While New York Community continued what could only be described as solid earnings performance, with a third-quarter return on average assets of 1.37% and a return on tangible equity of 18.06%, the company followed the patter for many regional banks in the continued low-rate environment, with declines in its net interest income and net interest margin. The net interest margin is the spread between a bank's average yield on loans and investments, and its average cost for deposits and borrowings. Most regional banks are seeing margins squeezed. The Federal Reserve's target federal funds rate has been in a range of between zero and 0.25% since late 2008, and most banks have already seen most of the benefits of lower rates on deposits and borrowings. Meanwhile, the central bank in September increased its monthly purchases of long-term mortgage backed securities -- a move called QE3 -- in an effort to hold long-term rates at their historically low levels, or push them down even further. New York Community Bancorp's third-quarter net interest income declined to $285.0 million, from $296.7 million in the second quarter, and $295.0 million in the third quarter of last year, while the company's net interest margin narrowed to 3.17% in the third quarter, from 3.30% the previous quarter, and 3.33% a year earlier. The company said that "the linked-quarter and year-over-year reductions reflect the impact of the yield curve as the average 10-year Treasury rate fell 77 basis points year-over-year and 19 basis points linked-quarter, to 1.64%, and the average two-year Treasury rate fell three basis points linked-quarter and two basis points year-over-year, to 0.26%." New York Community Bancorp also said in its earnings release that "although loan production rose as the low level of market interest rates prompted a rise in refinancing activity, the replenishment of the loan portfolio occurred at lower yields," and that "the impact was somewhat tempered by the high level of prepayment penalty income from multi-family and commercial real estate loans held for investment, and by a meaningful increase in the average balance of loans." The company added that it "continued to reduce its cost of interest-bearing deposits, largely reflecting the benefit of its transaction with Aurora Bank."