DBRS: NYCB’s 3Q Core Results Down on Lower Mtge Banking

Summary:
• NYCB reported 3Q15 net income of $114.7 million, a 7.3% decrease compared to $123.7 million earned for 2Q15. The previous quarterly results were boosted by $7.8 million gain on the sale of an OREO property.
• DBRS views NYCB’s 3Q15 core results as reflecting continued sound fundamentals, including strong loan and deposit 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) 3Q15 results as a continuation of recent performance trends, highlighted by solid deposit and loan growth. The Company, with $49.0 billion in total assets at quarter-end, is managing its balance sheet to remain under the $50 billion SIFI threshold over the near term and, to help it achieve this, sold participations in certain multi-family and commercial real estate loans to other financial institutions.

Net interest income decreased from the linked-quarter largely reflecting lower prepayment penalty income. Noninterest income also declined on lower mortgage banking income and the previous quarter’s large gain on sale of an OREO property. NYCB expense discipline continues and expenses were lower this quarter largely driven by reductions in certain franchise taxes and FDIC deposit insurance premiums. The Company maintains an enviably-low efficiency ratio, which was 46.1% for 3Q15.

Asset quality continued to be sound and improved linked quarter on lower levels of nonaccrual loans and OREO. Additionally, the Company experienced a net recovery on non-covered assets for 3Q15. Given the ongoing extremely modest loss levels, NYCB released reserves again this quarter through a negative provision on non-covered loans.

Reflecting a modestly growing balance sheet and earnings retention, NYCB’s capital levels were relatively flat quarter-on-quarter.

NYCB’s ratings consider the Company’s resilient earnings generation and sound asset quality through the credit 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, which reduces financial flexibility.

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