compared to $6.8 billion at MarchDecember 31, 2021 and $6.7 billion in the year-ago quarter.down $85 million or 5% annualized compared to March 31, 2022. Excluding goodwill and preferred stock, tangible common stockholders' equity totaled $3.9 billion, relatively unchanged compared to $4.0 billion compared to $3.9 billion at both March 31, 20212022 and $3.8 billion in the year-ago quarter. December 31, 2021.
Book value per common share was $13.79stood at $13.56 as of June 30, 20212022 compared to $13.53$13.72 at March 31, 20212022 and $13.34$14.07 at June 30, 2020.
Common stockholders' equity to total assets was 11.16% at June 30, 2021 compared to 10.92% at MarchDecember 31, 2021, and 11.42% at June 30, 2020. On a tangible basis,while tangible book value per common share was $8.57 atas of June 30, 20212022 was $8.35 compared to $8.32$8.52 at March 31, 20212022 and $8.11$8.85 at June 30, 2020. Tangible common stockholders' equity to tangible assets was 7.24% at June 30, 2021 compared to 7.00% at MarchDecember 31, 2021 and 7.27% at June 30, 2020.2021.
Loans and Leases
Loans and Leases Originated for Investment
The majority of the loans we originate are loans and leases held for investment and most of the held-for-investment loans we produce are multi-family loans. Our production of multi-family loans began over five decades ago in the five boroughs of New York City, where the majority of the rental units currently consist of non-luxury, rent-regulated apartments featuring below-market rents. In addition to multi-family loans, our portfolio of loans held for investment contains a number of CRE loans, most of which are secured by income-producing properties located in New York City and Long Island.
In addition to multi-family and CRE loans, our specialty finance loans and leases have become an increasingly larger portion of our overall loan portfolio. The remainder of our portfolio includes smaller balances of C&I loans, one-to-four family loans, ADC loans, and other loans held for investment. The majority of C&I loans consist of loans to small- and mid-size businesses.
DuringFor the second quarter of 2021, the Company originated $3.1 billion ofended June 30, 2022, total loans and leases heldoriginated for investment surpassingwere $5.3 billion, up $2.2 billion or 72% compared to the first quarter pipeline by $1.4 billion. Total originations rose 21% on a linked-quarter basis, but down 7% on a year-over-year basis. The linked-quarter increase was primarily the result of a 42% increase in multi-family originations, a 12% increase in specialty finance originations, and a 206% increase in other C&I originations, This was offset by an 84% decrease in CRE originations.
For the six months ended June 30, 2021 total loans originated for investment were $5.6and exceeded the previous quarter's pipeline by $2.8 billion down 7% comparedor 107%. On a year-over-year basis, multi-family originations rose $861 million or 41% to $2.9 billion, while specialty finance originations increased $1.3 billion or 210% to $1.9 billion. CRE originations increased 204% or $143 million to $213 million during the $6.0 billion originated for the six monthsquarter ended June 30, 2020.2022.
44
The following table presents information about the loans held for investment we originated for the respective periods:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||||||
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mortgage Loans Originated for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Multi-family |
| $ | 2,078 |
|
| $ | 1,466 |
|
| $ | 2,413 |
|
| $ | 3,544 |
|
| $ | 3,831 |
|
Commercial real estate |
|
| 70 |
|
|
| 443 |
|
|
| 90 |
|
|
| 513 |
|
|
| 282 |
|
One-to-four family residential |
|
| 46 |
|
|
| 22 |
|
|
| 18 |
|
|
| 68 |
|
|
| 45 |
|
Acquisition, development, and construction |
|
| 70 |
|
|
| 6 |
|
|
| 1 |
|
|
| 76 |
|
|
| 5 |
|
Total mortgage loans originated for investment |
|
| 2,264 |
|
|
| 1,937 |
|
|
| 2,522 |
|
|
| 4,201 |
|
|
| 4,163 |
|
Other Loans Originated for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Specialty Finance |
|
| 606 |
|
|
| 541 |
|
|
| 700 |
|
|
| 1,147 |
|
|
| 1,657 |
|
Other commercial and industrial |
|
| 193 |
|
|
| 63 |
|
|
| 57 |
|
|
| 256 |
|
|
| 180 |
|
Other |
|
| 2 |
|
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 2 |
|
Total other loans originated for investment |
|
| 801 |
|
|
| 605 |
|
|
| 758 |
|
|
| 1,406 |
|
|
| 1,839 |
|
Total Loans Originated for Investment |
| $ | 3,065 |
|
| $ | 2,542 |
|
| $ | 3,280 |
|
| $ | 5,607 |
|
| $ | 6,002 |
|
47
|
|
| For the Three Months Ended |
|
|
| For the Six Months Ended |
| ||||||||||||||
(dollars in millions) |
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
|
| June 30, |
|
| June 30, |
| |||||
Mortgage Loan Originated for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Multi-family |
| $ |
| 2,939 |
| $ |
| 2,410 |
| $ |
| 2,078 |
|
| $ |
| 5,349 |
| $ |
| 3,544 |
|
Commercial real estate |
|
|
| 213 |
|
|
| 281 |
|
|
| 70 |
|
|
|
| 494 |
|
|
| 513 |
|
One-to-four family residential |
|
|
| 82 |
|
|
| 62 |
|
|
| 46 |
|
|
|
| 144 |
|
|
| 68 |
|
Acquisition, development, and construction |
|
|
| 32 |
|
|
| 40 |
|
|
| 70 |
|
|
|
| 72 |
|
|
| 76 |
|
Total mortgage loans originated for investment |
|
|
| 3,266 |
|
|
| 2,793 |
|
|
| 2,264 |
|
|
|
| 6,059 |
|
|
| 4,201 |
|
Other Loans Originated for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Specialty finance |
|
|
| 1,877 |
|
|
| 638 |
|
|
| 606 |
|
|
|
| 2,515 |
|
|
| 1,147 |
|
Other commercial and industrial |
|
|
| 116 |
|
|
| 102 |
|
|
| 193 |
|
|
|
| 218 |
|
|
| 256 |
|
Other |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
|
|
| 3 |
|
|
| 3 |
|
Total other loans originated for investment |
|
|
| 1,994 |
|
|
| 742 |
|
|
| 801 |
|
|
|
| 2,736 |
|
|
| 1,406 |
|
Total loans originated for investment |
| $ |
| 5,260 |
| $ |
| 3,535 |
| $ |
| 3,065 |
|
| $ |
| 8,795 |
| $ |
| 5,607 |
|
Loans and Leases Held for Investment
The individual held-for-investment loan portfolios are discussed in detail below.
Multi-Family Loans
Multi-family loans are our principal asset. The loans we produce are primarily secured by non-luxury residential apartment buildings in New York City that are rent-regulated and feature below-market rents—a market we refer to as our “Primary Lending Niche.” The majority of our multi-family loans are made to long-term owners of buildings with apartments that are subject to rent regulation and feature below-market rents.
At June 30, 2021,2022, total multi-family loans represented $32.6$37 billion or 75%76% of total loans and leases held for investment. The average multi-family loan had an average weighted life of 2.4 years.
At June 30, 2021, 78%2022, 72% of our multi-family loans were secured by rental apartment buildings in the New York City metro area and 3.2%3% were secured by buildings elsewhere in New York State. The remaining multi-family loans were secured by buildings outside these markets, including in the four other states in which we operate in.operate.
In addition, 68%61% or $22.3$22.5 billion of the Company's overall multi-family portfolio is secured by properties in New York State, of which $19.3$19.7 billion are subject to rent regulation laws. The weighted average LTV of the rent-regulated segment of the multi-family portfolio was 54.53%56.66%, as of June 30, 2021, 3302022, 372 bps below the overall multi-family weighted average LTV of 57.83%60.38%.
Our emphasis on multi-family loans is driven by several factors, including their structure, which reduces our exposure to interest rate volatility to some degree. Another factor driving our focus on multi-family lending has been the comparative quality of the loans we produce. Reflecting the nature of the buildings securing our loans, our underwriting standards, and the generally conservative LTV ratios our multi-family loans feature at origination, a relatively small percentage of the multi-family loans that have transitioned to non-performing status have actually resulted in losses, even when the credit cycle has taken a downward turn.
We primarily underwrite our multi-family loans based on the current cash flows produced by the collateral property, with a reliance on the “income” approach to appraising the properties, rather than the “sales” approach. The sales approach is subject to fluctuations in the real estate market, as well as general economic conditions, and is therefore likely to be more risky in the event of a downward credit cycle turn. We also consider a variety of other factors, including the physical condition of the underlying property; the net operating income of the mortgaged premises prior to debt service; the DSCR, which is the ratio of the property’s net operating income to its debt service; and the ratio of the loan amount to the appraised value (i.e., the LTV) of the property.
In addition to requiring a minimum DSCR of 125% on multi-family buildings, we obtain a security interest in the personal property located on the premises, and an assignment of rents and leases. Our multi-family loans generally represent no more than 75% of the lower of the appraised value or the sales price of the underlying property, and typically feature an amortization period of 30 years. In addition, some of our multi-family loans may contain an initial interest-only period which typically does not exceed two years; however, these loans are underwritten on a fully amortizing basis.
45
Commercial Real Estate Loans
At June 30, 2021,2022, CRE loans represented $6.8$7 billion or 16%14% of total loans and leases held for investment. The average CRE loan had an average weighted life of 2.3 years.investment, unchanged compared to the previous quarter.
The CRE loans originated by the Company are also secured by income-producing properties, such as office buildings, mixed-use buildings (retail storefront on the ground floor and apartment units above the ground floor), retail centers, and multi-tenanted light industrial properties. At June 30, 2021, 85%2022, 83% of our CRE loans were secured by properties in the New York City metro area, while properties in other parts of New York State accounted for 2.2%3% of the properties securing our CRE loans and properties in all other states accounted for 13.0%15% combined.
Specialty Finance Loans and Leases
At June 30, 2021,2022, specialty finance loans and leases totaled $3.3$4.1 billion or 7.5%9% of total loans and leases held for investment.
We produce our specialty finance loans and leases through a subsidiary that is staffed by a group of industry veterans with expertise in originating and underwriting senior securitized debt and equipment loans and leases. The subsidiary participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide.
48
The specialty finance loans and leases we fund fall into three categories: asset-based lending, dealer floor-plan lending, and equipment loan and lease financing. Each of these credits is secured with a perfected first security interest in, or outright ownership of, the underlying collateral, and structured as senior debt or as a non-cancelable lease. Asset-based and dealer floor-plan loans are priced at floating rates predominately tied to LIBOR,SOFR or LIBOR-replacement rates, while our equipment financing credits are priced at fixed rates at a spread over Treasuries.
Since launching our specialty finance business in the third quarter of 2013, no losses have been recorded on any of the loans or leases in this portfolio.
C&I Loans
At June 30, 2021,2022, C&I loans totaled $553$549 million or 1.3%1% of total loans and leases held for investment. During the current second quarter, we transferred $94 million of PPP loans designated as held for sale to held for investment.
The C&I loans we produce are primarily made to small and mid-size businesses in the five boroughs of New York City and on Long Island. Such loans are tailored to meet the specific needs of our borrowers, and include term loans, demand loans, revolving lines of credit, and, to a much lesser extent, loans that are partly guaranteed by the Small Business Administration.
A broad range of C&I loans, both collateralized and unsecured, are made available to businesses for working capital (including inventory and accounts receivable), business expansion, the purchase of machinery and equipment, and other general corporate needs. In determining the term and structure of C&I loans, several factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. C&I loans are typically secured by business assets and personal guarantees of the borrower, and include financial covenants to monitor the borrower’s financial stability.
The interest rates on our other C&I loans can be fixed or floating, with floating-rate loans being tied to prime or some other market index, plus an applicable spread. Our floating-rate loans may or may not feature a floor rate of interest. The decision to require a floor on other C&I loans depends on the level of competition we face for such loans from other institutions, the direction of market interest rates, and the profitability of our relationship with the borrower.
Acquisition, Development, and Construction Loans
ADC loans at June 30, 20212022 totaled $187$195 million and represented 0.43%0.40% of total loans and leases held for investment. Because ADC loans are generally considered to have a higher degree of credit risk, especially during a downturn in the business cycle, borrowers are required to provide a guarantee of repayment and completion.
One-to-Four Family Loans
At June 30, 2021,2022, one-to-four family loans totaled $190$129 million or 0.44%0.27% of total loans and leases held for investment. These loan balances include certain mixed-use CRE with less than five residential units classified as one-to-four family loans.
46
Other Loans
Other loans totaled $12$6 million at June 30, 20212022 and consisted mainly of overdraft loans and loans to non-profit organizations. We currently do not offer home equity loans or home equity lines of credit.
Loans Held for Sale
During the second quarter of 2021, the Company transferred $94 million of PPP loans to the held for investment C&I portfolio. Accordingly, loans held for sale at June 30, 2021 were zero compared to $141 million at March 31, 2021 and $117 million at December 31, 2020.
Lending Authority
The loans we originate for investment are subject to federal and state laws and regulations, and are underwritten in accordance with loan underwriting policies approved by the Management Credit Committee, the CommercialBoard Credit Committee, and the Mortgage and Real Estate and Credit Committees of the Board, and the Board of Directors of the Bank.
C&I loans less than or equal to $3 million are approved by the joint authority of lending officers. C&I loans in excess of $3 million and all multi-family, CRE, ADC, and Specialty Finance loans regardless of amount are required to be presented to the Management Credit Committee for approval. Multi-family, CRE, and C&I loans in excess of $5 million and Specialty Finance in excess of $15 million are also required to be presented to the Commercial Credit Committee and the Mortgage and Real Estate Committee of the Board, as applicable so that the Committees can review the loan’s associated risks. The Commercial Credit and
49
Mortgage and Real Estate Committees have authority to direct changes in lending practices as they deem necessary or appropriate in order to address individual or aggregate risks and credit exposures in accordance with the Bank’s strategic objectives and risk appetites.
All mortgage loans in excess of $50 million, specialty finance loans in excess of $15 million and all other C&I loans in excess of $5 million require approval by the Mortgage and Real Estate Committee or the Credit Committee of the Board, as applicable.
The Board of Directors updated certain aspects of the Company's lending authority as detailed below. These changes arewere effective as of July 21, 2021.
Multi-family, CRE, ADC, and specialty finance loans less than or equal to $10 million and C&I loans less than or equal to $5 million are approved by the joint authority of lending officers. C&I loans in excess of $5 million and all multi-family, CRE, ADC, and specialty finance loans in excess of $10 million are required to be presented to the Management Credit Committee for approval. Multi-family, CRE, ADC, and specialty finance loans in excess of $50 million and C&I loans in excess of $10 million are also required to be presented to the Board Credit Committee of the Board, so that the Committee can review the loan’s associated risks and approve the credit. The Board Credit Committee has authority to direct changes in lending practices as they deem necessary or appropriate in order to address individual or aggregate risks and credit exposures in accordance with the Bank’s strategic objectives and risk appetites.
In addition, all loans of $50 million or more originated by the Bank continue to be reported to the Board of Directors.
At June 30, 2021,2022, the largest mortgage loan in our portfolio was a $329 million multi-family loan collateralized by six properties located in Brooklyn, New York. As of the date of this report, the loan has been current since origination.
47
Geographical Analysis of the Portfolio of Loans Held for Investment
The following table presents a geographical analysis of the multi-family and CRE loans in our held-for-investment loan portfolio at June 30, 2021:2022:
|
| At June 30, 2021 |
|
| At June 30, 2022 |
|
| |||||||||||||||||||||||||||
|
| Multi-Family Loans |
|
| Commercial Real Estate |
|
|
| Multi-Family Loans |
|
| Commercial Real Estate Loans |
|
| ||||||||||||||||||||
(dollars in millions) |
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
|
|
| Amount |
| Percent |
|
| Amount |
| Percent |
|
| ||||||||||
New York City: |
|
|
|
|
|
|
|
|
|
|
|
| New York City: |
|
|
|
|
|
|
|
|
|
| |||||||||||
Manhattan |
| $ | 7,765 |
| 23.86 |
| % | $ | 2,984 |
| 43.80 |
| % | $ |
| 7,655 |
| 20.82 |
| % |
| $ |
| 2,854 |
| 42.52 |
| % | ||||||
Brooklyn |
| 6,183 |
| 19.00 |
| 413 |
| 6.06 |
|
|
| 6,422 |
| 17.46 |
|
|
| 351 |
| 5.23 |
|
| ||||||||||||
Bronx |
| 3,720 |
| 11.43 |
| 155 |
| 2.28 |
|
|
| 3,725 |
| 10.13 |
|
|
| 143 |
| 2.13 |
|
| ||||||||||||
Queens |
| 2,890 |
| 8.88 |
| 611 |
| 8.97 |
|
|
| 2,922 |
| 7.95 |
|
|
| 554 |
| 8.25 |
|
| ||||||||||||
Staten Island |
|
| 137 |
|
| 0.42 |
|
| 51 |
|
| 0.75 |
|
|
| 127 |
|
| 0.34 |
|
|
|
| 52 |
|
| 0.78 |
|
| |||||
Total New York City |
| $ | 20,695 |
|
| 63.59 |
| % | $ | 4,214 |
|
| 61.86 |
| % | $ |
| 20,851 |
|
| 56.70 |
| % |
| $ |
| 3,954 |
|
| 58.91 |
| % | ||
New Jersey |
| 4,168 |
| 12.81 |
| 526 |
| 7.72 |
|
|
| 5,034 |
| 13.69 |
|
|
| 554 |
| 8.25 |
|
| ||||||||||||
Long Island |
|
| 539 |
|
| 1.66 |
|
| 1,034 |
|
| 15.18 |
|
|
| 537 |
|
| 1.46 |
|
|
|
| 1,033 |
|
| 15.39 |
|
| |||||
Total Metro New York |
| $ | 25,402 |
|
| 78.06 |
| % | $ | 5,774 |
|
| 84.76 |
| % | $ |
| 26,422 |
|
| 71.85 |
| % |
| $ |
| 5,541 |
|
| 82.55 |
| % | ||
Other New York State |
| 1,035 |
| 3.18 |
| 152 |
| 2.23 |
|
|
| 1,152 |
| 3.13 |
|
|
| 169 |
| 2.52 |
|
| ||||||||||||
Pennsylvania |
|
| 3,722 |
| 10.12 |
|
|
| 320 |
| 4.77 |
|
| |||||||||||||||||||||
Florida |
|
| 1,621 |
| 4.41 |
|
|
| 207 |
| 3.08 |
|
| |||||||||||||||||||||
Ohio |
|
| 733 |
| 2.00 |
|
|
| 40 |
| 0.60 |
|
| |||||||||||||||||||||
Arizona |
|
| 417 |
| 1.13 |
|
|
| 33 |
| 0.49 |
|
| |||||||||||||||||||||
All other states |
|
| 6,103 |
|
| 18.76 |
|
| 887 |
|
| 13.01 |
|
|
| 2,705 |
|
| 7.36 |
|
|
|
| 402 |
|
| 5.99 |
|
| |||||
Total |
| $ | 32,540 |
|
| 100.00 |
| % | $ | 6,813 |
|
| 100.00 |
| % | $ |
| 36,772 |
|
| 100.00 |
| % |
| $ |
| 6,712 |
|
| 100.00 |
| % |
At June 30, 2021,2022, the largest concentration of ADC loans held for investment was located in Metro New York, with a total of $167 million at that date. The majority of our other loans held for investment were secured by properties and/or businesses located in Metro New York.
Outstanding Loan Commitments
At June 30, 2021, we had outstanding loan commitments of $2.7 billion, as compared to $2.5 billion at December 31, 2020.
Multi-family, CRE, ADC and 1-4 family loans together represented $459 million of held-for-investment loan commitments at the end of the quarter, while other loans represented $2.2 billion. Included in the latter amount were commitments to originate specialty finance loans and leases of $1.6 billion and commitments to originate other C&I loans of $568 million.
In addition to loan commitments, we had commitments to issue financial stand-by, performance stand-by, and commercial letters of credit totaling $281 million at June 30, 2021, a $95 million decrease from the volume at December 31, 2020. The fees we
50
collect in connection with the issuance of letters of credit are included in Fee Income in the Consolidated Statements of Income and Comprehensive Income.
Asset Quality
Non-Performing Loans and Repossessed Assets
NPAs declined $14 million or 20% to $56 million at June 30, 2021 totaled $40 million, down 13%2022 compared to $46 million at December 31, 2020, representing 0.07%the previous quarter. This represented 0.09% of total assets unchanged ascompared to 0.11% of total assets at March 31, 2022. Total NPLs were $50 million, down $13 million or 21% compared to March 31, 2022, representing 0.10% of total loans compared to 0.13% at the previous quarter. Repossessed assets, consisting primarily of repossessed taxi medallions, were $6 million at June 30, 2022, down $1 million or 14% from March 31, 2022. Finally, total loans past due 30 to 89 days declined $4 million or 12% to $30 million compared to the previous quarter.
NPLs atFor the three months ended June 30, 2021 declined 16% to $322022, the Company reported a net recovery of $7 million compared to $38a net charge-off of $2 million at December 31, 2020, representing 0.07% of total loans compared to 0.08% for the previous quarter.
Total repossessed assets at the end of the second quarter were $8 million, unchanged from the previous quarter.
three months ended March 31, 2022. For the six months ended June 30, 2021,2022, the Company recordedreported net recoveries of $7$5 million compared to net charge-offsrecoveries of $14$7 million for the six months ended June 30, 2020. The decrease represents the decline in charge-offs of other C&I and taxi related loans.2021.
48
The following table presents our non-performing loans by loan type and the changes in the respective balances from December 31, 20202021 to June 30, 2021:2022:
|
|
|
|
|
|
|
| Change from |
| |||||||
(dollars in millions) |
| June 30, |
|
| December 31, |
|
| Amount |
|
| Percent |
| ||||
Non-Performing Loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-accrual mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Multi-family |
| $ | 9 |
|
| $ | 4 |
|
| $ | 5 |
|
|
| 125 | % |
Commercial real estate |
|
| 12 |
|
|
| 12 |
|
|
| — |
|
|
| 0 | % |
One-to-four family |
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| 0 | % |
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total non-accrual mortgage loans |
|
| 23 |
|
|
| 18 |
|
|
| 5 |
|
|
| 28 | % |
Non-accrual other loans (1) |
|
| 9 |
|
|
| 20 |
|
|
| (11 | ) |
|
| -55 | % |
Total non-performing loans |
| $ | 32 |
|
| $ | 38 |
|
| $ | (6 | ) |
|
| -16 | % |
Change from (dollars in millions) June 30, December 31, Amount Percent Non-Performing Loans: Non-accrual mortgage loans: Multi-family $ 18 $ 10 $ 8 80 % Commercial real estate 27 16 11 69 One-to-four family — 1 (1 ) (100 ) Acquisition, development, and construction — — — — Total non-accrual mortgage loans 45 27 18 67 Non-accrual other loans (1) 5 6 (1 ) (17 ) Total non-performing loans $ 50 $ 33 $ 17 52
December 31, 2021
to
June 30, 2022
2022
2021
The following table sets forth the changes in non-performing loans over the six months ended June 30, 2021:2022:
(dollars in millions) |
|
|
| |
Balance at December 31, 2020 |
| $ | 38 |
|
New non-accrual |
|
| 11 |
|
Charge-offs |
|
| (5 | ) |
Transferred to repossessed assets |
|
| - |
|
Loan payoffs, including dispositions and principal |
|
| (12 | ) |
Restored to performing status |
|
| - |
|
Balance at June 30, 2021 |
| $ | 32 |
|
(dollars in millions) | ||||
Balance at December 31, 2021 | $ | 33 | ||
New non-accrual | 36 | |||
Charge-offs | (1 | ) | ||
Transferred to repossessed assets | — | |||
Loan payoffs, including dispositions and principal | (18 | ) | ||
Restored to performing status | — | |||
Balance at June 30, 2022 | $ | 50 | ||
A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because the Company no longer expects to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At June 30, 20212022 and December 31, 2020,2021, all of our non-performing loans were non-accrual loans.
51
We monitor non-accrual loans both within and beyond our primary lending area, which is defined as including: (a) the counties that comprise our CRA Assessment area, and (b) the entirety of the following states: Arizona; Florida; New York; New Jersey; Ohio; and Pennsylvania, in the same manner. Monitoring loans generally involves inspecting and re-appraising the collateral properties; holding discussions with the principals and managing agents of the borrowing entities and/or retained legal counsel, as applicable; requesting financial, operating, and rent roll information; confirming that hazard insurance is in place or force-placing such insurance; monitoring tax payment status and advancing funds as needed; and appointing a receiver, whenever possible, to collect rents, manage the operations, provide information, and maintain the collateral properties.
It is our policy to order updated appraisals for all non-performing loans, irrespective of loan type, that are collateralized by multi-family buildings, CRE properties, or land, in the event that such a loan is 90 days or more past due, and if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered annually until such time as the loan becomes performing and is returned to accrual status. It is generally not our policy to obtain updated appraisals for performing loans. However, appraisals may be ordered for performing loans when a borrower requests an increase in the loan amount, a modification in loan terms, or an extension of a maturing loan. We do not analyze LTVs on a portfolio-wide basis.
49
Non-performing loans are reviewed regularly by management and discussed on a monthly basis with the Management Credit Committee, the Board Credit Committee, and the Boards of Directors of the Company and the Bank, as applicable. Collateral-dependent non-performing loans are written down to their current appraised values, less certain transaction costs. Workout specialists from our Loan Workout Unit actively pursue borrowers who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings are retained to institute such action with regard to such borrowers.
Properties and assets that are acquired through foreclosure are classified as either OREO or repossessed assets, and are recorded at fair value at the date of acquisition, less the estimated cost of selling the property/asset. Subsequent declines in the fair value of OREO or repossessed assets are charged to earnings and are included in non-interest expense. It is our policy to require an appraisal and an environmental assessment (in accordance with our Environmental Risk Policy) of properties classified as OREO before foreclosure, and to re-appraise the properties/assets on an as-needed basis, and not less than annually, until they are sold. We dispose of such properties/assets as quickly and prudently as possible, given current market conditions and the property’s or asset’s condition.
To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we consider to be prudent. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows being generated by the property to determine its economic value using the “income approach,” and then at the market value of the property that collateralizes the loan. The amount of the loan is then based on the lower of the two values, with the economic value more typically used.
The condition of the collateral property is another critical factor. Multi-family buildings and CRE properties are inspected from rooftop to basement as a prerequisite to closing, with a member of the Board Credit Committee participating in inspections on multi-family, CRE, and ADC loans to be originated in excess of $50 million. We continue to conduct inspections as per the aforementioned policy, however, due to the COVID-19 pandemic, currently full access to some properties and buildings may be limited. Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experienced in-house appraisal officers and staff, perform appraisals on collateral properties. In many cases, a second independent appraisal review is performed.
In addition to underwriting multi-family loans on the basis of the buildings’ income and condition, we consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to present evidence of their ability to repay the loan from the buildings’ current rent rolls, their financial statements, and related documents.
In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and whose track record with our lending officers is typically greater than ten years. Furthermore, in New York City, where the majority of the buildings securing our multi-family loans are located, the rents that tenants may be charged on certain apartments are typically restricted under certain new rent regulation laws. As a result, the rents that tenants pay for such apartments are generally lower than current market rents. Buildings with a preponderance of such rent-regulated apartments are less likely to experience vacancies in times of economic adversity.
Reflecting the strength of the underlying collateral for these loans and the collateral structure, a relatively small percentage of our non-performing multi-family loans have resulted in losses over time. While our multi-family lending niche has not been immune to downturns in the credit cycle, the limited number of losses we have recorded, even in adverse credit cycles, suggests that the multi-family loans we produce involve less credit risk than certain other types of loans. In general, buildings that are subject to rent regulation have tended to be stable, with occupancy levels remaining more or less constant over time. Because the rents are typically below market and the buildings securing our loans are generally maintained in good condition, they have been more likely to retain their tenants in adverse economic times. In addition, we exclude any short-term property tax exemptions and abatement benefits the property owners receive when we underwrite our multi-family loans.
52
To further manage our credit risk, our lending policies limit the amount of credit granted to any one borrower, and typically require minimum DSCRs of 125% for multi-family loans and 130% for CRE loans. Although we typically lend up to 75% of the appraised value on multi-family buildings and up to 65% on commercial properties, the average LTVs of such credits at origination were below those amounts at June 30, 2021.2022. Exceptions to these LTV limitations are minimal and are reviewed on a case-by-case basis.
50
The repayment of loans secured by commercial real estate is often dependent on the successful operation and management of the underlying properties. To minimize our credit risk, we originate CRE loans in adherence with conservative underwriting standards, and require that such loans qualify on the basis of the property’s current income stream and DSCR. The approval of a loan also depends on the borrower’s credit history, profitability, and expertise in property management, and generally requires a minimum DSCR of 130% and a maximum LTV of 65%. In addition, the origination of CRE loans typically requires a security interest in the fixtures, equipment, and other personal property of the borrower and/or an assignment of the rents and/or leases. In addition, our CRE loans may contain an interest-only period which typically does not exceed three years; however, these loans are underwritten on a fully amortizing basis.
Multi-family and CRE loans are generally originated at conservative LTVs and DSCRs, as previously stated. Low LTVs provide a greater likelihood of full recovery and reduce the possibility of incurring a severe loss on a credit; in many cases, they reduce the likelihood of the borrower “walking away” from the property. Although borrowers may default on loan payments, they have a greater incentive to protect their equity in the collateral property and to return their loans to performing status. Furthermore, in the case of multi-family loans, the cash flows generated by the properties are generally below-market and have significant value.
With regard to ADC loans, we typically lend up to 75% of the estimated as-completed market value of multi-family and residential tract projects; however, in the case of home construction loans to individuals, the limit is 80%. With respect to commercial construction loans, we typically lend up to 65% of the estimated as-completed market value of the property. Credit risk is also managed through the loan disbursement process. Loan proceeds are disbursed periodically in increments as construction progresses, and as warranted by inspection reports provided to us by our own lending officers and/or consulting engineers.
To minimize the risk involved in specialty finance lending and leasing, each of our credits is secured with a perfected first security interest or outright ownership in the underlying collateral, and structured as senior debt or as a non-cancellable lease. To further minimize the risk involved in specialty finance lending and leasing, we re-underwrite each transaction. In addition, we retain outside counsel to conduct a further review of the underlying documentation.
Other C&I loans are typically underwritten on the basis of the cash flows produced by the borrower’s business, and are generally collateralized by various business assets, including, but not limited to, inventory, equipment, and accounts receivable. As a result, the capacity of the borrower to repay is substantially dependent on the degree to which the business is successful. Furthermore, the collateral underlying the loan may depreciate over time, may not be conducive to appraisal, and may fluctuate in value, based upon the operating results of the business. Accordingly, personal guarantees are also a normal requirement for other C&I loans.
The procedures we follow with respect to delinquent loans are generally consistent across all categories, with late charges assessed, and notices mailed to the borrower, at specified dates. We attempt to reach the borrower by telephone to ascertain the reasons for delinquency and the prospects for repayment. When contact is made with a borrower at any time prior to foreclosure or recovery against collateral property, we attempt to obtain full payment, and will consider a repayment schedule to avoid taking such action. Delinquencies are addressed by our Loan Workout Unit and every effort is made to collect rather than initiate foreclosure proceedings.
The following table presents our loans 30 to 89 days past due by loan type and the changes in the respective balances from December 31, 20202021 to June 30, 2021:2022:
|
|
|
|
|
|
|
| Change from |
| |||||||
(dollars in millions) |
| June 30, |
|
| December 31, |
|
| Amount |
|
| Percent |
| ||||
Loans 30-89 Days Past Due: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Multi-family |
| $ | 9 |
|
| $ | 4 |
|
| $ | 5 |
|
|
| 125 | % |
Commercial real estate |
|
| 15 |
|
|
| 10 |
|
|
| 5 |
|
|
| 50 | % |
One-to-four family |
|
| — |
|
|
| 2 |
|
|
| (2 | ) |
|
| -100 | % |
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other loans (1) |
|
| 11 |
|
|
| — |
|
|
| 11 |
|
| NM |
| |
Total loans 30-89 days past due |
| $ | 35 |
|
| $ | 16 |
|
| $ | 19 |
|
|
| 119 | % |
53
Change from (dollars in millions) June 30, December 31, Amount Percent Loans 30-89 Days Past Due: Multi-family $ 20 $ 57 $ (37 ) -65 % Commercial real estate 1 2 (1 ) -50 One-to-four family 7 8 (1 ) -13 Acquisition, development, and construction — — — NM Other loans (1) 2 — 2 NM Total loans 30-89 days past due $ 30 $ 67 $ (37 ) -55 %
December 31, 2021
to
June 30, 2022
2022
2021
51
During the second quarter of 2022, total loans 30-89 days past due decreased to $30 million compared to $67 million at December 31, 2021, primarily due to two multi-family loans that became current during the six months ending June 30, 2022.
Fair values for all multi-family buildings, CRE properties, and land are determined based on the appraised value. If an appraisal is more than one year old and the loan is classified as either non-performing or as an accruing TDR, then an updated appraisal is required to determine fair value. Estimated disposition costs are deducted from the fair value of the property to determine estimated net realizable value. In the instance of an outdated appraisal on an impaired loan, we adjust the original appraisal by using a third-party index value to determine the extent of impairment until an updated appraisal is received.
While we strive to originate loans that will perform fully, adverse economic and market conditions, among other factors, can adversely impact a borrower’s ability to repay.
Based upon all relevant and available information as of the end of the current second quarter, management believes that the allowance for losses on loans was appropriate at that date.
At June 30, 2021,2022, the Company's three largest NPLs were threetwo CRE loans with balances of $19 million and $8 million $7 million and $3one multi-family loan of $7 million.
Troubled Debt Restructurings
In an effort to proactively manage delinquent loans, we have selectively extended to certain borrowers such concessions as rate reductions and extensions of maturity dates, as well as forbearance agreements, when such borrowers have exhibited financial difficulty. In accordance with GAAP, we are required to account for such loan modifications or restructurings as TDRs.
The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances of each transaction, which may change from period to period, and involve management’s judgment regarding the likelihood that the concession will result in the maximum recovery for the Company.
Loans modified as TDRs are placed on non-accrual status until we determine that future collection of principal and interest is reasonably assured. This generally requires that the borrower demonstrate performance according to the restructured terms for at least six consecutive months. At June 30, 2021,2022, non-accrual TDRs included taxi medallion-related loans with a combined balance of $9$4 million.
At June 30, 2021,2022, loans on which concessions were made with respect to rate reductions and/or extensions of maturity dates totaled $31$45 million.
Based on the number of loans performing in accordance with their revised terms, our success rates for restructured CRE and multi-family loans, was 100%. The success rates for restructured one-to-four family and other loans were 0%100% and 8%32%, respectively, at June 30, 2021.2022.
Analysis of Troubled Debt Restructurings
The following table sets forth the changes in our TDRs over the six months ended June 30, 2021:2022:
(dollars in millions) |
| Accruing |
| Non-Accrual |
| Total |
|
| Accruing |
|
|
| Non- |
|
|
| Total |
| ||||||||
Balance at December 31, 2020 |
| $ | 15 |
|
| $ | 19 |
|
| $ | 34 |
| ||||||||||||||
Balance at December 31, 2021 | $ |
| 16 |
|
| $ |
| 13 |
|
| $ |
| 29 |
| ||||||||||||
New TDRs |
|
| - |
|
|
| 8 |
|
|
| 8 |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
| ||
Charge-offs |
|
| - |
|
|
| (4 | ) |
|
| (4 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||
Transferred from performing |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||
Loan payoffs, including dispositions and principal |
|
| - |
|
|
| (7 | ) |
|
| (7 | ) |
|
| — |
|
|
|
| (3 | ) |
|
|
| (3 | ) |
Balance at June 30, 2021 |
| $ | 15 |
|
| $ | 16 |
|
| $ | 31 |
| ||||||||||||||
Balance at June 30, 2022 | $ |
| 16 |
|
| $ |
| 29 |
|
| $ |
| 45 |
|
On a limited basis, we may provide additional credit to a borrower after a loan has been placed on non-accrual status or classified as a TDR if, in management’s judgment, the value of the property after the additional loan funding is greater than the initial value of the property plus the additional loan funding amount. During the six months ended June 30, 2021,2022, no such additions were made. Furthermore, the terms of our restructured loans typically would not restrict us from cancelling outstanding commitments for other credit facilities to a borrower in the event of non-payment of a restructured loan.
52
Except for the non-accrual loans and TDRs disclosed in this filing, we did not have any potential problem loans at the end of the current quarter that would have caused management to have serious doubts as to the ability of a borrower to comply with present loan repayment terms and that would have resulted in such disclosure if that were the case.
54
Loan Deferrals
Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the CARES Act and bank regulators have provided relief from TDR accounting. The main benefits of TDR relief include a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; aging of the loans is frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and the loans are generally not reported as non-accrual during the modification period.
Under the CARES Act, the Company made the election to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease (“COVID-19”); (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the COVID-19 national emergency declaration or (B) December 31, 2020. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency.
During the second quarter of 2020, the Company implemented various loan modification programs with some of its borrowers, in accordance with the CARES Act and interagency regulatory guidance. These modifications were primarily full payment deferrals for an initial six month period, with the ability to extend again at the end of the deferral period, at the Bank’s discretion. Most of these deferrals were entered into during April and May, and were therefore, they were eligible to come off of their deferral period beginning in the fourth quarter of 2020, and the remaining were eligible to come off their deferral during the first quarter of 2021. Accordingly, at June 30, 2021, 100% of the Company's full-payment deferrals had returned to payment status.
In addition, to the full-payment deferrals, the Company entered into certain modifications whereby the borrowers are paying interest and escrow only. At June 30, 2021, these principal deferrals totaled $1.0 billion, down 60% or $1.5 billion compared to $2.5 billion for the previous quarter.
The following tables reflect, as of June 30, 2021, the aggregate amount of principal deferrals by various category.
Principal Deferrals as of June 30, 2021 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Amount in |
|
| Outstanding |
|
| Deferred as |
|
| Weighted- |
| ||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Multi-family |
| $ | 497 |
|
| $ | 32,484 |
|
|
| 1.5 | % |
|
| 54.2 | % |
CRE: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Office |
| $ | 239 |
|
| $ | 3,210 |
|
|
| 7.4 | % |
|
| 66.2 | % |
Retail |
|
| 155 |
|
|
| 1,779 |
|
|
| 8.7 | % |
|
| 70.3 | % |
Mixed use |
|
| 69 |
|
|
| 565 |
|
|
| 12.2 | % |
|
| 65.8 | % |
Condo/ Co-op |
|
| 36 |
|
|
| 256 |
|
|
| 14.1 | % |
|
| 41.0 | % |
Other |
|
| 1 |
|
|
| 1,003 |
|
|
| 0.1 | % |
|
| 35.7 | % |
Sub-total CRE |
| $ | 500 |
|
| $ | 6,813 |
|
|
| 7.3 | % |
|
| 65.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Multi-Family and CRE |
|
| 997 |
|
|
| 39,297 |
|
|
| 2.5 | % |
|
| 59.9 | % |
|
|
|
|
|
|
|
|
|
|
|
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| ||||
Other |
|
| 8 |
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 1,005 |
|
|
|
|
|
|
|
|
|
|
Additionally, the allowance for credit losses on accrued interest receivable on loans, including loans in the deferral program, was $929,449, as of June 30, 2021.
55
Asset Quality Analysis
The following table presents information regarding our consolidated allowanceon the Company's net charge-offs as compared to average loans outstanding for credit losses on loans and leases, our non-performing assets, and our 30 to 89 days past due loans atthe six months ended June 30, 2021 and December 31, 2020.2022:
(dollars in millions) |
| At or For the |
|
| At or For the |
|
| ||
Allowance for Credit Losses on Loan and Leases: |
|
|
|
|
|
|
| ||
Balance at beginning of period |
| $ | 194 |
|
| $ | 148 |
|
|
CECL day 1 transition adjustment |
|
| — |
|
|
| 2 |
|
|
Adjusted allowance for credit losses at January 1 |
|
| 194 |
|
|
| 150 |
|
|
Provision for credit losses |
|
| 1 |
|
|
| 63 |
|
|
Charge-offs: |
|
|
|
|
|
|
| ||
Multi-family |
|
| (2 | ) |
|
| — |
|
|
Commercial real estate |
|
| — |
|
|
| (2 | ) |
|
One-to-four family residential |
|
| — |
|
|
| — |
|
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
Other loans |
|
| (3 | ) |
|
| (20 | ) |
|
Total charge-offs |
|
| (5 | ) |
|
| (22 | ) |
|
Recoveries: |
|
|
|
|
|
|
| ||
Multi-family |
|
| — |
|
|
| 1 |
|
|
Commercial real estate |
|
| 2 |
|
|
| — |
|
|
One-to-four family residential |
|
| — |
|
|
| — |
|
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
Other loans |
|
| 10 |
|
|
| 2 |
|
|
Total recoveries |
|
| 12 |
|
|
| 3 |
|
|
Net recoveries (charge-offs) |
|
| 7 |
|
|
| (19 | ) |
|
Balance at end of period |
| $ | 202 |
|
| $ | 194 |
|
|
Non-Performing Assets: |
|
|
|
|
|
|
| ||
Non-accrual mortgage loans: |
|
|
|
|
|
|
| ||
Multi-family |
| $ | 9 |
|
| $ | 4 |
|
|
Commercial real estate |
|
| 12 |
|
|
| 12 |
|
|
One-to-four family residential |
|
| 2 |
|
|
| 2 |
|
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
Total non-accrual mortgage loans |
|
| 23 |
|
|
| 18 |
|
|
Other non-accrual loans |
|
| 9 |
|
|
| 20 |
|
|
Total non-performing loans |
| $ | 32 |
|
| $ | 38 |
|
|
Repossessed assets (1) |
|
| 8 |
|
|
| 8 |
|
|
Total non-performing assets |
| $ | 40 |
|
| $ | 46 |
|
|
Asset Quality Measures: |
|
|
|
|
|
|
| ||
Non-performing loans to total loans |
|
| 0.07 |
| % |
| 0.09 |
| % |
Non-performing assets to total assets |
|
| 0.07 |
|
|
| 0.08 |
|
|
Allowance for credit losses to non-performing loans |
|
| 641.41 |
|
|
| 513.55 |
|
|
Allowance for credit losses to total loans |
|
| 0.46 |
|
|
| 0.45 |
|
|
Net charge-offs during the period to average loans |
|
| (0.02 | ) |
|
| 0.04 |
|
|
Loans 30-89 Days Past Due: |
|
|
|
|
|
|
| ||
Multi-family |
| $ | 9 |
|
| $ | 4 |
|
|
Commercial real estate |
|
| 15 |
|
|
| 10 |
|
|
One-to-four family residential |
|
| — |
|
|
| 2 |
|
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
Other loans |
|
| 11 |
|
|
| — |
|
|
Total loans 30-89 days past due |
| $ | 35 |
|
| $ | 16 |
|
|
(1) Includes $5 million and $7 million of repossessed taxi medallions at June 30, 2021 and December 31, 2020, respectively.
| For the Six Months Ended, |
| ||||
| June 30, |
| June 30, |
| ||
(dollars in millions) | 2022 |
| 2021 |
| ||
Multi-family |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | - |
| $ | 2 |
|
Average amount outstanding | $ | 35,332 |
| $ | 32,177 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| 0.01 | % |
|
|
|
|
| ||
Commercial real estate |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | - |
| $ | (2 | ) |
Average amount outstanding | $ | 6,669 |
| $ | 6,830 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| -0.03 | % |
|
|
|
|
| ||
One-to-Four Family |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | - |
| $ | - |
|
Average amount outstanding | $ | 146 |
| $ | 210 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| 0.00 | % |
|
|
|
|
| ||
Acquisition, Development and Construction |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | - |
| $ | - |
|
Average amount outstanding | $ | 228 |
| $ | 110 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| 0.00 | % |
|
|
|
|
| ||
Other Loans |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | (5 | ) | $ | (7 | ) |
Average amount outstanding | $ | 4,104 |
| $ | 3,450 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| -0.12 | % |
| -0.20 | % |
|
|
|
|
| ||
Total loans |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | (5 | ) | $ | (7 | ) |
Average amount outstanding | $ | 46,479 |
| $ | 42,777 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| -0.01 | % |
| -0.02 | % |
Geographical Analysis of Non-Performing Loans
The following table presents a geographical analysis of our non-performing loans at June 30, 2021:2022:
(dollars in millions) | |||||||
New York | $ | 46 |
| ||||
New Jersey | 3 |
| |||||
All other states | 1 | ||||||
Total non-performing loans | $ | 50 |
|
56
Securities
At June 30, 2021,2022, total securities decreased $101declined $118 million or 7%to $5.7 billion, down 4% annualized on a linked-quarter basis to $6.1 billion, compared to $6.2 billion atDecember 31, 2021 and were relatively unchanged compared to March 31, 2021.2022. At the end of the current second quarter,June 30, 2022, total securities represented 10.6%9.0% of total assets compared to 10.7%9.2% and 9.7%, respectively, at the first quarter ofMarch 31, 2022 and December 31, 2021.
53
The following table summarizes the weighted average yield of debt securities for the maturities indicated at June 30, 2022:
| Mortgage- |
|
| U.S. |
|
| State, |
|
| Other |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available-for-Sale Debt |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Due within one year |
| 2.75 |
| % |
| 2.12 |
| % |
| — |
| % |
| 1.01 |
| % |
Due from one to five years |
| 3.28 |
|
|
| 3.22 |
|
|
| — |
|
|
| 2.92 |
|
|
Due from five to ten years |
| 2.73 |
|
|
| 1.59 |
|
|
| 3.53 |
|
|
| 3.25 |
|
|
Due after ten years |
| 1.96 |
|
|
| 1.62 |
|
|
| — |
|
|
| 1.76 |
|
|
Total debt securities available for sale |
| 2.11 |
|
|
| 1.88 |
|
|
| 3.53 |
|
|
| 2.67 |
|
|
Federal Home Loan Bank Stock
As a member of the FHLB-NY, the Bank is required to acquire and hold shares of its capital stock, and to the extent FHLB borrowings are utilized, may further invest in FHLB stock. At June 30, 20212022 and December 31, 2020,2021, the Bank held FHLB-NY stock in the amount of $686$635 million and $714$734 million, respectively. FHLB-NY stock continued to be valued at par, with no impairment required at that date.
Dividends from the FHLB-NY to the Bank totaled $8 million and $9$8 million, respectively, in the three months ended June 30, 20212022 and 2020.2021.
Bank-Owned Life Insurance
BOLI is recorded at the total cash surrender value of the policies in the Consolidated Statements of Condition, and the income generated by the increase in the cash surrender value of the policies is recorded in Non-Interest Income in the Consolidated Statements of Income and Comprehensive Income. Reflecting an increase in the cash surrender value of the underlying policies, our investment in BOLI increased $7$8 million to $1.2 billion at June 30, 20212022 from December 31, 2020.2021.
Goodwill
We record goodwill in our Consolidated Statements of Condition in connection with certain of our business combinations. Goodwill, which is tested at least annually for impairment, refers to the difference between the purchase price and the fair value of an acquired company’s assets, net of the liabilities assumed. Goodwill totaled $2.4 billion at both June 30, 20212022 and December 31, 2020. For more information about the Company’s goodwill, see the discussion of “Critical Accounting Policies” earlier in this report.2021.
Sources of Funds
The Parent Company (i.e., the Company on an unconsolidated basis) has three primary funding sources for the payment of dividends, share repurchases, and other corporate uses: dividends paid to the Company by the Bank; capital raised through the issuance of stock; and funding raised through the issuance of debt instruments.
On a consolidated basis, our funding primarily stems from a combination of the following sources: deposits; borrowed funds, primarily in the form of wholesale borrowings; the cash flows generated through the repayment and sale of loans; and the cash flows generated through the repayment and sale of securities.
Loan repayments and sales totaled $4.4$6.0 billion in the six months ended June 30, 2021, down $1.22022, up $1.6 billion from the $5.6$4.4 billion recorded in the year-earlier six months. Cash flows from the repayment and sales of securities totaled $931$397 million and $1.4 billion,$931 million, respectively, in the corresponding periods, while purchases of securities totaled $788 million and $1.3 billion, and $735 million, respectively.
54
Deposits
Our ability to retain and attract deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay, the types of products we offer, and the attractiveness of their terms. From time to time, we have chosen not to compete actively for deposits, depending on our access to deposits through acquisitions, the availability of lower-cost funding sources, the impact of competition on pricing, and the need to fund our loan demand.
At June 30, 2021,2022, total deposits were $34.2$41.2 billion, up $1.7$3.3 billion compared to total deposits at March 31, 2022, and up $6.2 billion since December 31, 2020.2021. At the end of the current second quarter,June 30, 2022, total deposits represented 59.5%65.4% of total assets whilecompared to 62.2% at March 31, 2022 and 58.9% at December 31, 2021. Additionally, at June 30, 2022, CDs represented 26.2%19.6% of total deposits. The majority, or $1.5 billion of this growth occurred in the non-interest-bearing checking category, as the Company is currently working with its technology partner to bring in additional low cost deposits. These deposits are short-term in natureversus 20.8% at March 31, 2022 and related to individual spending patterns. These deposits peaked during the second quarter of 2021 and are expected to run off over the next year.24.0% at December 31, 2021.
Included in the June 30, 20212022 balance of deposits were business institutional deposits of $1.5$1.9 billion and municipal deposits of $1.0 billion,$597 million, as compared to $1.3$1.4 billion and $1.0 billion,$751 million, respectively, at December 31, 2020.2021. Also, included in the June 30, 2022 balance of deposits was $7.8 billion of BaaS-related deposits up $5.8 billion from December 31, 2021. Brokered deposits remained stable at $5.5$4.5 billion, including brokered interest bearinginterest-bearing checking accounts of $1.2 billion$467 million at June 30, 20212022 and $1.3$1.5 billion at December 31, 2020,
57
2021, brokered money market accounts of $3.0$2.9 billion at June 30, 20212022 and $2.9 billion at December 31, 2020,2021, and brokered CDs of $1.3$1.1 billion at June 30, 20212022 and $1.0$1.2 billion at December 31, 2020.2021. The extent to which we accept brokered deposits depends on various factors, including the availability and pricing of such wholesale funding sources, and the availability and pricing of other sources of funds.
The following table indicates the amount of time deposits, by account, that are in excess of the FDIC insurance limit (currently $250,000) by time remaining until maturity as of June 30, 2022:
|
| June 30, |
| |
(dollars in millions) |
| 2022 |
| |
Portion of U.S. time deposits in excess of insurance limit |
| $ | 2,598 |
|
Time deposits otherwise uninsured with a maturity of: |
|
|
| |
3 months or less |
| $ | 693 |
|
Over 3 months through 6 months |
|
| 388 |
|
Over 6 months through 12 months |
|
| 509 |
|
Over 12 months |
|
| 1,008 |
|
Total time deposits otherwise uninsured |
| $ | 2,598 |
|
Borrowed Funds
Borrowed funds consist primarily of wholesale borrowings (i.e., FHLB-NY advances, repurchase agreements, and federal funds purchased) and, to a far lesser extent, junior subordinated debentures and subordinated notes. As of June 30, 2021,2022, borrowed funds declined $625 million$2.3 billion or 8%27% annualized to $15.5$14.3 billion compared to December 31, 2020,2021, and represented 26.9%23% of total assets at that date. The decrease was mainly due to a decline in wholesale borrowings, consisting primarily of FHLB-NY advances, which declined to $14.8$13.7 billion compared to $15.4$15.9 billion at year-end 2020.2021. Also included in wholesale borrowings are repurchase agreements of $800 million, unchanged from the balance at December 31, 2020.2021.
Subordinated Notes
On November 6, 2018, the Company issued $300 million aggregate principal amount of its 5.90% Fixed-to-Floating Rate Subordinated Notes due 2028. The Company intends to usehas used $278 million of the net proceeds from the offering for general corporate purposes, which may include opportunistic repurchases ofto repurchase shares of its common stock pursuant to its previously announced share repurchase program.program, and may use the balance of the offering towards the repurchase of its common stock or for other general corporate purposes. The Notes were offered to the public at 100% of their face amount. At June 30, 2021,2022, the balance of subordinated notes was $296 million, which excludes certain costs related to their issuance.
Junior Subordinated Debentures
Junior subordinated debentures totaled $360$361 million at June 30, 2021,2022, comparable to the balance at December 31, 2020.2021.
55
Risk Definitions
The following section outlines the definitions of interest rate risk, market risk, and liquidity risk, and how the Company manages market and interest rate risk:
Interest Rate Risk – Interest rate risk is the risk to earnings or capital arising from movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (re-pricing risk); from changing rate relationships among different yield curves affecting Company activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in a bank’s products (options risk). The evaluation of interest rate risk must consider the impact of complex, illiquid hedging strategies or products, and also the potential impact on fee income (e.g. prepayment income) which is sensitive to changes in interest rates. In those situations where trading is separately managed, this refers to structural positions and not trading portfolios.
Market Risk – Market risk is the risk to earnings or capital arising from changes in the value of portfolios of financial instruments. This risk arises from market-making, dealing, and position-taking activities in interest rate, foreign exchange, equity, and commodities markets. Many banks use the term “price risk” interchangeably with market risk; this is because market risk focuses on the changes in market factors (e.g., interest rates, market liquidity, and volatilities) that affect the value of traded instruments. The primary accounts affected by market risk are those which are revalued for financial presentation (e.g., trading accounts for securities, derivatives, and foreign exchange products).
58
Liquidity Risk – Liquidity risk is the risk to earnings or capital arising from a bank’s inability to meet its obligations when they become due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. Liquidity risk also arises from a bank’s failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.
Management of Market and Interest Rate Risk
We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain balance sheet accounts; to determine the appropriate level of risk, given our business strategy, risk appetite, operating environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner consistent with guidelines approved by the Boards of Directors of the Company and the Bank.
Market and Interest Rate Risk
As a financial institution, we are focused on reducing our exposure to interest rate volatility. Changes in interest rates pose one of the greatest challenges to our financial performance, as such changes can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. To reduce our exposure to changing rates, the Boards of Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments to the asset and liability mix can be made when deemed appropriate.
The actual duration of held-for-investment mortgage loans and mortgage-related securities can be significantly impacted by changes in prepayment levels and market interest rates. The level of prepayments may be impacted by a variety of factors, including the economy in the region where the underlying mortgages were originated; seasonal factors; demographic variables; and the assumability of the underlying mortgages. However, the largest determinants of prepayments are interest rates and the availability of refinancing opportunities.
We manage our interest rate risk by taking the following actions: continue to emphasize the origination and retention of intermediate-term assets, primarily in the form of multi-family and CRE loans; continue to originate certain floating rate C&I loans; depending on funding needs, replace maturing wholesale borrowings with longer term borrowings; and as needed, execute interest rate swaps.
LIBOR Transition and Phase-OutProcess
On July 27,The discontinuation of LIBOR has been developing since 2017 when the U.K.United Kingdom’s Financial Conduct Authority (FCA), which regulates(“FCA”) first called for LIBOR announced that it will no longer request banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020 the ICE Benchmark Administration (“IBA”) announced they will extend the publication of most US Dollar LIBOR (“USD LIBOR”) through June 30, 2023. The FRB established the Alternative Reference Rate Committee (“ARRC”), comprised of a group of private market participants and other members, representing banks and financial sector regulators, to identify a set of alternative reference rates for potential use as benchmarks. The FRB-NY has established the Secured Oversight Finance Rate or "SOFR" as its recommended alternative to LIBOR, and it is anticipated that LIBOR will be phased out by 2021. The ICE Benchmark Administration, the endpublisher of LIBOR discontinued publication of the one-week and two-month US Dollar LIBOR on December 31, 2021, and will discontinue publication of overnight, one-month, three-month, six-month, and twelve-month U.S Dollar LIBORs on June 30, 2023, although its use for new business was restricted after December 31, 2021, with limited exceptions.
56
In October 2020, the International Swaps and Derivatives Association announced fallback language for derivative contracts incorporating SOFR, as well as a process by which counterparties to such contracts could elect to apply the fallback language to existing derivatives on or after January 25, 2021. In additionSOFR was identified by the Alternative Reference Rates Committee (ARRC), a group of private-market participants convened to help ensure a successful transition from LIBOR in the United States, as the recommended replacement to US Dollar LIBOR in the United States. The adoption of the fallback protocols does not change the index for subject agreements from LIBOR to SOFR, but simply creates the Company is evaluating alternatives other than SOFR as a potential alternativelegal framework for the appropriate mechanisms to LIBOR.occur in the future.
The Bank has established a sub-committee of its ALCO to address issues related to the phase-outphase out and transition away from LIBOR. ThisThe sub-committee is led by our Chief Financial Officer and consists of personnel from various departments throughout the Bank including lending, loan administration, credit risk management, finance/treasury, including interest rate risk and liquidity management, information technology, and operations.
Bank. The Company has identified certain LIBOR-based contracts that extend beyond June 30, 2023, included inwhich may include loans and leases, securities, wholesale borrowings, derivative financial instruments, and long-term debt. The sub-committee has reviewed contractthe associated contracts and legal agreements for conformance to the ARRC aligned fallback language and noted that certain contracts will need updated provisions forrequire some form of standardization in accordance with LIBOR transition recommended fallback provisions.
The FRB, the transitionFDIC, and is coordinatingthe OCC issued supervisory guidance encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. In accordance with impacted business lines. In complying with industry requirements, the Bank will not offer new LIBOR based productionguidance, as of after December 31, 2021.2021 the Bank does not offer LIBOR indexed products.
59
Interest Rate Sensitivity Analysis
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time frame if it will mature or reprice within that period of time. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time frame and the amount of interest-bearing liabilities maturing or repricing within that same period of time.
In a rising interest rate environment, an institution with a negative gap would generally be expected, absent the effects of other factors, to experience a greater increase in the cost of its interest-bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income. Conversely, in a declining rate environment, an institution with a negative gap would generally be expected to experience a lesser reduction in the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an increase in its net interest income.
In a rising interest rate environment, an institution with a positive gap would generally be expected to experience a greater increase in the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an increase in its net interest income. Conversely, in a declining rate environment, an institution with a positive gap would generally be expected to experience a lesser reduction in the cost of its interest-bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income.
At June 30, 2021,2022, our one-year gap was a negative 7.10%26.14%, compared to a negative 4.94%7.43% at December 31, 2020.2021. The change in our one-year gap from December 31, 2020,2021, primarily reflects a decreasean increase in mortgage and other loans expected toborrowings that will mature or reprice within one year.are projected to get put back to the Company and an increase in new deposit balances that are indexed to short term rates.
The table on the following page sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at June 30, 20212022 which, based on certain assumptions stemming from our historical experience, are expected to reprice or mature in each of the future time periods shown. Except as stated below, the amounts of assets and liabilities shown as repricing or maturing during a particular time period were determined in accordance with the earlier of (1) the term to repricing, or (2) the contractual terms of the asset or liability.
The table provides an approximation of the projected repricing of assets and liabilities at June 30, 20212022 on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. For residential mortgage-related securities, prepayment rates are forecasted at a weighted average CPR of 22.35%6.99% per annum; for multi-family and CRE loans, prepayment rates are forecasted at weighted average CPRs of 17.81%8.69% and 12.81%7.25% per annum, respectively. Borrowed funds were not assumed to prepay.
60
Savings, interest bearing checking and money market accounts were assumed to decay based on a comprehensive statistical analysis that incorporated our historical deposit experience. Based on the results of this analysis, savings accounts were assumed to decay at a rate of 78%67% for the first five years and 22%33% for years six through ten. Interest-bearing checking accounts were assumed to decay at a rate of 82%85% for the first five years and 18%15% for years six through ten. The decay assumptions reflect the prolonged low
57
interest rate environment and the uncertainty regarding future depositor behavior. Including those accounts having specified repricing dates, money market accounts were assumed to decay at a rate of 92%79% for the first five years and 8%21% for years six through ten.
|
| At June 30, 2021 |
| |||||||||||||||||||||||||
(dollars in millions) |
| Three |
|
| Four to |
|
| More Than |
|
| More Than |
|
| More Than |
|
| More Than |
|
| Total |
| |||||||
INTEREST-EARNING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage and other loans (1) |
| $ | 7,462 |
|
| $ | 6,234 |
|
| $ | 16,081 |
|
| $ | 10,235 |
|
| $ | 3,500 |
|
| $ | 31 |
|
| $ | 43,543 |
|
Mortgage-related |
|
| 296 |
|
|
| 404 |
|
|
| 891 |
|
|
| 523 |
|
|
| 569 |
|
|
| 310 |
|
|
| 2,993 |
|
Other securities (2) |
|
| 1,991 |
|
|
| 207 |
|
|
| 63 |
|
|
| 184 |
|
|
| 1,325 |
|
|
| - |
|
|
| 3,770 |
|
Interest-earning cash |
|
| 1,941 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,941 |
|
Total interest-earning assets |
|
| 11,690 |
|
|
| 6,845 |
|
|
| 17,035 |
|
|
| 10,942 |
|
|
| 5,394 |
|
|
| 341 |
|
|
| 52,247 |
|
INTEREST-BEARING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Interest-bearing checking and |
|
| 7,023 |
|
|
| 862 |
|
|
| 2,359 |
|
|
| 892 |
|
|
| 1,667 |
|
|
| - |
|
|
| 12,803 |
|
Savings accounts |
|
| 2,381 |
|
|
| 2,543 |
|
|
| 687 |
|
|
| 518 |
|
|
| 1,761 |
|
|
| - |
|
|
| 7,890 |
|
Certificates of deposit |
|
| 2,913 |
|
|
| 4,907 |
|
|
| 1,001 |
|
|
| 94 |
|
|
| 34 |
|
|
| - |
|
|
| 8,949 |
|
Borrowed funds |
|
| 239 |
|
|
| 1,748 |
|
|
| 4,500 |
|
|
| 550 |
|
|
| 8,280 |
|
|
| 142 |
|
|
| 15,459 |
|
Total interest-bearing |
|
| 12,556 |
|
|
| 10,060 |
|
|
| 8,547 |
|
|
| 2,054 |
|
|
| 11,742 |
|
|
| 142 |
|
|
| 45,101 |
|
Interest rate sensitivity gap |
| $ | (866 | ) |
| $ | (3,215 | ) |
| $ | 8,488 |
|
| $ | 8,888 |
|
| $ | (6,348 | ) |
| $ | 199 |
|
| $ | 7,146 |
|
Cumulative interest rate |
| $ | (866 | ) |
| $ | (4,081 | ) |
| $ | 4,407 |
|
| $ | 13,295 |
|
| $ | 6,947 |
|
| $ | 7,146 |
|
|
|
| |
Cumulative interest rate |
|
| -1.51 | % |
|
| -7.10 | % |
|
| 7.67 | % |
|
| 23.13 | % |
|
| 12.09 | % |
|
| 12.43 | % |
|
|
| |
Cumulative net interest- |
|
| 93.10 | % |
|
| 81.96 | % |
|
| 114.14 | % |
|
| 140.02 | % |
|
| 115.45 | % |
|
| 115.84 | % |
|
|
|
|
|
| At June 30, 2022 |
| |||||||||||||||||||||||||||||||
(dollars in millions) |
|
| Three |
|
|
| Four to |
|
|
| More Than |
|
|
| More Than |
|
|
| More Than |
|
|
| More Than |
|
|
| Total |
| |||||||
INTEREST-EARNING ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage and other loans (1) |
| $ |
| 7,153 |
|
| $ |
| 5,636 |
|
| $ |
| 14,144 |
|
| $ |
| 13,698 |
|
| $ |
| 7,856 |
|
| $ |
| — |
|
| $ |
| 48,487 |
|
Mortgage-related securities (2)(3) |
|
|
| 191 |
|
|
|
| 171 |
|
|
|
| 520 |
|
|
|
| 329 |
|
|
|
| 437 |
|
|
|
| 819 |
|
|
|
| 2,467 |
|
Other securities (2) |
|
|
| 1,754 |
|
|
|
| 445 |
|
|
|
| 361 |
|
|
|
| 40 |
|
|
|
| 403 |
|
|
|
| 829 |
|
|
|
| 3,832 |
|
Interest-earning cash, cash equivalents |
|
|
| 3,130 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 3,130 |
|
Total interest-earning assets |
|
|
| 12,228 |
|
|
|
| 6,252 |
|
|
|
| 15,025 |
|
|
|
| 14,067 |
|
|
|
| 8,696 |
|
|
|
| 1,648 |
|
|
|
| 57,916 |
|
INTEREST-BEARING LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Interest-bearing checking and money |
|
|
| 11,890 |
|
|
|
| 506 |
|
|
|
| 2,865 |
|
|
|
| 648 |
|
|
|
| 3,280 |
|
|
|
| — |
|
|
|
| 19,189 |
|
Savings accounts |
|
|
| 3,067 |
|
|
|
| 2,599 |
|
|
|
| 480 |
|
|
|
| 295 |
|
|
|
| 3,139 |
|
|
|
| — |
|
|
|
| 9,580 |
|
Certificates of deposit |
|
|
| 3,070 |
|
|
|
| 3,078 |
|
|
|
| 1,882 |
|
|
|
| 60 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 8,090 |
|
Borrowed funds |
|
|
| 7,989 |
|
|
|
| 2,775 |
|
|
|
| 2,900 |
|
|
|
| 500 |
|
|
|
| — |
|
|
|
| 143 |
|
|
|
| 14,307 |
|
Total interest-bearing liabilities |
|
|
| 26,016 |
|
|
|
| 8,958 |
|
|
|
| 8,127 |
|
|
|
| 1,503 |
|
|
|
| 6,419 |
|
|
|
| 143 |
|
|
|
| 51,166 |
|
Interest rate sensitivity gap per period (4) |
| $ |
| (13,788 | ) |
| $ |
| (2,706 | ) |
| $ |
| 6,898 |
|
| $ |
| 12,564 |
|
| $ |
| 2,277 |
|
| $ |
| 1,505 |
|
| $ |
| 6,750 |
|
Cumulative interest rate sensitivity gap |
| $ |
| (13,788 | ) |
| $ |
| (16,494 | ) |
| $ |
| (9,596 | ) |
| $ |
| 2,968 |
|
| $ |
| 5,245 |
|
| $ |
| 6,750 |
|
|
|
|
| |
Cumulative interest rate sensitivity gap |
|
|
| (21.85 | ) | % |
|
| (26.14 | ) | % |
|
| (15.21 | ) | % |
|
| 4.70 |
| % |
|
| 8.31 |
| % |
|
| 10.70 |
| % |
|
|
| |
Cumulative net interest-earning assets as a |
|
|
| 47.00 |
| % |
|
| 52.84 |
| % |
|
| 77.74 |
| % |
|
| 106.65 |
| % |
|
| 110.28 |
| % |
|
| 113.19 |
| % |
|
|
|
Prepayment and deposit decay rates can have a significant impact on our estimated gap. While we believe our assumptions to be reasonable, there can be no assurance that the assumed prepayment and decay rates will approximate actual future loan and securities prepayments and deposit withdrawal activity.
To validate our prepayment assumptions for our multi-family and CRE loan portfolios, we perform a quarterly analysis, during which we review our historical prepayment rates and compare them to our projected prepayment rates. We continually review the actual prepayment rates to ensure that our projections are as accurate as possible, since prepayments on these types of loans are not as closely correlated to changes in interest rates as prepayments on one-to-four family loans tend to be. In addition, we review the call provisions, if any, in our borrowings and investment portfolios and, on a monthly basis, compare the actual calls to our projected calls to ensure that our projections are reasonable.
61
As of June 30, 2021,2022, the impact of a 100 bp decline in market interest rates for our loans would have had very little impact on prepayment speeds due to the current low interest rates and current coupons being floored at base rates. The impact of a 100 bp increase in market interest rates would have decreasedincreased our projected prepayment rates for multi-family and CRE loans by a constant prepayment rate of 3.68%2.90% per annum.
Certain shortcomings are inherent in the method of analysis presented in the preceding Interest Rate Sensitivity Analysis. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of the market, while interest rates on other types may lag behind changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. Furthermore, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate from those assumed in calculating the
58
table. Also, the ability of some borrowers to repay their adjustable-rate loans may be adversely impacted by an increase in market interest rates.
Interest rate sensitivity is also monitored through the use of a model that generates estimates of the change in our Economic Value of Equity (“EVE”) over a range of interest rate scenarios. EVE is defined as the net present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The EVE ratio, under any interest rate scenario, is defined as the EVE in that scenario divided by the market value of assets in the same scenario. The model assumes estimated loan prepayment rates, reinvestment rates, and deposit decay rates similar to those utilized in formulating the preceding Interest Rate Sensitivity Analysis.
Based on the information and assumptions in effect at June 30, 2021,2022, the following table reflects the estimated percentage change in our EVE, assuming the changes in interest rates noted:
Change in | Estimated | |
|
| |
+ | -8.17% | |
+ 200 over one year |
| -16.66% |
The net changes in EVE presented in the preceding table are within the parameterslimits approved by the Boards of Directors of the Company and the Bank.
As with the Interest Rate Sensitivity Analysis, certain shortcomings are inherent in the methodology used in the preceding interest rate risk measurements. Modeling changes in EVE requires that certain assumptions be made which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the EVE Analysis presented above assumes that the composition of our interest rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and also assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the duration to maturity or repricing of specific assets and liabilities. Furthermore, the model does not take into accountconsider the benefit of any strategic actions we may take to further reduce our exposure to interest rate risk. Accordingly, while the EVE Analysis provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income, and may very well differ from actual results.
We also utilize an internal net interest income simulation to manage our sensitivity to interest rate risk. The simulation incorporates various market-based assumptions regarding the impact of changing interest rates on future levels of our financial assets and liabilities. The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the following table, due to the frequency, timing, and magnitude of changes in interest rates; changes in spreads between maturity and repricing categories; and prepayments, among other factors, coupled with any actions taken to counter the effects of any such changes.
62
Based on the information and assumptions in effect at June 30, 2021,2022, the following table reflects the estimated percentage change in future net interest income for the next twelve months, assuming the changes in interest rates noted:
Change in Interest Rates | Estimated | |
| 4.41% | |
+100 over one year |
| -3.72% |
+200 over one year |
|
59
Future changes in our mix of assets and liabilities may result in greater changes to our gap, NPV, and/or net interest income simulation.
In the event that our EVE and net interest income sensitivities were to breach our internal policy limits, we would undertake the following actions to ensure that appropriate remedial measures were put in place:
Where temporary changes in market conditions or volume levels result in significant increases in risk, strategies may involve reducing open positions or employing synthetic hedging techniques to more immediately reduce risk exposure. Where variance from policy tolerances is triggered by more fundamental imbalances in the risk profiles of core loan and deposit products, a remedial strategy may involve restoring balance through natural hedges to the extent possible before employing synthetic hedging techniques. Other strategies might include:
In connection with our net interest income simulation modeling, we also evaluate the impact of changes in the slope of the yield curve. At June 30, 2021,2022, our analysis indicated that an immediate inversion of the yield curve would be expected to result in a 6.57%(4.32)% decrease in net interest income; conversely, an immediate steepening of the yield curve would be expected to result in a 0.59%13.38% increase in net interest income. It should be noted that the yield curve changes in these scenarios were updated, given the changing market rate environment, which resulted in an increase in the income sensitivity.sensitivity in the steepening scenario.
Liquidity, Contractual Obligations and Off-Balance Sheet Commitments and Capital Position
Liquidity
We manage our liquidity to ensure that our cash flows are sufficient to support our operations, and to compensate for any temporary mismatches between sources and uses of funds caused by variable loan and deposit demand.
63
We monitor our liquidity daily to ensure that sufficient funds are available to meet our financial obligations. Our most liquid assets are cash and cash equivalents, which totaled $2.1$3.3 billion and $1.9$2.2 billion, respectively, at June 30, 20212022 and December 31, 2020.2021. As in the past, our portfolios of loansloan and securities portfolios provided meaningful liquidity in the first six months of the year,2022, with cash flows from the repayment and sale of loans totaling $4.4$6.0 billion and cash flows from the repayment and sale of securities totaling $931$397 million.
Additional liquidity stems from the retail, institutional, and municipal deposits we gather and from our use of wholesale funding sources, including brokered deposits and wholesale borrowings. We alsoIn addition, we have access to the Bank’s approved lines of credit with various counterparties, including the FHLB-NY. The availability of these wholesale funding sources is generally based on the available amount of mortgage loan collateral available under a blanket lien we have pledged to the respective institutions and, to a lesser extent, the available amount of available securities that may be pledged to collateralize our borrowings. At June 30, 2021,2022, our available borrowing capacity with the FHLB-NY was $7.6$12.2 billion. In addition, the CompanyBank had $6.1available-for-sale securities of $5.7 billion, of available-for-sale securities, at that date, of which, $4.7$4.6 billion was unencumbered.is unpledged.
Furthermore, the Bank has an agreementagreements with the FRB-NY that enablesenable it to access the discount window as a further means of enhancing liquidity if need be.their liquidity. In connection with the agreement,these agreements, the Bank has pledged certain loans and securities to collateralize any funds thatthey may be borrowed.borrow. At June 30, 2021,2022, the maximum amount the Bank could borrow from the FRB-NY was $1.1 billion. There were no borrowings outstandingagainst these lines of credit at that date.June 30, 2022.
60
Our primary investing activity is loan production. In the second three months of 2021,production, and the volume of loans we originated for investment was $3.1 billion.totaled $8.8 billion in 2022. During this time, the net cash used in investing activities totaled $802 million. Our operating activities provided net cash of $14 million, while$3.1 billion; the net cash provided by our operating activities totaled $399 million. Our financing activities totaled $926 million.provided net cash of $3.7 billion.
CDs due to mature or reprice in one year or less as offrom June 30, 20212022 totaled $7.8$6.1 billion, representing 87%76% of total CDs at that date. Our ability to attract and retain theseretail deposits, including CDs, and to attract new deposits depends on numerous factors, including, customeramong others, the convenience of our branches and our other banking channels; our customers’ satisfaction with the service they receive; the rates of interest we pay on our deposits,offer; the types of products we offer,feature; and the attractiveness of their terms. However, there are times when we may choose not
Our decision to compete for such deposits dependingalso depends on numerous factors, including, among others, our access to deposits through acquisitions, the availability of lower-cost funding sources, the competitivenessimpact of the market and its impactcompetition on pricing, and ourthe need for such deposits to fund our loan demand, as previously discussed.demand.
The Parent Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to operating expenses and any share repurchases, the Parent Company is responsible for paying any dividends declared to our shareholders.stockholders. As a Delaware corporation, the Parent Company is able to pay dividends either from surplus or, in case there is no surplus, from net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
The Parent Company’s ability to pay dividends may also depend, in part, upon dividends it receives from the Bank. The ability of the Bank to pay dividends and other capital distributions to the Parent Company is generally limited by New York State Banking Law and regulations, and by certain regulations of the FDIC. In addition, the Superintendent of the New York State Department of Financial Services (the “Superintendent”), the FDIC, and the FRB, for reasons of safety and soundness, may prohibit the payment of dividends that are otherwise permissible by regulations.
Under New York State Banking Law, a New York State-chartered stock-form savings bank or commercial bank may declare and pay dividends out of its net profits, unless there is an impairment of capital. However, the approval of the Superintendent is required if the total of all dividends declared in a calendar year would exceed the total of a bank’s net profits for that year, combined with its retained net profits for the preceding two years.
In the six months ended June 30, 2021,2022, the Bank paid dividends totaling $190 million to the Parent Company, leaving $343$573 million theythat it could dividend to the Parent Company without regulatory approval at that date.year-end. Additional sources of liquidity available to the Parent Company at June 30, 20212022 included $148$133 million in cash and cash equivalents. If the Bank was to apply to the Superintendent for approval to make a dividend or capital distribution in excess of the dividend amounts permitted under the regulations, there can be no assurance that such application would be approved.
Contractual Obligations and Off-Balance Sheet Commitments
In the normal course of business, we enter into a variety of contractual obligations in order to manage our assets and liabilities, fund loan growth, operate our branch network, and address our capital needs.
For example, we offer CDs with contractual terms to our customers, and borrow funds under contract from the FHLB-NY and various brokerage firms. These contractual obligations are reflected in the Consolidated Statements of Condition under “Deposits” and “Borrowed funds,” respectively. At June 30, 2022, we had CDs of $8.1 billion and long-term debt (defined as borrowed funds with an original maturity one year or more) of $12.6 billion.
At June 30, 2022, we also had commitments to extend credit in the form of mortgage and other loan originations, as well as commercial, performance stand-by, and financial stand-by letters of credit, totaling $4.9 billion. These off-balance sheet commitments consist of agreements to extend credit, as long as there is no violation of any condition established in the contract under which the loan is made. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee.
The letters of credit we issue consist of performance stand-by, financial stand-by, and commercial letters of credit. Financial stand-by letters of credit primarily are issued for the benefit of other financial institutions, municipalities, or landlords on behalf of certain of our current borrowers, and obligate us to guarantee payment of a specified financial obligation. Performance stand-by letters of credit are primarily issued for the benefit of local municipalities on behalf of certain of our borrowers. Performance letters of credit obligate us to make payments in the event that a specified third party fails to perform under non-financial contractual obligations. Commercial letters of credit act as a means of ensuring payment to a seller upon shipment of goods to a buyer. Although commercial letters of credit are used to effect payment for domestic transactions, the majority are used to settle payments in international trade. Typically, such letters of credit require the presentation of documents that describe the commercial transaction, and provide evidence of shipment and the transfer of title. The fees we collect in connection with the issuance of letters of credit are included in “Fee income” in the Consolidated Statements of Income and Comprehensive Income.
61
Based upon our current liquidity position, we expect that our funding will be sufficient to fulfill these cash obligations and commitments when they are due both in the short term and long term.
For the three months ended June 30, 2022, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.
At June 30, 2022, we had no commitments to purchase securities.
Capital Position
On March 17, 2017, we issued 515,000 shares of preferred stock. The offering generated capital of $503 million, net of underwriting and other issuance costs, for general corporate purposes, with the bulk of the proceeds being distributed to the Bank.
64
On October 24, 2018, the Company announced that it had received regulatory approval to repurchase its common stock. Accordingly, the Board of Directors approved a $300 million common share repurchase program. The repurchase program was funded through the issuance of a like amount of subordinated notes. As of June 30, 2021,2022, the Company has repurchased a total of 28.929.7 million shares at an average price of $9.63$9.61 or an aggregate purchase price of $278$285 million, leaving $17$10 million remaining under the current authorization.
Stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity includeincludes AOCL, which decreased $50$368 million from the balance at the end of last year and $45$379 million from the year-ago quarter to $75$453 million at June 30, 2021.2022. The year-to-date decrease was primarily the result of a $66$391 million change in the net unrealized gain (loss) on available-for-sale securities, net of tax, and a $18$23 million change in the net unrealized loss on cash flow hedges, net of tax, to $22$14 million.
Regulatory Capital
The Bank is subject to regulation, examination, and supervision by the NYSDFS and the FDIC (the “Regulators”). The Bank is also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which established five categories of capital adequacy ranging from “well capitalized” to “critically undercapitalized.” Such classifications are used by the FDIC to determine various matters, including prompt corrective action and each institution’s FDIC deposit insurance premium assessments. Capital amounts and classifications are also subject to the Regulators’ qualitative judgments about the components of capital and risk weightings, among other factors.
The quantitative measures established to ensure capital adequacy require that banks maintain minimum amounts and ratios of leverage capital to average assets and of common equity tier 1 capital, tier 1 capital, and total capital to risk-weighted assets (as such measures are defined in the regulations). At June 30, 2021,2022, our capital measures continued to exceed the minimum federal requirements for a bank holding company and for a bank. The following table sets forth our common equity tier 1, tier 1 risk-based, total risk-based, and leverage capital amounts and ratios on a consolidated basis and for the Bank on a stand-alone basis, as well as the respective minimum regulatory capital requirements, at that date:
Regulatory Capital Analysis (the Company)
| Risk-Based Capital |
|
|
|
|
|
|
| ||||||||||||||||||||
At June 30, 2022 | Common Equity |
|
| Tier 1 |
|
| Total |
|
| Leverage Capital |
|
| ||||||||||||||||
(dollars in millions) | Amount |
| Ratio |
|
| Amount |
| Ratio |
|
| Amount |
| Ratio |
|
| Amount |
| Ratio |
|
| ||||||||
Total capital | $ | 4,368 |
|
| 9.16 |
| % | $ | 4,871 |
|
| 10.22 |
| % | $ | 5,719 |
|
| 12.00 |
| % | $ | 4,871 |
|
| 8.13 |
| % |
Minimum for capital adequacy |
| 2,145 |
|
| 4.50 |
|
|
| 2,860 |
|
| 6.00 |
|
|
| 3,813 |
|
| 8.00 |
|
|
| 2,396 |
|
| 4.00 |
|
|
Excess | $ | 2,223 |
|
| 4.66 |
| % | $ | 2,011 |
|
| 4.22 |
| % | $ | 1,906 |
|
| 4.00 |
| % | $ | 2,475 |
|
| 4.13 |
| % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
| Risk-Based Capital |
|
|
|
|
|
|
|
| |||||||||||||||||||||||
At June 30, 2021 |
| Common Equity |
|
| Tier 1 |
|
| Total |
|
| Leverage Capital |
|
| ||||||||||||||||||||
(dollars in millions) |
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| ||||||||
Total capital |
| $ | 4,088 |
|
|
| 9.84 |
| % | $ | 4,590 |
|
|
| 11.05 |
| % | $ | 5,421 |
|
|
| 13.05 |
| % | $ | 4,590 |
|
|
| 8.25 |
| % |
Minimum for capital adequacy |
|
| 1,869 |
|
|
| 4.50 |
|
|
| 2,492 |
|
|
| 6.00 |
|
|
| 3,322 |
|
|
| 8.00 |
|
|
| 2,225 |
|
|
| 4.00 |
|
|
Excess |
| $ | 2,219 |
|
|
| 5.34 |
| % | $ | 2,098 |
|
|
| 5.05 |
| % | $ | 2,099 |
|
|
| 5.05 |
| % | $ | 2,365 |
|
|
| 4.25 |
| % |
Regulatory Capital Analysis (New York Community Bank)
|
| Risk-Based Capital |
|
|
|
|
|
|
| Risk-Based Capital |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||
At June 30, 2021 |
| Common Equity |
|
| Tier 1 |
|
| Total |
|
| Leverage Capital |
| |||||||||||||||||||||||||||||||||||||||||||||||||
At June 30, 2022 | Common Equity |
|
| Tier 1 |
|
| Total |
|
| Leverage Capital |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| Amount |
| Ratio |
|
| Amount |
| Ratio |
|
| Amount |
| Ratio |
|
| Amount |
| Ratio |
|
| |||||||||||||||||
Total capital |
| $ | 5,091 |
| 12.26 |
| % | $ | 5,091 |
| 12.26 |
| % | $ | 5,277 |
| 12.71 |
| % | $ | 5,091 |
| 9.15 |
| % | $ | 5,365 |
| 11.26 |
| % | $ | 5,365 |
| 11.26 |
| % | $ | 5,569 |
| 11.69 |
| % | $ | 5,365 |
| 8.96 |
| % | ||||||||||||
Minimum for capital adequacy |
|
| 1,868 |
|
| 4.50 |
|
| 2,491 |
|
| 6.00 |
|
| 3,321 |
|
| 8.00 |
|
| 2,225 |
|
| 4.00 |
|
|
| 2,143 |
|
| 4.50 |
|
|
| 2,858 |
|
| 6.00 |
|
|
| 3,810 |
|
| 8.00 |
|
|
| 2,395 |
|
| 4.00 |
|
| |||||||
Excess |
| $ | 3,223 |
|
| 7.76 |
| % | $ | 2,600 |
|
| 6.26 |
| % | $ | 1,956 |
|
| 4.71 |
| % | $ | 2,866 |
|
| 5.15 |
| % | $ | 3,222 |
|
| 6.76 |
| % | $ | 2,507 |
|
| 5.26 |
| % | $ | 1,759 |
|
| 3.69 |
| % | $ | 2,970 |
|
| 4.96 |
| % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
At June 30, 2021,2022, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 505400 bps and the fully-phased in capital conservation buffer by 255150 bps.
The Bank also exceeded the minimum capital requirements to be categorized as “Well Capitalized.” To be categorized as well capitalized, a bank must maintain a minimum common equity tier 1 ratio of 6.50%; a minimum tier 1 risk-based capital ratio of 8.00%; a minimum total risk-based capital ratio of 10.00%; and a minimum leverage capital ratio of 5.00%.
Earnings Summary for the Three Months Ended June 30, 20212022
Net income forFor the three months ended June 30, 20212022, net income totaled $152$171 million, up 45%13% compared to the $105$152 million wethe Company reported for the three months ended June 30, 2020.2021. Net income available to common shareholdersstockholders for the second quarter of 2021three months ended June 30, 2022 totaled $144$163 million, up 48%13% compared to the $97$144 million wethe Company reported for the second quarter of 2020.
three months ended June 30, 2021. On a per share basis, diluted earnings per common shareEPS were $0.30,$0.34 for the three months ended June 30, 2022, up 43%13% compared to the $0.21 we$0.30 the Company reported for the second quarterthree months ended June 30, 2021. Both net income and net income available to common stockholders for the three months ended June 30, 2022 include merger-related expenses of 2020.$3 million, net of income tax, while the three months ended June 30, 2021 includes merger-related expenses of $10 million, net of income tax and a $2 million revaluation of the Company's deferred taxes due to a change in the New York State tax rate.
Net Interest Income
Net interest income is our primary source of income. Its level is a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition for loans and deposits, the monetary policy of the FOMC, and market interest rates.
Net interest income is also influenced by the level of prepayment income primarily generated in connection with the prepayment of our multi-family and CRE loans, as well as securities. Since prepayment income is recorded as interest income, an increase or decrease in its level will also be reflected in the average yields (as applicable) on our loans, securities, and interest-earning assets, and therefore in our interest rate spread and net interest margin.
It should be noted that the level of prepayment income on loans recorded in any given period depends on the volume of loans that refinance or prepay during that time. Such activity is largely dependent on such external factors as current market conditions, including real estate values, and the perceived or actual direction of market interest rates. In addition, while a decline in market interest rates may trigger an increase in refinancing and, therefore, prepayment income, so too may an increase in market interest rates. It is not unusual for borrowers to lock in lower interest rates when they expect, or see, that market interest rates are rising rather than risk refinancing later at a still higher interest rate.
Year-Over-Year Comparison
Net interest income for the three months ended June 30, 2021 increased $652022 totaled $359 million, up $28 million or 24%8% on a year-over-year basis. This increase was primarily driven by a $57$42 million or 36% decline in interest expense compared to the year-ago quarter and an $8 million or 2%10% increase in interest income.income offset by a $14 million or 14% increase in interest expense.
63
Details of the increasechange in net interest income are as follows:
Net Interest Margin
The Company's NIM improved during the current second quarter in-line with the growth in net interest income. ForDuring the three months ended June 30, 2021,2022, the NIM increased 32 bpswas 2.52%, up two basis points on a year-over-year basis and two bpup nine basis points on a linked-quarter basis.
Prepayment income contributed 14 basis points to 2.50%.the current quarter's NIM, up two basis points compared to the second quarter of last year and up six basis points compared to the first quarter of this year. Excluding the impact from prepayment income, the NIM on a non-GAAP basis was 2.38%, up three basis points compared to the second quarter of this year.
The following table summarizes the contribution of loan and securities prepayment income on the Company’s interest income and NIM for the respective periods:
|
|
|
|
|
|
|
|
|
|
| June 30, 2022 |
|
| ||||||||
|
| For the Three |
|
| Compared to |
|
| ||||||||||||||
(dollars in millions) |
| June 30, |
|
| March 31, |
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| |||||
Total Interest Income |
| $ | 473 |
|
| $ | 429 |
|
| $ | 431 |
|
|
| 10 |
| % |
| 10 |
| % |
Prepayment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ | 19 |
|
| $ | 11 |
|
| $ | 22 |
|
|
| 73 |
| % |
| (14 | ) | % |
Securities |
|
| 1 |
|
|
| — |
|
|
| 5 |
|
| NM |
| % |
| (80 | ) | % | |
Total prepayment income |
| $ | 20 |
|
| $ | 11 |
|
| $ | 27 |
|
|
| 82 |
| % |
| (26 | ) | % |
GAAP Net Interest Margin |
| 2.52 |
| % | 2.43 |
| % | 2.50 |
| % |
| 9 |
| bp |
| 2 |
| bp | |||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Prepayment income from loans |
| -13 |
| bp | -8 |
| bp | -17 |
| bp |
| (5 | ) | bp | 4 |
| bp | ||||
Prepayment income from securities |
| -1 |
|
|
| — |
|
| -3 |
|
|
| (1 | ) | bp | 2 |
| bp | |||
Add excess liquidity |
|
| — |
|
|
| — |
|
| 8 |
|
|
| — |
|
| 8 |
|
| ||
Total prepayment income contribution to net interest margin |
| -14 |
| bp | -8 |
| bp | -12 |
| bp |
| (6 | ) | bp |
| (2 | ) | bp | |||
Adjusted Net Interest Margin (non-GAAP) |
| 2.38 |
| % | 2.35 |
| % | 2.38 |
| % |
| 3 |
| bp | 0 |
| bp |
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| For the Three Months Ended |
|
| June 30, 2021 |
|
| ||||||||||||||
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| |||||
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| |||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Interest Income |
| $ | 431 |
|
| $ | 423 |
|
| $ | 423 |
|
|
| 2 | % |
|
| 2 | % |
|
Prepayment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ | 22 |
|
| $ | 19 |
|
| $ | 12 |
|
|
| 16 | % |
|
| 83 | % |
|
Securities |
|
| 5 |
|
|
| 1 |
|
|
| — |
|
|
| 400 | % |
| NM |
|
| |
Total prepayment income |
| $ | 27 |
|
| $ | 20 |
|
| $ | 12 |
|
|
| 35 | % |
|
| 125 | % |
|
GAAP Net Interest Margin |
|
| 2.50 | % |
|
| 2.48 | % |
|
| 2.18 | % |
| 2 |
| bp | 32 |
| bp |
The following table sets forth certain information regarding our average balance sheet for the three-month periods, including the average yields on our interest-earning assets and the average costs of our interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average balance of interest-earning assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the quarters are derived from average balances that are calculated daily. The average yields and costs include fees, as well as premiums and discounts (including mark-to-market adjustments from acquisitions), that are considered adjustments to such average yields and costs.
Net Interest Income Analysis
|
| For the Three Months Ended |
|
| |||||||||||||||||||||||||||||
|
| June 30, 2022 |
|
| March 31, 2022 |
|
| June 30, 2021 |
|
| |||||||||||||||||||||||
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
|
| |||||||||
|
| Average |
|
|
|
| Yield/ |
|
| Average |
|
|
|
| Yield/ |
|
| Average |
|
|
| Yield/ |
|
| |||||||||
(dollars in millions) |
| Balance |
|
| Interest |
| Cost |
|
| Balance |
|
| Interest |
| Cost |
|
| Balance |
| Interest |
| Cost |
|
| |||||||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Mortgage and other loans and leases, net (1) | $ |
| 47,144 |
| $ |
| 424 |
|
| 3.61 |
| % | $ | 45,807 |
| $ |
| 393 |
|
| 3.43 |
| % | $ | 42,817 |
| $ | 386 |
|
| 3.60 |
| % |
Securities (2)(3) |
|
| 6,676 |
|
|
| 40 |
|
| 2.40 |
|
|
| 6,538 |
|
|
| 34 |
|
| 2.12 |
|
|
| 6,790 |
|
| 43 |
|
| 2.55 |
|
|
Reverse repurchase agreements |
|
| 348 |
|
|
| 2 |
|
| 1.93 |
|
|
| 292 |
|
|
| 1 |
|
| 1.12 |
|
|
| 469 |
|
| 1 |
|
| 1.32 |
|
|
Interest-earning cash, cash equivalents, and due from banks |
|
| 2,861 |
|
|
| 7 |
|
| 0.93 |
|
|
| 1,924 |
|
|
| 1 |
|
| 0.21 |
|
|
| 2,946 |
|
| 1 |
|
| 0.11 |
|
|
Total interest-earning assets |
|
| 57,029 |
|
|
| 473 |
|
| 3.32 |
|
|
| 54,561 |
|
|
| 429 |
|
| 3.15 |
|
|
| 53,022 |
|
| 431 |
|
| 3.25 |
|
|
Non-interest-earning assets |
|
| 4,959 |
|
|
|
|
|
|
|
| 5,333 |
|
|
|
|
|
|
|
| 5,092 |
|
|
|
|
|
| ||||||
Total assets | $ |
| 61,988 |
|
|
|
|
|
|
| $ | 59,894 |
|
|
|
|
|
|
| $ | 58,114 |
|
|
|
|
|
| ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-bearing checking and money market accounts | $ |
| 17,456 |
| $ |
| 24 |
|
| 0.55 |
| % | $ | 13,784 |
| $ |
| 8 |
|
| 0.24 |
| % | $ | 12,699 |
| $ | 7 |
|
| 0.24 |
| % |
Savings accounts |
|
| 9,228 |
|
|
| 10 |
|
| 0.41 |
|
|
| 9,208 |
|
|
| 8 |
|
| 0.35 |
|
|
| 7,487 |
|
| 7 |
|
| 0.36 |
|
|
Certificates of deposit |
|
| 8,102 |
|
|
| 12 |
|
| 0.62 |
|
|
| 8,070 |
|
|
| 11 |
|
| 0.53 |
|
|
| 9,154 |
|
| 14 |
|
| 0.58 |
|
|
Total interest-bearing deposits |
|
| 34,786 |
|
|
| 46 |
|
| 0.53 |
|
|
| 31,062 |
|
|
| 27 |
|
| 0.35 |
|
|
| 29,340 |
|
| 28 |
|
| 0.38 |
|
|
Short term borrowed funds |
|
| 1,959 |
|
|
| 5 |
|
| 0.96 |
|
|
| 3,212 |
|
|
| 3 |
|
| 0.39 |
|
|
| 2,250 |
|
| 2 |
|
| 0.35 |
|
|
Other borrowed funds |
|
| 13,050 |
|
|
| 63 |
|
| 1.94 |
|
|
| 13,351 |
|
|
| 67 |
|
| 2.04 |
|
|
| 13,474 |
|
| 70 |
|
| 2.07 |
|
|
Total Borrowed funds |
|
| 15,009 |
|
|
| 68 |
|
| 1.81 |
|
|
| 16,563 |
|
|
| 70 |
|
| 1.72 |
|
|
| 15,724 |
|
| 72 |
|
| 1.82 |
|
|
Total interest-bearing liabilities |
|
| 49,795 |
|
|
| 114 |
|
| 0.92 |
|
|
| 47,625 |
|
|
| 97 |
|
| 0.82 |
|
|
| 45,064 |
|
| 100 |
|
| 0.88 |
|
|
Non-interest-bearing deposits |
|
| 4,568 |
|
|
|
|
|
|
|
| 4,397 |
|
|
|
|
|
|
|
| 5,488 |
|
|
|
|
|
| ||||||
Other liabilities |
|
| 724 |
|
|
|
|
|
|
|
| 826 |
|
|
|
|
|
|
|
| 691 |
|
|
|
|
|
| ||||||
Total liabilities |
|
| 55,087 |
|
|
|
|
|
|
|
| 52,848 |
|
|
|
|
|
|
|
| 51,243 |
|
|
|
|
|
| ||||||
Stockholders’ equity |
|
| 6,901 |
|
|
|
|
|
|
|
| 7,046 |
|
|
|
|
|
|
|
| 6,871 |
|
|
|
|
|
| ||||||
Total liabilities and stockholders’ equity | $ |
| 61,988 |
|
|
|
|
|
|
| $ | 59,894 |
|
|
|
|
|
|
| $ | 58,114 |
|
|
|
|
|
| ||||||
Net interest income/interest rate spread |
|
|
| $ |
| 359 |
|
| 2.40 |
| % |
|
| $ |
| 332 |
|
| 2.33 |
| % |
|
| $ | 331 |
|
| 2.37 |
| % | |||
Net interest margin |
|
|
|
|
|
|
| 2.52 |
| % |
|
|
|
|
|
| 2.43 |
| % |
|
|
|
|
| 2.50 |
| % | ||||||
Ratio of interest-earning assets to interest-bearing |
|
|
|
|
|
| 1.15x |
|
|
|
|
|
|
| 1.15x |
|
|
|
|
|
| 1.18x |
|
|
| For the Three Months Ended |
| |||||||||||||||||||||||||
| June 30, 2021 |
| March 31, 2021 |
| June 30, 2020 |
| |||||||||||||||||||||
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| |||||||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Mortgage and other loans, net (1) | $ | 42,817 |
| $ | 386 |
|
| 3.60 | % | $ | 42,736 |
| $ | 383 |
|
| 3.59 | % | $ | 41,853 |
| $ | 382 |
|
| 3.65 | % |
Securities (2)(3) |
| 6,790 |
|
| 43 |
|
| 2.55 |
|
| 6,517 |
|
| 39 |
|
| 2.36 |
|
| 5,920 |
|
| 41 |
|
| 2.77 |
|
Interest-earning cash and cash |
| 3,415 |
|
| 2 |
|
| 0.27 |
|
| 1,835 |
|
| 1 |
|
| 0.28 |
|
| 856 |
|
| — |
|
| 0.10 |
|
Total interest-earning assets |
| 53,022 |
| $ | 431 |
|
| 3.25 |
|
| 51,088 |
|
| 423 |
|
| 3.32 |
|
| 48,629 |
|
| 423 |
|
| 3.48 |
|
Non-interest-earning assets |
| 5,092 |
|
|
|
|
|
| 5,218 |
|
|
|
|
|
| 5,158 |
|
|
|
|
| ||||||
Total assets | $ | 58,114 |
|
|
|
|
| $ | 56,306 |
|
|
|
|
| $ | 53,787 |
|
|
|
|
| ||||||
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-bearing checking and | $ | 12,699 |
| $ | 7 |
|
| 0.24 | % | $ | 12,626 |
| $ | 9 |
|
| 0.28 | % | $ | 10,540 |
| $ | 10 |
|
| 0.38 | % |
Savings accounts |
| 7,487 |
|
| 7 |
|
| 0.36 |
|
| 6,713 |
|
| 6 |
|
| 0.38 |
|
| 5,336 |
|
| 8 |
|
| 0.62 |
|
Certificates of deposit |
| 9,154 |
|
| 14 |
|
| 0.58 |
|
| 9,984 |
|
| 18 |
|
| 0.75 |
|
| 13,135 |
|
| 65 |
|
| 2.00 |
|
Total interest-bearing deposits |
| 29,340 |
|
| 28 |
|
| 0.38 |
|
| 29,323 |
|
| 33 |
|
| 0.46 |
|
| 29,011 |
|
| 83 |
|
| 1.16 |
|
Borrowed funds |
| 15,724 |
|
| 72 |
|
| 1.82 |
|
| 15,995 |
|
| 72 |
|
| 1.82 |
|
| 14,403 |
|
| 74 |
|
| 2.06 |
|
Total interest-bearing liabilities |
| 45,064 |
|
| 100 |
|
| 0.88 |
|
| 45,318 |
|
| 105 |
|
| 0.94 |
|
| 43,414 |
|
| 157 |
|
| 1.46 |
|
Non-interest-bearing deposits |
| 5,488 |
|
|
|
|
|
| 3,243 |
|
|
|
|
|
| 3,040 |
|
|
|
|
| ||||||
Other liabilities |
| 691 |
|
|
|
|
|
| 872 |
|
|
|
|
|
| 676 |
|
|
|
|
| ||||||
Total liabilities |
| 51,243 |
|
|
|
|
|
| 49,433 |
|
|
|
|
|
| 47,130 |
|
|
|
|
| ||||||
Stockholders’ equity |
| 6,871 |
|
|
|
|
|
| 6,873 |
|
|
|
|
|
| 6,657 |
|
|
|
|
| ||||||
Total liabilities and stockholders’ | $ | 58,114 |
|
|
|
|
| $ | 56,306 |
|
|
|
|
| $ | 53,787 |
|
|
|
|
| ||||||
Net interest income/interest rate |
|
| $ | 331 |
|
| 2.37 | % |
|
| $ | 318 |
|
| 2.38 | % |
|
| $ | 266 |
|
| 2.02 | % | |||
Net interest margin |
|
|
|
|
| 2.50 | % |
|
|
|
|
| 2.48 | % |
|
|
|
|
| 2.18 | % | ||||||
Ratio of interest-earning assets to |
|
|
|
| 1.18x |
|
|
|
|
| 1.13x |
|
|
|
|
| 1.12x |
|
67
(Recovery of) Provision for Credit Losses
For the three months ended June 30, 2021,2022, the Company recordedreported a provision for credit losses of $9 million compared to a recovery of credit losses of $4 million compared to an $18 million provision for the three months ended June 30, 2020.2021. The year-over-year improvementcurrent quarter's provision largely reflects the significant improvement in forecasted, future economic conditions based onstrong loan growth the adoption of CECL in the first quarter of last year, as well as net recoveries of $6 millionCompany experienced during the second quarter.
For additional information about our provisions for and recoveries of loan losses, see the discussion of the allowances for loan losses under “Critical Accounting Policies” and the discussion of “Asset Quality” that appear earlier in this report.
65
Non-Interest Income
We generate non-interest income through a variety of sources, including—among others—fee income (in the form of retail deposit fees and charges on loans); income from our investment in BOLI; gains on the sale of securities; and revenues produced through the sale of third-party investment products.
For the three months ended June 30, 2021,2022, non-interest income totaled $16$18 million, up $113% on a year-over-year basis. The current second quarter includes a $1.7 million or 7% compared togain on the year-ago quarter. The increase was mainlysale of the result of higher fee income, offset by a slight declineCompany's former headquarters building in BOLI income.Westbury, N.Y.
The following table summarizes our non-interest income for the respective periods:
|
| For the Three Months Ended |
| |||||||||
(dollars in millions) |
| June 30, |
|
| March 31, |
|
| June 30, |
| |||
Fee income |
| $ | 6 |
|
| $ | 5 |
|
| $ | 4 |
|
BOLI income |
|
| 8 |
|
|
| 7 |
|
|
| 9 |
|
Net gain (loss) on securities |
|
| - |
|
|
| - |
|
|
| 1 |
|
Other income: |
|
|
|
|
|
|
|
|
| |||
Third-party investment product sales |
|
| - |
|
|
| 1 |
|
|
| 1 |
|
Other |
|
| 2 |
|
|
| 1 |
|
|
| - |
|
Total other income |
|
| 2 |
|
|
| 2 |
|
|
| 1 |
|
Total non-interest income |
| $ | 16 |
|
| $ | 14 |
|
| $ | 15 |
|
|
| For the Three Months Ended |
| |||||||||
|
| June 30, |
|
| March 31, |
|
| June 30, |
| |||
(dollars in millions) |
| 2022 |
|
| 2022 |
|
| 2021 |
| |||
Fee income |
| $ | 6 |
|
| $ | 6 |
|
| $ | 6 |
|
BOLI income |
|
| 7 |
|
|
| 7 |
|
|
| 8 |
|
Net gain (loss) on securities |
|
| — |
|
|
| (1 | ) |
|
| — |
|
Other income: |
|
|
|
|
|
|
|
|
| |||
Third-party investment product sales |
|
| 1 |
|
|
| 1 |
|
|
| — |
|
Other |
|
| 4 |
|
|
| 1 |
|
|
| 2 |
|
Total other income |
|
| 5 |
|
|
| 2 |
|
|
| 2 |
|
Total non-interest income |
| $ | 18 |
|
| $ | 14 |
|
| $ | 16 |
|
Non-Interest Expense
Total non-interest expense for the three months ended June 30, 2021 was $139 million, up $16 million or 13% on a year-over-year basis. Included in our current second quarter results are $10 million in merger-related expenses pertaining to our upcoming merger with Flagstar Bancorp, Inc. This was driven by a $6 million or 22% increase in general and administrative expense to $33 million. This was largely related to legal, professional, and FDIC insurance premiums.
Income Tax Expense
For the three months ended June 30, 2021,2022, non-interest expenses totaled $138 million, down $1 million or 1% compared to the Company recordedsecond quarter of last year. The current second quarter amount includes $4 million in merger-related expenses compared to $10 million in the year-ago quarter. The second quarter efficiency ratio was 35.57% compared to 37.11% for the second quarter of last year.
Income Tax Expense
For the three months ended June 30, 2022, income tax expense of $60totaled $59 million, primarily duedown $1 million or 2% compared to higher pre-tax income and a higher effective tax rate.the three months ended June 30, 2021. The effective tax rate increasedfor the current second quarter was 25.60% compared to 28.38% compared to 24.80% infor the second quarter of last year. The year-ago quarter. This increase wassecond quarter income tax expense includes $2 million due to two factors: the non-deductibilityrevaluation of merger-related expenses and an increasedeferred taxes related to a change in the New York State tax rate to 7.25% from 6.50%. The increase in the New York State tax rate resulted in a one-time expense related to the revaluation of our deferred tax asset.rate.
Earnings Summary for the Six Months Ended June 30, 20212022
For the six months ended June 30, 2021,2022, net income totaled $297$326 million up 45%$29 million or 10% compared to the $205 million for the first six months ended June 30, 2020. Net income available for common shareholders for the six months ended June 30, 2021 totaled $281 million compared to $189$297 million for the six months ended June 30, 2020, up 49%.
On a per share basis, diluted earnings per2021. Net income available to common sharestockholders for the six months ended June 30, 2021 were $0.60,2022 was $310 million, up 50%$29 million or 10% compared to $0.40$281 million for the six months ended June 30, 2020.2021. On a per share basis, diluted EPS for the six months ended June 30, 2022 totaled $0.66, up 10% compared to $0.60 for the six months ended June 30, 2021. For the six months ended June 30, 2022, both net income and net income available to common stockholders included merger-related expenses of $8 million, net of income tax, compared to $10 million, net of tax, for the six months ended June 30, 2021. The June 30, 2022 six-month period also included $2 million related to the revaluation of the Company's deferred taxes due to the change in the New York State tax rate.
Net Interest Income
68
Net interest income for the six months ended June 30, 2021,2022, totaled $691 million compared to $649 million up $139 million or 27% compared tofor the six months ended June 30, 2020.2021, up $42 million or 6% on a year-over-year basis. The year-over-year improvement was driven by lowera $48 million or 6% increase in interest income, offset modestly by a $6 million or 3% increase in interest expense.
Details of the change in net interest income are as follows:
66
Net Interest Margin
For the six months ended June 30, 2021,2022, the NIM increased 39 bpdecreased one basis point to 2.49%2.48% compared to the six months ended June 30, 2020.2021. Prepayment income contributed 12 basis points to this period's NIM compared to 14 basis points in the prior year's six-month period. Excluding the impact from prepayment income, the NIM, on a non-GAAP basis was 2.36%, up one basis point compared to the six months ended June 30, 2021.
|
| For the Six Months Ended |
|
| ||||||||||||||||
|
| June 30, |
| June 30, |
|
| ||||||||||||||
|
| 2021 |
| 2020 |
| % Change |
|
| For the Six |
|
|
| ||||||||
(dollars in millions) |
|
|
|
|
|
|
|
| June 30, |
|
| June 30, |
|
| % Change |
|
| |||
Total Interest Income |
| $854 |
| $864 |
| -1% |
|
| $ | 902 |
|
| $ | 854 |
|
|
| 6 |
| % |
Prepayment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loans |
| $41 |
| $21 |
| 95% |
|
| $ | 30 |
|
| $ | 41 |
|
|
| (27 | ) | % |
Securities |
| 6 |
| 1 |
| 500% |
|
|
| 1 |
|
|
| 6 |
|
|
| (83 | ) | % |
Total prepayment income |
| $47 |
| $22 |
| 114% |
|
| $ | 31 |
|
| $ | 47 |
|
|
| (34 | ) | % |
GAAP Net Interest Margin |
| 2.49% |
| 2.10% |
| 39 | bp |
| 2.48 |
| % | 2.49 |
| % |
| 1 |
| bp | ||
Less: |
|
|
|
|
|
|
|
|
| |||||||||||
Prepayment income from loans |
| -11 |
| bp | -16 |
| bp |
| 5 |
| bp | |||||||||
Prepayment income from securities |
| -1 |
|
| -2 |
|
|
| 1 |
| bp | |||||||||
Add excess liquidity |
| 0 |
|
| 4 |
|
|
| (4 | ) |
| |||||||||
Total prepayment income contribution to net interest margin |
| -12 |
| bp | -14 |
| bp |
| 2 |
| bp | |||||||||
Adjusted Net Interest Margin |
|
| 2.36 |
| % |
| 2.35 |
| % |
| 1 |
| bp |
The following table sets forth certain information regarding our average balance sheet for the six-month periods, including the
average yields on our interest-earning assets and the average costs of our interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average balance of interest-earning assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the quarters are derived from average balances that are calculated daily. The average yields and costs include fees, as well as premiums and discounts (including mark-to-market adjustments from acquisitions), that are considered adjustments to such average yields and costs.
6967
Net Interest Income Analysis
| For the Six Months Ended |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
| For the Six Months Ended June 30, |
|
| June 30, 2022 |
|
|
| June 30, 2021 |
|
| ||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
| Average |
| |||||||||||||||||||||||||||
|
| Average |
|
| Interest |
|
| Average |
|
| Average |
|
| Interest |
|
| Average |
|
| Average |
|
|
|
|
| Yield/ |
|
| Average |
|
|
|
|
| Yield/ |
| |||||||||||||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance |
|
|
| Interest |
|
| Cost |
|
|
| Balance |
|
| Interest |
|
| Cost |
|
| ||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Mortgage and other loans, net |
| $ | 42,777 |
| $ | 769 |
| 3.60 | % |
| $ | 41,682 |
| $ | 774 |
| 3.71 | % | |||||||||||||||||||||||||||||||||
Securities |
| 6,654 |
| 82 |
| 2.46 |
| 6,134 |
| 88 |
| 2.88 |
| ||||||||||||||||||||||||||||||||||||||
Interest-earning cash and cash |
|
| 2,630 |
|
| 3 |
|
| 0.27 |
|
| 760 |
|
| 2 |
|
| 0.55 |
| ||||||||||||||||||||||||||||||||
Mortgage and other loans and leases, net (1) | $ |
| 46,479 |
|
| $ |
| 817 |
|
|
| 3.52 |
| % |
| $ | 42,777 |
|
| $ | 769 |
|
|
| 3.60 |
| % | ||||||||||||||||||||||||
Securities (2)(3) |
|
| 6,607 |
|
|
| 75 |
|
|
| 2.26 |
|
|
|
| 6,654 |
|
|
| 82 |
|
|
| 2.46 |
|
| |||||||||||||||||||||||||
Reverse repurchase agreements |
|
| 320 |
|
|
| 2 |
|
|
| 1.56 |
|
|
|
| 367 |
|
|
| 1 |
|
|
| 0.84 |
|
| |||||||||||||||||||||||||
Interest-earning cash, cash equivalents, and due from banks |
|
| 2,395 |
|
|
|
| 8 |
|
|
| 0.64 |
|
|
|
| 2,263 |
|
|
| 2 |
|
|
| 0.18 |
|
| ||||||||||||||||||||||||
Total interest-earning assets |
| 52,061 |
|
| 854 |
|
| 3.28 |
| 48,576 |
|
| 864 |
|
| 3.56 |
|
|
| 55,801 |
|
|
| 902 |
|
|
| 3.24 |
|
|
|
| 52,061 |
|
|
| 854 |
|
|
| 3.28 |
|
| ||||||||
Non-interest-earning assets |
|
| 5,154 |
|
|
|
|
|
|
|
| 5,022 |
|
|
|
|
|
|
|
| 5,145 |
|
|
|
|
|
|
|
|
| 5,154 |
|
|
|
|
|
|
|
| ||||||||||||
Total assets |
| $ | 57,215 |
|
|
|
|
|
|
| $ | 53,598 |
|
|
|
|
|
| $ |
| 60,946 |
|
|
|
|
|
|
|
| $ | 57,215 |
|
|
|
|
|
|
| |||||||||||||
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest-bearing checking and money |
| $ | 12,663 |
| $ | 16 |
| 0.26 | % |
| $ | 10,305 |
| $ | 39 |
| 0.75 | % | $ |
| 15,629 |
|
| $ |
| 32 |
|
|
| 0.42 |
| % |
| $ | 12,663 |
|
| $ | 16 |
|
|
| 0.26 |
| % | ||||||
Savings accounts |
| 7,102 |
| 13 |
| 0.37 |
| 5,085 |
| 17 |
| 0.68 |
|
|
| 9,218 |
|
|
| 18 |
|
|
| 0.38 |
|
|
|
| 7,102 |
|
|
| 13 |
|
|
| 0.37 |
|
| ||||||||||||
Certificates of deposit |
|
| 9,566 |
|
| 32 |
|
| 0.67 |
|
| 13,628 |
|
| 145 |
|
| 2.14 |
|
|
| 8,086 |
|
|
|
| 23 |
|
|
| 0.58 |
|
|
|
| 9,566 |
|
|
| 32 |
|
|
| 0.67 |
|
| |||||
Total interest-bearing deposits |
| 29,331 |
|
| 61 |
|
| 0.42 |
| 29,018 |
|
| 201 |
|
| 1.39 |
|
|
| 32,933 |
|
|
| 73 |
|
|
| 0.45 |
|
|
|
| 29,331 |
|
|
| 61 |
|
|
| 0.42 |
|
| ||||||||
Borrowed funds |
|
| 15,859 |
|
| 144 |
|
|
| 1.82 |
|
| 14,421 |
|
| 153 |
|
|
| 2.14 |
| ||||||||||||||||||||||||||||||
Short term borrowed funds |
|
| 2,132 |
|
|
| 7 |
|
|
| 0.66 |
|
|
|
| 2,250 |
|
|
| 4 |
|
|
| 0.35 |
|
| |||||||||||||||||||||||||
Other borrowed funds |
|
| 13,650 |
|
|
|
| 131 |
|
|
| 1.93 |
|
|
|
| 13,609 |
|
|
| 140 |
|
|
| 2.07 |
|
| ||||||||||||||||||||||||
Total Borrowed funds |
|
| 15,782 |
|
|
|
| 138 |
|
|
| 1.76 |
|
|
|
| 15,859 |
|
|
| 144 |
|
|
| 1.82 |
|
| ||||||||||||||||||||||||
Total interest-bearing liabilities |
| 45,190 |
|
| 205 |
|
| 0.91 |
| 43,439 |
|
| 354 |
|
| 1.64 |
|
|
| 48,715 |
|
|
| 211 |
|
|
| 0.87 |
|
|
|
| 45,190 |
|
|
| 205 |
|
|
| 0.91 |
|
| ||||||||
Non-interest-bearing deposits |
| 4,372 |
|
|
|
|
|
|
| 2,805 |
|
|
|
|
|
|
|
| 4,483 |
|
|
|
|
|
|
|
|
| 4,372 |
|
|
|
|
|
|
|
| ||||||||||||||
Other liabilities |
|
| 781 |
|
|
|
|
|
|
|
| 680 |
|
|
|
|
|
|
|
| 775 |
|
|
|
|
|
|
|
|
| 781 |
|
|
|
|
|
|
| |||||||||||||
Total liabilities |
| 50,343 |
|
|
|
|
|
|
| 46,924 |
|
|
|
|
|
|
|
| 53,973 |
|
|
|
|
|
|
|
|
| 50,343 |
|
|
|
|
|
|
|
| ||||||||||||||
Stockholders’ equity |
|
| 6,872 |
|
|
|
|
|
|
|
| 6,674 |
|
|
|
|
|
|
|
| 6,973 |
|
|
|
|
|
|
|
|
| 6,872 |
|
|
|
|
|
|
| |||||||||||||
Total liabilities and stockholders’ equity |
| $ | 57,215 |
|
|
|
|
|
|
| $ | 53,598 |
|
|
|
|
|
| $ |
| 60,946 |
|
|
|
|
|
|
|
| $ | 57,215 |
|
|
|
|
|
|
|
| ||||||||||||
Net interest income/interest rate spread |
|
|
|
| $ | 649 |
|
| 2.37 | % |
|
|
|
| $ | 510 |
|
|
| 1.92 | % |
|
|
|
| $ |
| 691 |
|
|
| 2.37 |
| % |
|
|
|
| $ | 649 |
|
|
| 2.38 |
| % | |||||
Net interest margin |
|
|
|
|
|
|
|
| 2.49 | % |
|
|
|
|
|
|
|
| 2.10 | % |
|
|
|
|
|
|
|
| 2.48 |
| % |
|
|
|
|
|
|
|
| 2.49 |
| % | |||||||||
Ratio of interest-earning assets to |
|
|
|
|
|
|
| 1.15x |
|
|
|
|
|
|
|
| 1.12x |
|
|
|
|
|
|
|
| 1.15x |
|
|
|
|
|
|
|
|
| 1.15x |
|
|
Provision for Credit Losses
On a year-to-date basis,For the provision for credit losses was zero compared tosix months ended June 30, 2022, the Company reported a provision for credit losses of $38 million for the first half of 2020. The year-to-date improvement reflects the significant improvement in forecasted future economic conditions, as well as, year-to-date net recoveries of $7 million compared to net charge-offs of $14 million duringzero for the first six months of 2020.ended June 30, 2021.
Non-Interest Income
We generateFor the six months ended June 30, 2022, non-interest income through a variety of sources, including—among others— fee income (in the form of retail
deposit fees and charges on loans); income from our investment in BOLI; gains on the sale of securities; and revenues produced through the sale of third-party investment products.
For the first six months of 2021, total non-interest income was $30totaled $32 million, downup $2 million or 6%7% compared to $32$30 million for the first six months of 2020. The decrease was mainlyended June 30, 2021. Included in the result ofcurrent six-month period is a $2 million or 12% decline in BOLI income to $15 million. The year-ago six month period included $1 million in net gainsloss on securities compared to no such gain duringor loss in the first six monthsyear-ago six-month period. The current six-month period includes a $1.7 million gain on the sale of 2021.
70
the Company's former headquarters building in Westbury, N.Y.
The following table summarizes our non-interest income for the respective periods:
68
Non-Interest Income Analysis
|
| For the Six Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||
(dollars in millions) |
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||
Fee income |
| $ | 11 |
|
| $ | 11 |
|
| $ | 12 |
|
| $ | 11 |
|
BOLI income |
| 15 |
|
|
| 17 |
|
|
| 14 |
|
|
| 15 |
| |
Net gain on securities |
| — |
|
|
| 1 |
| |||||||||
Net gain (loss) on securities |
|
| (1 | ) |
|
| — |
| ||||||||
Other income: |
|
|
|
|
|
|
|
|
|
| ||||||
Third-party investment product sales |
| — |
|
|
| 2 |
|
|
| 2 |
|
|
| — |
| |
Other |
|
| 4 |
|
|
| 1 |
|
|
| 5 |
|
|
| 4 |
|
Total other income |
|
| 4 |
|
|
| 3 |
|
|
| 7 |
|
|
| 4 |
|
Total non-interest income |
| $ | 30 |
|
| $ | 32 |
|
| $ | 32 |
|
| $ | 30 |
|
Non-Interest Expense
For the six months ended June 30, 2021, total2022, non-interest expenses weretotaled $279 million, up $8 million or 3% compared to $271 million for the six months ended June 30, 2021. Merger-related expenses for the six months ended June 30, 2022 totaled $11 million, up $22$1 million or 9%10% compared to $10 million for the first six months of 2020. Included in the results for the first six months of 2021 was $10 million of merger-related expenses. Included in the results for the first six months of 2020 was a $4 million lease termination benefit.ended June 30, 2021. The efficiency ratio improvedfor the six months ended June 30, 2022 declined to 37.04% compared to 38.46% during the first six months of the year compared to 45.91% for the first six months of last year.2021.
Income Tax Expense
For the six months ended June 30, 2021,2022, income tax expense totaled $111 million, up 122%unchanged compared to the six months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 was 25.39% compared to 27.11% for the six months ended June 30, 2021. The six months ended June 30, 2021 also included $2 million of additional income tax expense
during the first six months of 2020. The increase was related to higher pre-tax income, the non-deductibility of merger-related expenses, and an increase in the New York State tax rate. It also includes the previously mentioned $2 million expense related due to the revaluation of our deferred tax asset. The effective tax rate for the first half of 2021 increasedtaxes related to 27.11% compared to 19.45%a change in the first half of 2020.New York state tax rate.
7169
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about the Company’s market risk were presented on pages 7468 through 7872 of our 20202021 Annual Report on Form 10-K, filed with the SEC on February 26, 2021.25, 2022. Subsequent changes in the Company’s market risk profile and interest rate sensitivity are detailed in the discussion entitled “Management of Market and Interest Rate Risk” earlier in this quarterly report.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (the “SEC’s”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e), as adopted by the SEC under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period.
(b) Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.reporting.
7270
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Refer to “Part I, Financial Information, Item 1, Financial Statements, Note 14 Legal Proceedings”, which is incorporated by reference into this item.
Item 1A. Risk Factors
In addition to the other information set forth in this report, readers should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and the Company’s Form 10-Q for the three months ended March 31, 2021as such factors could materially affect the Company’s business, financial condition, or future results of operations.
The There have been no material changes in the risk factors set forthas discussed in our 2020the Company's Annual Report on Form 10-K and in our Marchfor the year ended December 31, 2021 Form 10-Q are updated by the following risks:
Combining NYCB and Flagstar may be more difficult, costly or time-consuming than expected, and NYCB may fail to realize the anticipated benefits of the merger.
The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of NYCB and Flagstar. To realize the anticipated benefits and cost savings from the merger, NYCB and Flagstar must integrate and combine their businesses in a manner that permits those cost savings to be realized, without adversely affecting current revenues and future growth. If NYCB and Flagstar are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.
An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of NYCB following the completion of the merger, which may adversely affect the value of the common stock of NYCB following the completion of the merger.
NYCB and Flagstar have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on each of NYCB and Flagstar during this transition period and on NYCB for an undetermined period after completion of the merger.
Litigation related to the merger has been filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors, and additional litigation may be filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors in the future, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of NYCB and Flagstar.
Litigation related to the merger has been filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors, and additional litigation may be filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors in the future. The outcome of any litigation is uncertain. If any plaintiff were successful in obtaining an injunction prohibiting NYCB or Flagstar from completing the merger, the holdco merger, the bank merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to NYCB and/or Flagstar, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the merger. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of NYCB and Flagstar.
The COVID-19 pandemic’s impact on NYCB’s business and operations following the completion of the merger is uncertain.
The extent to which the COVID-19 pandemic will negatively affect the business, financial condition, liquidity, capital and results of operations of NYCB following the completion of the merger will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic, the direct and indirect impact of the
73
COVID-19 pandemic on employees, clients, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on NYCB’s business, and there is no guarantee that efforts by NYCB to address the adverse impacts of the COVID-19 pandemic will be effective.
Even after the COVID-19 pandemic has subsided, NYCB may continue to experience adverse impacts to its business as a result of the COVID-19 pandemic’s global economic impact, including reduced availability of credit, adverse impacts on liquidity and the negative financial effects from any recession or depression that may occur.
NYCB may be unable to retain NYCB and/or Flagstar personnel successfully after the merger is completed.
The success of the merger will depend in part on NYCB’s ability to retain the talents and dedication of key employees currently employed by NYCB and Flagstar. It is possible that these employees may decide not to remain with NYCB or Flagstar, as applicable, while the merger is pending or with NYCB after the merger is completed. If NYCB and Flagstar are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, NYCB and Flagstar could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, NYCB’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating NYCB and Flagstar to hiring suitable replacements, all of which may cause NYCB’s business to suffer. In addition, NYCB and Flagstar may not be able to locate or retain suitable replacements for any key employees who leave either company.
Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on NYCB following the merger.
Before the mergers may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve Board, the FDIC, the NYDFS, certain mortgage agencies, and, with respect to the Bank’s establishment and operation of Flagstar Bank’s branches and other offices following the effective time of the bank merger, any state bank regulatory authority, and other regulatory authorities. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors. These approvals could be delayed or not obtained at all, including due to: an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals, including factors not known as of the date of this report and factors that may arise in the future; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally. The Federal Reserve Board has stated that if material weaknesses are identified by examiners before a banking organization applies to engage in expansionary activity, the Federal Reserve Board will expect the banking organization to resolve all such weaknesses before applying for such expansionary activity. The Federal Reserve Board has also stated that if issues arise during the processing of an application for expansionary activity, it will expect the applicant banking organization to withdraw its application pending resolution of any supervisory concerns.
The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of NYCB’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of NYCB following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.
In addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, NYCB will not be required, and Flagstar will not be permitted without NYCB’s prior written consent, to take actions or agree to conditions in connection with obtaining the foregoing permits, consents, approvals and authorizations of governmental entities that would reasonably be expected to have a material adverse effect on NYCB and its subsidiaries, taken as a whole, after giving effect to the merger.
The merger agreement may be terminated in accordance with its terms and the merger may not be completed.
The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: (1) approval by Flagstar shareholders of the Flagstar merger proposal and the approval by NYCB’s stockholders of the NYCB share issuance proposal; (2) authorization for listing on the NYSE of the shares of NYCB common stock; (3) the receipt of the requisite regulatory approvals, including the approval of the Federal Reserve Board, the FDIC, the NYDFS, certain mortgage
74
agencies, and, with respect to the Bank’s establishment and operation of Flagstar Bank’s branches and other offices following the effective time of the bank merger, any state bank regulatory authority, and other regulatory authorities, and no such requisite regulatory approval will have resulted in the imposition of any materially burdensome regulatory condition (as defined in the merger agreement); (4) effectiveness of the registration statement on Form S-4 filed by NYCB and no proceedings for such purpose will have been initiated or threatened by the SEC and not withdrawn; and (5) the absence of any order, injunction, decree or other legal restraint prohibiting the consummation of the merger, the holdco merger or the bank merger issued by any governmental entity being in effect, and no law, statute, rule or regulation having been enacted, promulgated or enforced by any governmental entity which prohibits or makes illegal the consummation of the merger, the holdco merger or the bank merger. Each of Flagstar’s or NYCB’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the merger agreement and (c) in the case of Flagstar’s obligation to complete the merger, receipt by Flagstar of an opinion from its counsel to the effect that the merger and the holdco merger, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code and (d) in the case of NYCB’s obligation to complete the merger, either (i) the receipt of a similar opinion from its counsel, or (ii) the merger and holdco merger, taken together, reasonably being expected to result in a Material Adverse Tax Consequence (as defined in the merger agreement) to NYCB.
These conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after shareholder approval, as applicable, or NYCB or Flagstar may elect to terminate the merger agreement in certain other circumstances.
Failure to complete the merger could negatively impact NYCB.
If the merger is not completed for any reason there may be various adverse consequences and NYCB may experience negative reactions from the financial markets and from their respective customers and employees. For example, NYCB’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of NYCB common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. NYCB and/or Flagstar also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against NYCB or Flagstar to perform their respective obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, either NYCB or Flagstar may be required to pay a termination fee of $90 million to the other party.
Additionally, each of NYCB has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing the joint proxy statement/prospectus, and all filing and other fees paid in connection with the merger. If the merger is not completed, NYCB would have to pay these expenses without realizing the expected benefits of the merger.
NYCB will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on NYCB. These uncertainties may impair NYCB’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with NYCB to seek to change existing business relationships with NYCB. In addition, subject to certain exceptions, Flagstar has agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its business without NYCB’s consent, and Flagstar and NYCB have agreed to refrain from taking certain actions that may adversely affect their respective ability to consummate the merger on a timely basis without the other’s consent. These restrictions may prevent NYCB from pursuing attractive business opportunities that may arise prior to the completion of the merger.
The merger agreement limits Flagstar’s and NYCB’s respective abilities to pursue alternatives to the merger and may discourage other companies from trying to acquire NYCB.
The merger agreement contains “no shop” covenants that restrict each of NYCB’s and Flagstar’s ability to, directly or indirectly, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by each respective board of directors, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any alternative acquisition proposals. These provisions, which include a $90 million termination fee payable under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of Flagstar or NYCB from considering or proposing that acquisition even if, in the case of a potential acquisition of Flagstar, it were prepared to pay consideration with a higher per share price to Flagstar shareholders than what is contemplated in the merger, or may result in a potential third-party acquirer proposing to pay a lower per share price to acquire Flagstar or NYCB than it might otherwise have proposed to pay.
75
NYCB is expected to incur significant costs related to the merger and integration.
NYCB has incurred and expects to incur significant, non-recurring costs in connection with negotiating the merger agreement and closing the merger. In addition, NYCB will incur integration costs following the completion of the merger as NYCB integrates the Flagstar business, including facilities and systems consolidation costs and employment-related costs. Anticipated pre-tax one-time expenses related to the merger are currently estimated to be approximately $220 million.
There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time. NYCB and Flagstar may also incur additional costs to maintain employee morale and to retain key employees. NYCB and Flagstar will also incur significant legal, financial advisory, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger.
Each current NYCB stockholder will have a reduced ownership and voting interest in NYCB following the consummation of the merger than the holder’s ownership and voting interest in NYCB individually, as applicable, prior to the consummation of the merger and will exercise less influence over management.
NYCB stockholders currently have the right to vote in the election of the board of directors and on other matters affecting NYCB and Flagstar, respectively. When the merger is completed, each NYCB stockholder will become an NYCB stockholder, with a percentage ownership of NYCB that is smaller than the holder’s percentage ownership of either NYCB individually prior to the consummation of the merger. Based on the number of shares of NYCB common stock and Flagstar common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of NYCB common stock expected to be issued in the merger, the former Flagstar shareholders, as a group, are estimated to own approximately 31% of the outstanding shares of NYCB common stock immediately after the merger and current NYCB stockholders as a group are estimated to own approximately 69% of the outstanding shares of NYCB common stock immediately after the merger. Because of this, Flagstar shareholders may have less influence on the management and policies of NYCB than they now have on the management and policies of Flagstar, and NYCB stockholders may have less influence on the management and policies of NYCB when the merger is completed than they now have on the management and policies of NYCB.
Issuance of shares of NYCB common stock in connection with the merger may adversely affect the market price of NYCB common stock.
In connection with the payment of the merger consideration, NYCB expects to issue approximately 212.0 million shares of NYCB common stock to Flagstar shareholders. The issuance of these new shares of NYCB common stock may result in fluctuations in the market price of NYCB common stock, including a stock price decrease2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Shares Repurchased Pursuant to the Company’s Stock-Based Incentive Plans
Participants in the Company’s stock-based incentive plans may have shares of common stock withheld to fulfill the income tax obligations that arise in connection with the vesting of their stock awards. Shares that are withheld for this purpose are repurchased pursuant to the terms of the applicable stock-based incentive plan, rather than pursuant to the share repurchase program authorized by the Board of Directors, described below.
Shares Repurchased Pursuant to the Board of Directors’ Share Repurchase Authorization
On October 23, 2018, the Board of Directors authorized the repurchase of up to $300 million of the Company’s common stock. Under said authorization, shares may be repurchased on the open market or in privately negotiated transactions. As of June 30, 2022, the Company has repurchased $278 million of its common stock under this repurchase authorization, leaving $17 million available for repurchase under this repurchase authorization.
Shares that are repurchased pursuant to the Board of Directors’ authorization, and those that are repurchased pursuant to the Company’s stock-based incentive plans, are held in our Treasury account and may be used for various corporate purposes, including, but not limited to, merger transactions and the vesting of restricted stock awards.
76
(dollars in millions, except share data) |
|
|
|
|
|
|
|
|
| |||
Second Quarter 2021 |
| Total Shares |
|
| Average Price |
|
| Total |
| |||
April 1 – April 30 |
|
| 10,534 |
|
| $ | 12.31 |
|
| $ | — |
|
May 1 – May 31 |
|
| 1,918 |
|
|
| 11.76 |
|
|
| — |
|
June 1 – June 30 |
|
| 4,970 |
|
|
| 11.39 |
|
|
| — |
|
Total shares repurchased (1) |
|
| 17,422 |
|
|
| 11.99 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
| |||
(1) Shares tied to stock-based incentive plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(amounts in millions, except share data) |
| Total Shares |
|
| Average Price |
|
| Total |
| |||
Second Quarter 2022 |
|
|
|
|
|
|
|
|
| |||
April |
|
| 14,650 |
| $ |
| 9.47 |
| $ |
| 0 |
|
May |
|
| 275,157 |
|
|
| 8.99 |
|
|
| 2 |
|
June |
|
| 520,189 |
|
|
| 8.81 |
|
|
| 5 |
|
Total Second Quarter 2022 |
|
| 809,996 |
|
|
| 8.88 |
| $ |
| 7 |
|
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
7771
Item 6. Exhibits
Exhibit No. | ||
2.1 | ||
2.2 | ||
3.1 | ||
|
| |
|
| |
3.3 | Certificate of Amendment of Amended and Restated Certificate of Incorporation.(5) | |
3.4 | ||
3.5 | Amended and Restated Bylaws. | |
4.1 | Specimen Stock Certificate. | |
4.2 | ||
4.3 | Form of certificate representing the Series A Preferred Stock. | |
4.4 | Form of depositary receipt representing the Depositary Shares. | |
4.5 | Registrant will furnish, upon request, copies of all instruments defining the rights of holders of long-term debt instruments of the registrant and its consolidated subsidiaries. | |
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31.1 | ||
31.2 | ||
32.0 | ||
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | The cover page of New York Community Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, |
* Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.
** Management plan or compensation plan arrangement.
72
(4)
78
(5)
(6) 10-K for8-K filed with the year ended December 31, 2016Securities and Exchange Commission on June 8, 2022 (File No. 1-31565).
(7)
(8)
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NEW YORK COMMUNITY BANCORP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
New York Community Bancorp, Inc. | |||
(Registrant) | |||
DATE: August | BY: | /s/ Thomas R. Cangemi | |
Thomas R. Cangemi Chairman, President, and Chief Executive Officer | |||
DATE: August | BY: | /s/ John J. Pinto | |
John J. Pinto Senior Executive Vice President and Chief Financial Officer |
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