SEC filing summary
Reporting period: Fiscal year ended December 31, 2022. The filing is New York Community Bancorp, Inc.’s consolidated 10-K, including Flagstar Bank, N.A.; it is not a standalone Flagstar Bank filing. NYCB acquired Flagstar Bancorp on December 1, 2022, so reported 2022 results include Flagstar for December only unless otherwise noted.
Business context
The combined company operates 395 branches across nine states and has significant multifamily lending, mortgage origination and servicing, and mortgage warehouse lending businesses. Its loan portfolio remains concentrated in multifamily and commercial real estate, with much of the multifamily exposure tied to New York rental properties.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total assets, year-end | $90.1 billion | $59.5 billion |
| Loans and leases held for investment, year-end | $69.0 billion | $45.7 billion |
| Total deposits, year-end | $58.7 billion | $35.1 billion |
| Net interest income | $1.396 billion | $1.289 billion |
| Net interest margin | 2.35% | 2.47% |
| Net income | $650 million | $596 million |
| Net income available to common stockholders | $617 million | $563 million |
| Diluted earnings per share | $1.26 | $1.20 |
| Return on average assets | 1.01% | 1.04% |
| Return on average common equity | 9.38% | 8.75% |
| Operating cash flow | $1.026 billion | $290 million |
- Interest expense rose to $696 million from $400 million as deposit and borrowing costs increased. Average cost of interest-bearing liabilities rose to 1.35% from 0.88%.
- Provision for credit losses was $133 million versus $3 million, including $117 million related to the initial allowance measurement on acquired non-PCD Flagstar loans. Net charge-offs were a $4 million recovery.
- Non-interest income was $247 million, including a $159 million bargain purchase gain on Flagstar. Non-interest expense increased to $684 million, including $75 million of merger-related expenses and $5 million of intangible amortization. The reported efficiency ratio was 40.72%, versus 38.36%.
- Year-end allowance for credit losses on loans and leases was $393 million, or 0.57% of loans; nonperforming loans were $141 million, and NPAs were $153 million, or 0.17% of assets.
- Year-end borrowed funds were $21.3 billion, including $20.3 billion in wholesale borrowings, primarily FHLB advances. Cash and cash equivalents were $2.0 billion. The Bank reported $11.3 billion of available FHLB-NY borrowing capacity and $8.6 billion of unpledged available-for-sale securities.
- Uninsured deposits were estimated at $19.6 billion. Brokered deposits totaled $5.1 billion; $9.2 billion of certificates of deposit were due to mature or reprice within one year.
- Company common equity tier 1, tier 1, total risk-based capital, and leverage ratios were 9.06%, 9.78%, 11.66%, and 9.70%, respectively. The Bank’s total risk-based capital ratio was 11.43%; both were categorized as well capitalized.
- Available-for-sale securities totaled $9.1 billion and had $873 million of gross unrealized losses at year-end, which management attributed to interest-rate changes rather than credit impairment. Accumulated other comprehensive loss was $620 million, largely reflecting securities valuation changes.
Material changes versus 2021
- Flagstar’s acquisition added $25.8 billion of assets, $18.0 billion of loans held for investment, and $16.0 billion of deposits, net of purchase accounting adjustments. The transaction was an all-stock deal and generated the $159 million bargain purchase gain. Purchase-accounting fair values remained preliminary and subject to adjustment for up to one year after closing.
- Loans grew 51% and deposits 67% year over year, reflecting both the acquisition and organic growth. The loan mix shifted: multifamily declined to 55% of loans held for investment from 76%, while commercial loans increased to 33%.
- Net interest income rose 8%, but NIM declined 12 basis points to 2.35% amid rising rates and a liability-sensitive balance sheet. Prepayment income contributed 8 basis points to NIM, down from 15 basis points.
- Nonperforming assets increased to $153 million from $41 million, substantially due to acquired assets, including one-to-four-family and home equity loans. The allowance-to-NPL ratio fell to 279% from 612%.
- Tangible common equity to tangible assets declined to 6.41% from 7.21%; tangible book value per common share declined to $8.23 from $8.85.
Outlook, commentary, risks and unusual items
- Management said mortgage-market conditions were expected to remain challenging through 2023. The company planned to reduce distributed retail mortgage coverage by 69% and shift to a branch-footprint model, aiming to align costs with demand while retaining participation across mortgage channels.
- Management identified rising interest rates, deposit competition and funding costs, real estate values, and multifamily/CRE credit concentration as important risks. New York rent-regulation laws may constrain landlords’ ability to raise rents or convert units to market-rate rents; management reported no material impact from the law to date.
- Interest-rate sensitivity modeling estimated that a parallel 100-basis-point rate increase would reduce next-12-month net interest income by 2.81%, and a 200-basis-point increase by 4.93%. A further yield-curve inversion was estimated to reduce NII by 4.80%. These are model estimates, not guidance.
- The parent company must obtain OCC approval for dividends to it through at least November 1, 2024 following the acquisition, potentially constraining capital distributions. The Board declared a $0.17-per-share common dividend in January 2023.
- The company reported $22.4 billion of total loan and letter-of-credit commitments. Management stated that current liquidity was expected to cover obligations and commitments, but deposit outflows, wholesale funding availability, and collateral values could affect that assessment.
- Legal actions in the ordinary course were described as immaterial in aggregate. A California mortgage-escrow interest case was being appealed; an adverse outcome or broader adoption of the relevant ruling could affect earnings.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. However, the internal-control assessment excluded Flagstar’s controls over approximately $25.8 billion of acquired assets and $132 million of revenue included in 2022; integration work was ongoing.
Important facts for investors to verify
- Track post-acquisition integration, purchase-accounting adjustments, realized cost savings, and the contribution of Flagstar beyond its one month included in reported 2022 results.
- Review deposit composition and retention, especially BaaS and uninsured deposits, brokered funding, deposit pricing, and near-term CD maturities.
- Monitor NIM and funding costs under changing rates, including actual performance relative to the company’s interest-rate sensitivity simulations.
- Assess credit trends in multifamily, CRE, acquired residential loans, and other portfolios; verify allowance adequacy and whether nonperforming loans continue to rise.
- Evaluate the effect of New York rent regulation, property values, occupancy, and borrower cash flows on multifamily collateral and repayment capacity.
- Confirm mortgage restructuring results, MSR valuation and hedging performance, and the impact of lower mortgage demand on servicing, originations, and warehouse lending.
- Check capital and liquidity capacity, dividend restrictions and approvals, and any material updates to the California escrow litigation or other contingencies.