Filing identity and reporting period
Important mismatch: The supplied filing is New York Community Bancorp, Inc.’s Form 10-Q for the quarter ended March 31, 2013—not a filing by Flagstar Bank, National Association. The summary below reflects the filing text provided.
New York Community Bancorp is a bank holding company operating New York Community Bank and New York Commercial Bank, with banking and residential mortgage banking businesses. Unless otherwise noted, dollar amounts below are in U.S. dollars.
Financial results and key metrics
| Metric | Q1 2013 | Comparable period |
|---|---|---|
| Net interest income | $275.2 million | $288.4 million Q1 2012; $290.0 million Q4 2012 |
| Net interest margin | 2.95% | 3.24% Q1 2012; 3.15% Q4 2012 |
| Non-interest income | $75.6 million | $62.0 million Q1 2012 |
| Non-interest expense | $156.1 million | $150.2 million Q1 2012 |
| Net income / diluted EPS | $118.7 million / $0.27 | $118.3 million / $0.27 Q1 2012; $122.8 million / $0.28 Q4 2012 |
- Net interest income after loan-loss provisions was $265.7 million. Total loan-loss provision was $9.5 million: $5.0 million for non-covered loans and $4.5 million for covered loans.
- Cash flows from operating activities were $632.0 million; investing activities used $1.239 billion; financing activities provided $234.5 million. Cash and equivalents fell $372.2 million to $2.055 billion.
- At March 31, total assets were $44.512 billion; total loans, net, $31.803 billion; deposits $25.478 billion; borrowed funds $13.179 billion; and stockholders’ equity $5.666 billion.
- Non-covered loans held for investment were $28.1 billion, of which 68.4% were multi-family and 26.8% commercial real estate. Total securities were $5.464 billion.
- Non-performing non-covered loans were $193.6 million, or 0.69% of non-covered loans; non-covered non-performing assets were $263.9 million, or 0.64% of non-covered assets. Net charge-offs were $5.6 million, 0.02% of average loans on a non-annualized basis.
- Cash and available funding included $6.9 billion of FHLB-NY borrowing capacity and $321.7 million of available-for-sale securities. Certificates of deposit of $4.9 billion matured within one year.
- Consolidated regulatory capital ratios reported were 8.87% Tier 1 risk-based, 13.26% total risk-based, and 14.00% leverage. Tangible equity to tangible assets was 7.61% (a non-GAAP measure).
Material changes versus prior periods
- Year over year, net income was nearly unchanged, while net interest income fell 4.6% and net interest margin declined 29 basis points to 2.95%. Lower average asset yields were the principal stated driver.
- Non-interest income increased year over year, supported by $16.6 million in securities-sale gains, $3.6 million in FDIC indemnification income, and higher other income. The latter included a $3.9 million recovery on a security previously classified as other-than-temporarily impaired.
- Mortgage banking income declined to $26.1 million from $35.2 million in Q1 2012 as refinancing activity slowed with higher mortgage rates.
- Deposits increased $600.2 million from year-end, as savings and NOW/money-market balances grew; CDs declined $468.1 million. Borrowed funds decreased $251.6 million.
- Non-performing non-covered loans declined from $261.3 million at year-end to $193.6 million. The reduction included a $41.6 million multi-family loan transferred to OREO; OREO consequently increased to $70.3 million.
- First-quarter compensation expense included $6.0 million of retirement and severance costs. The company repositioned $6.0 billion of wholesale borrowings, reporting a 117-basis-point reduction in weighted-average funding cost and an approximately four-year extension of weighted-average call and maturity dates.
Outlook, risks, contingencies, and unusual items
- The filing gives no specific earnings or revenue guidance. Management emphasized its established multi-family lending and mortgage-banking model and noted that mortgage rates, refinancing volumes, prepayment penalties, deposit flows, and local economic conditions affect results.
- Management’s interest-rate simulations estimated that a parallel 100-basis-point increase would reduce next-12-month net interest income by 0.80%, and a 200-basis-point increase by 2.16%. Estimated net portfolio value declined 0.64% and 4.35%, respectively. Management cautioned that model assumptions and actual outcomes may differ.
- Credit risks include concentration in New York-area multi-family and commercial real estate lending, borrower/property performance, and economic or real-estate weakness. Most non-covered loans were concentrated in multi-family and CRE; management also identified ADC and C&I lending risks.
- Covered loans and certain OREO are subject to FDIC loss-sharing agreements. The covered portfolio had $296.0 million of loans at least 90 days past due, treated as performing under the acquired-loan accounting method; the filing states the FDIC generally reimburses 80% of losses up to specified thresholds and 95% beyond them.
- Mortgage loan sale representations and warranties expose the company to repurchase or indemnification claims. The reserve was $8.9 million at March 31, versus $6.2 million a year earlier; 16 GSE requests totaling $3.5 million remained outstanding at quarter-end. Management said reasonably possible losses beyond the reserve were not material.
- The company reported $357.967 million of junior subordinated debentures. It noted that proposed phase-out of trust-preferred instruments from Tier 1 capital could reduce capital ratios; the described 25% reduction scenario would have lowered Tier 1 leverage by 21 basis points and Tier 1 risk-based capital by 32 basis points.
- Management stated that legal actions in the ordinary course were immaterial in the aggregate, and that there were no material changes to previously disclosed risk factors. Disclosure controls were concluded effective, with no material change in internal control over financial reporting reported.
- After quarter-end, the board declared a $0.25-per-share quarterly dividend, payable May 17, 2013. A $16.6 million securities gain and the $3.9 million security recovery materially supported reported non-interest income.
Most important facts for investors to verify
- Confirm the issuer: the supplied 10-Q is for New York Community Bancorp, Inc., not Flagstar Bank, National Association.
- Review the sustainability of earnings given lower net interest margin, dependence on prepayment penalties, and significant securities gains and other unusual income items.
- Assess asset quality beyond headline improvement, including transfers to OREO, covered-loan delinquency treatment, TDR balances, and exposure to concentrated real-estate markets.
- Evaluate wholesale funding dependence, near-term CD maturities, available borrowing capacity, and the potential capital impact of regulatory changes to trust-preferred securities.
- Check mortgage repurchase and indemnification exposure, FDIC loss-share assumptions, and management’s sensitivity-model assumptions against subsequent results.