FLG

Business Context and Reporting Period

Company: New York Community Bancorp, Inc. (Parent of New York Community Bank and New York Commercial Bank)

Filing Type: Form 10-Q (Quarterly Report)

Period Ended: March 31, 2009

Overview: The Company is a bank holding company operating primarily in New York City, Long Island, Westchester County, and New Jersey. Its business model emphasizes multi-family mortgage lending on below-market rental apartment buildings. As of March 31, 2009, the Company held total assets of $32.4 billion.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability: Net income increased 22.5% year-over-year to $88.7 million, driven by a 28.2% increase in net interest income.
• Net Interest Income: Rose to $206.9 million due to a 48-basis point improvement in net interest margin (to 2.89%) and loan growth. This was achieved despite a 38-basis point decline in asset yields, as funding costs fell 93 basis points year-over-year.
• Asset Quality: Non-performing assets increased to $176.8 million (0.55% of total assets) from $114.8 million at year-end 2008. Net charge-offs were $5.1 million for the quarter (0.02% of average loans).
• Loan Portfolio: Total loans increased $101.2 million to $22.3 billion. Multi-family loans grew $131.2 million to $15.9 billion (71.1% of total loans), while Acquisition, Development, and Construction (ADC) loans declined $54.0 million as the Company reduced exposure to this higher-risk category.
• Liquidity: Cash and cash equivalents decreased to $167.3 million from $203.2 million at year-end. Operating activities used $78.2 million in net cash, while investing activities provided $40.6 million.

Guidance, Outlook, and Risks

• Management Commentary: Management attributes improved performance to increased loan production and a strategic reduction in funding costs. The Company continues to focus on multi-family lending with conservative underwriting standards.
• Interest Rate Risk: The Company maintains a negative one-year interest rate sensitivity gap of -0.37%. Management models indicate that a 200-basis point increase in interest rates would decrease Net Portfolio Value (NPV) by 18.68% and future net interest income by 1.16%.
• Capital Position: The Company and its subsidiaries are categorized as "well capitalized." Tangible stockholders' equity to tangible assets ratio improved to 5.75% from 5.66% at year-end.
• Risks and Contingencies:
  • Securities Impairment: The Company holds significant unrealized losses on held-to-maturity ($61.3 million) and available-for-sale ($41.4 million) securities. Management currently deems these temporary, citing intent and ability to hold to maturity, but notes that further market deterioration could trigger other-than-temporary impairment (OTTI) charges.
  • Economic Environment: Rising unemployment in the Company's service areas (NYC, Long Island, NJ) and declining real estate values pose risks to loan performance.
  • FDIC Assessments: FDIC insurance premiums increased significantly in Q1 2009 ($6.2 million) compared to prior periods, with an additional special assessment expected in Q2 2009.

Investor Verification Checklist

• Securities Portfolio Quality: Verify the stability of the $5.8 billion securities portfolio, specifically the $1.8 billion in "other" held-to-maturity securities (corporate bonds, capital trust notes) which carry significant unrealized losses.
• Non-Performing Loan Trends: Monitor the trajectory of non-performing loans, which rose to $175.3 million (0.79% of total loans), with a specific focus on the ADC and Commercial Real Estate segments.
• Funding Cost Sustainability: Assess the ability to maintain low funding costs as the Company relies heavily on wholesale borrowings ($12.6 billion) and brokered deposits.
• FDIC Assessment Impact: Confirm the timing and magnitude of the proposed 10-basis point special FDIC assessment expected in Q2 2009.
• Dividend Policy: Note the declaration of a $0.25 per share quarterly dividend, payable May 19, 2009, and its impact on retained earnings.