NOTE 8: BORROWED FUNDS

The following table summarizes the Company’s borrowed funds at December 31, 2017 and 2016:


	December 31,
(in thousands)	2017		2016
Wholesale borrowings:
FHLB advances	$	12,104,500	$	11,664,500
Repurchase agreements		450,000		1,500,000
Federal funds purchased		—		150,000

Total wholesale borrowings	$	12,554,500	$	13,314,500
Junior subordinated debentures		359,179		358,879

Total borrowed funds	$	12,913,679	$	13,673,379

Accrued interest on borrowed funds is included in “Other liabilities” in the Consolidated Statements of Condition and amounted to $19.3 million and $18.1 million, respectively, at December 31, 2017 and 2016.

FHLB Advances

The following table presents an analysis of the contractual maturities of the Company’s outstanding FHLB advances at December 31, 2017, none of which had callable features.


	Contractual Maturity
(dollars in thousands) Year of Maturity	Amount		Weighted Average Interest Rate
2018	$	3,923,500		1.51
2019		4,431,000		1.74
2020		3,150,000		2.09
2021		600,000		2.21

Total FHLB advances	$	12,104,500		1.78	%

The Company had no short-term FHLB advances at December 31, 2017. At December 31, 2016, short-term advances totaled $300.0 million with a weighted average interest rate of 0.81%. During the twelve months ended at December 31, 2017 and 2016, the average balances of short-term FHLB advances were $3.3 million and $929.4 billion, with weighted average interest rates of 0.82% and 0.60%, respectively. In 2017 and 2016, the interest expense generated by average short-term FHLB advances was $27,000 and $5.5 million, respectively. During 2015, the average balance of short-term advances was $2.3 billion with a weighted average interest rate of 0.42%, generating interest expense of $9.8 million.

At December 31, 2017 and 2016, respectively, the Banks had combined unused lines of available credit with the FHLB-NY of up to $7.1 billion and $7.5 billion. There were no overnight FHLB-NY advances at December 31, 2017. At December 31, 2016, the Banks had $10.0 million outstanding FHLB-NY advances with a weighted average interest rate of 0.78%. During the twelve months ended December 31, 2016, the average balance of overnight advances amounted to $426.5 million with a weighted average interest rate of 0.59%, generating interest expense of $2.5 million. During 2015, the average balance of overnight advances was $572.7 million with a weighted average interest rate of 0.44%. The interest expense generated by average overnight advances was $2.5 million in 2015.

Total FHLB advances generated interest expense of $186.0 million, $172.0 million, and $230.6 million, in the years ended December 31, 2017, 2016, and 2015, respectively.

Repurchase Agreements

The following table presents an analysis of the contractual maturities of the Company’s outstanding repurchase agreements accounted for as secured borrowings at December 31, 2017. None of these repurchase agreements had callable features.


	Contractual Maturity
(dollars in thousands) Year of Maturity	Amount		Weighted Average Interest Rate
2018	$	250,000		3.04
2019		200,000		1.69

Total	$	450,000		2.44	%

The following table provides the contractual maturity and weighted average interest rate of repurchase agreements, and the amortized cost and fair value (including accrued interest) of the securities collateralizing the repurchase agreements, at December 31, 2017:


						Mortgage-Related and Other Securities				GSE Debentures and U.S. Treasury Obligations
(dollars in thousands) Contractual Maturity	Amount		Weighted Average Interest Rate			Amortized Cost		Fair Value		Amortized Cost		Fair Value
Greater than 90 days	$	450,000		2.44	%	$	216,076	$	217,383	$	248,065	$	249,489

The Company had no short-term repurchase agreements outstanding at December 31, 2017 or 2016. During the year ended December 31, 2015, the Company had average short-term repurchase agreements outstanding of $197.3 million with a weighted average interest rate of 0.31%, generating interest expense of $614,000.

At December 31, 2017 and 2016, the accrued interest on repurchase agreements amounted to $760,000 and $1.2 million, respectively. The interest expense on repurchase agreements was $16.4 million, $23.3 million, and $99.9 million, in the years ended December 31, 2017, 2016, and 2015, respectively.

Federal Funds Purchased

There were no federal funds purchased outstanding at December 31, 2017. At December 31, 2016, the balance of federal funds purchased was $150.0 million with a weighted average interest rate of 0.75%.

In 2017 and 2016, respectively, the average balances of federal funds purchased were to $47.9 million and $525.4 million, with weighted average interest rates of 0.87% and 0.51%. In 2015, the average balance of federal funds purchased amounted to $588.8 million with a weighted average interest rate of 0.26%. The interest expense produced by federal funds purchased was $418,000, $2.7 million, and $1.5 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Junior Subordinated Debentures

At December 31, 2017 and 2016, the Company had $359.2 million and $358.9 million, respectively, of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by statutory business trusts (the “Trusts”) that issued guaranteed capital securities.

The Trusts are accounted for as unconsolidated subsidiaries, in accordance with GAAP. The proceeds of each issuance were invested in a series of junior subordinated debentures of the Company and the underlying assets of each statutory business trust are the relevant debentures. The Company has fully and unconditionally guaranteed the obligations under each trust’s capital securities to the extent set forth in a guarantee by the Company to each trust. The Trusts’ capital securities are each subject to mandatory redemption, in whole or in part, upon repayment of the debentures at their stated maturity or earlier redemption.

The following junior subordinated debentures were outstanding at December 31, 2017:

Issuer

Interest
Rate
of Capital
Securities
and
Debentures

Junior
Subordinated
Debentures
Amount
Outstanding

Capital
Securities
Amount
Outstanding

Date of
Original Issue

Stated Maturity

First Optional
Redemption Date

(dollars in thousands)

New York Community Capital Trust V (BONUSES^SM Units)

6.000

$145,253

138,902

Nov. 4, 2002

Nov. 1, 2051

Nov. 4, 2007

⁽¹⁾

New York Community Capital Trust X

3.188

123,712

120,000

Dec. 14, 2006

Dec. 15, 2036

Dec. 15, 2011

⁽²⁾

PennFed Capital Trust III

4.838

30,928

30,000

June 2, 2003

June 15, 2033

June 15, 2008

⁽²⁾

New York Community Capital Trust XI

3.345

59,286

57,500

April 16, 2007

June 30, 2037

June 30, 2012

⁽²⁾

Total junior subordinated debentures

$359,179

346,402

(1)

Callable subject to certain conditions as described in the prospectus filed with the SEC on November 4, 2002.

(2)

Callable from this date forward.

The Bifurcated Option Note Unit SecuritiES^SM (“BONUSES units”) included in the preceding table were issued by the Company on November 4, 2002 at a public offering price of $50.00 per share. Each of the 5,500,000 BONUSES units offered consisted of a capital security issued by New York Community Capital Trust V, a trust formed by the Company, and a warrant to purchase 2.4953 shares of the common stock of the Company (for a total of approximately 13.7 million common shares) at an effective exercise price of $20.04 per share. Each capital security has a maturity of 49 years, with a coupon, or distribution rate, of 6.00% on the $50.00 per share liquidation amount. The warrants and capital securities were non-callable for five years from the date of issuance and were not called by the Company when the five-year period passed on November 4, 2007.

The gross proceeds of the BONUSES units totaled $275.0 million and were allocated between the capital security and the warrant comprising such units in proportion to their relative values at the time of issuance. The value assigned to the warrants, $92.4 million, was recorded as a component of additional “paid-in capital” in the Company’s Consolidated Statements of Condition. The value assigned to the capital security component was $182.6 million. The $92.4 million difference between the assigned value and the stated liquidation amount of the capital securities was treated as an original issue discount, and is being amortized to interest expense over the 49-year life of the capital securities on a level-yield basis. At December 31, 2017, this discount totaled $66.4 million.

The other three trust preferred securities noted in the preceding table were formed for the purpose of issuing Company Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trusts Holding Solely Junior Subordinated Debentures (collectively, the “Capital Securities”). Dividends on the Capital Securities are payable either quarterly or semi-annually and are deferrable, at the Company’s option, for up to five years. As of December 31, 2017, all dividends were current.

Interest expense on junior subordinated debentures was $19.6 million, $18.5 million, and $17.6 million, respectively, for the years ended December 31, 2017, 2016, and 2015.