SEC Filing Summary: New York Community Bancorp, Inc. — First Quarter 2018
Registrant clarification: The supplied filing is New York Community Bancorp, Inc.’s Form 10-Q, not a filing by Flagstar Bank, National Association. It covers the quarter ended March 31, 2018; the financial statements are unaudited.
Business context and reporting period
New York Community Bancorp is the holding company for New York Community Bank and New York Commercial Bank. Its lending is concentrated in multifamily real estate, with substantial New York City exposure. The company had $49.7 billion in assets, 255 branches, and reported four-quarter average assets of $48.9 billion, below the then-applicable $50 billion SIFI threshold.
Financial results and key metrics
| Metric | Q1 2018 | Comparable period / change |
|---|---|---|
| Interest income | $404.3 million | $399.1 million in Q1 2017 |
| Net interest income | $270.3 million | Down $24.6 million year over year |
| Net interest margin | 2.42% | 2.71% in Q1 2017; 2.48% in Q4 2017 |
| Provision for non-covered loan losses | $9.6 million | $1.8 million in Q1 2017 |
| Non-interest income | $22.9 million | $32.2 million in Q1 2017 |
| Non-interest expense | $139.1 million | $166.9 million in Q1 2017 |
| Net income | $106.6 million | $104.0 million in Q1 2017 |
| Net income available to common shareholders; diluted EPS | $98.3 million; $0.20 | $104.0 million; $0.21 in Q1 2017 |
| Cash from operating activities | $148.3 million | $370.1 million in Q1 2017 |
| Cash and cash equivalents, quarter-end | $2.68 billion | $2.53 billion at December 31, 2017 |
Interest expense rose to $134.0 million from $104.2 million year over year, reflecting higher deposit and borrowing costs. Adjusted NIM excluding prepayment income was 2.29%, versus 2.60% a year earlier. Management reported a 47.45% efficiency ratio, improving from 50.99% in Q1 2017.
Total assets were $49.65 billion; net loans $38.76 billion; deposits $29.24 billion; borrowed funds $13.34 billion; and stockholders’ equity $6.78 billion. The allowance for loan losses was $161.1 million, or 0.41% of loans. Net charge-offs were $6.5 million, equal to 0.02% of average loans. Non-performing loans were $73.4 million and non-performing assets $88.8 million, or 0.18% of assets.
Common equity Tier 1, Tier 1, total risk-based capital, and leverage ratios were 11.46%, 12.93%, 14.43%, and 9.50%, respectively. The banks also exceeded the stated minimum capital levels to be categorized as well capitalized.
Material changes versus comparable periods
- Net income rose 2% year over year, but common earnings fell 5% and diluted EPS declined from $0.21 to $0.20, partly because Q1 2018 included $8.2 million of preferred dividends.
- NIM contracted 29 basis points year over year. Management attributed pressure to rising short-term rates and higher retail deposit pricing.
- Loans held for investment grew $501.5 million from year-end, led by multifamily lending; originations were $2.42 billion, up 46% year over year but down 22% from the seasonally strong prior quarter.
- Operating expenses declined 17% year over year. Management linked the reduction to the 2017 exit from mortgage banking and continued cost-control efforts. Mortgage banking income was zero versus $9.8 million in Q1 2017.
- Deposits increased $133.3 million from year-end, while borrowed funds increased $430.1 million. The increase in borrowings was primarily FHLB advances.
- Net interest income declined despite higher interest income, as interest expense increased more sharply. The 2017 loan comparison also included covered loans later sold in 2017.
Outlook, risks, contingencies, and unusual items
- Outlook: The filing provides no specific earnings or NIM guidance. Management described continued loan growth and cost savings, while noting that rising funding costs were weighing on margins. It said the company could grow its balance sheet by approximately $3 billion before exceeding the SIFI threshold, based on the trailing four-quarter asset average.
- Interest-rate exposure: The one-year cumulative interest-rate gap was negative 19.66%. Modeling estimated that a 100- or 200-basis-point rate increase would reduce next-12-month net interest income by 4.00% or 7.89%, and reduce net portfolio value by 5.68% or 11.52%, respectively. These are model estimates dependent on assumptions.
- Credit concentration: Multifamily loans were 73.7% of held-for-investment loans; 64.0% of multifamily loans and 68.9% of CRE loans were secured by New York City properties. Multifamily, non-owner-occupied CRE, and ADC loans equaled 750% of bank risk-based capital, within the stated 850% limit.
- Taxi medallion exposure: Non-accrual taxi medallion-related loans were $44.8 million; related loans 30–89 days past due were $6.7 million, and repossessed medallions were $8.8 million. The filing identifies taxi medallion loan deterioration as a driver of higher year-over-year non-performing loans.
- Funding and liquidity: CDs totaling $7.1 billion, or 78.3% of CDs, were due within one year. Available FHLB-NY borrowing capacity was $7.0 billion; the banks also reported $3.4 billion of available-for-sale securities and additional discount-window access.
- Securities and accounting: Unrealized losses on securities were $34.9 million at quarter-end, which management primarily attributed to rates and spread volatility rather than credit risk. Adoption of the new equity-security accounting standard moved fair-value changes into earnings; adoption of the tax-effects standard increased retained earnings by $2.5 million. The company was evaluating the expected-loss credit standard, whose adoption could materially affect financial position and results.
- Other: The board declared a $0.17-per-share common dividend payable in May 2018. Management reported no material change in disclosed risk factors; ordinary-course legal proceedings were considered immaterial in aggregate. Disclosure controls were judged effective.
Important facts for investors to verify
- Confirm the issuer: this summary concerns New York Community Bancorp, not Flagstar Bank, National Association.
- Track deposit pricing, borrowing costs, NIM, and the stated interest-rate sensitivity assumptions as rates change.
- Review multifamily and New York City real-estate concentration, the 750% CRE-related concentration measure, and future credit provisions.
- Monitor taxi medallion non-accrual loans, repossessed assets, charge-offs, and recoveries.
- Assess near-term CD maturities, brokered deposits, wholesale borrowing dependence, and available liquidity capacity.
- Reconcile common earnings and EPS with preferred dividends, mortgage-banking exit effects, and continuing expense reductions.