☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-31565
Delaware | 06-1377322 | |||||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
102 Duffy Avenue, Hicksville, New York11801
(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:
102 Duffy Avenue, | Hicksville, | New York | 11801 | |||||||||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol
| Name of each exchange on which registered | ||||||||||||
Common Stock, | NYCB | New York Stock Exchange | ||||||||||||
Bifurcated Option Note Unit | NYCB PU | New York Stock Exchange | ||||||||||||
| NYCB PA | New York Stock Exchange |
Large | ☒ | Accelerated | ☐ | ||||||||||||||||||||
|
| Smaller Reporting Company | ☐ | ||||||||||||||||||||
Non-Accelerated Filer | ☐ | ||||||||||||||||||||||
Emerging | ☐ |
466,135,820
Number
Quarter Ended
2023
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Item 1. |
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2022 | |||||||||
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Note 2 - Computation of Earnings Per Common Share | |||||||||
Note 3 - Business Combination | |||||||||
Note 4 - Accumulated Other Comprehensive Income | |||||||||
Note 5 - Investment Securities | |||||||||
Note 6 - Loans and Leases | |||||||||
Note 7 - Allowance for Credit Losses | |||||||||
Note 8 - Leases | |||||||||
Note 9 - Mortgage Servicing Rights | |||||||||
Note 10 -Variable Interest Entities | |||||||||
Note 11 - Borrowed Funds | |||||||||
Note 12 - Pension and Other Post-Retirement Benefits | |||||||||
Note 13 - Stock-Related Benefit Plans | |||||||||
Note 14 - Derivative and Hedging Activities | |||||||||
Note 15 - Intangible Assets | |||||||||
Item 2. | |||||||||
Item 3. | |||||||||
Item 4. | |||||||||
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Item 1. | |||||||||
Item 1A. | |||||||||
Item 2. | |||||||||
Item 3. | |||||||||
Item 4. | |||||||||
Item 5. | |||||||||
Item 6. | |||||||||
Term | Definition | Term | Definition | |||||||||||||||||
ACL | Allowance for Credit Losses | FHLB-NY | Federal Home Loan Bank of New York | |||||||||||||||||
ADC | Acquisition, development, and construction loan | FOAL | Fallout-Adjusted Locks | |||||||||||||||||
ALCO | Asset and Liability Management Committee | 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 Update | 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 | |||||||||||||||||
C&I | Commercial and industrial loan | GNMA | Government National Mortgage Association | |||||||||||||||||
CDs | Certificates of deposit | GSE | Government-sponsored enterprises | |||||||||||||||||
CECL | Current Expected Credit Loss | HELOC | Home Equity Line of Credit | |||||||||||||||||
CFPB | Consumer Financial Protection Bureau | HELOAN | Home Equity Loan | |||||||||||||||||
CMOs | Collateralized mortgage obligations | HPI | Housing Price Index | |||||||||||||||||
CMT | Constant maturity treasury rate | LGG | Loans with government guarantees | |||||||||||||||||
CPI | Consumer Price Index | LHFS | Loans Held-for-Sale | |||||||||||||||||
CPR | Constant prepayment rate | LIBOR | London Interbank Offered Rate | |||||||||||||||||
CRA | Community Reinvestment Act | LTV | Loan-to-value ratio | |||||||||||||||||
CRE | Commercial real estate loan | MBS | Mortgage-backed securities | |||||||||||||||||
DIF | Deposit Insurance Fund | MSRs | Mortgage servicing rights | |||||||||||||||||
DFA | Dodd-Frank Wall Street Reform and Consumer Protection Act | NIM | Net interest margin | |||||||||||||||||
DSCR | Debt service coverage ratio | NOL | Net operating loss | |||||||||||||||||
EAR | Earnings at Risk | NPAs | Non-performing assets | |||||||||||||||||
EPS | Earnings per common share | NPLs | Non-performing loans | |||||||||||||||||
ERM | Enterprise Risk Management | NPV | Net Portfolio Value | |||||||||||||||||
ESOP | Employee Stock Ownership Plan | NYSE | New York Stock Exchange | |||||||||||||||||
EVE | Economic Value of Equity at Risk | OCC | Office of the Comptroller of the Currency | |||||||||||||||||
Fannie Mae | Federal National Mortgage Association | OREO | Other real estate owned | |||||||||||||||||
FASB | Financial Accounting Standards Board | PAA | Purchase accounting adjustments | |||||||||||||||||
FCA | the United Kingdom's Financial Conduct Authority | ROU | Right of use asset | |||||||||||||||||
FDI Act | Federal Deposit Insurance Act | SBA | Small Business Administration | |||||||||||||||||
FDIC | Federal Deposit Insurance Corporation | Signature | Signature Bridge Bank, N.A. | |||||||||||||||||
FHA | Federal Housing Administration | SEC | U.S. Securities and Exchange Commission | |||||||||||||||||
FHFA | Federal Housing Finance Agency | SOFR | Secured Overnight Financing Rate | |||||||||||||||||
FHLB | Federal Home Loan Bank | TDR | Troubled debt restructurings |
CHARGE-OFF
DERIVATIVE
3
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.
YIELD
5
LIST OF ABBREVIATIONS AND ACRONYMS
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6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
(in millions, except share data) |
| (unaudited) |
|
|
|
| ||
ASSETS: |
|
|
|
|
|
| ||
Cash, cash equivalents and due from banks |
| $ | 1,700 |
|
| $ | 2,211 |
|
Securities: |
|
|
|
|
|
| ||
Debt securities available-for-sale ($561 and $1,168 pledged at |
|
| 6,689 |
|
|
| 5,780 |
|
Equity investments with readily determinable fair values, at fair value |
|
| 14 |
|
|
| 16 |
|
Total securities |
|
| 6,703 |
|
|
| 5,796 |
|
Loans and leases held for investment, net of deferred loan fees and costs |
|
| 48,984 |
|
|
| 45,738 |
|
Less: Allowance for credit losses on loans and leases |
|
| (218 | ) |
|
| (199 | ) |
Total loans and leases, net |
|
| 48,766 |
|
|
| 45,539 |
|
Federal Home Loan Bank stock, at cost |
|
| 630 |
|
|
| 734 |
|
Premises and equipment, net |
|
| 250 |
|
|
| 270 |
|
Operating lease right-of-use assets |
|
| 227 |
|
|
| 249 |
|
Goodwill |
|
| 2,426 |
|
|
| 2,426 |
|
Bank-owned life insurance |
|
| 1,200 |
|
|
| 1,184 |
|
Other assets |
|
| 1,054 |
|
|
| 1,118 |
|
Total assets |
| $ | 62,956 |
|
| $ | 59,527 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
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|
| ||
Deposits: |
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| ||
Interest-bearing checking and money market accounts |
| $ | 19,897 |
|
| $ | 13,209 |
|
Savings accounts |
|
| 8,860 |
|
|
| 8,892 |
|
Certificates of deposit |
|
| 9,109 |
|
|
| 8,424 |
|
Non-interest-bearing accounts |
|
| 3,839 |
|
|
| 4,534 |
|
Total deposits |
|
| 41,705 |
|
|
| 35,059 |
|
Borrowed funds: |
|
|
|
|
|
| ||
Wholesale borrowings: |
|
|
|
|
|
| ||
Federal Home Loan Bank advances |
|
| 12,840 |
|
|
| 15,105 |
|
Repurchase agreements |
|
| 300 |
|
|
| 800 |
|
Total wholesale borrowings |
|
| 13,140 |
|
|
| 15,905 |
|
Junior subordinated debentures |
|
| 361 |
|
|
| 361 |
|
Subordinated notes |
|
| 297 |
|
|
| 296 |
|
Total borrowed funds |
|
| 13,798 |
|
|
| 16,562 |
|
Operating lease liabilities |
|
| 227 |
|
|
| 249 |
|
Other liabilities |
|
| 480 |
|
|
| 613 |
|
Total liabilities |
|
| 56,210 |
|
|
| 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 |
|
| 6,121 |
|
|
| 6,126 |
|
Retained earnings |
|
| 957 |
|
|
| 741 |
|
Treasury stock, at cost (24,303,014 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 $234 and |
|
| (612 | ) |
|
| (45 | ) |
Net unrealized loss on pension and post-retirement obligations, net of tax of $12 |
|
| (30 | ) |
|
| (31 | ) |
Net unrealized gain (loss) on cash flow hedges, net of tax of $(16) and $3, respectively |
|
| 40 |
|
|
| (9 | ) |
Total accumulated other comprehensive loss, net of tax |
|
| (602 | ) |
|
| (85 | ) |
Total stockholders’ equity |
|
| 6,746 |
|
|
| 7,044 |
|
Total liabilities and stockholders’ equity |
| $ | 62,956 |
|
| $ | 59,527 |
|
|
|
|
|
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| ||
See accompanying notes to the consolidated financial statements. |
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7
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
|
| For the |
|
| For the |
| ||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions, except per share data) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans and leases |
| $ | 442 |
|
| $ | 376 |
|
| $ | 1,259 |
|
| $ | 1,145 |
|
Securities and money market investments |
|
| 67 |
|
|
| 39 |
|
|
| 152 |
|
|
| 124 |
|
Total interest income |
|
| 509 |
|
|
| 415 |
|
|
| 1,411 |
|
|
| 1,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
INTEREST EXPENSE: |
|
|
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|
|
|
|
|
|
|
|
| ||||
Interest-bearing checking and money market accounts |
|
| 72 |
|
|
| 8 |
|
|
| 104 |
|
|
| 24 |
|
Savings accounts |
|
| 15 |
|
|
| 7 |
|
|
| 33 |
|
|
| 20 |
|
Certificates of deposit |
|
| 23 |
|
|
| 11 |
|
|
| 46 |
|
|
| 43 |
|
Borrowed funds |
|
| 73 |
|
|
| 71 |
|
|
| 211 |
|
|
| 215 |
|
Total interest expense |
|
| 183 |
|
|
| 97 |
|
|
| 394 |
|
|
| 302 |
|
Net interest income |
|
| 326 |
|
|
| 318 |
|
|
| 1,017 |
|
|
| 967 |
|
Provision for credit losses |
|
| 2 |
|
|
| (1 | ) |
|
| 9 |
|
|
| (1 | ) |
Net interest income after provision for credit loan losses |
|
| 324 |
|
|
| 319 |
|
|
| 1,008 |
|
|
| 968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
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|
| ||||
Fee income |
|
| 5 |
|
|
| 6 |
|
|
| 17 |
|
|
| 17 |
|
Bank-owned life insurance |
|
| 10 |
|
|
| 7 |
|
|
| 24 |
|
|
| 22 |
|
Net loss on securities |
|
| (1 | ) |
|
| — |
|
|
| (2 | ) |
|
| — |
|
Other |
|
| 3 |
|
|
| 2 |
|
|
| 10 |
|
|
| 6 |
|
Total non-interest income |
|
| 17 |
|
|
| 15 |
|
|
| 49 |
|
|
| 45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NON-INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Compensation and benefits |
|
| 79 |
|
|
| 77 |
|
|
| 238 |
|
|
| 229 |
|
Occupancy and equipment |
|
| 22 |
|
|
| 22 |
|
|
| 67 |
|
|
| 65 |
|
General and administrative |
|
| 31 |
|
|
| 30 |
|
|
| 95 |
|
|
| 96 |
|
Total operating expense |
|
| 132 |
|
|
| 129 |
|
|
| 400 |
|
|
| 390 |
|
Merger-related expenses |
|
| 4 |
|
|
| 6 |
|
|
| 15 |
|
|
| 16 |
|
Total non-interest expense |
|
| 136 |
|
|
| 135 |
|
|
| 415 |
|
|
| 406 |
|
Income before income taxes |
|
| 205 |
|
|
| 199 |
|
|
| 642 |
|
|
| 607 |
|
Income tax expense |
|
| 53 |
|
|
| 50 |
|
|
| 164 |
|
|
| 161 |
|
Net income |
| $ | 152 |
|
| $ | 149 |
|
| $ | 478 |
|
| $ | 446 |
|
Preferred stock dividends |
|
| 8 |
|
|
| 9 |
|
|
| 25 |
|
|
| 25 |
|
Net income available to common stockholders |
| $ | 144 |
|
| $ | 140 |
|
| $ | 453 |
|
| $ | 421 |
|
Basic earnings per common share |
| $ | 0.31 |
|
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 0.90 |
|
Diluted earnings per common share |
| $ | 0.30 |
|
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 152 |
|
| $ | 149 |
|
| $ | 478 |
|
| $ | 446 |
|
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in net unrealized gain (loss) on securities available-for-sale, |
|
| (176 | ) |
|
| (23 | ) |
|
| (567 | ) |
|
| (89 | ) |
Change in pension and post-retirement obligations, net of tax of |
|
| — |
|
|
| 1 |
|
|
| (1 | ) |
|
| 3 |
|
Change in net unrealized (loss) gain on cash flow hedges, net of tax |
|
| 28 |
|
|
| (2 | ) |
|
| 46 |
|
|
| 1 |
|
Less: Reclassification adjustment for sales of available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Reclassification adjustment for defined benefit pension plan, |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 4 |
|
Reclassification adjustment for net gain on cash flow hedges |
|
| (2 | ) |
|
| 6 |
|
|
| 3 |
|
|
| 14 |
|
Total other comprehensive loss, net of tax |
|
| (149 | ) |
|
| (17 | ) |
|
| (517 | ) |
|
| (67 | ) |
Total comprehensive income (loss), net of tax |
| $ | 3 |
|
| $ | 132 |
|
| $ | (39 | ) |
| $ | 379 |
|
See accompanying notes to the consolidated financial statements.
8
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
(in millions, except share data) | Shares |
|
| Preferred |
|
| Common |
|
| Paid-in |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| ||||||||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at June 30, 2022 |
| 466,243,078 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,114 |
|
| $ | 893 |
|
| $ | (238 | ) |
| $ | (453 | ) |
| $ | 6,824 |
|
Shares issued for restricted stock, net of forfeitures |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
Dividends paid on common stock ($0.17) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (80 | ) |
|
| — |
|
|
| — |
|
|
| (80 | ) |
Dividends paid on preferred stock ($15.94) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| (8 | ) |
Purchase of common stock |
| (107,022 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive income, net of tax |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (149 | ) |
|
| (149 | ) |
Balance at September 30, 2022 |
| 466,136,056 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,121 |
|
| $ | 957 |
|
| $ | (238 | ) |
| $ | (602 | ) |
| $ | 6,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at June 30, 2021 |
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
Shares issued for restricted stock, net of forfeitures |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
Dividends paid on common stock ($0.17) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (79 | ) |
|
| — |
|
|
| — |
|
|
| (79 | ) |
Dividends paid on preferred stock ($15.94) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9 | ) |
|
| — |
|
|
| — |
|
|
| (9 | ) |
Purchase of common stock |
| (36,163 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Other comprehensive loss, net of tax |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17 | ) |
|
| (17 | ) |
Balance at September 30, 2021 |
| 465,020,799 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,119 |
|
| $ | 678 |
|
| $ | (246 | ) |
| $ | (92 | ) |
| $ | 6,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
9
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
(in millions, except share data) |
| Shares |
|
| Preferred |
|
| Common |
|
| Paid-in |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| ||||||||
Nine Months Ended September 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 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 478 |
|
|
| — |
|
|
| — |
|
|
| 478 |
|
Dividends paid on common stock ($0.51) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (237 | ) |
|
| — |
|
|
| — |
|
|
| (237 | ) |
Dividends paid on preferred stock ($47.82) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25 | ) |
|
| — |
|
|
| — |
|
|
| (25 | ) |
Purchase of common stock |
|
| (1,818,952 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19 | ) |
|
| — |
|
|
| (19 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (517 | ) |
|
| (517 | ) |
Balance at September 30, 2022 |
|
| 466,136,056 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,121 |
|
| $ | 957 |
|
| $ | (238 | ) |
| $ | (602 | ) |
| $ | 6,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Nine Months Ended September 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 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 446 |
|
|
| — |
|
|
| — |
|
|
| 446 |
|
Dividends paid on common stock ($0.51) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (237 | ) |
|
| — |
|
|
| — |
|
|
| (237 | ) |
Dividends paid on preferred stock ($47.82) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25 | ) |
|
| — |
|
|
| — |
|
|
| (25 | ) |
Purchase of common stock |
|
| (1,396,951 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| (16 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (67 | ) |
|
| (67 | ) |
Balance at September 30, 2021 |
|
| 465,020,799 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,119 |
|
| $ | 678 |
|
| $ | (246 | ) |
| $ | (92 | ) |
| $ | 6,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
10
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
| For the Nine Months Ended September 30, |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income |
| $ | 478 |
|
| $ | 446 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Provision for (Recovery of) loan losses |
|
| 9 |
|
|
| (1 | ) |
Depreciation |
|
| 13 |
|
|
| 16 |
|
Amortization of discounts and premiums, net |
|
| (8 | ) |
|
| (4 | ) |
Net (gain) loss on securities |
|
| 2 |
|
|
| — |
|
Net loss (gain) on sales of loans |
|
| — |
|
|
| (1 | ) |
Net gain on sales of fixed assets |
|
| (2 | ) |
|
| — |
|
Stock-based compensation |
|
| 22 |
|
|
| 24 |
|
Deferred tax expense |
|
| 0 |
|
|
| (6 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Decrease in other assets(1) |
|
| 65 |
|
|
| (314 | ) |
Increase (decrease) in other liabilities(2) |
|
| 51 |
|
|
| (33 | ) |
Purchases of securities held for trading |
|
| (75 | ) |
|
| (110 | ) |
Proceeds from sales of securities held for trading |
|
| 75 |
|
|
| 110 |
|
Origination of loans held for sale |
|
| — |
|
|
| (52 | ) |
Net cash provided by operating activities |
|
| 631 |
|
|
| 75 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from repayment of securities available for sale |
|
| 571 |
|
|
| 1,399 |
|
Proceeds from sales of securities available for sale |
|
| — |
|
|
| — |
|
Purchase of securities available for sale |
|
| (2,190 | ) |
|
| (1,567 | ) |
Redemption of Federal Home Loan Bank stock |
|
| 311 |
|
|
| 67 |
|
Purchases of Federal Home Loan Bank stock |
|
| (207 | ) |
|
| (37 | ) |
Proceeds from (purchases of) bank-owned life insurance, net |
|
| 5 |
|
|
| 10 |
|
Proceeds from sales of loans |
|
| — |
|
|
| 37 |
|
Purchases of loans |
|
| (157 | ) |
|
| (133 | ) |
Other changes in loans, net |
|
| (3,084 | ) |
|
| (530 | ) |
Dispositions (purchases) of premises and equipment, net |
|
| 9 |
|
|
| (3 | ) |
Net cash used in investing activities |
|
| (4,742 | ) |
|
| (757 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Net increase in deposits |
|
| 6,646 |
|
|
| 2,184 |
|
Net decrease in short-term borrowed funds |
|
| 115 |
|
|
| — |
|
Proceeds from long-term borrowed funds |
|
| 6,930 |
|
|
| 650 |
|
Repayments of long-term borrowed funds |
|
| (9,810 | ) |
|
| (1,300 | ) |
Cash dividends paid on common stock |
|
| (237 | ) |
|
| (237 | ) |
Cash dividends paid on preferred stock |
|
| (25 | ) |
|
| (25 | ) |
Treasury stock repurchased |
|
| (7 | ) |
| — |
| |
Payments relating to treasury shares received for restricted stock award tax payments |
|
| (12 | ) |
|
| (16 | ) |
Net cash provided by financing activities |
|
| 3,600 |
|
|
| 1,256 |
|
Net increase in cash, cash equivalents, due from banks and restricted cash |
|
| (511 | ) |
|
| 574 |
|
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 |
| $ | 1,700 |
|
| $ | 2,522 |
|
Supplemental information: |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 399 |
|
| $ | 311 |
|
Cash paid for income taxes |
|
| 13 |
|
|
| 471 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
| ||
Transfers to repossessed assets from loans |
| $ | — |
|
| $ | 1 |
|
Securitization of residential mortgage loans to mortgage-backed securities |
| $ | 157 |
|
|
| 133 |
|
Transfer of loans from held for investment to held for sale |
|
| — |
|
|
| 52 |
|
Transfer of loans from held for sale to held for investment |
|
| — |
|
|
| 94 |
|
Shares issued for restricted stock awards |
|
| 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).
The Bank currently operates 237 branches, 18 of which operate directly under the New York Community Bank name. The remaining 219 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. 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method in the first quarter of 2022 upon issuance. The amendments expand the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. In addition, the amendments expand the scope of the portfolio layer method to include non-prepayable assets; specify eligible hedging instruments in a single-layer hedge; provide additional guidance on the accounting for and disclosure of hedge basis adjustments; specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. To date, the guidance has not had any impact on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.
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 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 September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
(in millions, except share and per share amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income available to common stockholders |
| $ | 144 |
|
| $ | 140 |
|
| $ | 453 |
|
| $ | 421 |
|
Less: Dividends paid on and earnings allocated |
|
| (2 | ) |
|
| (2 | ) |
|
| (6 | ) |
|
| (5 | ) |
Earnings applicable to common stock |
| $ | 142 |
|
| $ | 138 |
|
| $ | 447 |
|
| $ | 416 |
|
Weighted average common shares outstanding |
|
| 465,115,180 |
|
|
| 464,047,337 |
|
|
| 465,354,754 |
|
|
| 463,813,827 |
|
Basic earnings per common share |
| $ | 0.31 |
|
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 0.90 |
|
Earnings applicable to common stock |
| $ | 142 |
|
| $ | 138 |
|
| $ | 447 |
|
| $ | 416 |
|
Weighted average common shares outstanding |
|
| 465,115,180 |
|
|
| 464,047,337 |
|
|
| 465,354,754 |
|
|
| 463,813,827 |
|
Potential dilutive common shares |
|
| 979,177 |
|
|
| 834,612 |
|
|
| 926,184 |
|
|
| 744,292 |
|
Total shares for diluted earnings per common |
|
| 466,094,357 |
|
|
| 464,881,949 |
|
|
| 466,280,938 |
|
|
| 464,558,119 |
|
Diluted earnings per common share and |
| $ | 0.30 |
|
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 3: Reclassifications out of Accumulated Other Comprehensive Loss
|
| ||||||
|
|
| |||||
|
|
|
| ||||
|
| ||||||
|
|
| |||||
|
|
|
|
| |||
|
| ||||||
|
|
|
| ||||
| |||||||
|
|
|
| ||||
|
|
|
| ||||
|
|
| |||||
|
| ||||||
|
|
|
| ||||
|
|
|
|
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 September 30, 2022 and December 31, 2021:
|
|
| September 30, 2022 |
| ||||||||||||||||
(in millions) |
|
| Amortized |
|
|
| Gross |
|
|
| Gross |
|
|
| Fair |
| ||||
Debt securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-Related Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates |
| $ |
| 1,115 |
|
| $ |
| — |
|
| $ |
| 171 |
|
| $ |
| 944 |
|
GSE CMOs |
|
|
| 1,562 |
|
|
|
| — |
|
|
|
| 276 |
|
|
|
| 1,286 |
|
Total mortgage-related debt securities |
| $ |
| 2,677 |
|
| $ |
| — |
|
| $ |
| 447 |
|
| $ |
| 2,230 |
|
Other Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U. S. Treasury obligations |
| $ |
| 1,677 |
|
| $ |
| — |
|
| $ |
| 5 |
|
| $ |
| 1,672 |
|
GSE debentures |
|
|
| 1,749 |
|
|
|
| — |
|
|
|
| 343 |
|
|
|
| 1,406 |
|
Asset-backed securities (1) |
|
|
| 401 |
|
|
|
| — |
|
|
|
| 10 |
|
|
|
| 391 |
|
Corporate bonds |
|
|
| 884 |
|
|
|
| 2 |
|
|
|
| 31 |
|
|
|
| 855 |
|
Municipal bonds |
|
|
| 18 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 18 |
|
Foreign notes |
|
|
| 25 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 25 |
|
Capital trust notes |
|
|
| 96 |
|
|
|
| 6 |
|
|
|
| 10 |
|
|
|
| 92 |
|
Total other debt securities |
| $ |
| 4,850 |
|
| $ |
| 8 |
|
| $ |
| 399 |
|
| $ |
| 4,459 |
|
Total debt securities available for sale |
| $ |
| 7,527 |
|
| $ |
| 8 |
|
| $ |
| 846 |
|
| $ |
| 6,689 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mutual funds |
| $ |
| 16 |
|
| $ |
| — |
|
| $ |
| 2 |
|
| $ |
| 14 |
|
Total equity securities |
| $ |
| 16 |
|
| $ |
| — |
|
| $ |
| 2 |
|
| $ |
| 14 |
|
Total securities (2) |
| $ |
| 7,543 |
|
| $ |
| 8 |
|
| $ |
| 848 |
|
| $ |
| 6,703 |
|
|
| 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 |
|
14
At September 30, 2022 and December 31, 2021, respectively, the Company had $630 million and $734 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.
Net losses on equity securities recognized in earnings for the nine months ended September 30, 2022 and 2021 were $2 and $0, respectively.
The following table summarizes, by contractual maturity, the amortized cost of securities at September 30, 2022:
|
|
| Mortgage- |
|
|
| U.S. |
|
|
| State, |
|
|
| Other |
|
|
| Fair |
| |||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Available-for-Sale Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Due within one year |
| $ |
| 4 |
|
| $ |
| 1,677 |
|
| $ |
| — |
|
| $ |
| 25 |
|
| $ |
| 1,701 |
|
Due from one to five years |
|
|
| 143 |
|
|
|
| 247 |
|
|
|
| — |
|
|
|
| 428 |
|
|
|
| 807 |
|
Due from five to ten years |
|
|
| 219 |
|
|
|
| 1,077 |
|
|
|
| 18 |
|
|
|
| 527 |
|
|
|
| 1,544 |
|
Due after ten years |
|
|
| 2,311 |
|
|
|
| 425 |
|
|
|
| — |
|
|
|
| 426 |
|
|
|
| 2,637 |
|
Total debt securities available |
| $ |
| 2,677 |
|
| $ |
| 3,426 |
|
| $ |
| 18 |
|
| $ |
| 1,406 |
|
| $ |
| 6,689 |
|
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 September 30, 2022:
|
|
| Less than Twelve Months |
|
|
| Twelve Months or Longer |
|
|
| Total |
| ||||||||||||||||||
(in millions) |
|
| Fair Value |
|
|
| Unrealized |
|
|
| Fair Value |
|
|
| Unrealized |
|
|
| Fair Value |
|
|
| Unrealized |
| ||||||
Temporarily Impaired Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U. S. Treasury obligations |
| $ |
| 1,476 |
|
| $ |
| 5 |
|
| $ |
| — |
|
| $ |
| — |
|
| $ |
| 1,476 |
|
| $ |
| 5 |
|
GSE certificates |
|
|
| 572 |
|
|
|
| 62 |
|
|
|
| 371 |
|
|
|
| 109 |
|
|
|
| 943 |
|
|
|
| 171 |
|
GSE CMOs |
|
|
| 448 |
|
|
|
| 41 |
|
|
|
| 838 |
|
|
|
| 235 |
|
|
|
| 1,286 |
|
|
|
| 276 |
|
U.S. Government agency and GSE obligations |
|
|
| 394 |
|
|
|
| 43 |
|
|
|
| 1,012 |
|
|
|
| 300 |
|
|
|
| 1,406 |
|
|
|
| 343 |
|
Asset-backed securities |
|
|
| 125 |
|
|
|
| 2 |
|
|
|
| 224 |
|
|
|
| 8 |
|
|
|
| 349 |
|
|
|
| 10 |
|
Corporate bonds |
|
|
| 720 |
|
|
|
| 27 |
|
|
|
| 95 |
|
|
|
| 4 |
|
|
|
| 815 |
|
|
|
| 31 |
|
Municipal bonds |
|
|
| 11 |
|
|
|
| — |
|
|
|
| 7 |
|
|
|
| 1 |
|
|
|
| 18 |
|
|
|
| 1 |
|
Foreign notes |
|
|
| 25 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 25 |
|
|
|
| — |
|
Capital trust notes |
|
|
| 46 |
|
|
|
| 1 |
|
|
|
| 36 |
|
|
|
| 8 |
|
|
|
| 82 |
|
|
|
| 9 |
|
Equity securities |
|
|
| 4 |
|
|
|
| — |
|
|
|
| 11 |
|
|
|
| 2 |
|
|
|
| 15 |
|
|
|
| 2 |
|
Total temporarily impaired |
| $ |
| 3,821 |
|
| $ |
| 181 |
|
| $ |
| 2,594 |
|
| $ |
| 667 |
|
| $ |
| 6,415 |
|
| $ |
| 848 |
|
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, 2021:
|
| Less than Twelve Months |
|
|
| Twelve Months or Longer |
|
|
| Total |
| ||||||||||||||||||
(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 obligations |
|
| 317 |
|
|
|
| 7 |
|
|
|
| 185 |
|
|
|
| 8 |
|
|
|
| 502 |
|
|
|
| 15 |
|
GSE certificates |
|
| 846 |
|
|
|
| 28 |
|
|
|
| 293 |
|
|
|
| 17 |
|
|
|
| 1,139 |
|
|
|
| 45 |
|
GSE CMOs |
|
| 491 |
|
|
|
| 8 |
|
|
|
| 926 |
|
|
|
| 37 |
|
|
|
| 1,417 |
|
|
|
| 45 |
|
Asset-backed securities |
|
| 130 |
|
|
|
| 1 |
|
|
|
| 135 |
|
|
|
| 2 |
|
|
|
| 265 |
|
|
|
| 3 |
|
Corporate bonds |
|
| — |
|
|
|
| — |
|
|
|
| 99 |
|
|
|
| 1 |
|
|
|
| 99 |
|
|
|
| 1 |
|
Municipal bonds |
|
| — |
|
|
|
| — |
|
|
|
| 8 |
|
|
|
| — |
|
|
|
| 8 |
|
|
|
| — |
|
Foreign notes |
|
| 5 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 5 |
|
|
|
| — |
|
Capital trust notes |
|
| — |
|
|
|
| — |
|
|
|
| 37 |
|
|
|
| 7 |
|
|
|
| 37 |
|
|
|
| 7 |
|
Equity securities |
|
| 12 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 12 |
|
|
|
| — |
|
Total temporarily impaired | $ |
| 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 September 30, 2022 consisted of 103 agency MBS, 18 agency CMOs, five capital trust notes, six asset-backed securities, two corporate bonds, 28 U.S. government agency bonds, one municipal bond and one equity security. The investment securities designated as having a continuous loss position for twelve months or more at December 31, 2021 consisted of four agency collateralized mortgage obligations, five capital trusts notes, four asset-backed securities, two corporate bonds, 20 US government agency bonds, 21 agency mortgage-backed securities and one 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 is 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 September 30, 2022 or December 31, 2021 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 nine months ended September 30, 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:
| September 30, 2022 |
|
|
| December 31, 2021 |
|
| ||||||||
(dollars in millions) | Amount |
| Percent of |
|
|
| Amount |
| Percent of |
|
| ||||
Loans and Leases Held for Investment: |
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage Loans: |
|
|
|
|
|
|
|
|
|
|
| ||||
Multi-family | $ | 37,179 |
|
| 75.98 |
| % |
| $ | 34,603 |
|
| 75.75 |
| % |
Commercial real estate |
| 6,603 |
|
| 13.49 |
|
|
|
| 6,698 |
|
| 14.66 |
|
|
One-to-four family |
| 123 |
|
| 0.25 |
|
|
|
| 160 |
|
| 0.35 |
|
|
Acquisition, development, and construction |
| 203 |
|
| 0.41 |
|
|
|
| 209 |
|
| 0.46 |
|
|
Total mortgage loans held for investment (1) |
| 44,108 |
|
| 90.13 |
|
|
|
| 41,670 |
|
| 91.22 |
|
|
Other Loans: |
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
| 3,122 |
|
| 6.38 |
|
|
|
| 2,236 |
|
| 4.89 |
|
|
Lease financing, net of unearned income |
| 1,697 |
|
| 3.48 |
|
|
|
| 1,770 |
|
| 3.88 |
|
|
Total commercial and industrial loans (2) |
| 4,819 |
|
| 9.86 |
|
|
|
| 4,006 |
|
| 8.77 |
|
|
Other |
| 6 |
|
| 0.01 |
|
|
|
| 5 |
|
| 0.01 |
|
|
Total other loans held for investment |
| 4,825 |
|
| 9.87 |
|
|
|
| 4,011 |
|
| 8.78 |
|
|
Total loans and leases held for investment (1) | $ | 48,933 |
|
| 100.00 |
| % |
| $ | 45,681 |
|
| 100.00 |
| % |
Net deferred loan origination costs |
| 51 |
|
|
|
|
|
| 57 |
|
|
|
| ||
Allowance for loan and lease losses |
| (218 | ) |
|
|
|
|
| (199 | ) |
|
|
| ||
Total loans and leases, net | $ | 48,766 |
|
|
|
|
| $ | 45,539 |
|
|
|
|
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.
The Company also originates one-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.
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 September 30, 2022 and December 31, 2021 were loans of $6 million 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 September 30, 2022 and December 31, 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 September 30, 2022:
(in millions) |
| Loans |
|
| Non- |
|
| Loans 90 |
|
| Total |
|
| Current |
|
| Total |
| ||||||
Multi-family |
| $ | 31 |
|
| $ | 13 |
|
| $ | — |
|
| $ | 44 |
|
| $ | 37,135 |
|
| $ | 37,179 |
|
Commercial real estate |
|
| 1 |
|
|
| 28 |
|
|
| — |
|
|
| 29 |
|
|
| 6,574 |
|
|
| 6,603 |
|
One-to-four family |
|
| 7 |
|
|
| 1 |
|
|
| — |
|
|
| 8 |
|
|
| 115 |
|
|
| 123 |
|
Acquisition, development, and |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
|
| 203 |
|
Commercial and industrial(1) (2) |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
|
| 4,816 |
|
|
| 4,819 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
Total |
| $ | 39 |
|
| $ | 45 |
|
| $ | — |
|
| $ | 84 |
|
| $ | 48,849 |
|
| $ | 48,933 |
|
The following table presents information regarding the quality of the Company’s loans held for investment at December 31, 2021:
(in millions) |
| Loans |
|
| Non- |
|
| Loans 90 |
|
| Total |
|
| Current |
|
| Total |
| ||||||
Multi-family |
| $ | 57 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 67 |
|
| $ | 34,536 |
|
| $ | 34,603 |
|
Commercial real estate |
|
| 2 |
|
|
| 16 |
|
|
| — |
|
|
| 18 |
|
|
| 6,680 |
|
|
| 6,698 |
|
One-to-four family |
|
| 8 |
|
|
| 1 |
|
|
| — |
|
|
| 9 |
|
|
| 151 |
|
|
| 160 |
|
Acquisition, development, and |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 209 |
|
|
| 209 |
|
Commercial and industrial(1) (2) |
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| 6 |
|
|
| 4,000 |
|
|
| 4,006 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| 5 |
|
Total |
| $ | 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 September 30, 2022.
|
| Mortgage Loans |
|
| Other Loans |
| ||||||||||||||||||||||||||
(in millions) |
| Multi- |
|
| Commercial |
|
| One-to- |
|
| Acquisition, |
|
| Total |
|
| Commercial |
|
| Other |
|
| Total |
| ||||||||
Credit Quality Indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Pass |
| $ | 35,688 |
|
| $ | 5,834 |
|
| $ | 107 |
|
| $ | 185 |
|
| $ | 41,814 |
|
| $ | 4,816 |
|
| $ | 6 |
|
| $ | 4,822 |
|
Special mention |
|
| 830 |
|
|
| 464 |
|
|
| 8 |
|
|
| 18 |
|
|
| 1,320 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| 661 |
|
|
| 305 |
|
|
| 8 |
|
|
| — |
|
|
| 974 |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 37,179 |
|
| $ | 6,603 |
|
| $ | 123 |
|
| $ | 203 |
|
| $ | 44,108 |
|
| $ | 4,819 |
|
| $ | 6 |
|
| $ | 4,825 |
|
19
The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at December 31, 2021:
|
| Mortgage Loans |
|
| Other Loans |
| ||||||||||||||||||||||||||
(in millions) |
| Multi- |
|
| Commercial |
|
| One-to- |
|
| Acquisition, |
|
| Total |
|
| Commercial |
|
| Other |
|
| Total |
| ||||||||
Credit Quality Indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Pass |
| $ | 33,011 |
|
| $ | 5,874 |
|
| $ | 137 |
|
| $ | 204 |
|
| $ | 39,226 |
|
| $ | 3,959 |
|
| $ | 5 |
|
| $ | 3,964 |
|
Special mention |
|
| 981 |
|
|
| 643 |
|
|
| 14 |
|
|
| 5 |
|
|
| 1,643 |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Substandard |
|
| 611 |
|
|
| 181 |
|
|
| 9 |
|
|
| — |
|
|
| 801 |
|
|
| 45 |
|
|
| — |
|
|
| 45 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 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.
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 September 30, 2022.
|
| Vintage Year |
| |||||||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior To |
|
| Revolving |
|
| Total |
| ||||||||
Pass |
| $ | 7,655 |
|
| $ | 9,310 |
|
| $ | 8,727 |
|
| $ | 4,960 |
|
| $ | 3,825 |
|
| $ | 7,354 |
|
| $ | 12 |
|
| $ | 41,843 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| 95 |
|
|
| 221 |
|
|
| 277 |
|
|
| 728 |
|
|
| — |
|
|
| 1,321 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 37 |
|
|
| 201 |
|
|
| 130 |
|
|
| 605 |
|
|
| — |
|
|
| 973 |
|
Total mortgage loans |
| $ | 7,655 |
|
| $ | 9,310 |
|
| $ | 8,859 |
|
| $ | 5,382 |
|
| $ | 4,232 |
|
| $ | 8,687 |
|
| $ | 12 |
|
| $ | 44,137 |
|
Pass |
|
| 757 |
|
|
| 642 |
|
|
| 457 |
|
|
| 423 |
|
|
| 78 |
|
|
| 223 |
|
|
| 2,263 |
|
|
| 4,843 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
|
| — |
|
|
| 4 |
|
Total other loans |
|
| 757 |
|
|
| 642 |
|
|
| 457 |
|
|
| 424 |
|
|
| 80 |
|
|
| 224 |
|
|
| 2,263 |
|
|
| 4,847 |
|
Total |
| $ | 8,412 |
|
| $ | 9,952 |
|
| $ | 9,316 |
|
| $ | 5,806 |
|
| $ | 4,312 |
|
| $ | 8,911 |
|
| $ | 2,275 |
|
| $ | 48,984 |
|
When management determines that foreclosure is probable, for loans that are individually evaluated the 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 September 30, 2022:
|
| Collateral Type |
| |||||
(in millions) |
| Real |
|
| Other |
| ||
Multi-family |
| $ | 13 |
|
| $ | — |
|
Commercial real estate |
|
| 43 |
|
|
| — |
|
One-to-four family |
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
Commercial and industrial |
|
| — |
|
|
| 4 |
|
Other |
|
| — |
|
|
| — |
|
Total collateral-dependent loans held for investment |
|
| 56 |
|
|
| 4 |
|
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 nine months ended September 30, 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 credit 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 September 30, 2022, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $45 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 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 September 30, 2022 and December 31, 2021:
|
|
| September 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 |
|
21
(1) Includes $4 million and $6 million of taxi medallion-related loans at September 30, 2022 and December 31, 2021, respectively.
The financial effects of the Company’s TDRs for the three months ended September 30, 2022 and 2021 are summarized as follows:
|
| For the Three Months Ended September 30, 2022 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| |||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial real estate |
|
| — |
|
| $ | — |
|
| $ | — |
|
| 0 | % | 0 | % |
| $ | — |
|
| $ | — |
|
|
| For the Three Months Ended September 30, 2021 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| |||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial real estate |
|
| 2 |
|
| $ | 4 |
|
| $ | 4 |
|
| 6.00 | % | 3.55 | % |
| $ | — |
|
| $ | — |
|
The financial effects of the Company’s TDRs for the nine months ended September 30, 2022 and 2021 are summarized as follows:
|
| For the Nine Months Ended September 30, 2022 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial real estate |
|
| 2 |
|
| $ | 22 |
|
| $ | 19 |
|
|
| 6.00 |
| % |
| 4.02 |
| % | $ | 3 |
|
| $ | — |
|
|
| For the Nine Months Ended September 30, 2021 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial real estate |
|
| 2 |
|
| $ | 4 |
|
| $ | 4 |
|
|
| 6.00 |
| % |
| 3.55 |
| % | $ | — |
|
| $ | — |
|
At September 30, 2022 and September 30, 2021, no loans have been modified as TDRs that were in payment default during the twelve months ended at that date.
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 Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||
(in millions) |
| Mortgage |
|
| Other |
|
| Total |
|
| Mortgage |
|
| Other |
|
| Total |
| ||||||
Balance, beginning of period |
| $ | 178 |
|
| $ | 21 |
|
| $ | 199 |
|
| $ | 176 |
|
| $ | 18 |
|
| $ | 194 |
|
Charge-offs |
|
| (5 | ) |
|
| — |
|
|
| (5 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (5 | ) |
Recoveries |
|
| 4 |
|
|
| 6 |
|
|
| 10 |
|
|
| 2 |
|
|
| 10 |
|
|
| 12 |
|
Provision for (recovery of) credit |
|
| 31 |
|
|
| (17 | ) |
|
| 14 |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Balance, end of period |
| $ | 208 |
|
| $ | 10 |
|
| $ | 218 |
|
| $ | 177 |
|
| $ | 25 |
|
| $ | 202 |
|
Separately, at September 30, 2022, the Company had an allowance for unfunded commitments of $7 million, as compared to $12 million at December 31, 2021.
For the nine months ended September 30, 2022, the allowance for credit losses on loan and leases increased primarily as a result of loan portfolio growth combined with reduced prepayment estimates lengthening the average portfolio life, primarily offset by improvements in environmental factors surrounding the COVID-19 pandemic, specifically those affecting the New York City area.
The macroeconomic forecast factors 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 rise at an annualized rate of 1.6% and 1.5% respectively for 2022 and 2023. Unemployment continues to subside from the historic shock of 2020, as peak unemployment rates are forecasted to be approximately 3.6% in 2022 and 3.9% in 2023. Federal Reserve continues to aggressively tighten monetary policy. As a result, the federal funds rate is now forecast to average 1.5% in 2022 and 3.3% in 2023, compared with 1.1% in 2022 and 2.7% 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.
In addition to these quantitative inputs, several qualitative factors were considered in estimating our allowance for loan and lease credit losses, including attributes related to a concentrated commercial real estate portfolio, specifically those affecting commercial real estate in the New York City area, as well as changes in credit policies and underwriting guidelines and laws and regulations.
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 September 30, 2022:
(in millions) |
| Recorded |
|
| Related |
|
| Interest |
| |||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 13 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 27 |
|
|
| — |
|
|
| 1 |
|
One-to-four family |
|
| — |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 3 |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans with no related allowance |
| $ | 43 |
|
| $ | — |
|
| $ | 1 |
|
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | — |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 1 |
|
|
| — |
|
|
| — |
|
One-to-four family |
|
| 1 |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans with an allowance recorded |
| $ | 2 |
|
| $ | — |
|
| $ | — |
|
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 13 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 28 |
|
|
| — |
|
|
| 1 |
|
One-to-four family |
|
| 1 |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 3 |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans |
| $ | 45 |
|
| $ | — |
|
| $ | 1 |
|
The following table presents additional information about the Company’s nonaccrual loans at December 31, 2021:
(in millions) |
| Recorded |
|
| Related |
|
| Interest |
| |||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 9 |
|
| $ | — |
|
| $ | 1 |
|
Commercial real estate |
|
| 14 |
|
|
| — |
|
|
| — |
|
One-to-four family |
|
| — |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 6 |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans with no related allowance |
| $ | 29 |
|
| $ | — |
|
| $ | 1 |
|
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 1 |
|
| $ | — |
|
| $ | — |
|
Commercial real estate |
|
| 2 |
|
|
| — |
|
|
| — |
|
One-to-four family |
|
| 1 |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans with an allowance recorded |
| $ | 4 |
|
| $ | — |
|
| $ | — |
|
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
| |||
Multi-family |
| $ | 10 |
|
| $ | — |
|
| $ | 1 |
|
Commercial real estate |
|
| 16 |
|
|
| — |
|
|
| — |
|
One-to-four family |
|
| 1 |
|
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| 6 |
|
|
| — |
|
|
| — |
|
Total nonaccrual loans |
| $ | 33 |
|
| $ | — |
|
| $ | 1 |
|
24
Note 7. Borrowed Funds
The following table summarizes the Company’s borrowed funds at the dates indicated:
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Wholesale borrowings: |
|
|
|
|
|
| ||
FHLB advances |
| $ | 12,840 |
|
| $ | 15,105 |
|
Repurchase agreements |
|
| 300 |
|
|
| 800 |
|
Total wholesale borrowings |
| $ | 13,140 |
|
| $ | 15,905 |
|
Junior subordinated debentures |
|
| 361 |
|
|
| 361 |
|
Subordinated notes |
|
| 297 |
|
|
| 296 |
|
Total borrowed funds |
| $ | 13,798 |
|
| $ | 16,562 |
|
The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at September 30, 2022:
|
| Remaining Contractual Maturity of the Agreements |
| |||||||||||||
(in millions) |
| Overnight and |
|
| Up to |
|
| 30–90 Days |
|
| Greater than |
| ||||
GSE obligations |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 300 |
|
Subordinated Notes
At September 30, 2022 and December 31, 2021, the Company had $297 million and $296 million of fixed-to-floating rate subordinated notes outstanding:
Date of Original Issue |
| Stated Maturity |
| Interest Rate(1) |
|
| Original Issue |
| ||
(dollars in millions) |
| |||||||||
Nov. 6, 2018 |
| Nov. 6, 2028 |
|
| 5.90 | % |
| $ | 300 |
|
Junior Subordinated Debentures
At September 30, 2022 and December 31, 2021, the Company had $361 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 September 30, 2022:
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 |
| 4.89 |
|
|
|
| 124 |
|
|
|
| 120 |
|
| Dec. 14, 2006 |
| Dec. 15, 2036 |
| Dec. 15, 2011 | (2) | |
PennFed Capital Trust III |
| 6.54 |
|
|
|
| 31 |
|
|
|
| 30 |
|
| June 2, 2003 |
| June 15, 2033 |
| June 15, 2008 | (2) | |
New York Community Capital |
| 5.32 |
|
|
|
| 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 September 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
|
|
|
| Post |
|
|
|
|
| Post |
| ||||
|
| Pension |
|
| Retirement |
|
| Pension |
|
| Retirement |
| ||||
(in millions) |
| Benefits |
|
| Benefits (1) |
|
| Benefits |
|
| Benefits (1) |
| ||||
Components of net periodic pension expense (credit): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest cost |
| $ | 1 |
|
| $ | — |
|
| $ | 1 |
|
| $ | — |
|
Expected return on plan assets |
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
|
| — |
|
Amortization of net actuarial loss |
|
| 1 |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
Net periodic (credit) expense |
| $ | (2 | ) |
| $ | — |
|
| $ | (1 | ) |
| $ | — |
|
|
| For the Nine Months Ended September 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
|
|
|
| Post |
|
|
|
|
| Post |
| ||||
|
| Pension |
|
| Retirement |
|
| Pension |
|
| Retirement |
| ||||
(in millions) |
| Benefits |
|
| Benefits (1) |
|
| Benefits |
|
| Benefits (1) |
| ||||
Components of net periodic pension expense (credit): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest cost |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
Expected return on plan assets |
|
| (12 | ) |
|
| — |
|
|
| (12 | ) |
|
| — |
|
Amortization of net actuarial loss |
|
| 2 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
Net periodic (credit) expense |
| $ | (7 | ) |
| $ | — |
|
| $ | (4 | ) |
| $ | — |
|
The Company expects to contribute $1 million to its post-retirement plan to pay premiums and claims for the fiscal year ending December 31, 2022. The Company does not expect to make any contributions to its pension plan in 2022.
Note 9. Stock-Based Compensation
At September 30, 2022, the Company had a total of 5,350,487 shares available for grants as restricted stock, options, or other forms of related rights. The Company granted 3,096,694 shares of restricted stock, with an average fair value of $11.62 per share on the date of grant, during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company granted 3,131,949 shares of restricted stock, with an average fair value of $11.20 per share.
The shares of restricted stock that were granted during the nine months ended September 30, 2022 and 2021, vest over a one- or five year period. Compensation and benefits expense related to the restricted stock grants is recognized on a straight-line basis over the vesting period and totaled $21 million and $22 million for the nine months ended September 30, 2022 and 2021, including $7 million and $7 million for the three months ended September 30, 2022 and September 30, 2021, respectively.
26
The following table provides a summary of activity with regard to restricted stock awards in the nine months ended September 30, 2022:
|
| For the Nine Months Ended |
| |||||
|
| Number of Shares |
|
| Weighted |
| ||
Unvested at beginning of year |
|
| 6,950,335 |
|
| $ | 11.68 |
|
Granted |
|
| 3,096,694 |
|
|
| 11.62 |
|
Vested |
|
| (2,288,069 | ) |
|
| 12.27 |
|
Canceled |
|
| (426,785 | ) |
|
| 11.49 |
|
Unvested at end of year |
|
| 7,332,175 |
|
|
| 11.49 |
|
As of September 30, 2022, unrecognized compensation cost relating to unvested restricted stock totaled $66 million. This amount will be recognized over a remaining weighted average period of 3.1 years.
The following table provides a summary of activity with regard to Performance-Based Restricted Stock Units ("PSUs") in the nine months ended September 30, 2022:
|
|
| ||||||
|
| |||||||
|
| |||||||
|
|
| ||||||
|
|
| ||||||
|
|
|
|
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 and $2 million for the three and nine months ended September 30, 2022 and September 30, 2021. As of September 30, 2022, unrecognized compensation cost relating to unvested restricted stock totaled $5 million. This amount will be recognized over a remaining weighted average period of 1.7 years. As of September 30, 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 $2 million and $5 million for the three and nine months ended September 30, 2022 and September 30, 2021.
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:
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.
27
The following tables present assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, and that were included in the Company’s Consolidated Statements of Condition at those dates:
| Fair Value Measurements at September 30, 2022 |
| |||||||||||||
(in millions) | Quoted |
|
| Significant |
|
| Significant |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-related Debt Securities |
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates | $ | — |
|
| $ | 944 |
|
| $ | — |
|
| $ | 944 |
|
GSE CMOs |
| — |
|
|
| 1,286 |
|
|
| — |
|
|
| 1,286 |
|
Total mortgage-related debt securities | $ | — |
|
| $ | 2,230 |
|
| $ | — |
|
| $ | 2,230 |
|
Other Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
| ||||
U. S. Treasury obligations | $ | 1,672 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,672 |
|
GSE debentures |
| — |
|
|
| 1,406 |
|
|
| — |
|
|
| 1,406 |
|
Asset-backed securities |
| — |
|
|
| 391 |
|
|
| — |
|
|
| 391 |
|
Municipal bonds |
| — |
|
|
| 18 |
|
|
| — |
|
|
| 18 |
|
Corporate bonds |
| — |
|
|
| 855 |
|
|
| — |
|
|
| 855 |
|
Foreign notes |
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
|
Capital trust notes |
| — |
|
|
| 92 |
|
|
| — |
|
|
| 92 |
|
Total other debt securities | $ | 1,672 |
|
| $ | 2,787 |
|
| $ | — |
|
| $ | 4,459 |
|
Total debt securities available for sale | $ | 1,672 |
|
| $ | 5,017 |
|
| $ | — |
|
| $ | 6,689 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Mutual funds and common stock |
| — |
|
|
| 14 |
|
|
| — |
|
|
| 14 |
|
Total equity securities | $ | — |
|
| $ | 14 |
|
| $ | — |
|
| $ | 14 |
|
Total securities | $ | 1,672 |
|
| $ | 5,031 |
|
| $ | — |
|
| $ | 6,703 |
|
28
|
| 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
29
measured at fair value on a non-recurring basis as of September 30, 2022 and December 31, 2021, and that were included in the Company’s Consolidated Statements of Condition at those dates:
|
| Fair Value Measurements at September 30, 2022 Using |
| |||||||||||||||
(in millions) |
| Quoted Prices |
|
| Significant |
|
|
| Significant |
|
|
| Total Fair |
| ||||
Certain loans (1) |
| $ | — |
|
| $ | — |
|
|
| $ | 25 |
|
|
| $ | 25 |
|
Other assets(2) |
|
| — |
|
|
| — |
|
|
|
| 38 |
|
|
|
| 38 |
|
Total |
| $ | — |
|
| $ | — |
|
|
| $ | 63 |
|
|
| $ | 63 |
|
|
| 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 |
|
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.
30
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 September 30, 2022 and December 31, 2021:
|
|
| September 30, 2022 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurement Using |
| ||||||||||||||
(in millions) |
|
| Carrying |
|
|
| Estimated |
|
|
| Quoted Prices |
|
| Significant |
|
|
| Significant |
| |||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash, cash equivalents and due from banks |
| $ |
| 1,700 |
|
| $ |
| 1,700 |
|
| $ |
| 1,700 |
|
|
| $ |
| — |
|
|
| $ | — |
|
FHLB stock (1) |
|
|
| 630 |
|
|
|
| 630 |
|
|
|
| — |
|
|
|
|
| 630 |
|
|
|
| — |
|
Loans and leases, net |
|
|
| 48,766 |
|
|
|
| 45,725 |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
| 45,725 |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ |
| 41,705 |
|
| $ |
| 41,448 |
|
| $ |
| 32,596 |
| (2) |
| $ |
| 8,852 |
| (3) |
| $ | — |
|
Borrowed funds |
|
|
| 13,798 |
|
|
|
| 13,615 |
|
|
|
| — |
|
|
|
|
| 13,615 |
|
|
|
| — |
|
|
| December 31, 2021 |
| |||||||||||||||||||
|
|
|
|
|
|
|
| Fair Value Measurement Using |
| |||||||||||||
(in millions) |
| Carrying |
|
| Estimated |
|
| Quoted Prices |
| Significant |
| Significant |
| |||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash, cash equivalents and due from banks |
| $ | 2,211 |
|
| $ | 2,211 |
|
| $ | 2,211 |
|
|
| $ | — |
|
|
| $ | — |
|
FHLB stock (1) |
|
| 734 |
|
|
| 734 |
|
|
| — |
|
|
|
| 734 |
|
|
|
| — |
|
Loans and leases, net |
|
| 45,539 |
|
|
| 44,748 |
|
|
| — |
|
|
|
| — |
|
|
|
| 44,748 |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ | 35,059 |
|
| $ | 35,051 |
|
| $ | 26,635 |
| (2) |
| $ | 8,416 |
| (3) |
| $ | — |
|
Borrowed funds |
|
| 16,562 |
|
|
| 17,169 |
|
|
| — |
|
|
|
| 17,169 |
|
|
|
| — |
|
The methods and significant assumptions used to estimate fair values for the Company’s financial instruments follow:
Cash, Cash Equivalents and Due From Banks
Cash, cash equivalents and due from banks include cash and due from banks and federal funds sold. The estimated fair values of cash, 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.
31
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 September 30, 2022 and December 31, 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.
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.
32
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 September 30, 2022 and December 31, 2021, the carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $34million and $61 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:
(in millions) |
| For the |
|
| For the |
|
| For the |
|
| For the |
| ||||
Interest income on lease financing (1) |
| $ | 14 |
|
| $ | 38 |
|
| $ | 13 |
|
| $ | 41 |
|
At September 30, 2022 and December 31, 2021, the carrying value of net investment in leases was $1.8 billion and $1.9 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:
(in millions) |
| September 30, |
|
| December 31, |
| ||
Net investment in the lease - lease payments receivable |
| $ | 1,722 |
|
| $ | 1,790 |
|
Net investment in the lease - unguaranteed residual assets |
|
| 59 |
|
|
| 75 |
|
Total lease payments |
| $ | 1,781 |
|
| $ | 1,865 |
|
The following table presents the remaining maturity analysis of the undiscounted lease receivables as of September 30, 2022, as well as the reconciliation to the total amount of receivables recognized in the Consolidated Statements of Condition:
(in millions) |
| September 30, |
| ||
2022 |
| $ |
| 3 |
|
2023 |
|
|
| 86 |
|
2024 |
|
|
| 186 |
|
2025 |
|
|
| 375 |
|
2026 |
|
|
| 373 |
|
Thereafter |
|
|
| 758 |
|
Total lease payments |
|
|
| 1,781 |
|
Plus: deferred origination costs |
|
|
| 20 |
|
Less: unearned income |
|
|
| (84 | ) |
Total lease finance receivables, net |
| $ |
| 1,717 |
|
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
33
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 $21million and $15 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. Included in these amounts was $5 million and $5 million for the three months ended September 30, 2022 and September 30, 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 years, 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:
(in millions) |
| For the Three |
|
| For the Nine |
|
| For the Three |
|
| For the Nine |
| ||||
Operating lease cost |
| $ | 7 |
|
| $ | 21 |
|
| $ | 7 |
|
| $ | 20 |
|
Sublease income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total lease cost |
| $ | 7 |
|
| $ | 21 |
|
| $ | 7 |
|
| $ | 20 |
|
Supplemental cash flow information related to the leases for the following periods:
(in millions) |
| For the Three |
|
| For the Nine |
|
| For the Three |
|
| For the Nine |
| ||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating cash flows from operating leases |
| $ | 7 |
|
| $ | 21 |
|
| $ | 7 |
|
| $ | 20 |
|
Supplemental balance sheet information related to the leases for the following periods:
(in millions, except lease term and discount rate) |
| September 30, |
|
| December 31, |
| ||
Operating Leases: |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
| $ | 227 |
|
| $ | 249 |
|
Operating lease liabilities |
| $ | 227 |
|
| $ | 249 |
|
Weighted average remaining lease term |
| 13 years |
|
| 16 years |
| ||
Weighted average discount rate% |
|
| 3.23 | % |
|
| 3.05 | % |
34
(in millions) |
| September 30, |
| ||
2022 |
| $ |
| 7 |
|
2023 |
|
|
| 27 |
|
2024 |
|
|
| 26 |
|
2025 |
|
|
| 25 |
|
2026 |
|
|
| 24 |
|
Thereafter |
|
|
| 171 |
|
Total lease payments |
|
|
| 280 |
|
Less: imputed interest |
|
|
| (53 | ) |
Total present value of lease liabilities |
| $ |
| 227 |
|
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 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 September 30, 2022, all of the Company’s $1.5 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 September 30, 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 September 30, 2022, the Company had a net positive exposure.
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 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 nine months ended September 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 nine months ended September 30, 2022. For the three and nine months ended September 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 $37 million for the three and nine months ended September 30, 2021.
35
As of September 30, 2022, and December 31, 2021 the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
(in millions) |
| September 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 |
|
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the periods indicated.
(in millions) | For the Three |
|
| For the Nine |
|
| For the Three |
|
| For the Nine |
| ||||
Derivative – interest rate swap: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income | $ | — |
|
| $ | 25 |
|
| $ | 25 |
|
| $ | 49 |
|
Hedged item – loans: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income | $ | — |
|
| $ | (25 | ) |
| $ | (25 | ) |
| $ | (49 | ) |
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 $1.5 billion and $2.3 billion as of September 30, 2022 and December 31, 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 September 30, 2022 and December 31, 2021:
(dollars in millions) |
| September 30, |
|
| December 31, |
| ||
Notional amounts |
| $ | 1,500 |
|
| $ | 2,250 |
|
Cash collateral received (posted) |
|
| 58 |
|
|
| (12 | ) |
Weighted average pay rates |
|
| 1.51 | % |
|
| 1.27 | % |
Weighted average receive rates |
|
| 2.89 | % |
|
| 0.18 | % |
Weighted average maturity |
| 2.2 years |
|
| 0.9 years |
|
36
The following table presents the effect of the Company's cash flow derivative instruments on AOCL for the nine months ended September 30, 2022 and 2021:
(in millions) |
| For the Nine |
|
| For the Nine |
| ||
Amount of (loss) gain recognized in AOCL |
| $ | 64 |
|
| $ | 2 |
|
Amount of reclassified from AOCL to interest expense |
|
| 4 |
|
|
| 18 |
|
Gains (losses) included in the Consolidated Statements of Income related to interest rate derivatives designated as cash flow hedges during the nine months ended September 30, 2022 was $4 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 $21 million will be reclassified to interest expense.
37
Note 13. Pending Acquisition
Receipt of OCC Approval for Bank Merger and Merger Extension
On October 28, 2022, the Company and Flagstar Bancorp, Inc. ("Flagstar") jointly announced the receipt of approval from the Office of the Comptroller of the Company (the "OCC") to convert Flagstar Bank, FSB to a national bank to be known as Flagstar Bank, N.A., and to merge New York Community Bank into Flagstar Bank, N.A. with Flagstar Bank being the surviving entity.
The acquisition of Flagstar by the Company is still subject to the approval of the FRB, as well as the satisfaction of certain other customary closing conditions under the merger agreement, as amended, between the two companies (the “Merger Agreement”). The OCC approval is subject to a statutory 15-day waiting period that provides that the bank merger cannot be consummated until 15 days after OCC approval has been received, which in this case is November 11, 2022. There is no associated waiting period with the FRB approval. NYCB and Flagstar intend to consummate the holding company and bank merger promptly after FRB approval is received and the OCC waiting period ends.
In addition, NYCB and Flagstar announced that they have mutually agreed to extend the Merger Agreement to December 31, 2022 from October 31, 2022 to provide additional time to obtain regulatory approval from the FRB. The extension was approved by the Boards of Directors of both companies. Pursuant to the terms of the Merger Agreement, Flagstar shareholders will receive 4.0151 shares of Company common stock for each Flagstar share they own.
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, 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.
38
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 CommunityFlagstar Bank, N.A. (the “Bank”).
39
40
At or for the At or for the Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in millions) 2022 2022 2021 2022 2021 Total Stockholders’ Equity $ 6,746 $ 6,824 $ 6,967 $ 6,746 $ 6,967 Less: Goodwill (2,426 ) (2,426 ) (2,426 ) (2,426 ) (2,426 ) Preferred stock (503 ) (503 ) (503 ) (503 ) (503 ) Tangible common stockholders’ equity $ 3,817 $ 3,895 $ 4,038 $ 3,817 $ 4,038 Total Assets $ 62,956 $ 63,093 $ 57,890 $ 62,956 $ 57,890 Less: Goodwill (2,426 ) (2,426 ) (2,426 ) (2,426 ) (2,426 ) Tangible Assets $ 60,530 $ 60,667 $ 55,464 $ 60,530 $ 55,464 Average common stockholders’ equity $ 6,389 $ 6,398 $ 6,474 $ 6,443 $ 6,404 Less: Average goodwill (2,426 ) (2,426 ) (2,426 ) (2,426 ) (2,426 ) Average tangible common stockholders’ equity $ 3,963 $ 3,972 $ 4,048 $ 4,017 $ 3,978 Average Assets $ 63,269 $ 61,988 $ 57,307 $ 61,729 $ 57,246 Less: Average goodwill (2,426 ) (2,426 ) (2,426 ) (2,426 ) (2,426 ) Average tangible assets $ 60,843 $ 59,562 $ 54,881 $ 59,303 $ 54,820 GAAP MEASURES: Return on average assets (1) 0.96 % 1.10 % 1.04 % 1.03 % 1.04 % Return on average common stockholders' equity (2) 9.01 10.18 8.69 9.39 8.77 Book value per common share $ 13.39 $ 13.56 $ 13.90 $ 13.39 $ 13.90 Common stockholders’ equity to total assets 9.92 10.02 11.17 9.92 11.17 NON-GAAP MEASURES: Return on average tangible assets (1) 1.02 % 1.17 % 1.08 % 1.10 % 1.08 % Return on average tangible common stockholders’ equity (2) 14.81 16.73 13.89 15.43 14.12 Tangible book value per common share $ 8.19 $ 8.35 $ 8.68 $ 8.19 $ 8.68 Tangible common stockholders’ equity to tangible assets 6.31 6.42 7.28 6.31 7.28 For the Three Months Ended For the Nine Months Ended (dollars in millions) September 30, 2022 June 30, September 30, 2021 September 30, 2022 September 30, 2021 Mortgage Loan Originated for Investment: Multi-family $1,716 $2,939 $1,796 $7,065 $5,341 Commercial real estate 243 213 143 737 655 One-to-four family residential 13 82 70 157 138 Acquisition, development, and construction 11 32 18 83 94 Total mortgage loans originated for investment 1,983 3,266 2,027 8,042 6,228 Other Loans Originated for Investment: Specialty finance 1,560 1,877 796 4,075 1,943 Other commercial and industrial 215 116 127 433 383 Other 2 1 2 5 5 Total other loans originated for investment 1,777 1,994 925 4,513 2,331 Total loans originated for investment $3,760 $5,260 $2,952 $12,555 $8,559 to $11.6 billion at our discretion. At September 30, 2022 Multi-Family Loans Commercial Real Estate Loans (dollars in millions) Amount Percent Amount Percent New York City: Manhattan $ 7,410 19.93 % $ 2,760 41.80 % Brooklyn 6,448 17.34 340 5.14 Bronx 3,731 10.04 147 2.22 Queens 2,941 7.91 564 8.54 Staten Island 127 0.34 51 0.78 Total New York City $ 20,657 55.56 % $ 3,862 58.48 % New Jersey 5,012 13.48 562 8.51 Long Island 540 1.45 1,030 15.60 Total Metro New York $ 26,209 70.49 % $ 5,454 82.59 % Other New York State 1,163 3.13 141 2.14 Pennsylvania 3,740 10.06 318 4.82 Florida 1,730 4.65 208 3.15 Ohio 780 2.10 40 0.61 Arizona 412 1.11 33 0.50 All other states 3,145 8.46 409 6.19 Total $ 37,179 100.00 % $ 6,603 100.00 % Change from (dollars in millions) September 30, December 31, Amount Percent Non-Performing Loans: Non-accrual mortgage loans: Multi-family $ 13 $ 10 $ 3 30 % Commercial real estate 28 16 12 75 One-to-four family 1 1 — — Acquisition, development, and construction — — — — Total non-accrual mortgage loans 42 27 15 56 Non-accrual other loans (1) 3 6 (3 ) (50 ) Total non-performing loans $ 45 $ 33 $ 12 36 Includes home equity, consumer and other loans. in accordance with underwriting standards that are similar to those applicable to our multi-family credits, the percentage of our non-performing CRE loans that have resulted in losses has been comparatively small over time. Change from (dollars in millions) September 30, December 31, Amount Percent Loans 30-89 Days Past Due: Multi-family $ 31 $ 57 $ (26 ) -46 % Commercial real estate 1 2 (1 ) -50 One-to-four family 7 8 (1 ) -13 Acquisition, development, and construction — — — NM Other loans (1) — — — NM Total loans 30-89 days past due $ 39 $ 67 $ (28 ) -42 % theour ability to effectively manage liquidity, including our success in deploying any liquidity arising from a transaction into assets bearing sufficiently high yields without incurring unacceptable credit or interest rate risk; Part I, Item 1A, Risk Factors, in our Form 10-K for the year ended December 31, 20212022, our Forms 10-Q for the quarters ended June 30, 2023 and March 31, 2023, and this Form 10-Q, for a further discussion of important risk factors that could cause actual results to differ materially from our forward-looking statements.41RECONCILIATIONS 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:1.Tangible common stockholders’ equity is an important indication of the Company’s ability to grow organically and through business combinations, as well as its ability to pay dividends and to engage in various capital management strategies.2.Tangible book value per common share and the ratio of tangible common stockholders’ equity to tangible assets are among the capital measures considered by current and prospective investors, both independent of, and in comparison with, the Company’s peers.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:(1)To calculate return on average assets for a period, we divide net income generated during that period by average assets recorded during that period. To calculate return on average tangible assets for a period, we divide net income by average tangible assets recorded during that period.(2)To calculate return on average common stockholders’ equity for a period, we divide net income available to common shareholders generated during that period by average common stockholders’ equity recorded during that period. To calculate return on average tangible common stockholders’ equity for a period, we divide net income available to common shareholders generated during that period by average tangible common stockholders’ equity recorded during that period.ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 42Executive SummaryNew 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 237 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.Third Quarter 2022 Overview2022,2023, total assets were $63.0$111.2 billion, up $3.4 billion or 8% annualized compared to December 31, 2021. The year-to-date increase was due primarily to growth in our loan portfolio, and to a lesser extent, growth in the securities portfolio, offset slightly by a decline in the level of cash and cash equivalents.Total loans held for investment increased $3.2 billion or 9% annualized, ending the quarter at $49.0$21.1 billion compared to December 31, 2021. Our loan growth continues2022. Total deposits were $82.7 billion at September 30, 2023, up $24.0 billion from December 31, 2022. These year-to-date increases were primarily due to be driven by growth in two categories: multi-family loansour March 20, 2023, assumption of a substantial amount of the deposits and specialty finance loans.Duringcertain identified liabilities and the current third quarter,acquisition of certain assets and lines of business of Signature Bridge Bank, from the Company reinvested a portion of its cash balances in short-term treasury securities. Accordingly, total available-for-sale securities increased by $1.0 billion to $6.7 billion, up 18% (not annualized) comparedFDIC as receiver for Signature Bridge Bank (the “Signature Transaction”). See Note 3 “Business Combinations” to the second quarter ofConsolidated Financial Statements for further information regarding the year. At the same time, the level of cash balances declined $1.6 billion to $1.7 billion.Signature TransactionOn the liability front, total deposits increased $6.6 billion or 25% annualized to $41.7 billion. Once again, the deposit growth was driven by growth in our BaaS business and loan-related deposits.Given the strong year-to-date deposit growth, wholesale borrowings declined $2.8 billion or 23% annualized to $13.1 billion compared to December 31, 2021.2022, the Company reported2023, net income of $152was $207 million up 2%as compared to the $149$413 million that the Company reported for the three months ended SeptemberJune 30, 2021.2023. Net income available to common stockholders for the three months ended September 30, 2022 totaled $1442023 was $199 million, up 3% compared to the $140$405 million that the Company reported for the three months Septemberended June 30, 2021.2023. Diluted EPS were $0.30totaled $0.27 for the three months ended September 30, 2023 compared to $0.55 for the three months ended June 30, 2023.unchangedfurther demonstrating the reduction of our concentration in this asset class.September 31, 2021.June 30, 2023. The decrease was driven by lower average earning assets, partially offset by a six basis point increase in net interest margin and lower average interest-bearing liabilities.Included in2022 results are $42023, net interest margin was 3.27 percent up six basis points compared to the three months ended June 30, 2023. We continued to benefit from the higher interest rate environment and recently acquired loans, which positively impacted the yields on our assets.merger-related expensesthe third quarter of 2023 and multi-family increased $91 million of which the largest individual loan was $42 million. Repossessed assets of $12 million were slightly lower compared to $6$13 million in the prior quarter.Three Months Ended, September 30, 2023 June 30, 2023 (dollars in millions) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost ASSETS: Interest-earning assets: $ 85,691 $ 1,251 5.82 % $ 83,810 $ 1,161 5.55 % 10,317 111 4.30 % 9,781 102 4.18 % Reverse repurchase agreements 299 5 6.11 % 429 6 5.85 % Interest-earning cash and cash equivalents 10,788 145 5.31 % 18,279 229 5.03 % Total interest-earning assets $ 107,095 $ 1,512 5.62 % $ 112,299 $ 1,498 5.34 % Non-interest-earning assets 7,179 8,974 Total assets $ 114,274 $ 121,273 LIABILITIES AND STOCKHOLDERS' EQUITY: Interest-bearing deposits: Interest-bearing checking and money market accounts $ 31,321 $ 268 3.40 % $ 30,647 $ 232 3.05 % Savings accounts 9,628 43 1.76 % 10,015 40 1.61 % Certificates of deposit 17,545 180 4.06 % 18,587 169 3.61 % Total interest-bearing deposits $ 58,494 $ 491 3.33 % $ 59,249 $ 441 2.98 % Short term borrowed funds 5,632 62 4.38 % 6,807 75 4.46 % Other borrowed funds 9,964 77 3.04 % 11,393 82 2.88 % Total Borrowed funds $ 15,596 $ 139 3.53 % $ 18,200 $ 157 3.47 % Total interest-bearing liabilities $ 74,090 $ 630 3.37 % $ 77,449 $ 598 3.10 % Non-interest-bearing deposits 25,703 24,613 Other liabilities 3,286 8,321 Total liabilities $ 103,079 $ 110,383 Stockholders’ equity 11,195 10,890 Total liabilities and stockholders’ equity $ 114,274 $ 121,273 Net interest income/interest rate spread $ 882 2.25 % $ 900 2.24 % Net interest margin 3.27 % 3.21 % Ratio of interest-earning assets to interest-bearing liabilities 1.45 x 1.45 x Nine Months Ended, September 30, 2023 September 30, 2022 (dollars in millions) Average Balance Interest Average Yield/Cost Average Balance Interest Average Yield/Cost ASSETS: Interest-earning assets: $ 80,569 $ 3,279 5.43 % $ 47,158 $ 1,259 3.56 % 10,314 318 4.11 % 6,864 125 2.43 % Reverse repurchase agreements 503 21 5.74 % 388 7 2.35 % Interest-earning cash and cash equivalents 11,127 426 5.11 % 2,326 20 1.12 % Total interest-earning assets $ 102,513 $ 4,044 5.27 % $ 56,736 $ 1,411 3.32 % Non-interest-earning assets 7,582 4,993 Total assets $ 110,095 $ 61,729 LIABILITIES AND STOCKHOLDERS' EQUITY: Interest-bearing deposits: Interest-bearing checking and money market accounts $ 28,385 $ 657 3.09 % $ 16,915 $ 104 0.82 % Savings accounts 10,240 122 1.60 % 9,245 33 0.49 % Certificates of deposit 16,627 436 3.50 % 8,197 46 0.75 % Total interest-bearing deposits $ 55,252 $ 1,215 2.94 % $ 34,357 $ 183 0.71 % Short term borrowed funds 7,146 241 4.50 % 1,925 17 1.16 % Other borrowed funds 11,537 251 2.91 % 13,419 194 1.93 % Total Borrowed funds $ 18,683 $ 492 3.52 % $ 15,344 $ 211 1.84 % Total interest-bearing liabilities $ 73,935 $ 1,707 3.09 % $ 49,701 $ 394 1.06 % Non-interest-bearing deposits 21,214 4,332 Other liabilities 4,518 750 Total liabilities $ 99,667 $ 54,783 Stockholders’ equity 10,428 6,946 Total liabilities and stockholders’ equity $ 110,095 $ 61,729 Net interest income/interest rate spread $ 2,337 2.18 % $ 1,017 2.26 % Net interest margin 3.05 % 2.39 % Ratio of interest-earning assets to interest-bearing liabilities 1.39 x 1.14 x Three Months Ended, Nine Months Ended, (in millions) Volume Rate Net Volume Rate Net INTEREST-EARNING ASSETS: Mortgage and other loans and leases, net $ 27 $ 63 $ 90 $ 1,361 $ 659 $ 2,020 Securities $ 6 $ 3 $ 9 $ 106 $ 87 $ 193 Reverse repurchase agreements $ (2) $ 1 $ (1) $ 5 $ 9 $ 14 Interest Earning Cash & Cash Equivalent $ (99) $ 15 $ (84) $ 337 $ 69 $ 406 Total interest-earnings assets $ (68) $ 82 $ 14 $ 1,809 $ 824 $ 2,633 INTEREST-BEARING LIABILITIES: Interest-bearing checking and money market accounts $ 6 $ 30 $ 36 $ 266 $ 287 $ 553 Savings accounts $ (2) $ 5 $ 3 $ 12 $ 77 $ 89 Certificates of deposit $ (11) $ 22 $ 11 $ 221 $ 169 $ 390 Short Term Borrowed Funds $ (10) $ (3) $ (13) $ 176 $ 48 $ 224 Other Borrowed Funds $ (16) $ 11 $ (5) $ (41) $ 98 $ 57 Total interest-bearing liabilities $ (33) $ 65 $ 32 $ 634 $ 679 $ 1,313 Change in net interest income $ (35) $ 17 $ (18) $ 1,175 $ 145 $ 1,320 Three Months Ended, Nine Months Ended, (in millions) September 30, 2023 June 30, 2023 September 30, 2023 September 30, 2022 Bargain purchase gain $ — $ 141 $ 2,142 $ — Fee income 58 48 133 17 Net return on mortgage servicing rights 23 25 70 — Net gain on loan sales and securitizations 28 25 73 — Other 21 14 46 10 Bank-owned life insurance 11 11 32 24 Net loan administration income 19 39 65 — Net (loss) gain on securities — $ (1) (1) (2) Total non-interest income $ 160 $ 302 $ 2,560 $ 49 2021.2023 compared to $39 million for the three months ended June 30, 2023 driven by a reduction in subservicing income related to a decrease in loans being serviced for the FDIC related to the Signature Transaction.2022, net2023, the Company reported a provision for income totaled $478taxes of $141 million, up 7% compared to $446$164 million for the nine months ended September 30, 2021. Net income available to common stockholders2022. Income tax expense for the nine months endedcurrent year was impacted by the Signature Transaction and Flagstar acquisition.2022 totaled $453 million, up 8%2023, compared to $421 million for$90.1 billion at December 31, 2022 due to the three months ended September 30, 2021.Signature Transaction, which closed on March 20, 2023, and organic loan growth.Diluted EPS fornine months ended September 30, 2022 were $0.96, up 7% compared to $0.90 for the nine months ended September 30, 2021.Signature Transaction.Included in the nine months ended September 30, 2022 were merger-related expenses of $15 million, down modestly compared to $16 million for the nine months ended September 30, 2021.The key trends in the third quarter of 2022 were:Continued Portfolio Loan GrowthAt September 30, 2022, total$49.0 billion compared to $45.7 billion, up 9% on an annualized basis. The loan portfolio has now grown over the past four consecutive quarters and continues to be driven by growth in both our multi-family and specialty finance businesses. The multi-family portfolio totaled $37.2$84.0 billion at September 30, 2022, up $2.6 billion or 10% annualized2023 compared to $69.0 billion at December 31, 2021 and $407 million or 4% annualized compared to June 30, 2022. The specialty43finance portfolio also continued to increase, growing $755 million or 29% annualized to $4.3 billion compared to December 31, 2021 and $117 million or 11% annualized compared to June 30, 2022.The growth in the multi-family portfolio was driven by ongoing market share gains in our non-luxury. rent regulated niche within the New York City multi-family market. Growth in the specialty finance portfolio was primarily driven by draw downs on existing commitments.Another Strong Quarter of Deposit GrowthTotal deposits at September 30, 2022 were $41.7 billion, up $6.6 billion or 25% annualized compared to December 31, 2021 and up $461 million or 4% annualized compared to June 30, 2022. The increase was driven by growth in the Company's BaaS businessaforementioned loans acquired from the Signature Transaction and in loan-related deposits from our borrowers.organic loan growth.BaaS deposits2022 totaled $7.9 billion, up $5.8 billion on a year-to-date basis. Loan-related deposits totaled $4.8 billion, up $793 million or 26% annualized2023, compared to $9.1 billion at December 31, 2021.Stable Non-Interest ExpensesFor the three months ended2022. As of September 30, 2022, non-interest expenses totaled $136 million, up 1%2023, the Company has no held-to-maturity securities portfolio and all of the Company’s securities were designated as “Available-for-Sale”, unchanged from December 31, 2022.$135 million we reported fordeposits assumed in the three months ended September 30, 2021, but down 1% compared to the $138 million we reported during the three months ended June 30, 2022.Signature Transaction. Included in the current third quarter amountSeptember 30, 2023 balance are $4 million$2.0 billion in merger-related expenses, unchangednon-interest-bearing custodial deposits related to the Signature Transaction.the second-quarter 2022 amount and down $2 million compared to the $6 million in merger-related expenses we reported during third-quarter 2021.Recent EventsDeclaration of Dividend on Common SharesOn October 25, 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 November 17, 2022 to common shareholders of record as of November 7, 2022.Receipt of OCC Approval for Bank Merger and Merger ExtensionOn October 28, 2022, the Company and Flagstar Bancorp, Inc. ("Flagstar") jointly announced the receipt of approval from the Office of the Comptroller of the Company (the "OCC") to convert Flagstar Bank, FSB to a national bank to be known as Flagstar Bank, N.A., and to merge New York Community Bank into Flagstar Bank, N.A. with Flagstar Bank being the surviving entity.The acquisition of Flagstar by the Company is still subject to the approval of the FRB, as well as the satisfaction of certain other customary closing conditions under the merger agreement, as amended, between the two companies (the "Merger Agreement"). The OCC approval is subject to a statutory 15-day waiting period that provides that the bank merger cannot be consummated until 15 days after OCC approval has been received, which in this case is November 11, 2022. There is no associated waiting period with the FRB approval. NYCB and Flagstar intend to consummate the holding company and bank merger promptly after FRB approval is received and the OCC waiting period ends.In addition, NYCB and Flagstar announced that they have mutually agreed to extend the Merger Agreement to$20.3 billion at December 31, 2022, from October 31, 2022 to provide additional time to obtain regulatory approvalreflecting the use of some of the cash acquired from the FRB. Signature Transaction to reduce the level of FHLB-NY borrowings.extension was approved byfollowing table summarizes the Boards of Directors of both companies. Pursuant to the terms of the Merger Agreement, Flagstar shareholders will receive 4.0151 shares of Company common stock for each Flagstar share they own.Critical Accounting PoliciesWe consider certain accounting policies to be critically important to the portrayalcomposition 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. loan portfolio:September 30, 2023 December 31, 2022 (dollars in millions) Amount Percent of Loans Held for Investment Amount Percent of Loans Held for Investment Mortgage Loans: Multi-family $ 37,698 44.9 % $ 38,130 55.3 % Commercial real estate 10,486 12.5 % 8,526 12.4 % One-to-four family first mortgage 5,882 7.0 % 5,821 8.4 % Acquisition, development, and construction 2,910 3.5 % 1,996 2.9 % Total mortgage loans $ 56,976 67.8 % $ 54,473 78.9 % Other Loans: Commercial and industrial $ 24,423 29.1 % $ 12,276 17.8 % Other loans 2,596 3.1 % 2,252 3.3 % Total other loans held for investment $ 27,019 32.2 % $ 14,528 21.1 % Total loans and leases held for investment $ 83,995 100.0 % $ 69,001 100.0 % Allowance for credit losses on loans and leases (619) (393) Total loans and leases held for investment, net $ 83,376 $ 68,608 Loans held for sale 1,926 1,115 Total loans and leases, net $ 85,302 $ 69,723 inherent sensitivity offollowing table summarizes 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.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.44Allowance for Credit LossesThe 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 replaced 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.The allowance for credit losses on loans and leases 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 unpaid loan balance, net of deferred fees and 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 average loss rate on 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 loan and lease losses, 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 the 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.The allowance for credit losses on loans and leases 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 segments exhibit similar risk characteristics. Smaller pools of homogenous financing receivables with homogeneous risk characteristics were modeled using the methodology selected for the portfolio segment. The macroeconomic data used in the quantitative models are based on a 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, the 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.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 September 30, 2022 and December 31, 2021, the allowance for credit losses on off-balance sheet exposures was $7 million and $12 million, respectively. The 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.45While changes to the economic 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 changes in this assumption could have a material 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. Excluding other factors, as the weighted average life of the portfolio increases or decreases, so will the required amount of the allowance for credit losses on mortgage loans.Balance Sheet SummaryAt September 30, 2022, total assets were $63.0 billion, relatively unchanged compared to the previous quarter and up $3.4 billion or 8% annualized compared to December 31, 2021. The year-to-date increase was driven primarily by loan growth and to a lesser extent, growth in the securities portfolio. The linked-quarter change was driven by loan growth offset largely by a decline in cash balances.Total loans held for investment increased $3.2 billion or 9% annualized to $49.0 billion compared to December 31, 2021 and up $447 million or 4% annualized compared to June 30, 2022. Loan growth continues to be driven by growth in both the multi-family and specialty finance portfolios.On the liability side, total deposits increased $6.6 billion or 25% annualized to $41.7 billion compared to December 31, 2021 and rose $461 million or 4% annualized compared to June 30, 2022. At the same time, borrowed funds declined $2.8 billion or 22% annualized to $13.8 billion compared to December 31, 2021 and $509 million or 14% annualized compared to June 30, 2022.Loans and LeasesLoans and Leases Originated for InvestmentThe 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.investment:Three Months Ended, Nine Months Ended, September 30, 2023 June 30, 2023 September 30, 2023 September 30, 2022 (dollars in millions) Amount Amount Amount Amount Mortgage Loan Originated for Investment: Multi-family $ 204 $ 217 $ 761 $ 7,065 Commercial real estate 280 278 867 737 One-to-four family first mortgage 115 98 487 157 Acquisition, development, and construction 495 593 1,273 83 Total mortgage loans originated for investment $ 1,094 $ 1,186 $ 3,388 $ 8,042 Other Loans Originated for Investment: Specialty finance $ 2,228 $ 1,905 $ 5,468 $ 4,075 Commercial and industrial 1,192 1,581 3,270 433 Other 406 312 1,056 5 Total other loans originated for investment $ 3,826 $ 3,797 $ 9,793 $ 4,513 Total loans originated for investment $ 4,920 $ 4,983 $ 13,181 $ 12,555 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.Loan originations for the three months ended September 30, 2022 totaled $3.8 billion, up 27% compared to the three months ended September 30, 2021, but down 29% compared to the record amount of loans the Company originated during the three months ended June 30, 2022. Third quarter 2022 originations exceeded the prior quarter's pipeline of $2.5 billion by $1.2 billion or 147%.During the current third quarter, multi-family originations totaled $1.7 billion, down slightly compared to the year-ago third quarter and down $1.2 billion compared to the record second-quarter origination volumes. Specialty finance originations totaled $1.6 billion during the current third quarter, up nearly double compared to the third quarter of 2021 and down $317 million compared to second quarter 2022.For the nine months ended September 30, 2022, total loan originations were $12.6 billion, up $4 billion or 47% compared to the nine months ended September 30, 2021. On a year-over-year basis, multi-family originations increased 32% to $7.1 billion, while specialty finance originations more than doubled to $4.1 billion.46The following table presents information about the loans held for investment we originated for the respective periods:
2022Loans and Leases Held for InvestmentThe individual held-for-investment loan portfolios are discussed in detail below.Multi-family loans are our principal asset. arefeature rent-regulated units 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.Attotal multi-family loans represented $37.2 billion or 76%due to a combination of total loanshigher interest rates and leases held for investment.our loan diversification strategy.At September 30, 2022, 71%buildings in the New York City metro area and 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.buildings.In addition, 60%At September 30, 2023, $21.5 billion or $22.4 billion57 percent of the Company's overallCompany’s total multi-family loan portfolio is secured by properties in New York State, many of which $19.5 billion are, subject to rent regulation laws. The weighted average LTV of the rent-regulated segmentNew York State rent regulated multi-family portfolio was 59 percent as of September 30, 2023 as compared to 61 percent atDecember 31, 2022.multi-family portfolio was 57.05%, asbuildings’ income and condition, we consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to present evidence of September 30, 2022, 358 bps belowtheir ability to repay the overall multi-family weighted average LTVloan from the buildings’ current rent rolls, their financial statements, and related documents.60.63%.Our emphasis onour multi-family loans are ten-year fixed rate credits, the vast majority of our multi-family loans feature a term of ten or twelve years, with a fixed rate of interest for the first five or seven years of the loan, and an alternative rate of interest in years six through ten or eight through twelve. The rate charged in the first five or seven years is driven by several factors, including their structure, which reducesgenerally based on intermediate-term interest rates plus a spread.exposure toloans and interest-earning assets, our net interest rate volatilityspread and net interest margin, and the level of net interest income we record. No assumptions are involved in the recognition of prepayment income, as such income is recorded when the cash is received.some degree. Another factor drivingsix weeks in duration.focus onunderwriting quality of multi-family lending has been the comparative quality of the loans we produce. Reflectingis distinctive. This reflects the nature of the buildings securing our loans, our underwriting process and standards, and the generally conservative LTV ratios our multi-family loans feature at origination,origination. Historically, a relatively small percentage of the multi-family loans that have transitioned to non-performing status have actually resulted in actual losses, even when the credit cycle has taken a downward turn. 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.125%120 percent 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%75 percent 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. Exceptions to these levels are47At September 30, 2023 Multi-Family Loans (dollars in millions) Amount Percent of Total New York City: Manhattan $ 6,960 19 % Brooklyn 6,199 16 % Bronx 3,645 10 % Queens 2,834 8 % Staten Island 134 — % Total New York City $ 19,772 53 % New Jersey 5,092 14 % Long Island 511 1 % Total Metro New York $ 25,375 68 % Other New York State 1,242 3 % Pennsylvania 3,729 10 % Florida 1,690 4 % Ohio 1,015 3 % Arizona 435 1 % All other states 4,212 11 % Total $ 37,698 100 % Loans2022,2023, CRE loans represented $6.6$10.5 billion, or 13%12.5 percent, of total loans and leases held for investment, unchangedreflecting a $2.0 billion increase when compared to $8.5 billion at December 31, 2022. Approximately $1.9 billion of CRE loans were acquired in the previous quarter.Signature Transaction.originated by the Companywe produce are also secured by income-producing properties such as office buildings, retail centers, 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 September 30, 2022, 83%2023, the largest concentration of our CRE loans were secured by properties in the metro New York City metro area, whilearea. Refer to the Geographical Analysis table included below for additional details.other parts ofthe New York State accounted for 2%metro area. the properties securingmore than half of our CRE loans are similar to the terms of our multi-family credits which primarily feature a fixed rate of interest for the first five years of the loan that is generally based on intermediate-term interest rates plus a spread. In addition to customary fixed rate terms, we now also offer floating rates advances indexed to CME Term SOFR. These products are generally offered in combination with interest rate cap or swaps that provide borrowers with additional optionality to manage their interest rate risk. Following the initial fixed rate period, the loan resets to an adjustable interest rate that is indexed to CME Term SOFR or Prime, plus a spread. Alternately, the borrower may opt for a fixed rate that is tied to the five-year fixed advance rate of the FHLB-NY plus a spread. The fixed-rate option also requires the payment of an amount equal to one percentage point of the then-outstanding loan balance. In either case, the minimum rate at repricing is equivalent to the rate in the initial five- or seven-year term.At September 30, 2023 Commercial Real Estate Loans (dollars in millions) Amount Percent of Total New York $ 5,413 52 % Michigan 990 9 % New Jersey 589 6 % Florida 415 4 % Texas 103 1 % Pennsylvania 376 3 % Ohio 119 1 % All other states 2,481 24 % Total $ 10,486 100 % allthis portfolio is $5.6 billion in warehouse loans that allow mortgage lenders to fund the closing of residential mortgage loans.states accountedgeneral 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.15% combined.debt to tangible net worth is 15 to 1. At September 30, 2023, we had $5.6 billion outstanding warehouse loans to other mortgage lenders and have relationships in place to lend up Loans and Leases2022,2023, specialty finance loans and leases totaled $4.3$5.2 billion or 9%6 percent of total loans and leases held for investment.investment, up $753 million or 17 percent compared to December 31, 2022.leaselease 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-basedAs of September 30, 2023, 82 percent of specialty finance loan commitments are structured as floating rate obligations which will benefit in a rising rate environment.dealer floor-plan loans are priced at floating rates predominately tiedleases, representing 45 percent of total originations compared to SOFR or LIBOR-replacement rates, while our equipment financing credits are priced at fixed rates at a spread over Treasuries.$1.6 billion for the same period in 2022, representing 41 percent of total originations.C&I Loans2022, C&I2023, one-to-four family loans totaled $578represented $5.9 billion, including $925 million of LGG, or 1%7 percent, of total loans and leases 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 LoansADC loans at September 30, 2022 totaled $203 million and represented 0.41% of total loans and leases held for investment. Because ADCAs of September 30, 2023, the repurchase liability on LGG loans are generally considered to have a higher degreewas $362 million. As 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 LoansAt September 30,December 31, 2022 one-to-four family loans totaled $123 million$5.8 billion. These loans include various types of conforming and non-conforming fixed and adjustable rate loans underwritten using Fannie Mae and Freddie Mac guidelines for the purpose of purchasing or 0.25%refinancing owner occupied and second home properties. We typically hold certain mortgage loans in LHFI that do not qualify for sale to the Agencies and that have an acceptable yield and risk profile. The LTV requirements on our residential first mortgage loans vary depending on occupancy, property type, loan amount, and FICO scores. Loans with LTVs exceeding 80 percent are required to obtain mortgage insurance. As of totalSeptember 30, 2023, non-government guaranteed loans in this portfolio had an average current FICO score of 741 and leasesan average LTV of 53.investment. These loan balances include certain mixed-use CRE with less than fiveinvestment and the liability to repurchase the loans is recorded in other liabilities on the Consolidated Statements of Condition. Certain loans within our portfolio may be subject to indemnifications and insurance limits which expose us to limited credit risk. We have reserved for these risks within other assets and as a component of our ACL on residential units classified as one-to-four family loans.first mortgages.48Other$6 million at September 30, 2022$2.6 billion and consisted mainlyprimarily of overdraft loans and loans to non-profit organizations. We currently do not offer home equity loans or home equity lines of credit.credit, boat and recreational vehicle indirect lending, point of sale consumer loans and other consumer loans, including overdraft loans.Lending AuthorityOur home equity portfolio includes HELOANs, second mortgage loans, and HELOCs. These loans are underwritten and priced in an effort to ensure credit quality and loan profitability. Our debt-to-income ratio on HELOANs and HELOCs is capped at 43 percent and 45 percent, respectively. We currently limit the maximum CLTV to 89.99 percent and FICO scores to a minimum of 700. Second mortgage loans and HELOANs are fixed rate loans and are available with terms up to 20 years. HELOC loans are primarily variable-rate loans that contain a 10-year interest only draw period followed by a 20-year amortizing period. As of September 30, 2023, loans in this portfolio had an average current FICO score of 750.investment are subjectnearly all of this portfolio, except the SBA loans. We estimate the fair value of mortgage loans based on quoted market prices for securities backed by similar types of loans, where available, or by discounting estimated cash flows using observable inputs inclusive of interest rates, prepayment speeds and loss assumptions for similar collateral.federala single or related group of borrowers in excess of 15 percent of Tier 1 plus Tier 2 capital and state lawsany portion of the ACL not included in Tier 2 capital. We have a tracking and regulations,reporting process to monitor lending concentration levels, and are underwritten in accordance with loan underwriting policiesall new commercial real estate credit exposures to relationships that exceed $200 million and all other commercial credit exposures to relationships that exceed $100 million must be approved by the Management Credit Committee, the Board Credit Committee andof the Board. Exceptions to these levels are made to borrowers on a case by case basis, with the approval of the Board of DirectorsCredit Committee of the Bank.C&I loansBoard. Relationships less than or equal to $3 millionthe aforementioned limits including those discussed throughout the loans held for investment section of this document, are approved by the joint authority of credit officers and 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 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.The Board of Directors updated certain aspects of the Company's lending authority as detailed below. These changes were 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 addressIn addition, all loans of $50 million or more originated by the Bank continue to be reported to the Board of Directors. six properties located in Brooklyn, New York. As of the date of this report, the loan has been current since origination.49Geographical Analysis of the Portfolio of Loans Held for Investmenta geographical analysis of the multi-familyCompany's asset quality measures at the respective dates:September 30, 2023 December 31, 2022 Non-performing loans to total loans held for investment 0.52 % 0.20 % Non-performing assets to total assets 0.40 0.17 Allowance for credit losses on loans and leases to non-performing loans 142.79 278.87 Allowance for credit losses on loans and leases to total loans held for investment 0.74 0.57 CRE loans in our held-for-investment loan portfolio at September 30, 2022:
of Total
of TotalAt September 30, 2022, the largest concentration of ADCnon-performing loans held for investment was located in Metro New York, with a total of $174 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.Asset QualityNon-Performing Loans and Repossessed AssetsNon-performing assets at September 30, 2022 declined $6 million or 11% to $50 million compared to June 30, 2022. This represents 0.08% of total assets compared to 0.09% at June 30, 2022. Total non-performing loans declined $5 million or 10% to $45 million compared to $50 million at June 30, 2022 and represent 0.09% of total loans at September 30, 2022 compared to 0.10% of total loans at June 30, 2022. Repossessed assets, consisting primarily of repossessed taxi medallion loans totaled $5 million at September 30, 2022, down $1 million or 17% compared to June 30, 2022. Total increased $9 million or 30% to $39 million at September 30, 2022 compared to June 30, 2022.50The following table presents our non-performing loans by loan type and the changes in the respective balances from December 31, 2021 to September 30, 2022:balances:
December 31, 2021
to
September 30, 2022
2022
2021(1)Includes $3 million and $6 million of non-accrual taxi medallion-related loans at September 30, 2022 and December 31, 2021, respectively.September 30, 2023 compared to December 31, 2022 (dollars in millions) September 30, 2023 December 31, 2022 Amount Percent Loans 30 to 89 Days Past Due: Multi-family $ 60 $ 34 $ 26 76 % Commercial real estate 26 2 24 1200 % One-to-four family first mortgage 19 21 (2) (10) % Acquisition, development, and construction 1 — 1 NM Commercial and industrial 43 2 41 2050 % Other loans 20 11 9 82 % Total loans 30-89 days past due $ 169 $ 70 99 141 % The following table sets forth the changes in non-performing loans over the nine months ended September 30, 2022:(dollars in millions)Balance at December 31, 2021$33New non-accrual38Charge-offs(1)Transferred to repossessed assets—Loan payoffs, including dispositions and principal
pay-downs(24)Restored to performing status(1)Balance at September 30, 2022$45non-accrual“non-accrual” loan when it is 90 days or more past due or when it is deemed to be impaired because the Companywe no longer expectsexpect to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, management ceaseswe cease the accrual of interest owed, and previously accrued interest is reversed and charged against interest income. At September 30, 2023 and December 31, 2022, all of our non-performing loans were non-accrual loans. A loan is generally returned to accrual status when the loan is current and management haswe have reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At September 30, 2022 and December 31, 2021, all of our non-performing loans were non-accrual loans. 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 retainedand retain 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 andstatus. advancing funds as needed; and appointingseeking approval from the courts to appoint a receiver, whenever possible,when necessary to protect the Bank’s interests, including to collect rents, manage theproperty operations, provide information, and maintainensure maintenance of the collateral properties.irrespective of loan type,90 days or more past due 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.Change from December 31, 2022 to September 30, 2023 (dollars in millions) September 30, 2023 December 31, 2022 Amount Percent Non-accrual mortgage loans: Multi-family $ 102 $ 13 $ 89 685 % Commercial real estate 157 20 137 685 % One-to-four family first mortgage 90 92 (2) (2) % Acquisition, development, and construction $ 1 $ — 1 NM Total non-accrual mortgage loans $ 350 $ 125 225 180 % Commercial and industrial 65 3 62 2067 % 19 13 6 46 % Total non-performing loans $ 434 $ 141 293 208 % Repossessed assets 12 12 — — % Total non-performing assets $ 446 $ 153 293 192 % 51(2)(in millions) Balance at December 31, 2022 $ 141 New non-accrual, including acquired from acquisition 384 Charge-offs (20) Transferred to repossessed assets (3) Loan payoffs, including dispositions and principal pay-downs (34) Restored to performing status (34) Balance at September 30, 2023 $ 434 Management Credit Committee, the Board Credit Committee, and the BoardsBoard of Directors of the Company and the Bank, as applicable. Collateral-dependentIn accordance with our charge-off policy, 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. 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.property. Subsequent declines in the fair value of OREO or repossessedthe assets are charged to earnings and are included in non-interest expense. It is our policy to require an appraisal and an (in accordance with our Environmental Risk Policy) of properties classified as OREO before foreclosure, and to re-appraise the properties/assetsproperties on an as-needed basis, and not less than annually, until they are sold. We dispose of such properties/assetsproperties as quickly and prudently as possible, given current market conditions and the property’s or asset’s condition.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.approval. 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.new rent regulationrent-control or rent-stabilization 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. 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.125%120 percent for multi-family loans and 130%130 percent for CRE loans. AlthoughAt origination, we typically lend up to 75%75 percent of the appraised value on multi-family buildings and up to 65%65 percent on commercial properties, the average LTVs of such credits at origination were below those amounts at September 30, 2022. properties. Exceptions to these DSCR and LTV limitations are minimal and are reviewed on a case-by-case basis.approved by the joint authority of credit and lending officers and when necessary, the Board Credit Committee of the Board.52management, 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,management. Given that 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.LowLower 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.75%75 percent 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%.80 percent. With respect to commercial construction loans, we typically lend up to 65%65 percent 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.typically underwrittenbased on the basisnumerous criteria, including historical andthe cash flows produced bymanagement, acceptable collateral, and market conditions and trends in the borrower’s business, andindustry.These loans 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 tovariable rate loans in 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 alsointerest rate fluctuates with a normal requirement for other C&I loans.specified index rate.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, 2021 to September 30, 2022:
December 31, 2021
to
September 30, 2022
2022
2021(1)Does not include any past due taxi medallion-related loans at September 30, 2022 and December 31, 2021.
53
During the nine months ended September 30, 2022, total loans 30-89 days past due decreased to $39 million compared to $67 million at December 31, 2021, primarily due to two multi-family loans that became current during the nine months ending September 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,TDM, 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.
compared to gross charge-offs of $3 million and net recoveries of $1 million for the three months ended June 30, 2023. For the nine months ended September 30, 2023, our gross charge-offs were $34 million and net charge-offs were $23 million, compared to gross charge-offs of $5 million and net recoveries of $5 million over the same period in 2022.
Analysis of Troubled Debt Restructurings
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
September 30, 2023 | June 30, 2023 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||
Charge-offs: | |||||||||||||||||||||||
Multi-family | $ | 2 | $ | — | $ | 2 | $ | 1 | |||||||||||||||
Commercial real estate | 14 | — | 14 | 4 | |||||||||||||||||||
One-to-four family residential | — | 1 | 3 | — | |||||||||||||||||||
Commercial and industrial | 6 | — | 6 | — | |||||||||||||||||||
Other | 4 | 2 | 9 | — | |||||||||||||||||||
Total charge-offs | $ | 26 | $ | 3 | $ | 34 | $ | 5 | |||||||||||||||
Recoveries: | |||||||||||||||||||||||
Commercial real estate | — | — | — | (4) | |||||||||||||||||||
Commercial and industrial | (1) | (3) | (8) | (6) | |||||||||||||||||||
Other | (1) | (1) | (3) | — | |||||||||||||||||||
Total recoveries | $ | (2) | $ | (4) | $ | (11) | $ | (10) | |||||||||||||||
Net charge-offs (recoveries) | $ | 24 | $ | (1) | $ | 23 | $ | (5) |
(dollars in millions) |
| Accruing |
|
|
| Non- |
|
|
| Total |
| |||
Balance at December 31, 2021 | $ |
| 16 |
|
| $ |
| 13 |
|
| $ |
| 29 |
|
New TDRs |
|
| — |
|
|
|
| 19 |
|
|
|
| 19 |
|
Charge-offs |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Transferred from performing |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Loan payoffs, including dispositions and |
|
| — |
|
|
|
| (3 | ) |
|
|
| (3 | ) |
Balance at September 30, 2022 | $ |
| 16 |
|
| $ |
| 29 |
|
| $ |
| 45 |
|
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.
Nine Months Ended, | ||||||||||||||
(dollars in millions) | September 30, 2023 | September 30, 2022 | ||||||||||||
Multi-family | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | 2 | $ | 1 | ||||||||||
Average amount outstanding | $ | 37,908 | $ | 35,825 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | 0.01 | % | — | % | ||||||||||
Commercial real estate | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | 14 | $ | — | ||||||||||
Average amount outstanding | $ | 9,950 | $ | 6,673 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | 0.14 | % | — | % | ||||||||||
One-to-Four Family first mortgage | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | 3 | $ | — | ||||||||||
Average amount outstanding | $ | 5,901 | $ | 139 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | 0.05 | % | — | % | ||||||||||
Acquisition, Development and Construction | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | — | $ | — | ||||||||||
Average amount outstanding | $ | 2,403 | $ | 217 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | — | % | — | % | ||||||||||
Commercial and Industrial Loans | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | (2) | $ | (6) | ||||||||||
Average amount outstanding | $ | 20,218 | $ | 4,298 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | -0.01 | % | (0.14) | % | ||||||||||
Other Loans | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | 6 | $ | — | ||||||||||
Average amount outstanding | $ | 4,189 | $ | 6 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | 0.14 | % | — | % | ||||||||||
Total loans | ||||||||||||||
Net charge-offs (recoveries) during the period | $ | 23 | $ | (5) | ||||||||||
Average amount outstanding | $ | 80,569 | $ | 47,158 | ||||||||||
Net charge-offs (recoveries) as a percentage of average loans | 0.03 | % | (0.01) | % |
| For the Nine Months Ended |
| ||||
| September 30, |
| September 30, |
| ||
(dollars in millions) | 2022 |
| 2021 |
| ||
Multi-family |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | 1 |
| $ | 1 |
|
Average amount outstanding | $ | 35,825 |
| $ | 32,214 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| 0.00 | % |
|
|
|
|
| ||
Commercial real estate |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | - |
| $ | (2 | ) |
Average amount outstanding | $ | 6,673 |
| $ | 6,782 |
|
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 | $ | - |
| $ | 1 |
|
Average amount outstanding | $ | 139 |
| $ | 200 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| 0.50 | % |
|
|
|
|
| ||
Acquisition, Development and Construction |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | - |
| $ | - |
|
Average amount outstanding | $ | 217 |
| $ | 137 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| 0.00 | % |
| 0.00 | % |
|
|
|
|
| ||
Other Loans |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | (6 | ) | $ | (7 | ) |
Average amount outstanding | $ | 4,304 |
| $ | 3,572 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| -0.14 | % |
| -0.20 | % |
|
|
|
|
| ||
Total loans |
|
|
|
| ||
Net charge-offs (recoveries) during the period | $ | (5 | ) | $ | (7 | ) |
Average amount outstanding | $ | 47,158 |
| $ | 42,905 |
|
Net charge-offs (recoveries) as a percentage of average loans |
| -0.01 | % |
| -0.02 | % |
The following table presents a geographical analysis of our non-performing loanstotal assets at September 30, 2022:2023, compared to $9.1 billion, or 10 percent of total assets at December 31, 2022
| |||||
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Securities
. At September 30, 2022, the available-for-sale securities portfolio totaled $6.7 billion, up $1.0 billion or 18% compared to June 30, 20222023 and up $909 million or 21% annualized compared to December 31, 2021. During the current third quarter, the Company reinvested a portion2022, all of its cash position into shorter-term treasury securities.
55
our securities were designated as “Available-for-Sale”. At September 30, 2022,2023, 15 percent of our portfolio are floating rate securities.
| Mortgage- |
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| U.S. |
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| State, |
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| Other |
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Available-for-Sale Debt |
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Due within one year |
| 3.33 |
| % |
| 3.11 |
| % |
| — |
| % |
| 3.01 |
| % |
Due from one to five years |
| 3.32 |
|
|
| 3.22 |
|
|
| — |
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|
| 4.21 |
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Due from five to ten years |
| 2.46 |
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| 1.53 |
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| 3.52 |
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|
| 3.96 |
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Due after ten years |
| 2.02 |
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|
| 1.80 |
|
|
| — |
|
|
| 4.02 |
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Total debt securities available for sale |
| 2.13 |
|
|
| 2.46 |
|
|
| 3.52 |
|
|
| 4.04 |
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|
Mortgage- Related Securities | U.S. Government and GSE Obligations | State, County, and Municipal | Other Debt Securities (2) | ||||||||||||||||||||
Available-for-Sale Debt Securities: (1) | |||||||||||||||||||||||
Due within one year | 2.71 | % | 4.32 | % | — | % | — | % | |||||||||||||||
Due from one to five years | 3.34 | 5.44 | — | 6.62 | |||||||||||||||||||
Due from five to ten years | 2.77 | 1.56 | 3.16 | 5.04 | |||||||||||||||||||
Due after ten years | 4.06 | 1.09 | — | 5.73 | |||||||||||||||||||
Total debt securities available for sale | 3.97 | 2.39 | 3.16 | 5.83 |
September 30, (dollars in millions) 2022 Portion of U.S. time deposits in excess of insurance limit $ 3,025 Time deposits otherwise uninsured with a maturity of: 3 months or less $ 639 Over 3 months through 6 months 610 Over 6 months through 12 months 749 Over 12 months 1,027 Total time deposits otherwise uninsured $ 3,025 At September 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) $ 6,889 $ 5,578 $ 14,332 $ 14,414 $ 7,726 $ — $ 48,939 Mortgage-related securities (2)(3) 153 176 491 330 258 822 2,230 Other securities (2) 1,735 1,821 351 53 704 425 5,089 Interest-earning cash, cash equivalents 1,558 — — — — — 1,558 Total interest-earning assets 10,335 7,575 15,174 14,797 8,688 1,247 57,816 INTEREST-BEARING LIABILITIES: Interest-bearing checking and money 13,004 463 2,758 583 3,089 — 19,897 Savings accounts 2,685 1,956 361 270 3,588 — 8,860 Certificates of deposit 1,558 5,252 2,259 40 — — 9,109 Borrowed funds 6,529 2,900 3,725 500 — 144 13,798 Total interest-bearing liabilities 23,776 10,571 9,103 1,393 6,677 144 51,664 Interest rate sensitivity gap per period (4) $ (13,441 ) $ (2,996 ) $ 6,071 $ 13,404 $ 2,011 $ 1,103 $ 6,152 Cumulative interest rate sensitivity gap $ (13,441 ) $ (16,437 ) $ (10,366 ) $ 3,038 $ 5,049 $ 6,152 Cumulative interest rate sensitivity gap (21.35 ) % (26.11 ) % (16.47 ) % 4.83 % 8.02 % 9.77 % Cumulative net interest-earning assets as a 43.47 % 52.14 % 76.14 % 106.77 % 109.80 % 111.91 % Liquidity, Contractual Obligations and Off-Balance Sheet Commitments, and Capital Position Risk-Based Capital At September 30, 2022 Common Equity Tier 1 Total Leverage Capital (dollars in millions) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital $ 4,440 9.24 % $ 4,942 10.29 % $ 5,793 12.06 % $ 4,942 8.06 % Minimum for capital adequacy 2,162 4.50 2,883 6.00 3,844 8.00 2,453 4.00 Excess $ 2,278 4.74 % $ 2,059 4.29 % $ 1,949 4.06 % $ 2,489 4.06 % Risk-Based Capital At September 30, 2022 Common Equity Tier 1 Total Leverage Capital (dollars in millions) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital $ 5,467 11.39 % $ 5,467 11.39 % $ 5,673 11.82 % $ 5,467 8.92 % Minimum for capital adequacy 2,160 4.50 2,880 6.00 3,840 8.00 2,451 4.00 Excess $ 3,307 6.89 % $ 2,587 5.39 % $ 1,833 3.82 % $ 3,016 4.92 % Modeling changes in NII 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 NII analysis presented below 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 account the benefit of any strategic actions we may take to further reduce our exposure to interest rate risk. 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. portfolio layer method. For the three months ended September 30, The following table September 30, 2022 For the Three Compared to (dollars in millions) September 30, June 30, September 30, June 30, September 30, Total Interest Income $ 509 $ 473 $ 415 8 % 23 % Prepayment Income: Loans $ 10 $ 19 $ 15 (47 ) % (33 ) % Securities — 1 1 (100 ) % (100 ) % Total prepayment income $ 10 $ 20 $ 16 (50 ) % (38 ) % GAAP Net Interest Margin 2.22 % 2.52 % 2.44 % (30 ) bp (22 ) bp Less: Prepayment income from loans -7 bp -13 bp -11 bp 6 bp 4 bp Prepayment income from securities 0 -1 -1 1 bp 1 bp Total prepayment income contribution to net interest margin -7 bp -14 bp -12 bp 7 bp 5 bp Adjusted Net Interest Margin (non-GAAP) 2.15 % 2.38 % 2.32 % (23 ) bp (17 ) bp For the Three Months Ended September 30, 2022 June 30, 2022 September 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) $ 48,495 $ 442 3.64 % $ 47,144 $ 424 3.61 % $ 43,159 $ 376 3.48 % Securities (2)(3) 7,368 51 2.74 6,676 40 2.40 6,657 37 2.21 Reverse repurchase agreements 521 4 3.34 348 2 1.93 497 1 1.22 Interest-earning cash, cash equivalents, and due from banks 2,192 12 2.15 2,861 7 0.93 1,612 1 0.15 Total interest-earning assets 58,576 509 3.47 57,029 473 3.32 51,925 415 3.20 Non-interest-earning assets 4,693 4,959 5,382 Total assets $ 63,269 $ 61,988 $ 57,307 LIABILITIES AND STOCKHOLDERS’ EQUITY: Interest-bearing deposits: Interest-bearing checking and money market accounts $ 19,443 $ 72 1.47 % $ 17,456 $ 24 0.55 % $ 12,783 $ 8 0.23 % Savings accounts 9,297 15 0.69 9,228 10 0.41 7,974 7 0.36 Certificates of deposit 8,416 23 1.07 8,102 12 0.62 8,716 11 0.53 Total interest-bearing deposits 37,156 110 1.18 34,786 46 0.53 29,473 26 0.35 Short term borrowed funds 2,080 13 2.48 1,959 5 0.96 2,258 1 0.35 Other borrowed funds 12,403 60 1.92 13,050 63 1.94 13,271 70 2.09 Total Borrowed funds 14,483 73 2.00 15,009 68 1.81 15,529 71 1.84 Total interest-bearing liabilities 51,639 183 1.41 49,795 114 0.92 45,002 97 0.87 Non-interest-bearing deposits 4,037 4,568 4,462 Other liabilities 701 724 866 Total liabilities 56,377 55,087 50,330 Stockholders’ equity 6,892 6,901 6,977 Total liabilities and stockholders’ equity $ 63,269 61,988 $ 57,307 Net interest income/interest rate spread $ 326 2.06 % $ 359 2.40 % $ 318 2.33 % Net interest margin 2.22 % 2.52 % 2.44 % Ratio of interest-earning assets to interest-bearing 1.13x 1.15x 1.15x For the Three Months Ended September 30, June 30, September 30, (dollars in millions) 2022 2022 2021 Fee income $ 5 $ 6 $ 6 BOLI income 10 7 7 Net gain (loss) on securities (1 ) — — Other income: Third-party investment product sales 1 1 — Other 2 4 2 Total other income 3 5 2 Total non-interest income $ 17 $ 18 $ 15 For the Nine (dollars in millions) September 30, September 30, % Change Total Interest Income $ 1,411 $ 1,269 11 % Prepayment Income: Loans $ 40 $ 56 (29 ) % Securities 2 7 (71 ) % Total prepayment income $ 42 $ 63 (33 ) % GAAP Net Interest Margin 2.39 % 2.48 % (9 ) bp Less: Prepayment income from loans -9 bp -14 bp 5 bp Prepayment income from securities -1 -2 1 bp Total prepayment income contribution to net interest margin -10 bp -16 bp 6 bp Adjusted Net Interest Margin 2.29 % 2.32 % (3 ) bp For the Nine Months Ended September 30, 2022 September 30, 2021 Average Average Average Yield/ Average Yield/ (dollars in millions) Balance Interest Cost Balance Interest Cost ASSETS: Interest-earning assets: Mortgage and other loans and leases, net (1) $ 47,158 $ 1,259 3.56 % $ 42,905 $ 1,145 3.56 % Securities (2)(3) 6,864 125 2.43 6,655 118 2.38 Reverse repurchase agreements 388 7 2.35 410 3 1.00 Interest-earning cash, cash equivalents, and due from banks 2,326 20 1.12 2,044 3 0.17 Total interest-earning assets 56,736 1,411 3.32 52,014 1,269 3.25 Non-interest-earning assets 4,993 5,232 Total assets $ 61,729 $ 57,246 LIABILITIES AND STOCKHOLDERS’ EQUITY: Interest-bearing deposits: Interest-bearing checking and money market $ 16,915 $ 104 0.82 % $ 12,703 $ 24 0.25 % Savings accounts 9,245 33 0.49 7,396 20 0.36 Certificates of deposit 8,197 46 0.75 9,280 43 0.63 Total interest-bearing deposits 34,357 183 0.71 29,379 87 0.40 Short term borrowed funds 1,925 17 1.16 2,253 6 0.35 Other borrowed funds 13,419 194 1.93 13,495 209 2.07 Total Borrowed funds 15,344 211 1.84 15,748 215 1.83 Total interest-bearing liabilities 49,701 394 1.06 45,127 302 0.90 Non-interest-bearing deposits 4,332 4,402 Other liabilities 750 810 Total liabilities 54,783 50,339 Stockholders’ equity 6,946 6,907 Total liabilities and stockholders’ equity $ 61,729 $ 57,246 Net interest income/interest rate spread $ 1,017 2.26 % $ 967 2.35 % Net interest margin 2.39 % 2.48 % Ratio of interest-earning assets to interest-bearing 1.14x 1.15x For the Nine Months Ended September 30, September 30, (dollars in millions) 2022 2021 Fee income $ 17 $ 17 BOLI income 24 22 Net gain (loss) on securities (2 ) — Other income: Third-party investment product sales 4 — Other 6 6 Total other income 10 6 Total non-interest income $ 49 $ 45 financial reporting to include the acquired operations. There have (amounts in millions, except share data) Total Shares Average Price Total Third Quarter 2022 July 94,243 $ 9.09 $ 1 August 1,077 10.80 0 September 11,702 9.57 0 Total Third Quarter 2022 107,022 9.16 $ 1 Item 3. 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 /s/ Thomas R. Cangemi Thomas R. Cangemi (Principal Executive Officer) John J. Pinto and Chief Financial OfficerAs 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. 2021, the Bank held FHLB-NY stock in the amount of $630 million and $734 million,2022, 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 $9 million and $8 million, respectively, in the three months ended September 30, 2022 and 2021, and $25 million for both nine months ended September 30, 2022 and 2021.Non-Interest Income“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 $16at September 30, 2023 rose $15 million to $1.2$1.6 billion at September 30, 2022 from compared to December 31, 2021.2022.Consolidated Statementsconsolidated statements of Conditioncondition 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 bothAs of September 30, 20222023 and December 31, 2021.2022 goodwill was $2.4 billion. (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 Parent Company by the Bank; capital raised through the issuance of stock;securities; and funding raised through the issuance of debt instruments. 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 $9.3 billion in the nine months ended September 30, 2022, up $2.1 billion from the $7.2 billion recorded in the year-earlier nine months. Cash flows from the repayment and sales of securities totaled $571 million and $1.4 billion, respectively, in the corresponding periods, while purchases of securities totaled $2.2 billion and $1.6 billion, respectively.56DepositsAsDepending on their availability and pricing relative to other funding sources, we also include brokered deposits in our deposit mix. Brokered deposits accounted for $8.1 billion of our deposits at September 30, 2022,2023, compared to $5.1 billionat December 31, 2022. Brokered money market accounts represented $2.3 billion of total brokered deposits totaled $41.7at September 30, 2023 and $2.8 billion up $6.6at December 31, 2022; brokered interest-bearing checking accounts represented $0.7 billion or 25% annualizedand $1.0 billion, respectively. At September 30, 2023, we had $5.1 billion of brokered CDs, compared to $1.3 billion at December 31, 2022.2021 and up $461 million or 4% annualized compared to June 30, 2022. The strong increase on a year-to-date basis was driven by growth in the Company's BaaS initiative and growth in loan-related deposits. This growth moderated during the current third quarter2022 due to seasonally lower loan growth and the impactSignature Transaction. This represents 38 percent of higher market interest rates.our total deposits.Our BaaS deposits fall into three verticals: traditional BaaS, consisting primarily of deposits from FinTech companies; banking as a service for governmental agencies, including various municipalities and the U.S. Treasury's prepaid debit card program; and mortgage as a service, catering to mortgage companies, and consisting of escrow deposit accounts for principal, interest payments, and tax payments. At September 30, 2022, traditional BaaS deposits totaled $5.3 billion, government BaaS deposits totaled $579 million, and mortgage as a service deposits totaled $2.0 billion.maturity asmaturity:(in millions) September 30, 2023 December 31, 2022 Portion of U.S. time deposits in excess of insurance limit $ 4,893 $ 3,749 Time deposits otherwise uninsured with a maturity of: 3 months or less 1,733 969 Over 3 months through 6 months 1,032 604 Over 6 months through 12 months 1,624 1,269 Over 12 months 504 907 Total time deposits otherwise uninsured $ 4,893 $ 3,749 September 30, 2022:Borrowed FundsBorrowedour borrowed funds consist primarily ofare wholesale borrowings (i.e., FHLB-NY advances, repurchase agreements,(FHLB-NY and federal funds purchased)FHLB-Indianapolis advances) and, to a far lesser extent, junior subordinated debentures and subordinated notes. At September 30, 2022,2023, total borrowed funds declined $2.8decreased $6.7 billion or 22% annualized to $13.8$14.6 billion compared to the balance at December 31, 2021 and down $509 million2022 primarily driven by the paydown of wholesale borrowings with cash received in the Signature Transaction.June$20.3 billion at December 31, 2022.2022.2023 and December 31, 2022, respectively. Pursuant to blanket collateral agreements with the Bank, our FHLB-NY, FHLB-Indianapolis advances and overnight advances are secured by pledges of certain eligible collateral in the form of loans and securities. At September 30, 2023 and December 31, 2022, total$3.2 billion and $6.8 billion of our wholesale borrowings represented 22%had callable features, respectively.total assetsfederal funds outstanding at September 30, 2023. At December 31, 2022, there were no federal funds outstanding.28% of total assets$575 million at December 31, 2021 and 23% of total assets at June 30, 2022. The year-to-date decline was mainly due to a $2.3 billion or 20% annualized decrease in FHLB-NY borrowings to $12.8 billion combined with a $500 million decrease in repurchase agreements to $300 million. The linked-quarter decrease was largely due to the decrease in repurchase agreements.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 has used $286 million of the net proceeds from the offering to repurchase shares of its common stock pursuant to its previously announced share repurchase 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 September 30, 2022,2023, the balance of subordinated notes was $297$437 million, which excludes certain costs relatedincluding $135 million assumed from the Flagstar acquisition, as compared to their issuance.Junior Subordinated DebenturesJunior subordinated debentures totaled $361$432 million at September 30, 2022, comparable to the balance at December 31, 2021.2022.Risk DefinitionsThe following section outlines the definitions of interest rate risk, market risk,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 rate57relationships 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 inSupplementary Data” for 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).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 RiskWe 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 RiskAs 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 portionfurther discussion 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;our junior subordinated debentures and as needed, execute interest rate swaps.LIBOR Transition ProcessThe discontinuation of LIBOR has been developing since 2017 when the United Kingdom’s Financial Conduct Authority (“FCA”) first called for LIBOR to be phased out by 2021. The ICE Benchmark Administration, the publisher 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 US Dollar LIBORs on June 30, 2023, although its use for new business was restricted after December 31, 2021, with limited exceptions.58In 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. SOFR 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 legal framework for the appropriate mechanisms to occur in the future.The Bank established a sub-committee of ALCO to address issues related to the phase out and transition away from LIBOR. The sub-committee is led by our Chief Financial Officer and consists of personnel from various departments throughout the Bank. The Company has identified certain LIBOR-based contracts that extend beyond June 30, 2023, which may include loans and leases, securities, wholesale borrowings, derivative financial instruments, and long-termsubordinated debt. The sub-committee has reviewed the associated contracts and legal agreements for conformance to the ARRC aligned fallback language and noted that certain contracts will require some form of standardization in accordance with LIBOR transition recommended fallback provisions.The FRB, the FDIC, and the 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 guidance, as of after December 31, 2021 the Bank does not offer LIBOR indexed products.Interest Rate Sensitivity AnalysisThe 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 September 30, 2022, our one-year gap was a negative 26.11%, compared to a negative 7.43% at December 31, 2021. The change in our one-year gap from December 31, 2021, primarily reflects an increase in borrowings that will mature or 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 September 30, 2022 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 September 30, 2022 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 7.16% per annum; for multi-family and CRE loans, prepayment rates are forecasted at weighted average CPRs of 7.39% and 6.82% per annum, respectively. Borrowed funds were not assumed to prepay.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 60% for the first five years and 40% for years six through ten. Interest-bearing checking accounts were assumed to decay at a rate of 86% for the first five years and 14% for years six through ten. The decay assumptions reflect the prolonged low59interest 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 80% for the first five years and 20% for years six through ten.
Months
or Less
Twelve
Months
One Year
to Three
Years
Three
Years to
Five Years
Five Years
to 10 Years
10 Years
and due from banks
market accounts
as a percentage of total assets
percentage of net interest-bearing liabilities(1)For the purpose of the gap analysis, loans held for sale, non-performing loans and the allowances for loan losses have been excluded.(2)Mortgage-related and other securities, including FHLB stock, are shown at their respective carrying amounts.(3)Expected amount based, in part, on historical experience.(4)The interest rate sensitivity gap per period represents the difference between interest-earning assets and interest-bearing liabilities.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.As of September 30, 2022, the impact of a 100 bp decline in market interest rates would have increased our projected prepayment rates for multi-family and CRE loans by a constant prepayment rate of 0.81% 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 table. Also, the ability of some borrowers to repay their adjustable-rate loans may be adversely impacted by an increase in market interest rates.60Interest 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 September 30, 2022, the following table reflects the estimated percentage change in our EVE, assuming the changes in interest rates noted:Change in
Interest
Rates (in basis
points)Estimated
Percentage
Change in
Economic
Value of Equity-200 over one year10.37%-100 over one year9.27%+100 over one year-6.91%+ 200 over one year-14.45%The net changes in EVE presented in the preceding table are within the limits 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 consider 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.Based on the information and assumptions in effect at September 30, 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
(in basis points) (1)Estimated Percentage Change in
Future Net Interest Income-200 over one year6.65%-100 over one year3.32%+100 over one year-3.22%+200 over one year-6.52%(1)In general, short- and long-term rates are assumed to increase in parallel fashion across all four quarters and then remain unchanged.Future changes in our mix of assets and liabilities may result in greater changes to our gap, NPV, and/or net interest income simulation.61In 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:•Our ALCO Committee would inform the Board of Directors of the variance, and present recommendations to the Board regarding proposed courses of action to restore conditions to within-policy tolerances.•In formulating appropriate strategies, the ALCO Committee would ascertain the primary causes of the variance from policy tolerances, the expected term of such conditions, and the projected effect on capital and earnings.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:•Asset restructuring, involving sales of assets having higher risk profiles, or a gradual restructuring of the asset mix over time to affect the maturity or repricing schedule of assets;•Liability restructuring, whereby product offerings and pricing are altered or wholesale borrowings are employed to affect the maturity structure or repricing of liabilities;•Expansion or shrinkage of the balance sheet to correct imbalances in the repricing or maturity periods between assets and liabilities; and/or•Use or alteration of off-balance sheet positions, including interest rate swaps, caps, floors, options, and forward purchase or sales commitments.In connection with our net interest income simulation modeling, we also evaluate the impact of changes in the slope of the yield curve. At September 30, 2022, our analysis indicated that an immediate inversion of the yield curve would be expected to result in a 5.66% decrease in net interest income; conversely, an immediate steepening of the yield curve would be expected to result in a 22.10% 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 in the steepening scenario.Liquidity$1.7$6.9 billion and $2.2$2.0 billion, respectively, at September 30, 20222023 and December 31, 2021. As2022, respectively. The $4.9 billion increase in the past, our loan and securities portfolios provided meaningful liquidity in 2022, with cash flows from the repayment and sale of loans totaling $9.3 billion and cash flows fromequivalents includes custodial deposits related to the repaymentSignature Transaction.salecash equivalents, unpledged securities, and FHLB borrowing capacity),was $31.2 billion , approximately matching the balance of securities totaling $571 million.our uninsured deposits.deposits and wholesale borrowings.deposits. In 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 amount of mortgage loan collateral available under a blanket lien we have pledged to the respective institutions and, to a lesser extent, the amount of available securities that may be pledged to collateralize our borrowings. At September 30, 2022,2023 our available borrowing capacity with the FHLB-NY was $12.2$16.9 billion. InIn addition, the Bank had available-for-sale securities of $6.7$8.7 billion, of which, $6.1$7.4 billion is unpledged.theirour liquidity. In connectionconnection with these agreements, the Bank has pledged certain loans and securities to collateralize any funds theywe may borrow. At September 30, 2022, theThe maximum amount the Bank could borrow from the FRB-NY was $1.1 billion. $1.0 billion.There were no borrowings against these lines of credit at September 30, 2022.2023.62Our primary investing activity is loan production, and the volume of loans we originated for investment totaled $12.6 billion in 2022. During this time, the net cash used in investing activities totaled $4.7 billion; the net cash provided by our operating activities totaled $631 million. Our financing activities provided net cash of $3.6 billion.20222023 totaled $6.8$15.7 billion, representing 75%90 percent of total CDs at that date. Our ability to attract and retain retail deposits, including CDs, depends on numerous factors, including, among others, the convenience of our branches and our other banking channels; our customers’ satisfaction with the service they receive; the rates of interest we offer; the types of products we feature; and the attractiveness of their terms.The Parentability 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 distributionssubsidiary bank can supply funds 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,non-bank subsidiaries. The Bank would require the approval of the Superintendent is requiredOCC if the total of all dividends declaredit declares in aany calendar year wouldwere to exceed the total of a bank’sits respective net profits for that year combined with its respective retained net profits for the preceding two years. In 2022,calendar years, less any required transfer to paid-in capital. The term “net profits” is defined as net income for a given period less any dividends paid during that period. As a result of our acquisition of Flagstar, we are also required to seek regulatory approval from the Bank paid dividends totaling $250 million toOCC for the Parent Company, leaving $675 million that it couldpayment of any dividend to the Parent Company withoutthrough at least the period ending November 1, 2024. In connection with receiving regulatory approval at year-end. Additional sourcesfrom the OCC for the Signatureliquidity availabletwo years from the date of the Signature Transaction, it will not declare or pay any dividend without receiving a prior written determination of no supervisory objection from the OCC and (ii) it will not declare or pay dividends on the amount of retained earnings that represents any net bargain purchase gain that is subject to a conditional period that may be imposed by the OCC.In the nine months ended September 30, 2023, dividends of $430 million were paid by the Bank to the Parent Company atCompany. At September 30, 2022 included $104 million in cash and cash equivalents. If2023, the Bank washad $555 million available for additional dividends, excluding bargain purchase gain from retained earnings.apply tomeet its cash flow obligations over the Superintendentnext 12 months and 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.foreseeable future.Off-Balance Sheet CommitmentsFHLB-NY and various brokerage firms.FHLB-NY. These contractual obligations are reflected in the Consolidated Statements of Condition under “Deposits” and “Borrowed funds,” respectively. At September 30, 2022,2023, we had CDs of $9.1$17.3 billion and long-term debt (defined as borrowed funds with an original maturity one year or more) of $10.3$7.7 billion.2022,2023, 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 $5.2 billion.credit. 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.(in millions) September 30, 2023 December 31, 2022 Multi-family and commercial real estate $ 85 $ 216 One-to-four family including interest rate locks 2,054 2,066 Acquisition, development, and construction 4,076 3,539 Warehouse loan commitments 6,489 8,042 Other loan commitments 11,690 7,964 Total loan commitments $ 24,394 $ 21,827 Commercial, performance stand-by, and financial stand-by letters of credit 578 541 Total commitments $ 24,972 $ 22,368 632022,2023, we did not engage in any off-balance sheet transactions reasonably likelythat we expect to have a material effect on our financial condition, results of operations or cash flows.2022,2023, we had no commitments to purchase securities.Capital PositionOn 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.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 September 30, 2022, the Company has repurchased a total of 29.7 million shares at an average price of $9.61 or an aggregate purchase price of $286 million, leaving $9 million remaining under the current authorization.Stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity include AOCL, which decreased $517 million from the balance at the end of last year and $510 million from the year-ago quarter to $602 million at September 30, 2022. The year-to-date decrease was primarily the result of a $567 million decrease in the net unrealized loss on available-for-sale securities, net of tax, and a $49 million change in the net unrealized gain (loss) on cash flow hedges, net of tax, to $40 million.NYSDFSOCC and the FDICFederal Reserve (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.2022,2023, 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:Risk-Based Capital September 30, 2023 Common Equity Tier 1 Tier 1 Total Leverage Capital (dollars in millions) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital $ 8,382 9.59 % $ 8,885 10.17 % $ 10,462 11.97 % $ 8,885 7.92 % Minimum for capital adequacy purposes 3,932 4.50 5,242 6.00 6,990 8.00 4,487 4.00 Excess $ 4,450 5.09 % $ 3,643 4.17 % $ 3,472 3.97 % $ 4,398 3.92 % December 31, 2022 Total capital $ 6,335 9.06 % $ 6,838 9.78 % $ 8,154 11.66 % $ 6,838 9.70 % Minimum for capital adequacy purposes 3,146 4.50 4,195 6.00 5,593 8.00 2,819 4.00 Excess $ 3,189 4.56 % $ 2,643 3.78 % $ 2,561 3.66 % $ 4,019 5.70 % Regulatory Capital Analysis (the Company)Risk-Based Capital September 30, 2023 Common Equity Tier 1 Tier 1 Total Leverage Capital (dollars in millions) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital $ 9,690 11.10 % $ 9,690 11.10 % $ 10,274 11.77 % $ 9,690 8.64 % Minimum for capital adequacy purposes 3,929 4.50 5,239 6.00 6,985 8.00 4,484 4.00 Excess $ 5,761 6.60 % $ 4,451 5.10 % $ 3,289 3.77 % $ 5,206 4.64 % December 31, 2022 Total capital $ 7,653 10.96 % $ 7,653 10.96 % $ 7,982 11.43 % $ 7,653 10.87 % Minimum for capital adequacy purposes 3,142 4.50 4,189 6.00 5,585 8.00 2,817 4.00 Excess $ 4,511 6.46 % $ 3,464 4.96 % $ 2,397 3.43 % $ 4,836 6.87 %
Tier 1
purposes64Regulatory Capital Analysis (New York Community Bank)
Tier 1
purposes2022,2023, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 406 bps397 basis points and the fully-phased infully phased-in capital conservation buffer by 156 bps.147 basis points.6.50%;6.50 percent; a minimum tier 1 risk-based capital ratio of 8.00%;8 percent; a minimum total risk-based capital ratio of 10.00%;10 percent; and a minimum leverage capital ratio of 5.00%.5 percent.Earnings SummaryThree Months Endedproposed rule has ended and the final rule is expected to be issued later in 2023. While the ultimate impact of the special assessment will be dependent on the final rule, the Company has estimated that its special assessment under the provisions of the proposed rule would be approximately $36 million, which is expected to be recognized in earnings upon issuance of the final rule. The Company continues to monitor regulatory changes related to these developments which have also increased regulatory and market focus on the liquidity, asset-liability management and unrealized securities losses of banks.Change in Interest Rates (in basis points) Estimated Percentage Change in Economic Value of Equity -200 over one year 1.8% -100 over one year 0.9% +100 over one year (1.4)% +200 over one year (3.1)% Estimated Percentage Change in Future Net Interest Income -200 over one year (3.0)% -100 over one year (2.0)% +100 over one year 2.2% +200 over one year 4.4% ITEM 1. FINANCIAL STATEMENTS September 30, 2023 December 31, 2022 (in millions, except per share data) (unaudited) ASSETS: Cash and cash equivalents $ 6,929 $ 2,032 Securities: Debt Securities available-for-sale ($1,380 and $434 pledged at September 30, 2023 and December 31, 2022, respectively) 8,723 9,060 Equity investments with readily determinable fair values, at fair value 13 14 Total securities 8,736 9,074 Loans held for sale ($1,325 and $1,115 measured at fair value, respectively) 1,926 1,115 Loans and leases held for investment, net of deferred loan fees and costs 83,995 69,001 Less: Allowance for credit losses on loans and leases (619) (393) Total loans and leases held for investment, net 83,376 68,608 Federal Home Loan Bank stock and Federal Reserve Bank stock, at cost 1,110 1,267 Premises and equipment, net 638 491 Core deposit and other intangibles 661 287 Goodwill 2,426 2,426 Mortgage servicing rights 1,135 1,033 Bank-owned life insurance 1,576 1,561 Other assets 2,717 2,250 Total assets $ 111,230 $ 90,144 LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Interest-bearing checking and money market accounts $ 31,087 $ 22,511 Savings accounts 9,415 11,645 Certificates of deposit 17,310 12,510 Non-interest-bearing accounts 24,863 12,055 Total deposits 82,675 58,721 Borrowed funds: Federal Home Loan Bank advances 13,023 20,325 Fed funds purchased 547 — Total wholesale borrowings 13,570 20,325 Junior subordinated debentures 578 575 Subordinated notes 437 432 Total borrowed funds 14,585 21,332 Other liabilities 2,977 1,267 Total liabilities 100,237 81,320 Stockholders' equity: Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares issued and outstanding) 503 503 7 7 Paid-in capital in excess of par 8,217 8,130 Retained earnings 3,278 1,041 Treasury stock, at cost ($22,035,565 and 24,212,052 shares, respectively) (217) (237) Accumulated other comprehensive loss, net of tax: Net unrealized loss on securities available for sale, net of tax of $324 and $240, respectively (863) (626) Net unrealized loss on pension and post-retirement obligations, net of tax of $17 and $18, respectively (42) (46) Net unrealized gain on cash flow hedges, net of tax of $(41) and $(20), respectively 110 52 Total accumulated other comprehensive loss, net of tax (795) (620) Total stockholders’ equity 10,993 8,824 Total liabilities and stockholders’ equity $ 111,230 $ 90,144
(unaudited)Three Months Ended September 30, Nine months ended September 30, (in millions, except per share data) 2023 2022 2023 2022 INTEREST INCOME: Loans and leases $ 1,251 $ 442 $ 3,279 $ 1,259 Securities and money market investments 261 67 765 152 Total interest income 1,512 509 4,044 1,411 INTEREST EXPENSE: Interest-bearing checking and money market accounts 268 72 657 104 Savings accounts 43 15 122 33 Certificates of deposit 180 23 436 46 Borrowed funds 139 73 492 211 Total interest expense 630 183 1,707 394 Net interest income 882 326 2,337 1,017 Provision for (recovery of) credit losses 62 2 281 9 Net interest income after provision for credit loan losses 820 324 2,056 1,008 NON-INTEREST INCOME: Fee income 58 5 133 17 Bank-owned life insurance 11 10 32 24 Net (loss) on securities — (1) (1) (2) Net return on mortgage servicing rights 23 — 70 — Net gain on loan sales and securitizations 28 — 73 — Net Loan administration income 19 — 65 — Bargain purchase gain — — 2,142 — Other 21 3 46 10 Total non-interest income 160 17 2,560 49 NON-INTEREST EXPENSE: Operating expenses: Compensation and benefits 346 79 854 238 Occupancy and equipment 55 22 142 67 General and administrative 184 31 496 95 Total operating expense 585 132 1,492 400 Intangible asset amortization 36 — 90 — Merger-related and restructuring expenses 91 4 267 15 Total non-interest expense 712 136 1,849 415 Income before income taxes 268 205 2,767 642 Income tax expense 61 53 141 164 Net income $ 207 $ 152 $ 2,626 $ 478 Preferred stock dividends 8 8 25 25 Net income available to common stockholders $ 199 $ 144 $ 2,601 $ 453 Basic earnings per common share $ 0.27 $ 0.31 $ 3.62 $ 0.96 Diluted earnings per common share $ 0.27 $ 0.30 $ 3.61 $ 0.96 Net income $ 207 $ 152 $ 2,626 $ 478 Other comprehensive loss, net of tax: Change in net unrealized loss on securities available for sale, net of tax of $69; $67; $84 and $217, respectively (195) (176) (237) (567) Change in pension and post-retirement obligations, net of tax of $—; $—; $(1) and $—, respectively — — 2 (1) Change in net unrealized gain on cash flow hedges, net of tax of $(17); $(11); $(26) and $(18), respectively 47 28 72 46 Reclassification adjustment for defined benefit pension plan, net of tax of $—; $—; $— and $—, respectively 1 1 2 2 Reclassification adjustment for net (loss) gain on cash flow hedges included in net income, net of tax $2; $1; $5 and $(1), respectively (6) (2) (14) 3 Total other comprehensive loss, net of tax (153) (149) (175) (517) Total comprehensive income (loss), net of tax $ 54 $ 3 $ 2,451 $ (39) (in millions, except share data) Shares Outstanding Preferred Stock (Par Value: $0.01) Common Stock (Par Value: $0.01) Paid-in Capital in excess of Par Retained Earnings Treasury Stock, at Cost Accumulated Other Comprehensive Loss, Net of Tax Total Stockholders’ Equity Three Months Ended September 30, 2023 Balance at June 30, 2023 722,475,755 $ 503 $ 7 $ 8,204 $ 3,205 $ (217) $ (642) $ 11,060 Shares issued for restricted stock, net of forfeitures 43,458 — — — — — — — Compensation expense related to restricted stock awards 0 — — 13 — — — 13 Net income 0 — — — 207 — — 207 Dividends paid on common stock ($0.17) 0 — — — (125) — — (125) Dividends paid on preferred stock ($15.94) 0 — — — (9) — — (9) Purchase of common stock (33,956) — — — — — — — Other comprehensive loss, net of tax 0 — — — — — (153) (153) Balance at September 30, 2023 722,485,257 $ 503 $ 7 $ 8,217 $ 3,278 $ (217) $ (795) $ 10,993 Three Months Ended September 30, 2022 Balance at June 30, 2022 466,243,078 $ 503 $ 5 $ 6,114 $ 893 $ (238) $ (453) $ 6,824 Shares issued for restricted stock, net of forfeitures — — — — — — — — Compensation expense related to restricted stock awards — — — 7 — — — 7 Net income — — — — 152 — — 152 Dividends paid on common stock ($0.17) — — — — (80) — — (80) Dividends paid on preferred stock ($15.94) — — — — (8) — — (8) Purchase of common stock (107,022) — — — — — — — Other comprehensive loss, net of tax — — — — — — (149) (149) Balance at September 30, 2022 466,136,056 $ 503 $ 5 $ 6,121 $ 957 $ (238) $ (602) $ 6,746 (in millions, except share data) Shares Outstanding Preferred Stock (Par Value: $0.01) Common Stock (Par Value: $0.01) Paid-in Capital in excess of Par Retained Earnings Treasury Stock, at Cost Accumulated Other Comprehensive Loss, Net of Tax Total Stockholders’ Equity Nine Months Ended September 30, 2023 Balance at December 31, 2022 681,217,334 $ 503 $ 7 $ 8,130 $ 1,041 $ (237) $ (620) $ 8,824 Issuance and exercise of FDIC Equity appreciation instrument 39,032,006 — — 85 — — — 85 Shares issued for restricted stock, net of forfeitures 3,436,504 — — (31) — 31 — — Compensation expense related to restricted stock awards — — — 33 — — — 33 Net income — — — — 2,626 — — 2,626 Dividends paid on common stock ($0.51) — — — — (364) — — (364) Dividends paid on preferred stock ($47.82) — — — — (25) — — (25) Purchase of common stock (1,200,587) — — — — (11) — (11) Other comprehensive loss, net of tax — — — — — — (175) (175) Balance at September 30, 2023 722,485,257 $ 503 $ 7 $ 8,217 $ 3,278 $ (217) $ (795) $ 10,993 Nine Months Ended September 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 — — — 22 — — — 22 Net income — — — — 478 — — 478 Dividends paid on common stock ($0.51) — — — — (237) — — (237) Dividends paid on preferred stock ($47.82) — — — — (25) — — (25) Purchase of common stock (1,818,952) — — — — (19) — (19) Other comprehensive loss, net of tax — — — — — — (517) (517) Balance at September 30, 2022 466,136,056 $ 503 $ 5 $ 6,121 $ 957 $ (238) $ (602) $ 6,746 For the Nine Months Ended September 30, (in millions) 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,626 $ 478 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Provision for loan losses 281 9 Amortization of intangibles 90 — Depreciation 29 13 Amortization of discounts and premiums, net (221) (8) Net (gain) loss on securities 1 2 Net (gain) loss on sales of loans (73) — Net gain on sales of fixed assets — (2) Gain on business acquisition (2,142) — Stock-based compensation 33 22 Deferred tax expense (32) — Changes in operating assets and liabilities: Decrease (increase) in other assets (135) 65 (Decrease) increase in other liabilities (358) 51 Purchases of securities held for trading (10) (75) Proceeds from sales of securities held for trading 10 75 Change in loans held for sale, net (615) — Net cash (used in) provided by operating activities (516) 631 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from repayment of securities available for sale 1,254 571 Proceeds from sales of securities available for sale 1,341 — Purchase of securities available for sale (2,346) (2,190) Redemption of Federal Home Loan Bank stock 1,069 311 Purchases of Federal Home Loan Bank and Federal Reserve Bank stock (912) (207) Proceeds from bank-owned life insurance, net 27 5 Purchases of loans — (157) Net Proceeds from sales of MSR's 50 — Other changes in loans, net (3,077) (3,084) (Purchases) dispositions of premises and equipment, net (42) 9 Cash acquired in business acquisition 25,043 — Net cash provided by (used in) investing activities 22,407 (4,742) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in deposits (9,641) 6,646 Net decrease in short-term borrowed funds (705) 115 Proceeds from long-term borrowed funds 3,675 6,930 Repayments of long-term borrowed funds (9,725) (9,810) Net receipt of payments of loans serviced for others (48) — Cash dividends paid on common stock (364) (237) Cash dividends paid on preferred stock (25) (25) Treasury stock repurchased — (7) Payments relating to treasury shares received for restricted stock award tax payments (11) (12) Net cash (used in) provided by financing activities (16,844) 3,600 5,047 (511) 2,082 2,211 $ 7,129 $ 1,700 Supplemental information: Cash paid for interest $ 1,656 $ 399 Cash paid for income taxes 32 13 Non-cash investing and financing activities: Transfers to repossessed assets from loans $ 4 $ — Securitization of loans to mortgage-backed securities available for sale 109 157 Shares issued for restricted stock awards 31 27 Business Combination: Fair value of tangible assets acquired 37,526 — Intangible assets 464 — Liabilities assumed 35,763 — Issuance of FDIC Equity appreciation instrument 85 — Standard Description Effective Date ASU 2022-02- Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures Issued March 2022 ASU 2022-02 eliminates prior accounting guidance for TDRs, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The standard also requires that an entity disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases. The Company adopted ASU 2022-02 effective January 1, 2023 using a modified retrospective transition approach for the amendments related to the recognition and measurement of TDRs. The impact of the adoption resulted in an immaterial change to the allowance for credit losses ("ACL"), thus no adjustment to retained earnings was recorded. Disclosures have been updated to reflect information on loan modifications given to borrowers experiencing financial difficulty as presented in Note 6. TDR disclosures are presented for comparative periods only and are not required to be updated in current periods. Additionally, the current year vintage disclosure included in Note 6 has been updated to reflect gross charge-offs by year of origination for the three months ended September 30, 2023. ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method Issued: March 2023 ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The Company adopted ASU 2023-02 effective January 1, 2023 and it did not have a significant impact on the Company's consolidated financial statements. Three Months Ended September 30, Nine Months Ended September 30, (in millions, except share and per share amounts) 2023 2022 2023 2022 Net income available to common stockholders $ 199 $ 144 $ 2,601 $ 453 Less: Dividends paid on and earnings allocated to participating securities (2) (2) (27) (6) Earnings applicable to common stock $ 197 $ 142 $ 2,574 $ 447 Weighted average common shares outstanding 722,486,509 465,115,180 710,684,522 465,354,754 Basic earnings per common share $ 0.27 $ 0.31 $ 3.62 $ 0.96 Earnings applicable to common stock $ 197 $ 142 $ 2,574 $ 447 Weighted average common shares outstanding 722,486,509 465,115,180 710,684,522 465,354,754 Potential dilutive common shares 2,426,381 979,177 1,753,527 926,184 Total shares for diluted earnings per common share computation 724,912,890 466,094,357 712,438,049 466,280,938 Diluted earnings per common share and common share equivalents $ 0.27 $ 0.30 $ 3.61 $ 0.96 (in millions) March 20, 2023 Net assets acquired before fair value adjustments $ 2,973 Fair value adjustments: Loans (727) Core deposit and other intangibles 464 Certificates of deposit 27 Other net assets and liabilities 39 FDIC Equity Appreciation Instrument (85) Deferred tax liability (690) Bargain purchase gain on Signature Transaction, as initially reported $ 2,001 Measurement period adjustments, excluding taxes 53 Change in deferred tax liability 88 Bargain purchase gain on Signature Transaction, as adjusted $ 2,142 (in millions) As Initially Reported Measurement Period Adjustments As Adjusted Purchase Price consideration $ 85 $ — $ 85 Fair value of assets acquired: Cash & cash equivalents 25,043 — 25,043 Loans held for sale 232 — 232 Loans held for investment: Commercial and industrial 10,102 (214) 9,888 Commercial real estate 1,942 (262) 1,680 Consumer and other 174 (1) 173 Total loans held for investment 12,218 (477) 11,741 CDI and other intangible assets 464 — 464 Other assets 679 (169) 510 Total assets acquired 38,636 (646) 37,990 Fair value of liabilities assumed: Deposits 33,568 — 33,568 Other liabilities 2,982 (787) 2,195 Total liabilities assumed 36,550 (787) 35,763 Fair value of net identifiable assets 2,086 141 2,227 Bargain purchase gain $ 2,001 $ 141 $ 2,142 (in millions) Total Par value (UPB) $ 583 ACL at acquisition (13) Non-credit (discount) (76) Fair value $ 494 (in millions) For the Nine Months Ended September 30, 2023 Details about Accumulated Other Comprehensive Loss Affected Line Item in the Consolidated Statements of Income and Comprehensive Income Unrealized gains on available-for-sale securities: $ — Net gain on securities — Income tax expense $ — Net gain on securities, net of tax Unrealized gains on cash flow hedges: $ 19 Interest expense (5) Income tax benefit $ 14 Net gain on cash flow hedges, net of tax Amortization of defined benefit pension plan items: Past service liability $ — Actuarial losses (2) (2) Total before tax — Income tax benefit $ (2) Amortization of defined benefit pension plan items, net of tax Total reclassifications for the period $ 12 September 30, 2023 (in millions) Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Debt securities available-for-sale Mortgage-Related Debt Securities: GSE certificates $ 1,378 $ — $ 214 $ 1,164 GSE CMOs 4,883 — 532 4,351 Private Label CMOs 177 — 3 174 Total mortgage-related debt securities $ 6,438 $ — $ 749 $ 5,689 Other Debt Securities: U. S. Treasury obligations $ 195 $ — $ — $ 195 GSE debentures 2,041 1 383 1,659 319 — 6 313 Municipal bonds 7 — 1 6 Corporate bonds 769 3 35 737 Foreign notes 35 — 2 33 Capital trust notes 97 5 11 91 Total other debt securities $ 3,463 $ 9 $ 438 $ 3,034 Total debt securities available for sale $ 9,901 $ 9 $ 1,187 $ 8,723 Equity securities: Mutual funds $ 16 $ — $ 3 $ 13 Total equity securities $ 16 $ — $ 3 $ 13 $ 9,917 $ 9 $ 1,190 $ 8,736 December 31, 2022 (in millions) Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Debt securities available-for-sale Mortgage-Related Debt Securities: GSE certificates $ 1,457 $ — $ 160 $ 1,297 GSE CMOs 3,600 1 300 3,301 Private Label CMOs 185 6 — 191 Total mortgage-related debt securities $ 5,242 $ 7 $ 460 $ 4,789 Other Debt Securities: U. S. Treasury obligations $ 1,491 $ — $ 4 $ 1,487 GSE debentures 1,749 — 351 1,398 375 — 14 361 Municipal bonds 30 — — 30 Corporate bonds 913 2 30 885 Foreign Notes 20 — — 20 Capital trust notes 97 5 12 90 Total other debt securities $ 4,675 $ 7 $ 411 $ 4,271 Total other securities available for sale $ 9,917 $ 14 $ 871 $ 9,060 Equity securities: Mutual funds $ 16 $ — $ 2 $ 14 Total equity securities $ 16 $ — $ 2 $ 14 $ 9,933 $ 14 $ 873 $ 9,074 Mortgage- Related Securities U.S. Government and GSE Obligations State, County, and Municipal Fair Value ( in millions) Available-for-Sale Debt Securities: Due within one year $ 20 $ 492 $ — $ — $ 508 Due from one to five years 179 150 — 457 776 Due from five to ten years 319 1,427 7 407 1,714 Due after ten years 5,920 167 — 356 5,725 Total debt securities available for sale $ 6,438 $ 2,236 $ 7 $ 1,220 $ 8,723 Less than Twelve Months Twelve Months or Longer Total (in millions) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Temporarily Impaired Securities: U. S. Treasury obligations $ — $ — $ — $ — $ — $ — U.S. Government agency and GSE obligations 216 1 1,367 382 1,583 383 GSE certificates 341 23 823 191 1,164 214 Private Label CMOs 140 3 — — 140 3 GSE CMOs 3,234 180 1,117 352 4,351 532 Asset-backed securities — — 280 6 280 6 Municipal bonds — — 6 1 6 1 Corporate bonds — — 405 35 405 35 Foreign notes 24 1 9 1 33 2 Capital trust notes — — 81 11 81 11 Equity securities — — 13 3 13 3 Total temporarily impaired securities $ 3,955 $ 208 $ 4,101 $ 982 $ 8,056 $ 1,190 Less than Twelve Months Twelve Months or Longer Total (in millions) Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Temporarily Impaired Securities: U. S. Treasury obligations $ 1,487 $ 4 $ — $ — $ 1,487 $ 4 U.S. Government agency and GSE obligations 243 5 1,156 346 1,399 351 GSE certificates 871 46 420 114 1,291 160 GSE CMOs 2,219 36 925 264 3,144 300 Asset-backed securities 61 2 262 12 323 14 Municipal bonds 9 — 7 — 16 — Corporate bonds 698 27 97 3 795 30 Foreign notes 20 — — — 20 — Capital trust notes 46 2 34 10 80 12 Equity securities 4 — 10 2 14 2 Total temporarily impaired securities $ 5,658 $ 122 $ 2,911 $ 751 $ 8,569 $ 873 September 30, 2023 December 31, 2022 (dollars in millions) Amount Percent of
Loans
Held for
InvestmentAmount Percent of
Loans
Held for
InvestmentLoans and Leases Held for Investment: Mortgage Loans: Multi-family $ 37,698 44.9 % $ 38,130 55.3 % Commercial real estate 10,486 12.5 % 8,526 12.4 % One-to-four family first mortgage 5,882 7.0 % 5,821 8.4 % Acquisition, development, and construction 2,910 3.5 % 1,996 2.8 % $ 56,976 67.9 % $ 54,473 78.9 % Other Loans: Commercial and industrial 21,275 25.3 % 10,597 15.4 % Lease financing, net of unearned income of $243 and $85, respectively 3,148 3.7 % 1,679 2.4 % 24,423 29.0 % 12,276 17.8 % Other 2,596 3.1 % 2,252 3.3 % Total other loans held for investment 27,019 32.1 % 14,528 21.1 % $ 83,995 100.0 % $ 69,001 100.0 % Allowance for credit losses on loans and leases (619) (393) Total loans and leases held for investment, net 83,376 68,608 Loans held for sale, at fair value 1,926 1,115 Total loans and leases, net $ 85,302 $ 69,723 (in millions) Loans 30-89 Days Past Due Non- Accrual Loans Total Past Due Loans Current Loans Total Loans Receivable Multi-family $ 60 $ 102 $ 162 $ 37,536 $ 37,698 Commercial real estate 26 157 183 10,303 10,486 One-to-four family first mortgage 19 90 109 5,773 5,882 Acquisition, development, and construction 1 1 2 2,908 2,910 43 65 108 24,315 24,423 Other 20 19 39 2,557 2,596 Total $ 169 $ 434 $ 603 $ 83,392 $ 83,995 (in millions) Loans 30-89 Days Past Due Non- Accrual Loans Total Past Due Loans Current Loans Total Loans Receivable Multi-family $ 34 $ 13 $ 47 $ 38,083 $ 38,130 Commercial real estate 2 20 22 8,504 8,526 One-to-four family first mortgage 21 92 113 5,708 5,821 Acquisition, development, and construction — — — 1,996 1,996 2 3 5 12,271 12,276 Other 11 13 24 2,228 2,252 Total $ 70 $ 141 $ 211 $ 68,790 $ 69,001 Mortgage Loans Other Loans (in millions) Multi- Family Commercial Real Estate One-to- Four Family Acquisition, Development, and Construction Total Mortgage Loans Other Total Other Loans Credit Quality Indicator: $ 36,027 $ 9,248 $ 5,780 $ 2,894 $ 53,949 $ 24,162 $ 2,572 $ 26,734 Special mention 776 425 3 15 1,219 94 — 94 Substandard 895 813 99 1 1,808 160 24 184 Doubtful — — — — — 7 — 7 Total $ 37,698 $ 10,486 $ 5,882 $ 2,910 $ 56,976 $ 24,423 $ 2,596 $ 27,019 Mortgage Loans Other Loans (in millions) Multi- Family Commercial Real Estate One-to- Four Family Acquisition, Development, and Construction Total Mortgage Loans Other Total Other Loans Credit Quality Indicator: $ 36,622 $ 7,871 $ 5,710 $ 1,992 $ 52,195 $ 12,208 $ 2,238 $ 14,446 Special mention 864 230 8 4 1,106 18 — 18 Substandard 644 425 103 — 1,172 50 14 64 Doubtful — — — — — — — — Total $ 38,130 $ 8,526 $ 5,821 $ 1,996 $ 54,473 $ 12,276 $ 2,252 $ 14,528 Vintage Year (in millions) 2023 2022 2021 2020 2019 Prior To 2019 Revolving Loans Revolving Loans Converted to Term Loans Total $ 2,218 $ 13,695 $ 10,148 $ 9,547 $ 5,247 $ 11,115 $ 1,972 $ 7 $ 53,949 Special Mention 2 46 26 176 211 758 — — 1,219 Substandard 44 18 32 38 331 1,342 — 3 1,808 Doubtful — — — — — — — — — Total mortgage loans $ 2,264 $ 13,759 $ 10,206 $ 9,761 $ 5,789 $ 13,215 $ 1,972 $ 10 $ 56,976 Current-period gross writeoffs — — — — (2) (17) — — (19) $ 8,458 $ 3,924 $ 1,980 $ 1,619 $ 993 $ 1,021 $ 8,418 $ 321 $ 26,734 Special Mention 7 24 6 3 37 13 4 — 94 Substandard 16 28 21 16 5 46 42 10 184 Doubtful — — 7 — — — — — 7 Total other loans $ 8,481 $ 3,976 $ 2,014 $ 1,638 $ 1,035 $ 1,080 $ 8,464 $ 331 $ 27,019 Current-period gross writeoffs $ (6) $ (2) $ (1) $ (1) $ (2) $ (3) $ — $ — $ (15) Total $ 10,745 $ 17,735 $ — $ 12,220 $ 11,399 $ 6,824 $ 14,295 $ 10,436 $ 341 $ 83,995 Collateral Type (in millions) Real Property Other Multi-family $ 102 $ — Commercial real estate 170 — One-to-four family first mortgage 100 — Commercial and industrial — 33 Other — — Total collateral-dependent loans held for investment $ 372 $ 33 Amortized Cost (dollars in millions) Interest Rate Reduction Term Extension Combination - Interest Rate Reduction & Term Extension Total Percent of Total Loan class Three months ended September 30, 2023 Multi-family $ 100 $ — $ — $ 100 0.95 % Commercial real estate 67 — — 67 0.64 % One-to-four family first mortgage 3 1 2 6 0.10 % Commercial and Industrial 1 11 2 14 0.07 % Other Consumer — — 1 1 0.04 % Total $ 171 $ 12 $ 5 $ 188 Nine months ended September 30, 2023 Multi-family $ 100 $ — $ — $ 100 0.95 % Commercial real estate 119 — — 119 1.13 % One-to-four family first mortgage 3 4 5 12 0.20 % Commercial and Industrial 1 18 2 21 0.09 % Other Consumer $ — $ — $ 1 1 0.04 % Total $ 223 $ 22 $ 8 $ 253 Interest Rate Reduction Term Extension Weighted-average contractual interest rate From To Weighted-average Term (in years) Three months ended September 30, 2023 Multi-family 7.73 % 6.17 % Commercial real estate 10.77 % 4.32 % One-to-four family first mortgage — % — % 9.9 Commercial and industrial 8.02 % 7.74 % 0.36 Other Consumer 9.28 % 4.75 % 4.8 Nine months ended September 30, 2023 Multi-family 7.73 % 6.17 % Commercial real estate 10.48 % 4.18 % One-to-four family first mortgage — % — % 12.1 Commercial and industrial 8.02 % 7.74 % 0.46 Other Consumer 14.49 % 8.00 % 4.8 September 30, 2023 (dollars in millions) Current 30 - 89 Past Due 90+ Past Due Total One-to-four family first mortgage 1 — 9 10 Commercial and industrial 21 — — 21 Other Consumer 1 — — 1 Total $ 23 $ — $ 9 $ 32 September 30, 2022 (dollars in millions) Accruing Non- Accrual Total Loan Category: Multi-family $ — $ 6 $ 6 Commercial real estate 16 19 35 — 4 4 Total $ 16 $ 29 $ 45 Weighted Average Interest Rate (dollars in millions) Number of Loans Pre- Modification Recorded Investment Post- Modification Recorded Investment Pre- Modification Post- Modification Charge- off Amount Capitalized Interest Loan Category: Three Months Ended September 30, 2022 Commercial real estate 0 $ — $ — — % — % $ — $ — Nine Months Ended September 30, 2022 Commercial real estate 2 $ 22 $ 19 6.00 % 4.02 % $ 3 $ — For the Nine Months Ended September 30, 2023 2022 (in millions) Mortgage Other Total Mortgage Other Total Balance, beginning of period $ 290 $ 103 $ 393 $ 178 $ 21 $ 199 Adjustment for Purchased PCD Loans — 13 13 — — — Charge-offs (19) (15) (34) (5) — (5) Recoveries — 11 11 4 6 10 Provision for (recovery of) credit losses on loans and leases 108 128 236 31 (17) 14 Balance, end of period $ 379 $ 240 $ 619 $ 208 $ 10 $ 218 $152$619 million, up 2%$226 million compared to $149December 31, 2022. The day 1 impact of the Signature Transaction that closed on March 20, 2023 added $138 million to the reserve. The remaining net increase of approximately $88 million was driven by changes in the macroeconomic forecasts, specifically the inflationary pressures leading to sharp increases in interest rates and a slow-down of prepayment activity leading to longer weighted average lives on the balance sheet. In addition, the increase reflects unfavorable market conditions in the CRE portfolio (primarily office).(in millions) Recorded Investment Related Allowance Interest Income Recognized Nonaccrual loans with no related allowance: Multi-family $ 58 $ — $ 1 Commercial real estate 42 — 1 One-to-four family first mortgage 84 — — Acquisition, development, and construction — — — Other (includes C&I) 38 — — Total nonaccrual loans with no related allowance $ 222 $ — $ 2 Nonaccrual loans with an allowance recorded: Multi-family $ 44 $ 1 $ 1 Commercial real estate 115 4 3 One-to-four family first mortgage 6 — — Acquisition, development, and construction 1 1 — Other (includes C&I) 46 32 — Total nonaccrual loans with an allowance recorded $ 212 $ 38 $ 4 Total nonaccrual loans: Multi-family $ 102 $ 1 $ 2 Commercial real estate 157 4 4 One-to-four family first mortgage 90 — — Acquisition, development, and construction 1 1 — Other (includes C&I) 84 32 — Total nonaccrual loans $ 434 $ 38 $ 6 (in millions) Recorded Investment Related Allowance Interest Income Recognized Nonaccrual loans with no related allowance: Multi-family $ 13 $ — $ — Commercial real estate 19 — 1 One-to-four family first mortgage 90 — — Other (includes C&I) 3 — — Total nonaccrual loans with no related allowance $ 125 $ — $ 1 Nonaccrual loans with an allowance recorded: Commercial real estate $ 1 $ — $ — One-to-four family first mortgage 2 — — Other (includes C&I) 13 14 — Total nonaccrual loans with an allowance recorded $ 16 $ 14 $ — Total nonaccrual loans: Multi-family $ 13 $ — $ — Commercial real estate 20 — 1 One-to-four family first mortgage 92 — — Other (includes C&I) 16 14 — Total nonaccrual loans $ 141 $ 14 $ 1 (in millions) For the three months ended September 30, 2023 For the nine months ended September 30, 2023 For the three months ended September 30, 2022 For the nine months ended September 30, 2022 $ 28 $ 80 $ 14 $ 38 (in millions) September 30, 2023 December 31, 2022 Net investment in the lease - lease payments receivable $ 3,161 $ 1,685 Net investment in the lease - unguaranteed residual assets 296 60 Total lease payments $ 3,457 $ 1,745 (in millions) September 30, 2023 2023 $ 159 2024 573 2025 659 2026 800 2027 503 Thereafter 763 Total lease payments $ 3,457 Plus: deferred origination costs 17 Less: unearned income (243) Less: purchase accounting adjustment $ (83) Total lease finance receivables, net $ 3,148 (in millions) For the three months ended September 30, 2023 For the nine months ended September 30, 2023 For the three months ended September 30, 2022 For the nine months ended September 30, 2022 Operating lease cost $ 25 $ 60 $ 7 $ 21 Sublease income — — — — Total lease cost $ 25 $ 60 $ 7 $ 21 (in millions) For the three months ended September 30, 2023 For the nine months ended September 30, 2023 For the three months ended September 30, 2022 For the nine months ended September 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 16 $ 46 $ 7 $ 21 (in millions, except lease term and discount rate) September 30, 2023 December 31, 2022 Operating Leases: $ 442 $ 119 $ 456 $ 122 Weighted average remaining lease term 11.9 years 6 years Weighted average discount rate % 4.53 % 3.85 %
(in millions)September 30, 2023 Maturities of lease liabilities: 2023 $ 6 2024 68 2025 62 2026 54 2027 48 Thereafter 379 Total lease payments $ 617 Less: imputed interest $ (161) Total present value of lease liabilities $ 456 (in millions) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Balance at beginning of period $ 1,031 $ 1,033 Additions from loans sold with servicing retained 67 148 Reductions from sales — (51) (20) (54) 57 59 Fair value of MSRs at end of period $ 1,135 $ 1,135 September 30, 2023 Fair Value (dollars in millions) Actual 10% adverse change 20% adverse change Option adjusted spread 5.6 % $ 1,114 $ 1,094 Constant prepayment rate 7.3 % 1,100 1,068 Weighted average cost to service per loan $ 69 $ 1,124 $ 1,114 December 31, 2022 Fair Value (dollars in millions) Actual 10% adverse change 20% adverse change Option adjusted spread 5.9 % $ 1,012 $ 992 Constant prepayment rate 7.9 % 1,000 970 Weighted average cost to service per loan $ 68 $ 1,023 $ 1,013 (in millions) Three months ended September 30, 2023 Nine months ended September 30, 2023 Net return on mortgage servicing rights $ 59 $ 169 Decrease in MSR fair value due to pay-offs, pay-downs, run-off, model changes and other (20) (54) Changes in fair value due to interest rate risk 57 59 (73) (105) Net transaction costs — 1 Total return (loss) included in net return on mortgage servicing rights $ 23 $ 70 (in millions) Three months ended September 30, 2023 Nine months ended September 30, 2023 Loan administration income on mortgage loans subserviced $ 42 $ 116 (55) (124) Other servicing charges (1) (3) Total loss on mortgage loans subserviced, included in loan administration income $ (14) $ (11) (in millions) September 30, 2023 December 31, 2022 Wholesale borrowings: FHLB advances $ 13,023 $ 20,325 Fed Funds purchased 547 — Total wholesale borrowings $ 13,570 $ 20,325 Junior subordinated debentures 578 575 Subordinated notes 437 432 Total borrowed funds $ 14,585 $ 21,332 Issuer Interest Rate of Capital Securities and Debentures Capital Securities Amount Outstanding Date of Original Issue Stated Maturity (dollars in millions) New York Community Capital Trust V (BONUSES Units) (1) 6.00 $ 147 $ 141 Nov. 4, 2002 Nov. 1, 2051 New York Community Capital Trust X (2) 7.27 124 120 Dec. 14, 2006 Dec. 15, 2036 PennFed Capital Trust III (2) 8.92 31 30 June 2, 2003 June 15, 2033 New York Community Capital Trust XI (2) 7.31 59 58 April 16, 2007 June 30, 2037 Flagstar Statutory Trust II (2) 8.91 26 25 Dec. 26, 2002 Dec. 26, 2032 Flagstar Statutory Trust III (2) 8.82 26 25 Feb. 19, 2003 April 7, 2033 Flagstar Statutory Trust IV (2) 8.91 26 25 Mar. 19, 2003 Mar 19, 2033 Flagstar Statutory Trust V (2) 7.57 26 25 Dec 29, 2004 Jan. 7, 2035 Flagstar Statutory Trust VI (2) 7.57 26 25 Mar. 30, 2005 April 7, 2035 Flagstar Statutory Trust VII (2) 7.42 51 50 Mar. 29, 2005 June 15, 2035 Flagstar Statutory Trust VIII (2) 7.07 26 25 Sept. 22, 2005 Oct. 7, 2035 Flagstar Statutory Trust IX (2) 7.12 26 25 June 28, 2007 Sept. 15, 2037 Flagstar Statutory Trust X (2) 8.17 15 15 Aug. 31, 2007 Sept 15, 2037 $ 609 $ 589 Date of Original Issue Stated Maturity Interest Rate Original Issue Amount November 6, 2018 November 6, 2028 (1) 5.900% $ 300 October 28, 2020 November 1, 2030 (2) 4.125% $ 150 For the three months ended September 30, 2023 2022 (in millions) Pension Benefits Pension Benefits Post Retirement Benefits Interest cost $ 1 $ — $ 1 $ — Expected return on plan assets (4) — (4) — Amortization of net actuarial loss 2 — 1 — Net periodic (credit) expense $ (1) $ — $ (2) $ — For the Nine Months Ended September 30, 2023 2022 (in millions) Pension Benefits Pension Benefits Post Retirement Benefits Interest cost $ 4 $ — $ 3 $ — Expected return on plan assets (11) — (12) — Amortization of net actuarial loss 5 — 2 — Net periodic (credit) expense $ (2) $ — $ (7) $ — 2021. Net income available2023 and September 30, 2022.common stockholders forrestricted stock awards:For the Nine Months Ended September 30, 2023 Number of Shares Weighted Average Grant Date Fair Value Unvested at beginning of year 9,576,602 $ 10.92 Granted 9,521,787 10.23 Vested (2,973,101) 11.07 Forfeited (904,537) 10.60 Unvested at end of period 15,220,751 $ 10.48 threenine months ended September 30, 2023:Number of
SharesWeighted
Average
Grant Date
Fair ValuePerformance
PeriodExpected
Vesting
DateOutstanding at beginning of year 794,984 $ 10.73 Granted 566,656 8.95 Released (143,352) 10.34 Forfeited — — Outstanding at end of period 1,218,288 9.95 January 1, 2022 - December 31, 2025 March 31, 2023 - 2026 was $144including $1 million up 3% compared to $140and $1 million for the three months ended September 30, 2021. Diluted EPS were $0.30 for the three months ended2023 and 2022. As of September 30, 2022, unchanged compared2023, unrecognized compensation cost relating to the three months endedunvested restricted stock totaled $6 million. This amount will be recognized over a remaining weighted average period of 1.8 years. As of September 30, 2021. Both net income2023, the Company believes it is probable that the performance conditions will be met.net income availableHedging Activitiescommon stockholders include $3 millioncertain risks arising from both its business operations and economic conditions. The Company principally manages its exposure to a wide variety of merger-related expenses, netbusiness and operational risks through management of income taxes, whileits core business activities. The Company manages economic risks, including interest rate and liquidity risks, primarily by managing the three months ended September 30, 2021 contain merger-related expensesamount, sources, and duration of $5 million, net of income taxes.Net Interest IncomeNet interest income is our primary source of income. Its level is a function of the average balance of our interest-earningits assets the average balance of our interest-bearingand liabilities and, the spread betweenuse of derivative financial instruments. Specifically, the yield on suchCompany 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.costConsolidated Statements of such liabilities. These factorsCondition. The Company's policy is to present our derivative assets and derivative liabilities on the Consolidated Statement of Condition on a gross basis, even when provisions allowing for set-off are influencedin place. However, for derivative contracts cleared through certain central clearing parties, variation margin payments are recognized as settlements. We are exposed to non-performance risk by both the pricing and mixcounterparties to our various derivative financial instruments. A majority of our interest-earning assetsderivatives are centrally cleared through a Central Counterparty Clearing House or consist of residential mortgage interest rate lock commitments further limiting our exposure to non-performance risk. We believe that the non-performance risk inherent inour interest-bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition for loans and deposits, the monetary policycollateral provisions of the FOMC,derivative agreements.marketforward commitments used to manage exposure to changes in interest rates.rates and MSR asset values and to meet the needs of customers. The Company also enters into interest rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. Market risk on interest rate lock commitments and mortgage LHFS is managed using corresponding forward sale commitments and US Treasury futures. Changes in the fair value of derivatives not designated as hedging instruments are recognized on the Consolidated Statements of Income and Comprehensive Income.Net. The Company has designated certain interest rate swaps as cash flow hedges on overnight SOFR-based variable interest payments on federal home loan bank advances. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income on the Consolidated Statements of Condition and reclassified into interest expense in the same period in which the hedge transaction is also influenced byrecognized in earnings. At September 30, 2023, the levelCompany had $110 million (net-of-tax) of prepayment income primarily generatedunrealized gains on derivatives classified as cash flow hedges recorded in connection withaccumulated other comprehensive loss. The Company had $52 million (net-of-tax) of unrealized gains on derivatives classified as cash flow hedges recorded in accumulated other comprehensive loss at December 31, 2022.prepaymentfair value of our multi-familycertain of its fixed-rate assets due to changes in 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 CRE loans,that qualify as fair value hedges, the gain or loss on the derivative as well as securities. Since prepayment income is recorded asthe offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in 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 ourincome.spread and net interest margin.It should be noted that the levelswaps with a notional amounts 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$2.0 billion to hedge certain real estate values, andloans using 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 Comparison2022,2023, the floating rate received related to the net settlement of this interest rate swap was greater than the fixed rate payments. As such, interest income from loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was increased by $8 million or 3% to $326and $15 million for three months and nine months September 30, 2023, respectively.a year-over-year basis, but decreased $33our hedged real estate loans is included in loans and leases held for investment on our Consolidated Statements of Condition. The carrying amount of our hedged loans was $6.4 billion at September 30, 2023, of which unrealized gains of $46 million or 9% on a linked-quarter basis. While interest income rose on a year-over-year basis, the aggressive pace of interest rate increases during the past quarter led to a significant increase in interest expense. This waswere due to both an increasethe fair value hedge relationship. We have designated $2.0 billion of this portfolio of loans in the average balancea hedging relationship as of interest-bearing liabilities along with a higher cost of funds.Details of the change in net interest income are as follows:•Total interest income increased $94 million or 23% to $509 million on a year-over-year basis. This was primarily due to growth in average loan balances, along with higher yields and growth in average securities.65•Total interest expense almost doubled on a year-over-year basis, increasing $86 million or 89% to $183 million compared to $97 million for the three months ended September 30, 2021. The increase was due to both an increase in average interest-bearing liabilities and in the cost of funds.2023.•Average loans increased $5.3 billion or 12% on a year-over-year basis to $48.5 billion, whileThe following tables set forth information regarding the average loan yield rose 16 basis points to 3.64%.Company’s derivative financial instruments:September 30, 2023 Fair Value (in millions) Notional Amount Other Assets Other Liabilities Derivatives designated as cash flow hedging instruments: Interest rate swaps on FHLB advances $ 5,500 $ — $ 5 Total $ 5,500 $ — $ 5 Derivatives designated as fair value hedging instruments: Interest rate swaps on multi-family loans held for investment $ 2,000 $ — $ 1 Derivatives not designated as hedging instruments: Assets Futures $ 2,630 $ 1 $ — Mortgage-backed securities forwards 1,861 37 — Rate lock commitments 1,352 6 — Interest rate swaps and swaptions 5,937 140 — Total $ 11,780 $ 184 $ — Liabilities Mortgage-backed securities forwards $ 710 $ — $ 16 Rate lock commitments 702 — 12 Interest rate swaps and swaptions 2,706 — 79 Total derivatives not designated as hedging instruments $ 4,118 $ — $ 107 December 31, 2022 Fair Value (in millions) Notional Amount Other Assets Other Liabilities Derivatives designated as cash flow hedging instruments: Interest rate swaps $ 3,750 $ 5 $ — Total $ 3,750 $ 5 $ — Derivatives not designated as hedging instruments: Assets Futures $ 1,205 $ 2 $ — Mortgage-backed securities forwards 1,065 36 — Rate lock commitments 1,539 9 — Interest rate swaps and swaptions 7,594 182 — Total $ 11,403 $ 229 $ — Liabilities Mortgage-backed securities forwards $ 739 $ — $ 61 Rate lock commitments 527 — 10 Interest rate swaps and swaptions 2,445 — 65 Total derivatives not designated as hedging instruments $ 3,711 $ — $ 136 •Average securities balances rose $711 million or 11% on a year-over-year basis to $7.4 billion as the Company redeployed a portion of its cash balances into short-term securities. During the same time period, the average yield on securities rose 53 basis points to 2.74%.•Interest expense on average interest-bearing deposits increased $84 million to $110 million on a year-over-year basis as the average balance of interest-bearing deposits rose $7.7 billion or 26% to $37.2 billion while the average cost of interest-bearing deposits increased 83 basis points to 1.18%.•Most of the increase was in the interest-bearing checking and MMA category. Average interest-bearing checking and MMA balances increased $6.7 billion or 52% on a year-over-year basis to $19.4 billion. The average cost of these deposits increased 124 basis points to 1.47%.•Interest expense on average borrowed funds increased $2 million on a year-over-year basis to $73 million. While average borrowings declined 7% to $14.5 billion, the average cost rose 16 basis points to 2.00%.•Average non-interesting bearing deposits declined $425 million or 10% to $4.0 billion.Net Interest MarginFor the three months ended September 30, 2022, the NIM declined 30 basis points to 2.22% compared to the previous quarter and declined 22 basis points compared to the third quarter of 2021.Prepayment income contributed seven basis points to the third quarter 2022 NIM, compared to 14 basis points in the previous quarter and 12 basis points in the year-ago quarter. Excluding the impact from prepayment income, the third-quarter 2022 NIM on a non-GAAP basis was 2.15%, down 23 basis points compared to the previous quarter and down 17 basis points compared to the year-ago quarter.summarizespresents the contributionderivative subject to a master netting agreement, including the cash pledged as collateral:September 30, 2023 Gross Amounts Not Offset in the Statements of Condition (in millions) Gross Amount Gross Amounts Netted in the Statements of Condition Net Amount Presented in the Statements of Condition Financial Instruments Cash Collateral Pledged (Received) Derivatives designated hedging instruments: Interest rate swaps on FHLB advances $ 5 $ — $ 5 $ 4 $ 80 $ 1 $ — $ 1 $ — $ 31 Derivatives not designated as hedging instruments: Assets Mortgage-backed securities forwards $ 37 $ — $ 37 $ — $ (6) Interest rate swaptions 140 — 140 — (37) Futures 1 — 1 — 1 Total derivative assets $ 178 $ — $ 178 $ — $ (42) Liabilities Futures $ — $ — $ — $ — $ — Mortgage-backed securities forwards 16 — 16 — 15 79 — 79 — 42 Total derivative liabilities $ 95 $ — $ 95 $ — $ 57 loanopen positions is considered settlement of the derivative position for accounting purposes.December 31, 2022 Gross Amounts Not Offset in the Statements of Condition (in millions) Gross Amount Gross Amounts Netted in the Statements of Condition Net Amount Presented in the Statements of Condition Financial Instruments Cash Collateral Pledged (Received) Derivatives designated hedging instruments: Interest rate swaps on FHLB advances $ 5 $ — $ 5 $ 4 $ 27 Derivatives not designated as hedging instruments: Assets Mortgage-backed securities forwards $ 36 $ — $ 36 $ — $ (9) Interest rate swaptions 182 — 182 — (36) Futures 2 2 1 Total derivative assets $ 220 $ — $ 220 $ — $ (44) Liabilities Mortgage-backed securities forwards $ 61 $ — $ 61 $ — $ 54 65 — 65 — 29 Total derivative liabilities $ 126 $ — $ 126 $ — $ 83 securities prepaymentto 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.(in millions) For the Nine Months Ended September 30, 2023 For the Year Ended December 31, 2022 For the Nine Months Ended September 30, 2022 Amount of gain (loss) recognized in AOCL $ 98 $ 88 $ 64 Amount of reclassified from AOCL to interest expense $ (19) $ (4) $ 4 income and NIM for the respective periods:expense reduction of $124 million is expected to be reclassified out of AOCL.
Months Ended
2022
2022
2021
2022
202166sets forth certain information regarding our average balance sheet forpresents 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
liabilities(1)Amounts are net of net deferred loan origination costs/(fees) and the allowances for loan losses and include loans held for sale and non-performing loans.(2)Amounts are at amortized cost.(3)Includes FHLB stock.Provision for (Recovery of) Credit LossesFor the three months ended September 30, 2022, the provision for credit losses totaled $2 million compared to a recovery of credit losses of $1 milliongain (loss) recognized in the year-ago quarter and $9 million in the previous quarter of 2022. During the current third quarter, we recorded net charge-offs of zero, unchanged compared to the year-ago quarter and compared to a $7 million net recovery during second-quarter 2022.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.67Non-Interest IncomeWe 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 September 30, 2022, non-interest income totaled $17 million, up $2 million or 13% compared to the third quarter of 2021, but down $1 million or 6% compared to the second quarter of 2022. The current third quarter includes net losses on securities of $1 million compared to no such net gains or losses on securities in either the prior-quarter or the year-ago quarter. The prior quarter included a $1.7 million gain on the sale of the Company's former headquarters building in Westbury, N.Y.The following table summarizes our non-interest income for the respective periods:Non-Interest ExpenseFor the three months ended September 30, 2022, total non-interest expenses were $136 million, up 1% compared to the $135 million reported for the three months ended September 30, 2021, but down 1% compared to the $138 million reported during the three months ended June 30, 2022. Included in the current third quarter are $4 million in merger-related expenses, unchanged compared to second-quarter 2022, but down 33% compared to $6 million during the third-quarter 2021. Excluding this item, total operating expenses for the three months ended September 30, 2022 were $132 million, down $2 million or 1% compared to the previous quarter, but up $3 million or 2% compared to the year-ago quarter. The efficiency ratio during the current third quarter was 38.57% compared to 35.57% during second-quarter 2022 and 38.84% during the year-ago third quarter.Income Tax ExpenseFor the three months ended September 30, 2022, income tax expense totaled $53 million, reflecting an effective tax rate of 25.66% compared to income tax expense of $59 million with an effective tax rate of 25.60% in the previous quarter and income tax expense of $50 million, reflecting an effective tax rate of 25.19% in the year-ago quarter. The linked-quarter decrease in our income tax expense was driven primarily by a lower amount of pre-tax income.Earnings Summary for the Nine Months Ended September 30, 2022For the nine months ended September 30, 2022, net income totaled $478 million, up 7% compared to the nine months ended September 30, 2021. Net income available to common stockholders for the nine months ended September 30, 2022 totaled $453 million, up 8% compared to $421 million for the nine months ended September 30, 2021. Diluted EPS for the nine months ended September 30, 2022 were $0.96, up 7% compared to $0.90 for the nine months ended September 30, 2021. Included in both nine month periods are merger-related expenses and other one-time items of $11 million, net of income taxes and $15 million net of income taxes, respectively, for the nine months ended September 30, 2022 and 2021, respectively.Net Interest IncomeNet interest income for the nine months ended September 30, 2022 was $1.0 billion compared to $967 million for the nine months ended September 30, 2021, up 5%. The year-over-year increase was driven by a $142 million or 11% increase in total interest income to $1.4 billion, partially offset by a $92 million or 30% increase in total interest expense.Details of the change in net interest income are as follows:•Average interest-earnings assets increased $4.7 billion or 9% to $56.7 billion, while the average yield on interest-earnings assets rose seven basis points to 3.32%.68•Average interest-bearing liabilities grew $4.6 billion or 10% to $49.7 billion, while the average cost of interest-bearing liabilities increased 16 basis points to 1.06%.•Interest income on average loans increased $114 million or 10% to $1.3 billion, driven by a $4.3 billion or 10% increase in average loan balances, while the average yield was unchanged at 3.56%.•Average securities balances rose 3% to $6.9 billion and the average yield increased five basis points to 2.43%.•Interest expense on average deposits increased $96 million or 110% to $183 million, while the average costderivative instruments, net of deposits increased 31 basis points to 0.71%.•The majority of the increase in interest expense on deposits was in the interest-bearing checking and MMA category. The average balance of interest-bearing checking and MMA rose $4.2 billion or 33% to $16.9 billion. The average cost of these deposits increased 57 basis points to 0.82%.•Interest expense on average borrowed funds was down $4 million to $211 million due to a $404 million or 3% decline in average balances and a one basis point increase in the average cost to 1.84%.Net Interest MarginFor the nine months ended September 20, 2022, the NIM was 2.39%, down nine basis points compared to 2.48% for the nine months ended September 30, 2021. Prepayment income totaled $42 million compared to $63 million in the year-ago period, and contributed 10 basis points to the NIM compared to 16 basis points in the year-ago period. Excluding the impact from prepayment income, the NIM, on a non-GAAP basis was 2.29% for the nine months ended September 30, 2022, down three basis points compared to the nine months ended September 30, 2021.
Months Ended
2022
2021
(non-GAAP)The following table sets forth certain information regarding our average balance sheet for the six-month periods, including theaverage 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.69Net Interest Income Analysis
accounts
liabilitiesProvision for (Recovery of) Credit LossesFor the nine months ended September 30, 2022, the provision for credit losses totaled $9 million compared to a net recovery of credit losses of $1 million for the nine months ended September 30, 2021. On a year-to-date basis, we recorded a net recovery of $5 million compared to a net recovery of $7 million for 2021 year-to-date.Non-Interest IncomeFor the nine-months ended September 30, 2022, non-interest income totaled $49 million, up $4 million or 9% compared to the nine months ended September 30, 2021. Included in the current year-to-date period is a $2 million net loss on securities compared to no such gain or loss in the year-ago year-to-date period. Also included in the current year-to-date period is the previously mentioned gain on the sale of the Company's former headquarters building.The following table summarizes our non-interest income for the respective periods:70Non-Interest Income AnalysisNon-Interest ExpenseFor the nine-months ended September 30, 2022, non-interest expense totaled $415 million, up $9 million or 2% compared to the nine months ended September 30, 2021. Merger-related expenses for the nine months ended September 30, 2022 totaled $15 million compared to $16 million for the nine months ended September 30, 2021. Excluding the impact of merger-related expenses, total operating expensesoffsetting positions:(dollars in millions) Three months ended September 30, 2023 Nine months ended September 30, 2023 Derivatives not designated as hedging instruments Location of Gain (Loss) Futures Net return on mortgage servicing rights $ — $ 3 Interest rate swaps and swaptions Net return on mortgage servicing rights (61) (83) Mortgage-backed securities forwards Net return on mortgage servicing rights (12) (25) Rate lock commitments and US Treasury futures Net gain on loan sales 1 39 Other non-interest income — 1 Total derivative (loss) gain $ (72) $ (65) nine months ended September 30, 2022 were $400 million, up $10 million or 3% compared to $390 million for the nine months ended September 30, 2021. The efficiency ratio for the nine months ended September 30, 2022reporting unit level, at least once a year. There was 37.53% compared to 38.58%no change in goodwill during the nine months ended September 30, 2021.2023.Income Tax ExpenseFornine-months endedSignature Transaction, the Company recorded $464 million of core deposit intangible and other intangible assets that are amortizable.2022, total income tax expense was $164 million, up slightly compared to total income tax2023, intangible assets consisted of the following:September 30, 2023 December 31, 2022 (in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Core deposit intangible $ 700 $ (81) $ 619 $ 250 $ (4) $ 246 Other intangible assets 56 (14) 42 42 (1) 41 Total other intangible assets $ 756 $ (95) $ 661 $ 292 $ (5) $ 287 $161 millionCDI and other intangible assets for the nine months endednext five years is as follows:(in millions) Amortization Expense 2023 $ 36 2024 133 2025 107 2026 94 2027 81 Total $ 451 2021. This represents2023 and December 31, 2022, and that were included in the Company’s Consolidated Statements of Condition at those dates:September 30, 2023 (in millions) Quoted Prices in Active Markets for Identical Assets
(Level 1)Significant Other Observable Inputs
(Level 2)Significant Unobservable Inputs
(Level 3)Netting Adjustments Total Fair Value Assets: Mortgage-related Debt Securities Available for Sale: GSE certificates $ — $ 1,164 $ — $ — $ 1,164 GSE CMOs $ — $ 4,351 $ — $ — $ 4,351 Private Label CMOs $ — $ 142 $ 32 $ — $ 174 Total mortgage-related debt securities $ — $ 5,657 $ 32 $ — $ 5,689 Other Debt Securities Available for Sale: U. S. Treasury obligations $ 195 $ — $ — $ — $ 195 GSE debentures $ — $ 1,659 $ — $ — $ 1,659 Asset-backed securities $ — $ 313 $ — $ — $ 313 Municipal bonds $ — $ 6 $ — $ — $ 6 Corporate bonds $ — $ 737 $ — $ — $ 737 Foreign notes $ — $ 33 $ — $ — $ 33 Capital trust notes $ — $ 91 $ — $ — $ 91 Total other debt securities $ 195 $ 2,839 $ — $ — $ 3,034 Total debt securities available for sale $ 195 $ 8,496 $ 32 $ — $ 8,723 Equity securities: Mutual funds and common stock $ — $ 13 $ — $ — $ 13 Total equity securities $ — $ 13 $ — $ — $ 13 Total securities $ 195 $ 8,509 $ 32 $ — $ 8,736 Loans held-for-sale Residential first mortgage loans $ — $ 1,148 $ — $ — $ 1,148 Acquisition, development, and construction $ — $ 168 $ — $ — $ 168 Commercial and industrial loans $ — $ — $ 9 $ — $ — $ 9 Derivative assets Interest rate swaps and swaptions $ — $ 140 $ — $ — $ 140 Futures $ — $ 1 $ — $ — $ 1 Rate lock commitments (fallout-adjusted) $ — $ — $ 6 $ — $ 6 Mortgage-backed securities forwards $ — $ 37 $ — $ — $ 37 Mortgage servicing rights $ — $ — $ 1,135 $ — $ 1,135 Total assets at fair value $ 195 $ 10,012 $ 1,173 $ — $ 11,380 Derivative liabilities Mortgage-backed securities forwards $ — $ 16 $ — $ — $ 16 Interest rate swaps and swaptions $ — $ 79 $ — $ — $ 79 Rate lock commitments (fallout-adjusted) $ — $ — $ 12 $ — $ 12 Total liabilities at fair value $ — $ 95 $ 12 $ — $ 107 December 31, 2022 (in millions) Quoted Prices in Active Markets for Identical Assets
(Level 1)Significant Other Observable Inputs
(Level 2)Significant Unobservable Inputs
(Level 3)Netting Adjustments Total Fair Value Assets: Mortgage-related Debt Securities Available for Sale: GSE certificates $ — $ 1,297 $ — $ — $ 1,297 GSE CMOs — 3,301 — — 3,301 Private Label CMOs — 191 — — 191 Total mortgage-related debt securities $ — $ 4,789 $ — $ — $ 4,789 Other Debt Securities Available for Sale: U. S. Treasury obligations $ 1,487 $ — $ — $ — $ 1,487 GSE debentures — 1,398 — — 1,398 Asset-backed securities — 361 — — 361 Municipal bonds — 30 — — 30 Corporate bonds — 885 — — 885 Foreign notes — 20 — — 20 Capital trust notes — 90 — — 90 Total other debt securities $ 1,487 $ 2,784 $ — $ — $ 4,271 Total debt securities available for sale $ 1,487 $ 7,573 $ — $ — $ 9,060 Equity securities: Mutual funds and common stock — 14 — — 14 Total equity securities — 14 — — 14 Total securities $ 1,487 $ 7,587 $ — $ — $ 9,074 Loans held-for-sale Residential first mortgage loans $ — $ 1,115 $ — $ — $ 1,115 Derivative assets Interest rate swaps and swaptions — 182 — — 182 Futures — 2 — — 2 Rate lock commitments (fallout-adjusted) — — 9 — 9 Mortgage-backed securities forwards — 36 — — 36 Mortgage servicing rights — — 1,033 — 1,033 Total assets at fair value $ 1,487 $ 8,922 $ 1,042 $ — $ 11,451 Derivative liabilities Mortgage-backed securities forwards — 61 — — 61 Interest rate swaps and swaptions — 65 — — 65 Rate lock commitments (fallout-adjusted) — — 10 — 10 Total liabilities at fair value $ — $ 126 $ 10 $ — $ 136 effective taxactive market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities.(dollars in millions) Balance at Beginning of Year Total Gains / (Losses) Recorded in Earnings (1) Purchases / Originations Sales Settlement Transfers In (Out) Balance at End of Year Three Months Ended September 30, 2023 Assets $ 1,031 $ 37 $ 67 $ — — — $ 1,135 Private Label CMOs — — — — — 32 32 — (42) 30 — — 6 (6) Totals $ 1,031 $ (5) $ 97 $ — $ — $ 38 $ 1,161 Nine Months Ended September 30, 2023 Assets $ 1,033 $ 5 $ 148 $ (51) — — $ 1,135 Private Label CMOs — — — — — 32 32 (1) (70) 90 — — (25) (6) Totals $ 1,032 $ (65) $ 238 $ (51) $ — $ 7 $ 1,161 25.48%our risk management activities related to such Level 3 instruments.26.48%, respectively, for the nine months endedfair value measurements as of September 30, 2023:Fair Value Valuation Technique (dollars in millions) Assets Mortgage servicing rights $ 1,135 Discounted cash flows Option adjusted spread 5.2% - 21.7% 5.6% Constant prepayment rate —% - 10.0% 7.3% Weighted average cost to service per loan $65 - $90 $69 Private Label CMOs $ 32 Discounted cash flows Constant default rates 0.10% - 0.30% Weighted average life 8.2 - 11.9 Rate lock commitments (net) $ (6) Consensus pricing Origination pull-through rate 71.10% 2021, respectively.The year-ago nine-month periodthat were included $2 millionin the Company’s Consolidated Statements of income tax expenseCondition at those dates:Fair Value Measurements at September 30, 2023 Using (in millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Certain impaired loans (2) $ 162 $ 162 $ 46 $ 46 Total $ — $ — $ 208 $ 208 revaluationinfrequency of deferred taxes relatedthe observable prices and/or the restrictions on the shares.Fair Value Measurements at December 31, 2022 Using (in millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value $ — $ — $ 28 $ 28 — — 41 41 Total $ — $ — $ 69 $ 69 a change inits initial classification as repossessed assets and equity securities without readily determinable fair values. These equity securities are classified as Level 3 due to the New York State tax rate.infrequency of the observable prices and/or the restrictions on the shares.71ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitativequalitative disclosuresother pertinent real estate and other market data.September 30, 2023 Fair Value Measurement Using (in millions) Carrying Value Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets: Cash and cash equivalents $ 6,929 $ 6,929 $ 6,929 $ — $ — 1,110 1,110 — 1,110 — Loans and leases held for investment, net 83,376 80,331 — — 80,331 Financial Liabilities: Deposits $ 82,675 $ 82,494 $ 65,365 (2) $ 17,129 (3) $ — Borrowed funds 14,585 14,317 — 14,317 — December 31, 2022 Fair Value Measurement Using (in millions) Carrying Value Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets: Cash and cash equivalents $ 2,032 $ 2,032 $ 2,032 $ — $ — 1,267 1,267 — 1,267 — Loans and leases held for investment, net 68,608 65,673 — — 65,673 Financial Liabilities: Deposits $ 58,721 $ 58,479 $ 46,211 (2) $ 12,268 (3) $ — Borrowed funds 21,332 21,231 — 21,231 — For the Three Months ended September 30, For the Nine Months Ended September 30, (dollars in millions) 2023 2023 Assets Loans held-for-sale $ — $ — Net gain on loan sales $ (25) $ 4 September 30, 2023 (dollars in millions) Unpaid Principal Balance Fair Value Fair Value Over / (Under) UPB Assets: Nonaccrual loans: Loans held-for-sale $ 2 $ 2 $ — Loans held-for-investment — — — Total non-accrual loans $ 2 $ 2 $ — Other performing loans: Loans held-for-sale $ 1,310 $ 1,316 $ 6 Total other performing loans $ 1,310 $ 1,316 $ 6 Total loans: Loans held-for-sale $ 1,312 $ 1,318 $ 6 Total loans $ 1,312 $ 1,318 $ 6 December 31, 2022 (dollars in millions) Unpaid Principal Balance Fair Value Fair Value Over / (Under) UPB Assets: Other performing loans: Loans held-for-sale 1,095 1,115 20 Total other performing loans $ 1,095 $ 1,115 $ 20 Total loans: Loans held-for-sale 1,095 1,115 20 Total loans $ 1,095 $ 1,115 $ 20 Item 3. Quantitative and Qualitative Disclosures about Market Risk were presented on pages 68 through 72 of our 2021 Annual Report on Form 10-K, filed with the SEC on February 25, 2022. Subsequent changesis included 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"Market Risk" in this quarterly report.report in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" which is incorporated herein by reference.Item 4. Controls and Procedures ITEM 4. CONTROLS AND PROCEDURESDisclosureare the controls and other procedures that are designedwere effective to ensure that information required to be disclosed by the Company in the reports that the Companyit 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”)Commission'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 effectiveforms as of the end of the period.September 30, 2023.ControlControls.Financial Reportingnot been anyno changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) underRule 13a-15(d) of the Exchange Act) during the fiscal quarter to which this report relatesthree months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.72–- OTHER INFORMATIONItem 1. Legal Proceedings Item 1. Legal ProceedingsRefer“Part I, Financial Information, Item 1, Financial Statements, Note 14 Legal Proceedings”, which is incorporated by reference into this item.Item 1A. Risk FactorsIn additionbe immaterial to the other information set forth in this report, readers should carefully considerfinancial condition and results of operations of the factors discussed in Part I,Company.Item 1A. Risk Factors inof the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as such2022 and the Company’s Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 for information regarding risk factors that could materially affect the Company’s business, financial condition, or future results of operations. ThereOther than as set forth below, there have been no material changes inwith regard to the risk factors as discusseddisclosed in “Item 1A. Risk Factors” of the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2021.2022 and the Company’s Form 10-Q for the quarter ended March 31, 2023.Item 2. Unregistered SalesThe Company, entities that we have acquired, and certain of Equity Securitiesour service providers have experienced information technology security breaches and Usemay be vulnerable to future security breaches.These incidents have resulted in, and could result in, additional expenses, exposure to civil litigation, increased regulatory scrutiny, losses, and a loss of Proceedscustomers , any of which could adversely impact our financial condition, results of operations, and the market price of our stock.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 2022,2023, the Company has repurchased $286 approximately $9 million of its common stock under this repurchase authorization, leaving $9 million available for repurchaseremaining under this repurchase authorization.(dollars in millions, except share data) Period Total Shares of Common Stock Repurchased Average Price Paid per Common Share Total Allocation Total Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs Third Quarter 2023 July 1 - 31, 2023 10,323 $ 12.11 $ — — August 1 - 31, 2023 12,555 13.53 — — September 1 - 30, 2023 11,078 11.69 — — Total Third Quarter 2023 33,956 $ 12.50 $ — —
Period
of Common
Stock
Repurchased
Paid per
Common
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AllocationItem 3. Defaults upon Senior SecuritiesNot applicable.Item 4. Mine Safety DisclosuresNot applicable.Item 5. Other InformationNot applicable.73Item 6. Exhibits
The Company had no defaults on senior securities. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Name & Title Date of Adoption / Termination Aggregate Number of Shares of Common Stock to be Purchased or Sold Pursuant to Trading Arrangement James Carpenter, Director Adopted on September 21, 2023 Up to 125,000 shares may be sold December 21, 2023 – December 12, 2024 Item 6. Exhibits The cover page of New York Community Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formattedCover Page Interactive Date File (formatted in Inline XBRL (included within theand contained in Exhibit 101 attachments).101)Incorporated by reference to Exhibits to the Company's Form 8-K filed with the Securities and Exchange Commission on April 27, 2021 (File No. 1-31565).(2)Incorporated by reference to Exhibits to the Company's Form 8-K filed with the Securities and Exchange Commission on April 27, 2022 (File No. 1-31565).(3)Incorporated by reference to Exhibits to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 28, 2022 (File No. 1-31565).74(4).(5)(2).(6)(3).(7)(4)ExhibitsExhibit 3.4 of the Company’sRegistrant’s Registration Statement on Form 8-A (File No. 333-210919), as filed with the Securities and Exchange Commission on March 16, 2017.(8)(5)ExhibitsExhibit 3.2 filed with the Company’s Form 8-K filed with the Securities and Exchange Commission on June 8,December 1, 2022 (File No. 1-31565).(9)(6).(10)(7).75NEW YORK COMMUNITY BANCORP, INC.SIGNATURESRegistrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.DATE: November 9, 2023 New York Community Bancorp, Inc. (Registrant) New York Community Bancorp, Inc.(Registrant)DATE: November 4, 2022BY:Chairman, President and Chief Executive OfficerDATE: November 4, 2022BY:/s/ John J. Pinto Senior Executive Vice President (Principal Financial Officer) 76