NYCB 2017 Annual Report

70 and “other” sources, including the revenues produced through the sale of third -party investment products and those produced through our subsidiary, Peter B. Cannell & Co., Inc. (“PBC”), an investment advisory firm. Non-interest income increased $71.3 million year-over-year to $216.9 million in the twelve months ended December 31, 2017. The increase was primarily attributable to the following factors: • An $82.0 million gain on the sale of our covered loans and mortgage banking operations. • A $26.6 million increase in the net gain on sale of securities. This was due to the previously mentioned securities portfolio repositioning and subsequent sale of securities during the second quarter. • Mortgage banking income fell $7.9 million year-over-year to $19.3 million, as we exited this line of business in the third quarter of the year. • Other non-interest income increased to $44.5 million in the twelve months ended December 31, 2017 from $41.6 million in the twelve months ended December 31, 2016. • The net gain on sales of loans, primarily through participations, fell $14.7 million year-over-year to $1.2 million. Non-Interest Income Analysis The following table summarizes our sources of non-interest income in the twelve months ended December 31, 2017, 2016, and 2015: For the Years Ended December 31, (in thousands) 2017 2016 2015 Mortgage banking income $ 19,337 $ 27,281 $ 54,113 Fee income 31,759 32,665 34,058 BOLI income 27,133 31,015 27,541 Net gain on sales of loans 1,156 15,806 26,133 Net gain on sales of securities 29,924 3,347 4,054 FDIC indemnification expense (18,961) (6,155) (9,336) Gain on sale of covered loans and mortgage banking operations 82,026 -- -- Other income: Peter B. Cannell & Co., Inc. 22,026 22,537 26,771 Third-party investment product sales 12,771 11,658 13,292 Recovery of OTTI securities 1,120 1,214 242 Other 8,589 6,204 33,895 Total other income 44,506 41,613 74,200 Total non-interest income $216,880 $145,572 $210,763 Non-Interest Expense Non-interest expense has two primary components: operating expenses, which include compensation and benefits, occupancy and equipment, and general and administrative (“G&A”) expenses; and the amortization of the CDI stemming from certain of our business combinations. Non-interest expense totaled $641.4 million in the twelve months ended December 31, 2017, as compared to $651.6 million in the year-earlier twelve-month period. While non-interest expense declined year-over-year, operating expenses increased modestly to $641.2 million from $638.1 million in 2016. Compensation and benefits expense accounted for $9.5 million of the year-over-year increase, having grown to $361.0 million in 2017. The increase was driven by a combination of factors, including an increase in stock-based compensation expense, normal salary increases, and the addition of senior level staff in various departments. This was offset by a $6.9 million decline in G&A expense to $181.3 million, primarily reflecting a $3.8 million decrease in FDIC deposit insurance premiums to $57.3 million. Income Tax Expense Income tax expense includes federal, New York State, and New York City income taxes, as well as non-material income taxes from other jurisdictions where we operate our branches and/or conduct our mortgage banking business.

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