NEW YORK COMMUNITY BANCORP, INC. REPORTS FOURTH QUARTER AND FULL-YEAR 2021 DILUTED EPS OF $0.30 AND $1.20 ON A GAAP BASIS, AND $0.31 AND $1.24 ON A NON-GAAP BASIS - Form 8-K

NEW YORK COMMUNITY BANCORP, INC. REPORTS FOURTH QUARTER AND FULL-YEAR 2021 DILUTED EPS OF $0.30 AND $1.20 ON A GAAP BASIS, AND $0.31 AND $1.24 ON A NON-GAAP BASIS

QUARTERLY RESULTS DRIVEN BY RECORD LOAN GROWTH, A STABLE NET INTEREST MARGIN, CONTINUED DEPOSIT GROWTH, ALONG WITH A SIGNIFICANT DECLINE IN DELINQUENCIES

BOARD OF DIRECTORS DECLARES A $0.17 DIVIDEND PER COMMON SHARE

HICKSVILLE, N.Y., Jan. 26, 2022 /PRNewswire/ --

New York Community Bancorp, Inc. (NYSE: NYCB) (the "Company") today reported net income for the three months ended December 31, 2021 of $150 million, down 21% compared to the $189 million we reported for the three months ended December 31, 2020. Last year's fourth quarter results include a $55 million tax benefit related to certain provisions of the CARES Act. Excluding this benefit, net income on a non-GAAP basis for last year's fourth quarter was $134 million, resulting in 16% year-over-year growth in the current fourth quarter.

Net income available to common stockholders for the fourth quarter of 2021 totaled $142 million compared to $181 million for the fourth quarter of 2020. Excluding the aforementioned tax benefit, net income available to common stockholders on a non-GAAP basis for the fourth quarter of 2020 was $126 million, resulting in 17% year-over-year growth.

Diluted EPS were $0.30 down 23% compared to $0.39 in the fourth quarter of last year. The current fourth quarter results included $7 million of merger-related charges while last year's quarter included the previously mentioned tax benefit. On a non-GAAP basis, diluted EPS available to common stockholders were $0.31 for the current fourth quarter, up 15% compared to $0.27 for the year-ago fourth quarter.

For the twelve months ended December 31, 2021, net income was $596 million, an increase of 17% compared to $511 million for the twelve months ended December 31, 2020, which includes a $68 million income tax benefit related to the CARES Act. Excluding the aforementioned tax benefit in full-year 2020 and $23 million in merger-related expenses in 2021, net income on a non-GAAP basis was $618 million, up 43% compared to full-year 2020. Net income available to common stockholders in full-year 2021 was $563 million, up 18% compared to full-year 2020. Excluding both the merger-related expenses and the CARES Act-related tax benefit, non-GAAP net income available to common stockholders was $585 million, up 43% compared to full-year 2020.

GAAP-basis diluted EPS in full-year 2021 were $1.20, up 18% compared to the $1.02 we reported in full-year 2020. Excluding the previously discussed items, full-year 2021 non-GAAP diluted EPS were $1.24, up 43% compared to non-GAAP diluted EPS of $0.87 in full-year 2020.

Commenting on the Company's performance, Chairman, President, and Chief Executive Officer, Thomas R. Cangemi stated: "We reported very strong fourth-quarter and full-year 2021 operating results and have solid momentum heading into 2022. Our fourth quarter results were highlighted by record quarterly loan growth, a stable net interest margin, continued deposit growth, along with strong asset quality trends.

"This was a record year for the Company. On a non-GAAP basis, we reported diluted EPS of $1.24 and net income available to common stockholders of $585 million. Our diluted EPS was the highest level since 2005, while net income available to common stockholders is the best we have ever reported in 27 years as a public company. On a year-over-year basis, pre-provision net revenue rose 28% excluding merger-related expenses, loans grew 7%, which was above our mid-single digit target, and core deposits increased 20%. Additionally, both measures of our net interest margin, with and without the impact of prepayment income, grew by double-digits and net interest income increased 17%, while operating expense rose a modest $7 million. Lastly, our asset quality continues to be strong and continues to rank among the best in the industry. During the fourth quarter, loans 30-89 days past due dropped $380 million or 85% on a linked-quarter basis, while deferred loans declined 48% to $479 million, also on a linked-quarter basis. For the full-year, we recorded a modest net recovery of $2 million.

"Earlier this week, we announced a commitment to our communities, especially underserved communities, in the form of a $28 billion, five-year pledge agreement. We believe that this important and substantial agreement will provide greater economic opportunities for low-to-moderate income communities and communities of color and help bridge the racial wealth gap.

"Given our full-year 2021 results, the underlying strength of our loan portfolio, and the emergence from COVID, the Board of Directors reinstated the Company's share repurchase program, which was temporarily suspended in 2020 due to the uncertainties surrounding the COVID outbreak. The Company has $17 million remaining under the existing authorization and will repurchase shares as market conditions warrant.

"Finally, I would like to thank all of our employees. Their hard work and dedication last year was unparalleled. Our strong results would not have been possible without their commitment to our Company, our customers, and our shareholders. They continue to be a key contributor to our ongoing success."

DIVIDEND DECLARATION

The Board of Directors declared a quarterly cash dividend of $0.17 per share on the Company's common stock. Based on a closing price of $12.19 as of January 25, 2022, this represents an annualized dividend yield of 5.6%. The dividend is payable on February 17, 2022 to common stockholders of record as of February 7, 2022.

BALANCE SHEET SUMMARY

At December 31, 2021, total assets were $59.5 billion, up $3.2 billion or 6% compared to December 31, 2020, and up $1.6 billion or 11% annualized compared to the third quarter of 2021. The growth in both periods was driven by strong loan growth funded primarily by deposit growth and a fourth quarter increase in the level of wholesale borrowings.

Total loans and leases held for investment of $45.7 billion represent a $2.9 billion or 7% increase compared to December 31, 2020 and a $2.1 billion or 19% annualized increase compared to September 30, 2021. Both the year-over-year and linked-quarter growth was in the multi-family and specialty finance portfolios, offset by modest declines in the commercial real estate ("CRE") portfolio.

Total deposits for the full year were $35.1 billion, up $2.6 billion or 8% compared to last year and rose $438 million or 5% annualized compared to the previous quarter. Core deposits (total deposits excluding CDs) increased to $26.6 billion at year-end 2021, up $4.5 billion or 20% compared to year-end 2020, and $738 million or 11% annualized compared to the third quarter of 2021.

Borrowed funds totaled $16.6 billion at year-end 2021, up $478 million or 3% compared to year-end 2020. Given the strong loan growth during the current fourth quarter, the Company utilized borrowings to fund some of this growth. Given this, borrowed funds during the quarter rose $1.1 billion, up 29% annualized compared to the third quarter of 2021.

Loans

At December 31, 2021, multi-family loans increased to $34.6 billion, up $2.4 billion or 7%, compared to December 31, 2020 with the majority of this increase occurring in the fourth quarter of 2021. Multi-family loans grew $1.8 billion or 21% annualized compared to the third quarter of 2021. This was driven by increased activity on the part of both existing and new borrowers prompted by the expectation of higher interest rates in 2022 due to recent Federal Reserve Board statements and the Company's ability to service and meet our borrowers' needs.

The specialty finance portfolio totaled $3.5 billion at December 31, 2021, up $451 million or 15% compared to December 31, 2020 and up $337 million or 43% annualize compared to September 30, 2021. The increase in specialty finance loans this quarter was the result of increased borrowers demand due to improved economic activity. As of year-end 2021, the specialty finance segment also had $5.6 billion in total commitments, up 16% compared to year-end 2020. Of the $5.6 billion in total commitments, 69% or $3.9 billion at year-end 2021 are structured as floating rate obligations.

The CRE loan portfolio ended the year at $6.7 billion, down $138 million or 2% compared to year-end 2020 and flat compared to the third quarter of 2021.

Originations

Loan originations were also very strong during the fourth quarter of 2021. For the three months ended December 31, 2021, loans and leases originated for investment totaled $4.6 billion, up 55% on a linked-quarter basis and up 18% on a year-over-year basis and far outpacing the third quarter pipeline of $1.9 billion. On a linked-quarter basis, multi-family originations increased 62% to $2.9 billion, while specialty finance originations rose 52% to $1.2 billion.

For the twelve months ended December 31, 2021, loans and leases originated for investment totaled $13.1 billion, up 2% compared to December 31, 2020. For the full year, multi-family originations were $8.3 billion, down 5% compared to last year, while specialty finance originations rose 17% to $3.2 billion.

Of the fourth quarter's $4.6 billion of originations, approximately 89% represented new money to the Bank.

Pipeline

The current pipeline heading into the first quarter of the year stands at $2.2 billion with approximately 61% of this amount representing new money. The current pipeline includes $1.7 billion of multi-family loans, $129 million of CRE loans, $251 million in specialty finance loans, and $42 million in commercial and industrial ("C&I") loans.

Asset Quality

Non-Performing Assets
Non-performing assets ("NPAs") at December 31, 2021 increased modestly compared to the balance at September 30, 2021. Total NPAs were $41 million, up $4 million or 11% compared to $37 million in the previous quarter and represented seven basis points of total assets compared to six basis points in the previous quarter. Total non-performing loans ("NPLs") at December 31, 2021 rose $5 million or 18% to $33 million compared to the previous quarter and represented seven basis points of total loans compared to six basis points in the prior quarter.

During the fourth quarter, total loans 30-89 days past due declined $380 million or 85% on a linked-quarter basis to $67 million compared to $447 million during the third quarter of the year. During the fourth quarter, the borrower who had become 30 days delinquent during the third quarter brought the entire $377 million of delinquent loans current.

Allowance for Credit Losses

At December 31, 2021, the allowance for credit losses ("ACL") was $199 million, relatively unchanged compared to the previous quarter and up $5 million compared to December 31, 2020. At December 31, 2021, the ACL represented 611.79% of total NPLs and 0.44% of total loans.

Loan Deferral Program Update

At December 31, 2021, deferred loans paying interest-only and escrow totaled $479 million, down $435 million or 48% compared to the previous quarter. As of year-end 2021, the Company had zero full-payment deferrals.

Deposits

At December 31, 2021, deposits totaled $35.1 billion, up $2.6 billion or 8% compared to December 31, 2020 and $438 million or 5% annualized on a linked-quarter basis. The year-over-year growth was driven by higher levels of non-interest bearing accounts and savings accounts. Non-interest bearing accounts at year-end 2021 totaled $4.5 billion, up $1.5 billion or 47% compared to year-end 2020.

Savings accounts at December 31, 2021 totaled $8.9 billion and increased $2.5 billion or 39% compared to the balance at December 31, 2020. This was offset by a decline in CDs, which decreased $1.9 billion or 18% on a year-over-year basis to $8.4 billion.

Included in non-interest bearing deposits are deposits related to our Banking as a Service initiative, which at December 31, 2021, totaled $1.0 billion. Total deposits also include $4.0 billion of loan-related deposits from our borrowers, which increased $475 million or 14% compared to December 31, 2020.

CAPITAL POSITION

The Company's capital position remains strong at both the holding company level and at the Bank level, as all of our regulatory capital ratios continue to exceed regulatory minimums to be classified as "Well Capitalized," the highest regulatory classification.

The table below depicts the Company's and the Bank's regulatory capital ratios at those respective periods.

EARNINGS SUMMARY FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2021

Net Interest Income

For the three months ended December 31, 2021, net interest income rose $14 million or 5% on a year-over-year basis to $322 million. The higher level of net interest income was the result of a $20 million or 17% decline in interest expense as our cost of funds declined, offset partially by a $6 million or 1% decrease in interest income due to lower loan and securities yields, while average interest earning assets increased $3.1 billion or 6% to $53.0 billion.

The year-over-year improvement in interest expense was the result of lower funding costs, which decreased 22 basis points to 0.84% compared to the year-ago quarter, while deposit costs dropped 27 basis points to 0.34%.

Included in net interest income for the three months ended December 31, 2021 is $16 million of prepayment income, down $5 million or 24% compared to the year-ago fourth quarter. Excluding the impact from this item, net interest income on a non-GAAP basis was $306 million, up $19 million or 7% compared to the year-ago quarter.

Net interest income for the twelve months ended December 31, 2021 was $1.3 billion, up $189 million or 17% compared to the twelve months ended December 31, 2020. The full-year trends were similar to the trends during the current fourth quarter. The full-year improvement was driven by lower interest expense. Interest expense for the year ended December 31, 2021 was $400 million, down $208 million or 34% compared to the year ended December 31, 2020, while interest income declined a modest $19 million or 1% to $1.7 billion.

On a year-over-year basis, the cost of funds dropped 51 basis points to 0.88% driven in large part by a 68 basis point decrease in our cost of deposits to 0.38%. Interest expense on deposits declined $192 million or 63% to $114 million on a year-over-year basis.

Prepayment income for the twelve months ended December 31, 2021 totaled $79 million, up $25 million or 46% compared to the twelve months ended December 31, 2020. Excluding the impact from prepayment income, net interest income on a non-GAAP basis was $1.2 billion, up $164 million or 16% on a year-over-year basis.

Net Interest Margin

During the three months ended December 31, 2021, the net interest margin ("NIM") was 2.44%, unchanged on a linked-quarter basis and down three basis points compared to the fourth quarter of last year. Prepayment income contributed 12 basis points to this quarter's NIM, same as the third quarter contribution and 17 basis points in the year-ago fourth quarter. Excluding the impact from prepayment income, the NIM on a non-GAAP basis was 2.32%, unchanged compared to the third quarter of 2021 and up two basis points compared to the fourth quarter of 2020.

For the twelve months ended December 31, 2021, the NIM increased by 23 basis points to 2.47% compared to the twelve months ended December 31, 2020. Prepayment income contributed 15 basis points to this year's NIM compared to 11 basis points last year. Excluding the impact from prepayment income, the 2021 full-year NIM, on a non-GAAP basis, was 2.32%, up 19 basis points compared to full-year 2020.

Provision for (Recovery of) Credit Losses

For the three months ended December 31, 2021, the Company recorded a provision for credit losses of $4 million, compared to a provision for credit losses of $11 million in the fourth quarter of last year and a recovery of $1 million in the third quarter of 2021. For the three months December 31, 2021, net charge-offs were $5 million or 0.01% of average loans compared to $6 million, also 0.01% of average loans, in the year-ago quarter. We recorded zero net charge-offs during the third quarter of 2021.

For the twelve months ended December 31, 2021, the Company reported a provision for credit losses of $3 million compared to $62 million for the twelve months ended December 31, 2020. Additionally, the Company recorded net recoveries of $2 million for full-year 2021 compared to net charge-offs of $19 million or 0.04% of average loans for full-year 2020.

Pre-Provision Net Revenue ("PPNR")

The tables below detail the Company's PPNR and related measures, which are non-GAAP measures, for the periods noted.

For the three months ended December 31, 2021, PPNR grew $14 million or 7% to $203 million compared to the three months ended December 31, 2020. This year's fourth quarter results include $7 million in merger-related expenses versus no such expenses in the fourth quarter of last year. Excluding these expenses, PPNR increased $21 million or 11% to $210 million compared to the year-ago fourth quarter.

For the twelve months ended December 31, 2021, PPNR totaled $809 million, up $159 million or 24% compared to the twelve months ended December 31, 2020. Full-year 2021 includes $23 million in merger-related expenses compared to no such expenses in full-year 2020. Excluding these expenses, PPNR was $832 million, up $182 million or 28% in 2021 compared to 2020.

Non-Interest Income

For the three months ended December 31, 2021, total non-interest income was $16 million, up $1 million compared to both the previous and year-ago quarter. For the twelve months ended December 31, 2021, non-interest income totaled $61 million, unchanged from the twelve months ended December 31, 2020. The year-ago twelve-month period included net gain on securities of $1 million compared to no such gain during the comparable period of 2021.

Non-Interest Expense

For the three months ended December 31, 2021, total non-interest expenses were $135 million, unchanged on a linked-quarter basis and up $1 million compared to the year-ago fourth quarter. Included in fourth quarter 2021 were $7 million in merger-related expenses, compared to $6 million during the third quarter and zero compared to the year-ago fourth quarter. Excluding this item, total operating expenses were $128 million for the current fourth quarter compared to $129 million for the third quarter and $134 million in the year-ago fourth quarter. The efficiency ratio during the fourth quarter of 2021 improved to 37.70% compared to 38.84% in the third quarter and 41.36% in the year-ago fourth quarter.

For the twelve months ended December 31, 2021, total non-interest expenses were $541 million, up $30 million or 6% compared to the twelve months ended December 31, 2020. Excluding merger-related expenses of $23 million, total operating expenses in full-year 2021 were $518 million, up $7 million or 1% compared to full-year 2020. In 2021, the efficiency ratio was 38.36% compared to 44.02% in 2020.

Income Taxes

For the three months ended December 31, 2021, income tax expense totaled $49 million and the effective tax rate was 24.90%, compared to $50 million and 25.19% for the three months ended September 30, 2021. During the three months ended December 31, 2020, the Company recorded an income tax benefit of $11 million, which included a $55 million income tax benefit related to certain tax provisions related to corporations under the CARES Act.

For the twelve months ended December 31, 2021, income tax expense totaled $210 million and the effective tax rate was 26.09% compared to $77 million and an effective tax rate of 13.05% for the twelve months ended December 31, 2020. In 2020, the Company recorded an income tax benefit of $68 million related to the CARES Act. In 2021, our effective tax rate was negatively impacted by the non-deductibility of certain merger-related expenses and an increase in the New York State tax rate.

About New York Community Bancorp, Inc.

Based in Hicksville, NY, New York Community Bancorp, Inc. is a leading producer of multi-family loans on non-luxury, rent-regulated apartment buildings in New York City, and the parent of New York Community Bank. At December 31, 2021, the Company reported assets of $59.5 billion, loans of $45.7 billion, deposits of $35.1 billion, and stockholders' equity of $7.0 billion. Reflecting our growth through a series of acquisitions, the Company operates 237 branches through eight local divisions, each with a history of service and strength: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New York; Garden State Community Bank in New Jersey; Ohio Savings Bank in Ohio; and AmTrust Bank in Florida and Arizona.

In January 2022, the Company announced a Community Benefits Agreement in collaboration with the National Community Reinvestment Coalition ("NCRC") and its members. Under the NCRC agreement NYCB has committed to provide $28 billion in loans, investments, and other financial support to communities and people of color, low- and moderate-income families and communities, and small businesses. The five-year agreement is subject to the closing of NYCB's pending merger with Flagstar Bancorp, Inc.

Post-Earnings Release Conference Call

The Company will host a conference call on Wednesday, January 26, 2022, at 8:30 a.m. (Eastern Time) to discuss its fourth quarter 2021 performance. The conference call may be accessed by dialing (877) 407-8293 (for domestic calls) or (201) 689-8349 (for international calls) and asking for "New York Community Bancorp" or "NYCB." A replay will be available approximately three hours following completion of the call through 11:59 p.m. on January 30, 2022 and may be accessed by calling (877) 660-6853 (domestic) or (201) 612-7415 (international) and providing the following conference ID: 13725672. In addition, the conference call will be webcast at ir.myNYCB.com, and archived through 5:00 p.m. on February 23, 2022.

Cautionary Statements Regarding Forward-Looking Information

This earnings release and the associated conference call may include forward-looking statements by the Company and our authorized officers pertaining to such matters as our goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of probable losses on loans; our assessments of interest rate and other market risks; and our ability to achieve our financial and other strategic goals, including those related to the pending merger with Flagstar Bancorp, Inc. and the strategic relationship with Figure Technologies, Inc.

Forward-looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Additionally, forward-looking statements speak only as of the date they are made; the Company does not assume any duty, and does not undertake, to update our forward-looking statements. Furthermore, because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in our statements, and our future performance could differ materially from our historical results.

Our forward-looking statements are subject to the following principal risks and uncertainties: the effect of the COVID-19 pandemic, including the length of time that the pandemic continues, the potential imposition of future shelter in place orders or additional restrictions on travel in the future, the effect of the pandemic on the general economy and on the businesses of our borrowers and their ability to make payments on their obligation, the remedial actions and stimulus measures adopted by federal, state, and local governments; the inability of employees to work due to illness, quarantine, or government mandates; general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of our loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; and changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties and/or are beyond our control. Our forward-looking statements are also subject to the following principal risks and uncertainties with respect to our pending merger with Flagstar Bancorp and our strategic relationship with Figure Technologies, Inc.; the occurrence of any event, change or other circumstances that could give rise to the right of any of the parties to the pending transactions to terminate the agreements governing such transactions; the outcome of any legal proceedings that may be instituted against the Company or any other party to the transactions; the possibility that the proposed transactions will not close when expected or at all because required regulatory or other approvals are not received or other conditions to the closings are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated; the possibility that the anticipated benefits of the proposed transactions will not be realized when expected or at all; diversion of management's attention from ongoing business operations and opportunities; the possibility that the Company may be unable to achieve expected synergies and operating efficiencies in or as a result of the proposed transactions within the expected timeframes or at all; revenues following the proposed transactions may be lower than expected; and there can be no assurance that the Community Benefits Agreement entered into with NCRC, which is contingent upon the closing of the Company's pending merger with Flagstar Bancorp, Inc., will achieve the results or outcome originally expected or anticipated by us as a result of changes to our business strategy, performance of the U.S. economy, or changes to the laws and regulations affecting us, our customers, communities we serve, and the U.S. economy (including, but not limited to, tax laws and regulations).

More information regarding some of these factors is provided in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2020, the Risk Factors section in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and in other SEC reports we file. Our forward-looking statements may also be subject to other risks and uncertainties, including those we may discuss in this news release, on our conference call, during investor presentations, or in our SEC filings, which are accessible on our website and at the SEC's website, www.sec.gov.

Investor/Media Contact:
Salvatore J. DiMartino
(516) 683-4286

- Financial Statements and Highlights Follow -

NEW YORK COMMUNITY BANCORP, INC.
RECONCILIATIONS OF CERTAIN GAAP AND NON-GAAP FINANCIAL MEASURES
(unaudited)

While stockholders' equity, total assets, and book value per share are financial measures that are recorded in accordance with U.S. generally accepted accounting principles ("GAAP"), tangible stockholders' equity, tangible assets, and tangible book value per share are not. Nevertheless, it is management's belief that these non-GAAP measures should be disclosed in our earnings releases and other investor communications for the following reasons:

1. Tangible stockholders' equity is an important indication of the Company's ability to grow organically and through business combinations, as well as its ability to pay dividends and to engage in various capital management strategies.
2. Returns on average tangible assets and average tangible stockholders' equity are among the profitability measures considered by current and prospective investors, both independent of, and in comparison with, the Company's peers.
3. Tangible book value per share and the ratio of tangible stockholders' equity to tangible assets are among the capital measures considered by current and prospective investors, both independent of, and in comparison with, its peers.

Tangible stockholders' equity, tangible assets, and the related non-GAAP profitability and capital measures should not be considered in isolation or as a substitute for stockholders' equity, total assets, or any other profitability or capital measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP measures may differ from that of other companies reporting non-GAAP measures with similar names.

The following table presents reconciliations of our common stockholders' equity and tangible common stockholders' equity, our total assets and tangible assets, and the related GAAP and non-GAAP profitability and capital measures at or for the periods indicated:

While diluted earnings per common share, net income, net income available to common stockholders, and total non-interest income are financial measures that are recorded in accordance with GAAP, financial measures that adjust these GAAP measures to exclude expenses to our pending merger with Flagstar, the CARES Act related tax benefit, and the revaluation of deferred taxes related to New York State tax rate change are not. Nevertheless, it is management's belief that these non-GAAP measures should be disclosed in our earnings release and other investor communications because they are not considered part of recurring operations and are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.

While net income is a financial measure that is calculated in accordance with GAAP, PPNR and PPNR excluding merger-related expenses are non-GAAP financial measures. Nevertheless, it is management's belief that these non-GAAP measures should be disclosed in our earnings releases and other investor communications because management believes these measures are relevant to understanding the performance of the Company attributable to elements other than the provision for credit losses and the ability of the Company to generate earnings sufficient to cover estimated credit losses, particularly in view of the volatility of the provision for credit losses resulting from the implementation of CECL and the economic impact of the COVID-19 pandemic. These measures also provide a meaningful basis for comparison to other financial institutions since it is commonly employed and is a measure frequently cited by investors and analysts. The following table reconciles the non-GAAP financial measures of PPNR and PPNR excluding merger-related expenses to the comparable GAAP financial measures of net income for the stated periods:

While our net interest margin, including the contribution of prepayment income is recorded in accordance with GAAP, adjusted net interest margin, which excludes the contribution of prepayment income is not. Nevertheless, management uses this non-GAAP measure in its analysis of our performance, and believes that this non-GAAP measure should be disclosed in our earnings releases and other investor communications for the following reasons:

1. Adjusted net interest margin gives investors a better understanding of the effect of prepayment income and other items on our net interest margin. Prepayment income in any given period depends on the volume of loans that refinance or prepay, or securities that prepay, during that period. Such activity is largely dependent on external factors such as current market conditions, including real estate values, and the perceived or actual direction of market interest rates.
   
   
2. Adjusted net interest margin is among the measures considered by current and prospective investors, both independent of, and in comparison with, our peers.

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