Business context and reporting period
This is New York Community Bancorp, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2022—not a filing by Flagstar Bank, National Association. NYCB is the holding company for New York Community Bank. It reported 237 branches and a loan portfolio concentrated in multifamily real estate.
Key financial metrics
Unless otherwise stated, amounts are in millions of dollars.
| Metric | Q1 2022 / March 31, 2022 | Comparison |
|---|---|---|
| Total assets | $61,005 | Up $1,478 from December 31, 2021 |
| Loans and leases held for investment | $46,758 | Up $1,020 from year-end |
| Deposits | $37,954 | Up $2,895 from year-end |
| Total borrowed funds | $15,337 | Down $1,225 from year-end |
| Stockholders’ equity | $6,909 | Down $135 from year-end |
| Net interest income | $332 | Up 4% year over year |
| Net interest margin | 2.43% | Down 5 basis points year over year |
| Net income | $155 | Up 7% year over year |
| Net income available to common shareholders | $147 | Up 7% year over year |
| Diluted EPS | $0.31 | Compared with $0.29 |
| Operating cash flow | $185 | Compared with $124 |
| Investing cash flow | ($1,068) | Compared with ($681) |
| Financing cash flow | $1,572 | Compared with $1,332 |
Interest income was $429 and interest expense $97. The provision for credit losses was a recovery of $2, versus a $4 provision in Q1 2021. Non-interest income was $14; non-interest expense was $141, including $7 of merger-related costs. The efficiency ratio was 38.65%, versus 39.87%. The filing reports a 25.16% effective tax rate.
Material changes and balance-sheet developments
- Deposits grew 33% on an annualized linked-quarter basis, driven by the Banking-as-a-Service business and customer loan-related deposits. BaaS deposits were $5.4 billion; loan-related deposits were $4.4 billion.
- Loans grew 9% annualized on a linked-quarter basis. Multifamily loans rose $1.1 billion to $35.8 billion; specialty finance loans and leases declined $168 million to $3.3 billion, largely following one large borrower payoff.
- Multifamily represented approximately 76.6% of loans held for investment. About 58.3% of multifamily loans and 59.5% of CRE loans were in New York City; the filing describes material exposure to Metro New York real estate.
- Available-for-sale securities fell to $5.6 billion. Rising rates drove unrealized losses: the quarter’s after-tax change in unrealized AFS securities was a loss of $215, contributing to a $199 decline in total other comprehensive income. AOCI was a loss of $284 at quarter-end.
- Book value per common share was $13.72 and tangible book value per common share was $8.52, down from $14.07 and $8.85, respectively, at year-end.
Credit, liquidity, capital, and outlook
- Nonperforming assets were $70, or 0.11% of assets, up from $41 at year-end. Nonperforming loans rose to $63 from $33; management attributed much of the increase to a $20 CRE loan and said it did not expect significant losses on that loan. Loans 30–89 days past due declined to $34 from $67. There were no full-payment deferrals; interest-and-escrow-only deferrals totaled $282.
- The allowance for credit losses on loans and leases was $197, with an additional $11 allowance for unfunded commitments. Management cited improved macroeconomic and environmental factors, including conditions affecting New York City CRE, in explaining the allowance recovery.
- Cash and cash equivalents were $2.9 billion. Available FHLB-NY borrowing capacity was $9.2 billion, and the Bank could borrow up to $1.5 billion from the FRB-NY discount window; neither facility had outstanding borrowings at quarter-end. Of $5.6 billion in AFS securities, $4.6 billion was unpledged.
- The Bank’s capital ratios exceeded minimum requirements and it met the filing’s stated “well capitalized” thresholds. Its total risk-based capital ratio was 12.07%; the holding company’s was 12.39%.
- Interest-rate sensitivity modeling estimated that a 100-basis-point rate increase would reduce next-12-month net interest income by 5.49%; a 200-basis-point increase would reduce it by 10.16%. Estimated EVE declined 6.94% under a 100-basis-point increase. These are model estimates, not guidance. The one-year cumulative interest-rate gap was negative 14.75%.
- No earnings or financial guidance is stated in the supplied filing text. Management’s credit-loss forecast assumptions included GDP growth of 3.7% in 2022 and 3.0% in 2023, and unemployment forecasts of 3.6% and 3.4%, respectively.
Merger, contingencies, and risks
NYCB’s proposed all-stock acquisition of Flagstar Bancorp, initially valued at $2.6 billion, remained pending. The parties extended the termination date to October 31, 2022 and said the combined bank would seek a national bank charter; the filing identifies OCC and Federal Reserve approvals as the remaining bank regulatory approvals. NYSDFS approval was reported on April 27, 2022. Two NYCB shareholder disclosure lawsuits remained; NYCB said the claims were without merit, and the defendants had not been served.
Risk factors highlighted include interest-rate and securities-market changes, inflation, real-estate values and CRE concentrations, deposit flows and wholesale funding, LIBOR transition, merger approval and integration, litigation, regulation, cybersecurity and technology, and geopolitical and pandemic effects. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Confirm the filing identity: the supplied 10-Q is for New York Community Bancorp, Inc., not Flagstar Bank, National Association.
- Check progress and required approvals for the Flagstar merger, including the extended October 31, 2022 termination date and planned national bank charter.
- Track deposit mix and durability, including BaaS, brokered deposits, uninsured time deposits, and the cost of funding as rates change.
- Monitor multifamily and CRE credit quality, nonperforming loans, interest-only deferrals, and the allowance assumptions underlying the reported recovery.
- Assess the effect of rate changes on net interest income, securities marks, and capital; the disclosed sensitivity figures depend on model assumptions.
- Review the remaining shareholder litigation and the material risk factors incorporated from the 2021 Form 10-K.