NYCB 2017 Annual Report

39 • Changes in the value of the underlying collateral for collateral-dependent loans; • The existence and effect of any concentrations of credit, and changes in the level of such concentrations; • Changes in the experience, ability, and depth of lending management and other relevant staff; and • The effect of other external factors, such as competition and legal and regulatory requirements, on the level of estimated credit losses in the existing portfolio. By considering the factors discussed above, we determine an allowance for non-covered loan losses that is applied to each significant loan portfolio segment to determine the total allowance for losses on non-covered loans. The historical loss period we use to determine the allowance for loan losses on non-covered loans is a rolling 28-quarter look-back period, as we believe this produces an appropriate reflection of our historical loss experience. The process of establishing the allowance for losses on non-covered loans also involves: • Periodic inspections of the loan collateral by qualified in-house and external property appraisers/inspectors; • Regular meetings of executive management with the pertinent Board committee, during which observable trends in the local economy and/or the real estate market are discussed; • Assessment of the aforementioned factors by the pertinent members of the Boards of Directors and management when making a business judgment regarding the impact of anticipated changes on the future level of loan losses; and • Analysis of the portfolio in the aggregate, as well as on an individual loan basis, taking into consideration payment history, underwriting analyses, and internal risk ratings. In order to determine their overall adequacy, each of the respective non-covered loan loss allowances is reviewed quarterly by management and the Board of Directors of the Community Bank or the Commercial Bank, as applicable. We charge off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For non- real estate-related consumer credits, the following past-due time periods determine when charge-offs are typically recorded: (1) Closed-end credits are charged off in the quarter that the loan becomes 120 days past due; (2) Open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) Both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days past the date we received notification that the borrower has filed for bankruptcy. The level of future additions to the respective non-covered loan loss allowances is based on many factors, including certain factors that are beyond management’s control, such as changes in economic and local market conditions, including declines in real estate values, and increases in vacancy rates and unemployment. Management uses the best available information to recognize losses on loans or to make additions to the loan loss allowances; however, the Community Bank and/or the Commercial Bank may be required to take certain charge-offs and/or recognize further additions to their loan loss allowances, based on the judgment of regulatory agencies with regard to information provided to them during their examinations of the Banks. An allowance for unfunded commitments is maintained separate from the allowances for non-covered loan losses and is included in “Other liabilities” in the Consolidated Statements of Condition. See Note 6, “Allowances for Loan Losses” for a further discussion of our allowance for lo sses on covered loans, as well as additional information about our allowance for losses on non-covered loans. Goodwill Impairment We have significant intangible assets related to goodwill. In connection with our acquisitions, assets acquired and liabilities assumed are recorded at their estimated fair values. Goodwill represents the excess of the purchase price of our acquisitions over the fair value of identifiable net assets acquired, including other identified intangible assets. Our goodwill is evaluated for impairment annually as of year-end or more frequently if conditions exist that indicate that the value may be impaired. Our determination of whether or not goodwill is impaired requires us to make significant judgments and requires us to use significant estimates and assumptions regarding estimated future cash flows. If we change our strategy or if market conditions shift, our judgments may change, which may result in adjustments to the recorded goodwill balance.