New York Community Bancorp, Inc.
615 Merrick Avenue
Westbury, New York 11590
www.myNYCB.com
ir@myNYCB.com
(516) 683-4420
STRENGTH.
STABILITY.
LONGEVITY.
2018 ANNUAL REPORT
TOTAL A SSETS
$51.9 BILLION
Our assets totaled $51.9 billion at the end of
December 31, 2018.
DEPOSITS
$30.8 BILLION
With 252 branches in Metro New York, New
Jersey, Ohio, Florida, and Arizona, our deposits
at December 31, 2018 totaled $30.8 billion.
MULTI-FAMILY LOANS
$29.9 BILLION
With a portfolio of $29.9 billion at the end
of December, we are a leading producer of
multi-family loans in New York City.
New York Community Bancorp, Inc.
615 Merrick Avenue
Westbury, New York 11590
www.myNYCB.com
ir@myNYCB.com
(516) 683-4420
STRENGTH.
STABILITY.
LONGEVITY.
2018 ANNUAL REPORT
TOTAL A SSETS
$51.9 BILLION
Our assets totaled $51.9 billion at the end of
December 31, 2018.
DEPOSITS
$30.8 BILLION
With 252 branches in Metro New York, New
Jersey, Ohio, Florida, and Arizona, our deposits
at December 31, 2018 totaled $30.8 billion.
MULTI-FAMILY LOANS
$29.9 BILLION
With a portfolio of $29.9 billion at the end
of December, we are a leading producer of
multi-family loans in New York City.
MULTI-FAMILY LOAN PORTFOLIO
(in millions)
COMMERCIAL REAL ESTATE
LOAN PORTFOLIO
(in millions)
SPECIALTY FINANCE LOAN AND
LEASE PORTFOLIO
(in millions)
$29,904
$28,092
$7,637
$7,860
$7,727
$7,366
$7,325
$7,001
$1,989
$25,989
$26,961
$23,849
$20,714
CAGR (2013-2018)
63.2%
$1,286
$1,584
$895
$635
2014
$848
$0
$172
2013
$258
$0
2015
2016
2017
2018
$1,068
$0
$1,266
$0
$1,784
$0
$1,917
$0
Years ended December 31,
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
Originations:
Net Charge-offs (Recoveries):
$7,417
$11
$7,584
$0
$9,214
$(4)
$5,685
$0
$5,378
$0
$6,622
$0
$2,168
$0
$1,661
$1
$1,842
$(1)
$1,180
$(1)
$1,039
$0
$967
$3
TOTAL RETURN ON INVESTMENT
OUR FRANCHISE: OVER 250 BRANCHE S ACROS S FI VE STATE S
As a result of nine stock splits between
1994 and 2004, our charter shareholders
have 2,700 shares of NYCB stock for each
100 shares originally purchased.
PEER GROUP
NYCB(a)
(a) Bloomberg
2,059%
3,843%
CAGR since IPO:
20.8%
3,069%
2,754%
2,670%
4,784%
4,682%
4,106%
4,265%
4,319%
The combined GDP of the five states we operate in is
equal to the fourth largest GDP in the world.
3,135%
Ohio Savings Bank
28
BRANCHES
Total Deposits:
$2.2B
141
BRANCHES
Total Deposits:
$18.9B
Queens County Savings Bank
Richmond County Savings Bank
Roslyn Savings Bank
Roosevelt Savings Bank
Atlantic Bank
717%
306%
203%
179%
286%
231%
299%
459%
492%
530%
722%
722%
804%
804%
618%
618%
Years ended December 31,
1999
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Non-Interest-Bearing
8%
Savings
15%
MMA
18%
Interest-Bearing
Checking
19%
CDs
40%
DEPOSITS
(for the year ended
December 31, 2018)
Average cost of
interest-bearing
deposits: 1.66%
TOTAL
DEPOSITS:
$30.8
BILLION
1-4 Family
1%
C&I
6%
Mulit-Family
75%
CRE
17%
ADC
1%
LOANS
(for the year ended
December 31, 2018)
Average yield
on all
loan: 3.77%
TOTAL
HFI LOANS:
$40.2
BILLION
14
BRANCHES
Total Deposits:
$1.3B
AmTrust Bank
Note: Data as of 12/31/2018 from S&P Global Market Intelligence
AmTrust Bank
27
BRANCHES
Total Deposits:
$2.9B
42
BRANCHES
Total Deposits:
$4.4B
Garden State
Community Bank
CORPORATE DIRECTORY NEW YORK COMMUNIT Y BANCORP, INC.
BOARD OF DIRECTORS (1)
CHAIRMAN OF THE BOARD
Dominick Ciampa (2)
Founder
Ciampa Organization
MEMBERS
Hanif “Wally” Dahya(3)
Chief Executive Officer
The Y Company LLC
Leslie D. Dunn
Independent Director
Federal Home Loan Bank of Cincinnati
Joseph R. Ficalora (4)
President and Chief Executive Officer
New York Community Bancorp, Inc.
Michael J. Levine (5)
Principal, Norse Realty Group, Inc. &
Affiliates;
Partner, Levine & Schmutter, CPAs
James J. O’Donovan (6)
Senior Executive Vice President and
Chief Lending Officer (retired)
New York Community Bancorp, Inc.
Lawrence Rosano, Jr. (7)
President, Associated Development Corp.
and Associated Properties, Inc.
Ronald A. Rosenfeld
Chairman (retired)
Federal Housing Finance Board
Lawrence J. Savarese (8)
Senior Partner (retired)
KPMG
John M. Tsimbinos (9)
Chairman and Chief Executive Officer
(retired)
TR Financial Corp. and
Roosevelt Savings Bank
Robert Wann
Senior Executive Vice President and
Chief Operating Officer
New York Community Bancorp, Inc.
PRINCIPAL OFFICERS
Joseph R. Ficalora
President and Chief Executive Officer
Robert Wann
Senior Executive Vice President and
Chief Operating Officer
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
James J. Carpenter
Senior Executive Vice President and
Chief Lending Officer
John J. Pinto
Executive Vice President and
Chief Accounting Officer
EXECUTIVE VICE PRESIDENTS
John T. Adams
Chief Credit Officer
Fenton Aylmer
Chief Risk Officer
Robert D. Brown
Chief Information Officer
Anthony E. Donatelli
Director, Capital Planning and Stress
Testing
Frank Esposito
Director, Loan Administration
Andrew Kaplan
Director, Retail Products and Services;
President, NYCB Insurance Agency, Inc.
Eric S. Kracov
Chief Human Resources Officer
Joyce Larson
Chief Administrative Officer
Anthony M. Lewis
Chief Asset Review, Recovery,
and Disposition Officer
Nicholas C. Munson
Chief Audit Executive
R. Patrick Quinn, Esq.
Chief Corporate Governance Officer
and Corporate Secretary
Barbara A. Tosi-Renna
Assistant Chief Operating Officer
Thomas J. Zammit
Chief Appraiser
AFFILIATE OFFICERS
NEW YORK COMMUNITY BANK
Athanassia “Nancy” Papaioannou
President, Atlantic Bank Division
Kenneth M. Scheriff
Executive Vice President, Premier Banking
Robert T. Stratford, Jr.
Managing Director, Chief Lending Officer
NYCB SPECIALTY FINANCE CO., LLC
John F. X. Chipman
Executive Vice President and Director,
Specialty Finance
DIVISIONAL BANK DIRECTORS
QUEENS COUNTY SAVINGS BANK/
ROSLYN SAVINGS BANK
Joseph R. Ficalora
President, QCSB Division
Thomas J. Calabrese, Jr.
President, RSLN Division;
Vice President, Operations
Daniel Gale Agency
(1) Directors of New York Community Bancorp, Inc. also serve as directors of New York Community Bank.
(2) Mr. Ciampa also serves as Chairman of the Boards of Directors of New York Community Bank.
(3) Mr. Dahya chairs the Commercial Credit Committee of the Boards.
(4) Mr. Ficalora serves as a director on each of our Divisional Boards.
(5) Mr. Levine chairs the Risk Assessment and Nominating and Corporate Governance Committees of the Boards.
(6) Mr. O’Donovan chairs the Mortgage & Real Estate Committee of the Boards.
(7) Mr. Rosano serves as Vice Chairman of the Risk Assessment Committee of the Boards.
(8) Mr. Savarese chairs the Audit Committee of the Boards.
(9) Mr. Tsimbinos chairs the Compensation Committee of the Boards.
Hon. Claire Shulman
Queens Borough President (retired);
President and Chief Executive Officer
Flushing Willets Point Corona LDC
Michael R. Stoler
Managing Director
Madison Realty Capital
RICHMOND COUNTY SAVINGS BANK
Michael F. Manzulli
Chairman, RCBK Division
Former Chairman and
Chief Executive Officer
Richmond County Bancorp, Inc. and
Richmond County Savings Bank
Godfrey H. Carstens
President (retired)
Carstens Electrical Supply
Peter J. Esposito
Senior Mortgage Lending Officer (retired)
New York Community Bank
Lisa Giovinazzo, Esq.
Legal Director, SIDMC
James L. Kelley, Esq.
Partner
Lahr, Dillon, Manzulli, Kelley & Penett, P.C.
ATLANTIC BANK
Joseph R. Ficalora
Chairman and Chief Executive Officer
Atlantic Bank Division
Nicolas Bornozis
President
Capital Link Inc.
John Catsimatidis
Chairman and Chief Executive Officer
Red Apple Group
Andrew J. Jacovides
Former Ambassador, Cyprus
Comin Nicholas “Nick” Kafes
Senior Vice President, High Yield Bond
Trading
Tullett Prebon Financial Services LLC
Savas Konstantinides
President and Chief Executive Officer
Omega Brokerage
Spiros Milonas
President
Ionian Management Inc.
Mitchell Rutter
President
Essex Capital Partners
John M. Tsimbinos
OHIO SAVINGS BANK
Ronald A. Rosenfeld
Chairman, OSB Division
Leslie D. Dunn
Robert P. Duvin
Partner
Littler Mendelson, PC
Keith V. Mabee
Group President
Corporate Communications
and Investor Relations
Falls Communications
MULTI-FAMILY LOAN PORTFOLIO
(in millions)
COMMERCIAL REAL ESTATE
LOAN PORTFOLIO
(in millions)
SPECIALTY FINANCE LOAN AND
LEASE PORTFOLIO
(in millions)
$29,904
$28,092
$7,637
$7,860
$7,727
$7,366
$7,325
$7,001
$1,989
$25,989
$26,961
$23,849
$20,714
CAGR (2013-2018)
63.2%
$1,286
$1,584
$895
$635
2014
$848
$0
$172
2013
$258
$0
2015
2016
2017
2018
$1,068
$0
$1,266
$0
$1,784
$0
$1,917
$0
Years ended December 31,
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
Originations:
Net Charge-offs (Recoveries):
$7,417
$11
$7,584
$0
$9,214
$(4)
$5,685
$0
$5,378
$0
$6,622
$0
$2,168
$0
$1,661
$1
$1,842
$(1)
$1,180
$(1)
$1,039
$0
$967
$3
TOTAL RETURN ON INVESTMENT
OUR FRANCHISE: OVER 250 BRANCHE S ACROS S FI VE STATE S
As a result of nine stock splits between
1994 and 2004, our charter shareholders
have 2,700 shares of NYCB stock for each
100 shares originally purchased.
PEER GROUP
NYCB(a)
(a) Bloomberg
2,059%
3,843%
CAGR since IPO:
20.8%
3,069%
2,754%
2,670%
4,784%
4,682%
4,106%
4,265%
4,319%
The combined GDP of the five states we operate in is
equal to the fourth largest GDP in the world.
3,135%
Ohio Savings Bank
28
BRANCHES
Total Deposits:
$2.2B
141
BRANCHES
Total Deposits:
$18.9B
Queens County Savings Bank
Richmond County Savings Bank
Roslyn Savings Bank
Roosevelt Savings Bank
Atlantic Bank
717%
306%
203%
179%
286%
231%
299%
459%
492%
530%
722%
722%
804%
804%
618%
618%
Years ended December 31,
1999
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Non-Interest-Bearing
8%
Savings
15%
MMA
18%
Interest-Bearing
Checking
19%
CDs
40%
DEPOSITS
(for the year ended
December 31, 2018)
Average cost of
interest-bearing
deposits: 1.66%
TOTAL
DEPOSITS:
$30.8
BILLION
1-4 Family
1%
C&I
6%
Mulit-Family
75%
CRE
17%
ADC
1%
LOANS
(for the year ended
December 31, 2018)
Average yield
on all
loan: 3.77%
TOTAL
HFI LOANS:
$40.2
BILLION
14
BRANCHES
Total Deposits:
$1.3B
AmTrust Bank
Note: Data as of 12/31/2018 from S&P Global Market Intelligence
AmTrust Bank
27
BRANCHES
Total Deposits:
$2.9B
42
BRANCHES
Total Deposits:
$4.4B
Garden State
Community Bank
CORPORATE DIRECTORY NEW YORK COMMUNIT Y BANCORP, INC.
BOARD OF DIRECTORS (1)
CHAIRMAN OF THE BOARD
Dominick Ciampa (2)
Founder
Ciampa Organization
MEMBERS
Hanif “Wally” Dahya(3)
Chief Executive Officer
The Y Company LLC
Leslie D. Dunn
Independent Director
Federal Home Loan Bank of Cincinnati
Joseph R. Ficalora (4)
President and Chief Executive Officer
New York Community Bancorp, Inc.
Michael J. Levine (5)
Principal, Norse Realty Group, Inc. &
Affiliates;
Partner, Levine & Schmutter, CPAs
James J. O’Donovan (6)
Senior Executive Vice President and
Chief Lending Officer (retired)
New York Community Bancorp, Inc.
Lawrence Rosano, Jr. (7)
President, Associated Development Corp.
and Associated Properties, Inc.
Ronald A. Rosenfeld
Chairman (retired)
Federal Housing Finance Board
Lawrence J. Savarese (8)
Senior Partner (retired)
KPMG
John M. Tsimbinos (9)
Chairman and Chief Executive Officer
(retired)
TR Financial Corp. and
Roosevelt Savings Bank
Robert Wann
Senior Executive Vice President and
Chief Operating Officer
New York Community Bancorp, Inc.
PRINCIPAL OFFICERS
Joseph R. Ficalora
President and Chief Executive Officer
Robert Wann
Senior Executive Vice President and
Chief Operating Officer
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
James J. Carpenter
Senior Executive Vice President and
Chief Lending Officer
John J. Pinto
Executive Vice President and
Chief Accounting Officer
EXECUTIVE VICE PRESIDENTS
John T. Adams
Chief Credit Officer
Fenton Aylmer
Chief Risk Officer
Robert D. Brown
Chief Information Officer
Anthony E. Donatelli
Director, Capital Planning and Stress
Testing
Frank Esposito
Director, Loan Administration
Andrew Kaplan
Director, Retail Products and Services;
President, NYCB Insurance Agency, Inc.
Eric S. Kracov
Chief Human Resources Officer
Joyce Larson
Chief Administrative Officer
Anthony M. Lewis
Chief Asset Review, Recovery,
and Disposition Officer
Nicholas C. Munson
Chief Audit Executive
R. Patrick Quinn, Esq.
Chief Corporate Governance Officer
and Corporate Secretary
Barbara A. Tosi-Renna
Assistant Chief Operating Officer
Thomas J. Zammit
Chief Appraiser
AFFILIATE OFFICERS
NEW YORK COMMUNITY BANK
Athanassia “Nancy” Papaioannou
President, Atlantic Bank Division
Kenneth M. Scheriff
Executive Vice President, Premier Banking
Robert T. Stratford, Jr.
Managing Director, Chief Lending Officer
NYCB SPECIALTY FINANCE CO., LLC
John F. X. Chipman
Executive Vice President and Director,
Specialty Finance
DIVISIONAL BANK DIRECTORS
QUEENS COUNTY SAVINGS BANK/
ROSLYN SAVINGS BANK
Joseph R. Ficalora
President, QCSB Division
Thomas J. Calabrese, Jr.
President, RSLN Division;
Vice President, Operations
Daniel Gale Agency
(1) Directors of New York Community Bancorp, Inc. also serve as directors of New York Community Bank.
(2) Mr. Ciampa also serves as Chairman of the Boards of Directors of New York Community Bank.
(3) Mr. Dahya chairs the Commercial Credit Committee of the Boards.
(4) Mr. Ficalora serves as a director on each of our Divisional Boards.
(5) Mr. Levine chairs the Risk Assessment and Nominating and Corporate Governance Committees of the Boards.
(6) Mr. O’Donovan chairs the Mortgage & Real Estate Committee of the Boards.
(7) Mr. Rosano serves as Vice Chairman of the Risk Assessment Committee of the Boards.
(8) Mr. Savarese chairs the Audit Committee of the Boards.
(9) Mr. Tsimbinos chairs the Compensation Committee of the Boards.
Hon. Claire Shulman
Queens Borough President (retired);
President and Chief Executive Officer
Flushing Willets Point Corona LDC
Michael R. Stoler
Managing Director
Madison Realty Capital
RICHMOND COUNTY SAVINGS BANK
Michael F. Manzulli
Chairman, RCBK Division
Former Chairman and
Chief Executive Officer
Richmond County Bancorp, Inc. and
Richmond County Savings Bank
Godfrey H. Carstens
President (retired)
Carstens Electrical Supply
Peter J. Esposito
Senior Mortgage Lending Officer (retired)
New York Community Bank
Lisa Giovinazzo, Esq.
Legal Director, SIDMC
James L. Kelley, Esq.
Partner
Lahr, Dillon, Manzulli, Kelley & Penett, P.C.
ATLANTIC BANK
Joseph R. Ficalora
Chairman and Chief Executive Officer
Atlantic Bank Division
Nicolas Bornozis
President
Capital Link Inc.
John Catsimatidis
Chairman and Chief Executive Officer
Red Apple Group
Andrew J. Jacovides
Former Ambassador, Cyprus
Comin Nicholas “Nick” Kafes
Senior Vice President, High Yield Bond
Trading
Tullett Prebon Financial Services LLC
Savas Konstantinides
President and Chief Executive Officer
Omega Brokerage
Spiros Milonas
President
Ionian Management Inc.
Mitchell Rutter
President
Essex Capital Partners
John M. Tsimbinos
OHIO SAVINGS BANK
Ronald A. Rosenfeld
Chairman, OSB Division
Leslie D. Dunn
Robert P. Duvin
Partner
Littler Mendelson, PC
Keith V. Mabee
Group President
Corporate Communications
and Investor Relations
Falls Communications
DE AR FELLOW SHAREHOLDERS:
2018 WA S A SIGNIFIC ANT YE AR
2018 WA S A SIGNIFIC ANT YE AR for New York Community Bancorp, Inc. Not only did
it mark our twenty-fifth anniversary as a publicly traded company, but it also marked our return to growth
after nearly five years of being restrained.
For those investors who have been shareholders since day one, you know that growth, whether organically or
through acquisitions, has been a consistent theme for us over the last quarter century. On November 23, 1993,
the date of our initial public offering, the Company had approximately $1 billion in assets
and seven branch locations, all in the greater New York City region. We ended 2018 with
$51.9 billion in assets and over 250 branches spread throughout five states. Much of
this growth has resulted through acquisitions. We’ve consummated 11 transactions
since going public, each of which has fueled our deposit growth and our loan production.
Each transaction has also expanded our franchise into new markets and enhanced our
management team. Acquisitions have also fueled growth in our earnings and book value
per share, as well as providing us with very strong returns. As a result, since our IPO
date to December 31, 2018, we have provided our charter shareholders with a total return on their investment,
including dividends, of 3,135%, well above that of our industry peers.
However, for the past several years, our growth has been held back due to various regulations promulgated under
the Dodd-Frank Wall Street Reform and Consumer Protection Act, which negatively impacted many community
and regional banks. The most onerous of these regulations for the Company was the arbitrary $50 billion in
assets threshold used in order to be considered a Systemically Important Financial Institution or a SIFI bank.
REGUL ATORY RELIEF FINALLY HAPPENS
REGUL ATORY RELIEF FINALLY HAPPENS
In last year’s annual letter I wrote that we were encouraged by the progress being made by the regulatory relief
efforts in Congress. Our hopes were realized when, in late May of 2018, the President signed into law S.2155, the
Economic Growth, Regulatory Relief, and Consumer Protection Act. The Act, among other things, re-defined the
manner by which banks are designated as being a SIFI by increasing the asset threshold requirement to qualify for
the designation to $250 billion from $50 billion. This new legislation is a game changer for the Company as we were
only one of a handful of banks that were hovering just under the $50 billion SIFI threshold for the past several years.
This was one of the major factors positively impacting our performance in 2018. Once it was enacted, we resumed
our organic growth by increasing both our loan portfolio as well as the size of our investment securities portfolio.
In addition to allowing us to grow past $50 billion without any undue regulatory burdens, the changed regulatory
environment benefited us in several other ways: we received final regulatory approval to merge our commercial
bank subsidiary, New York Commercial Bank, into our community bank, New York Community Bank; we reduced our
regulatory compliance costs; and the Federal Reserve Board approved a $300 million share repurchase program,
which we funded with a subordinated note offering. Under this program we repurchased 23.9 million shares at an
average price of $9.54 per share for an aggregate purchase amount of $228 million as of March 31, 2019. This leaves
approximately $72 million remaining for future repurchases.
EXECUTING OUR GAME PL AN
EXECUTING OUR GAME PL AN
The other major factor that had a positive impact on our 2018 performance was the successful execution of
our strategic plan, that was put into place in late 2017. This plan consists of three strategies: growing the loan
portfolio; redeploying cash into higher-yielding assets; and significantly reducing our operating expenses.
To this end, we originated $10 billion of loans in 2018, up 13% compared to the amount we originated in 2017.
Overall, total loans rose 5% to $40.2 billion, which was in line with expectations. Our loan growth continues to
be driven by our flagship multi-family loan product, which increased 6% to $29.9 billion and by our specialty
finance loans, which rose 26% to $2 billion.
While approximately 50% of the specialty finance loan portfolio is variable rate, principally
all of our multi-family and CRE loans are fixed rate and priced at a spread above the five-
year treasury rate. Notably, the loans we originated last year had higher coupon rates
than our existing portfolio. More importantly, we will benefit over the next several years
from the re-pricing of our loan portfolio. About one-third of our current loan portfolio, with
an average coupon of 3.37%, is reaching its contractual maturity date or its re-pricing
date. These are loans that were originated in 2014 and 2015. Today the average market
rate on our loan originations is closer to 4.00%.
Also during the year, we commenced a reinvestment strategy whereby we re-deployed
our excess cash position into higher-yielding investment securities. The cash position
was the result of various strategic asset sales we undertook in 2017. This had a beneficial impact on our net
interest income, as the average yield on our investment securities portfolio was 3.82% for the twelve months
ended December 31, 2018, compared to 1.92% on our cash balances.
Historically, the Company has operated a low-cost business model. Since the enactment of the Dodd-Frank Act,
our operating expenses, and hence our efficiency ratio, have increased dramatically mainly to keep pace with
all of the new regulations and requirements under this law. Prior to its enactment, our efficiency ratio hovered in
the mid-30% range. Since its passage, it has increased to approximately 50%. Accordingly, after regulatory relief
became effective in early 2018, we embarked on a cost reduction program. During 2018, we reduced the level of
operating expenses significantly. At $547 million, total operating expenses declined $95 million or 15% compared
to the prior year, and was much lower than our peak operating expense run rate of $660 million as of the second
quarter of 2017. Some of the cost savings were due to the sale of our mortgage banking business in late 2017, but
the remaining cost savings represent lower regulatory compliance-related expenses due to the SIFI threshold
being raised to $250 billion of assets. While this represents a dramatic decline, we are confident that operating
expenses will continue to trend lower in 2019 and expect them to finish the year in the low $500 million range.
Another positive in 2018 has been in the area of deposit growth. In the absence of
executing on our M&A strategy, it has been the Company’s strategy to increase deposits
organically. Accordingly, we increased total deposits by 6% on a year-over-year basis to
$30.8 billion.
While we are proud of the organic growth we achieved during 2018, this does not rule
out our other historical growth engine: acquisitions. We have grown our franchise over
the past 25 years and enhanced our shareholder value through 11 highly accretive
mergers of community banks and thrifts. Now that the SIFI threshold has been increased and the regulatory
environment has become more conducive to us doing acquisitions, we feel that the right opportunities are
present for us to restart this engine.
But as with past transactions, we are a disciplined and opportunistic acquirer. Historically, we have used
acquisitions to restructure our balance sheet and increase our liquidity, which is then reinvested into higher
yielding loans. More importantly for all shareholders, any transaction we may undertake must be accretive.
If a potential acquisition does not meet our internal metrics, we will not consummate the transaction.
LOOKING AHE AD
As of this writing, there is lingering uncertainty regarding economic growth in the United States. The Federal
Reserve Board has increased short-term interest rates eight times over the past two years, from nearly
zero to a range of 2.25% to 2.50%. However, it appears that they have stopped for the time being, leading some
to speculate that economic growth will slow and possibly lead us into a recession. We are well positioned
if that turns out to be the case. Our low-risk credit culture and business model has resulted in superior
WE ENDED 2018 WITH $51.9 BILLION IN A S SETS AND OVER
250 BRANCHES SPRE AD THROUGHOUT FIVE STATES.
asset quality through past cycles. While we have grown from $1 billion in assets 25 years ago to nearly
$52 billion in assets today, the composition of our loan portfolio and our strict underwriting practices have
not changed significantly since our IPO.
The majority of our lending, approximately 75% at the end of 2018, is focused on low-risk multi-family loans
on non-luxury, rent-regulated apartment buildings located within the five boroughs of New York City. We are a
market leader lending to this asset class, having developed strong expertise and industry relationships over
the last five decades.
Our best-in-class underwriting and expertise in the rent-regulated multi-family market in New York City has
distinguished our asset quality performance from other banks throughout the country. Going back 25 years
since the time of our IPO, our asset quality in any credit cycle has consistently been better than our industry
peers, while very few of our non-performing loans have resulted in actual losses. Even during and after the
Great Recession, our losses were limited in contrast to those taken by most other banks. Rent-regulated
buildings have below-market rents and are more likely to retain their tenants and therefore their revenue
stream in downward credit cycles. Both average rent growth and growth in net operating income have been
positive since 1990, regardless of the interest rate and economic environment.
Since 1993, losses on our multi-family loan portfolio have aggregated 17 basis points of cumulative loan
originations. Our commercial real estate portfolio, which is a logical extension of our multi-family portfolio,
has fared even better. Losses on commercial real estate loans have aggregated 11 basis points of cumulative
originations since 1993. Our newest loan class, our specialty finance business, that we started in 2013, is
another high-quality lending niche. Since inception, we have grown this portfolio from zero to $2 billion and
have not had any delinquencies during this time. Overall, as a public company, our cumulative loan losses
have been 102 basis points compared to our peers’ 2,427 basis points.
IN CONCLUSION
While the future is yet unwritten, shareholders can be certain that the Company will continue to execute its
business model in the same manner in which it has always done: conservative underwriting; an efficient
operation; and organic growth combined with accretive acquisitions.
On behalf of our Board, management team, and our employees who support our efforts, we thank you for your
continued investment, as well as for the confidence in our leadership it conveys.
Sincerely yours,
JOSEPH R. FICALORA
President and
Chief Executive Officer
DOMINICK CIAMPA
Chairman of the Board
April 9, 2019
Left to right: James J. Carpenter, Dominick Ciampa, Robert Wann, Thomas R. Cangemi
and Joseph R. Ficalora
HELPING OUR COMMUNITIES GROW
At New York Community Bancorp, our mission is to excel in all we do for
all those we serve. This extends to our communities as well.
NYCB is proud to continue its Marquee Partnership
with the “NYCB Live: Home of Nassau Veterans
Memorial Coliseum presented by New York
Community Bank,” helping the local economy and
honoring our veterans.
NYCB employees volunteer at “The League of Yes” event sponsored
by NYCB for individuals with disabilities.
A team of NYCB employees partnered with Junior
Achievement of New York to teach students how
cities function and prepare them on how to make
real-life decisions.
While our Company has grown over the last twenty five years, so too has our commitment to the communities
we serve. Over this time, more and more of our resources have been invested in various programs throughout
all of our communities, where the need is greatest or where we will impact the largest number of people. Our
commitment to the communities we serve comes not only through donations and grants, but also through
volunteering our time and talent. At the end of the day, our belief is that the relationship between our Family of
Banks and the communities which they serve, is a symbiotic one—the more we give to our communities, the
more we receive from them.
In 2018, the Bank and our two affiliated foundations awarded $1.5 million to about 500 organizations. Almost
10% of the organizations we donated to received multiple donations for various worthwhile programs.
Additionally, many of our employees donated their time and their talent to various causes that are near and
dear to them. Last year, our employees volunteered more than 4,000 hours to many worthwhile causes. These
causes ranged from health fairs and job fairs, to neighborhood festivals. It ranged from Habitat for Humanity in
various states to the Miami Rescue Mission, Maggie’s Place, Providence House, the Phoenix Children’s Hospital,
Junior Achievement, Big Brothers Big Sisters, the Cleveland Orchestra, and many more.
Our branches also participated in many campaigns to bring in food and clothing for organizations in their
neighborhoods. This included the Island Harvest Operation Hope Veteran’s Day Food Drive, whereby all
donations benefited veterans and military families on Long Island; a Back-to-School Campaign, where employees
donated backpacks, notebooks, crayons, markers, and other school supplies to local schools throughout
our communities.
Our Elite Banking program, whereby the Bank donates money on behalf of eligible customers to a non-profit
organization that the customer values, is another way we give back to our communities.
We also participate in various sponsorships. These sponsorships include several programs with the American
Cancer Society and the Leukemia & Lymphoma Society throughout each of our five states. It also included the
second year of our partnership with “NYCB Live: Home of the Nassau Veterans Memorial Coliseum presented by
New York Community Bank.” This sponsorship provides the Bank with naming rights and exposure to a broad
audience, while the name continues to honor our veterans.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2018
Commission File Number 1-31565
NEW YORK COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
06-1377322
(I.R.S. Employer
Identification No.)
615 Merrick Avenue, Westbury, New York 11590
(Address of principal executive offices)
(Zip code)
(Registrant’s telephone number, including area code) (516) 683-4100
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value,
Bifurcated Option Note Unit SecuritiES SM, and Fixed-to-
Floating Rate Series A Noncumulative Perpetual
Preferred Stock, $0.01 par value
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such
files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “accelerated filer,” “large accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting
Company Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of June 30, 2018, the aggregate market value of the shares of common stock outstanding of the registrant was $5.3 billion, excluding 13,814,256
shares held by all directors and executive officers of the registrant. This figure is based on the closing price of the registrant’s common stock on June
29, 2018, $11.04 per share, as reported by the New York Stock Exchange.
The number of shares of the registrant’s common stock outstanding as of February 19, 2019 was 467,333,953 shares.
Documents Incorporated by Reference
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 4, 2019 are incorporated by reference into Part
III.
CROSS REFERENCE INDEX
Cautionary Statement Regarding Forward-Looking Language
Glossary and Abbreviations
PART I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities
Selected Financial Data
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management, and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary (None)
Signatures
Certifications
Page
1
3
7
19
30
30
30
30
31
34
35
70
75
130
130
131
131
131
131
131
132
132
134
135
137
For the purpose of this Annual Report on Form 10-K, the words “we,” “us,” “our,” and the “Company” are used to refer
to New York Community Bancorp, Inc. and our consolidated subsidiary, New York Community Bank (the “Bank”).
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING LANGUAGE
This report, like many written and oral communications presented by New York Community Bancorp, Inc.
and our authorized officers, may contain certain forward-looking statements regarding our prospective performance
and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995,
and are including this statement for purposes of said safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and
expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,”
“should,” “could,” “may,” or similar expressions. Although we believe that our plans, intentions, and expectations as
reflected in these forward-looking statements are reasonable, we can give no assurance that they will be achieved or
realized.
Our ability to predict results or the actual effects of our plans and strategies is inherently uncertain.
Accordingly, actual results, performance, or achievements could differ materially from those contemplated,
expressed, or implied by the forward-looking statements contained in this report.
There are a number of factors, many of which are beyond our control, that could cause actual conditions,
events, or results to differ significantly from those described in our forward-looking statements. These factors
include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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;
any uncertainty relating to the LIBOR calculation process and the potential phasing out of LIBOR after
2021;
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 concentrations 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;
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;
1
•
•
•
•
•
•
•
•
•
•
•
•
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 Item 1A, “Risk Factors” in this annual report and in our other SEC filings 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.
2
GLOSSARY
BASIS POINT
Throughout this filing, the year-over-year changes that occur in certain financial measures are reported in
terms of basis points. Each basis point is equal to one hundredth of a percentage point, or 0.01%.
BOOK VALUE PER COMMON SHARE
Book value per common share refers to the amount of common stockholders’ equity attributable to each
outstanding share of common stock, and is calculated by dividing total stockholders’ equity less preferred stock at
the end of a period, by the number of shares outstanding at the same date.
BROKERED DEPOSITS
Refers to funds obtained, directly or indirectly, by or through deposit brokers that are then deposited into one
or more deposit accounts at a bank.
CHARGE-OFF
Refers to the amount of a loan balance that has been written off against the allowance for losses on non-
covered loans.
COMMERCIAL REAL ESTATE LOAN
A mortgage loan secured by either an income-producing property owned by an investor and leased primarily
for commercial purposes or, to a lesser extent, an owner-occupied building used for business purposes. The CRE
loans in our portfolio are typically secured by office buildings, retail shopping centers, light industrial centers with
multiple tenants, or mixed-use properties.
COST OF FUNDS
The interest expense associated with interest-bearing liabilities, typically expressed as a ratio of interest
expense to the average balance of interest-bearing liabilities for a given period.
CRE CONCENTRATION RATIO
Refers to the sum of multi-family, non-owner occupied CRE, and acquisition, development, and construction
(“ADC”) loans divided by total risk-based capital.
DEBT SERVICE COVERAGE RATIO
An indication of a borrower’s ability to repay a loan, the DSCR generally measures the cash flows available to
a borrower over the course of a year as a percentage of the annual interest and principal payments owed during that
time.
DERIVATIVE
A term used to define a broad base of financial instruments, including swaps, options, and futures contracts,
whose value is based upon, or derived from, an underlying rate, price, or index (such as interest rates, foreign
currency, commodities, or prices of other financial instruments such as stocks or bonds).
DIVIDEND PAYOUT RATIO
The percentage of our earnings that is paid out to shareholders in the form of dividends. It is determined by
dividing the dividend paid per share during a period by our diluted earnings per share during the same period of
time.
EFFICIENCY RATIO
Measures total operating expenses as a percentage of the sum of net interest income and non-interest income.
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.
3
GOVERNMENT-SPONSORED ENTERPRISES
Refers to a group of financial services corporations that were created by the United States Congress to
enhance the availability, and reduce the cost, of credit to certain targeted borrowing sectors, including home finance.
The GSEs include, but are not limited to, the Federal National Mortgage Association (“Fannie Mae”), the Federal
Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks (the “FHLBs”).
GSE OBLIGATIONS
Refers to GSE mortgage-related securities (both certificates and collateralized mortgage obligations) and GSE
debentures.
INTEREST RATE SENSITIVITY
Refers to the likelihood that the interest earned on assets and the interest paid on liabilities will change as a
result of fluctuations in market interest rates.
INTEREST RATE SPREAD
The difference between the yield earned on average interest-earning assets and the cost of average interest-
bearing liabilities.
LOAN-TO-VALUE RATIO
Measures the balance of a loan as a percentage of the appraised value of the underlying property.
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 and securities and the interest expense
produced by deposits and borrowed funds.
NET INTEREST MARGIN
Measures net interest income as a percentage of average interest-earning assets.
NON-ACCRUAL LOAN
A loan generally is classified as a “non-accrual” loan when it is 90 days or more past due or when it is deemed
to be impaired because we no longer expect to collect all amounts due according to the contractual terms of the loan
agreement. When a loan is placed on non-accrual status, we cease the accrual of interest owed, and previously
accrued interest is reversed and charged against interest income. A loan generally is returned to accrual status when
the loan is current and we have reasonable assurance that the loan will be fully collectible.
NON-COVERED LOANS AND OREO
Refers to all of the loans and OREO in our portfolio that are not covered by our loss sharing agreements with
the FDIC.
NON-PERFORMING LOANS AND ASSETS
Non-performing loans consist of non-accrual loans and loans that are 90 days or more past due and still
accruing interest. Non-performing assets consist of non-performing loans, OREO and other repossessed assets.
OREO AND OTHER REPOSSESSED ASSETS
Includes real estate owned by the Company which was acquired either through foreclosure or default.
Repossessed assets are similar, except they are not real estate-related assets.
4
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 Bank with an
agreement to repurchase those securities at an agreed-upon price and date. The Bank’s repurchase agreements are
primarily collateralized by GSE obligations and other mortgage-related securities, and are entered into with either
the FHLBs or various brokerage firms.
SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION (“SIFI”)
A bank holding company with total consolidated assets that average more than $250 billion over the four most
recent quarters is designated a “Systemically Important Financial Institution” under the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the “Dodd-Frank Act”) of 2010, as amended by the Economic Growth,
Regulatory Relief, and Consumer Protection Act of 2018.
WHOLESALE BORROWINGS
Refers to advances drawn by the Bank against its line(s) of credit with the FHLBs, their repurchase
agreements with the FHLBs and various brokerage firms, and federal funds purchased.
YIELD
The interest income associated with interest-earning assets, typically expressed as a ratio of interest income to
the average balance of interest-earning assets for a given period.
5
LIST OF ABBREVIATIONS AND ACRONYMS
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
AmTrust - AmTrust Bank
FRB - Federal Reserve Board
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
BOLI - Bank-owned life insurance
BP - Basis point(s)
GAAP - U.S. generally accepted accounting principles
GLBA - The Gramm Leach Bliley Act
GNMA - Government National Mortgage Association
C&I - Commercial and industrial loan
GSEs - Government-sponsored enterprises
CCAR - Comprehensive Capital Analysis and Review
HQLAs - High-quality liquid assets
CDs - Certificates of deposit
LIBOR-London Interbank Offered Rate
CFPB - Consumer Financial Protection Bureau
LSA - Loss Share Agreements
CMOs - Collateralized mortgage obligations
LTV - Loan-to-value ratio
CMT - Constant maturity treasury rate
CPI - Consumer Price Index
CPR - Constant prepayment rate
CRA - Community Reinvestment Act
CRE - Commercial real estate loan
Desert Hills - Desert Hills Bank
DIF - Deposit Insurance Fund
MBS – Mortgage-backed securities
MSRs - Mortgage servicing rights
NIM - Net interest margin
NOL - Net operating loss
NPAs - Non-performing assets
NPLs - Non-performing loans
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
EPS - Earnings per common share
ERM - Enterprise Risk Management
NYSE - New York Stock Exchange
OCC - Office of the Comptroller of the Currency
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
SEC - U.S. Securities and Exchange Commission
FDI Act - Federal Deposit Insurance Act
SIFI - Systemically Important Financial Institution
FDIC - Federal Deposit Insurance Corporation
TDRs - Troubled debt restructurings
FHLB - Federal Home Loan Bank
6
ITEM 1.
BUSINESS
General
PART I
New York Community Bancorp, Inc., (on a stand-alone basis, the “Parent Company” or, collectively with its
subsidiaries, the “Company”) is the bank holding company for New York Community Bank (the “Bank”). Effective
as of the close of business on November 30, 2018, the Company’s other former banking subsidiary, New York
Commercial Bank (the “Commercial Bank”) was merged with and into the Bank. Accordingly, all of the
Commercial Bank’s 30 branches now operate as branches of the Bank.
New York Community Bank
Established in 1859, the Bank is a New York State-chartered savings bank with 252 branches that currently
operates through eight local divisions, each with a history of strength and service: Queens County Savings Bank,
Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New York;
Garden State Community Bank in New Jersey; Ohio Savings Bank in Ohio: and AmTrust Bank in Florida and
Arizona. We compete for depositors in these diverse markets by emphasizing service and convenience, with a
comprehensive menu of traditional and non-traditional products and services, and access to multiple service
channels, including online banking, mobile banking, and banking by phone.
We also are a leading producer of multi-family loans in New York City, with an emphasis on non-luxury
residential apartment buildings with rent-regulated units that feature below-market rents. In addition to multi-family
loans, which are our principal asset, we originate CRE loans (primarily in New York City, as well as on Long
Island) and, to a much lesser extent, ADC loans, and C&I loans. C&I loans consist of specialty finance loans and
leases, and other C&I loans that are typically made to small and mid-size business in Metro New York.
Online Information about the Company and the Bank
We also serve our customers through our website: www.myNYCB.com. In addition to providing our
customers with 24-hour access to their accounts, and information regarding our products and services, hours of
service, and locations, the website provides extensive information about the Company for the investment
community. Earnings releases, dividend announcements, and other press releases are posted upon issuance to the
Investor Relations portion of the website.
In addition, our filings with the SEC (including our annual report on Form 10-K; our quarterly reports on
Form 10-Q; and our current reports on Form 8-K), and all amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available without charge, and are posted to the
Investor Relations portion of our website. The website also provides information regarding our Board of Directors
and management team, as well as certain Board Committee charters and our corporate governance policies. The
content of our website shall not be deemed to be incorporated by reference into this Annual Report.
Our Market
Our current market for deposits consists of the 26 counties in the five states that are served by our branch
network, including all five boroughs of New York City, Nassau and Suffolk Counties on Long Island, and
Westchester County in New York; Essex, Hudson, Mercer, Middlesex, Monmouth, Ocean, and Union Counties in
New Jersey; Maricopa and Yavapai Counties in Arizona; Cuyahoga, Lake, and Summit Counties in Ohio; and
Broward, Collier, Lee, Miami-Dade, Palm Beach, and St. Lucie Counties in Florida.
The market for the loans we produce varies, depending on the type of loan. For example, the vast majority of
our multi-family loans are collateralized by rental apartment buildings in New York City, which is also home to the
majority of the properties collateralizing our CRE and ADC loans. In contrast, our specialty finance loans and leases
are generally made to large corporate obligors that participate in stable industries nationwide.
Competition for Deposits
The combined population of the 26 counties where our branches are located is approximately 31.5 million,
and the number of banks and thrifts we compete with currently exceeds 300. With total deposits of $30.8 billion at
December 31, 2018, we ranked eleventh among all bank and thrift depositories serving these 26 counties. We also
ranked third among all banks and thrifts in Union County, New Jersey, and third among all banks and thrifts in
Richmond, Queens, and Nassau Counties in New York. (market share information was provided by S&P Global
7
Market Intelligence.) We also compete for deposits with other financial institutions, including credit unions, on-linet
banks, and brokerage firms. Additionally, financial technology companies, also referred to as fintechs, are providing
nontraditional, but increasingly strong competition for deposits and customers.
Our ability to attract and retain deposits is not only a function of short-term interest rates and industry
consolidation, but also the competitiveness of the rates being offered by other financial institutions within our
marketplace.
Competition for deposits is also influenced by several internal factors, including the opportunity to assume or
acquire deposits through business combinations; the cash flows produced through loan and securities repayments
and sales; and the availability of attractively priced wholesale funds. In addition, the degree to which we seek to
compete for deposits is influenced by the liquidity needed to fund our loan production and other outstanding
commitments.
We compete for deposits and customers by placing an emphasis on convenience and service and, from time to
time, by offering specific products at highly competitive rates. In addition to our 252 Community Bank branches, we
have 277 ATM locations, including 238 that operate 24 hours a day. Our customers also have 24-hour access to their
accounts through our bank-by-phone service, through mobile banking, and online through our website,
www.myNYCB.com. We also offer certain money market accounts, certificates of deposit (“CDs”), and checking
accounts through a dedicated website: www.myBankingDirect.com.
We also compete by complementing our broad selection of traditional banking products with an extensive
menu of alternative financial services, including annuities, life and long-term care insurance, and mutual funds of
various third-party service providers.
In addition to checking and savings accounts, Individual Retirement Accounts, and CDs for both businesses
and consumers, we offer a suite of cash management products to address the needs of small and mid-size
businesses and professional associations.
Another competitive advantage is our strong community presence, with April 14, 2018 having marked the
159th year of service of our forebear, Queens County Savings Bank. We have found that our longevity, as well as
our strong capital position, are especially appealing to customers seeking a strong, stable, and service-oriented bank.
Competition for Loans
Our success as a lender is substantially tied to the economic health of the markets where we lend. Local
economic conditions have a significant impact on loan demand, the value of the collateral securing our credits, and
the ability of our borrowers to repay their loans.
The competition we face for loans also varies with the type of loan we are originating. In New York City,
where the majority of the buildings collateralizing our multi-family loans are located, we compete for such loans on
the basis of timely service and the expertise that stems from being a specialist in this lending niche. In addition to
the money center, regional, and local banks we compete with in this market, we compete with insurance companies
and other types of lenders. Certain of the banks we compete with sell the loans they produce to Fannie Mae and
Freddie Mac.
Our ability to compete for CRE loans depends on the same factors that impact our ability to compete for
multi-family credits, and the degree to which other CRE lenders choose to offer loan products similar to ours.
While we continue to originate ADC and C&I loans for investment, such loans represent a small portion of
our loan portfolio as compared to multi-family and CRE loans.
Environmental Issues
We encounter certain environmental risks in our lending activities and other operations. The existence of
hazardous materials may make it unattractive for a lender to foreclose on the properties securing its loans. In
addition, under certain conditions, lenders may become liable for the costs of cleaning up hazardous materials found
on such properties. We attempt to mitigate such environmental risks by requiring either that a borrower purchase
environmental insurance or that an appropriate environmental site assessment be completed as part of our
underwriting review on the initial granting of CRE and ADC loans, regardless of location, and of any out-of-state
multi-family loans we may produce. Depending on the results of an assessment, appropriate measures are taken to
8
address the identified risks. In addition, we order an updated environmental analysis prior to foreclosing on such
properties, and typically hold foreclosed multi-family, CRE, and ADC properties in subsidiaries.
Our attention to environmental risks also applies to the properties and facilities that house our bank
operations. Prior to acquiring a large-scale property, a Phase 1 Environmental Property Assessment is typically
performed by a licensed professional engineer to determine the integrity of, and/or the potential risk associated with,
the facility and the property on which it is built. Properties and facilities of a smaller scale are evaluated by qualified
in-house assessors, as well as by industry experts in environmental testing and remediation. This two-pronged
approach identifies potential risks associated with asbestos-containing material, above and underground storage
tanks, radon, electrical transformers (which may contain PCBs), ground water flow, storm and sanitary discharge,
and mold, among other environmental risks. These processes assist us in mitigating environmental risk by enabling
us to identify and address potential issues, including by avoiding taking ownership or control of contaminated
properties.
Subsidiary Activities
The Bank has formed, or acquired through merger transactions, 24 active subsidiary corporations. Of these, 16
are direct subsidiaries of the Bank and eight are subsidiaries of Bank-owned entities.
The 16 direct subsidiaries of the Bank are:
Name
100 Duffy Realty, LLC
Bellingham Corp.
Beta Investments, Inc.
Jurisdiction of
Organization Purpose
New York
New York
Delaware
Owns a back-office building
Organized to own interests in real estate
Holding company for Omega Commercial Mortgage
Corp. and Long Island Commercial Capital Corp. (see
below)
Owns branch buildings
Organized to own interests in real estate
Formed to hold and manage investment portfolios for
the Company
Formed to hold and manage investment portfolios for
the Company
Originates asset-based, equipment financing, and
dealer-floor plan loans
Organized to own an interest in real estate
Organized to own interests in real estate
Holding company for subsidiaries owning interests in
real estate
Receives revenues from third parties on the sale of
non-deposit insurance products
Owns a branch building
Holding company for Peter B. Cannell & Co., Inc.
(see below)
Formed to hold and manage investment portfolios for
the Company
Holding company for Ironbound Investment
Company, LLC (see below)
BSR 1400 Corp.
DHB Real Estate, LLC
Eagle Rock Investment Corp.
New York
Arizona
New Jersey
Ferry Development Holding Company
Delaware
NYCB Specialty Finance Company, LLC
Delaware
Heritage Realty Holding Company, LLC
Main Omni Realty Corp.
NYB Realty Holding Company, LLC
Maryland
New York
New York
NYCB Insurance Agency, Inc.
New York
Pacific Urban Renewal, Inc.
Richmond Enterprises, Inc.
New Jersey
New York
Synergy Capital Investments, Inc.
New Jersey
Woodhaven Investment Company, LLC
Delaware
9
The eight subsidiaries of Bank-owned entities are:
Name
1400 Corp.
Jurisdiction of
Organization Purpose
New York
Ironbound Investment Company, LLC
Florida
Long Island Commercial Capital Corp. New York
Omega Commercial Mortgage Corp.
Delaware
Peter B. Cannell & Co., Inc.
Delaware
Prospect Realty Holding Company, LLC New York
Delaware
Roslyn Real Estate Asset Corp.
Walnut Realty Holding Company, LLC Delaware
Holding company for Roslyn Real Estate Asset Corp.
(see below)
Organized for the purpose of investing in mortgage-
related assets
A REIT organized for the purpose of investing in
mortgage-related assets
A REIT organized for the purpose of investing in
mortgage-related assets
Advises high net worth individuals and institutions on
the management of their assets
Owns a back-office building
A REIT organized for the purpose of investing in
mortgage-related assets
Owns interests in properties where the Company
conducts back-office operations
NYB Realty Holding Company, LLC owns interests in 25 additional entities organized as indirect wholly-
owned subsidiaries to own interests in various real estate properties.
The Parent Company owns special business trusts that were formed for the purpose of issuing capital and
common securities and investing the proceeds thereof in the junior subordinated debentures issued by the Company.
See Note 8, “Borrowed Funds,” in Item 8, “Financial Statements and Supplementary Data,” for a further discussion
of the Company’s special business trusts. The Parent Company also has one non-banking subsidiary that was
established in connection with the acquisition of Atlantic Bank of New York.
Personnel
At December 31, 2018, the number of FTEs was 2,913, including 1,535 branch-related FTEs. Our employees are
not represented by a collective bargaining unit, and we consider our relationship with our employees to be good.
Federal, State, and Local Taxation
The Company is subject to federal, state, and local income taxes. See the discussion of “Income Taxes” in “Critical
Accounting Policies” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” later in this annual report.
Regulation and Supervision
General
The Bank is a New York State-chartered savings bank and its deposit accounts are insured under the DIF of
the FDIC up to applicable legal limits. For the fiscal year ended December 31, 2018, the Bank was also subject to
regulation and supervision by the NYSDFS, as its chartering agency; by the FDIC, as their insurer of deposits; and
by the CFPB.
The Bank is required to file reports with the NYSDFS, the FDIC, and the CFPB concerning its activities and
financial condition, and is periodically examined by the NYSDFS, the FDIC, and the CFPB to assess compliance
with various regulatory requirements, including with respect to safety and soundness and consumer financial
protection regulations. The regulatory structure gives the regulatory authorities extensive discretion in connection
with their supervisory and enforcement activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss allowance for regulatory purposes. Changes in
such regulations or in banking legislation could have a material impact on the Company, the Bank, and their
operations, as well as the Company’s shareholders.
10
The Company is subject to examination, regulation, and periodic reporting under the Bank Holding Company
Act of 1956, as amended (the “BHCA”), as administered by the FRB. Furthermore, the Company would be required
to obtain the prior approval of the FRB to acquire all, or substantially all, of the assets of any bank or bank holding
company.
In addition, the Company is periodically examined by the FRB-NY, and is required to file certain reports
under, and otherwise comply with, the rules and regulations of the SEC under federal securities laws. Certain of the
regulatory requirements applicable to the Bank and the Company are referred to below or elsewhere herein.
However, such discussion is not meant to be a complete explanation of all laws and regulations, and is qualified in
its entirety by reference to the actual laws and regulations.
The Dodd-Frank Act
Enacted in July 2010, the DFA significantly changed the bank regulatory structure and will continue to affect,
into the immediate future, the lending and investment activities and general operations of depository institutions and
their holding companies. The DFA is complex and comprehensive legislation that impacts practically all aspects of a
banking organization, and represents a significant overhaul of many aspects of the regulation of the financial
services industry.
The Economic Growth, Regulatory Relief, and Consumer Protection Act
On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (also referred to as
S.2155) was signed into law. As enacted, S.2155 modifies major provisions of the DFA and other laws governing
regulation of the financial industry. Among other things, S.2155 re-defines the manner by which banks are
designated as a SIFI, by increasing the asset threshold to $250 billion from $50 billion, modifies and provides
exemptions to certain mortgage lending rules, provides an exemption for certain banks with less than $10 billion in
assets from leverage and risk-based capital requirements, creates an exemption from prohibitions on proprietary
trading (the “Volcker Rule”), includes various provisions to address consumer protection, as well as several
provisions regarding securities exchanges and capital formation.
Capital Requirements
In early July 2013, the FRB and the FDIC approved revisions to their capital adequacy guidelines and prompt
corrective action rules to implement the revised standards of the Basel Committee on Banking Supervision,
commonly called Basel III, and to address relevant provisions of the DFA. “Basel III” generally refers to two
consultative documents released by the Basel Committee on Banking Supervision in December 2009. The “Basel III
Rules” generally refer to the rules adopted by U.S. banking regulators in December 2010 to align U.S. bank capital
requirements with Basel III and with the related loss absorbency rules they issued in January 2011, which include
significant changes to bank capital, leverage, and liquidity requirements.
The Basel III Rules include new risk-based capital and leverage ratios, which became effective January 1,
2015, and revised the definition of what constitutes “capital” for the purposes of calculating those ratios. Under the
Basel III Rules, the Company and the Bank are required to maintain minimum capital in accordance with the
following ratios: (i) a common equity tier 1 capital ratio of 4.5%; (ii) a tier 1 capital ratio of 6% (increased from
4%); (iii) a total capital ratio of 8% (unchanged from the prior rules); and (iv) a tier 1 leverage ratio of 4%.
In addition, the Basel III Rules assign higher risk weights to certain assets, such as the 150% risk weighting
assigned to exposures that are more than 90 days past due or are on non-accrual status, and to certain CRE facilities
that finance the acquisition, development, or construction of real property. The Basel III Rules also eliminate the
inclusion of certain instruments, such as trust preferred securities, from tier 1 capital. In addition, tier 2 capital is no
longer limited to the amount of tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax
assets, and investments in unconsolidated subsidiaries over designated percentages of common stock will be
required, subject to limitation, to be deducted from capital. Finally, tier 1 capital will include accumulated other
comprehensive income, which includes all unrealized gains and losses on available-for-sale securities.
The Basel III Rules also establish a “capital conservation buffer” (consisting entirely of common equity tier 1
capital) that will be 2.5% above the new regulatory minimum capital requirements when it is fully phased in. The
result will be an increase in the minimum common equity tier 1, tier 1, and total capital ratios to 7.0%, 8.5%, and
10.5%, respectively. The phase-in of the new capital conservation buffer requirement began in January 2016 at
0.625% of risk-weighted assets and will increase by that amount each year until fully implemented. The phase-in
period ended on January 1, 2019 and the capital conservation buffer is now at its fully phased-in level of 2.5%. An
institution can be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary
11
bonuses if its capital levels fall below these amounts. The Basel III Rules also establish a maximum percentage of
eligible retained income that can be utilized for such capital distributions.
In September 2017, the FRB, the FDIC, and the OCC proposed a rule intended to reduce regulatory burden by
simplifying several requirements in the agencies’ regulatory capital rule. Most aspects of the proposed rule would
apply only to banking organizations that are not subject to the “advanced approaches” in the capital rule, which are
generally firms with less than $250 billion in total consolidated assets and less than $10 billion in total foreign
exposure. The proposal would simplify and clarify a number of the more complex aspects of the existing capital
rule. Specifically, the proposed rule simplifies the capital treatment for certain ADC loans, mortgage servicing
assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and
minority interest. A final rule has not yet been issued.
Prompt Corrective Regulatory Action
Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective
action” with respect to institutions that do not meet minimum capital requirements. For such purposes, the law
establishes
tiers: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized.
five capital
As a result of the Basel III Rules, new definitions of the relevant measures for the five capital categories took
effect on January 1, 2015. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of
10% or greater, a tier 1 risk-based capital ratio of 8% or greater, a common equity tier 1 risk-based capital ratio of
6.5% or greater, and a tier 1 leverage ratio of 5% or greater, and is not subject to a regulatory order, agreement, or
directive to meet and maintain a specific capital level for any capital measure.
An institution is deemed to be “adequately capitalized” if it has a total risk-based capital ratio of 8% or
greater, a tier 1 risk-based capital ratio of 6% or greater, a common equity tier 1 risk-based capital ratio of 4.5% or
greater, and a tier 1 leverage ratio of 4% or greater.
An institution is deemed to be “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a tier
1 risk-based capital ratio of less than 6%, a common equity tier 1 risk-based capital ratio of less than 4.5%, or a tier
1 leverage ratio of less than 4%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-
based capital ratio of less than 6%, a tier 1 risk-based capital ratio of less than 4%, a common equity tier 1 risk-
based capital ratio of less than 3%, or a tier 1 leverage ratio of less than 3%. An institution is deemed to be
“critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is
equal to or less than 2%.
“Undercapitalized” institutions are subject to growth, capital distribution (including dividend), and other
limitations, and are required to submit a capital restoration plan. An institution’s compliance with such a plan is
required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the
lesser of 5% of the bank’s total assets when deemed undercapitalized or the amount necessary to achieve the status
of adequately capitalized. If an undercapitalized institution fails to submit an acceptable plan, it is treated as if it is
“significantly undercapitalized.” Significantly undercapitalized institutions are subject to one or more additional
restrictions including, but not limited to, an order by the FDIC to sell sufficient voting stock to become adequately
capitalized; requirements to reduce total assets, cease receipt of deposits from correspondent banks, or dismiss
directors or officers; and restrictions on interest rates paid on deposits, compensation of executive officers, and
capital distributions by the parent holding company.
Beginning 60 days after becoming “critically undercapitalized,” critically undercapitalized institutions also
may not make any payment of principal or interest on certain subordinated debt, extend credit for a highly leveraged
transaction, or enter into any material transaction outside the ordinary course of business. In addition, subject to a
narrow exception, the appointment of a receiver is required for a critically undercapitalized institution within 270
days after it obtains such status.
Stress Testing
Stress Testing for Systemically Important Financial Institutions
Should the four-quarter average of our total consolidated assets exceed $250 billion, we would become subject
to the FRB’s stress testing regulations administered under its CCAR capital planning and supervisory process.
Under this regime, in addition to reporting the results of a SIFI’s own capital stress testing, the FRB uses its own
models to evaluate whether each SIFI has the capital, on a total consolidated basis, necessary to continue operating
12
under the economic and financial market conditions of stressed macroeconomic scenarios identified by the FRB.
The FRB’s analysis includes an assessment of the projected losses, net income, and pro forma capital levels, and the
regulatory capital ratio, tier 1 common ratio, and other capital ratios, for the SIFI, and uses such analytical
techniques that the FRB determines to be appropriate to identify, measure, and monitor any risks of the SIFI that
may affect the financial stability of the United States.
Boards of directors of SIFIs are required to review and approve capital plans before they are submitted to the
FRB.
In December 2018, the FDIC issued a proposal that would revise the FDIC’s requirement for stress testing by
FDIC-insured institutions, consistent with changes made by the Economic Growth, Regulatory Relief, and
Consumer Protection Act. The proposed rule would amend the FDIC’s existing stress testing regulations to change
the minimum threshold for applicability from $10 billion to $250 billion, revise the frequency of required stress tests
by FDIC-supervised institutions from annual to periodic, and reduce the number of required stress testing scenarios
from three to two.
Standards for Safety and Soundness
Federal law requires each federal banking agency to prescribe, for the depository institutions under its
jurisdiction, standards that relate to, among other things, internal controls; information and audit systems; loan
documentation; credit underwriting; the monitoring of interest rate risk; asset growth; compensation; fees and
benefits; and such other operational and managerial standards as the agency deems appropriate. The federal banking
agencies adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness (the
“Guidelines”) to implement these safety and soundness standards. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to
meet any standard prescribed by the Guidelines, the agency may require the institution to provide it with an
acceptable plan to achieve compliance with the standard, as required by the Federal Deposit Insurance Act, as
amended, (the “FDI Act”).
FDIC Regulations
The discussion that follows pertains to FDIC regulations other than those already discussed on the preceding
pages.
Real Estate Lending Standards
The FDIC and the other federal banking agencies have adopted regulations that prescribe standards for
extensions of credit that (i) are secured by real estate, or (ii) are made for the purpose of financing construction or
improvements on real estate. The FDIC regulations require each institution to establish and maintain written internal
real estate lending standards that are consistent with safe and sound banking practices, and appropriate to the size of
the institution and the nature and scope of its real estate lending activities. The standards also must be consistent
with accompanying FDIC Guidelines, which include loan-to-value limitations for the different types of real estate
loans. Institutions are also permitted to make a limited amount of loans that do not conform to the proposed loan-to-
value limitations as long as such exceptions are reviewed and justified appropriately. The FDIC Guidelines also list
a number of lending situations in which exceptions to the loan-to-value standards are justified.
The FDIC, the OCC, and the FRB (collectively, the “Agencies”) also have issued joint guidance entitled
“Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “CRE Guidance”).
The CRE Guidance, which addresses land development, construction, and certain multi-family loans, as well as
CRE loans, does not establish specific lending limits but, rather, reinforces and enhances the Agencies’ existing
regulations and guidelines for such lending and portfolio management. Specifically, the CRE Guidance provides that
a bank has a concentration in CRE lending if (1) total reported loans for construction, land development, and other
land represent 100% or more of total risk-based capital; or (2) total reported loans secured by multi-family
properties, non-farm non-residential properties (excluding those that are owner-occupied), and loans for
construction, land development, and other land represent 300% or more of total risk-based capital and the bank’s
CRE loan portfolio has increased 50% or more during the prior 36 months. If a concentration is present,
management must employ heightened risk management practices that address key elements, including board and
management oversight and strategic planning, portfolio management, development of underwriting standards, risk
assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as
needed to support the level of CRE lending.
13
In September 2018, the FRB, FDIC, and OCC issued a joint proposal to modify the agencies’ capital rules for
high volatility CRE exposures, as required by the Economic Growth, Regulatory Relief, and Consumer Protection
Act.
Dividend Limitations
The FDIC has authority to use its enforcement powers to prohibit a savings bank or commercial bank from
paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal
law prohibits the payment of dividends that will result in the institution failing to meet applicable capital
requirements on a pro forma basis. The Bank is also subject to dividend declaration restrictions imposed by, and as
later discussed under, “New York State Law.”
Investment Activities
Since the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), all
state-chartered financial institutions, including savings banks, commercial banks, and their subsidiaries, have
generally been limited to such activities as principal and equity investments of the type, and in the amount,
authorized for national banks. The GLBA and FDIC regulations impose certain quantitative and qualitative
restrictions on such activities and on a bank’s dealings with a subsidiary that engages in specified activities.
In 1993, the Bank received grandfathering authority from the FDIC, which it continues to use, to invest in
listed stocks and/or registered shares subject to the maximum permissible investments of 100% of tier 1 capital, as
specified by the FDIC’s regulations, or the maximum amount permitted by New York State Banking Law,
whichever is less. Such grandfathering authority is subject to termination upon the FDIC’s determination that such
investments pose a safety and soundness risk to the Bank, or in the event that the Bank converts its charter or
undergoes a change in control.
Enforcement
The FDIC has extensive enforcement authority over insured banks, including the Bank. This enforcement
authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders,
and to remove directors and officers. In general, these enforcement actions may be initiated in response to violations
of laws and regulations and unsafe or unsound practices.
Insurance of Deposit Accounts
The deposits of the Bank are insured up to applicable limits by the DIF. The maximum deposit insurance
provided by the FDIC per account owner is $250,000 for all types of accounts.
Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk
categories based upon supervisory evaluations, regulatory capital level, and certain other factors, with less risky
institutions paying lower assessments based on the assigned risk levels. An institution’s assessment rate depends
upon the category to which it is assigned and certain other factors. Assessment rates range from 1.5 to 40 basis
points of the institution’s assessment base, which is calculated as average total assets minus average tangible equity.
In March 2016, the FDIC adopted final rules to impose a surcharge on the quarterly deposit insurance
assessments of insured depository institutions with total consolidated assets of $10 billion or more, in order to fund
the DFA-mandated increase in the DIF’s designated reserve ratio from 1.15% to 1.35%. The final rules became
effective on July 1, 2016. The surcharge, which equals 4.5 basis points of the institution’s deposit insurance
assessment base, is in effect for assessments billed after the designated reserve ratio reaches 1.15%, and continued
until the reserve ratio reaches or exceeds 1.35%, but no later than December 31, 2018. Beginning in the fourth
quarter of 2018, this surcharge was no longer being assessed.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC. Management does not know of any practice, condition, or
violation that would lead to termination of the deposit insurance for the Bank.
14
Holding Company Regulations
Federal Regulation
The Company is currently subject to examination, regulation, and periodic reporting under the BHCA, as
administered by the FRB.
The Company is required to obtain the prior approval of the FRB to acquire all, or substantially all, of the
assets of any bank or bank holding company. Prior FRB approval would be required for the Company to acquire
direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after giving
effect to such acquisition, it would, directly or indirectly, own or control more than 5% of any class of voting shares
of such bank or bank holding company. In addition, before any bank acquisition can be completed, prior approval
thereof may also be required to be obtained from other agencies having supervisory jurisdiction over the bank to be
acquired, including the NYSDFS.
FRB regulations generally prohibit a bank holding company from engaging in, or acquiring, direct or indirect
control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the
principal exceptions to this prohibition is for activities found by the FRB to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the FRB has
determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing
certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment, or
financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed
primarily to promote community welfare; and (vii) acquiring a savings and loan association.
The FRB has issued a policy statement regarding the payment of dividends by bank holding companies. In
general, the FRB’s policies provide that dividends should be paid only out of current earnings, and only if the
prospective rate of earnings retention by the bank holding company appears consistent with the organization’s
capital needs, asset quality, and overall financial condition. The FRB’s policies also require that a bank holding
company serve as a source of financial strength to its subsidiary bank by standing ready to use available resources to
provide adequate capital funds to those bank during periods of financial stress or adversity, and by maintaining the
financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary bank where
necessary.
The DFA codified the source of financial strength policy and required regulations to facilitate its application.
Under the prompt corrective action laws, the ability of a bank holding company to pay dividends may be restricted if
a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of the Company to
pay dividends or otherwise engage in capital distributions.
The status of the Company as a registered bank holding company under the BHCA does not exempt it from
certain federal and state laws and regulations applicable to corporations generally, including, without limitation,
certain provisions of the federal securities laws.
New York State Regulation
The Company is subject to regulation as a “multi-bank holding company” under New York State law. Among
other requirements, this means that the Company must receive the approval of the Superintendent prior to the
acquisition of 10% or more of the voting stock of another banking institution, or to otherwise acquire a banking
institution by merger or purchase.
Transactions with Affiliates
Under current federal law, transactions between depository institutions and their affiliates are governed by
Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W promulgated thereunder. Generally,
Section 23A limits the extent to which the institution or its subsidiaries may engage in “covered transactions” with
any one affiliate to an amount equal to 10% of the institution’s capital stock and surplus, and contains an aggregate
limit on all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus.
Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees or
acceptances on letters of credit issued on behalf of, an affiliate. Section 23B requires that covered transactions and a
broad list of other specified transactions be on terms substantially the same as, or at least as favorable to, the
institution or its subsidiaries as similar transactions with non-affiliates.
15
The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and
directors. However, the Sarbanes-Oxley Act contains a specific exemption for loans by an institution to its executive
officers and directors in compliance with other federal banking laws. Section 22(h) of the Federal Reserve Act, and
FRB Regulation O adopted thereunder, govern loans by a savings bank or commercial bank to directors, executive
officers, and principal shareholders.
Community Reinvestment Act
Federal Regulation
Under the CRA, as implemented by FDIC regulations, an institution has a continuing and affirmative
obligation consistent with its safe and sound operation to help meet the credit needs of its entire community,
including low and moderate income neighborhoods. The CRA generally does not establish specific lending
requirements or programs for financial institutions, nor does it limit an institution’s discretion to develop the types
of products and services that it believes are best suited to its particular community, consistent with the CRA. In its
most recent FDIC CRA performance evaluation, the Bank received overall state ratings of “Satisfactory” for Ohio,
Florida, Arizona, and New Jersey, as well as for the New York/New Jersey multi-state region. Furthermore, the
most recent overall FDIC CRA ratings for the Bank was “Satisfactory.”
New York State Regulation
The Bank is also subject to provisions of the New York State Banking Law that impose continuing and
affirmative obligations upon a banking institution organized in New York State to serve the credit needs of its local
community. Such obligations are substantially similar to those imposed by the CRA. The latest New York State
CRA ratings received by the Bank was “Outstanding”.
Bank Secrecy and Anti-Money Laundering
Federal laws and regulations impose obligations on U.S. financial institutions, including banks and
broker/dealer subsidiaries, to implement and maintain appropriate policies, procedures, and controls that are
reasonably designed to prevent, detect, and report instances of money laundering and the financing of terrorism, and
to verify the identity of their customers. In addition, these provisions require the federal financial institution
regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when
reviewing bank mergers and bank holding company acquisitions. Failure of a financial institution to maintain and
implement adequate programs to combat money laundering and terrorist financing could have serious legal and
reputational consequences for the institution.
Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign countries,
nationals, and others. These are typically known as the “OFAC” rules, based on their administration by the U.S.
Treasury Department Office of Foreign Assets Control. The OFAC-administered sanctions targeting countries take
many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on
trade with, or investment in, a sanctioned country, including prohibitions against direct or indirect imports from, and
exports to, a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to
making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a
blocking of assets in which the government or specially designated nationals of the sanctioned country have an
interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or
control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or
transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious
legal and reputational consequences.
Data Privacy
Federal and state law contains extensive consumer privacy protection provisions. The GLBA requires
financial institutions to periodically disclose their privacy practices and policies relating to sharing such information
and enable retail customers to opt out of the Company’s ability to share certain information with affiliates and non-
affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The GLBA
also requires financial institutions to implement a comprehensive information security program that includes
administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and
information.
16
Cybersecurity
The Cybersecurity Information Sharing Act (the “CISA”) is intended to improve cybersecurity in the U.S.
through sharing of information about security threats between the U.S. government and private sector organizations,
including financial institutions such as the Company. The CISA also authorizes companies to monitor their own
systems, notwithstanding any other provision of law, and allows companies to carry out defensive measures on their
own systems from potential cyber-attacks.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 was enacted to address, among other things, corporate governance, auditing
and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed
by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer are required to certify that our
quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the SEC
under the Sarbanes-Oxley Act have several requirements, including having those Officers certify that they are
responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls over
financial reporting; that they have made certain disclosures to our auditors and the Audit Committee of the Board of
Directors about our internal control over financial reporting; and they have included information in our quarterly and
annual reports about their evaluation and whether there have been changes in our internal control over financial
reporting or in other factors that could materially affect internal control over financial reporting.
Federal Reserve System
Under FRB regulations, the Bank is required to maintain reserves against its transaction accounts (primarily
NOW and regular checking accounts). Beginning January 2019, the Bank was required to maintain average daily
reserves equal to 3% on aggregate transaction accounts of up to $124.2 million, plus 10% on the remainder, and the
first $16.3 million of otherwise reservable balances, will both be exempt. These reserve requirements are subject to
adjustment by the FRB. The Bank is currently in compliance with the foregoing requirements.
Federal Home Loan Bank System
The Bank is a member of the FHLB-NY. As a member of the FHLB-NY, the Bank is required to acquire and
hold shares of FHLB-NY capital stock. At December 31, 2018, the Bank held $644.6 million of FHLB-NY stock.
New York State Law
The Bank derives its lending, investment, and other authority primarily from the applicable provisions of New
York State Banking Law and the regulations of the NYSDFS, as limited by FDIC regulations. Under these laws and
regulations, banks, including the Bank, may invest in real estate mortgages, consumer and commercial loans, certain
types of debt securities (including certain corporate debt securities, and obligations of federal, state, and local
governments and agencies), certain types of corporate equity securities, and certain other assets.
Under New York State Banking Law, New York State-chartered stock-form savings banks and commercial
banks may declare and pay dividends out of their net profits, unless there is an impairment of capital. Approval of
the Superintendent is required if the total of all dividends declared by the bank in a calendar year would exceed the
total of its net profits for that year combined with its retained net profits for the preceding two years, less prior
dividends paid.
New York State Banking Law gives the Superintendent authority to issue an order to a New York State-
chartered banking institution to appear and explain an apparent violation of law, to discontinue unauthorized or
unsafe practices, and to keep prescribed books and accounts. Upon a finding by the NYSDFS that any director,
trustee, or officer of any banking organization has violated any law, or has continued unauthorized or unsafe
practices in conducting the business of the banking organization after having been notified by the Superintendent to
discontinue such practices, such director, trustee, or officer may be removed from office after notice and an
opportunity to be heard. The Superintendent also has authority to appoint a conservator or a receiver for a savings or
commercial bank under certain circumstances.
Interstate Branching
Federal law allows the FDIC, and New York State Banking Law allows the Superintendent, to approve an
application by a state banking institution to acquire interstate branches by merger, unless, in the case of the FDIC,
the state of the target institution has opted out of interstate branching. New York State Banking Law authorizes
savings banks and commercial banks to open and occupy de novo branches outside the state of New York. Pursuant
17
to the DFA, the FDIC is authorized to approve a state bank’s establishment of a de novo interstate branch if the
intended host state allows de novo branching by banks chartered by that state. The Bank currently maintains 42
branches in New Jersey, 27 branches in Florida, 28 branches in Ohio, and 14 branches in Arizona, in addition to its
141 branches in New York State.
Acquisition of the Holding Company
Federal Restrictions
Under the Federal Change in Bank Control Act (“CIBCA”), a notice must be submitted to the FRB if any
person (including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s shares of
outstanding common stock, unless the FRB has found that the acquisition will not result in a change in control of the
Company. Under the CIBCA, the FRB generally has 60 days within which to act on such notices, taking into
consideration certain factors, including the financial and managerial resources of the acquirer; the convenience and
needs of the communities served by the Company, the Bank; and the anti-trust effects of the acquisition. Under the
BHCA, any company would be required to obtain approval from the FRB before it may obtain “control” of the
Company within the meaning of the BHCA. Control generally is defined to mean the ownership or power to vote
25% or more of any class of voting securities of the Company, the ability to control in any manner the election of a
majority of the Company’s directors, or the power to exercise a controlling influence over the management or
policies of the Company. Under the BHCA, an existing bank holding company would be required to obtain the
FRB’s approval before acquiring more than 5% of the Company’s voting stock. See “Holding Company Regulation”
earlier in this report.
New York State Change in Control Restrictions
New York State Banking Law generally requires prior approval of the New York State Banking Board before
any action is taken that causes any company to acquire direct or indirect control of a banking institution which is
organized in New York.
Federal Securities Law
The Company’s common stock and certain other securities listed on the cover page of this report are registered
with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is
subject to the information and proxy solicitation requirements, insider trading restrictions, and other requirements
under the Exchange Act.
Consumer Protection Regulations
The activities of the Company’s banking subsidiary, including its lending and deposit gathering activities, is
subject to a variety of consumer laws and regulations designed to protect consumers. These laws and regulations
mandate certain disclosure requirements, and regulate the manner in which financial institutions must deal with
clients and monitor account activity when taking deposits from, making loans to, or engaging in other types
of transactions with, such clients. Failure to comply with these laws and regulations could lead to substantial
penalties, operating restrictions, and reputational damage to the financial institution.
Applicable consumer protection laws include, but may not be limited to, the DFA, Truth in Lending Act,
Truth in Savings Act, Equal Credit Opportunity Act, Electronic Funds Transfer Act, Fair Housing Act, Home
Mortgage Disclosure Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Expedited Funds
Availability (Regulation CC), Reserve Requirements (Regulation D), Insider Transactions (Regulation O), Privacy
of Consumer Information (Regulation P), Margin Stock Loans (Regulation U), Right To Financial Privacy Act,
Flood Disaster Protection Act, Homeowners Protection Act, Servicemembers Civil Relief Act, Real Estate
Settlement Procedures Act, Telephone Consumer Protection Act, CAN-SPAM Act, Children’s Online Privacy
Protection Act, and the John Warner National Defense Authorization Act.
In addition, the Bank and its subsidiaries are subject to certain state laws and regulations designed to protect
consumers.
Consumer Financial Protection Bureau
The Bank is subject to oversight by the CFPB within the Federal Reserve System. The CFPB was established
under the DFA to implement and enforce rules and regulations under certain federal consumer protection laws with
respect to the conduct of providers of certain consumer financial products and services. The CFPB has broad
rulemaking authority for a wide range of consumer financial laws that apply to all banks, including, among other
18
things, the authority to prohibit acts and practices that are deemed to be unfair, deceptive, or abusive. Abusive acts
or practices are defined as those that (1) materially interfere with a consumer’s ability to understand a term or
condition of a consumer financial product or service, or (2) take unreasonable advantage of a consumer’s (a) lack of
financial savvy, (b) inability to protect himself in the selection or use of consumer financial products or services, or
(c) reasonable reliance on a covered entity to act in the consumer’s interests.
The CFPB has the authority to investigate possible violations of federal consumer financial law, hold
hearings, and commence civil litigation. The CFPB can issue cease-and-desist orders against banks and other entities
that violate consumer financial laws. The CFPB also may institute a civil action against an entity in violation of
federal consumer financial law in order to impose a civil penalty or an injunction. The CFPB has examination and
enforcement authority over all banks with more than $10 billion in assets, as well as certain of their affiliates.
Enterprise Risk Management
The Company’s and the Bank’s Boards of Directors are actively engaged in the process of overseeing the
efforts made by the Enterprise Risk Management (“ERM”) department to identify, measure, monitor, mitigate and
report risk. The Company has established an ERM program that reinforces a strong risk culture to support sound risk
management practices. The Board is responsible for the approval and oversight of the ERM program and
framework.
ERM is responsible for setting and aligning the Company’s Risk Appetite Statement with the goals and
objectives set forth in the Strategic and Capital Plans. Internal controls and ongoing monitoring processes capture
and address heightened risks that threaten the Company’s ability to achieve our goals and objectives, including the
recognition of safety and soundness concerns and consumer protection. Additionally, ERM monitors key risk
indicators against the established risk warning levels and limits, as well as elevated risks identified by the Chief Risk
Officer.
ITEM 1A. RISK FACTORS
There are various risks and uncertainties that are inherent to our business. Primary among these are (1) interest
rate risk, which arises from movements in interest rates; (2) credit risk, which arises from an obligor’s failure to
meet the terms of any contract with a bank or to otherwise perform as agreed; (3) liquidity risk, which arises from a
bank’s inability to meet its obligations when they come due without incurring unacceptable losses; (4) legal/
compliance risk, which arises from violations of, or non-conformance with, laws, rules, regulations, prescribed
practices, or ethical standards; (5) market risk, which arises from changes in the value of portfolios of financial
instruments; (6) strategic risk, which arises from adverse business decisions or improper implementation of those
business decisions; (7) operational risk, which arises from problems with service or product delivery; and
(8) reputational risk, which arises from negative public opinion.
Following is a discussion of the material risks and uncertainties that could have a material adverse impact on
our financial condition, results of operations, and the value of our shares. The failure to properly identify, monitor,
and mitigate any of the below referenced risks, could result in increased regulatory risk and could potentially have
an adverse impact on the Company. Additional risks that are not currently known to us, or that we currently believe
to be immaterial, also may have a material effect on our financial condition and results of operations. This report is
qualified in its entirety by those risk factors.
Interest Rate Risks
Changes in interest rates could reduce our net interest income and negatively impact the value of our loans,
securities, and other assets. This could have a material adverse effect on our cash flows, financial condition,
results of operations, and capital.
Our primary source of income is net interest income, which is the difference between the interest income
generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the
interest expense produced by our interest-bearing liabilities (consisting primarily of deposits and wholesale
borrowings).
The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, the
level of which is driven by the FOMC of the FRB. However, the yields generated by our loans and securities are
typically driven by intermediate-term interest rates, which are set by the market and generally vary from day to day.
The level of our net interest income is therefore influenced by movements in such interest rates, and the pace at
which such movements occur. If the interest rates on our interest-bearing liabilities increase at a faster pace than the
19
interest rates on our interest-earning assets, the result could be a reduction in net interest income and, with it, a
reduction in our earnings. Our net interest income and earnings would be similarly impacted were the interest rates
on our interest-earning assets to decline more quickly than the interest rates on our interest-bearing liabilities.
In addition, such changes in interest rates could affect our ability to originate loans and attract and retain
deposits; the fair values of our securities and other financial assets; the fair values of our liabilities; and the average
lives of our loan and securities portfolios.
Changes in interest rates also could have an effect on loan refinancing activity, which, in turn, would impact
the amount of prepayment income we receive on our multi-family and CRE loans. Because prepayment income is
recorded as interest income, the extent to which it increases or decreases during any given period could have a
significant impact on the level of net interest income and net income we generate during that time.
Also, changes in interest rates could have an effect on the slope of the yield curve. If the yield curve were to
invert or become flat, our net interest income and net interest margin could contract, adversely affecting our net
income and cash flows, and the value of our assets.
Changes to LIBOR may adversely impact the interest rate paid on our preferred stock and subordinated notes,
and may also impact some of our assets and liabilities.
On July 27, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will no
longer persuade or compel banks to submit rates for the calculation of LIBOR to the LIBOR administrator after
2021. The announcement also indicates that the continuation of LIBOR on the current basis cannot and will not be
guaranteed after 2021. Consequently, at this time, it is not possible to predict whether and to what extent banks will
continue to provide LIBOR submissions to the LIBOR administrator or whether any additional reforms to LIBOR
may be enacted in the United Kingdom or elsewhere. Similarly, it is not possible to predict whether LIBOR will
continue to be viewed as an acceptable benchmark for certain securities, loans, and liabilities, including our
preferred stock and subordinated notes, what rate or rates may become accepted alternatives to LIBOR or the effect
of any such changes in views or alternatives on the value of securities, loans, and liabilities, whose interest rates are
tied to LIBOR.
Uncertainty as to the nature of such potential changes, alternative reference rates, the elimination or
replacement of LIBOR, or other reforms may adversely affect the value of, and the return on, our securities, loans,
and liabilities, including, our preferred stock and subordinated notes, as well as the interest we pay on those
securities.
Credit Risks
A decline in the quality of our assets could result in higher losses and the need to set aside higher loan loss
provisions, thus reducing our earnings and our stockholders’ equity.
The inability of our borrowers to repay their loans in accordance with their terms would likely necessitate an
increase in our provision for loan losses, and therefore reduce our earnings.
The loans we originate for investment are primarily multi-family loans and, to a lesser extent, CRE loans.
Such loans are generally larger, and have higher risk-adjusted returns and shorter maturities, than the other loans we
produce for investment. Our credit risk would ordinarily be expected to increase with the growth of our multi-family
and CRE loan portfolios.
Payments on multi-family and CRE loans generally depend on the income generated by the underlying
properties which, in turn, depends on their successful operation and management. The ability of our borrowers to
repay these loans may be impacted by adverse conditions in the local real estate market and the local economy.
While we seek to minimize these risks through our underwriting policies, which generally require that such loans be
qualified on the basis of the collateral property’s cash flows, appraised value, and debt service coverage ratio,
among other factors, there can be no assurance that our underwriting policies will protect us from credit-related
losses or delinquencies.
We also originate ADC and C&I loans for investment, although to a far lesser degree than we originate multi-
family and CRE loans. ADC financing typically involves a greater degree of credit risk than longer-term financing
on multi-family and CRE properties. Risk of loss on an ADC loan largely depends upon the accuracy of the initial
estimate of the property’s value at completion of construction or development, compared to the estimated costs
(including interest) of construction. If the estimate of value proves to be inaccurate, the loan may be under-secured.
20
While we seek to minimize these risks by maintaining consistent lending policies and procedures, and rigorous
underwriting standards, an error in such estimates, among other factors, could have a material adverse effect on the
quality of our ADC loan portfolio, thereby resulting in losses or delinquencies.
To minimize the risks involved in our specialty finance lending and leasing, we participate in syndicated loans
that are brought to us, and equipment loans and leases that are assigned to us, by a select group of nationally
recognized sources, and generally are made to large corporate obligors, many of which are publicly traded, carry
investment grade or near-investment grade ratings, and participate in stable industries nationwide. Each of our
credits is secured with a perfected first security interest in the underlying collateral and structured as senior debt or
as a non-cancelable lease.
We seek to minimize the risks involved in our other C&I lending by underwriting such loans on the basis of
the cash flows produced by the business; by requiring that such loans be collateralized by various business assets,
including inventory, equipment, and accounts receivable, among others; and by requiring personal guarantees.
However, the capacity of a borrower to repay such a C&I loan is substantially dependent on the degree to which his
or her business is successful. In addition, the collateral underlying other C&I 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.
Although losses on the held-for-investment loans we produce have been comparatively limited, even during
periods of economic weakness in our markets, we cannot guarantee that this will be our experience in future periods.
The ability of our borrowers to repay their loans could be adversely impacted by a decline in real estate values
and/or an increase in unemployment, which not only could result in our experiencing losses, but also could
necessitate our recording a provision for losses on loans. Either of these events would have an adverse impact on our
net income.
Economic weakness in the New York metropolitan region, where the majority of the properties collateralizing our
multi-family, CRE, and ADC loans, and the majority of the businesses collateralizing our other C&I loans, are
located could have an adverse impact on our financial condition and results of operations.
Unlike larger national or superregional banks that serve a broader and more diverse geographic region, our
business depends significantly on general economic conditions in the New York metropolitan region, where the
majority of the buildings and properties securing the multi-family, CRE, and ADC loans we originate for
investment, and the businesses of the customers to whom we make our other C&I loans, are located.
Accordingly, the ability of our borrowers to repay their loans, and the value of the collateral securing such
loans, may be significantly affected by economic conditions in this region, including changes in the local real estate
market. A significant decline in general economic conditions caused by inflation, recession, unemployment, acts of
terrorism, extreme weather, or other factors beyond our control, could therefore have an adverse effect on our
financial condition and results of operations. In addition, because multi-family and CRE loans represent the majority
of the loans in our portfolio, a decline in tenant occupancy or rents due to such factors, or for other reasons, could
adversely impact the ability of our borrowers to repay their loans on a timely basis, which could have a negative
impact on our net income.
Furthermore, economic or market turmoil could occur in the near or long term. This could negatively affect
our business, our financial condition, and our results of operations, as well as our ability to maintain or increase the
level of cash dividends we currently pay to our shareholders.
Our allowance for losses on loans might not be sufficient to cover our actual losses, which would adversely
impact our financial condition and results of operations.
In addition to mitigating credit risk through our underwriting processes, we attempt to mitigate such risk
through the establishment of an allowance for losses on loans. The process of determining whether or not this
allowance is sufficient to cover potential loan losses is based on the methodology described in detail under “Critical
Accounting Policies” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in this report.
If the judgments and assumptions we make with regard to the allowance are incorrect, our allowance for
losses on such loans might not be sufficient, and additional loan loss provisions might need to be made. Depending
on the amount of such loan loss provisions, the adverse impact on our earnings could be material.
21
In addition, growth in our portfolio of loans held for investment may require us to increase the allowance for
losses on such loans by making additional provisions, which would reduce our net income. Furthermore, bank
regulators have the authority to require us to make provisions for loan losses or otherwise recognize loan charge-offs
following their periodic review of our held-for-investment loan portfolio, our underwriting procedures, and our
allowance for losses on such loans. Any increase in the loan loss allowance or in loan charge-offs as required by
such regulatory authorities could have a material adverse effect on our financial condition and results of operations.
Liquidity Risks
Failure to maintain an adequate level of liquidity could result in an inability to fulfill our financial obligations
and also could subject us to material reputational and compliance risk.
“Liquidity” refers to our ability to generate sufficient cash flows to support our operations and to fulfill our
obligations, including commitments to originate loans, to repay our wholesale borrowings and other liabilities, and
to satisfy the withdrawal of deposits by our customers.
Our primary sources of liquidity are the retail and institutional deposits we gather or acquire in connection
with acquisitions, and the brokered deposits we accept; borrowed funds, primarily in the form of wholesale
borrowings from the FHLB-NY and various Wall Street brokerage firms; cash flows generated through the
repayment and sale of loans; and cash flows generated through the repayment and sale of securities. In addition, and
depending on current market conditions, we have the ability to access the capital markets from time to time to
generate additional liquidity.
Deposit flows, calls of investment securities and wholesale borrowings, and the prepayment of loans and
mortgage-related securities are strongly influenced by such external factors as the direction of interest rates, whether
actual or perceived; local and national economic conditions; and competition for deposits and loans in the markets
we serve. The withdrawal of more deposits than we anticipate could have an adverse impact on our profitability as
this source of funding, if not replaced by similar deposit funding, would need to be replaced with wholesale funding,
the sale of interest-earning assets, or a combination of the two. The replacement of deposit funding with wholesale
funding could cause our overall cost of funds to increase, which would reduce our net interest income and results of
operations. A decline in interest-earning assets would also lower our net interest income and results of operations.
In addition, large-scale withdrawals of brokered or institutional deposits could require us to pay significantly
higher interest rates on our retail deposits or on other wholesale funding sources, which would have an adverse
impact on our net interest income and net income. Furthermore, changes to the FHLB-NY’s underwriting guidelines
for wholesale borrowings or lending policies may limit or restrict our ability to borrow, and therefore could have a
significant adverse impact on our liquidity. A decline in available funding could adversely impact our ability to
originate loans, invest in securities, and meet our expenses, or to fulfill such obligations as repaying our borrowings
or meeting deposit withdrawal demands.
A downgrade of the credit ratings of the Company and the Bank could also adversely affect our access to
liquidity and capital, and could significantly increase our cost of funds, trigger additional collateral or funding
requirements, and decrease the number of investors and counterparties willing to lend to us or to purchase our
securities. This could affect our growth, profitability, and financial condition, including our liquidity.
If we were to defer payments on our trust preferred capital debt securities or were in default under the related
indentures, we would be prohibited from paying dividends or distributions on our common stock.
The terms of our outstanding trust preferred capital debt securities prohibit us from (1) declaring or paying any
dividends or distributions on our capital stock, including our common stock; or (2) purchasing, acquiring, or making
a liquidation payment on such stock, under the following circumstances: (a) if an event of default has occurred and
is continuing under the applicable indenture; (b) if we are in default with respect to a payment under the guarantee
of the related trust preferred securities; or (c) if we have given notice of our election to defer interest payments but
the related deferral period has not yet commenced, or a deferral period is continuing. In addition, without notice to,
or consent from, the holders of our common stock, we may issue additional series of trust preferred capital debt
securities with similar terms, or enter into other financing agreements, that limit our ability to pay dividends on our
common stock.
22
Dividends on the Series A Preferred Stock are discretionary and noncumulative, and may not be paid if such
payment will result in our failure to comply with all applicable laws and regulations.
Dividends on the Series A Preferred Stock are discretionary and noncumulative. If our Board of Directors (or
any duly authorized committee of the Board) does not authorize and declare a dividend on the Series A Preferred
Stock for any dividend period, holders of the depositary shares will not be entitled to receive any dividend for that
dividend period, and the unpaid dividend will cease to accrue and be payable. We have no obligation to pay
dividends accrued for a dividend period after the dividend payment date for that period if our Board of Directors (or
any duly authorized committee thereof) has not declared a dividend before the related dividend payment date,
whether or not dividends on the Series A Preferred Stock or any other series of our preferred stock or our common
stock are declared for any future dividend period. Additionally, under the FRB’s capital rules, dividends on the
Series A Preferred Stock may only be paid out of our net income, retained earnings, or surplus related to other
additional tier 1 capital instruments.
If the non-payment of dividends on Series A Preferred Stock for any dividend period would cause the
Company to fail to comply with any applicable law or regulation, or any agreement we may enter into with our
regulators from time to time, then we would not be able to declare or pay a dividend for such dividend period. In
such a case, holders of the depositary shares will not be entitled to receive any dividend for that dividend period, and
the unpaid dividend will cease to accrue and be payable.
Legal/Compliance Risks
Inability to fulfill minimum capital requirements could limit our ability to conduct or expand our business, pay a
dividend, or result in termination of our FDIC deposit insurance, and thus impact our financial condition, our
results of operations, and the market value of our stock.
We are subject to the comprehensive, consolidated supervision and regulation set forth by the FRB. Such
regulation includes, among other matters, the level of leverage and risk-based capital ratios we are required to
maintain. Depending on general economic conditions, changes in our capital position could have a materially
adverse impact on our financial condition and risk profile, and also could limit our ability to grow through
acquisitions or otherwise. Compliance with regulatory capital requirements may limit our ability to engage in
operations that require the intensive use of capital and therefore could adversely affect our ability to maintain our
current level of business or expand.
Furthermore, it is possible that future regulatory changes could result in more stringent capital or liquidity
requirements, including increases in the levels of regulatory capital we are required to maintain and changes in the
way capital or liquidity is measured for regulatory purposes, either of which could adversely affect our business and
our ability to expand. For example, federal banking regulations adopted under Basel III standards require bank
holding companies and banks to undertake significant activities to demonstrate compliance with higher capital
requirements. Any additional requirements to increase our capital ratios or liquidity could necessitate our liquidating
certain assets, perhaps on terms that are unfavorable to us or that are contrary to our business plans. In addition, such
requirements could also compel us to issue additional securities, thus diluting the value of our common stock.
In addition, failure to meet established capital requirements could result in the FRB placing limitations or
conditions on our activities and further restricting the commencement of new activities. The failure to meet
applicable capital guidelines could subject us to a variety of enforcement remedies available to the federal regulatory
authorities, including limiting our ability to pay dividends; issuing a directive to increase our capital; and
terminating our FDIC deposit insurance.
Pursuant to the current requirements of the DFA, a bank holding company whose total consolidated assets
average more than $250 billion over the four most recent quarters is determined to be a SIFI, and therefore is subject
to stricter prudential standards. In addition to capital and liquidity requirements, these standards primarily include
risk-management requirements, dividend limits, and early remediation regimes.
Our results of operations could be materially affected by further changes in bank regulation, or by our ability to
comply with certain existing laws, rules, and regulations governing our industry.
We are subject to regulation, supervision, and examination by the following entities: (1) the NYSDFS, the
chartering authority for the Bank; (2) the FDIC, as the insurer of the Bank’s deposits; (3) the FRB-NY, in
accordance with objectives and standards of the U.S. Federal Reserve System; and (4) the CFPB, which was
established in 2011 under the Dodd-Frank Act and given broad authority to regulate financial service providers and
financial products.
23
Such regulation and supervision governs the activities in which a bank holding company and its banking
subsidiaries may engage, and are intended primarily for the protection of the DIF, the banking system in general,
and bank customers, rather than for the benefit of a company’s stockholders. These regulatory authorities have
extensive discretion in connection with their supervisory and enforcement activities, including with respect to the
imposition of restrictions on the operation of a bank or a bank holding company, the imposition of significant fines,
the ability to delay or deny merger or other regulatory applications, the classification of assets by a bank, and the
adequacy of a bank’s allowance for loan losses, among other matters. Changes in such regulation and supervision, or
changes in regulation or enforcement by such authorities, whether in the form of policy, regulations, legislation,
rules, orders, enforcement actions, ratings, or decisions, could have a material impact on the Company, our
subsidiary bank and other affiliates, and our operations. In addition, failure of the Company or the Bank to comply
with such regulations could have a material adverse effect on our earnings and capital.
See “Regulation and Supervision” in Part I, Item 1, “Business” earlier in this filing for a detailed description
of the federal, state, and local regulations to which the Company and the Bank are subject.
Our enterprise risk management framework may not be effective in mitigating the risks to which we are subject,
based upon the size, scope, and complexity of the Company.
As a financial institution, we are subject to a number of risks, including interest rate, credit, liquidity,
legal/compliance, market, strategic, operational, and reputational. Our ERM framework is designed to minimize the
risks to which we are subject, as well as any losses stemming from such risks. Although we seek to identify,
measure, monitor, report, and control our exposure to such risks, and employ a broad and diverse set of risk
monitoring and mitigation techniques in the process, those techniques are inherently limited because they cannot
anticipate the existence or development of risks that are currently unknown and unanticipated.
For example, economic and market conditions, heightened legislative and regulatory scrutiny of the financial
services industry, and increases in the overall complexity of our operations, among other developments, have
resulted in the creation of a variety of risks that were previously unknown and unanticipated, highlighting the
intrinsic limitations of our risk monitoring and mitigation techniques. As a result, the further development of
previously unknown or unanticipated risks may result in our incurring losses in the future that could adversely
impact our financial condition and results of operations. Furthermore, an ineffective ERM framework, as well as
other risk factors, could result in a material increase in our FDIC insurance premiums.
The implementation of a new accounting standard could require the Company to increase its allowance for loan
losses and may have a material adverse effect on its financial condition and results of operations.
FASB has adopted a new accounting standard that will be effective for the Company’s first fiscal year after
December 15, 2019. This standard, referred to as Current Expected Credit Loss, or CECL, will require financial
institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected
credit losses as an allowance for loan losses. This will change the current method of providing an allowance for loan
losses that are probable, which the Company expects could require it to increase its allowance for loan losses, and
will likely greatly increase the data the Company would need to collect and review to determine the appropriate
level of the allowance for loan losses. Any increase in the allowance for loan losses, or expenses incurred to
determine the appropriate level of the allowance for loan losses, may have a material adverse effect on the
Company’s financial condition and results of operations.
Market Risks
A decline in economic conditions could adversely affect the value of the loans we originate and the securities in
which we invest.
Although we take steps to reduce our exposure to the risks that stem from adverse changes in economic
conditions, such changes nevertheless could adversely impact the value of the loans we originate and the securities
we invest in.
Declines in real estate values and home sales, and an increase in the financial stress on borrowers stemming
from high unemployment or other adverse economic conditions, could negatively affect our borrowers and, in turn,
the repayment of the loans in our portfolio. Deterioration in economic conditions also could subject us and our
industry to increased regulatory scrutiny, and could result in an increase in loan delinquencies, an increase in
problem assets and foreclosures, and a decline in the value of the collateral for our loans, which could reduce our
customers’ borrowing power. Deterioration in local economic conditions could drive the level of loan losses beyond
the level we have provided for in our loan loss allowance; this, in turn, could necessitate an increase in our
24
provisions for loan losses, which would reduce our earnings and capital. Furthermore, declines in the value of our
investment securities could result in our having to record losses based on the other-than-temporary impairment of
securities, which would reduce our earnings and also could reduce our capital. In addition, continued economic
weakness could reduce the demand for our products and services, which would adversely impact our liquidity and
the revenues we produce.
The market price and liquidity of our common stock could be adversely affected if the economy were to weaken or
the capital markets were to experience volatility.
The market price of our common stock could be subject to significant fluctuations due to changes in investor
sentiment regarding our operations or business prospects. Among other factors, these risks may be affected by:
• Operating results that vary from the expectations of our management or of securities analysts and
investors;
• Developments in our business or in the financial services sector generally;
• Regulatory or legislative changes affecting our industry generally or our business and operations;
• Operating and securities price performance of companies that investors consider to be comparable to us;
• Changes in estimates or recommendations by securities analysts or rating agencies;
• Announcements of strategic developments, acquisitions, dispositions, financings, and other material
events by us or our competitors;
• Changes or volatility in global financial markets and economies, general market conditions, interest or
foreign exchange rates, stock, commodity, credit, or asset valuations; and
Significant fluctuations in the capital markets.
•
Economic or market turmoil could occur in the near or long term, which could negatively affect our business,
our financial condition, and our results of operations, as well as volatility in the price and trading volume of our
common stock.
Strategic Risks
Extensive competition for loans and deposits could adversely affect our ability to expand our business, as well as
our financial condition and results of operations.
We face significant competition for loans and deposits from other banks and financial institutions, both within
and beyond our local markets. We also compete with companies that solicit loans and deposits over the internet and
from FinTech companies.
Because our profitability stems from our ability to attract deposits and originate loans, our continued ability to
compete for depositors and borrowers is critical to our success. Our success as a competitor depends on a number of
factors, including our ability to develop, maintain, and build long-term relationships with our customers by
providing them with convenience, in the form of multiple branch locations, extended hours of service, and access
through alternative delivery channels; a broad and diverse selection of products and services; interest rates and
service fees that compare favorably with those of our competitors; and skilled and knowledgeable personnel to assist
our customers by addressing their financial needs. External factors that may impact our ability to compete include,
among others, the entry of new lenders and depository institutions in our current markets and, with regard to
lending, an increased focus on multi-family and CRE lending by existing competitors.
Limitations on our ability to grow our portfolios of multi-family and CRE loans could adversely affect our ability
to generate interest income, as well our financial condition and results of operations, perhaps materially.
Although we also originate ADC and C&I loans, and invest in securities, our portfolios of multi-family and
CRE loans represent the largest portion of our asset mix (91.9% of total loans as of December 31, 2018). Our
leadership position in these markets has been instrumental to our production of solid earnings and our consistent
record of exceptional asset quality. We monitor the ratio of our multi-family, CRE, and ADC loans (as defined in
the CRE Guidance) to our total risk-based capital to ensure that we are in compliance with regulatory guidance. Any
inability to grow our multi-family and CRE loan portfolios, could negatively impact our ability to grow our earnings
per share.
25
The inability to engage in merger transactions, or to realize the anticipated benefits of acquisitions in which we
might engage, could adversely affect our ability to compete with other financial institutions and weaken our
financial performance.
Mergers and acquisitions have contributed significantly to our growth and it is possible that we will look to
acquire other financial institutions, financial service providers, or branches of banks in the future.
Our ability to engage in future mergers and acquisitions would depend on our ability to identify suitable
merger partners and acquisition opportunities, our ability to finance and complete negotiated transactions at
acceptable prices and on acceptable terms, and our ability to obtain the necessary shareholder and regulatory
approvals.
If we are unable to engage in or complete a desired acquisition or merger transaction, our financial condition
and results of operations could be adversely impacted. As acquisitions have been a significant source of deposits, the
inability to complete a business combination could require that we increase the interest rates we pay on deposits in
order to attract such funding through our current branch network, or that we increase our use of wholesale funds.
Increasing our cost of funds could adversely impact our net interest income and our net income. Furthermore, the
absence of acquisitions could impact our ability to fulfill our loan demand.
Mergers and acquisitions involve a number of risks and challenges, including:
• Our ability to successfully integrate the branches and operations we acquire, and to adopt appropriate
internal controls and regulatory functions relating to such activities;
• Our ability to limit the outflow of deposits held by customers in acquired branches, and to successfully
retain and manage any loans we acquire;
• Our ability to attract new deposits, and to generate new interest-earning assets, in geographic areas we
have not previously served;
• Our success in deploying any cash received in a transaction into assets bearing sufficiently high yields
without incurring unacceptable credit or interest rate risk;
• Our ability to control the incremental non-interest expense from acquired operations;
• Our ability to retain and attract the appropriate personnel to staff acquired branches and conduct any
acquired operations;
• Our ability to generate acceptable levels of net interest income and non-interest income, including fee
income, from acquired operations;
• The diversion of management’s attention from existing operations;
• Our ability to address an increase in working capital requirements; and
• Limitations on our ability to successfully reposition the post-merger balance sheet when deemed
appropriate.
In addition, mergers and acquisitions can lead to uncertainties about the future on the part of customers and
employees. Such uncertainties could cause customers and others to consider changing their existing business
relationships with the company to be acquired, and could cause its employees to accept positions with other
companies before the merger occurs. As a result, the ability of a company to attract and retain customers, and to
attract, retain, and motivate key personnel, prior to a merger’s completion could be impaired.
Furthermore, no assurance can be given that acquired operations would not adversely affect our existing
profitability; that we would be able to achieve results in the future similar to those achieved by our existing banking
business; that we would be able to compete effectively in the market areas served by acquired branches; or that we
would be able to manage any growth resulting from a transaction effectively. In particular, our ability to compete
effectively in new markets would be dependent on our ability to understand those markets and their competitive
dynamics, and our ability to retain certain key employees from the acquired institution who know those markets
better than we do.
If our goodwill were determined to be impaired, it would result in a charge against earnings and thus a reduction
in our stockholders’ equity.
We test goodwill for impairment on an annual basis, or more frequently, if necessary. If we were to determine
that the carrying amount of our goodwill exceeded its implied fair value, we would be required to write down the
value of the goodwill on our balance sheet, adversely affecting our earnings as well as our capital.
26
The inability to receive dividends from our subsidiary bank could have a material adverse effect on our financial
condition or results of operations, as well as our ability to maintain or increase the current level of cash dividends
we pay to our shareholders.
The Parent Company (i.e., the company on an unconsolidated basis) is a separate and distinct legal entity from
the Bank, and a substantial portion of the revenues the Parent Company receives consists of dividends from the
Bank. These dividends are the primary funding source for the dividends we pay on our common stock and the
interest and principal payments on our debt. Various federal and state laws and regulations limit the amount of
dividends that a bank may pay to its parent company. In addition, our right to participate in a distribution of assets
upon the liquidation or reorganization of a subsidiary may be subject to the prior claims of the subsidiary’s creditors.
If the Bank is unable to pay dividends to the Parent Company, we might not be able to service our debt, pay our
obligations, or pay dividends on our common stock.
Reduction or elimination of our quarterly cash dividend could have an adverse impact on the market price of our
common stock.
Holders of our common stock are only entitled to receive such dividends as our Board of Directors may
declare out of funds available for such payments under applicable law and regulatory guidance, and although we
have historically declared cash dividends on our common stock, we are not required to do so. Furthermore, the
payment of dividends falls under federal regulations that have grown more stringent in recent years. While we pay
our quarterly cash dividend in compliance with current regulations, such regulations could change in the future. Any
reduction or elimination of our common stock dividend in the future could adversely affect the market price of our
common stock.
Operational Risks
Our stress testing processes rely on analytical and forecasting models that may prove to be inadequate or
inaccurate, which could adversely affect the effectiveness of our strategic planning and our ability to pursue
certain corporate goals.
The processes we use to estimate the effects of changing interest rates, real estate values, and economic
indicators such as unemployment on our financial condition and results of operations depend upon the use of
analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times
of market stress or other unforeseen circumstances. Furthermore, even if our assumptions are accurate predictors of
future performance, the models they are based on may prove to be inadequate or inaccurate because of other flaws in
their design or implementation. If the models we use in the process of managing our interest rate and other risks
prove to be inadequate or inaccurate, we could incur increased or unexpected losses which, in turn, could adversely
affect our earnings and capital. Additionally, failure by the Company to maintain compliance with strict capital,
liquidity, and other stress test requirements under banking regulations could subject us to regulatory sanctions,
including limitations on our ability to pay dividends.
The occurrence of any failure, breach, or interruption in service involving our systems or those of our service
providers could damage our reputation, cause losses, increase our expenses, and result in a loss of customers, an
increase in regulatory scrutiny, or expose us to civil litigation and possibly financial liability, any of which could
adversely impact our financial condition, results of operations, and the market price of our stock.
Communication and information systems are essential to the conduct of our business, as we use such systems,
and those maintained and provided to us by third party service providers, to manage our customer relationships, our
general ledger, our deposits, and our loans. In addition, our operations rely on the secure processing, storage, and
transmission of confidential and other information in our computer systems and networks. Although we take
protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems,
software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other
malicious code and cyber-attacks that could have an impact on information security. With the rise and permeation of
online and mobile banking, the financial services industry in particular faces substantial cybersecurity risk due to the
type of sensitive information provided by customers. Our systems and those of our third-party service providers and
customers are under constant threat, and it is possible that we or they could experience a significant event in the
future that could adversely affect our business or operations.
In addition, breaches of security may occur through intentional or unintentional acts by those having
authorized or unauthorized access to our confidential or other information, or that of our customers, clients, or
counterparties. If one or more of such events were to occur, the confidential and other information processed and
stored in, and transmitted through, our computer systems and networks could potentially be jeopardized, or could
27
otherwise cause interruptions or malfunctions in our operations or the operations of our customers, clients, or
counterparties. This could cause us significant reputational damage or result in our experiencing significant losses.
While we diligently assess applicable regulatory and legislative developments affecting our business, laws and
regulations relating to cybersecurity have been frequently changing, imposing new requirements on us, such as the
recently adopted New York State Department of Financial Services’ Cybersecurity Requirements for Financial
Services Companies regulation. In light of these conditions, we face the potential for additional regulatory scrutiny
that will lead to increasing compliance and technology expenses and, in some cases, possible limitations on the
achievement of our plans for growth and other strategic objectives.
Furthermore, we may be required to expend significant additional resources to modify our protective measures
or investigate and remediate vulnerabilities or other exposures arising from operational and security risks.
Additional expenditures may be required for third-party expert consultants or outside counsel.
We also may be subject to litigation and financial losses that either are not insured against or not fully covered
through any insurance we maintain.
In addition, we routinely transmit and receive personal, confidential, and proprietary information by e-mail
and other electronic means. We have discussed, and worked with our customers, clients, and counterparties to
develop secure transmission capabilities, but we do not have, and may be unable to put in place, secure capabilities
with all of these constituents, and we may not be able to ensure that these third parties have appropriate controls in
place to protect the confidentiality of such information. We maintain disclosure controls and procedures to ensure
we will timely and sufficiently notify our investors of material cybersecurity risks and incidents, including the
associated financial, legal, or reputational consequence of such an event, as well as reviewing and updating any prior
disclosures relating to the risk or event.
While we have established information security policies and procedures, including an Incident Response Plan,
to prevent or limit the impact of systems failures and interruptions, we may not be able to anticipate all possible
security breaches that could affect our systems or information and there can be no assurance that such events will
not occur or will be adequately prevented or mitigated if they do.
We maintain policies and procedures to prevent directors, certain officers, and corporate insiders from trading
stock after being made aware of a material cybersecurity incident and to control the distribution of information about
cybersecurity events that could constitute material information to the Company; however, we cannot be certain that
a corporate insider who becomes aware of a Company material cybersecurity incident does not undertake to buy or
sell Company stock before information about the incident becomes publicly available.
The Company and the Bank rely on third parties to perform certain key business functions, which may expose us
to further operational risk.
We outsource certain key aspects of our data processing to certain third-party providers. While we have
selected these third-party providers carefully, we cannot control their actions. Our ability to deliver products and
services to our customers, to adequately process and account for our customers’ transactions, or otherwise conduct
our business could be adversely impacted by any disruption in the services provided by these third parties; their
failure to handle current or higher volumes of usage; or any difficulties we may encounter in communicating with
them. Replacing these third-party providers also could entail significant delay and expense.
Our third-party providers may be vulnerable to unauthorized access, computer viruses, phishing schemes, and
other security breaches. Threats to information security also exist in the processing of customer information through
various other third-party providers and their personnel. We may be required to expend significant additional
resources to protect against the threat of such security breaches and computer viruses, or to alleviate problems
caused by such security breaches or viruses. To the extent that the activities of our third-party providers or the
activities of our customers involve the storage and transmission of confidential information, security breaches and
viruses could expose us to claims, regulatory scrutiny, litigation, and other possible liabilities.
In addition, the Company may not be adequately insured against all types of losses resulting from third-party
failures, and our insurance coverage may be inadequate to cover all losses resulting from systems failures or other
disruptions to our banking services.
28
Failure to keep pace with technological changes could have a material adverse impact on our ability to compete
for loans and deposits, and therefore on our financial condition and results of operations.
Financial products and services have become increasingly technology-driven. To some degree, our ability to
meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on our ability to keep
pace with technological advances and to invest in new technology as it becomes available. Many of our competitors
have greater resources to invest in technology than we do and may be better equipped to market new technology-
driven products and services.
If federal, state, or local tax authorities were to determine that we did not adequately provide for our taxes, our
income tax expense could be increased, adversely affecting our earnings.
The amount of income taxes we are required to pay on our earnings is based on federal, state, and local
legislation and regulations. We provide for current and deferred taxes in our financial statements, based on our
results of operations, business activity, legal structure, interpretation of tax statutes, assessment of risk of adjustment
upon audit, and application of financial accounting standards. We may take tax return filing positions for which the
final determination of tax is uncertain, and our net income and earnings per share could be reduced if a federal, state,
or local authority were to assess additional taxes that have not been provided for in our consolidated financial
statements. In addition, there can be no assurance that we will achieve our anticipated effective tax rate.
Unanticipated changes in tax laws or related regulatory or judicial guidance, or an audit assessment that denies
previously recognized tax benefits, could result in our recording tax expenses that materially reduce our net income.
The inability to attract and retain key personnel could adversely impact our operations.
To a large degree, our success depends on our ability to attract and retain key personnel whose expertise,
knowledge of our markets, and years of industry experience would make them difficult to replace. Competition for
skilled leaders in our industry can be intense, and we may not be able to hire or retain the people we would like to
have working for us. The unexpected loss of services of one or more of our key personnel could have a material
adverse impact on our business, given the specialized knowledge of such personnel and the difficulty of finding
qualified replacements on a timely basis. Furthermore, our ability to attract and retain personnel with the skills and
knowledge to support our business may require that we offer additional compensation and benefits that would
reduce our earnings.
Many aspects of our operations are dependent upon the soundness of other financial intermediaries, and thus
could expose us to systemic risk.
The soundness of many financial institutions may be closely interrelated as a result of relationships between
them involving credit, trading, execution of transactions, and the like. As a result, concerns about, or a default or
threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses, or
defaults by other institutions. As such “systemic risk” may adversely affect the financial intermediaries with which
we interact on a daily basis (such as clearing agencies, clearing houses, banks, and securities firms and exchanges),
we could be adversely impacted as well.
Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations could result
in material financial loss.
The BSA and the Patriot Act contain anti-money laundering and financial transparency provisions intended to
detect and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The
BSA, as amended by the Patriot Act, requires depository institutions to undertake activities including monitoring an
anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious
transactions, reporting on cash transactions above a certain threshold, and responding to requests for information by
regulatory authorities and law enforcement agencies. FINCEN, a unit of the U.S. Treasury Department that
administers the BSA, is authorized to impose significant civil monetary penalties for violations of these
requirements.
There is also increased scrutiny of compliance with OFAC. If the Company’s policies, procedures, and
systems are deemed deficient or the policies, procedures, and systems of financial institutions we have acquired or
may acquire in the future are deemed deficient, the Company would be subject to liability, including fines and
regulatory actions.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing
activities could also result in reputational risk for the Company.
29
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.
As a public company, we are required to maintain effective internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Internal control over financial reporting is complex
and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We
have made investments through joint ventures, such as our investment in consumer loans, and accounting for such
investments can increase the complexity of maintaining effective internal control over financial reporting. We
cannot assure you that our internal control over financial reporting will be effective in the future or that a material
weakness will not be discovered with respect to a prior period for which we had previously believed that our internal
control over financial reporting was effective. If we are not able to maintain or document effective internal control
over financial reporting, our independent registered public accounting firm will not be able to certify as to the
effectiveness of our internal control over financial reporting. Matters impacting our internal control over financial
reporting may cause us to be unable to report our financial information on a timely basis, or may cause us to restate
previously issued financial information, and thereby subject us to adverse regulatory consequences, including
sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a
negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our
financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our
independent registered public accounting firm reports a material weakness in the effectiveness of our internal control
over financial reporting. This could materially adversely affect us by, for example, leading to a decline in our stock
price and impairing our ability to raise capital.
Reputational Risk
Damage to our reputation could significantly harm the businesses we engage in, as well as our competitive
position and prospects for growth.
Our ability to attract and retain investors, customers, clients, and employees could be adversely affected by
damage to our reputation resulting from various sources, including employee misconduct, litigation, or regulatory
outcomes; failure to deliver minimum standards of service and quality; compliance failures; unethical behavior;
unintended disclosure of confidential information; and the activities of our clients, customers, and/or counterparties.
Actions by the financial services industry in general, or by certain entities or individuals within it, also could have a
significantly adverse impact on our reputation.
Our actual or perceived failure to identify and address various issues also could give rise to reputational risk
that could significantly harm us and our business prospects, including failure to properly address operational risks.
These issues include legal and regulatory requirements; consumer protection, fair lending, and privacy issues;
properly maintaining customer and associated personal information; record keeping; protecting against money
laundering; sales and trading practices; and ethical issues.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We own certain of our branch offices, as well as our headquarters on Long Island and certain other back-office
buildings in New York, Ohio, and Florida. We also utilize other branch and back-office locations in those states, and
in New Jersey and Arizona, under various lease and license agreements that expire at various times. (See Note 10,
“Commitments and Contingencies: Lease Commitments” in Item 8, “Financial Statements and Supplementary
Data.”) We believe that our facilities are adequate to meet our present and immediately foreseeable needs.
ITEM 3.
LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the ordinary course of its business. All such
actions in the aggregate involve amounts that are believed by management to be immaterial to the financial
condition and results of operations of the Company.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
30
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
The common stock of New York Community Bancorp, Inc. trades on the New York Stock Exchange (the
“NYSE”) under the symbol “NYCB.”
At December 31, 2018, the number of outstanding shares was 473,536,604 and the number of registered
owners was approximately 11,430. The latter figure does not include those investors whose shares were held for
them by a bank or broker at that date.
Stock Performance Graph
The following graph compares the cumulative total return on the Company’s stock in the five years ended
December 31, 2018 with the cumulative total returns on a broad market index (the S&P Mid-Cap 400 Index) and a
peer group index (the SNL U.S. Bank and Thrift Index) during the same time. The S&P Mid-Cap 400 Index was
chosen as the broad market index in connection with the Company’s trading activity on the NYSE; the SNL U.S.
Bank and Thrift Index currently is comprised of 405 bank and thrift institutions, including the Company. S&P
Global Market Intelligence provided us with the data for both indices.
The performance graph is being furnished solely to accompany this report pursuant to Item 201(e) of
Regulation S-K, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after
the date hereof, regardless of any general incorporation language in such filing.
The cumulative total returns are based on the assumption that $100.00 was invested in each of the three
investments on December 31, 2013 and that all dividends paid since that date were reinvested. Such returns are
based on historical results and are not intended to suggest future performance.
31
Comparison of 5-Year Cumulative Total Return
Among New York Community Bancorp, Inc.,
S&P Mid-Cap 400 Index, and SNL U.S. Bank and Thrift Index
ASSUMES $100 INVESTED ON DECEMBER 31, 2013
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 2018
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
New York Community Bancorp, Inc.
$100.00
$101.27
$109.58
$111.94
$96.40
$74.00
S&P Mid-Cap 400 Index
$100.00
$109.77
$107.38
$129.65
$150.71
$134.01
SNL U.S. Bank and Thrift Index
$100.00
$111.63
$113.89
$143.78
$169.07
$140.45
32
Share Repurchases
Shares Repurchased Pursuant to the Company’s Stock-Based Incentive Plans
Participants in the Company’s stock-based incentive plans may have shares of common stock withheld to
fulfill the income tax obligations that arise in connection with their exercise of stock options and the vesting of their
stock awards. Shares that are withheld for this purpose are repurchased pursuant to the terms of the applicable stock-
based incentive plan, rather than pursuant to the share repurchase program authorized by the Board of Directors
described below.
Shares Repurchased Pursuant to the Board of Directors’ Share Repurchase Authorization
On October 23, 2018, the Board of Directors authorized the repurchase of up to $300 million of the
Company’s common stock. Under said authorization, shares may be repurchased on the open market or in privately
negotiated transactions.
Shares that are repurchased pursuant to the Board of Directors’ authorization, and those that are repurchased
pursuant to the Company’s stock-based incentive plans, are held in our Treasury account and may be used for
various corporate purposes, including, but not limited to, merger transactions and the vesting of restricted stock
awards.
As indicated in the table below, during the twelve months ended December 31, 2018, the Company allocated
193,351 shares or $2.5 million toward the repurchase of shares tied to its stock-based incentive plans. Also, during
the fourth quarter of the year, the Company repurchased $160.8 million or 16.8 million shares of its common stock
under its recently authorized share repurchase program, leaving $139.2 million remaining under the current
repurchase authorization at December 31, 2018.
(dollars in thousands, except per share data)
Period
First Quarter 2018
Second Quarter 2018
Third Quarter 2018
Fourth Quarter 2018:
October
November
December
Total Fourth Quarter 2018
2018 Total
Total Shares of Common
Stock Repurchased
126,483
23,767
37,841
Average Price Paid
Per Common Share
$13.57
12.34
11.09
1,402
6,501,251
10,302,607
16,805,260
16,993,351
10.18
9.72
9.47
9.57
$ 9.61
Total Cost
$ 1,715
293
420
14
63,196
97,611
160,821
$163,249
33
ITEM 6.
SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
EARNINGS SUMMARY:
Net interest income (1)
Provision for (recovery of) losses on non-
covered loans
Recovery of losses on covered loans
Non-interest income
Non-interest expense:
Operating expenses (2)
Amortization of core deposit intangibles
Debt repositioning charge
Merger-related expenses
Total non-interest expense
Income tax expense (benefit)
Net income (loss) (3)
Basic earnings (loss) per common share (3)
Diluted earnings (loss) per common share (3)
Dividends paid per common share
SELECTED RATIOS:
Return on average assets (3)
Return on average common stockholders’
equity (3)
Average common stockholders’ equity to
average assets
Operating expenses to average assets (2)
Efficiency ratio (1)(2)
Net interest rate spread (1)
Net interest margin (1)
Dividend payout ratio
BALANCE SHEET SUMMARY:
Total assets
Loans, net of allowance for loan losses
Allowance for losses on non-covered loans
Allowance for losses on covered loans
Securities
Deposits
Borrowed funds
Common stockholders’ equity
Common shares outstanding
Book value per common share
Common stockholders’ equity to total assets
ASSET QUALITY RATIOS (excluding covered
2018
2017
2016
2015
2014
At or For the Years Ended December 31,
$ 1,030,995
$ 1,130,003
$ 1,287,382
$ 408,075
$ 1,140,353
18,256
--
91,558
546,628
--
--
--
546,628
135,252
422,417
$0.79
0.79
0.68
60,943
(23,701 )
216,880
641,218
208
--
--
641,426
202,014
466,201
$0.90
0.90
0.68
11,874
(7,694 )
145,572
638,109
2,391
--
11,146
651,646
281,727
495,401
$1.01
1.01
0.68
(3,334 )
(11,670 )
210,763
615,600
5,344
141,209
3,702
765,855
(84,857 )
(47,156 )
$(0.11 )
(0.11 )
1.00
--
(18,587 )
201,593
579,170
8,297
--
--
587,467
287,669
485,397
$1.09
1.09
1.00
0.84 %
0.96 %
1.00 %
(0.10 )%
1.01 %
6.20
12.51
1.09
48.70
2.06
2.25
86.08
7.12
12.76
1.32
47.61
2.47
2.59
75.56
8.19
12.28
1.29
44.53
2.85
2.93
67.33
(0.81 )
11.90
1.26
99.48
0.69
0.94
--
8.41
12.01
1.21
43.16
2.57
2.67
91.74
$51,899,376
40,006,088
159,820
--
5,644,071
30,764,430
14,207,866
6,152,395
473,536,604
$12.99
$49,124,195
38,265,183
158,046
--
3,531,427
29,102,163
12,913,679
6,292,536
488,490,352
$12.88
$48,926,555
39,308,016
158,290
23,701
3,817,057
28,887,903
13,673,379
6,123,991
487,056,676
$12.57
$50,317,796
38,011,995
147,124
31,395
6,173,645
28,426,758
15,748,405
5,934,696
484,943,308
$12.24
$48,559,217
35,647,639
139,857
45,481
7,096,450
28,328,734
14,226,487
5,781,815
442,587,190
$13.06
11.85 %
12.81 %
12.52 %
11.79 %
11.91 %
assets and non-covered purchased credit-
impaired loans):
Non-performing non-covered loans to total non-
covered loans
Non-performing non-covered assets to total
non-covered assets
Allowance for losses on non-covered loans to
non-performing non-covered loans
Allowance for losses on non-covered loans to
total non-covered loans
Net charge-offs (recoveries) to average loans (4)
0.11 %
0.19 %
0.15 %
0.13 %
0.23 %
0.11
351.21
0.40
0.04
0.18
0.14
0.13
0.30
214.50
277.19
310.08
181.75
0.41
0.16
0.42
0.00
0.41
(0.02 )
0.42
0.01
(1) The 2015 amount reflects the impact of a $773.8 million debt repositioning charge recorded as interest expense in the fourth
quarter of the year.
(2) The 2015 amount includes state and local non-income taxes of $5.4 million resulting from the debt repositioning charge.
(3) The 2015 amount reflects the $546.8 million after-tax impact of the debt repositioning charge recorded as interest expense
and non-interest expense, combined.
(4) Average loans include covered loans.
34
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the purpose of this discussion and analysis, the words “we,” “us,” “our,” and the “Company” are used to
refer to New York Community Bancorp, Inc. and our consolidated subsidiaries, including New York Community
Bank (the “Bank”).
Executive Summary
New York Community Bancorp, Inc. is the holding company for New York Community Bank, with 252
branches in Metro New York, New Jersey, Ohio, Florida, and Arizona. At December 31, 2018, we had total assets
of $51.9 billion, including total loans of $40.2 billion, total deposits of $30.8 billion, and total stockholders’ equity
of $6.7 billion.
Chartered in the State of New York, the Bank is subject to regulation by the FDIC, the CFPB, and the
NYSDFS. In addition, the holding company is subject to regulation by the FRB, the SEC, and to the requirements of
the NYSE, where shares of our common stock are traded under the symbol “NYCB.”
As a publicly traded company, our mission is to provide our shareholders with a solid return on their
investment by producing a strong financial performance, maintaining a solid capital position, and engaging in
corporate strategies that enhance the value of their shares. For the twelve months ended December 31, 2018, the
Company reported net income of $422.4 million, compared to the $466.2 million reported for the twelve months
ended December 31, 2017. Net income available to common shareholders in the comparable period was
$389.6 million, versus $441.6 million for the twelve months ended December 31, 2017. Diluted earnings per
common share were $0.79 for the twelve months ended December 31, 2018, as compared to $0.90 per diluted
common share for the twelve months ended December 31, 2017.
Additionally, we maintained our status as a well-capitalized institution with regulatory capital ratios that rose
year-over-year. We also engaged in various strategies that were consistent with our business model, as further
described below:
Continued Balance Sheet Growth
The Company resumed its organic balance sheet growth strategy in the first half of 2018, once the SIFI asset
threshold was legislatively increased to $250 billion from $50 billion. At December 31, 2018, total assets increased
$2.8 billion or 5.6% on a year-over-year basis. This growth was driven by a combination of loan growth and growth
in our investment securities portfolio. Our investment securities portfolio increased $2.1 billion or 59.8% to
$5.6 billion, as we redeployed a portion of our cash balances into higher yielding securities. On the lending side,
total loans held for investment grew $1.8 billion or 4.6% to $40.2 billion.
Our total loan growth during 2018 was the result of continued growth in the Company’s flagship multi-family
portfolio and in the specialty finance portfolio. Multi-family loans increased $1.8 billion or 6.4% to $29.9 billion,
while the specialty finance portfolio rose $405 million or 25.7% to $2.0 billion.
Lower Operating Expenses
Total non-interest expenses for the twelve-months ended December 31, 2018 were $546.6 million, down
$94.8 million or 14.8%, compared to the $641.4 million for the twelve months ended December 31, 2017. The year-
over-year improvement was the result of a $46.2 million or 12.7% decrease in compensation and benefits expense
and by a $49.5 million or 27.7% decrease in general and administrative expense. This was driven by the sale of our
mortgage banking business in the third quarter of 2017 and by lower regulatory compliance-related costs as a result
of the SIFI threshold being raised to $250 billion.
We Maintained Our Record of Exceptional Asset Quality
The Company’s asset quality continued to improve during 2018. Total NPAs declined $33.8 million or 38%
on a year-over-year basis to $56.3 million or 0.11% of total assets at December 31, 2018. During the same
timeframe, total non-accrual mortgage loans declined $17.0 million or 66% to $8.9 million, while other non-accrual
loans, which largely consist of taxi medallion-related loans, decreased $11.2 million or 23%. Repossessed assets
totaled $10.8 million, representing a $5.6 million or 34% decrease compared to the level at December 31, 2017. As
with non-accrual loans, the majority of our repossessed assets consist of taxi medallions, which were $8.2 million of
total repossessed assets at year-end 2018. Excluding taxi medallion-related assets, NPAs declined 29.5% to
35
$12.6 million or 0.02% of total assets at December 31, 2018 compared to $17.9 million or 0.03% of total assets at
September 30, 2018 and declined 64.2% compared to $35.2 million or 0.07% of total assets at December 31, 2017.
For the twelve months ended December 31, 2018, the Company recorded net charge-offs of $16.5 million or
0.04% of average loans, down $44.7 million or 73% compared to $61.2 million or 0.16% of average loans recorded
for the twelve months ended December 31, 2017. In both years, the majority of net charge-offs arose primarily from
taxi medallion-related loans. In full year 2018, taxi medallion related charge-offs were $12.8 million down 78.5%
from the $59.6 million recorded in full year 2017. At December 31, 2018, total remaining taxi medallion-related
loans were $73.7 million compared to $99.1 million at December 31, 2017.
External Factors
The following is a discussion of certain external factors that tend to influence our financial performance and
the strategic actions we take.
Interest Rates
Among the external factors that tend to influence our performance, the interest rate environment is key. Just as
short-term interest rates affect the cost of our deposits and that of the funds we borrow, market interest rates affect
the yields on the loans we produce for investment and the securities in which we invest.
As further discussed under “Loans Held for Investment” later on in this discussion, the interest rates on our
multi-family loans and CRE credits generally are based on the five-year and seven-year CMT. The following table
summarizes the high, low, and average five- and seven-year CMT rates in 2018 and 2017:
Constant Maturity Treasury Rates
Seven-Year
Five-Year
2018
2017
3.09 % 2.26 %
2.25
2.75
1.63
1.91
2018
2017
3.18 % 2.43 %
2.37
2.85
1.88
2.16
High
Low
Average
Because the multi-family and CRE loans we produce generate income when they prepay (which is recorded as
interest income), the impact of repayment activity can be especially meaningful. In 2018, prepayment income from
loans contributed $44.9 million to interest income; in the prior year, the contribution was $47.0 million.
Economic Indicators
While we attribute our asset quality to the nature of the loans we produce and our conservative underwriting
standards, the quality of our assets can also be impacted by economic conditions in our local markets and throughout
the United States. The information that follows consists of recent economic data that we consider to be germane to
our performance and the markets we serve.
The following table presents the generally downward trend in unemployment rates, as reported by the U.S.
Department of Labor, both nationally and in the various markets that comprise our footprint, for the months
indicated:
December
2018
2017
Unemployment rate:
United States
New York City
Arizona
Florida
New Jersey
New York
Ohio
3.7 %
3.9
5.1
3.3
3.6
3.8
4.8
3.9 %
4.0
4.6
3.7
4.2
4.4
4.5
36
The CPI measures the average change over time in the prices paid by urban consumers for a market basket of
consumer goods and services. The following table indicates the change in the CPI for the twelve months ended at
each of the indicated dates:
Change in prices:
For the Twelve Months Ended
December
2018
1.9%
2017
2.1%
Economic activity also is indicated by the Consumer Confidence Index®, which moved up to 126.6 in
December 2018 from 122.1 in December 2017. An index level of 90 or more is considered indicative of a strong
economy.
The following chart illustrates the relative stability of the rental vacancy rate in New York City for all rental
units and for rent stabilized units, from 1991 through 2017, as compared to the changes in average unemployment
rates in New York City during those years. As the New York City rental vacancy rate is only reported every three
years, the annual average unemployment rate in New York City is provided for those years only. As you can see the
vacancy rates for rent stabilized units are lower, in some years, meaningfully lower, then the vacancy rates for all
rental units.
New York City Rental Vacancy Rates to Unemployment Rates
New York City
Rental Vacancy Rate
All Rental Units 1
3.63%
3.45%
3.12%
2.88%
3.09%
2.94%
3.19%
4.01%
3.44%
3.78%
New York City
Rental Vacancy Rate
Rent Stabilized Units 1
2.06%
2.12%
2.55%
2.14%
2.68%
2.52%
2.46%
3.57%
3.10%
3.54%
New York City
Annual Average
Unemployment Rate 2
4.50%
7.20%
9.10%
5.60%
5.80%
8.00%
6.80%
8.80%
10.40%
8.70%
Year
2017
2014
2011
2008
2005
2002
1999
1996
1993
1991
(1) Source: Selected Initial Findings of the New York City Housing and Vacancy Survey
(2) Source: http://www.labor.ny.gov/stats/laus.asp
Recent Events
Dividend Declaration
On January 29, 2019, the Board of Directors declared a quarterly cash dividend on the Company’s common
stock of $0.17 per share, payable on February 26, 2019 to common shareholders of record at the close of business on
February 12, 2019.
Critical Accounting Policies
We consider certain accounting policies to be critically important to the portrayal of our financial condition
and results of operations, since they require management to make complex or subjective judgments, some of which
may relate to matters that are inherently uncertain. The inherent sensitivity of our consolidated financial statements
to these critical accounting policies, and the judgments, estimates, and assumptions used therein, could have a
material impact on our financial condition or results of operations.
We have identified the following to be critical accounting policies: the determination of the allowance for loan
losses; the determination of the amount, if any, of goodwill impairment; and the determination of the valuation
allowance, if any, for deferred tax assets.
The judgments used by management in applying these critical accounting policies may be influenced by
adverse changes in the economic environment, which may result in changes to future financial results.
37
Allowance for Loan Losses
The allowance for loan losses represents our estimate of probable and estimable losses inherent in the loan
portfolio as of the date of the balance sheet. Losses on loans are charged against, and recoveries of losses on loans
are credited back to, the allowance for loan losses.
The methodology used for the allocation of the allowance for loan losses at December 31, 2018 and
December 31, 2017 was generally comparable, whereby the Bank segregated their loss factors (used for both
criticized and non-criticized loans) into a component that was primarily based on historical loss rates and a
component that was primarily based on other qualitative factors that are probable to affect loan collectability. In
determining the allowance for loan losses, management considers the Bank’s current business strategies and credit
processes, including compliance with applicable regulatory guidelines and with guidelines approved by the Boards
of Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
The allowance for loan losses is established based on management’s evaluation of incurred losses in the
portfolio in accordance with GAAP, and is comprised of both specific valuation allowances and a general valuation
allowance.
Specific valuation allowances are established based on management’s analyses of individual loans that are
considered impaired. If a loan is deemed to be impaired, management measures the extent of the impairment and
establishes a specific valuation allowance for that amount. A loan is classified as impaired when, based on current
information and/or events, it is probable that we will be unable to collect all amounts due under the contractual
terms of the loan agreement. We apply this classification as necessary to loans individually evaluated for impairment
in our portfolios. Smaller-balance homogenous loans and loans carried at the lower of cost or fair value are
evaluated for impairment on a collective, rather than individual, basis. Loans to certain borrowers who have
experienced financial difficulty and for which the terms have been modified, resulting in a concession, are
considered TDRs and are classified as impaired.
We primarily measure impairment on an individual loan and determine the extent to which a specific
valuation allowance is necessary by comparing the loan’s outstanding balance to either the fair value of the
collateral, less the estimated cost to sell, or the present value of expected cash flows, discounted at the loan’s
effective interest rate. Generally, when the fair value of the collateral, net of the estimated cost to sell, or the present
value of the expected cash flows is less than the recorded investment in the loan, any shortfall is promptly charged
off.
We also follow a process to assign the general valuation allowance to loan categories. The general valuation
allowance is established by applying our loan loss provisioning methodology, and reflect the inherent risk in
outstanding held-for-investment loans. This loan loss provisioning methodology considers various factors in
determining the appropriate quantified risk factors to use to determine the general valuation allowance. The factors
assessed begin with the historical loan loss experience for each major loan category. We also take into account an
estimated historical loss emergence period (which is the period of time between the event that triggers a loss and the
confirmation and/or charge-off of that loss) for each loan portfolio segment.
The allocation methodology consists of the following components: First, we determine an allowance for loan
losses based on a quantitative loss factor for loans evaluated collectively for impairment. This quantitative loss
factor is based primarily on historical loss rates, after considering loan type, historical loss and delinquency
experience, and loss emergence periods. The quantitative loss factors applied in the methodology are periodically re-
evaluated and adjusted to reflect changes in historical loss levels, loss emergence periods, or other risks. Lastly, we
allocate an allowance for loan losses based on qualitative loss factors. These qualitative loss factors are designed to
account for losses that may not be provided for by the quantitative loss component due to other factors evaluated by
management, which include, but are not limited to:
• Changes in lending policies and procedures, including changes in underwriting standards and collection,
and charge-off and recovery practices;
• Changes in international, national, regional, and local economic and business conditions and
developments that affect the collectability of the portfolio, including the condition of various market
segments;
• Changes in the nature and volume of the portfolio and in the terms of loans;
• Changes in the volume and severity of past-due loans, the volume of non-accrual loans, and the volume
and severity of adversely classified or graded loans;
38
• Changes in the quality of our loan review system;
• Changes in the value of the underlying collateral for collateral-dependent loans;
• The existence and effect of any concentrations of credit, and changes in the level of such concentrations;
• Changes in the experience, ability, and depth of lending management and other relevant staff; and
• The effect of other external factors, such as competition and legal and regulatory requirements, on the
level of estimated credit losses in the existing portfolio.
By considering the factors discussed above, we determine an allowance for loan losses that is applied to each
significant loan portfolio segment to determine the total allowance for loan losses.
The historical loss period we use to determine the allowance for loan losses on loans is a rolling 32-quarter
look-back period, as we believe this produces an appropriate reflection of our historical loss experience.
The process of establishing the allowance for losses on non-covered loans also involves:
•
Periodic
appraisers/inspectors;
inspections of
the
loan collateral by qualified
in-house and external property
• Regular meetings of executive management with the pertinent Board committees, during which
observable trends in the local economy and/or the real estate market are discussed;
• Assessment of the aforementioned factors by the pertinent members of the Board of Directors and
management when making a business judgment regarding the impact of anticipated changes on the future
level of loan losses; and
• Analysis of the portfolio in the aggregate, as well as on an individual loan basis, taking into consideration
payment history, underwriting analyses, and internal risk ratings.
In order to determine their overall adequacy, the loan loss allowance is reviewed quarterly by management
Board Committees and the Board of Directors of the Bank, as applicable.
We charge off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed
uncollectible. The collectability of individual loans is determined through an assessment of the financial condition
and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For
non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are
typically recorded: (1) Closed-end credits are charged off in the quarter that the loan becomes 120 days past due;
(2) Open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) Both closed-end
and open-end credits are typically charged off in the quarter that the credit is 60 days past the date we received
notification that the borrower has filed for bankruptcy.
The level of future additions to the respective loan loss allowance is based on many factors, including certain
factors that are beyond management’s control, such as changes in economic and local market conditions, including
declines in real estate values, and increases in vacancy rates and unemployment. Management uses the best available
information to recognize losses on loans or to make additions to the loan loss allowance; however, the Bank may be
required to take certain charge-offs and/or recognize further additions to the loan loss allowance, based on the
judgment of regulatory agencies with regard to information provided during their examinations of the Bank.
An allowance for unfunded commitments is maintained separate from the allowance for loan losses and is
included in Other liabilities in the Consolidated Statements of Condition.
See Note 6, “Allowance for Loan Losses” for a further discussion of our allowance for loan losses.
Goodwill Impairment
We have significant intangible assets related to goodwill. In connection with our acquisitions, assets acquired
and liabilities assumed are recorded at their estimated fair values. Goodwill represents the excess of the purchase
price of our acquisitions over the fair value of identifiable net assets acquired, including other identified intangible
assets. Our goodwill is evaluated for impairment annually as of year-end or more frequently if conditions exist that
indicate that the value may be impaired. We test our goodwill for impairment at the reporting unit level. These
impairment evaluations are performed by comparing the carrying value of the goodwill of a reporting unit to its
estimated fair value. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the
business combination. We had previously identified two reporting units: our Banking Operations reporting unit and
39
our Residential Mortgage Banking reporting unit. On September 29, 2017, the Company sold the Residential
Mortgage Banking reporting unit. Our reporting unit is the same as our operating segment and reportable segment. If
we change our strategy or if market conditions shift, our judgments may change, which may result in adjustments to
the recorded goodwill balance.
For annual goodwill impairment testing, we have the option to first perform a qualitative assessment to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
including goodwill and other intangible assets. If we conclude that this is the case, we must perform the two-step test
described below. If we conclude based on the qualitative assessment that it is not more likely than not that the fair
value of a reporting unit is less than its carrying amount, we have completed our goodwill impairment test and do
not need to perform the two-step test.
Step one requires the fair value of each reporting unit is compared to its carrying value in order to identify
potential impairment. If the fair value of a reporting unit exceeds the carrying value of its net assets, goodwill is not
considered impaired and no further testing is required. If the carrying value of the net assets exceeds the fair value of
a reporting unit, potential impairment is indicated at the reporting unit level and step two of the impairment test is
performed.
Step two requires that when potential impairment is indicated in step one, we compare the implied fair value
of goodwill with the carrying amount of that goodwill. Determining the implied fair value of goodwill requires a
valuation of the reporting unit’s tangible and (non-goodwill) intangible assets and liabilities in a manner similar to
the allocation of the purchase price in a business combination. Any excess in the value of a reporting unit over the
amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. If the carrying
amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess.
As of December 31, 2018, we had goodwill of $2.4 billion. During the year ended December 31, 2018, no
triggering events were identified that indicated that the value of goodwill may be impaired. The Company performed
its annual goodwill impairment assessment as of December 31, 2018 using step one of the quantitative test and
found no indication of goodwill impairment at that date.
Income Taxes
In estimating income taxes, management assesses the relative merits and risks of the tax treatment of
transactions, taking into account statutory, judicial, and regulatory guidance in the context of our tax position. In this
process, management also relies on tax opinions, recent audits, and historical experience. Although we use the best
available information to record income taxes, underlying estimates and assumptions can change over time as a result
of unanticipated events or circumstances such as changes in tax laws and judicial guidance influencing our overall or
transaction-specific tax position.
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and
the carryforward of certain tax attributes such as net operating losses. A valuation allowance is maintained for
deferred tax assets that we estimate are more likely than not to be unrealizable, based on available evidence at the
time the estimate is made. In assessing the need for a valuation allowance, we estimate future taxable income,
considering the prudence and feasibility of tax planning strategies and the realizability of tax loss carryforwards.
Valuation allowances related to deferred tax assets can be affected by changes to tax laws, statutory tax rates, and
future taxable income levels. In the event we were to determine that we would not be able to realize all or a portion
of our net deferred tax assets in the future, we would reduce such amounts through a charge to income tax expense
in the period in which that determination was made. Conversely, if we were to determine that we would be able to
realize our deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded
valuation allowance through a decrease in income tax expense in the period in which that determination was made.
Subsequently recognized tax benefits associated with valuation allowances recorded in a business combination
would be recorded as an adjustment to goodwill.
40
FINANCIAL CONDITION
Balance Sheet Summary
Total assets at December 31, 2018 were $51.9 billion, a year-over-year increase of $2.8 billion or 5.6%.
Consistent with our strategy, this increase was driven by securities and loan growth which was funded through
deposits and to a lesser extent borrowed funds.
Total loans held for investment grew $1.8 billion or 4.6% from year-end 2017. The majority of this growth
was fueled by growth in our flagship multi-family loan portfolio, as the multi-family portfolio grew $1.8 billion or
6.4% to $29.9 billion.
During the year, we continued to redeploy our cash position by reinvesting cash into securities. Accordingly,
the balance of securities increased $2.1 billion or 59.8%, to $5.6 billion, including $848.1 million of growth during
the fourth quarter of the year.
Total deposits increased $1.7 billion or 5.7% from year-end 2017, to $30.8 billion, with $445.1 million of this
growth occurring during the fourth quarter of 2018. Borrowed funds totaled $14.2 billion at year-end 2018, up
$1.3 billion or 10.0%, compared to year-end 2017.
Total stockholders’ equity declined $140.1 million from the year-end 2017 balance, due in large part to our
previously announced $300 million buyback program during the fourth quarter of 2018. The Company repurchased
16.8 million shares at an average price of $9.57 during the quarter for a total of $160.8 million.
Common stockholders’ equity represented 11.85% of total assets at December 31, 2018 compared to 12.81%
at December 31, 2017. Book value per common share was $12.99 at December 31, 2018 compared to $12.88 at
December 31, 2017.
Loans
Loans Held for Investment
The majority of the loans we produce are loans held for investment and most of the held-for-investment loans
we produce are multi-family loans. Our production of multi-family loans began several decades ago in the five
boroughs of New York City, where the majority of the rental units currently consist of rent-regulated apartments
featuring below-market rents.
In addition to multi-family loans, our portfolio of loans held for investment contains a large number of CRE
credits, most of which are secured by income-producing properties located in New York City and on Long Island.
In addition to multi-family loans and CRE loans, our portfolio includes substantially smaller balances of one-
to-four family loans, ADC loans, and other loans held for investment, with C&I loans comprising the bulk of the
other loan portfolio. Specialty finance loans and leases account for most of our C&I credits, with the remainder
consisting primarily of loans to small and mid-size businesses, referred to as other C&I loans.
In 2018, we originated $10.1 billion of held-for-investment loans, a $1.1 billion or a 12.8% increase from the
prior year. The increase in originations was the result of higher multi-family and specialty finance loan originations.
Multi-family loan originations grew $1.2 billion or 23.1% to $6.6 billion, while specialty finance loans grew
$132.5 million or 7.4%. This growth was partially offset by declines in CRE and Other C&I loan originations, which
declined 7% and 6%, respectively.
Multi-Family Loans
Multi-family loans are our principal asset. The loans we produce are primarily secured by non-luxury
residential apartment buildings in New York City that feature rent-regulated units and below-market rents—a
market we refer to as our “primary lending niche.” Consistent with our emphasis on multi-family lending, multi-
family loan originations represented $6.6 billion, or 65.8%, of the loans we produced for investment in 2018.
At December 31, 2018, multi-family loans represented $29.9 billion, or 74.5%, of total loans held for
investment, reflecting a year-over-year increase of $1.8 billion, or 6.4%.
41
At December 31, 2018 and 2017, respectively, the average multi-family loan had a principal balance of
$6.1 million and $5.8 million; the expected weighted average life of the portfolio was 2.6 years at both of the
respective dates.
The majority of our multi-family loans are made to long-term owners of buildings with apartments that are
subject to rent regulation and feature below-market rents. Our borrowers typically use the funds we provide to make
building-wide improvements and renovations to certain apartments, as a result of which they are able to increase the
rents their tenants pay. In doing so, the borrower creates more cash flows to borrow against in future years.
In addition to underwriting multi-family loans on the basis of the buildings’ income and condition, we
consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to
present evidence of their ability to repay the loan from the buildings’ current rent rolls, their financial statements,
and related documents.
While a small percentage of our multi-family loans are ten-year fixed rate credits, the vast majority of our
multi-family loans feature a term of ten or twelve years, with a fixed rate of interest for the first five or seven years
of the loan, and an alternative rate of interest in years six through ten or eight through twelve. The rate charged in
the first five or seven years is generally based on intermediate-term interest rates plus a spread. During the
remaining years, the loan resets to an annually adjustable rate that is tied to the prime rate of interest, plus a spread.
Alternately, the borrower may opt for a fixed rate that is tied to the five-year fixed advance rate of the FHLB-NY,
plus a spread. The fixed-rate option also requires the payment of one percentage point of the then-outstanding loan
balance. In either case, the minimum rate at repricing is equivalent to the rate in the initial five-or seven-year term.
As the rent roll increases, the typical property owner seeks to refinance the mortgage, and generally does so before
the loan reprices in year six or eight.
Multi-family loans that refinance within the first five or seven years are typically subject to an established
prepayment penalty schedule. Depending on the remaining term of the loan at the time of prepayment, the penalties
normally range from five percentage points to one percentage point of the then-current loan balance. If a loan
extends past the fifth or seventh year and the borrower selects the fixed-rate option, the prepayment penalties
typically reset to a range of five points to one point over years six through ten or eight through twelve. For example,
a ten-year multi-family loan that prepays in year three would generally be expected to pay a prepayment penalty
equal to three percentage points of the remaining principal balance. A twelve-year multi-family loan that prepays in
year one or two would generally be expected to pay a penalty equal to five percentage points.
Because prepayment penalties are recorded as interest income, they are reflected in the average yields on our
loans and interest-earning assets, our net interest rate spread and net interest margin, and the level of net interest
income we record. No assumptions are involved in the recognition of prepayment income, as such income is only
recorded when cash is received.
Our success as a multi-family lender partly reflects the solid relationships we have developed with the
market’s leading mortgage brokers, who are familiar with our lending practices, our underwriting standards, and our
long-standing practice of basing our loans on the cash flows produced by the properties. The process of producing
such loans is generally four to six weeks in duration and, because the multi-family market is largely broker-driven,
the expense incurred in sourcing such loans is substantially reduced.
At December 31, 2018, the majority of our multi-family loans were secured by rental apartment buildings. In
addition, 77.4% of our multi-family loans were secured by buildings in the metro New York City area and 3.7%
were secured by buildings elsewhere in New York State. The remaining multi-family loans were secured by
buildings outside these markets, including in the four other states served by our retail branch offices.
Our emphasis on multi-family loans is driven by several factors, including their structure, which reduces our
exposure to interest rate volatility to some degree. Another factor driving our focus on multi-family lending has been
the comparative quality of the loans we produce. Reflecting the nature of the buildings securing our loans, our
underwriting standards, and the generally conservative LTV ratios our multi-family loans feature at origination, a
relatively small percentage of the multi-family loans that have transitioned to non-performing status have actually
resulted in losses, even when the credit cycle has taken a downward turn.
We primarily underwrite our multi-family loans based on the current cash flows produced by the collateral
property, with a reliance on the “income” approach to appraising the properties, rather than the “sales” approach.
The sales approach is subject to fluctuations in the real estate market, as well as general economic conditions, and is
42
therefore likely to be more risky in the event of a downward credit cycle turn. We also consider a variety of other
factors, including the physical condition of the underlying property; the net operating income of the mortgaged
premises prior to debt service; the DSCR, which is the ratio of the property’s net operating income to its debt
service; and the ratio of the loan amount to the appraised value (i.e., the LTV) of the property.
In addition to requiring a minimum DSCR of 120% on multi-family buildings, we obtain a security interest in
the personal property located on the premises, and an assignment of rents and leases. Our multi-family loans
generally represent no more than 75% of the lower of the appraised value or the sales price of the underlying
property, and typically feature an amortization period of 30 years. In addition, our multi-family loans may contain
an initial interest-only period which typically does not exceed two years; however, these loans are underwritten on a
fully amortizing basis.
Accordingly, while our multi-family lending niche has not been immune to downturns in the credit cycle, the
limited number of losses we have recorded, even in adverse credit cycles, suggests that the multi-family loans we
produce involve less credit risk than certain other types of loans. In general, buildings that are subject to rent
regulation have tended to be stable, with occupancy levels remaining more or less constant over time. Because the
rents are typically below market and the buildings securing our loans are generally maintained in good condition,
they have been more likely to retain their tenants in adverse economic times. In addition, we exclude any short-term
property tax exemptions and abatement benefits the property owners receive when we underwrite our multi-family
loans.
Commercial Real Estate Loans
At December 31, 2018, CRE loans represented $7.0 billion, or 17.4%, of total loans held for investment,
reflecting a year-over-year decline of $323.4 million or 4.4% compared to December 31, 2017. The average CRE
loan had a principal balance of $6.1 million at the end of this December, as compared to $5.7 million at the prior
year-end. In addition, the portfolio had an expected weighted average life of 2.7 years and 3.0 years at the
corresponding dates.
CRE loans represented $966.7 million, or 9.6%, of the loans we produced in 2018 for investment, as
compared to $1.0 billion, or 11.7%, in the prior year.
The CRE loans we produce are secured by income-producing properties such as office buildings, retail
centers, mixed-use buildings, and multi-tenanted light industrial properties. At December 31, 2018, 86.1% of our
CRE loans were secured by properties in the metro New York City area, while properties in other parts of New York
State accounted for 2.9% of the properties securing our CRE credits, while all other states accounted for 11.0%,
combined.
The terms of our CRE loans are similar to the terms of our multi-family credits. While a small percentage of
our CRE loans feature ten-year fixed-rate terms, they primarily feature a fixed rate of interest for the first five or
seven years of the loan that is generally based on intermediate-term interest rates plus a spread. During years six
through ten or eight through twelve, the loan resets to an annually adjustable rate that is tied to the prime rate of
interest, plus a spread. Alternately, the borrower may opt for a fixed rate that is tied to the five-year fixed advance
rate of the FHLB-NY plus a spread. The fixed-rate option also requires the payment of an amount equal to
one percentage point of the then-outstanding loan balance. In either case, the minimum rate at repricing is equivalent
to the rate in the initial five- or seven-year term.
Prepayment penalties apply to our CRE loans, as they do our multi-family credits. Depending on the
remaining term of the loan at the time of prepayment, the penalties normally range from five percentage points to
one percentage point of the then-current loan balance. If a loan extends past the fifth or seventh year and the
borrower selects the fixed rate option, the prepayment penalties typically reset to a range of five points to one point
over years six through ten or eight through twelve. Our CRE loans tend to refinance within two to three years of
origination, as reflected in the expected weighted average life of the CRE portfolio noted above.
The repayment of loans secured by commercial real estate is often dependent on the successful operation and
management of the underlying properties. To minimize our credit risk, we originate CRE loans in adherence with
conservative underwriting standards, and require that such loans qualify on the basis of the property’s current
income stream and DSCR. The approval of a loan also depends on the borrower’s credit history, profitability, and
expertise in property management, and generally requires a minimum DSCR of 130% and a maximum LTV of 65%.
In addition, the origination of CRE loans typically requires a security interest in the fixtures, equipment, and other
personal property of the borrower and/or an assignment of the rents and/or leases. In addition, our CRE loans may
43
contain an interest-only period which typically does not exceed three years; however, these loans are underwritten
on a fully amortizing basis.
C&I Loans
Our C&I loans are divided into two categories: specialty finance loans and leases, and other C&I loans, as
further described below.
Specialty Finance Loans and Leases
At December 31, 2018 and 2017, specialty finance loans and leases represented $2.0 billion and $1.5 billion,
respectively, of total loans held for investment.
We produce our specialty finance loans and leases through a subsidiary that is staffed by a group of industry
veterans with expertise in originating and underwriting senior securitized debt and equipment loans and leases. The
subsidiary participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned
to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors,
many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in
stable industries nationwide.
The specialty finance loans and leases we fund fall into three categories: asset-based lending, dealer floor-plan
lending, and equipment loan and lease financing. Each of these credits is secured with a perfected first security
interest in, or outright ownership of, the underlying collateral, and structured as senior debt or as a non-cancelable
lease. Asset-based and dealer floor-plan loans are priced at floating rates predominately tied to LIBOR, while our
equipment financing credits are priced at fixed rates at a spread over Treasuries.
Since launching our specialty finance business in the third quarter of 2013, no losses have been recorded on
any of the loans or leases in this portfolio.
Other C&I Loans
In the twelve months ended December 31, 2018, other C&I loans declined $31.0 million to $469.9 million,
and represented $478.6 million of the held-for-investment loans we produced. Included in the balance at year-end
2018 were taxi medallion-related loans of $73.7 million.
In contrast to the loans produced by our specialty finance subsidiary, the other C&I loans we produce are
primarily made to small and mid-size businesses in the five boroughs of New York City and on Long Island. Such
loans are tailored to meet the specific needs of our borrowers, and include term loans, demand loans, revolving lines
of credit, and, to a much lesser extent, loans that are partly guaranteed by the Small Business Administration.
A broad range of other C&I loans, both collateralized and unsecured, are made available to businesses for
working capital (including inventory and accounts receivable), business expansion, the purchase of machinery and
equipment, and other general corporate needs. In determining the term and structure of other C&I loans, several
factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. Other C&I
loans are typically secured by business assets and personal guarantees of the borrower, and include financial
covenants to monitor the borrower’s financial stability.
The interest rates on our other C&I loans can be fixed or floating, with floating-rate loans being tied to prime
or some other market index, plus an applicable spread. Our floating-rate loans may or may not feature a floor rate of
interest. The decision to require a floor on other C&I loans depends on the level of competition we face for such
loans from other institutions, the direction of market interest rates, and the profitability of our relationship with the
borrower.
Acquisition, Development, and Construction Loans
At December 31, 2018, ADC loans represented $407.9 million, or 1.0%, of total loans held for investment, as
compared to $435.8 million, or 1.1%, at the prior year-end. Originations of ADC loans totaled $56.7 million in
2018, down $20.5 million from the year-earlier amount.
At December 31, 2018, 38.0% of the loans in our ADC portfolio were for land acquisition and development;
the remaining 62.0% consisted of loans that were provided for the construction of commercial properties and owner-
44
occupied homes. Loan terms vary based upon the scope of the construction, and generally range from 18 months to
two years. They also feature a floating rate of interest tied to prime, with a floor. At December 31, 2018, 79.5% of
our ADC loans were for properties in New York City.
Because ADC loans are generally considered to have a higher degree of credit risk, especially during a
downturn in the credit cycle, borrowers are required to provide a guarantee of repayment and completion. In the
twelve months ended December 31, 2018 and 2017, we did not recover any losses against guarantees. The risk of
loss on an ADC loan is largely dependent upon the accuracy of the initial appraisal of the property’s value upon
completion of construction; the developer’s experience; the estimated cost of construction, including interest; and
the estimated time to complete and/or sell or lease such property.
When applicable, as a condition to closing an ADC loan, it is our practice to require that properties meet pre-
sale or pre-lease requirements prior to funding.
One-to-Four Family Loans
At December 31, 2018, one-to-four family loans represented $446.1 million, or 1.1%, of total loans held for
investment, as compared to $477.2 million, or 1.2%, at the prior year-end. These loan balances represent certain
mixed use CRE loans with less than five residential units being classified as one-to-four family loans. Other than
these types of loans, we do not currently expect to originate one-to-four family loans.
Other Loans
At December 31, 2018, other loans totaled $8.7 million and consisted primarily of consumer loans, most of
which were overdraft loans, and loans to non-profit organizations. We currently do not offer home equity loans or
lines of credit.
Lending Authority
The loans we originate for investment are subject to federal and state laws and regulations, and are
underwritten in accordance with loan underwriting policies approved by the Management Credit Committee, the
Commercial Credit Committee and the Mortgage and Real Estate and Credit Committees of the Board, and the
Board of Directors of the Bank.
Prior to 2017, all loans originated by the Bank were presented to the Mortgage and Real Estate Committee or
the Board Credit Committee of the Board of Directors, as applicable. Effective January 27, 2017 all C&I loans less
than or equal to $3.0 million are approved by the joint authority of lending officers. C&I loans in excess of
$3.0 million and all multifamily, CRE, ADC and Specialty Finance loans regardless of amount are required to be
presented to the Management Credit Committee for approval. Multifamily, CRE and C&I loans in excess of
$5.0 million and Specialty Finance in excess of $15.0 million are also required to be presented to the Commercial
Credit Committee and the Mortgage and Real Estate Committee of the Board, as applicable so that the Committees
can review the loan’s associated risks. The Committees have authority to direct changes in lending practices as they
deem necessary or appropriate in order to address individual or aggregate risks and credit exposures in accordance
with the Bank’s strategic objectives and risk appetites.
All mortgage loans in excess of $50.0 million, Specialty Finance loans in excess of $15.0 million and all other
C&I loans in excess of $5.0 million require approval by the Mortgage and Real Estate Committee or the Credit
Committee of the Board, as applicable.
In addition, all loans of $20.0 million or more originated by the Bank continue to be reported to the Board of
Directors.
In 2018, 192 loans of $10.0 million or more were originated by the Bank, with an aggregate loan balance of
$4.5 billion at origination. In 2017, by comparison, 172 loans of $10.0 million or more were originated, with an
aggregate loan balance at origination of $4.2 billion.
At December 31, 2018, the largest loan in our portfolio was a $246.0 million multi-family loan originated by
the Bank on February 8, 2018, which is collateralized by six properties located in Brooklyn, New York. As of the
date of this report, the loan has been current since origination. At December 31, 2017, the largest loan in our
portfolio was a loan originated by the Bank on June 28, 2013 to the owner of a commercial office building located in
Manhattan. The balance of the loan was $287.5 million at that date.
45
Geographical Analysis of the Portfolio of Non-Covered Loans Held for Investment
The following table presents a geographical analysis of the multi-family and CRE loans in our held-for-
investment loan portfolio at December 31, 2018:
At December 31, 2018
Multi-Family Loans
(dollars in thousands)
New York City:
Manhattan
Brooklyn
Bronx
Queens
Staten Island
Total New York City
New Jersey
Long Island
Total Metro New York
Other New York State
All other states
Total
Amount
$ 7,691,021
5,001,328
3,916,427
2,450,144
82,970
$19,141,890
3,409,387
581,496
$23,132,773
1,099,665
5,651,481
$29,883,919
Percent
of Total
25.74 %
16.74
13.10
8.20
0.28
64.06 %
11.41
1.94
77.41 %
3.68
18.91
100.00 %
Commercial Real Estate Loans
Percent
of Total
Amount
$3,363,096
536,629
89,733
619,128
55,486
$4,664,072
523,056
842,243
$6,029,371
201,990
767,473
$6,998,834
48.05 %
7.67
1.28
8.85
0.79
66.64 %
7.47
12.03
86.14 %
2.89
10.97
100.00 %
At December 31, 2018, the largest concentration of ADC loans held for investment was in New York City,
with a total of $324.2 million at that date. The majority of our other loans held for investment were secured by
properties and/or businesses located in Metro New York.
Loan Maturity and Repricing Analysis: Loans Held for Investment
The following table sets forth the maturity or period to repricing of our portfolio of loans held for investment
at December 31, 2018. Loans that have adjustable rates are shown as being due in the period during which their
interest rates are next subject to change.
Loans Held for Investment
at December 31, 2018
Multi-
Family
Commercial
Real Estate
One-to-Four
Family
Acquisition,
Development,
and
Construction
Other
Total
Loans
$ 4,674,477
$1,334,069
$ 62,881
$389,552
$1,681,321 $ 8,142,300
23,536,715
1,672,727
4,927,657
737,108
268,786
114,427
2,722
15,596
548,652 29,284,532
167,171 2,707,029
25,209,442
5,664,765
383,213
18,318
715,823 31,991,561
$29,883,919
$6,998,834
$446,094
$407,870
$2,397,144 $40,133,861
(in thousands)
Amount due:
Within one year
After one year:
One to five years
Over five years
Total due or repricing after
one year
Total amounts due or
repricing, gross
46
The following table sets forth, as of December 31, 2018, the dollar amount of all loans held for investment
that are due after December 31, 2019, and indicates whether such loans have fixed or adjustable rates of interest:
(in thousands)
Mortgage Loans:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Total mortgage loans
Other loans
Total loans
Loans Held for Sale
Due after December 31, 2019
Adjustable
Total
Fixed
$3,689,509
1,268,426
35,728
17,226
5,010,889
--
$5,010,889
$21,519,933
4,396,339
347,485
1,092
26,264,849
715,823
$26,980,672
$25,209,442
5,664,765
383,213
18,318
31,275,738
715,823
$31,991,561
At December 31, 2018 we did not have any loans held for sale, whereas at December 31, 2017, loans held for
sale were $35.3 million.
Loan Origination Analysis
The following table summarizes our production of loans held for investment and loans held for sale in the
years ended December 31, 2018 and 2017:
(dollars in thousands)
Mortgage Loan Originated for Investment:
Multi-family
Commercial real estate
One-to-four family residential
Acquisition, development, and construction
Total mortgage loans originated for investment
Other Loans Originated for Investment:
Specialty finance
Other commercial and industrial
Other
Total other loans originated for investment
Total loans originated for investment
Loans originated for sale
Total loans originated
For the Years Ended December 31,
2017
2018
Amount
Percent
of Total
Amount
Percent
of Total
$ 6,621,808
966,731
12,624
56,651
7,657,814
65.84 %
9.61
0.13
0.56
76.14
1,917,048
478,619
4,116
2,399,783
19.06
4.76
0.04
23.86
$ 10,057,597 100.00 %
--
$ 10,057,597 100.00 %
--
$ 5,377,600
1,039,105
124,763
77,153
6,618,621
1,784,549
511,416
3,159
2,299,124
$ 8,917,745
1,674,123
50.77 %
9.81
1.18
0.73
62.49
16.85
4.83
0.03
21.71
84.20 %
15.80
$ 10,591,868 100.00 %
47
Loan Portfolio Analysis
The following table summarizes the composition of our loan portfolio at each year-end for the five years ended December 31, 2018:
2018
Amount
$29,883,919
6,998,834
446,094
Percent
of Total
Loans
Amount
2017
Percent
of Total
Loans
Percent
of Non-
Covered
Loans
At December 31,
2016
Percent
of Total
Loans
Percent
of Non-
Covered
Loans
Amount
Amount
2015
Percent
of Total
Loans
Percent
of Non-
Covered
Loans
Amount
2014
Percent
of Total
Loans
Percent
of Non-
Covered
Loans
74.46 % $28,074,709 73.12 % 73.12 % $26,945,052 68.28 % 71.35 % $25,971,629 68.04 % 71.93 %
7,724,362 19.57
17.44
0.97
1.11
7,322,226 19.07
1.24
7,857,204 20.58
0.31
20.45
1.01
21.76
0.32
19.07
1.24
381,081
116,841
477,228
$23,831,846
66.54 % 71.39 %
7,634,320 21.32
0.39
138,915
22.87
0.41
407,870
37,736,717
1.02
94.03
435,825
1.14
36,309,988 94.57
1.14
94.57
381,194
0.97
35,431,689 89.79
1.01
93.82
311,676
0.82
34,257,350 89.75
0.86
94.87
258,116
0.72
31,863,197 88.97
0.77
95.44
1,539,733
500,841
8,460
2,049,034
4.78
1.17
0.02
5.97
100.00
--
4.01
1.31
0.02
5.34
$38,359,022 99.91
0.09
35,258
100.00 % $38,394,280 100.00
--
1,267,530
632,915
24,067
1,924,512
4.01
1.31
0.02
5.34
99.91
0.09
3.21
1.60
0.06
4.87
$37,356,201 94.66
1.04
409,152
100.00 % $37,765,353 95.70
4.30
1,698,133
880,673
569,883
32,583
1,483,139
3.36
1.68
0.06
5.10
98.92
1.08
2.31
1.49
0.09
3.89
$35,740,489 93.64
0.96
367,221
100.00 % $36,107,710 94.60
5.40
2,060,089
632,827
476,394
31,943
1,141,164
2.44
1.58
0.09
4.11
98.98
1.02
1.77
1.33
0.09
3.19
$33,004,361 92.16
1.06
379,399
100.00 % $33,383,760 93.22
6.78
2,428,622
1.89
1.43
0.10
3.42
98.86
1.14
100.00 %
$39,463,486 100.00 %
$38,167,799 100.00 %
$35,812,382 100.00 %
--
$38,394,280 100.00 %
(dollars in thousands)
Non-Covered Mortgage Loans:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and
construction
Total non-covered mortgage loans
Non-Covered Other Loans:
Specialty finance
Other commercial and industrial
Other loans
Total non-covered other loans
Total non-covered loans held for investment
Loans held for sale
Total non-covered loans
Covered loans
Total loans
Net deferred loan origination costs
Allowance for losses on non-covered loans
Allowance for losses on covered loans
Total loans, net
1,918,545
469,875
8,724
2,397,144
$40,133,861
--
$40,133,861
--
$40,133,861
32,047
(159,820 )
--
$40,006,088
28,949
(158,046 )
--
$38,265,183
26,521
(158,290 )
(23,701 )
$39,308,016
22,715
(147,124 )
(31,395 )
$38,011,995
20,595
(139,857 )
(45,481 )
$35,647,639
48
Outstanding Loan Commitments
At December 31, 2018 and 2017, we had outstanding loan commitments of $2.0 billion and $1.9 billion,
respectively. We also had commitments to issue letters of credit totaling $508.1 million and $339.4 million at
December 31, 2018 and 2017, respectively. The fees we collect in connection with the issuance of letters of credit
are included in “Fee income” in the Consolidated Statements of Operations and Comprehensive Income.
The letters of credit we issue consist of performance stand-by, financial stand-by, and commercial letters of
credit. Financial stand-by letters of credit primarily are issued for the benefit of other financial institutions,
municipalities, or landlords on behalf of certain of our current borrowers, and obligate us to guarantee payment of a
specified financial obligation. Performance stand-by letters of credit are primarily issued for the benefit of local
municipalities on behalf of certain of our borrowers. These borrowers are mainly developers of residential
subdivisions with whom we currently have a lending relationship. Performance letters of credit obligate us to make
payments in the event that a specified third party fails to perform under non-financial contractual obligations.
Commercial letters of credit act as a means of ensuring payment to a seller upon shipment of goods to a buyer.
Although commercial letters of credit are used to effect payment for domestic transactions, the majority are used to
settle payments in international trade. Typically, such letters of credit require the presentation of documents that
describe the commercial transaction, and provide evidence of shipment and the transfer of title.
For more information about our outstanding loan commitments and commitments to issue letters of credit at
the end of this December, see the discussion of “Liquidity” later in this discussion and analysis of our financial
condition and results of operations.
Asset Quality
Loans Held for Investment and Repossessed Assets
Total NPAs declined $33.8 million or 38% on a year-over-year basis to $56.3 million or 0.11% of total assets
at December 31, 2018. During the same timeframe, total non-accrual mortgage loans declined $17.0 million or 66%
to $8.9 million, while other non-accrual loans, which largely consist of taxi medallion-related loans, decreased
$11.2 million or 23%.
Repossessed assets totaled $10.8 million, representing a $5.6 million or 34% decrease compared to the level at
December 31, 2017. As with non-accrual loans, the majority of our repossessed assets consist of taxi medallions,
which were $8.2 million of total repossessed assets at year-end 2018.
Excluding taxi medallion-related assets, NPAs declined 29.5% to $12.6 million or 0.02% of total assets at
December 31, 2018 compared to $17.9 million or 0.03% of total assets at September 30, 2018 and declined 64.2%
compared to $35.2 million or 0.07% of total assets at December 31, 2017.
The following table presents our non-performing loans by loan type and the changes in the respective balances
from December 31, 2017 to December 31, 2018:
Change from
December 31, 2017
to
December 31, 2018
December 31,
2018
December 31,
2017
Amount
Percent
(dollars in thousands)
Non-Performing Loans:
Non-accrual mortgage loans:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Total non-accrual mortgage loans
Non-accrual other loans
Total non-performing loans
$ 4,220
3,021
1,651
--
8,892
36,614
$45,506
$11,078
6,659
1,966
6,200
25,903
47,779
$73,682
$ (6,858 )
(3,638 )
(315 )
(6,200 )
(17,011 )
(11,165 )
$(28,176 )
(61.91 )%
(54.63 )
(16.02 )
NM
(65.67 )
(23.37 )
(38.24 )%
(1) Includes $35.5 million and $46.7 million of non-accrual taxi medallion-related loans at December 31, 2018 and
December 31, 2017, respectively.
49
At the end of this December, taxi medallion-related loans totaled $73.7 million, representing 0.18% of our
total held-for-investment loan portfolio. Last December, taxi medallion-related loans totaled $99.1 million,
representing 0.26% of our total held-for-investment loan portfolio
The following table sets forth the changes in non-performing non-covered loans over the twelve months ended
December 31, 2018:
(in thousands)
Balance at December 31, 2017
New non-accrual
Charge-offs
Transferred to other real estate owned
Loan payoffs, including dispositions and principal pay-downs
Restored to performing status
Balance at December 31, 2018
$ 73,682
28,849
(12,092 )
(5,631 )
(36,129 )
(3,173 )
$ 45,506
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. At December 31, 2018 and 2017, all of our non-
performing loans were non-accrual loans. A loan is generally returned to accrual status when the loan is current and
we have reasonable assurance that the loan will be fully collectible.
We monitor non-accrual loans both within and beyond our primary lending area in the same manner.
Monitoring loans generally involves inspecting and re-appraising the collateral properties; holding discussions with
the principals and managing agents of the borrowing entities and/or retained legal counsel, as applicable; requesting
financial, operating, and rent roll information; confirming that hazard insurance is in place or force-placing such
insurance; monitoring tax payment status and advancing funds as needed; and appointing a receiver, whenever
possible, to collect rents, manage the operations, provide information, and maintain the collateral properties.
It is our policy to order updated appraisals for all non-performing loans, irrespective of loan type, that are
collateralized by multi-family buildings, CRE properties, or land, in the event that such a loan is 90 days or more
past due, and if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered
annually until such time as the loan becomes performing and is returned to accrual status. It is not our policy to
obtain updated appraisals for performing loans. However, appraisals may be ordered for performing loans when a
borrower requests an increase in the loan amount, a modification in loan terms, or an extension of a maturing loan.
We do not analyze current LTVs on a portfolio-wide basis.
Non-performing loans are reviewed regularly by management and discussed on a monthly basis with the
Mortgage Committee, the Credit Committee, and the Board of Directors of the Bank, as applicable. In accordance
with our charge-off policy, collateral-dependent non-performing loans are written down to their current appraised
values, less certain transaction costs. Workout specialists from our Loan Workout Unit actively pursue borrowers
who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with
experience in foreclosure proceedings are retained to institute such action with regard to such borrowers.
Properties and other assets that are acquired through foreclosure are classified as repossessed assets, and are
recorded at fair value at the date of acquisition, less the estimated cost of selling the property. Subsequent declines in
the fair value of the assets are charged to earnings and are included in non-interest expense. It is our policy to
require an appraisal and an environmental assessment of properties classified as OREO before foreclosure, and to re-
appraise the properties on an as-needed basis, and not less than annually, until they are sold. We dispose of such
properties as quickly and prudently as possible, given current market conditions and the property’s condition.
To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we
consider to be prudent. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows
being generated by the property to determine its economic value using the “income approach,” and then at the
market value of the property that collateralizes the loan. The amount of the loan is then based on the lower of the
two values, with the economic value more typically used.
The condition of the collateral property is another critical factor. Multi-family buildings and CRE properties
are inspected from rooftop to basement as a prerequisite to approval, with a member of the Mortgage or Credit
50
Committee participating in inspections on multi-family loans to be originated in excess of $7.5 million, and a
member of the Mortgage or Credit Committee participating in inspections on CRE loans to be originated in excess
of $4.0 million. Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experienced
in-house appraisal officers and staff, perform appraisals on collateral properties. In many cases, a second
independent appraisal review is performed.
In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and
whose track record with our lending officers is typically greater than ten years. Furthermore, in New York City,
where the majority of the buildings securing our multi-family loans are located, the rents that tenants may be
charged on certain apartments are typically restricted under certain rent-control or rent-stabilization laws. As a
result, the rents that tenants pay for such apartments are generally lower than current market rents. Buildings with a
preponderance of such rent-regulated apartments are less likely to experience vacancies in times of economic
adversity.
Reflecting the strength of the underlying collateral for these loans and the collateral structure, a relatively
small percentage of our non-performing multi-family loans have resulted in losses over time.
To further manage our credit risk, our lending policies limit the amount of credit granted to any one borrower,
and typically require minimum DSCRs of 120% for multi-family loans and 130% for CRE loans. Although we
typically lend up to 75% of the appraised value on multi-family buildings and up to 65% on commercial properties,
the average LTVs of such credits at origination were below those amounts at December 31, 2018. Exceptions to
these LTV limitations are minimal and are reviewed on a case-by-case basis.
The repayment of loans secured by commercial real estate is often dependent on the successful operation and
management of the underlying properties. To minimize our credit risk, we originate CRE loans in adherence with
conservative underwriting standards, and require that such loans qualify on the basis of the property’s current
income stream and DSCR. The approval of a CRE loan also depends on the borrower’s credit history, profitability,
and expertise in property management. Given that our CRE loans are underwritten in accordance with underwriting
standards that are similar to those applicable to our multi-family credits, the percentage of our non-performing CRE
loans that have resulted in losses has been comparatively small over time.
Multi-family and CRE loans are generally originated at conservative LTVs and DSCRs, as previously stated.
Low LTVs provide a greater likelihood of full recovery and reduce the possibility of incurring a severe loss on a
credit; in many cases, they reduce the likelihood of the borrower “walking away” from the property. Although
borrowers may default on loan payments, they have a greater incentive to protect their equity in the collateral
property and to return their loans to performing status. Furthermore, in the case of multi-family loans, the cash flows
generated by the properties are generally below-market and have significant value.
With regard to ADC loans, we typically lend up to 75% of the estimated as-completed market value of multi-
family and residential tract projects; however, in the case of home construction loans to individuals, the limit is 80%.
With respect to commercial construction loans, we typically lend up to 65% of the estimated as-completed market
value of the property. Credit risk is also managed through the loan disbursement process. Loan proceeds are
disbursed periodically in increments as construction progresses, and as warranted by inspection reports provided to
us by our own lending officers and/or consulting engineers.
To minimize the risk involved in specialty finance lending and leasing, each of our credits is secured with a
perfected first security interest or outright ownership in the underlying collateral, and structured as senior debt or as
a non-cancellable lease. To further minimize the risk involved in specialty finance lending and leasing, we re-
underwrite each transaction. In addition, we retain outside counsel to conduct a further review of the underlying
documentation.
Other C&I loans are typically underwritten on the basis of the cash flows produced by the borrower’s
business, and are generally collateralized by various business assets, including, but not limited to, inventory,
equipment, and accounts receivable. As a result, the capacity of the borrower to repay is substantially dependent on
the degree to which the business is successful. Furthermore, the collateral underlying the loan may depreciate over
time, may not be conducive to appraisal, and may fluctuate in value, based upon the operating results of the
business. Accordingly, personal guarantees are also a normal requirement for other C&I loans.
In addition, at December 31, 2018, one-to-four family loans, ADC loans, and other loans represented 1.1%,
1.0%, and 6.0%, of total loans held for investment, as compared to 1.2%, 1.1%, and 5.3%, respectively, at
51
December 31, 2017. Furthermore, while 1.5% of our other loans were non-performing at December 31, 2018, 0.37%
of our one-to-four family loans were non-performing at that date. There were no non-performing ADC loans at
December 31, 2018.
The procedures we follow with respect to delinquent loans are generally consistent across all categories, with
late charges assessed, and notices mailed to the borrower, at specified dates. We attempt to reach the borrower by
telephone to ascertain the reasons for delinquency and the prospects for repayment. When contact is made with a
borrower at any time prior to foreclosure or recovery against collateral property, we attempt to obtain full payment,
and will consider a repayment schedule to avoid taking such action. Delinquencies are addressed by our Loan
Workout Unit and every effort is made to collect rather than initiate foreclosure proceedings.
The following table presents our non-covered loans 30 to 89 days past due by loan type and the changes in the
respective balances from December 31, 2017 to December 31, 2018:
(dollars in thousands)
Loans 30-89 Days Past Due:
Multi-family
Commercial real estate
One-to-four family residential
Other loans (1)
Total loans 30-89 days past due
Change from
December 31, 2017
to
December 31, 2018
Percent
Amount
December 31,
2017
2018
$ -- $ 1,258 $ (1,258 )
(13,227 )
13,227
(576 )
585
(2,164 )
2,719
$564 $17,789 $(17,225 )
--
9
555
NM %
NM
(98.46 )
(79.59 )
(96.83 )
(1) Includes $530,000 and $2.7 million of non-accrual taxi medallion-related loans at December 31, 2018 and 2017,
respectively.
Fair values for all multi-family buildings, CRE properties, and land are determined based on the appraised
value. If an appraisal is more than one year old and the loan is classified as either non-performing or as an accruing
TDR, then an updated appraisal is required to determine fair value. Estimated disposition costs are deducted from
the fair value of the property to determine estimated net realizable value. In the instance of an outdated appraisal on
an impaired loan, we adjust the original appraisal by using a third-party index value to determine the extent of
impairment until an updated appraisal is received.
While we strive to originate loans that will perform fully, adverse economic and market conditions, among
other factors, can negatively impact a borrower’s ability to repay. Historically, our level of charge-offs has been
relatively low in downward credit cycles, even when the volume of non-performing loans has increased. In 2018, we
recorded net charge-offs of $16.5 million, as compared to net charge-offs of $61.2 million in the prior year. Taxi
medallion-related net charge-offs accounted for $12.8 million of this year’s amount and $59.6 million of last year’s
amount.
Partially reflecting the net charge-offs noted above, and the provision of $18.3 million for the allowance for
loan losses, the allowance for losses on loans increased $1.8 million, equaling $159.8 million at the end of this
December from $158.0 million at December 31, 2017. Reflecting the decrease in non-performing loans cited earlier
in this discussion, the allowance for losses on loans represented 351.21% of non-performing loans at December 31,
2018, as compared to 214.50% at the prior year-end.
52
Based upon all relevant and available information at the end of this December, management believes that the
allowance for losses on loans was appropriate at that date.
The following table presents information about our five largest non-performing loans at December 31, 2018.
Loan No. 1 (2) Loan No. 2 (2) Loan No. 3 (3)
Loan No. 4
Loan No. 5
Type of Loan
Origination date
C&I
Multi-Family
CRE
4/29/14
1/05/06
6/16/03
CRE
11/3/00
C&I
3/8/04
Origination balance
$13,325,000
$12,640,000
$1,800,000
$3,000,000
$1,350,000
Full commitment balance (1)
$13,325,000
$12,640,000
$1,800,000
$3,000,000
$1,190,000
Balance at December 31, 2018
$4,366,059
$4,220,331
$1,255,633
Associated allowance
None
None
None
Non-accrual date
Origination LTV
Current LTV
Last appraisal
June 2017
March 2014
October 2015
N/A
N/A
N/A
79%
54%
68%
40%
January 2018 September 2018
$1,000,000
None
May 2010
N/A
N/A
N/A
$907,984
None
June 2014
63%
61%
March 2018
(1) There are no funds available for further advances on the five largest non-performing loans.
(2) Loan is a Troubled Debt Restructure.
(3) Current LTV is combined with Loan No. 4.
The following is a description of the five loans identified in the preceding table. It should be noted that no
allocation for the loan loss allowance was needed for any of these loans, as determined by using the fair value of
collateral method defined in ASC 310-10 and -35.
No. 1 - The borrower is an owner of a finance company based in New York. The loan is collateralized by
various taxi medallions in New York, New York and Chicago, Illinois.
No. 2 - The borrower is an owner of real estate and is based in New Jersey. The loan is collateralized by a
multi-family complex with 267 residential units and four retail stores in Atlantic City, New Jersey.
No. 3 - The borrower is an owner of real estate and is based in New York. This loan is collateralized by a
19,508 square foot commercial building in Woodhaven, New York (same property as loan No. 4).
No. 4 - The borrower is an owner of real estate based in New York. The loan is a line of credit partially
collateralized by a second mortgage on a 19,508 square foot commercial building in Woodhaven,
New York (same property as loan No. 3).
No. 5 - The borrower is an owner/operator of gas stations. This loan is collateralized by the principal’s
personal residence in Brightwaters, New York.
Troubled Debt Restructurings
In an effort to proactively manage delinquent loans, we have selectively extended such concessions as rate
reductions and extensions of maturity dates, as well as forbearance agreements, to certain borrowers who have
experienced financial difficulty. In accordance with GAAP, we are required to account for such loan modifications
or restructurings as TDRs.
The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances
of each transaction, which may change from period to period, and involve management’s judgment regarding the
likelihood that the concession will result in the maximum recovery for the Company.
Loans modified as TDRs are placed on non-accrual status until we determine that future collection of principal
and interest is reasonably assured. This generally requires that the borrower demonstrate performance according to
the restructured terms for at least six consecutive months.
At December 31, 2018, loans modified as TDRs totaled $34.9 million, including accruing loans of
$9.2 million and non-accrual loans of $25.7 million. At the prior year-end, loans modified as TDRs totaled
$45.6 million, including accruing loans of $9.7 million and non-accrual loans of $35.9 million.
53
Analysis of Troubled Debt Restructurings
The following table sets forth the changes in our TDRs over the twelve months ended December 31, 2018:
(in thousands)
Balance at December 31, 2017
New TDRs
Charge-offs
Loan payoffs, including dispositions and
principal pay-downs
Balance at December 31, 2018
Accruing
$ 9,653
1,765
--
Non-Accrual Total
$45,556
7,651
(3,405 )
$ 35,903
5,886
(3,405 )
(2,256 )
$ 9,162
(12,665 )
$ 25,719
(14,921 )
$34,881
Loans on which concessions were made with respect to rate reductions and/or extensions of maturity dates
totaled $34.8 million and $44.6 million, respectively, at December 31, 2018 and 2017; loans in connection with
which forbearance agreements were reached amounted to $37,000 and $1.0 million at the respective dates.
Multi-family and CRE loans accounted for $4.2 million and zero dollars of TDRs at the end of this December,
as compared to $8.9 million and $368,000, respectively, at the prior year-end. Based on the number of loans
performing in accordance with their revised terms, our success rate for restructured multi-family loans was 100%;
for ADC loans it was 100%; and for one-to-four loans it was 50% at the end of this December; our success rate for
other loans was 94%, at that date.
On a limited basis, we may provide additional credit to a borrower after the loan has been placed on non-
accrual status or modified as a TDR if, in management’s judgment, the value of the property after the additional loan
funding is greater than the initial value of the property plus the additional loan funding amount. In 2018, no such
additional credit was provided. Furthermore, the terms of our restructured loans typically would not restrict us from
cancelling outstanding commitments for other credit facilities to a borrower in the event of non-payment of a
restructured loan.
For additional information about our TDRs at December 31, 2018 and 2017, see the discussion of “Asset
Quality” in Note 5, “Loans” in Item 8, “Financial Statements and Supplementary Data.”
Except for the non-accrual loans and TDRs disclosed in this filing, we did not have any potential problem
loans at December 31, 2018 that would have caused management to have serious doubts as to the ability of a
borrower to comply with present loan repayment terms and that would have resulted in such disclosure if that were
the case.
54
Asset Quality Analysis (Excluding Covered Loans, Covered OREO, Non-Covered Purchased Credit-Impaired
Loans, and Non-Covered Loans Held for Sale)
The following table presents information regarding our consolidated allowance for losses on non-covered
loans, our non-performing non-covered assets, and our non-covered loans 30 to 89 days past due at each year-end in
the five years ended December 31, 2018. Covered loans and non-covered purchased credit-impaired (“PCI”) loans
are considered to be performing due to the application of the yield accretion method. Therefore, covered loans and
non-covered PCI loans are not reflected in the amounts or ratios provided in this table.
(dollars in thousands)
Allowance for Losses on Non-Covered Loans:
Balance at beginning of year
Provision for (recovery of) losses on non-covered loans
Recovery from allowance on PCI loans
Charge-offs:
Multi-family
Commercial real estate
One-to-four family residential
Acquisition, development, and construction
Other loans
Total charge-offs
Recoveries
Net (charge-offs) recoveries
Balance at end of year
Non-Performing Non-Covered Assets:
Non-accrual non-covered mortgage loans:
Multi-family
Commercial real estate
One-to-four family residential
Acquisition, development, and construction
Total non-accrual non-covered mortgage loans
Non-accrual non-covered other loans
Loans 90 days or more past due and still accruing interest
Total non-performing non-covered loans (1)
Non-covered repossessed assets (2)
Total non-performing non-covered assets
Asset Quality Measures:
Non-performing non-covered loans to total
non-covered loans
Non-performing non-covered assets to total
non-covered assets
Allowance for losses on non-covered loans to
non-performing non-covered loans
Allowance for losses on non-covered loans to total
non-covered loans
Net charge-offs (recoveries) during the period to average
loans outstanding during the period (3)
Non-Covered Loans 30-89 Days Past Due:
Multi-family
Commercial real estate
One-to-four family residential
Acquisition, development, and construction
Other loans
Total loans 30-89 days past due (4)
2018
$158,046
18,256
--
(34 )
(3,191 )
--
(2,220 )
(12,897 )
(18,342 )
1,860
(16,482 )
$159,820
$ 4,220
3,021
1,651
--
8,892
36,614
--
$45,506
10,794
$56,300
At or for the Years Ended December 31,
2016
2015
2017
2014
$156,524
60,943
1,766
$145,196
12,036
--
$139,857
(2,846 )
--
$141,946
--
--
(279 )
--
(96 )
--
(62,975 )
(63,350 )
2,163
(61,187 )
$158,046
--
--
(170 )
--
(3,413 )
(3,583 )
2,875
(708 )
$156,524
(167 )
(273 )
(875 )
--
(1,273 )
(2,588 )
10,773
8,185
$145,196
$ 11,078
6,659
1,966
6,200
25,903
47,779
--
$ 73,682
16,400
$ 90,082
$ 13,558
9,297
9,679
6,200
38,734
17,735
--
$ 56,469
11,607
$ 68,076
$ 13,904
14,920
12,259
27
41,110
5,715
--
$ 46,825
14,065
$ 60,890
(755 )
(1,615 )
(410 )
-- )
(5,296 )
(8,076 )
5,987
(2,089 )
$139,857
$ 31,089
24,824
11,032
654
67,599
9,351
--
$ 76,950
61,956
$138,906
0.11 %
0.19 %
0.15 %
0.13 %
0.23 %
0.11
0.18
0.14
0.13
0.30
351.21
214.50
277.19
310.08
181.75
0.40
0.04
$ --
--
9
--
555
$ 564
0.41
0.16
$ 1,258
13,227
585
--
2,719
$17,789
0.42
0.00
$ 28
--
2,844
--
7,511
$10,383
0.41
(0.02 )
$4,818
178
1,117
--
492
$6,605
0.42
0.01
$ 464
1,464
3,086
--
1,178
$6,192
(1) The December 31, 2016, 2015, and 2014 amounts exclude loans 90 days or more past due of $131.5 million, $137.2 million,
and $157.9 million, respectively, that are covered by FDIC loss sharing agreements. The December 31, 2016 and 2015
amounts also exclude $869,000 and $969,000, respectively, of non-covered PCI loans.
(2) The December 31, 2016, 2015, and 2014 amounts exclude OREO of $17.0 million, $25.8 million, and $32.0 million,
respectively, that were covered by FDIC loss sharing agreements.
(3) Average loans include covered loans.
(4) The December 31, 2016, 2015, and 2014 amounts exclude loans 30 to 89 days past due of $22.6 million, $32.8 million, and
$41.7 million, respectively, that are covered by FDIC loss sharing agreements. The December 31, 2016 amount also
excludes $6 thousand of non-covered PCI loans. There were no non-covered PCI loans 30 to 89 days past due at any of the
prior year-ends.
55
The following table sets forth the allocation of the consolidated allowance for losses on non-covered loans, excluding the allowance for losses on non-
covered PCI loans, at each year-end for the five years ended December 31, 2018:
(dollars in thousands)
Multi-family loans
Commercial real estate loans
One-to-four family residential
loans
Acquisition, development, and
construction loans
Other loans
Total loans
2018
Percent of
Loans in Each
Category
to Total Non-
Covered
Loans Held for
Investment
74.46 %
17.44
Amount
$ 93,651
20,572
Amount
$ 98,972
19,934
2017
Percent of
Loans in Each
Category
to Total
Non-Covered
Loans Held
for Investment Amount
$ 91,590
20,943
73.19 %
19.09
2016
Percent of
Loans in Each
Category
to Total
Non-Covered
Loans Held
for Investment Amount
72.13 %
20.68
$ 93,977
19,721
Percent of
Loans in Each
Category
to Total
Non-Covered
Loans Held for
Investment
72.67 %
21.98
Percent of
Loans in Each
Category
to Total
Non-Covered
Loans Held for
Investment
72.21 %
23.13
Amount
$ 96,212
19,546
2015
2014
1,333
1.11
1,360
1.24
1,484
1.02
612
0.33
562
0.42
10,744
28,837
$159,820
1.02
5.97
100.00 %
12,692
29,771
$158,046
1.14
5.34
100.00 %
9,908
32,599
$156,524
1.02
5.15
100.00 %
8,402
22,484
$145,196
0.87
4.15
100.00 %
6,296
17,241
$139,857
0.78
3.46
100.00 %
56
Each of the preceding allocations was based upon an estimate of various factors, as discussed in “Critical
Accounting Policies” earlier in this report, and a different allocation methodology may be deemed to be more
appropriate in the future. In addition, it should be noted that the portion of the allowance for losses on non-covered
loans allocated to each non-covered loan category does not represent the total amount available to absorb losses that
may occur within that category, since the total loan loss allowance is available for the entire non-covered loan
portfolio.
The following table presents a geographical analysis of our non-performing loans at December 31, 2018:
(in thousands)
New York
New Jersey
Arizona
All other states
Total non-performing loans
$38,923
5,132
862
589
$45,506
Securities
Total securities were $5.6 billion, or 10.9%, of total assets at the end of this December, as compared to
$3.5 billion, or 7.2%, of total assets at December 31, 2017. During the second quarter of 2017, the Company
repositioned its “Held-to-Maturity” securities portfolio by designating the entire portfolio as “Available-for-Sale.” In
addition, it took advantage of favorable bond market conditions and sold approximately $521.0 million of securities,
resulting in a pre-tax gain on sale of $26.9 million.
At December 31, 2018, available-for-sale securities represented $5.6 billion and had an estimated weighted
average life of 6.2 years. Included in the year-end amount were mortgage-related securities of $3.0 billion and other
securities of $2.6 billion.
At the prior year-end, available-for-sale securities represented $3.5 billion, or 7.2%, of total securities, and had
an estimated weighted average life of 5.2 years. Mortgage-related securities accounted for $2.6 million of the year-
end balance, with other securities accounting for the remaining $912.7 million.
The investment policies of the Company and the Bank are established by the Board of Directors and
implemented by the ALCO. ALCO meets monthly or on an as-needed basis to review the portfolios and specific
capital market transactions. In addition, the securities portfolios and investment activities are reviewed monthly by
the Board of Directors. Furthermore, the policy governing the investment portfolio activities is reviewed at least
annually by the ALCO and ratified by the Board of Directors.
Our general investment strategy is to purchase liquid investments with various maturities to ensure that our
overall interest rate risk position stays within the required limits of our investment policies. We generally limit our
investments to GSE obligations and U.S. Treasury obligations. At December 31, 2018 and 2017, GSE obligations
and U.S. Treasury obligations together represented 83.5% and 94.4% of total securities, respectively. The remainder
of the portfolio at those dates was comprised of corporate bonds, trust preferred securities, asset-backed securities,
and municipal obligations.
Depending on management’s intent at the time of purchase, securities are classified as either “held to
maturity” or “available for sale.” Held-to-maturity securities are securities that management has the positive intent
to hold to maturity. In addition to generating cash flows from repayments, securities held to maturity are a source of
earnings and serve as collateral for our wholesale borrowings.
During the second quarter of 2017, the Company designated its entire securities portfolio as available-for-sale.
Available-for-sale securities are securities that management intends to hold for an indefinite period of time. In
addition to generating cash flows from sales and from repayments of principal and interest, such securities serve as a
source of liquidity for future loan production, the reduction of higher-cost funding, and general operating activities.
A decision to purchase or sell available-for-sale securities is based on economic conditions, including changes in
interest rates, liquidity, and our asset and liability management strategy.
57
Federal Home Loan Bank Stock
As members of the FHLB-NY, the Bank is required to acquire and hold shares of its capital stock. At
December 31, 2018, the Bank held FHLB-NY stock in the amount of $644.6 million. At December 31, 2017, the
Bank held FHLB-NY stock in the amount of $603.8 million. The remainder of the Company’s FHLB-NY stock at
December 31, 2017 was held by New York Commercial Bank. Dividends from the FHLB-NY to the Bank totaled
$40.8 million and $32.3 million, respectively, in 2018 and 2017.
Bank-Owned Life Insurance
BOLI is recorded at the total cash surrender value of the policies in the Consolidated Statements of Condition,
and the income generated by the increase in the cash surrender value of the policies is recorded in “Non-interest
income” in the Consolidated Statements of Operations and Comprehensive Income. Reflecting an increase in the
cash surrender value of the underlying policies, our investment in BOLI rose $10.5 million year-over-year to
$977.6 million at December 31, 2018.
Goodwill
We record goodwill in our consolidated statements of condition in connection with certain of our business
combinations. Goodwill, which is tested at least annually for impairment, refers to the difference between the
purchase price and the fair value of an acquired company’s assets, net of the liabilities assumed. Goodwill totaled
$2.4 billion at both December 31, 2018 and 2017.
For more information about the Company’s goodwill, see the discussion of “Critical Accounting Policies”
earlier in this report.
Sources of Funds
The Parent Company has four primary funding sources for the payment of dividends, share repurchases, and
other corporate uses: dividends paid to the Parent Company by the Bank; capital raised through the issuance of
securities; funding raised through the issuance of debt instruments; and repayments of, and income from, investment
securities.
On a consolidated basis, our funding primarily stems from a combination of the following sources: retail,
institutional, and brokered deposits; borrowed funds, primarily in the form of wholesale borrowings; cash flows
generated through the repayment and sale of loans; and cash flows generated through the repayment and sale of
securities.
In 2018, loan repayments and sales generated cash flows of $8.3 billion, as compared to $11.7 billion in
2017. Cash flows from repayments accounted for $8.1 billion and $7.8 billion of the respective totals and cash flows
from sales accounted for $195.6 million and $3.9 billion, of the respective totals.
In 2018, cash flows from the repayment and sale of securities respectively totaled $817.8 million and
$278.5 million, while the purchase of securities amounted to $3.3 billion for the year. By comparison, cash flows
from the repayment and sale of securities totaled $563.1 million and $1.0 billion, respectively, in 2017, and were
offset by the purchase of securities totaling $1.2 billion.
In 2018, the cash flows from loans and securities were primarily deployed into the production of multi-family
loans held for investment, as well as held-for-investment CRE loans and specialty finance loans and leases.
Deposits
Total deposits increased $1.7 billion or 5.7% on a year-over-year basis to $30.8 billion. Deposit growth was
driven by CDs and to a lesser extent by growth in non-interest bearing accounts. Compared to the fourth quarter of
last year, CDs rose $3.6 billion or 41.1% to $12.2 billion, while non-interest bearing deposits increased over the
same timeframe by $84.6 million or 3.7% to $2.4 billion. This was consistent with our strategy to increase the level
of retail CDs.
While the vast majority of our deposits are retail in nature (i.e., they are deposits we have gathered through
our branches or through business combinations), institutional deposits and municipal deposits are also part of our
deposit mix. Retail deposits rose $2.2 billion year-over-year to $24.1 billion, while institutional deposits declined
$468.4 million to $1.8 billion at year-end. Municipal deposits represented $961.9 million of total deposits at the end
of this December, a $37.5 million decrease from the balance at December 31, 2017.
58
Depending on their availability and pricing relative to other funding sources, we also include brokered
deposits in our deposit mix. Brokered deposits accounted for $4.0 billion of our deposits at the end of this
December, comparable to December 31, 2017. Brokered money market accounts represented $1.9 billion of total
brokered deposits at December 31, 2018 and $2.6 billion at December 31, 2017; brokered interest-bearing checking
accounts represented $786.1 million and $793.7 million, respectively, at the corresponding dates. At December 31,
2018, we had $1.3 billion of brokered CDs, compared to $567.8 million at December 31, 2017.
Borrowed Funds
The majority of our borrowed funds are wholesale borrowings and consist of FHLB-NY advances, repurchase
agreements, and federal funds purchased, and, to a lesser extent, junior subordinated debentures and subordinated
notes. At December 31, 2018, total borrowed funds increased $1.3 billion or 10% to $14.2 billion compared to the
balance at December 31, 2017. The bulk of the year-over-year increase was driven by a $999.2 million or 8%
increase in the balance of wholesale borrowings. The remainder of the increase was due to the Company’s issuance
in the fourth quarter of $300 million of subordinated notes.
Wholesale Borrowings
Wholesale borrowings totaled $13.6 billion and $12.6 billion, respectively, at December 31, 2018 and 2017,
representing 26.1% and 25.6% of total assets at the respective dates. FHLB-NY advances accounted for
$13.1 billion of the year-end 2018 balance, as compared to $12.1 billion at the prior year-end. Pursuant to blanket
collateral agreements with the Bank, our FHLB-NY advances and overnight advances are secured by pledges of
certain eligible collateral in the form of loans and securities. (For more information regarding our FHLB-NY
advances, see the discussion that appears earlier in this report regarding our membership and our ownership of stock
in the FHLB-NY.) At December 31, 2018, $4.7 billion of our wholesale borrowings had callable features. At
December 31, 2017, none of our wholesale borrowings had callable features.
Also included in wholesale borrowings were repurchase agreements of $500.0 million at December 31, 2018
compared to $450.0 million at December 31, 2017. Repurchase agreements are contracts for the sale of securities
owned or borrowed by the Bank with an agreement to repurchase those securities at agreed-upon prices and dates.
Our repurchase agreements are primarily collateralized by GSE obligations, and may be entered into with the
FHLB-NY or certain brokerage firms. The brokerage firms we utilize are subject to an ongoing internal financial
review to ensure that we borrow funds only from those dealers whose financial strength will minimize the risk of
loss due to default. In addition, a master repurchase agreement must be executed and on file for each of the
brokerage firms we use.
We had no federal funds purchased at both December 31, 2018 and 2017.
Junior Subordinated Debentures
Junior subordinated debentures totaled $359.5 million at December 31, 2018, slightly higher than the balance
at the prior year-end reflecting discount accretion.
Subordinated Notes
On November 6, 2018, the Company issued $300 million aggregate principal amount of its 5.90% Fixed-to-
Floating Rate Subordinated Notes due 2028. The Company intends to use the net proceeds from the Offering for
general corporate purposes, which may include opportunistic repurchases of shares of its common stock pursuant to
its previously announced share repurchase program. The Notes were offered to the public at 100% of their face
amount. At December 31, 2018, the balance of subordinated notes was $294.7 million, which excludes certain costs
related to their issuance.
See Note 8, “Borrowed Funds,” in Item 8, “Financial Statements and Supplementary Data” for a further
discussion of our wholesale borrowings and our junior subordinated debentures.
Liquidity, Contractual Obligations and Off-Balance Sheet Commitments, and Capital Position
Liquidity
We manage our liquidity to ensure that our cash flows are sufficient to support our operations, and to
compensate for any temporary mismatches between sources and uses of funds caused by variable loan and deposit
demand.
59
We monitor our liquidity daily to ensure that sufficient funds are available to meet our financial obligations.
Our most liquid assets are cash and cash equivalents, which totaled $1.5 billion and $2.5 billion, respectively, at
December 31, 2018 and 2017. As in the past, our loan and securities portfolios provided meaningful liquidity in
2018, with cash flows from the repayment and sale of loans totaling $8.3 billion and cash flows from the repayment
and sale of securities totaling $1.1 billion.
Additional liquidity stems from deposits and from our use of wholesale funding sources, including brokered
deposits and wholesale borrowings. In addition, we have access to the Bank’s approved lines of credit with various
counterparties, including the FHLB-NY. The availability of these wholesale funding sources is generally based on
the amount of mortgage loan collateral available under a blanket lien we have pledged to the respective institutions
and, to a lesser extent, the amount of available securities that may be pledged to collateralize our borrowings. At
December 31, 2018, our available borrowing capacity with the FHLB-NY was $7.5 billion. In addition, the Bank
had available-for-sale securities of $5.6 billion, of which, $4.4 billion is unpledged.
Furthermore, the Bank has agreements with the FRB-NY that enable it to access the discount window as a
further means of enhancing their liquidity. In connection with these agreements, the Bank has pledged certain loans
and securities to collateralize any funds they may borrow. At December 31, 2018, the maximum amount the Bank
could borrow from the FRB-NY was $1.4 billion. There were no borrowings against either line of credit at
December 31, 2018.
Our primary investing activity is loan production, and the volume of loans we originated for investment
totaled $10.1 billion in 2018. During this time, the net cash used in investing activities totaled $4.0 billion; the net
cash provided by our operating activities totaled $540.4 million. Our financing activities provided net cash of
$2.4 billion.
CDs due to mature or reprice in one year or less from December 31, 2018 totaled $10.4 billion, representing
85% of total CDs at that date. Our ability to attract and retain retail deposits, including CDs, depends on numerous
factors, including, among others, the convenience of our branches and our other banking channels; our customers’
satisfaction with the service they receive; the rates of interest we offer; the types of products we feature; and the
attractiveness of their terms.
Our decision to compete for deposits also depends on numerous factors, including, among others, our access
to deposits through acquisitions, the availability of lower-cost funding sources, the impact of competition on pricing,
and the need to fund our loan demand.
The Parent Company is a separate legal entity from the Bank and must provide for its own liquidity. In
addition to operating expenses and any share repurchases, the Parent Company is responsible for paying any
dividends declared to our shareholders. As a Delaware corporation, the Parent Company is able to pay dividends
either from surplus or, in case there is no surplus, from net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.
In each of the four quarters of 2018, the Company was required to receive a non-objection from the FRB to
pay all dividends; non-objections were received from the FRB in all four quarters of the year. Beginning in 2019, the
Company no longer is required to receive non-objection from the FRB.
The Parent Company’s ability to pay dividends may also depend, in part, upon dividends it receives from the
Bank. The ability of the Bank to pay dividends and other capital distributions to the Parent Company is generally
limited by New York State Banking Law and regulations, and by certain regulations of the FDIC. In addition, the
Superintendent of the New York State Department of Financial Services (the “Superintendent”), the FDIC, and the
FRB, for reasons of safety and soundness, may prohibit the payment of dividends that are otherwise permissible by
regulations.
Under New York State Banking Law, a New York State-chartered stock-form savings bank or commercial
bank may declare and pay dividends out of its net profits, unless there is an impairment of capital. However, the
approval of the Superintendent is required if the total of all dividends declared in a calendar year would exceed the
total of a bank’s net profits for that year, combined with its retained net profits for the preceding two years. In 2018,
the Bank paid dividends totaling $380.0 million to the Parent Company, leaving $463.4 million that it could
dividend to the Parent Company without regulatory approval at year-end. Additional sources of liquidity available to
the Parent Company at December 31, 2018 included $228.6 million in cash and cash equivalents. If the Bank was to
60
apply to the Superintendent for approval to make a dividend or capital distribution in excess of the dividend amounts
permitted under the regulations, there can be no assurance that such application would be approved.
Contractual Obligations and Off-Balance Sheet Commitments
In the normal course of business, we enter into a variety of contractual obligations in order to manage our
assets and liabilities, fund loan growth, operate our branch network, and address our capital needs.
For example, we offer CDs with contractual terms to our customers, and borrow funds under contract from the
FHLB-NY and various brokerage firms. These contractual obligations are reflected in the Consolidated Statements
of Condition under “Deposits” and “Borrowed funds,” respectively. At December 31, 2018, we had CDs of
$12.2 billion and long-term debt (defined as borrowed funds with an original maturity in excess of one year) of
$14.2 billion.
We also are obligated under certain non-cancelable operating leases on the buildings and land we use in
operating our branch network and in performing our back-office responsibilities. These obligations are not included
in the Consolidated Statements of Condition and totaled $145.5 million at December 31, 2018.
Contractual Obligations
The following table sets forth the maturity profile of the aforementioned contractual obligations as of
December 31, 2018:
(in thousands)
One year or less
One to three years
Three to five years
More than five years
Total
Certificates of
Deposit
$10,327,860
1,656,903
22,883
186,676
$12,194,322
Long-Term Debt (1)
$4,631,000
4,247,661
25,000
5,304,205
$14,207,866
Operating
Leases
$ 30,322
43,135
16,552
55,525
$145,534
Total
$14,989,182
5,947,699
64,435
5,546,406
$26,547,722
(1) Includes FHLB advances, repurchase agreements, junior subordinated debentures, and subordinated debt.
At December 31, 2018, we also had commitments to extend credit in the form of mortgage and other loan
originations, as well as commercial, performance stand-by, and financial stand-by letters of credit, totaling
$2.5 billion. These off-balance sheet commitments consist of agreements to extend credit, as long as there is no
violation of any condition established in the contract under which the loan is made. Commitments generally have
fixed expiration dates or other termination clauses and may require the payment of a fee.
The following table summarizes our off-balance sheet commitments to extend credit in the form of loans and
letters of credit at December 31, 2018:
(in thousands)
Mortgage Loan Commitments:
Multi-family and commercial real estate
One-to-four family
Acquisition, development, and construction
Total mortgage loan commitments
Other loan commitments (1)
Total loan commitments
Commercial, performance stand-by, and financial stand-by
letters of credit
Total commitments
(1) Includes unadvanced lines of credit.
$ 365,788
1,478
241,468
$ 608,734
1,426,210
$2,034,944
508,121
$2,543,065
Of the total loan commitments noted in the preceding table, all $2.0 billion were for loans held for investment.
Based upon our current liquidity position, we expect that our funding will be sufficient to fulfill these obligations
and commitments when they are due.
At December 31, 2018, we had no commitments to purchase securities.
61
Capital Position
Total stockholders’ equity declined $140.1 million, or 2.1%, year-over-year to $6.7 billion; common
stockholders’ equity represented 11.85% of total assets and a book value per common share of $12.99 at
December 31, 2018. At the prior year-end, total stockholders’ equity totaled $6.8 billion, and common stockholders’
equity represented 12.81% of total assets and a book value per common share of $12.88.
Tangible common stockholders’ equity also declined $140.1 million year-over-year to $3.7 billion. The year-
end 2018 balance represented 7.51% of tangible common assets and a tangible common book value per common
share of $7.85. At the prior year-end, tangible common stockholders’ equity totaled $3.9 billion, representing 8.26%
of tangible common assets and a tangible common book value per common share of $7.89.
We calculate tangible common stockholders’ equity by subtracting the amount of goodwill, CDI, and
preferred stock recorded at the end of a period from the amount of stockholders’ equity recorded at the same date.
While goodwill totaled $2.4 billion at December 31, 2018 and 2017, CDI was zero for both periods. Preferred stock
was $502.8 million at the end of 2018 and 2017. (See the discussion and reconciliations of stockholders’ equity and
tangible common stockholders’ equity, total assets and tangible assets, and the related financial measures that appear
on the last page of this discussion and analysis of our financial condition and results of operations.)
Stockholders’ equity and tangible common stockholders’ equity both include AOCL, which is comprised of
the net unrealized gain or loss on available-for-sale securities; the net unrealized loss on the non-credit portion of
OTTI securities; and the Company’s pension and post-retirement obligations at the end of a period. In the twelve
months ended December 31, 2018 and 2017, AOCL totaled $87.7 million and $15.2 million, respectively. The
increase in AOCL was largely the net effect of a $21.9 million increase in net pension and post-retirement
obligations to $71.1 million and the $49.7 million difference between the net unrealized loss on securities available
for sale recorded at the end of this December and the net unrealized gain on securities available for sale recorded at
December 31, 2017.
As reflected in the following table, our capital measures continued to exceed the minimum federal
requirements for a bank holding company at December 31, 2018 and 2017:
At December 31, 2018
(dollars in thousands)
Common equity tier 1 capital
Tier 1 risk-based capital
Total risk-based capital
Leverage capital
At December 31, 2017
(dollars in thousands)
Common equity tier 1 capital
Tier 1 risk-based capital
Total risk-based capital
Leverage capital
Actual
Minimum
Amount
$3,806,857
4,309,697
5,112,079
4,309,697
Ratio
Required Ratio
10.55 %
11.94
14.16
8.74
4.50 %
6.00
8.00
4.00
Actual
Minimum
Amount
$3,869,129
4,371,969
4,877,208
4,371,969
Ratio
Required Ratio
11.36 %
12.84
14.32
9.58
4.50 %
6.00
8.00
4.00
At December 31, 2018, the capital ratios for the Company and the Bank continued to exceed the levels
required for classification as “well capitalized” institutions, as defined under the Federal Deposit Insurance
Corporation Improvement Act of 1991, and as further discussed in Note 17, “Capital,” in Item 8, “Financial
Statements and Supplementary Data.”
RESULTS OF OPERATIONS: 2018 AS COMPARED TO 2017
Net Interest Income
Net interest income is our primary source of income. Its level is a function of the average balance of our
interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on
such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-
earning assets and our interest-bearing liabilities which, in turn, are impacted by various external factors, including
the local economy, competition for loans and deposits, the monetary policy of the FOMC, and market interest rates.
62
The cost of our deposits and borrowed funds is largely based on short-term rates of interest, the level of which
is partially impacted by the actions of the FOMC. The FOMC reduces, maintains, or increases the target federal
funds rate (the rate at which banks borrow funds overnight from one another) as it deems necessary. In 2018, the
FOMC increased the target federal funds rate four times for a total of 100 basis points, to a target range of 2.25% to
2.50%.
While the target federal funds rate generally impacts the cost of our short-term borrowings and deposits, the
yields on our held-for-investment loans and other interest-earning assets are typically impacted by intermediate-term
market interest rates. In 2018, the five-year CMT ranged from a low of 2.25% to a high of 3.09% with an average
rate of 2.75% for the year. In 2017, the five-year CMT ranged from a low of 1.63% to a high of 2.26% with an
average rate of 1.91% for the year.
Another factor that impacts the yields on our interest-earning assets—and our net interest income—is the
income generated by our multi-family and CRE loans and securities when they prepay. Since prepayment income is
recorded as interest income, an increase or decrease in its level will also be reflected in the average yields (as
applicable) on our loans, securities, and interest-earning assets, and therefore in our net interest income, our net
interest rate spread, and our net interest margin.
It should be noted that the level of prepayment income on loans recorded in any given period depends on the
volume of loans that refinance or prepay during that time. Such activity is largely dependent on such external factors
as current market conditions, including real estate values, and the perceived or actual direction of market interest
rates. In addition, while a decline in market interest rates may trigger an increase in refinancing and, therefore,
prepayment income, so too may an increase in market interest rates. It is not unusual for borrowers to lock in lower
interest rates when they expect, or see, that market interest rates are rising rather than risk refinancing later at a still
higher interest rate.
For the twelve months ended December 31, 2018, net interest income decreased $99.0 million or 9% to
$1.0 billion compared to $1.1 billion for the twelve months ended December 31, 2017. Interest income increased
$107.4 million or 6.8% to $1.7 billion compared to $1.6 billion for the twelve months ended December 31, 2017.
This increase was largely driven by loan growth and by growth in the securities portfolio as the Company
redeployed its excess cash. This was offset by an increase in interest expense. Interest expense increased
$206.4 million or 45.6% to $658.7 million during 2018.
Year-Over-Year Comparison
The following factors contributed to the year-over-year reduction in net interest income:
•
Interest income rose $107.4 million year-over-year due to a $56.7 million increase in interest income
from securities and money market investments, coupled with a $50.7 million increase in interest income
from loans.
• The increase in interest income from loans was largely due to a $722.7 million increase in the average
balance along with a six-basis point increase in the average yield. In addition, prepayment income
contributed $44.9 million to the interest income from loans and 11 basis points to the average yield on
such assets compared to $47.0 million and 12 basis points in 2017.
• The year-over-year improvement in interest income from securities was driven by an $833.1 million
increase in the average balance, coupled with a 10-basis point increase in the average yield.
• As a result, the average balance of interest-earning assets rose $2.3 billion million from the year-earlier
level and the average yield rose five basis points.
•
Interest expense rose $206.4 million year-over-year as interest expense on deposits rose $149.5 million
and the interest expense on borrowed funds rose $56.9 million.
• The year-over-year increase in interest expense stemming from deposits was due to a 52-basis point rise
in the average cost of such funds due to higher short-term interest rates, along with a $1.0 billion increase
in the average balance. Additionally, the average balance of lower cost deposits such as savings accounts,
interest-bearing checking and money market accounts declined, while the average balance of higher cost
CDs increased by $2.1 billion.
• The increase in the interest income from borrowed funds was driven by a 35-basis point rise in the
average cost of such funding and by a $618.0 million increase in the average balance from the year-earlier
amount.
63
• As a result, the average balance of interest-bearing liabilities rose $1.7 billion and the average cost of
funds rose 46 basis points year-over-year.
Net Interest Margin
The direction of the Company’s net interest margin was consistent with that of its net interest income, and
generally was driven by the same factors as those described above. At 2.25%, the margin was 34-basis points
narrower than the margin recorded for full-year 2017. The reduction was due, in part, to a decline in prepayment
income from the levels recorded in the prior year, as reflected in the table below. Adjusted net interest margin is a
non-GAAP financial measure, as more fully discussed below.
RECONCILIATION OF NET INTEREST MARGIN AND ADJUSTED NET INTEREST MARGIN
While our net interest margin, including the contribution of prepayment income and the impact from our
recent subordinated notes offering, is recorded in accordance with GAAP, adjusted net interest margin, which
excludes the contribution of prepayment income, is not. Nevertheless, management uses this non-GAAP measure in
its analysis of our performance, and believes that this non-GAAP measure should be disclosed in this report and
other investor communications for the following reasons:
1. Adjusted net interest margin gives investors a better understanding of the effect of prepayment income on
our net interest margin. Prepayment income in any given period depends on the volume of loans that
refinance or prepay, or securities that prepay, during that period. Such activity is largely dependent on
external factors such as current market conditions, including real estate values, and the perceived or actual
direction of market interest rates.
2. Adjusted net interest margin is among the measures considered by current and prospective investors, both
independent of, and in comparison with, our peers.
Adjusted net interest margin should not be considered in isolation or as a substitute for net interest margin,
which is calculated in accordance with GAAP. Moreover, the manner in which we calculate this non-GAAP
measure may differ from that of other companies reporting a non-GAAP measure with a similar name.
The following table sets forth certain information regarding our average balance sheet for the years indicated,
including the average yields on our interest-earning assets and the average costs of our interest-bearing liabilities.
Average yields are calculated by dividing the interest income produced by the average balance of interest-earning
assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-
bearing liabilities. The average balances for the year are derived from average balances that are calculated daily. The
average yields and costs include fees, as well as premiums and discounts (including mark-to-market adjustments
from acquisitions), that are considered adjustments to such average yields and costs.
64
For the Twelve Months EndedDec. 31,Dec. 31,20182017Change (%)(dollars in thousands)Total Interest Income$1,689,673$1,582,2397%Prepayment Income: Loans$44,949$47,004-4% Securities4,957 8,130 -39%Total prepayment income$49,906$55,134-9%GAAP Net Interest Margin2.25%2.59%-34bp Less: Prepayment income from loans10 bp11 bp-1bp Prepayment income from securities1 2 -1bp Plus: Subordinated debt issuance- - 0bpTotal prepayment income contribution toand subordinated debt impact on net interest margin11 bp13 bp-2bpAdjusted Net Interest Margin (non-GAAP)2.14%2.46%-32bp
Net Interest Income Analysis
(dollars in thousands)
ASSETS:
Interest-earning assets:
2018
For the Years Ended December 31,
2017
Average
Balance
Interest
Average
Yield/
Cost
Average
Balance
Interest
Average
Yield/
Cost
Average
Balance
2016
Interest
Mortgage and other loans, net (1)
Securities (2)(3)
Interest-earning cash and cash equivalents
Total interest-earning assets
Non-interest-earning assets
Total assets
$39,122,724 $1,467,944
184,136
37,593
1,689,673
4,819,789
1,955,837
45,898,350
4,314,990
$50,213,340
3.75 %
3.82
1.92
3.68
$38,400,003 $1,417,237
148,429
16,573
1,582,239
3,986,722
1,227,137
43,613,862
5,011,020
$48,624,882
3.69 % $39,076,298 $1,472,020
202,832
4,922,722
3.72
11,336
1.35
17
44,010,356
1,674,869
3.63
5,289,245
$49,299,601
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-bearing liabilities:
Interest-bearing checking and money market
accounts
Savings accounts
Certificates of deposit
Total interest-bearing deposits
Borrowed funds
Total interest-bearing liabilities
Non-interest-bearing deposits
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
Net interest income/interest rate spread
Net interest margin
Ratio of interest-earning assets to
interest-bearing liabilities
$12,033,213 $ 167,972
28,994
182,383
379,349
279,329
658,678
4,902,728
10,236,599
27,172,540
13,454,912
40,627,452
2,550,163
252,804
43,430,419
6,782,921
$50,213,340
$1,030,995
1.40 %
0.59
1.78
1.40
2.08
1.62
2.06 %
2.25 %
1.13 x
$12,787,703 $ 98,980
28,447
102,355
229,782
222,454
452,236
5,170,342
8,164,518
26,122,563
12,836,919
38,959,482
2,782,155
279,466
42,021,103
6,603,779
$48,624,882
$1,130,003
0.77 % $13,322,346 $ 62,166
31,982
5,915,020
0.55
76,875
6,899,706
1.25
171,023
26,137,072
0.88
216,464
14,059,543
1.73
40,196,615
387,487
1.16
2,860,532
190,403
43,247,550
6,052,051
$49,299,601
$1,287,382
2.47 %
2.59 %
1.12 x
(1) Amounts are net of net deferred loan origination costs/(fees) and the allowance for loan losses, and include loans held for sale and non-performing loans.
(2) Amounts are at amortized cost.
(3) Includes FHLB stock.
Average
Yield/
Cost
3.77 %
4.12
0.15
3.81
0.47 %
0.54
1.11
0.65
1.54
0.96
2.85 %
2.93 %
1.09 x
65
The following table presents the extent to which changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities affected our interest income and interest expense during the
periods indicated. Information is provided in each category with respect to (i) the changes attributable to changes in
volume (changes in volume multiplied by prior rate); (ii) the changes attributable to changes in rate (changes in rate
multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume
and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Rate/Volume Analysis
Year Ended
December 31, 2018
Compared to Year Ended
December 31, 2017
Increase/(Decrease)
Due to
Year Ended
December 31, 2017
Compared to Year Ended
December 31, 2016
Increase/(Decrease)
Due to
Volume
Rate
Net
Volume
Rate
Net
$ 26,909 $ 23,798 $ 50,707
56,727
107,434
5,791
29,589
50,936
77,845
$ (25,239 ) $ (29,544 ) $ (54,783 )
(37,847 )
(50,216 )
(92,630 )
(79,760 )
12,369
(12,870 )
$
(5,468 ) $ 74,460 $ 68,992
$
(2,388 ) $ 39,202 $ 36,814
(1,225 )
30,091
11,124
34,522
$ 43,323
547
1,772
80,028
49,937
56,875
45,751
206,442
171,920
$ (142,331 ) $ (99,008 )
(3,535 )
574
(4,109 )
25,480
10,339
15,141
5,990
19,488
(13,498 )
64,749
69,603
(4,854 )
(8,016 ) $ (149,363 ) $ (157,379 )
$
(in thousands)
INTEREST-EARNING ASSETS:
Mortgage and other loans, net
Securities and money market investments
Total
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and money
market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Total
Change in net interest income
Provision for (Recoveries of) Loan Losses
Provision for (Recovery of) Losses on Loans
The provision for losses on loans, like the recovery of loan losses, is based on the methodology used by
management in calculating the allowance for losses on such loans. Reflecting this methodology, which is discussed
in detail under “Critical Accounting Policies” earlier in this report, for the twelve months ended December 31, 2018,
the Company reported a provision for loan losses of $18.3 million, down $42.7 million or 70% compared to
$60.9 million for the twelve months ended December 31, 2017. The year-over-year decrease was related to taxi
medallion-related charge-offs during the year.
Reflecting the 2018 provision and twelve-month net charge-offs of $16.5 million, the allowance for losses on
loans of $159.8 million increased $1.8 million at the end of this December compared to $158.0 million at the prior
year-end.
For additional information about our methodologies for recording recoveries of, and provisions for, loan
losses, see the discussion of the loan loss allowance under “Critical Accounting Policies” and the discussion of
“Asset Quality” that appear earlier in this report.
Non-Interest Income
We generate non-interest income through a variety of sources, including—among others—fee income (in the
form of retail deposit fees and charges on loans); income from our investment in BOLI; gains on sales of securities;
and “other” sources, including the revenues produced through the sale of third-party investment products and those
produced through our subsidiary, Peter B. Cannell & Co., Inc. (“PBC”), an investment advisory firm.
For the twelve months ended December 31, 2018, non-interest income fell $125.3 million or 57.8% to
$91.6 million compared to $216.9 million for the twelve months ended December 31, 2017. Full year 2017 included
items related to the sale of our covered loan portfolio and the sale of our mortgage banking business. This included
an $82.0 million gain on the sale of covered loans and mortgage banking operations and $19.0 million of FDIC
indemnification expense. Additionally, we recorded $19.3 million of mortgage banking income during the twelve
months ended December 31, 2017 and a $29.9 million net gain on securities compared to a net loss of $2.0 million
in 2018.
66
Non-Interest Income Analysis
The following table summarizes our sources of non-interest income in the twelve months ended December 31,
2018, 2017, and 2016:
(in thousands)
Fee income
BOLI income
Mortgage banking income
Net gain on sales of loans
Net (loss) gain on securities
FDIC indemnification expense
Gain on sale of covered loans and
mortgage banking operations
Other income:
Investment advisory income
Third-party investment product sales
Recovery of OTTI securities
Other
Total other income
Total non-interest income
Non-Interest Expense
For the Years Ended December 31,
2017
$ 31,759
27,133
19,337
1,156
29,924
(18,961 )
2018
$29,765
28,252
--
111
(1,994 )
--
2016
$ 32,665
31,015
27,281
15,806
3,347
(6,155 )
--
82,026
--
20,277
12,474
146
2,527
35,424
$91,558
22,026
12,771
1,120
8,589
44,506
$216,880
22,537
11,658
1,214
6,204
41,613
$145,572
Non-interest expense has two primary components: operating expenses, which include compensation and
benefits, occupancy and equipment, and general and administrative (“G&A”) expenses; and the amortization of the
CDI stemming from certain of our business combinations.
Total non-interest expense for the twelve months ended December 31, 2018 was $546.6 million, down
$94.8 million or 14.8% compared to the $641.4 million reported for the twelve months ended December 31, 2017.
The year-over-year improvement was the result of a $46.2 million or 12.7% decrease in compensation and benefits
expense and by a $49.5 million or 27.7% decrease in general and administrative expense. This was driven by the
sale of our mortgage banking business and lower regulatory compliance-related costs.
Income Tax Expense
Income tax expense includes federal, New York State, and New York City income taxes, as well as non-
material income taxes from other jurisdictions where we operate our branches and/or conduct our mortgage banking
business.
For the twelve months ended December 31, 2018, income tax expense declined $66.8 million or 33.0% to
$135.3 million compared to the twelve months ended December 31, 2017. The effective tax rate for full year 2018
was 24.25% compared to 30.23% for full year 2017. The decrease in both the effective tax rate and income tax
expense was primarily due to the Tax Cuts and Jobs Act, which largely became effective in January 2018.
RESULTS OF OPERATIONS: 2017 AS COMPARED TO 2016
Earnings Summary
For the twelve months ended December 31, 2017, the Company reported diluted earnings per common share
of $0.90, as compared to diluted earnings per common share of $1.01 for the twelve months ended December 31,
2016, a decrease of 11%. Net income available to common shareholders totaled $441.6 million in 2017 as compared
to $495.4 million in 2016, also down 11%. Net income for 2017 was $466.2 million, down 6% from 2016.
Net Interest Income
In 2017, net interest income decreased 12% to $1.1 billion as compared to $1.3 billion in 2016. The decline in
the full-year 2017 net interest income was driven by a 17% increase in interest expense due to higher funding costs.
Year-Over-Year Comparison
The following factors contributed to the year-over-year reduction in net interest income:
67
•
Interest income fell $92.6 million year-over-year as a $37.8 million decline in interest income from
securities and money market investments was coupled with a $54.8 million decline in interest income
from loans.
• The decline in interest income from loans was largely due to a $676.3 million decline in the average
balance and an eight-basis point decline in the average yield. In addition, prepayment income contributed
$47.0 million to the interest income from loans and 12 basis points to the average yield on such assets
compared to $60.9 million and 16 basis points in 2016.
• The year-over-year reduction in interest income from securities was driven by a $936.0 million decrease
in the average balance, coupled with a 40-basis point drop in the average yield.
• As a result, the average balance of interest-earning assets declined $396.5 million from the year-earlier
level and the average yield fell 18 basis points.
•
Interest expense rose $64.7 million year-over-year as interest expense on deposits rose $58.8 million and
the interest expense on borrowed funds rose $6.0 million.
• The year-over-year rise in interest expense stemming from deposits was due to a 23-basis point rise in the
average cost of such funds due to higher short-term interest rates, offset by a $14.5 million decrease in the
average balance. Additionally, the average balance of lower cost deposits such as savings accounts,
interest-bearing checking and money market accounts declined, while the average balance of higher cost
CDs increased by $1.3 billion.
• The increase in the interest income from borrowed funds was driven by a 19-basis point rise in the
average cost of such funding and mitigated by a $1.2 billion decline in the average balance from the year-
earlier amount.
• As a result, the average balance of interest-bearing liabilities fell $1.2 billion and the average cost of
funds rose 20 basis points year-over-year.
Net Interest Margin
The direction of the Company’s net interest margin was consistent with that of its net interest income, and
generally was driven by the same factors as those described above. At 2.59%, the margin was 34-basis points
narrower than the margin recorded for full-year 2016. The reduction was due, in part, to a decline in prepayment
income from the levels recorded in the prior year.
Provision for (Recoveries of) Loan Losses
Provision for (Recovery of) Losses on Non-Covered Loans
The provision for losses on non-covered loans, like the recovery of non-covered loan losses, is based on the
methodology used by management in calculating the allowance for losses on such loans. Reflecting this
methodology, which is discussed in detail under “Critical Accounting Policies” earlier in this report. For the twelve
months ended December 31, 2017, the Company reported a $60.9 million provision for losses on non-covered loans
as compared to $11.9 million for the twelve months ended December 31, 2016. The year-over-year increase was
related
quarter
of 2017.
taxi medallion-related
aforementioned
charge-offs
during
third
the
the
to
Reflecting the 2017 provision and twelve-month net charge-offs of $61.2 million, the allowance for losses on
non-covered loans of $158.0 million was relatively unchanged at the end of this December compared to
$158.3 million at the prior year-end.
Recovery of Losses on Covered Loans
For full-year 2017, the Company recovered $23.7 million on certain pools of acquired loans covered by FDIC
loss-sharing agreements, as compared to $7.7 million for full-year 2016. The recoveries recorded in the respective
years were largely offset by FDIC indemnification expense of $19.0 million and $6.2 million recorded in “Non-
interest income.”
On July 28, 2017, the Company completed the sale of its covered loans to an affiliate of Cerberus.
Accordingly, at December 31, 2017, the Company no longer had any covered loans and related FDIC loss share
receivable on its balance sheet.
68
Non-Interest Income
Non-interest income increased $71.3 million year-over-year to $216.9 million in the twelve months ended
December 31, 2017. The increase was primarily attributable to the following factors:
• An $82.0 million gain on the sale of our covered loans and mortgage banking operations.
• A $26.6 million increase in the net gain on sale of securities. This was due to the previously mentioned
securities portfolio repositioning and subsequent sale of securities during the second quarter.
• Mortgage banking income fell $7.9 million year-over-year to $19.3 million, as we exited this line of
business in the third quarter of the year.
• Other non-interest income increased to $44.5 million in the twelve months ended December 31, 2017
from $41.6 million in the twelve months ended December 31, 2016.
• The net gain on sales of loans, primarily through participations, fell $14.7 million year-over-year to
$1.2 million.
Non-Interest Expense
Non-interest expense totaled $641.4 million in the twelve months ended December 31, 2017, as compared to
$651.6 million in the year-earlier twelve-month period. While non-interest expense declined year-over-year,
operating expenses increased modestly to $641.2 million from $638.1 million in 2016.
Compensation and benefits expense accounted for $9.5 million of the year-over-year increase, having grown
to $361.0 million in 2017. The increase was driven by a combination of factors, including an increase in stock-based
compensation expense, normal salary increases, and the addition of senior level staff in various departments. This
was offset by a $6.9 million decline in G&A expense to $181.3 million, primarily reflecting a $3.8 million decrease
in FDIC deposit insurance premiums to $57.3 million.
Income Tax Expense
In the twelve months ended December 31, 2017, we recorded income tax expense of $202.0 million, reflecting
pre-tax income of $668.2 million and an effective tax rate of 30.2%. The decrease in both the effective tax rate and
income tax expense was primarily due to the Tax Cuts and Jobs Act, which was enacted in December 2017. This
resulted in the Company recording a one-time net benefit during the fourth quarter of the year, to income tax
expense of $42 million, including that portion related to the re-measurement of our net deferred tax liabilities.
QUARTERLY FINANCIAL DATA
The following table sets forth selected unaudited quarterly financial data for the years ended December 31,
2018 and 2017:
(in thousands, except per share data)
Net interest income
Provision for (recoveries of) loan
losses
Non-interest income
Non-interest expense
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
Net income available to common
shareholders
Basic earnings per common share
Diluted earnings per common share
IMPACT OF INFLATION
2018
2017
4th
3rd
2nd
1st
$247,236 $249,506 $263,955 $270,298
4th
$270,974
3rd
$276,343
2nd
$287,769
1st
$294,917
2,770
23,073
134,946
132,593
30,854
101,739
8,207
1,201
22,922
9,571
4,714
22,857
22,706
134,433 138,142 139,107
136,794 143,805 144,477
37,925
36,451
106,772 107,354 106,552
8,207
8,207
30,022
8,207
2,926
25,343
148,484
144,907
8,386
136,521
8,207
44,585
108,928
162,234
178,452
67,984
110,468
8,207
(6,261)
50,437
163,765
180,702
65,447
115,255
8,207
(4,008)
32,172
166,943
164,154
60,197
103,957
--
$ 93,532
$0.19
$0.19
$ 98,565
$0.20
$0.20
$ 99,147
$0.20
$0.20
$ 98,345
$0.20
$0.20
$128,314
$0.26
$0.26
$102,261
$0.21
$0.21
$107,048
$0.22
$0.22
$103,957
$0.21
$0.21
The consolidated financial statements and notes thereto presented in this report have been prepared in
accordance with GAAP, which requires that we measure our financial condition and operating results in terms of
historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, nearly all of
69
a bank’s assets and liabilities are monetary in nature. As a result, the impact of interest rates on our performance is
greater than the impact of general levels of inflation. Interest rates do not necessarily move in the same direction, or
to the same extent, as the prices of goods and services.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 2, “Summary of Significant Accounting Policies,” in Item 8, “Financial Statements and
Supplementary Data,” for a discussion of the impact of recent accounting pronouncements on our financial
condition and results of operations.
RECONCILIATIONS OF STOCKHOLDERS’ EQUITY, COMMON
STOCKHOLDERS’ EQUITY,
AND TANGIBLE COMMON STOCKHOLDERS’ EQUITY; TOTAL ASSETS AND TANGIBLE ASSETS;
AND THE RELATED MEASURES
While stockholders’ equity, common stockholders’ equity, total assets, and book value per common share are
financial measures that are recorded in accordance with U.S. generally accepted accounting principles (“GAAP”),
tangible common stockholders’ equity, tangible assets, and tangible book value per common share are not. It is
management’s belief that these non-GAAP measures should be disclosed in this report and others we issue for the
following reasons:
1. Tangible common stockholders’ equity is an important indication of the Company’s ability to grow
organically and through business combinations, as well as its ability to pay dividends and to engage in
various capital management strategies.
2. Tangible book value per common share and the ratio of tangible common stockholders’ equity to tangible
assets are among the capital measures considered by current and prospective investors, both independent
of, and in comparison with, the Company’s peers.
Tangible common stockholders’ equity, tangible assets, and the related non-GAAP measures should not be
considered in isolation or as a substitute for stockholders’ equity, common stockholders’ equity, total assets, or any
other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP
measures may differ from that of other companies reporting non-GAAP measures with similar names.
Reconciliations of our stockholders’ equity, common stockholders’ equity, and tangible common
stockholders’ equity; our total assets and tangible assets; and the related financial measures for the respective
periods follow:
(dollars in thousands)
Stockholders’ Equity
Less: Goodwill
Preferred stock
Tangible common stockholders’ equity
Total Assets
Less: Goodwill
Tangible assets
Common stockholders’ equity to total assets
Tangible common stockholders’ equity to tangible assets
Book value per common share
Tangible book value per common share
At or for the
Twelve Months Ended
December 31,
2018
$ 6,655,235
(2,436,131 )
(502,840 )
$ 3,716,264
2017
$ 6,795,376
(2,436,131 )
(502,840 )
$ 3,856,405
$51,899,376
(2,436,131 )
$49,463,245
$49,124,195
(2,436,131 )
$46,688,064
11.85 %
7.51
$12.99
7.85
12.81 %
8.26
$12.88
7.89
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and
liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain
balance sheet accounts; to determine the appropriate level of risk, given our business strategy, operating
70
environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner
consistent with guidelines approved by the Boards of Directors of the Company and the Bank.
Market Risk
As a financial institution, we are focused on reducing our exposure to interest rate volatility, which represents
our primary market risk. Changes in market interest rates represent the greatest challenge to our financial
performance, as such changes can have a significant impact on the level of income and expense recorded on a large
portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning
assets, other than those possessing a short term to maturity. To reduce our exposure to changing rates, the Board of
Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments to the
asset and liability mix can be made when deemed appropriate.
The actual duration of held-for-investment mortgage loans and mortgage-related securities can be significantly
impacted by changes in prepayment levels and market interest rates. The level of prepayments may, in turn, be
impacted by a variety of factors, including the economy in the region where the underlying mortgages were
originated; seasonal factors; demographic variables; and the assumability of the underlying mortgages. However, the
factors with the most significant impact on prepayments are market interest rates and the availability of refinancing
opportunities.
In 2018, we managed our interest rate risk by taking the following actions: (1) We continued to emphasize the
origination and retention of intermediate-term assets, primarily in the form of multi-family and CRE loans; (2) We
increased our portfolio of C&I loans, which feature floating rates; and (3) We replaced maturing wholesale
borrowings with longer term borrowings, including some with callable features.
Interest Rate Sensitivity Analysis
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and
liabilities are “interest rate sensitive” and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability
is said to be interest rate sensitive within a specific time frame if it will mature or reprice within that period of time.
The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time frame and the amount of interest-bearing liabilities maturing or repricing within
that same period of time.
In a rising interest rate environment, an institution with a negative gap would generally be expected, absent the
effects of other factors, to experience a greater increase in the cost of its interest-bearing liabilities than it would in
the yield on its interest-earning assets, thus producing a decline in its net interest income. Conversely, in a declining
rate environment, an institution with a negative gap would generally be expected to experience a lesser reduction in
the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an
increase in its net interest income.
In a rising interest rate environment, an institution with a positive gap would generally be expected to
experience a greater increase in the yield on its interest-earning assets than it would in the cost of its interest-bearing
liabilities, thus producing an increase in its net interest income. Conversely, in a declining rate environment, an
institution with a positive gap would generally be expected to experience a lesser reduction in the cost of its interest-
bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest
income.
At December 31, 2018, our one-year gap was a negative 22.56%, as compared to a negative 19.57% at
December 31, 2017
The table on the following page sets forth the amounts of interest-earning assets and interest-bearing liabilities
outstanding at December 31, 2018 which, based on certain assumptions stemming from our historical experience,
are expected to reprice or mature in each of the future time periods shown. Except as stated below, the amounts of
assets and liabilities shown as repricing or maturing during a particular time period were determined in accordance
with the earlier of (1) the term to repricing, or (2) the contractual terms of the asset or liability.
The table provides an approximation of the projected repricing of assets and liabilities at December 31, 2018
on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month
period and subsequent selected time intervals. For residential mortgage-related securities, prepayment rates are
forecasted at a weighted average CPR of 10% per annum; for multi-family and CRE loans, prepayment rates are
71
forecasted at weighted average CPRs of 12% and 10% per annum, respectively. Borrowed funds were not assumed
to prepay.
Savings, NOW, and money market accounts were assumed to decay based on a comprehensive statistical
analysis that incorporated our historical deposit experience. Based on the results of this analysis, savings accounts
were assumed to decay at a rate of 57% for the first five years and 43% for years six through ten. Interest-bearing
checking accounts were assumed to decay at a rate of 76% for the first five years and 24% for years six through ten.
The decay assumptions reflect the prolonged low interest rate environment and the uncertainty regarding future
depositor behavior. Including those accounts having specified repricing dates, money market accounts were assumed
to decay at a rate of 84% for the first five years and 16% for years six through ten.
72
Interest Rate Sensitivity Analysis
(dollars in thousands)
INTEREST-EARNING ASSETS:
Mortgage and other loans (1)
Mortgage-related securities (2)(3)
Other securities (2)
Interest-earning cash and cash equivalents
Total interest-earning assets
INTEREST-BEARING LIABILITES:
Interest-bearing checking and money
market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Total interest-bearing liabilities
Interest rate sensitivity gap per period (4)
Cumulative interest rate sensitivity gap
Cumulative interest rate sensitivity gap as a
Three
Months
or Less
Four to
Twelve
Months
More Than
One Year
to Three Years
At December 31, 2018
More Than
Three Years
to Five Years
More Than
Five Years
to 10 Years
More
Than
10 Years
Total
$ 3,649,243
32,940
2,026,623
1,330,516
7,039,322
$ 4,472,014
142,139
226,476
--
4,840,629
$17,280,343
580,242
53,826
--
17,914,411
$11,995,651
1,011,394
50,949
--
13,057,994
$ 2,647,883
607,579
806,641
--
4,062,103
$ 75,268
585,988
133,313
--
794,569
$40,120,402
2,960,282
3,297,828
1,330,516
47,709,028
5,976,641
642,477
2,978,174
1,913,926
11,511,218
$(4,471,896 )
$(4,471,896 )
819,355
938,287
7,388,054
2,931,000
12,076,696
$(7,236,067 )
$(11,707,963 )
1,482,629
619,702
1,620,536
4,247,661
7,970,528
$ 9,943,883
$(1,764,080 )
873,274
457,880
205,309
25,000
1,561,463
$11,496,531
$9,732,451
2,378,150
1,984,914
2,249
4,950,000
9,315,313
$(5,253,210 )
$4,479,241
--
--
--
140,279
140,279
$654,290
$5,133,531
11,530,049
4,643,260
12,194,322
14,207,866
42,575,497
$ 5,133,531
percentage of total assets
(8.62 )%
(22.56 )%
(3.40 )%
18.75 %
8.63 %
9.89 %
Cumulative net interest-earning assets as a
percentage of net interest-bearing liabilities
61.15 %
50.36 %
94.41 %
129.39 %
110.56 %
112.06 %
(1) For the purpose of the gap analysis, non-performing non-covered loans and the allowance for loan losses have been excluded.
(2) Mortgage-related and other securities, including FHLB stock, are shown at their respective carrying amounts.
(3) Expected amount based, in part, on historical experience.
(4) The interest rate sensitivity gap per period represents the difference between interest-earning assets and interest-bearing liabilities.
73
Prepayment and deposit decay rates can have a significant impact on our estimated gap. While we believe our
assumptions to be reasonable, there can be no assurance that the assumed prepayment and decay rates noted above
will approximate actual future loan and securities prepayments and deposit withdrawal activity.
To validate our prepayment assumptions for our multi-family and CRE loan portfolios, we perform a monthly
analysis, during which we review our historical prepayment rates and compare them to our projected prepayment
rates. We continually review the actual prepayment rates to ensure that our projections are as accurate as possible,
since prepayments on these types of loans are not as closely correlated to changes in interest rates as prepayments on
one-to-four family loans tend to be. In addition, we review the call provisions in our borrowings and investment
portfolios and, on a monthly basis, compare the actual calls to our projected calls to ensure that our projections are
reasonable. As of December 31, 2018, the impact of a 100-basis point decline in market interest rates would have
increased our projected prepayment rates for multi-family and CRE loans by a constant prepayment rate of 16.32%
per annum. Conversely, the impact of a 100-basis point increase in market interest rates would have decreased our
projected prepayment rates for multi-family and CRE loans by a constant prepayment rate of 4.53% per annum.
Certain shortcomings are inherent in the method of analysis presented in the preceding Interest Rate
Sensitivity Analysis. For example, although certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market interest rates. The interest rates on certain types
of assets and liabilities may fluctuate in advance of the market, while interest rates on other types may lag behind
changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict
changes in interest rates both on a short-term basis and over the life of the asset. Furthermore, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely deviate from those assumed in
calculating the table. Also, the ability of some borrowers to repay their adjustable-rate loans may be adversely
impacted by an increase in market interest rates.
Interest rate sensitivity is also monitored through the use of a model that generates estimates of the change in
our net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is defined as the net present value of
expected cash flows from assets, liabilities, and off-balance sheet contracts. The NPV ratio, under any interest rate
scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The
model assumes estimated loan prepayment rates, reinvestment rates, and deposit decay rates similar to those utilized
in formulating the preceding Interest Rate Sensitivity Analysis.
Based on the information and assumptions in effect at December 31, 2018, the following table sets forth our
NPV, assuming the changes in interest rates noted:
(dollars in thousands)
Change in
Interest Rates
(in basis points) (1)
--
+100
+200
Market Value
of Assets
$51,341,235
50,166,988
49,040,399
Market Value
of Liabilities
$43,713,044
43,016,000
42,375,965
Net Portfolio
Value
$7,628,191
7,150,988
6,664,434
Net Change
$ --
(477,203 )
(963,757 )
Portfolio Market
Value Projected
% Change
to Base
-- %
(6.26 )
(12.63 )
(1) The impact of 100- and 200-basis point reductions in interest rates is not presented in view of the current level of the federal
funds rate and other short-term interest rates
The net changes in NPV presented in the preceding table are within the limits approved by the Boards of
Directors of the Company and the Bank.
As with the Interest Rate Sensitivity Analysis, certain shortcomings are inherent in the methodology used in
the preceding interest rate risk measurements. Modeling changes in NPV requires that certain assumptions be made
which may or may not reflect the manner in which actual yields and costs respond to changes in market interest
rates. In this regard, the NPV Analysis presented above assumes that the composition of our interest rate sensitive
assets and liabilities existing at the beginning of a period remains constant over the period being measured, and also
assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the
duration to maturity or repricing of specific assets and liabilities. Furthermore, the model does not take into account
the benefit of any strategic actions we may take to further reduce our exposure to interest rate risk. Accordingly,
while the NPV Analysis provides an indication of our interest rate risk exposure at a particular point in time, such
measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest
rates on our net interest income, and may very well differ from actual results.
74
We also utilize an internal net interest income simulation to manage our sensitivity to interest rate risk. The
simulation incorporates various market-based assumptions regarding the impact of changing interest rates on future
levels of our financial assets and liabilities. The assumptions used in the net interest income simulation are
inherently uncertain. Actual results may differ significantly from those presented in the following table, due to the
frequency, timing, and magnitude of changes in interest rates; changes in spreads between maturity and repricing
categories; and prepayments, among other factors, coupled with any actions taken to counter the effects of any such
changes. Based on the information and assumptions in effect at December 31, 2018, the following table reflects the
estimated percentage change in future net interest income for the next twelve months, assuming the changes in
interest rates noted:
Change in Interest Rates
(in basis points) (1)
+100 over one year
+200 over one year
Estimated Percentage Change in
Future Net Interest Income
(3.91) %
(7.33)
(1) In general, short- and long-term rates are assumed to increase in parallel fashion across all four quarters and then remain
unchanged.
Future changes in our mix of assets and liabilities may result in other changes to our gap, NPV, and/or net
interest income simulation.
In the event that our net interest income and NPV sensitivities were to breach our internal policy limits, we
would undertake the following actions to ensure that appropriate remedial measures were put in place:
• Our ALCO Committee would inform the Board of Directors of the variance, and present
recommendations to the Board regarding proposed courses of action to restore conditions to within-policy
tolerances.
•
In formulating appropriate strategies, the ALCO Committee would ascertain the primary causes of the
variance from policy tolerances, the expected term of such conditions, and the projected effect on capital
and earnings.
Where temporary changes in market conditions or volume levels result in significant increases in interest rate
risk, strategies may involve reducing open positions or employing synthetic hedging techniques to more
immediately reduce risk exposure. Where variance from policy tolerances is triggered by more fundamental
imbalances in the risk profiles of core loan and deposit products, a remedial strategy may involve restoring balance
through natural hedges to the extent possible before employing synthetic hedging techniques. Other strategies might
include:
• Asset restructuring, involving sales of assets having higher risk profiles, or a gradual restructuring of the
asset mix over time to affect the maturity or repricing schedule of assets;
• Liability restructuring, whereby product offerings and pricing are altered or wholesale borrowings are
employed to affect the maturity structure or repricing of liabilities;
• Expansion or shrinkage of the balance sheet to correct imbalances in the repricing or maturity periods
between assets and liabilities; and/or
• Use or alteration of off-balance sheet positions, including interest rate swaps, caps, floors, options, and
forward-purchase or sales commitments.
In connection with our net interest income simulation modeling, we also evaluate the impact of changes in the
slope of the yield curve. At December 31, 2018, our analysis indicated that an immediate inversion of the yield
curve would be expected to result in a 1.39% decrease in net interest income; conversely, an immediate steepening
of the yield curve would be expected to result in a 3.60% increase.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and Notes thereto and other supplementary data begin on the
following page.
75
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except share data)
ASSETS:
Cash and cash equivalents
Securities:
Debt securities available for sale ($1,228,702 and $1,263,227 pledged at December 31, 2018 and 2017,
respectively)
Equity investments with readily determinable fair values, at fair value
Total securities
Loans held for sale
Loans held for investment, net of deferred loan fees and costs
Less: Allowance for loan losses
Loans held for investment, net
Total loans, net
Federal Home Loan Bank stock, at cost
Premises and equipment, net
Goodwill
Mortgage servicing rights ($2,729 measured at fair value at December 31, 2017)
Bank-owned life insurance
Other real estate owned and other repossessed assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Deposits:
Interest-bearing checking and money market accounts
Savings accounts
Certificates of deposit
Non-interest-bearing accounts
Total deposits
Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances
Repurchase agreements
Total wholesale borrowings
Junior subordinated debentures
Subordinated notes
Total borrowed funds
Other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares issued and
outstanding)
Common stock at par $0.01 (900,000,000 shares authorized; 490,439,070 and 489,072,101 shares issued,
and 473,536,604 and 488,490,352 shares outstanding, respectively)
Paid-in capital in excess of par
Retained earnings
Treasury stock, at cost (16,902,466 and 581,749 shares, respectively)
Accumulated other comprehensive loss, net of tax:
Net unrealized (loss) gain on securities available for sale, net of tax of $4,201 and $(27,961),
respectively
Net unrealized loss on the non-credit portion of other-than-temporary impairment
(“OTTI”) losses on securities, net of tax of $2,517 and $3,338, respectively
Net unrealized loss on pension and post-retirement obligations, net of tax of $27,224 and
$32,121, respectively
Total accumulated other comprehensive loss, net of tax
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to the consolidated financial statements.
76
December 31,
2018
2017
$ 1,474,955 $ 2,528,169
5,613,520
30,551
5,644,071
--
40,165,908
(159,820 )
40,006,088
40,006,088
644,590
346,179
2,436,131
780
977,627
10,794
358,161
$51,899,376
3,531,427
--
3,531,427
35,258
38,387,971
(158,046 )
38,229,925
38,265,183
603,819
368,655
2,436,131
6,100
967,173
16,400
401,138
$49,124,195
$11,530,049
4,643,260
12,194,322
2,396,799
30,764,430
$12,936,301
5,210,001
8,643,646
2,312,215
29,102,163
13,053,661
500,000
13,553,661
359,508
294,697
14,207,866
271,845
45,244,141
12,104,500
450,000
12,554,500
359,179
--
12,913,679
312,977
42,328,819
502,840
502,840
4,904
6,099,940
297,202
(161,998 )
4,891
6,072,559
237,868
(7,615 )
(10,534 )
39,188
(6,042 )
(5,221 )
(71,077 )
(87,653 )
6,655,235
$51,899,376
(49,134 )
(15,167 )
6,795,376
$49,124,195
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
INTEREST INCOME:
Mortgage and other loans
Securities and money market investments
Total interest income
INTEREST EXPENSE:
Interest-bearing checking and money market accounts
Savings accounts
Certificates of deposit
Borrowed funds
Total interest expense
Net interest income
Provision for losses on non-covered loans
Recovery of losses on covered loans
Net interest income after provision for (recovery of) loan losses
NON-INTEREST INCOME:
Fee income
Bank-owned life insurance
Mortgage banking income
Net gain on sales of loans
Net (loss) gain on securities
FDIC indemnification expense
Gain on sale of covered loans and mortgage banking operations
Other
Total non-interest income
NON-INTEREST EXPENSE:
Operating expenses:
Compensation and benefits
Occupancy and equipment
General and administrative
Total operating expenses
Amortization of core deposit intangibles
Merger-related expenses
Total non-interest expense
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
Net income available to common shareholders
Basic earnings per common share
Diluted earnings per common share
Net income
Other comprehensive (loss) income, net of tax:
Change in net unrealized gain (loss) on securities available for sale,
net of tax of $32,166; $(29,740); and $1,560, respectively
Change in the non-credit portion of OTTI losses recognized in
other comprehensive (loss) income, net of tax of $(821); $(13); and
$(49), respectively
Change in pension and post-retirement obligations, net of tax of
$(4,897); $(2,234); and $(2,924), respectively
Less: Reclassification adjustment for sales of available-for-sale
securities, net of tax of $(4); $1,245; and $1,127, respectively
Total other comprehensive (loss) income, net of tax
Total comprehensive income , net of tax
See accompanying notes to the consolidated financial statements.
77
Years Ended December 31,
2017
2018
2016
$1,467,944 $1,417,237 $1,472,020
202,849
1,674,869
221,729
1,689,673
165,002
1,582,239
167,972
28,994
182,383
279,329
658,678
1,030,995
18,256
--
1,012,739
98,980
28,447
102,355
222,454
452,236
1,130,003
60,943
(23,701 )
1,092,761
62,166
31,982
76,875
216,464
387,487
1,287,382
11,874
(7,694 )
1,283,202
29,765
28,252
--
111
(1,994 )
--
--
35,424
91,558
31,759
27,133
19,337
1,156
29,924
(18,961 )
82,026
44,506
216,880
32,665
31,015
27,281
15,806
3,347
(6,155 )
--
41,613
145,572
317,496
100,107
129,025
546,628
--
--
546,628
557,669
135,252
363,698
98,963
178,557
641,218
208
--
641,426
668,215
202,014
352,008
98,543
187,558
638,109
2,391
11,146
651,646
777,128
281,727
$ 422,417 $ 466,201 $ 495,401
--
$ 389,589 $ 441,580 $ 495,401
$1.01
$1.01
$0.90
$0.90
$0.79
$0.79
24,621
32,828
$422,417
$466,201
$495,401
(49,732 )
41,684
(2,207 )
(821 )
20
77
(21,943 )
1,585
4,015
10
(72,486 )
$349,931
(1,743 )
41,546
$507,747
(1,577 )
308
$495,709
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
PREFERRED STOCK (Par Value: $0.01):
Balance at beginning of year
Issuance of preferred stock (515,000 shares)
Balance at end of year
COMMON STOCK (Par Value: $0.01):
Balance at beginning of year
Shares issued for restricted stock awards (1,366,969; 2,004,212; and 2,099,865,
respectively)
Balance at end of year
PAID-IN CAPITAL IN EXCESS OF PAR:
Balance at beginning of year
Shares issued for restricted stock awards, net of forfeitures
Compensation expense related to restricted stock awards
Balance at end of year
RETAINED EARNINGS:
Years Ended December 31,
2017
2018
2016
$ 502,840 $ -- $ --
--
502,840
--
502,840
--
502,840
4,891
4,871
4,850
13
4,904
20
4,891
21
4,871
6,072,559
(8,879 )
36,260
6,099,940
6,047,558
(11,028 )
36,029
6,072,559
6,023,882
(8,985 )
32,661
6,047,558
Balance at beginning of year
Net income
Dividends paid on common stock ($0.68; $0.68; and $0.68 per share, respectively)
Dividends paid on preferred stock ($63.76 and $47.81 per share, respectively)
Effect of adopting ASU No. 2016-09
Effect of adopting ASU No. 2016-01
Effect of adopting ASU No. 2018-02
Balance at end of year
237,868
422,417
(333,061 )
(32,828 )
--
260
2,546
297,202
128,435
466,201
(332,147 )
(24,621 )
--
--
--
237,868
(36,568 )
495,401
(330,810 )
--
412
--
--
128,435
TREASURY STOCK, AT COST:
Balance at beginning of year
Purchase of common stock (16,993,351; 1,284,373; and 566,584 shares,
respectively)
Shares issued for restricted stock awards (672,634; 713,837; and 580,087 shares,
respectively)
Balance at end of year
(7,615 )
(160 )
(447 )
(163,249 )
(18,463 )
(8,677 )
8,866
(161,998 )
11,008
(7,615 )
8,964
(160 )
(15,167 )
(2,546 )
(69,940 )
(87,653 )
(57,021 )
--
308
(56,713 )
$6,655,235 $6,795,376 $6,123,991
(56,713 )
--
41,546
(15,167 )
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX:
Balance at beginning of year
Effect of adopting ASU No. 2018-02
Other comprehensive (loss) income, net of tax
Balance at end of year
Total stockholders’ equity
See accompanying notes to the consolidated financial statements.
78
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
Years Ended December 31,
2017
2018
2016
$ 422,417
$ 466,201
$ 495,401
activities:
Provision for loan losses
Depreciation
Amortization of discounts and premiums, net
Amortization of core deposit intangibles
Net loss (gain) on sales of securities
Gain on trading securities activity
Net gain on sales of loans
Stock-based compensation
Deferred tax expense
Changes in operating assets and liabilities:
Decrease in other assets
(Decrease) increase in other liabilities
Purchases of securities held for trading
Proceeds from sales of securities held for trading
Origination of loans held for sale
Proceeds from sales of loans originated for sale
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayment of securities held to maturity
Proceeds from repayment of securities available for sale
Proceeds from sales of securities held to maturity
Proceeds from sales of securities available for sale
Purchase of securities held to maturity
Purchase of securities available for sale
Redemption of Federal Home Loan Bank stock
Purchases of Federal Home Loan Bank stock
Proceeds from bank-owned life insurance
Proceeds from sales of loans
Other changes in loans, net
Purchase of premises and equipment, net
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits
Net decrease in short-term borrowed funds
Proceeds from issuance of long-term borrowed funds
Repayments of long-term borrowed funds
Net proceeds from issuance of preferred stock
Cash dividends paid on common stock
Cash dividends paid on preferred stock
Treasury stock repurchased
Payments relating to treasury shares received for restricted stock award
tax payments
Net cash provided by (used in) financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information:
Cash paid for interest
Cash paid for income taxes
Non-cash investing and financing activities:
Transfers to repossessed assets from loans
Transfer of loans from held for investment to held for sale
Shares issued for restricted stock awards
Securities transferred from held to maturity to available for sale
See accompanying notes to the consolidated financial statements.
79
18,256
32,323
(3,891 )
--
14
(222 )
(111 )
36,260
23,197
29,952
(53,320 )
(141,615 )
141,837
--
35,258
540,355
--
817,822
--
278,539
--
(3,288,204 )
120,220
(160,991 )
16,303
195,760
(1,990,068 )
(9,847 )
(4,020,466 )
1,662,267
--
5,667,268
(4,373,500 )
--
(333,061 )
(32,828 )
(160,767 )
37,242
32,803
(4,555 )
208
(29,924 )
(316 )
(87,301 )
36,029
21,444
451,873
23,329
(202,450 )
202,766
(1,674,123 )
2,053,484
1,326,710
175,375
387,772
547,925
453,878
(13,030 )
(1,163,043 )
90,909
(103,794 )
--
2,289,377
(1,575,846 )
(27,783 )
1,061,740
214,260
(460,000 )
3,000,000
(3,300,000 )
502,840
(332,147 )
(24,621 )
--
4,180
32,811
(26,258 )
2,391
(3,347 )
--
(57,398 )
32,661
44,746
326,790
(4,336 )
--
--
(4,646,773 )
4,554,785
755,653
2,499,205
50,192
1,297
322,038
(213,208 )
(279,402 )
601,941
(528,904 )
--
1,675,550
(2,826,365 )
(84,179 )
1,218,165
461,145
(3,256,300 )
1,181,000
--
--
(330,810 )
--
--
(2,482 )
2,426,897
(1,053,214 )
2,528,169
$ 1,474,955
(18,463 )
(418,131 )
1,970,319
557,850
$ 2,528,169
(8,677 )
(1,953,642 )
20,176
537,674
$ 557,850
$645,588
44,123
$ 447,476
217,682
$ 382,135
180,238
$ 5,631
195,649
8,879
--
$ 9,973
1,910,121
11,028
3,040,305
$ 20,099
1,659,743
8,985
--
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 (hereinafter referred to as the “Bank”). Effective with the close of business
November 30, 2018, the Company’s other banking subsidiary New York Commercial Bank (“Commercial Bank”)
was merged with and into Community Bank. Accordingly, all Commercial Bank’s 30 branches in Manhattan,
Queens, Brooklyn, Westchester County, and Long Island (all in New York).
Founded on April 14, 1859 and formerly known as Queens County Savings Bank, the Bank converted from a
state-chartered mutual savings bank to the capital stock form of ownership on November 23, 1993, at which date the
Company issued its initial offering of common stock (par value: $0.01 per share) at a price of $25.00 per share
($0.93 per share on a split-adjusted basis, reflecting the impact of nine stock splits between 1994 and 2004).
The Bank currently operates 252 branches, 19 of which operate directly under the Community Bank name.
The remaining 233 Community Bank branches operate through eight divisional banks: Queens County Savings
Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New
York; Garden State Community Bank in New Jersey; AmTrust Bank in Florida and Arizona; and Ohio Savings
Bank in Ohio.
Basis of Presentation
The following is a description of the significant accounting and reporting policies that the Company and its
subsidiaries follow in preparing and presenting their consolidated financial statements, which conform to U.S.
generally accepted accounting principles (“GAAP”) and to general practices within the banking industry. The
preparation of financial statements in conformity with GAAP requires the Company to make estimates and
judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses
during the reporting period. Estimates that are particularly susceptible to change in the near term are used in
connection with the determination of the allowance for loan losses; the evaluation of goodwill for impairment; and
the evaluation of the need for a valuation allowance on the Company’s deferred tax assets.
The accompanying consolidated financial statements include the accounts of the Company and other entities
in which the Company has a controlling financial interest. All inter-company accounts and transactions are
eliminated in consolidation. The Company currently has certain unconsolidated subsidiaries in the form of wholly-
owned statutory business trusts, which were formed to issue guaranteed capital securities (“capital securities”). See
Note 8, “Borrowed Funds,” for additional information regarding these trusts.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For cash flow reporting purposes, cash and cash equivalents include cash on hand, amounts due from banks,
and money market investments, which include federal funds sold and reverse repurchase agreements. At
December 31, 2018 and 2017, the Company’s cash and cash equivalents totaled $1.5 billion and $2.5 billion,
respectively. Included in cash and cash equivalents at those dates were $1.3 billion and $2.1 billion, respectively, of
interest-bearing deposits in other financial institutions, primarily consisting of balances due from the Federal
Reserve Bank of New York. Also included in cash and cash equivalents at December 31, 2018 and 2017 were
federal funds sold of $5.2 million and $3.1 million, respectively. There were no pledged reverse repurchase
agreements outstanding at December 31, 2018. The Company had $250.0 million in pledged reverse repurchase
agreements outstanding at December 31, 2017.
In accordance with the monetary policy of the FRB, the Company was required to maintain total reserves with
the FRB-NY of $846.5 million and $763.4 million, respectively, at December 31, 2018 and 2017, in the form of
deposits and vault cash. The Company was in compliance with this requirement at both dates.
Debt Securities and Equity Investments with Readily Determinable Fair Values
The securities portfolio primarily consists of mortgage-related securities and, to a lesser extent, debt and
equity (together, “other”) securities. Securities that are classified as “available for sale” are carried at their estimated
fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or
80
loss in stockholders’ equity. Securities that the Company has the intent and ability to hold to maturity are classified
as “held to maturity” and carried at amortized cost, less the non-credit portion of OTTI recorded in AOCL, net of
tax.
Equity investments with readily determinable fair values are measured at fair value with changes in fair value
recognized in net income.
The fair values of our securities—and particularly our fixed-rate securities—are affected by changes in market
interest rates and credit spreads. In general, as interest rates rise and/or credit spreads widen, the fair value of fixed-
rate securities will decline. As interest rates fall and/or credit spreads tighten, the fair value of fixed-rate securities
will rise. We regularly conduct a review and evaluation of our securities portfolio to determine if the decline in the
fair value of any security below its carrying amount is other than temporary. If we deem any such decline in value to
be other than temporary, the security is written down to its current fair value, creating a new cost basis, and the
resultant loss (other than the OTTI of debt securities attributable to non-credit factors) is charged against earnings
and recorded in “Non-interest income.” Our assessment of a decline in fair value requires judgment as to the
financial position and future prospects of the entity that issued the investment security, as well as a review of the
security’s underlying collateral. Broad changes in the overall market or interest rate environment generally will not
lead to a write-down.
In accordance with OTTI accounting guidance, unless we have the intent to sell, or it is more likely than not
that we may be required to sell a security before recovery, OTTI is recognized as a realized loss in earnings to the
extent that the decline in fair value is credit-related. If there is a decline in fair value of a security below its carrying
amount and we have the intent to sell it, or it is more likely than not that we may be required to sell the security
before recovery, the entire amount of the decline in fair value is charged to earnings.
Premiums and discounts on securities are amortized to expense and accreted to income over the remaining
period to contractual maturity using a method that approximates the interest method, and are adjusted for anticipated
prepayments. Dividend and interest income are recognized when earned. The cost of securities sold is based on the
specific identification method.
Federal Home Loan Bank Stock
As a member of the FHLB-NY, the Company is required to hold shares of FHLB-NY stock, which is carried
at cost. The Company’s holding requirement varies based on certain factors, including its outstanding borrowings
from the FHLB-NY.
The Company conducts a periodic review and evaluation of its FHLB-NY stock to determine if any
impairment exists. The factors considered in this process include, among others, significant deterioration in FHLB-
NY earnings performance, credit rating, or asset quality; significant adverse changes in the regulatory or economic
environment; and other factors that could raise significant concerns about the creditworthiness and the ability of the
FHLB-NY to continue as a going concern.
Loans
Loans, net, are carried at unpaid principal balances, including unearned discounts, purchase accounting (i.e.,
acquisition-date fair value) adjustments, net deferred loan origination costs or fees, and the allowance for loan
losses.
On June 27, 2017, the Company entered into an agreement to sell its mortgage banking business, which was
acquired as part of its 2009 FDIC-assisted acquisition of AmTrust and is reported under the Company’s Residential
Mortgage Banking segment, to Freedom Mortgage Corporation (“Freedom”). On September 29, 2017, the sale was
completed with proceeds received in the amount of $226.6 million, resulting in a gain of $7.4 million, which is
included in “Non-Interest Income” in the accompanying Consolidated Statements of Operations and Comprehensive
Income. Freedom acquired both the Company’s origination and servicing platforms, as well as its mortgage
servicing loan portfolio of $20.5 billion and related MSRs asset of $208.8 million.
Accordingly, all of the loans held for sale that were outstanding at December 31, 2017, were originated by the
Bank through its previous mortgage banking operation, and were sold to Freedom. Such loans were carried at fair
value, which was primarily based on quoted market prices for securities backed by similar types of loans. The
changes in fair value of these assets were largely driven by changes in mortgage interest rates subsequent to loan
81
funding. In addition, loans originated as “held for investment” and subsequently designated as “held for sale” are
transferred to held for sale at fair value.
Additionally, the Company received approval from the FDIC to sell assets covered under its LSA, early
terminate the LSA, and entered into an agreement to sell the majority of its one-to-four family residential mortgage-
related assets, including those covered under the LSA, to an affiliate of Cerberus Capital Management, L.P.
(“Cerberus”). On July 28, 2017, the Company completed the sale, resulting in the receipt of proceeds of $1.9 billion
from Cerberus and the FDIC and settled the related FDIC loss share receivable, resulting in a gain of $74.6 million
which is included in “Non-Interest Income” in the accompanying Consolidated Statements of Operations and
Comprehensive Income. As a result of this sale the Company had no covered loans at December 31, 2017 or 2018.
The Company recognizes interest income on loans using the interest method over the life of the loan.
Accordingly, the Company defers certain loan origination and commitment fees, and certain loan origination costs,
and amortizes the net fee or cost as an adjustment to the loan yield over the term of the related loan. When a loan is
sold or repaid, the remaining net unamortized fee or cost is recognized in interest income.
Prepayment income on loans is recorded in interest income and only when cash is received. Accordingly,
there are no assumptions involved in the recognition of prepayment income.
Two factors are considered in determining the amount of prepayment income: the prepayment penalty
percentage set forth in the loan documents, and the principal balance of the loan at the time of prepayment. The
volume of loans prepaying may vary from one period to another, often in connection with actual or perceived
changes in the direction of market interest rates. When interest rates are declining, rising precipitously, or perceived
to be on the verge of rising, prepayment income may increase as more borrowers opt to refinance and lock in current
rates prior to further increases taking place.
A loan generally is classified as a “non-accrual” loan when it is 90 days or more past due or when it is deemed
to be impaired because the Company no longer expects to collect all amounts due according to the contractual terms
of the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed,
and previously accrued interest is charged against interest income. A loan is generally returned to accrual status
when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest
income on non-accrual loans is recorded when received in cash.
Allowance for Loan Losses
The allowance for loan losses represents our estimate of probable and estimable losses inherent in the loan
portfolio as of the date of the balance sheet. Losses on loans are charged against, and recoveries of losses on loans
are credited back to, the allowance for loan losses.
The methodology used for the allocation of the allowance for loan losses at December 31, 2018 and
December 31, 2017 was generally comparable, whereby the Bank segregated their loss factors (used for both
criticized and non-criticized loans) into a component that was primarily based on historical loss rates and a
component that was primarily based on other qualitative factors that are probable to affect loan collectability. In
determining the allowance for loan losses, management considers the Bank’s current business strategies and credit
processes, including compliance with applicable regulatory guidelines and with guidelines approved by the Board of
Directors with regard to credit limitations, loan approvals, underwriting criteria, and loan workout procedures.
The allowance for loan losses is established based on management’s evaluation of incurred losses in the
portfolio in accordance with GAAP, and is comprised of both specific valuation allowances and a general valuation
allowance.
Specific valuation allowances are established based on management’s analyses of individual loans that are
considered impaired. If a loan is deemed to be impaired, management measures the extent of the impairment and
establishes a specific valuation allowance for that amount. A loan is classified as impaired when, based on current
information and/or events, it is probable that we will be unable to collect all amounts due under the contractual
terms of the loan agreement. We apply this classification as necessary to loans individually evaluated for impairment
in our portfolios. Smaller-balance homogenous loans and loans carried at the lower of cost or fair value are
evaluated for impairment on a collective, rather than individual, basis. Loans to certain borrowers who have
experienced financial difficulty and for which the terms have been modified, resulting in a concession, are
considered TDRs and are classified as impaired.
82
We primarily measure impairment on an individual loan and determine the extent to which a specific
valuation allowance is necessary by comparing the loan’s outstanding balance to either the fair value of the
collateral, less the estimated cost to sell, or the present value of expected cash flows, discounted at the loan’s
effective interest rate. Generally, when the fair value of the collateral, net of the estimated cost to sell, or the present
value of the expected cash flows is less than the recorded investment in the loan, any shortfall is promptly charged
off.
We also follow a process to assign the general valuation allowance to loan categories. The general valuation
allowance is established by applying our loan loss provisioning methodology, and reflect the inherent risk in
outstanding held-for-investment loans. This loan loss provisioning methodology considers various factors in
determining the appropriate quantified risk factors to use to determine the general valuation allowance. The factors
assessed begin with the historical loan loss experience for each major loan category. We also take into account an
estimated historical loss emergence period (which is the period of time between the event that triggers a loss and the
confirmation and/or charge-off of that loss) for each loan portfolio segment.
The allocation methodology consists of the following components: First, we determine an allowance for loan
losses based on a quantitative loss factor for loans evaluated collectively for impairment. This quantitative loss
factor is based primarily on historical loss rates, after considering loan type, historical loss and delinquency
experience, and loss emergence periods. The quantitative loss factors applied in the methodology are periodically re-
evaluated and adjusted to reflect changes in historical loss levels, loss emergence periods, or other risks. Lastly, we
allocate an allowance for loan losses based on qualitative loss factors. These qualitative loss factors are designed to
account for losses that may not be provided for by the quantitative loss component due to other factors evaluated by
management, which include, but are not limited to:
• Changes in lending policies and procedures, including changes in underwriting standards and collection,
and charge-off and recovery practices;
• Changes in international, national, regional, and local economic and business conditions and
developments that affect the collectability of the portfolio, including the condition of various market
segments;
• Changes in the nature and volume of the portfolio and in the terms of loans;
• Changes in the volume and severity of past-due loans, the volume of non-accrual loans, and the volume
and severity of adversely classified or graded loans;
• Changes in the quality of our loan review system;
• Changes in the value of the underlying collateral for collateral-dependent loans;
• The existence and effect of any concentrations of credit, and changes in the level of such concentrations;
• Changes in the experience, ability, and depth of lending management and other relevant staff; and
• The effect of other external factors, such as competition and legal and regulatory requirements, on the
level of estimated credit losses in the existing portfolio.
By considering the factors discussed above, we determine an allowance for loan losses that is applied to each
significant loan portfolio segment to determine the total allowance for loan losses.
The historical loss period we use to determine the allowance for loan losses on loans is a rolling 32-quarter
look-back period, as we believe this produces an appropriate reflection of our historical loss experience.
The process of establishing the allowance for losses on non-covered loans also involves:
•
Periodic
appraisers/inspectors;
inspections of
the
loan collateral by qualified
in-house and external property
• Regular meetings of executive management with the pertinent Board committee, during which observable
trends in the local economy and/or the real estate market are discussed;
• Assessment of the aforementioned factors by the pertinent members of the Boards of Directors and
management when making a business judgment regarding the impact of anticipated changes on the future
level of loan losses; and
• Analysis of the portfolio in the aggregate, as well as on an individual loan basis, taking into consideration
payment history, underwriting analyses, and internal risk ratings.
83
In order to determine their overall adequacy, the loan loss allowance is reviewed quarterly by management
Board Committees and the Board of Directors of the Bank, as applicable.
We charge off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed
uncollectible. The collectability of individual loans is determined through an assessment of the financial condition
and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For
non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are
typically recorded: (1) Closed-end credits are charged off in the quarter that the loan becomes 120 days past due;
(2) Open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) Both closed-end
and open-end credits are typically charged off in the quarter that the credit is 60 days past the date we received
notification that the borrower has filed for bankruptcy.
The level of future additions to the respective loan loss allowance is based on many factors, including certain
factors that are beyond management’s control, such as changes in economic and local market conditions, including
declines in real estate values, and increases in vacancy rates and unemployment. Management uses the best available
information to recognize losses on loans or to make additions to the loan loss allowance; however, the Bank may be
required to take certain charge-offs and/or recognize further additions to the loan loss allowance, based on the
judgment of regulatory agencies with regard to information provided during their examinations of the Bank.
An allowance for unfunded commitments is maintained separate from the allowance for loan losses and is
included in Other liabilities in the Consolidated Statements of Condition.
See Note 6, Allowance for Loan Losses for a further discussion of our allowance for loan losses.
Goodwill
We have significant intangible assets related to goodwill. In connection with our acquisitions, assets acquired
and liabilities assumed are recorded at their estimated fair values. Goodwill represents the excess of the purchase
price of our acquisitions over the fair value of identifiable net assets acquired, including other identified intangible
assets. Our goodwill is evaluated for impairment annually as of year-end or more frequently if conditions exist that
indicate that the value may be impaired. We test our goodwill for impairment at the reporting unit level. These
impairment evaluations are performed by comparing the carrying value of the goodwill of a reporting unit to its
estimated fair value. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the
business combination. We had previously identified two reporting units: our Banking Operations reporting unit and
our Residential Mortgage Banking reporting unit. On September 29, 2017, the Company sold the Residential
Mortgage Banking reporting unit. Our reporting unit is the same as our operating segment and reportable segment. If
we change our strategy or if market conditions shift, our judgments may change, which may result in adjustments to
the recorded goodwill balance.
For annual goodwill impairment testing, we have the option to first perform a qualitative assessment to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
including goodwill and other intangible assets. If we conclude that this is the case, we must perform the two-step test
described below. If we conclude based on the qualitative assessment that it is not more likely than not that the fair
value of a reporting unit is less than its carrying amount, we have completed our goodwill impairment test and do
not need to perform the two-step test.
Step one requires the fair value of each reporting unit is compared to its carrying value in order to identify
potential impairment. If the fair value of a reporting unit exceeds the carrying value of its net assets, goodwill is not
considered impaired and no further testing is required. If the carrying value of the net assets exceeds the fair value of
a reporting unit, potential impairment is indicated at the reporting unit level and step two of the impairment test is
performed.
Step two requires that when potential impairment is indicated in step one, we compare the implied fair value
of goodwill with the carrying amount of that goodwill. Determining the implied fair value of goodwill requires a
valuation of the reporting unit’s tangible and (non-goodwill) intangible assets and liabilities in a manner similar to
the allocation of the purchase price in a business combination. Any excess in the value of a reporting unit over the
amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. If the carrying
amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess.
84
As of December 31, 2018, we had goodwill of $2.4 billion. During the year ended December 31, 2018, no
triggering events were identified that indicated that the value of goodwill may be impaired. The Company performed
its annual goodwill impairment assessment as of December 31, 2018 using step one of the quantitative test and
found no indication of goodwill impairment at that date.
Premises and Equipment, Net
Premises, furniture, fixtures, and equipment are carried at cost, less the accumulated depreciation computed on
a straight-line basis over the estimated useful lives of the respective assets (generally 20 years for premises and three
to ten years for furniture, fixtures, and equipment). Leasehold improvements are carried at cost less the accumulated
amortization computed on a straight-line basis over the shorter of the related lease term or the estimated useful life
of the improvement.
Depreciation and amortization are included in “Occupancy and equipment expense” in the Consolidated
Statements of Operations and Comprehensive Income (Loss), and amounted to $32.3 million, $32.8 million, and
$32.8 million, respectively, in the years ended December 31, 2018, 2017, and 2016.
Bank-Owned Life Insurance
The Company has purchased life insurance policies on certain employees. These BOLI policies are recorded
in the Consolidated Statements of Condition at their cash surrender value. Income from these policies and changes
in the cash surrender value are recorded in “Non-interest income” in the Consolidated Statements of Operations and
Comprehensive Income. At December 31, 2018 and 2017, the Company’s investment in BOLI was $977.6 million
and $967.2 million, respectively. There were no additional purchases of BOLI during the years ended December 31,
2018 or 2017. The Company’s investment in BOLI generated income of $28.3 million, $27.1 million, and
$31.0 million, respectively, during the years ended December 31, 2018, 2017, and 2016.
Repossessed Assets and OREO
Repossessed assets consist of any property or other assets acquired through, or in lieu of, foreclosure are sold
or rented, and are recorded at fair value, less the estimated selling costs, at the date of acquisition. Following
foreclosure, management periodically performs a valuation of the asset, and the assets are carried at the lower of the
carrying amount or fair value, less the estimated selling costs. Expenses and revenues from operations and changes
in valuation, if any, are included in “General and administrative” expense in the Consolidated Statements of
Operations and Comprehensive Income. At December 31, 2018, the Company had $2.6 million of OREO and
$8.2 million of taxi medallions. At December 31, 2017, the Company had $8.2 million of OREO and $8.2 million of
taxi medallions.
Income Taxes
Income tax expense consists of income taxes that are currently payable and deferred income taxes. Deferred
income tax expense is determined by recognizing deferred tax assets and liabilities for future tax consequences
attributable to temporary differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates that
are expected to apply to taxable income in years in which those temporary differences are expected to be recovered
or settled. The Company assesses the deferred tax assets and establishes a valuation allowance when realization of a
deferred asset is not considered to be “more likely than not.” The Company considers its expectation of future
taxable income in evaluating the need for a valuation allowance.
The Company estimates income taxes payable based on the amount it expects to owe the various tax
authorities (i.e., federal, state, and local). Income taxes represent the net estimated amount due to, or to be received
from, such tax authorities. In estimating income taxes, management assesses the relative merits and risks of the
appropriate tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the
context of the Company’s tax position. In this process, management also relies on tax opinions, recent audits, and
historical experience. Although the Company uses the best available information to record income taxes, underlying
estimates and assumptions can change over time as a result of unanticipated events or circumstances such as changes
in tax laws and judicial guidance influencing its overall tax position.
Stock-Based Compensation
Under the New York Community Bancorp, Inc. 2012 Stock Incentive Plan (the “2012 Stock Incentive Plan”),
which was approved by the Company’s shareholders at its Annual Meeting on June 7, 2012, shares are available for
grant as restricted stock or other forms of related rights. At December 31, 2018, the Company had 4,951,108 shares
85
available for grant under the 2012 Stock Incentive Plan. Compensation cost related to restricted stock grants is
recognized on a straight-line basis over the vesting period. For a more detailed discussion of the Company’s stock-
based compensation, see Note 13, “Stock-Related Benefit Plans.”
Retirement Plans
The Company’s pension benefit obligations and post-retirement health and welfare benefit obligations, and the
related costs, are calculated using actuarial concepts in accordance with GAAP. The measurement of such
obligations and expenses requires that certain assumptions be made regarding several factors, most notably
including the discount rate and the expected rate of return on plan assets. The Company evaluates these assumptions
on an annual basis. Other factors considered by the Company in its evaluation include retirement patterns, mortality
rates, turnover, and the rate of compensation increase.
Under GAAP, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or
obligations that have not been recognized under previous accounting standards must be recognized in AOCL until
they are amortized as a component of net periodic benefit cost.
Earnings per Common Share (Basic and Diluted)
Basic earnings per common share (“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 earnings per common share for
the years ended December 31, 2018, 2017, and 2016:
(in thousands, except share and per share amounts)
Net income available to common shareholders
Less: Dividends paid on and earnings allocated to
participating securities
Earnings applicable to common stock
Weighted average common shares outstanding
Basic earnings per common share
Years Ended December 31,
2017
$441,580
2018
$389,589
2016
$495,401
(4,871 )
$384,718
(3,554 )
$438,026
(3,795 )
$491,606
487,287,872 487,073,951 485,150,173
$1.01
$0.90
$0.79
Earnings applicable to common stock
$384,718
$438,026
$491,606
Weighted average common shares outstanding
Potential dilutive common shares
Total shares for diluted earnings per common share computation
Diluted earnings per common share and common share equivalents
Impact of Recent Accounting Pronouncements
Recently Adopted Accounting Standards
487,287,872 487,073,951 485,150,173
--
487,287,872 487,073,951 485,150,173
$1.01
$0.90
$0.79
--
--
The Company 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
86
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 adopted ASU No. 2018-16, Derivatives and Hedging (Topic 815)—Inclusion of the Secured
Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge
Accounting Purposes, effective on its issuance date of October 25, 2018. The purpose of ASU 2018-16 is to permit
the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic
815. The amendments in ASU 2018-16 are required to be applied prospectively for qualifying new or redesignated
hedging relationships entered into on or after the date of adoption. As of December 31, 2018, the Company had no
identified accounting hedges in place, and as such, adoption of ASU No. 2018-16 had no impact on the Company’s
Consolidated Statements of Condition, results of operations, or cash flows.
The Company 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 of December 31, 2018, the Company had no identified accounting hedges in place, and as such,
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 is the only
component that can be capitalized. The standard required 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 requires 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 are also required to disclose
information regarding the nature of the restrictions. The adoption of ASU No. 2016-18 did not have an 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
87
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 equity investments were reclassified from securities available for
sale to other assets with their related market value changes reflected in earnings for the twelve months ended
December 31, 2018. In addition, the fair value disclosures for financial instruments in Note 14 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 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 of 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. 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 through 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. 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
88
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.
The Company will adopt ASU No. 2016-13 as of January 1, 2020 on a modified retrospective basis with a
cumulative-effect adjustment to retained earnings as of the adoption date. However, 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 will 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 will 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, will prospectively apply the guidance in ASU No. 2016-13 for PCD
assets. A prospective transition approach will be used for PCD assets where upon adoption, the amortized cost basis
will 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
it 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 are 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 a working group with multiple members from
applicable departments to evaluate the requirements of the new standard, plan for loss modeling requirements
consistent with lifetime expected loss estimates, and assess 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 subsequently issued four
amendments to the ASU: ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient Transition to
Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Leases (Topic 842):
Targeted Improvements; and ASU 2018-20, Narrow-Scope Improvements. The Company will adopt the ASUs as of
January 1, 2019 on a modified retrospective basis with a cumulative-effect adjustment through retained earnings as
of the date of adoption. Topic 842 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, ASU 2016-02
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. Topic 842 includes a
number of optional practical expedients that entities may elect to apply. The Company plans to adopt the practical
expedients of: not reevaluating whether or not a contract contains a lease; retaining current lease classification; not
reassessing initial direct costs for existing leases; and not reassessing existing land easements that were not
previously accounted for as leases under current lease accounting rules. The Company will not utilize the practical
expedient of hindsight in its lease assessments. The Company’s working group, comprised of associates from
disciplines such as Vendor Risk Management, Real Estate, Technology, and Accounting, has completed its review
for embedded leases in the Company’s contractual arrangements in an effort to identify the Company’s full lease
population. To date, we have found only an immaterial amount of 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
89
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.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of ASU 2018-13 is
to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of
the information required by GAAP that is most important to users of each entity’s financial statements. The
amendments in ASU 2018-13 are effective for the Company as of January 1, 2020. Early adoption is permitted and
an entity is permitted to early adopt any removed or modified disclosures upon issuance of the ASU and delay
adoption of the additional disclosures until their effective date. The amendments removed the disclosure
requirements for transfers between Levels 1 and 2 of the fair value hierarchy, the disclosure of the policy for timing
of transfers between levels of the fair value hierarchy, and the disclosure of the valuation processes for Level 3 fair
value measurements. Additionally, the amendments modified the disclosure requirements for investments in certain
entities that calculate net asset value and measurement uncertainty. Finally, the amendments added disclosure
requirements for the changes in unrealized gains and losses included in other comprehensive income for recurring
Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to
develop Level 3 measurements. The amendments on changes in unrealized gains and losses, the range and weighted
average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative
description of measurement uncertainty should be applied prospectively for only the most recent interim or annual
period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all
periods presented upon their effective date. The adoption of ASU 2018-13 is not expected to have a material effect
on the Company’s Consolidated Statements of Condition, results of operations, or cash flows.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal Use
Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement that is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs
incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation
costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use
software license). The accounting for the service element of a hosting arrangement that is a service contract is not
affected by the amendment. ASU No. 2018-15 is effective for fiscal years beginning after December 31, 2019. The
Company plans to early adopt ASU 2018-15 as of January 1, 2019. The adoption of ASU 2018-15 is not expected to
have a material effect on the Company’s Consolidated Statements of Conditions, results of operations, or cash flows.
NOTE 3: RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS
(in thousands)
For the Twelve Months Ended December 31, 2018
Details about
Accumulated Other Comprehensive Loss
Unrealized losses on available-for-sale
securities
Amortization of defined benefit pension plan
items:
Past service liability
Actuarial losses
Total reclassifications for the period
Amount Reclassified
from Accumulated
Other Comprehensive
Loss (1)
Affected Line Item in the
Consolidated Statements of Operations
and Comprehensive Income
$
$
(14 )
4
(10 )
Net (loss) gain on securities
Income tax benefit
Net (loss) gain on securities, net of tax
$ 249
periodic credit(2)
Included in the computation of net
Included in the computation of net
(7,487 )
(7,238 )
2,068
$ (5,170 )
$ (5,180 )
periodic credit (2)
Total before tax
Income tax benefit
Amortization of defined benefit pension
plan items, net of tax
(1) Amounts in parentheses indicate expense items.
(2) See Note 12, “Employee Benefits,” for additional information.
90
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 December 31, 2018 and 2017:
(in thousands)
Debt securities available-for-sale
Mortgage-Related Debt Securities:
GSE certificates
GSE CMOs
Total mortgage-related debt securities
Other Debt Securities:
GSE debentures
Asset-backed securities (1)
Municipal bonds
Corporate bonds
Capital trust notes
Total other debt securities
Total other securities available for sale (2)
Equity securities:
Preferred stock
Mutual funds and common stock (3)
Total equity securities
Total securities
Amortized
Cost
$ 1,705,336
1,248,621
$ 2,953,957
$ 1,334,549
386,768
68,551
836,153
48,278
$ 2,674,299
$ 5,628,256
15,292
16,870
32,162
$
$ 5,660,418
December 31, 2018
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair Value
$ 18,146
8,380
$ 26,526
$ 3,366
784
195
8,667
6,435
$ 19,447
$ 45,973
--
366
366
$
$ 46,339
$ 15,961
4,240
$ 20,201
$ 8,988
430
2,563
23,105
5,422
$ 40,508
$ 60,709
1,446
531
$ 1,977
$ 62,686
$ 1,707,521
1,252,761
$ 2,960,282
$ 1,328,927
387,122
66,183
821,715
49,291
$ 2,653,238
$ 5,613,520
13,846
16,705
30,551
$
$ 5,644,071
(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 December 31, 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.
91
(in thousands)
Mortgage-Related Securities:
GSE certificates
GSE CMOs
Total mortgage-related securities
Other Securities:
U. S. Treasury obligations
GSE debentures
Municipal bonds
Corporate bonds
Capital trust notes
Preferred stock
Mutual funds and common stock (1)
Total other securities
Total securities available for sale (2)
Amortized
Cost
$ 2,023,677
536,284
$ 2,559,961
$ 199,960
473,879
70,381
79,702
48,230
15,292
16,874
$ 904,318
$ 3,464,279
December 31, 2017
Gross
Unrealized
Gain
Gross
Unrealized
Loss
$ 46,364
14,446
$ 60,810
$
--
2,044
540
11,073
6,498
142
487
$ 20,784
$ 81,594
$ 1,199
826
$ 2,025
$
62
2,665
801
--
8,632
--
261
$ 12,421
$ 14,446
Fair Value
$ 2,068,842
549,904
$ 2,618,746
$ 199,898
473,258
70,120
90,775
46,096
15,434
17,100
$ 912,681
$ 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 December 31, 2018 and 2017, respectively, the Company had $644.6 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, gross realized gains, and gross realized losses from the
sale of available-for-sale securities during the years ended December 31, 2018, 2017, and 2016:
(in thousands)
Gross proceeds
Gross realized gains
Gross realized losses
2018
December 31,
2017
$278,539 $453,878 $322,038
3,128
--
3,848
860
967
981
2016
In addition, during the twelve months ended December 31, 2017, the Company sought to take advantage of
favorable bond market conditions and sold held-to-maturity securities with an amortized cost of $521.0 million
resulting in gross proceeds of $547.9 million including a gross realized gain of $26.9 million. Accordingly, the
Company transferred the remaining $3.0 billion of held-to-maturity securities to available-for-sale with a net
unrealized gain of $82.8 million classified in other comprehensive loss in the Consolidated Statements of Condition.
Having the securities portfolio classified as available-for-sale improves the Company’s liquidity measures.
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).
(in thousands)
Beginning credit loss amount as of December 31, 2017
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
Ending credit loss amount as of December 31, 2018
92
For the
Twelve Months Ended
December 31, 2018
$196,333
--
--
--
--
--
146
$196,187
The following table summarizes, by contractual maturity, the amortized cost of securities at December 31, 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:
Due within one year
Due from one to five years
Due from five to ten years
Due after ten years
Total debt securities available for sale
$
--
1,093,265
328,455
1,532,237
$ 2,953,957
-- %
3.31
3.41
3.20
3.26 %
$
--
32,874
1,148,695
152,980
$ 1,334,549
-- %
3.48
3.41
3.63
3.44 %
$
148
146
10,981
57,276
$ 68,551
6.59 %
6.66
3.78
2.71
2.90 %
$
--
92,830
743,323
435,046
$ 1,271,199
-- %
3.75
4.34
3.24
3.92 %
$
153
1,233,880
2,213,968
2,165,519
$ 5,613,520
(1) Not presented on a tax-equivalent basis.
(2) Includes corporate bonds, capital trust notes, and asset-backed securities.
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, 2018:
(in thousands)
Temporarily Impaired Securities:
U. S. Government agency and GSE obligations
GSE certificates
GSE CMOs
Asset-backed securities
Municipal bonds
Corporate bonds
Capital trust notes
Equity securities
Total temporarily impaired securities
Less than Twelve Months
Twelve Months or Longer
Fair Value
Unrealized Loss Fair Value Unrealized Loss Fair Value
Total
Unrealized Loss
$ 276,113
576,970
465,779
69,166
5,876
642,843
--
17,836
$ 2,054,583
$ 2,629
10,598
1,892
430
21
23,105
--
1,464
$ 40,139
$ 329,372
232,969
99,050
--
48,837
--
38,360
11,293
$ 759,881
$ 6,359
5,363
2,348
--
2,542
--
5,422
513
$ 22,547
$ 605,485
809,939
564,829
69,166
54,713
642,843
38,360
29,129
$ 2,814,464
$ 8,988
15,961
4,240
430
2,563
23,105
5,422
1,977
$ 62,686
93
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:
(in thousands)
Temporarily Impaired Available-for-Sale Securities:
GSE certificates
GSE debentures
GSE CMOs
U. S. Treasury obligations
Municipal bonds
Capital trust notes
Equity securities
Total temporarily impaired available-for-sale securities
Less than Twelve Months
Twelve Months or Longer
Fair Value
Unrealized Loss Fair Value Unrealized Loss Fair Value
Total
Unrealized Loss
$ 232,546
333,045
118,694
199,898
11,169
--
--
$ 895,352
$ 535
2,665
826
62
259
--
--
$ 4,347
$ 20,440
--
--
--
41,054
35,105
11,545
$ 108,144
$
664
--
--
--
542
8,632
261
$ 10,099
$ 252,986
333,045
118,694
199,898
52,223
35,105
11,545
$ 1,003,496
$ 1,199
2,665
826
62
801
8,632
261
$ 14,446
94
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 December 31, 2018, the Company had unrealized losses on certain available for sale GSE obligations,
municipal bonds, corporate bonds, asset-backed securities, capital trust notes, and equity investments with readily
determinable fair values. The unrealized losses on the Company’s GSE obligations, municipal bonds, corporate
bonds, asset-backed securities and capital trust notes at December 31, 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 unrealized losses on the Company’s equity investments with readily determinable fair values at
December 31, 2018 were caused by market volatility. Equity investments with readily determinable fair values are
measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the
available-for-sale category. 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
December 31, 2018 consisted of nine agency mortgage-related securities, nine US Government agency securities,
seven agency collateralized mortgage obligations, five capital trusts notes, three municipal bonds, and one mutual
fund. At December 31, 2017 securities designated as having a continuous loss position for twelve months or more
consisted of six agency mortgage-related securities, five capital trust notes, two municipal bonds, and one mutual
fund. At December 31, 2018, the fair value of securities having a continuous loss position for twelve months or
more was 2.9% below the collective amortized cost of $782.4 million. At December 31, 2017, the fair value of such
securities was 8.5% below the collective amortized cost of $118.2 million. At December 31, 2018 and 2017, the
combined market value of the respective securities represented unrealized losses of $22.5 million and $10.1 million,
respectively.
95
NOTE 5: LOANS
The following table sets forth the composition of the loan portfolio at the dates indicated:
(dollars in thousands)
Loans Held for Investment:
Mortgage Loans:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Total mortgage loans held for investment
Other Loans:
Commercial and industrial
Lease financing, net of unearned income
of $53,891 and $65,041, respectively
Total commercial and industrial loans (1)
Other
Total other loans held for investment
Total loans held for investment
Net deferred loan origination costs
Allowance for losses
Loans held for investment, net
Loans held for sale
Total loans, net
December 31, 2018
December 31, 2017
Percent of
Loans Held for
Investment
Amount
Percent of
Loans Held
for Investment
Amount
$29,883,919
6,998,834
446,094
407,870
$37,736,717
74.46 %
17.44
1.11
1.02
94.03
$28,074,709
7,322,226
477,228
435,825
$36,309,988
73.19 %
19.09
1.24
1.14
94.66
1,705,308
4.25
1,377,964
3.59
683,112
2,388,420
8,724
2,397,144
$40,133,861
32,047
(159,820 )
$40,006,088
--
$40,006,088
1.70
5.95
0.02
5.97
100.00 %
662,610
2,040,574
8,460
2,049,034
$38,359,022
28,949
(158,046 )
$38,229,925
35,258
$38,265,183
1.73
5.32
0.02
5.34
100.00 %
(1) Includes specialty finance loans and leases of $1.9 billion and $1.5 billion, respectively, at December 31, 2018 and 2017.
Other C&I loans of $469.9 million and $500.8 million, respectively, at December 31, 2018 and 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.
96
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 December 31, 2018 were loans of $35.3 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 December 31, 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.
97
Asset Quality
The following table presents information regarding the quality of the Company’s loans held for investment at
December 31, 2018:
Loans
30-89 Days
Past Due
$ --
--
9
Non-
Accrual
Loans
$ 4,220
3,021
1,651
Loans
90 Days or More
Delinquent and
Still Accruing
Interest
$--
--
--
Total
Past Due
Loans
Total Loans
Current
Receivable
Loans
$ 4,220 $29,879,699 $29,883,919
3,021 6,995,813 6,998,834
446,094
1,660
444,434
--
530
25
$564
--
36,608
6
$45,506
--
--
--
$--
--
37,138
31
$46,070
407,870
407,870
2,351,282 2,388,420
8,724
$40,087,791 $40,133,861
8,693
(in thousands)
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and
construction
Commercial and industrial(1) (2)
Other
Total
(1) Includes $530,000 and $35.5 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
Delinquent and
Still Accruing
Interest
$--
--
--
Non-
Accrual
Loans
$11,078
6,659
1,966
Loans
30-89 Days
Past Due
$ 1,258
13,227
585
Total
Past Due
Loans
Total Loans
Current
Receivable
Loans
$12,336 $28,062,373 $28,074,709
19,886 7,302,340 7,322,226
477,228
2,551
474,677
--
6,200
2,711
8
$17,789
47,768
11
$73,682
--
--
--
$--
6,200
429,625
435,825
50,479
19
$91,471
1,990,095 2,040,574
8,460
$38,267,551 $38,359,022
8,441
(in thousands)
Multi-family
Commercial real estate
One-to-four family
Acquisition, development,
and construction
Commercial and industrial(1)
(2)
Other
Total
(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 December 31, 2018:
Mortgage Loans
Other Loans
(in thousands)
Credit Quality Indicator:
Multi-
Family
Commercial
Real Estate
One-to-Four
Family
Acquisition,
Development,
and
Construction
Total
Mortgage
Loans
Commercial
and
Industrial(1)
Other
Total Other
Loans
Pass
Special mention
Substandard
Doubtful
Total
$29,548,242 $6,880,105
90,653
312,025
28,076
23,652
--
--
$29,883,919 $6,998,834
$444,443
--
1,651
--
$446,094
$319,001
73,964
14,905
--
$407,870
$37,191,791 $2,306,563
19,751
476,642
62,106
68,284
--
--
$37,736,717 $2,388,420
$ 8,469 $2,315,032
19,751
62,361
--
$ 8,724 $2,397,144
--
255
--
(1) Includes lease financing receivables, all of which were classified as Pass.
98
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
(in thousands)
Credit Quality Indicator:
Multi-
Family
Commercial
Real Estate
One-to-Four
Family
Acquisition,
Development,
and
Construction
Total
Mortgage
Loans
Commercial
and
Industrial(1)
Other
Total Other
Loans
Pass
Special mention
Substandard
Doubtful
Total
$27,874,330 $7,255,100
47,123
125,752
20,003
74,627
--
--
$28,074,709 $7,322,226
$471,571
3,691
1,966
--
$477,228
$344,040
76,033
15,752
--
$435,825
$35,945,041 $1,925,527
20,883
252,599
94,164
112,348
--
--
$36,309,988 $2,040,574
$8,449 $1,933,976
20,883
94,175
--
$8,460 $2,049,034
--
11
--
(1) Includes lease financing receivables, all of which were classified as Pass.
The preceding classifications are the most current ones available and generally have been updated within the
last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass
loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close
attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower
or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company
will sustain some loss); and doubtful loans, based on existing circumstances, have weaknesses that make collection
or liquidation in full highly questionable and improbable. In addition, one-to-four family loans are classified based
on the duration of the delinquency.
The interest income that would have been recorded under the original terms of non-accrual loans at the
respective year-ends, and the interest income actually recorded on these loans in the respective years, is summarized
below:
(in thousands)
Interest income that would have been recorded
Interest income actually recorded
Interest income foregone
Troubled Debt Restructurings
2018
$ 4,145
(3,480 )
$ 665
December 31,
2017
$ 4,974
(2,904 )
$ 2,070
2016
$ 3,128
(1,708 )
$ 1,420
The Company is required to account for certain loan modifications and restructurings as TDRs. In general, a
modification or restructuring of a loan constitutes a TDR if the Company grants a concession to a borrower
experiencing financial difficulty. A loan modified as a TDR generally is placed on non-accrual status until the
Company determines that future collection of principal and interest is reasonably assured, which requires, among
other things, that the borrower demonstrate performance according to the restructured terms for a period of at least
six consecutive months.
In 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
December 31, 2018, loans on which concessions were made with respect to rate reductions and/or extension of
maturity dates amounted to $34.8 million; loans on which forbearance agreements were reached amounted to
$37,000.
The following table presents information regarding the Company’s TDRs as of December 31, 2018 and 2017:
(in thousands)
Loan Category:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development,
and construction
Commercial and industrial
Total
December 31, 2018
December 31, 2017
Accruing Non-Accrual Total Accruing Non-Accrual Total
$ --
--
--
8,297
865
$9,162
$ 4,220
--
1,022
$ 4,220
--
1,022
$ 824
--
--
$ 8,061
368
1,066
$ 8,885
368
1,066
--
20,477
$25,719
8,297
21,342
$34,881
8,652
177
$9,653
--
26,408
$35,903
8,652
26,585
$45,556
99
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 twelve months ended December 31, 2018, 2017 and
2016 are summarized as follows:
For the Twelve Months Ended December 31, 2018
Weighted Average
Interest Rate
Number
of Loans
Pre-Modification
Recorded
Investment
Post-Modification
Recorded
Investment
Pre-
Modification
Post-
Modification
Charge-off
Amount
Capitalized
Interest
(dollars in thousands)
Loan Category:
Acquisition, development,
and construction
Commercial and industrial
Total
(dollars in thousands)
Loan Category:
One-to-four family
Acquisition, development,
and construction
Commercial and industrial
Total
1
21
22
4
2
65
71
$
900
7,763
$ 8,663
$
900
5,455
$ 6,355
4.50 %
3.25
4.50 %
3.13
$
--
2,308
$ 2,308
$ --
--
$ --
For the Twelve Months Ended December 31, 2017
Weighted Average
Interest Rate
Number
of Loans
Pre-Modification
Recorded
Investment
Post-Modification
Recorded
Investment
Pre-
Modification
Post-
Modification
Charge-off
Amount
Capitalized
Interest
$
810
$
986
5.93 %
2.21 % $
--
$ 12
8,652
52,179
$ 61,641
8,652
26,409
$ 36,047
5.50
3.36
5.50
3.29
--
14,273
$ 14,273
--
--
$ 12
For the Twelve Months Ended December 31, 2016
Weighted Average
Interest Rate
(dollars in thousands)
Loan Category:
Multi-family
One-to-four family
Commercial and industrial
Total
Number
of Loans
Pre-Modification
Recorded
Investment
Post-Modification
Recorded
Investment
Pre-
Modification
Post-
Modification
Charge-off
Amount
Capitalized
Interest
1
5
7
13
$ 9,340
900
4,697
$ 14,937
$ 8,129
1,036
3,935
$ 13,100
4.63 %
4.26
3.22
4.00 % $
2.65
3.19
$
--
--
170
170
$ --
11
--
$ 11
At December 31, 2018, one C&I loan, in the amount of $194,000 that had been modified as a TDR during the
twelve months ended at that date and was 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 losses on non-
covered loans and covered loans, based upon the method of evaluating loan impairment:
(in thousands)
Allowance for Loan Losses at December 31, 2018:
Loans collectively evaluated for impairment
Mortgage
Other
Total
$ 130,983
$ 28,837
$ 159,820
100
(in thousands)
Allowance for Loan Losses at December 31, 2017:
Loans collectively evaluated for impairment
Mortgage
Other
Total
$ 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)
Loans Receivable at December 31, 2018:
Mortgage
Other
Total
Loans individually evaluated for impairment $
Loans collectively evaluated for impairment
15,794
37,720,923
$ 37,736,717
$
36,375
2,360,769
$ 2,397,144
$
52,169
40,081,692
$ 40,133,861
Total
(in thousands)
Loans Receivable at December 31, 2017:
Loans individually evaluated for impairment
Loans collectively evaluated for impairment
Total
Mortgage
Other
Total
$
31,747
36,278,241
$ 36,309,988
$
48,810
2,000,224
$ 2,049,034
$
80,557
38,278,465
$ 38,359,022
Allowance for Loan Losses
The following table summarizes activity in the allowance for loan losses for the periods indicated:
(in thousands)
Balance, beginning of period
Charge-offs
Recoveries
Provision for non-covered
loan losses
Balance, end of period
For the Twelve Months Ended December 31,
2018
Mortgage Other
Mortgage
Total
2017
Other
$125,416 $32,874 $158,290
(63,350 )
(62,975 )
2,163
1,558
(375 )
605
Total
2,629
60,943
$128,275 $29,771 $158,046
58,314
$128,275
(5,445 )
264
$ 29,771 $158,046
(18,342 )
(12,897 )
1,860
1,596
7,889
$130,983
10,367
18,256
$ 28,837 $159,820
101
The following table presents additional information about the Company’s impaired loans at December 31,
2018:
Total impaired loans with no related allowance
$ 52,169
(in thousands)
Impaired loans with no related allowance:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Other
Impaired loans with an allowance recorded:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Other
Total impaired loans with an allowance
recorded
Total impaired loans:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Other
Total impaired loans
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
$ 4,220
2,256
1,022
8,296
36,375
$ 7,168
7,371
1,076
9,197
101,701
$ 126,513
$
$
--
--
--
--
--
--
--
--
--
--
$ --
--
--
--
--
$ --
$ --
--
--
--
--
$ 6,114
3,234
1,576
9,238
42,984
$ 63,146
$
--
--
--
--
20
$ 340
--
26
590
3,057
$ 4,013
$
--
--
--
--
--
--
$
--
$
--
$ --
$
20
$
$ 4,220
2,256
1,022
8,296
36,375
$ 52,169
$ 7,168
7,371
1,076
9,197
101,701
$ 126,513
$ --
--
--
--
--
$ --
$ 6,114
3,234
1,576
9,238
43,004
$ 63,166
$ 340
--
26
590
3,057
$ 4,013
102
The following table presents additional information about the Company’s impaired loans at December 31,
2017:
Total impaired loans with no related allowance
$ 80,557
(in thousands)
Impaired loans with no related allowance:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Other
Impaired loans with an allowance recorded:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Other
Total impaired loans with an allowance
recorded
Total impaired loans:
Multi-family
Commercial real estate
One-to-four family
Acquisition, development, and construction
Other
Total impaired loans
NOTE 7: DEPOSITS
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
$ 8,892
5,137
1,966
15,752
48,810
$ 11,470
10,252
2,072
25,952
104,901
$ 154,647
$
$
--
--
--
--
--
$
--
$
--
--
--
--
--
--
$ --
--
--
--
--
$ --
$ --
--
--
--
--
$ 9,554
3,522
2,489
10,976
43,074
$ 69,615
$ 495
92
50
575
2,200
$ 3,412
$
$
--
--
--
--
314
--
--
--
--
--
--
$ --
$
314
$
$ 8,892
5,137
1,966
15,752
48,810
$ 80,557
$ 11,470
10,252
2,072
25,952
104,901
$ 154,647
$ --
--
--
--
--
$ --
$ 9,554
3,522
2,489
10,976
43,388
$ 69,929
$ 495
92
50
575
2,200
$ 3,412
The following table sets forth the weighted average interest rates for each type of deposit at December 31,
2018 and 2017:
December 31,
2018
2017
Amount
Percent
of Total
Weighted
Average
Interest
Rate
Amount
Percent
of Total
Weighted
Average
Interest
Rate
$11,530,049
4,643,260
12,194,322
2,396,799
37.48 %
15.09
39.64
7.79
1.74 %
0.68
2.15
--
$12,936,301
5,210,001
8,643,646
2,312,215
44.45 % 0.23 %
17.90
29.70
7.95
0.52
1.31
--
$30,764,430 100.00 %
1.61 %
$29,102,163 100.00 % 0.58 %
(dollars in thousands)
Interest-bearing checking and
money market accounts
Savings accounts
Certificates of deposit
Non-interest-bearing accounts
Total deposits
At December 31, 2018 and 2017, the aggregate amount of deposits that had been reclassified as loan balances
(i.e., overdrafts) was $2.8 million and $3.1 million, respectively.
103
The scheduled maturities of certificates of deposit (“CDs”) at December 31, 2018 were as follows:
(in thousands)
1 year or less
More than 1 year through 2 years
More than 2 years through 3 years
More than 3 years through 4 years
More than 4 years through 5 years
Over 5 years
Total CDs
$10,327,860
1,615,405
41,498
16,435
6,448
186,676
$12,194,322
The following table presents a summary of CDs in amounts of $100,000 or more by remaining term to
maturity, at December 31, 2018:
(in thousands)
Total
3 Months
or Less
$1,664,185
CDs of $100,000 or More Maturing Within
Over 6 to
12 Months
$2,324,535
Over
12 Months
$1,232,625
Over 3 to
6 Months
$1,776,418
Total
$6,997,763
Included in total deposits at both December 31, 2018 and 2017 were brokered deposits of $4.0 billion with
weighted average interest rates of 2.50% and 1.37% at the respective year-ends. Brokered money market accounts
represented $1.9 billion and $2.6 billion, respectively, of the December 31, 2018 and 2017 totals, and brokered
interest-bearing checking accounts represented $786.1 million and $793.7 million, respectively. Brokered CDs
represented $1.3 billion and $567.8 million of brokered deposits at December 31, 2018 and 2017, respectively.
NOTE 8: BORROWED FUNDS
The following table summarizes the Company’s borrowed funds at December 31, 2018 and 2017:
(in thousands)
Wholesale borrowings:
December 31,
2018
2017
FHLB advances
Repurchase agreements
Federal funds purchased
Total wholesale borrowings
Junior subordinated debentures
Subordinated notes
Total borrowed funds
$13,053,661
500,000
--
$13,553,661
359,508
294,697
$14,207,866
$12,104,500
450,000
--
$12,554,500
359,179
--
$12,913,679
Accrued interest on borrowed funds is included in “Other liabilities” in the Consolidated Statements of
Condition and amounted to $23.5 million and $19.3 million, respectively, at December 31, 2018 and 2017.
FHLB Advances
The contractual maturities and the next call dates of FHLB advances outstanding at December 31, 2018 were
as follows:
Contractual Maturity
Earlier of Contractual Maturity
or Next Call Date
(dollars in thousands)
Year
2019
2020
2021
2022
2028
Total FHLB advances
Amount
$ 4,431,000
3,425,000
822,661
25,000
4,350,000
$13,053,661
Amount
$ 4,431,000
5,175,000
3,422,661
25,000
--
$13,053,661
Weighted
Average
Interest Rate
1.74
2.20
2.45
2.75
--
2.11 %
Weighted
Average
Interest Rate
1.74
2.13
2.40
2.75
2.40
2.11 %
104
FHLB advances include both straight fixed-rate advances and advances under the FHLB convertible advance
program, which gives the FHLB the option of either calling the advance after an initial lock-out period of up to five
years and quarterly thereafter until maturity, or a one-time call at the initial call date.
The Company had no short-term FHLB advances at December 31, 2018 or 2017. During the twelve months
ended at December 31, 2017 and 2016, the average balances of short-term FHLB advances were $3.3 million and
$929.4 million, with weighted average interest rates of 0.82% and 0.60%, respectively. In 2017 and 2016, the
interest expense generated by average short-term FHLB advances was $27,000 and $5.5 million, respectively.
At December 31, 2018 and 2017, respectively, the Bank had unused lines of available credit with the FHLB-
NY of up to $7.5 billion and $7.1 billion. There were no overnight FHLB-NY advances at December 31, 2018 or
2017. During the twelve months ended December 31, 2018, the average balance of overnight advances amounted to
$5.2 million, with a weighted average interest rate of 2.3%, generating interest expense of $121,000. During the
twelve months ended December 31, 2017 and 2016, the average balances of overnight advances amounted to
$7.7 million and $426.5 million, with a weighted average interest rates of 0.98% and 0.59%, respectively. In 2017
and 2016, the interest expense generated by average overnight advances was $75,000 and $2.5 million.
Total FHLB advances generated interest expense of $248.0 million, $186.0 million, and $172.0 million, in the
years ended December 31, 2018, 2017, and 2016, respectively.
Repurchase Agreements
The following table presents an analysis of the contractual maturities and next call dates of the Company’s
outstanding repurchase agreements accounted for as secured borrowings at December 31, 2018.
(dollars in thousands)
Year of Maturity
2019
2021
2028
Contractual Maturity
Amount
$200,000
--
300,000
$500,000
Weighted Average
Interest Rate
1.69 %
--
2.37
2.10 %
Earlier of Contractual Maturity
or Next Call Date
Amount
$200,000
300,000
--
$500,000
Weighted Average
Interest Rate
1.69 %
2.37
--
2.10 %
The following table provides the contractual maturity and weighted average interest rate of repurchase
agreements, and the amortized cost and fair value (including accrued interest) of the securities collateralizing the
repurchase agreements, at December 31, 2018:
(dollars in thousands)
Period of Maturity
30 to 90 days
Greater than 90 days
Total
Amount
$200,000
300,000
$500,000
Weighted Average
Interest Rate
1.69%
2.37
2.10%
Amortized
Cost
$ 215,244
--
$ 215,244
Fair Value
$ 213,135
--
$ 213,135
Mortgage-Related and
Other Securities
GSE Debentures and
U.S. Treasury
Obligations
Amortized
Cost
$ --
321,163
$ 321,163
Fair Value
$ --
317,683
$ 317,683
The Company had no short-term repurchase agreements outstanding at December 31, 2018 or 2017.
At December 31, 2018 and 2017, the accrued interest on repurchase agreements amounted to $287,000 and
$760,000, respectively. The interest expense on repurchase agreements was $6.8 million, $16.4 million, and
$23.3 million, in the years ended December 31, 2018, 2017, and 2016, respectively.
Federal Funds Purchased
There were no federal funds purchased outstanding at December 31, 2018 or 2017.
In 2018 and 2017, respectively, the average balances of federal funds purchased were to $620,000 and
$47.9 million, with weighted average interest rates of 2.2% and 0.87%. In 2016, the average balance of federal funds
purchased amounted to $525.4 million with a weighted average interest rate of 0.51%. The interest expense
105
produced by federal funds purchased was $14,000, $418,000 and $2.7 million for the years ended December 31,
2018, 2017 and 2016, respectively.
Subordinated Notes
On November 6, 2018, the Company issued $300.0 million aggregate principal amount of our 5.90% Fixed-
to-Floating Rate Subordinated Notes due 2028 (the “Notes”). The Notes will mature on November 6, 2028. From
and including the date of original issuance to, but excluding November 6, 2023, the Notes will bear interest at an
initial rate of 5.90% per annum, payable semi-annually in arrears on May 6 and November 6 of each year,
commencing on May 6, 2019. Unless redeemed, from and including November 6, 2023 to but excluding the
Maturity Date, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month
LIBOR rate plus 278 basis points, payable quarterly in arrears on February 6, May 6, August 6 and November 6 of
each year, commencing on February 6, 2024.
Issuance costs incurred were $5.4 million and are being amortized as part of interest expense over 10 years.
The interest expense on subordinated notes amounted to $2.8 million at the year ended December 31, 2018.
Junior Subordinated Debentures
At December 31, 2018 and 2017, the Company had $359.5 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 December 31, 2018:
Interest
Rate
of Capital
Securities
and
Debentures
Junior
Subordinated
Debentures
Amount
Outstanding
Capital
Securities
Amount
Outstanding
(dollars in thousands)
Date of
Original Issue Stated Maturity
First Optional
Redemption Date
6.000 %
$145,582
$139,231 Nov. 4, 2002
Nov. 1, 2051
Nov. 4, 2007 (1)
4.388
6.038
4.453
123,712
30,928
120,000 Dec. 14, 2006 Dec. 15, 2036 Dec. 15, 2011 (2)
June 15, 2008 (2)
30,000 June 2, 2003
June 15, 2033
59,286
57,500 April 16, 2007 June 30, 2037
June 30, 2012 (2)
$359,508
$346,731
Issuer
New York Community
Capital Trust V
(BONUSESSM Units)
New York Community
Capital Trust X
PennFed Capital Trust III
New York Community
Capital Trust XI
Total junior subordinated
debentures
(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.
The Bifurcated Option Note Unit SecuritiESSM (“BONUSES units”) included in the preceding table were
issued by the Company on November 4, 2002 at a public offering price of $50.00 per share. Each of the 5,500,000
BONUSES units offered consisted of a capital security issued by New York Community Capital Trust V, a trust
formed by the Company, and a warrant to purchase 2.4953 shares of the common stock of the Company (for a total
of approximately 13.7 million common shares) at an effective exercise price of $20.04 per share. Each capital
security has a maturity of 49 years, with a coupon, or distribution rate, of 6.00% on the $50.00 per share liquidation
amount. The warrants and capital securities were non-callable for five years from the date of issuance and were not
called by the Company when the five-year period passed on November 4, 2007.
106
The gross proceeds of the BONUSES units totaled $275.0 million and were allocated between the capital
security and the warrant comprising such units in proportion to their relative values at the time of issuance. The
value assigned to the warrants, $92.4 million, was recorded as a component of additional “paid-in capital” in the
Company’s Consolidated Statements of Condition. The value assigned to the capital security component was
$182.6 million. The $92.4 million difference between the assigned value and the stated liquidation amount of the
capital securities was treated as an original issue discount, and is being amortized to interest expense over the 49-
year life of the capital securities on a level-yield basis. At December 31, 2018, this discount totaled $66.1 million.
The other three trust preferred securities noted in the preceding table were formed for the purpose of issuing
Company Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trusts Holding Solely Junior
Subordinated Debentures (collectively, the “Capital Securities”). Dividends on the Capital Securities are payable
either quarterly or semi-annually and are deferrable, at the Company’s option, for up to five years. As of
December 31, 2018, all dividends were current.
Interest expense on junior subordinated debentures was $21.7 million, $19.6 million, and $18.5 million,
respectively, for the years ended December 31, 2018, 2017, and 2016.
NOTE 9: FEDERAL, STATE, AND LOCAL TAXES
The following table summarizes the components of the Company’s net deferred tax asset (liability) at
December 31, 2018 and 2017:
(in thousands)
Deferred Tax Assets:
Allowance for loan losses
Compensation and related benefit obligations
Acquisition accounting and fair value adjustments on securities
(including OTTI)
Non-accrual interest
Restructuring and retirement of borrowed funds
Net operating loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Deferred tax asset after valuation allowance
Deferred Tax Liabilities:
Amortizable intangibles
Acquisition accounting and fair value adjustments on securities
$
$
December 31,
2018
2017
$
45,611 $ 46,239
13,010
19,693
6,728
431
---
---
11,349
83,812
----
--
818
1,105
2,967
15,953
80,092
----
83,812 $ 80,092
(2,263 ) $
(1,704 )
(including OTTI)
Undistributed earnings of subsidiaries
Mortgage servicing rights
Premises and equipment
Prepaid pension cost
Leases
Other
Gross deferred tax liabilities
Net deferred tax liability
---
---
(223 )
(11,242 )
(19,135 )
(115,259 )
(14,800 )
(17,090 )
(19,003 )
(1,794 )
(12,907 )
(24,324 )
(78,682 )
(9,385 )
$ (162,922 ) $ (164,889 )
(79,110 ) $ (84,797 )
$
The deferred tax liability represents the anticipated federal, state, and local tax expenses or benefits that are
expected to be realized in future years upon the utilization of the underlying tax attributes comprising said balances.
The net deferred tax liability is included in “Other liabilities” in the Consolidated Statements of Condition at
December 31, 2018 and 2017.
The Company has determined that all deductible temporary differences and net operating loss carryforwards
are more likely than not to provide a benefit in reducing future federal, state, and local tax liabilities, as applicable.
The Company has reached this determination based on its history of reporting positive taxable income in all relevant
tax jurisdictions, the length of time available to utilize the net operating loss carryforwards, and the recognition of
taxable income in future periods from taxable temporary differences.
107
The following table summarizes the Company’s income tax expense for the years ended December 31, 2018,
2017, and 2016:
(in thousands)
Federal – current
State and local – current
Total current
Federal – deferred
State and local – deferred
Total deferred
Income tax expense reported in net income
Income tax expense reported in stockholders’ equity related to:
Employee stock plans
Securities available-for-sale
Pension liability adjustments
Non-credit portion of OTTI losses
Total income taxes
2018
December 31,
2017
$ 89,187 $153,587
26,983
180,570
3,498
17,946
21,444
202,014
22,868
112,055
13,058
10,139
23,197
135,252
2016
$216,182
20,799
236,981
18,203
26,543
44,746
281,727
---
(32,162 )
4,897
821
--
28,495
2,234
13
$108,808 $232,756
--
(2,687 )
2,924
49
$282,013
The following table presents a reconciliation of statutory federal income tax expense (benefit) to combined
actual income tax expense (benefit) reported in net income for the years ended December 31, 2018, 2017, and 2016:
(in thousands)
Statutory federal income tax at 21%, 35% and 35%, respectively
State and local income taxes, net of federal income tax effect
Effect of tax law changes
Non-deductible FDIC deposit insurance premiums
Effect of tax deductibility of ESOP
Non-taxable income and expense of BOLI
Federal tax credits
Adjustments relating to prior tax years
Merger-related expenses
Other, net
Total income tax expense
2018
$117,111
24,451
1,625
8,852
(3,116 )
(5,957 )
(531 )
(7,246)
---
63
$135,252
December 31,
2017
2016
$233,875 $271,995
30,772
--
---
(6,452 )
(10,808 )
(1,607 )
(668 )
(850 )
(655 )
$202,014 $281,727
29,204
(41,943 )
---
(5,083 )
(9,529 )
(1,386 )
144
--
(3,268 )
U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was
enacted. As a result of the Tax Reform Act of 2017, the Company recorded a tax benefit of $42 million for the
period ended December 31, 2017 due to the net impact of remeasurement of tax attributes affected by the enactment
of the Tax Reform Act. Due to changes to the New Jersey tax laws enacted in 2018, a tax expense of $2.1 million
for the year-ended December 31, 2018 was recorded.
The Company invests in affordable housing projects through limited partnerships that generate federal Low
Income Housing Tax Credits. The balances of these investments, which are included in “Other assets” in the
Consolidated Statements of Condition, were $62.3 million and $46.2 million, respectively, at December 31, 2018
and 2017, and included commitments of $37.2 million and $23.9 million that are expected to be funded over the
next three years. The Company elected to apply the proportional amortization method to these investments.
Recognized in the determination of income tax (benefit) expense from operations for the years ended December 31,
2018, 2017, and 2016 were $5.2 million, $4.5 million, and $4.0 million, respectively, of affordable housing tax
credits and other tax benefits, and an offsetting $4.7 million, $3.1 million, and $3.0 million, respectively, for the
amortization of the related investments. No impairment losses were recognized in relation to these investments for
the years ended December 31, 2018, 2017, and 2016.
GAAP prescribes a recognition threshold and measurement attribute for use in connection with the obligation
of a company to recognize, measure, present, and disclose in its financial statements uncertain tax positions that the
Company has taken or expects to take on a tax return. As of December 31, 2018, the Company had $33.4 million of
unrecognized gross tax benefits. Gross tax benefits do not reflect the federal tax effect associated with state tax
amounts. The total amount of net unrecognized tax benefits at December 31, 2018 that would have affected the
effective tax rate, if recognized, was $26.4 million.
108
Interest and penalties (if any) related to the underpayment of income taxes are classified as a component of
income tax expense in the Consolidated Statements of Operations and Comprehensive Income. During the years
ended December 31, 2018, 2017, and 2016, the Company recognized income tax expense attributed to interest and
penalties of $1.7 million, $1.8 million, and $1.2 million, respectively. Accrued interest and penalties on tax
liabilities were $11.3 million and $8.9 million, respectively, at December 31, 2018 and 2017.
The following table summarizes changes in the liability for unrecognized gross tax benefits for the years
ended December 31, 2018, 2017, and 2016:
(in thousands)
Uncertain tax positions at beginning of year
Additions for tax positions relating to current-year operations
Additions for tax positions relating to prior tax years
Subtractions for tax positions relating to prior tax years
Reductions in balance due to settlements
Uncertain tax positions at end of year
2018
2016
$33,681 $33,487 $30,456
1,304
1,997
(270 )
--
$33,357 $33,681 $33,487
4,332
1,398
(5,101 )
(435 )
----
1,660
(1,984 )
----
December 31,
2017
The Company and its subsidiaries have filed tax returns in many states. The following are the more significant
tax filings that are open for examination:
•
Federal tax filings for tax years 2015 through the present;
• New York State tax filings for tax years 2010 through the present;
• New York City tax filings for tax years 2011 through the present; and
• New Jersey tax filings for tax years 2014 through the present.
In addition to other state audits, the Company is currently under examination by the following taxing
jurisdictions of significance to the Company:
• New York State for the tax years 2010 through 2014; and
• New York City for the tax years 2011 and 2012.
It is reasonably possible that there will be developments within the next twelve months that would necessitate
an adjustment to the balance of unrecognized tax benefits, including decreases of up to $20 million due to
completion of tax authorities’ exams and the expiration of statutes of limitations.
As a savings institution, the Bank is subject to a special federal tax provision regarding its frozen tax bad debt
reserve. At December 31, 2018, the Bank’s federal tax bad debt base-year reserve was $61.5 million, with a related
federal deferred tax liability of $12.9 million, which has not been recognized since the Bank does not expect that this
reserve will become taxable in the foreseeable future. Events that would result in taxation of this reserve include
redemptions of the Bank’s stock or certain excess distributions by the Bank to the Company.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Pledged Assets
The Company pledges securities to serve as collateral for its repurchase agreements, among other purposes. At
December 31, 2018, the Company had pledged available for sale mortgage-related securities and other securities
with carrying values of $840.7 million and $388.0 million, respectively. At December 31, 2017, the Company had
pledged mortgage-related securities and other securities held to maturity with carrying values of $917.2 million and
$346.0 million, respectively. In addition, the Company had $31.4 billion and $30.1 billion of loans pledged to the
FHLB-NY to serve as collateral for its wholesale borrowings at the respective year-ends.
Loan Commitments and Letters of Credit
At December 31, 2018 and 2017, the Company had commitments to originate loans, including unused lines of
credit, of $2.0 billion and $1.9 billion, respectively. The majority of the outstanding loan commitments at those
dates were expected to close within 90 days. In addition, the Company had commitments to originate letters of credit
totaling $508.1 million and $339.4 million at December 31, 2018 and 2017.
109
The following table summarizes the Company’s off-balance sheet commitments to originate loans and letters
of credit at December 31, 2018:
(in thousands)
Mortgage Loan Commitments:
Multi-family and commercial real estate
One-to-four family
Acquisition, development, and construction
Total mortgage loan commitments
Other loan commitments
Total loan commitments
Commercial, performance stand-by, and financial stand-by letters of credit
Total commitments
Lease Commitments
$ 365,788
1,478
241,468
$ 608,734
1,426,210
2,034,944
508,121
$2,543,065
At December 31, 2018, the Company was obligated under various non-cancelable operating lease and license
agreements with renewal options on properties used primarily for branch operations. The Company currently
expects to renew such agreements upon their expiration in the normal course of business. The agreements contain
periodic escalation clauses that provide for increases in the annual rents, commencing at various times during the
lives of the agreements, which are primarily based on increases in real estate taxes and cost-of-living indices. The
remaining projected minimum annual rental commitments under these agreements, exclusive of taxes and other
charges, are summarized as follows:
(in thousands)
2019
2020
2021
2022
2023 and thereafter
Total minimum future rentals
$ 30,322
23,399
19,736
16,552
55,525
$145,534
The rental expense under these leases, which is included in “Occupancy and equipment expense” in the
Consolidated Statements of Operations and Comprehensive Income, amounted to $33.6 million, $33.2 million, and
$32.6 million, respectively, in the years ended December 31, 2018, 2017, and 2016. Rental income on Company-
owned properties, netted in occupancy and equipment expense, was approximately $9.9 million, $9.5 million, and
$7.1 million in the corresponding periods. There was no minimum future rental income under non-cancelable sub-
lease agreements at December 31, 2018.
Financial Guarantees
The Company provides guarantees and indemnifications to its customers to enable them to complete a variety
of business transactions and to enhance their credit standings. These guarantees are recorded at their respective fair
values in “Other liabilities” in the Consolidated Statements of Condition. The Company deems the fair value of the
guarantees to equal the consideration received.
The following table summarizes the Company’s guarantees and indemnifications at December 31, 2018:
(in thousands)
Financial stand-by letters of credit
Performance stand-by letters of credit
Commercial letters of credit
Total letters of credit
Expires
Within One
Year
$169,242
3,614
3,272
$176,128
Expires
After One
Year
$55,563
--
490
$56,053
Total
Outstanding
Amount
$224,805
3,614
3,762
$232,181
Maximum Potential
Amount of
Future Payments
$444,066
3,665
60,390
$508,121
The maximum potential amount of future payments represents the notional amounts that could be funded
under the guarantees and indemnifications if there were a total default by the guaranteed parties or if indemnification
provisions were triggered, as applicable, without consideration of possible recoveries under recourse provisions or
from collateral held or pledged.
110
The Company collects fees upon the issuance of commercial and stand-by letters of credit. Fees for stand-by
letters of credit fees are initially recorded by the Company as a liability, and are recognized as income periodically
through the respective expiration dates. Fees for commercial letters of credit are collected and recognized as income
at the time that they are issued and upon payment of each set of documents presented. In addition, the Company
requires adequate collateral, typically in the form of cash, real property, and/or personal guarantees upon its issuance
of Irrevocable Stand-by Letters of Credit. Commercial letters of credit are primarily secured by the goods being
purchased in the underlying transaction and are also personally guaranteed by the owner(s) of the applicant
company.
At December 31, 2018, the Company had no commitments to purchase securities.
Legal Proceedings
The Company is involved in various legal actions arising in the ordinary course of its business. All such
actions in the aggregate involve amounts that are believed by management to be immaterial to the financial
condition and results of operations of the Company.
NOTE 11: INTANGIBLE ASSETS
Goodwill
Goodwill is presumed to have an indefinite useful life and is tested for impairment, rather than amortized, at
the reporting unit level, at least once a year. There were no changes in the carrying amount of goodwill during the
years ended December 31, 2018 or 2017. Goodwill totaled $2.4 billion at each of these dates.
NOTE 12: EMPLOYEE BENEFITS
Retirement Plan
The New York Community Bancorp, Inc. Retirement Plan (the “Retirement Plan”) covers substantially all
employees who had attained minimum age, service, and employment status requirements prior to the date when the
individual plans were frozen by the banks of origin. Once frozen, the individual plans ceased to accrue additional
benefits, service, and compensation factors, and became closed to employees who would otherwise have met
eligibility requirements after the “freeze” date.
111
The following table sets forth certain information regarding the Retirement Plan as of the dates indicated:
(in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial (gain) loss
Annuity payments
Settlements
Benefit obligation at end of year
Change in Plan Assets:
Fair value of assets at beginning of year
Actual (loss) return on plan assets
Contributions
Annuity payments
Settlements
Fair value of assets at end of year
Funded status (included in “Other assets”)
Changes recognized in other comprehensive income (loss) for the
year ended December 31:
Amortization of prior service cost
Amortization of actuarial loss
Net actuarial loss arising during the year
Total recognized in other comprehensive income (loss) for the year
(pre-tax)
December 31,
2018
2017
$ 151,411
5,085
(4,676 )
(6,453 )
(2,132 )
$ 143,235
$ 146,429
5,616
8,267
(6,485 )
(2,416 )
$ 151,411
$ 234,136
(15,305 )
--
(6,453 )
(2,132 )
$ 210,246
$ 67,011
$ 220,740
22,297
--
(6,485 )
(2,416 )
$ 234,136
$ 82,725
$
--
(7,179 )
26,768
$
--
(8,209 )
2,260
$ 19,589
$ (5,949 )
Accumulated other comprehensive loss (pre-tax) not yet recognized
in net periodic benefit cost at December 31:
Prior service cost
Actuarial loss, net
Total accumulated other comprehensive loss (pre-tax)
$
--
93,180
$ 93,180
$
--
73,591
$ 73,591
In 2019, an estimated $10.0 million of unrecognized net actuarial loss for the Retirement Plan will be
amortized from AOCL into net periodic benefit cost. The comparable amount recognized as net periodic benefit cost
in 2018 was $7.2 million. No prior service cost will be amortized in 2019 and none was amortized in 2018. The
discount rates used to determine the benefit obligation at December 31, 2018 and 2017 were 4.1% and 3.4%,
respectively.
The discount rate reflects rates at which the benefit obligation could be effectively settled. To determine this
rate, the Company considers rates of return on high-quality fixed-income investments that are currently available
and are expected to be available during the period until the pension benefits are paid. The expected future payments
are discounted based on a portfolio of high-quality rated bonds (above-median AA curve) for which the Company
relies on the Financial Times Stock Exchange (“FTSE”) (formerly Citigroup) Pension Liability Index that is
published as of the measurement date.
The components of net periodic pension credit were as follows for the years indicated:
(in thousands)
Components of net periodic pension credit:
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Net periodic pension credit
Years Ended December 31,
2017
2018
2016
$ 5,085
(16,139 )
7,179
$ (3,875 )
$ 5,616
(16,290 )
8,209
$ (2,465 )
$ 5,881
(15,627 )
9,050
(696 )
$
112
The following table indicates the weighted average assumptions used in determining the net periodic benefit
cost for the years indicated:
Discount rate
Expected rate of return on plan assets
Years Ended December 31,
2016
2017
2018
4.1 %
3.9 %
3.4 %
7.5
7.5
7.0
As of December 31, 2018 Retirement Plan assets were invested in two diversified investment portfolios of the
Pentegra Retirement Trust (the “Trust”) (formerly known as “RSI Retirement Trust”), a private placement
investment fund.
The Company (in this context, the “Plan Sponsor”) chooses the specific asset allocation for the Retirement
Plan within the parameters set forth in the Trust’s Investment Policy Statement. The long-term investment objectives
are to maintain the Retirement Plan’s assets at a level that will sufficiently cover the Plan Sponsor’s long-term
obligations, and to generate a return on those assets that will meet or exceed the rate at which the Plan Sponsor’s
long-term obligations will grow.
The Retirement Plan allocates its assets in accordance with the following targets:
• To hold 55% of its assets in equity securities via investment in the Trust’s Long-Term Growth—Equity
(“LTGE”) Portfolio, a diversified portfolio that invests in a number of actively and passively managed
equity mutual funds and collective trusts in order to diversify within U.S. and non-U.S. equity markets;
• To hold 44% of its assets in intermediate-term investment-grade bonds via investment in the Trust’s
Long-Term Growth—Fixed Income (“LTGFI”) Portfolio, a diversified portfolio that invests in a number
of fixed-income mutual funds and collective investment trusts, primarily including intermediate-term
bond funds with a focus on U.S. investment grade securities and opportunistic allocations to below-
investment grade and non-U.S. investments; and
• To hold 1% of its assets in a cash-equivalent portfolio for liquidity purposes.
In addition, the Retirement Plan holds Company shares, the value of which is approximately equal to 10% of
the assets that are held by the Trust.
The LTGE and LTGFI portfolios are designed to provide long-term growth of equity and fixed-income assets
with the objective of achieving an investment return in excess of the cost of funding the active life, deferred vesting,
and all 30-year term and longer obligations of retired lives in the Trust. Risk and volatility are further managed in
accordance with the distinct investment objectives of the Trust’s respective portfolios.
113
The following table presents information about the fair value measurements of the investments held by the
Retirement Plan as of December 31, 2018:
(in thousands)
Equity:
Large-cap value (1)
Large-cap growth (2)
Large-cap core (3)
Mid-cap value (4)
Mid-cap growth (5)
Mid-cap core (6)
Small-cap value (7)
Small-cap growth (8)
Small-cap core (9)
International equity (10)
Fixed Income Funds:
Fixed Income – U.S. Core (11)
Intermediate duration (12)
Equity Securities:
Company common stock
Cash Equivalents:
Money market *
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$ 18,431
18,846
13,365
3,950
4,034
4,072
3,143
5,492
3,070
22,946
65,274
21,649
$ --
--
--
--
--
--
--
--
--
--
--
--
$ 18,431
18,846
13,365
3,950
4,034
4,072
3,143
5,492
3,070
22,946
65,274
21,649
21,968
21,968
--
4,006
$ 210,246
1,053
$23,021
2,953
$ 187,225
$--
--
--
--
--
--
--
--
--
--
--
--
--
--
$--
Includes cash equivalent investments in equity and fixed income strategies.
*
(1) This category contains large-cap stocks with above-average yield. The portfolio typically holds between 60 and 70 stocks.
(2) This category seeks long-term capital appreciation by investing primarily in large growth companies based in the U.S.
(3) This fund tracks the performance of the S&P 500 Index by purchasing the securities represented in the Index in
approximately the same weightings as the Index.
(4) This category employs an indexing investment approach designed to track the performance of the CRSP US Mid-Cap Value
Index.
(5) This category employs an indexing investment approach designed to track the performance of the CRSP US Mid-Cap
Growth Index.
(6) This category seeks to track the performance of the S&P Midcap 400 Index.
(7) This category consists of a selection of investments based on the Russell 2000 Value Index.
(8) This category consists of a mutual fund invested in small cap growth companies along with a fund invested in a selection of
investments based on the Russell 2000 Growth Index.
(9) This category consists of a mutual fund investing in readily marketable securities of U.S. companies with market
capitalizations within the smallest 10% of the market universe, or smaller than the 1000th largest US company.
(10) This category has investments in medium to large non-US companies, including high quality, durable growth companies and
companies based in countries with stable economic and political systems. A portion of this category consists of an index
fund designed to track the MSC ACWI ex-US Net Dividend Return Index.
(11) This category currently includes equal investments in three mutual funds, two of which usually hold at least 80% of fund
assets in investment grade fixed income securities, seeking to outperform the Barclays US Aggregate Bond Index while
maintaining a similar duration to that index. The third fund targets investments of 50% or more in mortgage-backed
securities guaranteed by the US government and its agencies.
(12) This category consists of a mutual fund which invest in a diversified portfolio of high-quality bonds and other fixed income
securities, including U.S. Government obligations, mortgage-related and asset backed securities, corporate and municipal
bonds, CMOs, and other securities mostly rated A or better.
114
Current Asset Allocation
The asset allocations for the Retirement Plan as of December 31, 2018 and 2017 were as follows:
Equity securities
Debt securities
Cash equivalents
Total
At December 31,
2017
2018
59 %
57 %
39
41
2
2
100 %
100 %
Determination of Long-Term Rate of Return
The long-term rate of return on Retirement Plan assets assumption was based on historical returns earned by
equities and fixed income securities, and adjusted to reflect expectations of future returns as applied to the
Retirement Plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn long-
term rates of return in the ranges of 6% to 8% and 3% to 5%, respectively, with an assumed long-term inflation rate
of 2.5% reflected within these ranges. When these overall return expectations are applied to the Retirement Plan’s
target allocations, the result is an expected rate of return of 5% to 7%.
Expected Contributions
The Company does not expect to contribute to the Retirement Plan in 2019.
Expected Future Annuity Payments
The following annuity payments, which reflect expected future service, as appropriate, are expected to be paid
by the Retirement Plan during the years indicated:
(in thousands)
2019
2020
2021
2022
2023
2024 and thereafter
Total
Qualified Savings Plan
$ 7,668
7,865
7,906
8,032
8,246
43,509
$83,226
The Company maintains a defined contribution qualified savings plan in which all full-time employees are
able to participate after three months of service and having attained age 21. No matching contributions are made by
the Company to this plan.
Post-Retirement Health and Welfare Benefits
The Company offers certain post-retirement benefits, including medical, dental, and life insurance (the
“Health & Welfare Plan”) to retired employees, depending on age and years of service at the time of retirement. The
costs of such benefits are accrued during the years that an employee renders the necessary service.
The Health & Welfare Plan is an unfunded plan and is not expected to hold assets for investment at any time.
Any contributions made to the Health & Welfare Plan are used to immediately pay plan premiums and claims as
they come due.
115
The following table sets forth certain information regarding the Health & Welfare Plan as of the dates
indicated:
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial (gain) loss
Premiums and claims paid
Benefit obligation at end of year
Change in plan assets:
Fair value of assets at beginning of year
Employer contribution
Premiums and claims paid
Fair value of assets at end of year
Funded status (included in “Other liabilities”)
Changes recognized in other comprehensive (loss) income for
the year ended December 31:
Amortization of prior service cost
Amortization of actuarial gain
Net actuarial (gain) loss arising during the year
Total recognized in other comprehensive loss for the year (pre-tax)
Accumulated other comprehensive loss (pre-tax) not yet recognized
in net periodic benefit cost at December 31:
Prior service cost
Actuarial loss, net
Total accumulated other comprehensive loss (pre-tax)
December 31,
2018
2017
$ 16,349
513
(2,248 )
(1,031 )
$ 13,583
--
$
1,031
(1,031 )
$
--
$ (13,583 )
$ 16,294
577
517
(1,039 )
$ 16,349
$
--
1,039
(1,039 )
$
--
$ (16,349 )
$ 249
(309 )
(2,248 )
$ (2,308 )
$ 249
(274 )
517
$ 492
$ (785 )
2,823
$ 2,038
$ (1,034 )
5,380
$ 4,346
The discount rates used in the preceding table were 3.9% and 3.3%, respectively, at December 31, 2018 and
2017.
The estimated net actuarial loss and the prior service liability that will be amortized from AOCL into net
periodic benefit cost in 2019 are $124,000 and $249,000, respectively.
The following table presents the components of net periodic benefit cost for the years indicated:
(in thousands)
Components of Net Periodic Benefit Cost:
Service cost
Interest cost
Amortization of past-service liability
Amortization of net actuarial loss
Net periodic benefit cost
Years Ended December 31,
2016
2018
2017
$
--
513
(249 )
309
$ 573
$
--
577
(249 )
274
$ 602
$
5
639
(249 )
326
$ 721
The following table presents the weighted average assumptions used in determining the net periodic benefit
cost for the years indicated:
Discount rate
Current medical trend rate
Ultimate trend rate
Year when ultimate trend rate will be reached
Years Ended December 31,
2016
2017
2018
3.8 %
3.7 %
3.3 %
6.5
6.5
6.5
5.0
5.0
5.0
2022
2023
2024
116
Had the assumed medical trend rate at December 31, 2018 increased by 1% for each future year, the
accumulated post-retirement benefit obligation at that date would have increased by $663,000, and the aggregate of
the benefits earned and the interest components of 2018 net post-retirement benefit cost would each have increased
by $24,000. Had the assumed medical trend rate decreased by 1% for each future year, the accumulated post-
retirement benefit obligation at December 31, 2018 would have declined by $558,000, and the aggregate of the
benefits earned and the interest components of 2018 net post-retirement benefit cost would each have declined by
$20,000.
Expected Contributions
The Company expects to contribute $1.2 million to the Health & Welfare Plan to pay premiums and claims in
the fiscal year ending December 31, 2019.
Expected Future Payments for Premiums and Claims
The following amounts are currently expected to be paid for premiums and claims during the years indicated
under the Health & Welfare Plan:
(in thousands)
2019
2020
2021
2022
2023
2024 and thereafter
Total
$ 1,160
1,130
1,099
1,061
1,025
4,552
$10,027
NOTE 13: STOCK-RELATED BENEFIT PLANS
New York Community Bank Employee Stock Ownership Plan
All full-time employees who have attained 21 years of age and have completed twelve consecutive months of
credited service are eligible to participate in the Employee Stock Ownership Plan (“ESOP”), with benefits vesting
on a six-year basis, starting with 20% in the second year of employment and continuing in 20% increments in each
successive year. Benefits are payable upon death, retirement, disability, or separation from service, and may be paid
in stock. However, in the event of a change in control, as defined in the ESOP, any unvested portion of benefits shall
vest immediately.
In 2018, 2017, and 2016, the Company allocated 529,531, 695,675, and 617,031 shares, respectively, to
participants in the ESOP. For the years ended December 31, 2018, 2017, and 2016, the Company recorded ESOP-
related compensation expense of $5.0 million, $9.2 million, and $9.8 million, respectively.
Supplemental Executive Retirement Plan
In 1993, the Bank established a Supplemental Executive Retirement Plan (“SERP”), which provided
additional unfunded, non-qualified benefits to certain participants in the ESOP in the form of Company common
stock. The SERP was frozen in 1999. Trust-held assets, consisting entirely of Company common stock, amounted to
1,929,189 and 1,819,985 shares, respectively, at December 31, 2018 and 2017, including shares purchased through
dividend reinvestment. The cost of these shares is reflected as a reduction of paid-in capital in excess of par in the
Consolidated Statements of Condition.
Stock Based Compensation
At December 31, 2018, the Company had a total of 4,951,108 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 (
“2012 Stock Incentive Plan”), which was approved by the Company’s shareholders at its Annual Meeting on June 7,
2012. The Company granted 2,543,023 shares of restricted stock, with an average fair value of $13.50 per share on
the date of grant, during the twelve months ended December 31, 2018.
During 2017 and 2016, the Company granted 2,956,249 shares and 2,805,652 shares, respectively, of
restricted stock, which had average fair values of $15.16 and $15.21 per share on the respective grant dates. The
shares of restricted stock that were granted during the years ended December 31, 2018, 2017, and 2016 vest over a
117
period of five years. Compensation and benefits expense related to the restricted stock grants is recognized on a
straight-line basis over the vesting period and totaled $36.3 million, $36.0 million, and $32.7 million, respectively,
for the years ended December 31, 2018, 2017, and 2016.
The following table provides a summary of activity with regard to restricted stock awards in the year ended
December 31, 2018:
For the Year Ended December 31, 2018
Unvested at beginning of year
Granted
Vested
Cancelled
Unvested at end of year
Number of Shares
5,574,167
2,543,023
(865,022 )
(347,780 )
6,904,388
Weighted Average
Grant Date
Fair Value
15.38
13.50
15.15
14.87
14.74
As of December 31, 2018, unrecognized compensation cost relating to unvested restricted stock totaled
$72.1 million. This amount will be recognized over a remaining weighted average period of 2.9 years.
NOTE 14: 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.
118
The following tables present assets and liabilities that were measured at fair value on a recurring basis as of
December 31, 2018 and 2017, and that were included in the Company’s Consolidated Statements of Condition at
those dates:
(in thousands)
Assets:
Mortgage-Related Debt Securities
Available for Sale:
GSE certificates
GSE CMOs
Total mortgage-related debt securities
Other Debt Securities Available
for Sale:
GSE debentures
Asset-backed securities
Municipal bonds
Corporate bonds
Capital trust notes
Total other debt securities
Total debt securities available for sale
Equity securities:
Preferred stock
Mutual funds and common stock
Total equity securities
Total securities
(in thousands)
Assets:
Mortgage-Related Securities
Available for Sale:
GSE certificates
GSE CMOs
Total mortgage-related securities
Other Securities Available for Sale:
U. S. Treasury Obligations
GSE debentures
Municipal bonds
Corporate bonds
Capital trust notes
Preferred stock
Mutual funds and common stock
Total other securities
Total securities available for sale
Other Assets:
Loans held for sale
Mortgage servicing rights
Fair Value Measurements at December 31, 2018
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Netting
Adjustments
Total
Fair Value
$
$
$
$
$
--
--
--
--
--
--
--
--
--
--
$ 13,846
--
$ 13,846
$ 13,846
$ 1,707,521
1,252,761
$ 2,960,282
$ 1,328,927
387,122
66,183
821,715
49,291
$ 2,653,238
$ 5,613,520
$
--
16,705
16,705
$
$ 5,630,225
$
$
$
$
$
$
$
$
--
--
--
--
--
--
--
--
--
--
--
--
--
--
$ --
--
$ --
$ --
--
--
--
--
$ --
$ --
$ --
--
$ --
$ --
$ 1,707,521
1,252,761
$ 2,960,282
$ 1,328,927
387,122
66,183
821,715
49,291
$ 2,653,238
$ 5,613,520
$
13,846
16,705
30,551
$
$ 5,644,071
Fair Value Measurements at December 31, 2017
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Netting
Adjustments
Total
Fair Value
$
$
--
--
$ 199,898
--
--
--
--
15,434
--
$ 215,332
$ 215,332
$ 2,068,842
549,904
$ 2,618,746
$
--
473,258
70,120
90,775
46,096
--
17,100
$ 697,349
$ 3,316,095
$
$
$
$
$
--
--
--
--
--
--
--
--
--
--
--
$
--
--
$
35,258
--
$
--
2,729
119
$ --
$ --
$ --
--
--
--
--
--
--
$ --
$ --
$ --
--
$ 2,068,842
549,904
$ 2,618,746
$ 199,898
473,258
70,120
90,775
46,096
15,434
17,100
$ 912,681
$ 3,531,427
$
35,258
2,729
The Company reviews and updates the fair value hierarchy classifications for its assets on a quarterly basis.
Changes from one quarter to the next that are related to the observability of inputs for a fair value measurement may
result in a reclassification from one hierarchy level to another.
A description of the methods and significant assumptions utilized in estimating the fair values of securities
follows:
Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation
hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities.
If quoted market prices are not available for a specific security, then fair values are estimated by using pricing
models. These pricing models primarily use market-based or independently sourced market parameters as inputs,
including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to
observable market information, models incorporate transaction details such as maturity and cash flow assumptions.
Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy, and
primarily include such instruments as mortgage-related and corporate debt securities.
Periodically, the Company uses fair values supplied by independent pricing services to corroborate the fair
values derived from the pricing models. In addition, the Company reviews the fair values supplied by independent
pricing services, as well as their underlying pricing methodologies, for reasonableness. The Company challenges
pricing service valuations that appear to be unusual or unexpected.
While the Company believes its valuation methods are appropriate, and consistent with those of other market
participants, the use of different methodologies or assumptions to determine the fair values of certain financial
instruments could result in different estimates of fair values at a reporting date.
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:
December 31, 2018
December 31, 2017
Fair Value
Carrying
Amount
$--
Aggregate
Unpaid
Principal
$--
Fair Value
Carrying Amount
Less Aggregate
Unpaid Principal
$--
Fair Value
Carrying
Amount
$35,258
Aggregate
Unpaid
Principal
$34,563
Fair Value
Carrying Amount
Less Aggregate
Unpaid Principal
$695
(in thousands)
Loans held for sale
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
Mortgage Banking Income
from Changes in Fair Value (1)
For the Twelve Months Ended December 31,
2018
2017
$
899
$
2016
$ (5,616 )
(27,453 )
$ (33,069 )
(in thousands)
Loans held for sale
Mortgage servicing rights
Total loss
--
(224 )
(224 )
$
(1) Included in “Non-interest income.”
(20,076 )
$ (19,177 )
120
Changes in Level 3 Fair Value Measurements
The following tables present, for the twelve months ended December 31, 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
Gains/(Losses) Recorded in
(in thousands)
Mortgage servicing rights
(in thousands)
Mortgage servicing rights
Interest rate lock commitments
Fair Value
January 1,
2018
$2,729
Fair Value
January 1,
2017
$228,099
982
Income/
(Loss)
$(224 )
Comprehensive
(Loss) Income
$--
Issuances Settlements
$(2,505 )
$--
Transfers
to/(from)
Level 3
$--
Fair Value at
December 31,
2018
$--
Total Realized/Unrealized
Gains/(Losses) Recorded in
Income/
(Loss)
$(20,076 )
(982 )
Comprehensive
(Loss) Income
$--
--
Issuances Settlements
$(223,348 )
$18,054
--
--
Transfers
to/(from)
Level 3
$--
--
Fair Value at
December 31,
2017
$2,729
--
Change in
Unrealized
Gains/(Losses)
Related to
Instruments Held at
December 31, 2018
$--
Change in
Unrealized
Gains/(Losses)
Related to
Instruments Held at
December 31, 2017
$(222 )
--
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 twelve months ended December 31, 2018 or 2017.
121
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 December 31, 2018 and 2017,
and that were included in the Company’s Consolidated Statements of Condition at those dates:
Fair Value Measurements at December 31, 2018 Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
$--
--
$--
Significant Other
Observable Inputs
(Level 2)
$--
--
$--
Significant
Unobservable Inputs
(Level 3)
$38,213
1,265
$39,478
Total Fair
Value
$38,213
1,265
$39,478
(in thousands)
Certain impaired loans (1)
Other assets(2)
Total
(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.
Fair Value Measurements at December 31, 2017 Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
$--
--
$--
Significant Other
Observable Inputs
(Level 2)
$--
--
$--
Significant
Unobservable Inputs
(Level 3)
$45,837
4,357
$50,194
Total Fair
Value
$45,837
4,357
$50,194
(in thousands)
Certain impaired loans (1)
Other assets (2)
Total
(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.
122
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 December 31, 2018 and 2017:
December 31, 2018
(in thousands)
Financial Assets:
Carrying
Value
Estimated
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Fair Value Measurement Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash and cash equivalents
FHLB stock (1)
Loans, net
$ 1,474,955
644,590
40,006,088
$ 1,474,955
644,590
39,461,985
$ 1,474,955
--
--
$
--
644,590
--
$
--
--
39,461,985
Financial Liabilities:
Deposits
Borrowed funds
$30,764,430 $30,748,729
14,136,526
14,207,866
$ 18,570,108 (2)
$ 12,178,621 (3) $
--
14,136,526
--
--
(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
(in thousands)
Financial Assets:
Carrying
Value
Estimated
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Fair Value Measurement Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash and cash equivalents
FHLB stock (1)
Loans, net
$ 2,528,169 $ 2,528,169
603,819
38,254,538
603,819
38,265,183
$ 2,528,169
--
--
$
--
603,819
--
$
--
--
38,254,538
Financial Liabilities:
Deposits
Borrowed funds
$29,102,163 $29,044,852
12,780,653
12,913,679
$ 20,458,517 (2)
--
$ 8,586,335 (3) $ --
--
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.
123
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 December 31, 2018 and 2017.
NOTE 15: DIVIDEND RESTRICTIONS
The Parent Company is a separate legal entity from the Bank and must provide for its own liquidity. In
addition to operating expenses and any share repurchases, the Parent Company is responsible for paying any
dividends declared to the Company’s shareholders. As a Delaware corporation, the Parent Company is able to pay
dividends either from surplus or, in case there is no surplus, from net profits for the fiscal year in which the dividend
is declared and/or the preceding fiscal year.
Various legal restrictions limit the extent to which the Company’s subsidiary bank can supply funds to the
Parent Company and its non-bank subsidiaries. The Company’s subsidiary bank would require the approval of the
Superintendent of the NYSDFS if the dividends they declared in any calendar year were to exceed the total of their
respective net profits for that year combined with their respective retained net profits for the preceding two calendar
years, less any required transfer to paid-in capital. The term “net profits” is defined as the remainder of all earnings
from current operations plus actual recoveries on loans, investments, and other assets, after deducting from the total
thereof all current operating expenses, actual losses if any, and all federal, state, and local taxes. In 2018, dividends
of $380.0 million were paid by the Bank to the Parent Company; at December 31, 2018, the Bank could have paid
additional dividends of $463.4 million to the Parent Company without regulatory approval.
124
NOTE 16: PARENT COMPANY-ONLY FINANCIAL INFORMATION
The following tables present the condensed financial statements for New York Community Bancorp, Inc.
(Parent Company only):
Condensed Statements of Condition
(in thousands)
ASSETS:
Cash and cash equivalents
Investments in subsidiaries
Receivables from subsidiaries
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Junior subordinated debentures
Subordinated notes
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
Condensed Statements of Income
December 31,
2018
2017
$ 228,618
7,064,341
6,455
23,724
$7,323,138
$ 359,508
294,697
13,698
667,903
6,655,235
$7,323,138
$ 90,536
7,050,139
4,750
23,980
$7,169,405
$ 359,179
--
14,850
374,029
6,795,376
$7,169,405
Years Ended December 31,
2017
$ 943
336,000
1,700
338,643
54,333
2018
$ 500
380,000
793
381,293
59,372
2016
$ 527
330,000
679
331,206
49,157
321,921
16,616
284,310
19,575
282,049
19,592
338,537
83,880
$422,417
303,885
162,316
$466,201
301,641
193,760
$495,401
(in thousands)
Interest income
Dividends received from subsidiaries
Other income
Gross income
Operating expenses
Income before income tax benefit and equity in underdistributed
earnings of subsidiaries
Income tax benefit
Income before equity in underdistributed (overdistributed) earnings
of subsidiaries
Equity in underdistributed earnings of subsidiaries
Net income
125
Condensed Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Change in other assets
Change in other liabilities
Other, net
Equity in underdistributed earnings of subsidiaries
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and repayments of securities
Change in receivable from subsidiaries, net
Investment in subsidiaries
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock repurchased
Cash dividends paid on common and preferred stock
Proceeds from issuance of preferred stock
Proceeds from issuance of subordinated notes
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
NOTE 17: CAPITAL
Years Ended December 31,
2017
2018
2016
$422,417
256
(1,152 )
36,677
(83,880 )
$374,318
$ 466,201
10,122
(36,226 )
36,330
(162,316 )
$ 314,111
$ 495,401
316
(2,252 )
33,333
(193,760 )
$ 333,038
$ --
(1,705 )
--
(1,705 )
$ 2,000
3,089
(420,000 )
(414,911 )
$ --
(204 )
--
$ (204 )
$(163,249 )
(365,889 )
--
294,607
(234,531 )
138,082
90,536
$ 228,618
$ (18,463 )
(356,768 )
502,840
--
$ 127,609
26,809
63,727
$ 90,536
$ (8,677 )
(330,810 )
--
--
$(339,487 )
(6,653 )
70,380
$ 63,727
The Company is subject to examination, regulation, and periodic reporting under the Bank Holding Company
Act of 1956, as amended, which is administered by the FRB. The FRB has adopted capital adequacy guidelines for
bank holding companies (on a consolidated basis) that are substantially similar to those of the FDIC for the Bank.
The following tables present the regulatory capital ratios for the Company at December 31, 2018 and 2017, in
comparison with the minimum amounts and ratios required by the FRB for capital adequacy purposes:
Risk-Based Capital
At December 31, 2018
(dollars in thousands)
Total capital
Minimum for capital adequacy
purposes
Excess
At December 31, 2017
(dollars in thousands)
Total capital
Minimum for capital adequacy
purposes
Excess
Common Equity
Tier 1
Leverage Capital
Ratio
Amount
$3,806,857 10.55 % $4,309,697 11.94 % $5,112,079 14.16 % $4,309,697 8.74 %
Amount Ratio Amount
Amount
Ratio
Ratio
Tier 1
Total
1,624,366
$2,182,491
4.50
2,165,822 6.00
2,887,763 8.00
1,972,440 4.00
6.05 % $2,143,875 5.94 % $2,224,316 6.16 % $2,337,257 4.74 %
Risk-Based Capital
Common Equity
Tier 1
Leverage Capital
Ratio
Amount
$3,869,129 11.36 % $4,371,969 12.84 % $4,877,208 14.32 % $4,371,969 9.58 %
Amount Ratio Amount
Amount
Ratio
Ratio
Tier 1
Total
1,532,448
$2,336,681
4.50
2,043,265 6.00
2,724,353 8.00
1,826,141 4.00
6.86 % $2,328,704 6.84 % $2,152,855 6.32 % $2,545,828 5.58 %
Basel III calls for the phase-in of a capital conservation buffer over a five-year period beginning with 0.625%
in 2016 and reaching 2.50% in 2019, when fully phased in. At December 31, 2018, our total risk-based capital ratio
exceeded the minimum requirement for capital adequacy purposes by 616 basis points and the fully phased-in
capital conservation buffer by 366 basis points.
126
The Bank is subject to regulation, examination, and supervision by the NYSDFS and the FDIC (the
“Regulators”). The Bank is also governed by numerous federal and state laws and regulations, including the FDIC
Improvement Act of 1991, which established five categories of capital adequacy ranging from “well capitalized” to
“critically undercapitalized.” Such classifications are used by the FDIC to determine various matters, including
prompt corrective action and each institution’s FDIC deposit insurance premium assessments. Capital amounts and
classifications are also subject to the Regulators’ qualitative judgments about the components of capital and risk
weightings, among other factors.
The quantitative measures established to ensure capital adequacy require that banks maintain minimum
amounts and ratios of leverage capital to average assets and of common equity tier 1 capital, tier 1 capital, and total
capital to risk-weighted assets (as such measures are defined in the regulations). At December 31, 2018, the Bank
exceeded all the capital adequacy requirements to which they were subject.
As of December 31, 2018, the Company and the Bank are categorized as “well capitalized” under the
regulatory framework for prompt corrective action. To be categorized as well capitalized, a bank must maintain a
minimum common equity tier 1 risk-based capital ratio of 6.50%; a minimum tier 1 risk-based capital ratio of
8.00%; a minimum total risk-based capital ratio of 10.00%; and a minimum leverage capital ratio of 5.00%. In the
opinion of management, no conditions or events have transpired since December 31, 2018 to change these capital
adequacy classifications.
The following tables present the actual capital amounts and ratios for the Bank at December 31, 2018 and
2017 in comparison to the minimum amounts and ratios required for capital adequacy purposes.
Risk-Based Capital
At December 31, 2018
(dollars in thousands)
Total capital
Minimum for capital adequacy
purposes
Excess
At December 31, 2017
(dollars in thousands)
Total capital
Minimum for capital adequacy
purposes
Excess
Preferred Stock
Common Equity
Tier 1
Leverage Capital
Ratio
Amount
$4,725,497 13.10 % $4,725,497 13.10 % $4,886,450 13.54 % $4,725,497 9.58 %
Amount Ratio Amount
Amount
Ratio
Ratio
Tier 1
Total
1,623,575
$3,101,922
4.50
2,164,766 6.00
2,886,355 8.00
1,972,625 4.00
8.60 % $2,560,731 7.10 % $2,000,095 5.54 % $2,752,872 5.58 %
Risk-Based Capital
Common Equity
Tier 1
Leverage Capital
Ratio
Amount
$4,253,233 13.43 % $4,253,233 13.43 % $4,387,620 13.86 % $4,253,233 10.06 %
Amount Ratio Amount
Amount
Ratio
Ratio
Tier 1
Total
1,424,795
$2,828,438
4.50
1,899,727 6.00
2,532,969 8.00
1,691,041 4.00
8.93 % $2,353,506 7.43 % $1,854,651 5.86 % $2,562,192 6.06 %
On March 17, 2017, the Company issued 20,600,000 depositary shares, each representing a 1/40th interest in a
share of the Company’s Fixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock, par value $0.01
per share, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). Dividends will
accrue on the depositary shares at a fixed rate equal to 6.375% per annum until March 17, 2027, and a floating rate
equal to Three-month LIBOR plus 382.1 basis points per annum beginning on March 17, 2027. Dividends will be
payable in arrears on March 17, June 17, September 17, and December 17 of each year, which commenced on
June 17, 2017.
Treasury Stock Repurchases
On October 23, 2018, the Board of Directors approved the repurchase of up to $300 million of the Company’s
outstanding common stock. As of December 31, 2018, 16.8 million shares have been repurchased at a cost of
$160.8 million.
127
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
New York Community Bancorp, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of condition of New York Community Bancorp, Inc.
and subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of
operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the
three-year period ended December 31, 2018, and the related notes (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 28, 2019 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1993.
New York, New York
February 28, 2019
128
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
New York Community Bancorp, Inc.:
Opinion on Internal Control over Financial Reporting
We have audited New York Community Bancorp, Inc. and subsidiaries’ (the Company) internal control over
financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated statements of condition of the Company as of December 31, 2018 and 2017, the
related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash
flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the
consolidated financial statements), and our report dated February 28, 2019 expressed an unqualified opinion on
those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
New York, New York
February 28, 2019
129
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision, and with the participation, of our Chief Executive Officer and Chief Financial Officer,
our management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and
procedures pursuant to Rule 13a-15(b), as adopted by the Securities and Exchange Commission (the “SEC”) under
the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of
the end of the period covered by this annual report.
Disclosure controls and procedures are the controls and other procedures that are designed to ensure that
information required to be disclosed in the reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or submits under the Exchange Act is
accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over
financial reporting. Our system of internal control is designed under the supervision of management, including our
Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of the Company’s financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles (“GAAP”).
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide
reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures are made only in accordance with the authorization of
management and the Boards of Directors of the Company and the Bank; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could
have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls
may become inadequate because of changes in conditions or that the degree of compliance with policies and
procedures may deteriorate.
As of December 31, 2018, management assessed the effectiveness of the Company’s internal control over
financial reporting based upon the framework established in Internal Control—Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon its
assessment, management concluded that the Company’s internal control over financial reporting as of December 31,
2018 was effective using this criteria.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 has
been audited by KPMG LLP, an independent registered public accounting firm that audited the Company’s
consolidated financial statements as of and for the year ended December 31, 2018, as stated in their report, included
in Item 8 on the preceding page, which expresses an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2018.
(c) Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report
130
relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Information regarding our directors, executive officers, and corporate governance appears in our Proxy
Statement for the Annual Meeting of Shareholders to be held on June 4, 2019 (hereafter referred to as our “2019
Proxy Statement”) under the captions “Information with Respect to Nominees, Continuing Directors, and Executive
Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Meetings and Committees of the Board of
Directors,” and “Corporate Governance,” and is incorporated herein by this reference.
A copy of our Code of Business Conduct and Ethics, which applies to our Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, and Chief Accounting Officer as officers of the Company, and all other
senior financial officers of the Company designated by the Chief Executive Officer from time to time, is available
on the Investor Relations portion of our website: www.myNYCB.com and will be provided, without charge, upon
written request to the Chief Corporate Governance Officer and Corporate Secretary at 615 Merrick Avenue,
Westbury, NY 11590.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation appears in our 2019 Proxy Statement under the captions
Insider Participation,”
“Compensation Committee Report,” “Compensation Committee
“Compensation Discussion and Analysis,” “Executive Compensation and Related Information,” and “Director
Compensation,” and is incorporated herein by this reference.
Interlocks and
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
AND RELATED STOCKHOLDER MATTERS
The following table provides information regarding the Company’s equity compensation plans at
December 31, 2018:
Number of securities to be
issued upon exercise of
outstanding options,
warrants, and rights
Weighted-average exercise
price of outstanding
options, warrants, and
rights
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(a)
(b)
(c)
--
--
--
--
--
--
4,951,108
--
4,951,108
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Information relating to the security ownership of certain beneficial owners and management appears in our
2019 Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners” and “Information with
Respect to Nominees, Continuing Directors, and Executive Officers.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information regarding certain relationships and related transactions, and director independence, appears in our
2018 Proxy Statement under the captions “Transactions with Certain Related Persons” and “Corporate Governance,”
respectively, and is incorporated herein by this reference.
131
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information regarding principal accounting fees and services appears in our 2019 Proxy Statement under the
caption “Audit and Non-Audit Fees,” and is incorporated herein by this reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents Filed As Part of This Report
1. Financial Statements
The following are incorporated by reference from Item 8 hereof:
• Reports of Independent Registered Public Accounting Firm;
• Consolidated Statements of Condition at December 31, 2018 and 2017;
• Consolidated Statements of Operations and Comprehensive Income for each of the years in the three-year
period ended December 31, 2018;
• Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period
ended December 31, 2018;
• Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31,
2018; and
• Notes to the Consolidated Financial Statements.
The following are incorporated by reference from Item 9A hereof:
• Management’s Report on Internal Control over Financial Reporting; and
• Changes in Internal Control over Financial Reporting.
2. Financial Statement Schedules
Financial statement schedules have been omitted because they are not applicable or because the required
information is provided in the Consolidated Financial Statements or Notes thereto.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
The following exhibits are filed as part of this Form 10-K, and this list includes the Exhibit Index.
Exhibit No.
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
Amended and Restated Certificate of Incorporation (1)
Certificates of Amendment of Amended and Restated Certificate of Incorporation (2)
Certificate of Amendment of Amended and Restated Certificate of Incorporation (3)
Certificate of Designations of the Registrant with respect to the Series A Preferred Stock, dated March
16, 2017, filed with the Secretary of State of the State of Delaware and effective March 16, 2017 (4)
Amended and Restated Bylaws(5)
Specimen Stock Certificate (6)
Deposit Agreement, dated as of March 16, 2017, by and among the Registrant, Computershare, Inc, and
Computershare Trust Company, N.A., as joint depositary, and the holders from time to time of the
depositary receipts described therein (7)
Form of certificate representing the Series A Preferred Stock (7)
Form of depositary receipt representing the Depositary Shares (7)
Registrant will furnish, upon request, copies of all instruments defining the rights of holders of long-
132
10.1
10.2
term debt instruments of the registrant and its consolidated subsidiaries.
Form of Employment Agreement between New York Community Bancorp, Inc. and Joseph R. Ficalora,
Robert Wann, Thomas R. Cangemi, James J. Carpenter, and John J. Pinto* (8)
Synergy Financial Group, Inc. 2004 Stock Option Plan (as assumed by New York Community Bancorp,
Inc. effective October 1, 2007)* (9)
Incentive Savings Plan of Queens County Savings Bank* (11)
10.3(P) Form of Change in Control Agreements among the Company, the Bank, and Certain Officers* (10)
10.4(P) Form of Queens County Savings Bank Employee Severance Compensation Plan* (10)
10.5(P) Form of Queens County Savings Bank Outside Directors’ Consultation and Retirement Plan* (10)
10.6(P) Form of Queens County Bancorp, Inc. Employee Stock Ownership Plan and Trust* (10)
10.7(P)
10.8(P) Retirement Plan of Queens County Savings Bank* (10)
10.9(P) Supplemental Benefit Plan of Queens County Savings Bank* (12)
10.10(P) Excess Retirement Benefits Plan of Queens County Savings Bank* (10)
10.11(P) Queens County Savings Bank Directors’ Deferred Fee Stock Unit Plan* (10)
10.12
10.13
New York Community Bancorp, Inc. Management Incentive Compensation Plan* (13)
New York Community Bancorp, Inc. 2006 Stock Incentive Plan* (13)
10.14
10.15
11.0
21.0
23.0
31.1
31.2
32.0
101
New York Community Bancorp, Inc. 2012 Stock Incentive Plan* (14)
Underwriting Agreement, dated November 1, 2018, by and among the Registrant and Goldman Sachs &
Co., Sandler O’Neill & Partners, L.P., Credit Suisse Securities (USA) LLC, Jeffries LLC, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters listed therein
(15)
Statement Re: Computation of Per Share Earnings (See Note 2 to the Consolidated Financial
Statements)
Subsidiaries information incorporated herein by reference to Part I, “Subsidiaries”
Consent of KPMG LLP, dated February 28, 2019 (attached hereto)
Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302
of the Sarbanes-Oxley Act of 2002 (attached hereto)
Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302
of the Sarbanes-Oxley Act of 2002 (attached hereto)
Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer of the Company
in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto)
The following materials from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the
Consolidated Statements of Condition, (ii)
the Consolidated Statements of Operations and
Comprehensive Income (Loss), (iii) the Consolidated Statements of Changes in Stockholders’ Equity,
(iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial
Statements.
* Management plan or compensation plan arrangement.
(1)
Incorporated by reference to Exhibits filed with the Company’s Form 10-Q for the quarterly period ended
March 31, 2001 (File No. 0-22278)
Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31,
2003 (File No. 1-31565)
Incorporated by reference to Exhibits to the Company’s Form 8-K filed with the Securities and Exchange
Commission on April 27, 2016 (File No. 1-31565)
Incorporated herein by reference to 3.4 of the Registrant’s Registration Statement on Form 8-A (File No. 333-
210919), as filed with the Securities and Exchange Commission on March 16, 2017
(2)
(3)
(4)
133
(5)
(6)
(7)
(8)
(9)
Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31,
2016 (File No. 1-31565)
Incorporated by reference to Exhibits filed with the Company’s Form 10-Q filed with the Securities and
Exchange Commission on November 9, 2017 (File No. 1-31565)
Incorporated by reference to Exhibits filed with the Company’s Form 8-K filed with the Securities and
Exchange Commission on March 17, 2017
Incorporated by reference to Exhibits filed with the Company’s Form 8-k filed with the Securities and
Exchange Commission on March 9, 2006
Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on October 4, 2007,
Registration No. 333-146512
(10) Incorporated by reference to Exhibits filed with the Company’s Registration Statement filed on Form S-1,
Registration No. 33-66852
(11) Incorporated by reference to Exhibits to Form S-8, Registration Statement filed on October 27, 1994,
Registration No. 33-85682
(12) Incorporated by reference to Exhibits filed with the 1995 Proxy Statement for the Annual Meeting of
Shareholders held on April 19, 1995
(13) Incorporated by reference to Exhibits filed with the 2006 Proxy Statement for the Annual Meeting of
Shareholders held on June 7, 2006
(14) Incorporated by reference to Exhibits filed with the 2012 Proxy Statement for the Annual Meeting of
Shareholders held on June 7, 2012
(15) Incorporated by reference to Exhibits filed with the Company’s Form 8-K filed with the Securities and
Exchange Commission on November 6, 2018 (File No. 1-31565)
ITEM 16. FORM 10-K SUMMARY
None.
134
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
February 28, 2019
New York Community Bancorp, Inc.
(Registrant)
/s/ Joseph R. Ficalora
Joseph R. Ficalora
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Joseph R. Ficalora
Joseph R. Ficalora
President, Chief Executive Officer,
and Director
(Principal Executive Officer)
/s/ John J. Pinto
John J. Pinto
Executive Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
/s/ Dominick Ciampa
Dominick Ciampa
Chairman of the Board of Directors
/s/ Leslie D. Dunn
Leslie D. Dunn
Director
/s/ James J. O’Donovan
James J. O’Donovan
Director
/s/ Ronald A. Rosenfeld
Ronald A. Rosenfeld
Director
/s/ John M. Tsimbinos
John M. Tsimbinos
Director
/s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
2/28/19
/s/ Hanif W. Dahya
Hanif W. Dahya
Director
/s/ Michael J. Levine
Michael J. Levine
Director
/s/ Lawrence Rosano, Jr.
Lawrence Rosano, Jr.
Director
/s/ Lawrence J. Savarese
Lawrence J. Savarese
Director
/s/ Robert Wann
Robert Wann
Senior Executive Vice President,
Chief Operating Officer, and Director
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
2/28/19
135
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.0
The Board of Directors
New York Community Bancorp, Inc.:
We consent to the incorporation by reference in the registration statement (Nos. 333-218358, 333-182334, 333-
146512, 333-135279, 333-130908, 333-110361, 333-105901, 333-89826, 333-66366, 333-51988, and 333-32881)
on Form S-8 and the registration statements (Nos. 333-188181, 333-188178, 333-129338, 333-105350, 333-100767,
333-86682, 333-150442, 333-152147, 333-166080, 333-210919, 333-210917, and 333-218358) on Form S-3 of
New York Community Bancorp, Inc. of our reports dated February 28, 2019, with respect to the consolidated
statements of condition of New York Community Bancorp, Inc. as of December 31, 2018 and 2017, and the related
consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows
for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the
“consolidated financial statements”) and the effectiveness of internal control over financial reporting as of
December 31, 2018, which reports appear in the December 31, 2018 annual report on Form 10-K of New York
Community Bancorp, Inc.
New York, New York
February 28, 2019
136
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATIONS
EXHIBIT 31.1
I, Joseph R. Ficalora, certify that:
1. I have reviewed this annual report on Form 10-K of New York Community Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
DATE: February 28, 2019
BY: /s/ Joseph R. Ficalora
Joseph R. Ficalora
President and Chief Executive Officer
(Duly Authorized Officer)
137
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATIONS
EXHIBIT 31.2
I, Thomas R. Cangemi, certify that:
1. I have reviewed this annual report on Form 10-K of New York Community Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
DATE: February 28, 2019
BY: /s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
138
EXHIBIT 32.0
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of New York Community Bancorp, Inc. (the “Company”) on Form 10-K for
the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), the
undersigned certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of
2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company as of and for the period covered by the Report.
DATE: February 28, 2019
DATE: February 28, 2019
BY: /s/ Joseph R. Ficalora
Joseph R. Ficalora
President and Chief Executive Officer
(Duly Authorized Officer)
BY:
/s/ Thomas R. Cangemi
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
139
MULTI-FAMILY LOAN PORTFOLIO
(in millions)
COMMERCIAL REAL ESTATE
LOAN PORTFOLIO
(in millions)
SPECIALTY FINANCE LOAN AND
LEASE PORTFOLIO
(in millions)
$29,904
$28,092
$7,637
$7,860
$7,727
$7,366
$7,325
$7,001
$1,989
$25,989
$26,961
$23,849
$20,714
CAGR (2013-2018)
63.2%
$1,286
$1,584
$895
$635
2014
$848
$0
$172
2013
$258
$0
2015
2016
2017
2018
$1,068
$0
$1,266
$0
$1,784
$0
$1,917
$0
Years ended December 31,
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
2017
2018
Originations:
Net Charge-offs (Recoveries):
$7,417
$11
$7,584
$0
$9,214
$(4)
$5,685
$0
$5,378
$0
$6,622
$0
$2,168
$0
$1,661
$1
$1,842
$(1)
$1,180
$(1)
$1,039
$0
$967
$3
TOTAL RETURN ON INVESTMENT
OUR FRANCHISE: OVER 250 BRANCHE S ACROS S FI VE STATE S
As a result of nine stock splits between
1994 and 2004, our charter shareholders
have 2,700 shares of NYCB stock for each
100 shares originally purchased.
PEER GROUP
NYCB(a)
(a) Bloomberg
2,059%
3,843%
CAGR since IPO:
20.8%
3,069%
2,754%
2,670%
4,784%
4,682%
4,106%
4,265%
4,319%
The combined GDP of the five states we operate in is
equal to the fourth largest GDP in the world.
3,135%
Ohio Savings Bank
28
BRANCHES
Total Deposits:
$2.2B
141
BRANCHES
Total Deposits:
$18.9B
Queens County Savings Bank
Richmond County Savings Bank
Roslyn Savings Bank
Roosevelt Savings Bank
Atlantic Bank
717%
306%
203%
179%
286%
231%
299%
459%
492%
530%
722%
722%
804%
804%
618%
618%
Years ended December 31,
1999
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Non-Interest-Bearing
8%
Savings
15%
MMA
18%
Interest-Bearing
Checking
19%
CDs
40%
DEPOSITS
(for the year ended
December 31, 2018)
Average cost of
interest-bearing
deposits: 1.66%
TOTAL
DEPOSITS:
$30.8
BILLION
1-4 Family
1%
C&I
6%
Mulit-Family
75%
CRE
17%
ADC
1%
LOANS
(for the year ended
December 31, 2018)
Average yield
on all
loan: 3.77%
TOTAL
HFI LOANS:
$40.2
BILLION
14
BRANCHES
Total Deposits:
$1.3B
AmTrust Bank
Note: Data as of 12/31/2018 from S&P Global Market Intelligence
AmTrust Bank
27
BRANCHES
Total Deposits:
$2.9B
42
BRANCHES
Total Deposits:
$4.4B
Garden State
Community Bank
CORPORATE DIRECTORY NEW YORK COMMUNIT Y BANCORP, INC.
BOARD OF DIRECTORS (1)
CHAIRMAN OF THE BOARD
Dominick Ciampa (2)
Founder
Ciampa Organization
MEMBERS
Hanif “Wally” Dahya(3)
Chief Executive Officer
The Y Company LLC
Leslie D. Dunn
Independent Director
Federal Home Loan Bank of Cincinnati
Joseph R. Ficalora (4)
President and Chief Executive Officer
New York Community Bancorp, Inc.
Michael J. Levine (5)
Principal, Norse Realty Group, Inc. &
Affiliates;
Partner, Levine & Schmutter, CPAs
James J. O’Donovan (6)
Senior Executive Vice President and
Chief Lending Officer (retired)
New York Community Bancorp, Inc.
Lawrence Rosano, Jr. (7)
President, Associated Development Corp.
and Associated Properties, Inc.
Ronald A. Rosenfeld
Chairman (retired)
Federal Housing Finance Board
Lawrence J. Savarese (8)
Senior Partner (retired)
KPMG
John M. Tsimbinos (9)
Chairman and Chief Executive Officer
(retired)
TR Financial Corp. and
Roosevelt Savings Bank
Robert Wann
Senior Executive Vice President and
Chief Operating Officer
New York Community Bancorp, Inc.
PRINCIPAL OFFICERS
Joseph R. Ficalora
President and Chief Executive Officer
Robert Wann
Senior Executive Vice President and
Chief Operating Officer
Thomas R. Cangemi
Senior Executive Vice President and
Chief Financial Officer
James J. Carpenter
Senior Executive Vice President and
Chief Lending Officer
John J. Pinto
Executive Vice President and
Chief Accounting Officer
EXECUTIVE VICE PRESIDENTS
John T. Adams
Chief Credit Officer
Fenton Aylmer
Chief Risk Officer
Robert D. Brown
Chief Information Officer
Anthony E. Donatelli
Director, Capital Planning and Stress
Testing
Frank Esposito
Director, Loan Administration
Andrew Kaplan
Director, Retail Products and Services;
President, NYCB Insurance Agency, Inc.
Eric S. Kracov
Chief Human Resources Officer
Joyce Larson
Chief Administrative Officer
Anthony M. Lewis
Chief Asset Review, Recovery,
and Disposition Officer
Nicholas C. Munson
Chief Audit Executive
R. Patrick Quinn, Esq.
Chief Corporate Governance Officer
and Corporate Secretary
Barbara A. Tosi-Renna
Assistant Chief Operating Officer
Thomas J. Zammit
Chief Appraiser
AFFILIATE OFFICERS
NEW YORK COMMUNITY BANK
Athanassia “Nancy” Papaioannou
President, Atlantic Bank Division
Kenneth M. Scheriff
Executive Vice President, Premier Banking
Robert T. Stratford, Jr.
Managing Director, Chief Lending Officer
NYCB SPECIALTY FINANCE CO., LLC
John F. X. Chipman
Executive Vice President and Director,
Specialty Finance
DIVISIONAL BANK DIRECTORS
QUEENS COUNTY SAVINGS BANK/
ROSLYN SAVINGS BANK
Joseph R. Ficalora
President, QCSB Division
Thomas J. Calabrese, Jr.
President, RSLN Division;
Vice President, Operations
Daniel Gale Agency
(1) Directors of New York Community Bancorp, Inc. also serve as directors of New York Community Bank.
(2) Mr. Ciampa also serves as Chairman of the Boards of Directors of New York Community Bank.
(3) Mr. Dahya chairs the Commercial Credit Committee of the Boards.
(4) Mr. Ficalora serves as a director on each of our Divisional Boards.
(5) Mr. Levine chairs the Risk Assessment and Nominating and Corporate Governance Committees of the Boards.
(6) Mr. O’Donovan chairs the Mortgage & Real Estate Committee of the Boards.
(7) Mr. Rosano serves as Vice Chairman of the Risk Assessment Committee of the Boards.
(8) Mr. Savarese chairs the Audit Committee of the Boards.
(9) Mr. Tsimbinos chairs the Compensation Committee of the Boards.
Hon. Claire Shulman
Queens Borough President (retired);
President and Chief Executive Officer
Flushing Willets Point Corona LDC
Michael R. Stoler
Managing Director
Madison Realty Capital
RICHMOND COUNTY SAVINGS BANK
Michael F. Manzulli
Chairman, RCBK Division
Former Chairman and
Chief Executive Officer
Richmond County Bancorp, Inc. and
Richmond County Savings Bank
Godfrey H. Carstens
President (retired)
Carstens Electrical Supply
Peter J. Esposito
Senior Mortgage Lending Officer (retired)
New York Community Bank
Lisa Giovinazzo, Esq.
Legal Director, SIDMC
James L. Kelley, Esq.
Partner
Lahr, Dillon, Manzulli, Kelley & Penett, P.C.
ATLANTIC BANK
Joseph R. Ficalora
Chairman and Chief Executive Officer
Atlantic Bank Division
Nicolas Bornozis
President
Capital Link Inc.
John Catsimatidis
Chairman and Chief Executive Officer
Red Apple Group
Andrew J. Jacovides
Former Ambassador, Cyprus
Comin Nicholas “Nick” Kafes
Senior Vice President, High Yield Bond
Trading
Tullett Prebon Financial Services LLC
Savas Konstantinides
President and Chief Executive Officer
Omega Brokerage
Spiros Milonas
President
Ionian Management Inc.
Mitchell Rutter
President
Essex Capital Partners
John M. Tsimbinos
OHIO SAVINGS BANK
Ronald A. Rosenfeld
Chairman, OSB Division
Leslie D. Dunn
Robert P. Duvin
Partner
Littler Mendelson, PC
Keith V. Mabee
Group President
Corporate Communications
and Investor Relations
Falls Communications
New York Community Bancorp, Inc.
615 Merrick Avenue
Westbury, New York 11590
www.myNYCB.com
ir@myNYCB.com
(516) 683-4420
STRENGTH.
STABILITY.
LONGEVITY.
2018 ANNUAL REPORT
TOTAL A SSETS
$51.9 BILLION
Our assets totaled $51.9 billion at the end of
December 31, 2018.
DEPOSITS
$30.8 BILLION
With 252 branches in Metro New York, New
Jersey, Ohio, Florida, and Arizona, our deposits
at December 31, 2018 totaled $30.8 billion.
MULTI-FAMILY LOANS
$29.9 BILLION
With a portfolio of $29.9 billion at the end
of December, we are a leading producer of
multi-family loans in New York City.