NEW YORK COMMUNITY BANCORP INC - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-31565

NEW YORK COMMUNITY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

06-1377322

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

615 Merrick Avenue, Westbury, New York 11590

(Address of principal executive offices)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, $0.01 par value per share	NYCB	New York Stock Exchange
Bifurcated Option Note Unit SecuritiES SM	NYCB PU	New York Stock Exchange
Depository Shares each representing a 1/40th interest in a share of Fixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock, $0.01 par value	NYCB PA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 “large accelerated filer,” “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 Exchange Act). Yes ☐ No ☒

465,063,850

Number of shares of common stock outstanding at May 3, 2021

NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

Quarter Ended March 31, 2021


		Page No.

	Glossary	3

	List of Abbreviations and Acronyms	6

Part I.	FINANCIAL INFORMATION	7

Item 1.	Financial Statements	7

	Consolidated Statements of Condition as of March 31, 2021 (unaudited) and December 31, 2020	7

	Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (unaudited)	8

	Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited)	9

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)	10

	Notes to the Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	71

Item 4.	Controls and Procedures	71

Part II.	OTHER INFORMATION	72

Item 1.	Legal Proceedings	72

Item 1A.	Risk Factors	72

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73

Item 3.	Defaults upon Senior Securities	73

Item 4.	Mine Safety Disclosures	73

Item 5.	Other Information	73

Item 6.	Exhibits	74

Signatures		76

GLOSSARY

BASIS POINT

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

BOOK VALUE PER COMMON SHARE

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

BROKERED DEPOSITS

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

CHARGE-OFF

Refers to the amount of a loan balance that has been written off against the allowance for credit losses on loans and leases.

COMMERCIAL REAL ESTATE LOAN

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

COST OF FUNDS

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

CRE CONCENTRATION RATIO

Refers to the sum of multi-family, non-owner occupied CRE, and acquisition, development, and construction (“ADC”) loans divided by total risk-based capital.

DEBT SERVICE COVERAGE RATIO

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

DERIVATIVE

A term used to define a broad base of financial instruments, including swaps, options, and futures contracts, whose value is based upon, or derived from, an underlying rate, price, or index (such as interest rates, foreign currency, commodities, or prices of other financial instruments such as stocks or bonds).

DIVIDEND PAYOUT RATIO

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

EFFICIENCY RATIO

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

GOODWILL

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

GOVERNMENT-SPONSORED ENTERPRISES

Refers to a group of financial services corporations that were created by the United States Congress to enhance the availability, and reduce the cost of, credit to certain targeted borrowing sectors, including home finance. The GSEs include, but are not limited to, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks (the “FHLBs”).

GSE OBLIGATIONS

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

INTEREST RATE SENSITIVITY

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

INTEREST RATE SPREAD

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

LOAN-TO-VALUE RATIO

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

MULTI-FAMILY LOAN

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

NET INTEREST INCOME

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

NET INTEREST MARGIN

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

NON-ACCRUAL LOAN

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

NON-PERFORMING LOANS AND ASSETS

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

OREO AND OTHER REPOSSESSED ASSETS

Includes real estate owned by the Company which was acquired either through foreclosure or default. Repossessed assets are similar, except they are not real estate-related assets.

RENT-REGULATED APARTMENTS

In New York City, where the vast majority of the properties securing our multi-family loans are located, the amount of rent that tenants may be charged on the apartments in certain buildings is restricted under rent-stabilization laws. Rent-stabilized apartments are generally located in buildings with six or more units that were built between February 1947 and January 1974. Rent-regulated apartments tend to be more affordable to live in because of the applicable regulations, and buildings with a preponderance of such rent-regulated apartments are therefore less likely to experience vacancies in times of economic adversity.

REPURCHASE AGREEMENTS

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

SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION (“SIFI”)

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

WHOLESALE BORROWINGS

Refers to advances drawn by the Bank against its line(s) of credit with the FHLBs, their repurchase agreements with the FHLBs and various brokerage firms, and federal funds purchased.

YIELD

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

LIST OF ABBREVIATIONS AND ACRONYMS


ACL—Allowance for Credit Losses on Loans and Leases		FDI Act—Federal Deposit Insurance Act
ADC—Acquisition, development, and construction loan		FDIC—Federal Deposit Insurance Corporation
ALCO—Asset and Liability Management Committee		FHLB—Federal Home Loan Bank
AMT—Alternative minimum tax		FHLB-NY—Federal Home Loan Bank of New York
AmTrust—AmTrust Bank		FOMC—Federal Open Market Committee
AOCL—Accumulated other comprehensive loss		FRB—Federal Reserve Board
ASC—Accounting Standards Codification		FRB-NY—Federal Reserve Bank of New York
ASU—Accounting Standards Update		Freddie Mac—Federal Home Loan Mortgage Corporation
BOLI—Bank-owned life insurance		FTEs—Full-time equivalent employees
BP—Basis point(s)		GAAP—U.S. generally accepted accounting principles
CARES Act—Coronavirus Aid, Relief, and Economic Security Act		GLBA—The Gramm Leach Bliley Act
C&I—Commercial and industrial loan		GNMA—Government National Mortgage Association
CCAR—Comprehensive Capital Analysis and Review		GSEs—Government-sponsored enterprises
CDs—Certificates of deposit		HQLAs—High-quality liquid assets
CECL—Current Expected Credit Loss		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		MBS—Mortgage-backed securities
CPI—Consumer Price Index		NIM—Net interest margin
CPR—Constant prepayment rate		NOL—Net operating loss
CRA—Community Reinvestment Act		NPAs—Non-performing assets
CRE—Commercial real estate loan		NPLs—Non-performing loans
Desert Hills—Desert Hills Bank		NPV—Net Portfolio Value
DIF—Deposit Insurance Fund		NYSDFS—New York State Department of Financial Services
DFA—Dodd-Frank Wall Street Reform and Consumer Protection Act		NYSE—New York Stock Exchange
DSCR—Debt service coverage ratio		OCC—Office of the Comptroller of the Currency
EAR—Earnings at Risk		OFAC—Office of Foreign Assets Control
EPS—Earnings per common share		OREO—Other real estate owned
ERM—Enterprise Risk Management		PPP—Paycheck Protection Program loans administered by the Small Business Administration
EVE—Economic Value of Equity at Risk		SEC—U.S. Securities and Exchange Commission
Fannie Mae—Federal National Mortgage Association		SIFI—Systemically Important Financial Institution
FASB—Financial Accounting Standards Board		TDRs—Troubled debt restructurings

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data)


	March 31, 2021			December 31, 2020
	(unaudited)
Assets:
Cash and cash equivalents	$	2,722,915		$	1,947,931
Securities:
Debt securities available-for-sale ($1,242,310 and $1,278,177 pledged at March 31, 2021 and December 31, 2020, respectively) (Allowance for credit losses of $0 at March 31, 2021 and December 31, 2020)		6,177,905			5,813,333
Equity investments with readily determinable fair values, at fair value		15,801			31,576
Total securities		6,193,706			5,844,909
Loans held for sale		141,435			117,136
Loans and leases held for investment, net of deferred loan fees and costs		43,125,139			42,883,598
Less: Allowance for credit losses on loans and leases		(197,758	)		(194,043	)
Total loans and leases held for investment, net		42,927,381			42,689,555
Total loans and leases held for investment and held for sale, net		43,068,816			42,806,691
Federal Home Loan Bank stock, at cost		698,984			714,005
Premises and equipment, net		282,407			287,447
Operating lease right-of-use assets		262,196			266,864
Goodwill		2,426,379			2,426,379
Bank-owned life insurance		1,165,765			1,164,196
Other real estate owned and other repossessed assets		8,153			8,318
Other assets		827,571			839,380
Total assets	$	57,656,892		$	56,306,120
Liabilities and Stockholders’ Equity:
Deposits:
Interest-bearing checking and money market accounts	$	12,665,002		$	12,610,073
Savings accounts		7,043,602			6,415,608
Certificates of deposit		9,614,298			10,330,680
Non-interest-bearing accounts		4,874,234			3,080,452
Total deposits		34,197,136			32,436,813
Borrowed funds:
Wholesale borrowings:
Federal Home Loan Bank advances		14,302,661			14,627,661
Repurchase agreements		800,000			800,000
Total wholesale borrowings		15,102,661			15,427,661
Junior subordinated debentures		360,362			360,259
Subordinated notes		295,764			295,624
Total borrowed funds		15,758,787			16,083,544
Operating lease liabilities		262,169			266,846
Other liabilities		642,360			677,273
Total liabilities		50,860,452			49,464,476
Stockholders’ equity:
Preferred stock at par $0.01 (5,000,000 shares authorized): Series A (515,000 shares issued and outstanding)		502,840			502,840
Common stock at par $0.01 (900,000,000 shares authorized; 490,439,070 and 490,439,070 shares issued; and 465,074,384 and 463,901,808 shares outstanding, respectively)		4,904			4,904
Paid-in capital in excess of par		6,103,251			6,122,690
Retained earnings		552,566			494,229
Treasury stock, at cost (25,364,686 and 26,537,262 shares, respectively)		(245,005	)		(257,541	)
Accumulated other comprehensive loss, net of tax:
Net unrealized (loss) gain on securities available for sale, net of tax of $16,051 and ($25,072), respectively		(41,809	)		66,880
Net unrealized loss on pension and post-retirement obligations, net of tax of $20,198 and $21,898, respectively		(54,855	)		(59,345	)
Net unrealized loss on cash flow hedges, net of tax of $9,658 and $12,519, respectively		(25,452	)		(33,013	)
Total accumulated other comprehensive loss, net of tax		(122,116	)		(25,478	)
Total stockholders’ equity		6,796,440			6,841,644
Total liabilities and stockholders’ equity	$	57,656,892		$	56,306,120

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)


	For the
	Three Months Ended
	March 31,
	2021			2020
Interest Income:
Loans and leases	$	383,430		$	391,911
Securities and money market investments		39,678			49,131
Total interest income		423,108			441,042
Interest Expense:
Interest-bearing checking and money market accounts		8,652			28,564
Savings accounts		6,255			8,934
Certificates of deposit		18,471			79,555
Borrowed funds		72,071			79,522
Total interest expense		105,449			196,575
Net interest income		317,659			244,467
Provision for credit losses		3,569			20,601
Net interest income after provision for credit losses		314,090			223,866
Non-Interest Income:
Fee income		5,539			7,018
Bank-owned life insurance		6,890			7,389
Net (loss) gain on securities		(483	)		534
Other		2,461			1,958
Total non-interest income		14,407			16,899
Non-Interest Expense:
Operating expenses:
Compensation and benefits		78,026			79,451
Occupancy and equipment		21,481			17,875
General and administrative		32,894			28,196
Total non-interest expense		132,401			125,522
Income before income taxes		196,096			115,243
Income tax expense		50,500			14,915
Net income		145,596			100,328
Preferred stock dividends		8,207			8,207
Net income available to common shareholders	$	137,389		$	92,121
Basic earnings per common share	$	0.29		$	0.20
Diluted earnings per common share	$	0.29		$	0.20
Net income	$	145,596		$	100,328
Other comprehensive loss, net of tax:
Change in net unrealized loss on securities available for sale, net of tax of $41,123 and $4,611, respectively		(108,689	)		(12,157	)
Change in pension and post-retirement obligations, net of tax of ($1,238) and ($19), respectively		3,271			45
Change in net unrealized gain (loss) on cash flow hedges, net of tax of $(1,245) and $13,397, respectively		3,287			(35,888	)
Less: Reclassification adjustment for sales of available-for-sale securities, net of tax of $0; $206, respectively		—			(543	)
Reclassification adjustment for defined benefit pension plan, net of tax of ($462), ($487), respectively		1,219			1,288
Reclassification adjustment for net gain (loss) on cash flow hedges included in net income, net of tax of ($1,617) and $178, respectively		4,274			(467	)
Total other comprehensive loss, net of tax		(96,638	)		(47,722	)
Total comprehensive income, net of tax	$	48,958		$	52,606

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


				Preferred		Common											Accumulated
				Stock		Stock		Paid-in									Other			Total
Three Months Ended March 31, 2021	Shares Outstanding			(Par Value: $0.01)		(Par Value: $0.01)		Capital in Excess of Par			Retained Earnings			Treasury Stock, at Cost			Comprehensive Loss, Net of Tax			Stockholders’ Equity
Balance at December 31, 2020		463,901,808		$	502,840	$	4,904	$	6,122,690		$	494,229		$	(257,541	)	$	(25,478	)	$	6,841,644
Shares issued for restricted stock, net of forfeitures		2,515,942			—		—		(28,051	)		—			28,051			—			—
Compensation expense related to restricted stock awards		—			—		—		8,612			—			—			—			8,612
Net income		—			—		—		—			145,596			—			—			145,596
Dividends paid on common stock ($0.17)		—			—		—		—			(79,052	)		—			—			(79,052	)
Dividends paid on preferred stock ($15.94)		—			—		—		—			(8,207	)		—			—			(8,207	)
Purchase of common stock		(1,343,366	)		—		—		—			—			(15,515	)		—			(15,515	)
Other comprehensive loss, net of tax		—			—		—		—			—			—			(96,638	)		(96,638	)
Balance at March 31, 2021		465,074,384		$	502,840	$	4,904	$	6,103,251		$	552,566		$	(245,005	)	$	(122,116	)	$	6,796,440

Three Months Ended March 31, 2020
Balance at December 31, 2019		467,346,781		$	502,840	$	4,904	$	6,115,487		$	342,023		$	(220,717	)	$	(32,843	)	$	6,711,694
Opening retained earnings adjustment (1)		—			—		—		—			(10,468	)					—			(10,468	)
Adjusted balance, beginning of period												331,555									6,701,226
Shares issued for restricted stock, net of forfeitures		2,321,105			—		—		(22,198	)		—			22,198			—			—
Compensation expense related to restricted stock awards		—			—		—		8,251			—			—			—			8,251
Net income		—			—		—		—			100,328			—			—			100,328
Dividends paid on common stock ($0.17)		—			—		—		—			(79,332	)		—			—			(79,332	)
Dividends paid on preferred stock ($15.94)		—			—		—		—			(8,207	)					—			(8,207	)
Purchase of common stock		(3,307,183	)		—		—		—			—			(37,159	)		—			(37,159	)
Other comprehensive loss, net of tax		—			—		—		—			—			—			(47,722	)		(47,722	)
Balance at March 31, 2020		466,360,703		$	502,840	$	4,904	$	6,101,540		$	344,344		$	(235,678	)	$	(80,565	)	$	6,637,385

(1) Amount represents a $10.5 million cumulative adjustment, net of tax, to retained earnings as of January 1, 2020, as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which became effective January 1, 2020.

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	For the Three Months Ended March 31,
	2021			2020
Cash Flows from Operating Activities:
Net income	$	145,596		$	100,328
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		3,569			20,601
Depreciation		5,357			6,407
Amortization of discounts and premiums, net		1,344			6,384
Net loss (gain) on securities		483			(534	)
Gain on trading activity		(94	)		—
Net (gain) loss on sales of loans		(744	)		4
Stock-based compensation		8,612			8,251
Deferred tax expense		31,279			44,465
Changes in operating assets and liabilities:
Decrease (increase) in other assets(1)		7,891			(34,397	)
Decrease in other liabilities(2)		(28,007	)		(20,813	)
Purchases of securities held for trading		(60,000	)		—
Proceeds from sales of securities held for trading		60,094			—
Held for sale originations		(51,766	)		—
Net cash provided by operating activities		123,614			130,696
Cash Flows from Investing Activities:
Proceeds from repayment of securities available for sale		495,342			428,098
Proceeds from sales of securities available for sale	—				369,972
Purchase of securities available for sale		(985,594	)		(483,789	)
Redemption of Federal Home Loan Bank stock		15,601			72,567
Purchases of Federal Home Loan Bank stock		(580	)		(88,875	)
Proceeds from bank-owned life insurance, net		7,182			1,772
Proceeds from sales of loans		32,929			3,124
Purchases of loans		(20,723	)		(26,300	)
Other changes in loans, net		(225,019	)		(380,427	)
Purchases of premises and equipment, net		(317	)		(438	)
Net cash used in investing activities		(681,179	)		(104,296	)
Cash Flows from Financing Activities:
Net increase in deposits		1,760,323			315,634
Net increase in short-term borrowed funds	—				1,350,000
Proceeds from long-term borrowed funds		325,000			2,150,000
Repayments of long-term borrowed funds		(650,000	)		(3,125,000	)
Cash dividends paid on common stock		(79,052	)		(79,332	)
Cash dividends paid on preferred stock		(8,207	)		(8,207	)
Treasury stock repurchased	—				(28,924	)
Payments relating to treasury shares received for restricted stock award tax payments		(15,515	)		(8,235	)
Net cash provided by financing activities		1,332,549			565,936
Net increase in cash, cash equivalents, and restricted cash		774,984			592,336
Cash, cash equivalents, and restricted cash at beginning of period		1,947,931			741,870
Cash, cash equivalents, and restricted cash at end of period	$	2,722,915		$	1,334,206
Supplemental information:
Cash paid for interest	$	113,189		$	202,459
Cash paid for income taxes		14,005			10,000
Non-cash investing and financing activities:
Transfers to repossessed assets from loans	$	—		$	120
Securitization of residential mortgage loans to mortgage-backed securities available for sale		20,723			26,300
Transfer of loans from held for investment to held for sale		47,745			3,124
Shares issued for restricted stock awards		28,051			22,198

(1) Includes $4.7 million and $4.1 million of amortization of operating lease right-of-use assets for the three months ended March 31, 2021 and 2020, respectively.

(2) Includes $4.7 million and $4.1 million of amortization of operating lease liability for the three months ended March 31, 2021 and 2020, respectively.

See accompanying notes to the consolidated financial statements.

NEW YORK COMMUNITY BANCORP, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization, Basis of Presentation, and Impact of Recent Accounting Pronouncements

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”).

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 237 branches, 19 of which operate directly under the Community Bank name. The remaining 218 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 credit losses and the evaluation of goodwill for impairment.

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

When necessary, certain reclassifications have been made to prior-year amounts to conform to the current-year presentation.

Impact of Recent Accounting Pronouncements

Recently Adopted Accounting Standards

The Company adopted ASU No. 2020-04 in the first quarter of 2021 upon issuance. The amendments provide optional expedients and exceptions for certain contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform. The guidance is effective from the date of issuance until December 31, 2022. If certain criteria are met, the amendments allow exceptions to the designation criteria of the hedging relationship and the assessment of hedge effectiveness during the transition period. To date, the guidance has not had a material impact on the Company’s Consolidated Statements of Condition, results of operations, or cash flows. The Company will continue to assess the impact as the reference rate transition occurs.

The Company adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and its amendments, (“ASU No. 2016-13”) as of January 1, 2020. ASU No. 2016-13 amended 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 eliminated the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The amendments in ASU No. 2016-13 replaced the incurred loss impairment methodology 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 financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses will be presented as an allowance rather than as a write-down. The amendments affected loans, debt securities, trade receivables, 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 adopted ASU No. 2016-13 on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the adoption date and, accordingly, the Company recorded a net of tax decrease of $10.5 million to retained earnings as of January 1, 2020. A prospective transition approach was required for debt securities for which an OTTI had been recognized before the effective date. The effect of the prospective transition approach was 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 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 are recorded in earnings when received.

The Company adopted, on a prospective basis, ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment as of January 1, 2020. 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 recognizes 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 adoption of ASU No. 2017-04 did not have a material effect on the Company’s Consolidated Statements of Condition, results of operations, or cash flows. During the three months ended March 31, 2021, the Company assessed the current environment, including the estimated impact of the COVID-19 pandemic on macroeconomic variables and economic forecasts and how those might impact the fair value of its reporting unit. After consideration of the items above and the first three months 2021 results, the Company determined it was not more-likely-than-not that the fair value of its reporting unit was below its book value as of March 31, 2021.

Note 2. Computation of Earnings per Common Share

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

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


	For the Three Months Ended March 31,
(in thousands, except share and per share amounts)	2021			2020
Net income available to common shareholders	$	137,389		$	92,121
Less: Dividends paid on and earnings allocated to participating securities		(1,795	)		(1,170	)
Earnings applicable to common stock	$	135,594		$	90,951
Weighted average common shares outstanding		463,292,906			464,993,970
Basic earnings per common share	$	0.29		$	0.20
Earnings applicable to common stock	$	135,594		$	90,951
Weighted average common shares outstanding		463,292,906			464,993,970
Potential dilutive common shares		594,031			418,674
Total shares for diluted earnings per common share computation		463,886,937			465,412,644
Diluted earnings per common share and common share equivalents	$	0.29		$	0.20

Note 3: Reclassifications out of Accumulated Other Comprehensive Loss


(in thousands)	For the Three Months Ended March 31, 2021
Details about Accumulated Other Comprehensive Loss	Amount Reclassified out of Accumulated Other Comprehensive Loss (1)			Affected Line Item in the Consolidated Statements of Income and Comprehensive Income
Unrealized gains (losses) on available-for-sale securities:	$	—		Net gain (losses) on securities
		—		Income tax expense
	$	—		Net gain (losses) on securities, net of tax

Unrealized loss on cash flow hedges:	$	(5,891	)	Interest expense
		1,617		Income tax benefit
	$	(4,274	)	Net loss on cash flow hedges, net of tax
Amortization of defined benefit pension plan items:
Past service liability	$	62		Included in the computation of net periodic credit(2)
Actuarial losses		(1,743	)	Included in the computation of net periodic cost (2)
		(1,681	)	Total before tax
		462		Income tax benefit
	$	(1,219	)	Amortization of defined benefit pension plan items, net of tax
Total reclassifications for the period	$	(5,493	)

(1) Amounts in parentheses indicate expense items.

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

Note 4. Securities

The following tables summarize the Company’s portfolio of debt securities available for sale and equity investments with readily determinable fair values at March 31, 2021 and December 31, 2020:


	March 31, 2021
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Debt securities available-for-sale
Mortgage-Related Debt Securities:
GSE certificates	$	1,183,746	$	40,473	$	14,901	$	1,209,318
GSE CMOs		2,007,855		28,837		50,422		1,986,270
Total mortgage-related debt securities	$	3,191,601	$	69,310	$	65,323	$	3,195,588
Other Debt Securities:
U. S. Treasury obligations	$	64,993	$	5	$	—	$	64,998
GSE debentures		1,433,280		2,693		67,632		1,368,341
Asset-backed securities (1)		520,111		4,030		3,368		520,773
Municipal bonds		25,715		482		186		26,011
Corporate bonds		870,886		16,594		5,410		882,070
Foreign notes		25,000		993		—		25,993
Capital trust notes		95,621		6,823		8,313		94,131
Total other debt securities	$	3,035,606	$	31,620	$	84,909	$	2,982,317
Total debt securities available for sale	$	6,227,207	$	100,930	$	150,232	$	6,177,905
Equity Securities:
Mutual funds		15,814		116		129		15,801
Total equity securities	$	15,814	$	116	$	129	$	15,801
Total securities (2)	$	6,243,021	$	101,046	$	150,361	$	6,193,706

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

(2) Excludes accrued interest receivable of $14.8 million included in other assets in the Consolidated Statements of Condition.


	December 31, 2020
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Debt securities available-for-sale
Mortgage-Related Debt Securities:
GSE certificates	$	1,155,436	$	54,310	$	136	$	1,209,610
GSE CMOs		1,786,896		44,691		2,872		1,828,715
Total mortgage-related debt securities	$	2,942,332	$	99,001	$	3,008	$	3,038,325
Other Debt Securities:
U.S. Treasury obligations	$	64,984	$	1	$	—	$	64,985
GSE debentures		1,158,253		3,998		3,949		1,158,302
Asset-backed securities (1)		530,226		2,576		5,703		527,099
Municipal bonds		25,776		625		90		26,311
Corporate bonds		870,745		17,928		6,447		882,226
Foreign notes		25,000		538		—		25,538
Capital trust notes		95,507		5,540		10,500		90,547
Total other debt securities	$	2,770,491	$	31,206	$	26,689	$	2,775,008
Total other securities available for sale	$	5,712,823	$	130,207	$	29,697	$	5,813,333
Equity Securities:
Preferred stock	$	15,292	$	201	$	—	$	15,493
Mutual funds		15,814		269		—		16,083
Total equity securities	$	31,106	$	470	$	—	$	31,576
Total securities(2)	$	5,743,929	$	130,677	$	29,697	$	5,844,909

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

(2) Excludes accrued interest receivable of $14.9 million included in other assets in the Consolidated Statements of Condition.

At March 31, 2021 and December 31, 2020, respectively, the Company had $699.0 million and $714.0 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 three months ended March 31, 2021 and 2020:


	For the Three Months Ended March 31,
(in thousands)	2021		2020
Gross proceeds	—		$	369,972
Gross realized gains		—		1,811
Gross realized losses		—		1,062

Net losses on equity securities recognized in earnings for the three months ended March 31, 2021 and 2020 were $483,000 and $215,000, respectively.

The following table summarizes, by contractual maturity, the amortized cost of securities at March 31, 2021:


	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	$	23,017		3.76	%	$	75,943		0.54	%	$	—		—	%	$	49,817		3.01	%	$	149,348
Due from one to five years		361,118		3.18			21,924		3.52			—		—			223,181		1.87			637,035
Due from five to ten years		175,554		2.48			238,052		2.16			19,840		3.51			706,390		2.03			1,146,853
Due after ten years		2,631,912		1.98			1,162,354		1.53			5,875		3.33			532,230		1.25			4,244,669
Total debt securities available for sale	$	3,191,601		2.16	%	$	1,498,273		1.61	%	$	25,715		3.47	%	$	1,511,618		1.76	%	$	6,177,905

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

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

The following table presents securities with no related allowance having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of March 31, 2021:


	Less than Twelve Months				Twelve Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
GSE certificates	$	323,281	$	14,901	$	—	$	—	$	323,281	$	14,901
GSE CMOs		918,257		50,422		—		—		918,257		50,422
GSE debentures		1,244,721		67,633		—		—		1,244,721		67,633
Asset-backed securities		112,149		405		179,063		2,962		291,212		3,367
Municipal bonds		—		—		8,744		186		8,744		186
Corporate bonds		—		—		319,590		5,410		319,590		5,410
Capital trust notes		—		—		35,601		8,313		35,601		8,313
Equity securities		11,676		129		—		—		11,676		129
Total temporarily impaired securities	$	2,610,084	$	133,490	$	542,998	$	16,871	$	3,153,082	$	150,361

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, 2020:


	Less than Twelve Months				Twelve Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Securities:
U. S. Treasury obligations	$	—	$	—	$	—	$	—	$	—	$	—
U. S. Government agency and GSE obligations		58,876		136		—		—		58,876		136
GSE certificates		442,207		2,807		73,568		65		515,775		2,872
GSE CMOs		522,441		3,949		—		—		522,441		3,949
Asset-backed securities		—		—		363,618		5,703		363,618		5,703
Municipal bonds		—		—		8,891		90		8,891		90
Corporate bonds		72,024		2,976		246,528		3,471		318,552		6,447
Foreign notes		—		—		—		—		—		—
Capital trust notes		—		—		33,393		10,500		33,393		10,500
Equity securities		—		—		—		—		—		—
Total temporarily impaired securities	$	1,095,548	$	9,868	$	725,998	$	19,829	$	1,821,546	$	29,697

The investment securities designated as having a continuous loss position for twelve months or more at March 31, 2021 consisted of five capital trusts notes, five asset-backed securities, five corporate bonds, and one municipal bond. The investment securities designated as having a continuous loss position for twelve months or more at December 31, 2020 consisted of four agency collateralized mortgage obligations, five capital trusts notes, seven asset-backed securities, three corporate bonds, and one municipal bond.

The Company evaluates available-for-sale debt securities in unrealized loss positions at least quarterly to determine if an allowance for credit losses is required. Based on an evaluation of available information about past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability, the Company has concluded that it expects to receive all contractual cash flows from each security held in its available-for-sale securities portfolio.

We first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, any previously recognized allowances are charged off and the security’s amortized cost basis is written down to fair value through income. If neither of the aforementioned criteria is met, we evaluate whether the decline in fair value has resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

None of the unrealized losses identified as of March 31, 2021 or December 31, 2020 relates to the marketability of the securities or the issuers’ ability to honor redemption obligations. Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment. Management based this conclusion on an analysis of each issuer including a detailed credit assessment of each issuer. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell the positions before the recovery of their amortized cost basis, which may be at maturity. As such, no allowance for credit losses was recorded with respect to debt securities as of or during the three months ended March 31, 2021.

Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status.

Note 5. Loans and Leases

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


	March 31, 2021						December 31, 2020
(dollars in thousands)	Amount			Percent of Loans Held for Investment			Amount			Percent of Loans Held for Investment
Loans and Leases Held for Investment:
Mortgage Loans:
Multi-family	$	32,195,256			74.77	%	$	32,236,385			75.28	%
Commercial real estate		7,027,236			16.32			6,835,763			15.96
One-to-four family		208,108			0.48			235,989			0.55
Acquisition, development, and construction		115,947			0.27			89,790			0.21
Total mortgage loans held for investment(1)		39,546,547			91.84		$	39,397,927			92.00
Other Loans:
Commercial and industrial		1,610,550			3.74			1,682,519			3.93
Lease financing, net of unearned income of $110,582 and $116,366, respectively		1,898,980			4.41			1,734,824			4.05
Total commercial and industrial loans (2)		3,509,530			8.15			3,417,343			7.98
Other		5,593			0.01			6,520			0.02
Total other loans held for investment(1)		3,515,123			8.16			3,423,863			8.00
Total loans and leases held for investment	$	43,061,670			100.00	%	$	42,821,790			100.00	%
Net deferred loan origination costs		63,469						61,808
Allowance for credit losses loans and leases		(197,758	)					(194,043	)
Total loans and leases held for investment, net	$	42,927,381					$	42,689,555
Loans held for sale (3)		141,435						117,136
Total loans and leases, net	$	43,068,816					$	42,806,691

(1) Excludes accrued interest receivable of $219.0 million and $219.1 million at March 31, 2021 and December 31, 2020, respectively, which is included in other assets in the Consolidated Statements of Condition.

(2) Includes specialty finance loans and leases of $3.2 billion and $3.0 billion, respectively, at March 31, 2021 and December 31, 2020, and other C&I loans of $350.8 million and $393.3 million, respectively, at March 31, 2021 and December 31, 2020.

(3) Includes deferred loan origination fees of $3.8 million and $1.7 million at March 31, 2021 and December 31, 2020, respectively.

Loans Held for Investment

The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized 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 adjustable rate mortgages made to borrowers with a solid credit history.

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

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

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

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

To minimize the risk involved in specialty finance lending and leasing, the Company participates in syndicated loans that are brought to it, and equipment loans and leases that are assigned to it, by a select group of nationally recognized sources who have long-term relationships with its experienced lending officers. 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. 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 March 31, 2021 and December 31, 2020, were loans of $7.0 million and $37.5 million, respectively, to certain officers, directors, and their related interests and parties. There were no loans to principal shareholders at that date.

Asset Quality

A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because the Company no longer expects to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At March 31, 2021 and December 31, 2020, all of our non-performing loans were non-accrual loans.

The following table presents information regarding the quality of the Company’s loans held for investment at March 31, 2021:


(in thousands)	Loans 30-89 Days Past Due		Non- Accrual Loans		Loans 90 Days or More Delinquent and Still Accruing Interest		Total Past Due Loans		Current Loans		Total Loans Receivable
Multi-family	$	961	$	9,888	$	—	$	10,849	$	32,184,407	$	32,195,256
Commercial real estate		19,371		11,573		—		30,944		6,996,292		7,027,236
One-to-four family		—		1,466		—		1,466		206,642		208,108
Acquisition, development, and construction		—		—		—		—		115,947		115,947
Commercial and industrial(1) (2)		—		10,247		—		10,247		3,499,283		3,509,530
Other		13		4		—		17		5,576		5,593
Total loans and leases held for investment	$	20,345	$	33,178	$	—	$	53,523	$	43,008,147	$	43,061,670

(1) Includes $10.1 million of taxi medallion-related loans that were 90 days or more past due. There were no taxi medallion-related loans that were 30 to 89 days past due.

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

The following table presents information regarding the quality of the Company’s loans held for investment at December 31, 2020:


(in thousands)	Loans 30-89 Days Past Due		Non- Accrual Loans		Loans 90 Days or More Delinquent and Still Accruing Interest		Total Past Due Loans		Current Loans		Total Loans Receivable
Multi-family	$	4,091	$	4,068	$	—	$	8,159	$	32,228,226	$	32,236,385
Commercial real estate		9,989		12,142		—		22,131		6,813,632		6,835,763
One-to-four family		1,575		1,696		—		3,271		232,718		235,989
Acquisition, development, and construction		—		—		—		—		89,790		89,790
Commercial and industrial(1) (2)		—		19,866		—		19,866		3,397,477		3,417,343
Other		3		13		—		16		6,504		6,520
Total	$	15,658	$	37,785	$	—	$	53,443	$	42,768,347	$	42,821,790

(1) Includes $18.6 million of taxi medallion-related loans that were 90 days or more past due. There were no taxi medallion-related loans that were 30 to 89 days past due.

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

The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at March 31, 2021:


	Mortgage Loans										Other Loans
(in thousands)	Multi- Family		Commercial Real Estate		One-to- Four Family		Acquisition, Development, and Construction		Total Mortgage Loans		Commercial and Industrial(1)		Other		Total Other Loans
Credit Quality Indicator:
Pass	$	30,647,027	$	5,867,168	$	194,220	$	101,958	$	36,810,373	$	3,450,432	$	5,589	$	3,456,021
Special mention		875,091		785,007		5,354		13,989		1,679,441		2,071		—		2,071
Substandard		673,138		375,061		8,534		—		1,056,733		57,027		4		57,031
Doubtful		—		—		—		—		—		—		—		—
Total	$	32,195,256	$	7,027,236	$	208,108	$	115,947	$	39,546,547	$	3,509,530	$	5,593	$	3,515,123

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

The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at December 31, 2020:


	Mortgage Loans										Other Loans
(in thousands)	Multi- Family		Commercial Real Estate		One-to- Four Family		Acquisition, Development, and Construction		Total Mortgage Loans		Commercial and Industrial(1)		Other		Total Other Loans
Credit Quality Indicator:
Pass	$	31,220,071	$	5,884,244	$	221,861	$	68,233	$	37,394,409	$	3,388,293	$	6,507	$	3,394,800
Special mention		566,756		637,101		12,436		21,557		1,237,850		2,842		—		2,842
Substandard		449,558		314,418		1,692		—		765,668		26,208		13		26,221
Doubtful		—		—		—		—		—		—		—		—
Total	$	32,236,385	$	6,835,763	$	235,989	$	89,790	$	39,397,927	$	3,417,343	$	6,520	$	3,423,863

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

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

The following table presents, by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of March 31, 2021.


(in thousands)	Vintage Year
Risk Rating Group	2021		2020		2019		2018		2017		Prior To 2017		Revolving Loans		Total
Pass	$	2,092,263	$	9,587,201	$	6,432,567	$	5,472,277	$	3,995,854	$	9,238,124	$	20,182	$	36,838,468
Special Mention		—		13,067		215,301		345,152		136,466		969,925		—		1,679,911
Substandard		—		—		193,116		249,729		109,848		503,900		—		1,056,593
Total mortgage loans	$	2,092,263	$	9,600,268	$	6,840,984	$	6,067,158	$	4,242,168	$	10,711,949	$	20,182	$	39,574,972
Pass		249,885		1,004,860		679,606		149,190		195,499		235,594		976,916		3,491,550
Special Mention		—		—		71		—		—		—		2,000		2,071
Substandard		—		2,132		3,723		1,840		8,688		13,844		26,319		56,546
Total other loans		249,885		1,006,992		683,400		151,030		204,187		249,438		1,005,235		3,550,167
Total	$	2,342,148	$	10,607,260	$	7,524,384	$	6,218,188	$	4,446,355	$	10,961,387	$	1,025,417	$	43,125,139

When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral adjusted for selling costs. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, the collateral-dependent practical expedient has been elected and expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For CRE loans, collateral properties include office buildings, warehouse/distribution buildings, shopping centers, apartment buildings, residential and commercial tract development. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. CRE loans are impacted by fluctuations in collateral values, as well as the ability of the borrower to obtain permanent financing.

The following table summarizes the extent to which collateral secures the Company’s collateral-dependent loans held for investment by collateral type as of March 31, 2021:


	Collateral Type
(in thousands)	Real Property		Other
Multi-family	$	6,840	$	—
Commercial real estate		25,386		—
One-to-four family		329		—
Acquisition, development, and construction		—		—
Commercial and industrial		—		16,769
Other		—		—
Total collateral-dependent loans held for investment	$	32,555	$	16,769

Other collateral primarily consists of taxi medallions, cash, accounts receivable and inventory.

There were no significant changes in the extent to which collateral secures the Company’s collateral-dependent financial assets during the three months ended March 31, 2021.

Troubled Debt Restructurings

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 determining the Company’s allowance for loan and lease losses, reasonably expected TDRs are individually evaluated and consist of criticized, classified, or maturing loans that will have a modification processed within the next three months.

In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of March 31, 2021, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $32.1 million; loans on which forbearance agreements were reached amounted to $146 thousand.

The CARES Act was enacted on March 27, 2020. Under the CARES Act, the Company made the election to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease (“COVID-19”); (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. This includes short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency.

The following table presents information regarding the Company’s TDRs as of March 31, 2021 and December 31, 2020:


	March 31, 2021						December 31, 2020
(in thousands)	Accruing		Non- Accrual		Total		Accruing		Non- Accrual		Total
Loan Category:
Multi-family	$	—	$	6,840	$	6,840	$	—	$	—	$	—
Commercial real estate		14,894		—		14,894		14,967		—		14,967
One-to-four family		—		330		330		—		557		557
Commercial and industrial(1)		—		10,134		10,134		—		18,761		18,761
Total	$	14,894	$	17,304	$	32,198	$	14,967	$	19,318	$	34,285

(1) Includes $10.0 million and $17.5 million of taxi medallion-related loans at March 31, 2021 and December 31, 2020, respectively.

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

The financial effects of the Company’s TDRs for the three months ended March 31, 2021 and 2020 are summarized as follows:


	For the Three Months Ended March 31, 2021
							Weighted Average Interest Rate
(dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Pre- Modification			Post- Modification			Charge- off Amount		Capitalized Interest
Loan Category:
Multi-family		1	$	7,515	$	7,515		3.13	%		3.25	%	$	-	$	-


	For the Three Months Ended March 31, 2020
							Weighted Average Interest Rate
(dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Pre- Modification			Post- Modification			Charge- off Amount		Capitalized Interest
Loan Category:
Commercial and industrial		8	$	1,920	$	1,572		3.29	%		3.24	%	$	348	$	—

At March 31, 2021, 17 C&I loans in the aggregate amount of $2.1 million have been modified as TDRs during the twelve months ended at that date, and were in payment default. At March 31, 2020, five C&I and one 1-4 family residential loans totaling $600,000 and $140,000, respectively, that had been modified as TDRs during the twelve months ended at that date and were in payment default.

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

Subsequent to the modification, the loan is not considered to be in default until payment is contractually past due in accordance with the modified terms. However, the Company may consider a loan with multiple modifications or forbearance periods to be in default, and would consider a loan to be in default if the borrower were in bankruptcy or if the loan were partially charged off subsequent to modification. Management takes into consideration all TDR modifications in determining the appropriate level of the allowance.

Note 6. Allowance for Credit Losses on Loans and Leases

Allowance for Credit Losses on Loans and Leases

The following table summarizes activity in the allowance for credit losses on loans and leases for the periods indicated:


	For the Three Months Ended March 31,
	2021									2020
(in thousands)	Mortgage			Other			Total			Mortgage			Other			Total
Balance, beginning of period	$	176,538		$	17,505		$	194,043		$	122,695		$	24,943		$	147,638
Impact of CECL adoption		—			-			—			(178	)		2,089			1,911
Adjusted balance, beginning of period		176,538			17,505			194,043			122,517			27,032			149,549
Charge-offs		(658	)		(3,666	)		(4,324	)		—			(10,385	)		(10,385	)
Recoveries		20			4,821			4,841			11			178			189
Provision for credit losses		527			2,671			3,198			18,786			4,105			22,891
Balance, end of period	$	176,427		$	21,331		$	197,758		$	141,314		$	20,930		$	162,244

At March 31, 2021, the allowance for credit losses on loans and leases totaled $197.8 million, up $3.7 million compared to December 31, 2020, driven by a provision for credit losses of $3.6 million.

Separately, at March 31, 2021, the Company had an allowance for unfunded commitments of $12.3 million.

For the three months ended March 31, 2021, the allowance for credit losses on loans and leases increased modestly primarily due to qualitative adjustments surrounding the COVID-19 pandemic's continued impact on our primary lending geography and existing portfolio, partially offset by improvement in the macroeconomic forecast. The forecast scenario includes low single digit growth of Gross Domestic Product (“GDP”), while unemployment remains elevated into the forecasted time horizon. In addition to these economic and quantitative inputs, several qualitative factors were considered, including the risk that the economic decline proves to be more severe and/or prolonged than our baseline forecast. The impact of the unprecedented fiscal stimulus and changes to federal and local laws and regulations, including changes to various government sponsored loan programs, was also considered.

The Company charges off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter that the loan becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days past the date the Company received notification that the borrower has filed for bankruptcy.

The following table presents additional information about the Company’s nonaccrual loans at March 31, 2021:


(in thousands)	Recorded Investment		Related Allowance		Interest Income Recognized
Nonaccrual loans with no related allowance:
Multi-family	$	6,840	$	—	$	81
Commercial real estate		10,491		-		-
One-to-four family		330		-		3
Acquisition, development, and construction		-		-		-
Other		10,205		-		18
Total nonaccrual loans with no related allowance	$	27,866	$	—	$	102
Nonaccrual loans with an allowance recorded:
Multi-family	$	3,048	$	435	$	—
Commercial real estate		1,082		84		2
One-to-four family		1,137		365		3
Acquisition, development, and construction		-		-		-
Other		45		20		1
Total nonaccrual loans with an allowance recorded	$	5,312	$	904	$	6
Total nonaccrual loans:
Multi-family	$	9,888	$	435	$	81
Commercial real estate		11,573		84		2
One-to-four family		1,467		365		6
Acquisition, development, and construction		-		-		-
Other		10,250		20		19
Total nonaccrual loans	$	33,178	$	904	$	108

The following table presents additional information about the Company’s nonaccrual loans at December 31, 2020:


(in thousands)	Recorded Investment		Related Allowance		Interest Income Recognized
Nonaccrual loans with no related allowance:
Multi-family	$	—	$	—	$	—
Commercial real estate		2,256		—		—
One-to-four family		557		—		21
Acquisition, development, and construction		—		—		—
Other		19,821		—		820
Total nonaccrual loans with no related allowance	$	22,634	$	—	$	841
Nonaccrual loans with an allowance recorded:
Multi-family	$	4,068	$	589	$	28
Commercial real estate		9,886		133		52
One-to-four family		1,139		370		14
Acquisition, development, and construction		—		—		—
Other		58		18		5
Total nonaccrual loans with an allowance recorded	$	15,151	$	1,110	$	99
Total nonaccrual loans:
Multi-family	$	4,068	$	589	$	28
Commercial real estate		12,142		133		52
One-to-four family		1,696		370		35
Acquisition, development, and construction		—		—		—
Other		19,879		18		825
Total nonaccrual loans	$	37,785	$	1,110	$	940

Note 7. Borrowed Funds

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


(in thousands)	March 31, 2021			December 31, 2020
Wholesale Borrowings:
FHLB advances	$	14,302,661	$		14,627,661
Repurchase agreements		800,000			800,000
Total wholesale borrowings	$	15,102,661	$		15,427,661
Junior subordinated debentures		360,362			360,259
Subordinated notes		295,764			295,624
Total borrowed funds	$	15,758,787	$		16,083,544

The following table summarizes the Company’s repurchase agreements accounted for as secured borrowings at March 31, 2021:


	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight and Continuous		Up to 30 Days		30–90 Days		Greater than 90 Days
GSE obligations	$	—	$	—	$	—	$	800,000

Subordinated Notes

At March 31, 2021 and December 31, 2020, the Company had $295.8 million and $295.6 million, respectively, of fixed-to-floating rate subordinated notes outstanding:

Date of Original Issue

Stated
Maturity

Interest
Rate(1)

Original Issue
Amount

(dollars in thousands)

Nov. 6, 2018

Nov. 6, 2028

5.90

300,000

(1) 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. Unless redeemed, from and including November 6, 2023 to but excluding the maturity date, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR rate plus 278 basis points payable quarterly.

Junior Subordinated Debentures

At March 31, 2021 and December 31, 2020, the Company had $360.4 million and $360.3 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 March 31, 2021:


Issuer	Interest Rate of Capital Securities and Debentures			Junior Subordinated Debentures Amount Outstanding		Capital Securities Amount Outstanding		Date of Original Issue	Stated Maturity	First Optional Redemption Date
(dollars in thousands)
New York Community Capital Trust V (BONUSESSM Units)		6.00	%	$	146,436	$	140,085	Nov. 4, 2002	Nov. 1, 2051	Nov. 4, 2007(1)
New York Community Capital Trust X		1.78			123,712		120,000	Dec. 14, 2006	Dec. 15, 2036	Dec. 15, 2011 (2)
PennFed Capital Trust III		3.43			30,928		30,000	June 2, 2003	June 15, 2033	June 15, 2008 (2)
New York Community Capital Trust XI		1.85			59,286		57,500	April 16, 2007	June 30, 2037	June 30, 2012 (2)
Total junior subordinated debentures				$	360,362	$	347,585

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

(2) Callable from this date forward.

Note 8. Pension and Other Post-Retirement Benefits

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


	For the Three Months Ended March 31,
	2021						2020
(in thousands)	Pension Benefits			Post- Retirement Benefits			Pension Benefits			Post- Retirement Benefits
Components of net periodic (credit) expense: (1)
Interest cost	$	912		$	56		$	1,173		$	82
Expected return on plan assets		(4,016	)		-			(3,876	)		—
Amortization of prior-service liability		-			(62	)		—			(62	)
Amortization of net actuarial loss		1,732			11			1,831			6
Net periodic (credit) expense	$	(1,372	)	$	5		$	(872	)	$	26

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

The Company expects to contribute $915,000 to its post-retirement plan to pay premiums and claims for the fiscal year ending December 31, 2021. The Company does not expect to make any contributions to its pension plan in 2021.

Note 9. Stock-Based Compensation

At March 31, 2021, the Company had a total of 8,481,554 shares available for grants as restricted stock, options, or other forms of related rights. The Company granted 3,029,949 shares of restricted stock, with an average fair value of $11.15 per share on the date of grant, during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company granted 2,387,645 shares of restricted stock, with an average fair value of $11.64 per share.

The shares of restricted stock that were granted during the three months ended March 31, 2021 and 2020, vest over a one or five year period. Compensation and benefits expense related to the restricted stock grants is recognized on a straight-line basis over the vesting period and totaled $8.0 million and $7.8 million, respectively, for the three months ended March 31, 2021 and 2020.

The following table provides a summary of activity with regard to restricted stock awards in the three months ended March 31, 2021:


	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		6,228,048		$	12.43
Granted		3,029,949			11.15
Vested		(1,918,654	)		13.21
Canceled		(59,260	)		11.65
Unvested at end of period		7,280,083			11.70

As of March 31, 2021, unrecognized compensation cost relating to unvested restricted stock totaled $77.6 million. This amount will be recognized over a remaining weighted average period of 3.6 years.

The following table provides a summary of activity with regard to Performance-Based Restricted Stock Units ("PSUs") in the three months ended March 31, 2021:


	Number of Shares		Performance Period	Expected Vesting Date
Outstanding at beginning of year		477,872
Granted		307,479	January 1, 2021 - December 31, 2023	March 31, 2024
Outstanding at end of period		785,351

PSUs are subject to adjustment or forfeiture, based upon the achievement by the Company of certain performance standards. Compensation and benefits expense related to PSUs is recognized using the fair value as of the date the units were approved, on a straight-line basis over the vesting period and totaled $586,000 and $407,000 for the three months ended March 31, 2021 and March 31, 2020, respectively. As of March 31, 2021, unrecognized compensation cost relating to unvested restricted stock totaled $6.3 million. This amount will be recognized over a remaining weighted average period of 2.1 years. As of March 31, 2021, the Company believes it is probable that the performance conditions will be met.

The Company matches a portion of employee 401(k) plan contributions. Such expense totaled $1.7 million and $1.6 million for the three months ended March 31, 2021 and 2020, respectively.

Note 10. Fair Value Measurements

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



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



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



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

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

The following tables present assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at March 31, 2021
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustments		Total Fair Value
Assets:
Mortgage-Related Debt Securities Available for Sale:
GSE certificates	$	—	$	1,209,318	$	—	$	—	$	1,209,318
GSE CMOs		—		1,986,270		—		—		1,986,270
Total mortgage-related debt securities	$	—	$	3,195,588	$	—	$	—	$	3,195,588
Other Debt Securities Available for Sale:
U. S. Treasury obligations	$	64,998	$	—	$	—	$	—	$	64,998
GSE debentures		—		1,368,341		—		—		1,368,341
Asset-backed securities		—		520,773		—		—		520,773
Municipal bonds		—		26,011		—		—		26,011
Corporate bonds		—		882,070		—		—		882,070
Foreign notes		—		25,993						25,993
Capital trust notes		—		94,131		—		—		94,131
Total other debt securities	$	64,998	$	2,917,319	$	—	$	—	$	2,982,317
Total debt securities available for sale	$	64,998	$	6,112,907	$	—	$	—	$	6,177,905
Equity securities:
Mutual funds		—		15,801		—		—		15,801
Total equity securities	$	—	$	15,801	$	—	$	—	$	15,801
Total securities	$	64,998	$	6,128,708	$	—	$	—	$	6,193,706


	Fair Value Measurements at December 31, 2020
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustments		Total Fair Value
Assets:
Mortgage-Related Debt Securities Available for Sale:
GSE certificates	$	—	$	1,209,610	$	—	$	—	$	1,209,610
GSE CMOs		—		1,828,715		—		—		1,828,715
Total mortgage-related debt securities	$	—	$	3,038,325	$	—	$	—	$	3,038,325
Other Debt Securities Available for Sale:
U.S. Treasury obligations	$	64,985	$	—	$	—	$	—	$	64,985
GSE debentures		—		1,158,302		—		—		1,158,302
Asset-backed securities		—		527,099		—		—		527,099
Municipal bonds		—		26,311		—		—		26,311
Corporate bonds		—		882,226		—		—		882,226
Foreign notes		—		25,538						25,538
Capital trust notes		—		90,547		—		—		90,547
Total other debt securities	$	64,985	$	2,710,023	$	—	$	—	$	2,775,008
Total debt securities available for sale	$	64,985	$	5,748,348	$	—	$	—	$	5,813,333
Equity securities:
Preferred stock	$	15,493	$	—	$	—	$	—	$	15,493
Mutual funds		—		16,083		—		—		16,083
Total equity securities	$	15,493	$	16,083	$	—	$	—	$	31,576
Total securities	$	80,478	$	5,764,431	$	—	$	—	$	5,844,909

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.

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 March 31, 2021 and December 31, 2020, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at March 31, 2021 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain nonaccrual loans (1)	$	—	$	—	$	23,172	$	23,172
Other assets(2)		—		—		10,583		10,583
Total	$	—	$	—	$	33,755	$	33,755

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

(2) Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity investments without readily determinable fair values. These equity investments are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares.


	Fair Value Measurements at December 31, 2020 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain nonaccrual loans (1)	$	—	$	—	$	41,066	$	41,066
Other assets (2)		—		—		5,655		5,655
Total	$	—	$	—	$	46,721	$	46,721

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

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

Other Fair Value Disclosures

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

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

The following tables summarize the carrying values, estimated fair values, and fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at March 31, 2021 and December 31, 2020:


	March 31, 2021
					Fair Value Measurement Using
(in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents	$	2,722,915	$	2,722,915	$	2,722,915		$	—		$	—
FHLB stock (1)		698,984		698,984		—			698,984			—
Loans, net		43,068,816		42,433,118		—			—			42,433,118
Financial Liabilities:
Deposits	$	34,197,136	$	34,215,071	$	24,582,838	(2)	$	9,632,233	(3)	$	—
Borrowed funds		15,758,787		16,475,503		—			16,475,503			—

(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, 2020
					Fair Value Measurement Using
(in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents	$	1,947,931	$	1,947,931	$	1,947,931		$	—		$	—
FHLB stock (1)		714,005		714,005		—			714,005			—
Loans, net		42,806,691		42,376,214		—		$	—			42,376,214
Financial Liabilities:
Deposits	$	32,436,813	$	32,466,013	$	22,106,133	(2)	$	10,359,880	(3)	$	—
Borrowed funds		16,083,544		16,794,338		—			16,794,338			—

(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-NY is generally restricted and there is no established liquid market for their resale. The carrying amount approximates the fair value.

Loans

The Company discloses the fair value of loans measured at amortized cost using an exit price notion. The Company determined the fair value on substantially all of its loans for disclosure purposes, on an individual loan 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 March 31, 2021 and December 31, 2020.

Note 11. Leases

Lessor Arrangements

The Company is a lessor in the equipment finance business where it has executed direct financing leases (“lease finance receivables”). The Company produces lease finance receivables through a specialty finance subsidiary that participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide. Lease finance receivables are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any initial direct costs incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method.

The standard leases are typically repayable on a level monthly basis with terms ranging from 24 to 120 months. At the end of the lease term, the lessee usually has the option to return the equipment, to renew the lease or purchase the equipment at the then fair market value (“FMV”) price. For leases with a FMV renewal/purchase option, the relevant residual value assumptions are based on the estimated value of the leased asset at the end of lease term, including evaluation of key factors, such as, the estimated remaining useful life of the leased asset, its historical secondary market value including history of the lessee executing the FMV option, overall credit evaluation and return provisions. The Company acquires the leased asset at fair market value and provides funding to the respective lessee at acquisition cost, less any volume or trade discounts, as applicable. Therefore, there is generally no selling profit or loss to recognize or defer at inception of a lease.

The residual value component of a lease financing receivable represents the estimated fair value of the leased equipment at the end of the lease term. In establishing residual value estimates, the Company may rely on industry data, historical experience, and independent appraisals and, where appropriate, information regarding product life cycle, product upgrades and competing products. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer or purchase of the residual asset by the lessee or another party. Impairment of residual values arises if the expected fair value is less than the carrying amount. The Company assesses its net investment in lease financing receivables (including residual values) for impairment on an annual basis with any impairment losses recognized in accordance with the impairment guidance for financial instruments. As such, net investment in lease financing receivables may be reduced by an allowance for credit losses with changes recognized as provision expense. On certain lease financings, the Company obtains residual value insurance from third parties to manage and reduce the risk associated with the residual value of the leased assets. At March 31, 2021 and December 31, 2020, the carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $63.0 million and $70.6 million, respectively.

The Company uses the interest rate implicit in the lease to determine the present value of its lease financing receivables.

The components of lease income were as follows:


(in thousands)	For the Three Months ended March 31, 2021		For the Three Months ended March 31, 2020
Interest income on lease financing (1)	$	13,871	$	11,949

(1) Included in Interest Income – Loans and leases in the Consolidated Statements of Income and Comprehensive Income.

At March 31, 2021 and December 31, 2020, the carrying value of net investment in leases was $2.0 billion and $1.9 billion. The components of net investment in direct financing leases, including the carrying amount of the lease receivables, as well as the unguaranteed residual asset were as follows:


(in thousands)	March 31, 2021		December 31, 2020
Net investment in the lease - lease payments receivable	$	1,929,213	$	1,771,097
Net investment in the lease - unguaranteed residual assets		80,349		80,093
Total lease payments	$	2,009,562	$	1,851,190

The following table presents the remaining maturity analysis of the undiscounted lease receivables as of March 31, 2021, as well as the reconciliation to the total amount of receivables recognized in the Consolidated Statements of Condition:


(in thousands)	March 31, 2021
2021	$	24,349
2022		111,308
2023		342,220
2024		236,013
2025		427,495
Thereafter		868,177
Total lease payments		2,009,562
Plus: deferred origination costs		30,823
Less: unearned income		(110,582	)
Total lease finance receivables, net	$	1,929,803

Lessee Arrangements

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the Consolidated Statements of Condition.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most leases do not provide an implicit rate, the incremental borrowing rate (FHLB borrowing rate) is used in determining the present value of lease payments. The implicit rate is used when readily determinable. The operating lease ROU asset is measured at cost, which includes the initial measurement of the lease liability, prepaid rent and initial direct costs incurred by the Company, less incentives received. The lease terms include options to extend the lease when it is reasonably certain that we will exercise that option. For the vast majority of the Company’s leases, we are reasonably certain we will exercise our options to renew to the end of all renewal option periods. As such, substantially all of our future options to extend the leases have been included in the lease liability and ROU assets.

Variable costs such as the proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Amortization of the ROU assets was $4.7 million and $4.1 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

The Company has operating leases for corporate offices, branch locations, and certain equipment. The Company’s leases have remaining lease terms of one year to approximately 25 years, the vast majority of which include one or more options to extend the leases for up to five years resulting in lease terms up to 40 years.

The components of lease expense were as follows:


(in thousands)	For the Three Months Ended March 31, 2021			For the Three Months Ended March 31, 2020
Operating lease cost	$	6,750		$	6,759
Sublease income		(28	)		(11	)
Total lease cost	$	6,722		$	6,748

Supplemental cash flow information related to the leases for the following periods:


(in thousands)	For the Three Months Ended March 31, 2021		For the Three Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,750	$	6,759

Supplemental balance sheet information related to the leases for the following periods:


(in thousands, except lease term and discount rate)	March 31, 2021			December 31, 2020
Operating Leases:
Operating lease right-of-use assets		262,196		$	266,864
Operating lease liabilities		262,169			266,846
Weighted average remaining lease term	16 years			16 years
Weighted average discount rate		3.08	%		3.12	%


Maturities of lease liabilities:	March 31, 2021
(in thousands)
2021	$	20,099
2022		25,893
2023		25,435
2024		24,764
2025		24,073
Thereafter		222,215
Total lease payments		342,479
Less: imputed interest		(80,310	)
Total present value of lease liabilities	$	262,169

Note 12. Derivative and Hedging Activities

The Company’s derivative financial instruments consist of interest rate swaps. The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposure to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate and liquidity risks, primarily by managing the amount, sources, and duration of its assets and liabilities and, from time to time, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties are the Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”). As of March 31, 2021, all of the Company’s $4.3 billion notional derivative contracts were cleared on the LCH. Daily variation margin payments on derivatives cleared through the LCH are accounted for as legal settlement. For derivatives cleared through LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative, which includes accrued interest; therefore, those interest rate and derivative contracts the Company clears through the LCH are reported at a fair value of approximately zero at March 31, 2021.

The Company’s exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At March 31, 2021, the Company had a net negative exposure.

Fair Value of Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Such derivatives were used to hedge the changes in fair value of certain of its pools of prepayable fixed rate assets. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

The Company has entered into an interest rate swap with a notional amount of $2.0 billion to hedge certain real estate loans. For the three months ended March 31, 2021, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $12.0 million for the three months ended March 31, 2021. For the three months ended March 31, 2020, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $3.9 million.

As of March 31, 2021, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:


(in thousands)	March 31, 2021
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included	Carrying Amount of the Hedged Assets			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets
Total loans and leases, net (1)	$	2,047,999	$		47,999

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At March 31, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $3.4 billion; the cumulative basis adjustments associated with these hedging relationships was $48.0 million; and the amount of the designated hedged items was $2.0 billion.

As of December 31, 2020, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:


(in thousands)	December 31, 2020
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included	Carrying Amount of the Hedged Assets			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets
Total loans and leases, net (1)	$	2,073,214	$		73,214

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At December 31, 2020 the amortized cost basis of the closed portfolios used in these hedging relationships was $3.6 billion; the cumulative basis adjustments associated with these hedging relationships was $73.2 million; and the amount of the designated hedged items was $2.0 billion.

The following table sets forth information regarding the Company’s derivative financial instruments at March 31, 2021 and December 31, 2020:


	Notional Amount		Other Assets		Other Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swap	$	2,000,000	$	—	$	—
Total derivatives designated as fair value hedging instruments	$	2,000,000	$	—	$	—

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


(in thousands)	For the Three Months Ended March 31, 2021			For the Three Months Ended March 31, 2020
Derivative – interest rate swap:
Interest income	$	25,215		$	(28,130	)
Hedged item – loans:
Interest income	$	(25,215	)	$	28,130

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of amounts subject to variability caused by changes in interest rates from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes in the fair value of derivatives designated and that qualify as cash flow hedges are initially recorded in other comprehensive income and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings.

Interest rate swaps with notional amounts totaling $2.3 billion as of March 31, 2021 and December 31, 2020, were designated as cash flow hedges of certain FHLB borrowings.

The following table summarizes information about the interest rate swaps designated as cash flow hedges at March 31, 2021 and December 31, 2020:


(dollars in thousands)	March 31, 2021			December 31, 2020
Notional amounts	$	2,250,000		$	2,250,000
Cash collateral posted		35,109			45,532
Weighted average pay rates		1.27	%		1.27	%
Weighted average receive rates		0.20	%		0.23	%
Weighted average maturity	1.7 years			1.9 years

The following table presents the effect of the Company’s cash flow derivative instruments on AOCL for the three months ended March 31, 2021 and 2020:


(in thousands)	For the Three Months Ended March 31, 2021		For the Three Months Ended March 31, 2020
Amount of gain (loss) recognized in AOCL	$	4,532	$	(49,285	)
Amount of gain (loss) reclassified from AOCL to interest expense		5,891		(645	)

Gains (losses) included in the Consolidated Statements of Income related to interest rate derivatives designated as cash flow hedges during the three months ended March 31, 2021 was $5.9 million. Amounts reported in AOCL related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate borrowings. During the next twelve months, the Company estimates that an additional $24.1 million will be reclassified to interest expense.

Note 13. Subsequent Event

Pending Acquisition of Flagstar Bancorp, Inc.

On April 26, 2021, the Company announced that it had entered into a definitive merger agreement under which we would acquire Flagstar Bancorp, Inc. ("Flagstar") in a 100% stock transaction valued at the time at $2.6 billion. Under terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own. Following completion of the transaction, New York Community shareholders are expected to own 68% of the combined company, while Flagstar shareholders are expected to own 32% of the combined company. The new company will have over $87 billion in total assets, operate nearly 400 traditional branches in nine states, and 87 retail home lending offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, Michigan, including Flagstar's mortgage operations. The transaction is expected to close in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including the receipt of the requisite regulatory approvals and approval by the shareholders of each company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the purpose of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” and the “Company” are used to refer to New York Community Bancorp, Inc. and our consolidated 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;



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;



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, including the pending acquisition of Flagstar Bancorp, Inc.;



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, including the pending acquisition of Flagstar Bancorp, Inc.;



potential exposure to unknown or contingent liabilities of companies we have acquired, may acquire, or target for acquisition, including the pending acquisition of Flagstar Bancorp, Inc.;



the ability to invest effectively in new information technology systems and platforms;



changes in future ACL requirements under relevant accounting and regulatory requirements;



the ability to pay future dividends at currently expected rates;



the ability to hire and retain key personnel;



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



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



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



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



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



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



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



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



changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, and other changes pertaining to banking, securities, taxation, rent regulation and housing (the New York Housing Stability and Tenant Protection Act of 2019), financial accounting and reporting, environmental protection, 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, and guidelines;



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 to federal, state, and local income tax laws;



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



increases in our FDIC insurance premium;



legislative and regulatory initiatives related to climate change, resulting in operational changes and additional expenses;



unforeseen or catastrophic events including natural disasters, war, terrorist activities, and the emergence of a pandemic;



the effects of COVID-19, which includes, but are not limited to, the length of time that the pandemic continues, the effectiveness of the COVID-19 vaccination program, the potential imposition of further restrictions on travel or movement in the future, the remedial actions and stimulus measures adopted by federal, state, and local governments, the health of our employees and the inability of employees to work due to illness, quarantine, or government mandates, the business continuity plans of our customers and our vendors, the increased likelihood of cybersecurity risk, data breaches, or fraud due to employees working from home, the ability of our borrowers to continue to repay their loan obligations, the lack of property transactions and asset sales, potential impact on collateral values, and the effect of the pandemic on the general economy and businesses of our borrowers; 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, on an ongoing basis, we evaluate opportunities to expand through mergers and acquisitions and opportunities for strategic combinations with other banking organizations. Our evaluation of such opportunities involves discussions with other parties, due diligence, and negotiations. As a result, we may decide to enter into definitive arrangements regarding such opportunities at any time.

In addition to the risks and challenges described above, these types of transactions involve a number of other risks and challenges, including:



The ability to successfully integrate branches and operations and to implement appropriate internal controls and regulatory functions relating to such activities;



The ability to limit the outflow of deposits, and to successfully retain and manage any loans;



The ability to attract new deposits, and to generate new interest-earning assets, in geographic areas that have not been previously served;



The success in deploying any liquidity arising from a transaction into assets bearing sufficiently high yields without incurring unacceptable credit or interest rate risk;



The ability to obtain cost savings and control incremental non-interest expense;



The ability to retain and attract appropriate personnel;



The 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;



The ability to address an increase in working capital requirements; and



Limitations on the ability to successfully reposition our post-merger balance sheet when deemed appropriate.

See Part II, Item 1A, Risk Factors, in this report and Part I, Item 1A, Risk Factors, in our Form 10-K for the year ended December 31, 2020 for a further discussion of important risk factors that could cause actual results to differ materially from our forward-looking statements.

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

RECONCILIATIONS OF STOCKHOLDERS’ EQUITY, COMMON STOCKHOLDERS’ EQUITY,

AND TANGIBLE COMMON STOCKHOLDERS’ EQUITY;

TOTAL ASSETS AND TANGIBLE ASSETS; AND THE RELATED MEASURES

(unaudited)

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

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:


	At or for the
	Three Months Ended
	March 31,			Dec. 31,			March 31,
(dollars in thousands)	2021			2020			2020
Total Stockholders’ Equity	$	6,796,440		$	6,841,644		$	6,637,385
Less: Goodwill		(2,426,379	)		(2,426,379	)		(2,426,379	)
Preferred stock		(502,840	)		(502,840	)		(502,840	)
Tangible common stockholders’ equity	$	3,867,221		$	3,912,425		$	3,708,166
Total Assets	$	57,656,892		$	56,306,120		$	54,261,093
Less: Goodwill		(2,426,379	)		(2,426,379	)		(2,426,379	)
Tangible Assets	$	55,230,513		$	53,879,741		$	51,834,714
Average common stockholders’ equity	$	6,370,579		$	6,258,720		$	6,188,032
Less: Average goodwill		(2,426,379	)		(2,426,379	)		(2,426,379	)
Average tangible common stockholders’ equity	$	3,944,200		$	3,832,341		$	3,761,653
Average Assets	$	56,305,692		$	54,959,914		$	53,408,504
Less: Average goodwill		(2,426,379	)		(2,426,379	)		(2,426,379	)
Average tangible assets	$	53,879,313		$	52,533,535		$	50,982,125
Net income available to common stockholders	$	137,389		$	181,457		$	92,121
GAAP MEASURES:
Return on average assets (1)		1.03	%		1.38	%		0.75	%
Return on average common stockholders' equity (2)		8.63			11.60			5.95
Book value per common share	$	13.53		$	13.66		$	13.15
Common stockholders’ equity to total assets		10.92			11.26			11.31
NON-GAAP MEASURES:
Return on average tangible assets (1)		1.08	%		1.44	%		0.79	%
Return on average tangible common stockholders’ equity (2)		13.93			18.94			9.80
Tangible book value per common share	$	8.32		$	8.43		$	7.95
Tangible common stockholders’ equity to tangible assets		7.00			7.26			7.15

(1) To calculate return on average assets for a period, we divide net income generated during that period by average assets recorded during that period. To calculate return on average tangible assets for a period, we divide net income by average tangible assets recorded during that period.

(2) To calculate return on average common stockholders’ equity for a period, we divide net income available to common shareholders generated during that period by average common stockholders’ equity recorded during that period. To calculate return on average tangible common stockholders’ equity for a period, we divide net income available to common shareholders generated during that period by average tangible common stockholders’ equity recorded during that period.

Executive Summary

New York Community Bancorp, Inc. is the holding company for New York Community Bank, a New York State-chartered savings bank, headquartered in Westbury, New York. The Bank is subject to regulation by the NYSDFS, the FDIC, and the CFPB. 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 trade under the symbol “NYCB” and shares of our preferred stock trade under the symbol “NYCB PA”.

Reflecting our growth through a series of acquisitions, the Company currently operates 237 branch locations through eight local divisions, each with a history of service and strength. In New York, we operate as Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank; in New Jersey as Garden State Community Bank; in Ohio as the Ohio Savings Bank; and as AmTrust Bank in Arizona and Florida.

Now in its 28th year 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, adhering to conservative underwriting standards, maintaining a solid capital position, and engaging in corporate strategies that enhance the value of our shares.

First Quarter 2021 Overview

At March 31, 2021, the Company had total assets of $57.7 billion, total loans and leases held for investment of $43.1 billion, total deposits of $34.2 billion, and total stockholders’ equity of $6.8 billion. For the three months ended March 31, 2021, the Company reported net income of $145.6 million, up 45% compared to the $100.3 million reported for the three months ended March 31, 2020.

Net income available to common shareholders for the three months ended March 31, 2021 totaled $137.4 million, up 49% compared to the $92.1 million the Company reported for the three months ended March 31, 2020. On a per share basis, the Company reported diluted earnings per common share of $0.29 for the three months ended March 31, 2021, up 45% compared to the $0.20 reported for the three months ended March 31, 2020.

The key trends in the first quarter of 2021 were:

Continued Net Interest Income Growth and Net Interest Margin Expansion

During the first quarter of 2021, the Company's net interest income and net interest margin continued to improve. Net interest income for the three months ended March 31, 2021 rose $73.2 million or 30% to $317.7 million compared to the three months ended March 31, 2020. The year-over-year improvement was primarily driven by lower interest expense. Total interest expense for the three months ended March 31, 2021 declined $91.1 million or 46% to $105.4 million compared to the three months ended March 31, 2020. Prepayment income for the three months ended March 31, 2021 totaled $19.7 million, up 87% or $9.1 million compared to the three months ended March 31, 2020. Excluding the impact from prepayment income, net interest income on a non-GAAP basis would have been $298.0 million, up $64.1 million or 27% compared to the year-ago quarter.

The Company's NIM also continued to improve. For the three months ended March 31, 2021, the NIM increased one bp to 2.48% on a linked-quarter basis and up 47 bps on a year-over-year comparison. As with the improvement in the Company's net interest income, the improvement in the NIM was driven by lower funding costs. The Company's overall cost of funds declined 12 bps on a linked-quarter basis and 88 bps on a year-over-year basis to 0.94%. During the current first quarter, the average cost of deposits decreased to 0.46%, down 15 bps compared to the previous quarter and down 116 bps compared to the year-ago quarter. Prepayment income contributed 15 bps to the current quarter's NIM, down two bps compared to the previous quarter, but up six bps compared to the year-ago quarter. Excluding the contribution from prepayment income, the first quarter NIM, on a non-GAAP basis, would have been 2.33%, up three bps compared to the previous quarter and up 41 bps compared to the year-ago quarter.

Operating Expenses Trended Lower

For the three months ended March 31, 2021, non-interest expenses totaled $132.4 million, down 1% compared to the previous quarter, but up 5% compared to the year-ago quarter. On a linked-quarter basis, compensation and benefits expense increased 8% to $78.0 million, but was partially offset by a 14% decrease in general and administrative expenses. This decrease was primarily due to a decrease in professional fees and a recovery on previously written down repossessed taxi medallions. The efficiency ratio dropped below 40% during the three months ended March 31, 2021 to 39.87% compared to 41.36% in the fourth quarter of 2020 and compared to 48.03% in the first quarter of 2020.

Strong Growth in Deposits

At March 31, 2021, total deposits increased $1.8 billion or 22% annualized to $34.2 billion compared to December 31, 2020. During the first quarter, we began working with our technology partners on a program to bring in additional low-cost deposits. The first step of this new relationship was to take in deposits related to the Economic Impact Payments ("EIP") associated with the federal stimulus plans. At quarter-end, these deposits totaled $1.6 billion and were all non-interest bearing accounts. In addition to the growth in non-interest bearing accounts, savings accounts grew $628.0 million or 39% annualized to $7.0 billion compared to the previous quarter, while at the same time, higher cost CD balances continued to decline. Total CDs declined $716.4 million or 28% annualized compared to December 31, 2020.

Asset Quality Remains Pristine

The Company’s asset quality metrics continued to be solid during the current first quarter, reflecting the underlying strength of our loan portfolio. NPAs at March 31, 2021 totaled $41.3 million, down 10% compared to $46.1 million at December 31, 2020, or seven bps of total assets compared to eight bps in the previous quarter. Total NPLs at March 31, 2021 declined 12% to $33.2 million compared to December 31, 2020. This decline was driven primarily by a decline in other non-accrual loans, which consist largely of taxi medallion-related non-accrual loans. Non-performing taxi medallion-related assets at March 31, 2021 were $14.9 million down $10.2 million or 41% compared to December 31, 2020.

During the second quarter of last year, the Company implemented various loan modification programs with some of its borrowers, in accordance with the CARES Act. These modifications were primarily full-payment deferrals for an initial six-month period, with the ability to extend again at the end of the deferral period, at the Bank's discretion. The majority of these deferrals were eligible to come off of their initial deferral period during the fourth quarter of 2020, with the remaining eligible to come off of their initial deferral period during the first quarter of 2021. Accordingly, as of March 31, 2021, 100% or $6.1 billion of our full-payment loan deferrals have returned to payment status. In addition, approximately $2.5 billion or 6% of total loans have been modified and are currently paying interest-only and escrow. The majority of these loans are scheduled to come off of their deferral period during the second quarter of the year. At this point, we expect the majority of these loans to return to full-payment status once they come off of their deferral period.

Recent Events

Declaration of Dividend on Common Shares

On April 22, 2021, our Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.17 per share. The dividend is payable on May 18, 2021 to common shareholders of record as of May 7, 2021.

Acquisition of Flagstar Bancorp, Inc. ("Flagstar")

On April 26, 2021, the Company announced that it had entered into a definitive merger agreement under which it would acquire Flagstar in a 100% stock transaction valued at the time at $2.6 billion. Under terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own. Following completion of the transaction, New York Community shareholders are expected to own 68% of the combined company, while Flagstar shareholders are expected to own 32% of the combined company.

The new company will have over $87 billion in total assets, operate nearly 400 traditional branches in nine states, and 87 retail home lending offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, Michigan, including Flagstar's mortgage operations. The transaction is expected to close in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including the receipt of the requisite regulatory approvals and approval by the shareholders of each company.

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 credit losses on loans and leases; and the determination of the amount, if any, of goodwill impairment.

The judgments used by management in applying these critical accounting policies may be influenced by adverse changes in the economic environment, which may result in changes to future financial results.

Allowance for Credit Losses on Loans and Leases

The Company’s January 1, 2020, adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” resulted in a significant change to our methodology for estimating the allowance since December 31, 2019. ASU No. 2016-13 replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loan receivables. It also applies to off-balance sheet exposures not accounted for as insurance and net investments in leases accounted for under ASC Topic 842.

The allowance for loan and lease losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, fair value hedge accounting adjustments, and deferred fees and costs. Subsequent changes (favorable and unfavorable) in expected credit losses are recognized immediately in net income as a credit loss expense or a reversal of credit loss expense. Management estimates the allowance by projecting probability-of-default, loss-given-default and exposure-at-default depending on economic parameters for each month of the remaining contractual term. Economic parameters are developed using available information relating to past events, current conditions, and economic forecasts. The Company’s economic forecast period reverts to a historical norm based on inputs after 24 months. Historical credit experience provides the basis for the estimation of expected credit losses, with adjustments made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels and terms, as well as for changes in environmental conditions, such as changes in legislation, regulation, policies, administrative practices or other relevant factors. Expected credit losses are estimated over the contractual term of the loans, adjusted for forecasted prepayments when appropriate. The contractual term excludes potential extensions or renewals. The methodology used in the estimation of the allowance for credit losses on loans and leases, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Each quarter, we reassess the appropriateness of the economic period, the reversion period and historical mean at the portfolio segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time.

The allowance for loan and lease losses is measured on a collective (pool) basis when similar risk characteristics exist. Management believes the products within each of the entity’s portfolio classes exhibit similar risk characteristics. Loans that are determined to have unique risk characteristics are evaluated on an individual basis by management. If a loan is determined to be collateral dependent, or meets the criteria to apply the collateral dependent practical expedient, expected credit losses are determined based on the fair value of the collateral at the reporting date, less costs to sell as appropriate. The macroeconomic data used in the quantitative models are based on an economic forecast period of 24 months. The Company leverages economic projections including property market and prepayment forecasts from established independent third parties to inform its loss drivers in the forecast. Beyond this forecast period, we revert to a historical average loss rate. This reversion to the historical average loss rate is performed on a straight-line basis over 12 months.

The portfolio segment represents the level at which a systematic methodology is applied to estimate credit losses. Smaller pools of homogenous financing receivables with homogeneous risk characteristics were modeled using the methodology selected for the portfolio segment to which factors in the qualitative scorecard include: concentration, modeling and forecast imprecision and limitations, policy and underwriting, prepayment uncertainty, external factors, nature and volume, management, and loan review. Each factor is subject to an evaluation of metrics, consistently applied, to measure adjustments needed for each reporting period.

Loans that do not share risk characteristics are evaluated on an individual basis. These include loans that are in nonaccrual status with balances above management determined materiality thresholds depending on loan class and also loans that are designated as TDR or “reasonably expected TDR” (criticized, classified, or maturing loans that will have a modification processed within the next three months). In addition, all taxi medallion loans are individually evaluated.

The Company maintains an allowance for credit losses on off-balance sheet credit exposures. At March 31, 2021, and December 31, 2020, the allowance for credit losses on off-balance sheet credit exposures was $12.3 million and $11.9 million, respectively. We estimate expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit losses expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated life. The Company examined historical credit conversion factor (“CCF”) trends to estimate utilization rates, and chose an appropriate mean CCF based on both management judgment and quantitative analysis. Quantitative analysis involved examination of CCFs over a range of fund-up windows (between 12 and 36 months) and comparison of the mean CCF for each fund-up window with management

judgment determining whether the highest mean CCF across fund-up windows made business sense. The Company applies the same standards and estimated loss rates to the credit exposures as to the related class of loans.

For the three months ended March 31, 2021 the allowance for loan and lease losses increased primarily due to macroeconomic factors surrounding the COVID-19 pandemic, specifically the resultant estimated decreases in property values. The forecast scenario includes low single digit growth of Gross Domestic Product (“GDP”), while unemployment remains elevated into the forecasted time horizon. In addition to these quantitative inputs, several qualitative factors were considered, including the risk that the economic decline proves to be more severe and/or prolonged than our baseline forecast which also increased our allowance for loan and lease credit losses. The impact of the unprecedented fiscal stimulus and changes to federal and local laws and regulations, including changes to various government sponsored loan programs, was also considered.

Current Expected Credit Losses

At December 31, 2019, the allowance for loan and lease losses totaled $147.6 million. On January 1, 2020, the Company adopted the CECL methodology under ASU Topic 326. Upon adoption, we recognized an increase in the ACL of $1.9 million as a “Day 1” transition adjustment from changes in methodology, with a corresponding decrease in retained earnings. At March 31, 2021, the ACL totaled $197.8 million, up $3.7 million compared to December 31, 2020 driven by a provision for credit losses of $3.2 million and net recoveries of $517,000 during the first three months of 2021.

Separately, at December 31, 2019, the Company had an allowance for unfunded commitments of $461,000. With the adoption of CECL on January 1, 2020, we recognized a “Day 1” transition adjustment of $12.5 million. At March 31, 2021, the allowance for unfunded commitments totaled $12.3 million.


(in thousands)	Loans and Leases		Unfunded Commitments
Allowance for credit losses on loans and leases at December 31, 2020	$	194,043	$	11,939
Q1 2021 provision for credit losses		3,198		371
Q1 2021 net recoveries		517		—
Allowance for credit losses on loans and leases at March 31, 2021	$	197,758	$	12,310

See Note 6, Allowance for Credit Losses on Loans and Leases for a further discussion of our Allowance for Credit Losses.

Goodwill Impairment

The Company adopted, on a prospective basis, ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment on January 1, 2020. We have significant intangible assets as of March 31, 2021, including goodwill of $2.4 billion. In connection with our acquisitions, the 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. We test our goodwill for impairment at the reporting unit level. We have identified one reporting unit which 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.

We perform our goodwill impairment test in the fourth quarter of each year, or more often if events or circumstances warrant. For annual goodwill impairment testing, we have the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If we conclude that this is the case, we would compare the fair value the reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized, however, would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, we would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

The Company assessed the environment in the first quarter of 2021, including the estimated impact of the COVID-19 pandemic on macroeconomic variables and economic forecasts and how those might impact the fair value of our reporting unit. After consideration of the items above and the first three months of 2021 results, the Company determined it was not more-likely-than-not that the fair value of any reporting unit was below book value as of March 31, 2021. We will continue to monitor and evaluate the impact of COVID-19 and its impact on our market capitalization, overall economic conditions, and any triggering events that may indicate an impairment of goodwill in the future.

Balance Sheet Summary

At March 31, 2021, total assets were $57.7 billion, up $1.4 billion or 10% on an annualized basis compared to December 31, 2020. The growth was driven by several factors, including strong double-digit growth in total deposits, which drove the significant increase in the level of cash and cash equivalents, an increase in the securities portfolio, and modest growth in total loans and leases held for investment.

The level of cash balances increased $775.0 million to $2.7 billion compared to the prior quarter. Total securities, consisting primarily of available-for-sale securities, also increased as the Company continued to buy securities as long-term interest rates increased during the first quarter and the yield curve steepened. Total securities grew $348.8 million to $6.2 billion, or 24% annualized compared to December 31, 2020.

Total loans and leases held for investment rose $241.5 million to $43.1 million or 2% annualized compared to December 31, 2020. The growth during the current first quarter was driven by growth in our specialty finance portfolio and by a rebound in the CRE portfolio, while multi-family loans declined modestly.

At March 31, 2021, the multi-family portfolio was relatively unchanged, declining a modest $40.9 million to $32.2 billion compared to December 31, 2020, but increased $924.7 million or 3% on a year-over-year basis. The specialty finance portfolio increased $136.1 million or 18% annualized to $3.2 billion compared to year-end 2020 and was up $160.3 million or 5% compared to the year-ago quarter. The CRE portfolio rebounded during the current quarter, increasing $191.5 million or 11% annualized compared to December 31, 2020, but was flat compared to the year-ago quarter. C&I loans declined $42.4 million or 43% annualized to $352.0 million and declined $81.9 million or 19% compared to the year-ago quarter.

Total deposits at March 31, 2021 increased $1.8 billion or 22% annualized to $34.2 billion compared to December 31, 2020, primarily due to our new relationship with several of our technology partners. This led to substantial growth in non-interest bearing accounts. Non-interest bearing accounts rose $1.8 billion or 58% (not annualized) compared to December 31, 2020 and up $2.2 billion or 81% compared to the year-ago quarter. The relationship with our technology partners accounted for $1.6 billion of this increase. In addition to the growth in non-interest bearing accounts, we also grew savings accounts $628.0 million to $7.0 billion, up 39% annualized compared to the previous quarter and up 42% or $2.1 billion compared to the year-ago quarter. At the same time, CD balances continued to decline. CDs dropped $716.4 million or 28% annualized to $9.6 billion and $4.5 billion or 32% compared to the year-ago quarter.

Totaled borrowed funds at March 31, 2021 decreased $324.8 million or 8% annualized to $15.8 billion compared to December 31, 2020, but increased $826.0 million or 6% compared to March 31, 2020.

Total stockholders' equity was $6.8 billion at March 31, 2021, relatively unchanged compared to the previous quarter and rose $159.1 million or 2% compared to the year-ago quarter. Excluding goodwill and preferred stock, tangible common stockholders' equity totaled $3.9 billion as of March 31, 2021, unchanged relative to the previous quarter and up $159.1 million or 4% compared to the year-ago quarter. Book value per common share was $13.53 at March 31, 2021 compared to $13.66 at December 31, 2020 and to $13.15 compared to March 31, 2020.

Common stockholders' equity to total assets was 10.92% at March 31, 2021 compared to 11.26% and 11.31%, as of December 31, 2020 and March 31, 2020, respectively. On a tangible basis, tangible book value per common share was $8.32 at March 31, 2021 compared to $8.43 at December 31, 2020 and $7.95 at March 31, 2020. Tangible common stockholders' equity to tangible assets was 7.00% at the end of the current first quarter compared to 7.26% at the previous quarter and 7.15% compared to the year-ago quarter.

Loans and Leases

Loans and Leases Originated for Investment

The majority of the loans we originate are loans and leases held for investment and most of the held-for-investment loans we produce are multi-family loans. Our production of multi-family loans began over five decades ago in the five boroughs of New York City, where the majority of the rental units currently consist of non-luxury, rent-regulated apartments featuring below-market rents. In addition to multi-family loans, our portfolio of loans held for investment contains a number of CRE loans, most of which are secured by income-producing properties located in New York City and Long Island.

In addition to multi-family and CRE loans, our specialty finance loans and leases have become an increasingly larger portion of our overall loan portfolio. The remainder of our portfolio includes smaller balances of C&I loans, one-to-four family loans, ADC loans, and other loans held for investment. The majority of C&I loans consist of loans to small- and mid-size businesses.

During the current first quarter, the Company originated $2.5 billion of loans and leases held for investment, exceeding the fourth quarter pipeline by $1.0 billion, but down 34% compared to the fourth quarter of last year and down 7% compared to the first quarter of last year. The linked-quarter decrease was due to a 47% decline in multi-family loan originations, a 13% decline in CRE loan originations, and a 48% decline in other C&I loan originations. This was offset by a 21% linked-quarter increase in specialty finance originations.

The following table presents information about the loans held for investment we originated for the respective periods:


	For the Three Months Ended				March 31, 2021 compared to
	March 31,		March 31,			March 31,
	2021		2020			2020
(in thousands)
Mortgage Loans Originated for Investment:
Multi-family	$	1,465,831	$	1,417,219		$	48,612
Commercial real estate		443,207		191,651			251,556
One-to-four family residential		21,520		27,196			(5,676	)
Acquisition, development, and construction		6,622		4,908			1,714
Total mortgage loans originated for investment		1,937,180		1,640,974			296,206
Other Loans Originated for Investment:
Specialty Finance		541,494		957,393			(415,899	)
Other commercial and industrial		62,507		122,386			(59,879	)
Other		1,137		925			212
Total other loans originated for investment		605,138		1,080,704			(475,566	)
Total Loans Originated for Investment	$	2,542,318	$	2,721,678		$	(179,360	)

Loans and Leases Held for Investment

The individual held-for-investment loan portfolios are discussed in detail below.

Multi-Family Loans

Multi-family loans are our principal asset. The loans we produce are primarily secured by non-luxury residential apartment buildings in New York City that are rent-regulated and feature below-market rents—a market we refer to as our “Primary Lending Niche.” 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.

At March 31, 2021, total multi-family loans represented $32.2 billion or 75% of total loans and leases held for investment. The average multi-family loan had a principal balance of $6.6 million and an average weighted life of 2.4 years.

At March 31, 2021, 79% of our multi-family loans were secured by rental apartment buildings in the New York City metro area and 3.0% 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 we operate in.

In addition, 69% or $22.1 billion of the Company's overall multi-family portfolio is secured by properties in New York State, of which $19.3 billion are subject to rent regulation laws. The weighted average LTV of the rent-regulated segment of the multi-family portfolio was 54.37%, as of March 31, 2021, 312 bps below the overall multi-family weighted average LTV of 57.49%.

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.

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 existing, in-place 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.

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 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, some of our multi-family loans may contain an initial interest-only period which typically does not exceed two years; however, these loans are underwritten on a fully amortizing basis.

Commercial Real Estate Loans

At March 31, 2021, CRE loans represented $7.0 billion or 16% of total loans and leases held for investment. The average CRE loan had a principal balance of $7.0 million and an average weighted life of 2.4 years.

The CRE loans originated by the Company are also secured by income-producing properties, such as office buildings, mixed-use buildings (retail storefront on the ground floor and apartment units above the ground floor), retail centers, and multi-tenanted light industrial properties. At March 31, 2021, 85% of our CRE loans were secured by properties in the New York City metro area, while properties in other parts of New York State accounted for 2.2% of the properties securing our CRE loans and properties in all other states accounted for 12.6% 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 also apply to our CRE loans. 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.

Specialty Finance Loans and Leases

At March 31, 2021, specialty finance loans and leases totaled $3.4 billion or 7.9% of total loans and leases held for investment.

We produce our specialty finance loans and leases through a subsidiary that is staffed by a group of industry veterans with expertise in originating and underwriting senior securitized debt and equipment loans and leases. The subsidiary participates in syndicated loans that are brought to them, and equipment loans and leases that are assigned to them, by a select group of nationally recognized sources, and are generally made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide.

The specialty finance loans and leases we fund fall into three categories: asset-based lending, dealer floor-plan lending, and equipment loan and lease financing. Each of these credits is secured with a perfected first security interest in, or outright ownership of, the underlying collateral, and structured as senior debt or as a non-cancelable lease. Asset-based and dealer floor-plan loans are priced at floating rates predominately tied to LIBOR, while our equipment financing credits are priced at fixed rates at a spread over Treasuries.

Since launching our specialty finance business in the third quarter of 2013, no losses have been recorded on any of the loans or leases in this portfolio.

C&I Loans

At March 31, 2021, C&I loans totaled $350.8 million or 0.82% of total loans and leases held for investment. Included in the quarter-end balance were $16.6 million of taxi medallion-related loans.

The C&I loans we produce are primarily made to small and mid-size businesses in the five boroughs of New York City and on Long Island. Such loans are tailored to meet the specific needs of our borrowers, and include term loans, demand loans, revolving lines of credit, and, to a much lesser extent, loans that are partly guaranteed by the Small Business Administration.

A broad range of C&I loans, both collateralized and unsecured, are made available to businesses for working capital (including inventory and accounts receivable), business expansion, the purchase of machinery and equipment, and other general corporate needs. In determining the term and structure of C&I loans, several factors are considered, including the purpose, the collateral, and the anticipated sources of repayment. C&I loans are typically secured by business assets and personal guarantees of the borrower, and include financial covenants to monitor the borrower’s financial stability.

The interest rates on our other C&I loans can be fixed or floating, with floating-rate loans being tied to prime or some other market index, plus an applicable spread. Our floating-rate loans may or may not feature a floor rate of interest. The decision to require a floor on other C&I loans depends on the level of competition we face for such loans from other institutions, the direction of market interest rates, and the profitability of our relationship with the borrower.

Acquisition, Development, and Construction Loans

ADC loans at March 31, 2021 totaled $115.9 million and represented 0.27% of total loans and leases held for investment. Because ADC loans are generally considered to have a higher degree of credit risk, especially during a downturn in the business cycle, borrowers are required to provide a guarantee of repayment and completion.

One-to-Four Family Loans

At March 31, 2021, one-to-four family loans totaled $208.1 million or 0.48% of total loans and leases held for investment.

Other Loans

Other loans totaled $5.6 million at March 31, 2021 and consisted mainly of overdraft loans and loans to non-profit organizations. We currently do not offer home equity loans or home equity lines of credit.

Loans Held for Sale

At March 31, 2021, the Company has $141.4 million in loans held for sale, up $24.3 million compared to December 31, 2020. The majority of these loans in both periods are part of the Paycheck Protection Program (the "PPP"). At March 31, 2020, the Company did not have any loans designated as held for sale.

Lending Authority

The loans we originate for investment are subject to federal and state laws and regulations, and are underwritten in accordance with loan underwriting policies approved by the Management Credit Committee, the Commercial Credit Committee and the Mortgage and Real Estate and Credit Committees of the Board, and the Board of Directors of the Bank.

C&I loans less than or equal to $3.0 million are approved by the joint authority of lending officers. C&I loans in excess of $3.0 million and all multi-family, CRE, ADC, and Specialty Finance loans regardless of amount are required to be presented to the Management Credit Committee for approval. Multi-family, CRE, and C&I loans in excess of $5.0 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 Commercial Credit and Mortgage and Real Estate Committees have authority to direct changes in lending practices as they deem necessary or appropriate in order to address individual or aggregate risks and credit exposures in accordance with the Bank’s strategic objectives and risk appetites.

All mortgage loans in excess of $50.0 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.

At March 31, 2021, the largest mortgage loan in our portfolio was a $329.0 million multi-family loan collateralized by six properties located in Brooklyn, New York. As of the date of this report, the loan has been current since origination.

Geographical Analysis of the Portfolio of Loans Held for Investment

The following table presents a geographical analysis of the multi-family and CRE loans in our held-for-investment loan portfolio at March 31, 2021:


	At March 31, 2021
	Multi-Family Loans					Commercial Real Estate Loans
(dollars in thousands)	Amount		Percent of Total			Amount		Percent of Total
New York City:
Manhattan	$	7,688,174		23.88	%	$	3,127,924		44.51	%
Brooklyn		6,012,604		18.68			462,638		6.58
Bronx		3,948,218		12.26			156,373		2.23
Queens		2,889,237		8.97			623,942		8.88
Staten Island		137,325		0.43			51,525		0.73
Total New York City	$	20,675,558		64.22	%	$	4,422,402		62.93	%
New Jersey		4,209,730		13.08			558,601		7.95
Long Island		486,224		1.51			1,011,777		14.40
Total Metro New York	$	25,371,512		78.81	%	$	5,992,780		85.28	%
Other New York State		957,057		2.97			152,803		2.17
All other states		5,866,687		18.22			881,653		12.55
Total	$	32,195,256		100.00	%	$	7,027,236		100.00	%

At March 31, 2021, the largest concentration of ADC loans held for investment was located in Metro New York, with a total of $98.5 million at that date. The majority of our other loans held for investment were secured by properties and/or businesses located in Metro New York.

Outstanding Loan Commitments

At March 31, 2021, we had outstanding loan commitments of $2.8 billion, as compared to $2.5 billion from the level at December 31, 2020.

Multi-family, CRE, ADC and 1-4 family loans together represented $628.4 million of held-for-investment loan commitments at the end of the quarter, while other loans represented $2.2 billion. Included in the latter amount were commitments to originate specialty finance loans and leases of $1.5 billion and commitments to originate other C&I loans of $620.6 million.

In addition to loan commitments, we had commitments to issue financial stand-by, performance stand-by, and commercial letters of credit totaling $288.6 million at March 31, 2021, an $87.3 million decrease from the volume at December 31, 2020. The fees we collect in connection with the issuance of letters of credit are included in Fee Income in the Consolidated Statements of Income and Comprehensive Income.

Asset Quality

Non-Performing Loans and Repossessed Assets

NPAs at March 31, 2021 totaled $41.3 million, down 10% compared to $46.1 million at December 31, 2020, representing 0.07% of total assets as compared to 0.08% at the previous quarter.

NPLs at March 31, 2021 declined 12% to $33.2 million compared to $37.8 million at December 31, 2020, representing 0.08% of total loans compared to 0.09% for the previous quarter. Included in the first quarter amount were $10.1 million in non-accrual taxi medallion-related loans compared to $18.6 million for the previous quarter.

Total repossessed assets at the end of the first quarter were $8.2 million, relatively unchanged compared to the $8.3 million at the end of the previous quarter. At March 31, 2021, repossessed assets included $4.8 million of repossessed taxi medallions compared to $6.5 million at December 31, 2020. At the end of the current first quarter, the Company's remaining taxi medallion-related assets totaled $16.6 million compared to $25.2 million in the previous quarter.

For the three months ended March 31, 2021, the Company recorded net recoveries of $517,000 compared to net charge-offs of $10.2 million for the three months ended March 31, 2020. The decrease represents the decline in charge-offs of other C&I and taxi related loans.

The following table presents our non-performing loans by loan type and the changes in the respective balances from December 31, 2020 to March 31, 2021:


					Change from December 31, 2020 to March 31, 2021
(dollars in thousands)	March 31, 2021		December 31, 2020		Amount			Percent
Non-Performing Loans:
Non-accrual mortgage loans:
Multi-family	$	9,888	$	4,068	$	5,820			143	%
Commercial real estate		11,573		12,142		(569	)		-5	%
One-to-four family		1,466		1,696		(230	)		-14	%
Acquisition, development, and construction		—		—		—			—
Total non-accrual mortgage loans		22,927		17,906		5,021			28	%
Non-accrual other loans (1)		10,251		19,879		(9,628	)		-48	%
Total non-performing loans	$	33,178	$	37,785	$	(4,607	)		-12	%

(1) Includes $10.1 million and $18.6 million of non-accrual taxi medallion-related loans at March 31, 2021 and December 31, 2020, respectively.

The following table sets forth the changes in non-performing loans over the three months ended March 31, 2021:


(in thousands)
Balance at December 31, 2020	$	37,785
New non-accrual		7,849
Charge-offs		(4,324	)
Transferred to repossessed assets		-
Loan payoffs, including dispositions and principal pay-downs		(8,132	)
Restored to performing status		-
Balance at March 31, 2021	$	33,178

We monitor non-accrual loans both within and beyond our primary lending area, which is defined as including: (a) the counties that comprise our CRA Assessment area, and (b) the entirety of the following states: Arizona; Florida; New York; New Jersey; Ohio; and Pennsylvania, in the same manner. Monitoring loans generally involves inspecting and re-appraising the collateral properties; holding discussions with the principals and managing agents of the borrowing entities and/or retained legal counsel, as applicable; requesting financial, operating, and rent roll information; confirming that hazard insurance is in place or force-placing such insurance; monitoring tax payment status and advancing funds as needed; and appointing a receiver, whenever possible, to collect rents, manage the operations, provide information, and maintain the collateral properties.

It is our policy to order updated appraisals for all non-performing loans, irrespective of loan type, that are collateralized by multi-family buildings, CRE properties, or land, in the event that such a loan is 90 days or more past due, and if the most recent appraisal on file for the property is more than one year old. Appraisals are ordered annually until such time as the loan becomes performing and is returned to accrual status. It is not our policy to obtain updated appraisals for performing loans. However, appraisals may be ordered for performing loans when a borrower requests an increase in the loan amount, a modification in loan terms, or an extension of a maturing loan. We do not analyze LTVs on a portfolio-wide basis.

Non-performing loans are reviewed regularly by management and discussed on a monthly basis with the Management Credit Committee, the Commercial and the Mortgage and Real Estate Credit Committees of the Board, and the Boards of Directors of the Company and the Bank, as applicable. Collateral-dependent non-performing loans are written down to their current appraised values, less certain transaction costs. Workout specialists from our Loan Workout Unit actively pursue borrowers who are delinquent in repaying their loans in an effort to collect payment. In addition, outside counsel with experience in foreclosure proceedings are retained to institute such action with regard to such borrowers.

Properties and assets that are acquired through foreclosure are classified as either OREO or repossessed assets, and are recorded at fair value at the date of acquisition, less the estimated cost of selling the property/asset. Subsequent declines in the fair value of OREO or repossessed assets are charged to earnings and are included in non-interest expense. It is our policy to require an appraisal and an environmental assessment of properties classified as OREO before foreclosure, and to re-appraise the properties/assets on an as-needed basis, and not less than annually, until they are sold. We dispose of such properties/assets as quickly and prudently as possible, given current market conditions and the property’s or asset’s condition.

To mitigate the potential for credit losses, we underwrite our loans in accordance with credit standards that we consider to be prudent. In the case of multi-family and CRE loans, we look first at the consistency of the cash flows being generated by the property to determine its economic value using the “income approach,” and then at the market value of the property that collateralizes the loan. The amount of the loan is then based on the lower of the two values, with the economic value more typically used.

The condition of the collateral property is another critical factor. Multi-family buildings and CRE properties are inspected from rooftop to basement as a prerequisite to approval, with a member of the Mortgage or Credit Committee participating in inspections on multi-family loans to be originated in excess of $7.5 million, and a member of the Mortgage or Credit Committee participating in inspections on CRE loans to be originated in excess of $4.0 million. We continue to conduct inspections as per the aforementioned policy, however, due to the COVID-19 pandemic, currently full access to some properties and buildings may be limited. Furthermore, independent appraisers, whose appraisals are carefully reviewed by our experienced in-house appraisal officers and staff, perform appraisals on collateral properties. In many cases, a second independent appraisal review is performed.

In addition to underwriting multi-family loans on the basis of the buildings’ income and condition, we consider the borrowers’ credit history, profitability, and building management expertise. Borrowers are required to present evidence of their ability to repay the loan from the buildings’ current rent rolls, their financial statements, and related documents.

In addition, we work with a select group of mortgage brokers who are familiar with our credit standards and whose track record with our lending officers is typically greater than ten years. Furthermore, in New York City, where the majority of the buildings securing our multi-family loans are located, the rents that tenants may be charged on certain apartments are typically restricted under certain new rent regulation laws. As a result, the rents that tenants pay for such apartments are generally lower than current market rents. Buildings with a preponderance of such rent-regulated apartments are less likely to experience vacancies in times of economic adversity.

Reflecting the strength of the underlying collateral for these loans and the collateral structure, a relatively small percentage of our non-performing multi-family loans have resulted in losses over time. While our multi-family lending niche has not been immune to downturns in the credit cycle, the limited number of losses we have recorded, even in adverse credit cycles, suggests that the multi-family loans we produce involve less credit risk than certain other types of loans. In general, buildings that are subject to rent regulation have tended to be stable, with occupancy levels remaining more or less constant over time. Because the rents are typically below market and the buildings securing our loans are generally maintained in good condition, they have been more likely to retain their tenants in adverse economic times. In addition, we exclude any short-term property tax exemptions and abatement benefits the property owners receive when we underwrite our multi-family loans.

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 March 31, 2021. 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 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 contain an interest-only period which typically does not exceed three years; however, these loans are underwritten on a fully amortizing basis.

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.

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 loans 30 to 89 days past due by loan type and the changes in the respective balances from December 31, 2020 to March 31, 2021:


					Change from December 31, 2020 to March 31, 2021
(dollars in thousands)	March 31, 2021		December 31, 2020		Amount			Percent
Loans 30-89 Days Past Due:
Multi-family	$	961	$	4,091	$	(3,130	)		-77	%
Commercial real estate		19,371		9,989		9,382			94	%
One-to-four family		—		1,575		(1,575	)		-100	%
Acquisition, development, and construction		—		—		—			—
Other loans (1)		13		3		10			333	%
Total loans 30-89 days past due	$	20,345	$	15,658	$	4,687			30	%

(1) Does not include any past due taxi medallion-related loans at March 31, 2021 and December 31, 2020.

Fair values for all multi-family buildings, CRE properties, and land are determined based on the appraised value. If an appraisal is more than one year old and the loan is classified as 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 adversely impact a borrower’s ability to repay.

Based upon all relevant and available information as of the end of the current third quarter, management believes that the allowance for losses on loans was appropriate at that date.

At March 31, 2021, the Company's three largest NPLs were one CRE loan with a balance of $8.2 million and two multi-family loans with balances of $6.8 million and $1.8 million.

Troubled Debt Restructurings

In an effort to proactively manage delinquent loans, we have selectively extended to certain borrowers such concessions as rate reductions and extensions of maturity dates, as well as forbearance agreements, when such borrowers have exhibited financial difficulty. In accordance with GAAP, we are required to account for such loan modifications or restructurings as TDRs.

The eligibility of a borrower 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 March 31, 2021, non-accrual TDRs included taxi medallion-related loans with a combined balance of $10.0 million.

At March 31, 2021, loans on which concessions were made with respect to rate reductions and/or extensions of maturity dates totaled $32.1 million; loans in connection with which forbearance agreements were reached totaled $146,000 at that date.

Based on the number of loans performing in accordance with their revised terms, our success rates for restructured CRE loans, was 100%. The success rates for restructured one-to-four family and other loans were 50% and 60%, respectively, at March 31, 2021.

Analysis of Troubled Debt Restructurings

The following table sets forth the changes in our TDRs over the three months ended March 31, 2021:


(in thousands)	Accruing			Non-Accrual			Total
Balance at December 31, 2020	$	14,967		$	19,318		$	34,285
New TDRs		-			7,514			7,514
Charge-offs		-			(4,311	)		(4,311	)
Loan payoffs, including dispositions and principal pay-downs		(73	)		(5,217	)		(5,290	)
Balance at March 31, 2021	$	14,894		$	17,304		$	32,198

On a limited basis, we may provide additional credit to a borrower after a loan has been placed on non-accrual status or classified as a TDR if, in management’s judgment, the value of the property after the additional loan funding is greater than the initial value of the property plus the additional loan funding amount. During the three months ended March 31, 2021, no such additions were made. Furthermore, the terms of our restructured loans typically would not restrict us from cancelling outstanding commitments for other credit facilities to a borrower in the event of non-payment of a restructured loan.

Except for the non-accrual loans and TDRs disclosed in this filing, we did not have any potential problem loans at the end of the current quarter that would have caused management to have serious doubts as to the ability of a borrower to comply with present loan repayment terms and that would have resulted in such disclosure if that were the case.

Loan Deferrals

Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the CARES Act and bank regulators have provided relief from TDR accounting. The main benefits of TDR relief include a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; aging of the loans is frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and the loans are generally not reported as non-accrual during the modification period.

Under the CARES Act, the Company made the election to deem that loan modifications do not result in TDRs if they are (1) related to the novel coronavirus disease (“COVID-19”); (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the COVID-19 national emergency declaration or (B) December 31, 2020. In December 2020, Congress amended the CARES Act through the Consolidated Appropriation Act of 2021, which provided additional COVID-19 relief to American families and businesses, including extending TDR relief under the CARES Act until the earlier of December 31, 2021 or 60 days following the termination of the national emergency.

During the second quarter of 2020, the Company implemented various loan modification programs with some of its borrowers, in accordance with the CARES Act and interagency regulatory guidance. These modifications were primarily full payment deferrals for an initial six month period, with the ability to extend again at the end of the deferral period, at the Bank’s discretion. Most of these deferrals were entered into during April and May, and were therefore, they were eligible to come off of their deferral period beginning in the fourth quarter of 2020, and the remaining were eligible to come off their deferral during the first quarter of 2021. Accordingly, at March 31, 2021, 100% of the $6.1 billion of loans on deferral had returned to payment status.

In addition, approximately $2.5 billion or 6% of total loans have been modified and are currently paying interest-only and escrow ("principal deferrals"). The majority of these principal deferrals, $2.1 billion or 84%, are scheduled to resume principal payments during the second quarter of 2021. The remaining $400.0 million are scheduled to resume principal payments by year-end.

The following tables reflect, as of March 31, 2021, the aggregate amount of principal deferrals by various category.


Principal Deferrals as of March 31, 2021

	Amount in Deferral		Outstanding Balance		Deferred as a % of Outstanding Balance			Weighted- Average LTV
(in millions)
Multi-family	$	1,715	$	32,142		5.3	%		54.8	%
CRE:
Office	$	389	$	3,235		12.0	%		51.7	%
Retail		203		1,804		11.3	%		61.5	%
Mixed use		132		665		19.9	%		52.6	%
Condo/ Co-op		59		262		22.6	%		46.6	%
Other		17		1,061		1.6	%		61.9	%
Sub-total CRE	$	800	$	7,027		11.4	%		54.2	%

Total Multi-Family and CRE		2,515		39,169		6.4	%		54.6	%

Other		20

Total	$	2,535

Additionally, the allowance for credit losses on accrued interest receivable on loans, including loans in the deferral program, was $997,891, as of March 31, 2021.

Asset Quality Analysis

The following table presents information regarding our consolidated allowance for credit losses on loans and leases, our non-performing assets, and our 30 to 89 days past due loans at March 31, 2021 and December 31, 2020.


(dollars in thousands)	At or For the Three Months Ended March 31, 2021				At or For the Year Ended December 31, 2020
Allowance for Credit Losses on Loan and Leases:
Balance at beginning of period	$	194,043			$	147,638
CECL day 1 transition adjustment		—				1,911
Adjusted allowance for credit losses at January 1		194,043				149,549
Provision for credit losses		3,198				63,279
Charge-offs:
Multi-family		(658	)			—
Commercial real estate		—				(1,870	)
One-to-four family residential		—				(2	)
Acquisition, development, and construction		—				—
Other loans		(3,666	)			(20,306	)
Total charge-offs		(4,324	)			(22,178	)
Recoveries:
Multi-family		—				755
Commercial real estate		—				354
One-to-four family residential		18				—
Acquisition, development, and construction		2				63
Other loans		4,821				2,221
Total recoveries		4,841				3,393
Net recoveries (charge-offs)		517				(18,785	)
Balance at end of period	$	197,758			$	194,043
Non-Performing Assets:
Non-accrual mortgage loans:
Multi-family	$	9,888			$	4,068
Commercial real estate		11,573				12,142
One-to-four family residential		1,466				1,696
Acquisition, development, and construction		—				—
Total non-accrual mortgage loans		22,927				17,906
Other non-accrual loans		10,251				19,879
Total non-performing loans	$	33,178			$	37,785
Repossessed assets (1)		8,153				8,318
Total non-performing assets	$	41,331			$	46,103
Asset Quality Measures:
Non-performing loans to total loans		0.08		%		0.09		%
Non-performing assets to total assets		0.07				0.08
Allowance for credit losses to non-performing loans		596.05				513.55
Allowance for credit losses to total loans		0.46				0.45
Net charge-offs during the period to average loans outstanding during the period		0.00				0.04
Loans 30-89 Days Past Due:
Multi-family	$	961			$	4,091
Commercial real estate		19,371				9,989
One-to-four family residential		—				1,575
Acquisition, development, and construction		—				—
Other loans		13				3
Total loans 30-89 days past due	$	20,345			$	15,658

(1) Includes $4.8 million and $6.5 million of repossessed taxi medallions at March 31, 2021 and December 31, 2020, respectively.

Geographical Analysis of Non-Performing Loans

The following table presents a geographical analysis of our non-performing loans at March 31, 2021:


(in thousands)
New York	$	30,350
New Jersey		2,139
All other states		689
Total non-performing loans	$	33,178

Securities

At March 31, 2021, total securities increased $348.8 million or 24% annualized on a linked-quarter basis to $6.2 billion, compared to $5.8 billion at December 31, 2020. The purchase of securities has increased due to higher long-term interest rates and a steeper yield curve during the quarter. At the end of the current first quarter, total securities represented 10.7% of total assets compared to 10.4% at the fourth quarter of 2020.

Federal Home Loan Bank Stock

As a member of the FHLB-NY, the Bank is required to acquire and hold shares of its capital stock, and to the extent FHLB borrowings are utilized, may further invest in FHLB stock. At March 31, 2021 and December 31, 2020, the Bank held FHLB-NY stock in the amount of $699.0 million and $714.0 million, respectively. FHLB-NY stock continued to be valued at par, with no impairment required at that date.

Dividends from the FHLB-NY to the Bank totaled $8.5 million and $9.7 million, respectively, in the three months ended March 31, 2021 and 2020.

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 Income and Comprehensive Income. Reflecting an increase in the cash surrender value of the underlying policies, our investment in BOLI increased $1.6 million to $1.2 billion at March 31, 2021 from December 31, 2020.

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 March 31, 2021 and December 31, 2020. For more information about the Company’s goodwill, see the discussion of “Critical Accounting Policies” earlier in this report.

Sources of Funds

The Parent Company (i.e., the Company on an unconsolidated basis) has three primary funding sources for the payment of dividends, share repurchases, and other corporate uses: dividends paid to the Company by the Bank; capital raised through the issuance of stock; and funding raised through the issuance of debt instruments.

On a consolidated basis, our funding primarily stems from a combination of the following sources: deposits; borrowed funds, primarily in the form of wholesale borrowings; the cash flows generated through the repayment and sale of loans; and the cash flows generated through the repayment and sale of securities.

Loan repayments and sales totaled $2.4 billion in the three months ended March 31, 2021, up $56.7 million from the $2.3 billion recorded in the year-earlier three months. Cash flows from the repayment and sales of securities totaled $495.3 million and $798.1 million, respectively, in the corresponding periods, while purchases of securities totaled $985.6 million and $483.8 million, respectively.

Deposits

Our ability to retain and attract deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay, the types of products we offer, and the attractiveness of their terms. From time to time, we have chosen not to compete actively for deposits, depending on our access to deposits through acquisitions, the availability of lower-cost funding sources, the impact of competition on pricing, and the need to fund our loan demand.

At March 31, 2021, total deposits were $34.2 billion, up $1.8 billion compared to December 31, 2020. At the end of the current first quarter, total deposits represented 59.3% of total assets, while CDs represented 28.1% of total deposits. The majority, or $1.6 billion of this growth occurred in the non-interest-bearing checking category, as the Company is currently working with its technology partners to bring in additional low cost deposits. These deposits are short-term in nature and related to individual spending patterns. We expect these deposits to peak during the second quarter of 2021 and then run off over the next year.

Included in the March 31, 2021 balance of deposits were business institutional deposits of $1.4 billion and municipal deposits of $859.8 million, as compared to $1.3 billion and $1.0 billion, respectively, at December 31, 2020. Brokered deposits remained stable at $5.3 billion, including brokered interest bearing checking of $1.3 billion at March 31, 2021 and December 31, 2020, brokered money market accounts of $3.1 billion at March 31, 2021 and $3.0 billion at December 31, 2020, and brokered CDs of $989 million at March 31, 2021, similar to the balance at December 31, 2020. The extent to which we accept brokered deposits depends on various factors, including the availability and pricing of such wholesale funding sources, and the availability and pricing of other sources of funds.

Borrowed Funds

Borrowed funds consist primarily of wholesale borrowings (i.e., FHLB-NY advances, repurchase agreements, and federal funds purchased) and, to a far lesser extent, junior subordinated debentures and subordinated notes. As of March 31, 2021, borrowed funds declined $324.8 million or 8% annualized to $15.8 billion compared to December 31, 2020, and represented 27.4% of total assets at that date. The decrease was mainly due to a decline in wholesale borrowings, consisting primarily of FHLB-NY advances, which declined to $14.3 billion compared to $14.6 billion at year-end 2020. Also included in wholesale borrowings are repurchase agreements of $800.0 million, unchanged from the balance at December 31, 2020.

Subordinated Notes

On November 6, 2018, the Company issued $300 million aggregate principal amount of its 5.90% Fixed-to-Floating Rate Subordinated Notes due 2028. The Company intends to use the net proceeds from 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 March 31, 2021, the balance of subordinated notes was $295.8 million, which excludes certain costs related to their issuance.

Junior Subordinated Debentures

Junior subordinated debentures totaled $360.4 million at March 31, 2021, comparable to the balance at December 31, 2020.

Risk Definitions

The following section outlines the definitions of interest rate risk, market risk, and liquidity risk, and how the Company manages market and interest rate risk:

Interest Rate Risk – Interest rate risk is the risk to earnings or capital arising from movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (re-pricing risk); from changing rate relationships among different yield curves affecting Company activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in a bank’s products (options risk). The evaluation of interest rate risk must consider the impact of complex, illiquid hedging strategies or products, and also the potential impact on fee income (e.g. prepayment income) which is sensitive to changes in interest rates. In those situations where trading is separately managed, this refers to structural positions and not trading portfolios.

Market Risk – Market risk is the risk to earnings or capital arising from changes in the value of portfolios of financial instruments. This risk arises from market-making, dealing, and position-taking activities in interest rate, foreign exchange, equity, and commodities markets. Many banks use the term “price risk” interchangeably with market risk; this is because market risk focuses on the changes in market factors (e.g., interest rates, market liquidity, and volatilities) that affect the value of traded instruments. The primary accounts affected by market risk are those which are revalued for financial presentation (e.g., trading accounts for securities, derivatives, and foreign exchange products).

Liquidity Risk – Liquidity risk is the risk to earnings or capital arising from a bank’s inability to meet its obligations when they become due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. Liquidity risk also arises from a bank’s failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.

Management of Market and Interest Rate Risk

We manage our assets and liabilities to reduce our exposure to changes in market interest rates. The asset and liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain balance sheet accounts; to determine the appropriate level of risk, given our business strategy, risk appetite, operating environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner consistent with guidelines approved by the Boards of Directors of the Company and the Bank.

Market and Interest Rate Risk

As a financial institution, we are focused on reducing our exposure to interest rate volatility. Changes in interest rates pose one of the greatest challenges to our financial performance, as such changes can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. To reduce our exposure to changing rates, the Boards of Directors and management monitor interest rate sensitivity on a regular or as needed basis so that adjustments to the asset and liability mix can be made when deemed appropriate.

The actual duration 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 be impacted by a variety of factors, including the economy in the region where the underlying mortgages were originated; seasonal factors; demographic variables; and the assumability of the underlying mortgages. However, the largest determinants of prepayments are interest rates and the availability of refinancing opportunities.

We manage our interest rate risk by taking the following actions: continue to emphasize the origination and retention of intermediate-term assets, primarily in the form of multi-family and CRE loans; continue to originate certain floating rate C&I loans; depending on funding needs, replace maturing wholesale borrowings with longer term borrowings; and as needed, execute interest rate swaps.

LIBOR Transition Process

On July 27, 2017, the U.K. Financial Conduct Authority (FCA), which regulates LIBOR, announced that it will no longer request banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020 the ICE Benchmark Administration (“IBA”) announced they will extend the publication of most US Dollar LIBOR (“USD LIBOR”) through June 30, 2023. The FRB established the Alternative Reference Rate Committee (“ARRC”), comprised of a group of private market participants and other members, representing banks and financial sector regulators, to identify a set of alternative reference rates for potential use as benchmarks. The ARRC has recommended the Secured Overnight Financing Rate or “SOFR” as the preferred alternative rate to U.S. dollar LIBOR but Financial Institutions are permitted to select a different index for their products offered.

The Bank has established a sub-committee of its ALCO to address issues related to the phase-out and ultimate transition away from LIBOR to an alternate rate. This sub-committee is led by our Chief Financial Officer and consists of personnel from various departments throughout the Bank including lending, loan administration, credit risk management, finance/treasury, including interest rate risk and liquidity management, information technology, and operations. The Company has LIBOR-based contracts that extend beyond June 30, 2023 included in loans and leases, securities, wholesale borrowings, derivative financial instruments and long-term debt. The sub-committee has reviewed contract fallback language and noted that certain contracts will need updated provisions for the transition and is coordinating with impacted business lines. In complying with industry requirements, the Bank will not offer new LIBOR based production after December 31, 2021.

While the ARRC has recommended SOFR as the replacement for LIBOR, there is acknowledgment that the development of a credit sensitive element could be a complement to SOFR. At this time, it is unclear as to the likelihood and timing of this occurring, but such a development could have an impact on our transition efforts.

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 March 31, 2021, our one-year gap was a negative 6.17%, compared to a negative 4.94% at December 31, 2020. The change in our one-year gap from December 31, 2020, primarily reflects a decrease in mortgage and other loans expected to mature or reprice within one year, partially offset by an increase in interest-earning cash and cash equivalents.

The table on the following page sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at March 31, 2021 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 March 31, 2021 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 19.55% per annum; for multi-family and CRE loans, prepayment rates are forecasted at weighted average CPRs of 16.65% and 11.03% per annum, respectively. Borrowed funds were not assumed to prepay.

Savings, interest bearing checking and money market accounts were assumed to decay based on a comprehensive statistical analysis that incorporated our historical deposit experience. Based on the results of this analysis, savings accounts were assumed to decay at a rate of 75% for the first five years and 25% for years six through ten. Interest-bearing checking accounts were assumed to decay at a rate of 82% for the first five years and 18% for years six through ten. The decay assumptions reflect the prolonged low interest rate environment and the uncertainty regarding future depositor behavior. Including those accounts having specified repricing dates, money market accounts were assumed to decay at a rate of 92% for the first five years and 8% for years six through ten.


	At March 31, 2021
(dollars in thousands)	Three Months or Less			Four to Twelve Months			More Than One Year to Three Years			More Than Three Years to Five Years			More Than Five Years to 10 Years			More Than 10 Years			Total
INTEREST-EARNING ASSETS:
Mortgage and other loans (1)	$	7,348,923		$	6,081,362		$	16,199,114		$	9,812,504		$	3,591,390		$	58,668		$	43,091,961
Mortgage-related securities (2)(3)		324,112			362,730			954,212			549,658			636,032			368,844			3,195,588
Other securities (2)		1,818,468			244,041			53,706			111,682			1,453,404			-			3,681,301
Interest-earning cash and cash equivalents		2,583,685			-			-			-			-			-			2,583,685
Total interest-earning assets		12,075,188			6,688,133			17,207,032			10,473,844			5,680,826			427,512			52,552,535
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and money market accounts		7,603,739			889,659			1,612,087			920,018			1,639,499			-			12,665,002
Savings accounts		1,856,322			2,120,788			736,531			551,807			1,778,154			-			7,043,602
Certificates of deposit		4,760,698			3,900,261			765,777			187,280			282			-			9,614,298
Borrowed funds		513,926			672,661			5,350,000			800,000			8,280,000			142,200			15,758,787
Total interest-bearing liabilities		14,734,685			7,583,369			8,464,395			2,459,105			11,697,935			142,200			45,081,689
Interest rate sensitivity gap per period (4)	$	(2,659,497	)	$	(895,236	)	$	8,742,637		$	8,014,739		$	(6,017,109	)	$	285,312		$	7,470,846
Cumulative interest rate sensitivity gap	$	(2,659,497	)	$	(3,554,733	)	$	5,187,904		$	13,202,643		$	7,185,534		$	7,470,846
Cumulative interest rate sensitivity gap as a percentage of total assets		-4.61	%		-6.17	%		9.00	%		22.90	%		12.46	%		12.96	%
Cumulative net interest- earning assets as a percentage of net interest- bearing liabilities		81.95	%		84.07	%		116.85	%		139.72	%		115.99	%		116.57	%

(1) For the purpose of the gap analysis, loans held for sale, non-performing loans and the allowances 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.

Prepayment and deposit decay rates can have a significant impact on our estimated gap. While we believe our assumptions to be reasonable, there can be no assurance that the assumed prepayment and decay rates will approximate actual future loan and securities prepayments and deposit withdrawal activity.

To validate our prepayment assumptions for our multi-family and CRE loan portfolios, we perform a quarterly 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, if any, in our borrowings and investment portfolios and, on a monthly basis, compare the actual calls to our projected calls to ensure that our projections are reasonable.

As of March 31, 2021, the impact of a 100 bp decline in market interest rates for our loans would have had very little impact on prepayment speeds due to the current low interest rates and current coupons being floored at base rates. The impact of a 100 bp increase in market interest rates would have decreased our projected prepayment rates for multi-family and CRE loans by a constant prepayment rate of 3.2% 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 Economic Value of Equity (“EVE”) over a range of interest rate scenarios. EVE is defined as the net present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The EVE ratio, under any interest rate scenario, is defined as the EVE 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 March 31, 2021, the following table reflects the estimated percentage change in our EVE, assuming the changes in interest rates noted:


Change in Interest Rates (in basis points)(1)		Estimated Percentage Change in Economic Value of Equity
+100		-4.34%
+200		-13.08%

(1) The impact of a 100 bp and a 200 bp reduction in interest rates is not presented in view of the current level of the federal funds rate and other short-term interest rates.

The net changes in EVE presented in the preceding table are within the parameters 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 EVE 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 EVE 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 EVE Analysis provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income, and may very well differ from actual results.

We also utilize an internal net interest income simulation to manage our sensitivity to interest rate risk. The simulation incorporates various market-based assumptions regarding the impact of changing interest rates on future levels of our financial assets and liabilities. The assumptions used in the net interest income simulation are inherently uncertain. Actual results may differ significantly from those presented in the following table, due to the frequency, timing, and magnitude of changes in interest rates; changes in spreads between maturity and repricing categories; and prepayments, among other factors, coupled with any actions taken to counter the effects of any such changes.

Based on the information and assumptions in effect at March 31, 2021, the following table reflects the estimated percentage change in future net interest income for the next twelve months, assuming the changes in interest rates noted:


Change in Interest Rates (in basis points)(1)(2)		Estimated Percentage Change in Future Net Interest Income
+100		-1.27%
+200		-3.13%

(1) In general, short- and long-term rates are assumed to increase in parallel fashion across all four quarters and then remain unchanged.

(2) The impact of a 100 bp and a 200 bp reduction in interest rates is not presented in view of the current level of the federal funds rate and other short-term interest rates.

Future changes in our mix of assets and liabilities may result in greater changes to our gap, NPV, and/or net interest income simulation.

In the event that our EVE and net interest income sensitivities were to breach our internal policy limits, we would undertake the following actions to ensure that appropriate remedial measures were put in place:



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 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 March 31, 2021, our analysis indicated that an immediate inversion of the yield curve would be expected to result in a 6.98% decrease in net interest income; conversely, an immediate steepening of the yield curve would be expected to result in a 0.35% increase in net interest income. It should be noted that the yield curve changes in these scenarios were updated, given the changing market rate environment, which resulted in an increase in the income sensitivity.

Liquidity

We manage our liquidity to ensure that cash flows are sufficient to support our operations, and to compensate for any temporary mismatches between sources and uses of funds caused by variable loan and deposit demand.

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 $2.7 billion and $1.9 billion, respectively, at March 31, 2021 and December 31, 2020. As in the past, our portfolios of loans and securities provided liquidity in the first three months of the year, with cash flows from the repayment and sale of loans totaling $2.4 billion and cash flows from the repayment and sale of securities totaling $495.3 million.

Additional liquidity stems from the retail, institutional, and municipal deposits we gather and from our use of wholesale funding sources, including brokered deposits and wholesale borrowings. We also have access to the 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 available amount of mortgage loan collateral under a blanket lien we have pledged to the respective institutions and, to a lesser extent, the available amount of securities that may be pledged to collateralize our borrowings. At March 31, 2021, our available borrowing capacity with the FHLB-NY was $7.6 billion. In addition, the Company had $6.2 billion of available-for-sale securities, at that date, of which $5.0 billion was unencumbered.

Furthermore, the Bank has an agreement with the FRB-NY that enables it to access the discount window as a further means of enhancing liquidity if need be. In connection with the agreement, the Bank has pledged certain loans and securities to collateralize any funds that may be borrowed. At March 31, 2021, the maximum amount the Bank could borrow from the FRB-NY was $1.2 billion. There were no borrowings outstanding at that date.

Our primary investing activity is loan production. In the first three months of 2021, the volume of loans originated for investment was $2.5 billion. During this time, the net cash used in investing activities totaled $681.2 million. Our operating activities provided net cash of $123.6 million, while the net cash provided by our financing activities totaled $1.3 billion.

CDs due to mature in one year or less as of March 31, 2021 totaled $8.7 billion, representing 95% of total CDs at that date. Our ability to retain these CDs and to attract new deposits depends on numerous factors, including customer satisfaction, the rates of interest we pay on our deposits, the types of products we offer, and the attractiveness of their terms. However, there are times when we may choose not to compete for such deposits, depending on the availability of lower-cost funding, the competitiveness of the market and its impact on pricing, and our need for such deposits to fund loan demand, as previously discussed.

The Parent Company is a separate legal entity from 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 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.

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 the three months ended March 31, 2021, the Bank paid dividends totaling $95.0 million to the Parent Company, leaving $277.4 million they could dividend to the Parent Company without regulatory approval at that date. Additional sources of liquidity available to the Parent Company at March 31, 2021 included $144.7 million in cash and cash equivalents. If the Bank was to apply to the Superintendent for approval to make a dividend or capital distribution in excess of the dividend amounts permitted under the regulations, there can be no assurance that such application would be approved.

Capital Position

On March 17, 2017, we issued 515,000 shares of preferred stock. The offering generated capital of $502.8 million, net of underwriting and other issuance costs, for general corporate purposes, with the bulk of the proceeds being distributed to the Bank.

On October 24, 2018, the Company announced that it had received regulatory approval to repurchase its common stock. Accordingly, the Board of Directors approved a $300 million common share repurchase program. The repurchase program was funded through the issuance of a like amount of subordinated notes. As of March 31, 2021, the Company has repurchased a total of 28.9 million shares at an average price of $9.63 or an aggregate purchase price of $278.1 million, leaving $16.9 million remaining under the current authorization.

Stockholders’ equity, common stockholders’ equity, and tangible common stockholders’ equity include AOCL, which decreased $96.6 million from the balance at the end of last year and $41.6 million from the year-ago quarter to $122.1 million at March 31, 2021. The year-to-date decrease was primarily the result of a $108.7 million change in the net unrealized gain (loss) on available-for-sale securities, net of tax, and a $7.6 million change in the net unrealized loss on cash flow hedges, net of tax, to $25.5 million.

Regulatory Capital

The Bank is subject to regulation, examination, and supervision by the NYSDFS and the FDIC (the “Regulators”). The Bank is also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which established five categories of capital adequacy ranging from “well capitalized” to “critically undercapitalized.” Such classifications are used by the FDIC to determine various matters, including prompt corrective action and each institution’s FDIC deposit insurance premium assessments. Capital amounts and classifications are also subject to the Regulators’ qualitative judgments about the components of capital and risk weightings, among other factors.

The quantitative measures established to ensure capital adequacy require that banks maintain minimum amounts and ratios of leverage capital to average assets and of common equity tier 1 capital, tier 1 capital, and total capital to risk-weighted assets (as such measures are defined in the regulations). At March 31, 2021, our capital measures continued to exceed the minimum federal requirements for a bank holding company and for a bank. The following table sets forth our common equity tier 1, tier 1 risk-based, total risk-based, and leverage capital amounts and ratios on a consolidated basis and for the Bank on a stand-alone basis, as well as the respective minimum regulatory capital requirements, at that date:

Regulatory Capital Analysis (the Company)


	Risk-Based Capital
At March 31, 2021	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	4,014,898		9.84	%	$	4,517,738		11.07	%	$	5,345,417		13.09	%	$	4,517,738		8.41	%
Minimum for capital adequacy purposes		1,836,935		4.50			2,449,247		6.00			3,265,662		8.00			2,150,017		4.00
Excess	$	2,177,963		5.34	%	$	2,068,491		5.07	%	$	2,079,755		5.09	%	$	2,367,721		4.41	%

Regulatory Capital Analysis (New York Community Bank)


	Risk-Based Capital
At March 31, 2021	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	5,024,758		12.31	%	$	5,024,758		12.31	%	$	5,209,088		12.77	%	$	5,024,758		9.35	%
Minimum for capital adequacy purposes		1,836,181		4.50			2,448,241		6.00			3,264,321		8.00			2,149,340		4.00
Excess	$	3,188,577		7.81	%	$	2,576,517		6.31	%	$	1,944,767		4.77	%	$	2,875,418		5.35	%

At March 31, 2021, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 509 bps and the fully-phased in capital conservation buffer by 259 bps.

The Bank also exceeded the minimum capital requirements to be categorized as “Well Capitalized.” To be categorized as well capitalized, a bank must maintain a minimum common equity tier 1 ratio of 6.50%; a minimum tier 1 risk-based capital ratio of 8.00%; a minimum total risk-based capital ratio of 10.00%; and a minimum leverage capital ratio of 5.00%.

Earnings Summary for the Three Months Ended March 31, 2021

Net income for the three months ended March 31, 2021 was $145.6 million, up 45% compared to $100.3 million for the three months ended March 31, 2020. Net income available to common shareholders for the three months ended March 31, 2021 totaled $137.4 million, up 49% compared to $92.1 million for the three months ended March 31, 2020. On a per share basis, the Company reported diluted earnings per common share of $0.29 for the first quarter of 2021, up 45% compared to the $0.20 reported for the first quarter of 2020.

Net Interest Income

Net interest income is our primary source of income. Its level is a function of the average balance of our interest-earning assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-bearing liabilities which, in turn, are impacted by various external factors, including the local economy, competition for loans and deposits, the monetary policy of the FOMC, and market interest rates.

Net interest income is also influenced by the level of prepayment income primarily generated in connection with the prepayment of our multi-family and CRE loans, as well as securities. Since prepayment income is recorded as interest income, an increase or decrease in its level will also be reflected in the average yields (as applicable) on our loans, securities, and interest-earning assets, and therefore in our interest rate spread and net interest margin.

It should be noted that the level of prepayment income on loans recorded in any given period depends on the volume of loans that refinance or prepay during that time. Such activity is largely dependent on such external factors as current market conditions, including real estate values, and the perceived or actual direction of market interest rates. In addition, while a decline in market interest rates may trigger an increase in refinancing and, therefore, prepayment income, so too may an increase in market interest rates. It is not unusual for borrowers to lock in lower interest rates when they expect, or see, that market interest rates are rising rather than risk refinancing later at a still higher interest rate.

Year-Over-Year Comparison

Net interest income for the three months ended March 31, 2021 increased $73.2 million or 30% to $317.7 million compared to the three months ended March 31, 2020. This improvement was the result of a significant decline in the Company's funding costs, which resulted in a substantial decrease in interest expense. This was offset by a decline in interest income.

Details of the increase in net interest income follow:



Interest income declined 4.1% to $423.1 million compared to the year-ago quarter. Interest income on mortgage and other loans was $383.4 million, down 2.2% compared to the first quarter of 2020. Interest income on securities declined 18.7% to $38.4 million compared to the year-ago quarter.



The decline in interest income on loans was due to lower loan yields, offset by an increase in average balances. Loan yields declined 19 bps to 3.59% compared to the year-ago quarter, while average balances increased $1.2 billion or 3.0% compared to the year-ago quarter. In addition, interest income from securities was similarly impacted by lower yields. The yield on the securities portfolio declined 62 bps to 2.36% compared to the first quarter of 2020.



Total interest expense was $105.4 million for the three months ended March 31, 2021, down $91.1 million or 46.4% compared to the three months ended March 31, 2020. This improvement was the result of a significant decline in the Company's cost of funds. The cost of funds declined 88 bps to 0.94% compared to the first quarter of last year.



The majority of the improvement was driven by a lower average cost of CDs, along with a decline in the average balance of CDs. The average cost of CDs declined 152 bps to 0.75% while the average balance of CDs decreased $4.1 billion or 29.3% to $10.0 billion.

Net Interest Margin

The Company's NIM improved during the current first quarter inline with the growth in net interest income. For the three months ended March 31, 2021, the NIM increased 47 bps on a year-over-year basis and one bp on a linked-quarter basis, to 2.48%.

For the three months ended March 31, 2021, adjusted NIM improved 41 bps to 2.33% compared to the prior year's first quarter. 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 summarizes the contribution of loan and securities prepayment income on the Company’s interest income and NIM for the respective periods:


	For the Three Months Ended
	March 31,				March 31,
	2021				2020				Change (%)
(dollars in thousands)
Total Interest Income	$	423,108			$	441,042				-4	%
Prepayment Income:
Loans	$	18,749			$	10,189				84	%
Securities		921				348				165	%
Total prepayment income	$	19,670			$	10,537				87	%
GAAP Net Interest Margin		2.48	%			2.01	%			47		bp
Less:
Prepayment income from loans		15		bp		9		bp		6		bp
Prepayment income from securities		-				-				-		bp
Total prepayment income contribution to net interest margin		15		bp		9		bp		6		bp
Adjusted Net Interest Margin (non-GAAP)		2.33	%			1.92	%			41		bp

While our net interest margin, including the contribution of prepayment income, is recorded in accordance with GAAP, adjusted net interest margin, which excludes the contribution of prepayment income, is not. Nevertheless, management uses 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 three-month periods, including the average yields on our interest-earning assets and the average costs of our interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average balance of interest-earning assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the quarters are derived from average balances that are calculated daily. The average yields and costs include fees, as well as premiums and discounts (including mark-to-market adjustments from acquisitions), that are considered adjustments to such average yields and costs.

Net Interest Income Analysis


	For the Three Months Ended
	March 31, 2021							March 31, 2020
	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
(dollars in thousands)
Assets:
Interest-earning assets:
Mortgage and other loans, net (1)	$	42,735,708	$	383,430		3.59	%	$	41,511,176	$	391,911		3.78	%
Securities (2)(3)		6,516,568		38,430		2.36	%		6,347,320		47,276		2.98
Interest-earning cash and cash equivalents		1,835,268		1,248		0.28	%		662,899		1,855		1.13
Total interest-earning assets		51,087,544	$	423,108		3.32	%		48,521,395		441,042		3.64
Non-interest-earning assets		5,218,148							4,887,109
Total assets	$	56,305,692						$	53,408,504
Liabilities and Stockholders’ Equity:
Interest-bearing deposits:
Interest-bearing checking and money market accounts	$	12,626,151	$	8,652		0.28	%	$	10,070,100	$	28,564		1.14	%
Savings accounts		6,713,051		6,255		0.38	%		4,833,600		8,934		0.74
Certificates of deposit		9,983,363		18,471		0.75	%		14,120,484		79,555		2.27
Total interest-bearing deposits		29,322,565		33,378		0.46	%		29,024,184		117,053		1.62
Borrowed funds		15,994,741		72,071		1.82	%		14,439,309		79,522		2.21
Total interest-bearing liabilities		45,317,306		105,449		0.94	%		43,463,493		196,575		1.82
Non-interest-bearing deposits		3,242,803							2,569,331
Other liabilities		872,164							684,808
Total liabilities		49,432,273							46,717,632
Stockholders’ equity		6,873,419							6,690,872
Total liabilities and stockholders’ equity	$	56,305,692						$	53,408,504
Net interest income/interest rate spread						2.38	%			$	244,467		1.82	%
Net interest margin			$	317,659		2.48	%						2.01	%
Ratio of interest-earning assets to interest-bearing liabilities					1.13x							1.12x

(1) Amounts are net of net deferred loan origination costs/(fees) and the allowances for loan losses and include loans held for sale and non-performing loans.

(2) Amounts are at amortized cost.

(3) Includes FHLB stock.

Provision for Credit Losses

For the three months ended March 31, 2021, the Company recorded a provision for credit losses of $3.6 million compared to $20.6 million for the three months ended March 31, 2020. The year-over-year improvement reflects the significant improvement in forecasted, future economic conditions based on the adoption of CECL in the first quarter of last year.

For additional information about our provisions for and recoveries of loan losses, see the discussion of the allowances for loan losses under “Critical Accounting Policies” and the discussion of “Asset Quality” that appear earlier in this report.

Non-Interest Income

We 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 the sale of securities; and revenues produced through the sale of third-party investment products.

For the first three months ended March 31, 2021, non-interest income totaled $14.4 million, down 14.8% compared to the three months ended March 31, 2020. The decrease was mainly the result of lower fee income, as the Company waived certain retail banking fees in 2020 as a result of COVID-19. Additionally, the current first quarter includes a net loss on securities of $483,000 compared to net gains on securities of $534,000 in the year-ago quarter.

The following table summarizes our non-interest income for the respective periods:


	For the Three Months Ended
(in thousands)	March 31, 2021			March 31, 2020
Fee income	$	5,539		$	7,018
BOLI income		6,890			7,389
Net (loss) gain on securities		(483	)		534
Other income:
Third-party investment product sales		1,135			1,277
Other		1,326			681
Total other income		2,461			1,958
Total non-interest income	$	14,407		$	16,899

Non-Interest Expense Analysis

Total non-interest expense for the three months ended March 31, 2021 totaled $132.4 million, up 5% compared to the year-ago quarter. The main categories that increased were occupancy and equipment expense and general and administrative expense. This was largely due to PPE, cleaning, and other COVID-19-related expenses. Despite this increase, the efficiency ratio declined to 39.87% compared to 48.03% due to higher revenues.

Income Tax Expense

For the three months ended March 31, 2021, the Company recorded income tax expense of $50.5 million, largely driven by higher pre-tax income and reflects an effective tax rate of 25.75%. In the year-ago quarter, the Company recorded income tax expense of $14.9 million, reflecting an effective tax rate of 12.94%. The CARES Act, enacted on March 27, 2020, included certain tax provisions for corporations, one of which was the temporary carry back of tax losses. During the first quarter of 2020, the Company recognized a $13.1 million tax benefit related to its tax loss carryback as provided by the CARES Act.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about the Company’s market risk were presented on pages 74 through 78 of our 2020 Annual Report on Form 10-K, filed with the SEC on February 26, 2021. Subsequent changes in the Company’s market risk profile and interest rate sensitivity are detailed in the discussion entitled “Management of Market and Interest Rate Risk” earlier in this quarterly report.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (the “SEC’s”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e), as adopted by the SEC under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period.

(b) Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. 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 1A. Risk Factors

In addition to the other information set forth in this report, readers should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as such factors could materially affect the Company’s business, financial condition, or future results of operations.

The risk factors set forth in our 2020 Form 10-K are updated by the following risks:

Failure to complete our proposed merger with Flagstar could negatively impact our business, financial results, and stock price.

If for any reason the merger is not completed, our ongoing business may be adversely impacted and we will be subject to a number of risks, including: the financial markets may react negatively, resulting in negative impacts on our stock price and other adverse impacts; we may experience negative reactions from our customers, vendors, and employees; we will have incurred substantial expenses and will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, investment banking, and other professional and administrative fees; the merger agreement places certain restrictions on the conduct of our business prior to completion of the merger, such restrictions, may adversely affect our ability to execute certain of our business strategies; and matters relating to the merger may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that may have benefited us as a standalone company.

Our ability to complete the proposed merger with Flagstar is subject to the receipt of approval from various regulatory agencies.

Prior to the transaction contemplated in the merger agreement being consummated, the Company and Flagstar must obtain various approvals, including approvals of the New York State Department of Financial Services, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System. The terms and conditions of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company's business or require changes to the terms of the transaction completed by the merger agreement. Although the Company and Flagstar do not currently expect that any such conditions or changes would be imposed, there can be no assurance that the regulations will not impose any such conditions, obligations or restrictions, and that such conditions, limitations, obligations or restrictions will not have the effect if delaying or preventing completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe, any of which might have an adverse effect on the combined company following the merger.

We face risks and uncertainties related to our proposed merger with Flagstar.

Uncertainty about the effect of the merger on personnel and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain, and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others that deal with us to seek to change their existing business relationships with us. Employee retention may be particularly challenging during the pendency of the merger, as employees may experience uncertainty about their roles with the surviving company following the merger.

The Company and Flagstar have operated and, until the completion of the merger, will continue to operate independently. The ultimate success of the merger, including anticipated benefits and cost savings, among other things, will depend, in part, on our and Flagstar's ability to successfully combine and integrate our and Flagstar's businesses in a manner that facilitates growth opportunities and realizes anticipated cost savings. It is possible that the integration process could result in the loss of key employees, the loss of customers, the disruption of either company's ongoing business, unexpected integration issues, higher than expected integration costs, and an integration process that takes longer than originally anticipated. Also, if the combined companies experience difficulties or delays with the integration process, the anticipated benefits of the merger may not be realized fully, or at all.

The merger agreement between the Company and Flagstar may be terminated in accordance with its terms.

The merger agreement is subject to a number of conditions which need to be fulfilled in order to consummate the merger. These conditions include the approval of shareholders of both companies, the receipt of all required regulatory approvals, the absence of any order, injunction, or other legal restraint, subject to certain exceptions, the accuracy of representations and warranties under the merger agreement, our and Flagstar's performance of our and their respective obligations under the merger agreement in all material aspects, and each of our and Flagstar's receipt of a tax opinion to the effect that the merger will be treated as a "reorganization" within the

meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and accordingly, the merger may be delayed or may not be completed.

We and Flagstar may opt to terminate the merger agreement under certain circumstances. Among other situations, if the merger is not completed by April 25, 2022, either we or Flagstar may choose not to proceed with the merger. We and Flagstar can also mutually decide to terminate the merger agreement at any time. If the merger agreement is terminated, under certain limited circumstances, Flagstar may be required to pay a $90 million termination fee to us.

Stockholder litigation could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations.

Lawsuits may be filed against us, Flagstar, or the directors and officers of either company relating to the proposed merger. Litigation filed against us, our Board of Directors, or Flagstar and its Board of Directors could prevent or delay the completion of the merger, cause us to incur additional costs, or result in the payment of damages following completion of the merger. The defense or settlement of any lawsuit or claim that remains unresolved at the effective time of the merger may adversely affect the combined company's business, financial condition, results of operation, cash flows, and market price.

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

Shares Repurchased Pursuant to the Company’s Stock-Based Incentive Plans

Participants in the Company’s stock-based incentive plans may have shares of common stock withheld to fulfill the income tax obligations that arise in connection with the vesting of their stock awards. Shares that are withheld for this purpose are repurchased pursuant to the terms of the applicable stock-based incentive plan, rather than pursuant to the share repurchase program authorized by the Board of Directors, described below.

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.

The Company allocated 1.3 million shares or $15.5 million toward the repurchase of shares tied to its stock-based incentive plans during the three months ended March 31, 2021.


(dollars in thousands, except per share data)
First Quarter 2021	Total Shares of Common Stock Repurchased		Average Price Paid per Common Share		Total Allocation
January 1 – January 31		653,767	$	11.13	$	7,276,427
February 1 – February 28		318		10.81		3,438
March 1 – March 31		689,281		11.95		8,234,953
Total shares repurchased		1,343,366		11.55	$	15,514,818

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits


Exhibit No.
2.1		Agreement and Plan of Merger, dated as of April 24, 2021, by and among New York Community Bancorp, Inc., 615 Corp., a wholly-owned subsidiary of New York Community Bancorp, Inc. and Flagstar Bancorp, Inc. * (1)

3.1		Amended and Restated Certificate of Incorporation. (2)

3.2		Certificates of Amendment of Amended and Restated Certificate of Incorporation. (3)

3.3		Certificate of Amendment of Amended and Restated Certificate of Incorporation. (4)

3.4		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. (5)

3.5		Amended and Restated Bylaws. (6)

4.1		Specimen Stock Certificate. (7)

4.2		Deposit Agreement, dated as of March 16, 2017, by and among the Registrant, Computershare, Inc., and Computershare Trust Company, N.A., as joint depositary, and the holders from time to time of the depositary receipts described therein. (8)

4.3		Form of certificate representing the Series A Preferred Stock. (8)

4.4		Form of depositary receipt representing the Depositary Shares. (8)

4.5		Registrant will furnish, upon request, copies of all instruments defining the rights of holders of long-term debt instruments of the registrant and its consolidated subsidiaries.

10.1		Letter Agreement, dated as of April 24, 2021, by and between New York Community Bancorp, Inc. and Thomas Cangemi. ** (1)

31.1		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).

31.2		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).

32.0		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).

101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		The cover page of New York Community Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).

* Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.

** Management plan or compensation plan arrangement.

(1) Incorporated by reference to Exhibits to the Company's Form 8-K filed with the Securities and Exchange Commission on April 27, 2021 (File No. 1-31565).

(2) Incorporated by reference to Exhibits filed with the Company’s Form 10-Q for the quarterly period ended March 31, 2001 (File No. 0-22278).

(3) Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31, 2003 (File No. 1-31565).

(4) Incorporated by reference to Exhibits to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 27, 2016 (File No. 1-31565).

(5) Incorporated by reference to Exhibits of the Company’s Registration Statement on Form 8-A (File No. 333-210919), as filed with the Securities and Exchange Commission on March 16, 2017.

(6) Incorporated by reference to Exhibits filed with the Company’s Form 10-K for the year ended December 31, 2016 (File No. 1-31565).

(7) Incorporated by reference to Exhibits filed with the Company’s Form 10-Q for the quarterly period ended September 30, 2017 (File No. 1-31565).

(8) Incorporated by reference to Exhibits filed with the Company’s Form 8-K filed with the Securities and Exchange Commission on March 17, 2017 (File No. 1-31565).

NEW YORK COMMUNITY BANCORP, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		New York Community Bancorp, Inc.
		(Registrant)

DATE: May 7, 2021	BY:	/s/ Thomas R. Cangemi
		Thomas R. Cangemi Chairman, President, and Chief Executive Officer

DATE: May 7, 2021	BY:	/s/ John J. Pinto
		John J. Pinto Senior Executive Vice President and Chief Financial Officer