Edgar Filing: NEW YORK COMMUNITY BANCORP INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015

Commission File Number 1-31565

NEW YORK COMMUNITY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

06-1377322

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

615 Merrick Avenue, Westbury, New York 11590

(Address of principal executive offices)

(Registrant’s telephone number, including area code) (516) 683-4100

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 X 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 Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer X Accelerated Filer Non-accelerated Filer Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

444,322,450

Number of shares of common stock outstanding at

August 4, 2015

NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

Quarter Ended June 30, 2015


INDEX		Page No.

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Condition as of June 30, 2015 (unaudited) and December 31, 2014	1

	Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014 (unaudited)	2

	Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2015 (unaudited)	3

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 (unaudited)	4

	Notes to the Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	89

Item 4.	Controls and Procedures	89

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	90

Item 1A.	Risk Factors	90

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90

Item 3.	Defaults Upon Senior Securities	90

Item 4.	Mine Safety Disclosures	90

Item 5.	Other Information	90

Item 6.	Exhibits	91

Signatures		92

Exhibits

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data)


	June 30, 2015		December 31, 2014
	(unaudited)
Assets:
Cash and cash equivalents		$ 588,718		$ 564,150
Securities:
Available-for-sale ($10,760 and $11,436 pledged, respectively)		165,140		173,783
Held-to-maturity ($4,503,605 and $4,584,886 pledged, respectively) (fair value of $6,797,286 and $7,085,971, respectively)		6,658,363		6,922,667

Total securities		6,823,503		7,096,450

Non-covered loans held for sale		299,465		379,399
Non-covered loans held for investment, net of deferred loan fees and costs		33,636,238		33,024,956
Less: Allowance for losses on non-covered loans		(141,348)		(139,857)

Non-covered loans held for investment, net		33,494,890		32,885,099
Covered loans		2,244,203		2,428,622
Less: Allowance for losses on covered loans		(46,148)		(45,481)

Covered loans, net		2,198,055		2,383,141

Total loans, net		35,992,410		35,647,639
Federal Home Loan Bank stock, at cost		510,205		515,327
Premises and equipment, net		325,757		319,002
FDIC loss share receivable		363,758		397,811
Goodwill		2,436,131		2,436,131
Core deposit intangibles, net		5,014		7,943
Mortgage servicing rights		253,638		227,297
Bank-owned life insurance		928,444		915,156
Other real estate owned (includes $32,628 and $32,048, respectively, covered by loss sharing agreements)		58,803		94,004
Other assets		362,151		338,307

Total assets		$48,648,532		$48,559,217

Liabilities and Stockholders’ Equity:
Deposits:
NOW and money market accounts		$12,822,680		$12,549,600
Savings accounts		7,498,505		7,051,622
Certificates of deposit		5,707,292		6,420,598
Non-interest-bearing accounts		2,568,696		2,306,914

Total deposits		28,597,173		28,328,734
Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances		9,909,946		10,183,132
Repurchase agreements		3,325,000		3,425,000
Fed funds purchased		418,000		260,000

Total wholesale borrowings		13,652,946		13,868,132
Junior subordinated debentures		358,477		358,355

Total borrowed funds		14,011,423		14,226,487
Other liabilities		225,313		222,181

Total liabilities		42,833,909		42,777,402

Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized; none issued)		--		--
Common stock at par $0.01 (600,000,000 shares authorized; 444,343,024 and 442,659,460 shares issued, and 444,336,836 and 442,587,190 shares outstanding, respectively)		4,444		4,427
Paid-in capital in excess of par		5,378,215		5,369,623
Retained earnings		485,683		464,569
Treasury stock, at cost (6,188 and 72,270 shares, respectively)		(109)		(1,118)
Accumulated other comprehensive loss, net of tax:
Net unrealized gain on securities available for sale, net of tax of $1,889 and $2,022, respectively		2,607		2,990
Net unrealized loss on the non-credit portion of other-than-temporary impairment (“OTTI”) losses on securities, net of tax of $3,422 and $3,444, respectively		(5,353)		(5,387)
Net unrealized loss on pension and post-retirement obligations, net of tax of $34,359 and $36,118, respectively		(50,864)		(53,289)

Total accumulated other comprehensive loss, net of tax		(53,610)		(55,686)

Total stockholders’ equity		5,814,623		5,781,815

Total liabilities and stockholders’ equity		$48,648,532		$48,559,217

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2015		2014		2015		2014
Interest Income:
Mortgage and other loans		$357,999		$350,557		$722,503		$696,087
Securities and money market investments		63,621		67,325		128,030		137,106

Total interest income		421,620		417,882		850,533		833,193


Interest Expense:
NOW and money market accounts		11,727		9,371		22,779		17,767
Savings accounts		12,925		8,259		25,258		14,732
Certificates of deposit		15,729		18,464		32,845		37,524
Borrowed funds		96,142		98,296		191,786		195,528

Total interest expense		136,523		134,390		272,668		265,551

Net interest income		285,097		283,492		577,865		567,642
(Recovery of) losses on non-covered loans		(1,872)		--		(2,742)		--
Provision for (recovery of) losses on covered loans		2,206		188		3,083		(14,442)

Net interest income after provisions for (recoveries of) loan losses		284,763		283,304		577,524		582,084


Non-Interest Income:
Mortgage banking income		15,968		15,291		34,374		29,901
Fee income		8,778		9,430		17,172		18,324
Bank-owned life insurance		6,774		6,813		13,478		13,642
Net gain on sales of securities		592		262		803		5,135
FDIC indemnification income (expense)		1,764		150		2,466		(11,554)
Gain on Visa shares sold		--		--		--		3,856
Other income		28,025		20,647		45,842		30,524

Total non-interest income		61,901		52,593		114,135		89,828


Non-Interest Expense:
Operating expenses:
Compensation and benefits		83,067		74,843		170,276		150,583
Occupancy and equipment		25,941		24,380		51,240		50,378
General and administrative		41,577		46,531		84,321		88,795

Total operating expenses		150,585		145,754		305,837		289,756
Amortization of core deposit intangibles		1,345		2,082		2,929		4,405

Total non-interest expense		151,930		147,836		308,766		294,161

Income before income taxes		194,734		188,061		382,893		377,751
Income tax expense		71,030		69,373		139,930		143,809

Net income		$123,704		$118,688		$242,963		$233,942

Other comprehensive income, net of tax:
Change in net unrealized gain/loss on securities available for sale, net of tax of $1,294; $1,459; $133; and $3,988, respectively		(2,098)		2,156		(383)		5,885
Change in the non-credit portion of OTTI losses recognized in other comprehensive income, net of tax of $11; $11; $22; and $22, respectively		17		17		34		34
Change in pension and post-retirement obligations, net of tax of $915; $356; $1,759; and $713, respectively		1,177		526		2,425		1,052
Less: Reclassification adjustment for sales of available-for-sale securities, net of tax of $104 and $2,073, respectively		--		(158)		--		(3,062)

Total other comprehensive income, net of tax		(904)		2,541		2,076		3,909

Total comprehensive income, net of tax		$122,800		$121,229		$245,039		$237,851


Basic earnings per share		$0.28		$0.27		$0.55		$0.53

Diluted earnings per share		$0.28		$0.27		$0 55		$0.53

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	For the Six Months Ended June 30, 2015
Common Stock (Par Value: $0.01):
Balance at beginning of year		$ 4,427
Shares issued for restricted stock awards (1,683,564 shares)		17

Balance at end of period		4,444


Paid-in Capital in Excess of Par:
Balance at beginning of year		5,369,623
Shares issued for restricted stock awards, net of forfeitures		(7,709)
Compensation expense related to restricted stock awards		14,627
Tax effect of stock plans		1,674

Balance at end of period		5,378,215


Retained Earnings:
Balance at beginning of year		464,569
Net income		242,963
Dividends paid on common stock ($0.50 per share)		(221,849)

Balance at end of period		485,683


Treasury Stock:
Balance at beginning of year		(1,118)
Purchase of common stock (429,695 shares)		(6,682)
Shares issued for restricted stock awards (495,777 shares)		7,691

Balance at end of period		(109)


Accumulated Other Comprehensive Loss, net of tax:
Balance at beginning of year		(55,686)
Other comprehensive income, net of tax		2,076

Balance at end of period		(53,610)

Total stockholders’ equity		$ 5,814,623

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	For the Six Months Ended June 30,
	2015		2014
Cash Flows from Operating Activities:
Net income	$	242,963	$	233,942
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) loan losses		341		(14,442)
Depreciation and amortization		15,402		13,652
Amortization of discounts and premiums, net		(3,405)		(4,092)
Amortization of core deposit intangibles		2,929		4,405
Net gain on sales of securities		(803)		(5,135)
Gain on sales of loans		(40,778)		(8,700)
Gain on Visa shares sold		--		(3,856)
Stock plan-related compensation		14,627		13,942
Deferred tax (benefit) expense		(940)		6,871
Changes in assets and liabilities:
Decrease (increase) in other assets		5,781		(54,150)
Increase (decrease) in other liabilities		6,608		(6,073)
Origination of loans held for sale		(2,887,032)		(1,380,169)
Proceeds from sales of loans originated for sale		2,820,718		1,301,765

Net cash provided by operating activities		176,411		97,960

Cash Flows from Investing Activities:
Proceeds from repayment of securities held to maturity		262,797		276,896
Proceeds from repayment of securities available for sale		8,004		7,216
Proceeds from sales of securities held to maturity		19,730		--
Proceeds from sales of securities available for sale		166,760		137,309
Purchase of securities held to maturity		(14,097)		(150,338)
Purchase of securities available for sale		(166,500)		(99,000)
Proceeds from sale of Visa shares		--		3,856
Net redemption (purchase) of Federal Home Loan Bank stock		5,122		(10,318)
Net increase in loans		(1,283,633)		(1,873,342)
Proceeds from sales of loans		1,045,613		--
Purchase of premises and equipment, net		(22,157)		(28,847)

Net cash provided by (used in) investing activities		21,639		(1,736,568)

Cash Flows from Financing Activities:
Net increase in deposits		268,439		1,691,477
Net (decrease) increase in short-term borrowed funds		(616,800)		199,700
Net increase (decrease) in long-term borrowed funds		401,736		(3,036)
Tax effect of stock plans		1,674		2,019
Cash dividends paid on common stock		(221,849)		(221,048)
Treasury stock purchases		(6,682)		(6,165)
Net cash received from stock option exercises		--		61

Net cash (used in) provided by financing activities		(173,482)		1,663,008

Net increase in cash and cash equivalents		24,568		24,400
Cash and cash equivalents at beginning of period		564,150		644,550

Cash and cash equivalents at end of period	$	588,718	$	668,950

Supplemental information:
Cash paid for interest		$276,654		$272,458
Cash paid for income taxes		116,722		123,870
Non-cash investing and financing activities:
Transfers to other real estate owned from loans		$29,481		$61,054
Transfer of loans from held for investment to held for sale		1,030,910		--
Transfer of loans from held for sale to held for investment		153,578		--
Shares issued from Treasury stock for restricted stock awards		7,691		7,055

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

Organization

Formerly known as Queens County Bancorp, Inc., 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”). In addition, 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. 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 per share) at a price of $25.00 per share. The Commercial Bank was established on December 30, 2005.

Reflecting nine stock splits between September 30, 1994 and February 17, 2004, the Company’s initial offering price adjusts to $0.93 per share. All share and per share data presented in this report reflect the impact of the stock splits.

The Company changed its name to New York Community Bancorp, Inc. on November 21, 2000 in anticipation of completing the first of eight business combinations that expanded its footprint well beyond Queens County to encompass all five boroughs of New York City, Long Island, and Westchester County in New York, and seven counties in the northern and central parts of New Jersey. The Company expanded beyond this region to south Florida, northeast Ohio, and central Arizona through its FDIC-assisted acquisition of certain assets and its assumption of certain liabilities of AmTrust Bank (“AmTrust”) in December 2009, and extended its Arizona franchise through its FDIC-assisted acquisition of certain assets and its assumption of certain liabilities of Desert Hills Bank (“Desert Hills”) in March 2010. On June 28, 2012, the Company completed its 11th transaction when it assumed certain deposits of Aurora Bank FSB.

Reflecting its growth through acquisitions, the Community Bank currently operates 242 branches, four of which operate directly under the Community Bank name. The remaining 238 Community Bank branches operate through seven divisional banks: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, and Roosevelt Savings 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 wholly-owned 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 allowances for loan losses; the valuation of mortgage servicing rights (“MSRs”); the evaluation of goodwill for impairment; the evaluation of other-than-temporary impairment (“OTTI”) on securities; and the evaluation of the need for a valuation allowance on the Company’s deferred tax assets.

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 debentures (“capital securities”). Please see Note 7, “Borrowed Funds,” for additional information regarding these trusts.

Note 2. Computation of Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the same method as basic EPS, however, the computation reflects the potential dilution that would occur if outstanding in-the-money stock options were exercised and converted into common stock.

Unvested stock-based compensation awards containing non-forfeitable rights to dividends are considered participating securities, and therefore are included in the two-class method for calculating EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. The Company grants restricted stock to certain employees under its stock-based compensation plans. Recipients receive cash dividends during the vesting periods of these awards, including on the unvested portion of such awards. Since these dividends are non-forfeitable, the unvested awards are considered participating securities and therefore have earnings allocated to them.

The following table presents the Company’s computation of basic and diluted EPS for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share data)	2015		2014		2015		2014
Net income		$123,704		$118,688		$242,963		$233,942
Less: Dividends paid on and earnings allocated to participating securities		(911)		(852)		(1,760)		(1,648)

Earnings applicable to common stock		$122,793		$117,836		$241,203		$232,294


Weighted average common shares outstanding		442,721,173		441,155,063		442,357,774		440,864,462

Basic earnings per common share		$0.28		$0.27		$0.55		$0.53


Earnings applicable to common stock		$122,793		$117,836		$241,203		$232,294


Weighted average common shares outstanding		442,721,173		441,155,063		442,357,774		440,864,462
Potential dilutive common shares ⁽¹⁾		--		--		--		--

Total shares for diluted earnings per share computation		442,721,173		441,155,063		442,357,774		440,864,462


Diluted earnings per common share and common share equivalents		$0.28		$0.27		$0.55		$0.53

(1)

Options to purchase 10,000 shares of the Company’s common stock that were outstanding in the three and six months ended June 30, 2015, at a weighted average exercise price of $18.41, were excluded from the respective computations of diluted EPS because their inclusion would have had an antidilutive effect. Options to purchase 58,560 shares of the Company’s common stock that were outstanding in the three and six months ended June 30, 2014, at a weighted average exercise price of $18.04, were excluded from the respective computations of diluted EPS because their inclusion also would have had an antidilutive effect.

Note 3. Reclassifications Out of Accumulated Other Comprehensive Loss (“AOCL”)


(in thousands)	For the Six Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Loss	Amount Reclassified from Accumulated Other Comprehensive Loss ⁽¹⁾		Affected Line Item in the Consolidated Statement of Income and Comprehensive Income
Amortization of defined benefit pension plan items:
Past service liability	$	124	Included in the computation of net periodic (credit) expense ⁽²⁾
Actuarial losses		(4,296)	Included in the computation of net periodic (credit) expense ⁽²⁾

		(4,172)	Total before tax
		1,754	Tax benefit

Total reclassifications for the period	$	(2,418)

(1)	Amounts in parentheses indicate expense items.

(2)	Please see Note 9, “Pension and Other Post-Retirement Benefits,” for additional information.

Note 4. Securities

The following table summarizes the Company’s portfolio of securities available for sale at June 30, 2015:


	June 30, 2015
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE⁽¹⁾ certificates	$	14,218	$	1,076	$	--	$	15,294
GSE CMOs⁽²⁾		--		--		--		--
Private label CMOs		--		--		--		--

Total mortgage-related securities	$	14,218	$	1,076	$	--	$	15,294

Other Securities:
Municipal bonds	$	845	$	81	$	--	$	926
Capital trust notes		9,438		--		2,397		7,041
Preferred stock		118,205		5,290		99		123,396
Mutual funds and common stock ⁽³⁾		17,939		597		53		18,483

Total other securities	$	146,427	$	5,968	$	2,549	$	149,846

Total securities available for sale	$	160,645	$	7,044	$	2,549	$	165,140

(1)	Government-sponsored enterprise.

(2)	Collateralized mortgage obligations.

(3)	Primarily consists of mutual funds that are Community Reinvestment Act-qualified investments.

The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2014:


	December 31, 2014
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	18,350	$	1,350	$	--	$	19,700
GSE CMOs		--		--		--		--
Private label CMOs		--		--		--		--

Total mortgage-related securities	$	18,350	$	1,350	$	--	$	19,700

Other Securities:
Municipal bonds	$	841	$	101	$	--	$	942
Capital trust notes		13,431		31		1,980		11,482
Preferred stock		118,205		5,246		440		123,011
Mutual funds and common stock		17,943		748		43		18,648

Total other securities	$	150,420	$	6,126	$	2,463	$	154,083

Total securities available for sale	$	168,770	$	7,476	$	2,463	$	173,783

The following tables summarize the Company’s portfolio of securities held to maturity at June 30, 2015 and December 31, 2014:


	June 30, 2015
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,369,401	$	2,369,401	$	87,091	$	7,891	$	2,448,601
GSE CMOs		1,453,962		1,453,962		63,631		126		1,517,467

Total mortgage-related securities	$	3,823,363	$	3,823,363	$	150,722	$	8,017	$	3,966,068

Other Securities:
GSE debentures	$	2,623,964	$	2,623,964	$	25,537	$	33,392	$	2,616,109
Corporate bonds		73,534		73,534		11,453		--		84,987
Municipal bonds		71,853		71,853		2		1,563		70,292
Capital trust notes		74,425		65,649		5,191		11,010		59,830

Total other securities	$	2,843,776	$	2,835,000	$	42,183	$	45,965	$	2,831,218

Total securities held to maturity ⁽¹⁾	$	6,667,139	$	6,658,363	$	192,905	$	53,982	$	6,797,286

(1)	Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI recorded in AOCL. At June 30, 2015, the non-credit portion of OTTI recorded in AOCL was $8.8 million (before tax).


	December 31, 2014
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,468,791	$	2,468,791	$	106,414	$	3,838	$	2,571,367
GSE CMOs		1,610,243		1,610,243		65,075		711		1,674,607

Total mortgage-related securities	$	4,079,034	$	4,079,034	$	171,489	$	4,549	$	4,245,974

Other Securities:
GSE debentures	$	2,635,989	$	2,635,989	$	24,173	$	32,920	$	2,627,242
Corporate bonds		73,317		73,317		12,113		--		85,430
Municipal bonds		58,682		58,682		--		1,027		57,655
Capital trust notes		84,476		75,645		5,193		11,168		69,670

Total other securities	$	2,852,464	$	2,843,633	$	41,479	$	45,115	$	2,839,997

Total securities held to maturity ⁽¹⁾	$	6,931,498	$	6,922,667	$	212,968	$	49,664	$	7,085,971

(1)	Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI recorded in AOCL. At December 31, 2014, the non-credit portion of OTTI recorded in AOCL was $8.8 million (before tax).

At June 30, 2015 and December 31, 2014, respectively, the Company had $510.2 million and $515.3 million of Federal Home Loan Bank (“FHLB”) stock, at cost, primarily consisting of stock in the FHLB-New York (the “FHLB-NY”). The Company is required to maintain an investment in FHLB-NY stock in order to have access to the funding it provides.

The following table summarizes the gross proceeds, gross realized gains, and gross realized losses from the sale of available-for-sale securities during the six months ended June 30, 2015 and 2014:


	For the Six Months Ended June 30,
(in thousands)	2015		2014
Gross proceeds		$166,760		$137,309
Gross realized gains		260		5,135
Gross realized losses		--		--

In addition, during the six months ended June 30, 2015, the Company sold held-to-maturity securities with gross proceeds of $19.7 million and gross realized gains of $543,000, all of which were securities on which the Company had collected a substantial portion (at least 85%) of the initial principal balance. No comparable sales occurred in the first six months of 2014.

In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2015. For credit-impaired debt securities, OTTI recognized in earnings after that date is presented as an addition in two components, based upon whether 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).


(in thousands)	For the Six Months Ended June 30, 2015
Beginning credit loss amount as of December 31, 2014		$199,008
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		--
Increases in expected cash flows on debt securities		--

Ending credit loss amount as of June 30, 2015		$199,008

The following table summarizes the carrying amounts and estimated fair values of held-to-maturity mortgage-backed securities and debt securities, and the amortized costs and estimated fair values of available-for-sale securities, at June 30, 2015, by contractual maturity.


	At June 30, 2015
(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
Held-to-Maturity Securities:
Due within one year	$	--		--%	$	--		--%	$	--		--%	$	--		--%	$	--
Due from one to five years		--		--		59,994		4.17		650		2.96		--		--		66,153
Due from five to ten years		3,254,299		3.26		2,563,970		2.70		--		--		63,910		4.67		6,000,937
Due after ten years		569,064		3.12		--		--		71,203		3.03		75,273		5.03		730,196

Total securities held to maturity	$	3,823,363		3.24%	$	2,623,964		2.73%	$	71,853		3.03%	$	139,183		4.86%	$	6,797,286

Available-for-Sale Securities: ⁽³⁾
Due within one year	$	--		--%	$	--		--%	$	124		6.45%	$	--		--%	$	127
Due from one to five years		2,941		6.66		--		--		580		6.49		--		--		3,684
Due from five to ten years		630		4.20		--		--		141		6.66		--		--		820
Due after ten years		10,647		4.92		--		--		--		--		9,438		4.23		18,630

Total securities available for sale	$	14,218		5.25%	$	--		--%	$	845		6.51%	$	9,438		4.23%	$	23,261

(1)	Not presented on a tax-equivalent basis.

(2)	Includes corporate bonds and capital trust notes. Included in capital trust notes are $183,000 of pooled trust preferred securities held to maturity, all of which are due after ten years. The remaining capital trust notes consist of single-issue trust preferred securities.

(3)	As equity securities have no contractual maturity, they have been excluded from this table.

The following table presents held-to-maturity securities and available-for-sale securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of June 30, 2015:


At June 30, 2015 (in thousands)	Less than Twelve Months						Twelve Months or Longer						Total
At June 30, 2015 (in thousands)	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Temporarily Impaired Held-to-Maturity Mortgage-Backed Securities and Debt Securities:
GSE debentures		$	829,898		$	8,619		$	1,374,047		$	24,773		$	2,203,945		$	33,392
GSE certificates			349,168			7,554			12,660			337			361,828			7,891
GSE CMOs			52,699			126			--			--			52,699			126
Municipal bonds			56,196			1,563			--			--			56,196			1,563
Capital trust notes			24,947			53			25,242			10,957			50,189			11,010

Total temporarily impaired held-to-maturity mortgage-backed securities and debt securities		$	1,312,908		$	17,915		$	1,411,949		$	36,067		$	2,724,857		$	53,982

Temporarily Impaired Available-for-Sale Securities:
Capital trust notes		$	1,996		$	4		$	5,046		$	2,393		$	7,042		$	2,397
Equity securities			26,946			152			--			--			26,946			152

Total temporarily impaired available-for-sale securities		$	28,942		$	156		$	5,046		$	2,393		$	33,988		$	2,549


At December 31, 2014	Less than Twelve Months						Twelve Months or Longer						Total
(in thousands)	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Temporarily Impaired Held-to-Maturity Mortgage-Backed Securities and Debt Securities:
GSE debentures		$	--		$	--		$	2,204,399		$	32,920		$	2,204,399		$	32,920
GSE certificates			--			--			242,909			3,838			242,909			3,838
GSE CMOs			--			--			72,209			711			72,209			711
Municipal bonds			13,735			195			43,058			832			56,793			1,027
Capital trust notes			--			--			25,019			11,168			25,019			11,168

Total temporarily impaired held-to-maturity mortgage-backed securities and debt securities		$	13,735		$	195		$	2,587,594		$	49,469		$	2,601,329		$	49,664

Temporarily Impaired Available-for-Sale Securities:
Capital trust notes		$	--		$	--		$	5,451		$	1,980		$	5,451		$	1,980
Equity securities			53,721			364			15,174			119			68,895			483

Total temporarily impaired available-for-sale securities		$	53,721		$	364		$	20,625		$	2,099		$	74,346		$	2,463

An OTTI loss on impaired 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 relating to factors other than credit losses are recorded in AOCL. Financial Accounting Standards Board (“FASB”) guidance also requires additional disclosures regarding the calculation of credit losses, as well as factors considered by the investor in reaching a conclusion that an investment is not other-than-temporarily impaired.

Securities in unrealized loss positions are analyzed as part of the Company’s ongoing assessment of OTTI. When the Company intends to sell such securities, the Company recognizes an impairment loss equal to the full difference between the amortized cost basis and the fair value of those securities. When the Company does not intend to sell equity or debt securities in an unrealized loss position, potential OTTI is considered based on a variety of factors, including the length of time and extent to which the fair value has been less than the cost; adverse conditions specifically related to the industry, the geographic area, or financial condition of the issuer, or the underlying collateral of a security; the payment structure of the security; changes to the rating of the security by a rating agency; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, the Company estimates cash flows over the remaining life of the underlying collateral to assess whether credit losses exist and, where applicable, to determine if any adverse changes in cash flows have occurred. The Company’s cash flow estimates take into account expectations of relevant market and economic data as of the end of the reporting period. As of June 30, 2015, the Company did not intend to sell its securities with an unrealized loss position, and it was more likely than not that the Company would not be required to sell these securities before recovery of their amortized cost basis. The Company believes that the securities with an unrealized loss position were not other-than-temporarily impaired as of June 30, 2015.

Other factors considered in determining whether or not an impairment is temporary include the severity of the impairment; the cause of the impairment; the near-term prospects of the issuer; and the forecasted recovery period using current estimates of volatility in market interest rates (including liquidity and risk premiums).

Management’s assertion regarding its intent not to sell, or that it is not more likely than not that the Company will be required to sell a security before its anticipated recovery, is based on a number of factors, including a quantitative estimate of the expected recovery period (which may extend to maturity), and management’s intended strategy with respect to the identified security or portfolio. If management does have the intent to sell, or believes it is more likely than not that the Company will be required to sell the security before its anticipated recovery, the unrealized loss is charged directly to earnings in the Consolidated Statement of Income and Comprehensive Income.

The unrealized losses on the Company’s GSE mortgage-related securities, GSE municipal bonds, and GSE debentures at June 30, 2015 were primarily caused by movements in market interest rates and spread volatility, rather than credit risk. It is expected that these securities will not be settled at a price that is less than the amortized cost of the Company’s investment. Because the Company does not have the intent to sell the investments, and it is not more likely than not that the Company will be required to sell them before the anticipated recovery of fair value, which may be at maturity, the Company did not consider these investments to be other than temporarily impaired at June 30, 2015.

The Company reviews quarterly financial information related to its investments in municipal bonds and capital trust notes, as well as other information that is released by each of the issuers of such bonds and notes, to determine their continued creditworthiness. The contractual terms of these investments do not permit settling the securities at prices that are less than the amortized costs of the investments; therefore, the Company expects that these investments will not be settled at prices that are less than their amortized costs. 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. Because the Company does not have the intent to sell the investments, and it is not more likely than not that the Company will be required to sell them before the anticipated recovery of fair value, which may be at maturity, it did not consider these investments to be other than temporarily impaired at June 30, 2015. 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; deteriorating credit enhancement; net operating losses; and illiquidity in the financial markets.

At June 30, 2015, the Company’s equity securities portfolio consisted of perpetual preferred stock, common stock, and mutual funds. The Company considers a decline in the fair value of available-for-sale equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. There was an unrealized loss on one of the Company’s equity securities at June 30, 2015, which was primarily caused by market volatility. The

Company evaluated the near-term prospects of a recovery of fair value for this security, together with the severity and duration of impairment to date. Based on this evaluation, and its ability and intent to hold this investment for a reasonably sufficient period of time to realize a near-term forecasted recovery of fair value, the Company did not consider this investment to be other than temporarily impaired at June 30, 2015. Nonetheless, it is possible that this equity security will perform worse than is currently expected, which could lead to adverse changes in its fair value, or the failure of the security to fully recover in value as presently forecasted by management. This potentially would cause the Company to record an OTTI loss in a future period. Events that could trigger a material decline in the fair value of this security 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 June 30, 2015 consisted of eight agency debt securities, five capital trust notes, and three agency mortgage-backed securities. At December 31, 2014, the investment securities designated as having a continuous loss position for twelve months or more consisted of 16 agency mortgage-backed securities, 17 GSE debt securities, three GSE CMOs, five capital trust notes, two GSE municipal bonds, and one preferred stock security. At June 30, 2015 and December 31, 2014, the combined market value of the respective securities represented unrealized losses of $38.5 million and $51.6 million. At June 30, 2015, the fair value of securities having a continuous loss position for twelve months or more was 2.6% below the collective amortized cost of $1.5 billion. At December 31, 2014, the fair value of such securities was 1.9% below the collective amortized cost of $2.7 billion.

Note 5. Loans

The following table sets forth the composition of the loan portfolio at June 30, 2015 and December 31, 2014:


	June 30, 2015				December 31, 2014
(dollars in thousands)	Amount		Percent of Non-Covered Loans Held for Investment		Amount		Percent of Non-Covered Loans Held for Investment
Non-Covered Loans Held for Investment:
Mortgage Loans:
Multi-family	$	23,753,743		70.66%	$	23,831,846		72.21%
Commercial real estate		8,083,727		24.05		7,634,320		23.13
Acquisition, development, and construction		285,545		0.85		258,116		0.78
One-to-four family		106,964		0.32		138,915		0.42

Total mortgage loans held for investment		32,229,979		95.88		31,863,197		96.54

Other Loans:
Commercial and industrial		1,061,954		3.16		900,551		2.73
Lease financing, net of unearned income of $32,714 and $18,913		281,065		0.84		208,670		0.63

Total commercial and industrial loans		1,343,019		4.00		1,109,221		3.36
Purchased credit-impaired loans ⁽¹⁾		13,377		0.04		--		--
Other		28,721		0.08		31,943		0.10

Total other loans held for investment		1,385,117		4.12		1,141,164		3.46

Total non-covered loans held for investment	$	33,615,096		100.00%	$	33,004,361		100.00%

Net deferred loan origination costs		21,142				20,595
Allowance for losses on non-covered loans		(141,348)				(139,857)

Non-covered loans held for investment, net	$	33,494,890			$	32,885,099

Covered loans		2,244,203				2,428,622
Allowance for losses on covered loans		(46,148)				(45,481)

Covered loans, net	$	2,198,055			$	2,383,141
Loans held for sale		299,465				379,399

Total loans, net	$	35,992,410			$	35,647,639

(1)	Includes $945,000 of multi-family loans; $10.3 million of commercial real estate loans; $1.3 million of acquisition, development, and construction loans; $661,000 of commercial and industrial loans; and $170,000 of other loans that were included in “Covered loans” at December 31, 2014.

Non-Covered Loans

Non-Covered Loans Held for Investment

The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized by non-luxury apartment buildings in New York City that are rent-regulated and feature below-market rents. In addition, the Company originates commercial real estate (“CRE”) loans, most of which are collateralized by properties located in New York City and on Long Island.

The Company also originates acquisition, development, and construction (“ADC”) loans, and commercial and industrial (“C&I”) loans, for investment. ADC loans are primarily originated for multi-family and residential tract projects in New York City and on Long Island. C&I loans consist of asset-based loans, equipment loans and leases, and dealer floor-plan loans (together, “specialty finance loans and leases”) that are made to nationally recognized borrowers throughout the U.S.; and “other” C&I loans that primarily are made to small and mid-size businesses in Metro New York. Other C&I loans are typically made for working capital, business expansion, and the purchase of machinery and equipment.

Payments on multi-family and CRE loans generally depend on the income produced by the underlying properties which, in turn, depends on their successful operation and management. Accordingly, 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. While the Company generally requires that such loans be qualified on the basis of the collateral property’s current cash flows, appraised value, and debt service coverage ratio, among other factors, there can be no assurance that its underwriting policies will protect the Company from credit-related losses or delinquencies.

ADC loans typically involve a higher degree of credit risk than loans secured by improved or owner-occupied real estate. Accordingly, borrowers are required to provide a guarantee of repayment and completion, and loan proceeds are disbursed as construction progresses, as certified by in-house or third-party engineers. The risk of loss on an ADC loan is largely dependent upon the accuracy of the initial appraisal of the property’s value upon completion of construction or development; the developer’s experience; the estimated cost of construction, including interest; and the estimated time to complete and/or sell or lease such property. The Company seeks to minimize these risks 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 (based, for example, on a downturn in the local economy or real estate market), 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.

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. Specialty finance loans and leases 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. Furthermore, 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 a non-cancelable lease. To further minimize the risk involved in specialty finance lending and leasing, each transaction is re-underwritten. In addition, outside counsel is retained to conduct a further review of the underlying documentation.

To minimize the risks involved in other C&I lending, the Company underwrites such loans on the basis of the cash flows produced by the business; requires that such loans be collateralized by various business assets, including inventory, equipment, and accounts receivable, among others; and requires personal guarantees. However, the capacity of a borrower to repay such a C&I loan is substantially dependent on the degree to which the business is successful. In addition, the collateral underlying such loans may depreciate over time, may not be conducive to appraisal, or may fluctuate in value, based upon the results of operations of the business.

Included in non-covered loans held for investment at June 30, 2015 and December 31, 2014 were loans to non-officer directors of $126.6 million and $129.5 million, respectively.

Non-covered purchased credit-impaired (“PCI”) loans, which had a carrying value of $13.4 million and an unpaid principal balance of $16.5 million at June 30, 2015, are loans that had been covered under an FDIC loss sharing agreement that expired in March 2015 and that now are included in non-covered loans. Such loans continue to be accounted for under Accounting Standards Codification (“ASC”) 310-30 and are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the lives of the loans. Under ASC 310-30, 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.

Non-Covered Loans Held for Sale

The mortgage banking operation of the Community Bank was established in January 2010 to originate, aggregate, and service one-to-four family loans. Community banks, credit unions, mortgage companies, and mortgage brokers use its proprietary web-accessible mortgage banking platform to originate and close one-to-four family loans throughout the U.S. These loans are generally sold to GSEs, servicing retained. To a much lesser extent, the Community Bank uses its mortgage banking platform to originate jumbo loans which it typically sells to other financial institutions. Such loans have not represented, nor are they expected to represent, a material portion of the held-for-sale loans originated by the Community Bank. In addition, the Community Bank services mortgage loans for various third parties, primarily including GSEs. The unpaid principal balance of loans serviced for others was $23.5 billion and $22.4 billion at June 30, 2015 and December 31, 2014, respectively.

Asset Quality

The following table presents information regarding the quality of the Company’s non-covered loans held for investment (excluding non-covered PCI loans) at June 30, 2015:


(in thousands)	Loans 30-89 Days Past Due		Non- Accrual Loans⁽¹⁾		Loans 90 Days or More Delinquent and Still Accruing Interest		Total Past Due Loans		Current Loans		Total Loans Receivable
Multi-family	$	6,423	$	17,250	$	--	$	23,673	$	23,730,070	$	23,753,743
Commercial real estate		--		20,694		--		20,694		8,063,033		8,083,727
One-to-four family		890		11,642		--		12,532		94,432		106,964
Acquisition, development, and construction		--		529		--		529		285,016		285,545
Commercial and industrial⁽²⁾		498		7,509		--		8,007		1,335,012		1,343,019
Other		543		1,256		--		1,799		26,922		28,721

Total	$	8,354	$	58,880	$	--	$	67,234	$	33,534,485	$	33,601,719

(1)	Excludes $1.4 million of non-covered PCI loans that were 90 days or more past due.

(2)	Includes lease financing receivables, all of which were current.

The following table presents information regarding the quality of the Company’s non-covered loans held for investment at December 31, 2014:


(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
Multi-family	$	464	$	31,089	$	--	$	31,553	$	23,800,293	$	23,831,846
Commercial real estate		1,464		24,824		--		26,288		7,608,032		7,634,320
One-to-four family		3,086		11,032		--		14,118		124,797		138,915
Acquisition, development, and construction		--		654		--		654		257,462		258,116
Commercial and industrial⁽¹⁾		530		8,382		--		8,912		1,100,309		1,109,221
Other		648		969		--		1,617		30,326		31,943

Total	$	6,192	$	76,950	$	--	$	83,142	$	32,921,219	$	33,004,361

(1)	Includes lease financing receivables, all of which were current.

The following table summarizes the Company’s portfolio of non-covered loans held for investment, excluding non-covered PCI loans, by credit quality indicator at June 30, 2015:


(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 Loan Segment
Credit Quality Indicator:
Pass	$	23,707,432	$	8,055,461	$	95,322	$	284,407	$	32,142,622	$	1,316,115	$	27,465	$	1,343,580
Special mention		17,442		3,561		--		--		21,003		9,189		--		9,189
Substandard		28,869		24,705		11,642		1,138		66,354		17,715		1,256		18,971
Doubtful		--		--		--		--		--		--		--		--

Total	$	23,753,743	$	8,083,727	$	106,964	$	285,545	$	32,229,979	$	1,343,019	$	28,721	$	1,371,740

(1)	Includes lease financing receivables, all of which were classified as “pass.”

The following table summarizes the Company’s portfolio of non-covered loans held for investment by credit quality indicator at December 31, 2014:


(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 Loan Segment
Credit Quality Indicator:
Pass	$	23,777,569	$	7,591,223	$	127,883	$	256,868	$	31,753,543	$	1,083,173	$	30,974	$	1,114,147
Special mention		6,798		9,123		--		--		15,921		17,032		--		17,032
Substandard		47,479		33,974		11,032		1,248		93,733		9,016		969		9,985
Doubtful		--		--		--		--		--		--		--		--

Total	$	23,831,846	$	7,634,320	$	138,915	$	258,116	$	31,863,197	$	1,109,221	$	31,943	$	1,141,164

(1)	Includes lease financing receivables, all of which were classified as “pass.”

The preceding classifications are the most current 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 a potential weakness or risk that may result in the deterioration of future repayment; 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 distinct 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.

Troubled Debt Restructurings

The Company is required to account for certain held-for-investment loan modifications and restructurings as troubled debt restructurings (“TDRs”). In general, a modification or restructuring of a loan constitutes a TDR if the Company grants a concession to a borrower experiencing financial difficulty. A loan modified as a TDR generally is placed on non-accrual status until the Company determines that future collection of principal and interest is reasonably assured, which requires, among other things, that the borrower demonstrate performance according to the restructured terms for a period of at least six consecutive months.

In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of June 30, 2015, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $20.4 million; loans on which forbearance agreements were reached amounted to $8.5 million.

The following table presents information regarding the Company’s TDRs as of June 30, 2015 and December 31, 2014:


	June 30, 2015						December 31, 2014
(in thousands)	Accruing		Non-Accrual		Total		Accruing		Non-Accrual		Total
Loan Category:
Multi-family	$	2,034	$	5,713	$	7,747	$	7,697	$	17,879	$	25,576
Commercial real estate		6,091		12,732		18,823		8,139		9,939		18,078
One-to-four family		--		397		397		--		260		260
Acquisition, development, and construction		--		529		529		--		654		654
Commercial and industrial		--		1,181		1,181		--		1,195		1,195
Other		--		223		223		--		--		--

Total	$	8,125	$	20,775	$	28,900	$	15,836	$	29,927	$	45,763

The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances of each transaction, which may change from period to period, and 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 six months ended June 30, 2015 are summarized as follows:


	For the Six Months Ended June 30, 2015
(dollars in thousands)			Weighted Average Interest Rate
(dollars in thousands)	Number of Loans		Pre- Modification			Post- Modification			Charge-off Amount			Capitalized Interest
Loan Category:
Commercial real estate		3		7.48	%		7.48	%		$	956		$	--
One-to-four family		2		5.69			3.54				--			--
Other		2		4.58			2.00				--			--

Total		7								$	956		$	--

In the six months ended June 30, 2014, the Company classified one multi-family loan in the amount of $316,000, one CRE loan in the amount of $2.1 million, one ADC loan in the amount of $935,000, and one C&I loan in the amount of $499,000 as non-accrual TDRs. While other concessions were granted to the borrowers, the interest rates on the loans were maintained. As a result, these TDRs did not have a financial impact on the Company’s results of operations during the current six-month period.

At June 30, 2015 and 2014, none of the loans that had been modified as TDRs during the twelve months ended at those dates 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, when the agreement to forebear or allow a delay of payment is part of a modification. 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 does consider a loan with multiple modifications or forbearance periods to be in default, and would also consider a loan to be in default if it was in bankruptcy or was partially charged off subsequent to modification.

Covered Loans

The following table presents the carrying value of covered loans acquired in the AmTrust and Desert Hills acquisitions as of June 30, 2015:


(dollars in thousands)	Amount			Percent of Covered Loans
Loan Category:
One-to-four family		$	2,071,996		92.3%
All other loans			172,207		7.7

Total covered loans		$	2,244,203		100.0%

The Company refers to certain loans acquired in the AmTrust and Desert Hills transactions as “covered loans” because the Company is being reimbursed for a substantial portion of losses on these loans under the terms of the FDIC loss sharing agreements. Covered loans are accounted for under ASC 310-30 and are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the lives of the loans. Under ASC 310-30, 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.

At June 30, 2015 and December 31, 2014, the unpaid principal balances of covered loans were $2.7 billion and $2.9 billion, respectively. The carrying values of such loans were $2.2 billion and $2.4 billion, respectively, at the corresponding dates.

At the respective acquisition dates, 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”) is 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.” The non-accretable difference represents an estimate of the credit risk in the loan portfolios at the respective acquisition dates.

The accretable yield is 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 increase or decrease the amount of interest income expected to be collected, depending on the direction of interest rates. Prepayments affect the estimated lives of covered loans and could change 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 are driven by the credit outlook and by actions that may be taken with borrowers.

On a quarterly basis, the Company evaluates the estimates of the cash flows it expects to collect. Expected future cash flows from interest payments are based on variable rates at the time of the quarterly evaluation. Estimates of expected cash flows that are impacted by changes in interest rate indices for variable rate loans and prepayment assumptions are treated as prospective yield adjustments and included in interest income.

In the six months ended June 30, 2015, changes in the accretable yield for covered loans were as follows:


(in thousands)	Accretable Yield
Balance at beginning of period	$	1,037,023
Reclassification from non-accretable difference		29,338
Accretion		(69,690)

Balance at end of period	$	996,671

In the preceding table, the line item “Reclassification from non-accretable difference” 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, the underlying credit assumptions improved, which resulted in an increase in future expected interest cash flows and, consequently, an increase in the accretable yield. The effect of this increase was partially offset by the coupon rates on variable rate loans resetting lower, which resulted in a decrease in future expected interest cash flows and, consequently, a decrease in the accretable yield.

Reflecting the foreclosure of certain loans acquired in the AmTrust and Desert Hills acquisitions, the Company owns certain other real estate owned (“OREO”) that is covered under the Company’s loss sharing agreements with the FDIC (“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 have been charged to non-interest expense, and have been partially offset by loss reimbursements under the FDIC loss sharing agreements. Any recoveries of previous write-downs have been credited to non-interest expense and partially offset by the portion of the recovery that was due to the FDIC.

The FDIC loss share receivable represents the present value of the estimated losses to be reimbursed by the FDIC. The estimated losses were based on the same cash flow estimates used in determining the fair value of the covered loans. The FDIC loss share receivable is reduced as losses on covered loans are recognized and as loss sharing payments are received from the FDIC. Realized losses in excess of acquisition-date estimates result in an increase in the FDIC loss share receivable. Conversely, if realized losses are lower than the acquisition-date estimates, the FDIC loss share receivable is reduced by amortization to interest income.

The following table presents information regarding the Company’s covered loans that were 90 days or more past due at June 30, 2015 and December 31, 2014:


(in thousands)	June 30, 2015		December 31, 2014
Covered Loans 90 Days or More Past Due:
One-to-four family	$	131,805	$	148,967
Other loans		6,935		8,922

Total covered loans 90 days or more past due	$	138,740	$	157,889

The following table presents information regarding the Company’s covered loans that were 30 to 89 days past due at June 30, 2015 and December 31, 2014:


(in thousands)	June 30, 2015		December 31, 2014
Covered Loans 30-89 Days Past Due:
One-to-four family	$	36,820	$	37,680
Other loans		2,392		4,016

Total covered loans 30-89 days past due	$	39,212	$	41,696

At June 30, 2015, the Company had $39.2 million of covered loans that were 30 to 89 days past due, and covered loans of $138.7 million that were 90 days or more past due but considered to be performing due to the application of the yield accretion method under ASC 310-30. The remaining portion of the Company’s covered loan portfolio totaled $2.1 billion at June 30, 2015 and was considered current at that date. Per ASC 310-30, the Company aggregates credit-impaired loans acquired in the same fiscal quarter 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.

Loans that may have been classified as non-performing loans by AmTrust or Desert Hills were no longer classified as non-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 represents the contractual balance, reduced by the portion that is expected to be uncollectible (i.e., the non-accretable difference) and by an accretable yield (discount) that is recognized as interest income. It is important to note that management’s judgment is required in reclassifying loans subject to ASC 310-30 as performing loans, and such judgment is dependent on having a reasonable expectation about the timing and amount of the cash flows to be collected, even if the loan is contractually past due.

The primary credit quality indicator for covered loans is the expectation of underlying cash flows. In the three months ended June 30, 2015 and 2014, the Company recorded provisions for losses on covered loans of $2.2 million and $188,000, respectively. The respective provisions were largely due to credit deterioration in the acquired portfolios of one-to-four family and home equity loans, and were partly offset by FDIC indemnification income of $1.8 million and $150,000, respectively, that was recorded in “Non-interest income” in the respective periods.

The Company recorded a provision for loan losses on covered loans of $3.1 million during the six months ended June 30, 2015, which was largely offset by FDIC indemnification income of $2.5 million. During the six months ended June 30, 2014, the Company recovered $14.4 million from the allowance for losses on covered loans, in connection with an increase in expected cash flows on certain pools of loans acquired in the Company’s FDIC-assisted transactions. The recovery was partly offset by FDIC indemnification expense of $11.6 million. The FDIC indemnification income and expense recorded in the six months ended June 30, 2015 and 2014 were recorded in “Non-interest income” in the corresponding periods.

Note 6. Allowances for Loan Losses

The following tables provide information regarding the Company’s allowances for losses on non-covered and covered loans, based upon the method of evaluating loan impairment:


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at June 30, 2015:
Loans individually evaluated for impairment	$	--	$	--	$	--
Loans collectively evaluated for impairment		115,565		23,487		139,052
Acquired loans with deteriorated credit quality		23,235		25,209		48,444

Total	$	138,800	$	48,696	$	187,496


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2014:
Loans individually evaluated for impairment	$	26	$	--	$	26
Loans collectively evaluated for impairment		122,590		17,241		139,831
Acquired loans with deteriorated credit quality		23,538		21,943		45,481

Total	$	146,154	$	39,184	$	185,338

The following tables provide information regarding loans receivable, based upon the method of evaluating impairment:


(in thousands)	Mortgage		Other		Total
Loans Receivable at June 30, 2015:
Loans individually evaluated for impairment	$	61,337	$	18,399	$	79,736
Loans collectively evaluated for impairment		32,168,642		1,353,341		33,521,983
Acquired loans with deteriorated credit quality		2,084,542		173,038		2,257,580

Total	$	34,314,521	$	1,544,778	$	35,859,299


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2014:
Loans individually evaluated for impairment	$	81,574	$	6,806	$	88,380
Loans collectively evaluated for impairment		31,781,623		1,134,358		32,915,981
Acquired loans with deteriorated credit quality		2,227,572		201,050		2,428,622

Total	$	34,090,769	$	1,342,214	$	35,432,983

Allowance for Losses on Non-Covered Loans

The following table summarizes activity in the allowance for losses on non-covered loans for the six months ended June 30, 2015 and 2014:


	June 30,
	2015						2014
(in thousands)	Mortgage		Other		Total		Mortgage		Other		Total
Balance, beginning of period		$122,616		$17,241		$139,857		$127,840		$14,106		$141,946
Charge-offs		(655)		(375)		(1,030)		(2,344)		(5,044)		(7,388)
Recoveries		1,640		1,207		2,847		924		3,991		4,915
Transfer from the allowance for losses on covered loans ⁽¹⁾		2,250		166		2,416		--		--		--
(Recovery of) provision for non-covered loan losses		(8,156)		5,414		(2,742)		--		--		--

Balance, end of period		$117,695		$23,653		$141,348		$126,420		$13,053		$139,473

(1)	Represents the allowance associated with $13.4 million of loans acquired in the Desert Hills transaction that were transferred from covered loans to non-covered loans upon expiration of the related FDIC loss sharing agreement.

Please see “Critical Accounting Policies” for additional information regarding the Company’s allowance for losses on non-covered loans.

The following table presents additional information about the Company’s impaired non-covered loans at June 30, 2015:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	30,017	$	38,045	$	--	$	37,200	$	601
Commercial real estate		28,986		32,669		--		30,148		921
One-to-four family		2,028		2,252		--		1,855		3
Acquisition, development, and construction		529		926		--		612		28
Commercial and industrial		18,176		23,817		--		10,376		207

Total impaired loans with no related allowance	$	79,736	$	97,709	$	--	$	80,191	$	1,760


Impaired loans with an allowance recorded:
Multi-family	$	--	$	--	$	--	$	1,046	$	--
Commercial real estate		--		--		--		--		--
One-to-four family		--		--		--		--		--
Acquisition, development, and construction		--		--		--		--		--
Commercial and industrial		--		--		--		--		--

Total impaired loans with an allowance recorded	$	--	$	--	$	--	$	1,046	$	--


Total impaired loans:
Multi-family	$	30,017	$	38,045	$	--	$	38,246	$	601
Commercial real estate		28,986		32,669		--		30,148		921
One-to-four family		2,028		2,252		--		1,855		3
Acquisition, development, and construction		529		926		--		612		28
Commercial and industrial		18,176		23,817		--		10,376		207

Total impaired loans	$	79,736	$	97,709	$	--	$	81,237	$	1,760

The following table presents additional information about the Company’s impaired non-covered loans at December 31, 2014:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	45,383	$	52,593	$	--	$	54,051	$	1,636
Commercial real estate		30,370		32,460		--		29,935		1,629
One-to-four family		2,028		2,069		--		1,254		--
Acquisition, development, and construction		654		1,024		--		505		218
Commercial and industrial		6,806		12,155		--		7,749		307

Total impaired loans with no related allowance	$	85,241	$	100,301	$	--	$	93,494	$	3,790


Impaired loans with an allowance recorded:
Multi-family	$	3,139	$	3,139	$	26	$	628	$	72
Commercial real estate		--		--		--		490		--
One-to-four family		--		--		--		61		--
Acquisition, development, and construction		--		--		--		--		--
Commercial and industrial		--		--		--		--		--

Total impaired loans with an allowance recorded	$	3,139	$	3,139	$	26	$	1,179	$	72


Total impaired loans:
Multi-family	$	48,522	$	55,732	$	26	$	54,679	$	1,708
Commercial real estate		30,370		32,460		--		30,425		1,629
One-to-four family		2,028		2,069		--		1,315		--
Acquisition, development, and construction		654		1,024		--		505		218
Commercial and industrial		6,806		12,155		--		7,749		307

Total impaired loans	$	88,380	$	103,440	$	26	$	94,673	$	3,862

Allowance for Losses on Covered Loans

Covered loans are reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions are, and will continue to be, reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered loans, the Company periodically performs an analysis to estimate the expected cash flows for each of the pools of loans. The Company records a provision for (recovery of) losses on covered loans to the extent that the expected cash flows from a loan pool have decreased or increased since the acquisition date.

Accordingly, if there is 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 is recorded as a provision for covered loan losses charged to earnings, and an allowance for covered loan losses is established. A related credit to non-interest income and an increase in the FDIC loss share receivable is recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

If there is 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 is recorded as a recovery of the prior-period impairment charged to earnings, and the allowance for covered loan losses is reduced. A related debit to non-interest income and a decrease in the FDIC loss share receivable is recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

The following table summarizes activity in the allowance for losses on covered loans for the six months ended June 30, 2015 and 2014:


	June 30,
(in thousands)	2015			2014
Balance, beginning of period	$	45,481		$	64,069
Provision for (recovery of) losses on covered loans		3,083			(14,443	)
Transfer to the allowance for losses on non-covered loans ⁽¹⁾		(2,416	)		--

Balance, end of period	$	46,148		$	49,626

(1)	Represents the allowance associated with $13.4 million of loans acquired in the Desert Hills transaction that were transferred from covered loans to non-covered loans upon expiration of the related FDIC loss sharing agreement.

Note 7. Borrowed Funds

The following table summarizes the Company’s borrowed funds at June 30, 2015 and December 31, 2014:


(in thousands)	June 30, 2015		December 31, 2014
Wholesale borrowings:
FHLB advances	$	9,909,946	$	10,183,132
Repurchase agreements		3,325,000		3,425,000
Fed funds purchased		418,000		260,000

Total wholesale borrowings	$	13,652,946	$	13,868,132
Junior subordinated debentures		358,477		358,355

Total borrowed funds	$	14,011,423	$	14,226,487

The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at June 30, 2015:


	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight and Continuous		Up to 30 Days		30–90 Days		Greater than 90 Days		Total
GSE debentures and mortgage-related securities	$	--	$	--	$	--	$	3,325,000	$	3,325,000

At June 30, 2015 and December 31, 2014, the Company had $358.5 million and $358.4 million, respectively, of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by statutory business trusts (the “Trusts”) that issued guaranteed capital securities. Reflecting the adoption of the Basel III capital rules on January 1, 2015, 25% of the capital securities qualified as Tier 1 capital of the Company at June 30, 2015. At December 31, 2014, 100% of the capital securities qualified as Tier 1 capital of the Company.

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.

The following junior subordinated debentures were outstanding at June 30, 2015:

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

(dollars in thousands)

New York Community Capital Trust V (BONUSES^SMUnits)

6.000%

$144,551

$138,200

Nov. 4, 2002

Nov. 1, 2051

Nov. 4, 2007 ⁽¹⁾

New York Community Capital Trust X

1.886

123,712

120,000

Dec. 14, 2006

Dec. 15, 2036

Dec. 15, 2011 ⁽²⁾

PennFed Capital Trust III

3.536

30,928

30,000

June 2, 2003

June 15, 2033

June 15, 2008 ⁽²⁾

New York Community Capital Trust XI

1.932

59,286

57,500

April 16, 2007

June 30, 2037

June 30, 2012 ⁽²⁾

Total junior subordinated debentures

$358,477

$345,700

(1)	Callable subject to certain conditions as described in the prospectus filed with the SEC on November 4, 2002.

(2)	Callable from this date forward.

Note 8. Mortgage Servicing Rights

The Company had MSRs of $253.6 million and $227.3 million, respectively, at June 30, 2015 and December 31, 2014. The June 30th balance 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). The December 31st balance consisted entirely of residential MSRs.

Residential MSRs are carried at fair value, with changes in fair value recorded as a component of non-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 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 bases the fair value of its MSRs on the present value of estimated future net servicing income cash flows. The Company 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 reassesses, and periodically adjusts, the underlying inputs and assumptions to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset.

The value of residential MSRs at any given time is significantly affected by the mortgage interest rates that are then currently available in the marketplace which, in turn, influence mortgage loan prepayment speeds. During periods of declining interest rates, the value of MSRs generally declines as an increase in mortgage refinancing activity results in an increase in prepayments. Conversely, during periods of rising interest rates, the value of MSRs generally increases as mortgage refinancing activity declines.

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. Changes in the carrying value of participation MSRs due to amortization or changes in fair value, if any, are reported in “Other income” in the period during which such changes occur.

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 June 30, 2015				For the Three Months Ended June 30, 2014
(in thousands)	Residential		Participation		Residential		Participation
Carrying value, beginning of period	$	220,371	$	--	$	238,004	$	--
Additions		15,981		2,828		7,175		--
Increase (decrease) in fair value:
Due to changes in interest rates and valuation assumptions		29,737		--		(535)		--
Due to other changes ⁽¹⁾		(15,126)		--		(15,829)		--
Amortization		--		(153)		--		--

Carrying value, end of period	$	250,963	$	2,675	$	228,815	$	--

(1)	Net servicing cash flows, including loan payoffs, and the passage of time.


	For the Six Months Ended June 30, 2015				For the Six Months Ended June 30, 2014
(in thousands)	Residential		Participation		Residential		Participation
Carrying value, beginning of period	$	227,297	$	--	$	241,018	$	--
Additions		30,998		2,828		13,983		--
Increase (decrease) in fair value:
Due to changes in interest rates and valuation assumptions		23,289		--		(492)		--
Due to other changes ⁽¹⁾		(30,621)		--		(25,694)		--
Amortization		--		(153)		--		--

Carrying value, end of period	$	250,963	$	2,675	$	228,815	$	--

(1)	Net servicing cash flows, including loan payoffs, and the passage of time.

The following table presents the key assumptions used in calculating the fair value of the Company’s residential MSRs at the dates indicated:


	June 30, 2015			December 31, 2014
Expected Weighted Average Life		95 months			83 months
Constant Prepayment Speed		7.4	%		9.3	%
Discount Rate		10.0			10.0
Primary Mortgage Rate to Refinance		4.0			4.0
Cost to Service (per loan per year):
Current		$ 63			$ 63
30-59 days or less delinquent		213			213
60-89 days delinquent		313			313
90-119 days delinquent		413			413
120 days or more delinquent		563			563

As indicated in the preceding table, there were no changes in the assumed servicing costs over the six months ended June 30, 2015.

Note 9. Pension and Other Post-Retirement Benefits

The following tables set forth certain disclosures for the Company’s pension and post-retirement plans for the periods indicated:


	For the Three Months Ended June 30,
	2015						2014
(in thousands)	Pension Benefits			Post-Retirement Benefits			Pension Benefits			Post-Retirement Benefits
Components of net periodic (credit) expense:
Interest cost	$	1,516		$	175		$	1,474		$	190
Service cost		--			1			--			1
Expected return on plan assets		(4,390	)		--			(4,859	)		--
Amortization of past service liability		--			(62	)		--			(62	)
Amortization of net actuarial loss		2,052			96			822			118

Net periodic (credit) expense	$	(822	)	$	210		$	(2,563	)	$	247


	For the Six Months Ended June 30,
	2015						2014
(in thousands)	Pension Benefits			Post-Retirement Benefits			Pension Benefits			Post-Retirement Benefits
Components of net periodic (credit) expense:
Interest cost	$	3,032		$	350		$	2,948		$	380
Service cost		--			2			--			2
Expected return on plan assets		(8,780	)		--			(9,718	)		--
Amortization of past service liability		--			(124	)		--			(124	)
Amortization of net actuarial loss		4,104			192			1,644			236

Net periodic (credit) expense	$	(1,644	)	$	420		$	(5,126	)	$	494

The Company expects to contribute $1.3 million to its post-retirement plan to pay premiums and claims for the fiscal year ending December 31, 2015. The Company does not expect to make any contributions to its pension plan in 2015.

Note 10. Stock-Based Compensation

At June 30, 2015, the Company had 12,276,212 shares available for grants as options, restricted stock, 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. Included in this amount were 1,030,673 shares that were transferred from the 2006 Stock Incentive Plan, which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2006 and reapproved at its Annual Meeting on June 2, 2011. The Company granted 2,301,141 shares of restricted stock during the six months ended June 30, 2015. The shares had an average fair value of $15.79 per share on the date of grant and a vesting period of five years. The six-month amount includes 115,000 shares that were granted in the second quarter with an average fair value of $17.06 per share on the date of grant. Compensation and benefits expense related to the restricted stock grants is recognized on a straight-line basis over the vesting period, and totaled $14.6 million and $13.9 million, respectively, in the six months ended June 30, 2015 and 2014, including $7.5 million and $7.3 million, respectively, in the three months ended at those dates.

The following table provides a summary of activity with regard to restricted stock awards in the six months ended June 30, 2015:


	For the Six Months Ended June 30, 2015
	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		5,802,409			$15.24
Granted		2,301,141			15.79
Vested		(1,589,233	)		15.31
Cancelled		(122,300	)		15.26

Unvested at end of period		6,392,017			15.42

As of June 30, 2015, unrecognized compensation cost relating to unvested restricted stock totaled $85.8 million. This amount will be recognized over a remaining weighted average period of 3.4 years.

In addition, the Company had two stock option plans at June 30, 2015: the 1998 Richmond County Financial Corp. Stock Compensation Plan and the 2004 Synergy Financial Group Stock Option Plan (collectively, the “Stock Option Plans”). All stock options granted under the Stock Option Plans expire ten years from the date of grant.

The Company uses the modified prospective approach to recognize compensation costs related to share-based payments at fair value on the date of grant, and recognizes such costs in the financial statements over the vesting period during which the employee provides service in exchange for the award. As there were no unvested options at any time during the six months ended June 30, 2015 or the year ended December 31, 2014, the Company did not record any compensation and benefits expense relating to stock options during those periods.

To satisfy the exercise of options, the Company either issues new shares of common stock or uses common stock held in Treasury. In the event that Treasury stock is used, the difference between the average cost of Treasury shares and the exercise price is recorded as an adjustment to retained earnings or paid-in capital on the date of exercise. At June 30, 2015, there were 12,400 stock options outstanding. There were no shares available for future issuance under the Stock Option Plans at that date.

The status of the Stock Option Plans at June 30, 2015, and the changes that occurred during the six months ended at that date, are summarized below:


	For the Six Months Ended June 30, 2015
	Number of Stock Options		Weighted Average Exercise Price
Stock options outstanding, beginning of year		58,560		$	18.04
Exercised		--			--
Expired/forfeited		(46,160)			18.02

Stock options outstanding, end of period		12,400			18.11
Options exercisable, end of period		12,400			18.11

The intrinsic value of stock options outstanding and exercisable at June 30, 2015 was $4,000. There were no options exercised during the six months ended June 30, 2015. The intrinsic value of options exercised during the six months ended June 30, 2014 was $63,000.

Note 11. Fair Value Measurements

GAAP sets forth a definition of fair value, establishes a consistent framework for measuring fair value, and requires disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. GAAP also clarifies that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

●

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 – Inputs to the valuation methodology are significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants use in pricing an asset or liability.

A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2015 Using
(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	$	--	$	15,294	$	--	$	--	$	15,294
GSE CMOs		--		--		--		--
Private label CMOs		--		--		--		--

Total mortgage-related securities	$	--	$	15,294	$	--	$	--	$	15,294

Other Securities Available for Sale:
Municipal bonds	$	--	$	926	$	--	$	--	$	926
Capital trust notes		--		7,041		--		--		7,041
Preferred stock		94,856		28,540		--		--		123,396
Mutual funds and common stock		1,082		17,401		--		--		18,483

Total other securities	$	95,938	$	53,908	$	--	$	--	$	149,846

Total securities available for sale	$	95,938	$	69,202	$	--	$	--	$	165,140

Other Assets:
Loans held for sale	$	--	$	299,465	$	--	$	--	$	299,465
Mortgage servicing rights		--		--		250,963		--		250,963
Interest rate lock commitments		--		--		1,920		--		1,920
Derivative assets-other⁽²⁾		5,302		4,852		--		(5,355)		4,799
Liabilities:
Derivative liabilities	$	(959)	$	(6,701)	$	--	$	7,516	$	(144)

(1)	Includes cash collateral received from, and paid to, counterparties.

(2)	Includes $5.0 million to purchase Treasury options.


	Fair Value Measurements at December 31, 2014 Using
(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	$	--		$	19,700		$	--	$	--		$	19,700
GSE CMOs		--			--			--		--			--
Private label CMOs		--			--			--		--			--

Total mortgage-related securities	$	--		$	19,700		$	--	$	--		$	19,700

Other Securities Available for Sale:
Municipal bonds	$	--		$	942		$	--	$	--		$	942
Capital trust notes		--			11,482			--		--			11,482
Preferred stock		95,051			27,960			--		--			123,011
Mutual funds and common stock		16,984			1,664			--		--			18,648

Total other securities	$	112,035		$	42,048		$	--	$	--		$	154,083

Total securities available for sale	$	112,035		$	61,748		$	--	$	--		$	173,783

Other Assets:
Loans held for sale	$	--		$	379,399		$	--	$	--		$	379,399
Mortgage servicing rights		--			--			227,297		--			227,297
Interest rate lock commitments		--			--			4,397		--			4,397
Derivative assets-other⁽²⁾		2,655			8,429			--		(7,198	)		3,886
Liabilities:
Derivative liabilities	$	(346	)	$	(7,862	)	$	--	$	7,696		$	(512	)

(1)	Includes cash collateral received from, and paid to, counterparties.

(2)	Includes $2.6 million to purchase Treasury options.

The Company reviews and updates the fair value hierarchy classifications for its assets on a quarterly basis. Changes from one quarter to the next that are related to the observability of inputs for a fair value measurement may result in a reclassification from one hierarchy level to another.

A description of the methods and significant assumptions utilized in estimating the fair values of available-for-sale securities follows:

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities, exchange-traded securities, and derivatives.

If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, models incorporate transaction details such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy, and primarily include such instruments as mortgage-related and corporate debt securities.

In certain cases where there is limited activity or less transparency around inputs to a valuation, securities are classified within Level 3 of the valuation hierarchy. In valuing capital trust notes, which may include pooled trust preferred securities, collateralized debt obligations (“CDOs”), and certain single-issue capital trust notes, the determination of fair value may require benchmarking to similar instruments or analyzing default and recovery rates. Therefore, capital trust notes are valued using a model based on the specific collateral composition and cash flow structure of the securities. Key inputs to the model consist of market spread data for each credit rating, collateral type, and other relevant contractual features. In instances where quoted price information is available, the price is considered when arriving at a security’s fair value. Where there is limited activity or less transparency around the inputs to the valuation of preferred stock, the valuation is based on a discounted cash flow model.

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 services’ valuations that appear to be unusual or unexpected.

The Company carries loans held for sale originated by the Residential Mortgage Banking segment 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 an internal valuation model. The Company 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 reassesses and 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 is one-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. At June 30, 2015 the Company’s loans held for sale consisted of one-to-four family mortgage loans, none of which was 90 days or more past due. 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:

June 30, 2015

December 31, 2014

(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

$299,465

$294,952

$4,513

$201,012

$194,692

$6,320

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 June 30,					For the Six Months Ended June 30,
(in thousands)	2015		2014			2015			2014
Loans held for sale	$	17	$	5,267		$	4,386		$	6,934
Mortgage servicing rights		14,611		(16,364	)		(7,332	)		(26,186	)

Total gain (loss)	$	14,628	$	(11,097	)	$	(2,946	)	$	(19,252	)

(1)	Does not include the effect of hedging activities.

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 six months ended June 30, 2015 and 2014, 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		Total Realized/Unrealized Gains/(Losses) Recorded in					Issuances		Settlements		Transfers		Fair Value		Change in Unrealized Gains/(Losses) Related to
(in thousands)	January 1, 2015		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements		to/(from) Level 3		at June 30, 2015		Instruments Held at June 30, 2015
Mortgage servicing rights		$227,297		$(7,332	)		$--		$30,998		$ --		$ --		$250,963		$ 23,289
Interest rate lock commitments		4,397		(2,477	)		--		--		--		--		1,920		1,920

(in thousands)	Fair Value		Total Realized/Unrealized Gains/(Losses) Recorded in					Issuances		Settlements		Transfers		Fair Value		Change in Unrealized Gains/(Losses) Related to
(in thousands)	January 1, 2014		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements		to/(from) Level 3		at June 30, 2014		Instruments Held at June 30, 2014
Available-for-sale capital securities		$241,018		$(26,186	)		$--		$ 13,983		$ --		$ --		$228,815		$ (492	)
Interest rate lock commitments		258		3,634			--		--		--		--		3,892		3,892

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. During the six months ended June 30, 2015, the Company transferred certain mutual funds to Level 2 from Level 1 as a result of decreased observable market activity for these securities. There were no gains or losses recognized as a result of the transfer of securities during the six months ended June 30, 2015. There were no transfers in or out of Levels 1, 2, or 3 during the six months ended June 30, 2014.

For Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2015, the significant unobservable inputs used in the fair value measurements were as follows:


(dollars in thousands)	Fair Value at June 30, 2015		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Mortgage servicing rights	$	250,963	Discounted Cash Flow	Weighted Average Constant Prepayment Rate ⁽¹⁾	7.40%

				Weighted Average Discount Rate	10.00

Interest rate lock commitments		1,920	Discounted Cash Flow	Weighted Average Closing Ratio	71.52

(1)	Represents annualized loan repayment rate assumptions.

The significant unobservable inputs used in the fair value measurement of the Company’s MSRs are the weighted average constant prepayment rate and the weighted average discount rate. Significant increases or decreases in either of those inputs in isolation could result in significantly lower or higher fair value measurements. Although the constant prepayment rate and the discount rate are not directly interrelated, they generally move in opposite directions.

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 a Non-Recurring Basis

Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g., when there is evidence of impairment). The following tables present assets and liabilities that were measured at fair value on a non-recurring basis as of June 30, 2015 and December 31, 2014, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2015 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		$--		$ --		$2,909		$ 2,909
Other assets ⁽¹⁾		--		9,312		--		9,312

Total		$--		$9,312		$2,909		$12,221

(1)	Represents the fair value of OREO, based on the appraised value of the collateral subsequent to its initial classification as OREO.


	Fair Value Measurements at December 31, 2014 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		$--		$ --		$23,366		$23,366
Other assets ⁽¹⁾		--		15,916		--		15,916

Total		$--		$15,916		$23,366		$39,282

(1)	Represents the fair value of OREO, based on the appraised value of the collateral subsequent to its initial classification as OREO.

The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate market data.

Other Fair Value Disclosures

FASB guidance requires the disclosure of fair value information about the Company’s on- and off-balance sheet financial instruments. When available, quoted market prices are used as the measure of fair value. In cases where quoted market prices are not available, fair values are based on present-value estimates or other valuation techniques. Such fair values are significantly affected by the assumptions used, the timing of future cash flows, and the discount rate.

Because assumptions are inherently subjective in nature, estimated fair values cannot be substantiated by comparison to independent market quotes. Furthermore, in many cases, the estimated fair values provided would not necessarily be realized in an immediate sale or settlement of such instruments.

The following tables summarize the carrying values, estimated fair values, and fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at June 30, 2015 and December 31, 2014:


	June 30, 2015
					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	$	588,718	$	588,718	$	588,718		$	--		$	--
Securities held to maturity		6,658,363		6,797,286		--			6,796,305			981
FHLB stock⁽¹⁾		510,205		510,205		--			510,205			--
Loans, net		35,992,410		36,186,788		--			--			36,186,788
Financial Liabilities:
Deposits	$	28,597,173	$	28,623,505	$	22,889,881	⁽²⁾	$	5,733,624	⁽³⁾	$	--
Borrowed funds		14,011,423		14,834,992		--			14,834,992			--

(1)	Carrying value and estimated fair value are at cost.

(2)	NOW and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)	Certificates of deposit.


	December 31, 2014
					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	$	564,150	$	564,150	$	564,150		$	--		$	--
Securities held to maturity		6,922,667		7,085,971		--			7,084,959			1,012
FHLB stock⁽¹⁾		515,327		515,327		--			515,327			--
Loans, net		35,647,639		36,167,980		--			--			36,167,980
Financial Liabilities:
Deposits	$	28,328,734	$	28,377,897	$	21,908,136	⁽²⁾	$	6,469,761	⁽³⁾	$	--
Borrowed funds		14,226,487		15,140,171		--			15,140,171			--

(1)	Carrying value and estimated fair value are at cost.

(2)	NOW 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:

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and fed 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 maturity and cash flow assumptions.

Federal Home Loan Bank Stock

Ownership in equity securities of the FHLB is restricted and there is no established market for their resale. The carrying amount approximates the fair value.

Loans

The 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 or non-performing). The estimated fair values of mortgage and other loans are computed by discounting the anticipated cash flows from the respective portfolios. The discount rates reflect current market rates for loans with similar terms to borrowers of similar credit quality. The estimated fair values of non-performing mortgage and other loans are based on recent collateral appraisals.

The methods used to estimate the fair values of 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, 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 of the Company in and of itself or in comparison with any other company.

Mortgage Servicing Rights

MSRs do not trade in an active market with readily observable prices. Accordingly, the Company utilizes a valuation model that calculates the present value of estimated future cash flows. The model incorporates various assumptions, including estimates of prepayment speeds, discount rates, refinance rates, servicing costs, and ancillary income. The Company reassesses and periodically adjusts the underlying inputs and assumptions to reflect current market conditions and assumptions that a market participant would consider in valuing the MSR asset.

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 prices for similar loans and securities in an active market. The fair value of IRLCs for one-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 IRLC fall-out factors.

Deposits

The fair values of deposit liabilities with no stated maturity (i.e., NOW and money market accounts, savings accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values of certificates of deposit 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 such off-balance sheet financial instruments were insignificant at June 30, 2015 and December 31, 2014.

Note 12. Derivative Financial Instruments

The Company’s derivative financial instruments consist of financial forward and futures contracts, IRLCs, and options. These derivatives relate to mortgage banking operations, MSRs, and other risk management activities, and seek to mitigate or reduce the Company’s exposure to losses from adverse changes in interest rates. These activities will vary in scope based on the level and volatility of interest rates, the type of assets held, and other changing market conditions.

In accordance with the applicable accounting guidance, 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 on 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 Statements 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.

The Company held derivatives with a notional amount of $4.0 billion at June 30, 2015. Changes in the fair value of these derivatives are reflected in current-period earnings. None 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 response to changes in interest rates.

To manage the price risk associated with fixed-rate non-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 also purchases put and call options to manage the risk associated with variations in the amount of IRLCs that ultimately close.

The following table sets forth information regarding the Company’s derivative financial instruments at June 30, 2015:


	June 30, 2015
	Notional		Unrealized ⁽¹⁾
(in thousands)	Amount		Gain		Loss
Treasury options	$	745,000	$	190	$	953
Treasury futures		25,000		63		--
Eurodollar futures		100,000		5		6
Forward commitments to sell loans/mortgage-backed securities		1,325,000		4,499		2,246
Forward commitments to buy loans/mortgage-backed securities		1,348,000		353		4,455
Interest rate lock commitments		484,283		1,920		--

Total derivatives	$	4,027,283	$	7,030	$	7,660

(1)	Derivatives in a net gain position are recorded as “Other assets” and derivatives in a net loss position are recorded as “Other liabilities” in the Consolidated Statements of Condition.

In addition, the Company mitigates a portion of the risk associated with changes in the value of 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, thus partially offsetting changes in the value of our 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:


	Gain (Loss) Included in Mortgage Banking Income
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2015		2014		2015		2014
Treasury options		$(8,490)		$1,454		$(5,074)		$1,055
Treasury and Eurodollar futures		(22)		161		361		106
Forward commitments to buy/sell loans/mortgage-backed securities		2,018		3,038		3,790		6,533

Total (loss)/gain		$(6,494)		$4,653		$ (923)		$7,694

The Company has in place an enforceable master netting arrangement with every counterparty. All master netting arrangements include rights to offset associated with the Company’s recognized derivative assets, derivative liabilities, and cash collateral received and pledged. Accordingly, the Company, where appropriate, offsets all derivative asset and liability positions with the cash collateral received and pledged.

The following tables present the effect of the master netting arrangements on the presentation of the derivative assets in the Consolidated Statements of Condition as of the dates indicated:

June 30, 2015

Gross Amounts Not
Offset in the
Consolidated Statement
of Condition

(in thousands)

Gross
Amount of
Recognized
Assets ⁽¹⁾

Gross Amount
Offset in the
Statement of
Condition

Net Amount of
Assets Presented
in the Statement
of Condition

Financial
Instruments

Cash
Collateral
Received

Net
Amount

Derivatives

$12,074

$5,355

$6,719

$--

$6,719

(1)	Includes $5.0 million to purchase Treasury options.

December 31, 2014

Gross Amounts Not
Offset in the
Consolidated Statement
of Condition

(in thousands)

Gross
Amount of
Recognized
Assets ⁽¹⁾

Gross Amount
Offset in the
Statement of
Condition

Net Amount of
Assets Presented
in the Statement
of Condition

Financial
Instruments

Cash
Collateral
Received

Net
Amount

Derivatives

$15,481

$7,198

$8,283

$--

$8,283

(1)	Includes $2.6 million to purchase Treasury options.

The following tables present the effect the master netting arrangements had on the presentation of the derivative liabilities in the Consolidated Statements of Condition as of the dates indicated:

June 30, 2015

Gross Amounts Not
Offset in the
Consolidated Statement
of Condition

(in thousands)

Gross
Amount of
Recognized
Liabilities

Gross Amount
Offset in the
Statement of
Condition

Net Amount of
Liabilities
Presented in the
Statement of
Condition

Financial
Instruments

Cash
Collateral
Pledged

Net
Amount

Derivatives

$7,660

$7,516

$144

$--

$144

December 31, 2014

Gross Amounts Not
Offset in the
Consolidated Statement
of Condition

(in thousands)

Gross
Amount of
Recognized
Liabilities

Gross Amount
Offset in the
Statement of
Condition

Net Amount of
Liabilities
Presented in the
Statement of
Condition

Financial
Instruments

Cash
Collateral
Pledged

Net
Amount

Derivatives

$8,208

$7,696

$512

$--

$512

Note 13. Segment Reporting

The Company’s operations are divided into two reportable business segments: Banking Operations and Residential Mortgage Banking. These operating segments have been identified based on the Company’s organizational structure. The segments require unique technology and marketing strategies, and offer different products and services. While the Company is managed as an integrated organization, individual executive managers are held accountable for the operations of these business segments.

The Company measures and presents information for internal reporting purposes in a variety of ways. The internal reporting system presently used by management in the planning and measurement of operating activities, and to which most managers are held accountable, is based on organizational structure.

The management accounting process uses various estimates and allocation methodologies to measure the performance of the operating segments. To determine financial performance for each segment, the Company allocates capital, funding charges and credits, certain non-interest expenses, and income tax provisions to each segment, as applicable. Allocation methodologies 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.

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 segment. Capital allocations are made to cover the following risk categories: credit risk, liquidity risk, interest rate risk, option risk, basis risk, market risk, and operational risk.

The Company allocates expenses to the reportable segments based on various factors, including the volume and amount 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.

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 originates, aggregates, sells, and services one-to-four family mortgage loans. Mortgage loan products consist primarily of agency-conforming fixed- and adjustable-rate loans and, to a lesser extent, jumbo hybrid loans, for the purpose of purchasing or refinancing one-to-four family homes. The Residential Mortgage Banking segment earns interest on loans held in the warehouse and non-interest income from the origination and servicing of loans. It also recognizes gains or losses on the sale of such loans.

The following table provides a summary of the Company’s segment results for the three months ended June 30, 2015, on an internally managed accounting basis:


	For the Three Months Ended June 30, 2015
(in thousands)	Banking Operations		Residential Mortgage Banking		Total Company
Net interest income		$280,006		$ 5,091		$285,097
Provision for loan losses		334		--		334
Non-interest income:
Third party⁽¹⁾		45,355		16,546		61,901
Inter-segment		(4,061)		4,061		--

Total non-interest income		41,294		20,607		61,901
Non-interest expense⁽²⁾		135,476		16,454		151,930

Income before income tax expense		185,490		9,244		194,734
Income tax expense		67,246		3,784		71,030

Net income		$118,244		$ 5,460		$123,704

Identifiable segment assets (period-end)		$48,011,913		$636,619		$48,648,532

(1)	Includes ancillary fee income.

(2)	Includes both direct and indirect expenses.

The following table provides a summary of the Company’s segment results for the six months ended June 30, 2015, on an internally managed accounting basis:


	For the Six Months Ended June 30, 2015
(in thousands)	Banking Operations				Residential Mortgage Banking			Total Company
Net interest income			$569,291				$ 8,574			$577,865
Provision for loan losses			341				--			341
Non-interest income:
Third party⁽¹⁾			78,509				35,626			114,135
Inter-segment			(8,231	)			8,231			--

Total non-interest income			70,278				43,857			114,135
Non-interest expense⁽²⁾			275,627				33,139			308,766

Income before income tax expense			363,601				19,292			382,893
Income tax expense			132,136				7,794			139,930

Net income			$231,465				$11,498			$242,963

Identifiable segment assets (period-end)		$	48,011,913			$	636,619		$	48,648,532

(1)	Includes ancillary fee income.

(2)	Includes both direct and indirect expenses.

The following table provides a summary of the Company’s segment results for the three months ended June 30, 2014, on an internally managed accounting basis:


	For the Three Months Ended June 30, 2014
(in thousands)	Banking Operations				Residential Mortgage Banking			Total Company
Net interest income			$280,008				$ 3,484			$283,492
Provision for loan losses			188				--			188
Non-interest income:
Third party ⁽¹⁾			36,578				16,015			52,593
Inter-segment			(3,771	)			3,771			--

Total non-interest income			32,807				19,786			52,593
Non-interest expense ⁽²⁾			133,929				13,907			147,836

Income before income tax expense			178,698				9,363			188,061
Income tax expense			65,879				3,494			69,373

Net income			$112,819				$ 5,869			$118,688

Identifiable segment assets (period-end)		$	47,931,214			$	673,558		$	48,604,772

(1)	Includes ancillary fee income.

(2)	Includes both direct and indirect expenses.

The following table provides a summary of the Company’s segment results for the six months ended June 30, 2014, on an internally managed accounting basis:


	For the Six Months Ended June 30, 2014
(in thousands)	Banking Operations				Residential Mortgage Banking			Total Company
Net interest income			$561,255				$ 6,387			$567,642
Recovery of loan losses			(14,442	)			--			(14,442	)
Non-interest income:
Third party ⁽¹⁾			58,462				31,366			89,828
Inter-segment			(7,550	)			7,550			--

Total non-interest income			50,912				38,916			89,828
Non-interest expense ⁽²⁾			264,754				29,407			294,161

Income before income tax expense			361,855				15,896			377,751
Income tax expense			137,888				5,921			143,809

Net income			$223,967				$ 9,975			$233,942

Identifiable segment assets (period-end)		$	47,931,214			$	673,558		$	48,604,772

(1)	Includes ancillary fee income.

(2)	Includes both direct and indirect expenses.

Note 14. Impact of Recent Accounting Pronouncements

In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-11, “Transfers and Servicing (Topic 860)—Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.” The amendments in ASU No. 2014-11 require that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement. The amendments require an entity to disclose information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements, in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. In addition, the amendments require disclosure of the types of collateral pledged in repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions, and the tenor of those transactions. The accounting changes in ASU No. 2014-11 are effective for the first interim or annual period beginning after December 15, 2014. The disclosure for certain transactions accounted for as sales is required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The adoption of ASU No. 2014-11 did not have a material effect on the Company’s consolidated statement of condition or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The amendments in ASU No. 2014-09 create Topic 606, “Revenue from Contracts with Customers,” and supersede the revenue recognition requirements in Topic 605, “Revenue Recognition,” including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts,” and create new Subtopic 340-40, “Other Assets and Deferred Costs—Contracts with Customers.” In summary, the core principle of Topic 606 is that an entity recognizes 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. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. The Company is in the process of evaluating the effects the adoption of ASU No. 2014-09 may have on its consolidated statement of condition or results of operations.

In January 2014, the FASB issued ASU No. 2014-01, “Investments – Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Qualified Affordable Housing Projects.” The amendments in ASU No. 2014-01 provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method, if certain conditions are met. ASU No. 2014-01 is effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014, with early adoption permitted; it should be applied retrospectively to all periods presented. The adoption of ASU No. 2014-01 on January 1, 2014 did not have a material effect on the Company’s consolidated statement of condition or results of operations.

In January 2014, the FASB issued ASU No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40), Reclassification of Residential Real Estate-Collateralized Consumer Mortgage Loans upon Foreclosure.” The amendments in ASU No. 2014-04 clarify when an in-substance repossession or foreclosure occurs, i.e., when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. ASU No. 2014-04 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of ASU No. 2014-04 on January 1, 2015 did not have a material effect on the Company’s consolidated statement of condition or results of operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the purpose of this discussion and analysis, the words “we,” “us,” “our,” and the “Company” are used to refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, including New York Community Bank (the “Community Bank”) and New York Commercial Bank (the “Commercial Bank”) (collectively, the “Banks”).

Forward-Looking Statements and Associated Risk Factors

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. Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

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:

●

general economic conditions, either nationally or in some or all of the areas in which we and our customers conduct our respective businesses;

●

conditions in the securities markets and real estate markets or the banking industry;

●

changes in real estate values, which could impact the quality of the assets securing the loans in our portfolio;

●

changes in interest rates, which may affect our net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of our assets, including our investment securities;

●

changes in the quality or composition of our loan or securities portfolios;

●

changes in our capital management policies, including those regarding business combinations, dividends, and share repurchases, among others;

●

our use of derivatives to mitigate our interest rate exposure;

●

changes in competitive pressures among financial institutions or from non-financial institutions;

●

changes in deposit flows and wholesale borrowing facilities;

●

changes in the demand for deposit, loan, and investment products and other financial services in the markets we serve;

●

our timely development of new lines of business and competitive products or services in a changing environment, and the acceptance of such products or services by our customers;

●

changes in our customer base or in the financial or operating performances of our customers’ businesses;

●

any interruption in customer service due to circumstances beyond our control;

●

our ability to retain key personnel;

●

potential exposure to unknown or contingent liabilities of companies we have acquired or may acquire in the future;

●

the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future;

●

environmental conditions that exist or may exist on properties owned by, leased by, or mortgaged to the Company;

●

any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems;

●

operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent;

●

changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection, and insurance, and the ability to comply with such changes in a timely manner;

●

changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System;

●

changes in accounting principles, policies, practices, or guidelines;

●

a material breach in performance by the Community Bank under our loss sharing agreements with the FDIC;

●

changes in our estimates of future reserves based upon the periodic review thereof under relevant regulatory and accounting requirements;

●

changes in regulatory expectations relating to predictive models we use in connection with stress testing and other forecasting or in the assumptions on which such modeling and forecasting are predicated;

●

the ability to successfully integrate any assets, liabilities, customers, systems, and management personnel of any banks we may acquire into our operations, and our ability to realize related revenue synergies and cost savings within expected time frames;

●

changes in our credit ratings or in our ability to access the capital markets;

●

war or terrorist activities; and

●

other economic, competitive, governmental, regulatory, technological, and geopolitical factors affecting our operations, pricing, and services.

In addition, we routinely evaluate opportunities to expand through acquisitions and conduct due diligence activities in connection with such opportunities. As a result, acquisition discussions and, in some cases, negotiations, may take place at any time, and acquisitions involving cash or our debt or equity securities may occur.

Furthermore, the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control.

Please see Item 1A, “Risk Factors,” for a further discussion of factors that could affect the actual outcome of future events.

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this report. Except as required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

RECONCILIATIONS OF STOCKHOLDERS’ EQUITY AND TANGIBLE STOCKHOLDERS’ EQUITY;

TOTAL ASSETS AND TANGIBLE ASSETS; AND THE RELATED MEASURES

Although tangible stockholders’ equity and tangible assets are not measures that are calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), management uses these non-GAAP measures in their analysis of our performance. We believe that these non-GAAP measures are important indications of our ability to grow both organically and through business combinations and, with respect to tangible stockholders’ equity, our ability to pay dividends and to engage in various capital management strategies.

We calculate tangible stockholders’ equity by subtracting from stockholders’ equity the sum of our goodwill and core deposit intangibles (“CDI”), and calculate tangible assets by subtracting the same sum from our total assets. To calculate our ratio of tangible stockholders’ equity to tangible assets, we divide our tangible stockholders’ equity by our tangible assets.

Tangible stockholders’ equity, tangible assets, and the related financial measures should not be considered in isolation or as a substitute for stockholders’ equity or any other measure prepared in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting non-GAAP financial measures with similar names.

Reconciliations of our stockholders’ equity and tangible stockholders’ equity; our total assets and tangible assets; and the related financial measures at June 30, 2015 and December 31, 2014 follow:


	June 30, 2015		December 31, 2014
(in thousands)
Stockholders’ Equity		$ 5,814,623		$ 5,781,815
Less: Goodwill		(2,436,131)		(2,436,131)
Core deposit intangibles		(5,014)		(7,943)

Tangible stockholders’ equity		$ 3,373,478		$ 3,337,741

Total Assets		$48,648,532		$48,559,217
Less: Goodwill		(2,436,131)		(2,436,131)
Core deposit intangibles		(5,014)		(7,943)

Tangible assets		$46,207,387		$46,115,143