Filing summary
Entity and period: The supplied filing is New York Community Bancorp, Inc.’s consolidated Form 10-K for the fiscal year ended December 31, 2021—not a Form 10-K for Flagstar Bank, National Association. Flagstar Bancorp, Inc. was the subject of a pending acquisition described in the filing. The figures below are for NYCB and its consolidated subsidiaries.
Business context and key financial metrics
NYCB operated 237 branches across New York, New Jersey, Ohio, Florida, and Arizona. Its lending was concentrated in New York multifamily and commercial real estate, alongside specialty finance loans and leases.
| Metric | FY 2021 / Dec. 31, 2021 | Prior comparable period |
|---|---|---|
| Net income | $596 million | $511 million in 2020; up 17% |
| Net income available to common shareholders | $563 million | $478 million in 2020; up 18% |
| Diluted earnings per share | $1.20 | $1.02 in 2020 |
| Net interest income | $1.289 billion | $1.100 billion in 2020; up 17% |
| Net interest margin | 2.47% | 2.24% in 2020 |
| Non-interest income | $61 million | $61 million in 2020 |
| Non-interest expense | $541 million, including $23 million of merger costs | $511 million in 2020 |
| Efficiency ratio | 38.36% | 44.02% in 2020 |
| Operating cash flow | $290 million | $334 million in 2020 |
| Cash and cash equivalents | $2.211 billion | $1.948 billion at year-end 2020 |
| Total assets | $59.527 billion | $56.306 billion at year-end 2020 |
| Loans and leases held for investment | $45.681 billion | $42.822 billion at year-end 2020 |
| Total deposits | $35.059 billion | $32.437 billion at year-end 2020 |
| Borrowed funds | $16.562 billion | $16.084 billion at year-end 2020 |
| Total stockholders’ equity | $7.044 billion | $6.842 billion at year-end 2020 |
Material changes and financial position
- Net interest income rose mainly because funding costs fell: interest expense decreased $208 million to $400 million. Average interest-bearing deposit cost declined to 0.38% from 1.06%; average borrowed-funds cost declined to 1.82% from 2.03%.
- Loan growth was 7% year over year, led by multifamily loans, up $2.4 billion, and specialty finance, up $451 million. Multifamily loans were $34.6 billion, or 76% of loans held for investment; CRE loans were $6.7 billion, or 15%.
- Deposits increased 8%. Core deposits, defined as deposits excluding CDs, rose 20% to $26.6 billion. CDs declined 18% to $8.4 billion, while non-interest-bearing deposits grew 47% to $4.5 billion. Brokered deposits were $5.7 billion.
- Net charge-offs were a recovery of $2 million, compared with $19 million of net charge-offs in 2020. The provision for credit losses was $3 million versus $62 million. The allowance for credit losses on loans and leases was $199 million, or 0.44% of loans.
- Non-performing loans were $33 million, or 0.07% of loans, versus $38 million a year earlier. Non-performing assets were $41 million, or 0.07% of assets. Loans 30–89 days past due increased to $67 million from $16 million.
- Liquidity included $8.4 billion of available FHLB borrowing capacity, $4.6 billion of unpledged available-for-sale securities, and up to $1.0 billion of Federal Reserve discount-window capacity; the filing reports no borrowings against those lines at year-end.
- NYCB’s regulatory capital ratios remained above minimums: common equity Tier 1 was 9.68%, Tier 1 was 10.83%, total risk-based capital was 12.73%, and leverage capital was 8.46%. The Bank was categorized as well capitalized.
- Available-for-sale securities were $5.8 billion. Their unrealized losses were attributed to interest-rate changes rather than credit impairment; no securities credit-loss allowance was recorded.
Outlook, risks, contingencies, and unusual items
- Flagstar acquisition: The announced all-stock transaction was valued at $2.6 billion when announced. NYCB shareholders were expected to own 68% of the combined company and Flagstar shareholders 32%. Shareholders of both companies approved it, but regulatory approvals from the NYSDFS, FDIC, and Federal Reserve remained outstanding as of the filing. The proposed combined company was expected to have $85 billion in assets. NYCB recorded $23 million of merger-related expense in 2021.
- No specific financial guidance: The filing does not provide clear numerical earnings or margin guidance. Management described strategic initiatives including Banking as a Service and a planned USDF stablecoin program, subject to regulatory non-objection; a late-first-quarter 2022 launch was an expectation, not a completed event.
- Interest-rate exposure: The one-year interest-rate gap was negative 7.43%. The filing’s model estimated that a parallel 100-basis-point increase would reduce next-12-month net interest income by 1.37%, and a 200-basis-point increase by 4.91%. A modeled yield-curve inversion was estimated to reduce net interest income by 8.14%. These are scenario estimates based on assumptions, not forecasts.
- Concentrated credit exposure: Multifamily and CRE lending comprised about 91% of loans held for investment. Most multifamily and CRE collateral was in the New York metropolitan area. Rent regulation, property operating conditions, collateral values, and local economic weakness could affect borrower repayment and collateral recovery.
- COVID-19 deferrals: Loans with principal payment deferrals were $479 million at year-end, down from approximately $2.5 billion at year-end 2020; there were no full-payment deferrals remaining. Management warned that borrower difficulties after deferrals could increase non-accrual loans, charge-offs, and credit-loss provisions.
- Other risks: The filing highlights inflation, funding and deposit competition, cybersecurity and third-party service-provider risks, regulatory and compliance requirements, and the LIBOR transition. Some contracts indexed to LIBOR extended beyond its planned cessation dates and required transition planning.
- Tax and legal items: The effective tax rate rose to 26.09% from 13.05%, reflecting higher pretax income, nondeductible merger expenses, a New York State tax-rate increase, and the absence of a $68 million CARES Act-related tax benefit recognized in 2020. NYCB also disclosed shareholder lawsuits challenging merger-related proxy disclosures; it said the claims were without merit and that defendants had not been served.
- Audit: The independent auditor gave an unqualified opinion on the financial statements and internal control over financial reporting. The collective allowance estimate for multifamily and CRE loans was identified as a critical audit matter.
Important facts for investors to verify
- Confirm the intended issuer: this filing covers New York Community Bancorp, Inc., not Flagstar Bank, National Association.
- Check the subsequent outcome and final terms of the Flagstar transaction, including required regulatory approvals, closing, integration costs, and realized synergies.
- Track deposit composition and funding costs, particularly brokered deposits, CDs maturing within one year, and reliance on FHLB advances.
- Review multifamily and CRE credit quality, New York rent-regulation exposure, rising delinquencies, and the performance of loans exiting COVID-related accommodations.
- Assess how actual results compare with the filing’s interest-rate sensitivity scenarios and assumptions about prepayments and deposit behavior.
- Verify the status and economics of the proposed USDF stablecoin program and other Banking-as-a-Service initiatives, including regulatory approvals and associated risks.