NYCB 2017 Annual Report

88 See Note 6, “Allowances for Loan Losses” for a further discussion of the allowances for losses on non -covered and covered loans. Goodwill In connection with the Company’s acquisitions, assets that are acquired and liabilities that are assumed are recorded at their estimated fair values. Goodwill represents the excess of the purchase price of acquisitions over the fair value of the identifiable net assets acquired, including other identified intangible assets. The determination of whether or not goodwill is impaired could require the Company to make significant judgments and could require the use of significant estimates and assumptions regarding estimated future cash flows. If the Company changes its strategy or if market conditions shift, judgments may change, which may result in adjustments to the recorded goodwill balance. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations. The Company tests goodwill for impairment at the reporting unit level. These impairment evaluations are performed by comparing the carrying value of the goodwill of a reporting unit to its estimated fair value. Goodwill is allocated to the reporting units based on the reporting unit expected to benefit from the business combination. Previously, the Company had identified two reporting units, which were also our segments: our Banking Operations reporting unit and the Residential Mortgage Banking reporting unit. On September 29, 2017, the Company sold the Residential Mortgage Banking reporting unit; accordingly, the Company has one remaining reporting unit. Goodwill is evaluated for impairment annually at December 31st, or more frequently if conditions exist that indicate that the carrying value may be impaired. ASC 350 provides for an optional qualitative assessment for testing goodwill for impairment that may allow companies to skip the annual two-step test described below. The qualitative assessment permits companies to assess whether it is more likely than not (i.e., a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying amount. If the Company concludes based on the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is required to perform the two-step test. If the Company concludes based on the qualitative assessment that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it has completed its goodwill impairment test and does not need to perform the two-step test. Under step one of the two-step test, the fair value of a reporting unit is compared with its carrying value (including goodwill). If the fair value of a reporting unit is less than its carrying value, an indication of goodwill impairment exists for that reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit’s goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. At December 31, 2017, the Company utilized a quantitative assessment to test goodwill for impairment and determined that the fair value of its single reporting unit exceeded its carrying value thereby concluding that goodwill was not impaired. Premises and Equipment, Net Premises, furniture, fixtures, and equipment are carried at cost, less the accumulated depreciation computed on a straight-line basis over the estimated useful lives of the respective assets (generally 20 years for premises and three to ten years for furniture, fixtures, and equipment). Leasehold improvements are carried at cost less the accumulated amortization computed on a straight-line basis over the shorter of the related lease term or the estimated useful life of the improvement. Depreciation and amortization are included in “Occupancy and equipment expense” in the Consolidated Statements of Operations and Comprehensive Income (Loss), and amounted to $32.8 million, $32.8 million, and $31.5 million, respectively, in the years ended December 31, 2017, 2016, and 2015. Bank-Owned Life Insurance The Company has purchased life insurance policies on certain employees. These bank-owned life insurance (“BOLI”) policies are recorded in the Consolidated Statements of Condition at th eir cash surrender value. Income from these policies and changes in the cash surrender value are recorded in “Non - interest income” in the Consolidated Statements of Operations and Comprehensive Income (Loss). At December 31, 2017 and 2016, the Company’s investment in BOLI was $967.2 million and $949.0 million, respectively. There were no additional purchases of BOLI