New York Community posts best quarterly loan growth in 15 years

New York Community Bancorp is on a lending streak that it expects to continue in 2022.

The Hicksville, New York-based company reported loans and leases held for investment of $45.7 billion at the end of the fourth quarter, up 7% from the same period in 2020. It was the largest quarterly increase in lending since the first quarter of 2006, the company said.

Multifamily lending, long the bread-and-butter category for New York Community, was the primary driver. But the company’s investment in its specialty finance division, a segment that includes asset-based lending and equipment loans, is also paying off in the form of more originations and commitments.

The lending pipeline looks strong into the first quarter, Chairman and CEO Thomas Cangemi told analysts Wednesday during the company’s quarterly earnings call. Borrowers are making property purchases in anticipation of higher interest rates, he said.

New York Community typically has a strong fourth quarter in lending before slowing down a bit in the first quarter and then ramping up, Cangemi said. “But it’s coming out of the gate very strong,” he added.

Multifamily loans at the $59.5 billion-asset company rose 7% year over year, totaling $34.6 billion at the end of the fourth quarter and accounting for 76% of the company’s loan portfolio. Specialty finance loans increased to $3.7 billion, up 15% from the year-ago period.

Meanwhile, commercial real estate loans declined to $6.7 billion, down 2% year over year. While Cangemi has expressed a desire to book more such loans, he said the company hasn’t “seen a whole lot of CRE business,” though it sometimes refinances current customers.

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New York Community’s current pipeline includes $2.2 billion in loans, with multifamily loans of $1.7 billion representing the bulk of the pipeline, followed by $251 million in specialty finance loans, the company said.

One factor that could diversify New York Community’s loan portfolio: The company’s pending acquisition of Flagstar Bancorp. Among other potential benefits, the deal would give New York Community a sizable mortgage warehouse business and provide it the opportunity to cross-sell its products and services through Flagstar’s retail network, which in theory could lead to more commercial lending.

The $2.6 billion acquisition was announced last April and was initially expected to close during the fourth quarter. But New York Community, which has yet to receive approval from the Federal Reserve, later pushed back the timeline and now expects the Flagstar deal to be finalized sometime this year.

Cangemi said Wednesday that he is “very confident” the purchase will close, pointing to a $28 billion community reinvestment plan, announced this week, that he said should help “pave the way” for approval. Under the plan, New York Community will provide loans, investments and other financial support to communities and small businesses over five years.

“As far as the timing, it’s in the hands of the regulators,” Cangemi said.

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During the fourth quarter, New York Community reported net income of $150 million, down 21% year over year. The decline reflected a $55 million tax benefit that the company realized in the fourth quarter of 2020.

Earnings per share were 30 cents, down 23% year over year and 1 cent below the mean estimate of analysts polled by FactSet Research Systems.

During the quarter, New York Community incurred $7 million in charges related to the Flagstar merger, bringing last year’s total for such charges to $23 million. Noninterest expenses totaled $135 million, up $1 million from the year-ago period.

Deposits rose 8% to $35.1 billion. The company, which is moving away from higher-cost deposits in search of less expensive funding, reported a 47% increase in non-interest bearing accounts at the end of the year and a 39% increase in savings accounts.

Certificates of deposit, meanwhile, declined 18% over the course of the year. Still, CDs made up 24% of New York Community’s total deposits, while non-interest- bearing accounts made up 13%.

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