Filing summary
Issuer identification: The supplied filing is New York Community Bancorp, Inc.’s Form 10-Q, covering the quarter ended June 30, 2022—not a filing by Flagstar Bank, National Association. It reports consolidated results for NYCB and its subsidiary, New York Community Bank. The filing describes the proposed Flagstar Bancorp acquisition.
Business context and reporting period
NYCB is a bank holding company operating through New York Community Bank and 237 branches. Its lending is concentrated in multifamily and commercial real estate, with additional specialty finance lending. Figures below are in U.S. dollars; financial statement amounts are generally in millions unless noted.
Financial results and key metrics
| Metric | Q2 2022 / June 30, 2022 | Comparison |
|---|---|---|
| Total assets | $63.1 billion | Up $3.6 billion from year-end 2021 |
| Loans and leases held for investment | $48.5 billion | Up $2.8 billion from year-end 2021 |
| Total deposits | $41.2 billion | Up $6.2 billion from year-end 2021 |
| Total borrowed funds | $14.3 billion | Down $2.3 billion from year-end 2021 |
| Cash and cash equivalents | $3.3 billion | Up from $2.2 billion at year-end 2021 |
| Net income | $171 million | Up 13% from Q2 2021 |
| Net income available to common stockholders | $163 million; diluted EPS $0.34 | Up 13% and from $0.30, respectively, year over year |
| Net interest income | $359 million | Up 8% year over year |
| Net interest margin | 2.52% | Up 2 basis points year over year and 9 basis points sequentially |
| Provision for credit losses | $9 million | Compared with a $4 million recovery in Q2 2021 |
| Non-interest expense / efficiency ratio | $138 million / 35.57% | Expenses down $1 million; ratio improved from 37.11% |
For the first six months of 2022, net income was $326 million, common net income was $310 million, diluted EPS was $0.66, and net interest income was $691 million. The six-month net interest margin was 2.48%, down 1 basis point year over year. The filing reports operating cash flow of $399 million, investing cash outflow of $3.070 billion, financing cash inflow of $3.737 billion, and a $1.066 billion net increase in cash for the six months.
Multifamily loans were $36.8 billion, about 76% of held-for-investment loans. Deposits included $7.8 billion of BaaS-related balances. Stockholders’ equity was $6.8 billion; tangible book value per common share, a non-GAAP measure, was $8.35. The Bank’s total risk-based capital ratio was 11.69%, and its leverage ratio was 8.96%; the filing states that the Bank exceeded well-capitalized minimums.
Material changes versus comparable periods
- Quarterly earnings and net interest income increased year over year, supported by loan growth and a higher average yield on interest-earning assets. Higher deposit interest expense partly offset the increase.
- Loan originations reached $5.3 billion in Q2, up 72% year over year; about 80% represented new money. Multifamily growth and a rebound in specialty finance were key drivers.
- Deposits increased sharply, particularly BaaS and borrower-related deposits, while wholesale borrowings declined.
- Available-for-sale securities had $607 million of gross unrealized losses at June 30, 2022, largely attributed by management to interest-rate movements. Accumulated other comprehensive loss was $453 million, versus $85 million at year-end 2021; the decline weighed on stockholders’ equity.
- Non-performing loans increased to $50 million from $33 million at year-end 2021, although management reported Q2 net recoveries of $7 million and total non-performing assets of $56 million at quarter-end.
Outlook, risks, contingencies, and unusual items
- Flagstar transaction: The merger agreement termination date was extended to October 31, 2022. The parties amended the agreement to seek a national bank charter for the combined company; the filing identifies OCC and Federal Reserve approvals as required. NYSDFS had approved the transaction. The filing provides no earnings guidance.
- Interest-rate exposure: The one-year cumulative gap was negative 26.14% of total assets. Modeling estimated that a 100-basis-point rate increase would reduce next-12-month net interest income 3.72%; a 200-basis-point increase would reduce it 8.77%. Estimated economic value of equity declined 8.17% under a 100-basis-point increase and 16.66% under a 200-basis-point increase. Management cautions that these are model estimates dependent on assumptions.
- Credit and concentration risks: The loan book is heavily concentrated in multifamily and CRE, with substantial exposure to the New York metropolitan area and rent-regulated housing. Management’s allowance estimate incorporates loan growth, prepayment assumptions, economic forecasts, and qualitative judgments. The allowance for loan and lease losses was $216 million; the allowance for unfunded commitments was $7 million.
- Funding and liquidity: Management reported $12.2 billion of available FHLB borrowing capacity and $1.1 billion of potential Federal Reserve discount-window capacity, with no borrowings against those lines at quarter-end. BaaS deposits, brokered funding, deposit pricing and retention, and the maturity/repricing of funding remain relevant risks.
- Unusual items: Q2 included $4 million of merger-related expenses and a $1.7 million gain on sale of the former headquarters, included in other income. A $2 million deferred-tax revaluation was reported for Q2 2021. The filing’s discussion of the six-month tax revaluation is inconsistent about whether the $2 million item falls in 2021 or 2022; verify against the statements and supporting disclosures.
- Other matters: Two shareholder disclosure lawsuits relating to the proposed merger remained unresolved; NYCB said the claims were without merit and that defendants had not been served. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the correct registrant and whether a separate Flagstar Bank, National Association filing was intended; this document is NYCB’s consolidated 10-Q.
- Check subsequent merger approvals, closing timing, national-charter plans, integration costs, and any revised transaction terms.
- Assess the stability and concentration of BaaS and borrower-related deposits, uninsured time deposits, and the bank’s funding costs as rates rise.
- Review multifamily/CRE geographic and rent-regulation exposure, criticized loans, non-performing loan trends, and allowance adequacy.
- Evaluate the effect of securities unrealized losses and the modeled sensitivity of earnings and economic value to interest-rate changes.
- Reconcile the six-month deferred-tax revaluation disclosure and confirm the reported merger-related costs and headquarters-sale gain.