Business context and reporting period
This is New York Community Bancorp, Inc.’s consolidated Form 10-Q for the quarter ended March 31, 2021—not a standalone filing for Flagstar Bank, National Association. NYCB operated New York Community Bank and reported 237 branches. Its subsequent-event disclosure covers a pending acquisition of Flagstar Bancorp, Inc.
Financial performance and condition
| Metric | Q1 2021 | Comparable / change |
|---|---|---|
| Net interest income | $317.7 million | Up 30% year over year |
| Net income | $145.6 million | Up 45%; Q1 2020: $100.3 million |
| Net income available to common shareholders | $137.4 million; diluted EPS $0.29 | Q1 2020: $92.1 million; diluted EPS $0.20 |
| Net interest margin | 2.48% | Up 47 basis points year over year; up 1 point sequentially |
| Provision for credit losses | $3.6 million | Q1 2020: $20.6 million |
| Non-interest income / expense | $14.4 million / $132.4 million | Income down 15%; expense up 5% year over year |
| Operating cash flow | $123.6 million | Q1 2020: $130.7 million |
At March 31, 2021, total assets were $57.7 billion, loans and leases held for investment were $43.1 billion, deposits were $34.2 billion, and stockholders’ equity was $6.8 billion. Cash and cash equivalents were $2.7 billion. Total borrowed funds were $15.8 billion, down from $16.1 billion at year-end 2020. The company reported $7.6 billion of available FHLB borrowing capacity and $5.0 billion of unencumbered available-for-sale securities. Bank regulatory capital ratios exceeded minimum requirements; the Bank’s total risk-based capital ratio was 12.77%.
Material changes versus comparable periods
- Earnings growth primarily reflected sharply lower funding costs: interest expense fell 46% year over year, while interest income declined 4%. Cost of funds fell to 0.94% from 1.82%.
- Prepayment income rose to $19.7 million from $10.5 million; excluding it, management reported net interest margin of 2.33% versus 1.92% a year earlier.
- Deposits increased $1.8 billion from year-end, including $1.6 billion of stimulus-related, non-interest-bearing deposits. Certificates of deposit declined $716 million during the quarter.
- Loans and leases held for investment increased about $240 million from year-end. Multi-family loans remained the largest category at 75% of the portfolio; specialty finance and CRE balances grew.
- Non-performing assets declined to $41.3 million from $46.1 million at year-end; non-performing loans fell to $33.2 million. The allowance for loan and lease losses was $197.8 million, and net recoveries were $0.5 million.
- Accumulated other comprehensive loss increased to $122.1 million, mainly reflecting the decline in unrealized gains on available-for-sale securities. Tangible common equity to tangible assets was 7.00%, down from 7.26% at year-end.
Outlook, risks, contingencies, and unusual items
- No earnings or financial-performance guidance is provided. Management said $2.5 billion of loans were on interest-only and escrow payment modifications; most were scheduled to resume principal payments in Q2 2021. It expected the majority to return to full payments. All $6.1 billion of full-payment deferrals had returned to payment status by quarter-end.
- Management expects stimulus-related deposits to peak in Q2 2021 and run off over the following year. These deposits are short-term and tied to individual spending patterns.
- On April 26, 2021, NYCB announced an all-stock agreement to acquire Flagstar Bancorp, valued at approximately $2.6 billion at announcement. Closing was expected in Q4 2021, subject to shareholder and regulatory approvals and other conditions. NYCB shareholders were expected to own 68% of the combined company.
- Principal risks include real-estate and geographic concentration, borrower repayment and collateral values, interest-rate and liquidity exposure, COVID-19 effects, and the ability to obtain approvals for and integrate the Flagstar transaction. Management cited a negative one-year interest-rate gap of 6.17% of assets; its model estimated that a 100-basis-point rate increase would reduce next-12-month net interest income by 1.27%.
- Unrealized securities losses were attributed by management to interest-rate movements, not credit impairment; no securities credit-loss allowance was recorded. Goodwill was $2.4 billion, and management found no impairment trigger at quarter-end.
- Management reported effective disclosure controls and procedures. Ordinary-course legal proceedings were described as immaterial in aggregate.
Most important facts for investors to verify
- Confirm the filing entity and distinction between NYCB and Flagstar Bank; this filing reports NYCB consolidated results.
- Track the Flagstar merger’s approvals, closing conditions, timing, consideration, integration costs, and expected benefits.
- Monitor whether temporary stimulus-related deposits run off as expected and whether replacement funding affects costs and liquidity.
- Assess performance of the $2.5 billion in principal-deferral loans as payment terms resume, alongside CRE and multi-family credit trends.
- Review the sustainability of earnings growth given elevated prepayment income, lower funding costs, and securities-related changes in accumulated other comprehensive loss.