UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION13SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FORFor the quarterly period ended June 30, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number1-31565
NEW YORK COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 06-1377322 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
615 Merrick
102 Duffy Avenue Westbury, , Hicksville, New York 1159011801
(Address of principal executive offices)
(Registrant’s telephone number, including area code)(516) (516) 683-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 par value per share | NYCB | New York Stock Exchange | ||
Bifurcated Option Note Unit SecuritiESSM | NYCB PU | New York Stock Exchange | ||
Depository Shares each representing a1/40th interest in a share ofFixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock, $0.01 par value | NYCB PA | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitiondefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one)
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-Accelerated filer | ☐ | Smaller Reporting Company | ☐ | |||
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒
| ||||
465,033,012
Number of shares of common stock outstanding at August 2, 2021
NEW YORK COMMUNITY BANCORP, INC.
Quarter Ended SeptemberJune 30, 20172021
| Page No. | |||||
| ||||||
3 | ||||||
| ||||||
6 | ||||||
Part I. | 7 | |||||
Item 1. | 7 | |||||
7 | ||||||
8 | ||||||
9 | ||||||
11 | ||||||
12 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38 | ||||
Item 3. | 72 | |||||
Item 4. | 72 | |||||
Part II. | 73 | |||||
Item 1. | 73 | |||||
Item 1A. | 73 | |||||
Item 2. | 76 | |||||
Item 3. | 77 | |||||
Item 4. | 77 | |||||
Item 5. | 77 | |||||
Item 6. | 78 | |||||
80 |
2
GLOSSARY
BASIS POINT
Throughout this filing, the year-over-year changes that occur in certain financial measures are reported in terms of basis points. Each basis point is equal to one hundredth of a percentage point, or 0.01%.
BOOK VALUE PER COMMON SHARE
Book value per common share refers to the amount of common stockholders’ equity attributable to each outstanding share of common stock, and is calculated by dividing total stockholders’ equity less preferred stock at the end of a period, by the number of shares outstanding at the same date.
BROKERED DEPOSITS
Refers to funds obtained, directly or indirectly, by or through deposit brokers that are then deposited into one or more deposit accounts at a bank.
CHARGE-OFF
Refers to the amount of a loan balance that has been written off against the allowance for credit losses on loans and leases.
COMMERCIAL REAL ESTATE LOAN
A mortgage loan secured by either an income-producing property owned by an investor and leased primarily for commercial purposes or, to a lesser extent, an owner-occupied building used for business purposes. The CRE loans in our portfolio are typically secured by either office buildings, retail shopping centers, light industrial centers with multiple tenants, or mixed-use properties.
COST OF FUNDS
The interest expense associated with interest-bearing liabilities, typically expressed as a ratio of interest expense to the average balance of interest-bearing liabilities for a given period.
CRE CONCENTRATION RATIO
Refers to the sum of multi-family, non-owner occupied CRE, and acquisition, development, and construction (“ADC”) loans divided by total risk-based capital.
DEBT SERVICE COVERAGE RATIO
An indication of a borrower’s ability to repay a loan, the DSCR generally measures the cash flows available to a borrower over the course of a year as a percentage of the annual interest and principal payments owed during that time.
DERIVATIVE
A term used to define a broad base of financial instruments, including swaps, options, and futures contracts, whose value is based upon, or derived from, an underlying rate, price, or index (such as interest rates, foreign currency, commodities, or prices of other financial instruments such as stocks or bonds).
DIVIDEND PAYOUT RATIO
The percentage of our earnings that is paid out to shareholders in the form of dividends. It is determined by dividing the dividend paid per share during a period by our diluted earnings per share during the same period of time.
EFFICIENCY RATIO
Measures total operating expenses as a percentage of the sum of net interest income and non-interest income.
3
GOODWILL
Refers to the difference between the purchase price and the fair value of an acquired company’s assets, net of the liabilities assumed. Goodwill is reflected as an asset on the balance sheet and is tested at least annually for impairment.
GOVERNMENT-SPONSORED ENTERPRISES
Refers to a group of financial services corporations that were created by the United States Congress to enhance the availability, and reduce the cost of, credit to certain targeted borrowing sectors, including home finance. The GSEs include, but are not limited to, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks (the “FHLBs”).
GSE OBLIGATIONS
Refers to GSE mortgage-related securities (both certificates and collateralized mortgage obligations) and GSE debentures.
INTEREST RATE SENSITIVITY
Refers to the likelihood that the interest earned on assets and the interest paid on liabilities will change as a result of fluctuations in market interest rates.
INTEREST RATE SPREAD
The difference between the yield earned on average interest-earning assets and the cost of average interest-bearing liabilities.
LOAN-TO-VALUE RATIO
Measures the balance of a loan as a percentage of the appraised value of the underlying property.
MULTI-FAMILY LOAN
A mortgage loan secured by a rental or cooperative apartment building with more than four units.
NET INTEREST INCOME
The difference between the interest income generated by loans and securities and the interest expense produced by deposits and borrowed funds.
NET INTEREST MARGIN
Measures net interest income as a percentage of average interest-earning assets.
NON-ACCRUAL LOAN
A loan generally is classified as a “non-accrual” loan when it is 90 days or more past due or when it is deemed to be impaired because we no longer expect to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, we cease the accrual of interest owed, and previously accrued interest is reversed and charged against interest income. A loan generally is returned to accrual status when the loan is current and we have reasonable assurance that the loan will be fully collectible.
NON-PERFORMING LOANS AND ASSETS
Non-performing loans consist of non-accrual loans and loans that are 90 days or more past due and still accruing interest. Non-performing assets consist of non-performing loans, OREO and other repossessed assets.
4
OREO AND OTHER REPOSSESSED ASSETS
Includes real estate owned by the Company which was acquired either through foreclosure or default. Repossessed assets are similar, except they are not real estate-related assets.
RENT-REGULATED APARTMENTS
In New York City, where the vast majority of the properties securing our multi-family loans are located, the amount of rent that tenants may be charged on the apartments in certain buildings is restricted under rent-stabilization laws. Rent-stabilized apartments are generally located in buildings with six or more units that were built between February 1947 and January 1974. Rent-regulated apartments tend to be more affordable to live in because of the applicable regulations, and buildings with a preponderance of such rent-regulated apartments are therefore less likely to experience vacancies in times of economic adversity.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts for the sale of securities owned or borrowed by the Bank with an agreement to repurchase those securities at an agreed-upon price and date. The Bank’s repurchase agreements are primarily collateralized by GSE obligations and other mortgage-related securities, and are entered into with either the FHLBs or various brokerage firms.
SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION (“SIFI”)
A bank holding company with total consolidated assets that average more than $250 billion over the four most recent quarters is designated a “Systemically Important Financial Institution” under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) of 2010, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.
WHOLESALE BORROWINGS
Refers to advances drawn by the Bank against its line(s) of credit with the FHLBs, their repurchase agreements with the FHLBs and various brokerage firms, and federal funds purchased.
YIELD
The interest income associated with interest-earning assets, typically expressed as a ratio of interest income to the average balance of interest-earning assets for a given period.
5
LIST OF ABBREVIATIONS AND ACRONYMS
ACL—Allowance for Credit Losses on Loans and Leases | ||||||
| ||||||
| ||||||
FHLB—Federal Home Loan Bank | ||||||
| FHLB-NY—Federal Home Loan Bank of New York | |||||
AMT—Alternative minimum tax | FOMC—Federal Open Market Committee | |||||
AmTrust—AmTrust Bank | FRB—Federal Reserve Board | |||||
AOCL—Accumulated other comprehensive loss | FRB-NY—Federal Reserve Bank of New York | |||||
ASC—Accounting Standards Codification | Freddie Mac—Federal Home Loan Mortgage Corporation | |||||
ASU—Accounting Standards Update | FTEs—Full-time equivalent employees | |||||
BOLI—Bank-owned life insurance | GAAP—U.S. generally accepted accounting principles | |||||
BP—Basis point(s) | GLBA—The Gramm Leach Bliley Act | |||||
CARES Act—Coronavirus Aid, Relief, and Economic Security Act | GNMA—Government National Mortgage Association | |||||
C&I—Commercial and industrial loan | GSEs—Government-sponsored enterprises | |||||
CCAR—Comprehensive Capital Analysis and Review | HQLAs—High-quality liquid assets | |||||
CDs—Certificates of deposit | LIBOR—London Interbank Offered Rate | |||||
CECL—Current Expected Credit Loss | LSA—Loss Share Agreements | |||||
CFPB—Consumer Financial Protection Bureau | LTV—Loan-to-value ratio | |||||
CMOs—Collateralized mortgage obligations | MBS—Mortgage-backed securities | |||||
CMT—Constant maturity treasury rate | NIM—Net interest margin | |||||
CPI—Consumer Price Index | NOL—Net operating loss | |||||
CPR—Constant prepayment rate | NPAs—Non-performing assets | |||||
CRA—Community Reinvestment Act | NPLs—Non-performing loans | |||||
CRE—Commercial real estate loan | NPV—Net Portfolio Value | |||||
Desert Hills—Desert Hills Bank | NYSDFS—New York State Department of Financial Services | |||||
DIF—Deposit Insurance Fund | NYSE—New York Stock Exchange | |||||
DFA—Dodd-Frank Wall Street Reform and Consumer Protection Act | OCC—Office of the Comptroller of the Currency | |||||
DSCR—Debt service coverage ratio | OFAC—Office of Foreign Assets Control | |||||
EAR—Earnings at Risk | OREO—Other real estate owned | |||||
EPS—Earnings per common share | PPP—Paycheck Protection Program loans administered by the Small Business Administration | |||||
ERM—Enterprise Risk Management | SEC—U.S. Securities and Exchange Commission | |||||
EVE—Economic Value of Equity at Risk | SIFI—Systemically Important Financial Institution | |||||
Fannie Mae—Federal National Mortgage Association | SOFR—Secured Oversight Finance Rate | |||||
FASB—Financial Accounting Standards Board | TDRs—Troubled debt restructurings | |||||
FDI Act—Federal Deposit Insurance Act | ||||||
6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands,millions, except share data)
September 30, 2017 | December 31, 2016 |
| June 30, |
|
| December 31, |
| |||||||||
(unaudited) |
| (unaudited) |
|
|
|
| ||||||||||
Assets: |
|
|
|
|
|
| ||||||||||
Cash and cash equivalents | $ | 3,277,427 | $ | 557,850 |
| $ | 2,086 |
| $ | 1,948 |
| |||||
Securities: |
|
|
|
|
|
| ||||||||||
Available-for-sale ($1,162,014 pledged at September 30, 2017) | 3,031,026 | 104,281 | ||||||||||||||
Held-to-maturity ($1,930,533 pledged and fair value of $3,813,959 at December 31, 2016) | — | 3,712,776 | ||||||||||||||
|
| |||||||||||||||
Debt securities available-for-sale ($1,354 and $1,278 pledged at June 30, 2021 and |
| 6,077 |
| 5,813 |
| |||||||||||
Equity investments with readily determinable fair values, at fair value |
|
| 16 |
|
| 32 |
| |||||||||
Total securities | 3,031,026 | 3,817,057 |
|
| 6,093 |
|
| 5,845 |
| |||||||
|
| |||||||||||||||
Loans held for sale | 104,938 | 409,152 |
| - |
| 117 |
| |||||||||
Non-covered loans held for investment, net of deferred loan fees and costs | 37,506,199 | 37,382,722 | ||||||||||||||
Less: Allowance for losses onnon-covered loans | (158,918 | ) | (158,290 | ) | ||||||||||||
|
| |||||||||||||||
Non-covered loans held for investment, net | 37,347,281 | 37,224,432 | ||||||||||||||
Covered loans | — | 1,698,133 | ||||||||||||||
Less: Allowance for losses on covered loans | — | (23,701 | ) | |||||||||||||
|
| |||||||||||||||
Covered loans, net | — | 1,674,432 | ||||||||||||||
|
| |||||||||||||||
Total loans, net | 37,452,219 | 39,308,016 | ||||||||||||||
Loans and leases held for investment, net of deferred loan fees and costs |
| 43,575 |
| 42,884 |
| |||||||||||
Less: Allowance for credit losses on loans and leases |
|
| (202 | ) |
|
| (194 | ) | ||||||||
Total loans and leases held for investment, net |
| 43,373 |
| 42,690 |
| |||||||||||
Total loans and leases held for investment and held for sale, net |
| 43,373 |
| 42,807 |
| |||||||||||
Federal Home Loan Bank stock, at cost | 579,474 | 590,934 |
| 686 |
| 714 |
| |||||||||
Premises and equipment, net | 375,482 | 373,675 |
| 278 |
| 287 |
| |||||||||
FDIC loss share receivable | — | 243,686 | ||||||||||||||
Operating lease right-of-use assets |
| 256 |
| 267 |
| |||||||||||
Goodwill | 2,436,131 | 2,436,131 |
| 2,426 |
| 2,426 |
| |||||||||
Core deposit intangibles | — | 208 | ||||||||||||||
Bank-owned life insurance | 961,412 | 949,026 |
| 1,171 |
| 1,164 |
| |||||||||
Other assets (includes $16,990 of other real estate owned covered by Loss Share Agreements at December 31, 2016) | 344,720 | 649,972 | ||||||||||||||
|
| |||||||||||||||
Other real estate owned and other repossessed assets |
| 8 |
| 8 |
| |||||||||||
Other assets |
|
| 1,092 |
|
| 840 |
| |||||||||
Total assets | $ | 48,457,891 | $ | 48,926,555 |
| $ | 57,469 |
| $ | 56,306 |
| |||||
|
| |||||||||||||||
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
| ||||||||||
Deposits: |
|
|
|
|
|
| ||||||||||
Interest-bearing checking and money market accounts | $ | 12,338,949 | $ | 13,395,080 |
| $ | 12,803 |
| $ | 12,610 |
| |||||
Savings accounts | 4,996,578 | 5,280,374 |
| 7,890 |
| 6,416 |
| |||||||||
Certificates of deposit | 8,802,573 | 7,577,170 |
| 8,949 |
| 10,331 |
| |||||||||
Non-interest-bearing accounts | 2,755,097 | 2,635,279 |
|
| 4,535 |
|
| 3,080 |
| |||||||
|
| |||||||||||||||
Total deposits | 28,893,197 | 28,887,903 |
|
| 34,177 |
|
| 32,437 |
| |||||||
|
| |||||||||||||||
Borrowed funds: |
|
|
|
|
|
| ||||||||||
Wholesale borrowings: |
|
|
|
|
|
| ||||||||||
Federal Home Loan Bank advances | 11,554,500 | 11,664,500 |
| 14,003 |
| 14,628 |
| |||||||||
Repurchase agreements | 450,000 | 1,500,000 |
|
| 800 |
|
| 800 |
| |||||||
Federal funds purchased | — | 150,000 | ||||||||||||||
|
| |||||||||||||||
Total wholesale borrowings | 12,004,500 | 13,314,500 |
| 14,803 |
| 15,428 |
| |||||||||
Junior subordinated debentures | 359,102 | 358,879 |
| 360 |
| 360 |
| |||||||||
|
| |||||||||||||||
Subordinated notes |
|
| 296 |
|
| 296 |
| |||||||||
Total borrowed funds | 12,363,602 | 13,673,379 |
|
| 15,459 |
|
| 16,084 |
| |||||||
Operating lease liabilities |
| 256 |
| 267 |
| |||||||||||
Other liabilities | 441,438 | 241,282 |
|
| 661 |
|
| 676 |
| |||||||
|
| |||||||||||||||
Total liabilities | 41,698,237 | 42,802,564 |
|
| 50,553 |
|
| 49,464 |
| |||||||
|
| |||||||||||||||
Stockholders’ equity: |
|
|
|
|
|
| ||||||||||
Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares issued and outstanding) | 502,840 | — | ||||||||||||||
Common stock at par $0.01 (900,000,000 shares authorized; 489,072,101 and 487,067,889 shares issued; and 489,061,848 and 487,056,676 shares outstanding, respectively) | 4,891 | 4,871 | ||||||||||||||
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 | 6,063,813 | 6,047,558 |
| 6,111 |
| 6,123 |
| |||||||||
Retained earnings | 192,607 | 128,435 |
| 617 |
| 494 |
| |||||||||
Treasury stock, at cost (10,253 and 11,213 shares, respectively) | (130 | ) | (160 | ) | ||||||||||||
Treasury stock, at cost (25,382,108 and 26,537,262 shares, respectively) |
| (245 | ) |
| (258 | ) | ||||||||||
Accumulated other comprehensive loss, net of tax: |
|
|
|
|
|
| ||||||||||
Net unrealized gain (loss) on securities available for sale, net of tax of $34,189 and $534, respectively | 47,917 | (753 | ) | |||||||||||||
Net unrealized loss on thenon-credit portion of other-than-temporary impairment (“OTTI”) losses on securities, net of tax of $3,338 and $3,351, respectively | (5,221 | ) | (5,241 | ) | ||||||||||||
Net unrealized loss on pension and post-retirement obligations, net of tax of $31,744 and $34,355, respectively | (47,063 | ) | (50,719 | ) | ||||||||||||
|
| |||||||||||||||
Net unrealized gain on securities available for sale, net of tax of $0 and ($25), |
| 1 |
| 67 |
| |||||||||||
Net unrealized loss on pension and post-retirement obligations, net of tax of $20 and |
| (54 | ) |
| (59 | ) | ||||||||||
Net unrealized loss on cash flow hedges, net of tax of $8 and $13, respectively |
|
| (22 | ) |
|
| (33 | ) | ||||||||
Total accumulated other comprehensive loss, net of tax | (4,367 | ) | (56,713 | ) |
|
| (75 | ) |
|
| (25 | ) | ||||
|
| |||||||||||||||
Total stockholders’ equity | 6,759,654 | 6,123,991 |
|
| 6,916 |
|
| 6,842 |
| |||||||
|
| |||||||||||||||
Total liabilities and stockholders’ equity | $ | 48,457,891 | $ | 48,926,555 |
| $ | 57,469 |
| $ | 56,306 |
| |||||
|
|
See accompanying notes to the consolidated financial statements.
7
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands,millions, except per share data)
(unaudited)
|
| For the |
| For the |
| |||||||||||||||||||||||||||
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| June 30, |
|
| June 30, |
| |||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||||||||||
Interest Income: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Mortgage and other loans | $ | 350,990 | $ | 367,932 | $ | 1,070,722 | $ | 1,099,137 | ||||||||||||||||||||||||
Loans and leases |
| $ | 386 |
| $ | 382 |
|
| $ | 769 |
| $ | 774 |
| ||||||||||||||||||
Securities and money market investments | 42,685 | 48,164 | 121,147 | 160,384 |
|
| 45 |
|
| 41 |
|
|
| 85 |
|
| 90 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total interest income | 393,675 | 416,096 | 1,191,869 | 1,259,521 |
|
| 431 |
|
| 423 |
|
|
| 854 |
|
| 864 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Interest Expense: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Interest-bearing checking and money market accounts | 27,620 | 15,866 | 71,413 | 45,771 |
| 7 |
| 10 |
|
|
| 16 |
| 39 |
| |||||||||||||||||
Savings accounts | 7,109 | 7,439 | 21,069 | 25,001 |
| 7 |
| 8 |
|
|
| 13 |
| 17 |
| |||||||||||||||||
Certificates of deposit | 27,649 | 20,501 | 73,786 | 55,129 |
| 14 |
| 65 |
|
|
| 32 |
| 145 |
| |||||||||||||||||
Borrowed funds | 54,954 | 53,867 | 166,572 | 161,758 |
|
| 72 |
|
| 74 |
|
|
| 144 |
|
| 153 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total interest expense | 117,332 | 97,673 | 332,840 | 287,659 |
|
| 100 |
|
| 157 |
|
|
| 205 |
|
| 354 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net interest income | 276,343 | 318,423 | 859,029 | 971,862 |
| 331 |
| 266 |
|
|
| 649 |
| 510 |
| |||||||||||||||||
Provision for losses on non-covered loans | 44,585 | 1,234 | 58,017 | 6,699 | ||||||||||||||||||||||||||||
Recovery of losses on covered loans | — | (1,289 | ) | (23,701 | ) | (6,035 | ) | |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net interest income after provision for (recovery of) loan losses | 231,758 | 318,478 | 824,713 | 971,198 | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
(Recovery of) provision for credit losses |
|
| (4 | ) |
|
| 18 |
|
|
| 0 |
|
| 38 |
| |||||||||||||||||
Net interest income after (recovery of) provision for credit losses |
|
| 335 |
|
| 248 |
|
|
| 649 |
|
| 472 |
| ||||||||||||||||||
Non-Interest Income: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Mortgage banking income | 1,486 | 12,925 | 19,446 | 24,020 | ||||||||||||||||||||||||||||
Fee income | 7,972 | 8,640 | 23,983 | 24,480 |
| 6 |
| 4 |
|
|
| 11 |
| 11 |
| |||||||||||||||||
Bank-owned life insurance | 8,314 | 7,029 | 21,170 | 23,208 |
| 8 |
| 9 |
|
|
| 15 |
| 17 |
| |||||||||||||||||
Net (loss) gain on sales of loans | (76 | ) | 3,465 | 1,055 | 15,118 | |||||||||||||||||||||||||||
Net gain on sales of securities | — | 237 | 28,915 | 413 | ||||||||||||||||||||||||||||
FDIC indemnification expense | — | (1,031 | ) | (18,961 | ) | (4,828 | ) | |||||||||||||||||||||||||
Gain on sale of covered loans and mortgage banking operations | 82,026 | — | 82,026 | — | ||||||||||||||||||||||||||||
Net gain on securities |
| 0 |
| 1 |
|
|
| 0 |
| 1 |
| |||||||||||||||||||||
Other | 9,206 | 9,330 | 33,903 | 30,787 |
|
| 2 |
|
| 1 |
|
|
| 4 |
|
| 3 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total non-interest income | 108,928 | 40,595 | 191,537 | 113,198 |
|
| 16 |
|
| 15 |
|
|
| 30 |
|
| 32 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Non-Interest Expense: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Compensation and benefits | 91,594 | 86,079 | 280,008 | 261,230 |
| 74 |
| 75 |
|
|
| 152 |
| 155 |
| |||||||||||||||||
Occupancy and equipment | 25,133 | 24,347 | 73,595 | 73,837 |
| 22 |
| 21 |
|
|
| 43 |
| 39 |
| |||||||||||||||||
General and administrative | 45,483 | 48,506 | 139,131 | 139,309 |
|
| 33 |
|
| 27 |
|
|
| 66 |
|
| 55 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total operating expenses | 162,210 | 158,932 | 492,734 | 474,376 |
| 129 |
| 123 |
|
|
| 261 |
| 249 |
| |||||||||||||||||
Amortization of core deposit intangibles | 24 | 542 | 208 | 1,994 | ||||||||||||||||||||||||||||
Merger-related expenses | — | 2,211 | — | 4,674 |
|
| 10 |
|
| 0 |
|
|
| 10 |
|
| 0 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total non-interest expense | 162,234 | 161,685 | 492,942 | 481,044 |
|
| 139 |
|
| 123 |
|
|
| 271 |
|
| 249 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Income before income taxes | 178,452 | 197,388 | 523,308 | 603,352 |
| 212 |
| 140 |
|
|
| 408 |
| 255 |
| |||||||||||||||||
Income tax expense | 67,984 | 72,089 | 193,628 | 221,684 |
|
| 60 |
|
| 35 |
|
|
| 111 |
|
| 50 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income | $ | 110,468 | $ | 125,299 | $ | 329,680 | $ | 381,668 |
| 152 |
| 105 |
|
|
| 297 |
| 205 |
| |||||||||||||
Preferred stock dividends | 8,207 | — | 16,414 | — |
|
| 8 |
|
| 8 |
|
|
| 16 |
|
| 16 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income available to common shareholders | $ | 102,261 | $ | 125,299 | $ | 313,266 | $ | 381,668 |
| $ | 144 |
| $ | 97 |
|
| $ | 281 |
| $ | 189 |
| ||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Basic earnings per common share | $0.21 | $0.26 | $0.64 | $0.78 |
| $ | 0.30 |
| $ | 0.21 |
|
| $ | 0.60 |
| $ | 0.40 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Diluted earnings per common share | $0.21 | $0.26 | $0.64 | $0.78 |
| $ | 0.30 |
| $ | 0.21 |
|
| $ | 0.60 |
| $ | 0.40 |
| ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income | $ | 110,468 | $ | 125,299 | $ | 329,680 | $ | 381,668 |
| $ | 152 |
| $ | 105 |
|
| $ | 297 |
| $ | 205 |
| ||||||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||||||||||||||||||||
Change in net unrealized gain/loss on securities available for sale, net of tax of $3,049; $396; $35,493; and $1,186, respectively | (4,285 | ) | (558 | ) | 49,748 | 1,684 | ||||||||||||||||||||||||||
Change in the non-credit portion of OTTI losses recognized in other comprehensive income, net of tax of $0; $12; $13; and $36, respectively | — | 19 | 20 | 57 | ||||||||||||||||||||||||||||
Change in pension and post-retirement obligations, net of tax of $870; $946; $2,611 and $2,837, respectively | 1,219 | 1,336 | 3,656 | 4,007 | ||||||||||||||||||||||||||||
Less: Reclassification adjustment for sales of available-for-sale securities, net of tax of $770 | — | — | (1,078 | ) | — | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total other comprehensive (loss) income, net of tax | (3,066 | ) | 797 | 52,346 | 5,748 | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other comprehensive gain (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Change in net unrealized gain (loss) on securities available for sale, |
| 42 |
| 54 |
|
|
| (66 | ) |
| 42 |
| ||||||||||||||||||||
Change in pension and post-retirement obligations, net of tax of |
| (1 | ) |
| 0 |
|
|
| 2 |
| 0 |
| ||||||||||||||||||||
Change in net unrealized gain (loss) on cash flow hedges, net of tax |
| 0 |
| (5 | ) |
|
| 3 |
| (41 | ) | |||||||||||||||||||||
Less: Reclassification adjustment for sales of available-for-sale |
| 0 |
| 0 |
|
|
| 0 |
| (1 | ) | |||||||||||||||||||||
Reclassification adjustment for defined benefit pension plan, |
| 2 |
| 1 |
|
|
| 3 |
| 3 |
| |||||||||||||||||||||
Reclassification adjustment for net gain on cash flow hedges |
|
| 4 |
|
| 1 |
|
|
| 8 |
|
| 0 |
| ||||||||||||||||||
Total other comprehensive gain (loss), net of tax |
|
| 47 |
|
| 51 |
|
|
| (50 | ) |
|
| 3 |
| |||||||||||||||||
Total comprehensive income, net of tax | $ | 107,402 | $ | 126,096 | $ | 382,026 | $ | 387,416 |
| $ | 199 |
| $ | 156 |
|
| $ | 247 |
| $ | 208 |
| ||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
8
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions, except share data)
(unaudited)
|
|
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||
|
|
|
|
| Stock |
|
| Stock |
|
| Paid-in |
|
|
|
|
|
|
|
| Other |
|
| Total |
| ||||||||
Three Months Ended June 30, 2021 |
| Shares |
|
| (Par |
|
| (Par |
|
| Capital in |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Stockholders’ |
| ||||||||
Balance at March 31, 2021 |
|
| 465,074,384 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,103 |
|
| $ | 552 |
|
| $ | (245 | ) |
| $ | (122 | ) |
| $ | 6,796 |
|
Shares issued for restricted stock, net of forfeitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
|
| — |
|
|
| — |
|
|
| 152 |
|
Dividends paid on common stock ($0.17) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (79 | ) |
|
| — |
|
|
| — |
|
|
| (79 | ) |
Dividends paid on preferred stock ($15.94) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| — |
|
|
| — |
|
|
| (8 | ) |
Purchase of common stock |
|
| (17,422 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| 47 |
|
Balance at June 30, 2021 |
|
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Three Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at March 31, 2020 |
|
| 466,360,703 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,102 |
|
| $ | 344 |
|
| $ | (236 | ) |
| $ | (81 | ) |
| $ | 6,637 |
|
Shares issued for restricted stock, net of forfeitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
Dividends paid on common stock ($0.17) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (78 | ) |
|
| — |
|
|
| — |
|
|
| (78 | ) |
Dividends paid on preferred stock ($15.94) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
|
|
|
| — |
|
|
| (8 | ) | |
Purchase of common stock |
|
| (2,426,872 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21 | ) |
|
| — |
|
|
| (21 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 51 |
|
|
| 51 |
|
Balance at June 30, 2020 |
|
| 463,933,831 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,109 |
|
| $ | 363 |
|
| $ | (257 | ) |
| $ | (30 | ) |
| $ | 6,693 |
|
See accompanying notes to the consolidated financial statements.
9
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in millions, except share data)
(unaudited)
|
|
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||
|
|
|
|
| Stock |
|
| Stock |
|
| Paid-in |
|
|
|
|
|
|
|
| Other |
|
| Total |
| ||||||||
Six Months Ended June 30, 2021 |
| Shares |
|
| (Par |
|
| (Par |
|
| Capital in |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Stockholders’ |
| ||||||||
Balance at December 31, 2020 |
|
| 463,901,808 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,123 |
|
| $ | 494 |
|
| $ | (258 | ) |
| $ | (25 | ) |
| $ | 6,842 |
|
Shares issued for restricted stock, net of forfeitures |
|
| 2,515,942 |
|
|
| — |
|
|
| — |
|
|
| (28 | ) |
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
Dividends paid on common stock ($0.34) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (158 | ) |
|
| — |
|
|
| — |
|
|
| (158 | ) |
Dividends paid on preferred stock ($31.88) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| (16 | ) |
Purchase of common stock |
|
| (1,360,788 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15 | ) |
|
| — |
|
|
| (15 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| (50 | ) |
Balance at June 30, 2021 |
|
| 465,056,962 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,111 |
|
| $ | 617 |
|
| $ | (245 | ) |
| $ | (75 | ) |
| $ | 6,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Six Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2019 |
|
| 467,346,781 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,115 |
|
| $ | 342 |
|
| $ | (221 | ) |
| $ | (33 | ) |
| $ | 6,711 |
|
Opening retained earnings adjustment (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10 | ) |
|
|
|
|
| — |
|
|
| (10 | ) | |
Adjusted balance, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 332 |
|
|
|
|
|
|
|
|
| 6,701 |
| ||||||
Shares issued for restricted stock, net of forfeitures |
|
| 2,321,105 |
|
|
| — |
|
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
Compensation expense related to restricted stock awards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 205 |
|
|
| — |
|
|
| — |
|
|
| 205 |
|
Dividends paid on common stock ($0.34) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (158 | ) |
|
| — |
|
|
| — |
|
|
| (158 | ) |
Dividends paid on preferred stock ($31.88) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| (16 | ) |
Purchase of common stock |
|
| (5,734,055 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (58 | ) |
|
| — |
|
|
| (58 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 3 |
|
Balance at June 30, 2020 |
|
| 463,933,831 |
|
| $ | 503 |
|
| $ | 5 |
|
| $ | 6,109 |
|
| $ | 363 |
|
| $ | (257 | ) |
| $ | (30 | ) |
| $ | 6,693 |
|
(1) Amount represents a $10 million cumulative adjustment, net of tax, to retained earnings as of January 1, 2020, as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which became effective January 1, 2020.
See accompanying notes to the consolidated financial statements.
10
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
|
| For the Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ | 297 |
|
| $ | 205 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Provision for credit losses |
|
| — |
|
|
| 38 |
|
Depreciation |
|
| 11 |
|
|
| 13 |
|
Amortization of discounts and premiums, net |
|
| (3 | ) |
|
| 10 |
|
Net loss (gain) on securities |
|
| — |
|
|
| (1 | ) |
Net gain on sales of loans |
|
| (1 | ) |
|
| — |
|
Stock-based compensation |
|
| 16 |
|
|
| 16 |
|
Deferred tax expense |
|
| 26 |
|
|
| 77 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Increase in other assets(1) |
|
| (255 | ) |
|
| (99 | ) |
Decrease in other liabilities(2) |
|
| (25 | ) |
|
| (9 | ) |
Purchases of securities held for trading |
|
| (60 | ) |
|
| — |
|
Proceeds from sales of securities held for trading |
|
| 60 |
|
|
| — |
|
Held for sale originations |
|
| (52 | ) |
|
| (103 | ) |
Net cash provided by operating activities |
|
| 14 |
|
|
| 147 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
| ||
Proceeds from repayment of securities available for sale |
|
| 931 |
|
|
| 960 |
|
Proceeds from sales of securities available for sale |
| — |
|
|
| 442 |
| |
Purchase of securities available for sale |
|
| (1,252 | ) |
|
| (735 | ) |
Redemption of Federal Home Loan Bank stock |
|
| 29 |
|
|
| 127 |
|
Purchases of Federal Home Loan Bank stock |
|
| (1 | ) |
|
| (148 | ) |
Proceeds from bank-owned life insurance, net |
|
| 7 |
|
|
| 2 |
|
Proceeds from sales of loans |
|
| 33 |
|
|
| 3 |
|
Purchases of loans |
|
| (66 | ) |
|
| (48 | ) |
Other changes in loans, net |
|
| (481 | ) |
|
| (379 | ) |
(Purchases) dispositions of premises and equipment, net |
|
| (2 | ) |
|
| 3 |
|
Net cash (used in) provided by investing activities |
|
| (802 | ) |
|
| 227 |
|
Cash Flows from Financing Activities: |
|
|
|
|
|
| ||
Net increase in deposits |
|
| 1,740 |
|
|
| 72 |
|
Net increase in short-term borrowed funds |
|
| — |
|
|
| 1,450 |
|
Proceeds from long-term borrowed funds |
|
| 624 |
|
|
| 3,125 |
|
Repayments of long-term borrowed funds |
|
| (1,249 | ) |
|
| (4,125 | ) |
Cash dividends paid on common stock |
|
| (158 | ) |
|
| (158 | ) |
Cash dividends paid on preferred stock |
|
| (16 | ) |
|
| (16 | ) |
Treasury stock repurchased |
| — |
|
|
| (50 | ) | |
Payments relating to treasury shares received for restricted stock award tax payments |
|
| (15 | ) |
|
| (9 | ) |
Net cash provided by financing activities |
|
| 926 |
|
|
| 289 |
|
Net increase in cash, cash equivalents, and restricted cash |
|
| 138 |
|
|
| 663 |
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 1,948 |
|
|
| 742 |
|
Cash, cash equivalents, and restricted cash at end of period |
| $ | 2,086 |
|
| $ | 1,405 |
|
Supplemental information: |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 206 |
|
| $ | 370 |
|
Cash paid for income taxes |
|
| 336 |
|
|
| 10 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
| ||
Securitization of residential mortgage loans to mortgage-backed securities available for sale |
|
| 66 |
|
|
| 42 |
|
Transfer of loans from held for investment to held for sale |
|
| 48 |
|
|
| — |
|
Transfer of loans from held for sale to held for investment |
|
| 94 |
|
|
| — |
|
Shares issued for restricted stock awards |
|
| 28 |
|
|
| 22 |
|
(1) Includes $10 million and $9 million of amortization of operating lease right-of-use assets for the six months ended June 30, 2021 and 2020, respectively.
(2) Includes $10 million and $9 million of amortization of operating lease liability for the six months ended June 30, 2021 and 2020, respectively.
See accompanying notes to the consolidated financial statements.
11
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
For the Nine Months Ended September 30, 2017 | ||||
Preferred Stock (Par Value: $0.01): | ||||
Balance at beginning of year | $ | — | ||
Issuance of preferred stock (515,000 shares) | 502,840 | |||
|
| |||
Balance at end of period | 502,840 | |||
|
| |||
Common Stock (Par Value: $0.01): | ||||
Balance at beginning of year | 4,871 | |||
Shares issued for restricted stock awards (2,004,212 shares) | 20 | |||
|
| |||
Balance at end of period | 4,891 | |||
|
| |||
Paid-in Capital in Excess of Par: | ||||
Balance at beginning of year | 6,047,558 | |||
Shares issued for restricted stock awards, net of forfeitures | (11,028 | ) | ||
Compensation expense related to restricted stock awards | 27,283 | |||
|
| |||
Balance at end of period | 6,063,813 | |||
|
| |||
Retained Earnings: | ||||
Balance at beginning of year | 128,435 | |||
Net income | 329,680 | |||
Dividends paid on common stock ($0.51 per share) | (249,094 | ) | ||
Dividends paid on preferred stock ($31.88 per share) | (16,414 | ) | ||
|
| |||
Balance at end of period | 192,607 | |||
|
| |||
Treasury Stock: | ||||
Balance at beginning of year | (160 | ) | ||
Purchase of common stock (712,877 shares) | (10,978 | ) | ||
Shares issued for restricted stock awards (713,837 shares) | 11,008 | |||
|
| |||
Balance at end of period | (130 | ) | ||
|
| |||
Accumulated Other Comprehensive Loss, Net of Tax: | ||||
Balance at beginning of year | (56,713 | ) | ||
Other comprehensive income, net of tax | 52,346 | |||
|
| |||
Balance at end of period | (4,367 | ) | ||
|
| |||
Total stockholders’ equity | $ | 6,759,654 | ||
|
|
See accompanying notes to the consolidated financial statements.
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash Flows from Operating Activities: |
| |||||||
Net income | $ | 329,680 | $ | 381,668 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan losses | 34,316 | 664 | ||||||
Depreciation and amortization | 24,915 | 24,603 | ||||||
Amortization of discounts and premiums, net | (3,381 | ) | (25,114 | ) | ||||
Amortization of core deposit intangibles | 208 | 1,994 | ||||||
Net gain on sales of securities | (28,915 | ) | (413 | ) | ||||
Net gain on sales of loans | (87,200 | ) | (49,809 | ) | ||||
Stock-based compensation | 27,283 | 24,611 | ||||||
Deferred tax (benefit) expense | (12,324 | ) | 37,569 | |||||
Changes in operating assets and liabilities: |
| |||||||
Decrease in other assets | 536,552 | 353,403 | ||||||
Increase (decrease) in other liabilities | 181,400 | (11,608 | ) | |||||
Origination of loans held for sale | (1,623,848 | ) | (3,579,435 | ) | ||||
Proceeds from sales of loans originated for sale | 1,936,162 | 3,237,704 | ||||||
|
|
|
| |||||
Net cash provided by operating activities | 1,314,848 | 395,837 | ||||||
|
|
|
| |||||
Cash Flows from Investing Activities: | ||||||||
Proceeds from repayment of securities held to maturity | 175,375 | 2,356,766 | ||||||
Proceeds from repayment of securities available for sale | 336,429 | 50,010 | ||||||
Proceeds from sales of securities held to maturity | 547,925 | — | ||||||
Proceeds from sales of securities available for sale | 246,209 | 264,413 | ||||||
Purchases of securities held to maturity | (13,030 | ) | (10,086 | ) | ||||
Purchase of securities available for sale | (390,932 | ) | (271,836 | ) | ||||
Redemption of Federal Home Loan Bank stock | 79,254 | 463,623 | ||||||
Purchase of Federal Home Loan Bank stock | (67,794 | ) | (386,007 | ) | ||||
Proceeds from sales of loans | 2,260,687 | 1,354,796 | ||||||
Other changes in loans, net | (664,320 | ) | (2,623,161 | ) | ||||
Purchase of premises and equipment, net | (26,722 | ) | (69,665 | ) | ||||
|
|
|
| |||||
Net cash provided by investing activities | 2,483,081 | 1,128,853 | ||||||
|
|
|
| |||||
Cash Flows from Financing Activities: | ||||||||
Net increase in deposits | 5,294 | 712,841 | ||||||
Net decrease in short-term borrowed funds | (460,000 | ) | (1,927,800 | ) | ||||
(Repayments of) proceeds from long-term borrowed funds | (850,000 | ) | 181,000 | |||||
Net proceeds from issuance of preferred stock | 502,840 | — | ||||||
Cash dividends paid on common stock | (249,094 | ) | (248,081 | ) | ||||
Cash dividends paid on preferred stock | (16,414 | ) | — | |||||
Payments relating to treasury shares received for restricted stock award tax payments | (10,978 | ) | (8,542 | ) | ||||
|
|
|
| |||||
Net cash used in financing activities | (1,078,352 | ) | (1,290,582 | ) | ||||
|
|
|
| |||||
Net increase in cash and cash equivalents | 2,719,577 | 234,108 | ||||||
Cash and cash equivalents at beginning of period | 557,850 | 537,674 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of period | $ | 3,277,427 | $ | 771,782 | ||||
|
|
|
| |||||
Supplemental information: |
| |||||||
Cash paid for interest | $ | 330,182 | $ | 283,418 | ||||
Cash paid for income taxes | 110,651 | 135,192 | ||||||
Non-cash investing and financing activities: | ||||||||
Transfers to other real estate owned from loans | $ | 9,558 | $ | 18,691 | ||||
Transfer of loans from held for investment to held for sale | 1,881,532 | 1,339,679 | ||||||
Shares issued for restricted stock awards | 11,028 | 8,985 | ||||||
Securities transferred from held to maturity to available for sale | 3,040,305 | — |
See accompanying notes to the consolidated financial statements.
NEW YORK COMMUNITY BANCORP, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization, and Basis of Presentation, and Impact of Recent Accounting Pronouncements
Organization
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 and New York Commercial Bank (hereinafter referred to as the “Community Bank” and the “Commercial Bank,” respectively, and collectively as the “Banks”“Bank”). For the purpose of these Consolidated Financial Statements, the “Community Bank” and the “Commercial Bank” refer not only to the respective banks but also to their respective subsidiaries.
The Community Bank is the primary banking subsidiary of the Company, which was formerly known as Queens County Bancorp, Inc. Founded on April 14, 1859 and formerly known as Queens County Savings Bank, the Community 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$0.01 per share) at a price of $25.00$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 Commercial Bank was established on December 30, 2005.
Reflecting its growth through acquisitions, the CommunityThe Bank currently operates 225236 branches, two19 of which operate directly under the Community Bank name. The remaining 223217 Community Bank branches operate through seveneight divisional banks: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, and 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.
The Commercial Bank currently operates 30 branches in Manhattan, Queens, Brooklyn, Westchester County, and Long Island (all in New York), including 18 branches that operate under the name “Atlantic Bank.”
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 allowancesallowance for loan losses;credit losses and the evaluation of goodwill for impairment; and the evaluation of the need for a valuation allowance on the Company’s deferred tax assets.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 (“capital securities”).securities. See Note 7, “BorrowedBorrowed Funds,” for additional information regarding these trusts.
Impact of Recent Accounting Pronouncements
Recently Adopted Accounting Standards
The Company adopted ASU No. 2020-04 in the first quarter of 2021 upon issuance. The amendments provide optional expedients and exceptions for certain contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform. The guidance is effective from the date of issuance until December 31, 2022. If certain criteria are met, the amendments allow exceptions to the designation criteria of the hedging relationship and the assessment of hedge effectiveness during the transition period. To date, the guidance has not had a material impact on the Company’s Consolidated Statements of Condition, results of operations, or cash flows. The Company will continue to assess the impact as the reference rate transition occurs.
Note 2. Computation of Earnings per Common Share
Basic earnings per common share (“EPS”)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 outstandingin-the-money stock options were exercised and converted into common stock.
Unvested stock-based compensation awards containingnon-forfeitable rights to dividends paid on the Company’s common stock are considered participating securities, and therefore are included in thetwo-class method for calculating EPS. Under thetwo-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 portion of such awards. Since these dividends arenon-forfeitable, the unvested awards are considered participating securities and
12
therefore have earnings allocated to them.
The following table presents the Company’s computation of basic and diluted EPS for the periods indicated:
Three Months Ended | Nine Months Ended |
| For the Three Months Ended June 30, |
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||
(in thousands, except share and per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||
(amounts in millions, except share and per share amounts) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
Net income available to common shareholders | $ | 102,261 | $ | 125,299 | $ | 313,266 | $ | 381,668 |
| $ | 144 |
| $ | 97 |
| $ | 281 |
| $ | 189 |
| |||||||||||
Less: Dividends paid on and earnings allocated to participating securities | (823 | ) | (973 | ) | (2,512 | ) | (2,928 | ) |
|
| (3 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (3 | ) | ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Earnings applicable to common stock | $ | 101,438 | $ | 124,326 | $ | 310,754 | $ | 378,740 |
| $ | 141 |
|
| $ | 96 |
|
| $ | 277 |
|
| $ | 186 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Weighted average common shares outstanding | 487,274,303 | 485,352,998 | 487,025,614 | 485,087,197 |
|
| 464,092,947 |
|
|
| 461,933,533 |
|
|
| 463,695,136 |
|
|
| 463,463,751 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Basic earnings per common share | $ | 0.21 | $ | 0.26 | $ | 0.64 | $ | 0.78 |
| $ | 0.30 |
|
| $ | 0.21 |
|
| $ | 0.60 |
|
| $ | 0.40 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Earnings applicable to common stock | $ | 101,438 | $ | 124,326 | $ | 310,754 | $ | 378,740 |
| $ | 141 |
|
| $ | 96 |
|
| $ | 277 |
|
| $ | 186 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Weighted average common shares outstanding | 487,274,303 | 485,352,998 | 487,025,614 | 485,087,197 |
| 464,092,947 |
| 461,933,533 |
| 463,695,136 |
| 463,463,751 |
| |||||||||||||||||||
Potential dilutive common shares(1) | — | — | — | — | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total shares for diluted earnings per share computation | 487,274,303 | 485,352,998 | 487,025,614 | 485,087,197 | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Potential dilutive common shares |
|
| 801,591 |
|
|
| 555,960 |
|
|
| 698,385 |
|
|
| 487,317 |
| ||||||||||||||||
Total shares for diluted earnings per common share |
|
| 464,894,538 |
|
|
| 462,489,493 |
|
|
| 464,393,521 |
|
|
| 463,951,068 |
| ||||||||||||||||
Diluted earnings per common share and common share equivalents | $ | 0.21 | $ | 0.26 | $ | 0.64 | $ | 0.78 |
| $ | 0.30 |
|
| $ | 0.21 |
|
| $ | 0.60 |
|
| $ | 0.40 |
| ||||||||
|
|
|
|
Note 3.3: Reclassifications Outout of Accumulated Other Comprehensive Loss
(in thousands) | For the Nine Months Ended September 30, 2017 | |||||
Details about Accumulated Other Comprehensive Loss | Amount Reclassified from Accumulated Other Comprehensive Loss(1) | Affected Line Item in the and Comprehensive Income | ||||
Unrealized gains onavailable-for-sale securities | $ | 1,848 | Net gain on sales of securities | |||
(770 | ) | Income tax expense | ||||
|
| |||||
$ | 1,078 | Net gain on sales of securities, net of tax | ||||
|
| |||||
Amortization of defined benefit pension plan items: | ||||||
Past service liability | $ | 187 | Included in the computation of net periodic (credit) expense(2) | |||
Actuarial losses | (6,363 | ) | Included in the computation of net periodic (credit) expense(2) | |||
|
| |||||
(6,176 | ) | Total before tax | ||||
2,574 | Tax benefit | |||||
|
| |||||
$ | (3,602 | ) | Amortization of defined benefit pension plan items, net of tax | |||
|
| |||||
Total reclassifications for the period | $ | (2,524 | ) | |||
|
|
(dollars in | For the Six Months Ended June 30, 2021 | |||||
Details about Accumulated Other Comprehensive Loss | Amount | Affected Line Item in the | ||||
Unrealized gains (losses) on available-for-sale securities: | $ | — | Net gain (losses) on securities | |||
— | Income tax expense | |||||
$ | — | Net gain (losses) on securities, net of tax | ||||
Unrealized loss on cash flow hedges: | $ | (11 | ) | Interest expense | ||
3 | Income tax benefit | |||||
$ | (8 | ) | Net loss on cash flow hedges, net of tax | |||
Amortization of defined benefit pension plan items: | ||||||
Past service liability | $ | — | Included in the computation of net periodic credit(2) | |||
Actuarial losses | (4 | ) | Included in the computation of net periodic cost (2) | |||
(4 | ) | Total before tax | ||||
1 | Income tax benefit | |||||
$ | (3 | ) | Amortization of defined benefit pension plan items, net of tax | |||
Total reclassifications for the period | $ | (11 | ) |
(1) Amounts in parentheses indicate expense items.
(2) See Note 8, “Pension and Other Post-Retirement Benefits,” for additional information.
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 the dates indicated:
September 30, 2017 | ||||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | ||||||||||||
Mortgage-Related Securities: | ||||||||||||||||
GSE(1) certificates | $ | 1,904,431 | $ | 57,138 | $ | 1,217 | $ | 1,960,352 | ||||||||
GSE CMOs(2) | 530,365 | 19,812 | — | 550,177 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total mortgage-related securities | $ | 2,434,796 | $ | 76,950 | $ | 1,217 | $ | 2,510,529 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Other Securities: | ||||||||||||||||
U. S. Treasury obligations | $ | 199,838 | $ | 37 | $ | — | $ | 199,875 | ||||||||
GSE debentures | 88,242 | 2,592 | — | 90,834 | ||||||||||||
Corporate bonds | 74,580 | 11,557 | — | 86,137 | ||||||||||||
Municipal bonds | 71,079 | 137 | 849 | 70,367 | ||||||||||||
Capital trust notes | 48,217 | 3,489 | 10,939 | 40,767 | ||||||||||||
Preferred stock | 15,293 | 46 | — | 15,339 | ||||||||||||
Mutual funds and common stock(3) | 16,874 | 488 | 184 | 17,178 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other securities | $ | 514,123 | $ | 18,346 | $ | 11,972 | $ | 520,497 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total securities available for sale(4) | $ | 2,948,919 | $ | 95,296 | $ | 13,189 | $ | 3,031,026 | ||||||||
|
|
|
|
|
|
|
|
December 31, 2016 | ||||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | ||||||||||||
Mortgage-Related Securities: | ||||||||||||||||
GSE certificates | $ | 7,786 | $ | — | $ | 460 | $ | 7,326 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Other Securities: | ||||||||||||||||
Municipal bonds | $ | 583 | $ | 48 | $ | — | $ | 631 | ||||||||
Capital trust notes | 9,458 | 2 | 2,217 | 7,243 | ||||||||||||
Preferred stock | 70,866 | 1,446 | 328 | 71,984 | ||||||||||||
Mutual funds and common stock | 16,874 | 484 | 261 | 17,097 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other securities | $ | 97,781 | $ | 1,980 | $ | 2,806 | $ | 96,955 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total securities available for sale | $ | 105,567 | $ | 1,980 | $ | 3,266 | $ | 104,281 | ||||||||
|
|
|
|
|
|
|
|
The following table summarizes the Company’s portfolio of securities held to maturity at December 31, 2016:
(in thousands) | Amortized Cost | Carrying Amount | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||||
Mortgage-Related Securities: | ||||||||||||||||||||
GSEcertificates | $ | 2,193,489 | $ | 2,193,489 | $ | 64,431 | $ | 2,399 | $ | 2,255,521 | ||||||||||
GSE CMOs | 1,019,074 | 1,019,074 | 36,895 | 57 | 1,055,912 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total mortgage-related securities | $ | 3,212,563 | $ | 3,212,563 | $ | 101,326 | $ | 2,456 | $ | 3,311,433 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Securities: | ||||||||||||||||||||
U. S. Treasury obligations | $ | 200,293 | $ | 200,293 | $ | — | $ | 73 | $ | 200,220 | ||||||||||
GSE debentures | 88,457 | 88,457 | 3,836 | — | 92,293 | |||||||||||||||
Corporate bonds | 74,217 | 74,217 | 9,549 | — | 83,766 | |||||||||||||||
Municipal bonds | 71,554 | 71,554 | — | 1,789 | 69,765 | |||||||||||||||
Capital trust notes | 74,284 | 65,692 | 2,662 | 11,872 | 56,482 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other securities | $ | 508,805 | $ | 500,213 | $ | 16,047 | $ | 13,734 | $ | 502,526 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total securities held to maturity(1) | $ | 3,721,368 | $ | 3,712,776 | $ | 117,373 | $ | 16,190 | $ | 3,813,959 | ||||||||||
|
|
|
|
|
|
|
|
|
|
At SeptemberJune 30, 20172021 and December 31, 2016,2020:
|
| June 30, 2021 |
| |||||||||||||
(dollars in millions) |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||
Debt securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-Related Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates |
| $ | 1,037 |
|
| $ | 32 |
|
| $ | 9 |
|
| $ | 1,060 |
|
GSE CMOs |
|
| 1,940 |
|
|
| 25 |
|
|
| 32 |
|
|
| 1,933 |
|
Total mortgage-related debt securities |
| $ | 2,977 |
|
| $ | 57 |
|
| $ | 41 |
|
| $ | 2,993 |
|
Other Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U. S. Treasury obligations |
| $ | 65 |
|
| $ | — |
|
| $ | — |
|
| $ | 65 |
|
GSE debentures |
|
| 1,502 |
|
|
| 2 |
|
|
| 30 |
|
|
| 1,474 |
|
Asset-backed securities (1) |
|
| 507 |
|
|
| 4 |
|
|
| 2 |
|
|
| 509 |
|
Municipal bonds |
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Corporate bonds |
|
| 871 |
|
|
| 21 |
|
|
| 2 |
|
|
| 890 |
|
Foreign notes |
|
| 25 |
|
|
| 1 |
|
|
| — |
|
|
| 26 |
|
Capital trust notes |
|
| 96 |
|
|
| 7 |
|
|
| 8 |
|
|
| 95 |
|
Total other debt securities |
| $ | 3,091 |
|
| $ | 35 |
|
| $ | 42 |
|
| $ | 3,084 |
|
Total debt securities available for sale |
| $ | 6,068 |
|
| $ | 92 |
|
| $ | 83 |
|
| $ | 6,077 |
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mutual funds |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | 16 |
|
| $ | — |
|
| $ | — |
|
| $ | 16 |
|
Total securities (2) |
| $ | 6,084 |
|
| $ | 92 |
|
| $ | 83 |
|
| $ | 6,093 |
|
(1) The underlying assets of the asset-backed securities are substantially guaranteed by the U.S. Government.
(2) Excludes accrued interest receivable of $16 million included in other assets in the Consolidated Statements of Condition.
|
| December 31, 2020 |
| |||||||||||||
(dollars in millions) |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||
Debt securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage-Related Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GSE certificates |
| $ | 1,155 |
|
| $ | 54 |
|
| $ | — |
|
| $ | 1,209 |
|
GSE CMOs |
|
| 1,787 |
|
|
| 45 |
|
|
| 3 |
|
|
| 1,829 |
|
Total mortgage-related debt securities |
| $ | 2,942 |
|
| $ | 99 |
|
| $ | 3 |
|
| $ | 3,038 |
|
Other Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury obligations |
| $ | 65 |
|
| $ | — |
|
| $ | — |
|
| $ | 65 |
|
GSE debentures |
|
| 1,158 |
|
|
| 4 |
|
|
| 4 |
|
|
| 1,158 |
|
Asset-backed securities (1) |
|
| 530 |
|
|
| 2 |
|
| �� | 6 |
|
|
| 526 |
|
Municipal bonds |
|
| 26 |
|
|
| 1 |
|
|
| — |
|
|
| 27 |
|
Corporate bonds |
|
| 871 |
|
|
| 18 |
|
|
| 6 |
|
|
| 883 |
|
Foreign notes |
|
| 25 |
|
|
| 1 |
|
|
| — |
|
|
| 26 |
|
Capital trust notes |
|
| 96 |
|
|
| 6 |
|
|
| 11 |
|
|
| 91 |
|
Total other debt securities |
| $ | 2,771 |
|
| $ | 32 |
|
| $ | 27 |
|
| $ | 2,776 |
|
Total other securities available for sale |
| $ | 5,713 |
|
| $ | 131 |
|
| $ | 30 |
|
| $ | 5,814 |
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock |
| $ | 15 |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
Mutual funds |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | 31 |
|
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
Total securities(2) |
| $ | 5,744 |
|
| $ | 131 |
|
| $ | 30 |
|
| $ | 5,845 |
|
(1) The underlying assets of the asset-backed securities are substantially guaranteed by the U.S. Government.
(2) Excludes accrued interest receivable of $15 million included in other assets in the Consolidated Statements of Condition.
14
At June 30, 2021 and December 31, 2020, respectively, the Company had $579.5$686 million and $590.9$714 million ofFHLB-NY stock, at cost. The Company is required to maintainmaintains an investment inFHLB-NY stock partly in orderconjunction with its membership in the FHLB and partly related to haveits access to the FHLB funding it provides.utilizes.
The following table summarizes the gross proceeds, gross realized gains, and gross realized gainslosses from the sale ofavailable-for-sale securities during the periods indicated:
For the Nine Months Ended September 30, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Gross proceeds | $ | 246,209 | $ | 264,413 | ||||
Gross realized gains | 1,986 | 413 |
In addition, during the ninesix months ended SeptemberJune 30, 2017, the Company sought to take advantage of favorable bond market conditions2021 and soldheld-to-maturity2020:
|
| For the Six Months Ended |
| |||||
(dollars in millions) |
| 2021 |
|
| 2020 |
| ||
Gross proceeds |
|
| ��� |
|
| $ | 442 |
|
Gross realized gains |
|
| — |
|
|
| 2 |
|
Gross realized losses |
|
| — |
|
|
| 1 |
|
Net losses on equity securities with an amortized cost of $521.0 million resulting in gross proceeds of $547.9 million including a gross realized gain of $26.9 million. Accordingly, the Company transferred the remaining $3.0 billion ofheld-to-maturity securities toavailable-for-sale with a net unrealized gain of $82.8 million classified in other comprehensive loss in the Consolidated Statements of Condition. Having our securities portfolio classified asavailable-for-sale improves the Company’s interest rate risk sensitivity and liquidity measures and provides the Company with more options in meeting the expected future Liquidity Coverage Ratio (“LCR”) requirements.
In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2017. For credit-impaired debt securities, OTTI recognized in earnings after that date is presented as an addition in two components, based upon whetherfor the current period is the first time a debt security was credit-impaired (initial credit impairment) or is not the first time a debt security was credit-impaired (subsequent credit impairment).six months ended June 30, 2021 and 2020 were $0 and $1 million, respectively.
(in thousands) | For the Nine Months Ended September 30, 2017 | |||||
Beginning credit loss amount as of December 31, 2016 | $ | 197,552 | ||||
Add: | Initial other-than-temporary credit losses | — | ||||
Subsequent other-than-temporary credit losses | — | |||||
Amount previously recognized in AOCL | — | |||||
Less: | Realized losses for securities sold | — | ||||
Securities intended or required to be sold | — | |||||
Increase in cash flows on debt securities | 126 | |||||
|
| |||||
Ending credit loss amount as of September 30, 2017 | $ | 197,426 | ||||
|
|
The following table summarizes, by contractual maturity, the amortized cost ofavailable-for-sale securities at SeptemberJune 30, 2017:2021:
(dollars in thousands) | Mortgage- Related Securities | Average Yield | U.S. Treasury and GSE Obligations | Average Yield | State, County, and Municipal | Average Yield(1) | Other Debt Securities (2) | Average Yield | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-Sale Securities:(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Mortgage- |
|
| Average |
|
| U.S. |
|
| Average |
|
| State, |
|
| Average |
|
| Other Debt |
|
| Average |
|
| Fair |
| |||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Available-for-Sale Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Due within one year | $ | — | % | $ | 259,207 | 1.82 | % | $ | 150 | 6.47 | % | $ | — | — | % | $ | 260,064 |
| $ | — |
| - |
| % | $ | 69 |
| 0.17 |
| % | $ | — |
| - |
| % | $ | 50 |
| 2.97 |
| % | $ | 119 |
| |||||||||||||||||||||||||||
Due from one to five years | 1,101,945 | 3.13 | 6,950 | 3.84 | 438 | 6.59 | 48,351 | 3.51 | 1,192,831 |
| 242 |
| 3.19 |
| 22 |
| 3.52 |
| — |
| — |
| 303 |
| 1.74 |
| 595 |
| ||||||||||||||||||||||||||||||||||||||||||||
Due from five to ten years | 1,152,156 | 3.33 | 21,923 | 3.52 | — | — | 26,228 | 9.06 | 1,251,712 |
| 163 |
| 2.47 |
| 380 |
| 1.95 |
| 19 |
| 3.52 |
| 625 |
| 2.24 |
| 1,200 |
| ||||||||||||||||||||||||||||||||||||||||||||
Due after ten years | 180,695 | 3.01 | — | — | 70,491 | 2.88 | 48,218 | 3.70 | 293,902 |
|
| 2,572 |
|
| 1.93 |
|
| 1,096 |
|
| 1.56 |
|
| 6 |
|
| 3.33 |
|
| 521 |
|
| 1.21 |
|
| 4,163 |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total securities available for sale | $ | 2,434,796 | 3.21 | % | $ | 288,080 | 2.00 | % | $ | 71,079 | 2.91 | % | $ | 122,797 | 4.77 | % | $ | 2,998,509 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities available for sale |
| $ | 2,977 |
| 2.06 |
| % | $ | 1,567 |
| 1.62 |
| % | $ | 25 |
| 3.48 |
| % | $ | 1,499 |
| 1.81 |
| % | $ | 6,077 |
|
(1) Not presented on a tax-equivalent basis.
(2) Includes corporate bonds, capital trust notes, foreign notes and asset-backed securities.
The following table presentsavailable-for-sale securities with no related allowance having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of SeptemberJune 30, 2017:2021:
Less than Twelve Months | Twelve Months or Longer | Total |
| Less than Twelve Months |
|
| Twelve Months or Longer |
|
| Total |
| |||||||||||||||||||||||||||||||||||||
(in thousands) | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||||||||||||||||||||||||||
Temporarily ImpairedAvailable-for-Sale Securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||||||||||||||||||||
Temporarily Impaired Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
GSE certificates | $ | 197,953 | $ | 662 | $ | 18,195 | $ | 555 | $ | 216,148 | $ | 1,217 |
| $ | 336 |
| $ | 9 |
| $ | — |
| $ | — |
| $ | 336 |
| $ | 9 |
| |||||||||||||||||
U. S. Treasury obligations | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
US Treasuries |
| 65 |
| — |
| — |
| — |
| 65 |
| — |
| |||||||||||||||||||||||||||||||||||
GSE CMOs |
| 913 |
| 32 |
| — |
| — |
| 913 |
| 32 |
| |||||||||||||||||||||||||||||||||||
GSE debentures |
| 1,132 |
| 30 |
| — |
| — |
| 1,132 |
| 30 |
| |||||||||||||||||||||||||||||||||||
Asset-backed securities |
| 68 |
| — |
| 146 |
| 2 |
| 214 |
| 2 |
| |||||||||||||||||||||||||||||||||||
Municipal bonds | 52,715 | 849 | — | — | 52,715 | 849 |
| — |
| — |
| 8 |
| 2 |
| 8 |
| 2 |
| |||||||||||||||||||||||||||||
Corporate bonds |
| — |
| — |
| 323 |
| — |
| 323 |
| — |
| |||||||||||||||||||||||||||||||||||
Capital trust notes | — | — | 32,787 | 10,939 | 32,787 | 10,939 |
| — |
| — |
| 36 |
| 8 |
| 36 |
| 8 |
| |||||||||||||||||||||||||||||
Equity securities | 11,621 | 184 | — | — | 11,621 | 184 |
|
| 11,709 |
|
| — |
|
| — |
|
| — |
|
| 11,709 |
|
| — |
| |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total temporarily impairedavailable-for-sale securities | $ | 262,289 | $ | 1,695 | $ | 50,982 | $ | 11,494 | $ | 313,271 | $ | 13,189 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total temporarily impaired securities |
| $ | 14,223 |
| $ | 71 |
| $ | 513 |
| $ | 12 |
| $ | 14,736 |
| $ | 83 |
|
15
The following table presentsheld-to-maturity andavailable-for-sale securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2016:2020:
Less than Twelve Months | Twelve Months or Longer | Total |
| Less than Twelve Months |
|
| Twelve Months or Longer |
|
| Total |
| |||||||||||||||||||||||||||||||||||||
(in thousands) | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||||||||||||||||||||||||||
Temporarily ImpairedHeld-to-Maturity Securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||||||||||||||||||||
Temporarily Impaired Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
U. S. Treasury obligations |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| |||||||||||||||||||||||||||||
U. S. Government agency and GSE |
| 59 |
| — |
| — |
| — |
| 59 |
| — |
| |||||||||||||||||||||||||||||||||||
GSE certificates | $ | 268,891 | $ | 2,399 | $ | — | $ | — | $ | 268,891 | $ | 2,399 |
| 442 |
| 3 |
| 74 |
| — |
| 516 |
| 3 |
| |||||||||||||||||||||||
GSE CMOs | 42,980 | 57 | — | — | 42,980 | 57 |
| 522 |
| 4 |
| — |
| — |
| 522 |
| 4 |
| |||||||||||||||||||||||||||||
U. S. Treasury obligations | 200,220 | 73 | — | — | 200,220 | 73 | ||||||||||||||||||||||||||||||||||||||||||
Asset-backed securities |
| — |
| — |
| 364 |
| 6 |
| 364 |
| 6 |
| |||||||||||||||||||||||||||||||||||
Municipal bonds | 69,765 | 1,789 | — | — | 69,765 | 1,789 |
| — |
| — |
| 9 |
| — |
| 9 |
| — |
| |||||||||||||||||||||||||||||
Capital trust notes | — | — | 24,364 | 11,872 | 24,364 | 11,872 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total temporarily impairedheld-to-maturity securities | $ | 581,856 | $ | 4,318 | $ | 24,364 | $ | 11,872 | $ | 606,220 | $ | 16,190 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Temporarily ImpairedAvailable-for-Sale Securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
GSE certificates | $ | 7,326 | $ | 460 | $ | — | $ | — | $ | 7,326 | $ | 460 | ||||||||||||||||||||||||||||||||||||
Corporate bonds |
| 72 |
| 3 |
| 246 |
| 3 |
| 318 |
| 6 |
| |||||||||||||||||||||||||||||||||||
Foreign notes |
| — |
| — |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||||||||||||||
Capital trust notes | — | — | 5,241 | 2,217 | 5,241 | 2,217 |
| — |
| — |
| 33 |
| 11 |
| 33 |
| 11 |
| |||||||||||||||||||||||||||||
Equity securities | 29,059 | 589 | — | — | 29,059 | 589 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total temporarily impairedavailable-for-sale securities | $ | 36,385 | $ | 1,049 | $ | 5,241 | $ | 2,217 | $ | 41,626 | $ | 3,266 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total temporarily impaired securities |
| $ | 1,095 |
| $ | 10 |
| $ | 726 |
| $ | 20 |
| $ | 1,821 |
| $ | 30 |
|
An OTTI loss on impaired debt securities must be fully recognized in earnings if an investor has the intent to sell the debt security, or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss occurs, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts of impairment relating to factors other than credit losses are recorded in AOCL.
At September 30, 2017, the Company had unrealized losses on certain GSE mortgage-related securities, municipal bonds, capital trust notes, and equity securities. The unrealized losses on the Company’s GSE mortgage-related securities, municipal bonds, and capital trust notes at September 30, 2017 were primarily caused by movements in market interest rates and spread volatility, rather than credit risk. These securities are not expected to be settled at a price that is less than the amortized cost of the Company’s investment.
The Company reviews quarterly financial information related to its investments in capital trust notes, as well as other information that is released by each of the issuers of such notes, to determine their continued creditworthiness. The Company continues to monitor these investments and currently estimates that the present value of expected cash flows is not less than the amortized cost of the securities. It is possible that these securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from these securities and potential OTTI losses in the future. Future events that could trigger material unrecoverable declines in the fair values of the Company’s investments, and thus result in potential OTTI losses, include, but are not limited to, government intervention; deteriorating asset quality and credit metrics; significantly higher levels of default and loan loss provisions; losses in value on the underlying collateral; net operating losses; and illiquidity in the financial markets.
The Company considers a decline in the fair value of equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. The unrealized losses on the Company’s equity securities at September 30, 2017 were caused by market volatility. The Company evaluated the near-term prospects of recovering the fair value of these securities, together with the severity and duration of impairment to date, and determined that they were not other-than-temporarily impaired. Nonetheless, it is possible that these equity securities will perform worse than is currently expected, which could lead to adverse changes in their fair value, or to the failure of the securities to fully recover in value as currently anticipated by management. Either event could cause the Company to record an OTTI loss in a future period. Events that could trigger a material decline in the fair value of these securities include, but are not limited to, deterioration in the equity markets; a decline in the quality of the loan portfolio of the issuer in which the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuer.
The investment securities designated as having a continuous loss position for twelve months or more at SeptemberJune 30, 20172021 consisted of five5 capital trusttrusts notes, 4 asset-backed securities, 5 corporate bonds, and five agency mortgage-related securities. At December 31, 20161 municipal bond. The investment securities designated as having a continuous loss position for twelve months or more at December 31, 2020 consisted of five4 agency collateralized mortgage obligations, 5 capital trust notes. At September 30, 2017,trusts notes, 7 asset-backed securities, 3 corporate bonds, and 1 municipal bond.
The Company evaluates available-for-sale debt securities in unrealized loss positions at least quarterly to determine if an allowance for credit losses is required. Based on an evaluation of available information about past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability, the Company has concluded that it expects to receive all contractual cash flows from each security held in its available-for-sale securities portfolio.
We first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, any previously recognized allowances are charged off and the security’s amortized cost basis is written down to fair value through income. If neither of the aforementioned criteria is met, we evaluate whether the decline in fair value has resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are 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 of securities having a continuous loss position for twelve months or more was 18.4% belowis less than the collective amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
None of $62.5 million. Atthe unrealized losses identified as of June 30, 2021 or December 31, 2016,2020 relates to the fair valuemarketability of suchthe securities was 32.2% belowor the collectiveissuers’ 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 $43.7 million. At Septemberor during the six months ended June 30, 20172021.
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 December 31, 2016, the combined market value of the respective securities represented unrealized losses of $11.5 million and $14.1 million, respectively.Leases
Note 5: Loans
The following table sets forth the composition of the loan portfolio at the dates indicated:
September 30, 2017 | December 31, 2016 | |||||||||||||||
Amount | Percent of Non-Covered Loans Held for Investment | Amount | Percent of Non-Covered Loans Held for Investment | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Non-Covered Loans Held for Investment: | ||||||||||||||||
Mortgage Loans: | ||||||||||||||||
Multi-family | $ | 27,145,397 | 72.43 | % | $ | 26,945,052 | 72.13 | % | ||||||||
Commercial real estate | 7,550,387 | 20.14 | 7,724,362 | 20.68 | ||||||||||||
One-to-four family | 413,235 | 1.10 | 381,081 | 1.02 | ||||||||||||
Acquisition, development, and construction | 385,876 | 1.03 | 381,194 | 1.02 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total mortgage loans held for investment | $ | 35,494,895 | 94.70 | $ | 35,431,689 | 94.85 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Loans: | ||||||||||||||||
Commercial and industrial | 1,404,278 | 3.75 | 1,341,216 | 3.59 | ||||||||||||
Lease financing, net of unearned income of $58,870 and $60,278, respectively | 577,865 | 1.54 | 559,229 | 1.50 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total commercial and industrial loans(1) | 1,982,143 | 5.29 | 1,900,445 | 5.09 | ||||||||||||
Purchased credit-impaired loans | — | — | 5,762 | 0.01 | ||||||||||||
Other | 3,666 | 0.01 | 18,305 | 0.05 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other loans held for investment | 1,985,809 | 5.30 | 1,924,512 | 5.15 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalnon-covered loans held for investment | $ | 37,480,704 | 100.00 | % | $ | 37,356,201 | 100.00 | % | ||||||||
|
|
|
| |||||||||||||
Net deferred loan origination costs | 25,495 | 26,521 | ||||||||||||||
Allowance for losses onnon-covered loans | (158,918 | ) | (158,290 | ) | ||||||||||||
|
|
|
| |||||||||||||
Non-covered loans held for investment, net | $ | 37,347,281 | $ | 37,224,432 | ||||||||||||
|
|
|
| |||||||||||||
Covered loans | — | 1,698,133 | ||||||||||||||
Allowance for losses on covered loans | — | (23,701 | ) | |||||||||||||
|
|
|
| |||||||||||||
Covered loans, net | $ | — | $ | 1,674,432 | ||||||||||||
Loans held for sale | 104,938 | 409,152 | ||||||||||||||
|
|
|
| |||||||||||||
Total loans, net | $ | 37,452,219 | $ | 39,308,016 | ||||||||||||
|
|
|
|
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| ||||||||||
(dollars in millions) |
| Amount |
|
| Percent of |
|
| Amount |
|
| Percent of |
|
| ||||
Loans and Leases Held for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Multi-family |
| $ | 32,540 |
|
|
| 74.77 |
| % | $ | 32,236 |
|
|
| 75.28 |
| % |
Commercial real estate |
|
| 6,813 |
|
|
| 15.66 |
|
|
| 6,836 |
|
|
| 15.96 |
|
|
One-to-four family |
|
| 190 |
|
|
| 0.44 |
|
|
| 236 |
|
|
| 0.55 |
|
|
Acquisition, development, and construction |
|
| 187 |
|
|
| 0.43 |
|
|
| 90 |
|
|
| 0.21 |
|
|
Total mortgage loans held for investment(1) |
|
| 39,730 |
|
|
| 91.30 |
|
| $ | 39,398 |
|
|
| 92.00 |
|
|
Other Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
| 1,930 |
|
|
| 4.43 |
|
|
| 1,682 |
|
|
| 3.93 |
|
|
Lease financing, net of unearned income of |
|
| 1,846 |
|
|
| 4.24 |
|
|
| 1,735 |
|
|
| 4.05 |
|
|
Total commercial and industrial loans (2) |
|
| 3,776 |
|
|
| 8.67 |
|
|
| 3,417 |
|
|
| 7.98 |
|
|
Other |
|
| 12 |
|
|
| 0.03 |
|
|
| 7 |
|
|
| 0.02 |
|
|
Total other loans held for investment(1) |
|
| 3,788 |
|
|
| 8.70 |
|
|
| 3,424 |
|
|
| 8.00 |
|
|
Total loans and leases held for investment |
| $ | 43,518 |
|
|
| 100.00 |
| % | $ | 42,822 |
|
|
| 100.00 |
| % |
Net deferred loan origination costs |
|
| 57 |
|
|
|
|
|
| 62 |
|
|
|
|
| ||
Allowance for credit losses loans and leases |
|
| (202 | ) |
|
|
|
|
| (194 | ) |
|
|
|
| ||
Total loans and leases held for investment, net |
| $ | 43,373 |
|
|
|
|
| $ | 42,690 |
|
|
|
|
| ||
Loans held for sale (3) |
|
| - |
|
|
|
|
|
| 117 |
|
|
|
|
| ||
Total loans and leases, net |
| $ | 43,373 |
|
|
|
|
| $ | 42,807 |
|
|
|
|
|
Non-Covered Loans
Non-Covered(1) Excludes accrued interest receivable of $211 million and $219 million at June 30, 2021 and December 31, 2020, respectively, which is included in other assets in the Consolidated Statements of Condition.
(2) Includes specialty finance loans and leases of $3.2 billion and $3.0billion, respectively, at June 30, 2021 and December 31, 2020, and other C&I loans of $555 million and $393 million, respectively, at June 30, 2021 and December 31, 2020.
(3) Includes deferred loan origination fees of $0 million and $2 million at June 30, 2021 and December 31, 2020, respectively.
Loans Held for Investment
The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized bynon-luxury apartment buildings in New York City with rent-regulated units and below-market rents. In addition, the Company originates commercial real estate (“CRE”)CRE loans, most of which are collateralized by income-producing properties such as office buildings, retail centers,mixed-use buildings, and multi-tenanted light industrial properties that are located in New York City and on Long Island.
To a lesser extent, the Company also originatesone-to-four family loans, acquisition, development, and construction (“ADC”) loans, and commercial and industrial (“C&I”) ADC loans for investment.One-to-four family loans held for investment were originated through the Company’s former mortgage banking operation and primarily consisted of jumbo prime adjustable rate mortgages made to borrowers with a solid credit history.
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, “specialtyspecialty finance loans and leases”)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”other C&I loans that primarily are made to small andmid-size businesses in Metro New York. “Other”Other C&I loans are typically made for working capital, business expansion, and the purchase of machinery and equipment.
17
The repayment of multi-family and CRE loans generally depends on the income produced by the underlying properties which, in turn, depends on their successful operation and management. To mitigate the potential for credit losses, the Company underwrites its loans in accordance with credit standards it considers to be prudent, looking first at the consistency of the cash flows being produced by the underlying property. In addition, multi-family buildings, CRE properties, and ADC projects are inspected as a prerequisite to approval, and independent appraisers, whose appraisals are carefully reviewed by the Company’sin-house appraisers, perform appraisals on the collateral properties. In many cases, a second independent appraisal review is performed.
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 andloan-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 byin-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 had long-term relationships with its experienced lending officers. Each of these credits is secured with a perfected first security interest in or outright ownership inof the underlying collateral, and structured as senior debt or as anon-cancelable lease. To further minimize the risk involved in specialty finance lending and leasing, each transaction isre-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 innon-covered loans held for investment at SeptemberJune 30, 20172021 and December 31, 2016, respectively,2020, were loans of $58.7$7 million and $91.8$38 million, respectively, to certain officers, directors, and their related interests and parties. There were no loans to principal shareholders at eitherthat date.
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 those dates.
the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At June 30, 2021 and December 31, 2016, the Company hadnon-covered purchased credit-impaired (“PCI”) loans, with a carrying value2020, all of $5.8 million and an unpaid principal balance of $7.0 million at that date. PCI loans had been covered under Loss Share Agreements (“LSA”) with the FDIC that expired in March 2015 and had been included innon-covered loans. Suchour non-performing loans were accounted for under Accounting Standards Codification (“ASC”)310-30 and were initially measured at fair value, which included estimated future credit losses expected to be incurred over the lives of thenon-accrual loans. Under ASC310-30, purchasers are permitted to aggregate acquired loans into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. There were no such loans accounted for under ASC310-30 at September 30, 2017.
Loans Held for Sale18
As previously disclosed, on June 27, 2017, the Company entered into an agreement to sell its mortgage banking business, which was acquired as part of its 2009 FDIC-assisted acquisition of AmTrust Bank (“AmTrust”) and is reported under the Company’s Residential Mortgage Banking segment, to Freedom Mortgage Corporation (“Freedom”). Accordingly, on September 29, 2017, the sale was completed with proceeds received in the amount of $226.6 million, resulting in a gain of $7.4 million, which is included in“Non-interest income” in the accompanying Consolidated Statement of Income and Comprehensive Income. Freedom acquired both the Company’s origination and servicing platforms, as well as its mortgage servicing loan portfolio of $20.5 billion and related mortgage servicing rights (“MSRs”) asset of $208.8 million.
Additionally, as previously disclosed, the Company received approval from the FDIC to sell assets covered under our LSA, early terminate the LSA, and enter into an agreement to sell the majority of ourone-to-four family residential mortgage-related assets, including those covered under the LSA, to an affiliate of Cerberus Capital Management, L.P. (“Cerberus”). On July 28, 2017, the Company completed the sale, resulting in the receipt of proceeds of $1.9 billion from Cerberus and the FDIC and settled the related FDIC loss share receivable, resulting in a gain of $74.6 million which is included in“Non-interest income” in the accompanying Consolidated Statement of Income and Comprehensive Income. Effective October 31, 2017, the Company and the FDIC completed termination of the LSA.
The Community Bank’s mortgage banking operations originated, aggregated, sold, and servicedone-to-four family loans. Community banks, credit unions, mortgage companies, and mortgage brokers used its proprietaryweb-accessible mortgage banking platform to originate and closeone-to-four family loans nationwide. These loans were generally sold to GSEs, servicing retained. To a much lesser extent, the Community Bank used its mortgage banking platform to originate jumbo loans.
Asset Quality
The following table presents information regarding the quality of the Company’snon-covered loans held for investment at SeptemberJune 30, 2017:2021:
(in thousands) | Loans 30-89 Days Past Due | Non-Accrual Loans | Loans 90 Days or More Delinquent and Still Accruing Interest | Total Past Due Loans | Current Loans | Total Loans Receivable | ||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Loans |
|
| Non- |
|
| Loans |
|
| Total |
|
| Current |
|
| Total Loans |
| ||||||||||||||||||||||||||||||
Multi-family | $ | 602 | $ | 11,018 | $ | — | $ | 11,620 | $ | 27,133,777 | $ | 27,145,397 |
| $ | 9 |
| $ | 9 |
| $ | — |
| $ | 18 |
| $ | 32,522 |
| $ | 32,540 |
| |||||||||||||||||
Commercial real estate | 450 | 4,923 | — | 5,373 | 7,545,014 | 7,550,387 |
| 15 |
| 12 |
| — |
| 27 |
| 6,786 |
| 6,813 |
| |||||||||||||||||||||||||||||
One-to-four family | 676 | 2,179 | — | 2,855 | 410,380 | 413,235 |
| — |
| 2 |
| — |
| 2 |
| 188 |
| 190 |
| |||||||||||||||||||||||||||||
Acquisition, development, and construction | — | 6,200 | — | 6,200 | 379,676 | 385,876 |
| — |
| — |
| — |
| — |
| 187 |
| 187 |
| |||||||||||||||||||||||||||||
Commercial and industrial(1) (2) | 3,419 | 44,640 | — | 48,059 | 1,934,084 | 1,982,143 |
| 11 |
| — |
| — |
| 11 |
| 3,765 |
| 3,776 |
| |||||||||||||||||||||||||||||
Other | 6 | 10 | — | 16 | 3,650 | 3,666 |
|
| — |
|
| 9 |
|
| — |
|
| 9 |
|
| 3 |
|
| 12 |
| |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 5,153 | $ | 68,970 | $ | — | $ | 74,123 | $ | 37,406,581 | $ | 37,480,704 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total loans and leases held for investment |
| $ | 35 |
| $ | 32 |
| $ | — |
| $ | 67 |
| $ | 43,451 |
| $ | 43,518 |
|
(1) Includes $9 million of taxi medallion-related loans that were 90 days or more past due. There were 0 taxi medallion-related loans that were 30 to 89 days past due.
(2) Includes lease financing receivables, all of which were current.
The following table presents information regarding the quality of the Company’snon-covered loans held for investment (excludingnon-covered PCI loans) at December 31, 2016:2020:
(in thousands) | Loans 30-89 Days Past Due(1) | Non-Accrual Loans(1) | Loans 90 Days or More Delinquent and Still Accruing Interest | Total Past Due Loans | Current Loans | Total Loans Receivable | ||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Loans |
|
| Non- |
|
| Loans |
|
| Total |
|
| Current |
|
| Total Loans |
| ||||||||||||||||||||||||||||||
Multi-family | $ | 28 | $ | 13,558 | $ | — | $ | 13,586 | $ | 26,931,466 | $ | 26,945,052 |
| $ | 4 |
| $ | 4 |
| $ | — |
| $ | 8 |
| $ | 32,228 |
| $ | 32,236 |
| |||||||||||||||||
Commercial real estate | — | 9,297 | — | 9,297 | 7,715,065 | 7,724,362 |
| 10 |
| 12 |
| — |
| 22 |
| 6,814 |
| 6,836 |
| |||||||||||||||||||||||||||||
One-to-four family | 2,844 | 9,679 | — | 12,523 | 368,558 | 381,081 |
| 2 |
| 2 |
| — |
| 4 |
| 232 |
| 236 |
| |||||||||||||||||||||||||||||
Acquisition, development, and construction | — | 6,200 | — | 6,200 | 374,994 | 381,194 |
| — |
| — |
| — |
| — |
| 90 |
| 90 |
| |||||||||||||||||||||||||||||
Commercial and industrial(2) (3) | 7,263 | 16,422 | — | 23,685 | 1,876,760 | 1,900,445 | ||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial(1) (2) |
| — |
| 20 |
| — |
| 20 |
| 3,397 |
| 3,417 |
| |||||||||||||||||||||||||||||||||||
Other | 248 | 1,313 | — | 1,561 | 16,744 | 18,305 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7 |
|
| 7 |
| |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 10,383 | $ | 56,469 | $ | — | $ | 66,852 | $ | 37,283,587 | $ | 37,350,439 |
| $ | 16 |
| $ | 38 |
| $ | — |
| $ | 54 |
| $ | 42,768 |
| $ | 42,822 |
| |||||||||||||||||
|
|
|
|
|
|
(1) Includes $19 million of taxi medallion-related loans that were 90 days or more past due. There were 0 taxi medallion-related loans that were 30 to 89 days past due.
(2) Includes lease financing receivables, all of which were current.
The following table summarizes the Company’s portfolio ofnon-covered loans held for investment by credit quality indicator at SeptemberJune 30, 2017:2021:
Mortgage Loans | Other Loans |
| Mortgage Loans |
| Other Loans |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Multi-Family | Commercial Real Estate | One-to-Four Family | Acquisition, Development, and Construction | Total Mortgage Loans | Commercial and Industrial(1) | Other | Total Other Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Multi- |
|
| Commercial |
|
| One-to- |
|
| Acquisition, |
|
| Total |
|
| Commercial |
|
| Other |
|
| Total Other |
| ||||||||||||||||||||||||||||||||||||||||
Credit Quality Indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
Pass | $ | 27,059,736 | $ | 7,521,387 | $ | 411,056 | $ | 320,081 | $ | 35,312,260 | $ | 1,882,662 | $ | 3,656 | $ | 1,886,318 |
| $ | 31,044 |
| $ | 5,906 |
| $ | 177 |
| $ | 176 |
| $ | 37,303 |
| $ | 3,719 |
| $ | 12 |
| $ | 3,731 |
| |||||||||||||||||||||||
Special mention | 27,884 | 10,724 | — | 50,043 | 88,651 | 47,628 | — | 47,628 |
| 879 |
| 682 |
| 5 |
| 11 |
| 1,577 |
| 2 |
| — |
| 2 |
| |||||||||||||||||||||||||||||||||||||||
Substandard | 57,777 | 18,276 | 2,179 | 15,752 | 93,984 | 51,853 | 10 | 51,863 |
| 617 |
| 225 |
| 8 |
| — |
| 850 |
| 55 |
| — |
| 55 |
| |||||||||||||||||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 27,145,397 | $ | 7,550,387 | $ | 413,235 | $ | 385,876 | $ | 35,494,895 | $ | 1,982,143 | $ | 3,666 | $ | 1,985,809 |
| $ | 32,540 |
| $ | 6,813 |
| $ | 190 |
| $ | 187 |
| $ | 39,730 |
| $ | 3,776 |
| $ | 12 |
| $ | 3,788 |
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) Includes lease financing receivables, all of which were classified as Pass.
19
The following table summarizes the Company’s portfolio ofnon-covered loans held for investment (excludingnon-covered PCI loans) by credit quality indicator at December 31, 2016:2020:
Mortgage Loans | Other Loans |
| Mortgage Loans |
|
| Other Loans |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Multi-Family | Commercial Real Estate | One-to-Four Family | Acquisition, Development, and Construction | Total Mortgage Loans | Commercial and Industrial(1) | Other | Total Other Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Multi- |
| Commercial |
| One-to- |
| Acquisition, |
| Total |
| Commercial |
| Other |
| Total Other |
| |||||||||||||||||||||||||||||||||||||||||||||||
Credit Quality Indicator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
Pass | $ | 26,754,622 | $ | 7,701,773 | $ | 371,179 | $ | 341,784 | $ | 35,169,358 | $ | 1,771,975 | $ | 16,992 | $ | 1,788,967 |
| $ | 31,220 |
| $ | 5,884 |
| $ | 222 |
| $ | 68 |
| $ | 37,394 |
| $ | 3,388 |
| $ | 7 |
| $ | 3,395 |
| |||||||||||||||||||||||
Special mention | 164,325 | 12,604 | — | 33,210 | 210,139 | 54,979 | — | 54,979 |
| 567 |
| 637 |
| 12 |
| 22 |
| 1,238 |
| 3 |
| — |
| 3 |
| |||||||||||||||||||||||||||||||||||||||
Substandard | 26,105 | 9,985 | 9,902 | 6,200 | 52,192 | 73,491 | 1,313 | 74,804 |
| 449 |
| 315 |
| 2 |
| — |
| 766 |
| 26 |
| — |
| 26 |
| |||||||||||||||||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 26,945,052 | $ | 7,724,362 | $ | 381,081 | $ | 381,194 | $ | 35,431,689 | $ | 1,900,445 | $ | 18,305 | $ | 1,918,750 |
| $ | 32,236 |
| $ | 6,836 |
| $ | 236 |
| $ | 90 |
| $ | 39,398 |
| $ | 3,417 |
| $ | 7 |
| $ | 3,424 |
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) Includes lease financing receivables, all of which were classified as Pass.
The preceding classifications are the most current ones available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company will sustain some loss); and doubtful loans, based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. In addition,one-to-four family loans are classified based on the duration of the delinquency.
The following table presents, by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of June 30, 2021.
(dollars in millions) |
| Vintage Year |
| |||||||||||||||||||||||||||||
Risk Rating Group |
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior To |
|
| Revolving |
|
| Total |
| ||||||||
Pass |
| $ | 4,297 |
|
| $ | 9,536 |
|
| $ | 6,159 |
|
| $ | 5,305 |
|
| $ | 3,630 |
|
| $ | 8,383 |
|
| $ | 20 |
|
| $ | 37,330 |
|
Special Mention |
|
| — |
|
|
| 30 |
|
|
| 272 |
|
|
| 194 |
|
|
| 138 |
|
|
| 944 |
|
|
| — |
|
|
| 1,578 |
|
Substandard |
|
| — |
|
|
| 7 |
|
|
| 70 |
|
|
| 226 |
|
|
| 120 |
|
|
| 426 |
|
|
| 1 |
|
|
| 850 |
|
Total mortgage loans |
| $ | 4,297 |
|
| $ | 9,573 |
|
| $ | 6,501 |
|
| $ | 5,725 |
|
| $ | 3,888 |
|
| $ | 9,753 |
|
| $ | 21 |
|
| $ | 39,758 |
|
Pass |
|
| 612 |
|
|
| 931 |
|
|
| 632 |
|
|
| 139 |
|
|
| 184 |
|
|
| 217 |
|
|
| 1,045 |
|
|
| 3,760 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 2 |
|
Substandard |
|
| — |
|
|
| 2 |
|
|
| 3 |
|
|
| 2 |
|
|
| 8 |
|
|
| 14 |
|
|
| 26 |
|
|
| 55 |
|
Total other loans |
|
| 612 |
|
|
| 933 |
|
|
| 635 |
|
|
| 141 |
|
|
| 192 |
|
|
| 231 |
|
|
| 1,073 |
|
|
| 3,817 |
|
Total |
| $ | 4,909 |
|
| $ | 10,506 |
|
| $ | 7,136 |
|
| $ | 5,866 |
|
| $ | 4,080 |
|
| $ | 9,984 |
|
| $ | 1,094 |
|
| $ | 43,575 |
|
When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral adjusted for selling costs. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, the collateral-dependent practical expedient has been elected and expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For CRE loans, collateral properties include office buildings, warehouse/distribution buildings, shopping centers, apartment buildings, residential and commercial tract development. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. CRE loans are impacted by fluctuations in collateral values, as well as the ability of the borrower to obtain permanent financing.
20
The following table summarizes the extent to which collateral secures the Company’s collateral-dependent loans held for investment by collateral type as of June 30, 2021:
|
| Collateral |
| |||||
(dollars in millions) |
| Real |
|
| Other |
| ||
Multi-family |
| $ | 7 |
|
| $ | — |
|
Commercial real estate |
|
| 26 |
|
|
| — |
|
One-to-four family |
|
| — |
|
|
| — |
|
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
Commercial and industrial |
|
| — |
|
|
| 15 |
|
Other |
|
| — |
|
|
| — |
|
Total collateral-dependent loans held for investment |
| $ | 33 |
|
| $ | 15 |
|
There were no significant changes in the extent to which collateral secures the Company’s collateral-dependent financial assets during the six months ended June 30, 2021.
Troubled Debt Restructurings
The Company is required to account for certainheld-for-investment loan modifications and restructurings as troubled debt restructurings (“TDRs”).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 onnon-accrual status until the Company determines that future collection of principal and interest is reasonably assured, which requires, among other things, that the borrower demonstrate performance according to the restructured terms for a period of at least six consecutive months. In determining the Company’s allowance for loan and lease losses, reasonably expected TDRs are individually evaluated and consist of criticized, classified, or maturing loans that will have a modification processed within the next three months.
In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of SeptemberJune 30, 2017,2021, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $41.5 million; loans$31 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 forbearance agreements were reached amountedprovided additional COVID-19 relief to $1.8 million.American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency.
The following table presents information regarding the Company’s TDRs as of the dates indicated:June 30, 2021 and December 31, 2020:
September 30, 2017 | December 31, 2016 |
| June 30, 2021 |
|
| December 31, 2020 |
| |||||||||||||||||||||||||||||||||||||||||
(in thousands) | Accruing | Non-Accrual | Total | Accruing | Non-Accrual | Total | ||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Accruing |
|
| Non- |
|
| Total |
|
| Accruing |
|
| Non- |
|
| Total |
| ||||||||||||||||||||||||||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Multi-family | $ | 1,457 | $ | 7,608 | $ | 9,065 | $ | 1,981 | $ | 8,755 | $ | 10,736 |
| $ | — |
| $ | 7 |
| $ | 7 |
| $ | — |
| $ | — |
| $ | — |
| |||||||||||||||||
Commercial real estate | — | 373 | 373 | — | 1,861 | 1,861 |
| 15 |
| — |
| 15 |
| 15 |
| — |
| 15 |
| |||||||||||||||||||||||||||||
One-to-four family | — | 1,076 | 1,076 | 222 | 1,749 | 1,971 |
| — |
|
|
| — |
|
|
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||||
Commercial and industrial | 177 | 23,974 | 24,151 | 1,263 | 3,887 | 5,150 |
|
| — |
|
|
| 9 |
|
|
| 9 |
|
| — |
|
| 19 |
|
| 19 |
| |||||||||||||||||||||
Acquisition, development, and construction | 8,652 | — | 8,652 | |||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | 202 | 202 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 10,286 | $ | 33,031 | $ | 43,317 | $ | 3,466 | $ | 16,454 | $ | 19,920 |
| $ | 15 |
| $ | 16 |
| $ | 31 |
| $ | 15 |
| $ | 19 |
| $ | 34 |
| |||||||||||||||||
|
|
|
|
|
|
(1) Includes $9 million and $18 million of taxi medallion-related loans at June 30, 2021 and December 31, 2020, respectively.
21
The eligibility of a borrower forwork-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 financial effects of the Company’s TDRs for the periods indicatedthree months ended June 30, 2021 and 2020 are summarized as follows:
For the Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||||
Weighted Average Interest Rate | ||||||||||||||||||||||||||||
(dollars in thousands) | Number of Loans | Pre-Modification Recorded Investment | Post-Modification Recorded Investment | Pre-Modification | Post- Modification | Charge-off Amount | Capitalized Interest | |||||||||||||||||||||
Loan Category: | ||||||||||||||||||||||||||||
Acquisition, development, and construction | 2 | $ | 8,652 | $ | 8,652 | 5.50 | % | 5.50 | % | $ | — | $ | — | |||||||||||||||
Commercial and industrial | 22 | 18,002 | 7,620 | 3.18 | 2.91 | 6,350 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | 24 | $ | 26,654 | $ | 16,272 | $ | 6,350 | $ | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
For the Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||||
Weighted Average Interest Rate | ||||||||||||||||||||||||||||
(dollars in thousands) | Number of Loans | Pre-Modification Recorded Investment | Post-Modification Recorded Investment | Pre-Modification | Post- Modification | Charge-off Amount | Capitalized Interest | |||||||||||||||||||||
Loan Category: | ||||||||||||||||||||||||||||
One-to-four family | — | $ | — | $ | — | — | % | — | % | $ | — | $ | — | |||||||||||||||
Commercial and industrial | 2 | 1,314 | 1,273 | 3.22 | 3.22 | 41 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | 2 | $ | 1,314 | $ | 1,273 | $ | 41 | $ | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||
Weighted Average | ||||||||||||||||||||||||||||
(dollars in millions) | Number | Pre- | Post- | Pre- | Post- | Charge- | Capitalized | |||||||||||||||||||||
Loan Category: | ||||||||||||||||||||||||||||
Multi-family | — | $ | — | $ | — | — | — | $ | — | $ | — |
|
| For the Three Months Ended June 30, 2020 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial real estate |
|
| 1 |
|
| $ | 15 |
|
| $ | 15 |
|
|
| 8.00 | % |
|
| 3.50 | % |
| $ | — |
|
| $ | — |
|
Commercial and industrial |
| 11 |
|
|
| 2 |
|
|
| 1 |
|
|
| 2.92 |
|
|
| 2.92 |
|
|
| 1 |
|
|
| — |
| |
Total |
|
| 12 |
|
|
| 17 |
|
|
| 16 |
|
|
| 7.28 |
|
|
| 3.45 |
|
| $ | 1 |
|
| $ | — |
|
The financial effects of the Company’s TDRs for the periods indicatedsix months ended June 30, 2021 and 2020 are summarized as follows:
For the Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||||||
Weighted Average Interest Rate | ||||||||||||||||||||||||||||
(dollars in thousands) | Number of Loans | Pre-Modification Recorded Investment | Post-Modification Recorded Investment | Pre-Modification | Post- Modification | Charge-off Amount | Capitalized Interest | |||||||||||||||||||||
Loan Category: | ||||||||||||||||||||||||||||
One-to-four family | 4 | $ | 810 | $ | 990 | 5.93 | % | 2.21 | % | $ | — | $ | 12 | |||||||||||||||
Acquisition, development, and construction | 2 | 8,652 | 8,652 | 5.50 | 5.50 | — | — | |||||||||||||||||||||
Commercial and industrial | 52 | 48,716 | 23,673 | 3.36 | 3.29 | 11,079 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | 58 | $ | 58,178 | $ | 33,315 | $ | 11,079 | $ | 12 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
For the Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||||
Weighted Average Interest Rate | ||||||||||||||||||||||||||||
(dollars in thousands) | Number of Loans | Pre-Modification Recorded Investment | Post-Modification Recorded Investment | Pre-Modification | Post- Modification | Charge-off Amount | Capitalized Interest | |||||||||||||||||||||
Loan Category: | ||||||||||||||||||||||||||||
Multi-family | 1 | $ | 9,340 | $ | 8,303 | 4.63 | % | 4.00 | % | $ | — | $ | — | |||||||||||||||
One-to-four family | 3 | 477 | 628 | 3.62 | 3.07 | — | 6 | |||||||||||||||||||||
Commercial and industrial | 4 | 2,712 | 2,560 | 3.26 | 3.21 | 89 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | 8 | $ | 12,529 | $ | 11,491 | $ | 89 | $ | 6 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| For the Six Months Ended June 30, 2021 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Multi-family |
|
| 1 |
|
|
| 7 |
|
|
| 7 |
|
|
| 3.13 | % |
|
| 3.25 | % |
| $ | — |
|
| $ | — |
|
|
| For the Six Months Ended June 30, 2020 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||||||||||
(dollars in millions) |
| Number |
|
| Pre- |
|
| Post- |
|
| Pre- |
|
| Post- |
|
| Charge- |
|
| Capitalized |
| |||||||
Loan Category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial real estate |
|
| 1 |
|
| $ | 15 |
|
| $ | 15 |
|
|
| 8.00 | % |
|
| 3.50 | % |
| $ | — |
|
| $ | — |
|
Commercial and industrial |
|
| 19 |
|
|
| 4 |
|
|
| 3 |
|
|
| 3.08 |
|
|
| 3.03 |
|
|
| 1 |
|
|
| — |
|
Total |
|
| 20 |
|
| $ | 19 |
|
| $ | 18 |
|
|
| 6.89 |
|
|
| 3.42 |
|
| $ | 1 |
|
| $ | — |
|
At SeptemberJune 30, 2017, twonon-coveredone-to-four family loans, totaling $497,000 and six2021, 18 C&I loans totaling $1.4in the aggregate amount of $2 million have been modified as TDRs during the twelve months ended at that date, and were in payment default. At June 30, 2020, 40 C&I loans in the aggregate amount of $6 million that had been modified as TDRs during the twelve months ended at that date and were in payment default. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.
The Company does not consider a payment to be in default when the loan is in forbearance, or otherwise granted a delay of payment, or 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 doesmay consider a loan with multiple modifications or forbearance periods to be in default, and would also consider a loan to be in default if the borrower were in bankruptcy or if the loan were partially charged off subsequent to modification.
Covered Loans
As previously discussed, the Company sold its covered loan portfolio during the third quarter of 2017; therefore, the Company does not have any covered loans outstanding as of September 30, 2017.
The Company referred to certain loans acquired in the AmTrust and Desert Hills Bank (“Desert Hills”) transactions as “covered loans” because the Company was being reimbursed for a substantial portion of losses on these loans under the terms of the LSA. Covered loans were accounted for under ASC310-30 and were initially measured at fair value, which included estimated future credit losses expected to be incurred over the lives of the loans. Under ASC310-30, purchasers are permitted to aggregate acquired loans Management takes into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
The following table presents the carrying value of covered loans which were acquired in the acquisitions of AmTrust and Desert Hills as of December 31, 2016.
(dollars in thousands) | Amount | Percent of Covered Loans | ||||||
Loan Category: | ||||||||
One-to-four family | $ | 1,609,635 | 94.8 | % | ||||
Other loans | 88,498 | 5.2 | ||||||
|
|
|
| |||||
Total covered loans | $ | 1,698,133 | 100.0 | % | ||||
|
|
|
|
At December 31, 2016, the unpaid principal balance of covered loans was $2.1 billion and the carrying value of such loans was $1.7 billion.
At December 31, 2016, the Company estimated the fair values of the AmTrust and Desert Hills loan portfolios, which represented the expected cash flows from the portfolios, discounted at market-based rates. In estimating such fair values, the Company: (a) calculated the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”); and (b) estimated the expected amount and timing of undiscounted principal and interest payments (the “undiscounted expected cash flows”). The amount by which the undiscounted expected cash flows exceed the estimated fair value (the “accretable yield”) was accreted into interest income over the lives of the loans. The amount by which the undiscounted contractual cash flows exceed the undiscounted expected cash flows is referred to as the“non-accretable difference.” Thenon-accretable difference represented an estimate of the credit risk in the loan portfolios at the respective acquisition dates.
The accretable yield was affected by changes in interest rate indices for variable rate loans, changes in prepayment assumptions, and changes in expected principal and interest payments over the estimated lives of the loans. Changes in interest rate indices for variable rate loans increased or decreased the amount of interest income expected to be collected, depending on the direction of interest rates. Prepayments affected the estimated lives of covered loans and could have changed the amount of interest income and principal expected to be collected. Changes in expected principal and interest payments over the estimated lives of covered loans were driven by the credit outlook and by actions that may be taken with borrowers. As of September 30, 2017, the accretable yield was reduced to zero.
On a quarterly basis, the Company had evaluated the estimates of the cash flows it expected to collect. Expected future cash flows from interest payments were based on variable rates at the time of the quarterly evaluation. Estimates of expected cash flows that were impacted by changes in interest rate indices for variable rate loans and prepayment assumptions were treated as prospective yield adjustments and included in interest income.
In the nine months ended September 30, 2017, changes in the accretable yield for covered loans were as follows:
(in thousands) | Accretable Yield | |||
Balance at beginning of period | $ | 647,470 | ||
Accretion | (72,842 | ) | ||
Reclassification tonon-accretable difference for the six months ended June 30, 2017 | (11,381 | ) | ||
Changes in expected cash flows due to the sale of the covered loan portfolio | (563,247 | ) | ||
|
| |||
Balance at end of period | $ | — | ||
|
|
In the preceding table, the line item “Reclassification tonon-accretable difference for the six months ended June 30, 2017” includes changes in cash flows that the Company expects to collect due to changes in prepayment assumptions, changes in interest rates on variable rate loans, and changes in loss assumptions. As of the Company’s most recent quarterly evaluation, prepayment assumptions increased, which resulted in a decrease in future expected interest cash flows and, consequently, a decrease in the accretable yield. The effect of this decrease was partially offset with an improvement in the underlying credit assumptions and the resetting of rates on variable rate loans at a slightly higher level, which resulted in an increase in future expected interest cash flows and, consequently, an increase in the accretable yield.
Reflecting the foreclosure of certain loans acquired in the AmTrust and Desert Hills acquisitions, the Company owned certain other real estate owned (“OREO”) that was covered under its LSA (“covered OREO”). Covered OREO was initially recorded at its estimated fair value on the respective dates of acquisition, based on independent appraisals, less the estimated selling costs. Any subsequent write-downs due to declines in fair value were charged tonon-interest expense, and were partially offset by loss reimbursements under the LSA. Any recoveries of previous write-downs have been credited tonon-interest expense and partially offset by the portion of the recovery that was due to the FDIC. As previously discussed, the Company’s covered OREO was sold during the third quarter of 2017.
The FDIC loss share receivable represented the present value of the estimated losses to be reimbursed by the FDIC. The estimated losses were based on the same cash flow estimates usedconsideration all TDR modifications in determining the fair valueappropriate level of the covered loans. The FDIC loss share receivable was reduced as losses on covered loans were recognized and as loss sharing payments were received from the FDIC. Realized losses in excess of acquisition-date estimates resulted in an increase in the FDIC loss share receivable. Conversely, if realized losses were lower than the acquisition-date estimates, the FDIC loss share receivable was reduced by amortization to interest income. Effective October 31, 2017, the Company and the FDIC completed termination of the LSA.allowance.
At December 31, 2016, the Company held residential mortgage loans of $78.6 million that were in the process of foreclosure. The vast majority of such loans were covered loans. The Company had no residential mortgage loans that were in the process of foreclosure at September 30, 2017.
The following table presents information regarding the Company’s covered loans at December 31, 2016 that were 90 days or more past due:
(in thousands) | ||||
Covered Loans 90 Days or More Past Due: | ||||
One-to-four family | $ | 124,820 | ||
Other loans | 6,645 | |||
|
| |||
Total covered loans 90 days or more past due | $ | 131,465 | ||
|
|
The following table presents information regarding the Company’s covered loans at December 31, 2016 that were 30 to 89 days past due:
(in thousands) | ||||
Covered Loans30-89 Days Past Due: | ||||
One-to-four family | $ | 21,112 | ||
Other loans | 1,536 | |||
|
| |||
Total covered loans30-89 days past due | $ | 22,648 | ||
|
|
As noted above, at December 31, 2016, the Company had $22.6 million of covered loans that were 30 to 89 days past due, and covered loans of $131.5 million that were 90 days or more past due but considered to be performing due to the application of the yield accretion method under ASC310-30. The remainder of the Company’s covered loan portfolio totaled $1.5 billion at December 31, 2016 and were considered current at that date.
Loans that may have been classified asnon-performing loans by AmTrust or Desert Hills were no longer classified asnon-performing by the Company because, at the respective dates of acquisition, the Company believed that it would fully collect the new carrying value of these loans. The new carrying value represented the contractual balance, reduced by the portion that was expected to be uncollectible (i.e., thenon-accretable difference) and by an accretable yield (discount) that was recognized as interest income. It is important to note that management’s judgment was required in reclassifying loans subject to ASC310-30 as performing loans, and such judgment was dependent on having a reasonable expectation about the timing and amount of the cash flows to be collected, even if the loan was contractually past due.
The primary credit quality indicator for covered loans is the expectation of underlying cash flows. In the nine months ended September 30, 2017, the Company recorded recoveries of losses on covered loans of $23.7 million. The recoveries were largely due to an increase in expected cash flows in the acquired portfolios ofone-to-four family and home equity loans, and were partly offset by FDIC indemnification expense of $19.0 million that was recorded in“Non-interest income.”
The Company recovered losses on covered loans of $6.0 million during the nine months ended September 30, 2016, which was largely offset by FDIC indemnification expense of $4.8 million. In the three months ended September 30, 2016, the Company recorded recoveries of losses on covered loans of $1.3 million and FDIC indemnification expense of $1.0 million.
Note 6. Allowances for Loan Losses
The following tables provide additional information regarding the Company’s allowances for losses onnon-covered loans and covered loans, based upon the method of evaluating loan impairment:
(in thousands) | Mortgage | Other | Total | |||||||||
Allowances for Loan Losses at September 30, 2017: | ||||||||||||
Loans individually evaluated for impairment | $ | — | $ | — | $ | — | ||||||
Loans collectively evaluated for impairment | 122,522 | 36,396 | 158,918 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 122,522 | $ | 36,396 | $ | 158,918 | ||||||
|
|
|
|
|
| |||||||
(in thousands) | Mortgage | Other | Total | |||||||||
Allowances for Loan Losses at December 31, 2016: | ||||||||||||
Loans individually evaluated for impairment | $ | — | $ | 577 | $ | 577 | ||||||
Loans collectively evaluated for impairment | 123,925 | 32,022 | 155,947 | |||||||||
Acquired loans with deteriorated credit quality | 11,984 | 13,483 | 25,467 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 135,909 | $ | 46,082 | $ | 181,991 | ||||||
|
|
|
|
|
|
The following tables provide additional information regarding the methods used to evaluate the Company’s loan portfolio for impairment:
(in thousands) | Mortgage | Other | Total | |||||||||
Loans Receivable at September 30, 2017: | ||||||||||||
Loans individually evaluated for impairment | $ | 29,431 | $ | 45,682 | $ | 75,113 | ||||||
Loans collectively evaluated for impairment | 35,465,464 | 1,940,127 | 37,405,591 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 35,494,895 | $ | 1,985,809 | $ | 37,480,704 | ||||||
|
|
|
|
|
| |||||||
(in thousands) | Mortgage | Other | Total | |||||||||
Loans Receivable at December 31, 2016: | ||||||||||||
Loans individually evaluated for impairment | $ | 29,660 | $ | 18,592 | $ | 48,252 | ||||||
Loans collectively evaluated for impairment | 35,402,029 | 1,900,158 | 37,302,187 | |||||||||
Acquired loans with deteriorated credit quality | 1,614,755 | 89,140 | 1,703,895 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 37,046,444 | $ | 2,007,890 | $ | 39,054,334 | ||||||
|
|
|
|
|
|
Allowance for Credit Losses onNon-Covered Loans and Leases
Allowance for Credit Losses on Loans and Leases
The following table summarizes activity in the allowance for credit losses onnon-covered loans and leases for the periods indicated:
For the Nine Months Ended September 30, |
| For the Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 |
| 2021 |
|
| 2020 |
| |||||||||||||||||||||||||||||||||||||||||
(in thousands) | Mortgage | Other | Total | Mortgage | Other | Total | ||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Mortgage |
|
| Other |
|
| Total |
|
| Mortgage |
|
| Other |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 125,416 | $ | 32,874 | $ | 158,290 | $ | 124,478 | $ | 22,646 | $ | 147,124 |
| $ | 176 |
| $ | 18 |
| $ | 194 |
| $ | 123 |
| $ | 25 |
| $ | 148 |
| |||||||||||||||||
Impact of CECL adoption |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2 |
|
| 2 |
| |||||||||||||||||||||||||||||
Adjusted balance, beginning of period |
| 176 |
| 18 |
| 194 |
| 123 |
| 27 |
| 150 |
| |||||||||||||||||||||||||||||||||||
Charge-offs | (375 | ) | (58,203 | ) | (58,578 | ) | (170 | ) | (1,155 | ) | (1,325 | ) |
| (2 | ) |
|
| (3 | ) |
|
| (5 | ) |
| — |
| (14 | ) |
| (14 | ) | |||||||||||||||||
Recoveries | 595 | 594 | 1,189 | 1,251 | 956 | 2,207 |
| 2 |
|
|
| 10 |
|
|
| 12 |
| — |
| — |
| — |
| |||||||||||||||||||||||||
(Recovery of) provision fornon-covered loan losses | (3,114 | ) | 61,131 | 58,017 | 675 | 6,024 | 6,699 | |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Provision for credit losses |
|
| 1 | �� |
|
| — |
|
| 1 |
|
| 34 |
|
| 4 |
|
| 38 |
| ||||||||||||||||||||||||||||
Balance, end of period | $ | 122,522 | 36,396 | $ | 158,918 | $ | 126,234 | $ | 28,471 | $ | 154,705 |
| $ | 177 |
| $ | 25 |
| $ | 202 |
| $ | 157 |
| $ | 17 |
| $ | 174 |
| ||||||||||||||||||
|
|
|
|
|
|
See “Critical Accounting Policies” for additional information regarding
At June 30, 2021, the Company’s allowance for credit losses onnon-covered loans.
Separately, at June 30, 2021, the Company had an allowance for unfunded commitments of $11 million.
For the six months ended June 30, 2021, the allowance for credit losses on loan and leases increased primarily as a result of growth across segments of the loan portfolio, and by macroeconomic factors surrounding the COVID-19 pandemic, specifically the resultant estimated decreases in property values in the New York City area. The forecast includes a temporarily significant increase in Gross Domestic Product (“GDP”) to +6.9% in the second half of 2021 as the economy begins to recover from the systemic disruptions of the COVID-19 pandemic. Unemployment continues to subside from the historic shock of 2020, but is not forecasted to return to pre-pandemic levels around 3.5% until 2023. Interest rates are forecasted to begin to rise modestly and 10 Year-Baa spread widens slightly beginning in 2022 and levels off at 2.6% through 2023. In addition to these quantitative inputs, several qualitative factors were considered in increasing our allowance for loan and lease credit losses, including the risk that the economic decline proves to be more severe and/or prolonged than our baseline forecast. The impact of the unprecedented fiscal stimulus and changes to federal and local laws and regulations, including changes to various government sponsored loan programs, was also considered.
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 impairednon-coverednonaccrual loans at SeptemberJune 30, 2017:2021:
(in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||||||||||||||
Impaired loans with no related allowance: | ||||||||||||||||||||||||||||||||
(dollars in millions) |
| Recorded |
|
| Related |
|
| Interest |
| |||||||||||||||||||||||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Multi-family | $ | 9,071 | $ | 11,548 | $ | — | $ | 10,016 | $ | 378 |
| $ | 7 |
| $ | — |
| $ | — |
| ||||||||||||
Commercial real estate | 2,628 | 7,743 | — | 4,517 | 13 |
| 11 |
| - |
| - |
| ||||||||||||||||||||
One-to-four family | 1,980 | 2,086 | — | 2,898 | 38 |
| - |
| - |
| - |
| ||||||||||||||||||||
Acquisition, development, and construction | 15,752 | 25,952 | — | 8,588 | 435 |
| - |
| - |
| - |
| ||||||||||||||||||||
Other | 45,682 | 98,084 | — | 32,556 | 1,486 |
|
| 9 |
|
| - |
|
| - |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||
Total impaired loans with no related allowance | $ | 75,113 | $ | 145,413 | $ | — | $ | 58,575 | $ | 2,350 | ||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||
Impaired loans with an allowance recorded: | ||||||||||||||||||||||||||||||||
Total nonaccrual loans with no related allowance |
| $ | 27 |
| $ | — |
| $ | — |
| ||||||||||||||||||||||
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Multi-family | $ | — | $ | — | $ | — | $ | — | $ | — |
| $ | 2 |
| $ | 1 |
| $ | — |
| ||||||||||||
Commercial real estate | — | — | — | — | — |
| 1 |
| - |
| - |
| ||||||||||||||||||||
One-to-four family | — | — | — | — | — |
| 2 |
| - |
| - |
| ||||||||||||||||||||
Acquisition, development, and construction | — | — | — | — | — |
| - |
| - |
| - |
| ||||||||||||||||||||
Other | — | — | — | 3,278 | — |
|
| - |
|
| - |
|
| - |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||
Total impaired loans with an allowance recorded | $ | — | $ | — | $ | — | $ | 3,278 | $ | — | ||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||
Total impaired loans: | ||||||||||||||||||||||||||||||||
Total nonaccrual loans with an allowance recorded |
| $ | 5 |
| $ | 1 |
| $ | — |
| ||||||||||||||||||||||
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Multi-family | $ | 9,071 | $ | 11,548 | $ | — | $ | 10,016 | $ | 378 |
| $ | 9 |
| $ | 1 |
| $ | — |
| ||||||||||||
Commercial real estate | 2,628 | 7,743 | — | 4,517 | 13 |
| 12 |
| - |
| - |
| ||||||||||||||||||||
One-to-four family | 1,980 | 2,086 | — | 2,898 | 38 |
| 2 |
| - |
| - |
| ||||||||||||||||||||
Acquisition, development, and construction | 15,752 | 25,952 | — | 8,588 | 435 |
| - |
| - |
| - |
| ||||||||||||||||||||
Other | 45,682 | 98,084 | — | 35,834 | 1,486 |
|
| 9 |
|
| - |
|
| - |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||
Total impaired loans | $ | 75,113 | $ | 145,413 | $ | — | $ | 61,853 | $ | 2,350 | ||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||
Total nonaccrual loans |
| $ | 32 |
| $ | 1 |
| $ | — |
|
The following table presents additional information about the Company’s impairednon-coverednonaccrual loans at December 31, 2016:2020:
(in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||||||||||||||||
Impaired loans with no related allowance: | ||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Recorded |
|
|
| Related |
|
|
| Interest |
| |||||||||||||||||||||||
Nonaccrual loans with no related allowance: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Multi-family | $ | 10,742 | $ | 13,133 | $ | — | $ | 11,431 | $ | 627 |
| $ | — |
| $ | — |
| $ | — |
| ||||||||||||||
Commercial real estate | 9,117 | 14,868 | — | 10,461 | 143 |
| 2 |
| — |
| — |
| ||||||||||||||||||||||
One-to-four family | 3,601 | 4,267 | — | 3,079 | 124 |
| 1 |
| — |
| — |
| ||||||||||||||||||||||
Acquisition, development, and construction | 6,200 | 15,500 | — | 1,550 | 414 |
| — |
| — |
| — |
| ||||||||||||||||||||||
Other | 6,739 | 7,955 | — | 8,261 | 92 |
|
| 20 |
|
|
| — |
|
|
| 1 |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||
Total impaired loans with no related allowance | $ | 36,399 | $ | 55,723 | $ | — | $ | 34,782 | $ | 1,400 | ||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||
Impaired loans with an allowance recorded: | ||||||||||||||||||||||||||||||||||
Total nonaccrual loans with no related allowance |
| $ | 23 |
|
| $ | — |
|
| $ | 1 |
| ||||||||||||||||||||||
Nonaccrual loans with an allowance recorded: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Multi-family | $ | — | $ | — | $ | — | $ | — | $ | — |
| $ | 4 |
| $ | 1 |
| $ | — |
| ||||||||||||||
Commercial real estate | — | — | — | — | — |
| 10 |
| — |
| — |
| ||||||||||||||||||||||
One-to-four family | — | — | — | — | — |
| 1 |
| — |
| — |
| ||||||||||||||||||||||
Acquisition, development, and construction | — | — | — | — | — |
| — |
| — |
| — |
| ||||||||||||||||||||||
Other | 11,853 | 13,529 | 577 | 4,574 | 213 |
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||
Total impaired loans with an allowance recorded | $ | 11,853 | $ | 13,529 | $ | 577 | $ | 4,574 | $ | 213 | ||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||
Total impaired loans: | ||||||||||||||||||||||||||||||||||
Total nonaccrual loans with an allowance recorded |
| $ | 15 |
|
| $ | 1 |
|
| $ | — |
| ||||||||||||||||||||||
Total nonaccrual loans: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Multi-family | $ | 10,742 | $ | 13,133 | $ | — | $ | 11,431 | $ | 627 |
| $ | 4 |
| $ | 1 |
| $ | — |
| ||||||||||||||
Commercial real estate | 9,117 | 14,868 | — | 10,461 | 143 |
| 12 |
| — |
| — |
| ||||||||||||||||||||||
One-to-four family | 3,601 | 4,267 | — | 3,079 | 124 |
| 2 |
| — |
| — |
| ||||||||||||||||||||||
Acquisition, development, and construction | 6,200 | 15,500 | — | 1,550 | 414 |
| — |
| — |
| — |
| ||||||||||||||||||||||
Other | 18,592 | 21,484 | 577 | 12,835 | 305 |
|
| 20 |
|
|
| — |
|
|
| 1 |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||
Total impaired loans | $ | 48,252 | $ | 69,252 | $ | 577 | $ | 39,356 | $ | 1,613 | ||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||
Total nonaccrual loans |
| $ | 38 |
|
| $ | 1 |
|
| $ | 1 |
|
24
Allowance for Losses on Covered Loans
Covered loans were reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions were reviewed for collectability based on the expectations of cash flows from these loans. Covered loans were aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered loans, the Company periodically performed an analysis to estimate the expected cash flows for each of the pools of loans. The Company recorded a provision for (recovery of) losses on covered loans to the extent that the expected cash flows from a loan pool had decreased or increased since the acquisition date.
Accordingly, if there was a decrease in expected cash flows due to an increase in estimated credit losses (as compared to the estimates made at the respective acquisition dates), the decrease in the present value of expected cash flows was recorded as a provision for covered loan losses charged to earnings, and the allowance for covered loan losses was increased. A related credit tonon-interest income and an increase in the LSA are recognized at the same time, and measured based on the applicable loss sharing agreement percentage.
If there was an increase in expected cash flows due to a decrease in estimated credit losses (as compared to the estimates made at the respective acquisition dates), the increase in the present value of expected cash flows was recorded as a recovery of the prior-period impairment charged to earnings, and the allowance for covered loan losses was reduced. A related debit tonon-interest income and a decrease in the LSA was recognized at the same time, and measured based on the applicable Loss Share Agreement percentage.
The following table summarizes activity in the allowance for losses on covered loans for the periods indicated:
For the Nine Months Ended September 30, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Balance, beginning of period | $ | 23,701 | $ | 31,395 | ||||
Recovery of losses on covered loans(1) | (23,701 | ) | (6,035 | ) | ||||
|
|
|
| |||||
Balance, end of period | $ | — | $ | 25,360 | ||||
|
|
|
|
Note 7. Borrowed Funds
The following table summarizes the Company’s borrowed funds at the dates indicated:
(in thousands) | September 30, 2017 | December 31, 2016 | ||||||||||||||
(dollars in millions) |
| June 30, |
|
| December 31, |
| ||||||||||
Wholesale Borrowings: |
|
|
|
|
|
| ||||||||||
FHLB advances | $ | 11,554,500 | $ | 11,664,500 |
| $ | 14,003 |
| $ | 14,628 |
| |||||
Repurchase agreements | 450,000 | 1,500,000 |
|
| 800 |
|
| 800 |
| |||||||
Federal funds purchased | — | 150,000 | ||||||||||||||
|
| |||||||||||||||
Total wholesale borrowings | $ | 12,004,500 | $ | 13,314,500 |
| $ | 14,803 |
| $ | 15,428 |
| |||||
Junior subordinated debentures | 359,102 | 358,879 |
| 360 |
| 360 |
| |||||||||
|
| |||||||||||||||
Subordinated notes |
|
| 296 |
|
| 296 |
| |||||||||
Total borrowed funds | $ | 12,363,602 | $ | 13,673,379 |
| $ | 15,459 |
| $ | 16,084 |
| |||||
|
|
The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at SeptemberJune 30, 2017:2021:
Remaining Contractual Maturity of the Agreements | ||||||||||||||||
(in thousands) | Overnight and Continuous | Up to 30 Days | 30–90 Days | Greater than 90 Days | ||||||||||||
GSE debentures and mortgage-related securities | $ | — | $ | — | $ | — | $ | 450,000 | ||||||||
|
|
|
|
|
|
|
|
|
| Remaining Contractual Maturity of the Agreements |
| |||||||||||||
(dollars in millions) |
| Overnight and |
|
| Up to |
|
| 30–90 Days |
|
| Greater than |
| ||||
GSE obligations |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 800 |
|
Subordinated Notes
At SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company had $359.1$296 million of fixed-to-floating rate subordinated notes outstanding:
Date of Original Issue |
| Stated |
| Interest |
|
| Original Issue |
| ||
(dollars in millions) |
| |||||||||
Nov. 6, 2018 |
| Nov. 6, 2028 |
|
| 5.90 | % |
| $ | 300 |
|
(1) From and $358.9including the date of original issuance to, but excluding November 6, 2023, the Notes will bear interest at an initial rate of 5.90% per annum payable semi-annually. Unless redeemed, from and including November 6, 2023 to but excluding the maturity date, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR rate plus 278 basis points payable quarterly.
Junior Subordinated Debentures
At June 30, 2021 and December 31, 2020, the Company had $360 million respectively, 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 SeptemberJune 30, 2017:2021:
Issuer | Interest Rate of Capital Securities and Debentures | Junior Subordinated Debentures Amount Outstanding | Capital Securities Amount Outstanding | Date of Original Issue | Stated Maturity | First Optional Redemption Date | Interest |
|
| Junior |
|
| Capital |
|
| Date of |
| Stated |
| First | |||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
(dollars in millions) | (dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
New York Community Capital Trust V (BONUSESSMUnits) | 6.000 | % | $ | 145,176 | $ | 138,825 | Nov. 4, 2002 | Nov. 1, 2051 | Nov. 4, 2007 | (1) |
| 6.00 | % |
| $ | 146 |
| $ | 140 |
| Nov. 4, 2002 |
| Nov. 1, 2051 |
| Nov. 4, 2007(1) | ||||||||||||||||
New York Community Capital Trust X | 2.920 | 123,712 | 120,000 | Dec. 14, 2006 | Dec. 15, 2036 | Dec. 15, 2011 | (2) |
| 1.72 |
| 124 |
| 120 |
| Dec. 14, 2006 |
| Dec. 15, 2036 |
| Dec. 15, 2011 (2) | ||||||||||||||||||||||
PennFed Capital Trust III | 4.570 | 30,928 | 30,000 | June 2, 2003 | June 15, 2033 | June 15, 2008 | (2) |
| 3.37 |
| 31 |
| 30 |
| June 2, 2003 |
| June 15, 2033 |
| June 15, 2008 (2) | ||||||||||||||||||||||
New York Community Capital Trust XI | 2.985 | 59,286 | 57,500 | April 16, 2007 | June 30, 2037 | June 30, 2012 | (2) |
| 1.80 |
|
| 59 |
|
| 57 |
| April 16, 2007 |
| June 30, 2037 |
| June 30, 2012 (2) | ||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Total junior subordinated debentures | $ | 359,102 | $ | 346,325 |
|
|
| $ | 360 |
| $ | 347 |
|
|
|
|
|
| |||||||||||||||||||||||
|
|
(1) Callable subject to certain conditions as described |
Note 8. Mortgage Servicing Rights
The Company records a separate servicing asset representing the right to service third-party loans. Such MSRs are initially recorded at their fair value as a component of the sale proceeds. The fair values of MSRs are based on an analysis of discounted cash flows that incorporates estimates of (1) market servicing costs, (2) market-based estimates of ancillary servicing revenue, (3) market-based prepayment rates, and (4) market profit margins.
MSRs are subsequently measured at either fair value or are amortized in proportion to, and over the period of, estimated net servicing income. The Company elects one of those methods on a class basis. A class is determined based on (1) the availability of market inputs used in determining the fair value of servicing assets, and/or (2) the Company’s method for managing the risks of servicing assets.
As previously discussed, the Company completed the sale of its mortgage banking business in the third quarter of 2017, and consequently sold substantially all of its mortgage servicing assets. Accordingly, the value of the MSR asset declined to $6.9 million at September 30, 2017, compared to $225.4 million at June 30, 2017 and $234.0 million at December 31, 2016. These balances all consisted of two classes of MSRs for which the Company separately manages the economic risk: residential MSRs and participation MSRs (i.e., MSRs on loans sold through participations).
Residential MSRs are carried at fair value, and at September 30, 2017 reflected only loans sold through the FHLB’s Mortgage Partnership Finance Program, with changes in fair value recorded as a component ofnon-interest income in each period. The Company uses various derivative instruments to mitigate the income statement-effect of changes in fair value due to changes in valuation inputs and assumptions regarding its residential MSRs. The effects of changes in the fair value of the derivatives are recorded as “Mortgage banking income,” which is included in“Non-interest income” in the Consolidated Statements of Income and Comprehensive Income. MSRs do not trade in an active open market with readily observable prices. Accordingly, the Company utilizes a third-party valuation specialist to determine the fair value of its MSRs. This specialist determines fair value based on the present value of estimated future net servicing income cash flows, and incorporates assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The specialist and the Company evaluate, and periodically adjust, as necessary, these underlying inputs and assumptions to reflect market conditions and changes in the assumptions that a market participant would consider in valuing MSRs.
The value of residential MSRs at any given time is significantly affected by the mortgage interest rates that are then available in the marketplace. These, in turn, influence mortgage loan prepayment speeds. The rate of prepayment of serviced residential loans is the most significant estimate involved in the measurement process. Actual prepayment rates may differ from those projected by management due to changes in a variety of economic factors, including prevailing interest rates and the availability of alternative financing sources to borrowers.
During periods of declining interest rates, the value of residential MSRs generally declines as an increase in mortgage refinancing activity results in an increase in prepayments and a decrease in the carrying value of residential MSRs through a charge to earnings in the current period. Conversely, during periods of rising interest rates, the value of residential MSRs generally increases as mortgage refinancing activity declines and the actual prepayments of loans being serviced occur more slowly than had been expected. This results in the carrying value of residential MSRs and servicing income being higher than previously anticipated. Accordingly, the value of residential MSRs that is actually realized could differ from the value initially recorded.
The collective amount of contractually specified servicing fees, late fees, and ancillary fees, which is recorded as “Mortgage banking income” in the Consolidated Statements of Income and Comprehensive Income, was $483,000 and $1.1 million for the three and nine months ended September 30, 2017, respectively, and $351,000 and $983,000 for the three and nine months ended September 30, 2016, respectively.
Participation MSRs are initially carried at fair value and are subsequently amortized and carried at the lower of their fair value or amortized amount. The amortization is recorded in proportion to, and over the period of, estimated net servicing income, with impairment of those servicing assets evaluated through an assessment of their fair value via a discounted cash-flow method. The net carrying value is compared to the discounted estimated future net cash flows to determine whether adjustments should be made to carrying values or amortization schedules. Impairment of participation MSRs is recognized through a valuation allowance and a charge to current-period earnings if it is considered to be temporary, or through a direct write-down of the asset and a charge to current-period earnings if it is considered to be other than temporary. The predominant risk characteristics of the underlying loans that are used to stratify the participation MSRs for measurement purposes generally include the (1) loan origination date, (2) loan rate, (3) loan type and size, (4) loan maturity date, and (5) geographic location. Changes in the carrying value of participation MSRs due to amortization or declines in fair value (i.e., impairment), if any, are reported in “Other income” in the period during which such changes occur. In the nine months ended September 30, 2017 and 2016, there was no impairment related to the Company’s participation MSRs.
The following tables set forth the changes in the balances of residential MSRs and participation MSRs for the periods indicated:
For the Three Months Ended | ||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||
(in thousands) | Residential | Participation | Residential | Participation | ||||||||||||
Carrying value, beginning of period | $ | 220,586 | $ | 4,853 | $ | 188,331 | $ | 5,663 | ||||||||
Additions | 6,072 | 39 | 12,005 | 731 | ||||||||||||
Sales | (208,827 | ) | — | — | — | |||||||||||
Increase (decrease) in fair value: | ||||||||||||||||
Due to changes in interest rates | (222 | ) | — | 5,668 | — | |||||||||||
Due to model assumption changes(1) | — | — | — | — | ||||||||||||
Due to loan payoffs | (7,855 | ) | — | (12,818 | ) | — | ||||||||||
Due to passage of time and other changes | (6,972 | ) | — | (1,767 | ) | — | ||||||||||
Amortization | — | (813 | ) | — | (618 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Carrying value, end of period | $ | 2,782 | $ | 4,079 | $ | 191,419 | $ | 5,776 | ||||||||
|
|
|
|
|
|
|
|
For the Nine Months Ended | ||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||
(in thousands) | Residential | Participation | Residential | Participation | ||||||||||||
Carrying value, beginning of period | $ | 228,099 | $ | 5,862 | $ | 243,389 | $ | 4,345 | ||||||||
Additions | 18,054 | 595 | 31,185 | 2,999 | ||||||||||||
Sales | (208,827 | ) | — | — | — | |||||||||||
Increase (decrease) in fair value: | ||||||||||||||||
Due to changes in interest rates | (2,130 | ) | — | (32,139 | ) | — | ||||||||||
Due to model assumption changes(1) | — | — | (13,088 | ) | — | |||||||||||
Due to loan payoffs | (22,524 | ) | — | (31,939 | ) | — | ||||||||||
Due to passage of time and other changes | (9,890 | ) | — | (5,989 | ) | — | ||||||||||
Amortization | — | (2,378 | ) | — | (1,568 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Carrying value, end of period | $ | 2,782 | $ | 4,079 | $ | 191,419 | $ | 5,776 | ||||||||
|
|
|
|
|
|
|
|
The following table presents the key assumptions used in calculating the fair value of the Company’s residential MSRs at the dates indicated:
September 30, 2017 | December 31, 2016 | |||||||
Expected weighted average life | 87 months | 82 months | ||||||
Constant prepayment speed | 9.89 | % | 8.70 | % | ||||
Discount rate | 12.00 | 10.05 | ||||||
Primary mortgage rate to refinance | 4.00 | 4.11 | ||||||
Cost to service (per loan per year): | ||||||||
Current | $70 | $64 | ||||||
30-59 days or less delinquent | 220 | 214 | ||||||
60-89 days delinquent | 370 | 364 | ||||||
90-119 days delinquent | 470 | 464 | ||||||
120 days or more delinquent | 870 | 864 |
The increase in the constant prepayment speed was primarily attributable to an increase in the housing price index used by the Company’s third-party valuation specialist, suggesting that homebuyer demand has increased and newly created equity could lead to more refinancing.
In connectionprospectus filed with the aforementioned sale of the Company’s MSR portfolio, the Company will temporarily continue to service the $20.5 billion of loans and, consequently, the total unpaid principal balance of loans serviced for others remained largely unchanged at $24.5 billion and $25.1 billion at September 30, 2017 and December 31, 2016, respectively.SEC on November 4, 2002.
(2) Callable from this date forward.
Note 9.8. 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, |
| For the Three Months Ended June 30, |
| |||||||||||||||||||||||||||||
2017 | 2016 |
| 2021 |
|
| 2020 |
| |||||||||||||||||||||||||
(in thousands) | Pension Benefits | Post- Retirement Benefits | Pension Benefits | Post- Retirement Benefits | ||||||||||||||||||||||||||||
(dollars in millions) |
| Pension |
|
| Post- |
|
| Pension |
|
| Post- |
| ||||||||||||||||||||
Components of net periodic (credit) expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest cost | $ | 1,404 | $ | 144 | $ | 1,470 | $ | 160 |
| $ | 1 |
| $ | — |
| $ | 1 |
| $ | — |
| |||||||||||
Service cost | — | — | — | 1 | ||||||||||||||||||||||||||||
Expected return on plan assets | (4,073 | ) | — | (3,906 | ) | — |
| (4 | ) |
| — |
| (4 | ) |
| — |
| |||||||||||||||
Amortization of prior-service costs | — | (62 | ) | — | (62 | ) | ||||||||||||||||||||||||||
Amortization of prior-service liability |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||
Amortization of net actuarial loss | 2,053 | 68 | 2,262 | 81 |
|
| 2 |
|
| — |
|
| 2 |
|
| — |
| |||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net periodic (credit) expense | $ | (616 | ) | $ | 150 | $ | (174 | ) | $ | 180 |
| $ | (1 | ) |
| $ | — |
| $ | (1 | ) |
| $ | — |
| |||||||
|
|
|
|
For the Nine Months Ended September 30, |
| For the Six Months Ended June 30, |
| |||||||||||||||||||||||||||||
2017 | 2016 |
| 2021 |
|
| 2020 |
| |||||||||||||||||||||||||
(in thousands) | Pension Benefits | Post- Retirement Benefits | Pension Benefits | Post- Retirement Benefits | ||||||||||||||||||||||||||||
(dollars in millions) |
| Pension |
|
| Post- |
|
| Pension |
|
| Post- |
| ||||||||||||||||||||
Components of net periodic (credit) expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest cost | $ | 4,211 | $ | 433 | $ | 4,411 | $ | 479 |
| $ | 2 |
| $ | — |
| $ | 2 |
| $ | — |
| |||||||||||
Service cost | — | — | — | 3 | ||||||||||||||||||||||||||||
Expected return on plan assets | (12,217 | ) | — | (11,720 | ) | — |
| (8 | ) |
| — |
| (8 | ) |
| — |
| |||||||||||||||
Amortization of prior-service costs | — | (187 | ) | — | (187 | ) | ||||||||||||||||||||||||||
Amortization of prior-service liability |
| — |
| — |
| — |
| — |
| |||||||||||||||||||||||
Amortization of net actuarial loss | 6,157 | 206 | 6,786 | 245 |
|
| 4 |
|
| — |
|
| 4 |
|
| — |
| |||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net periodic (credit) expense | $ | (1,849 | ) | $ | 452 | $ | (523 | ) | $ | 540 |
| $ | (2 | ) |
| $ | — |
| $ | (2 | ) |
| $ | — |
| |||||||
|
|
|
|
(1) Amounts are included in G&A expense on the Consolidated Statements of Income and Comprehensive Income.
The Company expects to contribute $1.3$1 million to its post-retirement plan to pay premiums and claims for the fiscal year ending December 31, 2017.2021. The Company does not0t expect to make any contributions to its pension plan in 2017.2021.
Note 10.9. Stock-Based Compensation
At SeptemberJune 30, 2017,2021, the Company had a total of 6,912,4318,505,303 shares available for grants as options, restricted stock, options, or other forms of related rights under the New York Community Bancorp, Inc. 2012 Stock Incentive Plan (the “2012 Stock Incentive Plan”), which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2012.rights. The Company granted 2,941,2493,045,949 shares of restricted stock, during the nine months ended September 30, 2017. The shares hadwith an average fair value of $15.18$11.16 per share on the date of grant, and a vesting periodduring the six months ended June 30, 2021. During the six months ended June 30, 2020, the Company granted 2,390,345 shares of five years. The nine-month amount includes 122,500 shares that were granted in the third quarterrestricted stock, with an average fair value of $12.95$11.64 per share onshare.
The shares of restricted stock that were granted during the date of grant.six months ended June 30, 2021 and 2020, 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
26
vesting period and totaled $27.3$15 million and $24.6$16 million respectively, infor the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, including $9.1$7 million and $8.2$7 million respectively, infor the three months ended at those dates.
The following table provides a summary of activity with regard to restricted stock awards in the ninesix months ended SeptemberJune 30, 2017:2021:
Number of Shares | Weighted Average Grant Date Fair Value |
| Number of |
|
| Weighted Average |
| |||||||||
Unvested at beginning of year | 6,930,306 | $ | 15.37 |
| 6,228,048 |
| $ | 12.43 |
| |||||||
Granted | 2,941,249 | 15.18 |
| 3,045,949 |
| 11.16 |
| |||||||||
Vested | (2,291,234 | ) | 15.02 |
| (2,015,702 | ) |
| 13.19 |
| |||||||
Canceled | (206,920 | ) | 15.58 |
|
| (172,900 | ) |
|
| 11.72 |
| |||||
| ||||||||||||||||
Unvested at end of period | 7,373,401 | 15.40 |
|
| 7,085,395 |
|
| 11.68 |
| |||||||
|
As of SeptemberJune 30, 2017,2021, unrecognized compensation cost relating to unvested restricted stock totaled $90.9$70 million. This amount will be recognized over a remaining weighted average period of 3.23.4 years.
The following table provides a summary of activity with regard to Performance-Based Restricted Stock Units ("PSUs") in the six months ended June 30, 2021:
Number of | Performance | Expected | ||||||
Outstanding at beginning of year | 477,872 | |||||||
Granted | 356,740 | January 1, 2021 - December 31, 2023 | March 31, 2024 | |||||
Outstanding at end of period | 834,612 |
PSUs are subject to adjustment or forfeiture, based upon the achievement by the Company of certain performance standards. Compensation and benefits expense related to PSUs is recognized using the fair value as of the date the units were approved, on a straight-line basis over the vesting period and totaled $1 million for the three and six months ended June 30, 2021 and June 30, 2020. As of June 30, 2021, unrecognized compensation cost relating to unvested restricted stock totaled $6 million. This amount will be recognized over a remaining weighted average period of 1.9 years. As of June 30, 2021, the Company believes it is probable that the performance conditions will be met.
The Company had no stock options outstanding at Septembermatches a portion of employee 401(k) plan contributions. Such expense totaled $1million and $3 million for the three and six months ended June 30, 2017 or December 31, 2016.2021 and June 30, 2020.
Note 11.10. 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 ornon-recurring basis. GAAP also clarifies that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
27
A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following tables present assets and liabilities that were measured at fair value on a recurring basis for the periods indicated,as of June 30, 2021 and December 31, 2020, and that were included in the Company’s Consolidated Statements of Condition at those dates:
Fair Value Measurements at September 30, 2017 | ||||||||||||||||||||
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Netting Adjustments(1) | Total Fair Value | |||||||||||||||
Assets: | ||||||||||||||||||||
Mortgage-Related Securities Available for Sale: | ||||||||||||||||||||
GSE certificates | $ | — | $ | 1,960,352 | $ | — | $ | — | $ | 1,960,352 | ||||||||||
GSE CMOs | — | 550,177 | — | — | 550,177 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total mortgage-related securities | $ | — | $ | 2,510,529 | $ | — | $ | — | $ | 2,510,529 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Securities Available for Sale: | ||||||||||||||||||||
U.S Treasury Obligations | $ | 199,875 | $ | — | $ | — | $ | — | $ | 199,875 | ||||||||||
GSE debentures | — | 90,834 | — | — | 90,834 | |||||||||||||||
Corporate bonds | — | 86,137 | — | — | 86,137 | |||||||||||||||
Municipal bonds | — | 70,367 | — | — | 70,367 | |||||||||||||||
Capital trust notes | — | 40,767 | — | — | 40,767 | |||||||||||||||
Preferred stock | 15,339 | — | — | — | 15,339 | |||||||||||||||
Mutual funds and common stock | — | 17,178 | — | — | 17,178 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other securities | $ | 215,214 | $ | 305,283 | $ | — | $ | — | $ | 520,497 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total securities available for sale | $ | 215,214 | $ | 2,815,812 | $ | — | $ | — | $ | 3,031,026 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Assets: | ||||||||||||||||||||
Loans held for sale | $ | — | $ | 104,938 | $ | — | $ | — | $ | 104,938 | ||||||||||
Mortgage servicing rights | — | — | 2,782 | — | 2,782 | |||||||||||||||
Interest rate lock commitments | — | — | 269 | — | 269 | |||||||||||||||
Derivative assets-other(2) | 157 | 836 | — | (674 | ) | 319 | ||||||||||||||
Liabilities: | ||||||||||||||||||||
Derivative liabilities | $ | (144 | ) | $ | (1,322 | ) | $ | — | $ | 1,248 | $ | (218 | ) |
|
| Fair Value Measurements at June 30, 2021 |
| |||||||||||||||||
(dollars in millions) |
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Netting |
|
| Total Fair |
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-Related Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
GSE certificates |
| $ | — |
|
| $ | 1,060 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,060 |
|
GSE CMOs |
|
| — |
|
|
| 1,933 |
|
|
| — |
|
|
| — |
|
|
| 1,933 |
|
Total mortgage-related debt securities |
| $ | — |
|
| $ | 2,993 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,993 |
|
Other Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
U. S. Treasury obligations |
| $ | 65 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 65 |
|
GSE debentures |
|
| — |
|
|
| 1,474 |
|
|
| — |
|
|
| — |
|
|
| 1,474 |
|
Asset-backed securities |
|
| — |
|
|
| 509 |
|
|
| — |
|
|
| — |
|
|
| 509 |
|
Municipal bonds |
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Corporate bonds |
|
| — |
|
|
| 890 |
|
|
| — |
|
|
| — |
|
|
| 890 |
|
Foreign notes |
|
| — |
|
|
| 26 |
|
|
|
|
|
|
|
|
| 26 |
| ||
Capital trust notes |
|
| — |
|
|
| 95 |
|
|
| — |
|
|
| — |
|
|
| 95 |
|
Total other debt securities |
| $ | 65 |
|
| $ | 3,019 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,084 |
|
Total debt securities available for sale |
| $ | 65 |
|
| $ | 6,012 |
|
| $ | — |
|
| $ | — |
|
| $ | 6,077 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mutual funds |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | — |
|
| $ | 16 |
|
| $ | — |
|
| $ | — |
|
| $ | 16 |
|
Total securities |
| $ | 65 |
|
| $ | 6,028 |
|
| $ | — |
|
| $ | — |
|
| $ | 6,093 |
|
|
| Fair Value Measurements at December 31, 2020 |
| |||||||||||||||||
(dollars in millions) |
| Quoted Prices |
|
| Significant |
|
| Significant |
|
| Netting |
|
| Total Fair |
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mortgage-Related Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
GSE certificates |
| $ | — |
|
| $ | 1,209 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,209 |
|
GSE CMOs |
|
| — |
|
|
| 1,829 |
|
|
| — |
|
|
| — |
|
|
| 1,829 |
|
Total mortgage-related debt securities |
| $ | — |
|
| $ | 3,038 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,038 |
|
Other Debt Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
U.S. Treasury obligations |
| $ | 65 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 65 |
|
GSE debentures |
|
| — |
|
|
| 1,158 |
|
|
| — |
|
|
| — |
|
|
| 1,158 |
|
Asset-backed securities |
|
| — |
|
|
| 526 |
|
|
| — |
|
|
| — |
|
|
| 526 |
|
Municipal bonds |
|
| — |
|
|
| 27 |
|
|
| — |
|
|
| — |
|
|
| 27 |
|
Corporate bonds |
|
| — |
|
|
| 883 |
|
|
| — |
|
|
| — |
|
|
| 883 |
|
Foreign notes |
|
| — |
|
|
| 26 |
|
|
|
|
|
|
|
|
| 26 |
| ||
Capital trust notes |
|
| — |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
Total other debt securities |
| $ | 65 |
|
| $ | 2,711 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,776 |
|
Total debt securities available for sale |
| $ | 65 |
|
| $ | 5,749 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,814 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Preferred stock |
| $ | 15 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
Mutual funds |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
Total equity securities |
| $ | 15 |
|
| $ | 16 |
|
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
Total securities |
| $ | 80 |
|
| $ | 5,765 |
|
| $ | — |
|
| $ | — |
|
| $ | 5,845 |
|
Assets: Mortgage-Related Securities Available for Sale: GSE certificates Total mortgage-related securities Other Securities Available for Sale: Municipal bonds Capital trust notes Preferred stock Mutual funds and common stock Total other securities Total securities available for sale Other Assets: Loans held for sale Mortgage servicing rights Interest rate lock commitments Derivative assets-other(2) Liabilities: Derivative liabilities28 Fair Value Measurements at December 31, 2016 (in thousands) Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Netting
Adjustments(1) Total
Fair Value $ — $ 7,326 $ — $ — $ 7,326 $ — $ 7,326 $ — $ — $ 7,326 $ — $ 631 $ — $ — $ 631 — 7,243 — — 7,243 42,724 29,260 — — 71,984 — 17,097 — — 17,097 $ 42,724 $ 54,231 $ — $ — $ 96,955 $ 42,724 $ 61,557 $ — $ — $ 104,281 $ — $ 409,152 $ — $ — $ 409,152 — — 228,099 — 228,099 — — 982 — 982 2,611 16,829 — (17,861 ) 1,579 $ (6,009 ) $ (17,719 ) $ — $ 16,588 $ (7,140 )
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 ofavailable-for-sale securities follows:
Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities, and derivatives.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.
The Company carries loans held for sale at fair value. The fair value of loans held for sale is primarily based on quoted market prices for securities backed by similar types of loans. Changes in the fair value of these assets are largely driven by changes in interest rates subsequent to loan funding, and changes in the fair value of servicing associated with the mortgage loans held for sale. Loans held for sale are classified within Level 2 of the valuation hierarchy.
MSRs do not trade in an active open market with readily observable prices. The Company bases the fair value of its MSRs on the present value of estimated future net servicing income cash flows, utilizing a third-party valuation specialist. The specialist estimates future net servicing income cash flows with assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The Company periodically adjusts the underlying inputs and assumptions to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset. MSR fair value measurements use significant unobservable inputs and, accordingly, are classified within Level 3.
Exchange-traded derivatives that are valued using quoted prices are classified within Level 1 of the valuation hierarchy. The majority of the Company’s derivative positions are valued using internally developed models that use readily observable market parameters as their basis. These are parameters that are actively quoted and can be validated by external sources, including industry pricing services. Where the types of derivative products have been in existence for some time, the Company uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit quality of the counterparty. Furthermore, many of these models do not contain a high level of subjectivity, as the methodologies used in the models do not require significant judgment, and inputs to the models are readily observable from actively quoted markets, as is the case for “plain vanilla” interest rate swaps and option contracts. Such instruments are generally classified within Level 2 of the valuation hierarchy. Derivatives that are valued based on models with significant unobservable market parameters, and that are normally traded less actively, have trade activity that isone-way, and/or are traded in less-developed markets, are classified within Level 3 of the valuation hierarchy.
The fair values of interest rate lock commitments (“IRLCs”) for residential mortgage loans that the Company intends to sell are based on internally developed models. The key model inputs primarily include the sum of the value of the forward commitment based on the loans’ expected settlement dates and the projected values of the MSRs, loan level price adjustment factors, and historical IRLC closing ratios. The closing ratio is computed by the Company’s mortgage banking operation and is periodically reviewed by management for reasonableness. Such derivatives are classified as Level 3.
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.
Fair Value Option
Loans Held for Sale
The Company has elected the fair value option for its loans held for sale. These loans held for sale consist ofone-to-four family mortgage loans, none of which was 90 days or more past due at September 30, 2017. Management believes that the mortgage banking business operates on a short-term cycle. Therefore, in order to reflect the most relevant valuations for the key components of this business, and to reduce timing differences in amounts recognized in earnings, the Company has elected to record loans held for sale at fair value to match the recognition of IRLCs, MSRs, and derivatives, all of which are recorded at fair value in earnings. Fair value is based on independent quoted market prices of mortgage-backed securities comprised of loans with similar features to those of the Company’s loans held for sale, where available, and adjusted as necessary for such items as servicing value, guaranty fee premiums, and credit spread adjustments.
The following table reflects the difference between the fair value carrying amount of loans held for sale, for which the Company has elected the fair value option, and the unpaid principal balance:
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
(in thousands) | Fair Value Carrying Amount | Aggregate Unpaid Principal | Fair Value Carrying Amount Less Aggregate Unpaid Principal | Fair Value Carrying Amount | Aggregate Unpaid Principal | Fair Value Carrying Amount Less Aggregate Unpaid Principal | ||||||||||||||||||
Loans held for sale | $ | 104,938 | $ | 102,236 | $ | 2,702 | $ | 409,152 | $ | 408,928 | $ | 224 |
Gains and Losses Included in Income for Assets Where the Fair Value Option Has Been Elected
The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from the initial measurement and subsequent changes in fair value are recognized in earnings. The following table presents the changes in fair value related to initial measurement, and the subsequent changes in fair value included in earnings, for loans held for sale and MSRs for the periods indicated:
Gain (Loss) Included in Mortgage Banking Income from Changes in Fair Value(1) | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016(2) | 2017 | 2016(2) | ||||||||||||
Loans held for sale | $ | 464 | $ | (1,020 | ) | $ | 1,059 | $ | 2,782 | |||||||
Mortgage servicing rights | (9,743 | ) | (8,917 | ) | (20,092 | ) | (76,998 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total loss | $ | (9,279 | ) | $ | (9,937 | ) | $ | (19,033 | ) | $ | (74,216 | ) | ||||
|
|
|
|
|
|
|
|
The Company has determined that there is no instrument-specific credit risk related to its loans held for sale, due to the short duration of such assets.
Changes in Level 3 Fair Value Measurements
The following tables present, for the nine months ended September 30, 2017 and 2016, a roll-forward of the balance sheet amounts (including changes in fair value) for financial instruments classified in Level 3 of the valuation hierarchy:
(in thousands) | Fair Value January 1, 2017 | Total Realized/Unrealized Gains/(Losses) Recorded in | Issuances | Settlements | Transfers to/(from) Level 3 | Fair Value at September 30, 2017 | Change in Unrealized Gains/ (Losses) Related to Instruments Held at September 30, 2017 | |||||||||||||||||||||||||
Income/ (Loss) | Comprehensive (Loss) Income | |||||||||||||||||||||||||||||||
Mortgage servicing rights | $ | 228,099 | $ | (34,544 | ) | $ | — | $ | 18,054 | $ | (208,827 | ) | $ | — | $ | 2,782 | $ | (182 | ) | |||||||||||||
Interest rate lock commitments | 982 | (713 | ) | — | — | — | — | 269 | 269 | |||||||||||||||||||||||
(in thousands) | Fair Value January 1, 2016 | Total Realized/Unrealized Gains/(Losses) Recorded in | Issuances | Settlements | Transfers to/(from) Level 3 | Fair Value at September 30, 2016 | Change in Unrealized Gains/ (Losses) Related to Instruments Held at September 30, 2016 | |||||||||||||||||||||||||
Income/ (Loss) | Comprehensive (Loss) Income | |||||||||||||||||||||||||||||||
Mortgage servicing rights | $ | 243,389 | $ | (83,155 | ) | $ | — | $ | 31,185 | $ | — | $ | — | $ | 191,419 | $ | (58,546 | ) | ||||||||||||||
Interest rate lock commitments | 2,526 | 4,408 | — | — | — | — | 6,934 | 6,934 |
The Company’s policy is to recognize transfers in and out of Levels 1, 2, and 3 as of the end of the reporting period. There were no transfers in or out of Levels 1, 2, or 3 during the nine months ended September 30, 2017 or 2016.
For Level 3 assets and liabilities measured at fair value on a recurring basis as of September 30, 2017, the significant unobservable inputs used in the fair value measurements were as follows:
(dollars in thousands) | Fair Value at | Valuation Technique | Significant Unobservable Inputs | Significant Unobservable Input Value | ||||||
Mortgage servicing rights | $2,782 | Discounted Cash Flow | Weighted Average Constant Prepayment Rate(1) | 9.89 | % | |||||
Weighted Average Discount Rate | 12.00 | |||||||||
Interest rate lock commitments | 269 | Discounted Cash Flow | Weighted Average Closing Ratio | 69.88 |
The significant unobservable inputs used in the fair value measurement of the Company’s MSRs are the weighted average constant prepayment rate and the weighted average discount rate. Significant increases or decreases in either of those inputs in isolation could result in significantly lower or higher fair value measurements. Although the constant prepayment rate and the discount rate are not directly interrelated, they generally move in opposite directions.
The significant unobservable input used in the fair value measurement of the Company’s IRLCs is the closing ratio, which represents the percentage of loans currently in an interest rate lock position that management estimates will ultimately close. Generally, the fair value of an IRLC is positive if the prevailing interest rate is lower than the IRLC rate, and the fair value of an IRLC is negative if the prevailing interest rate is higher than the IRLC rate. Therefore, an increase in the closing ratio (i.e., a higher percentage of loans estimated to close) will result in the fair value of the IRLC increasing if in a gain position, or decreasing if in a loss position. The closing ratio is largely dependent on the stage of processing that a loan is currently in, and the change in prevailing interest rates from the time of the interest rate lock.
Assets Measured at Fair Value on aNon-Recurring Basis
Certain assets are measured at fair value on anon-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g., when there is evidence of impairment). The following tables present assets and liabilities that were measured at fair value on anon-recurring basis as of SeptemberJune 30, 20172021 and December 31, 2016,2020, and that were included in the Company’s Consolidated Statements of Condition at those dates:
|
| Fair Value Measurements at June 30, 2021 Using |
| |||||||||||||
(dollars in millions) |
| Quoted Prices in |
|
| Significant Other |
|
| Significant |
|
| Total Fair |
| ||||
Certain nonaccrual loans (1) |
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
| $ | 31 |
|
Other assets(2) |
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| 11 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | 42 |
|
| $ | 42 |
|
(1) Represents the fair value of impaired loans, based on the value of the collateral.
Fair Value Measurements at September 30, 2017 Using | ||||||||||||||||
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | ||||||||||||
Certain impaired loans(1) | $ | — | $ | — | $ | 42,581 | $ | 42,581 | ||||||||
Other assets(2) | — | — | 1,493 | 1,493 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | — | $ | 44,074 | $ | 44,074 | ||||||||
|
|
|
|
|
|
|
|
(2) Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity investments without readily determinable fair values. These equity investments are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares.
Fair Value Measurements at December 31, 2016 Using | ||||||||||||||||
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | ||||||||||||
Certain impaired loans(1) | $ | — | $ | — | $ | 15,635 | $ | 15,635 | ||||||||
Other assets(2) | — | — | 5,684 | 5,684 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | — | $ | — | $ | 21,319 | $ | 21,319 |
|
| Fair Value Measurements at December 31, 2020 Using |
| |||||||||||||
(dollars in millions) |
| Quoted Prices in |
|
| Significant Other |
|
| Significant |
|
| Total Fair |
| ||||
Certain nonaccrual loans (1) |
| $ | — |
|
| $ | — |
|
| $ | 41 |
|
| $ | 41 |
|
Other assets (2) |
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | 47 |
|
| $ | 47 |
|
(1) Represents the fair value of impaired loans, based on the value of the collateral.
(2) Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity investments without readily determinable fair values. These equity investments are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares.
29
The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate and other market data.
Other Fair Value Disclosures
GAAP requiresFor the disclosure of fair value information about the Company’son- andoff-balance sheet financial instruments. Wheninstruments, 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.
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 the dates indicated:June 30, 2021 and December 31, 2020:
September 30, 2017 |
| June 30, 2021 |
| |||||||||||||||||||||||||||||||||||||
Fair Value Measurement Using |
|
|
|
|
|
| Fair Value Measurement Using |
| ||||||||||||||||||||||||||||||||
(in thousands) | 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) | |||||||||||||||||||||||||||||||||||
(dollars in millions) |
| Carrying Value |
|
| Estimated |
|
| Quoted Prices |
|
| Significant |
|
| Significant |
| |||||||||||||||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Cash and cash equivalents | $ | 3,277,427 | $ | 3,277,427 | $ | 3,277,427 | $ | — | $ | — |
| $ | 2,086 |
| $ | 2,086 |
| $ | 2,086 |
| $ | — |
| $ | — |
| ||||||||||||||
FHLB stock(1) | 579,474 | 579,474 | — | 579,474 | — |
| 686 |
| 686 |
| — |
| 686 |
| — |
| ||||||||||||||||||||||||
Loans, net | 37,452,219 | 37,671,152 | — | — | 37,671,152 |
| 43,373 |
| 42,913 |
| — |
| — |
| 42,913 |
| ||||||||||||||||||||||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Deposits | $ | 28,893,197 | $ | 28,869,413 | $ | 20,090,624 | (2) | $ | 8,778,789 | (3) | $ | — |
| $ | 34,177 |
| $ | 34,186 |
| $ | 25,228 |
| (2) | $ | 8,958 |
| (3) | $ | — |
| ||||||||||
Borrowed funds | 12,363,602 | 12,277,697 | — | 12,277,697 | — |
| 15,459 |
| 16,243 |
| — |
| 16,243 |
| — |
|
(1) Carrying value and estimated fair value are at cost.
December 31, 2016 | ||||||||||||||||||||
Fair Value Measurement Using | ||||||||||||||||||||
(in thousands) | 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 | $ | 557,850 | $ | 557,850 | $ | 557,850 | $ | — | $ | — | ||||||||||
Securities held to maturity | 3,712,776 | 3,813,959 | 200,220 | 3,613,739 | — | |||||||||||||||
FHLB stock(1) | 590,934 | 590,934 | — | 590,934 | — | |||||||||||||||
Loans, net | 39,308,016 | 39,416,469 | — | — | 39,416,469 | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 28,887,903 | $ | 28,888,064 | $ | 21,310,733 | (2) | $ | 7,577,331 | (3) | $ | — | ||||||||
Borrowed funds | 13,673,379 | 13,633,943 | — | 13,633,943 | — |
(2) Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts.
(3) Certificates of deposit.
|
| December 31, 2020 |
| |||||||||||||||||
|
|
|
|
|
|
|
| Fair Value Measurement Using |
| |||||||||||
(dollars in millions) |
| Carrying |
|
| Estimated |
|
| Quoted Prices |
|
| Significant |
|
| Significant |
| |||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 1,948 |
|
| $ | 1,948 |
|
| $ | 1,948 |
|
| $ | — |
|
| $ | — |
|
FHLB stock (1) |
|
| 714 |
|
|
| 714 |
|
|
| — |
|
|
| 714 |
|
|
| — |
|
Loans, net |
|
| 42,807 |
|
|
| 42,376 |
|
|
| — |
|
| $ | — |
|
|
| 42,376 |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ | 32,437 |
|
| $ | 32,466 |
|
| $ | 22,106 |
| (2) | $ | 10,360 |
| (3) | $ | — |
|
Borrowed funds |
|
| 16,084 |
|
|
| 16,794 |
|
|
| — |
|
|
| 16,794 |
|
|
| — |
|
(1) Carrying value and estimated fair value are at cost.
(2) Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts.
(3) Certificates of deposit.
The methods and significant assumptions used to estimate fair values for the Company’s financial instruments follow:
30
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks and federal funds sold. The estimated fair values of cash and cash equivalents are assumed to equal their carrying values, as these financial instruments are either due on demand or have short-term maturities.
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 FHLBFHLB-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 portfolio is segregated into various components for valuation purposes in order to group loans based on their significant financial characteristics, such as loan type (mortgage or other) and payment status (performing ornon-performing). The estimated fair values of mortgage and other loans are computed by discounting the anticipated cash flows from the respective portfolios.basis. The discount rates reflect current market rates for loans with similar terms to borrowers ofhaving similar credit quality.quality on an exit price basis. The estimated fair values ofnon-performing mortgage and other loans are based on recent collateral appraisals.
The methods used to estimate the fair values of For those loans are extremely sensitive to the assumptions and estimates used. While management has attempted to use assumptions and estimates that best reflect the Company’s loan portfolio and current market conditions,where a greater degree of subjectivity is inherent in these values than in those determined in active markets. Accordingly, readers are cautioned in using this information for purposes of evaluating the financial condition and/or value ofdiscounted cash flow technique was not considered reliable, the Company in and of itself, or in comparison with that of any other company.
Mortgage Servicing Rights
MSRs do not trade in an active market with readily observable prices. Accordingly, the Company bases the fair value of its MSRs onused a valuation performed by a third-party valuation specialist. This specialist determines fair value based on the present value of estimated future net servicing income cash flows, and incorporates assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The specialist and the Company evaluate, and periodically adjust, as necessary, these underlying inputs and assumptions to reflect market conditions and changes in the assumptions that a market participant would consider in valuing MSRs.
Derivative Financial Instruments
For exchange-traded futures and exchange-traded options, fair value is based on observable quoted market prices in an active market. For forward commitments to buy and sell loans and mortgage-backed securities, fair value is based on observable market pricesprice for similar loans and securities in an active market. The fair value of IRLCs forone-to-four family mortgage loans that the Company intends to sell is based on internally developed models. The key model inputs primarily include the sum of the value of the forward commitment based on the loans’ expected settlement dates, the value of MSRs arrived at by an independent MSR broker, government agency price adjustment factors, and historical IRLCfall-out factors.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, andnon-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 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 suchoff-balance sheet financial instruments were insignificant at SeptemberJune 30, 20172021 and December 31, 2016.2020.
Note 11. Leases
Lessor Arrangements
The Company is a lessor in the equipment finance business where it has executed direct financing leases (“lease finance receivables”). The Company produces lease finance receivables through a specialty finance subsidiary that participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide. Lease finance receivables are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any initial direct costs incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.
31
The standard leases are typically repayable on a level monthly basis with terms ranging from 24 to 120 months. At the end of the lease term, the lessee usually has the option to return the equipment, to renew the lease or purchase the equipment at the then fair market value (“FMV”) price. For leases with a FMV renewal/purchase option, the relevant residual value assumptions are based on the estimated value of the leased asset at the end of lease term, including evaluation of key factors, such as, the estimated remaining useful life of the leased asset, its historical secondary market value including history of the lessee executing the FMV option, overall credit evaluation and return provisions. The Company acquires the leased asset at fair market value and provides funding to the respective lessee at acquisition cost, less any volume or trade discounts, as applicable. Therefore, there is generally no selling profit or loss to recognize or defer at inception of a lease.
The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, and independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on an annual basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense. On certain lease financings, the Company obtains residual value insurance from third parties to manage and reduce the risk associated with the residual value of the leased assets. At June 30, 2021 and December 31, 2020, the carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $63million and $71 million, respectively.
The Company uses the interest rate implicit in the lease to determine the present value of its lease financing receivables.
The components of lease income were as follows:
(dollars in millions) |
| For the |
|
| For the Six |
|
| For the |
|
| For the Six |
| ||||
Interest income on lease financing (1) |
| $ | 14 |
|
| $ | 28 |
|
| $ | 14 |
|
| $ | 26 |
|
(1) Included in Interest Income – Loans and leases in the Consolidated Statements of Income and Comprehensive Income.
At June 30, 2021 and December 31, 2020, the carrying value of net investment in leases was $1.9 billion. The components of net investment in direct financing leases, including the carrying amount of the lease receivables, as well as the unguaranteed residual asset were as follows:
(dollars in millions) |
| June 30, |
|
| December 31, |
| ||
Net investment in the lease - lease payments receivable |
| $ | 1,871 |
|
| $ | 1,771 |
|
Net investment in the lease - unguaranteed |
|
| 78 |
|
|
| 80 |
|
Total lease payments |
| $ | 1,949 |
|
| $ | 1,851 |
|
32
The following table presents the remaining maturity analysis of the undiscounted lease receivables as of June 30, 2021, as well as the reconciliation to the total amount of receivables recognized in the Consolidated Statements of Condition:
(dollars in millions) |
| June 30, |
| |
2021 |
| $ | 17 |
|
2022 |
|
| 53 |
|
2023 |
|
| 287 |
|
2024 |
|
| 308 |
|
2025 |
|
| 404 |
|
Thereafter |
|
| 880 |
|
Total lease payments |
|
| 1,949 |
|
Plus: deferred origination costs |
|
| 28 |
|
Less: unearned income |
|
| (103 | ) |
Total lease finance receivables, net |
| $ | 1,874 |
|
Lessee Arrangements
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use 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 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 $10million and $9million for the six months ended June 30, 2021 and June 30, 2020, respectively. Included in these amounts was $5 million for the three months ended June 30, 2021 and June 30, 2020, 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:
(dollars in millions) |
| For the |
|
| For the Six |
|
| For the |
|
| For the Six |
| ||||
Operating lease cost |
| $ | 7 |
|
| $ | 13 |
|
| $ | 7 |
|
| $ | 14 |
|
Sublease income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total lease cost |
| $ | 7 |
|
| $ | 13 |
|
| $ | 7 |
|
| $ | 14 |
|
33
Supplemental cash flow information related to the leases for the following periods:
(dollars in millions) |
| For the |
|
| For the Six |
|
| For the |
|
| For the Six |
| ||||
Cash paid for amounts included in the measurement |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating cash flows from operating leases |
| $ | 7 |
|
| $ | 13 |
|
| $ | 7 |
|
| $ | 14 |
|
Supplemental balance sheet information related to the leases for the following periods:
(in millions, except lease term and discount rate) |
| June 30, |
|
| December 31, |
| ||
Operating Leases: |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
|
| 256 |
|
| $ | 267 |
|
Operating lease liabilities |
|
| 256 |
|
|
| 267 |
|
Weighted average remaining lease term |
| 16 years |
|
| 16 years |
| ||
Weighted average discount rate |
|
| 3.07 | % |
|
| 3.12 | % |
Maturities of lease liabilities: |
| June 30, |
|
| |
(dollars in millions) |
|
|
|
| |
2021 |
| $ | 13 |
|
|
2022 |
|
| 26 |
|
|
2023 |
|
| 26 |
|
|
2024 |
|
| 25 |
|
|
2025 |
|
| 24 |
|
|
Thereafter |
|
| 218 |
|
|
Total lease payments |
|
| 332 |
|
|
Less: imputed interest |
|
| (76 | ) |
|
Total present value of lease liabilities |
| $ | 256 |
|
|
Note 12. Derivative Financial Instrumentsand 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 forwardinstruments. 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 futures contracts,uncertain cash amounts, the value of which are determined by interest rates.
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires all standardized derivatives, including most interest rate swaps, IRLCs,to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties are the Chicago Mercantile Exchange (“CME”) and options. These derivatives relate to mortgage banking operations, residential MSRs, and other risk management activities, and seek to mitigate or reducethe London Clearing House (“LCH”). As of June 30, 2021, all of the Company’s $4.3 billion notional derivative contracts were cleared on the LCH. Daily variation margin payments on derivatives cleared through the LCH are accounted for as legal settlement. For derivatives cleared through LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative, which includes accrued interest; therefore, those interest rate and derivative contracts the Company clears through the LCH are reported at a fair value of approximately zero at June 30, 2021.
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 losses from adverse changes in interest rates. These activities will vary in scope based on the level and volatility of interest rates, other changing market conditions, and the types of assets held.
In accordance with the applicable accounting guidance,counterparty to be zero. At June 30, 2021, the Company takes into account the impact of collateral and master netting agreements that allow it to settle all derivative contracts held with a single counterparty onhad a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. As a result, the Company’s Statementsnegative exposure.
34
Fair Value of Financial Condition could reflect derivative contracts with negative fair values that are included in derivative assets, and contracts with positive fair values that are included in derivative liabilities.Hedges of Interest Rate Risk
The Company held derivatives with a notional amount of $765.9 million at September 30, 2017. Changesis exposed to changes in the fair value of these derivatives are reflected in current-period earnings. Nonecertain of these derivatives are designated as hedges for accounting purposes.
The Company uses various financial instruments, including derivatives, in connection with its strategies to reduce pricing risk resulting from changes in interest rates. Derivative instruments may include IRLCs entered into with borrowers or correspondents/brokers to acquire agency-conforming fixed and adjustable rate residential mortgage loans that will be held for sale, as well as Treasury options and Eurodollar futures.
The Company enters into forward contracts to sell fixed rate mortgage-backed securities to protect against changes in the prices of agency-conforming fixed rate loans held for sale. Forward contracts are entered into with securities dealers in an amount related to the portion of IRLCs that is expected to close. The value of these forward sales contracts moves inversely with the value of the loans in responsefixed-rate assets due to changes in benchmark interest rates.
To manage the price risk associated with fixed-ratenon-conforming mortgage loans, the Company generally enters into forward contracts on mortgage-backed securities or forward commitments to sell loans to approved investors. Short positions in Eurodollar futures contracts are used to manage price risk on adjustable rate mortgage loans held for sale.
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 residential MSRs. 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 also purchases puthas entered into an interest rate swap with a notional amount of $2.0 billion to hedge certain real estate loans. For the three and call optionssix months ended June 30, 2021, the floating rate received related to manage the risknet 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 $12million and $24 million for the three and six months ended June 30, 2021. For the three and six months ended June 30, 2020, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $8 million and $12 million for the three and six months ended June 30, 2020, respectively.
As of June 30, 2021, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
(dollars in millions) |
| June 30, 2021 |
| |||||
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included |
| Carrying |
|
| Cumulative |
| ||
Total loans and leases, net (1) |
| $ | 2,050 |
|
| $ | 50 |
|
(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At June 30, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $3.1 billion; the cumulative basis adjustments associated with variations inthese hedging relationships was $50 million; and the amount of IRLCs that ultimately close.the designated hedged items was $2.0 billion.
As of December 31, 2020, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
(dollars in millions) |
| December 31, 2020 |
| |||||
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included |
| Carrying |
|
| Cumulative |
| ||
Total loans and leases, net (1) |
| $ | 2,073 |
|
| $ | 73 |
|
(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At December 31, 2020 the amortized cost basis of the closed portfolios used in these hedging relationships was $3.6 billion; the cumulative basis adjustments associated with these hedging relationships was $73 million; and the amount of the designated hedged items was $2.0 billion.
35
The following table sets forth information regarding the Company’s derivative financial instruments at SeptemberJune 30, 2017:2021 and December 31, 2020:
(in thousands) | Notional Amount | Unrealized(1) | ||||||||||
Gain | Loss | |||||||||||
Treasury options | $ | 20,000 | $ | — | $ | 144 | ||||||
Eurodollar futures | 20,000 | 1 | — | |||||||||
Forward commitments to sell loans/mortgage-backed securities | 365,000 | 836 | 461 | |||||||||
Forward commitments to buy loans/mortgage-backed securities | 305,000 | — | 861 | |||||||||
Interest rate lock commitments | 55,886 | 269 | — | |||||||||
|
|
|
|
|
| |||||||
Total derivatives | $ | 765,886 | $ | 1,106 | $ | 1,466 | ||||||
|
|
|
|
|
|
|
| Notional |
|
| Other |
|
| Other |
| |||
Derivatives designated as fair value hedging |
|
|
|
|
|
|
|
|
| |||
Interest rate swap |
| $ | 2,000 |
|
| $ | — |
|
| $ | — |
|
Total derivatives designated as fair value hedging |
| $ | 2,000 |
|
| $ | — |
|
| $ | — |
|
In addition, the Company mitigates a portion of the risk associated with changes in the value of its residential MSRs. The general strategy for mitigating this risk is to purchase derivative instruments, the value of which changes in the opposite direction of interest rates. This action partially offsets changes in the value of its servicing assets, which tends to move in the same direction as interest rates. Accordingly, the Company purchases Eurodollar futures and call options on Treasury securities, and enters into forward contracts to purchase mortgage-backed securities.
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the periods indicated:indicated.
Gain (Loss) Included in Mortgage Banking Income | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Treasury options | $ | (1,147 | ) | $ | (6,245 | ) | $ | (4,397 | ) | $ | 3,619 | |||||
Treasury and Eurodollar futures | (90 | ) | 17 | (163 | ) | (38 | ) | |||||||||
Interest rate swaps | (2,449 | ) | (1,751 | ) | (202 | ) | 2,427 | |||||||||
Forward commitments to buy/sell loans/mortgage-backed securities | (442 | ) | 1,768 | (3,522 | ) | 48 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total (loss)/gain | $ | (4,128 | ) | $ | (6,211 | ) | $ | (8,284 | ) | $ | 6,056 | |||||
|
|
|
|
|
|
|
|
(dollars in millions) |
| For the Three |
|
| For the Six |
|
| For the Three |
|
| For the Six |
| ||||
Derivative – interest rate swap: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income |
| $ | (2 | ) |
| $ | 24 |
|
| $ | (9 | ) |
| $ | (37 | ) |
Hedged item – loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income |
| $ | 2 |
|
| $ | (24 | ) |
| $ | 9 |
|
| $ | 37 |
|
Cash Flow Hedges of Interest Rate Risk
The Company hasCompany’s objectives in place an enforceable master netting arrangement with every counterparty. All master netting arrangements include rightsusing interest rate derivatives are to offset associated withadd stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the Company’s recognized derivative assets, derivative liabilities, and the cash collateral received and pledged. Accordingly,receipt of amounts subject to variability caused by changes in interest rates from a counterparty in exchange for the Company where appropriate, offsets all derivative assetmaking 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 liability positionsthat 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 thenotional amounts totaling $2.3 billion as of June 30, 2021 and December 31, 2020, were designated as cash collateral received and pledged.flow hedges of certain FHLB borrowings.
The following tables presenttable summarizes information about the interest rate swaps designated as cash flow hedges at June 30, 2021 and December 31, 2020:
(dollars in millions) |
| June 30, |
|
| December 31, |
| ||
Notional amounts |
| $ | 2,250 |
|
| $ | 2,250 |
|
Cash collateral posted |
|
| 30 |
|
|
| 46 |
|
Weighted average pay rates |
|
| 1.27 | % |
|
| 1.27 | % |
Weighted average receive rates |
|
| 0.15 | % |
|
| 0.23 | % |
Weighted average maturity |
| 1.4 years |
|
| 1.9 years |
|
The following table presents the effect of the master netting arrangementsCompany’s cash flow derivative instruments on AOCL for the presentation of the derivative assetssix months ended June 30, 2021 and 2020:
(dollars in millions) |
| For the Six |
|
| For the Six |
| ||
Amount of gain (loss) recognized in AOCL |
| $ | 4 |
|
| $ | 57 |
|
Amount of gain (loss) reclassified from AOCL to interest expense |
|
| 11 |
|
|
| 1 |
|
Gains (losses) included in the Consolidated Statements of ConditionIncome related to interest rate derivatives designated as ofcash flow hedges during the dates indicated:
September 30, 2017 | ||||||||||||||||||||||||
(in thousands) | Gross Amount of Recognized Assets(1) | Gross Amount Offset in the Statements of Condition | Net Amount of Assets Presented in the Statements of Condition | Gross Amounts Not Offset in the Consolidated Statements of Condition | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Received | |||||||||||||||||||||||
Derivatives | $ | 1,262 | $ | 674 | $ | 588 | $ | — | $ | — | $ | 588 |
December 31, 2016 | ||||||||||||||||||||||||
(in thousands) | Gross Amount of Recognized Assets(1) | Gross Amount Offset in the Statements of Condition | Net Amount of Assets Presented in the Statements of Condition | Gross Amounts Not Offset in the Consolidated Statements of Condition | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Received | |||||||||||||||||||||||
Derivatives | $ | 20,422 | $ | 17,861 | $ | 2,561 | $ | — | $ | — | $ | 2,561 |
The following tables present the effect the master netting arrangements had on the presentation of the derivative liabilitiessix months ended June 30, 2021 was $11 million. Amounts reported in the Consolidated Statements of ConditionAOCL related to derivatives will be reclassified to interest expense as of the dates indicated:
September 30, 2017 | ||||||||||||||||||||||||
(in thousands) | Gross Amount of Recognized Liabilities | Gross Amount Offset in the Statements of Condition | Net Amount of Liabilities Presented in the Statements of Condition | Gross Amounts Not Offset in the Consolidated Statements of Condition | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Pledged | |||||||||||||||||||||||
Derivatives | $ | 1,466 | $ | 1,248 | $ | 218 | $ | — | $ | — | $ | 218 |
Derivatives December 31, 2016 (in thousands) Gross Amount
of Recognized
Liabilities Gross Amount
Offset in the
Statements of
Condition Net Amount of
Liabilities
Presented in the
Statements of
Condition Gross Amounts Not
Offset in the
Consolidated
Statements of Condition Net
Amount Financial
Instruments Cash
Collateral
Pledged $ 23,728 $ 16,588 $ 7,140 $ — $ — $ 7,140
Note 13. Segment Reporting
The Company’s operationsinterest payments are divided into two reportable business segments: Banking Operations and Residential Mortgage Banking. These operating segments have been identified basedmade on the Company’s organizational structure. The segments require unique technology and marketing strategies, and offer different products and services. Whilevariable-rate borrowings. During the next twelve months, the Company is managed asestimates that an integrated organization, individual executive managers are held accountable foradditional $25 million will be reclassified to interest expense.
36
Note 13. Pending Acquisition
Acquisition of Flagstar Bancorp, Inc. ("Flagstar")
On April 26, 2021, the operations of these business segments.
The Company measures and presents information for internal reporting purposesannounced that it had entered into a definitive merger agreement (the “Merger Agreement”) under which we would acquire Flagstar Bancorp, Inc. ("Flagstar") in a variety100% stock transaction valued at the time at $2.6 billion (the “Merger”). Under terms of ways. the agreement, which was unanimously approved by the Boards of Directors of both companies, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own. Following completion of the Merger, New York Community shareholders are expected to own 68% of the combined company, while Flagstar shareholders are expected to own 32% of the combined company.
The internal reporting system presently usednew company will have over $85 billion in total assets, operate nearly 400 traditional branches in 9 states, and 86 retail home lending offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, Michigan, including Flagstar's mortgage operations.
Results of Special Shareholder Meeting to Approve Merger with Flagstar
On August 4, 2021, the Company’s shareholders held a special meeting at which the shareholders approved the issuance of Company common stock to holders of Flagstar Bancorp, Inc. common stock pursuant to the Agreement and Plan of Merger, dated as of April 24, 2021 (the “Merger Agreement”), and on the same date Flagstar’s shareholders held a special meeting at which its shareholders approved the Merger Agreement. The Merger is expected to close during the fourth quarter of 2021, subject to the satisfaction of certain closing conditions and the receipt of all necessary regulatory approvals.
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 managementalleged stockholders of NYCB against NYCB and the members of its board of directors challenging the accuracy or completeness of the disclosures contained in the planningForm 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 measurementfederal courts against Flagstar and its board of operating activities,directors (and, in one instance, NYCB and 615 Corp.) challenging the proposed Merger or Flagstar’s disclosures relating to which most managers are held accountable, is based on organizational structure.
the Merger. The management accounting process uses various estimatescomplaints in the actions against NYCB allege, among other things, that the defendants caused a materially incomplete and allocation methodologiesmisleading Form S-4 relating to measure the performanceproposed Merger to be filed with the SEC in violation of Section 14(a) and Section 20(a) of the operating segments. To determine financial performance for each segment, the Company allocates capital, funding chargesSecurities Exchange Act of 1934, as amended, and credits, certainnon-interest expenses, and income tax provisions to each segment, as applicable. Allocation methodologiesRule 14a-9 promulgated thereunder. NYCB believes that these claims are subject to periodic adjustment as the internal management accounting system is revised and/or as business or product lines within the segments change. In addition, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically revised.without merit.
The Company seeks to maximize shareholder value by, among other means, optimizing the return on stockholders’ equity and managing risk. Capital is assigned to each segment, the combination of which is equivalent to the Company’s consolidated total, on an economic basis, using management’s assessment of the inherent risks associated with the respective segments.
37
The Company allocates expenses to the reportable segments based on various factors, including the volume and number of loans produced and the number of full-time equivalent employees. Income taxes are allocated to the various segments based on taxable income and statutory rates applicable to the segment.ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Banking Operations Segment
The Banking Operations segment serves consumers and businesses by offering and servicing a variety of loan and deposit products and other financial services.
Residential Mortgage Banking Segment
The Residential Mortgage Banking segment originated, aggregated, sold, and servicedone-to-four family mortgage loans. Mortgage loan products consist primarily of agency-conforming, fixed and adjustable rate loans and, to a lesser extent, jumbo loans, for the purpose of purchasing or refinancingone-to-four family homes. The Residential Mortgage Banking segment earns interest on loans held in the warehouse andnon-interest income from the origination and servicing of loans. It also recognizes gains or losses on the sale of such loans.
The following tables provide a summary of the Company’s segment results for the periods indicated on an internally managed accounting basis:
For the Three Months Ended September 30, 2017 | ||||||||||||
(in thousands) | Banking Operations | Residential Mortgage Banking | Total Company | |||||||||
Net interest income | $ | 273,265 | $ | 3,078 | $ | 276,343 | ||||||
Provision for loan losses | 44,585 | — | 44,585 | |||||||||
Non-Interest Income: | ||||||||||||
Third party(1) | 99,596 | 1,973 | 101,569 | |||||||||
Gain on sale of mortgage banking operations | — | 7,359 | 7,359 | |||||||||
Inter-segment | (2,411 | ) | 2,411 | — | ||||||||
|
|
|
|
|
| |||||||
Totalnon-interest income | 97,185 | 11,743 | 108,928 | |||||||||
|
|
|
|
|
| |||||||
Non-interest expense(2) | 146,869 | 15,365 | 162,234 | |||||||||
|
|
|
|
|
| |||||||
Income (loss) before income tax expense | 178,996 | (544 | ) | 178,452 | ||||||||
Income tax expense (benefit) | 68,200 | (216 | ) | 67,984 | ||||||||
|
|
|
|
|
| |||||||
Net income (loss) | $ | 110,796 | $ | (328 | ) | $ | 110,468 | |||||
|
|
|
|
|
| |||||||
Identifiable segment assets(period-end) | $ | 48,457,891 | $ | — | $ | 48,457,891 | ||||||
|
|
|
|
|
|
For the Three Months Ended September 30, 2016 | ||||||||||||
(in thousands) | Banking Operations | Residential Mortgage Banking | Total Company | |||||||||
Net interest income | $ | 314,081 | $ | 4,342 | $ | 318,423 | ||||||
Recovery of loan losses | (55 | ) | — | (55 | ) | |||||||
Non-Interest Income: | ||||||||||||
Third party(1) | 27,131 | 13,464 | 40,595 | |||||||||
Inter-segment | (4,863 | ) | 4,863 | — | ||||||||
|
|
|
|
|
| |||||||
Totalnon-interest income | 22,268 | 18,327 | 40,595 | |||||||||
|
|
|
|
|
| |||||||
Non-interest expense(2) | 144,504 | 17,181 | 161,685 | |||||||||
|
|
|
|
|
| |||||||
Income before income tax expense | 191,900 | 5,488 | 197,388 | |||||||||
Income tax expense | 69,905 | 2,184 | 72,089 | |||||||||
|
|
|
|
|
| |||||||
Net income | $ | 121,995 | $ | 3,304 | $ | 125,299 | ||||||
|
|
|
|
|
| |||||||
Identifiable segment assets(period-end) | $ | 48,478,288 | $ | 984,332 | $ | 49,462,620 | ||||||
|
|
|
|
|
|
The following tables provide a summary of the Company’s segment results for the periods indicated on an internally managed accounting basis:
For the Nine Months Ended September 30, 2017 | ||||||||||||
(in thousands) | Banking Operations | Residential Mortgage Banking | Total Company | |||||||||
Net interest income | $ | 850,486 | $ | 8,543 | $ | 859,029 | ||||||
Provision for loan losses | 34,316 | — | 34,316 | |||||||||
Non-Interest Income: | ||||||||||||
Third party(1) | 163,221 | 20,957 | 184,178 | |||||||||
Gain on sale of mortgage banking operations | — | 7,359 | 7,359 | |||||||||
Inter-segment | (10,222 | ) | 10,222 | — | ||||||||
|
|
|
|
|
| |||||||
Totalnon-interest income | 152,999 | 38,538 | 191,537 | |||||||||
|
|
|
|
|
| |||||||
Non-interest expense(2) | 445,910 | 47,032 | 492,942 | |||||||||
|
|
|
|
|
| |||||||
Income before income tax expense | 523,259 | 49 | 523,308 | |||||||||
Income tax expense | 193,608 | 20 | 193,628 | |||||||||
|
|
|
|
|
| |||||||
Net income | $ | 329,651 | $ | 29 | $ | 329,680 | ||||||
|
|
|
|
|
| |||||||
Identifiable segment assets(period-end) | $ | 48,457,891 | $ | — | $ | 48,457,891 | ||||||
|
|
|
|
|
|
For the Nine Months Ended September 30, 2016 | ||||||||||||
(in thousands) | Banking Operations | Residential Mortgage Banking | Total Company | |||||||||
Net interest income | $ | 960,661 | $ | 11,201 | $ | 971,862 | ||||||
Provision for loan losses | 664 | — | 664 | |||||||||
Non-Interest Income: | ||||||||||||
Third party(1) | 87,616 | 25,582 | 113,198 | |||||||||
Inter-segment | (13,292 | ) | 13,292 | — | ||||||||
|
|
|
|
|
| |||||||
Totalnon-interest income | 74,324 | 38,874 | 113,198 | |||||||||
|
|
|
|
|
| |||||||
Non-interest expense(2) | 430,706 | 50,338 | 481,044 | |||||||||
|
|
|
|
|
| |||||||
Income (loss) before income tax expense | 603,615 | (263 | ) | 603,352 | ||||||||
Income tax expense (benefit) | 221,817 | (133 | ) | 221,684 | ||||||||
|
|
|
|
|
| |||||||
Net income (loss) | $ | 381,798 | $ | (130 | ) | $ | 381,668 | |||||
|
|
|
|
|
| |||||||
Identifiable segment assets(period-end) | $ | 48,478,288 | $ | 984,332 | $ | 49,462,620 | ||||||
|
|
|
|
|
|
Note 14. Impact of Recent Accounting Pronouncements, Not Yet Adopted
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2017-08, “Receivables- Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities” (“ASUNo. 2017-08”). ASUNo. 2017-08 shortens the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The Company plans to adopt ASUNo. 2017-08 effective January 1, 2019 and the adoption is not expected to have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.
In January 2017, the FASB issued ASUNo. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASUNo. 2017-04 eliminates the second step of the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity will recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill recorded. ASUNo. 2017-04 does not amend the optional qualitative assessment of goodwill impairment. The Company plans to adopt ASUNo. 2017-04 beginning January 1, 2020 and its adoption is not expected to have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.
In August 2016, the FASB issued ASUNo. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” ASUNo. 2016-15 addresses the following cash flow issues: debt prepayment or debt extinguishment costs; settlement ofzero-coupon debt instruments or other debt instruments with coupon interest rates that are
insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company plans to adopt ASUNo. 2016-15 beginning January 1, 2018 and its adoption is not expected to have a material effect on the Company’s Consolidated Statements of Condition or results of operations.
In June 2016, the FASB issued ASUNo. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASUNo. 2016-13 amends guidance on reporting credit losses for assets held on an amortized cost basis andavailable-for-sale debt securities. For assets held at amortized cost, ASUNo. 2016-13 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. Foravailable-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however ASUNo. 2016-13 will require that credit losses be presented as an allowance rather than as a write-down. The amendments affect loans, debt securities, trade receivables, net investments in leases,off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company plans to adopt ASUNo. 2016-13 effective January 1, 2020, using the required modified retrospective approach, which includes presenting the cumulative effect of initial application along with supplementary disclosures. The Company is evaluating ASUNo. 2016-13, initiating implementation efforts across the Company, and planning for loss modeling requirements consistent with lifetime expected loss estimates. The adoption of ASUNo. 2016-13 could have a material effect on the Company’s Consolidated Statements of Condition and results of operations. The extent of the impact upon adoption will likely depend on the characteristics of the Company’s loan portfolio and economic conditions at that date, as well as forecasted conditions thereafter.
In February 2016, the FASB issued ASUNo. 2016-02, “Leases (Topic 842).” ASUNo. 2016-02 will require entities that lease assets to recognize as assets and liabilities on the balance sheet the respective rights and obligations created by those leases. ASUNo. 2016-02 also will require disclosures that include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The Company plans to adopt ASUNo. 2016-02 effective January 1, 2019 using the required modified retrospective approach, which includes presenting the cumulative effect of initial application along with supplementary disclosures. As a lessor and lessee, we do not anticipate the classification of our leases to change, but we expect to recognize substantially all of our leases for which we are the lessee as a lease liability and correspondingright-of-use asset on our Consolidated Statements of Condition. The Company has assembled a project management team and is presently evaluating all of its leases, as well as contracts that may contain embedded leases, for compliance with the new lease accounting rules.
In January 2016, the FASB issued ASUNo. 2016-01, “Financial Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASUNo. 2016-01 amends guidance on classification and measurement of financial instruments, including revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. ASU2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. The company will adopt ASUNo. 2016-01 on January 1, 2018, and its adoption is not expected to have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.
In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company will adopt ASUNo. 2014-09 effective January 1, 2018 using the modified retrospective approach, which includes presenting the cumulative effect of initial application along with supplementary disclosures. ASUNo. 2014-09 does not apply to the vast majority of our revenue streams, (i.e. interest income) and therefore are not in scope. The remaining revenue streams that are in scope are de minimis and will not have a material impact on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.
For the purposespurpose of this Quarterly Report on Form10-Q, the words “we,” “us,” “our,” and the “Company” are used to refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, includingsubsidiary, New York Community Bank and New York Commercial Bank (the “Community Bank” and the “Commercial Bank,” respectively, and collectively, the “Banks”“Bank”).
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING LANGUAGE
This report, like many written and oral communications presented by New York Community Bancorp, Inc. and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of said safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. Although we believe that our plans, intentions, and expectations as reflected in these forward-looking statements are reasonable, we can give no assurance that they will be achieved or realized.
Our ability to predict results or the actual effects of our plans and strategies is inherently uncertain. Accordingly, actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained in this report.
There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described in our forward-looking statements. These factors include, but are not limited to:
38
In addition, the timing and occurrence ornon-occurrence of events may be subject to circumstances beyond our control.
Furthermore, on an ongoing basis, we routinely evaluate opportunities to expand through mergers and acquisitions and conductopportunities for strategic combinations with other banking organizations. Our evaluation of such opportunities involves discussions with other parties, due diligence, activities in connection with such opportunities.and negotiations. As a result, acquisition discussions and, in some cases, negotiations,we may take placedecide to enter into definitive arrangements regarding such opportunities at any time,time.
In addition to the risks and acquisitions involving cashchallenges described above, these types of transactions involve a number of other risks and challenges, including:
39
See Part II, Item 1A, “RiskRisk Factors,” in this report and Part I, Item 1A, “RiskRisk Factors,” in our Form10-K for the year ended December 31, 20162020 for a further discussion of important risk factors that could cause actual results to differ materially from our forward-looking statements.
Readers should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this report. We do not assume any obligation to revise or update these forward-looking statements except as may be required by law.
40
RECONCILIATIONS OF STOCKHOLDERS’ EQUITY, COMMON STOCKHOLDERS’ EQUITY,
AND TANGIBLE COMMON STOCKHOLDERS’ EQUITY;
TOTAL ASSETS AND TANGIBLE ASSETS; AND THE RELATED MEASURES
(unaudited)
While stockholders’ equity, common stockholders’ equity, total assets, and book value per common share are financial measures that are recorded in accordance with U.S. generally accepted accounting principles (“GAAP”),GAAP, tangible common stockholders’ equity, tangible assets, and tangible book value per common share are not. It is management’s belief that thesenon-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 relatednon-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 thesenon-GAAP measures may differ from that of other companies reportingnon-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:
(in thousands, except per share amounts) | September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||
Stockholders’ Equity | $ | 6,759,654 | $ | 6,123,991 | ||||||||||||||||||||||||
|
| At or for the |
|
| At or for the |
| ||||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||||
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||||||||||
(dollars in millions) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||||||
Total Stockholders’ Equity |
| $ | 6,916 |
| $ | 6,796 |
| $ | 6,693 |
|
| $ | 6,916 |
| $ | 6,693 |
| |||||||||||
Less: Goodwill | (2,436,131 | ) | (2,436,131 | ) |
| (2,426 | ) |
| (2,426 | ) |
| (2,426 | ) |
|
| (2,426 | ) |
| (2,426 | ) | ||||||||
Core deposit intangibles | — | (208 | ) | |||||||||||||||||||||||||
Preferred stock | (502,840 | ) | — |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) |
|
| (503 | ) | |||||
Tangible common stockholders’ equity |
| $ | 3,987 |
| $ | 3,867 |
| $ | 3,764 |
|
| $ | 3,987 |
| $ | 3,764 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Tangible common stockholders’ equity | $ | 3,820,683 | $ | 3,687,652 | ||||||||||||||||||||||||
Total Assets | $ | 48,457,891 | $ | 48,926,555 |
| $ | 57,469 |
| $ | 57,657 |
| $ | 54,210 |
|
| $ | 57,469 |
| $ | 54,210 |
| |||||||
Less: Goodwill | (2,436,131 | ) | (2,436,131 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) | ||||
Core deposit intangibles | — | (208 | ) | |||||||||||||||||||||||||
Tangible Assets |
| $ | 55,043 |
| $ | 55,231 |
| $ | 51,784 |
|
| $ | 55,043 |
| $ | 51,784 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Tangible assets | $ | 46,021,760 | $ | 46,490,216 | ||||||||||||||||||||||||
Average common stockholders’ equity |
| $ | 6,368 |
| $ | 6,370 |
| $ | 6,153 |
|
| $ | 6,369 |
| $ | 6,171 |
| |||||||||||
Less: Average goodwill |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) | ||||||||
Average tangible common stockholders’ equity |
| $ | 3,942 |
| $ | 3,944 |
| $ | 3,727 |
|
| $ | 3,943 |
| $ | 3,745 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Average Assets |
| $ | 58,114 |
| $ | 56,306 |
| $ | 53,787 |
|
| $ | 57,215 |
| $ | 53,598 |
| |||||||||||
Less: Average goodwill |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) |
|
| (2,426 | ) | ||||||||
Average tangible assets |
| $ | 55,688 |
| $ | 53,880 |
| $ | 51,361 |
|
| $ | 54,789 |
| $ | 51,172 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income available to common stockholders |
| $ | 144 |
| $ | 137 |
| $ | 97 |
|
| $ | 281 |
| $ | 189 |
| |||||||||||
GAAP MEASURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Return on average assets (1) |
| 1.04 | % |
| 1.03 | % |
| 0.78 | % |
|
| 1.04 | % |
| 0.77 | % | ||||||||||||
Return on average common stockholders' equity (2) |
| 9.00 |
| 8.63 |
| 6.31 |
|
|
| 8.81 |
| 6.13 |
| |||||||||||||||
Book value per common share |
| $ | 13.79 |
| $ | 13.53 |
| $ | 13.34 |
|
| $ | 13.79 |
| $ | 13.34 |
| |||||||||||
Common stockholders’ equity to total assets | 12.91 | % | 12.52 | % |
| 11.16 |
| 10.92 |
| 11.42 |
|
|
| 11.16 |
| 11.42 |
| |||||||||||
NON-GAAP MEASURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Return on average tangible assets (1) |
| 1.09 | % |
| 1.08 | % |
| 0.82 | % |
|
| 1.08 | % |
| 0.80 | % | ||||||||||||
Return on average tangible common stockholders’ equity (2) |
| 14.54 |
| 13.93 |
| 10.42 |
|
|
| 14.23 |
| 10.11 |
| |||||||||||||||
Tangible book value per common share |
| $ | 8.57 |
| $ | 8.32 |
| $ | 8.11 |
|
| $ | 8.57 |
| $ | 8.11 |
| |||||||||||
Tangible common stockholders’ equity to tangible assets | 8.30 | 7.93 |
| 7.24 |
| 7.00 |
| 7.27 |
|
|
| 7.24 |
| 7.27 |
| |||||||||||||
Book value per common share | $12.79 | $12.57 | ||||||||||||||||||||||||||
Tangible book value per common share | 7.81 | 7.57 |
(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.
41
Executive Summary
New York Community Bancorp, Inc. is the holding company for New York Community Bank, (the “Community Bank”), with 225 branches in Metroa New York New Jersey, Ohio, Florida, and Arizona; and New York Commercial Bank (the “Commercial Bank”), with 30 branchesState-chartered savings bank, headquartered in MetroHicksville, New York. At September 30, 2017, we had total assets of $48.5 billion, including total loans, net, of $37.5 billion, total deposits of $28.9 billion, and total stockholders’ equity of $6.8 billion.
Chartered in the State of New York, the CommunityThe Bank and the Commercial Bank areis subject to regulation by the Federal Deposit Insurance Corporation (the “FDIC”),NYSDFS, the Consumer Financial Protection Bureau,FDIC, and the New York State Department of Financial Services.CFPB. In addition, the holding company is subject to regulation by the Board of Governors ofFRB, the Federal Reserve System (the “FRB”), the U.S. SecuritiesSEC, and Exchange Commission (the “SEC”), andto the requirements of the New York Stock Exchange,NYSE, where shares of our common stock are tradedtrade under the symbol “NYCB” and shares of our preferred stock trade under the symbol “NYCB PR A.”PA”.
AsReflecting our growth through a publicly traded company, our mission is to provide our shareholdersseries of acquisitions, the Company currently operates 236 branch locations through eight local divisions, each with a solid return on theirhistory of service and strength. In New York, we operate as Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank; in New Jersey as Garden State Community Bank; in Ohio as the Ohio Savings Bank; and as AmTrust Bank in Arizona and Florida.
Second Quarter 2021 Overview
At June 30, 2021, the Company had total assets of $57.5 billion, total loans and leases held for investment by producing a strong financial performance, maintaining a solid capital position,of $43.6 billion, total deposits of $34.2 billion, and engaging in corporate strategies that enhance the valuetotal stockholders’ equity of their shares. In$6.9 billion. For the three months ended SeptemberJune 30, 2017, we generated2021, the Company reported net income of $110.5$152 million, andup 45% compared to the $105 million reported for the three months ended June 30, 2020. For the six months ended June 30, 2021, net income totaled $297 million, up 45% compared to $205 million reported for the six months ended June 30, 2020.
Net income available to common shareholders for the three months ended June 30, 2021 totaled $144 million, up 48% compared to the $97 million the Company reported for the three months ended June 30, 2020. For the six months ended June 30, 2021, net income available to common shareholders was $281 million, up 49% compared to $189 million reported in the first six months of $102.32020.
On a per share basis, the Company reported diluted earnings per common share of $0.30 for the three months ended June 30, 2021, up 43% compared to the $0.21 reported for the three months ended June 30, 2020. For the six months ended June 30, 2021, the Company reported diluted earnings per common share of $0.60, up 50% compared to diluted earnings per common share of $0.40 reported for the six months ended June 30, 2020.
Included in both the three and six months ended June 30, 2021 are $10 million in merger-related expenses and $2 million related to the revaluation of deferred taxes related to an increase in the New York State tax rate.
The key trends in the second quarter of 2021 were:
Continued Net Interest Income Growth and Net Interest Margin Expansion
The Company's net interest income and net interest margin continued to increase during the three months ended June 30, 2021. Net interest income during the second quarter of 2021 totaled $331 million, up 24% compared to the second quarter of 2020. The year-over-year improvement continues to be driven primarily by lower interest expense and secondarily by a modest increase in our interest income. Interest expense for the second quarter of 2021 totaled $100 million, down 36% compared to $157 million for the second quarter of 2020. Total interest income for the second quarter of 2021 was $431 million, up 2% compared to $423 million for the second quarter of 2020.
The Company's net interest income includes prepayment income. Prepayment income for the three months ended June 30, 2021 totaled $27 million, up 125% compared to the three months ended June 30, 2020.
At the same time, the Company's NIM also continued to improve. For the three months ended June 30, 2021, the NIM was 2.50%, up 32 bps on a year-over-year basis. As with net interest income, this improvement was driven mainly by a lower cost of funds. Our cost of funds for the three months ended June 30, 2021 totaled 0.88% compared to 1.46% for the three months ended June 30, 2020. This was the result of a significant decrease in the Company's average cost of deposits, which declined 78 bps to 0.38% for the three months ended June 30, 2021 compared to 1.16% for the three months ended June 30, 2020.
Prepayment income contributed 20 bps to the NIM this quarter. The NIM was also impacted by excess liquidity during the current second quarter given the strong increase in the average balance of cash and cash equivalents. This impacted the NIM by eight bps.
The Efficiency Ratio Continues to Trend Lower
During the three months ended June 30, 2021, our efficiency ratio declined to 37% compared to 44% during the three months ended June 30, 2020. This was primarily due to a much higher level of total revenue as compared to the year-ago quarter, while operating expenses were up on a year-over-year basis. Total revenues (total net interest income plus total non-interest income) rose
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23% to $347 million during the current second quarter compared to $281 million during the year-ago second quarter. Total operating expenses increased 5% to $129 million during the current second quarter compared to $123 million during the second quarter of last year.
Loan Growth Rebounded
At June 30, 2021, total loans held for investment increased $449 million or $0.21 per diluted common share.
Resumption4% annualized on a linked-quarter basis to $43.6 billion. During the current second quarter, the Company transferred $94 million of Meaningful Loan Growth
After not growingPaycheck Protection Program ("PPP") loans from the balance sheetheld for nearly three years,sale category to the held for investment category. Excluding this transfer, totalnon-covered loans held for investment increased $355 million or 3% annualized on a linked-quarter basis. On a year-over-year basis, total loans held for investment grew 2.7% over$1.3 billion or 3%.
At June 30, 2021, the multi-family portfolio rose $345 million to $32.6 billion compared to March 31, 2021, up 4% annualized. On a year-over-year basis, the multi-family portfolio increased $945 million or 3%. The specialty finance portfolio increased $59 million to $3.3 billion compared to March 31, 2021 up 7% annualized. When compared to the three months ended June 30, 2020, the specialty finance portfolio grew $334 million or 11%.
Strong Growth in Average Deposits
At June 30, 2021, total deposits of $34.2 billion remained flat on a linked-quarter basis, but they rose $2.4 billion or 8% on a year-over-year basis. However, on an annualizedaverage basis, deposits increased $2.3 billion or 7% compared to $37.5 billion. Totalnon-covered mortgage loans heldthe average for investment grew at an annualized rate of 3.5%the three months ended March 31, 2021 and they rose $2.8 billion or 9% compared to $35.5 billion, including 4.3% annualizedthe average for the three months ended June 30, 2020. This growth was driven by growth in average non-interest bearing deposits due to our multi-family loan portfolio. This was partially offset by a 2.4% (9.5% annualized) sequential decline in commercial and industrial (“C&I”relationship with our technology partner, which began late during the first quarter of 2021. These deposits are related to the Economic Impact Payments ("EIP") loans, largelyassociated with the result of prepayments. Total loans originated for investmentFederal government's fiscal stimulus plans. Accordingly, average non-interest bearing deposits increased 24%to $5.5 billion during the current second quarter, up 81% or $2.4 billion on a sequentialyear-over-year basis to $2.3and up 69% or $2.2 billion including 50% growth in multi-family originations and 30% growth in commercial real estate (“CRE”) loan originations.on a linked-quarter basis.
We Maintained Our Solid Record of Asset Quality Continues to be Solid
Non-performingnon-covered assets declined 7% to $84.7 million, or 0.17%, of totalnon-covered assets at the end of the current third quarter as compared to $91.6 million, or 0.20%, of totalnon-covered assets at June 30, 2017.Non-performingnon-covered loans decreased 16% to $69.0 million, or 0.18%, of totalnon-covered loans at the end of the current third quarter as compared to $82.0 million, or 0.22%, of totalnon-covered loans at June 30, 2017.
During the quarter,non-accrualnon-covered mortgage loans declined 22% to $24.3 million, while othernon-accrualnon-covered loans, which primarily consisted of taxi medallion-related loans, decreased 12% to $44.7 million. These improvements were partially offset by a 64% increase, to $15.8 million, innon-covered repossessed assets.
Net charge-offs for the current third quarter rose to $40.4 million, or 0.11%, of average loans compared to $11.4 million, or 0.03%, of average loans inThe Company's asset quality metrics remained solid during the second quarter of 2017.the year, underscoring the strength of our core portfolio. At June 30, 2021, NPAs totaled $40 million compared to $41 million at March 31, 2021, down 2% and compared to $63 million at June 30, 2020, down 37%. The increaseyear-over-year improvement was primarily due to charge-offsa significant improvement in other non-accrual loans. This category consists mainly of non-accrual taxi medallion-related loans. Other non-accrual loans declined 70% to $9 million at June 30, 2021, as non-accrual taxi medallion-related loans declined 65% to $9 million at June 30, 2021 compared to $26 million at June 30, 2020.
During the second quarter of 2020, the Company implemented various loan modification programs with some of its borrowers in accordance with the CARES Act and regulatory guidance. These modifications included both full-payment deferrals and principal deferrals (borrowers pay interest and escrow only). Since instituting these programs last year, total deferrals declined 86% to $1 billion compared to $7.4 billion at June 30, 2020. The remaining $1 billion are principal deferrals and are expected to decline further over the second half of 2021.
Recent Events
Declaration of Dividend on Common Shares
On July 27, 2021, our Board of Directors declared a quarterly cash dividend on the taxi medallion-related loan portfolio. Taxi medallion-related loans accounted for $40.6 millionCompany’s common stock of this quarter’s charge-offs compared$0.17 per share. The dividend is payable on August 17, 2021 to $11.3 million in the trailing quarter. Excluding these charge-offs, the Company would have recorded net recoveries during the quarter. At September 30, 2017, the Company’s total taxi medallion-related exposure was $105.6 million.common shareholders of record as of August 7, 2021.
Our Net Interest Income Was Pressured by the Rise in Interest RatesAcquisition of Flagstar Bancorp, Inc. ("Flagstar")
The FRB has raised its target federal funds rate four times since the fourth quarter of 2016, including in March and June of 2017. This increase in short-term interest rates led to an increase in our cost of funds. As a result of this factor, our net interest income fell $11.4 million, or 4% sequentially, and $42.1 million, or 13% year-over-year, to $276.3 million and our net interest margin fell 12 and 38 basis points, respectively, to 2.53% in the third quarter of this year.
Ongoing Expense Control
Non-interest expense totaled $162.2 million in the current third quarter, down 1% from the trailing-quarter level and up modestly from the year-earlier quarter. Merger-related expenses were $2.2 million in the year-earlier period; there were no comparable expenses in the third quarter of 2017. The sequential improvement was largely due to lower operating expenses including compensation and benefits expense and general and administrative (“G&A”) expense.
External Factors
The following is a discussion of certain external factors that tend to influence our financial performance and the strategic actions we take:
Interest Rates
Among the external factors that tend to influence our performance, the interest rate environment is key.
The cost of our deposits and short-term borrowed funds is largely based on short-term rates of interest, the level of which is partially impacted by the actions of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”). The FOMC reduces, maintains, or increases the target federal funds rate (the rate at which banks borrow funds overnight from one another) as it deems necessary. Since the fourth quarter of 2008, when the target federal funds rate was lowered to a range of 0% to 0.25%, the rate has been raised four times: on December 17, 2015, to a range of 0.25% to 0.50%; on December 14, 2016, to a range of 0.50% to 0.75%; on March 15, 2017, to a range of 0.75% to 1.00%; and most recently on June 14, 2017 to a range of 1.00% to 1.25%.
Just as short-term interest rates affect the cost of our deposits and that of the funds we borrow, market interest rates affect the yields on the loans we produce for investment and the securities in which we invest. As further discussed under “Loans Held for Investment” later on in this discussion, the interest rates on our multi-family and CRE loans generally are based on the five-year Constant Maturity Treasury Rate (“CMT”).
The following table summarizes the high, low, and average five- andten-year CMTs in the respective periods:
Five-Year Constant Maturity Treasury Rate | Ten-Year Constant Maturity Treasury Rate | |||||||||||||||||||||||||
Sept. 30 | June 30, | Sept. 30, | Sept. 30, | June 30, | Sept. 30, | |||||||||||||||||||||
2017 | 2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||||||||
High | 1.95 | % | 1.94 | % | 1.26 | % | High | 2.39 | % | 2.42 | % | 1.73 | % | |||||||||||||
Low | 1.63 | 1.71 | 0.94 | Low | 2.05 | 2.05 | 1.37 | |||||||||||||||||||
Average | 1.81 | 1.81 | 1.13 | Average | 2.24 | 2.26 | 1.56 |
(Source: Bloomberg)
Changes in market interest rates generally have a lesser impact on our multi-family and CRE loan production than they do on other types of loans we produce. Because the multi-family and CRE loans we produce generate income when they prepay (which is recorded as interest income), the impact of repayment activity can be meaningful. In the third quarter of 2017, prepayment income from loans contributed $14.1 million to interest income; in the trailing and year-earlier quarters, the contribution was $13.3 million and $13.4 million, respectively.
Economic Indicators
While we attribute our asset quality to the nature of the loans we produce and our conservative underwriting standards, the quality of our assets can also be impacted by economic conditions in our local markets and throughout the United States. The information that follows consists of recent economic data that we consider to be germane to our performance and the markets we serve.
The following table presents the unemployment rates for the United States and our key deposit markets in the months ended September 30, 2017, June 30, 2017, and September 30, 2016. While unemployment declined year-over-year in all of these markets, the sequential comparison indicates declines in certain markets and modest increases in two states and New York City.
For the Month Ended | ||||||||||||
September 30, 2017 | June 30, 2017 | September 30, 2016 | ||||||||||
Unemployment rate: | ||||||||||||
United States | 4.1 | % | 4.5 | % | 4.8 | % | ||||||
New York City | 5.0 | 4.4 | 5.4 | |||||||||
Arizona | 4.7 | 5.3 | 5.4 | |||||||||
Florida | 3.6 | 4.4 | 5.1 | |||||||||
New Jersey | 4.8 | 4.3 | 4.9 | |||||||||
New York | 4.7 | 4.5 | 4.9 | |||||||||
Ohio | 4.7 | 5.4 | 4.9 |
(Source: U.S. Department of Labor)
Another key economic indicator is the Consumer Price Index (the “CPI”), which measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The following table indicates the change in the CPI for the twelve months ended at each of the indicated dates:
For the Twelve Months Ended | ||||||||||||
September 2017 | June 2017 | September 2016 | ||||||||||
Change in prices: | 0.5 | % | (0.1 | )% | 0.3 | % |
Yet another pertinent economic indicator is the residential rental vacancy rate in New York, as reported by the U.S. Department of Commerce, and the office vacancy rate in Manhattan, as reported by a leading commercial real estate broker, Jones Lang LaSalle. These measures are important in view of the fact that 64.7% of our multi-family loans and 70.0% of our CRE loans are secured by properties in New York, with Manhattan accounting for 26.9% and 51.3% of our multi-family and CRE loans, respectively.
As reflected in the following table, residential rental vacancy rates in New York increased year-over-year and linked-quarter, while office vacancy rates in Manhattan declined year-over-year and linked quarter.
For the Three Months Ended | ||||||||||||
September 30, 2017 | June 30, 2017 | September 30, 2016 | ||||||||||
Rental Vacancy Rates: | ||||||||||||
New York residential | 5.6 | % | 5.1 | % | 5.1 | % | ||||||
Manhattan office | 10.2 | 10.8 | 10.5 |
Lastly, the Consumer Confidence Index® increased to 120.6 in September 2017 from 117.3 in June 2017 and 104.1 in September 2016. An index level of 90 or more is considered indicative of a strong economy.
Recent Events
Strategic Exit from the Mortgage Banking Business
On June 27, 2017,April 26, 2021, the Company announced that it had entered into ana definitive merger agreement to sell its mortgage banking business,(the “Merger Agreement”) under which we would acquire Flagstar Bancorp, Inc. ("Flagstar") in a 100% stock transaction valued at the time at $2.6 billion (the “Merger”). Under terms of the agreement, which was acquiredunanimously approved by the Boards of Directors of both companies, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own. Following
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completion of the Merger, New York Community shareholders are expected to own 68% of the combined company, while Flagstar shareholders are expected to own 32% of the combined company.
The new company will have over $85 billion in total assets, operate nearly 400 traditional branches in nine states, and 86 retail home lending offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, Michigan, including Flagstar's mortgage operations.
Results of Special Shareholder Meeting to Approve Merger with Flagstar
On August 4, 2021, the Company’s shareholders held a special meeting at which the shareholders approved the issuance of Company common stock to holders of Flagstar Bancorp, Inc. common stock pursuant to the Agreement and Plan of Merger, dated as part of its 2009 FDIC-assisted acquisition of AmTrust Bank (“AmTrust”April 24, 2021 (the “Merger Agreement”), and on the same date Flagstar’s shareholders held a special meeting at which its shareholders approved the Merger Agreement. The Merger is expected to Freedom Mortgage Corporation (“Freedom”). The saleclose during the fourth quarter of our mortgage banking business effectively takes2021, subject to the Company outsatisfaction of theone-to-four family residential wholesale lending business. Additionally, the Company received approval from the FDIC to sell the assets covered under our Loss Share Agreements (“LSA”)certain closing conditions and entered into an agreement to sell the majority of ourone-to-four family residential mortgage-related assets, including those covered under the LSA, to FirstKey Mortgage, LLC, an affiliate of Cerberus Capital Management, L.P. (“Cerberus”).
On July 28, 2017, the Company completed the sale, resulting in the receipt of proceeds of $1.9 billion from Cerberus and the FDIC to sell the aforementioned loans and settle the related LSA, resulting in a gain of $74.6 million which is included in“Non-interest income” in the accompanying Consolidated Statement of Income and Comprehensive Income. Effective October 31, 2017, the Company and the FDIC completed termination of the LSA.
The sale of our mortgage banking business to Freedom, which included both our origination and servicing platforms, as well as our mortgage servicing portfolio with unpaid loan principal balances totaling $20.5 billion and related mortgage servicing rights (“MSRs”) asset of $208.8 million, closed on September 29, 2017. We received proceeds in the amount of $226.6 million, resulting in apre-tax gain of $7.4 million.
The decision to sell the mortgage banking business and the assets covered under our LSA was the result of an evaluation with the Board of Directors and our outside advisors. Selling to a large, national, full-service mortgage banking company that would keep certain employees and maintain operations in the region were important considerations during the evaluation process. These actions are consistent with the Company’s strategic objectives. Such sales allow the Company to focus on its core business model, including growth through acquisitions, generate liquidity which will be redeployed into higher-earning assets, and enhance returns through improved efficiencies.
The Community Bank’s mortgage banking operation originated, aggregated, sold, and servicedone-to-four family loans. Community banks, credit unions, mortgage companies, and mortgage brokers used its proprietaryweb-accessible mortgage banking platform to originate and closeone-to-four family loans nationwide. These loans were generally sold to GSEs, servicing retained. To a much lesser extent, the Community Bank used its mortgage banking platform to originate jumbo loans.
Declaration of Dividend on Common Shares
On October 24, 2017, the Board of Directors declared a quarterly cash dividend of $0.17 per share on our common stock, payable on November 21, 2017 to shareholders of record at the close of business on November 7, 2017.
Critical Accounting Policies
We consider certain accounting policies to be critically important to the portrayal of our financial condition and results of operations, since they require management to make complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The inherent sensitivity of our consolidated financial statements to these critical accounting policies, and the judgments, estimates, and assumptions used therein, could have a material impact on our financial condition or results of operations.
We have identified the following to be critical accounting policies: the determination of the allowancesallowance for loancredit losses onnon-covered loans; loans and leases; and the determination of the amount, if any, of goodwill impairment; and the determination of the valuation allowance for deferred tax assets.impairment.
The judgments used by management in applying these critical accounting policies may be influenced by adverse changes in the economic environment, which may result in changes to future financial results.
Allowance for Credit Losses onNon-Covered Loans and Leases
The Company’s January 1, 2020, adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” resulted in a significant change to our methodology for estimating the allowance since December 31, 2019. ASU No. 2016-13 replaces 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 loan and lease losses onnon-covered loans represents our estimateis deducted from the amortized cost basis of probablea 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 principal balance outstanding, net of purchase premiums and estimablediscounts, fair value hedge accounting adjustments, and deferred fees and costs. Subsequent changes (favorable and unfavorable) in expected credit losses inherentare recognized immediately in net income as a credit loss expense or a reversal of credit loss expense. Management estimates thenon-covered loan portfolio as allowance by projecting probability-of-default, loss-given-default and exposure-at-default depending on economic parameters for each month of the dateremaining contractual term. Economic parameters are developed using available information relating to past events, current conditions, and economic forecasts. The Company’s economic forecast period reverts to a historical norm based on inputs after 24 months. Historical credit experience provides the basis for the estimation of expected credit losses, with 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 balance sheet. Losses onnon-coveredloans, are charged against, and recoveries of losses onnon-covered loans are credited back to, the allowanceadjusted for losses onnon-covered loans.
Althoughnon-covered loans are held by either the Community Bankforecasted prepayments when appropriate. The contractual term excludes potential extensions or the Commercial Bank, and a separate loan loss allowance is established for each, the total of the two allowances is available to cover all losses incurred. In addition, except as otherwise noted in the following discussion, the process for establishing the allowance for losses onnon-covered loans is largely the same for each of the Community Bank and the Commercial Bank.
renewals. The methodology used forin the allocationestimation of the allowance fornon-covered loan credit losses on loans and leases, which is performed at September 30, 2017least quarterly, is designed to be dynamic and December 31, 2016 was generally comparable, wherebyresponsive to changes in portfolio credit quality and forecasted economic conditions. Each quarter, we reassess the Community Bankappropriateness of the economic period, the reversion period and historical mean at the Commercial Bank segregated their loss factors (usedportfolio segment level, considering any required adjustments for both criticizeddifferences in underwriting standards, portfolio mix, andnon-criticized loans) into a component that was primarily based on historical loss rates and a component that was primarily based on other qualitative factors that are probable to affect loan collectability. In determining the respective allowances fornon-covered loan losses, management considers the Community Bank’s and the Commercial Bank’s current business strategies and credit processes, including compliance with applicable regulatory guidelines and with guidelines approved by the respective Boards of Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
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The allowance for loan and lease losses onnon-covered loans is established based on management’s evaluation of incurred losses in the portfolio in accordance with U.S. generally accepted accounting principles (“GAAP”), and is comprised of both specific valuation allowances and general valuation allowances.
Specific valuation allowances are established based on management’s analyses of individual loans that are considered impaired. If anon-covered loan is deemed to be impaired, management measures the extent of the impairment and establishes a specific valuation allowance for that amount. Anon-covered loan is classified as “impaired” when, based on current information and/or events, it is probable that we will be unable to collect all amounts due under the contractual terms of the loan agreement. We apply this classification as necessary tonon-covered loans individually evaluated for impairment in our portfolios. Smaller-balance homogenous loans and loans carried at the lower of cost or fair value are evaluated for impairmentmeasured on a collective rather than individual, basis.(pool) basis when similar risk characteristics exist. Management believes the products within each of the entity’s portfolio classes exhibit similar risk characteristics. Loans that are determined to certain borrowers who have experienced financial difficulty and for which the terms have been modified, resulting in a concession,unique risk characteristics are considered troubled debt restructurings (“TDRs”) and are classified as impaired.
We generally measure impairmentevaluated on an individual basis by management. If a loan and determineis determined to be collateral dependent, or meets the extentcriteria to which a specific valuation allowance is necessary by comparingapply the loan’s outstanding balance to eithercollateral dependent practical expedient, expected credit losses are determined based on the fair value of the collateral at the reporting date, less the estimated costcosts to sell or the present value of expected cash flows, discounted at the loan’s effective interest rate. Generally, when the fair value of the collateral, net of the estimated cost to sell, or the present value of the expected cash flows is less than the recorded investmentas appropriate. The macroeconomic data used in the loan, any shortfallquantitative models are based on an economic forecast period of 24 months. The Company leverages economic projections including property market and prepayment forecasts from established independent third parties to inform its loss drivers in the forecast. Beyond this forecast period, we revert to a historical average loss rate. This reversion to the historical average loss rate is promptly charged off.performed on a straight-line basis over 12 months.
We also followThe portfolio segment represents the level at which a processsystematic methodology is applied to assign general valuation allowancesestimate credit losses. Smaller pools of homogenous financing receivables with homogeneous risk characteristics were modeled using the methodology selected for the portfolio segment tonon-covered loan categories. General valuation allowances are established by applying our loan loss provisioning methodology, and reflect the inherent risk in outstandingheld-for-investment loans. This loan loss provisioning methodology considers various which factors in determining the appropriate quantified riskqualitative scorecard include: concentration, modeling and forecast imprecision and limitations, policy and underwriting, prepayment uncertainty, external factors, nature and volume, management, and loan review. Each factor is subject to usean evaluation of metrics, consistently applied, to determine the general valuation allowances. The factors assessed begin with the historical loan loss experiencemeasure adjustments needed for each majorreporting period.
Loans that do not share risk characteristics are evaluated on an individual basis. These include loans that are in nonaccrual status with balances above management determined materiality thresholds depending on loan category. Weclass and also take into account an estimated historical loss emergence period (which isloans that are designated as TDR or “reasonably expected TDR” (criticized, classified, or maturing loans that will have a modification processed within the period of time between the event that triggers a loss and the confirmation and/orcharge-off of that loss) for each loan portfolio segment.next three months). In addition, all taxi medallion loans are individually evaluated.
The allocation methodology consists of the following components: First, we determineCompany maintains an allowance for loancredit losses on off-balance sheet credit exposures. At June 30, 2021, and December 31, 2020, the allowance for credit losses on off-balance sheet credit exposures was $11 million and $12 million, respectively. We estimate 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 quantitative loss factorrange of fund-up windows (between 12 and 36 months) and comparison of the mean CCF for loans evaluated collectively for impairment. This quantitative loss factor is based primarily on historicaleach 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 after consideringto the credit exposures as to the related class of loans.
For the six months ended June 30, 2021 the allowance for credit losses on loan type, historical loss and delinquency experience,leases increased primarily as a result of growth across segments of the loan portfolio, and loss emergence periods. The quantitative lossby macroeconomic factors appliedsurrounding the COVID-19 pandemic, specifically the resultant estimated decreases in property values in the methodologyNew York City area. The forecast includes a temporarily significant increase in Gross Domestic Product (“GDP”) to +6.9% in the second half of 2021 as the economy begins to recover from the systemic disruptions of the COVID-19 pandemic. Unemployment continues to subside from the historic shock of 2020, but is not forecasted to return to pre-pandemic levels around 3.5% until 2023. Interest rates are periodicallyre-evaluatedforecasted to begin to rise modestly and adjusted10 Year-Baa spread widens slightly beginning in 2022 and levels off at 2.6% through 2023. In addition to reflect changesthese quantitative inputs, several qualitative factors were considered in historical loss levels, loss emergence periods, or other risks. Lastly, we allocate anincreasing our allowance for loan and lease credit losses, based on qualitative loss factors. These qualitative loss factors are designedincluding the risk that the economic decline proves to account for losses that may not be provided for bymore severe and/or prolonged than our baseline forecast. The impact of the quantitative loss component dueunprecedented fiscal stimulus and changes to other factors evaluated by management, which include, but are not limited to:
By considering the factors discussed above, we determine an allowance fornon-covered loan losses that is applied to each significant loan portfolio segment to determine the total allowance for losses onnon-covered loans.programs, was also considered.
The historical loss period we use to determineCurrent Expected Credit Losses
At December 31, 2019, the allowance for loan and lease losses onnon-covered loans is a rolling27-quarter look-back period, astotaled $148 million. On January 1, 2020, the Company adopted the CECL methodology under ASU Topic 326. Upon adoption, we believe this producesrecognized an appropriate reflection of our historical loss experience.
The process of establishing the allowance for losses onnon-covered loans also involves:
In order to determine their overall adequacy, each of the respectivenon-covered loan loss allowances is reviewed quarterly by management and the Board of Directors of the Community Bank or the Commercial Bank, as applicable.
We charge 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. Fornon-real estate-related consumer credits, the followingpast-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) Bothclosed-end andopen-end credits are typically charged off in the quarter that the credit is 60 days past the date we received notification that the borrower has filed for bankruptcy.
The level of future additions to the respectivenon-covered loan loss allowances is based on many factors, including certain factors that are beyond management’s control, such as“Day 1” transition adjustment from changes in economicmethodology, with a corresponding decrease in retained earnings. At June 30, 2021, the ACL totaled $202 million, up $8 million compared to December 31, 2020 driven by net recoveries of $7 million during the first six months of 2021 and local market conditions, including declines in real estate values, and increases in vacancy rates and unemployment. Management usesa zero provision for credit losses.
45
Separately, at December 31, 2019, the best available information to recognize losses on loans or to make additions to the loan loss allowances; however, the Community Bank and/or the Commercial Bank may be required to take certain charge-offs and/or recognize further additions to their loan loss allowances, based on the judgment of regulatory agencies with regard to information provided to them during their examinations of the Banks.
AnCompany had an allowance for unfunded commitments is maintained separate fromof $461,000. With the allowancesadoption of CECL on January 1, 2020, we recognized a “Day 1” transition adjustment of $13 million. At June 30, 2021, the allowance fornon-covered loan losses and is included in “Other liabilities” in the Consolidated Statements of Condition. unfunded commitments totaled $11 million.
(dollars in millions) |
| Loans and |
|
| Unfunded |
| ||
Allowance for credit losses at December 31, 2020 |
| $ | 194 |
|
| $ | 12 |
|
2021 Provision for (recovery of) credit losses |
|
| 1 |
|
|
| (1 | ) |
2021 net recoveries |
|
| 7 |
|
|
| — |
|
Allowance for credit losses at June 30, 2021 |
| $ | 202 |
|
| $ | 11 |
|
See Note 6, “AllowancesAllowance for Loan Losses”Credit Losses on Loans and Leases for a further discussion of our allowanceAllowance for lossesCredit Losses.
Goodwill Impairment
The Company adopted, on covered loans, as well as additional information about our allowancea prospective basis, ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for losses onnon-covered loans.
Goodwill Impairment
on January 1, 2020. We have significant intangible assets related to goodwill.as of June 30, 2021, including goodwill of $2.4 billion. In connection with our acquisitions, the assets that are acquired and liabilities that are assumed are recorded at their estimated fair values. Goodwill represents the excess of the purchase price of our acquisitions over the fair value of the identifiable net assets acquired, including other identified intangible assets. Our determination of whether or notWe test our goodwill for impairment at the reporting unit level. We have identified one reporting unit which is impaired requires us to make significant judgmentsthe same as our operating segment and requires us to use significant estimates and assumptions regarding estimated future cash flows.reportable segment. If we change our strategy or if market conditions shift, our judgments may change, which may result in adjustments to the recorded goodwill balance.
We testperform our goodwill for impairment attest in the reporting unit level. These impairment evaluations are performed by comparing the carrying valuefourth quarter of the goodwill of a reporting unit to its estimated fair value. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Previously, we had identified two reporting units: our Banking Operations reporting unit and our Residential Mortgage Banking reporting unit. On September 29, 2017, the Company sold the Residential Mortgage Banking reporting unit; accordingly, we have identified only one reporting unit.
each year, or more often if events or circumstances warrant. For annual goodwill impairment testing, we have the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If we conclude that this is the case, we must performwould compare thetwo-step test described below. If fair value the reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized, however, would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, we conclude basedwould consider income tax effects from any tax deductible goodwill on the qualitative assessment thatcarrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
The Company assessed the environment in the second quarter of 2021, including the estimated impact of the COVID-19 pandemic on macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting unit. After consideration of the items above and the first six months of 2021 results, the Company determined it is notmore likely thanwas not more-likely-than-not that the fair value of aany reporting unit is less thanwas below book value as of June 30, 2021. We will continue to monitor and evaluate the impact of COVID-19 and its carrying amount, we have completed our goodwill impairment test and do not need to perform thetwo-step test.
Under step one of thetwo-step test, we are required to determine the fair value of each reporting unit and compare it to the carrying value, including goodwill and other intangible assets, of such reporting unit. If the fair value exceeds the carrying value, no impairment loss is recognized and the second step, which is a calculation of the impairment, is not performed. However, if the carrying value of the reporting unit exceeds its fair value, an impairment charge is recorded equal to the extent that the carrying amount of goodwill exceeds its implied fair value.
Application of the impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and the determination of the fair value of each reporting unit. In assessing whether goodwill is impaired, we must make estimates and assumptions regarding future cash flows, long-term growth rates of our business, operating margins, discount rates, weighted average cost of capital, and other factors to determine the fair value of our assets. These estimates and assumptions require management’s judgment, and changes to these estimates and assumptions, as a result of changing economic and competitive conditions, could materially affect the determination of fair value and/or impairment. Future events could cause us to conclude that indicators of impairment exist for goodwill, and may result from, among other things, deterioration in the performance of our business, adverse market conditions, adverse changes in applicable laws and regulations, competition, or the sale or disposition of a reporting unit. Any resulting impairment loss could have a material adverse impact on our financial conditionmarket capitalization, overall economic conditions, and results of operations.
As of September 30, 2017, we had goodwill of $2.4 billion. Our goodwill is evaluated for impairment annually at December 31st, or more frequently if conditions exist that indicate that the value may be impaired. During the three months ended September 30, 2017, noany triggering events were identified that indicated that the valuemay indicate an impairment of goodwill might be impaired as of such date. We performed our annual goodwill impairment test as ofin the future.
Balance Sheet Summary
At June 30, 2021, total assets were $57.5 billion, up $1.2 billion or 4% on an annualized basis compared to December 31, 20162020. The growth was driven by good loan growth and based ondouble-digit growth in total deposits.
The level of cash balances increased $138 million to $2.1 billion compared to year-end 2020. Total securities grew $248 million to $6.1 billion, or 8% annualized compared to December 31, 2020.
Total loans and leases held for investment rose $691 million to $43.6 billion or 3% annualized compared to December 31, 2020. The growth during the results ofcurrent second quarter was driven by growth in our qualitative assessments, found no indication of goodwill impairment at that date.multi-family and specialty finance portfolios, while the CRE portfolio was relatively flat.
Income Taxes
In estimating income taxes, management assesses the relative merits and risks of the tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the context of our tax position. In this process, management also relies on tax opinions, recent audits, and historical experience. Although we use the best available information to record income taxes, underlying estimates and assumptions can change over time as a result of unanticipated events or circumstances such as changes in tax laws and judicial guidance influencing our overall or transaction-specific tax position.
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and the carry forward of certain tax attributes such as net operating losses. A valuation allowance is maintained for deferred tax assets that we estimate are more likely than not to be unrealizable, based on available evidence at the time the estimate is made. In assessing the need for a valuation allowance, we estimate future taxable income, considering the prudence and feasibility of tax planning strategies and the realizability of tax loss carry forwards. Valuation allowances related to deferred tax assets can be affected by changes to tax laws, statutory tax rates, and future taxable income levels. In the event we were to determine that we would not be able to realize all or a portion of our net deferred tax assets in the future, we would reduce such amounts through a charge to income tax expense in the period in which that determination was made. Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded valuation allowance through a decrease in income tax expense in the period in which that determination was made. Subsequently recognized tax benefits associated with valuation allowances recorded in a business combination would be recorded as an adjustment to goodwill.
Balance Sheet Summary
At September 30, 2017, we recorded total assets of $48.5 billion, a $110.2 million increase from the balance at June 30, 2017 and2021, the multi-family portfolio increased $345 million to $32.6 billion, compared to March 31, 2021 up 4% annualized. On a $468.7year-over-year basis, multi-family loans increased $945 million decline from the balance at Decemberor 3%. The specialty finance portfolio increased $59 million to $3.3 billion compared to March 31, 2016. Loans, net, and securities represented $37.5 billion and $3.0 billion, respectively, of the September 30th balance and were down $1.4 billion and $140.1 million, respectively, from the trailingquarter-end balances and $1.9 billion and $786.0 million, respectively, from theyear-end balances.
Deposits and borrowed funds totaled $28.9 billion and $12.4 billion, respectively, at the end of the current third quarter. The current third quarter deposit balance was comparable2021, up 7% annualized. Compared to the balances at both the second quarter of this year and year end. Borrowed funds were unchanged from2020, the priorquarter-end balance andspecialty finance portfolio grew $334 million or 11%. CRE loans declined $1.3$214 million compared to March 31, 2021 to $6.8 billion, from year end.down 12% annualized. The CRE portfolio declined $117 million or 2% on a year-over-year basis.
Total stockholders’ equity rose $635.7 million from theyear-end 2016 balance, due primarily to a $502.8 million preferred stock offering in March, and $24.9 million from theAt June 30, 2017 balance,2021, total deposits of $34.2 billion were flat on a linked-quarter basis, but up $2.4 billion or 8% on a year-over-year basis. The year-over-year growth was driven by our relationship with our technology partner, which started late during the first quarter of this year. This relationship resulted in substantial growth in non-interest bearing accounts. Non-interest bearing accounts increased $1.6 billion to $4.5 billion on a year-over-year basis.
46
Totaled borrowed funds at June 30, 2021 decreased $625 million or 8% annualized to $15.5 billion compared to December 31, 2020, but increased $451 million or 3% compared to June 30, 2020.
Total stockholders' equity was $6.9 billion at June 30, 2021 compared to $6.8 billion at March 31, 2021 and $6.7 billion in the current third-quarter end. Common stockholders’year-ago quarter. Excluding goodwill and preferred stock, tangible common stockholders' equity represented 12.91% of total assets at September 30, 2017totaled $4.0 billion compared to 12.89%$3.9 billion at March 31, 2021 and 12.31%, respectively, of total assets$3.8 billion in the year-ago quarter. Book value per common share was $13.79 at June 30, 20172021 compared to $13.53 at March 31, 2021 and September$13.34 at June 30, 2016,2020.
Common stockholders' equity to total assets was 11.16% at June 30, 2021 compared to 10.92% at March 31, 2021 and 11.42% at June 30, 2020. On a tangible basis, tangible book value per common share of $12.79 at September 30, 2017 compared to $12.74was $8.57 at June 30, 20172021 compared to $8.32 at March 31, 2021 and $12.50$8.11 at SeptemberJune 30, 2016.
Loans and Leases
Loans net, fell $1.4 billion fromand Leases Originated for Investment
The majority of the trailingquarter-endloans we originate are loans and $1.9 billion from year end to $37.5 billionleases 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 three months ended September 30, 2017, representing 77.3%five boroughs of total assets at that date. Included inNew York City, where thequarter-end balance werenon-covered 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 net,contains a number of $37.3 billion,CRE loans, most of which are secured by income-producing properties located in New York City andnon-covered loans held for sale of $104.9 million, as more fully discussed below. Long Island.
Non-Covered Loans Held for Investment
Non-covered loans held for investment totaled $37.5 billion at the end of the current third quarter, up $255.2 million from the June 30, 2017 balance and up $123.5 million from the balance at December 31, 2016. Loan originations increased $444.6 million, or 24%, sequentially, driven by 50% growth in multi-family originations and 30% growth in CRE originations.
Sales of participations totaled $37.8 million in the three months ended September 30, 2017, as compared to $148.2 million in the trailing three-month period. The pace of loan sale participations has declined due to the Company’s strategic decision to resume its balance sheet growth.
In addition to multi-family and CRE loans, theheld-for-investmentour specialty finance loans and leases have become an increasingly larger portion of our overall loan portfolio. The remainder of our portfolio includes substantially smaller balances of C&I loans, one-to-four family loans, ADC loans, and other loans with specialty financeheld for investment. The majority of C&I loans consist of loans to small- and mid-size businesses.
During the second quarter of 2021, the Company originated $3.1 billion of loans and leases held for investment, surpassing the first quarter pipeline by $1.4 billion. Total originations rose 21% on a linked-quarter basis, but down 7% on a year-over-year basis. The linked-quarter increase was primarily the result of a 42% increase in multi-family originations, a 12% increase in specialty finance originations, and a 206% increase in other C&I originations, This was offset by an 84% decrease in CRE originations.
For the six months ended June 30, 2021, total loans comprisingoriginated for investment were $5.6 billion, down 7% compared to the bulk of$6.0 billion originated for the “Other loan” portfolio.six months ended June 30, 2020.
At September 30, 2017, loans secured by multi-family, CRE, and ADC properties (as defined in the FDIC’s CRE Guidance) represented 739.9% of the consolidated Banks’ total risk-based capital, within the 850% limit agreed to with our regulators.
The following table presents information about the loans held for investment we originated for the respective periods:
For the Three Months Ended | For the Nine Months Ended |
| For the Three Months Ended |
|
| For the Six Months Ended |
| |||||||||||||||||||||||||||||||||
Sept. 30, | June 30, | Sept. 30, | Sept. 30, | Sept. 30, |
| June 30, |
|
| March 31, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||||||||||||||||||
(in thousands) | 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||||||||||||||||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Mortgage Loans Originated for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Multi-family | $ | 1,432,424 | $ | 952,265 | $ | 1,276,358 | $ | 3,339,302 | $ | 4,529,904 |
| $ | 2,078 |
| $ | 1,466 |
| $ | 2,413 |
|
| $ | 3,544 |
|
| $ | 3,831 |
| ||||||||||||
Commercial real estate | 249,773 | 192,072 | 345,543 | 692,187 | 892,676 |
| 70 |
| 443 |
| 90 |
| 513 |
|
|
| 282 |
| ||||||||||||||||||||||
One-to-four family residential | 22,047 | 50,697 | 101,365 | 116,603 | 248,020 |
| 46 |
| 22 |
| 18 |
|
|
| 68 |
|
|
| 45 |
| ||||||||||||||||||||
Acquisition, development, and construction | 21,754 | 20,836 | 17,855 | 55,509 | 123,849 |
|
| 70 |
|
| 6 |
|
| 1 |
|
| 76 |
|
|
| 5 |
| ||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total mortgage loans originated for investment | $ | 1,725,998 | $ | 1,215,870 | $ | 1,741,121 | $ | 4,203,601 | $ | 5,794,449 |
|
| 2,264 |
|
| 1,937 |
|
| 2,522 |
|
|
| 4,201 |
|
|
| 4,163 |
| ||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Other Loans Originated for Investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Specialty finance | $ | 468,735 | $ | 498,918 | $ | 369,308 | $ | 1,236,817 | $ | 907,551 | ||||||||||||||||||||||||||||||
Specialty Finance |
| 606 |
| 541 |
| 700 |
| 1,147 |
|
|
| 1,657 |
| |||||||||||||||||||||||||||
Other commercial and industrial | 115,569 | 150,787 | 151,279 | 388,511 | 451,340 |
| 193 |
| 63 |
| 57 |
| 256 |
|
|
| 180 |
| ||||||||||||||||||||||
Other | 700 | 785 | 894 | 2,370 | 3,010 |
|
| 2 |
|
| 1 |
|
| 1 |
|
|
| 3 |
|
|
| 2 |
| |||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total other loans originated for investment | $ | 585,004 | $ | 650,490 | $ | 521,481 | $ | 1,627,698 | $ | 1,361,901 |
|
| 801 |
|
| 605 |
|
| 758 |
|
| 1,406 |
|
|
| 1,839 |
| |||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total loans originated for investment | $ | 2,311,002 | $ | 1,866,360 | $ | 2,262,602 | $ | 5,831,299 | $ | 7,156,350 | ||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total Loans Originated for Investment |
| $ | 3,065 |
| $ | 2,542 |
| $ | 3,280 |
|
| $ | 5,607 |
|
| $ | 6,002 |
|
47
Loans and Leases Held for Investment
The individualheld-for-investment loan portfolios are discussed in detail below.
Multi-Family Loans
Multi-family loans are our principal asset. The loans we produce are primarily secured bynon-luxury residential apartment buildings in New York City that are rent-regulated and feature below-market rents—a market we refer to as our “primary lending niche.“Primary Lending Niche.”
Multi-family loan originations represented $1.4 billion, or 62.0%, of theheld-for-investment loans we produced in the current third quarter, reflecting a linked-quarter increase of $480.2 million and a $156.1 million increase year-over-year. At September 30, 2017, multi-family loans represented $27.1 billion, or 72.4%, of totalnon-covered loans held for investment, reflecting a $286.2 million increase from the balance at June 30th and a $200.3 million increase from the balance at December 31st.
The average multi-family loan had a principal balance of $5.6 million at the end of the current third quarter, which was modestly higher than the balances at June 30, 2017 and December 31, 2016, respectively.
The majority of our multi-family loans are made to long-term owners of residential apartment buildings with unitsapartments that are subject to rent regulation and feature below-market rents. Our borrowers typically use the funds we provide for future real estate investments, or to make building-wide improvements and renovations to certain units, as a result of which they are able to increase the rents their tenants pay. In this way, the borrower creates increased cash flows to service debt and borrow against in future years.
In addition to underwritingAt June 30, 2021, total multi-family loans on the basisrepresented $32.6 billion or 75% of the buildings’ incometotal loans and condition, we consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to present evidenceleases held for investment. The average multi-family loan had an average weighted life of their ability to repay the loan from the buildings’ current rent rolls, their financial statements, and related documents.2.4 years.
While a small percentage of our multi-family loans areten-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 generally based on intermediate-term interest rates plus a spread. During the remaining years, the loan resets to an annually adjustable rate that is tied to the prime rate of interest, plus a spread. Alternately, the borrower may opt for a fixed rate that is tied to the five-year fixed advance rate of the Federal Home Loan Bank of New York (the“FHLB-NY”), plus a spread. The fixed-rate option also requires the payment of 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. As the rent roll increases, the typical property owner seeks to refinance the mortgage, and generally does so before the loan reprices in year six or eight.
Our multi-family loans tend to refinance in approximately three years of origination; at September 30, 2017,At June 30, 2017, and December 31, 2016, the weighted average life of the multi-family loan portfolio was 2.7 years, 3.2 years, and 2.9 years, respectively.
Multi-family loans that refinance within the first five or seven years are typically subject to an established prepayment penalty schedule. Depending on the remaining term of the loan at the time of prepayment, the penalties normally range from five percentage points to one percentage point of the then-current loan balance. If a loan extends past the fifth or seventh year and the borrower selects the fixed rate option, the prepayment penalties typically reset to a range of five points to one point over years six through ten or eight through twelve. For example, aten-year multi-family loan that prepays in year three would generally be expected to pay a prepayment penalty equal to three percentage points of the remaining principal balance. A twelve-year multi-family loan that prepays in year one or two would generally be expected to pay a penalty equal to five percentage points.
Because prepayment penalties are recorded as interest income, they are reflected in the average yields on our loans and interest-earning assets, our interest rate spread 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 only recorded when cash is received.
Our success as a multi-family lender partly reflects the solid relationships we have developed with the market’s leading mortgage brokers, who are familiar with our lending practices, our underwriting standards, and our long-standing practice of basing our loans on the cash flows produced by the properties. The process of producing such loans is generally four to six weeks in duration and, because the multi-family market is largely broker-driven, the expense incurred in sourcing such loans is substantially reduced.
At September 30, 2017, the majority2021, 78% of our multi-family loans were secured by rent-regulated rental apartment buildings. In addition, 64.7% of our multi-family loans were secured by buildings in the New York City metro area and 5.5%3.2% 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 servedwe operate in.
In addition, 68% or $22.3 billion of the Company's overall multi-family portfolio is secured by our retail branch offices.properties in New York State, of which $19.3 billion are subject to rent regulation laws. The weighted average LTV of the rent-regulated segment of the multi-family portfolio was 54.53%, as of June 30, 2021, 330 bps below the overall multi-family weighted average LTV of 57.83%.
Our emphasis on multi-family loans is driven by several factors, including their structure, which reduces our exposure to interest rate volatility to some degree. Another factor driving our focus on multi-family lending has been the comparative quality of the loans we originate.produce. Reflecting the nature of the buildings securing our loans, our underwriting standards, and the generally conservative LTV ratios our multi-family loans feature at origination, a relatively small percentage of the multi-family loans that have transitioned to non-performing status have actually resulted in losses, even when the credit cycle has taken a downward turn.
We primarily underwrite our multi-family loans based on the current cash flows produced by the collateral property, with a reliance on the “income” approach to appraising the properties, rather than the “sales” approach. The sales approach is subject to fluctuations in the real estate market, as well as general economic conditions, and is therefore likely to be more risky in the event of a downward credit cycle turn. We also consider a variety of other factors, including the physical condition of the underlying property; the net operating income of the mortgaged premises prior to debt service; the debt service coverage ratio (“DSCR”),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 (“LTV”).property.
In addition to requiring a minimum DSCR of 120%125% on multi-family buildings, we obtain a security interest in the personal property located on the premises, and an assignment of rents and leases. Our multi-family loans generally represent no more than 75% of the lower of the appraised value or the sales price of the underlying property, and typically feature an amortization period of 30 years. In addition, some of our multi-family loans may contain an initial interest-only period which typically does not exceed two years; however, these loans are underwritten on a fully amortizing basis.
Commercial Real Estate Loans
At June 30, 2021, CRE loans represented $6.8 billion or 16% of total loans and leases held for investment. The average CRE loan had an average weighted life of 2.3 years.
The CRE loans originated by the Company are also secured by income-producing properties, such as office buildings, mixed-use buildings (retail storefront on the ground floor and apartment units above the ground floor), retail centers, and multi-tenanted light industrial properties. At June 30, 2021, 85% of our CRE loans were secured by properties in the New York City metro area, while properties in other parts of New York State accounted for 2.2% of the properties securing our CRE loans and properties in all other states accounted for 13.0% combined.
Specialty Finance Loans and Leases
At June 30, 2021, specialty finance loans and leases totaled $3.3 billion or 7.5% of total loans and leases held for investment.
We produce our specialty finance loans and leases through a subsidiary that is staffed by a group of industry veterans with expertise in originating and underwriting senior securitized debt and equipment loans and leases. The subsidiary participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide.
48
The specialty finance loans and leases we fund fall into three categories: asset-based lending, dealer floor-plan lending, and equipment loan and lease financing. Each of these credits is secured with a perfected first security interest in, or outright ownership of, the underlying collateral, and structured as senior debt or as a non-cancelable lease. Asset-based and dealer floor-plan loans are priced at floating rates predominately tied to LIBOR, while our equipment financing credits are priced at fixed rates at a spread over Treasuries.
Since launching our specialty finance business in the third quarter of 2013, no losses have been recorded on any of the loans or leases in this portfolio.
C&I Loans
At June 30, 2021, C&I loans totaled $553 million or 1.3% of total loans and leases held for investment. During the current second quarter, we transferred $94 million of PPP loans designated as held for sale to held for investment.
The C&I loans we produce are primarily made to small and mid-size businesses in the five boroughs of New York City and on Long Island. Such loans are tailored to meet the specific needs of our borrowers, and include term loans, demand loans, revolving lines of credit, and, to a much lesser extent, loans that are partly guaranteed by the Small Business Administration.
A broad range of C&I loans, both collateralized and unsecured, are made available to businesses for working capital (including inventory and accounts receivable), business expansion, the purchase of machinery and equipment, and other general corporate needs. In determining the term and structure of C&I loans, several factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. C&I loans are typically secured by business assets and personal guarantees of the borrower, and include financial covenants to monitor the borrower’s financial stability.
The interest rates on our other C&I loans can be fixed or floating, with floating-rate loans being tied to prime or some other market index, plus an applicable spread. Our floating-rate loans may or may not feature a floor rate of interest. The decision to require a floor on other C&I loans depends on the level of competition we face for such loans from other institutions, the direction of market interest rates, and the profitability of our relationship with the borrower.
Acquisition, Development, and Construction Loans
ADC loans at June 30, 2021 totaled $187 million and represented 0.43% of total loans and leases held for investment. Because ADC loans are generally considered to have a higher degree of credit risk, especially during a downturn in the business cycle, borrowers are required to provide a guarantee of repayment and completion.
One-to-Four Family Loans
At June 30, 2021, one-to-four family loans totaled $190 million or 0.44% of total loans and leases held for investment.
Other Loans
Other loans totaled $12 million at June 30, 2021 and consisted mainly of overdraft loans and loans to non-profit organizations. We currently do not offer home equity loans or home equity lines of credit.
Loans Held for Sale
During the second quarter of 2021, the Company transferred $94 million of PPP loans to the held for investment C&I portfolio. Accordingly, loans held for sale at June 30, 2021 were zero compared to $141 million at March 31, 2021 and $117 million at December 31, 2020.
Lending Authority
The loans we originate for investment are subject to federal and state laws and regulations, and are underwritten in accordance with loan underwriting policies approved by the Management Credit Committee, the Commercial Credit Committee and the Mortgage and Real Estate and Credit Committees of the Board, and the Board of Directors of the Bank.
C&I loans less than or equal to $3 million are approved by the joint authority of lending officers. C&I loans in excess of $3 million and all multi-family, CRE, ADC, and Specialty Finance loans regardless of amount are required to be presented to the Management Credit Committee for approval. Multi-family, CRE, and C&I loans in excess of $5 million and Specialty Finance in excess of $15 million are also required to be presented to the Commercial Credit Committee and the Mortgage and Real Estate Committee of the Board, as applicable so that the Committees can review the loan’s associated risks. The Commercial Credit and
49
Mortgage and Real Estate Committees have authority to direct changes in lending practices as they deem necessary or appropriate in order to address individual or aggregate risks and credit exposures in accordance with the Bank’s strategic objectives and risk appetites.
All mortgage loans in excess of $50 million, specialty finance loans in excess of $15 million and all other C&I loans in excess of $5 million require approval by the Mortgage and Real Estate Committee or the Credit Committee of the Board, as applicable.
The Board of Directors updated certain aspects of the Company's lending authority as detailed below. These changes are effective as of July 21, 2021.
Multi-family, CRE, ADC, and specialty finance loans less than or equal to $10 million and C&I loans less than or equal to $5 million are approved by the joint authority of lending officers. C&I loans in excess of $5 million and all multi-family, CRE, ADC, and specialty finance loans in excess of $10 million are required to be presented to the Management Credit Committee for approval. Multi-family, CRE, ADC, and specialty finance loans in excess of $50 million and C&I loans in excess of $10 million are also required to be presented to the Board Credit Committee of the Board, so that the Committee can review the loan’s associated risks and approve the credit. The Board Credit Committee has authority to direct changes in lending practices as they deem necessary or appropriate in order to address individual or aggregate risks and credit exposures in accordance with the Bank’s strategic objectives and risk appetites.
In addition, all loans of $50 million or more originated by the Bank continue to be reported to the Board of Directors.
At June 30, 2021, the largest mortgage loan in our portfolio was a $329 million multi-family loan collateralized by six properties located in Brooklyn, New York. As of the date of this report, the loan has been current since origination.
Geographical Analysis of the Portfolio of Loans Held for Investment
The following table presents a geographical analysis of the multi-family and CRE loans in our held-for-investment loan portfolio at June 30, 2021:
|
| At June 30, 2021 |
|
| |||||||||||||
|
| Multi-Family Loans |
|
| Commercial Real Estate |
|
| ||||||||||
(dollars in millions) |
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
|
| ||||
New York City: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manhattan |
| $ | 7,765 |
|
|
| 23.86 |
| % | $ | 2,984 |
|
|
| 43.80 |
| % |
Brooklyn |
|
| 6,183 |
|
|
| 19.00 |
|
|
| 413 |
|
|
| 6.06 |
|
|
Bronx |
|
| 3,720 |
|
|
| 11.43 |
|
|
| 155 |
|
|
| 2.28 |
|
|
Queens |
|
| 2,890 |
|
|
| 8.88 |
|
|
| 611 |
|
|
| 8.97 |
|
|
Staten Island |
|
| 137 |
|
|
| 0.42 |
|
|
| 51 |
|
|
| 0.75 |
|
|
Total New York City |
| $ | 20,695 |
|
|
| 63.59 |
| % | $ | 4,214 |
|
|
| 61.86 |
| % |
New Jersey |
|
| 4,168 |
|
|
| 12.81 |
|
|
| 526 |
|
|
| 7.72 |
|
|
Long Island |
|
| 539 |
|
|
| 1.66 |
|
|
| 1,034 |
|
|
| 15.18 |
|
|
Total Metro New York |
| $ | 25,402 |
|
|
| 78.06 |
| % | $ | 5,774 |
|
|
| 84.76 |
| % |
Other New York State |
|
| 1,035 |
|
|
| 3.18 |
|
|
| 152 |
|
|
| 2.23 |
|
|
All other states |
|
| 6,103 |
|
|
| 18.76 |
|
|
| 887 |
|
|
| 13.01 |
|
|
Total |
| $ | 32,540 |
|
|
| 100.00 |
| % | $ | 6,813 |
|
|
| 100.00 |
| % |
At June 30, 2021, the largest concentration of ADC loans held for investment was located in Metro New York, with a total of $167 million at that date. The majority of our other loans held for investment were secured by properties and/or businesses located in Metro New York.
Outstanding Loan Commitments
At June 30, 2021, we had outstanding loan commitments of $2.7 billion, as compared to $2.5 billion at December 31, 2020.
Multi-family, CRE, ADC and 1-4 family loans together represented $459 million of held-for-investment loan commitments at the end of the quarter, while other loans represented $2.2 billion. Included in the latter amount were commitments to originate specialty finance loans and leases of $1.6 billion and commitments to originate other C&I loans of $568 million.
In addition to loan commitments, we had commitments to issue financial stand-by, performance stand-by, and commercial letters of credit totaling $281 million at June 30, 2021, a $95 million decrease from the volume at December 31, 2020. The fees we
50
collect in connection with the issuance of letters of credit are included in Fee Income in the Consolidated Statements of Income and Comprehensive Income.
Asset Quality
Non-Performing Loans and Repossessed Assets
NPAs at June 30, 2021 totaled $40 million, down 13% compared to $46 million at December 31, 2020, representing 0.07% of total assets unchanged as compared to the previous quarter.
NPLs at June 30, 2021 declined 16% to $32 million compared to $38 million at December 31, 2020, representing 0.07% of total loans compared to 0.08% for the previous quarter.
Total repossessed assets at the end of the second quarter were $8 million, unchanged from the previous quarter.
For the six months ended June 30, 2021, the Company recorded net recoveries of $7 million compared to net charge-offs of $14 million for the six months ended June 30, 2020. The decrease represents the decline in charge-offs of other C&I and taxi related loans.
The following table presents our non-performing loans by loan type and the changes in the respective balances from December 31, 2020 to June 30, 2021:
|
|
|
|
|
|
|
| Change from |
| |||||||
(dollars in millions) |
| June 30, |
|
| December 31, |
|
| Amount |
|
| Percent |
| ||||
Non-Performing Loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-accrual mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Multi-family |
| $ | 9 |
|
| $ | 4 |
|
| $ | 5 |
|
|
| 125 | % |
Commercial real estate |
|
| 12 |
|
|
| 12 |
|
|
| — |
|
|
| 0 | % |
One-to-four family |
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| 0 | % |
Acquisition, development, and construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total non-accrual mortgage loans |
|
| 23 |
|
|
| 18 |
|
|
| 5 |
|
|
| 28 | % |
Non-accrual other loans (1) |
|
| 9 |
|
|
| 20 |
|
|
| (11 | ) |
|
| -55 | % |
Total non-performing loans |
| $ | 32 |
|
| $ | 38 |
|
| $ | (6 | ) |
|
| -16 | % |
(1) Includes $9 million and $19 million of non-accrual taxi medallion-related loans at June 30, 2021 and December 31, 2020, respectively.
The following table sets forth the changes in non-performing loans over the six months ended June 30, 2021:
(dollars in millions) |
|
|
| |
Balance at December 31, 2020 |
| $ | 38 |
|
New non-accrual |
|
| 11 |
|
Charge-offs |
|
| (5 | ) |
Transferred to repossessed assets |
|
| - |
|
Loan payoffs, including dispositions and principal |
|
| (12 | ) |
Restored to performing status |
|
| - |
|
Balance at June 30, 2021 |
| $ | 32 |
|
A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because the Company no longer expects to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At June 30, 2021 and December 31, 2020, all of our non-performing loans were non-accrual loans.
51
We monitor non-accrual loans both within and beyond our primary lending area, which is defined as including: (a) the counties that comprise our CRA Assessment area, and (b) the entirety of the following states: Arizona; Florida; New York; New Jersey; Ohio; and Pennsylvania, in the same manner. Monitoring loans generally involves inspecting and re-appraising the collateral properties; holding discussions with the principals and managing agents of the borrowing entities and/or retained legal counsel, as applicable; requesting financial, operating, and rent roll information; confirming that hazard insurance is in place or force-placing such insurance; monitoring tax payment status and advancing funds as needed; and appointing a receiver, whenever possible, to collect rents, manage the operations, provide information, and maintain the collateral properties.
It is our policy to order updated appraisals for all non-performing loans, irrespective of loan type, that are collateralized by multi-family buildings, CRE properties, or land, in the event that such a loan is 90 days or more past due, and if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered annually until such time as the loan becomes performing and is returned to accrual status. It is generally not our policy to obtain updated appraisals for performing loans. However, appraisals may be ordered for performing loans when a borrower requests an increase in the loan amount, a modification in loan terms, or an extension of a maturing loan. We do not analyze LTVs on a portfolio-wide basis.
Non-performing loans are reviewed regularly by management and discussed on a monthly basis with the Management Credit Committee, the Board Credit Committee, and the Boards of Directors of the Company and the Bank, as applicable. Collateral-dependent non-performing loans are written down to their current appraised values, less certain transaction costs. Workout specialists from our Loan Workout Unit actively pursue borrowers who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings are retained to institute such action with regard to such borrowers.
Properties and assets that are acquired through foreclosure are classified as either OREO or repossessed assets, and are recorded at fair value at the date of acquisition, less the estimated cost of selling the property/asset. Subsequent declines in the fair value of OREO or repossessed assets are charged to earnings and are included in non-interest expense. It is our policy to require an appraisal and an environmental assessment (in accordance with our Environmental Risk Policy) of properties classified as OREO before foreclosure, and to re-appraise the properties/assets on an as-needed basis, and not less than annually, until they are sold. We dispose of such properties/assets as quickly and prudently as possible, given current market conditions and the property’s or asset’s condition.
To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we consider to be prudent. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows being generated by the property to determine its economic value using the “income approach,” and then at the market value of the property that collateralizes the loan. The amount of the loan is then based on the lower of the two values, with the economic value more typically used.
The condition of the collateral property is another critical factor. Multi-family buildings and CRE properties are inspected from rooftop to basement as a prerequisite to closing, with a member of the Board Credit Committee participating in inspections on multi-family, CRE, and ADC loans to be originated in excess of $50 million. We continue to conduct inspections as per the aforementioned policy, however, due to the COVID-19 pandemic, currently full access to some properties and buildings may be limited. Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experienced in-house appraisal officers and staff, perform appraisals on collateral properties. In many cases, a second independent appraisal review is performed.
In addition to underwriting multi-family loans on the basis of the buildings’ income and condition, we consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to present evidence of their ability to repay the loan from the buildings’ current rent rolls, their financial statements, and related documents.
In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and whose track record with our lending officers is typically greater than ten years. Furthermore, in New York City, where the majority of the buildings securing our multi-family loans are located, the rents that tenants may be charged on certain apartments are typically restricted under certain new rent regulation laws. As a result, the rents that tenants pay for such apartments are generally lower than current market rents. Buildings with a preponderance of such rent-regulated apartments are less likely to experience vacancies in times of economic adversity.
Reflecting the strength of the underlying collateral for these loans and the collateral structure, a relatively small percentage of our non-performing multi-family loans have resulted in losses over time. While our multi-family lending niche has not been immune to downturns in the credit cycle, the limited number of losses we have recorded, even in adverse credit cycles, suggests that the multi-family loans we produce involve less credit risk than certain other types of loans. In general, buildings that are subject to rent regulation have tended to be stable, with occupancy levels remaining more or less constant over time. Because the rents are typically below market and the buildings securing our loans are generally maintained in good condition, they have been more likely to retain their tenants in adverse economic times. In addition, we exclude any short-term property tax exemptions and abatement benefits the property owners receive when we underwrite the cash flows of our multi-family loans.
Commercial Real Estate Loans52
To further manage our credit risk, our lending policies limit the amount of credit granted to any one borrower, and typically require minimum DSCRs of 125% for multi-family loans and 130% for CRE loans represented $7.6 billion, or 20.1%, of total loans held for investment at the endloans. Although we typically lend up to 75% of the current third quarter, a $9.8 million increase fromappraised value on multi-family buildings and up to 65% on commercial properties, the balanceaverage LTVs of such credits at origination were below those amounts at June 30, 2017, but2021. Exceptions to these LTV limitations are minimal and are reviewed on a $174.0 million decrease from the balance at December 31, 2016. CRE loans represented $249.8 million, or 10.8%, of loans originated for investment in the current third quarter, reflecting a linked-quarter increase of $57.7 million and a year-over-year decrease of $95.8 million.case-by-case basis.
At September 30, 2017, the average CRE loan had a principal balance of $5.7 million, unchanged from the average principal balance at June 30, 2017, and up modestly from December 31, 2016.
The CRE loans we produce are secured by income-producing properties such as office buildings, retail centers,mixed-use buildings, and multi-tenanted light industrial properties. At September 30, 2017, 70.0% of our CRE loans were secured by properties in New York City, while properties on Long Island accounted for 11.6%. Other parts of New York State accounted for 2.6% of the properties securing our CRE credits, while all other states accounted for 15.8%, combined.
The terms of our CRE loans are similar to the terms of our multi-family credits, and the same prepayment penalties also apply. Furthermore, our CRE loans also tend to refinance in approximately three years of origination; the weighted average life of the CRE portfolio was 2.9 years, 3.0 years, and 3.4 years at September 30, 2017, June 30, 2017, and December 31, 2016, respectively.
The repayment of loans secured by commercial real estate is often dependent on the successful operation and management of the underlying properties. To minimize our credit risk, we originate CRE loans in adherence with conservative underwriting standards, and require that such loans qualify on the basis of the property’s current income stream and DSCR. The approval of a loan also depends on the borrower’s credit history, profitability, and expertise in property management, and generally requires a minimum DSCR of 130% and a maximum LTV of 65%. Furthermore,In addition, the origination of CRE loans typically requires a security interest in the fixtures, equipment, and other personal property of the borrower and/or an assignment of the rents and/or leases. In addition, our CRE loans may contain an interest-only period which typically does not exceed three years. However,years; however, these loans are underwritten on a fully amortizing basis.
One-to-Four Family Loans
Reflecting our announcement that the Company was exiting the mortgage banking business, the September 30, 2017 balance ofone-to-four family loans held for investment was relatively unchanged sequentially at $413.2 million, representing 1.1% of total loans held for investment at that date.
Acquisition, Development, and Construction Loans
The balance of ADC loans increased $12.8 million to $385.9 million sequentially, representing 1.0% of totalheld-for-investment loans at the current third-quarter end. In the third quarter of 2017, we originated ADC loans of $21.8 million, a $918,000 increase from the trailing-quarter volume and a year-over-year increase of $3.9 million.
Because ADC loans are generally considered to have a higher degree of credit risk, especially during a downturn in the credit cycle, borrowers are required to provide a guarantee of repayment and completion. In the nine months ended September 30, 2017 and 2016, we recovered losses against guarantees of $321,000 and $314,000, respectively.
Other Loans
Other loans of $2.0 billion were relatively unchanged from the trailing three-month period, representing 5.3% of total loans at September 30th due to an increase in specialty finance loans and leases to $1.4 billion and a $20.8 million decline in other C&I loans to $545.5 million. Included in the latter amount were taxi medallion-related loans of $99.1 million, representing 0.3% of total loans held for investment. The remainder of the “other loan” portfolio included a nominal amount of consumer loans.
Originations of other loans totaled $585.0 million in the current third quarter, reflecting a $65.5 million decrease from the trailing-quarter volume and a $63.5 million increase from the year-earlier amount. Specialty finance loans and leases represented the bulk of the quarter’s other loan originations, at $468.7 million, reflecting a $30.2 million decrease from the trailing-quarter level and a $99.4 million increase from the year-earlier amount. Other C&I loans represented $115.6 million of the other loans produced in the current third quarter, down $35.2 million and $35.7 million, respectively, from the volumes in the earlier periods.
Specialty Finance Loans and Leases
Our specialty finance subsidiary is based in Foxboro, Massachusetts, and staffed by a group of industry veterans with expertise in originating and underwriting senior secured debt and equipment loans and leases. The subsidiary participates in syndicated loans that are brought to us, and equipment loans and leases that are assigned to us, by a select group of nationally recognized sources, and 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.
The loans and leases we fund fall into three distinct categories: asset-based lending, dealer floor-plan lending, and equipment loan and lease financing. Each of these credits is secured with a perfected first security interest or outright ownership in the underlying collateral, and structured as senior debt or as anon-cancelable lease. The pricing of our asset-based and dealer floor-plan loans are at floating rates predominately tied to LIBOR, while our equipment financing credits are at fixed rates at a spread over Treasuries.
Since launching our specialty finance business in the third quarter of 2013, no losses have been recorded on any of the loans or leases in this portfolio.
Other Commercial and Industrial Loans
In contrast to the loans produced by our specialty finance subsidiary, the other C&I loans we produce are primarily made to small andmid-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, revolving lines of credit, and, to a lesser extent, loans that are partly guaranteed by the Small Business Administration. A broad range of other 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 other C&I loans, several factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. Other 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.
Lending Authority
The loans we originate for investment are subject to federal and state laws and regulations, and are underwritten in accordance with loan underwriting policies and procedures approved by the Mortgage and Real Estate Committee of the Community Bank (the “Mortgage Committee”), the Credit Committee of the Commercial Bank (the “Credit Committee”), and the respective Boards of Directors of the Banks.
Prior to 2017, all loans originated by the Banks were presented to the Mortgage Committee or the Credit Committee, as applicable. Furthermore, all loans of $20.0 million or more originated by the Community Bank, and all loans of $10.0 million or more originated by the Commercial Bank, were reported to the applicable Board of Directors.One-to-four family mortgage loans were approved byline-of-business personnel having underwriting authority pursuant to a separate policy applicable to our mortgage banking segment.
Effective January 27, 2017, and in accordance with the Banks’ credit policies, all loans other thanone-to-four family mortgage loans and C&I loans less than or equal to $3.0 million are required to be presented to the Management Credit Committee for approval. All multi-family, CRE, and “other” C&I loans in excess of $5.0 million, and specialty finance loans in excess of $15.0 million, are also required to be presented to the Mortgage Committee or the Credit Committee, as applicable, so that the Committees can review the loans’ associated risks. The 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 Banks’ strategic objectives and risk appetites.
All mortgage loans in excess of $50.0 million and all “other” C&I loans in excess of $5.0 million require approval by the Mortgage Committee or the Credit Committee. Credit Committee approval also is required for specialty finance loans in excess of $15.0 million.
In addition, all loans of $20.0 million or more originated by the Community Bank, and all loans of $10.0 million or more originated by the Commercial Bank, continue to be reported to the applicable Board of Directors, and allone-to-four family mortgage loans and C&I loans less than or equal to $3.0 million continue to be approved byline-of-business personnel.
At September 30, 2017 and December 31, 2016, the largest loan in our portfolio was a loan originated by the Community Bank on June 28, 2013 to the owner of a commercial office building located in Manhattan. As of the date of this report, the loan has been current since origination. The balance of the loan was $287.5 million at both period-ends.
In view of the heightened regulatory focus on CRE concentration, we monitor the ratio of our multi-family, CRE, and ADC loans (as defined in the FDIC’s CRE Guidance) to our total risk-based capital to ensure that it remains within the 850% limit we have agreed to with our regulators. At September 30, 2017, the consolidated Banks’ CRE concentration ratio was 739.9%.
Geographical Analysis of the Portfolio ofNon-Covered Loans Held for Investment
The following table presents a geographical analysis of the multi-family and CRE loans in ourheld-for-investment loan portfolio at September 30, 2017:
Multi-Family Loans | Commercial Real Estate Loans | |||||||||||||||
Percent | Percent | |||||||||||||||
(dollars in thousands) | Amount | of Total | Amount | of Total | ||||||||||||
New York City: | ||||||||||||||||
Manhattan | $ | 7,311,621 | 26.94 | % | $ | 3,873,867 | 51.31 | % | ||||||||
Brooklyn | 4,237,542 | 15.61 | 597,718 | 7.92 | ||||||||||||
Bronx | 3,697,390 | 13.62 | 110,749 | 1.46 | ||||||||||||
Queens | 2,230,371 | 8.22 | 647,450 | 8.57 | ||||||||||||
Staten Island | 79,177 | 0.29 | 56,313 | 0.75 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total New York City | $ | 17,556,101 | 64.68 | % | $ | 5,286,097 | 70.01 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Long Island | 522,364 | 1.92 | 877,343 | 11.62 | ||||||||||||
Other New York State | 967,434 | 3.56 | 193,000 | 2.56 | ||||||||||||
All other states | 8,099,498 | 29.84 | 1,193,947 | 15.81 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 27,145,397 | 100.00 | % | $ | 7,550,387 | 100.00 | % | ||||||||
|
|
|
|
|
|
|
|
At September 30, 2017, the largest concentration ofone-to-four family loans held for investment was located in California, with a total of $202.2 million; the largest concentration of ADC loans held for investment was located in New York City, with a total of $282.5 million. The majority of our other loans held for investment were secured by properties and/or businesses located in Metro New York.
Non-Covered Loans Held for Sale
At September 30, 2017,non-covered loans held for sale were $104.9 million, down $304.2 million from the level at December 31, 2016. The decline is attributable to our exit from the mortgage banking business. The Company expects a majority of the current-period balance to be sold during the fourth quarter of 2017.
Outstanding Loan Commitments
At September 30, 2017, we had outstanding loan commitments of $2.2 billion, down $248.4 million from the level at June 30, 2017. Commitments to originate loans held for investment represented $2.1 billion of the September 30th total, and commitments to originate loans held for sale represented the remaining $50.4 million. At December 31, 2016, the respective commitments were $1.8 billion and $242.5 million.
Multi-family, CRE, and ADC loans together represented $814.5 million ofheld-for-investment loan commitments at the end of the third quarter, while other loans represented $1.3 billion, respectively. Included in the latter amount were commitments to originate specialty finance loans and leases of $901.9 million and commitments to originate other C&I loans of $403.8 million.
In addition to loan commitments, we had commitments to issue financialstand-by, performancestand-by, and commercial letters of credit totaling $339.6 million at September 30, 2017, a $20.7 million decrease from the volume at June 30th. The fees we collect in connection with the issuance of letters of credit are included in “Fee income” in the Consolidated Statements of Income and Comprehensive Income.
Asset Quality
Non-Covered Loans Held for Investment andNon-Covered Repossessed Assets
Non-performingnon-covered assets represented $84.7 million, or 0.17%, of totalnon-covered assets at September 30, 2017, as compared to $91.6 million, or 0.20% at June 30, 2017 and $68.1 million, or 0.14%, of totalnon-covered assets, at December 31, 2016. The $6.9 million decrease was the net effect of a $13.0 million decline innon-performingnon-covered loans to $69.0 million, and a $6.2 million increase innon-covered repossessed assets to $15.8 million.Non-performingnon-covered loans represented 0.18% of totalnon-covered loans at the end of the third quarter, compared to 0.22% at June 30th and 0.15% at December 31st.
The increase in bothnon-performingnon-covered loans andnon-performingnon-covered assets in the current nine-month period was largely attributable to the transition tonon-accrual status of taxi medallion-related loans. As reflected in the tables featured later in this discussion, the balance ofnon-accrualnon-covered mortgage loans declined $14.4 million from theyear-end balance to $24.3 million, while the balance ofnon-accrualnon-covered other loans rose $26.9 million to $44.7 million. Taxi medallion-related loans accounted for $43.4 million of this total.
In addition, the Company recorded net charge-offs of $40.4 million during the current third quarter, representing 0.11% of average loans.
The following table sets forth the changes innon-performingnon-covered loans over the nine months ended September 30, 2017:
(in thousands) | ||||
Balance at December 31, 2016 | $ | 56,469 | ||
Newnon-accrual | 68,616 | |||
Charge-offs | (24,409 | ) | ||
Transferred to other real estate owned | (6,607 | ) | ||
Loan payoffs, including dispositions and principalpay-downs | (25,009 | ) | ||
Restored to performing status | (90 | ) | ||
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| |||
Balance at September 30, 2017 | $ | 68,970 | ||
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The following table presents ournon-performingnon-covered loans by loan type and the changes in the respective balances for the nine months ended September 30, 2017:
Change from December 31, 2016 to September 30, 2017 | ||||||||||||||||
(dollars in thousands) | September 30, 2017 | December 31, 2016 | Amount | Percent | ||||||||||||
Non-PerformingNon-Covered Loans: | ||||||||||||||||
Non-accrualnon-covered mortgage loans: | ||||||||||||||||
Multi-family | $ | 11,018 | $ | 13,558 | $ | (2,540 | ) | (18.73 | )% | |||||||
Commercial real estate | 4,923 | 9,297 | (4,374 | ) | (47.05 | ) | ||||||||||
One-to-four family residential | 2,179 | 9,679 | (7,500 | ) | (77.49 | ) | ||||||||||
Acquisition, development, and construction | 6,200 | 6,200 | — | — | ||||||||||||
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Totalnon-accrualnon-covered mortgage loans | 24,320 | 38,734 | (14,414 | ) | (37.21 | ) | ||||||||||
Non-accrualnon-covered other loans(1) | 44,650 | 17,735 | 26,915 | 151.76 | ||||||||||||
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Totalnon-performingnon-covered loans | $ | 68,970 | $ | 56,469 | $ | 12,501 | 22.14 | % | ||||||||
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A loan generally is classified as a“non-accrual” loan when it is 90 days or more past due or when it is deemed to be impaired because we no longer expect to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed onnon-accrual status, we cease the accrual of interest owed, and previously accrued interest is reversed and charged against interest income. At September 30, 2017 and December 31, 2016, all of ournon-performing loans werenon-accrual loans. A loan is generally returned to accrual status when the loan is current and we have reasonable assurance that the loan will be fully collectible.
We monitornon-accrual loans both within and beyond our primary lending area in the same manner. Monitoring loans generally involves inspecting andre-appraising the collateral properties; holding discussions with the principals and managing agents of the borrowing entities and/or retained legal counsel, as applicable; requesting financial, operating, and rent roll information; confirming that hazard insurance is in place or force-placing such insurance; monitoring tax payment status and advancing funds as needed; and appointing a receiver, whenever possible, to collect rents, manage the operations, provide information, and maintain the collateral properties.
It is our policy to order updated appraisals for allnon-performing loans, irrespective of loan type, that are collateralized by multi-family buildings, CRE properties, or land, in the event that such a loan is 90 days or more past due, and if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered annually until such time as the loan becomes performing and is returned to accrual status. It is 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 current LTVs on a portfolio-wide basis.
Non-performing loans are reviewed regularly by management and discussed on a monthly basis with the Mortgage Committee, the Credit Committee, and the Boards of Directors of the respective Banks, as applicable. In accordance with ourcharge-off policy, collateral-dependentnon-performing loans are written down to their current appraised values, less certain transaction costs. Workout specialists from our Loan Workout Unit actively pursue borrowers who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings are retained to institute such action with regard to such borrowers.
Properties that are acquired through foreclosure are classified as OREO, and are recorded at fair value at the date of acquisition, less the estimated cost of selling the property. Subsequent declines in the fair value of OREO are charged to earnings and are included innon-interest expense. It is our policy to require an appraisal and an environmental assessment of properties classified as OREO before foreclosure, and tore-appraise the properties on anas-needed basis, and not less than annually, until they are sold. We dispose of such properties as quickly and prudently as possible, given current market conditions and the property’s condition.
To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we consider to be prudent. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows being generated by the property to determine its economic value using the “income approach,” and then at the market value of the property that collateralizes the loan. The amount of the loan is then based on the lower of the two values, with the economic value more typically used.
The condition of the collateral property is another critical factor. Multi-family buildings and CRE properties are inspected from rooftop to basement as a prerequisite to approval, with a member of the Mortgage or Credit Committee participating in inspections on multi-family loans to be originated in excess of $7.5 million, and a member of the Mortgage or Credit Committee participating in inspections on CRE loans to be originated in excess of $4.0 million. Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experiencedin-house appraisal officers and staff, perform appraisals on collateral properties. In many cases, a second independent appraisal review is performed.
In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and whose track record with our lending officers is typically greater than ten years. Furthermore, in New York City, where the majority of the buildings securing our multi-family loans are located, the rents that tenants may be charged on certain apartments are typically restricted under certain rent-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.
Reflecting the strength of the underlying collateral for these loans and the collateral structure, a relatively small percentage of ournon-performing multi-family loans have resulted in losses over time.
To further manage our credit risk, our lending policies limit the amount of credit granted to any one borrower, and typically require minimum DSCRs of 120% for multi-family loans and 130% for CRE loans. Although we typically lend up to 75% of the appraised value on multi-family buildings and up to 65% on commercial properties, the average LTVs of such credits at origination were below those amounts at September 30, 2017. Exceptions to these LTV limitations are minimal and are reviewed on acase-by-case basis.
The repayment of loans secured by commercial real estate is often dependent on the successful operation and management of the underlying properties. To minimize our credit risk, we originate CRE loans in adherence with conservative underwriting standards, and require that such loans qualify on the basis of the property’s current income stream and DSCR. The approval of a CRE loan also depends on the borrower’s credit history, profitability, and expertise in property management. Given that our CRE loans are underwritten in accordance with underwriting standards that are similar to those applicable to our multi-family credits, the percentage of ournon-performing CRE loans that have resulted in losses has been comparatively small over time.
Multi-family and CRE loans are generally originated at conservative LTVs and DSCRs, as previously stated. Low LTVs provide a greater likelihood of full recovery and reduce the possibility of incurring a severe loss on a credit; in many cases, they reduce the likelihood of the borrower “walking away” from the property. Although borrowers may default on loan payments, they have a greater incentive to protect their equity in the collateral property and to return their loans to performing status. Furthermore, in the case of multi-family loans, the cash flows generated by the properties are generally below-market and have significant value.
The following tables present the number and amount ofnon-performing multi-family and CRE loans by originating bank at September 30, 2017 and December 31, 2016:
As of September 30, 2017 | Non-Performing Multi-Family Loans | Non-Performing Commercial Real Estate Loans | ||||||||||||||
(dollars in thousands) | Number | Amount | Number | Amount | ||||||||||||
New York Community Bank | 6 | $ | 11,012 | 10 | $ | 4,923 | ||||||||||
New York Commercial Bank | 1 | 6 | — | — | ||||||||||||
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Total for New York Community Bancorp | 7 | $ | 11,018 | 10 | $ | 4,923 | ||||||||||
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As of December 31, 2016 | Non-Performing Multi-Family Loans | Non-Performing Commercial Real Estate Loans | ||||||||||||||
(dollars in thousands) | Number | Amount | Number | Amount | ||||||||||||
New York Community Bank | 11 | $ | 13,298 | 7 | $ | 4,297 | ||||||||||
New York Commercial Bank | 2 | 260 | 2 | 5,000 | ||||||||||||
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Total for New York Community Bancorp | 13 | $ | 13,558 | 9 | $ | 9,297 | ||||||||||
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With regard to ADC loans, we typically lend up to 75% of the estimatedas-completed market value of multi-family and residential tract projects; however, in the case of home construction loans to individuals, the limit is 80%. With respect to commercial construction loans, we typically lend up to 65% of the estimatedas-completed market value of the property. Credit risk is also managed through the loan disbursement process. Loan proceeds are disbursed periodically in increments as construction progresses, and as warranted by inspection reports provided to us by our own lending officers and/or consulting engineers.
To minimize the risk involved in specialty finance lending and leasing, each of our credits is secured with a perfected first security interest or outright ownership in the underlying collateral, and structured as senior debt or as anon-cancellable lease. To further minimize the risk involved in specialty finance lending and leasing, were-underwrite each transaction. In addition, we retain outside counsel to conduct a further review of the underlying documentation.
Other C&I loans are typically underwritten on the basis of the cash flows produced by the borrower’s business, and are generally collateralized by various business assets, including, but not limited to, inventory, equipment, and accounts receivable. As a result, the capacity of the borrower to repay is substantially dependent on the degree to which the business is successful. Furthermore, the collateral underlying the loan may depreciate over time, may not be conducive to appraisal, and may fluctuate in value, based upon the operating results of the business. Accordingly, personal guarantees are also a normal requirement for other C&I loans.
In addition,one-to-four family loans, ADC loans, and other loans represented 1.1%, 1.0%, and 5.3%, respectively, of totalnon-covered loans held for investment at September 30, 2017, comparable to, or consistent with, the levels at both June 30, 2017 and December 31, 2016. Furthermore, while 0.5% of ourone-to-four family loans werenon-performing at the end of the current third quarter, 1.6% of our ADC loans and 2.2% of our other loans werenon-performing at that date.
The procedures we follow with respect to delinquent loans are generally consistent across all categories, with late charges assessed, and notices mailed to the borrower, at specified dates. We attempt to reach the borrower by telephone to ascertain the reasons for delinquency and the prospects for repayment. When contact is made with a borrower at any time prior to foreclosure or recovery against collateral property, we attempt to obtain full payment, and will consider a repayment schedule to avoid taking such action. Delinquencies are addressed by our Loan Workout Unit and every effort is made to collect rather than initiate foreclosure proceedings.
The following table presents ourheld-for-investment loans 30 to 89 days past due by loan type and the changes in the respective balances for the nine months ended Septemberfrom December 31, 2020 to June 30, 2017:2021:
Change from December 31, 2016 to September 30, 2017 |
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| Change from |
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(dollars in thousands) | September 30, 2017 | December 31, 2016 | Amount | Percent | ||||||||||||||||||||||||||||
Non-Covered Loans30-89 Days Past Due: | ||||||||||||||||||||||||||||||||
(dollars in millions) |
| June 30, |
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| December 31, |
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| Amount |
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| Percent |
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Loans 30-89 Days Past Due: |
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Multi-family | $ | 602 | $ | 28 | $ | 574 | 2,050.00 | % |
| $ | 9 |
| $ | 4 |
| $ | 5 |
| 125 | % | ||||||||||||
Commercial real estate | 450 | — | 450 | — |
| 15 |
| 10 |
| 5 |
| 50 | % | |||||||||||||||||||
One-to-four family residential | 676 | 2,844 | (2,168 | ) | (76.23 | ) | ||||||||||||||||||||||||||
One-to-four family |
| — |
| 2 |
| (2 | ) |
| -100 | % | ||||||||||||||||||||||
Acquisition, development, and construction | — | — | — | — |
| — |
| — |
| — |
| — |
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Other loans | 3,425 | 7,511 | (4,086 | ) | (54.40 | ) |
|
| 11 |
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| — |
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| 11 |
| NM |
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Totalnon-covered loans30-89 days past due | $ | 5,153 | $ | 10,383 | $ | (5,230 | ) | (50.37 | )% | |||||||||||||||||||||||
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Total loans 30-89 days past due |
| $ | 35 |
| $ | 16 |
| $ | 19 |
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| 119 | % |
53
(1) Does not include any past due taxi medallion-related loans at June 30, 2021 and December 31, 2020.
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 eithernon-performing or as an accruing TDR, then an updated appraisal is required to determine fair value. Estimated disposition costs are deducted from the fair value of the property to determine estimated net realizable value. In the instance of an outdated appraisal on an impaired loan, we adjust the original appraisal by using a third-party index value to determine the extent of impairment until an updated appraisal is received.
While we strive to originate loans that will perform fully, adverse economic and market conditions, among other factors, can adversely impact a borrower’s ability to repay. Largely reflecting the nature of our primary lending niche and our conservative underwriting standards, we recorded aggregate net recoveries on our core multi-family and CRE portfolios in the third quarter of 2017.
Reflecting management’s assessment of the allowance fornon-covered loan losses, we recorded a $44.6 million provision for such losses in the current third quarter, as compared to $11.6 million and $1.2 million, respectively, in the trailing and year-earlier three months. Reflecting the third-quarter provision, and the aforementioned net charge-offs, the allowance for losses onnon-covered loans increased to $158.9 million at September 30, 2017. This represented 0.42% of totalnon-covered loans and 230.42% ofnon-performingnon-covered loans at that date.
Based upon all relevant and available information as of the end of the current thirdsecond quarter, management believes that the allowance for losses onnon-covered loans was appropriate at that date.
At SeptemberJune 30, 2017, our2021, the Company's three largestnon-performing NPLs were three CRE loans were a C&I loan with a balancebalances of $7.8$8 million, a multi-family loan with a balance of $7.6$7 million and an ADC loan with a balance of $6.2$3 million.
Troubled Debt Restructurings
In an effort to proactively manage delinquent loans, we have selectively extended to certain borrowers such concessions as rate reductions and extensions of maturity dates, as well as forbearance agreements, when such borrowers have exhibited financial difficulty. In accordance with GAAP, we are required to account for such loan modifications or restructurings as TDRs.
The eligibility of a borrower forwork-out concessions of any nature depends upon the facts and circumstances of each transaction, which may change from period to period, and involve management’s judgment regarding the likelihood that the concession will result in the maximum recovery for the Company.
Loans modified as TDRs are placed onnon-accrual status until we determine that future collection of principal and interest is reasonably assured. This generally requires that the borrower demonstrate performance according to the restructured terms for at least six consecutive months. At SeptemberJune 30, 2017,2021, non-accrual TDRs included taxi medallion-related loans with a combined balance of $43.4$9 million.
At SeptemberJune 30, 2017,2021, loans on which concessions were made with respect to rate reductions and/or extensions of maturity dates totaled $41.5 million; loans in connection with which forbearance agreements were reached totaled $1.8 million at that date.$31 million.
Based on the number of loans performing in accordance with their revised terms, our success rates for restructured multi-familyCRE loans, CRE loans,was 100%. The success rates for restructured one-to-four family loans, and other loans were 100%, 100%, 50%,0% and 84%8%, respectively, at SeptemberJune 30, 2017. There were no restructured ADC loans at that date.2021.
Analysis of Troubled Debt Restructurings
The following table sets forth the changes in our TDRs over the ninesix months ended SeptemberJune 30, 2017:2021:
(in thousands) | Accruing | Non-Accrual | Total | |||||||||
Balance at December 31, 2016 | $ | 3,466 | $ | 16,454 | $ | 19,920 | ||||||
New TDRs | 8,960 | 35,297 | 44,257 | |||||||||
Transferred to other real estate owned | — | (877 | ) | (877 | ) | |||||||
Charge-offs | — | (11,956 | ) | (11,956 | ) | |||||||
Transferred from accruing tonon-accrual | (1,254 | ) | 1,254 | — | ||||||||
Loan payoffs, including dispositions and principalpay-downs | (886 | ) | (7,141 | ) | (8,027 | ) | ||||||
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Balance at September 30, 2017 | $ | 10,286 | $ | 33,031 | $ | 43,317 | ||||||
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(dollars in millions) |
| Accruing |
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| Non-Accrual |
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| Total |
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Balance at December 31, 2020 |
| $ | 15 |
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| $ | 19 |
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| $ | 34 |
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New TDRs |
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| - |
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| 8 |
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| 8 |
|
Charge-offs |
|
| - |
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| (4 | ) |
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| (4 | ) |
Loan payoffs, including dispositions and principal |
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| - |
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| (7 | ) |
|
| (7 | ) |
Balance at June 30, 2021 |
| $ | 15 |
|
| $ | 16 |
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| $ | 31 |
|
On a limited basis, we may provide additional credit to a borrower after a loan has been placed onnon-accrual status or classified as a TDR if, in management’s judgment, the value of the property after the additional loan funding is greater than the initial value of the property plus the additional loan funding amount. During the ninesix months ended SeptemberJune 30, 2017,2021, no such additions were made. Furthermore, the terms of our restructured loans typically would not restrict us from cancelling outstanding commitments for other credit facilities to a borrower in the event ofnon-payment of a restructured loan.
Except for thenon-accrual loans and TDRs disclosed in this filing, we did not have any potential problem loans at the end of the current first quarter that would have caused management to have serious doubts as to the ability of a borrower to comply with present loan repayment terms and that would have resulted in such disclosure if that were the case.
54
Loan Deferrals
Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the CARES Act and bank regulators have provided relief from TDR accounting. The main benefits of TDR relief include a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; aging of the loans is frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and the loans are generally not reported as non-accrual during the modification period.
Under the CARES Act, the Company made the election to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease (“COVID-19”); (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the COVID-19 national emergency declaration or (B) December 31, 2020. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency.
During the second quarter of 2020, the Company implemented various loan modification programs with some of its borrowers, in accordance with the CARES Act and interagency regulatory guidance. These modifications were primarily full payment deferrals for an initial six month period, with the ability to extend again at the end of the deferral period, at the Bank’s discretion. Most of these deferrals were entered into during April and May, and were therefore, they were eligible to come off of their deferral period beginning in the fourth quarter of 2020, and the remaining were eligible to come off their deferral during the first quarter of 2021. Accordingly, at June 30, 2021, 100% of the Company's full-payment deferrals had returned to payment status.
In addition, to the full-payment deferrals, the Company entered into certain modifications whereby the borrowers are paying interest and escrow only. At June 30, 2021, these principal deferrals totaled $1.0 billion, down 60% or $1.5 billion compared to $2.5 billion for the previous quarter.
The following tables reflect, as of June 30, 2021, the aggregate amount of principal deferrals by various category.
Principal Deferrals as of June 30, 2021 |
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| Amount in |
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| Outstanding |
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| Deferred as |
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| Weighted- |
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(dollars in millions) |
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Multi-family |
| $ | 497 |
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| $ | 32,484 |
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| 1.5 | % |
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| 54.2 | % |
CRE: |
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Office |
| $ | 239 |
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| $ | 3,210 |
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| 7.4 | % |
|
| 66.2 | % |
Retail |
|
| 155 |
|
|
| 1,779 |
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|
| 8.7 | % |
|
| 70.3 | % |
Mixed use |
|
| 69 |
|
|
| 565 |
|
|
| 12.2 | % |
|
| 65.8 | % |
Condo/ Co-op |
|
| 36 |
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|
| 256 |
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|
| 14.1 | % |
|
| 41.0 | % |
Other |
|
| 1 |
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|
| 1,003 |
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|
| 0.1 | % |
|
| 35.7 | % |
Sub-total CRE |
| $ | 500 |
|
| $ | 6,813 |
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| 7.3 | % |
|
| 65.6 | % |
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Total Multi-Family and CRE |
|
| 997 |
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| 39,297 |
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| 2.5 | % |
|
| 59.9 | % |
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Other |
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| 8 |
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| |||
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Total |
| $ | 1,005 |
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Additionally, the allowance for credit losses on accrued interest receivable on loans, including loans in the deferral program, was $929,449, as of June 30, 2021.
55
Asset Quality Analysis (Excluding Covered Loans, Covered Repossessed Assets, andNon-Covered PCI Loans)
The following table presents information regarding our consolidated allowance for credit losses onnon-covered loans and leases, ournon-performingnon-covered non-performing assets, and ournon-covered loans 30 to 89 days past due loans at SeptemberJune 30, 20172021 and December 31, 2016. Covered loans andnon-covered purchased credit-impaired (“PCI”) loans were considered to be performing due to the application of the yield accretion method, as discussed elsewhere in this report. Therefore, covered loans andnon-covered PCI loans are not reflected in the amounts or ratios provided in this table.2020.
(dollars in thousands) | At or For the Nine Months Ended September 30, 2017 | At or For the Year Ended December 31, 2016 | |||||||||||||||
Allowance for Losses onNon-Covered Loans: | |||||||||||||||||
(dollars in millions) |
| At or For the |
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| At or For the |
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Allowance for Credit Losses on Loan and Leases: |
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Balance at beginning of period | $ | 158,290 | $ | 147,124 |
| $ | 194 |
| $ | 148 |
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Provision for losses onnon-covered loans | 58,017 | 11,874 | |||||||||||||||
CECL day 1 transition adjustment |
|
| — |
|
| 2 |
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Adjusted allowance for credit losses at January 1 |
| 194 |
| 150 |
|
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Provision for credit losses |
| 1 |
| 63 |
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Charge-offs: |
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|
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Multi-family | (279 | ) | — |
| (2 | ) |
| — |
|
| |||||||
Commercial real estate | — | — |
| — |
| (2 | ) |
| |||||||||
One-to-four family residential | (96 | ) | (170 | ) |
| — |
| — |
|
| |||||||
Acquisition, development, and construction | — | — |
| — |
| — |
|
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Other loans | (58,203 | ) | (3,413 | ) |
|
| (3 | ) |
|
| (20 | ) |
| ||||
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Total charge-offs | (58,578 | ) | (3,583 | ) |
| (5 | ) |
| (22 | ) |
| ||||||
Recoveries: |
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Multi-family | 28 | 78 |
| — |
| 1 |
|
| |||||||||
Commercial real estate | 398 | 799 |
| 2 |
| — |
|
| |||||||||
One-to-four family residential | 169 | 228 |
| — |
| — |
|
| |||||||||
Acquisition, development, and construction | — | 167 |
| — |
| — |
|
| |||||||||
Other loans | 594 | 1,603 |
|
| 10 |
|
| 2 |
|
| |||||||
|
| ||||||||||||||||
Total recoveries | 1,189 | 2,875 |
|
| 12 |
|
| 3 |
|
| |||||||
|
| ||||||||||||||||
Net charge-offs | (57,389 | ) | (708 | ) | |||||||||||||
|
| ||||||||||||||||
Net recoveries (charge-offs) |
|
| 7 |
|
| (19 | ) |
| |||||||||
Balance at end of period | $ | 158,918 | $ | 158,290 |
| $ | 202 |
| $ | 194 |
|
| |||||
|
| ||||||||||||||||
Non-PerformingNon-Covered Assets: | |||||||||||||||||
Non-accrualnon-covered mortgage loans: | |||||||||||||||||
Non-Performing Assets: |
|
|
|
|
|
| |||||||||||
Non-accrual mortgage loans: |
|
|
|
|
|
|
| ||||||||||
Multi-family | $ | 11,018 | $ | 13,558 |
| $ | 9 |
| $ | 4 |
|
| |||||
Commercial real estate | 4,923 | 9,297 |
| 12 |
| 12 |
|
| |||||||||
One-to-four family residential | 2,179 | 9,679 |
| 2 |
| 2 |
|
| |||||||||
Acquisition, development, and construction | 6,200 | 6,200 |
|
| — |
|
| — |
|
| |||||||
|
| ||||||||||||||||
Totalnon-accrualnon-covered mortgage loans | $ | 24,320 | $ | 38,734 | |||||||||||||
Othernon-accrualnon-covered loans | 44,650 | 17,735 | |||||||||||||||
|
| ||||||||||||||||
Totalnon-performingnon-covered loans(1) | $ | 68,970 | $ | 56,469 | |||||||||||||
Non-covered repossessed assets(2) | 15,753 | 11,607 | |||||||||||||||
|
| ||||||||||||||||
Totalnon-performingnon-covered assets | $ | 84,723 | $ | 68,076 | |||||||||||||
|
| ||||||||||||||||
Total non-accrual mortgage loans |
| 23 |
| 18 |
|
| |||||||||||
Other non-accrual loans |
|
| 9 |
|
| 20 |
|
| |||||||||
Total non-performing loans |
| $ | 32 |
| $ | 38 |
|
| |||||||||
Repossessed assets (1) |
|
| 8 |
|
| 8 |
|
| |||||||||
Total non-performing assets |
| $ | 40 |
| $ | 46 |
|
| |||||||||
Asset Quality Measures: |
|
|
|
|
|
|
| ||||||||||
Non-performingnon-covered loans to totalnon-covered loans | 0.18 | % | 0.15 | % | |||||||||||||
Non-performingnon-covered assets to totalnon-covered assets | 0.17 | 0.14 | |||||||||||||||
Allowance for losses onnon-covered loans tonon-performing non-covered loans | 230.42 | 277.19 | |||||||||||||||
Allowance for losses onnon-covered loans to totalnon-covered loans | 0.42 | 0.42 | |||||||||||||||
Net charge-offs during the period to average loans outstanding during the period(3) | 0.15 | 0.00 | |||||||||||||||
Non-Covered Loans30-89 Days Past Due: | |||||||||||||||||
Non-performing loans to total loans |
| 0.07 |
| % |
| 0.09 |
| % | |||||||||
Non-performing assets to total assets |
| 0.07 |
| 0.08 |
|
| |||||||||||
Allowance for credit losses to non-performing loans |
| 641.41 |
| 513.55 |
|
| |||||||||||
Allowance for credit losses to total loans |
| 0.46 |
| 0.45 |
|
| |||||||||||
Net charge-offs during the period to average loans |
| (0.02 | ) |
| 0.04 |
|
| ||||||||||
Loans 30-89 Days Past Due: |
|
|
|
|
|
|
| ||||||||||
Multi-family | $ | 602 | $ | 28 |
| $ | 9 |
| $ | 4 |
|
| |||||
Commercial real estate | 450 | — |
| 15 |
| 10 |
|
| |||||||||
One-to-four family residential | 676 | 2,844 |
| — |
| 2 |
|
| |||||||||
Acquisition, development, and construction | — | — |
| — |
| — |
|
| |||||||||
Other loans | 3,425 | 7,511 |
|
| 11 |
|
| — |
|
| |||||||
|
| ||||||||||||||||
Totalnon-covered loans30-89 days past due(4) | $ | 5,153 | $ | 10,383 | |||||||||||||
|
| ||||||||||||||||
Total loans 30-89 days past due |
| $ | 35 |
| $ | 16 |
|
|
Covered Loans and Covered Other Real Estate Owned
In connection with the AmTrust and Desert Hills Bank LSA, we established FDIC loss share receivables of $740.0(1) Includes $5 million and $69.6$7 million respectively, which were the acquisition-date fair values of the respective LSA (i.e., the expected reimbursements from the FDIC over the terms of the agreements). The loss share receivables increased if the losses increased,repossessed taxi medallions at June 30, 2021 and decreased if the losses fell short of the expected amounts. Increases in estimated reimbursements were recognized in income in the same period that they were identified and that the allowance for losses on the related covered loans was recognized.
Additionally, as previously disclosed, the Company received approval from the FDIC to sell assets covered under our LSA, early terminate the LSA, and enter into an agreement to sell the majority of ourone-to-four family residential mortgage-related assets, including those covered under the LSA, to an affiliate of Cerberus. On July 28, 2017, the Company completed the sale, resulting in the receipt of proceeds of $1.9 billion from Cerberus and the FDIC to sell the aforementioned loans and settle the related LSA, resulting in a gain of $74.6 million which is included in“Non-interest income” in the accompanying Consolidated Statement of Income and Comprehensive Income. Effective October 31, 2017, the Company and the FDIC completed termination of the LSA.
Asset Quality Analysis (Including Covered Loans, Covered OREO, andNon-Covered PCI Loans)
As previously discussed, the covered loan portfolio was sold during the third quarter of 2017; accordingly, the following table presents information regarding ournon-performing assets and loans past due at December 31, 2016 only, including covered loans and covered OREO (collectively, “covered assets”), andnon-covered PCI loans:2020, respectively.
(dollars in thousands) | At or For the Year Ended December 31, 2016 | |||
Covered Loans andNon-Covered PCI Loans 90 Days or More Past Due: | ||||
Multi-family | $ | — | ||
Commercial real estate | 612 | |||
One-to-four family | 125,076 | |||
Acquisition, development, and construction | — | |||
Other loans | 6,646 | |||
|
| |||
Total covered loans andnon-covered PCI loans 90 days or more past due | $ | 132,334 | ||
Covered other real estate owned | 16,990 | |||
|
| |||
Total covered assets andnon-covered PCI loans | $ | 149,324 | ||
|
| |||
TotalNon-Performing Assets: | ||||
Non-performing loans: | ||||
Multi-family | $ | 13,558 | ||
Commercial real estate | 9,909 | |||
One-to-four family | 134,755 | |||
Acquisition, development, and construction | 6,200 | |||
Othernon-performing loans | 24,381 | |||
|
| |||
Totalnon-performing loans | $ | 188,803 | ||
Other real estate owned | 28,598 | |||
|
| |||
Totalnon-performing assets | $ | 217,401 | ||
|
| |||
Asset Quality Ratios (including the allowance for losses oncovered loans andnon-covered PCI loans): | ||||
Totalnon-performing loans to total loans | 0.48 | % | ||
Totalnon-performing assets to total assets | 0.44 | |||
Allowance for loan losses to totalnon-performing loans | 96.39 | |||
Allowance for loan losses to total loans | 0.47 | |||
Covered Loans andNon-Covered PCI Loans30-89 Days Past Due: | ||||
Multi-family | $ | — | ||
Commercial real estate | — | |||
One-to-four family | 21,112 | |||
Acquisition, development, and construction | — | |||
Other loans | 1,542 | |||
|
| |||
Total covered loans andnon-covered PCI loans30-89 days past due | $ | 22,654 | ||
|
| |||
Total Loans30-89 Days Past Due: | ||||
Multi-family | $ | 28 | ||
Commercial real estate | — | |||
One-to-four family | 23,956 | |||
Acquisition, development, and construction | — | |||
Other loans | 9,053 | |||
|
| |||
Total loans30-89 days past due | $ | 33,037 | ||
|
|
Geographical Analysis ofNon-Performing Loans
The following table presents a geographical analysis of ournon-performing loans at SeptemberJune 30, 2017:2021:
(in thousands) | Total | |||
New York | $ | 49,097 | ||
New Jersey | 9,938 | |||
Maryland | 6,200 | |||
Connecticut | 1,781 | |||
Arizona | 1,204 | |||
Florida | 475 | |||
All other states | 275 | |||
|
| |||
Totalnon-performing loans | $ | 68,970 | ||
|
|
(dollars in millions) | ||||
New York | $ | 29 | ||
New Jersey | 2 | |||
All other states | 1 | |||
Total non-performing loans | $ | 32 |
Securities
56
Securities declined $140.1
At June 30, 2021, total securities decreased $101 million fromor 7% annualized on a linked-quarter basis to $6.1 billion, compared to $6.2 billion at March 31, 2021. At the end of the current second quarter-end 2017 balance and $786.0 million from theyear-end 2016 balance to $3.0 billion, representing 6.3%quarter, total securities represented 10.6% of total assets compared to 10.7% at September 30, 2017. During the secondfirst quarter of 2017, the Company repositioned its“Held-to-Maturity” securities portfolio by designating the entire portfolio as“Available-for-Sale.” In addition, it took advantage of favorable bond market conditions and sold approximately $521.0 million of securities, resulting in apre-tax gain on sale of $26.9 million.2021.
Federal Home Loan Bank Stock
As membersa member of theFHLB-NY, the Community Bank and the Commercial Bank areis required to acquire and hold shares of its capital stock, and to the extent FHLB borrowings are utilized, may further invest in FHLB stock. At SeptemberJune 30, 20172021 and December 31, 2016,2020, the Community Bank heldFHLB-NY stock in the amount of $564.3$686 million and $562.0$714 million, respectively, and the Commercial Bank heldrespectively. FHLB-NY stock of $15.1 million and $16.4 million, respectively.FHLB-NY stock continued to be valued at par, with no impairment required at that date.
Dividends from theFHLB-NY to the Community Bank totaled $22.8$8 million and $19.2$9 million, respectively, in the ninethree months ended SeptemberJune 30, 20172021 and 2016; dividends from theFHLB-NY to the Commercial Bank totaled $701,000 and $1.1 million, respectively, in the corresponding periods.2020.
Bank-Owned Life Insurance
Bank-owned life insurance (“BOLI”)BOLI is recorded at the total cash surrender value of the policies in the Consolidated Statements of Condition, and the income generated by the increase in the cash surrender value of the policies is recorded in“Non-interest income” 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 rose $12.4increased $7 million to $961.4 million in the nine months ended September$1.2 billion at June 30, 2017.2021 from December 31, 2020.
Goodwill and Core Deposit Intangibles
We record goodwill and core deposit intangibles (“CDI”) in our Consolidated Statements of Condition in connection with certain of our business combinations.
Goodwill, which is tested at least annually for impairment, refers to the difference between the purchase price and the fair value of an acquired company’s assets, net of the liabilities assumed. CDI refers to the fair value of the core deposits acquired in a business combination, and is typically amortized over a period of ten years from the acquisition date.
While goodwillGoodwill totaled $2.4 billion at both SeptemberJune 30, 20172021 and December 31, 2016, the balance of CDI, net, declined from $208,000 to zero as a result of amortization in the first nine months of this year.
2020. For more information about the Company’s goodwill, see the discussion of “Critical Accounting Policies” earlier in this report.
Sources of Funds
The Parent Company (i.e., the Company on an unconsolidated basis) has three primary funding sources for the payment of dividends, share repurchases, and other corporate uses: dividends paid to the Company by the Banks;Bank; capital raised through the issuance of stock; and funding raised through the issuance of debt instruments.
On a consolidated basis, our funding primarily stems from a combination of the following sources: deposits; borrowed funds, primarily in the form of wholesale borrowings; the cash flows generated through the repayment and sale of loans; and the cash flows generated through the repayment and sale of securities.
Loan repayments and sales totaled $9.3$4.4 billion in the ninesix months ended SeptemberJune 30, 2017,2021, down $1.2 billion from the $9.1$5.6 billion recorded in the year-earlier ninesix months. Cash flows from the repayment and sales of securities totaled $1.3 billion$931 million and $2.7$1.4 billion, respectively, in the corresponding periods, while purchases of securities totaled $404.0$1.3 billion and $735 million, and $281.9 million, respectively.
Deposits
Our ability to retain and attract deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay, the types of products we offer, and the attractiveness of their terms. That said, thereFrom time to time, we have been times that we’ve chosen not to compete actively for deposits, depending on our access to deposits through acquisitions, the availability of lower-cost funding sources, the impact of competition on pricing, and the need to fund our loan demand.
In the nine months ended SeptemberAt June 30, 2017,2021, total deposits of $28.9were $34.2 billion, were comparableup $1.7 billion compared to the level recorded at December 31, 2016. Certificates of deposit (“CDs”) represented 30.5% of total deposits at2020. At the end of the thirdcurrent second quarter, and total deposits represented 59.6%59.5% of total assets, at that date.while CDs represented 26.2% of total deposits. The majority, or $1.5 billion of this growth occurred in the non-interest-bearing checking category, as the Company is currently working with its technology partner to bring in additional low cost deposits. These deposits are short-term in nature and related to individual spending patterns. These deposits peaked during the second quarter of 2021 and are expected to run off over the next year.
Included in the September 30thJune 30, 2021 balance of deposits were business institutional deposits of $2.2$1.5 billion and municipal deposits of $791.5 million,$1.0 billion, as compared to $2.8$1.3 billion and $637.7 million,$1.0 billion, respectively, at December 31, 2016.2020. Brokered deposits dropped $79.1 million during this timeframe, to $3.9remained stable at $5.5 billion, the net effectincluding brokered interest bearing checking of an $83.1 million increase in $1.2 billion at June 30, 2021 and $1.3 billion at December 31, 2020,
57
brokered money market accounts to $2.6of $3.0 billion at June 30, 2021 and a $641.1 million decline in brokered interest-bearing checking accounts to $804.9 million. At September 30, 2017, we had $478.9 million of brokered CDs. We had noDecember 31, 2020, and brokered CDs of $1.3 billion at June 30, 2021 and $1.0 billion at December 31, 2016.2020. The extent to which we accept brokered deposits depends on various factors, including the availability and pricing of such wholesale funding sources, and the availability and pricing of other sources of funds.
Borrowed Funds
Borrowed funds consist primarily of wholesale borrowings (i.e.,FHLB-NY advances, repurchase agreements, and federal funds purchased) and, to a far lesser extent, junior subordinated debentures. In the three months ended Septemberdebentures and subordinated notes. As of June 30, 2017, the balance of2021, borrowed funds was unchanged from the trailing quarterdeclined $625 million or 8% annualized to $15.5 billion compared to December 31, 2020, and fell $1.3 billion from year end to $12.4 billion, representing 25.5%represented 26.9% of total assets at that date.
Wholesale Borrowings
Wholesale The decrease was mainly due to a decline in wholesale borrowings, wereconsisting primarily of FHLB-NY advances, which declined to $14.8 billion compared to $15.4 billion at year-end 2020. Also included in wholesale borrowings are repurchase agreements of $800 million, unchanged from the trailing quarter but fell $1.3 billionbalance at December 31, 2020.
Subordinated Notes
On November 6, 2018, the Company issued $300 million aggregate principal amount of its 5.90% Fixed-to-Floating Rate Subordinated Notes due 2028. The Company intends to use the net proceeds from year endthe offering for general corporate purposes, which may include opportunistic repurchases of shares of its common stock pursuant to $12.0 billion, representing 24.8%its previously announced share repurchase program. The Notes were offered to the public at 100% of total assets, at quarter end.
FHLB-NY advances declined $110.0 million during this time, to $11.6 billion, whiletheir face amount. At June 30, 2021, the balance of repurchase agreements dropped $1.1 billionsubordinated notes was $296 million, which excludes certain costs related to $450.0 million. In addition, while federal funds purchased amounted to $150.0 million at the end of December, there were no federal funds purchased at September 30, 2017.their issuance.
Junior Subordinated Debentures
Junior subordinated debentures totaled $359.1$360 million at the end of the current third quarter,June 30, 2021, comparable to the balance at December 31st.31, 2020.
Risk Definitions
The following section outlines the definitions of interest rate risk, market risk, and liquidity risk, and how the Company manages market and interest rate risk:
Interest Rate Risk –Interest rate risk is the risk to earnings or capital arising from movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows(re-pricing (re-pricing risk); from changing rate relationships among different yield curves affecting Company activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in a bank’s products (options risk). The evaluation of interest rate risk must consider the impact of complex, illiquid hedging strategies or products, and also the potential impact on fee income (e.g. prepayment income) which is sensitive to changes in interest rates. In those situations where trading is separately managed, this refers to structural positions and not trading portfolios.
Market Risk –Market risk is the risk to earnings or capital arising from changes in the value of portfolios of financial instruments. This risk arises from market-making, dealing, and position-taking activities in interest rate, foreign exchange, equity, and commodities markets. Many banks use the term “price risk” interchangeably with market risk; this is because market risk focuses on the changes in market factors (e.g., interest rates, market liquidity, and volatilities) that affect the value of traded instruments. The primary accounts affected by market risk are those which are revalued for financial presentation (e.g., trading accounts for securities, derivatives, and foreign exchange products).
58
Liquidity Risk –Liquidity risk is the risk to earnings or capital arising from a bank’s inability to meet its obligations when they become due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. Liquidity risk also arises from a bank’s failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.
Management of Market and Interest Rate Risk
We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain balance sheet accounts; to determine the appropriate level of risk, given our business strategy, risk appetite, operating environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner consistent with guidelines approved by the Boards of Directors of the Company the Community Bank, and the Commercial Bank.
Market and Interest Rate Risk
As a financial institution, we are focused on reducing our exposure to interest rate volatility. Changes in interest rates pose one of the greatest challengechallenges to our financial performance, as such changes can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. To reduce our exposure to changing rates, the Boards of Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments to the asset and liability mix can be made when deemed appropriate.
The actual duration ofheld-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.
In the first nine months of 2017, we managedWe manage our interest rate risk by taking the following actions: (1) We continuedcontinue to emphasize the origination and retention of intermediate-term assets, primarily in the form of multi-family and CRE loans; and (2) We continued the origination ofcontinue to originate certain floating rate C&I loans that feature floating interest rates.
In connectionloans; depending on funding needs, replace maturing wholesale borrowings with the activities of our mortgage banking operation, we enter into contingent commitments to fund or purchase residential mortgage loans by a specified future date at a statedlonger term borrowings; and as needed, execute interest rate swaps.
LIBOR Transition and corresponding price. Such commitments,Phase-Out
On July 27, 2017, the U.K. Financial Conduct Authority (FCA), which were generally known as interest rate lock commitmentsregulates LIBOR, announced that it will no longer request banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020 the ICE Benchmark Administration (“IRLCs”IBA”) announced they will extend the publication of most US Dollar LIBOR (“USD LIBOR”) through June 30, 2023. The FRB established the Alternative Reference Rate Committee (“ARRC”), were consideredcomprised of a group of private market participants and other members, representing banks and financial sector regulators, to identify a set of alternative reference rates for potential use as benchmarks. The FRB-NY has established the Secured Oversight Finance Rate or "SOFR" as its recommended alternative to LIBOR, and it is anticipated that LIBOR will be financial derivativesphased out by the end of 2021. In addition to SOFR, the Company is evaluating alternatives other than SOFR as a potential alternative to LIBOR.
The Bank has established a sub-committee of its ALCO to address issues related to the phase-out and as such, were carried at fair value.
To mitigatetransition away from LIBOR. This sub-committee is led by our Chief Financial Officer and consists of personnel from various departments throughout the Bank including lending, loan administration, credit risk management, finance/treasury, including interest rate risk associated with our IRLCs, we entered into forward commitments to sell mortgageand liquidity management, information technology, and operations.
The Company has LIBOR-based contracts that extend beyond June 30, 2023 included in loans or mortgage-backedand leases, securities, (“MBS”) by a specified future date and at a specified price. These forward-sale agreements were also carried at fair value. Such forward commitments to sell generally obligated us to complete the transaction as agreed, and therefore pose a risk to us if we are not able to deliver the loans or MBS pursuant to the terms of the applicable forward-sale agreement.
When we retained the servicing on the loans we sold, we capitalized an MSR asset. Residential MSRs are recorded at fair value, with changes in fair value recorded as a component ofnon-interest income. We estimate the fair value of the MSR asset based upon a number of factors, including current and expected loan prepayment rates, economic conditions, and market forecasts, as well as relevant characteristics of the associated underlying loans. Generally, when market interest rates decline, loan prepayments increase as customers refinance their existing mortgages to take advantage of more favorable interest rate terms. When a mortgage prepays, or when loans are expected to prepay earlier than originally expected, a portion of the anticipated cash flows associated with servicing these loans is terminated or reduced, which can result in a reduction in the fair value of the capitalized MSRs and a corresponding reduction in earnings.
To mitigate the prepayment risk inherent in residential MSRs, we could have sold the servicing of the loans we produced, and thus minimized the potential for earnings volatility. Instead, we opted to mitigate such risk by investing in exchange-tradedwholesale borrowings, derivative financial instruments and long-term debt. The sub-committee has reviewed contract fallback language and noted that were expected to experience oppositecertain contracts will need updated provisions for the transition and partially offsetting changes in fair value as related tois coordinating with impacted business lines. In complying with industry requirements, the value of our residential MSRs.
59
Interest Rate Sensitivity Analysis
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time frame if it will mature or reprice within that period of time. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time frame and the amount of interest-bearing liabilities maturing or repricing within that same period of time.
In a rising interest rate environment, an institution with a negative gap would generally be expected, absent the effects of other factors, to experience a greater increase in the cost of its interest-bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income. Conversely, in a declining rate environment, an institution with a negative gap would generally be expected to experience a lesser reduction in the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an increase in its net interest income.
In a rising interest rate environment, an institution with a positive gap would generally be expected to experience a greater increase in the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an increase in its net interest income. Conversely, in a declining rate environment, an institution with a positive gap would generally be expected to experience a lesser reduction in the cost of its interest-bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income.
At SeptemberJune 30, 2017,2021, ourone-year gap was a negative 17.52%7.10%, as compared to a negative 21.37%4.94% at December 31, 2016.2020. The385-basis point change was largely due to an increase in cash balances as a result of the sale of the mortgage banking operations and borrowings maturing or repricing within one year, combined withour one-year gap from December 31, 2020, primarily reflects a decrease in mortgage and other loans and deposits maturingexpected to mature or repricingreprice within that time.one year.
The table on the following page sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at SeptemberJune 30, 20172021 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 SeptemberJune 30, 20172021 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 constant prepayment rate (“CPR”)CPR of 15%22.35% per annum; for multi-family and CRE loans, prepayment rates are forecasted at weighted average CPRs of 15%17.81% and 13%12.81% per annum, respectively. Borrowed funds were not assumed to prepay.
60
Savings, interest-bearinginterest 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 57%78% for the first five years and 43%22% for years six through ten. Interest-bearing checking accounts were assumed to decay at a rate of 70%82% for the first five years and 30%18% for years six through ten. The decay assumptions reflect the prolonged low interest rate environment and the uncertainty regarding future depositor behavior. Including those accounts having specified repricing dates, money market accounts were assumed to decay at a rate of 71%92% for the first five years and 29%8% for years six through ten.
|
| At June 30, 2021 |
| |||||||||||||||||||||||||
(dollars in millions) |
| Three |
|
| Four to |
|
| More Than |
|
| More Than |
|
| More Than |
|
| More Than |
|
| Total |
| |||||||
INTEREST-EARNING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Mortgage and other loans (1) |
| $ | 7,462 |
|
| $ | 6,234 |
|
| $ | 16,081 |
|
| $ | 10,235 |
|
| $ | 3,500 |
|
| $ | 31 |
|
| $ | 43,543 |
|
Mortgage-related |
|
| 296 |
|
|
| 404 |
|
|
| 891 |
|
|
| 523 |
|
|
| 569 |
|
|
| 310 |
|
|
| 2,993 |
|
Other securities (2) |
|
| 1,991 |
|
|
| 207 |
|
|
| 63 |
|
|
| 184 |
|
|
| 1,325 |
|
|
| - |
|
|
| 3,770 |
|
Interest-earning cash |
|
| 1,941 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,941 |
|
Total interest-earning assets |
|
| 11,690 |
|
|
| 6,845 |
|
|
| 17,035 |
|
|
| 10,942 |
|
|
| 5,394 |
|
|
| 341 |
|
|
| 52,247 |
|
INTEREST-BEARING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Interest-bearing checking and |
|
| 7,023 |
|
|
| 862 |
|
|
| 2,359 |
|
|
| 892 |
|
|
| 1,667 |
|
|
| - |
|
|
| 12,803 |
|
Savings accounts |
|
| 2,381 |
|
|
| 2,543 |
|
|
| 687 |
|
|
| 518 |
|
|
| 1,761 |
|
|
| - |
|
|
| 7,890 |
|
Certificates of deposit |
|
| 2,913 |
|
|
| 4,907 |
|
|
| 1,001 |
|
|
| 94 |
|
|
| 34 |
|
|
| - |
|
|
| 8,949 |
|
Borrowed funds |
|
| 239 |
|
|
| 1,748 |
|
|
| 4,500 |
|
|
| 550 |
|
|
| 8,280 |
|
|
| 142 |
|
|
| 15,459 |
|
Total interest-bearing |
|
| 12,556 |
|
|
| 10,060 |
|
|
| 8,547 |
|
|
| 2,054 |
|
|
| 11,742 |
|
|
| 142 |
|
|
| 45,101 |
|
Interest rate sensitivity gap |
| $ | (866 | ) |
| $ | (3,215 | ) |
| $ | 8,488 |
|
| $ | 8,888 |
|
| $ | (6,348 | ) |
| $ | 199 |
|
| $ | 7,146 |
|
Cumulative interest rate |
| $ | (866 | ) |
| $ | (4,081 | ) |
| $ | 4,407 |
|
| $ | 13,295 |
|
| $ | 6,947 |
|
| $ | 7,146 |
|
|
|
| |
Cumulative interest rate |
|
| -1.51 | % |
|
| -7.10 | % |
|
| 7.67 | % |
|
| 23.13 | % |
|
| 12.09 | % |
|
| 12.43 | % |
|
|
| |
Cumulative net interest- |
|
| 93.10 | % |
|
| 81.96 | % |
|
| 114.14 | % |
|
| 140.02 | % |
|
| 115.45 | % |
|
| 115.84 | % |
|
|
|
Interest Rate Sensitivity Analysis
At September 30, 2017 | ||||||||||||||||||||||||||||
Three | Four to | More Than | More Than | More Than | More | |||||||||||||||||||||||
Months | Twelve | One Year | Three Years | Five Years | Than | |||||||||||||||||||||||
(dollars in thousands) | or Less | Months | to Three Years | to Five Years | to 10 Years | 10 Years | Total | |||||||||||||||||||||
INTEREST-EARNING ASSETS: | ||||||||||||||||||||||||||||
Mortgage and other loans(1) | $ | 3,404,215 | $ | 5,395,365 | $ | 13,855,861 | $ | 10,974,797 | $ | 3,759,589 | $ | 152,340 | $ | 37,542,167 | ||||||||||||||
Mortgage-related securities(2)(3) | 28,954 | 48,601 | 153,528 | 1,010,056 | 1,187,286 | 82,104 | 2,510,529 | |||||||||||||||||||||
Other securities(2) | 694,896 | 260,513 | 3,848 | 10,929 | 60,632 | 69,153 | 1,099,971 | |||||||||||||||||||||
Interest-earning cash and cash equivalents | 3,114,444 | — | — | — | — | — | 3,114,444 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total interest-earning assets | 7,242,509 | 5,704,479 | 14,013,237 | 11,995,782 | 5,007,507 | 303,597 | 44,267,111 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
INTEREST-BEARING LIABILITIES: | ||||||||||||||||||||||||||||
Interest-bearing checking and money market accounts | 6,442,546 | 436,363 | 1,007,765 | 826,948 | 3,625,327 | — | 12,338,949 | |||||||||||||||||||||
Savings accounts | 902,004 | 824,160 | 614,154 | 484,171 | 2,172,089 | — | 4,996,578 | |||||||||||||||||||||
Certificates of deposit | 3,193,359 | 4,899,393 | 629,427 | 67,239 | 13,155 | — | 8,802,573 | |||||||||||||||||||||
Borrowed funds | 1,463,926 | 3,273,500 | 7,381,000 | 100,000 | — | 145,176 | 12,363,602 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total interest-bearing liabilities | 12,001,835 | 9,433,416 | 9,632,346 | 1,478,358 | 5,810,571 | 145,176 | 38,501,702 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest rate sensitivity gap per period(4) | $ | (4,759,326 | ) | $ | (3,728,937 | ) | $ | 4,380,891 | $ | 10,517,424 | $ | (803,064 | ) | $ | 158,421 | $ | 5,765,409 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Cumulative interest rate sensitivity gap | $ | (4,759,326 | ) | $ | (8,488,263 | ) | $ | (4,107,372 | ) | $ | 6,410,052 | $ | 5,606,988 | $ | 5,765,409 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Cumulative interest rate sensitivity gap as a percentage of total assets | (9.82 | )% | (17.52 | )% | (8.48 | )% | 13.23 | % | 11.57 | % | 11.90 | % | ||||||||||||||||
Cumulative net interest-earning assets as a percentage of net interest-bearing liabilities | 60.35 | % | 60.40 | % | 86.78 | % | 119.70 | % | 114.62 | % | 114.97 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(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 monthlyquarterly 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 onone-to-four family loans tend to be. In addition, we review the call provisions, if any, in our borrowings and investment portfolios and, on a monthly basis, compare the actual calls to our projected calls to ensure that our projections are reasonable.
61
As of SeptemberJune 30, 2017,2021, the impact of a100-basis point 100 bp decline in market interest rates for our loans would have increased our projectedhad very little impact on prepayment speeds due to the current low interest rates for multi-family and CRE loans by a constant prepayment rate of 11.23% per annum. Conversely, thecurrent coupons being floored at base rates. The impact of a100-basis point 100 bp increase in market interest rates would have decreased our projected prepayment rates for multi-family and CRE loans by a constant prepayment rate of 4.08%3.68% 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.
Interest rate sensitivity is also monitored through the use of a model that generates estimates of the change in our net portfolio valueEconomic Value of Equity (“NPV”EVE”) over a range of interest rate scenarios. NPVEVE is defined as the net present value of expected cash flows from assets, liabilities, andoff-balance sheet contracts. The NPVEVE ratio, under any interest rate scenario, is defined as the NPVEVE 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 SeptemberJune 30, 2017,2021, the following table reflects the estimated percentage change in our NPV,EVE, assuming the changes in interest rates noted:
Change in Interest Rates
| Estimated | of Equity | ||
+100 | -4.07% | |||
+200 | -13.76% |
(1) The impact of a 100 bp and a 200 bp reduction in interest rates is not presented in view of the current level of the federal funds rate and other short-term interest rates.
The net changes in NPVEVE presented in the preceding table are within the parameters approved by the Boards of Directors of the Company and the Banks.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 NPVEVE 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 NPVEVE Analysis presented above assumes that the composition of our interest rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and also assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the duration to maturity or repricing of specific assets and liabilities. Furthermore, the model does not take into account the benefit of any strategic actions we may take to further reduce our exposure to interest rate risk. Accordingly, while the NPVEVE Analysis provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income, and may very well differ from actual results.
We also utilize an internal net interest income simulation to manage our sensitivity to interest rate risk. The simulation incorporates various market-based assumptions regarding the impact of changing interest rates on future levels of our financial assets and liabilities. The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the following table, due to the frequency, timing, and magnitude of changes in interest rates; changes in spreads between maturity and repricing categories; and prepayments, among other factors, coupled with any actions taken to counter the effects of any such changes.
62
Based on the information and assumptions in effect at SeptemberJune 30, 2017,2021, the following table reflects the estimated percentage change in future net interest income for the next twelve months, assuming the changes in interest rates noted:
Change in Interest Rates
| Estimated | |||
+100 | -1.24% | |||
+200 | -3.09% |
(1) In general, short- and long-term rates are assumed to increase in parallel fashion across all four quarters and then remain unchanged.
(2) The impact of a 100 bp and a 200 bp reduction in interest rates is not presented in view of the current level of the federal funds rate and other short-term interest rates.
Future changes in our mix of assets and liabilities may result in greater changes to our gap, NPV, and/or net interest income simulation.
In the event that our NPVEVE and net interest income sensitivities were to breach our internal policy limits, we would undertake the following actions to ensure that appropriate remedial measures were put in place:
Where temporary changes in market conditions or volume levels result in significant increases in risk, strategies may involve reducing open positions or employing synthetic hedging techniques to more immediately reduce risk exposure. Where variance from policy tolerances is triggered by more fundamental imbalances in the risk profiles of core loan and deposit products, a remedial strategy may involve restoring balance through natural hedges to the extent possible before employing synthetic hedging techniques. Other strategies might include:
In connection with our net interest income simulation modeling, we also evaluate the impact of changes in the slope of the yield curve. At SeptemberJune 30, 2017,2021, our analysis indicated that an immediate inversion of the yield curve would be expected to result in a 1.83%6.57% decrease in net interest income; conversely, an immediate steepening of the yield curve would be expected to result in a 3.85%0.59% 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.
Liquidity
We manage our liquidity to ensure that cash flows are sufficient to support our operations, and to compensate for any temporary mismatches between sources and uses of funds caused by variable loan and deposit demand.
63
We monitor our liquidity daily to ensure that sufficient funds are available to meet our financial obligations. Our most liquid assets are cash and cash equivalents, which totaled $3.3$2.1 billion and $557.9 million,$1.9 billion, respectively, at SeptemberJune 30, 20172021 and December 31, 2016.2020. As in the past, our portfolios of loans and securities provided liquidity in the first ninesix months of the year, with cash flows from the repayment and sale of loans totaling $9.3$4.4 billion and cash flows from the repayment and sale of securities totaling $1.3 billion.
Additional liquidity stems from the retail, institutional, and municipal deposits we gather and from our use of wholesale funding sources, including brokered deposits and wholesale borrowings. We also have access to the Banks’Bank’s approved lines of credit with various counterparties, including theFHLB-NY. The availability of these wholesale funding sources is generally based on the available amount of mortgage loan collateral under a blanket lien we have pledged to the respective institutions and, to a lesser extent, the available amount of securities that may be pledged to collateralize our borrowings. At SeptemberJune 30, 2017,2021, our available borrowing capacity with theFHLB-NY was $7.5$7.6 billion. In addition, the BanksCompany had $3.0$6.1 billion ofavailable-for-sale securities, combined, at that date.date, of which $4.7 billion was unencumbered.
Furthermore, both the Community Bank and the Commercial Bank have agreementshas an agreement with the Federal Reserve Bank of New York (the“FRB-NY”)FRB-NY that enable themenables it to access the discount window as a further means of enhancing their liquidity if need be. In connection with their agreements, the Banks haveagreement, the Bank has pledged certain loans and securities to collateralize any funds theythat may borrow.be borrowed. At SeptemberJune 30, 2017,2021, the maximum amount the Community Bank could borrow from theFRB-NY was $1.3 billion; the maximum amount the Commercial Bank could borrow from theFRB-NY was $77.5 million.$1.1 billion. There were no borrowings against either of these lines of creditoutstanding at that date.
Our primary investing activity is loan production. In the first ninesecond three months of 2017,2021, the volume of loans originated for investment was $5.8$3.1 billion. During this time, the net cash provided byused in investing activities totaled $2.5 billion.$802 million. Our operating activities provided net cash of $1.3 billion,$14 million, while the net cash used inprovided by our financing activities totaled $1.1 billion.$926 million.
CDs due to mature in one year or less from Septemberas of June 30, 20172021 totaled $8.1$7.8 billion, representing 91.9%87% of total CDs at that date. Our ability to retain these CDs and to attract new deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay on our deposits, the types of products we offer, and the attractiveness of their terms. However, there are times when we may choose not to compete for such deposits, depending on the availability of lower-cost funding, the competitiveness of the market and its impact on pricing, and our need for such deposits to fund loan demand, as previously discussed.
The Parent Company is a separate legal entity from each of the BanksBank and must provide for its own liquidity. In addition to operating expenses and any share repurchases, the Parent Company is responsible for paying dividends declared to our shareholders. As a Delaware corporation, the Parent Company is able to pay dividends either from surplus or, in case there is no surplus, from net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
In each of the four quarters of 2016, the Company was required under Supervisory Letter SR09-04 to receive anon-objection from the FRB to pay all dividends;non-objections were received from the FRB in all four quarters of the year. The FRB subsequently advised the Company to continue the exchange of written documentation to obtain theirnon-objection to the declaration of dividends in 2017. The Company has received all necessarynon-objections from the FRB for the dividends declared as of the date of this report.
The Parent Company’s ability to pay dividends may also depend, in part, upon dividends it receives from the Banks.Bank. The ability of the Community Bank and the Commercial Bank to pay dividends and other capital distributions to the Parent Company is generally limited by New York State Banking Law and regulations, and by certain regulations of the FDIC. In addition, the Superintendent of the New York State Department of Financial Services (the “Superintendent”), the FDIC, and the FRB, for reasons of safety and soundness, may prohibit the payment of dividends that are otherwise permissible by regulations.
Under New York State Banking Law, a New York State-chartered stock-form savings bank or commercial bank may declare and pay dividends out of its net profits, unless there is an impairment of capital. However, the approval of the Superintendent is required if the total of all dividends declared in a calendar year would exceed the total of a bank’s net profits for that year, combined with its retained net profits for the preceding two years.
In the ninesix months ended SeptemberJune 30, 2017,2021, the BanksBank paid dividends totaling $276.0$190 million to the Parent Company, leaving $302.4$343 million they could dividend to the Parent Company without regulatory approval at that date. Additional sources of liquidity available to the Parent Company at SeptemberJune 30, 20172021 included $135.8$148 million in cash and cash equivalents. If either of the Banks wereBank was to apply to the Superintendent for approval to make a dividend or capital distribution in excess of the dividend amounts permitted under the regulations, there can be no assurance that such application would be approved.
Derivative Financial InstrumentsCapital Position
We use various financial instruments, including derivatives, in connection with our strategies to mitigate or reduce our exposure to losses from adverse changes in interest rates. Our derivative financial instruments consist of financial forward and futures contracts, IRLCs, swaps, and options, and relate to our mortgage banking operation, residential MSRs, and other risk management activities. These activities will vary in scope based on the level and volatility of interest rates, the types of assets held, and other changing market conditions. At September 30,On March 17, 2017, we held derivative financial instruments with a notional valueissued 515,000 shares of $765.9 million. (See Note 12, “Derivative Financial Instruments,” for a further discussionpreferred stock. The offering generated capital of our use of such financial instruments.)
Capital Position
In March 2017, the Company raised $502.8$503 million, net of underwriting and other issuance expenses,costs, for general corporate purposes, with the bulk of the proceeds being distributed to the Bank.
64
On October 24, 2018, the Company announced that it had received regulatory approval to repurchase its common stock. Accordingly, the Board of Directors approved a $300 million common share repurchase program. The repurchase program was funded through an offeringthe issuance of depositary shares, each representing a 1/40 interest in a sharelike amount of preferred stock. Primarily reflecting the capital raised, total stockholders’ equity rose $635.7 million from the December 31st balance to $6.8 billion at September 30, 2017.
Common stockholders’ equity represented 12.91%, 12.89%, and 12.52%, respectively,subordinated notes. As of total assets at September 30, 2017, June 30, 2017, and December 31, 2016, and was equivalent to2021, the Company has repurchased a book value per common sharetotal of $12.79, $12.74, and $12.5728.9 million shares at an average price of $9.63 or an aggregate purchase price of $278 million, leaving $17 million remaining under the respective dates. We calculate book value per common share by dividing the amount of common stockholders’ equity at the end of a period by the number of common shares outstanding at the same date. At September 30, 2017, June 30, 2017, and December 31, 2016, we had outstanding common shares of 489,061,848, 489,023,298, and 487,056,676, respectively.current authorization.
Tangible common stockholders’ equity was relatively stable at $3.8 billion, representing 8.30% of tangible assets and a tangible book value per common share of $7.81 at September 30, 2017. At the end of the second quarter, tangible common stockholders’ equity also totaled $3.8 billion or 8.27% of tangible assets and a tangible book value per common share of $7.76. At December 31, 2016, tangible common stockholders’ equity totaled $3.7 billion, representing 7.93% of tangible assets, and a tangible book value per common share of $7.57.
We calculate tangible common stockholders’ equity by subtracting the amount of goodwill and CDI recorded at the end of a period from the amount of common stockholders’ equity recorded at the same date. At September 30, 2017, June 30, 2017, and December 31, 2016, we recorded goodwill of $2.4 billion; CDI was zero, $24,000, and $208,000, respectively, at the corresponding dates. (See the discussion and reconciliations of stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity; total assets and tangible assets; and the related financial measures that appear earlier in this report.)
Stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity include AOCL, which increased $3.1decreased $50 million from the balance at the end of Junelast year and decreased $52.3$45 million from the end of Decemberyear-ago quarter to $4.4$75 million at SeptemberJune 30, 2017.2021. The increaseyear-to-date decrease was primarily the result of a $4.3$66 million increasechange in the net unrealized gain (loss) onavailable-for-sale securities, net of tax, to $47.9 million and a $1.2$18 million decreasechange in pension and post-retirement obligations,the net unrealized loss on cash flow hedges, net of tax, to $47.1$22 million.
Regulatory Capital
The Bank is subject to regulation, examination, and supervision by the NYSDFS and the FDIC (the “Regulators”). The Bank is also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which established five categories of capital adequacy ranging from “well capitalized” to “critically undercapitalized.” Such classifications are used by the FDIC to determine various matters, including prompt corrective action and each institution’s FDIC deposit insurance premium assessments. Capital amounts and classifications are also subject to the Regulators’ qualitative judgments about the components of capital and risk weightings, among other factors.
The quantitative measures established to ensure capital adequacy require that banks maintain minimum amounts and ratios of leverage capital to average assets and of common equity tier 1 capital, tier 1 capital, and total capital to risk-weighted assets (as such measures are defined in the regulations). At SeptemberJune 30, 2017,2021, our capital measures continued to exceed the minimum federal requirements for a bank holding company.company and for a bank. The following table sets forth our common equity tier 1, tier 1 risk-based, total risk-based, and leverage capital amounts and ratios on a consolidated basis and for the Bank on a stand-alone basis, as well as the respective minimum regulatory capital requirements, at that date:
Regulatory Capital Analysis (the Company)
Risk-Based Capital | ||||||||||||||||||||||||||||||||
At September 30, 2017 | Common Equity Tier 1 | Tier 1 | Total | Leverage Capital | ||||||||||||||||||||||||||||
(dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||
Total capital | $ | 3,823,765 | 11.54 | % | $ | 4,326,605 | 13.06 | % | $ | 4,832,749 | 14.59 | % | $ | 4,326,605 | 9.40 | % | ||||||||||||||||
Minimum for capital adequacy purposes | 1,490,799 | 4.50 | 1,987,732 | 6.00 | 2,650,309 | 8.00 | 1,840,256 | 4.00 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Excess | $ | 2,332,966 | 7.04 | % | $ | 2,338,873 | 7.06 | % | $ | 2,182,440 | 6.59 | % | $ | 2,486,349 | 5.40 | % | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
Basel III calls for thephase-in of a capital conservation buffer over a five-year period beginning with 0.625% in 2016 and reaching 2.50% in 2019, when fully phased in.
|
| Risk-Based Capital |
|
|
|
|
|
|
|
| |||||||||||||||||||||||
At June 30, 2021 |
| Common Equity |
|
| Tier 1 |
|
| Total |
|
| Leverage Capital |
|
| ||||||||||||||||||||
(dollars in millions) |
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| ||||||||
Total capital |
| $ | 4,088 |
|
|
| 9.84 |
| % | $ | 4,590 |
|
|
| 11.05 |
| % | $ | 5,421 |
|
|
| 13.05 |
| % | $ | 4,590 |
|
|
| 8.25 |
| % |
Minimum for capital adequacy |
|
| 1,869 |
|
|
| 4.50 |
|
|
| 2,492 |
|
|
| 6.00 |
|
|
| 3,322 |
|
|
| 8.00 |
|
|
| 2,225 |
|
|
| 4.00 |
|
|
Excess |
| $ | 2,219 |
|
|
| 5.34 |
| % | $ | 2,098 |
|
|
| 5.05 |
| % | $ | 2,099 |
|
|
| 5.05 |
| % | $ | 2,365 |
|
|
| 4.25 |
| % |
Regulatory Capital Analysis (New York Community Bank)
|
| Risk-Based Capital |
|
|
|
|
|
|
|
| |||||||||||||||||||||||
At June 30, 2021 |
| Common Equity |
|
| Tier 1 |
|
| Total |
|
| Leverage Capital |
|
| ||||||||||||||||||||
(dollars in millions) |
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| ||||||||
Total capital |
| $ | 5,091 |
|
|
| 12.26 |
| % | $ | 5,091 |
|
|
| 12.26 |
| % | $ | 5,277 |
|
|
| 12.71 |
| % | $ | 5,091 |
|
|
| 9.15 |
| % |
Minimum for capital adequacy |
|
| 1,868 |
|
|
| 4.50 |
|
|
| 2,491 |
|
|
| 6.00 |
|
|
| 3,321 |
|
|
| 8.00 |
|
|
| 2,225 |
|
|
| 4.00 |
|
|
Excess |
| $ | 3,223 |
|
|
| 7.76 |
| % | $ | 2,600 |
|
|
| 6.26 |
| % | $ | 1,956 |
|
|
| 4.71 |
| % | $ | 2,866 |
|
|
| 5.15 |
| % |
65
At SeptemberJune 30, 2017,2021, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 659 basis points505 bps and the fully-phased in capital conservation buffer by 409 basis points.
As reflected in the following tables, the capital ratios for the Community Bank and the Commercial Bank also continued to exceed the minimum regulatory capital levels required at September 30, 2017:
Regulatory Capital Analysis (New York Community Bank)
Risk-Based Capital | ||||||||||||||||||||||||||||||||
At September 30, 2017 | Common Equity Tier 1 | Tier 1 | Total | Leverage Capital | ||||||||||||||||||||||||||||
(dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||
Total capital | $ | 4,176,102 | 13.60 | % | $ | 4,176,102 | 13.60 | % | $ | 4,304,995 | 14.02 | % | $ | 4,176,102 | 9.80 | % | ||||||||||||||||
Minimum for capital adequacy purposes | 1,381,593 | 4.50 | 1,842,123 | 6.00 | 2,456,165 | 8.00 | 1,703,799 | 4.00 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Excess | $ | 2,794,509 | 9.10 | % | $ | 2,333,979 | 7.60 | % | $ | 1,848,830 | 6.02 | % | $ | 2,472,303 | 5.80 | % | ||||||||||||||||
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
Regulatory Capital Analysis (New York Commercial Bank)
Risk-Based Capital | ||||||||||||||||||||||||||||||||
At September 30, 2017 | Common Equity Tier 1 | Tier 1 | Total | Leverage Capital | ||||||||||||||||||||||||||||
(dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||
Total capital | $ | 372,817 | 15.30 | % | $ | 372,817 | 15.30 | % | $ | 403,287 | 16.55 | % | $ | 372,817 | 11.07 | % | ||||||||||||||||
Minimum for capital adequacy purposes | 109,671 | 4.50 | 146,227 | 6.00 | 194,970 | 8.00 | 134,716 | 4.00 | ||||||||||||||||||||||||
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|
|
| |||||||||||||||||
Excess | $ | 263,146 | 10.80 | % | $ | 226,590 | 9.30 | % | $ | 208,317 | 8.55 | % | $ | 238,101 | 7.07 | % | ||||||||||||||||
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|
As of September 30, 2017, the Community Bank and the CommercialThe Bank also exceeded the minimum capital requirements to be categorized as “Well Capitalized.” To be categorized as well capitalized, a bank must maintain a minimum common equity tier 1 ratio of 6.50%; a minimum tier 1 risk-based capital ratio of 8.00%; a minimum total risk-based capital ratio of 10.00%; and a minimum leverage capital ratio of 5.00%.
Earnings Summary for the Three Months Ended SeptemberJune 30, 20172021
Net income for the three months ended June 30, 2021 totaled $152 million, up 45% compared to the $105 million we reported for the three months ended June 30, 2020. Net income available to common shareholders (“net income”)for the second quarter of 2021 totaled $102.3$144 million, inup 48% compared to the current third$97 million we reported for the second quarter equivalent to $0.21of 2020.
On a per share basis, diluted common share. In the trailing and year-earlier quarters, net income totaled $107.0 million and $125.3 million, and was equivalent to $0.22 and $0.26earnings per diluted common share respectively. The sequential and year-over-year declines in net income were primarily due$0.30, up 43% compared to a decrease in net interest income, as further discussed below.the $0.21 we reported for the second quarter of 2020.
Net Interest Income
Net interest income is our primary source of income. Its level is a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition for loans and deposits, the monetary policy of the FOMC, and market interest rates.
The cost of our deposits and short-term borrowed funds is largely based on short-term rates of interest, the level of which is partially impacted by the actions of the FOMC. The FOMC reduces, maintains, or increases the target federal funds rate (the rate at which banks borrow funds overnight from one another) as it deems necessary. Since the fourth quarter of 2008, when the target federal funds rate was lowered to a range of 0% to 0.25%, the rate has been raised three times: on December 17, 2015, to a range of 0.25% to 0.50%; on December 14, 2016, to a range of 0.50% to 0.75%; on March 15, 2017, to a range of 0.75% to 1.00%, and, most recently on June 14, 2017 to a range of 1.00% to 1.25%.
While the target federal funds rate generally impacts the cost of our short-term borrowings and deposits, the yields on ourheld-for-investment loans and other interest-earning assets are typically impacted by intermediate-term market interest rates. In the third quarter of 2017, the average five-year CMT was 1.81%, unchanged from the trailing quarter and as compared to 1.13% for the year-earlier quarter. The averageten-year CMT was 2.24% in the current third quarter, as compared to 2.26% and 1.56%, respectively, in the prior periods.
Net interest income is also influenced by the level of prepayment income primarily generated in connection with the prepayment of our multi-family and CRE loans, as well as securities. Since prepayment income is recorded as interest income, an increase or decrease in its level will also be reflected in the average yields (as applicable) on our loans, securities, and interest-earning assets, and therefore in our interest rate spread and net interest margin.
It should be noted that the level of prepayment income on loans recorded in any given period depends on the volume of loans that refinance or prepay during that time. Such activity is largely dependent on such external factors as current market conditions, including real estate values, and the perceived or actual direction of market interest rates. In addition, while a decline in market interest rates may trigger an increase in refinancing and, therefore, prepayment income, so too may an increase in market interest rates. It is not unusual for borrowers to lock in lower interest rates when they expect, or see, that market interest rates are rising rather than risk refinancing later at a still higher interest rate.
The Company recorded netYear-Over-Year Comparison
Net interest income for the three months ended June 30, 2021 increased $65 million or 24% on a year-over-year basis. This increase was primarily driven by a $57 million or 36% decline in interest expense compared to the year-ago quarter and an $8 million or 2% increase in interest income.
Details of $276.3 million in the current second quarter, an $11.4 million decrease from the trailing-quarter level and a $42.1 million decrease from the year-earlier amount.
Linked-Quarter Comparison
The sequential declineincrease in net interest income was attributable to a variety of factors, including an increase in our cost of funds,are as short-term interest rates rose in the quarter. Additionally, the sale of our covered loan portfolio, which closed at the end of July and resulted in excess liquidity being invested at lower yields, negatively impacted net interest income. This was partially offset by modest loan growth along with stable loan yields. Details of the linked-quarter decline in net interest income follow:follows:
Year-Over-Year Comparison
The following factors contributed to the year-over-year reduction in net interest income:
66
Net Interest Margin
The directionCompany's NIM improved during the current second quarter in-line with the growth in net interest income. For the three months ended June 30, 2021, the NIM increased 32 bps on a year-over-year basis and two bp on a linked-quarter basis, to 2.50%.
The following table summarizes the contribution of loan and securities prepayment income on the Company’s net interest margin was consistent with that of its net interest income and generally was driven by the same factors as those described above. At 2.53%, the margin was 12 basis points narrower than the trailing-quarter measure and 38 basis points narrower than the margin recorded in the third quarter of last year. The respective reductions were due, in part, to a decline in prepayment income from the levels recorded in the trailing and year-earlier quarters, as reflected in the following table:
For the Three Months Ended | ||||||||||||
(dollars in thousands) | September 30, 2017 | June 30, 2017 | September 30, 2016 | |||||||||
Total interest income | $ | 393,675 | $ | 399,075 | $ | 416,096 | ||||||
Prepayment income: | ||||||||||||
From loans | $ | 14,076 | $ | 13,285 | $ | 13,422 | ||||||
From securities | 2,488 | 1,708 | 8,947 | |||||||||
|
|
|
|
|
| |||||||
Total prepayment income | $ | 16,564 | $ | 14,993 | $ | 22,369 | ||||||
|
|
|
|
|
| |||||||
Net interest margin (including the contribution of prepayment income) | 2.53 | % | 2.65 | % | 2.91 | % | ||||||
Less: | ||||||||||||
Contribution of prepayment income to net interest margin: | ||||||||||||
From loans | 13 | bps | 12 | bps | 12 | bps | ||||||
From securities | 3 | 2 | 8 | |||||||||
|
|
|
|
|
| |||||||
Total contribution of prepayment income to net interest margin | 16 | bps | 14 | bps | 20 | bps | ||||||
|
|
|
|
|
| |||||||
Adjusted net interest margin (i.e., excluding the contribution of prepayment income)(1) | 2.37 | % | 2.51 | % | 2.71 | % |
While our net interest margin, including the contribution of prepayment income, is recorded in accordance with GAAP, adjusted net interest margin, which excludes the contribution of prepayment income, is not. Nevertheless, management uses thisnon-GAAP measure in its analysis of our performance, and believes that thisnon-GAAP measure should be disclosed in this report and other investor communicationsNIM for the following reasons:respective periods:
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| |||||
|
| For the Three Months Ended |
|
| June 30, 2021 |
|
| ||||||||||||||
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| March 31, |
|
| June 30, |
|
| |||||
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| |||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Interest Income |
| $ | 431 |
|
| $ | 423 |
|
| $ | 423 |
|
|
| 2 | % |
|
| 2 | % |
|
Prepayment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ | 22 |
|
| $ | 19 |
|
| $ | 12 |
|
|
| 16 | % |
|
| 83 | % |
|
Securities |
|
| 5 |
|
|
| 1 |
|
|
| — |
|
|
| 400 | % |
| NM |
|
| |
Total prepayment income |
| $ | 27 |
|
| $ | 20 |
|
| $ | 12 |
|
|
| 35 | % |
|
| 125 | % |
|
GAAP Net Interest Margin |
|
| 2.50 | % |
|
| 2.48 | % |
|
| 2.18 | % |
| 2 |
| bp | 32 |
| bp |
Adjusted net interest margin should not be considered in isolation or as a substitute for net interest margin, which is calculated in accordance with GAAP. Moreover, the manner in which we calculate thisnon-GAAP measure may differ from that of other companies reporting anon-GAAP measure with a similar name.
The following table sets forth certain information regarding our average balance sheet for the quarters indicated,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 (includingmark-to-market adjustments from acquisitions), that are considered adjustments to such average yields and costs.
Net Interest Income Analysis
For the Three Months Ended | For the Three Months Ended |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2017 | June 30, 2017 | September 30, 2016 | June 30, 2021 |
| March 31, 2021 |
| June 30, 2020 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | Average Balance | Interest | Average Yield/ Cost | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| |||||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
|
|
|
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Assets: |
|
|
|
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|
|
|
|
|
|
|
|
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| |||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Mortgage and other loans, net(1) | $ | 37,791,476 | $ | 350,990 | 3.71 | % | $ | 39,113,348 | $ | 361,330 | 3.70 | % | $ | 39,337,380 | $ | 367,932 | 3.74 | % | $ | 42,817 |
| $ | 386 |
| 3.60 | % | $ | 42,736 |
| $ | 383 |
| 3.59 | % | $ | 41,853 |
| $ | 382 |
| 3.65 | % | |||||||||||||||||||||
Securities(2)(3) | 3,597,699 | 34,359 | 3.81 | 4,226,369 | 37,732 | 3.55 | 4,426,703 | 48,160 | 4.34 |
| 6,790 |
| 43 |
| 2.55 |
| 6,517 |
| 39 |
| 2.36 |
| 5,920 |
| 41 |
| 2.77 |
| |||||||||||||||||||||||||||||||||||
Interest-earning cash and cash equivalents(2) | 2,474,307 | 8,326 | 1.34 | 8,858 | 13 | 0.59 | 8,629 | 4 | 0.18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning cash and cash |
| 3,415 |
| 2 |
| 0.27 |
| 1,835 |
| 1 |
| 0.28 |
| 856 |
| — |
| 0.10 |
| ||||||||||||||||||||||||||||||||||||||||||||
Total interest-earning assets | 43,863,482 | 393,675 | 3.59 | 43,348,575 | 399,075 | 3.68 | 43,772,712 | 416,096 | 3.80 |
| 53,022 |
| $ | 431 |
| 3.25 |
| 51,088 |
| 423 |
| 3.32 |
| 48,629 |
| 423 |
| 3.48 |
| ||||||||||||||||||||||||||||||||||
Non-interest-earning assets | 4,662,777 | 5,720,589 | 5,386,459 |
| 5,092 |
|
|
|
|
|
| 5,218 |
|
|
|
|
|
| 5,158 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 48,526,259 | $ | 49,069,164 | $ | 49,159,171 | $ | 58,114 |
|
|
|
|
| $ | 56,306 |
|
|
|
|
| $ | 53,787 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing checking and money market accounts | $ | 12,672,720 | $ | 27,620 | 0.86 | % | $ | 12,971,440 | $ | 24,084 | 0.74 | % | $ | 13,356,174 | $ | 15,866 | 0.47 | % | $ | 12,699 |
| $ | 7 |
| 0.24 | % | $ | 12,626 |
| $ | 9 |
| 0.28 | % | $ | 10,540 |
| $ | 10 |
| 0.38 | % | |||||||||||||||||||||
Savings accounts | 5,006,499 | 7,109 | 0.56 | 5,260,397 | 7,150 | 0.55 | 5,629,135 | 7,439 | 0.53 |
| 7,487 |
| 7 |
| 0.36 |
| 6,713 |
| 6 |
| 0.38 |
| 5,336 |
| 8 |
| 0.62 |
| |||||||||||||||||||||||||||||||||||
Certificates of deposit | 8,533,404 | 27,649 | 1.29 | 7,827,633 | 24,006 | 1.23 | 7,245,325 | 20,501 | 1.13 |
| 9,154 |
| 14 |
| 0.58 |
| 9,984 |
| 18 |
| 0.75 |
| 13,135 |
| 65 |
| 2.00 |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing deposits | 26,212,623 | 62,378 | 0.94 | 26,059,470 | 55,240 | 0.85 | 26,230,634 | 43,806 | 0.66 |
| 29,340 |
| 28 |
| 0.38 |
| 29,323 |
| 33 |
| 0.46 |
| 29,011 |
| 83 |
| 1.16 |
| |||||||||||||||||||||||||||||||||||
Borrowed funds | 12,397,681 | 54,954 | 1.76 | 13,195,987 | 56,066 | 1.70 | 13,802,662 | 53,867 | 1.55 |
| 15,724 |
| 72 |
| 1.82 |
| 15,995 |
| 72 |
| 1.82 |
| 14,403 |
| 74 |
| 2.06 |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 38,610,304 | 117,332 | 1.21 | 39,255,457 | 111,306 | 1.14 | 40,033,296 | 97,673 | 0.97 |
| 45,064 |
| 100 |
| 0.88 |
| 45,318 |
| 105 |
| 0.94 |
| 43,414 |
| 157 |
| 1.46 |
| |||||||||||||||||||||||||||||||||||
Non-interest-bearing deposits | 2,766,701 | 2,960,164 | 2,832,569 |
| 5,488 |
|
|
|
|
|
| 3,243 |
|
|
|
|
|
| 3,040 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Other liabilities | 383,622 | 203,237 | 212,303 |
| 691 |
|
|
|
|
|
| 872 |
|
|
|
|
|
| 676 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 41,760,627 | 42,418,858 | 43,078,168 |
| 51,243 |
|
|
|
|
|
| 49,433 |
|
|
|
|
|
| 47,130 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | 6,765,632 | 6,650,306 | 6,081,003 |
| 6,871 |
|
|
|
|
|
| 6,873 |
|
|
|
|
|
| 6,657 |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 48,526,259 | $ | 49,069,164 | $ | 49,159,171 | $ | 58,114 |
|
|
|
|
| $ | 56,306 |
|
|
|
|
| $ | 53,787 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income/interest rate spread | $ | 276,343 | 2.38 | % | $ | 287,769 | 2.54 | % | $ | 318,423 | 2.83 | % |
|
| $ | 331 |
| 2.37 | % |
|
| $ | 318 |
| 2.38 | % |
|
| $ | 266 |
| 2.02 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest margin | 2.53 | % | 2.65 | % | 2.91 | % |
|
|
|
|
| 2.50 | % |
|
|
|
|
| 2.48 | % |
|
|
|
|
| 2.18 | % | ||||||||||||||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 1.14x | 1.10x | 1.09x |
|
|
|
| 1.18x |
|
|
|
|
| 1.13x |
|
|
|
|
| 1.12x |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
(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.
67
(3) Includes FHLB stock.
(Recovery of) Provision for Credit Losses on Non-Covered Loans
The provision for losses onnon-covered loans is based on the methodology used by management in calculating the allowance for losses on such loans. Reflecting this methodology, which is discussed in detail under “Critical Accounting Policies,” we recorded a $44.6 million provision fornon-covered loan losses in the current third quarter, as compared to $11.6 million and $1.2 million inFor the three months ended June 30, 2017 and September 30, 2016. The elevated loan loss2021, the Company recorded a recovery of credit losses of $4 million compared to an $18 million provision for the current third quarter was due to our taxi medallion-related loans. Inthree months ended June 30, 2020. The year-over-year improvement reflects the thirdsignificant improvement in forecasted, future economic conditions based on the adoption of CECL in the first quarter of 2017, the Company recorded net charge-offs of $40.4 million, of which $40.6 million was related to taxi medallion-related loans, compared to the year-earlier quarter during which the Company recordedlast year, as well as net recoveries of $412,000, of which $49,000 was related to taxi medallion-related loans.$6 million during the second quarter.
For additional information about our provisions for and recoveries of loan losses, see the discussion of the allowances for loan losses under “Critical Accounting Policies” and the discussion of “Asset Quality” that appear earlier in this report.
Non-Interest Income
We generatenon-interest income through a variety of sources, including—among others—mortgage banking income; 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 and those produced through our wholly-owned subsidiary, Peter B. Cannell & Co., Inc. (“PBC”), an investment advisory firm.products.
Non-interestFor the three months ended June 30, 2021, non-interest income totaled $108.9$16 million, inup $1 million or 7% compared to the current third quarter, up $58.5 million fromyear-ago quarter. The increase was mainly the trailing-quarter level and $68.3 million from the year-earlier amount. The linked-quarter improvement was primarily driven by an $82.0 million gain on saleresult of covered loans and mortgage banking operations. This was partiallyhigher fee income, offset by a $6.7 millionslight decline in mortgage bankingBOLI income. The year-over-year increase reflects contributions from the same factors which impacted the linked-quarter results.
The following table summarizes our mortgage banking income for the periods indicated:
For the Three Months Ended | ||||||||||||
September 30, | June 30, | September 30, | ||||||||||
(in thousands) | 2017 | 2017 | 2016 | |||||||||
Mortgage Banking Income: | ||||||||||||
Income from originations | $ | 2,109 | $ | 4,394 | $ | 10,884 | ||||||
Servicing (loss) income | (623 | ) | 3,802 | 2,041 | ||||||||
|
|
|
|
|
| |||||||
Total mortgage banking income | $ | 1,486 | $ | 8,196 | $ | 12,925 | ||||||
|
|
|
|
|
|
The following table summarizes ournon-interest income for the respective periods:
Non-Interest Income Analysis
|
| For the Three Months Ended |
| |||||||||
(dollars in millions) |
| June 30, |
|
| March 31, |
|
| June 30, |
| |||
Fee income |
| $ | 6 |
|
| $ | 5 |
|
| $ | 4 |
|
BOLI income |
|
| 8 |
|
|
| 7 |
|
|
| 9 |
|
Net gain (loss) on securities |
|
| - |
|
|
| - |
|
|
| 1 |
|
Other income: |
|
|
|
|
|
|
|
|
| |||
Third-party investment product sales |
|
| - |
|
|
| 1 |
|
|
| 1 |
|
Other |
|
| 2 |
|
|
| 1 |
|
|
| - |
|
Total other income |
|
| 2 |
|
|
| 2 |
|
|
| 1 |
|
Total non-interest income |
| $ | 16 |
|
| $ | 14 |
|
| $ | 15 |
|
For the Three Months Ended | ||||||||||||
September 30, | June 30, | September 30, | ||||||||||
(in thousands) | 2017 | 2017 | 2016 | |||||||||
Mortgage banking income | $ | 1,486 | $ | 8,196 | $ | 12,925 | ||||||
Fee income | 7,972 | 8,151 | 8,640 | |||||||||
BOLI income | 8,314 | 6,519 | 7,029 | |||||||||
Net (loss) gain on sales of loans | (76 | ) | 1,397 | 3,465 | ||||||||
Net gain on sales of securities | — | 26,936 | 237 | |||||||||
FDIC indemnification expense | — | (14,325 | ) | (1,031 | ) | |||||||
Gain on sale of covered loans and mortgage banking operations | 82,026 | — | — | |||||||||
Other income: | ||||||||||||
Peter B. Cannell & Co., Inc. | 5,502 | 5,476 | 5,535 | |||||||||
Third-party investment product sales | 2,888 | 3,205 | 2,467 | |||||||||
Other | 816 | 4,882 | 1,328 | |||||||||
|
|
|
|
|
| |||||||
Total other income | 9,206 | 13,563 | 9,330 | |||||||||
|
|
|
|
|
| |||||||
Totalnon-interest income | $ | 108,928 | $ | 50,437 | $ | 40,595 | ||||||
|
|
|
|
|
|
Non-Interest Expense
Non-interestTotal non-interest expense has two primary components: operating expenses, which consist of compensation and benefits expense, occupancy and equipment expense, and G&A expense, andfor the amortization of the CDI stemming from certain merger transactions.
Non-interest expense totaled $162.2three months ended June 30, 2021 was $139 million, up $16 million or 13% on a year-over-year basis. Included in our current second quarter results are $10 million in the current third quarter, a $1.5 million decrease from the trailing-quarter level and a $549,000 increase from the year-earlier amount. Merger-relatedmerger-related expenses added $2.2 millionpertaining tonon-interest expense in the year-earlier quarter; there were no comparable expenses in the current quarter.
The majority of the Company’snon-interest expense consists of operating expenses, which totaled $162.2 million in the current third quarter, as compared to $163.7 million and $158.9 million, respectively, in the trailing and year-earlier periods. The linked-quarter decrease our upcoming merger with Flagstar Bancorp, Inc. This was driven by a $1.3$6 million declineor 22% increase in compensationgeneral and benefitsadministrative expense to $91.6$33 million. This was largely related to legal, professional, and FDIC insurance premiums.
Income Tax Expense
For the three months ended June 30, 2021, the Company recorded income tax expense of $60 million primarily due to higher pre-tax income and a $2.0 million decrease in G&A expense to $45.5 million, partially offset by a $1.7 million increase in occupancy and equipment expense to $25.1 million.
The year-over-year increase in operating expenses was largely due to a $5.5 million increase in compensation and benefits expense coupled with a $3.0 million decrease in G&A expense. The year-over-year rise in compensation and benefits expense was generally attributable to the addition of senior level staff in various departments, while the year-over-year decline in G&A expense was largely attributable to lower FDIC insurance premiums.
Income Tax Expense
Incomehigher effective tax expense totaled $68.0 million in the current third quarter, $2.5 million higher than the trailing-quarter level and $4.1 million lower than the year-earlier third-quarter amount.
Whilepre-tax income declined $2.3 million sequentially, to $178.5 million, therate. The effective tax rate increased to 38.10%28.38% compared to 24.80% in the current third quarter from 36.22%year-ago quarter. This increase was due to two factors: the non-deductibility of merger-related expenses and an increase in the trailing three-month period.
In the third quarter of 2016,pre-tax income was $18.9 million higher than the current third-quarter level, and the effectiveNew York State tax rate was 36.52%to 7.25% from 6.50%. The increase in the New York State tax rate resulted in a one-time expense related to the revaluation of our deferred tax asset.
Earnings Summary for the NineSix Months Ended SeptemberJune 30, 20172021
InFor the six months ended June 30, 2021, net income totaled $297 million, up 45% compared to the $205 million for the first ninesix months of 2017, we generated netended June 30, 2020. Net income available tofor common shareholders of $313.3for the six months ended June 30, 2021 totaled $281 million or $0.64compared to $189 million for the six months ended June 30, 2020, up 49%.
On a per share basis, diluted earnings per common share asfor the six months ended June 30, 2021 were $0.60, up 50% compared to net income available to common shareholders of $381.7 million, or $0.78 per diluted common share, in$0.40 for the first ninesix months of 2016.ended June 30, 2020.
Merger-related expenses totaled $4.7 million in the year-earlier nine months; there were no merger-related expenses in the current nine-month period.
Net Interest Income
68
Net interest income fell $112.8 million year-over-year to $859.0 million infor the ninesix months ended SeptemberJune 30, 2017.2021, totaled $649 million, up $139 million or 27% compared to the six months ended June 30, 2020. The decreaseyear-over-year improvement was driven by lower interest expense.
The following factors contributed to the year-over-year decrease in net interest income and margin:
Net Interest Margin
The following table summarizesFor the contribution of prepayment income from loans and securities to our interest income and net interest margin in the ninesix months ended SeptemberJune 30, 2017 and 2016:2021, the NIM increased 39 bp to 2.49% compared to the six months ended June 30, 2020.
For the Nine Months Ended September 30, | ||||||||
(dollars in thousands) | 2017 | 2016 | ||||||
Total interest income | $ | 1,191,869 | $ | 1,259,521 | ||||
Prepayment income: | ||||||||
From loans | $ | 36,926 | $ | 42,648 | ||||
From securities | 6,744 | 29,695 | ||||||
|
|
|
| |||||
Total prepayment income | $ | 43,670 | $ | 72,343 | ||||
|
|
|
| |||||
Net interest margin (including the contribution of prepayment income) | 2.63 | % | 2.95 | % | ||||
Less: | ||||||||
Contribution of prepayment income to net interest margin: | ||||||||
From loans | 11 | bps | 13 | bps | ||||
From securities | 2 | 9 | ||||||
|
|
|
| |||||
Total contribution of prepayment income to net interest margin | 13 | bps | 22 | bps | ||||
|
|
|
| |||||
Adjusted net interest margin (i.e., excluding the contribution of prepayment income)(1) | 2.50 | % | 2.73 | % |
|
| For the Six Months Ended |
|
|
| ||
|
| June 30, |
| June 30, |
|
|
|
|
| 2021 |
| 2020 |
| % Change |
|
(dollars in millions) |
|
|
|
|
|
|
|
Total Interest Income |
| $854 |
| $864 |
| -1% |
|
Prepayment Income: |
|
|
|
|
|
|
|
Loans |
| $41 |
| $21 |
| 95% |
|
Securities |
| 6 |
| 1 |
| 500% |
|
Total prepayment income |
| $47 |
| $22 |
| 114% |
|
GAAP Net Interest Margin |
| 2.49% |
| 2.10% |
| 39 | bp |
(1) “Adjusted net interest margin” is anon-GAAP financial measure, as more fully discussed below.
While our net interest margin, including the contribution of prepayment income, is recorded in accordance with GAAP, adjusted net interest margin, which excludes the contribution of prepayment income, is not. Nevertheless, management uses thisnon-GAAP measure in its analysis of our performance, and believes that thisnon-GAAP measure should be disclosed in this report and other investor communications for the following reasons:
Adjusted net interest margin should not be considered in isolation or as a substitute for net interest margin, which is calculated in accordance with GAAP. Moreover, the manner in which we calculate thisnon-GAAP measure may differ from that of other companies reporting anon-GAAP measure with a similar name.
The following table sets forth certain information regarding our average balance sheet for the nine-monthsix-month periods, indicated, 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 nine-month periodsquarters are derived from average balances that are calculated daily. The average yields and costs include fees, as well as premiums and discounts (includingmark-to-market adjustments from acquisitions), that are considered adjustments to such average yields and costs.
69
Net Interest Income Analysis
For the Nine Months Ended September 30, |
| For the Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 |
| 2021 |
|
| 2020 |
| |||||||||||||||||||||||||||||||||||||||||
Average | Average |
| Average |
|
| Interest |
|
| Average |
|
| Average |
|
| Interest |
|
| Average |
| |||||||||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Balance | Interest | Cost | Balance | Interest | Cost | ||||||||||||||||||||||||||||||||||||||||||
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Mortgage and other loans, net(1) | $ | 38,652,113 | $ | 1,070,722 | 3.69 | % | $ | 38,878,111 | $ | 1,099,137 | 3.77 | % | ||||||||||||||||||||||||||||||||||||
Securities(2)(3) | 4,052,154 | 112,800 | 3.72 | 5,065,917 | 160,373 | 4.22 | ||||||||||||||||||||||||||||||||||||||||||
Interest-earning cash and cash equivalents(2) | 832,463 | 8,347 | 1.34 | 8,749 | 11 | 0.17 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Mortgage and other loans, net |
| $ | 42,777 |
| $ | 769 |
| 3.60 | % |
| $ | 41,682 |
| $ | 774 |
| 3.71 | % | ||||||||||||||||||||||||||||||
Securities |
| 6,654 |
| 82 |
| 2.46 |
| 6,134 |
| 88 |
| 2.88 |
| |||||||||||||||||||||||||||||||||||
Interest-earning cash and cash |
|
| 2,630 |
|
| 3 |
|
| 0.27 |
|
| 760 |
|
| 2 |
|
| 0.55 |
| |||||||||||||||||||||||||||||
Total interest-earning assets | 43,536,730 | 1,191,869 | 3.65 | 43,952,777 | 1,259,521 | 3.82 |
| 52,061 |
|
| 854 |
|
| 3.28 |
| 48,576 |
|
| 864 |
|
| 3.56 |
| |||||||||||||||||||||||||
Non-interest-earning assets | 5,239,745 | 5,316,971 |
|
| 5,154 |
|
|
|
|
|
|
|
| 5,022 |
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 48,776,475 | $ | 49,269,748 |
| $ | 57,215 |
|
|
|
|
|
|
| $ | 53,598 |
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Interest-bearing checking and money market accounts | $ | 12,950,570 | $ | 71,413 | 0.74 | % | $ | 13,349,201 | $ | 45,771 | 0.46 | % |
| $ | 12,663 |
| $ | 16 |
| 0.26 | % |
| $ | 10,305 |
| $ | 39 |
| 0.75 | % | ||||||||||||||||||
Savings accounts | 5,171,645 | 21,069 | 0.54 | 6,112,342 | 25,001 | 0.55 |
| 7,102 |
| 13 |
| 0.37 |
| 5,085 |
| 17 |
| 0.68 |
| |||||||||||||||||||||||||||||
Certificates of deposit | 8,019,142 | 73,786 | 1.23 | 6,700,188 | 55,129 | 1.10 |
|
| 9,566 |
|
| 32 |
|
| 0.67 |
|
| 13,628 |
|
| 145 |
|
| 2.14 |
| |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing deposits | 26,141,357 | 166,268 | 0.85 | 26,161,731 | 125,901 | 0.64 |
| 29,331 |
|
| 61 |
|
| 0.42 |
| 29,018 |
|
| 201 |
|
| 1.39 |
| |||||||||||||||||||||||||
Borrowed funds | 12,992,691 | 166,572 | 1.71 | 14,083,459 | 161,758 | 1.53 |
|
| 15,859 |
|
| 144 |
|
|
| 1.82 |
|
| 14,421 |
|
| 153 |
|
|
| 2.14 |
| |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 39,134,048 | 332,840 | 1.14 | 40,245,190 | 287,659 | 0.95 |
| 45,190 |
|
| 205 |
|
| 0.91 |
| 43,439 |
|
| 354 |
|
| 1.64 |
| |||||||||||||||||||||||||
Non-interest-bearing deposits | 2,820,923 | 2,817,043 |
| 4,372 |
|
|
|
|
|
|
| 2,805 |
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Other liabilities | 269,132 | 179,471 |
|
| 781 |
|
|
|
|
|
|
|
| 680 |
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 42,224,103 | 43,241,704 |
| 50,343 |
|
|
|
|
|
|
| 46,924 |
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Stockholders’ equity | 6,552,372 | 6,028,044 |
|
| 6,872 |
|
|
|
|
|
|
|
| 6,674 |
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 48,776,475 | $ | 49,269,748 |
| $ | 57,215 |
|
|
|
|
|
|
| $ | 53,598 |
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Net interest income/interest rate spread | $ | 859,029 | 2.51 | % | $ | 971,862 | 2.87 | % |
|
|
|
| $ | 649 |
|
| 2.37 | % |
|
|
|
| $ | 510 |
|
|
| 1.92 | % | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Net interest margin | 2.63 | % | 2.95 | % |
|
|
|
|
|
|
|
| 2.49 | % |
|
|
|
|
|
|
|
| 2.10 | % | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 1.11x | 1.09x |
|
|
|
|
|
|
| 1.15x |
|
|
|
|
|
|
|
| 1.12x |
| ||||||||||||||||||||||||||||
|
|
Provision for LoanCredit Losses
ProvisionOn a year-to-date basis, the provision for Losses onNon-Covered Loans
Reflecting the methodology used by managementcredit losses was zero compared to calculate the allowance fornon-covered loan losses, we recorded a provision for credit losses onnon-covered loans of $58.0$38 million for the first half of 2020. The year-to-date improvement reflects the significant improvement in the nine months ended September 30, 2017forecasted future economic conditions, as well as, year-to-date net recoveries of $7 million compared to $6.7 million in the year ago nine months. The higher loan loss provision for the nine months ended September 30, 2017 was due to our taxi medallion-related loans. For the nine months ended September 30, 2017, the Company recorded net charge-offs of $57.4$14 million of which $54.8 million was due to taxi medallion-related loans. For the nine months ended September 30, 2016, the Company recorded a net recovery of $882,000, with taxi medallion-related charge-offs of $265,000.
Provision for (Recovery of) Losses on Covered Loans
Induring the first ninesix months of 2017, we recovered $23.7 million2020.
Non-Interest Income
We generate non-interest income through a variety of sources, including—among others— fee income (in the form of retail
deposit fees and charges on loans); income from the allowance for covered loan losses, reflecting an increaseour investment in expected cash flows from certain pools of covered loans as their credit quality improved and the aforementioned sale of the covered loans. In connection with this recovery, we recorded FDIC indemnification expense of $19.0 million in“Non-interest income” during the corresponding period.
In the first nine months of 2016, we recovered $6.0 million from the allowance for covered loan losses, reflecting an increase in expected cash flows from certain pools of covered loans as their credit quality improved. In connection with this recovery, we recorded FDIC indemnification income of $4.8 million in“Non-interest income” during the corresponding period.
Non-Interest Income
In the first nine months of 2017, we recordednon-interest income of $191.5 million, as compared to $113.2 million in the first nine months of 2016. The $78.3 million increase was largely driven by the $82.0 million gainBOLI; gains on the sale of our covered loanssecurities; and mortgage banking operations andrevenues produced through the sale of third-party investment products.
For the first six months of 2021, total non-interest income was $30 million, down $2 million or 6% compared to $32 million for the first six months of 2020. The decrease was mainly the result of a net gain on sales of securities of $28.9$2 million or 12% decline in BOLI income to $15 million. This was partially offset by lower mortgage banking income and lowerThe year-ago six month period included $1 million in net gains on salessecurities compared to no such gain during the first six months of loans.2021.
70
The following table summarizes our mortgage banking income for the periods indicated:
For the Nine Months Ended September 30, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Mortgage Banking Income: | ||||||||
Income from originations | $ | 11,478 | $ | 34,691 | ||||
Servicing income (loss) | 7,968 | (10,671 | ) | |||||
|
|
|
| |||||
Total mortgage banking income | $ | 19,446 | $ | 24,020 | ||||
|
|
|
|
The following table summarizes the components ofnon-interest income for the respective periods:
Non-Interest Income Analysis
For the Nine Months Ended September 30, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Mortgage banking income | $ | 19,446 | $ | 24,020 | ||||
Fee income | 23,983 | 24,480 | ||||||
BOLI income | 21,170 | 23,208 | ||||||
Net gain on sales of loans | 1,055 | 15,118 | ||||||
Net gain on sales of securities | 28,915 | 413 | ||||||
FDIC indemnification expense | (18,961 | ) | (4,828 | ) | ||||
Gain on sale of covered loans and mortgage banking operations | 82,026 | — | ||||||
Other income: | ||||||||
Peter B. Cannell & Co., Inc. | 16,512 | 17,100 | ||||||
Third-party investment product sales | 9,262 | 8,823 | ||||||
Other | 8,129 | 4,864 | ||||||
|
|
|
| |||||
Total other income | 33,903 | 30,787 | ||||||
|
|
|
| |||||
Totalnon-interest income | $ | 191,537 | $ | 113,198 | ||||
|
|
|
|
|
| For the Six Months Ended |
| |||||
|
| June 30, |
|
| June 30, |
| ||
(dollars in millions) |
| 2021 |
|
| 2020 |
| ||
Fee income |
| $ | 11 |
|
| $ | 11 |
|
BOLI income |
|
| 15 |
|
|
| 17 |
|
Net gain on securities |
|
| — |
|
|
| 1 |
|
Other income: |
|
|
|
|
|
| ||
Third-party investment product sales |
|
| — |
|
|
| 2 |
|
Other |
|
| 4 |
|
|
| 1 |
|
Total other income |
|
| 4 |
|
|
| 3 |
|
Total non-interest income |
| $ | 30 |
|
| $ | 32 |
|
Non-Interest Expense
In
Non-Interest Expense
For the six months ended June 30, 2021, total non-interest expenses were $271 million, up $22 million or 9% compared to the first ninesix months of 2017, we recordednon-interest expense2020. Included in the results for the first six months of $492.9 million, reflecting an $11.9 million increase from the year-earlier amount. Operating expenses accounted for $492.72021 was $10 million of merger-related expenses. Included in the current nine-month total, and were up $18.4results for the first six months of 2020 was a $4 million year-over-year.lease termination benefit. The efficiency ratio improved to 38.46% during the first six months of the year compared to 45.91% for the first six months of last year.
The rise in operating expenses was largely due to an $18.8 million increase in compensation and benefits expense to $280.0 million, while most other expense categories were flat on a year-over-year basis.
Income Tax Expense
Income
For the six months ended June 30, 2021, income tax expense fell $28.1totaled $111 million, year-over-yearup 122% compared to $193.6 millionincome tax expense
during the first six months of 2020. The increase was related to higher pre-tax income, the non-deductibility of merger-related expenses, and an increase in the nine months ended September 30, 2017. During this time,pre-tax income declined $80.0New York State tax rate. It also includes the previously mentioned $2 million expense related to $523.3 million, while the revaluation of our deferred tax asset. The effective tax rate rose modestlyfor the first half of 2021 increased to 37.00%, as27.11% compared to 36.74%.19.45%in the first half of 2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about the Company’s market risk were presented on pages83-87 74 through 78 of our 20162020 Annual Report on Form10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”)SEC on March 1, 2017.February 26, 2021. Subsequent changes in the Company’s market risk profile and interest rate sensitivity are detailed in the discussion entitled “Management of Market and Interest Rate Risk” earlier in this quarterly report.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (the “SEC’s”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant toRule 13a-15(b)13a-15(e), as adopted by the SEC under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period.
(b) Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined inRules 13a-15(f) and15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
The CompanyRefer to “Part I, Financial Information, Item 1, Financial Statements, Note 14 Legal Proceedings”, which is involved in various legal actions arising in the ordinary course of its business. All such actions in the aggregate involve amounts that are believedincorporated by management to be immaterial to the financial condition and results of operations of the Company.reference into this item.
In addition to the other information set forth in this report, readers should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form10-K for the year ended December 31, 2016, 2020 and the Company’s Form 10-Q for the three months ended March 31, 2021,as such factors could materially affect the Company’s business, financial condition, or future results of operations. There
The risk factors set forth in our 2020 Form 10-K and in our March 31, 2021 Form 10-Q are updated by the following risks:
Combining NYCB and Flagstar may be more difficult, costly or time-consuming than expected, and NYCB may fail to realize the anticipated benefits of the merger.
The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of NYCB and Flagstar. To realize the anticipated benefits and cost savings from the merger, NYCB and Flagstar must integrate and combine their businesses in a manner that permits those cost savings to be realized, without adversely affecting current revenues and future growth. If NYCB and Flagstar are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.
An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of NYCB following the completion of the merger, which may adversely affect the value of the common stock of NYCB following the completion of the merger.
NYCB and Flagstar have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on each of NYCB and Flagstar during this transition period and on NYCB for an undetermined period after completion of the merger.
Litigation related to the merger has been filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors, and additional litigation may be filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors in the future, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of NYCB and Flagstar.
Litigation related to the merger has been filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors, and additional litigation may be filed against Flagstar, the Flagstar board of directors, NYCB and the NYCB board of directors in the future. The outcome of any litigation is uncertain. If any plaintiff were successful in obtaining an injunction prohibiting NYCB or Flagstar from completing the merger, the holdco merger, the bank merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to NYCB and/or Flagstar, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the merger. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of NYCB and Flagstar.
The COVID-19 pandemic’s impact on NYCB’s business and operations following the completion of the merger is uncertain.
The extent to which the COVID-19 pandemic will negatively affect the business, financial condition, liquidity, capital and results of operations of NYCB following the completion of the merger will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic, the direct and indirect impact of the
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COVID-19 pandemic on employees, clients, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on NYCB’s business, and there is no guarantee that efforts by NYCB to address the adverse impacts of the COVID-19 pandemic will be effective.
Even after the COVID-19 pandemic has subsided, NYCB may continue to experience adverse impacts to its business as a result of the COVID-19 pandemic’s global economic impact, including reduced availability of credit, adverse impacts on liquidity and the negative financial effects from any recession or depression that may occur.
NYCB may be unable to retain NYCB and/or Flagstar personnel successfully after the merger is completed.
The success of the merger will depend in part on NYCB’s ability to retain the talents and dedication of key employees currently employed by NYCB and Flagstar. It is possible that these employees may decide not to remain with NYCB or Flagstar, as applicable, while the merger is pending or with NYCB after the merger is completed. If NYCB and Flagstar are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, NYCB and Flagstar could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, NYCB’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating NYCB and Flagstar to hiring suitable replacements, all of which may cause NYCB’s business to suffer. In addition, NYCB and Flagstar may not be able to locate or retain suitable replacements for any key employees who leave either company.
Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on NYCB following the merger.
Before the mergers may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve Board, the FDIC, the NYDFS, certain mortgage agencies, and, with respect to the Bank’s establishment and operation of Flagstar Bank’s branches and other offices following the effective time of the bank merger, any state bank regulatory authority, and other regulatory authorities. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors. These approvals could be delayed or not obtained at all, including due to: an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals, including factors not known as of the date of this report and factors that may arise in the future; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally. The Federal Reserve Board has stated that if material weaknesses are identified by examiners before a banking organization applies to engage in expansionary activity, the Federal Reserve Board will expect the banking organization to resolve all such weaknesses before applying for such expansionary activity. The Federal Reserve Board has also stated that if issues arise during the processing of an application for expansionary activity, it will expect the applicant banking organization to withdraw its application pending resolution of any supervisory concerns.
The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of NYCB’s business or require changes to the risk factors disclosedterms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of NYCB following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the Company’s 2016 Annual Reportdelay or abandonment of the merger. Additionally, the completion of the merger is conditioned on Form10-K.the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.
The risks describedIn addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, NYCB will not be required, and Flagstar will not be permitted without NYCB’s prior written consent, to take actions or agree to conditions in connection with obtaining the 2016 Annual Report on Form10-K are not the only risksforegoing permits, consents, approvals and authorizations of governmental entities that the Company faces. Additional risks and uncertainties not currently knownwould reasonably be expected to the Company, or that the Company currently deems to be immaterial, also may have a material adverse impacteffect on NYCB and its subsidiaries, taken as a whole, after giving effect to the merger.
The merger agreement may be terminated in accordance with its terms and the merger may not be completed.
The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: (1) approval by Flagstar shareholders of the Flagstar merger proposal and the approval by NYCB’s stockholders of the NYCB share issuance proposal; (2) authorization for listing on the Company’sNYSE of the shares of NYCB common stock; (3) the receipt of the requisite regulatory approvals, including the approval of the Federal Reserve Board, the FDIC, the NYDFS, certain mortgage
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agencies, and, with respect to the Bank’s establishment and operation of Flagstar Bank’s branches and other offices following the effective time of the bank merger, any state bank regulatory authority, and other regulatory authorities, and no such requisite regulatory approval will have resulted in the imposition of any materially burdensome regulatory condition (as defined in the merger agreement); (4) effectiveness of the registration statement on Form S-4 filed by NYCB and no proceedings for such purpose will have been initiated or threatened by the SEC and not withdrawn; and (5) the absence of any order, injunction, decree or other legal restraint prohibiting the consummation of the merger, the holdco merger or the bank merger issued by any governmental entity being in effect, and no law, statute, rule or regulation having been enacted, promulgated or enforced by any governmental entity which prohibits or makes illegal the consummation of the merger, the holdco merger or the bank merger. Each of Flagstar’s or NYCB’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the merger agreement and (c) in the case of Flagstar’s obligation to complete the merger, receipt by Flagstar of an opinion from its counsel to the effect that the merger and the holdco merger, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code and (d) in the case of NYCB’s obligation to complete the merger, either (i) the receipt of a similar opinion from its counsel, or (ii) the merger and holdco merger, taken together, reasonably being expected to result in a Material Adverse Tax Consequence (as defined in the merger agreement) to NYCB.
These conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after shareholder approval, as applicable, or NYCB or Flagstar may elect to terminate the merger agreement in certain other circumstances.
Failure to complete the merger could negatively impact NYCB.
If the merger is not completed for any reason there may be various adverse consequences and NYCB may experience negative reactions from the financial markets and from their respective customers and employees. For example, NYCB’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of NYCB common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. NYCB and/or Flagstar also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against NYCB or Flagstar to perform their respective obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, either NYCB or Flagstar may be required to pay a termination fee of $90 million to the other party.
Additionally, each of NYCB has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing the joint proxy statement/prospectus, and all filing and other fees paid in connection with the merger. If the merger is not completed, NYCB would have to pay these expenses without realizing the expected benefits of the merger.
NYCB will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on NYCB. These uncertainties may impair NYCB’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with NYCB to seek to change existing business relationships with NYCB. In addition, subject to certain exceptions, Flagstar has agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its business without NYCB’s consent, and Flagstar and NYCB have agreed to refrain from taking certain actions that may adversely affect their respective ability to consummate the merger on a timely basis without the other’s consent. These restrictions may prevent NYCB from pursuing attractive business opportunities that may arise prior to the completion of the merger.
The merger agreement limits Flagstar’s and NYCB’s respective abilities to pursue alternatives to the merger and may discourage other companies from trying to acquire NYCB.
The merger agreement contains “no shop” covenants that restrict each of NYCB’s and Flagstar’s ability to, directly or indirectly, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by each respective board of directors, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any alternative acquisition proposals. These provisions, which include a $90 million termination fee payable under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of Flagstar or NYCB from considering or proposing that acquisition even if, in the case of a potential acquisition of Flagstar, it were prepared to pay consideration with a higher per share price to Flagstar shareholders than what is contemplated in the merger, or may result in a potential third-party acquirer proposing to pay a lower per share price to acquire Flagstar or NYCB than it might otherwise have proposed to pay.
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NYCB is expected to incur significant costs related to the merger and integration.
NYCB has incurred and expects to incur significant, non-recurring costs in connection with negotiating the merger agreement and closing the merger. In addition, NYCB will incur integration costs following the completion of the merger as NYCB integrates the Flagstar business, including facilities and systems consolidation costs and employment-related costs. Anticipated pre-tax one-time expenses related to the merger are currently estimated to be approximately $220 million.
There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time. NYCB and Flagstar may also incur additional costs to maintain employee morale and to retain key employees. NYCB and Flagstar will also incur significant legal, financial condition, or resultsadvisory, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger.
Each current NYCB stockholder will have a reduced ownership and voting interest in NYCB following the consummation of operations.the merger than the holder’s ownership and voting interest in NYCB individually, as applicable, prior to the consummation of the merger and will exercise less influence over management.
NYCB stockholders currently have the right to vote in the election of the board of directors and on other matters affecting NYCB and Flagstar, respectively. When the merger is completed, each NYCB stockholder will become an NYCB stockholder, with a percentage ownership of NYCB that is smaller than the holder’s percentage ownership of either NYCB individually prior to the consummation of the merger. Based on the number of shares of NYCB common stock and Flagstar common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of NYCB common stock expected to be issued in the merger, the former Flagstar shareholders, as a group, are estimated to own approximately 31% of the outstanding shares of NYCB common stock immediately after the merger and current NYCB stockholders as a group are estimated to own approximately 69% of the outstanding shares of NYCB common stock immediately after the merger. Because of this, Flagstar shareholders may have less influence on the management and policies of NYCB than they now have on the management and policies of Flagstar, and NYCB stockholders may have less influence on the management and policies of NYCB when the merger is completed than they now have on the management and policies of NYCB.
Issuance of shares of NYCB common stock in connection with the merger may adversely affect the market price of NYCB common stock.
In connection with the payment of the merger consideration, NYCB expects to issue approximately 212.0 million shares of NYCB common stock to Flagstar shareholders. The issuance of these new shares of NYCB common stock may result in fluctuations in the market price of NYCB common stock, including a stock price decrease
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Shares Repurchased Pursuant to the Company’s Stock-Based Incentive Plans
Participants in the Company’s stock-based incentive plans may have shares of common stock withheld to fulfill the income tax obligations that arise in connection with the vesting of their stock awards. Shares that are withheld for this purpose are repurchased pursuant to the terms of the applicable stock-based incentive plan, rather than pursuant to the share repurchase program authorized by the Board of Directors, described below.
During the three months ended September 30, 2017, the Company allocated $344,000 toward the repurchase of shares of its common stock pursuant to the terms of its stock-based incentive plans, as indicated in the following table:
(dollars in thousands, except per share data) | ||||||||||||
Third Quarter 2017 | Total Shares of Common Stock Repurchased | Average Price Paid per Common Share | Total Allocation | |||||||||
July 1 – July 31 | 19,252 | $13.04 | $ | 251 | ||||||||
August 1 – August 31 | 2,074 | 12.59 | 26 | |||||||||
September 1 – September 30 | 5,344 | 12.46 | 67 | |||||||||
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Total shares repurchased | 26,670 | 12.89 | $ | 344 | ||||||||
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Shares Repurchased Pursuant to the Board of Directors’ Share Repurchase Authorization
On April 20, 2004,October 23, 2018, the Board of Directors authorized the repurchase of up to five$300 million shares of the Company’s common stock. Of this amount, 1,659,816 shares were still available for repurchase at September 30, 2017. Under said authorization, shares may be repurchased on the open market or in privately negotiated transactions. No shares have been repurchased under this authorization since August 2006.
Shares that are repurchased pursuant to the Board of Directors’ authorization, and those that are repurchased pursuant to the Company’s stock-based incentive plans, are held in our Treasury account and may be used for various corporate purposes, including, but not limited to, merger transactions and the vesting of restricted stock awards.
(dollars in millions, except share data) |
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Second Quarter 2021 |
| Total Shares |
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| Average Price |
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| Total |
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April 1 – April 30 |
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| 10,534 |
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| $ | 12.31 |
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| $ | — |
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May 1 – May 31 |
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| 1,918 |
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| 11.76 |
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| — |
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June 1 – June 30 |
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| 4,970 |
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| 11.39 |
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| — |
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Total shares repurchased (1) |
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| 17,422 |
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| 11.99 |
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| $ | — |
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(1) Shares tied to stock-based incentive plans |
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Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Not applicable.
Item 6. Exhibits
Exhibit No. | ||
2.1 | ||
3.1 | Amended and Restated Certificate of | |
3.2 | Certificates of Amendment of Amended and Restated Certificate of Incorporation.(3) | |
3.3 | Certificate of Amendment of Amended and Restated Certificate of | |
3.4 | ||
3.5 | Amended and Restated | |
4.1 | ||
4.2 |
| |
Deposit Agreement, dated as of March 16, 2017, by and among the Registrant, Computershare, Inc., and Computershare Trust Company, N.A., as joint depositary, and the holders from time to time of the depositary receipts described therein.(8) | ||
4.3 | Form of certificate representing the Series A Preferred Stock.(8) | |
4.4 | Form of depositary receipt representing the Depositary Shares.(8) | |
4.5 | Registrant will furnish, upon request, copies of all instruments defining the rights of holders of long-term debt instruments of the registrant and its consolidated subsidiaries. | |
10.1 | ||
31.1 | ||
31.2 | ||
32.0 | ||
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | The |
* Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.
** Management plan or compensation plan arrangement.
(1) 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 filed with the Company’s Form 10-Q for the quarterly period ended March 31, 2001 (File No. 0-22278).
(3) Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31, 2003 (File No. 1-31565).
(4) Incorporated by reference to Exhibits to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 27, 2016 (File No. 1-31565).
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(5) Incorporated by reference to Exhibits of the Company’s Registration Statement on Form 8-A (File No. 333-210919), as filed with the Securities and Exchange Commission on March 16, 2017.
(6) Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31, 2016 (File No. 1-31565).
(7) Incorporated by reference to Exhibits filed with the Company’s Form 10-Q for the quarterly period ended September 30, 2017 (File No. 1-31565).
(8) Incorporated by reference to Exhibits filed with the Company’s Form 8-K filed with the Securities and Exchange Commission on March 17, 2017 (File No. 1-31565).
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NEW YORK COMMUNITY BANCORP, INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| New York Community Bancorp, Inc. | |||||||
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DATE: | August 6, 2021 | BY: | /s/ Thomas R. Cangemi | |||||
Thomas R. Cangemi Chairman, President, and Chief Executive Officer | ||||||||
DATE: August 6, 2021 | BY: | /s/ John J. Pinto | ||||||
John J. Pinto Senior Executive Vice President and Chief Financial Officer |
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