Edgar Filing: NEW YORK COMMUNITY BANCORP INC

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

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, 2016

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.

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

487,067,889

Number of shares of common stock outstanding at

August 1, 2016

NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

Quarter Ended June 30, 2016


INDEX		Page No.

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Condition as of June 30, 2016 (unaudited) and December 31, 2015		1

	Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015 (unaudited)		2

	Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2016 (unaudited)		3

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 (unaudited)		4

	Notes to the Consolidated Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		83

Item 4.	Controls and Procedures		84

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings		85

Item 1A.	Risk Factors		85

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		85

Item 3.	Defaults upon Senior Securities		86

Item 4.	Mine Safety Disclosures		86

Item 5.	Other Information		86

Item 6.	Exhibits		86

Signatures			87

Exhibits

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data)


	June 30, 2016			December 31, 2015
	(unaudited)
Assets:
Cash and cash equivalents	$	674,289		$	537,674
Securities:
Available-for-sale		154,270			204,255
Held-to-maturity ($1,741,622 and $2,152,939 pledged, respectively) (fair value of $4,093,734 and $6,108,529, respectively)		3,822,561			5,969,390

Total securities		3,976,831			6,173,645

Non-covered loans held for sale		609,894			367,221
Non-covered loans held for investment, net of deferred loan fees and costs		36,800,530			35,763,204
Less: Allowance for losses on non-covered loans		(153,059	)		(147,124	)

Non-covered loans held for investment, net		36,647,471			35,616,080
Covered loans		1,890,883			2,060,089
Less: Allowance for losses on covered loans		(26,649	)		(31,395	)

Covered loans, net		1,864,234			2,028,694

Total loans, net		39,121,599			38,011,995
Federal Home Loan Bank stock, at cost		586,835			663,971
Premises and equipment, net		366,921			322,307
FDIC loss share receivable		280,942			314,915
Goodwill		2,436,131			2,436,131
Core deposit intangibles, net		1,146			2,599
Mortgage servicing rights		193,994			247,734
Bank-owned life insurance		939,875			931,627
Other real estate owned (includes $20,083 and $25,817, respectively, covered by loss sharing agreements)		32,897			39,882
Other assets		424,287			635,316

Total assets	$	49,035,747		$	50,317,796

Liabilities and Stockholders’ Equity:
Deposits:
NOW and money market accounts	$	13,408,815		$	13,069,019
Savings accounts		5,782,697			7,541,566
Certificates of deposit		7,017,413			5,312,487
Non-interest-bearing accounts		2,674,067			2,503,686

Total deposits		28,882,992			28,426,758

Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances		11,614,400			13,463,800
Repurchase agreements		1,500,000			1,500,000
Fed funds purchased		435,000			426,000

Total wholesale borrowings		13,549,400			15,389,800
Junior subordinated debentures		358,739			358,605

Total borrowed funds		13,908,139			15,748,405
Other liabilities		205,504			207,937

Total liabilities		42,996,635			44,383,100

Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized; none issued)		—			—
Common stock at par $0.01 (900,000,000 shares authorized; 487,016,052 and 484,968,024 shares issued, and 487,009,706 and 484,943,308 shares outstanding, respectively)		4,870			4,850
Paid-in capital in excess of par		6,031,540			6,023,882
Retained earnings (accumulated deficit)		54,866			(36,568	)
Treasury stock, at cost (6,346 and 24,716 shares, respectively)		(94	)		(447	)
Accumulated other comprehensive loss, net of tax:
Net unrealized gain on securities available for sale, net of tax of $3,735 and $2,153, respectively		5,273			3,031
Net unrealized loss on the non-credit portion of other-than-temporary impairment (“OTTI”) losses on securities, net of tax of $3,376 and $3,400, respectively		(5,280	)		(5,318	)
Net unrealized loss on pension and post-retirement obligations, net of tax of $35,388 and $37,279, respectively		(52,063	)		(54,734	)

Total accumulated other comprehensive loss, net of tax		(52,070	)		(57,021	)

Total stockholders’ equity		6,039,112			5,934,696

Total liabilities and stockholders’ equity	$	49,035,747		$	50,317,796

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						For the
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Interest Income:
Mortgage and other loans	$	370,482		$	357,999		$	731,205		$	722,503
Securities and money market investments		49,133			63,621			112,220			128,030

Total interest income		419,615			421,620			843,425			850,533

Interest Expense:
NOW and money market accounts		15,286			11,727			29,905			22,779
Savings accounts		7,354			12,925			17,562			25,258
Certificates of deposit		18,738			15,729			34,628			32,845
Borrowed funds		52,664			96,142			107,891			191,786

Total interest expense		94,042			136,523			189,986			272,668

Net interest income		325,573			285,097			653,439			577,865
Provision for (recovery of) losses on non-covered loans		2,744			(1,872	)		5,465			(2,742	)
(Recovery of) provision for losses on covered loans		(1,849	)		2,206			(4,746	)		3,083

Net interest income after provisions for (recoveries of) loan losses		324,678			284,763			652,720			577,524

Non-Interest Income:
Mortgage banking income		6,957			15,968			11,095			34,374
Fee income		7,917			8,778			15,840			17,172
Bank-owned life insurance		6,843			6,774			16,179			13,478
Net gain on sales of loans		5,878			8,757			11,653			14,703
Net gain on sales of securities		13			592			176			803
FDIC indemnification (expense) income		(1,479	)		1,764			(3,797	)		2,466
Other income		11,237			19,268			21,457			31,139

Total non-interest income		37,366			61,901			72,603			114,135

Non-Interest Expense:
Operating expenses:
Compensation and benefits		85,847			83,067			175,151			170,276
Occupancy and equipment		23,675			25,941			49,490			51,240
General and administrative		49,533			41,577			90,803			84,321

Total operating expenses		159,055			150,585			315,444			305,837
Amortization of core deposit intangibles		606			1,345			1,452			2,929
Merger-related expenses		1,250			—			2,463			—

Total non-interest expense		160,911			151,930			319,359			308,766

Income before income taxes		201,133			194,734			405,964			382,893
Income tax expense		74,673			71,030			149,595			139,930

Net income	$	126,460		$	123,704		$	256,369		$	242,963

Other comprehensive income (loss), net of tax:
Change in net unrealized gain/loss on securities available for sale, net of tax of $836; $1,294; $1,582; and $133, respectively		1,180			(2,098	)		2,242			(383	)
Change in the non-credit portion of OTTI losses recognized in other comprehensive income (loss), net of tax of $12; $11; $24; and $22, respectively		19			17			38			34
Change in pension and post-retirement obligations, net of tax of $946; $915; $1,891; and $1,759, respectively		1,335			1,177			2,671			2,425

Total other comprehensive income, net of tax		2,534			(904	)		4,951			2,076

Total comprehensive income, net of tax	$	128,994		$	122,800		$	261,320		$	245,039

Basic earnings per share	$	0.26		$	0.28		$	0.52		$	0.55

Diluted earnings per share	$	0.26		$	0.28		$	0.52		$	0.55

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, 2016
Common Stock (Par Value: $0.01):
Balance at beginning of year	$	4,850
Shares issued for restricted stock awards (2,048,028 shares)		20

Balance at end of period		4,870

Paid-in Capital in Excess of Par:
Balance at beginning of year		6,023,882
Shares issued for restricted stock awards, net of forfeitures		(8,709	)
Compensation expense related to restricted stock awards		16,367

Balance at end of period		6,031,540

Retained Earnings:
Balance at beginning of year		(36,568	)
Net income		256,369
Dividends paid on common stock ($0.34 per share)		(165,347	)
Effect of adopting Accounting Standards Update (“ASU”) No. 2016-09 ⁽¹⁾		412

Balance at end of period		54,866

Treasury Stock:
Balance at beginning of year		(447	)
Purchase of common stock (543,154 shares)		(8,336	)
Shares issued for restricted stock awards (561,524 shares)		8,689

Balance at end of period		(94	)

Accumulated Other Comprehensive Loss, net of tax:
Balance at beginning of year		(57,021	)
Other comprehensive income, net of tax		4,951

Balance at end of period		(52,070	)

Total stockholders’ equity	$	6,039,112

(1)	See Note 14, “Impact of Recent Accounting Pronouncements” for a discussion of the Company’s adoption of ASU No. 2016-09.

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,
	2016			2015
Cash Flows from Operating Activities:
Net income	$	256,369		$	242,963
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		719			341
Depreciation and amortization		16,325			15,402
Amortization of discounts and premiums, net		(15,983	)		(3,405	)
Amortization of core deposit intangibles		1,452			2,929
Net gain on sales of securities		(176	)		(803	)
Gain on sales of loans		(35,460	)		(40,778	)
Stock plan-related compensation		16,367			14,627
Deferred tax expense (benefit)		20,250			(940	)
Changes in assets and liabilities:
Decrease in other assets		297,480			5,781
(Decrease) increase in other liabilities		(21,206	)		6,608
Origination of loans held for sale		(2,176,235	)		(2,887,032	)
Proceeds from sales of loans originated for sale		1,927,800			2,820,718

Net cash provided by operating activities		287,702			176,411

Cash Flows from Investing Activities:
Proceeds from repayment of securities held to maturity		2,176,943			262,797
Proceeds from repayment of securities available for sale		49,959			8,004
Proceeds from sales of securities held to maturity		—			19,730
Proceeds from sales of securities available for sale		112,676			166,760
Purchase of securities held to maturity		(10,086	)		(14,097	)
Purchase of securities available for sale		(112,500	)		(166,500	)
Net redemption of Federal Home Loan Bank stock		77,136			5,122
Proceeds from sales of loans		1,037,760			1,045,613
Other changes in loans, net		(1,864,187	)		(1,283,633	)
Purchase of premises and equipment, net		(60,939	)		(22,157	)

Net cash provided by investing activities		1,406,762			21,639

Cash Flows from Financing Activities:
Net increase in deposits		456,234			268,439
Net decrease in short-term borrowed funds		(2,021,400	)		(616,800	)
Proceeds from long-term borrowed funds		181,000			503,900
Repayments of long-term borrowed funds		—			(102,164	)
Tax effect of stock plans ⁽¹⁾		—			1,674
Cash dividends paid on common stock		(165,347	)		(221,849	)
Payments relating to treasury shares received for restricted stock award tax payments ⁽¹⁾		(8,336	)		(6,682	)

Net cash used in financing activities		(1,557,849	)		(173,482	)

Net increase in cash and cash equivalents		136,615			24,568
Cash and cash equivalents at beginning of period		537,674			564,150

Cash and cash equivalents at end of period	$	674,289		$	588,718

Supplemental information:
Cash paid for interest	$	185,450		$	276,654
Cash paid for income taxes		125,209			116,722
Non-cash investing and financing activities:
Transfers to other real estate owned from loans	$	15,233		$	29,481
Transfer of loans from held for investment to held for sale		1,026,107			1,030,910
Transfer of loans from held for sale to held for investment		—			153,578
Shares issued for restricted stock awards		8,709			7,691

(1)	See Note 14, “Impact of Recent Accounting Pronouncements” for a discussion of the Company’s adoption of ASU No. 2016-09.

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 ($0.93 per share on a split-adjusted basis, reflecting the impact of nine stock splits between 1994 and 2004). The Commercial Bank was established on December 30, 2005.

Reflecting its growth through acquisitions, the Community Bank currently operates 226 branches, two of which operate directly under the Community Bank name. The remaining 224 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.”

On September 17, 2015, the Company submitted an application to the FDIC and the New York State Department of Financial Services requesting approval to merge the Commercial Bank with and into the Community Bank. The merger of the Company’s two bank subsidiaries is not expected to impact either bank’s customers or employees.

On October 29, 2015, the Company announced the signing of a definitive merger agreement with Astoria Financial Corporation (“Astoria Financial”). The merger was approved by shareholders of both companies on April 26, 2016. Pending receipt of the necessary regulatory approvals and subject to the terms of the Agreement and Plan of Merger, Astoria Financial will merge with and into the Company, and Astoria Bank will merge with and into the Community 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.

When necessary, certain reclassifications are made to prior-year amounts to conform to the current-year presentation. The presentation of long-term borrowings in the Consolidated Statements of Cash Flows for the six months ended June 30, 2015 is presented on a gross basis to conform to the presentation of long-term borrowings for the six months ended June 30, 2016.

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						Six Months Ended
	June 30,						June 30,
(in thousands, except share and per share data)	2016			2015			2016			2015
Net income	$	126,460		$	123,704		$	256,369		$	242,963
Less: Dividends paid on and earnings allocated to participating securities		(983	)		(911	)		(1,962	)		(1,760	)

Earnings applicable to common stock	$	125,477		$	122,793		$	254,407		$	241,203

Weighted average common shares outstanding		485,303,073			442,721,173			484,954,235			442,357,774

Basic earnings per common share	$	0.26		$	0.28		$	0.52		$	0.55

Earnings applicable to common stock	$	125,477		$	122,793		$	254,407		$	241,203

Weighted average common shares outstanding		485,303,073			442,721,173			484,954,235			442,357,774
Potential dilutive common shares ⁽¹⁾		—			—			—			—

Total shares for diluted earnings per share computation		485,303,073			442,721,173			484,954,235			442,357,774

Diluted earnings per common share and common share equivalents	$	0.26		$	0.28		$	0.52		$	0.55

(1)

At June 30, 2016, there were no stock options outstanding. 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 weighted average exercise prices of $18.41 per share were excluded from the computation of diluted EPS because their inclusion would have had an antidilutive effect.

Note 3. Reclassifications Out of Accumulated Other Comprehensive Loss


(in thousands)	For the Six Months Ended June 30, 2016
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:
Prior-service costs	$	124		Included in the computation of net periodic (credit) expense ⁽²⁾
Actuarial losses		(4,686	)	Included in the computation of net periodic (credit) expense ⁽²⁾

		(4,562	)	Total before tax
		1,891		Tax benefit

		(2,671	)	Amortization of defined benefit pension plan items, net of tax

Total reclassifications for the period	$	(2,671	)

(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 tables summarize the Company’s portfolio of securities available for sale at June 30, 2016 and December 31, 2015:


	June 30, 2016
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Municipal bonds	$	729	$	82	$	—	$	811
Capital trust notes		9,451		—		2,658		6,793
Preferred stock		118,205		10,869		31		129,043
Mutual funds and common stock ⁽¹⁾		16,877		746		—		17,623

Total securities available for sale	$	145,262	$	11,697	$	2,689	$	154,270

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


	December 31, 2015
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates ⁽¹⁾	$	53,820	$	33	$	1	$	53,852

Other Securities:
Municipal bonds	$	725	$	70	$	—	$	795
Capital trust notes		9,444		—		2,480		6,964
Preferred stock		118,205		7,415		248		125,372
Common stock		16,877		470		75		17,272

Total other securities	$	145,251	$	7,955	$	2,803	$	150,403

Total securities available for sale	$	199,071	$	7,988	$	2,804	$	204,255

(1)	Government-sponsored enterprise.

The following tables summarize the Company’s portfolio of securities held to maturity at June 30, 2016 and December 31, 2015:


	June 30, 2016
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,239,688	$	2.239,688	$	169,049	$	—	$	2,408,737
GSE CMOs ⁽¹⁾		1,190,119		1,190,119		86,810		—		1,276,929

Total mortgage-related securities	$	3,429,807	$	3,429,807	$	255,859	$	—	$	3,685,666

Other Securities:
GSE debentures	$	179,366	$	179,366	$	14,326	$	—	$	193,692
Municipal bonds		73,792		73,792		2,984		—		76,776
Corporate bonds		73,983		73,983		10,706		—		84,689
Capital trust notes		74,269		65,613		3,320		16,022		52,911

Total other securities	$	401,410	$	392,754	$	31,336	$	16,022	$	408,068

Total securities held to maturity ⁽²⁾	$	3,831,217	$	3,822,561	$	287,195	$	16,022	$	4,093,734

(1)	Collateralized mortgage obligations.

(2)	Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI recorded in Accumulated Other Comprehensive Loss (“AOCL”). At June 30, 2016, the non-credit portion of OTTI recorded in AOCL was $8.7 million, pre-tax.


	December 31, 2015
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,269,828	$	2,269,828	$	76,827	$	4,722	$	2,341,933
GSE CMOs		1,325,033		1,325,033		53,236		57		1,378,212

Total mortgage-related securities	$	3,594,861	$	3,594,861	$	130,063	$	4,779	$	3,720,145

Other Securities:
GSE debentures	$	2,159,856	$	2,159,856	$	23,892	$	7,568	$	2,176,180
Municipal bonds		75,317		75,317		262		1,084		74,495
Corporate bonds		73,756		73,756		10,503		—		84,259
Capital trust notes		74,317		65,600		3,750		15,900		53,450

Total other securities	$	2,383,246	$	2,374,529	$	38,407	$	24,552	$	2,388,384

Total securities held to maturity ⁽¹⁾	$	5,978,107	$	5,969,390	$	168,470	$	29,331	$	6,108,529

(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, 2015, the non-credit portion of OTTI recorded in AOCL was $8.7 million, pre-tax.

At June 30, 2016 and December 31, 2015, respectively, the Company had $586.8 million and $664.0 million of Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost. In order to have access to the funding provided by the FHLB-NY, the Company is required to maintain an investment in FHLB-NY stock.

The following table summarizes the gross proceeds and gross realized gains from the sale of available-for-sale securities during the six months ended June 30, 2016 and 2015:


	For the Six Months Ended June 30,
(in thousands)	2016		2015
Gross proceeds	$	112,676	$	166,760
Gross realized gains		176		260

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 2016.

In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2016. 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, 2016
Beginning credit loss amount as of January 1, 2016	$	198,766
Add: Initial other-than-temporary credit losses		—
Subsequent other-than-temporary credit losses		—
Amount previously recognized in AOCL		—
Less: Realized losses for securities sold		—
Securities intended or required to be sold		—
Increase in expected cash flows on debt securities		—

Ending credit loss amount as of June 30, 2016	$	198,766

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, 2016, by contractual maturity.


	At June 30, 2016
(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	$	—		—	%	$	—		—	%	$	219		2.96	%	$	—		—	%	$	219
Due from one to five years		555,797		3.76			66,673		4.14			—		—			—		—			676,824
Due from five to ten years		2,482,830		3.11			112,693		3.45			—		—			64,313		4.75			2,867,505
Due after ten years		391,180		2.98			—		—			73,573		2.89			75,283		5.20			549,186

Total securities held to maturity	$	3,429,807		3.20	%	$	179,366		3.71	%	$	73,792		2.89	%	$	139,596		4.99	%	$	4,093,734

Available-for-Sale Securities: ⁽³⁾
Due within one year	$	—		—	%	$	—		—	%	$	149		6.39	%	$	—		—	%	$	153
Due from one to five years		—		—			—		—			580		6.56			—		—			658
Due from five to ten years		—		—			—		—			—		—			—		—			—
Due after ten years		—		—			—		—			—		—			9,451		4.48			6,793

Total securities available for sale	$	—		—	%	$	—		—	%	$	729		6.52	%	$	9,451		4.48	%	$	7,604

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

(2)	Includes corporate bonds and capital trust notes

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

The following table presents held-to-maturity 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, 2016:


At June 30, 2016	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 Securities:
GSE certificates	$	—	$	—	$	—	$	—	$	—	$	—
GSE CMOs		—		—		—		—		—		—
Municipal bonds		—		—		—		—		—		—
Capital trust notes		—		—		45,201		16,022		45,201		16,022

Total temporarily impaired held-to-maturity securities	$	—	$	—	$	45,201	$	16,022	$	45,201	$	16,022

Temporarily Impaired Available-for-Sale Securities:
Capital trust notes	$	—	$	—	$	6,793	$	2,658	$	6,793	$	2,658
Equity securities		15,262		31		—		—		15,262		31

Total temporarily impaired available-for-sale securities	$	15,262	$	31	$	6,793	$	2,658	$	22,055	$	2,689


At December 31, 2015	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 Securities:
GSE debentures	$	547,484	$	728	$	1,176,949	$	6,840	$	1,724,433	$	7,568
GSE certificates		299,019		4,608		3,899		114		302,918		4,722
GSE CMOs		9,943		57		—		—		9,943		57
Municipal bonds		42,083		1,084		—		—		42,083		1,084
Capital trust notes		24,601		399		20,710		15,501		45,311		15,900

Total temporarily impaired held-to-maturity securities	$	923,130	$	6,876	$	1,201,558	$	22,455	$	2,124,688	$	29,331

Temporarily Impaired Available-for-Sale Securities:
GSE certificates	$	51,959	$	1	$	—	$	—	$	51,959	$	1
Capital trust notes		1,968		32		4,997		2,448		6,965		2,480
Equity securities		51,775		323		—		—		51,775		323

Total temporarily impaired available-for-sale securities	$	105,702	$	356	$	4,997	$	2,448	$	110,699	$	2,804

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 of impairment relating to factors other than credit losses are recorded in AOCL.

At June 30, 2016, the Company had unrealized losses on certain capital trust notes, and equity securities.

The Company reviews quarterly financial information related to its investments in capital trust notes, as well as other information that is released by each of the issuers of such notes, to determine their continued creditworthiness. The Company continues to monitor these investments and currently estimates that the present value of expected cash flows is not less than the amortized cost of the securities. It is possible that these securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from these securities and potential OTTI losses in the future. Future events that could trigger material unrecoverable declines in the fair values of the Company’s investments, and thus result in potential OTTI losses, include, but are not limited to: government intervention; deteriorating asset quality and credit metrics; significantly higher levels of default and loan loss provisions; losses in value on the underlying collateral; deteriorating credit enhancement; net operating losses; and illiquidity in the financial markets.

The Company considers a decline in the fair value of equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. The unrealized losses on the Company’s equity securities at June 30, 2016 were primarily caused by market volatility. The Company evaluated the near-term prospects of recovering the fair value of these securities, together with the severity and duration of impairment to date, and determined that they were not other than temporarily impaired. Nonetheless, it is possible that these equity securities will perform worse than is currently expected, which could lead to adverse changes in their fair value, or the failure of the securities to fully recover in value as currently forecasted by management. Either event could cause the Company to record an OTTI loss in a future period. Events that could trigger a material decline in the fair value of these securities include, but are not limited to, deterioration in the equity markets; a decline in the quality of the loan portfolio of the issuer in which the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuer.

The investment securities designated as having a continuous loss position for twelve months or more at June 30, 2016 consisted of six capital trust notes. At December 31, 2015, the investment securities designated as having a continuous loss position for twelve months or more consisted of seven agency debt securities, five capital trust notes, and two agency mortgage-backed securities. At June 30, 2016 and December 31, 2015, the combined market value of the respective securities represented unrealized losses of $18.7 million and $24.9 million. At June 30, 2016, the fair value of securities having a continuous loss position for twelve months or more was 26.4% below the collective amortized cost of $70.7 million. At December 31, 2015, the fair value of such securities was 2.0% below the collective amortized cost of $1.2 billion.

Note 5: Loans

The following table sets forth the composition of the loan portfolio at June 30, 2016 and December 31, 2015:


	June 30, 2016						December 31, 2015
	Amount			Percent of Non-Covered Loans Held for Investment			Amount			Percent of Non-Covered Loans Held for Investment
(dollars in thousands)
Non-Covered Loans Held for Investment:
Mortgage Loans:
Multi-family	$	26,750,593			72.73	%	$	25,971,629			72.67	%
Commercial real estate		7,793,610			21.19			7,857,204			21.98
Acquisition, development, and construction		361,523			0.98			311,676			0.87
One-to-four family		246,183			0.67			116,841			0.33

Total mortgage loans held for investment	$	35,151,909			95.57		$	34,257,350			95.85

Other Loans:
Commercial and industrial		1,174,180			3.19			1,085,529			3.04
Lease financing, net of unearned income of $47,492 and $43,553, respectively		425,047			1.16			365,027			1.02

Total commercial and industrial loans ⁽¹⁾		1,599,227			4.35			1,450,556			4.06
Purchased credit-impaired loans		5,983			0.02			8,344			0.02
Other		21,282			0.06			24,239			0.07

Total other loans held for investment		1,626,492			4.43			1,483,139			4.15

Total non-covered loans held for investment	$	36,778,401			100.00	%	$	35,740,489			100.00	%

Net deferred loan origination costs		22,129						22,715
Allowance for losses on non-covered loans		(153,059	)					(147,124	)

Non-covered loans held for investment, net	$	36,647,471					$	35,616,080

Covered loans		1,890,883						2,060,089
Allowance for losses on covered loans		(26,649	)					(31,395	)

Covered loans, net	$	1,864,234					$	2,028,694
Loans held for sale		609,894						367,221

Total loans, net	$	39,121,599					$	38,011,995

(1)	Includes specialty finance loans of $1.0 billion and $880.7 million and other C&I loans of $592.4 million and $569.9 million, respectively, at June 30, 2016 and December 31, 2015.

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 income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties that are located in New York City and on Long Island.

The Company also originates 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 generally are made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide; and “other” C&I loans that primarily are made to small and mid-size businesses in Metro New York. “Other” C&I loans are typically made for working capital, business expansion, and the purchase of machinery and equipment.

The repayment of multi-family and CRE loans generally depends on the income produced by the underlying properties which, in turn, depends on their successful operation and management. To mitigate the potential for credit losses, the Company underwrites its loans in accordance with credit standards it considers to be prudent, looking first at the consistency of the cash flows being produced by the underlying property. In addition, multi-family buildings and CRE properties are inspected as a prerequisite to approval, and independent appraisers, whose appraisals are carefully reviewed by the Company’s in-house appraisers, perform appraisals on the collateral properties. In many cases, a second independent appraisal review is performed. To further manage its credit risk, the Company’s lending policies limit the amount of credit granted to any one borrower and

typically require conservative debt service coverage ratios and loan-to-value ratios. Nonetheless, the ability of the Company’s borrowers to repay these loans may be impacted by adverse conditions in the local real estate market and the local economy. Accordingly, there can be no assurance that its underwriting policies will protect the Company from credit-related losses or delinquencies.

ADC loans typically involve a higher degree of credit risk than loans secured by improved or owner-occupied real estate. Accordingly, borrowers are required to provide a guarantee of repayment and completion, and loan proceeds are disbursed as construction progresses, as certified by in-house or third-party engineers. The Company seeks to minimize the credit risk on ADC loans by maintaining conservative lending policies and rigorous underwriting standards. However, if the estimate of value proves to be inaccurate, the cost of completion is greater than expected, or the length of time to complete and/or sell or lease the collateral property is greater than anticipated, the property could have a value upon completion that is insufficient to assure full repayment of the loan. This could have a material adverse effect on the quality of the ADC loan portfolio, and could result in losses or delinquencies.

To minimize the risk involved in specialty finance lending and leasing, the Company participates in syndicated loans that are brought to it, and equipment loans and leases that are assigned to it, by a select group of nationally recognized sources who have had long-term relationships with its experienced lending officers. Each of these credits is secured with a perfected first security interest 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, 2016 and December 31, 2015, respectively, were loans of $93.7 million and $105.6 million to executive officers, directors, and their related interests and parties. There were no loans to principal shareholders at either of those dates.

Non-covered purchased credit-impaired (“PCI”) loans, which had a carrying value of $6.0 million and an unpaid principal balance of $7.5 million at June 30, 2016, 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.

Loans Held for Sale

The Community Bank’s mortgage banking division originates, aggregates, and services 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 has used its mortgage banking platform to originate jumbo loans which it typically has sold 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.

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, 2016:


(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	$	2,253	$	13,771	$	—	$	16,024	$	26,734,569	$	26,750,593
Commercial real estate		—		11,811		—		11,811		7,781,799		7,793,610
One-to-four family		574		9,952		—		10,526		235,657		246,183
Acquisition, development, and construction		—		—		—		—		361,523		361,523
Commercial and industrial ⁽²⁾		1,883		1,677		—		3,560		1,595,667		1,599,227
Other		122		8,692		—		8,814		12,468		21,282

Total	$	4,832	$	45,903	$	—	$	50,735	$	36,721,683	$	36,772,418

(1)	Excludes $991,000 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, 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	$	4,818	$	13,904	$	—	$	18,722	$	25,952,907	$	25,971,629
Commercial real estate		178		14,920		—		15,098		7,842,106		7,857,204
One-to-four family		1,117		12,259		—		13,376		103,465		116,841
Acquisition, development, and construction		—		27		—		27		311,649		311,676
Commercial and industrial ⁽²⁾		—		4,473		—		4,473		1,446,083		1,450,556
Other		492		1,242		—		1,734		22,505		24,239

Total	$	6,605	$	46,825	$	—	$	53,430	$	35,678,715	$	35,732,145

(1)	Excludes $969,000 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 summarizes the Company’s portfolio of non-covered loans held for investment (excluding non-covered PCI loans) by credit quality indicator at June 30, 2016:


	Mortgage Loans										Other Loans
(in thousands)	Multi-Family		Commercial Real Estate		One-to-Four Family		Acquisition, Development, and Construction		Total Mortgage Loans		Commercial and Industrial⁽¹⁾		Other		Total Other Loans
Credit Quality Indicator:
Pass	$	26,512,672	$	7,750,219	$	236,231	$	360,763	$	34,859,885	$	1,527,439	$	19,943	$	1,547,382
Special mention		211,459		32,297		—		760		244,516		61,049		—		61,049
Substandard		26,462		11,094		9,952		—		47,508		10,739		1,339		12,078
Doubtful		—		—		—		—		—		—		—		—

Total	$	26,750,593	$	7,793,610	$	246,183	$	361,523	$	35,151,909	$	1,599,227	$	21,282	$	1,620,509

(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, 2015:


	Mortgage Loans										Other Loans
(in thousands)	Multi- Family		Commercial Real Estate		One-to- Four Family		Acquisition, Development, and Construction		Total Mortgage Loans		Commercial and Industrial⁽¹⁾		Other		Total Other Loans
Credit Quality Indicator:
Pass	$	25,936,423	$	7,839,127	$	104,582	$	309,039	$	34,189,171	$	1,433,778	$	22,996	$	1,456,774
Special mention		6,305		3,883		—		—		10,188		11,771		—		11,771
Substandard		28,901		14,194		12,259		2,637		57,991		5,007		1,243		6,250
Doubtful		—		—		—		—		—		—		—		—

Total	$	25,971,629	$	7,857,204	$	116,841	$	311,676	$	34,257,350	$	1,450,556	$	24,239	$	1,474,795

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

The preceding classifications are the most current ones available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have 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, 2016, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $15.6 million; loans on which forbearance agreements were reached amounted to $2.9 million.

The following table presents information regarding the Company’s TDRs as of June 30, 2016 and December 31, 2015:


	June 30, 2016						December 31, 2015
(in thousands)	Accruing		Non-Accrual		Total		Accruing		Non-Accrual		Total
Loan Category:
Multi-family	$	1,999	$	9,100	$	11,099	$	2,017	$	635	$	2,652
Commercial real estate		—		2,529		2,529		115		6,255		6,370
One-to-four family		—		1,605		1,605		—		987		987
Acquisition, development, and construction		—		—		—		—		27		27
Commercial and industrial		1,269		1,799		3,068		627		1,279		1,906
Other		—		206		206		—		213		213

Total	$	3,268	$	15,239	$	18,507	$	2,759	$	9,396	$	12,155

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, 2016 and the twelve months ended December 31, 2015 are summarized as follows:


	For the Six Months Ended June 30, 2016
	Weighted Average Interest Rate								Charge-
(dollars in thousands)	Number of Loans		Pre-Modification			Post- Modification			off Amount		Capitalized Interest
Loan Category:
Multi-family		1		4.63	%		4.00	%	$	—	$	—
One-to-four family		3		3.62			3.07			—		6
Commercial and industrial		2		3.30			3.20			47		—

Total		6							$	47	$	6


	For the Twelve Months Ended December 31, 2015
	Weighted Average Interest Rate								Charge-
(dollars in thousands)	Number of Loans		Pre-Modification			Post- Modification			off Amount		Capitalized Interest
Loan Category:
One-to-four family		4		4.02	%		2.72	%	$	—	$	6
Commercial and industrial		2		3.40			3.52			33		—
Other		2		4.58			2.00			—		2

Total		8							$	33	$	8

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 were in bankruptcy or were 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, 2016:


(dollars in thousands)	Amount		Percent of Covered Loans
Loan Category:
One-to-four family	$	1,775,616		93.9	%
Other loans		115,267		6.1

Total covered loans	$	1,890,883		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, 2016 and December 31, 2015, the unpaid principal balance of covered loans was $2.3 billion and $2.5 billion, respectively. The carrying value of such loans was $1.9 billion and $2.1 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, 2016, changes in the accretable yield for covered loans were as follows:


(in thousands)	Accretable Yield
Balance at beginning of period	$	803,145
Reclassification from non-accretable difference		8,348
Accretion		(66,193	)

Balance at end of period	$	745,300

In the preceding table, the line item “Reclassification from non-accretable difference” includes changes in cash flows that the Company does not expect to collect due to changes in prepayment assumptions, changes in interest rates on variable rate loans, and changes in loss assumptions. As of the Company’s most recent quarterly evaluation, prepayment assumptions increased, which resulted in a decrease in future expected interest cash flows and, consequently, a decrease in the accretable yield. The effect of this decrease was more than offset by an improvement in the underlying credit assumptions coupled with coupon rates on variable rate loans resetting slightly higher, which resulted in an increase in future expected interest cash flows and, consequently, an increase in the accretable yield.

Reflecting the foreclosure of certain loans acquired in the AmTrust and Desert Hills acquisitions, the Company owns certain other real estate owned (“OREO”) that is covered under the its 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, 2016 and December 31, 2015:


(in thousands)	June 30, 2016		December 31, 2015
Covered Loans 90 Days or More Past Due:
One-to-four family	$	126,615	$	130,626
Other loans		6,524		6,556

Total covered loans 90 days or more past due	$	133,139	$	137,182

The following table presents information regarding the Company’s covered loans that were 30 to 89 days past due at June 30, 2016 and December 31, 2015:


(in thousands)	June 30, 2016		December 31, 2015
Covered Loans 30-89 Days Past Due:
One-to-four family	$	26,658	$	30,455
Other loans		1,063		2,369

Total covered loans 30-89 days past due	$	27,721	$	32,824

At June 30, 2016, the Company had $27.7 million of covered loans that were 30 to 89 days past due, and covered loans of $133.1 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 $1.7 billion at June 30, 2016 and was considered current at that date.

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 and six months ended June 30, 2016, the Company recorded recoveries of losses on covered loans of $1.8 million and $4.7 million, respectively. The recoveries were largely due to an increase in expected cash flows in the acquired portfolios of one-to-four family and home equity loans, and were partly offset by FDIC indemnification expense of $1.5 million and $3.8 million respectively, that was recorded in “Non-interest income.”

The Company recorded a provision for losses on covered loans of $2.2 million and $3.1 million, respectively, in the three and six months ended June 30, 2015. The provision was largely due to credit deterioration in the acquired portfolios of one-to-four family and home equity loans, and was partly offset by FDIC indemnification income of $1.8 million and $2.5 million, respectively, that was recorded in “Non-interest income” in the corresponding period.

Note 6. Allowances for Loan Losses

The following tables provide additional 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, 2016:
Loans individually evaluated for impairment	$	—	$	—	$	—
Loans collectively evaluated for impairment		127,127		24,201		151,328
Acquired loans with deteriorated credit quality		13,300		15,080		28,380

Total	$	140,427	$	39,281	$	179,708


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2015:
Loans individually evaluated for impairment	$	—	$	—	$	—
Loans collectively evaluated for impairment		122,712		22,484		145,196
Acquired loans with deteriorated credit quality		14,583		18,740		33,323

Total	$	137,295	$	41,224	$	178,519

The following tables provide additional information regarding the methods used to evaluate the Company’s loan portfolio for impairment:


(in thousands)	Mortgage		Other		Total
Loans Receivable at June 30, 2016:
Loans individually evaluated for impairment	$	25,197	$	10,628	$	35,825
Loans collectively evaluated for impairment		35,126,712		1,609,882		36,736,594
Acquired loans with deteriorated credit quality		1,780,989		115,877		1,896,866

Total	$	36,932,898	$	1,736,387	$	38,669,285


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2015:
Loans individually evaluated for impairment	$	47,480	$	4,474	$	51,954
Loans collectively evaluated for impairment		34,209,870		1,470,321		35,680,191
Acquired loans with deteriorated credit quality		1,924,255		144,178		2,068,433

Total	$	36,181,605	$	1,618,973	$	37,800,578

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, 2016 and 2015:


	June 30,
	2016									2015
(in thousands)	Mortgage			Other			Total			Mortgage			Other			Total
Balance, beginning of period	$	124,478		$	22,646		$	147,124		$	122,616		$	17,241		$	139,857
Charge-offs		(153	)		(1,098	)		(1,251	)		(655	)		(375	)		(1,030	)
Recoveries		1,140			581			1,721			1,640			1,207			2,847
Transfer from the allowance for losses on covered loans ⁽¹⁾		—			—			—			2,250			166			2,416
Provision for (recovery of) non-covered loan losses		3,231			2,234			5,465			(8,156	)		5,414			(2,742	)

Balance, end of period	$	128,696		$	24,363		$	153,059		$	117,695		$	23,653		$	141,348

(1)	Represents the allowance associated with $14.2 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 tables present additional information about the Company’s impaired non-covered loans at June 30, 2016 and December 31, 2015:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired Loans with No Related Allowance:
Multi-family	$	11,106	$	13,273	$	—	$	17,190	$	325
Commercial real estate		11,144		16,859		—		12,114		101
One-to-four family		2,948		3,597		—		3,064		47
Acquisition, development, and construction		—		—		—		879		—
Other		10,627		11,181		—		8,057		111

Total impaired loans	$	35,825	$	44,910	$	—	$	41,304	$	584


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired Loans with No Related Allowance:
Multi-family	$	27,464	$	29,379	$	—	$	30,965	$	1,320
Commercial real estate		13,995		15,480		—		25,066		383
One-to-four family		3,384		8,929		—		2,302		75
Acquisition, development, and construction		2,637		3,035		—		1,086		148
Other		4,474		4,794		—		8,386		118

Total impaired loans	$	51,954	$	61,617	$	—	$	67,805	$	2,044

As indicated in the preceding tables, the Company had no impaired non-covered loans with an allowance recorded at June 30, 2016 or December 31, 2015.

Allowance for Losses on Covered Loans

Covered loans are reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust Bank and Desert Hills Bank 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 are 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 are 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, 2016 and 2015:


	June 30,
(in thousands)	2016			2015
Balance, beginning of period	$	31,395		$	45,481
(Recovery of) provision for losses on covered loans		(4,746	)		3,083
Transfer to the allowance for losses on non-covered loans ⁽¹⁾		—			(2,416	)

Balance, end of period	$	26,649		$	46,148

(1)	Represents the allowance associated with $14.2 million of loans acquired in the Desert Hills Bank 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, 2016 and December 31, 2015:


(in thousands)	June 30, 2016		December 31, 2015
Wholesale Borrowings:
FHLB advances	$	11,614,400	$	13,463,800
Repurchase agreements		1,500,000		1,500,000
Fed funds purchased		435,000		426,000

Total wholesale borrowings	$	13,549,400	$	15,389,800
Junior subordinated debentures		358,739		358,605

Total borrowed funds	$	13,908,139	$	15,748,405

The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at June 30, 2016:


	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight and Continuous		Up to 30 Days		30–90 Days		Greater than 90 Days
GSE debentures and mortgage-related securities	$	—	$	—	$	—	$	1,500,000

At June 30, 2016, the Company had $75.2 million in restricted cash which serves as collateral for certain repurchase agreements. There was no restricted cash at December 31, 2015.

At June 30, 2016 and December 31, 2015, the Company had $358.7 million and $358.6 million, respectively, of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by statutory business trusts (the “Trusts”) that issued guaranteed capital securities.

The Trusts are accounted for as unconsolidated subsidiaries in accordance with GAAP. The proceeds of each issuance were invested in a series of junior subordinated debentures of the Company and the underlying assets of each statutory business trust are the relevant debentures. The Company has fully and unconditionally guaranteed the obligations under each trust’s capital securities to the extent set forth in a guarantee by the Company to each trust. The Trusts’ capital securities are each subject to mandatory redemption, in whole or in part, upon repayment of the debentures at their stated maturity or earlier redemption. The following junior subordinated debentures were outstanding at June 30, 2016:


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	%	$	144,813	$	138,463		Nov. 4, 2002		Nov. 1, 2051		Nov. 4, 2007 ⁽¹⁾
New York Community Capital Trust X		2.253			123,712		120,000		Dec. 14, 2006		Dec. 15, 2036		Dec. 15, 2011 ⁽²⁾
PennFed Capital Trust III		3.903			30,928		30,000		June 2, 2003		June 15, 2033		June 15, 2008 ⁽²⁾
New York Community Capital Trust XI		2.281			59,286		57,500		April 16, 2007		June 30, 2037		June 30, 2012 ⁽²⁾

Total junior subordinated debentures				$	358,739	$	345,963

(1)	Callable subject to certain conditions as described in the prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 4, 2002.

(2)	Callable from this date forward.

Note 8. Mortgage Servicing Rights

In accordance with ASC 860-50, the Company records a separate servicing asset representing the right to service third-party loans. MSRs are initially recorded at their fair value as a component of the sale proceeds. The fair values of the MSRs are based on an analysis of discounted cash flows that incorporates estimates of (1) market servicing costs, (2) market-based estimates of ancillary servicing revenue, (3) market-based prepayment rates, and (4) market profit margins.

MSRs are subsequently measured at either fair value or amortized in proportion to, and over the period of, estimated net servicing income. The Company elects one of those methods on a class basis. A class is determined based on (1) the availability of market inputs used in determining the fair value of servicing assets, and/or (2) the Company’s method for managing the risks of servicing assets.

The Company had MSRs of $194.0 million and $247.7 million, respectively, at June 30, 2016 and December 31, 2015. Both period-end balances consisted of two classes of MSRs for which the Company separately managed the economic risk: residential MSRs and participation MSRs (i.e., MSRs on loans sold through participations).

The total unpaid principal balance of loans serviced for others was $25.1 billion and $24.2 billion at June 30, 2016 and December 31, 2015, respectively.

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 as “Mortgage banking income” which is included in “Non-interest income” in the Consolidated Statements of Income and Comprehensive Income. MSRs do not trade in an active open market with readily observable prices. Accordingly, the Company utilizes a third-party valuation specialist to determine the fair value of its MSRs. This specialist determines fair value based on the present value of estimated future net servicing income cash flows, and incorporates assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The specialist and the Company evaluate, and periodically adjust, as necessary, these underlying inputs and assumptions to reflect market conditions and changes in the assumptions that a market participant would consider in valuing MSRs.

The value of residential MSRs at any given time is significantly affected by the mortgage interest rates that are then available in the marketplace; these, in turn, influence mortgage loan prepayment speeds. The rate of prepayment of residential loans serviced is the most significant estimate involved in the measurement process. Actual prepayment rates differ from those projected by management due to changes in a variety of economic factors, including prevailing interest rates and the availability of alternative financing sources to borrowers.

During periods of declining interest rates, the value of residential MSRs generally declines as an increase in mortgage refinancing activity results in an increase in prepayments and a decrease in the carrying value of residential MSRs through a charge to earnings in the current period. Conversely, during periods of rising interest rates, the value of residential MSRs generally increases as mortgage refinancing activity declines and actual prepayments of the loans being serviced occurs more slowly than had been projected, resulting in increases in the carrying value of residential MSRs and servicing income than previously projected amounts. Accordingly, the residential MSRs actually realized, could differ from the amounts initially recorded.

Participation MSRs are initially carried at fair value and are subsequently amortized and carried at the lower of their fair value or amortized amount. The amortization is recorded in proportion to, and over the period of, estimated net servicing income, with impairment of those servicing assets evaluated through an assessment of the fair value of those assets via a discounted cash-flow method. The net carrying value is compared to its discounted estimated future net cash flows to determine whether adjustments should be made to carrying values or amortization schedules. Impairment of participation MSRs is recognized through a valuation allowance and a charge to current-period earnings if it is considered to be temporary or through a direct write-down of the asset and a charge to current-period earnings if it is considered other than temporary. The predominant risk characteristics of the underlying loans that are used to stratify the participation MSRs for measurement purposes generally include the (1) loan origination date, (2) loan rate, (3) loan type and size, (4) loan maturity date, and (5) geographic location. Changes in the carrying value of participation MSRs due to amortization or declines in fair value (i.e., impairment), if any, are reported in “Other income” in the period during which such changes occur. In the six months ended June 30, 2016, there was no impairment related to the Company’s participation MSRs.

The following tables set forth the changes in the balances of residential MSRs and participation MSRs for the periods indicated:


	For the Three Months Ended
	June 30, 2016						June 30, 2015
(in thousands)	Residential			Participation			Residential			Participation
Carrying value, beginning of period	$	208,087		$	5,181		$	220,371		$	—
Additions		11,232			1,018			15,981			2,828
Increase (decrease) in fair value:
Due to changes in interest rates		(13,521	)		—			25,957			—
Due to model assumption changes ⁽¹⁾		(4,250	)		—			—			—
Due to loan payoffs		(10,371	)		—			(10,263	)		—
Due to passage of time and other changes		(2,846	)		—			(1,083	)		—
Amortization		—			(536	)		—			(153	)

Carrying value, end of period	$	188,331		$	5,663		$	250,963		$	2,675

(1)	Represents changes in fair value driven by changes to the inputs to the valuation model related to assumed prepayment speeds.


	For the Six Months Ended
	June 30, 2016						June 30, 2015
(in thousands)	Residential			Participation			Residential			Participation
Carrying value, beginning of period	$	243,389		$	4,345		$	227,297		$	—
Additions		19,180			2,268			30,998			2,828
Increase (decrease) in fair value:
Due to changes in interest rates		(37,807	)		—			14,859			—
Due to model assumption changes ⁽¹⁾		(13,088	)					—			—
Due to loan payoffs		(19,121	)					(20,479	)		—
Due to passage of time and other changes		(4,222	)		—			(1,712	)		—
Amortization		—			(950	)		—			(153	)

Carrying value, end of period	$	188,331		$	5,663		$	250,963		$	2,675

(1)	Represents changes in fair value driven by changes to the inputs to the valuation model related to assumed prepayment speeds.

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, 2016			December 31, 2015
Expected weighted average life		71 months			92 months
Constant prepayment speed		11.54	%		7.35	%
Discount rate		10.02			10.01
Primary mortgage rate to refinance		3.53			4.03
Cost to service (per loan per year):
Current	$	64		$	63
30-59 days or less delinquent		201			213
60-89 days delinquent		351			313
90-119 days delinquent		451			413
120 days or more delinquent		851			563

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,
	2016						2015
(in thousands)	Pension Benefits			Post-Retirement Benefits			Pension Benefits			Post-Retirement Benefits
Components of net periodic (credit) expense:
Interest cost	$	1,470		$	160		$	1,516		$	175
Service cost		—			1			—			1
Expected return on plan assets		(3,906	)		—			(4,390	)		—
Amortization of prior-service costs		—			(62	)		—			(62	)
Amortization of net actuarial loss		2,262			81			2,052			96

Net periodic (credit) expense	$	(174	)	$	180		$	(822	)	$	210


	For the Six Months Ended June 30,
	2016						2015
(in thousands)	Pension Benefits			Post-Retirement Benefits			Pension Benefits			Post-Retirement Benefits
Components of net periodic (credit) expense:
Interest cost	$	2,940		$	320		$	3,032		$	350
Service cost		—			2			—			2
Expected return on plan assets		(7,812	)		—			(8,780	)		—
Amortization of prior-service costs		—			(124	)		—			(124	)
Amortization of net actuarial loss		4,524			162			4,104			192

Net periodic (credit) expense	$	(348	)	$	360		$	(1,644	)	$	420

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, 2016. The Company does not expect to make any contributions to its pension plan in 2016.

Note 10. Stock-Based Compensation

At June 30, 2016, the Company had 9,610,060 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 2,692,652 shares of restricted stock during the six months ended June 30, 2016. The shares had an average fair value of $15.22 per share on the date of grant and a vesting period of five years. The six-month amount includes 121,200 shares that were granted in the second quarter with an average fair value of $15.07 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 $16.4 million and $14.6 million, respectively, in the six months ended June 30, 2016 and 2015, including $8.2 million and $7.5 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, 2016:


	For the Six Months Ended June 30, 2016
	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		6,362,117		$	15.44
Granted		2,692,652			15.22
Vested		(1,935,663	)		15.38
Canceled		(75,200	)		15.17

Unvested at end of period		7,043,906			15.38

As of June 30, 2016, unrecognized compensation cost relating to unvested restricted stock totaled $94.4 million. This amount will be recognized over a remaining weighted average period of 3.4 years.

The following table summarizes the changes that occurred during the six months ended at June 30, 2016 with regard to the Company’s outstanding stock options:


	For the Six Months Ended June 30, 2016
	Number of Stock Options			Weighted Average Exercise Price
Stock options outstanding, beginning of year		2,400		$	16.88
Exercised		—			—
Expired		(2,400	)		16.88

Stock options outstanding, end of period		—			—
Options exercisable, end of period		—			—

There were no stock options outstanding at June 30, 2016 and no options exercised during the six months ended at that date.

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, 2016 and December 31, 2015, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2016
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting Adjustments⁽¹⁾			Total Fair Value
Assets:
Securities Available for Sale:
Municipal bonds	$	—		$	811		$	—	$	—		$	811
Capital trust notes		—			6,793			—		—			6,793
Preferred stock		100,167			28,876			—		—			129,043
Mutual funds and common stock		—			17,623			—		—			17,623

Total securities available for sale	$	100,167		$	54,103		$	—	$	—		$	154,270

Other Assets:
Loans held for sale	$	—		$	609,894		$	—	$	—		$	609,894
Mortgage servicing rights		—			—			188,331		—			188,331
Interest rate lock commitments		—			—			10,133		—			10,133
Derivative assets-other ⁽²⁾		9,303			8,184			—		(9,053	)		8,434
Liabilities:
Derivative liabilities	$	(635	)	$	(12,441	)	$	—	$	11,985		$	(1,091	)

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

(2)	Includes $4.9 million to purchase Treasury options.


	Fair Value Measurements at December 31, 2015
(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	$	—		$	53,852		$	—	$	—		$	53,852

Total mortgage-related securities	$	—		$	53,852		$	—	$	—		$	53,852

Other Securities Available for Sale:
Municipal bonds	$	—		$	795		$	—	$	—		$	795
Capital trust notes		—			6,964			—		—			6,964
Preferred stock		96,641			28,731			—		—			125,372
Mutual funds and common stock		—			17,272			—		—			17,272

Total other securities	$	96,641		$	53,762		$	—	$	—		$	150,403

Total securities available for sale	$	96,641		$	107,614		$	—	$	—		$	204,255

Other Assets:
Loans held for sale	$	—		$	367,221		$	—	$	—		$	367,221
Mortgage servicing rights		—			—			243,389		—			243,389
Interest rate lock commitments		—			—			2,526		—			2,526
Derivative assets-other ⁽²⁾		1,875			1,342			—		(1,024	)		2,193
Liabilities:
Derivative liabilities	$	(1,539	)	$	(2,783	)	$	—	$	3,986		$	(336	)

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

(2)	Includes $1.9 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.

Periodically, the Company uses fair values supplied by independent pricing services to corroborate the fair values derived from the pricing models. In addition, the Company reviews the fair values supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness. The Company challenges pricing service valuations that appear to be unusual or unexpected.

The Company carries loans held for sale originated by its mortgage banking operation 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.

Mortgage servicing rights (“MSRs”) do not trade in an active open market with readily observable prices. The Company bases the fair value of its MSRs on the present value of estimated future net servicing income cash flows, utilizing a third-party valuation specialist. The specialist estimates future net servicing income cash flows with assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The Company periodically adjusts the underlying inputs and assumptions to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset. MSR fair value measurements use significant unobservable inputs and, accordingly, are classified within Level 3.

Exchange-traded derivatives that are valued using quoted prices are classified within Level 1 of the valuation hierarchy. The majority of the Company’s derivative positions are valued using internally developed models that use readily observable market parameters as their basis. These are parameters that are actively quoted and can be validated by external sources, including industry pricing services. Where the types of derivative products have been in existence for some time, the Company uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit quality of the counterparty. Furthermore, many of these models do not contain a high level of subjectivity, as the methodologies used in the models do not require significant judgment, and inputs to the models are readily observable from actively quoted markets, as is the case for “plain vanilla” interest rate swaps and option contracts. Such instruments are generally classified within Level 2 of the valuation hierarchy. Derivatives that are valued based on models with significant unobservable market parameters, and that are normally traded less actively, have trade activity that 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. The Company’s loans held for sale consist of one-to-four family mortgage loans, none of which was 90 days or more past due at June 30, 2016. 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, 2016						December 31, 2015
(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	$	609,894	$	587,517	$	22,377	$	367,221	$	359,587	$	7,634

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)	2016			2015		2016			2015
Loans held for sale	$	12,143		$	17	$	19,043		$	4,386
Mortgage servicing rights		(30,988	)		14,611		(74,238	)		(7,332	)

Total (loss) gain	$	(18,845	)	$	14,628	$	(55,195	)	$	(2,946	)

(1)	Does not include the effect of hedging activities, which is included in “Other non-interest income.”

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, 2016 and 2015, a roll-forward of the balance sheet amounts (including changes in fair value) for financial instruments classified in Level 3 of the valuation hierarchy:


(in thousands)	Fair Value January 1, 2016		Total Realized/Unrealized Gains/(Losses) Recorded in					Issuances		Settlements		Transfers to/(from) Level 3		Fair Value at June 30, 2016		Change in Unrealized Gains/ (Losses) Related to Instruments Held at June 30, 2016
(in thousands)	Fair Value January 1, 2016		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements		Transfers to/(from) Level 3		Fair Value at June 30, 2016
Mortgage servicing rights	$	243,389	$	(74,238	)	$	—	$	19,180	$	—	$	—	$	188,331	$	(60,163	)
Interest rate lock commitments		2,526		7,607			—		—		—		—		10,133		10,133


(in thousands)	Fair Value January 1, 2015		Total Realized/Unrealized Gains/(Losses) Recorded in					Issuances		Settlements		Transfers to/(from) Level 3		Fair Value at June 30, 2015		Change in Unrealized Gains/ (Losses) Related to Instruments Held at June 30, 2015
(in thousands)	Fair Value January 1, 2015		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements		Transfers to/(from) Level 3		Fair Value 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

The Company’s policy is to recognize transfers in and out of Levels 1, 2, and 3 as of the end of the reporting period. There were no transfers in or out of Levels 1, 2, or 3 during the six months ended June 30, 2016. 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.

For Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(dollars in thousands)

Fair Value at
Jun. 30, 2016

Valuation Technique

Significant Unobservable Inputs

Significant
Unobservable
Input Value

Mortgage servicing rights

188,331

Discounted Cash Flow

Weighted Average Constant Prepayment Rate ⁽¹⁾

11.54

Weighted Average Discount Rate

10.02

Interest rate lock commitments

10,133

Discounted Cash Flow

Weighted Average Closing Ratio

75.74

(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, 2016 and December 31, 2015, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2016 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain impaired loans ⁽¹⁾	$	—	$	—	$	3,517	$	3,517
Other assets ⁽²⁾		—		—		9,109		9,109

Total	$	—	$	—	$	12,626	$	12,626

(1)	Represents the fair value of certain impaired loans, based on the value of the collateral.

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


	Fair Value Measurements at December 31, 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 ⁽¹⁾	$	—	$	—	$	3,930	$	3,930
Other assets ⁽²⁾		—		—		7,982		7,982

Total	$	—	$	—	$	11,912	$	11,912

(1)	Represents the fair value of certain impaired loans, based on the value of the collateral.

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

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

Other Fair Value Disclosures

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

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

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, 2016 and December 31, 2015:


	June 30, 2016
					Fair Value Measurement Using
(in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents	$	674,289	$	674,289	$	674,289		$	—		$	—
Securities held to maturity		3,822,561		4,093,734		—			4,092,947			787
FHLB stock ⁽¹⁾		586,835		586,835		—			586,835			—
Loans, net		39,121,599		39,569,245		—			—			39,569,245
Financial Liabilities:
Deposits	$	28,882,992	$	28,894,119	$	21,865,579	⁽²⁾	$	7,028,540	⁽³⁾	$	—
Borrowed funds		13,908,139		13,996,619		—			13,996,619			—

(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, 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	$	537,674	$	537,674	$	537,674		$	—		$	—
Securities held to maturity		5,969,390		6,108,529		—			6,107,697			832
FHLB stock ⁽¹⁾		663,971		663,971		—			663,971			—
Loans, net		38,011,995		38,245,434		—			—			38,245,434
Financial Liabilities:
Deposits	$	28,426,758	$	28,408,915	$	23,114,271	⁽²⁾	$	5,294,644	⁽³⁾	$	—
Borrowed funds		15,748,405		15,685,616		—			15,685,616			—

(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 maturities 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 that of any other company.

Mortgage Servicing Rights

MSRs do not trade in an active market with readily observable prices. Accordingly, the Company bases the fair value of its MSRs on a valuation performed by a third-party valuation specialist. This specialist determines fair value based on the present value of estimated future net servicing income cash flows, and incorporates assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The specialist and the Company evaluate, and periodically adjust, as necessary, these underlying inputs and assumptions to reflect market conditions and changes in the assumptions that a market participant would consider in valuing MSRs.

Derivative Financial Instruments

For exchange-traded futures and exchange-traded options, fair value is based on observable quoted market prices in an active market. For forward commitments to buy and sell loans and mortgage-backed securities, fair value is based on observable market 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 (“CDs”) represent contractual cash flows, discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. These estimated fair values do not include the intangible value of core deposit relationships, which comprise a significant portion of the Company’s deposit base.

Borrowed Funds

The estimated fair value of borrowed funds is based either on bid quotations received from securities dealers or the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with similar maturities and structures.

Off-Balance Sheet Financial Instruments

The fair values of commitments to extend credit and unadvanced lines of credit are estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the creditworthiness of the potential borrowers. The estimated fair values of such off-balance sheet financial instruments were insignificant at June 30, 2016 and December 31, 2015.

Note 12. Derivative Financial Instruments

The Company’s derivative financial instruments consist of financial forward and futures contracts, interest rate swaps, IRLCs, and options. These derivatives relate to mortgage banking operations, residential 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, other changing market conditions, and the types of assets held.

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 $3.6 billion at June 30, 2016. 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 uses interest rate swaps to hedge the fair value of its residential MSRs. 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, 2016:


	June 30, 2016
(in thousands)	Notional Amount		Unrealized ⁽¹⁾
(in thousands)	Notional Amount		Gain		Loss
Treasury options	$	595,000	$	216	$	497
Treasury futures		—		—		—
Eurodollar futures		175,000		—		138
Swaps		200,000		4,202		—
Forward commitments to sell loans/mortgage-backed securities		1,144,000		—		12,441
Forward commitments to buy loans/mortgage-backed securities		725,000		8,184		—
Interest rate lock commitments		739,902		10,133		—

Total derivatives	$	3,578,902	$	22,735	$	13,076

(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 its residential MSRs. The general strategy for mitigating this risk is to purchase derivative instruments, the value of which changes in the opposite direction of interest rates. This action partially offsets changes in the value of its servicing assets, which tends to move in the same direction as interest rates. Accordingly, the Company purchases Eurodollar futures and call options on Treasury securities, and enters into forward contracts to purchase mortgage-backed securities.

The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the periods indicated:


	Gain (Loss) Included in Mortgage Banking Income
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands)	2016			2015			2016			2015
Treasury options	$	2,633		$	(8,490	)	$	9,864		$	(5,074	)
Treasury and Eurodollar futures		(121	)		(22	)		(55	)		361
Swaps		2,682			—			4,178			—
Forward commitments to buy/sell loans/mortgage-backed securities		(2,589	)		2,018			(1,720	)		3,790

Total gain/(loss)	$	2,605		$	(6,494	)	$	12,267		$	(923	)

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 the 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, 2016
(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		Gross Amounts Not Offset in the Consolidated Statement of Condition				Net Amount
(in thousands)	Gross Amount of Recognized Assets ⁽¹⁾		Gross Amount Offset in the Statement of Condition				Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	27,620	$	9,053	$	18,567	$	—	$	—	$	18,567

(1)	Includes $4.9 million to purchase Treasury options.


	December 31, 2015
(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		Gross Amounts Not Offset in the Consolidated Statement of Condition				Net Amount
(in thousands)	Gross Amount of Recognized Assets ⁽¹⁾		Gross Amount Offset in the Statement of Condition				Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	5,743	$	1,024	$	4,719	$	—	$	—	$	4,719

(1)	Includes $1.9 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, 2016
(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		Gross Amounts Not Offset in the Consolidated Statement of Condition				Net Amount
(in thousands)	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Statement of Condition				Financial Instruments		Cash Collateral Pledged		Net Amount
Derivatives	$	13,076	$	11,985	$	1,091	$	—	$	—	$	1,091

	December 31, 2015
(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		Gross Amounts Not Offset in the Consolidated Statement of Condition				Net Amount
(in thousands)	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Statement of Condition				Financial Instruments		Cash Collateral Pledged		Net Amount
Derivatives	$	4,322	$	3,986	$	336	$	—	$	—	$	336

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 number of loans produced and the number of full-time equivalent employees. Income taxes are allocated to the various segments based on taxable income and statutory rates applicable to the segment.

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 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, 2016, on an internally managed accounting basis:


	For the Three Months Ended June 30, 2016
(in thousands)	Banking Operations			Residential Mortgage Banking			Total Company
Net interest income	$	321,663		$	3,910		$	325,573
Provision for loan losses		895			—			895
Non-interest income:
Third party ⁽¹⁾		29,899			7,467			37,366
Inter-segment		(4,317	)		4,317			—

Total non-interest income		25,582			11,784			37,366
Non-interest expense ⁽²⁾		144,152			16,759			160,911

Income before income tax expense		202,198			(1,065	)		201,133
Income tax expense (benefit)		75,097			(424	)		74,673

Net income (loss)	$	127,101		$	(641	)	$	126,460

Identifiable segment assets (period-end)	$	48,137,359		$	898,388		$	49,035,747

(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, 2016, on an internally managed accounting basis:


	For the Six Months Ended June 30, 2016
(in thousands)	Banking Operations			Residential Mortgage Banking			Total Company
Net interest income	$	646,580		$	6,859		$	653,439
Provision for loan losses		719			—			719
Non-Interest Income:
Third party⁽¹⁾		60,485			12,118			72,603
Inter-segment		(8,429	)		8,429			—

Total non-interest income		52,056			20,547			72,603

Non-interest expense⁽²⁾		286,202			33,157			319,359

Income before income tax expense		411,715			(5,751	)		405,964
Income tax expense (benefit)		151,912			(2,317	)		149,595

Net income (loss)	$	259,803		$	(3,434	)	$	256,369

Identifiable segment assets (period-end)	$	48,137,359		$	898,388		$	49,035,747

(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, 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
Recovery of 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.

Note 14. Impact of Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, ASU No. 2016-13 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however ASU No. 2016-13 will require that credit losses be presented as an allowance rather than as a write-down. ASU No. 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities may adopt ASU No. 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of evaluating the effects the adoption of ASU No. 2016-13 may have on the Company’s consolidated statements of condition and results of operations.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and accounting for forfeitures. The Company adopted ASU No. 2016-09 prospectively, effective for the first quarter of 2016. Upon adoption, the Company recorded an immaterial cumulative-effect adjustment to the opening balance of retained earnings. In addition, ASU No. 2016-09 requires that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than equity. This resulted in an immaterial benefit to income tax expense in the first quarter of 2016. Relative to forfeitures, ASU No. 2016-09 allows an entity’s accounting policy election to either continue to estimate the number of awards that are expected to vest, as under current guidance, or account for forfeitures when they occur. The Company has elected to continue its existing practice of estimating the number of awards that will be forfeited. The income tax effects of ASU No. 2016-09 on the statement of cash flows are now classified as cash flows from operating activities, rather than cash flows from financing activities. The Company elected to apply this cash flow classification guidance prospectively and, therefore, prior periods have not been adjusted. ASU No. 2016-09 also requires the presentation of certain employee withholding taxes as a financing activity on the Consolidated Statement of Cash Flows; this is consistent with the manner in which we have presented such employee withholding taxes in the past. Accordingly, no reclassification for prior periods is required.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” ASU No. 2016-02 will require organizations that lease assets (hereinafter referred to as “lessees”) to recognize as assets and liabilities on the balance sheet the respective rights and obligations created by those leases. Under ASU No. 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than twelve months. ASU No. 2016-02 also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. ASU No. 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early application will be permitted. The Company is in the process of evaluating the effects the adoption of ASU No. 2016-02 may have on the Company’s consolidated statements of condition and results of operations.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU No. 2016-01 require all equity investments to be measured at fair value, with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those resulting in consolidation of the investee). The amendments in ASU No. 2016-01 also require an entity to present separately in “Other comprehensive income” the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in ASU No. 2016-01 eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. (ASU No. 2016-01 is the final version of Proposed ASU No. 2013-220—Financial Instruments—Overall (Subtopic 825-10) and Proposed ASU No. 2013-221—Financial Instruments—Overall (Subtopic 825-10).) ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-01 is not expected to have a material effect on the Company’s consolidated statements 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 Accounting Standards 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 permitted only as of annual periods beginning after December 31, 2016, including interim reporting periods within that fiscal year. The Company is in the process of evaluating the effects the adoption of ASU No. 2014-09 may have on the Company’s consolidated statements of condition and results of operations.

ITEM 2.

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”).

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING LANGUAGE

This report, like many written and oral communications presented by New York Community Bancorp, Inc. and our authorized officers, may contain certain forward-looking statements regarding our prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of said safe harbor provisions.

Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. Although we believe that our plans, intentions, and expectations as reflected in these forward-looking statements are reasonable, we can give no assurance that they will be achieved or realized.

Our ability to predict results or the actual effects of our plans and strategies is inherently uncertain. Accordingly, actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained in this report.

There are a number of factors, many of which are beyond our control, that could cause actual conditions, events, or results to differ significantly from those described in our forward-looking statements. These factors include, but are not limited to:

•

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 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;

•

the ability to obtain shareholder and regulatory approval of any merger transactions we may propose (including regulatory approval of the proposed merger with Astoria Financial Corporation (“Astoria Financial”)) in a timely manner or otherwise;

•

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

•

risks relating to unanticipated costs of integration;

•

potential exposure to unknown or contingent liabilities of companies we have acquired, may acquire, or target for acquisition, including Astoria Financial;

•

failure to satisfy other closing conditions to any mergers we may propose, including the proposed merger with Astoria Financial;

•

the potential impact of the announcement or consummation of any merger we propose (including the proposed merger with Astoria Financial) on relationships with third parties, including customers, employees, and competitors;

•

failure to obtain applicable regulatory approvals for the payment of future dividends;

•

the ability to pay future dividends at currently expected rates;

•

the ability to hire and retain key personnel;

•

the ability to attract new customers and retain existing ones in the manner anticipated;

•

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;

•

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;

•

the ability to keep pace with, and implement on a timely basis, technological changes;

•

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;

•

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

•

natural disasters, war, or terrorist activities; and

•

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

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

Furthermore, 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.

You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this report. We do not assume any obligation to revise or update these forward-looking statements except as may be required by law.

RECONCILIATIONS OF STOCKHOLDERS’ EQUITY AND TANGIBLE STOCKHOLDERS’ EQUITY;

TOTAL ASSETS AND TANGIBLE ASSETS; AND THE RELATED MEASURES

(unaudited)

While stockholders’ equity, total assets, and book value per share are financial measures that are recorded in accordance with U.S. generally accepted accounting principles (“GAAP”), tangible stockholders’ equity, tangible assets, and the related tangible measures are not. Nevertheless, it is management’s belief that these non-GAAP measures should be disclosed in our SEC filings, earnings releases, and other investor communications, for the following reasons:

Tangible stockholders’ equity is an important indication of the Company’s ability to grow organically and through business combinations, as well as its ability to pay dividends and to engage in various capital management strategies.

Tangible stockholders’ equity, tangible book value per share, and the ratio of tangible stockholders’ equity to tangible assets are among the capital measures considered by current and prospective investors, both independent of, and in comparison with, its peers.

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. To calculate our tangible book value per share, we divide our tangible stockholders’ equity at the end of a period by the number of common shares outstanding at the same date.

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

The following table presents reconciliations of our stockholders’ equity and tangible stockholders’ equity, our total assets and tangible assets, and the related GAAP and non-GAAP profitability and capital measures at June 30, 2016 and December 31, 2015:


	June 30,			December 31,
(in thousands)	2016			2015
Stockholders’ Equity	$	6,039,112		$	5,934,696
Less: Goodwill		(2,436,131	)		(2,436,131	)
Core deposit intangibles		(1,146	)		(2,599	)

Tangible stockholders’ equity	$	3,601,835		$	3,495,966

Total Assets	$	49,035,747		$	50,317,796
Less: Goodwill		(2,436,131	)		(2,436,131	)
Core deposit intangibles		(1,146	)		(2,599	)

Tangible assets	$	46,598,470		$	47,879,066

Stockholders’ equity to total assets		12.32	%		11.79	%
Tangible stockholders’ equity to tangible assets		7.73			7.30

Book value per share	$	12.40		$	12.24
Tangible book value per share		7.40			7.21

Executive Summary

New York Community Bancorp, Inc. is the holding company for New York Community Bank (the “Community Bank”), with 226 branches in Metro New York, New Jersey, Ohio, Florida, and Arizona; and New York Commercial Bank (the “Commercial Bank”), with 30 branches in Metro New York. With assets of $49.0 billion at June 30, 2016, including loans, net, of $39.1 billion, we rank among the 25 largest U.S. bank holding companies.

Chartered in the State of New York, the Community Bank and the Commercial Bank are subject to regulation by the Federal Deposit Insurance Corporation (the “FDIC”), the Consumer Financial Protection Bureau, and the New York State Department of Financial Services. In addition, the holding company is subject to regulation by the Board of Governors of the Federal Reserve System (the “FRB”), the U.S. Securities and Exchange Commission (the “SEC”), and the requirements of the New York Stock Exchange, where shares of our common stock are traded under the symbol “NYCB”.

As a publicly traded company, our mission is to provide our shareholders with a solid return on their investment by producing a strong financial performance, maintaining a solid capital position, and engaging in corporate strategies that enhance the value of their shares. In support of this mission, we maintain a consistent business model, as described below:

•

We originate multi-family loans on non-luxury apartment buildings in New York City that are subject to rent regulation and feature below-market rents;

•

We underwrite our loans in accordance with conservative credit standards in order to maintain a high level of asset quality;

•

We originate one-to-four family loans through our proprietary web-based mortgage banking platform and sell the vast majority of those loans to governme