DBRS: NYCB’s 3Q14 Earnings Increase QoQ on Higher Net Interest Income

Summary:
• NYCB reported 3Q14 net income of $120.3 million, a 1.3% increase compared to $118.7 million earned for 2Q14, driven by higher net interest income and lower expenses.
• DBRS views NYCB’s 3Q14 results as reflecting continued sound fundamentals, including strong loan growth, low expenses, solid asset quality and adequate capital.
• DBRS rates the Company’s Issuer & Senior Debt rating at BBB (high) with a Stable trend.

DBRS, Inc. (DBRS) considers New York Community Bancorp, Inc.’s (NYCB or the Company) 3Q14 results as a continuation of recent performance trends highlighted by solid deposit and loan growth. The Company is managing its balance sheet to remain under $50 billion over the near term and, to help it achieve this, sold some portfolio single family residential mortgage loans during the quarter with additional loan sales expected in future quarters. Net interest income increased from the linked quarter reflecting higher prepayment penalty income and average loan balances. Additionally, NYCB continues to do a good job of controlling costs. Expenses were lower this quarter reflecting a decline in the costs to manage foreclosed assets as well as a reduction in FDIC insurance premiums. The Company continues to maintain an enviably low efficiency ratio in the low 40% range.

Asset quality continued to be sound and declined linked quarter on lower levels of other real estate owned. Given current loss levels, DBRS views the Company’s level of reserve coverage as solid.

Reflecting a relatively flat balance sheet, NYCB’s capital levels increased modestly quarter-on-quarter. DBRS views the Company’s capital levels as sufficient given current loss rates, however, NYCB’s large dividend payout ratio does reduce financial flexibility.

NYCB’s ratings consider the Company’s resilient earnings generation and sound asset quality through the cycle, which reflects positively on its lower risk niche business of multi-family lending, primarily on rent controlled/stabilized buildings in New York City. The ratings also reflect NYCB’s relatively high, yet manageable level of wholesale funding reliance, exposure to larger credits and geographic concentration in its loan book and its high dividend payout ratio.

Note:
All figures are in U.S. dollars unless otherwise noted.