NEW YORK COMMUNITY BANCORP INC [NYCB] Filings

10-Q 1 fbc-20230930.htm 10-Q fbc-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023


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

Commission file number: 001-16577

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.)

102 Duffy Avenue,

Hicksville,

New York

11801

(Address of principal executive offices)

(Zip Code)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value per share

NYCB

New York Stock Exchange

Bifurcated Option Note Unit SecuritiESSM

NYCB PU

New York Stock Exchange

Depositary Shares each representing a 1/40th interest in a share of Fixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock

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

☐

Smaller Reporting Company

☐

Non-Accelerated Filer

☐

Emerging growth company

☐

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

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

The number of shares of the registrant’s common stock outstanding as of November 3, 2023 was 722,488,113 shares.

NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2023

TABLE OF CONTENTS



PART I. – FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Statements of Financial Condition – September 30, 2023 (unaudited) and December 31, 2022	40
	Consolidated Statements of Income and Comprehensive Income – For the three and nine months ended September 30, 2023 and 2022 (unaudited)	41
	Consolidated Statements of Stockholders’ Equity – For the three and nine months ended September 30, 2023 and 2022 (unaudited)	42
	Consolidated Statements of Cash Flows – For the nine months ended September 30, 2023 and 2022 (unaudited)	44
	Notes to the Consolidated Financial Statements (unaudited)
	Note 1 - Organization Basis of Presentation	46
	Note 2 - Computation of Earnings Per Common Share	47
	Note 3 - Business Combination	48
	Note 4 - Accumulated Other Comprehensive Income	52
	Note 5 - Investment Securities	53
	Note 6 - Loans and Leases	56
	Note 7 - Allowance for Credit Losses	62
	Note 8 - Leases	63
	Note 9 - Mortgage Servicing Rights	66
	Note 10 -Variable Interest Entities	68
	Note 11 - Borrowed Funds	68
	Note 12 - Pension and Other Post-Retirement Benefits	69
	Note 13 - Stock-Related Benefit Plans	69
	Note 14 - Derivative and Hedging Activities	70
	Note 15 - Intangible Assets	74
	Note 16 - Fair Value Measures	75
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	82
Item 4.	Controls and Procedures	82

PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 3.	Defaults upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	85

SIGNATURES		87

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

The following list of abbreviations and acronyms are provided as a tool for the reader and may be used throughout this Report, including the Consolidated Financial Statements and Notes:

Term

Definition

Term

Definition

ACL

Allowance for Credit Losses

FHLB-NY

Federal Home Loan Bank of New York

ADC

Acquisition, development, and construction loan

FOAL

Fallout-Adjusted Locks

ALCO

Asset and Liability Management Committee

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

BaaS

Banking as a Service

FTEs

Full-time equivalent employees

BOLI

Bank-owned life insurance

GAAP

U.S. generally accepted accounting principles

Basis point(s)

GLBA

The Gramm Leach Bliley Act

C&I

Commercial and industrial loan

GNMA

Government National Mortgage Association

CDs

Certificates of deposit

GSE

Government-sponsored enterprises

CECL

Current Expected Credit Loss

HELOC

Home Equity Line of Credit

CFPB

Consumer Financial Protection Bureau

HELOAN

Home Equity Loan

CMOs

Collateralized mortgage obligations

HPI

Housing Price Index

CMT

Constant maturity treasury rate

LGG

Loans with government guarantees

CPI

Consumer Price Index

LHFS

Loans Held-for-Sale

CPR

Constant prepayment rate

LIBOR

London Interbank Offered Rate

CRA

Community Reinvestment Act

LTV

Loan-to-value ratio

CRE

Commercial real estate loan

MBS

Mortgage-backed securities

DIF

Deposit Insurance Fund

MSRs

Mortgage servicing rights

DFA

Dodd-Frank Wall Street Reform and Consumer Protection Act

NIM

Net interest margin

DSCR

Debt service coverage ratio

NOL

Net operating loss

EAR

Earnings at Risk

NPAs

Non-performing assets

EPS

Earnings per common share

NPLs

Non-performing loans

ERM

Enterprise Risk Management

NPV

Net Portfolio Value

ESOP

Employee Stock Ownership Plan

NYSE

New York Stock Exchange

EVE

Economic Value of Equity at Risk

OCC

Office of the Comptroller of the Currency

Fannie Mae

Federal National Mortgage Association

OREO

Other real estate owned

FASB

Financial Accounting Standards Board

PAA

Purchase accounting adjustments

FCA

the United Kingdom's Financial Conduct Authority

ROU

Right of use asset

FDI Act

Federal Deposit Insurance Act

SBA

Small Business Administration

FDIC

Federal Deposit Insurance Corporation

Signature

Signature Bridge Bank, N.A.

FHA

Federal Housing Administration

SEC

U.S. Securities and Exchange Commission

FHFA

Federal Housing Finance Agency

SOFR

Secured Overnight Financing Rate

FHLB

Federal Home Loan Bank

TDR

Troubled debt restructurings

GLOSSARY

BARGAIN PURCHASE GAIN

The amount by which the fair value of assets purchased exceeds the fair value of liabilities assumed and consideration given.

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 percent.

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.

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).

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.

TROUBLED DEBT MODIFICATION

A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties.

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.

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, Flagstar Bank, N.A. (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, including higher inflation and its impacts, 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 transition 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 commercial real estate loan 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;

•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 our recent acquisition of Flagstar Bancorp, Inc. and the purchase and assumption of certain assets and liabilities of Signature Bridge Bank;

•changes in the estimated fair value of the assets that we recorded in connection with the purchase and assumption of certain assets and liabilities of Signature Bridge Bank;

•potential exposure to unknown or contingent liabilities of companies we have acquired, may acquire, or target for acquisition, including our recent acquisition of Flagstar Bancorp, Inc. and the purchase and assumption of certain assets and liabilities of Signature Bridge Bank;

•the success of our previously announced investment in, and partnership with, Figure Technologies, Inc., a FinTech company focusing on payment and lending via blockchain technology;

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

•changes in future allowance for credit losses requirements under relevant accounting and regulatory requirements;

•the ability to pay future dividends;

•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, including with respect to any litigation or regulatory actions related to the business practices of acquired companies, including our recent acquisition of Flagstar Bancorp, Inc. and the purchase and assumption of certain assets and liabilities of Signature Bridge Bank;

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

•cybersecurity incidents, including 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;

•the potential impact to the Company from climate change, including higher regulatory compliance, increased expenses, operational changes, and reputational risks;

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

•the impacts related to or resulting from Russia’s military action in Ukraine and conflicts in the Middle East, including the broader impacts to financial markets and the global macroeconomic and geopolitical environment;

•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;

•our ability to effectively manage liquidity, including our 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 Item 1A, Risk Factors, in our Form 10-K for the year ended December 31, 2022, our Forms 10-Q for the quarters ended June 30, 2023 and March 31, 2023, and this Form 10-Q, 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.

PART I. FINANCIAL INFORMATION


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

EXECUTIVE SUMMARY

At September 30, 2023, total assets were $111.2 billion, up $21.1 billion compared to December 31, 2022. Total deposits were $82.7 billion at September 30, 2023, up $24.0 billion from December 31, 2022. These year-to-date increases were primarily due to our March 20, 2023, assumption of a substantial amount of the deposits and certain identified liabilities and the acquisition of certain assets and lines of business of Signature Bridge Bank, from the FDIC as receiver for Signature Bridge Bank (the “Signature Transaction”). See Note 3 “Business Combinations” to the Consolidated Financial Statements for further information regarding the Signature Transaction

For the three months ended September 30, 2023, net income was $207 million as compared to $413 million for the three months ended June 30, 2023. Net income available to common stockholders for the three months ended September 30, 2023 was $199 million, compared to $405 million for the three months ended June 30, 2023. Diluted EPS totaled $0.27 for the three months ended September 30, 2023 compared to $0.55 for the three months ended June 30, 2023.

Third quarter 2023 and second quarter 2023 net income and diluted EPS were impacted by merger related expenses of $91 million and $109 million, respectively, related to both the Signature Transaction and the Flagstar acquisition.

Loan Portfolio

At September 30, 2023, total C&I loans were $24.4 billion compared to $12.3 billion at December 31, 2022. The majority of the increase is attributable to the $10.0 billion of C&I loans acquired in the Signature Transaction along with growth in specialty finance and MSR lending, partially offset by seasonally lower mortgage warehouse balances.

The multi-family loan portfolio was $37.7 billion at September 30, 2023, down slightly compared to $38.1 billion at December 31, 2022. At September 30, 2023, multi-family loans represented 45 percent of total loans, compared to 55 percent at December 31, 2022, further demonstrating the reduction of our concentration in this asset class.

Commercial loans (commercial real estate and acquisition, development and construction loans) increased $2.9 billion at September 30, 2023 to $13.4 billion compared to $10.5 billion at December 31, 2022 largely attributable to the Signature Transaction and growth in our home builder finance portfolio.

One-to-four family residential loans totaled $5.9 billion at September 30, 2023, representing seven percent of total loans compared to $5.8 billion or eight percent of total loans at December 31, 2022. Other loans totaled $2.6 billion at September 30, 2023 compared to $2.3 billion at December 31, 2022. The other loan portfolio consists mostly of HELOC and other consumer loans.

Loans held-for-sale at September 30, 2023 totaled $1.9 billion, up from $1.1 billion at December 31, 2022, which reflects seasonally lower balances and the continued impact of higher mortgage rates.

Deposit Base

Deposits at September 30, 2023 totaled $82.7 billion up $24.0 billion compared to $58.7 billion at December 31, 2022 primarily driven by the Signature Transaction.

Our deposit base includes $31.3 billion of uninsured deposits at September 30, 2023 a net increase of $14.8 billion as compared to December 31, 2022 due to the Signature Transaction. This represents 37.8 percent of our total deposits. These amounts were determined based on the same methodologies and assumptions used for regulatory reporting purposes and exclude internal accounts. We also have $31.2 billion of total ready liquidity (cash and cash equivalents, unpledged securities, and FHLB borrowing capacity). Our total ready liquidity approximately matches the balance of our uninsured deposits.

Net Interest Income

For the three months ended September 30, 2023, net interest income totaled $882 million, down $18 million or 2 percent compared to the three months ended June 30, 2023. The decrease was driven by lower average earning assets, partially offset by a six basis point increase in net interest margin and lower average interest-bearing liabilities.

For the three months ended September 30, 2023, net interest margin was 3.27 percent up six basis points compared to the three months ended June 30, 2023. We continued to benefit from the higher interest rate environment and recently acquired loans, which positively impacted the yields on our assets.

Asset Quality

At September 30, 2023, NPA to total assets equaled 0.40 percent compared to 0.21 percent at June 30, 2023 while NPL to total loans equaled 0.52 percent compared to 0.28 percent at June 30, 2023. The increase in NPLs were primarily related to two commercial real estate loans in the office sector that added $139 million in the third quarter of 2023 and multi-family increased $91 million of which the largest individual loan was $42 million. Repossessed assets of $12 million were slightly lower compared to $13 million in the prior quarter.

Recent Events

Declaration of Dividend on Common Shares

On October 24, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.17 per share on the Company's common stock. The dividend is payable on November 16, 2023 to common stockholders of record as of November 6, 2023.

RESULTS OF OPERATIONS

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.

The cost of our deposits and borrowed funds is largely based on short-term rates of interest, the level of which is partially impacted by the actions of the FOMC.

While the target federal funds rate generally impacts the cost of our short-term borrowings and deposits, the yields on our held-for-investment loans and other interest-earning assets are not as sensitive to intermediate-term market interest rates.

Another factor that impacts the yields on our interest-earning assets—and our net interest income—is the income generated by our multi-family and CRE loans and securities when they prepay. Since prepayment income is recorded as interest income, an increase or decrease in its level will also be reflected in the average yields (as applicable) on our loans, securities, and interest-earning assets, and therefore in our net interest income, our net interest rate spread, and our net interest margin.

It should be noted that the level of prepayment income on loans recorded in any given period depends on the volume of loans that refinance or prepay during that time. Such activity is largely dependent on such external factors as current market conditions, including real estate values, and the perceived or actual direction of market interest rates. This impact is most prevalent in our multi-family and CRE portfolios, and to a lesser extent in our C&I and ADC portfolios.. 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. The impact of prepayments on the current quarter and year was minimal.

Comparison to Prior Quarter

Net interest income for the three months ended September 30, 2023 was $882 million, down $18 million or 2.0 percent compared to the three months ended June 30, 2023 primarily due to the following:

•Interest income on cash and cash equivalents decreased $84 million driven by a decrease in the average balance of $7.5 billion due to a decrease in custodial deposits associated with the Signature Transaction partially offset by a 28 basis point increase in the average yield to 5.3 percent.

•Interest expense on average interest-bearing deposits increased $50 million to $491 million during the three months ended September 30, 2023, driven by a 35 basis point increase in the average cost of interest-bearing deposits due to rising interest rates and competition for deposits.

•Interest income on loans and leases increased $90 million primarily from rising commercial loan rates and increased income from acquired loans.

•Interest expense on borrowed funds decreased $18 million or 11.5 percent to $139 million primarily driven by a $2.6 billion or 14.3 percent decrease in the average balances partially offset by a 6 basis point increase in rates.

Comparison to Prior Year to Date

For the nine months ended September 30, 2023, net interest income totaled $2.3 billion, up $1.3 billion or 130 percent compared to $1.0 billion for the nine months ended September 30, 2022. The year-over-year increase was primarily the result of the Flagstar acquisition, which closed late last year, and the Signature Transaction, which closed in late March of this year and were not part of the Company in the first three quarters of 2022.

•Interest income on mortgages and other loans was driven by a $33.4 billion or 70.8 percent increase in average loan balances to $80.6 billion. This is primarily driven by the December 2022 acquisition of Flagstar and the March 2023 Signature Transaction. Additionally, we had a 187 basis point increase in the average loan yield to 5.4 percent in the current year quarter due primarily to the rising interest rate environment.

•Interest income on securities was positively impacted by a 168 basis point increase in the average yield to 4.11 percent from 2.4 percent along with a 3.5 billion or 50.3 percent increase in the average securities balance to $10.3 billion primarily driven by the nine month contribution from the Flagstar acquisition.

•Interest-earning cash and cash equivalents reflected a 399 basis point increase in the average yield to 5.1 percent driven by higher short-term market rates and an increase in the average balance of $8.8 billion driven by the Signature Transaction.

•Interest expense on average interest-bearing deposits increased $1.0 billion to $1.2 billion during the nine months ended September 30, 2023, driven by a 223 basis point increase in the average cost of interest-bearing deposits due to rising interest rates. Average interest earning deposits grew $20.9 billion, or 60.8 percent, to $55.3 billion. The balance growth primarily reflects the December acquisition of Flagstar and the March Signature Transaction.

•Interest expense on borrowed funds increased $281 million or 133.18 percent to $492 million driven by a 168 basis point increase in rates in addition to a $3.3 billion or 21.8 percent increase in the average balance to $18.7 billion primarily driven by the December acquisition of Flagstar.

Net Interest Margin

The following table sets forth certain information regarding our average balance sheet for the periods indicated, including the average yields on our interest-earning assets and the average costs of our interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average balance of interest-earning assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances

for the periods 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.


	Three Months Ended,
	September 30, 2023						June 30, 2023
(dollars in millions)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
ASSETS:
Interest-earning assets:
Mortgage and other loans and leases , net (1)	$	85,691	$	1,251	5.82	%	$	83,810	$	1,161	5.55	%
Securities (2) (3)	10,317		111		4.30	%	9,781		102		4.18	%
Reverse repurchase agreements	299		5		6.11	%	429		6		5.85	%
Interest-earning cash and cash equivalents	10,788		145		5.31	%	18,279		229		5.03	%
Total interest-earning assets	$	107,095	$	1,512	5.62	%	$	112,299	$	1,498	5.34	%
Non-interest-earning assets	7,179						8,974
Total assets	$	114,274					$	121,273
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing deposits:
Interest-bearing checking and money market accounts	$	31,321	$	268	3.40	%	$	30,647	$	232	3.05	%
Savings accounts	9,628		43		1.76	%	10,015		40		1.61	%
Certificates of deposit	17,545		180		4.06	%	18,587		169		3.61	%
Total interest-bearing deposits	$	58,494	$	491	3.33	%	$	59,249	$	441	2.98	%
Short term borrowed funds	5,632		62		4.38	%	6,807		75		4.46	%
Other borrowed funds	9,964		77		3.04	%	11,393		82		2.88	%
Total Borrowed funds	$	15,596	$	139	3.53	%	$	18,200	$	157	3.47	%
Total interest-bearing liabilities	$	74,090	$	630	3.37	%	$	77,449	$	598	3.10	%
Non-interest-bearing deposits	25,703						24,613
Other liabilities	3,286						8,321
Total liabilities	$	103,079					$	110,383
Stockholders’ equity	11,195						10,890
Total liabilities and stockholders’ equity	$	114,274					$	121,273
Net interest income/interest rate spread			$	882	2.25	%			$	900	2.24	%
Net interest margin					3.27	%					3.21	%
Ratio of interest-earning assets to interest-bearing liabilities					1.45	x					1.45	x

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

(2)Amounts are at amortized cost.

(3)Includes FHLB stock and FRB stock.


	Nine Months Ended,
	September 30, 2023						September 30, 2022
(dollars in millions)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
ASSETS:
Interest-earning assets:
Mortgage and other loans and leases , net (1)	$	80,569	$	3,279	5.43	%	$	47,158	$	1,259	3.56	%
Securities (2) (3)	10,314		318		4.11	%	6,864		125		2.43	%
Reverse repurchase agreements	503		21		5.74	%	388		7		2.35	%
Interest-earning cash and cash equivalents	11,127		426		5.11	%	2,326		20		1.12	%
Total interest-earning assets	$	102,513	$	4,044	5.27	%	$	56,736	$	1,411	3.32	%
Non-interest-earning assets	7,582						4,993
Total assets	$	110,095					$	61,729
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing deposits:
Interest-bearing checking and money market accounts	$	28,385	$	657	3.09	%	$	16,915	$	104	0.82	%
Savings accounts	10,240		122		1.60	%	9,245		33		0.49	%
Certificates of deposit	16,627		436		3.50	%	8,197		46		0.75	%
Total interest-bearing deposits	$	55,252	$	1,215	2.94	%	$	34,357	$	183	0.71	%
Short term borrowed funds	7,146		241		4.50	%	1,925		17		1.16	%
Other borrowed funds	11,537		251		2.91	%	13,419		194		1.93	%
Total Borrowed funds	$	18,683	$	492	3.52	%	$	15,344	$	211	1.84	%
Total interest-bearing liabilities	$	73,935	$	1,707	3.09	%	$	49,701	$	394	1.06	%
Non-interest-bearing deposits	21,214						4,332
Other liabilities	4,518						750
Total liabilities	$	99,667					$	54,783
Stockholders’ equity	10,428						6,946
Total liabilities and stockholders’ equity	$	110,095					$	61,729
Net interest income/interest rate spread			$	2,337	2.18	%			$	1,017	2.26	%
Net interest margin					3.05	%					2.39	%
Ratio of interest-earning assets to interest-bearing liabilities					1.39	x					1.14	x

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

(2)Amounts are at amortized cost.

(3)Includes FHLB stock and FRB stock.

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) the changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) the changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.


	Three Months Ended,						Nine Months Ended,
	September 30, 2023 compared to June 30, 2023 Increase/(Decrease) Due to:						September 30, 2023 compared to September 30, 2022 Increase/(Decrease) Due to:
(in millions)	Volume		Rate		Net		Volume		Rate		Net
INTEREST-EARNING ASSETS:
Mortgage and other loans and leases, net	$	27	$	63	$	90	$	1,361	$	659	$	2,020
Securities	$	6	$	3	$	9	$	106	$	87	$	193
Reverse repurchase agreements	$	(2)	$	1	$	(1)	$	5	$	9	$	14
Interest Earning Cash & Cash Equivalent	$	(99)	$	15	$	(84)	$	337	$	69	$	406
Total interest-earnings assets	$	(68)	$	82	$	14	$	1,809	$	824	$	2,633
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and money market accounts	$	6	$	30	$	36	$	266	$	287	$	553
Savings accounts	$	(2)	$	5	$	3	$	12	$	77	$	89
Certificates of deposit	$	(11)	$	22	$	11	$	221	$	169	$	390
Short Term Borrowed Funds	$	(10)	$	(3)	$	(13)	$	176	$	48	$	224
Other Borrowed Funds	$	(16)	$	11	$	(5)	$	(41)	$	98	$	57
Total interest-bearing liabilities	$	(33)	$	65	$	32	$	634	$	679	$	1,313
Change in net interest income	$	(35)	$	17	$	(18)	$	1,175	$	145	$	1,320

Comparison to Prior Quarter

The Company's net interest margin for the three months ended September 30, 2023, was 3.27 percent, up six basis points compared to the three months ended June 30, 2023. The increase was driven by both a higher level of average earnings assets due to the Signature Transaction, along with higher yields on those assets.

Average loan balances increased $1.9 billion, or 2%, to $85.7 billion compared to the previous quarter, while the loan yield increased 27 basis points on a quarter-over-quarter basis to 5.82%. Average cash balances decreased to $10.8 billion during the third quarter compared to $18.3 billion during the second quarter, while the average yield rose 28 basis points to 5.31% from 5.03%.

Average interest-bearing liabilities decreased $3.4 billion, or 4%, to $74.1 billion on a quarter-over-quarter basis with the average cost increasing 27 basis points to 3.37% compared to 3.10%. Average interest-bearing deposits decreased $755 million, or 1%, to $58.5 billion, while the average cost rose 35 basis points to 3.33%. Average borrowed funds declined $2.6 billion, or 14%, to $15.6 billion, while the average cost of borrowed funds increased six basis points to 3.53%. Average non-interest-bearing deposit balances rose $1.1 billion, or 4%, to $25.7 billion compared to the previous quarter.

Comparison to Prior Year to Date

For the nine months ended September 30, 2023, the net interest margin was 3 percent, up 66 basis points compared to the nine months ended September 30, 2022. The year-over-year increase was primarily the result of a larger balance sheet driven by both the Flagstar acquisition and the Signature Transaction, and due to organic loan growth, along with the impact of higher interest rates. Average interest-earning assets increased $45.8 billion, or 81 percent, on a year-over-year basis to $102.5 billion for the nine months ended September 30, 2023, while the average yield rose 195 basis points to 5.27 percent.

Average loan balances rose $33.4 billion, or 71 percent, to $80.6 billion while the average loan yield rose 187 basis points to 5.43 percent on a year-over-year basis. Average cash balances increased $8.8 billion to $11.1 billion, while the average yield rose to 5.11 percent from 1.12 percent. Average securities increased $3.5 billion, or 50 percent, to $10.3 billion, while the average yield improved to 4.11 percent from 2.43 percent.

Average interest-bearing liabilities increased $24.2 billion, or 49 percent, to $73.9 billion while the average cost increased to 3.09 percent from 1.06 percent. Average interest-bearing deposits rose $20.9 billion, or 61 percent, while the average cost of deposits increased to 2.94 percent compared to 0.71 percent. Average borrowed funds increased $3.3 billion to $18.7 billion while the average cost rose to 3.52 percent from 1.84 percent. Average non-interest-bearing deposits rose $16.9 billion to $21.2 billion.

Provision for Credit Losses

Comparison to Prior Quarter

The three months ended September 30, 2023 the provision for credit losses totaled $62 million compared to a $49 million provision for the three months ended June 30, 2023.

During the third quarter 2023, we incorporated the commercial loans and unfunded commitments acquired in the Signature Transaction in the Company's allowance for credit loss models which resulted in a net provision benefit of $13 million.The $75 million provision on the remainder of the portfolio was driven by increases to our estimated loan loss and unfunded commitment reserves as a result of changes in the macroeconomic environment, specifically the inflationary pressures leading to sharp increases in interest rates and a slow-down of prepayment activity leading to longer weighted average lives on the balance sheet. In addition, the increase reflects unfavorable market conditions in the CRE portfolio (primarily office). During the quarter we had net charge-offs totaling $24 million.

The second quarter 2023 provision of $49 million included increases of $13 million related to specific reserves for new non-accrual loans and the remainder was driven by changes in the macroeconomic forecast.

Comparison to Prior Year to Date

The nine months ended September 30, 2023 provision for credit losses was $281 million compared to $9 million for the nine months ended September 30, 2022. The 2023 provision includes a $132 million initial provision for credit losses related to the initial ACL measurement of non-PCD acquired loans from the Signature Transaction and a $20 million provision for credit losses on legacy Signature Bank debt securities held by the Company prior to the transaction. The remaining $129 million was driven by increases to our estimated loan loss and unfunded commitment reserves as a result of changes in the macroeconomic environment discussed above. During the nine months ended September 30, 2023, we had net charge-offs totaling $23 million.

For additional information about our methodologies for recording recoveries of, and provisions for, credit losses, please refer to Critical Accounting Policies in our Form 10-K for the year ended December 31, 2022, which is available on our website, under the Investor Relations section, or on the website of the Securities and Exchange Commission, at sec.gov.

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); net return on our MSR asset; net gain on loan sales and securitizations, net loan administration income (including loan subservicing income); income from our investment in BOLI; and “other” sources, including the revenues produced through the sale of third-party investment products.

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


	Three Months Ended,				Nine Months Ended,
(in millions)	September 30, 2023		June 30, 2023		September 30, 2023		September 30, 2022
Bargain purchase gain	$	—	$	141	$	2,142	$	—
Fee income	58		48		133		17
Net return on mortgage servicing rights	23		25		70		—
Net gain on loan sales and securitizations	28		25		73		—
Other	21		14		46		10
Bank-owned life insurance	11		11		32		24
Net loan administration income	19		39		65		—
Net (loss) gain on securities	—		$	(1)	(1)		(2)
Total non-interest income	$	160	$	302	$	2,560	$	49

Comparison to Prior Quarter

For the three months ended September 30, 2023, non-interest income totaled $160 million as compared to $302 million in the second quarter, primarily due by the following:

•There was no income impact related to the bargain gain as compared to $141 million in recorded in the second quarter related to the Signature Transaction.

•Net loan administration income totaled $19 million for the three months ended September 30, 2023 compared to $39 million for the three months ended June 30, 2023 driven by a reduction in subservicing income related to a decrease in loans being serviced for the FDIC related to the Signature Transaction.

•The net return on mortgage servicing rights was $23 million or 8.0 percent for the third quarter compared to $25 million or 9.7 percent for the second quarter.

•Third quarter 2023 non-interest income includes a gain on loan sales of $28 million compared to $25 million during the second quarter, with a gain on sale margin of 59 basis points compared to 51 basis points last quarter.

Comparison to Prior Year to Date

Non-interest income increased $2.5 billion for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to the bargain purchase gain of $2.1 billion related to the Signature Transaction. Increases in non-interest income were also driven by the inclusion of the Flagstar acquisition and Signature Transaction including $116 million increase in fee income, net return on mortgage servicing rights of $70 million, gain on loan sales of $73 million and loan administration income of $65 million.

Non-Interest Expense

Comparison to Prior Quarter

For the three months ended September 30, 2023, non-interest expenses totaled $712 million, up $51 million, or 8 percent compared to the three months ended June 30, 2023.

Total operating expenses for the three months ended September 30, 2023 were $585 million, up $70 million compared to $515 million for the second quarter 2023. The increase was primarily driven by higher compensation and benefits due to the impact of recently added private banking teams and revenue-driven performance.

Comparison to Prior Year to Date

Non-interest expense increased $1.4 billion for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Total operating expenses for the nine months ended September 30, 2023 were up $1.1 billion compared to the nine months ended September 30, 2022. Both increases were primarily due the inclusion of Flagstar and Signature activity.

Income Tax Expense

Comparison to Prior Quarter

For the three months ended September 30, 2023, the Company reported a provision for income taxes of $61 million compared to $79 million for the three months ended June 30, 2023. Income tax expense for both the current quarter and for the second quarter 2023 was impacted by the Signature Transaction and Flagstar acquisition. The effective tax rate was 22.7 percent for the third quarter 2023.

Comparison to Prior Year to Date

For the nine months ended September 30, 2023, the Company reported a provision for income taxes of $141 million, compared to $164 million for the nine months ended September 30, 2022. Income tax expense for the current year was impacted by the Signature Transaction and Flagstar acquisition.

FINANCIAL CONDITION

Balance Sheet Summary

Total assets increased $21.1 billion to $111.2 billion as of September 30, 2023, compared to $90.1 billion at December 31, 2022 due to the Signature Transaction, which closed on March 20, 2023, and organic loan growth.

The Company acquired approximately $12 billion of loans, net of purchase accounting adjustments ("PAA"), $34 billion of deposits, net of PAA, and $2 billion of other liabilities related to the Signature Transaction.

Total loans and leases held for investment were $84.0 billion at September 30, 2023 compared to $69.0 billion at December 31, 2022. The increase was driven by the aforementioned loans acquired from the Signature Transaction and organic loan growth.

The securities portfolio totaled $8.7 billion at September 30, 2023, compared to $9.1 billion at December 31, 2022. As of September 30, 2023, the Company has no held-to-maturity securities portfolio and all of the Company’s securities were designated as “Available-for-Sale”, unchanged from December 31, 2022.

Total deposits grew $24.0 billion, or 41 percent to $82.7 billion at September 30, 2023 compared to $58.7 billion at December 31, 2022 primarily driven by the deposits assumed in the Signature Transaction. Included in the September 30, 2023 balance are $2.0 billion in non-interest-bearing custodial deposits related to the Signature Transaction.

Wholesale borrowings at September 30, 2023 were $13.6 billion compared to $20.3 billion at December 31, 2022, reflecting the use of some of the cash acquired from the Signature Transaction to reduce the level of FHLB-NY borrowings.

Loans held-for-investment

The following table summarizes the composition of our loan portfolio:


	September 30, 2023				December 31, 2022
(dollars in millions)	Amount		Percent of Loans Held for Investment		Amount		Percent of Loans Held for Investment
Mortgage Loans:
Multi-family	$	37,698	44.9	%	$	38,130	55.3	%
Commercial real estate	10,486		12.5	%	8,526		12.4	%
One-to-four family first mortgage	5,882		7.0	%	5,821		8.4	%
Acquisition, development, and construction	2,910		3.5	%	1,996		2.9	%
Total mortgage loans	$	56,976	67.8	%	$	54,473	78.9	%
Other Loans:
Commercial and industrial	$	24,423	29.1	%	$	12,276	17.8	%
Other loans	2,596		3.1	%	2,252		3.3	%
Total other loans held for investment	$	27,019	32.2	%	$	14,528	21.1	%
Total loans and leases held for investment	$	83,995	100.0	%	$	69,001	100.0	%
Allowance for credit losses on loans and leases	(619)				(393)
Total loans and leases held for investment, net	$	83,376			$	68,608
Loans held for sale	1,926				1,115
Total loans and leases, net	$	85,302			$	69,723

The following table summarizes our production of loans held for investment:


	Three Months Ended,				Nine Months Ended,
	September 30, 2023		June 30, 2023		September 30, 2023		September 30, 2022
(dollars in millions)	Amount		Amount		Amount		Amount
Mortgage Loan Originated for Investment:
Multi-family	$	204	$	217	$	761	$	7,065
Commercial real estate	280		278		867		737
One-to-four family first mortgage	115		98		487		157
Acquisition, development, and construction	495		593		1,273		83
Total mortgage loans originated for investment	$	1,094	$	1,186	$	3,388	$	8,042
Other Loans Originated for Investment:
Specialty finance	$	2,228	$	1,905	$	5,468	$	4,075
Commercial and industrial	1,192		1,581		3,270		433
Other	406		312		1,056		5
Total other loans originated for investment	$	3,826	$	3,797	$	9,793	$	4,513
Total loans originated for investment	$	4,920	$	4,983	$	13,181	$	12,555

Multi-Family Loans

The multi-family loans we produce are primarily secured by non-luxury residential apartment buildings in New York City that feature rent-regulated units and below-market rents.

The multi-family loan portfolio was $37.7 billion at September 30, 2023, down slightly compared to $38.1 billion at December 31, 2022 due to a combination of higher interest rates and our loan diversification strategy.

The majority of our multi-family loans were secured by rental apartment buildings.

At September 30, 2023, $21.5 billion or 57 percent of the Company’s total multi-family loan portfolio is secured by properties in New York State, many of which are, subject to rent regulation laws. The weighted average LTV of the New York State rent regulated multi-family portfolio was 59 percent as of September 30, 2023 as compared to 61 percent at December 31, 2022.

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

While a 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 indexed to CME Term SOFR or Prime, plus a spread. Alternately, the borrower may opt for a fixed rate that is tied to the five-year fixed advance rate of the FHLB-NY, plus a spread. The fixed-rate option also requires the payment of one percentage point of the then-outstanding loan balance. In either case, the minimum rate at repricing is equivalent to the rate in the initial five-or seven-year term. As the rent roll increases, the typical property owner seeks to refinance the mortgage, and generally does so before the loan reprices in year six or eight.

Multi-family loans that refinance within the first five or seven years are typically subject to an established prepayment penalty schedule. Depending on the remaining term of the loan at the time of prepayment, the penalties normally range from five percentage points to one percentage point of the then-current loan balance. If a loan extends past the fifth or seventh year and the borrower selects the fixed-rate option, the prepayment penalties typically reset to a range of five points to one point over years six through ten or eight through twelve. For example, a ten-year multi-family loan that prepays in year three would generally be expected to pay a prepayment penalty equal to three percentage points of the remaining principal balance. A twelve-year multi-family loan that prepays in year one or two would generally be expected to pay a penalty equal to five percentage points.

Because prepayment penalties assessed to the borrower 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 recorded when the 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 and generational direct relationships, who are familiar with our lending practices, our underwriting standards, and our long-standing practice of basing our loans on the cash flows produced by the properties. The process of producing such loans is generally four to six weeks in duration.

We believe our underwriting quality of multi-family lending is distinctive. This reflects the nature of the buildings securing our loans, our underwriting process and standards, and the generally conservative LTV ratios our multi-family loans feature at origination. Historically, a relatively small percentage of the multi-family loans that have transitioned to non-performing status have resulted in actual 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. 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 percent 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 percent of the lower of the appraised value or the sales price of the underlying property, and typically feature an amortization period of 30 years. In addition, our multi-family loans may contain an initial interest-only period which typically does not exceed two years; however, these loans are underwritten on a fully amortizing basis. Exceptions to these levels are

made to borrowers on a case by case basis and approved by the joint authority of credit and lending officers and when necessary, the Board Credit Committee of the Board.

We continue to monitor our loans held for investment portfolio and the related allowance for credit losses, particularly given the economic pressures facing the commercial real estate and multi-family markets. 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 historically 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 generally exclude any short-term property tax exemptions and abatement benefits the property owners receive when we underwrite our multi-family loans.

The following table presents a geographical analysis of the multi-family loans in our held-for-investment loan portfolio:


	At September 30, 2023
	Multi-Family Loans
(dollars in millions)	Amount		Percent of Total
New York City:
Manhattan	$	6,960	19	%
Brooklyn	6,199		16	%
Bronx	3,645		10	%
Queens	2,834		8	%
Staten Island	134		—	%
Total New York City	$	19,772	53	%
New Jersey	5,092		14	%
Long Island	511		1	%
Total Metro New York	$	25,375	68	%
Other New York State	1,242		3	%
Pennsylvania	3,729		10	%
Florida	1,690		4	%
Ohio	1,015		3	%
Arizona	435		1	%
All other states	4,212		11	%
Total	$	37,698	100	%

Commercial Real Estate

At September 30, 2023, CRE loans represented $10.5 billion, or 12.5 percent, of total loans held for investment, reflecting a $2.0 billion increase when compared to $8.5 billion at December 31, 2022. Approximately $1.9 billion of CRE loans were acquired in the Signature Transaction.

CRE loans represented $280 million, or 5.7 percent, of the loans we originated in the third quarter 2023 as compared to $278 million, or 5.6 percent in the second quarter 2023.

The CRE loans we produce are secured by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties. At September 30, 2023, the largest concentration of CRE loans were secured by properties in the metro New York City area. Refer to the Geographical Analysis table included below for additional details.

Approximately $3.4 billion of the CRE portfolio are office properties with an average balance of approximately $10 million and located primarily in the New York metro area.

The terms of more than half of our CRE loans are similar to the terms of our multi-family credits which primarily feature a fixed rate of interest for the first five years of the loan that is generally based on intermediate-term interest rates plus a spread. In addition to customary fixed rate terms, we now also offer floating rates advances indexed to CME Term SOFR. These products are generally offered in combination with interest rate cap or swaps that provide borrowers with additional optionality to manage their interest rate risk. Following the initial fixed rate period, the loan resets to an adjustable interest rate that is indexed to CME Term SOFR or Prime, plus a spread. Alternately, the borrower may opt for a fixed rate that is tied to the five-year fixed advance rate of the FHLB-NY plus a spread. The fixed-rate option also requires the payment of an amount equal to one percentage point of the then-outstanding loan balance. In either case, the minimum rate at repricing is equivalent to the rate in the initial five- or seven-year term.

Prepayment penalties apply to certain of our CRE loans, as they do our multi-family credits. Depending on the remaining term of the loan at the time of prepayment, the penalties normally range from five percentage points to one percentage point of the then-current loan balance. If a loan extends past the fifth or seventh year and the borrower selects the fixed rate option, the prepayment penalties typically reset to a range of five points to one point over years six through ten or eight through twelve.

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 percent and a maximum LTV of 65 percent. 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.

The following table presents a geographical analysis of the CRE loans in our held-for-investment loan portfolio:


	At September 30, 2023
	Commercial Real Estate Loans
(dollars in millions)	Amount		Percent of Total
New York	$	5,413	52	%
Michigan	990		9	%
New Jersey	589		6	%
Florida	415		4	%
Texas	103		1	%
Pennsylvania	376		3	%
Ohio	119		1	%
All other states	2,481		24	%
Total	$	10,486	100	%

Acquisition, Development, and Construction Loans

At September 30, 2023, our ADC loans represented $2.9 billion, or 3.5 percent, of total loans held for investment, reflecting an increase of $914 million compared to December 31, 2022.

Because ADC loans are generally considered to have a higher degree of credit risk, especially during a downturn in the credit cycle, borrowers are required to provide a guarantee of repayment and completion. The risk of loss on an ADC loan is largely dependent upon the accuracy of the initial appraisal of the property’s value upon completion of construction; the developer’s experience; the estimated cost of construction, including interest; and the estimated time to complete and/or sell or lease such property.

When applicable, as a condition to closing an ADC loan, it is our practice to require that properties meet pre-sale or pre-lease requirements prior to funding.

C&I Loans

At September 30, 2023 C&I loans totaled $24.4 billion or 29.1 percent of total loans held-for-investment. Included in this portfolio is $5.6 billion in warehouse loans that allow mortgage lenders to fund the closing of residential mortgage loans.

The non-warehouse C&I loans we produce are primarily made to small and mid-size businesses and finance companies. 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.

Also included in our C&I portfolio is our national warehouse lending platform with relationship managers across the country. We offer warehouse lines of credit to other mortgage lenders which allow the lender to fund the closing of residential mortgage loans. Each extension, advance, or draw-down on the line is fully collateralized by residential mortgage loans and is paid off when the lender sells the loan to an outside investor or, in some instances, to the Bank.

Underlying mortgage loans are predominantly originated using the agencies' underwriting standards. The guideline for debt to tangible net worth is 15 to 1. At September 30, 2023, we had $5.6 billion outstanding warehouse loans to other mortgage lenders and have relationships in place to lend up to $11.6 billion at our discretion.

The interest rates on our C&I loans can be fixed or floating, with floating-rate loans being tied to SOFR, 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 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.

Specialty Finance

At September 30, 2023, specialty finance loans and leases totaled $5.2 billion or 6 percent of total loans held for investment, up $753 million or 17 percent compared to December 31, 2022.

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. As of September 30, 2023, 82 percent of specialty finance loan commitments are structured as floating rate obligations which will benefit in a rising rate environment.

In the third quarter of 2023, the Company originated $2.2 billion of specialty finance loans and leases, representing 45 percent of total originations compared to $1.6 billion for the same period in 2022, representing 41 percent of total originations.

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.

One-to-Four Family Loans

At September 30, 2023, one-to-four family loans represented $5.9 billion, including $925 million of LGG, or 7 percent, of total loans held for investment. As of September 30, 2023, the repurchase liability on LGG loans was $362 million. As of December 31, 2022 one-to-four family loans totaled $5.8 billion. These loans include various types of conforming and non-conforming fixed and adjustable rate loans underwritten using Fannie Mae and Freddie Mac guidelines for the purpose of purchasing or refinancing owner occupied and second home properties. We typically hold certain mortgage loans in LHFI that do not qualify for sale to the Agencies and that have an acceptable yield and risk profile. The LTV requirements on our residential first mortgage loans vary depending on occupancy, property type, loan amount, and FICO scores. Loans with LTVs exceeding 80 percent are required to obtain mortgage insurance. As of September 30, 2023, non-government guaranteed loans in this portfolio had an average current FICO score of 741 and an average LTV of 53.

Substantially all LGG are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs. Nonperforming repurchased loans in this portfolio earn interest at a rate based upon the 10-year U.S. Treasury note rate from the time the underlying loan becomes 60 days delinquent until the loan is conveyed to HUD (if foreclosure timelines are met), which is not paid by the FHA until claimed. The Bank has a unilateral option to repurchase loans sold to GNMA if the loan is due, but unpaid, for three consecutive months (typically referred to as 90 days past due) and can recover losses through a claims process from the guarantor. These loans are recorded in loans held for investment and the liability to repurchase the loans is recorded in other liabilities on the Consolidated Statements of Condition. Certain loans within our portfolio may be subject to indemnifications and insurance limits which expose us to limited credit risk. We have reserved for these risks within other assets and as a component of our ACL on residential first mortgages.

Other Loans

At September 30, 2023, other loans totaled $2.6 billion and consisted primarily of home equity lines of credit, boat and recreational vehicle indirect lending, point of sale consumer loans and other consumer loans, including overdraft loans.

Our home equity portfolio includes HELOANs, second mortgage loans, and HELOCs. These loans are underwritten and priced in an effort to ensure credit quality and loan profitability. Our debt-to-income ratio on HELOANs and HELOCs is capped at 43 percent and 45 percent, respectively. We currently limit the maximum CLTV to 89.99 percent and FICO scores to a minimum of 700. Second mortgage loans and HELOANs are fixed rate loans and are available with terms up to 20 years. HELOC loans are primarily variable-rate loans that contain a 10-year interest only draw period followed by a 20-year amortizing period. As of September 30, 2023, loans in this portfolio had an average current FICO score of 750.

As of September 30, 2023, loans in our indirect portfolio had an average current FICO score of 745. Point of sale loans consist of unsecured consumer installment loans originated primarily for home improvement purposes through a third-party financial technology company who also provides us a level of credit loss protection.

Loans Held for Sale

Loans held-for-sale at September 30, 2023 totaled $1.9 billion, up from $1.1 billion at December 31, 2022. The Signature Transaction contributed $360 million of Small Business Administration ("SBA") loans to this increase. We classify loans as held for sale when we originate or purchase loans that we intend to sell. We have elected the fair value option for nearly all of this portfolio, except the SBA loans. We estimate the fair value of mortgage loans based on quoted market prices for securities backed by similar types of loans, where available, or by discounting estimated cash flows using observable inputs inclusive of interest rates, prepayment speeds and loss assumptions for similar collateral.

Lending Authority

We maintain credit limits in compliance with regulatory requirements. Under regulatory guidance, the Bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15 percent of Tier 1 plus Tier 2 capital and any portion of the ACL not included in Tier 2 capital. We have a tracking and reporting process to monitor lending concentration levels, and all new commercial real estate credit exposures to relationships that exceed $200 million and all other commercial credit exposures to relationships that exceed $100 million must be approved by the Board Credit Committee of the Board. Exceptions to these levels are made to borrowers on a case by case basis, with the approval of the Board Credit Committee of the Board. Relationships less than the aforementioned limits including those discussed throughout the loans held for investment section of this document, are approved by the joint authority of credit officers and lending officers. The Board Credit Committee has authority to direct changes in lending practices as they deem necessary or appropriate in order to address

individual or aggregate risks, including regulatory considerations, and credit exposures in accordance with the Bank’s strategic objectives and risk appetites.

At September 30, 2023 and December 31, 2022, the largest mortgage loan in our portfolio was a $329 million multi-family loan, which is collateralized by properties located in Brooklyn, New York. As of the date of this report, the loan has been current since origination.

Asset Quality

All asset quality information excludes LGG that are insured by U.S government agencies.

The following table presents the Company's asset quality measures at the respective dates:


	September 30, 2023		December 31, 2022
Non-performing loans to total loans held for investment	0.52	%	0.20	%
Non-performing assets to total assets	0.40		0.17
Allowance for credit losses on loans and leases to non-performing loans	142.79		278.87
Allowance for credit losses on loans and leases to total loans held for investment	0.74		0.57

Delinquent and non-performing loans held for investment and Repossessed Assets

The following table presents our loans, 30 to 89 days past due by loan type and the changes in the respective balances:


					September 30, 2023
					compared to
					December 31, 2022
(dollars in millions)	September 30, 2023		December 31, 2022		Amount		Percent
Loans 30 to 89 Days Past Due:
Multi-family	$	60	$	34	$	26	76	%
Commercial real estate	26		2		24		1200	%
One-to-four family first mortgage	19		21		(2)		(10)	%
Acquisition, development, and construction	1		—		1		NM
Commercial and industrial	43		2		41		2050	%
Other loans	20

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