NYCB 2017 Annual Report

36 We Maintained our Record of Exceptional Asset Quality Non-performing non-covered assets represented $90.1 million, or 0.18%, of total non-covered assets at the end of this December, and non-performing non-covered loans represented $73.7 million, or 0.19%, of total non-covered loans. While our level of non-performing assets was modestly higher than the year-earlier level, the increase stemmed from the transfer to non-accrual status of certain taxi medallion-related loans. The performance of our multi-family and CRE loans, which are our principal assets, continued to be exceptional over the course of the year. Also reflecting the quality of our assets was the level of net charge-offs we recorded in the twelve months ended December 31, 2017. Net charge-offs represented $61.2 million, or 0.16% of average loans, and largely consisted of taxi medallion-related loans. External Factors The following is a discussion of certain external factors that tend to influence our financial performance and the strategic actions we take. Interest Rates Among the external factors that tend to influence our performance, the interest rate environment is key. Just as short-term interest rates affect the cost of our deposits and that of the funds we borrow, market interest rates affect the yields on the loans we produce for investment and the securities in which we invest. As further discussed under “Loans Held for Investment” later on in this discussion, the interest rates on our multi-family loans and CRE credits generally are based on the five-year Constant Maturity Treasury Rate (the “CMT”). The following table summarizes the high, low, and average five- and ten-year CMT rates in 2017 and 2016: Constant Maturity Treasury Rates Five-Year Ten-Year 2017 2016 2017 2016 High 2.26% 2.10% 2.62% 2.60% Low 1.63 0.94 2.05 1.37 Average 1.91 1.33 2.33 1.84 Because the multi-family and CRE loans we produce generate income when they prepay (which is recorded as interest income), the impact of repayment activity can be especially meaningful. In 2017, prepayment income from loans contributed $47.0 million to interest income; in the prior year, the contribution was $60.9 million. Economic Indicators While we attribute our asset quality to the nature of the loans we produce and our conservative underwriting standards, the quality of our assets can also be impacted by economic conditions in our local markets and throughout the United States. The information that follows consists of recent economic data that we consider to be germane to our performance and the markets we serve. The following table presents the generally downward trend in unemployment rates, as reported by the U.S. Department of Labor, both nationally and in the various markets that comprise our footprint, for the months indicated: December 2017 2016 Unemployment rate: United States 3.9% 4.5% New York City 3.9 4.4 Arizona 4.6 4.7 Florida 3.7 4.7 New Jersey 4.1 4.2 New York 4.4 4.5 Ohio 4.5 4.8