New York Community Bancorp, Inc. Reports Third Quarter 2019 Diluted Earnings Per Common Share Of $0.19 As Net Interest Margin Stabilizes

WESTBURY, N.Y., Oct. 30, 2019 /PRNewswire/ --

New York Community Bancorp, Inc. (NYSE: NYCB) (the "Company") today reported net income for the three months ended September 30, 2019 of $99.0 million, up 2% from the $97.2 million reported for the three months ended June 30, 2019. On a year-to-date basis, net income was $293.9 million, down 8% compared to the first nine months of 2018.

Net income available to common shareholders for the third quarter of 2019 was $90.8 million, or $0.19 per common share, compared to $89.0 million, also $0.19 per common share for the second quarter of 2019. For the nine months ended September 30, 2019, net income available to common shareholders totaled $269.2 million, or $0.57 per common share, compared to $296.1 million or $0.60 per common share for the nine months ended September 30, 2018.

Commenting on the Company's third quarter 2019 performance, President and Chief Executive Officer Joseph R. Ficalora stated: "Overall, we are pleased with the Company's performance this quarter. With the FOMC having lowered short term interest rates twice so far during the third quarter, we are beginning to see a positive impact on our funding costs, marking an inflection point in the net interest margin and net interest income. The net interest margin during the third quarter stabilized at 1.99%, down only one basis point from the previous quarter, while net interest income was relatively unchanged.  We anticipate further improvements in our funding costs, and hence our net interest margin going forward due to our liability sensitive balance sheet.

"On the lending front, our loan portfolio continued to grow compared to the level at year-end 2018, led by our multi-family and specialty finance loan portfolios, but our end of period loan portfolio was down modestly compared to the prior quarter. However on an average basis, average total loan balances increased 5% annualized compared to the prior quarter to $40.8 billion. During the quarter, we experienced a number of loans refinancing away from us, as the dollars offered by alternative lenders did not meet our stringent underwriting standards.

"Our overall deposit growth slowed this quarter as we strategically chose to allow higher cost deposits to roll off.  This had a modest favorable impact on deposit costs during the third quarter.  We expect it to have a greater benefit going forward. As we adjust to a lower interest rate environment, we are aggressively managing our deposit costs lower and proactively reducing higher cost deposit balances.

"Our operating expenses, excluding certain items related to severance costs, declined compared to the previous quarter and the efficiency ratio improved to 47.37%.

"Finally, our asset quality metrics continue to be solid. More importantly, we are not seeing any negative credit trends in the rent-regulated portion of our multi-family portfolio post the passage of new rent control laws in June."

DIVIDEND DECLARATION
Reflecting our earnings, asset quality metrics, and strong capital position, the Board of Directors yesterday declared a quarterly cash dividend of $0.17 per share on the Company's common stock.  Based on a closing price of $13.69 as of October 29, 2019, this represents an annualized dividend yield of 5.0%. The dividend is payable on November 25, 2019 to common shareholders of record as of November 11, 2019.

BALANCE SHEET SUMMARY
On a year-to-date basis, total assets increased $638.3 million to $52.5 billion, a 2% increase on an annualized basis.  Similar to previous quarters, the year-to-date increase was primarily the result of loan growth and to a lesser extent, growth in the securities portfolio.  Our balance sheet growth has been funded through deposit growth, mainly through certificates of deposit ("CDs"), while borrowed funds have decreased.

Total loans held for investment rose $678.3 million, or 2% on an annualized basis, compared to December 31, 2018.  Loan growth during the first nine months of 2019, centered in our multi-family loan portfolio and in our commercial and industrial ("C&I") loan portfolio, the majority of which are comprised of specialty finance loans.

Total securities, which consist mainly of available-for-sale securities, rose $243.4 million compared to the balance at December 31, 2018, or 6% on an annualized basis.  However, given the low interest rate environment in place over the past two quarters, we have refrained from meaningfully growing the securities portfolio.

Total deposits rose $807.7 million, or 4% on an annualized basis, to $31.6 billion and total borrowed funds decreased $581.5 million, or 5% on an annualized basis. 

Loans
Total loans, net were $40.7 billion at September 30, 2019, relatively unchanged from the level at the end of the prior quarter, and up $688.7 million or 2% annualized compared to the balance at December 31, 2018. During the quarter, a number of multi-family loans refinanced away from the Bank because other alternative lenders were willing to provide more credit than we were, which was inconsistent with our rigorous underwriting standards. However, on an average basis, average total loans held for investment were $40.8 billion, up $548.2 million or 5% annualized on a linked-quarter basis. Our loan growth on a year-to-date basis continues to be driven by our core multi-family loan product and by our specialty finance portfolio, while the commercial real estate ("CRE") loan portfolio declined modestly.

On a linked-quarter basis, average multi-family loans increased $488.7 million to $30.5 billion up 7% on an annualized basis, while average CRE loans declined modestly to $6.9 billion or 0.3% annualized.  Our specialty lending business reported another strong quarter, with average specialty finance loans and leases increasing $131.1 million to $2.5 billion, up 23% annualized.

The average loan size for multi-family loans is $6.2 million and for CRE loans it is $6.4 million, both relatively stable with the previous quarter. The average weighted life of the multi-family portfolio was 2.1 years and for the CRE portfolio, it was 2.4 years, both unchanged from the prior quarter.

Originations
For the quarter ended September 30, 2019, total loans originated for investment were $2.3 billion compared to $3.0 billion for the quarter ended June 30, 2019. Multi-family originations totaled $1.2 billion, CRE originations were $309.3 million, and specialty finance loans and leases were $637.8 million. During the current quarter, origination activity was tempered as some investors have temporarily postponed their purchase and sale decisions while they assess the full impact of the recently enacted New York State Housing Stability and Tenant Protection Act of 2019. 

Pipeline
Our pipeline remains strong heading into the fourth quarter of the year. Currently, it stands at $2.2 billion, up 10% compared to the loan pipeline at the end of the second quarter.  This includes $1.3 billion in multi-family loans, $250 million in CRE loans, and $540 million in specialty finance loans and leases.

Funding
Deposits
Historically, the Company has been able to gain large institutional deposit balances, during the time that our competitors were not in the market for these types of deposits.  During the current third quarter, several competitors re-entered this market with a demonstrated willingness to pay irrational interest rates on these deposit products.  Rather than compete with these financial institutions, the Company selectively exited many of these relationships during the third quarter, opting instead to grow lower cost retail deposits and other relatively inexpensive funding sources. As a result, the interest-bearing checking and money market accounts category declined $1.6 billion on a year-over-year basis and $810.0 million on a linked-quarter basis. Despite this, for the nine months ended September 30, 2019, total deposits increased $807.7 million or 4% annualized to $31.6 billion.

Given our liability sensitive balance sheet, we are aggressively managing our deposit costs lower and proactively reducing higher cost deposit balances.  The benefit of this strategy should become more apparent in upcoming quarters through lower deposit costs.

Borrowed Funds
At September 30, 2019, total borrowed funds were $13.6 billion, down $581.5 million or 5% annualized compared to the balance at December 31, 2018.  The majority of the decline was the result of a $582.0 million decrease in wholesale borrowings, consisting mainly of Federal Home Loan Bank of New York advances, which ended the quarter at $13.0 billion.

The cost of our borrowings declined three basis points on a linked quarter basis to 2.38%.  We have approximately $5.1 billion of wholesale borrowings at an average rate of 2.06% maturing over the next five quarters.

Asset Quality
The Company's asset quality and asset quality metrics remained solid during the third quarter despite a modest uptick in total non-performing assets ("NPAs").  NPAs increased 8% on a linked-quarter basis to $67.9 million, as a $575,000 decrease in other non-accrual loans was offset by a $5.4 million increase in non-accrual mortgage loans.  Included in this amount was $33.6 million of taxi medallion non-accrual loans.

Total repossessed assets of $11.7 million were unchanged on a linked-quarter basis.  Included in this amount is $9.7 million of repossessed taxi medallions.  As of September 30, 2019, our remaining taxi medallion-related loans totaled $61.0 million, compared to $65.3 million at June 30, 2019.

Net charge-offs for the quarter ended September 30, 2019 declined to $6.5 million or 0.02% of average loans compared to $7.4 million, also 0.02% of average loans in the previous quarter.  On a year-to-date basis, net charge-offs totaled $15.8 million or 0.04% of average loans compared to $13.9 million or 0.04% in the first nine months of 2018. Taxi medallion-related charge-offs were $6.8 million and $9.7 million, for the first nine months of 2019 and 2018, respectively.

More importantly, we are not seeing any negative credit trends in the rent-regulated portion of our multi-family portfolio post the passage of new rent control laws in June. The overall weighted average LTV for our multi-family portfolio was 57.16% at September 30, 2019 and the weighted average LTV for the rent-regulated portion of this portfolio was 53.54%.

EARNINGS SUMMARY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

Net Interest Income
Net interest income for the three months ended September 30, 2019 totaled $235.9 million, compared to the $237.7 million for the three months ended June 30, 2019, and down 5% compared to the $249.5 million for the three months ended September 30, 2018.  Total interest income for the current third quarter rose modestly on a linked-quarter basis, and 7% on a year-over-year basis. Total interest expense also rose modestly on a linked-quarter basis and 24% year-over-year.

For the nine months ended September 30, 2019, net interest income totaled $714.9 million, down $68.8 million, or 9%, compared to the nine months ended September 30, 2018.  Total interest income for the first nine months of 2019 rose $107.7 million or 9% versus the first nine months of 2018, while interest expense increased $176.5 million or 38% over the same time period.

Net Interest Margin
The net interest margin ("NIM") for the third quarter of 2019 was 1.99%, down one basis point compared to the second quarter 2019 NIM.  The average asset yield for the current third quarter was 3.82%, unchanged from the prior quarter, while funding costs declined two basis points to 2.04% from the prior quarter.

Prepayment income for the third quarter was $14.1 million, up 12% from the $12.6 million recorded in the second quarter of 2019, contributing 11 basis points to this quarter's NIM, unchanged from the previous quarter. Excluding the impact from prepayment income, our third quarter NIM would have been 1.88%, on a non-GAAP basis, down one basis point compared to the previous quarter.

For the nine months ended September 30, 2019, the NIM was 2.01%, down 29 basis points compared to the nine months ended September 30, 2018.  This decrease was the result of higher funding costs due to the cumulative impact of multiple short-term interest rate increases during this time frame, offset partially by higher yields on our interest-earning assets.  The average asset yield increased 14 basis points to 3.81%, while the cost of funds increased 49 basis points to 2.03%.

Prepayment income for the nine months ended September 30, 2019 was $36.3 million, down 10% from the nine months ended September 30, 2018.  Prepayment income contributed 10 and 12 basis points, respectively to the NIM.  Excluding the impact from prepayment income, the NIM, on a non-GAAP basis, would have been 1.91%, compared to 2.18% for the prior nine months.

Provision for Loan Losses
For the third quarter of 2019, the Company reported a provision for loan losses of $4.8 million compared to a provision for loan losses of $1.8 million in the previous quarter. On a year-to-date basis, the Company reported a provision for loan losses of $5.4 million compared to a provision for loan losses of $15.5 million in the first nine months of 2018.

Non-Interest Income
For the three months ended September 30, 2019, total non-interest income increased $6.8 million to $24.4 million compared to $17.6 million in the three months ended June 30, 2019.  Included in the other income category in the current quarter is a $7.9 million gain on sale of a branch property located in Florida.

For the nine months ended September 30, 2019, non-interest income totaled $66.8 million compared to $68.5 million for the nine months ended September 30, 2018.  Included in the nine-month period for 2018 was revenue of $15.7 million related to our former wealth management business, Peter B. Cannell & Co., Inc. which was sold in the first quarter of 2019.  In addition to the aforementioned gain on the sale of a branch property, also included in the nine month period for 2019 was $7.8 million of net gains on securities compared to a net loss of $810,000 for the first nine months of 2018.

Non-Interest Expense
Total non-interest expense for the three months ended September 30, 2019 was $123.3 million, relatively unchanged from the prior quarter.  Included in the current third quarter was $1.4 million in severance costs.  For the nine months ended September 30, 2019, total non-interest expenses declined $26.6 million, or 6%, to $385.1 million. Our operating expenses during the first nine months of 2019 included certain items related to severance costs and branch rationalization, which totaled $10.4 million. The efficiency ratio for the current third quarter was 47.37% compared to 48.20% in the second quarter of the year.

Income Taxes
Income tax expense for the three months ended September 30, 2019 totaled $33.2 million, compared to $33.1 million in the prior quarter.  The effective tax rate was 25.09% during the current third quarter, compared to 25.42% in the second quarter of 2019. 

For the nine months ended September 30, 2019, income tax expense totaled $97.3 million, compared to $104.4 million for the nine months ended September 30, 2018.  The effective tax rate was 24.88% for the first nine months of 2019, compared to 24.56% for the year-ago nine months.

About New York Community Bancorp, Inc.
Based in Westbury, NY, New York Community Bancorp, Inc. is a leading producer of multi-family loans on non-luxury, rent-regulated apartment buildings in New York City, and the parent of New York Community Bank. At September 30, 2019, the Company reported assets of $52.5 billion, loans of $40.7 billion, deposits of $31.6 billion, and stockholders' equity of $6.7 billion.

Reflecting our growth through a series of acquisitions, the Company operates 239 branches through eight local divisions, each with a history of service and strength: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New York; Garden State Community Bank in New Jersey; Ohio Savings Bank in Ohio; and AmTrust Bank in Florida and Arizona.

Post-Earnings Release Conference Call
The Company will host a conference call on Wednesday, October 30, 2019, at 8:30 a.m. (Eastern Time) to discuss its third quarter 2019 performance. The conference call may be accessed by dialing (877) 407-8293 (for domestic calls) or (201) 689-8349 (for international calls) and asking for "New York Community Bancorp" or "NYCB." A replay will be available approximately three hours following completion of the call through 11:59 p.m. on November 3, 2019 and may be accessed by calling (877) 660-6853 (domestic) or (201) 612-7415 (international) and providing the following conference ID: 13694726. In addition, the conference call will be webcast at ir.myNYCB.com, and archived through 5:00 p.m. on November 27, 2019.

Cautionary Statements Regarding Forward-Looking Information
This earnings release and the associated conference call may include forward‐looking statements by the Company and our authorized officers pertaining to such matters as our goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of probable losses on loans; our assessments of interest rate and other market risks; and our ability to achieve our financial and other strategic goals.

Forward‐looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Additionally, forward‐looking statements speak only as of the date they are made; the Company does not assume any duty, and does not undertake, to update our forward‐looking statements. Furthermore, because forward‐looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in our statements, and our future performance could differ materially from our historical results.

Our forward‐looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of our loan or investment portfolios; changes in competitive pressures among financial institutions or from non‐financial institutions; our ability to obtain the necessary shareholder and regulatory approvals of any acquisitions we may propose; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations, and our ability to realize related revenue synergies and cost savings within expected time frames; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties and/or are beyond our control.

More information regarding some of these factors is provided in the Risk Factors section of our Form 10‐K for the year ended December 31, 2018 and in other SEC reports we file. Our forward‐looking statements may also be subject to other risks and uncertainties, including those we may discuss in this news release, on our conference call, during investor presentations, or in our SEC filings, which are accessible on our website and at the SEC's website, www.sec.gov.

- Financial Statements and Highlights Follow - 

NEW YORK COMMUNITY BANCORP, INC.
RECONCILIATIONS OF CERTAIN GAAP AND NON-GAAP FINANCIAL MEASURES
(unaudited)

While stockholders' equity, total assets, and book value per share are financial measures that are recorded in accordance with U.S. generally accepted accounting principles ("GAAP"), tangible stockholders' equity, tangible assets, and tangible book value per share are not.  Nevertheless, it is management's belief that these non-GAAP measures should be disclosed in our earnings releases and other investor communications for the following reasons:

1. Tangible stockholders' equity is an important indication of the Company's ability to grow organically and through business combinations, as well as its ability to pay dividends and to engage in various capital management strategies.
2. Returns on average tangible assets and average tangible stockholders' equity are among the profitability measures considered by current and prospective investors, both independent of, and in comparison with, the Company's peers.
3. Tangible book value per share and the ratio of tangible stockholders' equity to tangible assets are among the capital measures considered by current and prospective investors, both independent of, and in comparison with, its peers. 

Tangible stockholders' equity, tangible assets, and the related non-GAAP profitability and capital measures should not be considered in isolation or as a substitute for stockholders' equity, total assets, or any other profitability or capital measure calculated in accordance with GAAP.  Moreover, the manner in which we calculate these non-GAAP measures may differ from that of other companies reporting non-GAAP measures with similar names. 

The following table presents reconciliations of our common stockholders' equity and tangible common stockholders' equity, our total assets and tangible assets, and the related GAAP and non-GAAP profitability and capital measures at or for the periods indicated:

While our net interest margin, including the contribution of prepayment income is recorded in accordance with GAAP, adjusted net interest margin, which excludes the contribution of prepayment income is not.  Nevertheless, management uses this non-GAAP measure in its analysis of our performance, and believes that this non-GAAP measure should be disclosed in our earnings releases and other investor communications for the following reasons:

1. Adjusted net interest margin gives investors a better understanding of the effect of prepayment income and other items on our net interest margin. Prepayment income in any given period depends on the volume of loans that refinance or prepay, or securities that prepay, during that period. Such activity is largely dependent on external factors such as current market conditions, including real estate values, and the perceived or actual direction of market interest rates.
2. Adjusted net interest margin is among the measures considered by current and prospective investors, both independent of, and in comparison with, our peers.

SOURCE New York Community Bancorp, Inc.

Related Links

http://www.mynycb.com