FLAGSTAR BANK, NATIONAL ASSOCIATION annual report, FY2020

Vollständiges Dokument

Filing identity and reporting period

Important source mismatch: The request identifies Flagstar Bank, National Association, but the supplied filing is New York Community Bancorp, Inc. (NYSE: NYCB), the holding company for New York Community Bank. This summary reflects the supplied filing, not a Flagstar Bank filing. It is the 2020 Form 10-K for the fiscal year ended December 31, 2020, filed February 26, 2021.

NYCB operated 237 branches across New York, New Jersey, Ohio, Florida, and Arizona. Its principal lending business is multifamily mortgages, especially on New York City apartment buildings, alongside commercial real estate and specialty finance lending.

Financial performance and position

Metric20202019
Net interest income$1.100 billion$957.4 million
Net income$511.1 million$395.0 million
Net income available to common shareholders$478.3 million$362.2 million
Diluted earnings per common share$1.02$0.77
Net interest margin2.24%2.02%
Efficiency ratio44.02%49.08%
  • 2020 net income included a $68.4 million tax benefit related to the CARES Act. Excluding it, management reported non-GAAP net income of $442.7 million, up 12% from 2019.
  • Net interest income rose 14.9%; lower funding costs more than offset lower yields on loans and securities. Non-interest income fell 27.5% to $61.1 million, while non-interest expense was essentially unchanged at $511.2 million.
  • Fourth-quarter net income was $189.7 million, or $0.39 per diluted share. Fourth-quarter NIM was 2.47%, 43 basis points above the year-earlier quarter.
  • Net cash provided by operating activities was $334.2 million; investing activities used $1.025 billion; financing activities provided $1.897 billion. Cash and cash equivalents ended the year at $1.948 billion, versus $741.9 million a year earlier.

Balance sheet, credit, liquidity, and capital

  • Total assets were $56.3 billion, up 5.0% year over year. Deposits were $32.4 billion, up 2.5%; borrowed funds were $16.1 billion, up 10.5%. Total stockholders’ equity was $6.84 billion.
  • Loans held for investment were $42.82 billion. Multifamily loans were $32.24 billion, or 75.3% of that portfolio; commercial real estate loans were $6.84 billion, or 16.0%. About 73% of the loan portfolio was in the New York City metropolitan region.
  • Non-performing assets fell to $46.1 million, or 0.08% of assets, from $73.5 million, or 0.14%, in 2019. The allowance for credit losses on loans and leases increased to $194.0 million from $147.6 million; net charge-offs were $18.8 million.
  • At year-end, $2.6 billion of loans, or 6.1% of the portfolio, remained under payment deferral programs, mainly principal-only deferrals. The company reported that 99% of full-payment deferrals had returned to payment status; it also disclosed that $14.1 million of deferrals that had ended were still awaiting their first payment.
  • Available-for-sale securities totaled $5.8 billion. The Bank reported $7.3 billion of available FHLB-NY borrowing capacity and $1.1 billion of potential Federal Reserve discount-window capacity; no borrowings were outstanding against those lines at year-end.
  • Company regulatory capital ratios included CET1 of 9.72%, Tier 1 risk-based capital of 10.95%, total risk-based capital of 12.97%, and leverage capital of 8.52%. The Bank was also reported as well capitalized.
  • Common book value per share was $13.66, compared with $13.29 in 2019; tangible book value per share, a non-GAAP measure, was $8.43, compared with $8.09.

Material changes versus 2019

  • Net income increased 29%, with a substantial portion of the reported increase attributable to the CARES Act tax benefit. The NIM expanded 22 basis points for the year, chiefly as deposit costs declined.
  • CECL was adopted January 1, 2020. The transition reduced retained earnings by $10.5 million, net of tax, including a $1.9 million increase in the loan allowance and a $12.5 million increase in the allowance for unfunded commitments.
  • Multifamily loans grew 3.5% to $32.2 billion and specialty finance loans and leases grew 16.6% to $3.0 billion; CRE loans declined 3.5% to $6.8 billion. Total loans held for investment increased 2.4%.
  • Deposit mix shifted away from CDs: year-end CD balances decreased $3.9 billion, while savings and interest-bearing checking and money-market balances grew. Borrowed funds rose $1.5 billion.
  • Loan deferrals declined materially from mid-2020 levels: total reported deferrals were $2.6 billion at year-end versus $7.4 billion at June 30, 2020.

Outlook, commentary, risks, and unusual items

  • The filing provides no specific earnings or revenue guidance. Management emphasized improved margins and asset-quality indicators, but cautioned that the pandemic’s duration and its effects on borrowers, collateral values, and the economy remained uncertain.
  • Key exposures include concentrated multifamily and CRE lending in the New York metropolitan area, including loans secured by rent-regulated properties. The 2019 New York rent-law changes may constrain property income and collateral values; COVID-19-related business disruption and unemployment could also weaken repayment capacity.
  • Management warned that borrowers emerging from deferrals could become delinquent or non-accrual, and that collection or foreclosure activity could be constrained. The filing identified the CECL allowance for multifamily, CRE, and specialty finance portfolios as a critical audit matter because of model and forecast uncertainty.
  • Other notable risks include interest-rate and yield-curve sensitivity, LIBOR transition, reliance on wholesale funding, cybersecurity and third-party service risks, regulatory requirements, and potential goodwill impairment. Goodwill was $2.43 billion and was not impaired at year-end.
  • NYCB reported a $68.4 million CARES Act-related tax benefit. The company paid $0.68 per common share in 2020 and declared a $0.17 quarterly dividend in January 2021. Legal proceedings were described as ordinary-course matters that management considered immaterial in aggregate.
  • The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting.

Important facts for investors to verify

  1. Confirm the filing identity: the supplied document is NYCB’s 2020 Form 10-K, not a Flagstar Bank, National Association filing.
  2. Assess earnings excluding the $68.4 million tax benefit and evaluate whether lower funding costs and margin improvement can persist.
  3. Track the remaining $2.6 billion of payment deferrals, subsequent payment performance, delinquencies, charge-offs, and allowance adequacy.
  4. Review multifamily and CRE concentration, New York rent-regulation effects, borrower exposure to the local economy, and collateral assumptions in CECL forecasts.
  5. Monitor reliance on FHLB advances and other wholesale funding, near-term CD maturities, available borrowing capacity, and regulatory capital headroom.
  6. Consider the sensitivity disclosures: a 100-basis-point rate increase was estimated to reduce next-12-month net interest income by 1.02%; a 200-basis-point increase by 2.68%.