Edgar Filing: NEW YORK COMMUNITY BANCORP INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018

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, smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)


Large accelerated filer	☒	Accelerated filer ☐
Non-Accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller Reporting Company ☐
		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

490,360,806

Number of shares of common stock outstanding at

August 2, 2018

NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

Quarter Ended June 30, 2018


	Glossary
	List of Abbreviations and Acronyms

		Page No.

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Condition as of June 30, 2018 (unaudited) and December 31, 2017		1

	Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)		2

	Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2018 (unaudited)		3

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 (unaudited)		4

	Notes to the Consolidated Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		66

Item 4.	Controls and Procedures		66

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings		68

Item 1A.	Risk Factors		68

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		68

Item 3.	Defaults upon Senior Securities		68

Item 4.	Mine Safety Disclosures		68

Item 5.	Other Information		68

Item 6.	Exhibits		69

Signatures			70

Exhibits

GLOSSARY

BASIS POINT

Throughout this filing, the changes that occur in certain financial measures are reported in terms of basis points. Each basis point is equal to one hundredth of a percentage point, or 0.01%.

BOOK VALUE PER COMMON SHARE

Book value per common share refers to the amount of common stockholders’ equity attributable to each outstanding share of common stock, and is calculated by dividing total stockholders’ equity less preferred stock at the end of a period, by the number of shares outstanding at the same date.

BROKERED DEPOSITS

Refers to funds obtained, directly or indirectly, by or through deposit brokers that are then deposited into one or more deposit accounts.

CHARGE-OFF

Refers to the amount of a loan balance that has been written off against the allowance for loan losses.

COMMERCIAL REAL ESTATE LOAN

A mortgage loan secured by either an income-producing property owned by an investor and leased primarily for commercial purposes or, to a lesser extent, an owner-occupied building used for business purposes. The commercial real estate loans in our portfolio are typically secured by office buildings, retail shopping centers, and light industrial centers with multiple tenants, or mixed-use properties.

COST OF FUNDS

The interest expense associated with interest-bearing liabilities, typically expressed as a ratio of interest expense to the average balance of interest-bearing liabilities for a given period.

CRE CONCENTRATION RATIO

Refers to the sum of multi-family, non-owner occupied commercial real estate, and acquisition, development, and construction loans divided by total risk-based capital.

DEBT SERVICE COVERAGE RATIO

An indication of a borrower’s ability to repay a loan, the debt service coverage ratio generally measures the cash flows available to a borrower over the course of a year as a percentage of the annual interest and principal payments owed during that time.

DIVIDEND PAYOUT RATIO

The percentage of our earnings that is paid out to shareholders in the form of dividends. It is determined by dividing the dividend paid per share during a period by our diluted earnings per share during the same period of time.

EFFICIENCY RATIO

Measures total operating expenses as a percentage of the sum of net interest income and non-interest income.

GOODWILL

Refers to the difference between the purchase price and the fair value of an acquired company’s assets, net of the liabilities assumed. Goodwill is reflected as an asset on the balance sheet and is tested at least annually for impairment.

GOVERNMENT-SPONSORED ENTERPRISES

Refers to a group of financial services corporations that were created by the United States Congress to enhance the availability, and reduce the cost, of credit to certain targeted borrowing sectors, including home finance. The GSEs include, but

are not limited to, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Federal Home Loan Banks.

GSE OBLIGATIONS

Refers to GSE mortgage-related securities (both certificates and collateralized mortgage obligations) and GSE debentures.

INTEREST RATE SENSITIVITY

Refers to the likelihood that the interest earned on assets and the interest paid on liabilities will change as a result of fluctuations in market interest rates.

INTEREST RATE SPREAD

The difference between the yield earned on average interest-earning assets and the cost of average interest-bearing liabilities.

LOAN-TO-VALUE RATIO

Measures the balance of a loan as a percentage of the appraised value of the underlying property.

MORTGAGE BANKING INCOME

Refers to the income generated through our mortgage banking business, which is recorded in non-interest income. Mortgage banking income has two components: income generated from the origination of one-to-four family loans for sale (income from originations) and income generated by servicing such loans (servicing income).

MULTI-FAMILY LOAN

A mortgage loan secured by a rental or cooperative apartment building with more than four units.

NET INTEREST INCOME

The difference between the interest income generated by loans, securities and money market instruments, and the interest expense produced by deposits and borrowed funds.

NET INTEREST MARGIN

Measures net interest income as a percentage of average interest-earning assets.

NON-ACCRUAL LOAN

A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because we no longer expect to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, we cease the accrual of interest owed, and previously accrued interest is reversed and charged against interest income. A loan generally is returned to accrual status when the loan is current and we have reasonable assurance that the loan will be fully collectible.

NON-PERFORMING LOANS AND ASSETS

Non-performing loans consist of non-accrual loans and loans that are 90 days or more past due and still accruing interest. Non-performing assets consist of non-performing loans, OREO, and repossessed assets.

OREO AND OTHER REPOSSESSED ASSETS

Includes assets owned by the Company which are acquired either through foreclosure or default.

RENT-REGULATED APARTMENTS

In New York City, where the vast majority of the properties securing our multi-family loans are located, the amount of rent that tenants may be charged on the apartments in certain buildings is restricted under certain rent-control and rent-stabilization laws. Rent-control laws apply to apartments in buildings that were constructed prior to February 1947. An apartment is said to be rent-controlled if the tenant has been living continuously in the apartment for a period of time beginning prior to July 1971. When a rent-controlled apartment is vacated, it typically becomes rent-stabilized. Rent-stabilized apartments are generally located in buildings with six or more units that were built between February 1947 and January 1974. Rent-controlled and -stabilized (together, rent-regulated) apartments tend to be more affordable to live in because of the applicable

regulations, and buildings with a preponderance of such rent-regulated apartments are therefore less likely to experience vacancies in times of economic adversity.

REPURCHASE AGREEMENTS

Repurchase agreements are contracts for the sale of securities owned or borrowed by the Banks with an agreement to repurchase those securities at an agreed-upon price and date. The Banks’ repurchase agreements are primarily collateralized by GSE obligations and other mortgage-related securities, and are entered into with either the FHLBs or various brokerage firms.

SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION

A bank holding company with total consolidated assets that average more than $250 billion over the four most recent quarters is designated a “Systemically Important Financial Institution” under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as revised by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.

WHOLESALE BORROWINGS

Refers to advances drawn by the Banks against their respective lines of credit with the FHLBs, their repurchase agreements with the FHLBs and various brokerage firms, and federal funds purchased.

YIELD

The interest income associated with interest-earning assets, typically expressed as a ratio of interest income to the average balance of interest-earning assets for a given period.

LIST OF ABBREVIATIONS AND ACRONYMS


ADC - Acquisition, development, and construction loan		FHLB-NY - Federal Home Loan Bank of New York

ALCO - Asset and Liability Management Committee		FOMC - Federal Open Market Committee

AMT - Alternative minimum tax		FRB - Federal Reserve Board

AmTrust - AmTrust Bank		FRB-NY - Federal Reserve Bank of New York

AOCL - Accumulated other comprehensive loss		Freddie Mac - Federal Home Loan Mortgage Corporation

ASC - Accounting Standards Codification		FTEs - Full-time equivalent employees

ASU - Accounting Standards Update		GAAP - U.S. generally accepted accounting principles

BOLI - Bank-owned life insurance		GNMA - Government National Mortgage Association

BP - Basis point(s)		GSEs - Government-sponsored enterprises

C&I - Commercial and industrial loan		HQLAs - High-quality liquid assets

CCAR - Comprehensive Capital Analysis and Review		IRLCs - Interest rate lock commitments

CDs - Certificates of deposit		LCR - Liquidity coverage ratio

CFPB - Consumer Financial Protection Bureau		LSA - Loss Share Agreements

CMOs - Collateralized mortgage obligations		LTV - Loan-to-value ratio

CMT - Constant maturity treasury rate		MBS – Mortgage-backed securities

CPI - Consumer Price Index		MSRs - Mortgage servicing rights

CPR - Constant prepayment rate		NIM - Net interest margin

CRA - Community Reinvestment Act		NOL - Net operating loss

CRE - Commercial real estate loan		NPAs - Non-performing assets

Desert Hills - Desert Hills Bank		NPLs - Non-performing loans

DIF - Deposit Insurance Fund		NPV - Net Portfolio Value

DFA - Dodd-Frank Wall Street Reform and Consumer Protection Act		NYSDFS - New York State Department of Financial Services

DSCR - Debt service coverage ratio		NYSE - New York Stock Exchange

EPS - Earnings per common share		OCC - Office of the Comptroller of the Currency

ERM - Enterprise Risk Management		OFAC - Office of Foreign Assets Control

ESOP - Employee Stock Ownership Plan		OREO - Other real estate owned

Fannie Mae - Federal National Mortgage Association		OTTI - Other-than-temporary impairment

FASB - Financial Accounting Standards Board		PCI - Purchased credit-impaired loans

FDI Act - Federal Deposit Insurance Act		SEC - U.S. Securities and Exchange Commission

FDIC - Federal Deposit Insurance Corporation		SIFI - Systemically Important Financial Institution

FHLB - Federal Home Loan Bank		TDRs - Troubled debt restructurings

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data)


	June 30, 2018			December 31, 2017
	(unaudited)
Assets:
Cash and cash equivalents	$	2,204,397		$	2,528,169
Securities:
Debt securities available-for-sale ($842,424 and $1,263,227 pledged, respectively)		4,122,883			3,531,427
Equity investments with readily determinable fair values, at fair value		31,766			--

Total securities		4,154,649			3,531,427

Loans held for sale		--			35,258
Loans held for investment, net of deferred loan fees and costs		39,447,825			38,387,971
Less: Allowance for loan losses		(160,652	)		(158,046	)

Loans held for investment, net		39,287,173			38,229,925

Total loans, net		39,287,173			38,265,183
Federal Home Loan Bank stock, at cost		653,075			603,819
Premises and equipment, net		359,725			368,655
Goodwill		2,436,131			2,436,131
Mortgage servicing rights ($2,505 and $2,729 measured at fair value, respectively)		4,362			6,100
Bank-owned life insurance		971,795			967,173
Other real estate owned and other repossessed assets		14,204			16,400
Other assets		383,659			401,138

Total assets	$	50,469,170		$	49,124,195


Liabilities and Stockholders’ Equity:
Deposits:
Interest-bearing checking and money market accounts	$	11,830,315		$	12,936,301
Savings accounts		4,920,967			5,210,001
Certificates of deposit		10,306,519			8,643,646
Non-interest-bearing accounts		2,498,044			2,312,215

Total deposits		29,555,845			29,102,163

Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances		13,234,500			12,104,500
Repurchase agreements		200,000			450,000

Total wholesale borrowings		13,434,500			12,554,500
Junior subordinated debentures		359,339			359,179

Total borrowed funds		13,793,839			12,913,679
Other liabilities		330,134			312,977

Total liabilities		43,679,818			42,328,819


Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares issued and outstanding)		502,840			502,840
Common stock at par $0.01 (900,000,000 shares authorized; 490,439,070 and 489,072,101 shares issued; and 490,379,705 and 488,490,352 shares outstanding, respectively)		4,904			4,891
Paid-in capital in excess of par		6,082,394			6,072,559
Retained earnings		271,559			237,868
Treasury stock, at cost (59,365 and 581,749 shares, respectively)		(757	)		(7,615	)
Accumulated other comprehensive loss, net of tax:
Net unrealized (loss) gain on securities available for sale, net of tax of $3,757 and $(27,961), respectively		(9,069	)		39,188
Net unrealized loss on the non-credit portion of OTTI losses on securities, net of tax of $2,517 and $3,338, respectively		(6,042	)		(5,221	)
Net unrealized loss on pension and post-retirement obligations, net of tax of $21,057 and $32,121, respectively		(56,477	)		(49,134	)

Total accumulated other comprehensive loss, net of tax		(71,588	)		(15,167	)

Total stockholders’ equity		6,789,352			6,795,376

Total liabilities and stockholders’ equity	$	50,469,170		$	49,124,195

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Interest Income:
Mortgage and other loans		$368,456			$361,330			$724,373			$719,732
Securities and money market investments		48,876			37,745			97,284			78,462

Total interest income		417,332			399,075			821,657			798,194


Interest Expense:
Interest-bearing checking and money market accounts		40,380			24,084			74,749			43,793
Savings accounts		6,630			7,150			13,851			13,960
Certificates of deposit		39,534			24,006			70,049			46,137
Borrowed funds		66,833			56,066			128,755			111,618

Total interest expense		153,377			111,306			287,404			215,508

Net interest income		263,955			287,769			534,253			582,686
Provision for losses on non-covered loans		4,714			11,645			14,285			13,432
Recovery of losses on covered loans		--			(17,906	)		--			(23,701	)

Net interest income after provision for (recovery of) loan losses		259,241			294,030			519,968			592,955


Non-Interest Income:
Fee income		7,492			8,151			14,819			16,011
Bank-owned life insurance		6,318			6,519			13,122			12,856
Mortgage banking income		--			8,196			--			17,960
Net (loss) gain on securities		(303	)		26,936			(769	)		28,915
FDIC indemnification expense		--			(14,325	)		--			(18,961	)
Other		9,199			14,960			18,391			25,828

Total non-interest income		22,706			50,437			45,563			82,609


Non-Interest Expense:
Operating expenses:
Compensation and benefits		80,314			93,512			164,289			189,718
Occupancy and equipment		25,026			23,403			49,910			48,462
General and administrative		32,802			46,820			63,050			92,344

Total operating expenses		138,142			163,735			277,249			330,524
Amortization of core deposit intangibles		--			30			--			184

Total non-interest expense		138,142			163,765			277,249			330,708

Income before income taxes		143,805			180,702			288,282			344,856
Income tax expense		36,451			65,447			74,376			125,644

Net income		107,354			115,255			213,906			219,212
Preferred stock dividends		8,207			8,207			16,414			8,207

Net income available to common shareholders		$99,147			$107,048			$197,492			$211,005

Basic earnings per common share		$0.20			$0.22			$0.40			$0.43

Diluted earnings per common share		$0.20			$0.22			$0.40			$0.43


Net income		$107,354			$115,255			$213,906			$219,212
Other comprehensive (loss) income, net of tax:
Change in net unrealized gain/loss on securities available for sale, net of tax of $7,111; $(38,189); $31,718; and $(38,542), respectively		(17,119	)		53,538			(48,257	)		54,033
Change in the non-credit portion of OTTI losses recognized in other comprehensive income, net of tax of $0; $0; $(821); and $(13), respectively		--			1			(821	)		20
Change in pension and post-retirement obligations, net of tax of $(547); $(869); $(11,064) and $(1,741), respectively		1,313			1,219			(7,343	)		2,437
Less: Reclassification adjustment for sales of available-for-sale securities, net of tax of $770		--			--			--			(1,078	)

Total other comprehensive (loss) income, net of tax		(15,806	)		54,758			(56,421	)		55,412

Total comprehensive income, net of tax		$91,548			$170,013			$157,485			$274,624

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, 2018
Preferred Stock (Par Value: $0.01):
Balance at beginning of year		$	502,840

Balance at end of period			502,840


Common Stock (Par Value: $0.01):
Balance at beginning of year			4,891
Shares issued for restricted stock awards (1,366,969 shares)			13

Balance at end of period			4,904


Paid-in Capital in Excess of Par:
Balance at beginning of year			6,072,559
Shares issued for restricted stock awards, net of forfeitures			(8,879)
Compensation expense related to restricted stock awards			18,714

Balance at end of period			6,082,394


Retained Earnings:
Balance at beginning of year			237,868
Net income			213,906
Dividends paid on common stock ($0.34 per share)			(166,607)
Dividends paid on preferred stock ($31.88 per share)			(16,414)
Effect of adopting ASU No. 2016-01			260
Effect of adopting ASU No. 2018-02			2,546

Balance at end of period			271,559


Treasury Stock, at Cost:
Balance at beginning of year			(7,615)
Purchase of common stock (150,250 shares)			(2,008)
Shares issued for restricted stock awards (672,634 shares)			8,866

Balance at end of period			(757)


Accumulated Other Comprehensive Loss, Net of Tax:
Balance at beginning of year			(15,167)
Effect of adopting ASU No. 2018-02			(2,546)
Other comprehensive loss, net of tax			(53,875)

Balance at end of period			(71,588)

Total stockholders’ equity		$	6,789,352

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,
	2018			2017
Cash Flows from Operating Activities:
Net income		$213,906		$	219,212
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) loan losses		14,285			(10,269	)
Depreciation		16,549			16,001
Amortization of discounts and premiums, net		(3,095	)		(2,130	)
Amortization of core deposit intangibles		--			184
Net gain on sales of securities		--			(28,915	)
Gain on trading securities activity		(178	)		--
Net gain on sales of loans		(178	)		(10,501	)
Stock-based compensation		18,714			18,195
Deferred tax expense		4,620			27,766
Changes in operating assets and liabilities:
Decrease in other assets		10,140			101,612
Increase in other liabilities		36,492			51,393
Purchases of securities held for trading		(113,615	)		--
Proceeds from sales of securities held for trading		113,793			--
Origination of loans held for sale		--			(1,122,084	)
Proceeds from sales of loans originated for sale		35,258			1,275,991

Net cash provided by operating activities		346,691			536,455

Cash Flows from Investing Activities:
Proceeds from repayment of securities held to maturity		--			175,375
Proceeds from repayment of securities available for sale		416,555			2,614
Proceeds from sales of securities held to maturity		--			547,925
Proceeds from sales of securities available for sale		--			139,009
Purchase of securities held to maturity		--			(13,030	)
Purchase of securities available for sale		(1,116,898	)		(84,000	)
Redemption of Federal Home Loan Bank stock		51,139			65,161
Purchases of Federal Home Loan Bank stock		(100,395	)		(63,294	)
Proceeds from bank-owned life insurance		9,457			--
Proceeds from sales of loans		78,058			364,164
Other changes in loans, net		(1,149,413	)		(89,365	)
Purchase of premises and equipment, net		(7,619	)		(22,648	)

Net cash (used in) provided by investing activities		(1,819,116	)		1,021,911

Cash Flows from Financing Activities:
Net increase in deposits		453,682			5,662
Net decrease in short-term borrowed funds		--			(460,000	)
Proceeds from long-term borrowed funds		3,450,000			--
Repayments of long-term borrowed funds		(2,570,000	)		(850,000	)
Net proceeds from issuance of preferred stock		--			502,840
Cash dividends paid on common stock		(166,607	)		(166,031	)
Cash dividends paid on preferred stock		(16,414	)		(8,207	)
Payments relating to treasury shares received for restricted stock award tax payments		(2,008	)		(10,634	)

Net cash provided by (used in) financing activities		1,148,653			(986,370	)

Net (decrease) increase in cash and cash equivalents		(323,772	)		571,996
Cash and cash equivalents at beginning of period		2,528,169			557,850

Cash and cash equivalents at end of period		$2,204,397		$	1,129,846

Supplemental information:
Cash paid for interest		$280,653		$	214,315
Cash paid for income taxes		13,884			67,651
Non-cash investing and financing activities:
Transfers to repossessed assets from loans		$2,461		$	9,558
Transfer of loans from held for investment to held for sale		77,880			1,843,765
Shares issued for restricted stock awards		8,879			10,312
Securities transferred from held to maturity to available for sale		--			3,040,305

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Organization

New York Community Bancorp, Inc. (on a stand-alone basis, the Parent Company or, collectively with its subsidiaries, the Company) was organized under Delaware law on July 20, 1993 and is the holding company for New York Community Bank and New York Commercial Bank (hereinafter referred to as the Community Bank and the Commercial Bank, respectively, and collectively as the Banks). For the purpose of these Consolidated Financial Statements, the Community Bank and the Commercial Bank refer not only to the respective banks but also to their respective subsidiaries.

The Community Bank is the primary banking subsidiary of the Company, which was formerly known as Queens County Bancorp, Inc. Founded on April 14, 1859 and formerly known as Queens County Savings Bank, the Community Bank converted from a state-chartered mutual savings bank to the capital stock form of ownership on November 23, 1993, at which date the Company issued its initial offering of common stock (par value: $0.01 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 223 branches, two of which operate directly under the Community Bank name. The remaining 221 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 Atlantic Bank name.

Basis of Presentation

The following is a description of the significant accounting and reporting policies that the Company and its subsidiaries follow in preparing and presenting their consolidated financial statements, which conform to 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 and the evaluation of goodwill for impairment.

The accompanying consolidated financial statements include the accounts of the Company and other entities in which the Company has a controlling financial interest. All inter-company accounts and transactions are eliminated in consolidation. The Company currently has certain unconsolidated subsidiaries in the form of wholly-owned statutory business trusts, which were formed to issue guaranteed capital securities. See Note 7, Borrowed Funds, for additional information regarding these trusts.

Note 2. Computation of Earnings per Common Share

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

Unvested stock-based compensation awards containing non-forfeitable rights to dividends paid on the Company’s common stock are considered participating securities, and therefore are included in the two-class method for calculating EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends on the common stock. The Company grants restricted stock to certain employees under its stock-based compensation plan. Recipients receive cash dividends during the vesting periods of these awards, including on the unvested 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 amounts)	2018			2017			2018			2017
Net income available to common shareholders		$99,147			$107,048			$197,492			$211,005
Less: Dividends paid on and earnings allocated to participating securities		(1,267	)		(873	)		(2,524	)		(1,693	)

Earnings applicable to common stock		$97,880			$106,175			$194,968			$209,312


Weighted average common shares outstanding		488,530,527			487,282,404			488,336,395			486,899,209

Basic earnings per common share		$0.20			$0.22			$0.40			$0.43


Earnings applicable to common stock		$97,880			$106,175			$194,968			$209,312


Weighted average common shares outstanding		488,530,527			487,282,404			488,336,395			486,899,209
Potential dilutive common shares		--			--			--			--

Total shares for diluted earnings per share computation		488,530,527			487,282,404			488,336,395			486,899,209

Diluted earnings per common share and common share equivalents		$0.20			$0.22			$0.40			$0.43

Note 3. Reclassifications Out of Accumulated Other Comprehensive Loss


(in thousands)	For the Six Months Ended June 30, 2018
Details about Accumulated Other Comprehensive Loss	Amount Reclassified from Accumulated Other Comprehensive Loss ⁽¹⁾			Affected Line Item in the Consolidated Statement of Operations and Comprehensive Income (Loss)
Unrealized gains (losses) on debt securities available-for-sale		$	--	Net (loss) gain on securities
			--	Income tax expense

		$	--	Total net (loss) gain on securities


Amortization of defined benefit pension plan items:

Past service liability		$	124	Included in the computation of net periodic (credit) expense ⁽²⁾
Actuarial losses			(3,744)	Included in the computation of net periodic (credit) expense ⁽²⁾

			(3,620)	Total before tax
			1,065	Tax benefit

			$(2,555)	Amortization of defined benefit pension plan items, net of tax

Total reclassifications for the period			$(2,555)

(1)	Amounts in parentheses indicate expense items.

(2)	See Note 8, “Pension and Other Post-Retirement Benefits,” for additional information.

Note 4. Securities

The following tables summarize the Company’s portfolio of debt securities available for sale and equity investments with readily determinable fair values at June 30, 2018 and December 31, 2017:


	June 30, 2018
				Gross			Gross
	Amortized			Unrealized			Unrealized
(in thousands)	Cost			Gain			Loss			Fair Value
Debt securities available-for-sale
Mortgage-Related Debt Securities:
GSE certificates		$	1,936,949		$	11,307		$	24,840		$	1,923,416
GSE CMOs			658,435			5,755			4,418			659,772

Total mortgage-related debt securities		$	2,595,384		$	17,062		$	29,258		$	2,583,188

Other Debt Securities:
U. S. Treasury securities		$	199,839		$	--		$	143		$	199,696
GSE debentures			562,866			929			9,146			554,649
Asset-backed securities ⁽¹⁾			280,755			201			158			280,798
Municipal bonds			69,546			178			2,119			67,605
Corporate bonds			379,069			9,922			898			388,093
Capital trust notes			48,252			6,478			5,876			48,854

Total other debt securities		$	1,540,327		$	17,708		$	18,340		$	1,539,695

Total debt securities available for sale ⁽²⁾		$	4,135,711		$	34,770		$	47,598		$	4,122,883

Equity securities:
Preferred stock		$	15,292		$	--		$	184		$	15,108
Mutual funds and common stock ⁽³⁾			16,874			346			562			16,658

Total equity securities		$	32,166		$	346		$	746		$	31,766

Total securities		$	4,167,877		$	35,116		$	48,344		$	4,154,649

(1)	The underlying assets of the asset-backed securities are substantially guaranteed by the U.S. Government.

(2)	The amortized cost includes the non-credit portion of OTTI recorded in AOCL. At June 30, 2018, the non-credit portion of OTTI recorded in AOCL was $8.6 million before taxes.

(3)	Primarily consists of mutual funds that are CRA-qualified investments.


	December 31, 2017
				Gross			Gross
	Amortized			Unrealized			Unrealized
(in thousands)	Cost			Gain			Loss			Fair Value
Mortgage-Related Securities:
GSE certificates		$	2,023,677		$	46,364		$	1,199		$	2,068,842
GSE CMOs			536,284			14,446			826			549,904

Total mortgage-related securities		$	2,559,961		$	60,810		$	2,025		$	2,618,746

Other Securities:
U. S. Treasury obligations		$	199,960		$	--		$	62		$	199,898
GSE debentures			473,879			2,044			2,665			473,258
Municipal bonds			70,381			540			801			70,120
Corporate bonds			79,702			11,073			--			90,775
Capital trust notes			48,230			6,498			8,632			46,096
Preferred stock			15,292			142			--			15,434
Mutual funds and common stock ⁽¹⁾			16,874			487			261			17,100

Total other securities		$	904,318		$	20,784		$	12,421		$	912,681

Total securities available for sale ⁽²⁾		$	3,464,279		$	81,594		$	14,446		$	3,531,427

(1)	Primarily consists of mutual funds that are CRA-qualified investments.

(2)	The amortized cost includes the non-credit portion of OTTI recorded in AOCL. At December 31, 2017, the non-credit portion of OTTI recorded in AOCL was $8.6 million before taxes.

At June 30, 2018 and December 31, 2017, respectively, the Company had $653.1 million and $603.8 million of FHLB-NY stock, at cost. The Company maintains an investment in FHLB-NY stock partly in conjunction with its membership in the FHLB and partly related to its access to the FHLB funding it utilizes.

The following table summarizes the gross proceeds and gross realized gains from the sale of available-for-sale securities during the six months ended June 30, 2018 and 2017:


	For the Six Months Ended
	June 30,
(in thousands)	2018			2017
Gross proceeds		$	--	$139,009
Gross realized gains			--	1,986

In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2018. 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).


	For the
	Six Months Ended
(in thousands)	June 30, 2018
Beginning credit loss amount as of December 31, 2017		$196,333
Add: Initial other-than-temporary credit losses		--
Subsequent other-than-temporary credit losses		--
Amount previously recognized in AOCL		--
Less: Realized losses for securities sold		--
Securities intended or required to be sold		--
Increase in cash flows on debt securities		30

Ending credit loss amount as of June 30, 2018		$196,303

The following table summarizes, by contractual maturity, the amortized cost of securities at June 30, 2018:


	Mortgage- Related Securities			Average Yield			U.S. Government and GSE Obligations			Average Yield			State, County, and Municipal			Average Yield ⁽¹⁾			Other Debt Securities ⁽²⁾			Average Yield			Fair Value
(dollars in thousands)
Available-for-Sale Debt Securities: ⁽³⁾
Due within one year		$	--		--	%		$	199,839		1.70	%		$	149		6.51	%		$	--		--	%		$	199,846
Due from one to five years			1,219,407		3.34				6,950		3.84				293		6.63				48,648		3.86				1,283,154
Due from five to ten years			557,628		3.39				471,325		3.11				--		--				330,421		3.98				1,359,372
Due after ten years			818,349		2.94				84,591		3.09				69,104		2.88				329,007		3.24				1,280,511

Total debt securities available for sale		$	2,595,384		3.22	%		$	762,705		2.74	%		$	69,546		2.90	%		$	708,076		3.63	%		$	4,122,883

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

(2)	Includes corporate bonds, capital trust notes, and asset-backed securities.

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

The following table presents securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of June 30, 2018:


	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 Securities:
U. S. Treasury securities		$	199,695		$	143		$	--		$	--		$	199,695		$	143
U. S. Government agency and GSE obligations			524,847			9,146			--			--			524,847			9,146
GSE certificates			959,158			23,556			19,434			1,284			978,592			24,840
GSE CMOs			329,114			4,418			--			--			329,114			4,418
Asset-backed securities			112,408			158			--			--			112,408			158
Municipal bonds			--			--			50,087			2,119			50,087			2,119
Corporate bonds			293,218			898			--			--			293,218			898
Capital trust notes			--			--			37,883			5,876			37,883			5,876
Equity securities			19,089			211			11,271			535			30,360			746

Total temporarily impaired securities		$	2,437,529		$	38,530		$	118,675		$	9,814		$	2,556,204		$	48,344

The following table presents securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2017:


	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 Available-for-Sale Securities:
GSE certificates		$	232,546		$	535		$	20,440		$	664		$	252,986		$	1,199
GSE debentures			333,045			2,665			--			--			333,045			2,665
GSE CMOs			118,694			826			--			--			118,694			826
U. S. Treasury obligations			199,898			62			--			--			199,898			62
Municipal bonds			11,169			259			41,054			542			52,223			801
Capital trust notes			--			--			35,105			8,632			35,105			8,632
Equity securities			--			--			11,545			261			11,545			261

Total temporarily impaired available-for-sale securities		$	895,352		$	4,347		$	108,144		$	10,099		$	1,003,496		$	14,446

An OTTI loss on impaired debt securities must be fully recognized in earnings if an investor has the intent to sell the debt security, or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss occurs, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts of impairment relating to factors other than credit losses are recorded in AOCL.

At June 30, 2018, the Company had unrealized losses on certain GSE obligations, U.S. Treasury obligations, municipal bonds, corporate bonds, asset-backed securities, capital trust notes, and equity securities. The unrealized losses on the Company’s GSE obligations, U.S. Treasury obligations, municipal bonds, corporate bonds, asset-backed securities and capital trust notes at June 30, 2018 were primarily caused by movements in market interest rates and spread volatility, rather than credit risk. These securities are not expected to be settled at a price that is less than the amortized cost of the Company’s investment.

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

The Company considers a decline in the fair value of equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. The unrealized losses on the Company’s equity securities at June 30, 2018 were caused by market volatility. The Company evaluated the near-term prospects of recovering the fair value of these securities, together with the severity and duration of impairment to date, and determined that they were not other-than-temporarily impaired. Nonetheless, it is possible that these equity securities will perform worse than is currently expected, which could lead to adverse changes in their fair value, or to the failure of the securities to fully recover in value as currently anticipated by management. Either event could cause the Company to record an OTTI loss in a future period. Events that could trigger a material decline in the fair value of these securities include, but are not limited to, deterioration in the equity markets; a decline in the quality of the loan portfolio of the issuer in which the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuer.

The investment securities designated as having a continuous loss position for twelve months or more at both June 30, 2018 and December 31, 2017 consisted of six agency mortgage-related securities, five capital trust notes, three municipal bonds, and one mutual fund. At June 30, 2018, the fair value of securities having a continuous loss position for twelve months or more was 7.6% below the collective amortized cost of $128.5 million. At December 31, 2017, the fair value of such securities was 8.5% below the collective amortized cost of $118.2 million. At June 30, 2018 and December 31, 2017, the combined market value of the respective securities represented unrealized losses of $9.8 million and $10.1 million, respectively.

Note 5. Loans

The following table sets forth the composition of the loan portfolio at the dates indicated:


	June 30, 2018						December 31, 2017
(dollars in thousands)	Amount				Percent of Loans Held for Investment		Amount				Percent of Loans Held for Investment
Loans Held for Investment:
Mortgage Loans:
Multi-family		$	29,211,541			74.10%		$	28,074,709			73.19%
Commercial real estate			7,153,868			18.15			7,322,226			19.09
One-to-four family			449,419			1.14			477,228			1.24
Acquisition, development, and construction			424,827			1.08			435,825			1.14

Total mortgage loans held for investment		$	37,239,655			94.47		$	36,309,988			94.66

Other Loans:
Commercial and industrial			1,535,618			3.90			1,377,964			3.59
Lease financing, net of unearned income of $59,088 and $65,041, respectively			634,821			1.61			662,610			1.73

Total commercial and industrial loans ⁽¹⁾			2,170,439			5.51			2,040,574			5.32
Other			8,663			0.02			8,460			0.02

Total other loans held for investment			2,179,102			5.53			2,049,034			5.34

Total loans held for investment		$	39,418,757			100.00%		$	38,359,022			100.00%

Net deferred loan origination costs			29,068						28,949
Allowance for losses on non-covered loans			(160,652	)					(158,046	)

Loans held for investment, net		$	39,287,173					$	38,229,925

Loans held for sale			--						35,258

Total loans, net		$	39,287,173					$	38,265,183

(1)	Includes specialty finance loans and leases of $1.7 billion at June 30, 2018 and December 31, 2017, and other C&I loans of $491.7 million and $500.8 million, respectively, at June 30, 2018 and December 31, 2017.

Loans

Loans Held for Investment

The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized by non-luxury apartment buildings in New York City with rent-regulated units and below-market rents. In addition, the Company originates CRE loans, most of which are collateralized by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties that are located in New York City and on Long Island.

To a lesser extent, the Company also originates ADC loans for investment. One-to-four family loans held for investment were originated through the Company’s former mortgage banking operation and primarily consisted of jumbo prime adjustable rate mortgages made to borrowers with a solid credit history.

ADC loans are primarily originated for multi-family and residential tract projects in New York City and on Long Island. C&I loans consist of asset-based loans, equipment loans and leases, and dealer floor-plan loans (together, specialty finance loans and leases) that generally are made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide; and other C&I loans that primarily are made to small and mid-size businesses in Metro New York. Other C&I loans are typically made for working capital, business expansion, and the purchase of machinery and equipment.

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

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

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

To minimize the risk involved in specialty finance lending and leasing, the Company participates in syndicated loans that are brought to it, and equipment loans and leases that are assigned to it, by a select group of nationally recognized sources who have 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 typically requires personal guarantees. However, the capacity of a borrower to repay such a C&I loan is substantially dependent on the degree to which the business is successful. In addition, the collateral underlying such loans may depreciate over time, may not be conducive to appraisal, or may fluctuate in value, based upon the results of operations of the business.

Included in loans held for investment at June 30, 2018 were loans of $55.6 million to officers, directors, and their related interests and parties. There were no loans to principal shareholders at that date.

Loans Held for Sale

At June 30, 2018 the Company had no loans held for sale as compared to $35.3 million at December 31, 2017. At December 31, 2017, all loans held for sale were one-to-four family loans.

Asset Quality

The following table presents information regarding the quality of the Company’s loans held for investment at June 30, 2018:


(in thousands)	Loans 30-89 Days Past Due			Non- Accrual Loans			Loans 90 Days or More Delinquent and Still Accruing Interest			Total Past Due Loans			Current Loans			Total Loans Receivable
Multi-family		$	5		$	5,408		$	--		$	5,413		$	29,206,128		$	29,211,541
Commercial real estate			--			4,917			--			4,917			7,148,951			7,153,868
One-to-four family			214			1,669			--			1,883			447,536			449,419
Acquisition, development, and construction			--			--			--			--			424,827			424,827
Commercial and industrial⁽¹⁾ ^{(2 )}			1,994			44,483			--			46,477			2,123,962			2,170,439
Other			4,065			4			--			4,069			4,594			8,663

Total		$	6,278		$	56,481		$	--		$	62,759		$	39,355,998		$	39,418,757

(1)	Includes $2.0 million and $43.5 million of taxi medallion-related loans that were 30 to 89 days past due and 90 days or more past due, respectively.

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

The following table presents information regarding the quality of the Company’s loans held for investment at December 31, 2017:


							Loans
							90 Days or More
	Loans			Non-			Delinquent and			Total
	30-89 Days			Accrual			Still Accruing			Past Due			Current			Total Loans
(in thousands)	Past Due			Loans			Interest			Loans			Loans			Receivable
Multi-family		$	1,258		$	11,078		$	--		$	12,336		$	28,062,373		$	28,074,709
Commercial real estate			13,227			6,659			--			19,886			7,302,340			7,322,226
One-to-four family			585			1,966			--			2,551			474,677			477,228
Acquisition, development, and construction			--			6,200			--			6,200			429,625			435,825
Commercial and industrial^{(1) (2}⁾			2,711			47,768			--			50,479			1,990,095			2,040,574
Other			8			11			--			19			8,441			8,460

Total		$	17,789		$	73,682		$	--		$	91,471		$	38,267,551		$	38,359,022

(1)	Includes $2.7 million and $46.7 million of taxi medallion-related loans that were 30 to 89 days past due and 90 days or more past due, respectively.

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

The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at June 30, 2018:


	Mortgage Loans										Other Loans
							Acquisition,
					One-to-		Development,		Total		Commercial
	Multi-		Commercial		Four		and		Mortgage		and				Total Other
(in thousands)	Family		Real Estate		Family		Construction		Loans		Industrial⁽¹⁾		Other		Loans
Credit Quality Indicator:
Pass	$	29,019,539	$	7,101,257	$	444,093	$	341,154	$	36,906,043	$	2,080,569	$	8,659	$	2,089,228
Special mention		172,517		46,973		3,657		74,121		297,268		16,302		--		16,302
Substandard		19,485		5,638		1,669		9,552		36,344		73,568		4		73,572
Doubtful		--		--		--		--		--		--		--		--

Total	$	29,211,541	$	7,153,868	$	449,419	$	424,827	$	37,239,655	$	2,170,439	$	8,663	$	2,179,102

(1)	Includes lease financing receivables, all of which were classified as Pass.

The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at December 31, 2017:


	Mortgage Loans										Other Loans
							Acquisition,
					One-to-		Development,		Total		Commercial
	Multi-		Commercial		Four		and		Mortgage		and				Total Other
(in thousands)	Family		Real Estate		Family		Construction		Loans		Industrial⁽¹⁾		Other		Loans
Credit Quality Indicator:
Pass	$	27,874,330	$	7,255,100	$	471,571	$	344,040	$	35,945,041	$	1,925,527	$	8,449	$	1,933,976
Special mention		125,752		47,123		3,691		76,033		252,599		20,883		--		20,883
Substandard		74,627		20,003		1,966		15,752		112,348		94,164		11		94,175
Doubtful		--		--		--		--		--		--		--		--

Total	$	28,074,709	$	7,322,226	$	477,228	$	435,825	$	36,309,988	$	2,040,574	$	8,460	$	2,049,034

(1)	Includes lease financing receivables, all of which were classified as Pass.

The preceding classifications are the most current ones available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company will sustain some loss); and doubtful loans, based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. In addition, one-to-four family loans are classified based on the duration of the delinquency.

Troubled Debt Restructurings

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

In 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, 2018, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $39.9 million; loans on which forbearance agreements were reached amounted to $1.8 million.

The following table presents information regarding the Company’s TDRs as of June 30, 2018 and December 31, 2017:


	June 30, 2018									December 31, 2017
(in thousands)	Accruing			Non-Accrual			Total			Accruing			Non-Accrual			Total
Loan Category:
Multi-family		$	816		$	5,174		$	5,990		$	824		$	8,061		$	8,885
Commercial real estate			--			356			356			--			368			368
One-to-four family			--			1,043			1,043			--			1,066			1,066
Acquisition, development, and construction			9,552			--			9,552			8,652			--			8,652
Commercial and industrial			--			24,759			24,759			177			26,408			26,585

Total		$	10,368		$	31,332		$	41,700		$	9,653		$	35,903		$	45,556

The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances of each loan, which may change from period to period, and involves judgment by Company personnel regarding the likelihood that the concession will result in the maximum recovery for the Company.

The financial effects of the Company’s TDRs for the three months ended June 30, 2018 and 2017 are summarized as follows:


	For the Three Months Ended June 30, 2018
									Weighted Average
									Interest Rate
			Pre-Modification			Post-Modification
	Number		Recorded			Recorded			Pre-			Post-			Charge-off			Capitalized
(dollars in thousands)	of Loans		Investment			Investment			Modification			Modification			Amount			Interest
Loan Category:
Commercial and industrial		6		$	2,613		$	1,420		3.27	%		3.05	%		$	1,158		$	--


	For the Three Months Ended June 30, 2017
									Weighted Average
									Interest Rate
			Pre-Modification			Post-Modification
	Number		Recorded			Recorded			Pre-			Post-			Charge-off			Capitalized
(dollars in thousands)	of Loans		Investment			Investment			Modification			Modification			Amount			Interest
Loan Category:
One-to-four family		3		$	544		$	657		5.90	%		2.00	%		$	--		$	7
Commercial and industrial		13			22,752			18,722		3.49			3.45				825			--

Total		16		$	23,296		$	19,379								$	825		$	7

The financial effects of the Company’s TDRs for the six months ended June 30, 2018 and 2017 are summarized as follows:


	For the Six Months Ended June 30, 2018
									Weighted Average
									Interest Rate
			Pre-Modification			Post-Modification
	Number		Recorded			Recorded			Pre-			Post-			Charge-off			Capitalized
(dollars in thousands)	of Loans		Investment			Investment			Modification			Modification			Amount			Interest
Loan Category:
Acquisition, development, and construction		1		$	900		$	900		4.50	%		4.50	%		$	--		$	--
Commercial and industrial		12			5,780			3,174		3.27			3.14				2,476			--

Total		13		$	6,680		$	4,074								$	2,476		$	--


	For the Six Months Ended June 30, 2017
									Weighted Average
									Interest Rate
			Pre-Modification			Post-Modification
	Number		Recorded			Recorded			Pre-			Post-			Charge-off			Capitalized
(dollars in thousands)	of Loans		Investment			Investment			Modification			Modification			Amount			Interest
Loan Category:
Multi-family		4		$	809		$	994		5.93	%		2.21	%		$	--		$	12
Commercial and industrial		30			30,714			23,151		3.45			3.45				4,104			--

Total		34		$	31,523		$	24,145								$	4,104		$	12

At June 30, 2018, six C&I loans, in the amount of $1.7 million that had been modified as a TDR during the twelve months ended at that date were in payment default.

The Company does not consider a payment to be in default when the loan is in forbearance, or otherwise granted a delay of payment, when the agreement to forebear or allow a delay of payment is part of a modification.

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 the borrower were in bankruptcy or if the loan were partially charged off subsequent to modification.

Note 6. Allowance for Loan Losses

The following tables provide additional information regarding the Company’s allowance for loan losses based upon the method of evaluating loan impairment:


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at June 30, 2018:
Loans individually evaluated for impairment	$	--	$	39	$	39
Loans collectively evaluated for impairment		129,697		30,916		160,613

Total	$	129,697	$	30,955	$	160,652


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2017:
Loans collectively evaluated for impairment	$	128,275	$	29,771	$	158,046

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, 2018:
Loans individually evaluated for impairment	$	20,886	$	45,348	$	66,234
Loans collectively evaluated for impairment		37,218,769		2,133,754		39,352,523

Total	$	37,239,655	$	2,179,102	$	39,418,757


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2017:
Loans individually evaluated for impairment	$	31,747	$	48,810	$	80,557
Loans collectively evaluated for impairment		36,278,241		2,000,224		38,278,465

Total	$	36,309,988	$	2,049,034	$	38,359,022

Allowance for Loan Losses

The following table summarizes activity in the allowance for loan losses for the periods indicated:


	For the Six Months Ended June 30,
	2018									2017 ⁽¹⁾
(in thousands)	Mortgage			Other			Total			Mortgage			Other			Total
Balance, beginning of period	$	128,275		$	29,771		$	158,046		$	125,416		$	32,874		$	158,290
Charge-offs		(5,444	)		(7,404	)		(12,848	)		(90	)		(17,646	)		(17,736	)
Recoveries		229			940			1,169			180			517			697
Provision for (recovery of) non-covered loan losses		6,637			7,648			14,285			(3,785	)		17,217			13,432

Balance, end of period	$	129,697		$	30,955		$	160,652		$	121,721		$	32,962		$	154,683

(1)	Represents allowance for losses on non-covered loans, excluding PCI loans.

The following table presents additional information about the Company’s impaired loans at June 30, 2018:


				Unpaid						Average			Interest
	Recorded			Principal			Related			Recorded			Income
(in thousands)	Investment			Balance			Allowance			Investment			Recognized
Impaired loans with no related allowance:
Multi-family		$	5,990		$	8,778		$	--		$	7,771		$	227
Commercial real estate			3,675			8,790			--			3,811			29
One-to-four family			1,669			1,722			--			1,861			24
Acquisition, development, and construction			9,552			10,452			--			11,619			287
Other			45,309			106,995			--			46,962			1,504

Total impaired loans with no related allowance		$	66,195		$	136,737		$	--		$	72,024		$	2,071


Impaired loans with an allowance recorded:
Multi-family		$	--		$	--		$	--		$	--		$	--
Commercial real estate			--			--			--			--			--
One-to-four family			--			--			--			--			--
Acquisition, development, and construction			--			--			--			--			--
Other			39			39			39			26			4

Total impaired loans with an allowance recorded		$	39		$	39		$	39		$	26		$	4


Total impaired loans:
Multi-family		$	5,990		$	8,778		$	--		$	7,771		$	227
Commercial real estate			3,675			8,790			--			3,811			29
One-to-four family			1,669			1,722			--			1,861			24
Acquisition, development, and construction			9,552			10,452			--			11,619			287
Other			45,348			107,034			39			46,988			1,508



Total impaired loans		$	66,234		$	136,776		$	39		$	72,050		$	2,075


The following table presents additional information about the Company’s impaired loans at December 31, 2017:

				Unpaid						Average			Interest
	Recorded			Principal			Related			Recorded			Income
(in thousands)	Investment			Balance			Allowance			Investment			Recognized
Impaired loans with no related allowance:
Multi-family		$	8,892		$	11,470		$	--		$	9,554		$	495
Commercial real estate			5,137			10,252			--			3,522			92
One-to-four family			1,966			2,072			--			2,489			50
Acquisition, development, and construction			15,752			25,952			--			10,976			575
Other			48,810			104,901			--			43,074			2,200

Total impaired loans with no related allowance		$	80,557		$	154,647		$	--		$	69,615		$	3,412


Impaired loans with an allowance recorded:
Multi-family		$	--		$	--		$	--		$	--		$	--
Commercial real estate			--			--			--			--			--
One-to-four family			--			--			--			--			--
Acquisition, development, and construction			--			--			--			--			--
Other			--			--			--			314			--

Total impaired loans with an allowance recorded		$	--		$	--		$	--		$	314		$	--


Total impaired loans:
Multi-family		$	8,892		$	11,470		$	--		$	9,554		$	495
Commercial real estate			5,137			10,252			--			3,522			92
One-to-four family			1,966			2,072			--			2,489			50
Acquisition, development, and construction			15,752			25,952			--			10,976			575
Other			48,810			104,901			--			43,388			2,200

Total impaired loans		$	80,557		$	154,647		$	--		$	69,929		$	3,412

Note 7. Borrowed Funds

The following table summarizes the Company’s borrowed funds at the dates indicated:


	June 30,			December 31,
(in thousands)	2018			2017
Wholesale Borrowings:
FHLB advances		$	13,234,500		$	12,104,500
Repurchase agreements			200,000			450,000

Total wholesale borrowings		$	13,434,500		$	12,554,500
Junior subordinated debentures			359,339			359,179

Total borrowed funds		$	13,793,839		$	12,913,679

The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at June 30, 2018:


	Remaining Contractual Maturity of the Agreements
	Overnight and			Up to						Greater than
(in thousands)	Continuous			30 Days			30–90 Days			90 Days
GSE obligations		$	--		$	--		$	--		$	200,000

At June 30, 2018 and December 31, 2017, the Company had $359.3 million and $359.2 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, 2018:

Interest

Rate

Junior

of Capital

Subordinated

Capital

Securities

Debentures

Securities

and

Amount

Date of

First Optional

Issuer

Debentures

Outstanding

Original Issue

Stated Maturity

Redemption Date

(dollars in thousands)

New York Community Capital Trust V (BONUSES^SMUnits)

6.000

$145,413

$139,062

Nov. 4, 2002

Nov. 1, 2051

Nov. 4, 2007 ⁽¹⁾

New York Community Capital Trust X

3.941

123,712

120,000

Dec. 14, 2006

Dec. 15, 2036

Dec. 15, 2011 ⁽²⁾

PennFed Capital Trust III

5.591

30,928

30,000

June 2, 2003

June 15, 2033

June 15, 2008 ⁽²⁾

New York Community Capital Trust XI

3.987

59,286

57,500

April 16, 2007

June 30, 2037

June 30, 2012 ⁽²⁾

Total junior subordinated debentures

$359,339

$346,562

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

(2)	Callable from this date forward.

Note 8. Pension and Other Post-Retirement Benefits

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


	For the Three Months Ended June 30,
	2018						2017
				Post-						Post-
	Pension			Retirement			Pension			Retirement
(in thousands)	Benefits			Benefits			Benefits			Benefits
Components of net periodic (credit) expense: ⁽¹⁾
Interest cost		$	1,271		$	128		$	1,404		$	144
Expected return on plan assets			(4,035)			--			(4,073)			--
Amortization of prior-service costs			--			(62)			--			(62)
Amortization of net actuarial loss			1,795			76			2,053			68

Net periodic (credit) expense		$	(969)		$	142		$	(616)		$	150

(1)	Amounts are included in G&A expense on the Consolidated Statements of Income and Comprehensive Income.


	For the Six Months Ended June 30,
	2018						2017
				Post-						Post-
	Pension			Retirement			Pension			Retirement
(in thousands)	Benefits			Benefits			Benefits			Benefits
Components of net periodic (credit) expense: ⁽¹⁾
Interest cost		$	2,543		$	256		$	2,808		$	288
Expected return on plan assets			(8,071)			--			(8,146)			--
Amortization of prior-service costs			--			(124)			--			(124)
Amortization of net actuarial loss			3,591			153			4,106			136

Net periodic (credit) expense		$	(1,937)		$	285		$	(1,232)		$	300

(1)	Amounts are included in G&A expense on the Consolidated Statements of Income and Comprehensive Income.

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, 2018. The Company does not expect to make any contributions to its pension plan in 2018.

Note 9. Stock-Based Compensation

At June 30, 2018, the Company had a total of 4,822,248 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, which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2012. The Company granted 2,458,523 shares of restricted stock during the six months ended June 30, 2018. The shares had an average fair value of $13.59 per share on the date of grant and a vesting period of five years. The six-month amount includes 38,000 shares that were granted in the second quarter with an average fair value of $12.48 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 $18.7 million and $18.2 million, respectively, in the six months ended June 30, 2018 and 2017, including $9.0 million and $9.5 million 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, 2018:


				Weighted Average
				Grant Date
	Number of Shares			Fair Value
Unvested at beginning of year		5,574,167			$15.38
Granted		2,458,523			13.59
Vested		(697,482	)		15.20
Canceled		(134,420	)		15.01

Unvested at end of period		7,200,788			14.79

As of June 30, 2018, unrecognized compensation cost relating to unvested restricted stock totaled $91.9 million. This amount will be recognized over a remaining weighted average period of 3.4 years.

Note 10. Fair Value Measurements

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

•

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, 2018 and December 31, 2017, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2018
	Quoted Prices
	in Active			Significant
	Markets for			Other			Significant
	Identical			Observable			Unobservable
	Assets			Inputs			Inputs			Netting		Total
(in thousands)	(Level 1)			(Level 2)			(Level 3)			Adjustments⁽¹⁾		Fair Value
Assets:
Mortgage-Related Debt Securities Available for Sale:
GSE certificates		$	--		$	1,923,416		$	--		$ --		$	1,923,416
GSE CMOs			--			659,772			--		--			659,772

Total mortgage-related debt securities		$	--		$	2,583,188		$	--		$ --		$	2,583,188

Other Debt Securities Available for Sale:
U. S. Treasury securities		$	199,696		$	--		$	--		$ --		$	199,696
GSE debentures			--			554,649			--		--			554,649
Asset-backed securities			--			280,798			--		--			280,798
Municipal bonds			--			67,605			--		--			67,605
Corporate bonds			--			388,093			--		--			388,093
Capital trust notes			--			48,854			--		--			48,854

Total other debt securities		$	199,696		$	1,339,999		$	--		$ --		$	1,539,695

Total debt securities available for sale		$	199,696		$	3,923,187		$	--		$ --		$	4,122,883

Equity securities:
Preferred stock		$	15,108		$	--		$	--		$ --		$	15,108
Mutual funds and common stock			--			16,658			--		--			16,658

Total equity securities		$	15,108		$	16,658		$	--		$ --		$	31,766

Total securities		$	214,804		$	3,939,845		$	--		$ --		$	4,154,649

Other Assets:
Mortgage servicing rights		$	--		$	--		$	2,505		$ --		$	2,505


	Fair Value Measurements at December 31, 2017
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Netting		Total
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Adjustments⁽¹⁾		Fair Value
Assets:
Mortgage-Related Securities Available for Sale:
GSE certificates	$	--	$	2,068,842	$	--		$ --	$	2,068,842
GSE CMOs				549,904						549,904

Total mortgage-related securities	$	--	$	2,618,746	$	--		$ --	$	2,618,746

Other Securities Available for Sale:
U. S. Treasury Obligations	$	199,898	$	--	$	--		$ --	$	199,898
GSE debentures		--		473,258		--		--		473,258
Municipal bonds		--		70,120		--		--		70,120
Corporate bonds		--		90,775		--		--		90,775
Capital trust notes		--		46,096		--		--		46,096
Preferred stock		15,434		--		--		--		15,434
Mutual funds and common stock		--		17,100		--		--		17,100

Total other securities	$	215,332	$	697,349	$	--		$ --	$	912,681

Total securities available for sale	$	215,332	$	3,316,095	$	--		$ --	$	3,531,427

Other Assets:
Loans held for sale	$	--	$	35,258	$	--		$ --	$	35,258
Mortgage servicing rights		--		--		2,729		--		2,729

(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 securities follows:

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

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

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

The Company carries loans held for sale at fair value. The fair value of loans held for sale is based on an exit price, representing the amount that would be received when selling an asset in an orderly transaction between market participants. Loans held for sale are classified within Level 2 of the valuation hierarchy.

MSRs do not trade in an active open market with readily observable prices. The Company bases the fair value of its MSRs on the present value of estimated future net servicing income cash flows, utilizing a third-party valuation specialist. The specialist estimates future net servicing income cash flows with assumptions that market participants would use to estimate fair value, including estimates of prepayment speeds, discount rates, default rates, refinance rates, servicing costs, escrow account earnings, contractual servicing fee income, and ancillary income. The Company periodically adjusts the underlying inputs and

assumptions to reflect market conditions and assumptions that a market participant would consider in valuing the MSR asset. MSR fair value measurements use significant unobservable inputs and, accordingly, are classified within Level 3.

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 had elected the fair value option for its loans held for sale. The loans held for sale at December 31, 2017 consist of one-to-four family none of which were 90 days or more past due at that date.

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, 2018

December 31, 2017

Fair Value

Aggregate

Carrying Amount

Fair Value

Aggregate

Carrying Amount

(in thousands)

Carrying
Amount

Unpaid
Principal

Less Aggregate
Unpaid Principal

Carrying
Amount

Unpaid
Principal

Less Aggregate
Unpaid Principal

Loans held for sale

$--

$35,258

$34,563

$695

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 MSRs for the periods indicated:


	(Loss) Gain Included in
	Income from Changes in Fair Value ⁽¹⁾
	For the Three Months						For the Six Months Ended
	Ended June 30,						June 30,
(in thousands)	2018			2017			2018			2017
Mortgage servicing rights	$	(70	)		$	(30,988)	$	(224	)		$	(68,081)

(1)	Included in “Non-interest income.”

Changes in Level 3 Fair Value Measurements

The following tables present, for the six months ended June 30, 2018 and 2017, a roll-forward of the balance sheet amounts (including changes in fair value) for financial instruments classified in Level 3 of the valuation hierarchy:

Total Realized/Unrealized

Change in

Gains/(Losses) Recorded in

Unrealized

Gains/(Losses)

Fair Value

Transfers

Fair Value

Related to

January 1,

Income/

Comprehensive

to/(from)

at June 30,

Instruments Held at

(in thousands)

2018

(Loss)

(Loss) Income

Issuances

Settlements

Level 3

2018

June 30, 2018

Mortgage servicing rights

$2,729

$(224)

$--

$2,505

$(224)

Total Realized/Unrealized

Change in

Gains/(Losses) Recorded in

Unrealized

Gains/(Losses)

Fair Value

Transfers

Fair Value

Related to

January 1,

Income/

Comprehensive

to/(from)

at June 30,

Instruments Held at

(in thousands)

2017

(Loss)

(Loss) Income

Issuances

Settlements

Level 3

2017

June 30, 2017

Mortgage servicing rights

$228,099

$(19,496)

$--

$11,983

$--

$220,586

$(10,348)

Interest rate lock commitments

982

1,027

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, 2018 or 2017.

For Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2018, the significant unobservable inputs used in the fair value measurements were as follows:

(dollars in thousands)

Fair Value at
June 30, 2018

Valuation Technique

Significant Unobservable Inputs

Significant
Unobservable
Input Value

Mortgage servicing rights

$2,505

Discounted Cash Flow

Weighted Average Constant

Prepayment Rate ⁽¹⁾

10.66

Weighted Average Discount Rate

12.00

(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.

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, 2018 and December 31, 2017, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2018 Using
	Quoted Prices in
	Active Markets for			Significant Other			Significant
	Identical Assets			Observable Inputs			Unobservable Inputs			Total Fair
(in thousands)	(Level 1)			(Level 2)			(Level 3)			Value
Certain impaired loans ⁽¹⁾		$	--		$	--		$	42,738		$	42,738
Other assets			--			--			--			--

Total		$	--		$	--		$	42,738		$	42,738

(1)	Represents the fair value of impaired loans based on the value of the collateral and repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets.


	Fair Value Measurements at December 31, 2017 Using
	Quoted Prices in
	Active Markets for			Significant Other			Significant
	Identical Assets			Observable Inputs			Unobservable Inputs			Total Fair
(in thousands)	(Level 1)			(Level 2)			(Level 3)			Value
Certain impaired loans ⁽¹⁾		$	--		$	--		$	45,837		$	45,837
Other assets ⁽²⁾			--			--			4,357			4,357

Total		$	--		$	--		$	50,194		$	50,194

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

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

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

Other Fair Value Disclosures

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

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

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, 2018 and December 31, 2017:


	June 30, 2018
					Fair Value Measurement Using
					Quoted Prices in			Significant
					Active Markets			Other			Significant
					for Identical			Observable			Unobservable
	Carrying		Estimated		Assets			Inputs			Inputs
(in thousands)	Value		Fair Value		(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash and cash equivalents	$	2,204,397	$	2,204,397	$	2,204,397		$	--		$	--
FHLB stock ⁽¹⁾		653,075		653,075		--			653,075			--
Loans, net		39,287,173		38,834,022		--			--			38,834,022
Financial Liabilities:
Deposits	$	29,555,845	$	29,503,131	$	19,249,326	⁽²⁾	$	10,253,805	⁽³⁾	$	--
Borrowed funds		13,793,839		13,649,155		--			13,649,155			--

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

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

(3)	Certificates of deposit.


	December 31, 2017
					Fair Value Measurement Using
					Quoted Prices in			Significant
					Active Markets			Other			Significant
					for Identical			Observable			Unobservable
	Carrying		Estimated		Assets			Inputs			Inputs
(in thousands)	Value		Fair Value		(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash and cash equivalents	$	2,528,169	$	2,528,169	$	2,528,169		$	--		$	--
FHLB stock ⁽¹⁾		603,819		603,819		--			603,819			--
Loans, net		38,265,183		38,254,538		--			--			38,254,538
Financial Liabilities:
Deposits	$	29,102,163	$	29,044,852	$	20,458,517	⁽²⁾	$	8,586,335	⁽³⁾	$	--
Borrowed funds		12,913,679		12,780,653		--			12,780,653			--

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

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

(3)	Certificates of deposit.

The methods and significant assumptions used to estimate fair values for the Company’s financial instruments follow:

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and federal funds sold. The estimated fair values of cash and cash equivalents are assumed to equal their carrying values, as these financial instruments are either due on demand or have short-term maturities.

Securities

If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, pricing models also incorporate transaction details such as maturities and cash flow assumptions.

Federal Home Loan Bank Stock

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

Loans

The Company discloses the fair value of loans measured at amortized cost using an exit price notion. Prior to adopting ASU No. 2016-01, the Company measured the fair value of loans that are accounted for at amortized cost under an entry price notion. The entry price notion previously applied by the Company used a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument. The exit price notion uses the same approach, but also incorporates other factors, such as enhanced credit risk, illiquidity risk, and market factors. The Company determined the fair value on substantially all of its loans for disclosure purposes, on an individual loan basis. The discount rates reflect current market rates for loans with similar terms to borrowers having similar credit quality on an exit price basis. The estimated fair values of non-performing mortgage and other loans are based on recent collateral appraisals. For those loans where a discounted cash flow technique was not considered reliable, the Company used a quoted market price for each individual loan.

Deposits

The fair values of deposit liabilities with no stated maturity (i.e., interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values of CDs represent contractual cash flows, discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. These estimated fair values do not include the intangible value of core deposit 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, 2018 and December 31, 2017.

Note 11. Impact of Recent Accounting Pronouncements

Recently Adopted Accounting Standards

The Company early adopted ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, effective January 1, 2018. ASU No. 2018-02 addresses a narrow-scope financial reporting issue that arose as a consequence of the enactment of the Tax Cuts and Jobs Act of 2017. ASU No. 2018-02 permits an election to reclassify from accumulated other comprehensive income (loss) to retained earnings the standard tax effects resulting from the difference between the historical federal corporate income tax rate of 35% and the newly enacted 21% federal corporate income tax rate. Effective January 1, 2018, the Company recorded a reclassification adjustment of $2.5 million decreasing AOCL and increasing retained earnings. The Company’s only components of AOCL are the fair value adjustment for securities available for sale and the tax effected related pension and post-retirement obligations.

The Company early adopted ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, effective January 1, 2018. ASU No. 2017-12 changes the recognition and presentation requirements as well as the cost and complexity of applying hedge accounting by easing the requirements for effectiveness testing and hedge documentation. As the Company currently has no identified accounting hedges in place, adoption of ASU No. 2017-12 had no impact on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.

The Company adopted ASU No. 2017-09, Compensation—Stock Compensation (Topic 718) as of January 1, 2018. The ASU’s amendments are applied prospectively to awards modified on or after the effective date. ASU No. 2017-09 clarifies when changes to the terms or conditions of a share-based payment award should be accounted for as a modification. Modification accounting is applied only if the fair value, the vesting conditions, and the classification of the award (as an equity or liability instrument) change as a result of the change in terms or conditions. The adoption of ASU No. 2017-09 did not have an effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.

The Company adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost, on January 1, 2018. ASU No. 2017-07 requires companies to present the service cost component of net benefit cost in the income statement line items where they report compensation cost, and all other components of net benefit cost in the income statement separately from the service cost component and outside of operating income, if this subtotal is presented. Additionally, the service cost component will be the only component that can be capitalized. The standard requires retrospective application for the amendments related to the presentation of the service cost component and other components of net benefit cost, and prospective application for the amendments related to the capitalization requirements for the service cost components of net benefit cost. The adoption of ASU No. 2017-07 did not have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.

The Company adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, on January 1, 2018, with retrospective application. ASU No. 2016-18 will require that the reconciliation of the beginning-of-period and end-of-period cash and cash equivalent amounts shown on the statement of cash flows include restricted cash and restricted cash equivalents. If restricted cash and restricted cash equivalents are presented separately from cash and cash equivalents on the balance sheet, entities are required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Entities will also be required to disclose information regarding the nature of the restrictions. The adoption of ASU No. 2016-18 did not have a material impact on the Company’s financial position or results of operations, or cash flows.

The Company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments on January 1, 2018 with retrospective application. ASU No. 2016-15 addresses the following cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including BOLI policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The adoption of ASU No. 2016-15 did not have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.

The Company adopted ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities by means of a cumulative-effect adjustment as of January 1, 2018. ASU No. 2016-01 provides targeted improvements to GAAP including, amongst other improvements, the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the available-for-sale category. FHLB stock, however, is not in the scope of ASU No. 2016-01 and will continue to be presented at historical cost. Upon adoption, an immaterial amount of unrealized losses related to the in-scope equity securities was reclassified from other comprehensive loss to retained earnings and the reclassification of an equity investments from securities available for sale to other assets with its related market value changes reflected in earnings for the six months ended June 30, 2018. In addition, the fair value disclosures for financial instruments in Note 10 are computed using an exit price notion as required by ASU No. 2016-01.

The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers and its amendments which established ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018 using the modified retrospective approach. In summary, the core principle of ASC 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. The Company’s revenue streams that are covered by ASC Topic 606 are primarily fees earned in connection with performing services for our customers such as investment advisor fees, wire transfer fees, and bounced check fees. Such fees are either satisfied over time if the service is performed over a period of time (as with investment advisor fees or safe deposit box rental fees), or satisfied at a point in time (as with wire transfer fees and bounced check fees). The Company recognizes fees for services performed over the time period to which the fees relate. The Company recognizes fees earned at a point in time on the day the fee is earned. The modified retrospective approach which includes presenting the cumulative effect of initial application, if any, along with supplementary disclosures, if any. The Company did not record a cumulative effect adjustment upon adoption of the standard.

Recently Issued Accounting Standards

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU No. 2017-08 specifies that the premium amortization period ends at the earliest call date, rather than the contractual maturity date, for purchased non-contingently callable debt securities. Shortening the amortization period is generally expected to more closely align the interest income recognition with the expectations incorporated in the market pricing on the underlying securities. The shorter amortization period means that interest income would generally be lower in the periods before the earliest call date and higher thereafter (if the security is not called) compared to current GAAP. Currently, the premium is amortized to the contractual maturity date under GAAP. Because the premium will be amortized to the earliest call date, the holder will not recognize a loss in earnings for the unamortized premium when the call is exercised. This ASU No. 2017-08 is effective for annual and interim periods in fiscal years beginning after December 15, 2018. The ASU No. 2017-08 specifies that the transition approach to the standard be accounted for on a modified retrospective basis with a cumulative effect adjustment in retained earnings as of the beginning of the period of adoption. The Company plans to adopt ASU No. 2017-08 effective January 1, 2019 and the adoption is not expected to have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 eliminates the second step of the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity will recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill recorded. ASU No. 2017-04 does not amend the optional qualitative assessment of goodwill impairment. ASU No. 2017-04 is effective for annual and interim periods in fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to adopt ASU No. 2017-04 prospectively beginning January 1, 2020 and the impact of its adoption on the Company’s Consolidated Statements of Condition, results of operations, or cash flows will be dependent upon goodwill impairment determinations made after that date.

In June 2016, the FASB issued 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 on an amortized cost basis and available-for-sale debt securities. For assets held at amortized cost, 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. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The amendments in ASU No. 2016-13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects the measurement of expected credit losses based on relevant information about past events, including historical loss experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. 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. 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. For public business entities that are SEC filers, the amendments in ASU No. 2016-13 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

An entity will apply the amendments in ASU No. 2016-13 through a cumulative-effect adjustment to retained earnings as of January 1, 2020 (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an OTTI had been recognized before the effective date. The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of ASU No. 2016-13. Amounts previously recognized in accumulated other comprehensive income (loss) as of the date of adoption that relate to improvements in cash flows expected to be collected should continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption should be recorded in earnings when received. Financial assets for which the guidance in Subtopic 310-30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality (PCD assets), has previously been applied should prospectively apply the guidance in ASU No. 2016-13 for PCD assets. A prospective transition approach should be used for PCD assets where upon adoption, the amortized cost basis should be adjusted to reflect the addition of the allowance for credit losses. This transition relief will avoid the need for a reporting entity to reassess its purchased financial assets that exist as of the date of adoption to determine whether they would have met at acquisition the new criteria of more-than insignificant credit deterioration since origination. The transition relief also will allow an entity to accrete the remaining noncredit discount (based on the revised amortized cost basis) into interest income at the effective interest rate at the adoption date of ASU No. 2016-13. The same transition requirements should be applied to beneficial interests that previously applied Subtopic 310-30 or have a significant difference between contractual cash flows and expected cash flows.

The Company is evaluating ASU No. 2016-13 and has initiated a working group with multiple members from applicable departments to evaluate the requirements of the new standard, planning for loss modeling requirements consistent with lifetime expected loss estimates, and assessing the impact it will have on current processes. This evaluation includes a review of existing credit models to identify areas where existing credit models used to comply with other regulatory requirements may be leveraged and areas where new models may be required. The adoption of ASU No. 2016-13 could have a material effect on the Company’s Consolidated Statements of Condition and results of operations. The extent of the impact upon adoption will likely depend on the characteristics of the Company’s loan portfolio and economic conditions at that date, as well as forecasted conditions thereafter.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” and the Company will adopt the ASU as of January 1, 2019. ASU No. 2016-02 is intended to improve financial reporting about leasing transactions and the key provision impacting the Company is the requirement for a lessee to record a right-of-use asset and a liability, which represents the obligation to make lease payments for long-term operating leases. Additionally, the ASU includes quantitative and qualitative disclosures required by lessees and lessors to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. The Company’s working group, comprised of associates from disciplines such as Vendor Risk Management, Real Estate, Technology, and Accounting, have made substantial progress in reviewing contractual arrangements for embedded leases in an effort to identify the Company’s full lease population. To date, we have found only a few minor embedded leases in our non-lease contracts. We are presently evaluating all of our leases for compliance with the new lease accounting rules and as a lessor and lessee, we do not anticipate the classification of our leases to change. However, the Company’s assets and liabilities will increase by an immaterial amount based on the present value of remaining lease payments for leases in place at the adoption date. The Company is currently reviewing vendor software solutions to provide a robust lease accounting package that will accurately prepare the financial statement adjustments and enhanced disclosures required by ASU No. 2016-02.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the purposes of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” and the “Company” are used to refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, including New York Community Bank and New York Commercial Bank (the Community Bank and the Commercial Bank, respectively, and 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 penalty 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;

•

heightened regulatory focus on CRE concentration and related limits that have been, or may in the future be, imposed by regulators;

•

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;

•

our ability to obtain timely shareholder and regulatory approvals of any merger transactions or corporate restructurings we may propose;

•

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

•

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

•

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 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;

•

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.

See Part II, Item 1A, Risk Factors, in this report and Part I, Item 1A, Risk Factors, in our Form 10-K for the year ended December 31, 2017 for a further discussion of important risk factors that could cause actual results to differ materially from our forward-looking statements.

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

RECONCILIATIONS OF STOCKHOLDERS’ EQUITY, COMMON STOCKHOLDERS’ EQUITY,

AND TANGIBLE COMMON STOCKHOLDERS’ EQUITY;

TOTAL ASSETS AND TANGIBLE ASSETS; AND THE RELATED MEASURES

(unaudited)

While stockholders’ equity, common stockholders’ equity, total assets, and book value per common share are financial measures that are recorded in accordance with GAAP, tangible common stockholders’ equity, tangible assets, and tangible book value per common share are not. It is management’s belief that these non-GAAP measures should be disclosed in this report and others we issue for the following reasons:

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

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

Reconciliations of our stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity; our total assets and tangible assets; and the related financial measures for the respective periods follow:


	At or for the						At or for the
	Three Months Ended						Six Months Ended
	June 30,		Mar. 31,		June 30,		June 30,		June 30,
(dollars in thousands)	2018		2018		2017		2018		2017
Total Stockholders’ Equity	$	6,789,352	$	6,780,717	$	6,734,778	$	6,789,352	$	6,734,778
Less: Goodwill		(2,436,131)		(2,436,131)		(2,436,131)		(2,436,131)		(2,436,131)
Core deposit intangibles (“CDI”)		-		-		(24)		-		(24)
Preferred stock		(502,840)		(502,840)		(502,840)		(502,840)		(502,840)

Tangible common stockholders’ equity	$	3,850,381	$	3,841,746	$	3,795,783	$	3,850,381	$	3,795,783

Total Assets	$	50,469,170	$	49,654,874	$	48,347,658	$	50,469,170	$	48,347,658
Less: Goodwill		(2,436,131)		(2,436,131)		(2,436,131)		(2,436,131)		(2,436,131)
CDI

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