New York Community Bancorp Inc. has weathered previous economic downturns, but it now faces a gale-force wind as the economic recession hits the Big Apple's real estate sector.

A softening market for apartment rentals, aggravated by rising unemployment, is putting pressure on New York Community's core business of making loans to New York City landlords. And pending legislation and legal issues could spell more trouble for the parent of New York Community Bank and New York Commercial Bank.

Despite these concerns, Joseph R. Ficalora, New York Community's chairman, president and chief executive, is bullish on its prospects, even characterizing the weak economy as a chance to grow.

"Our opportunity in the future period to gain share of our particular niche is very real," and New York Community is profitable and lending, Ficalora said.

With rivals such as Washington Mutual Inc. and North Fork Bancorp having been absorbed by larger banks, the $32 billion-asset company expects to boost its 15% share of the New York area multifamily lending market this year. Its loan portfolio grew by 9% last year, to about $22 billion, and it plan to increase lending by "double digits" this year to take advantage of the vacuum, Ficalora said.

He said New York Community's strength resides in its portfolio of loans to owners of rent-controlled buildings that have more than four units. About 70% of its book, or $15.7 billion, consists of those types of loans, which Ficalora said rarely go bad.

"If you look back, we have not had a loss in our multifamily niche for 29 years," he said.

New York Community has 215 branches in the New York area and northeastern New Jersey. The Westbury company's net income rose 52% in the fourth quarter, to $102.2 million. It had a relatively modest $7.7 million loan-loss provision in 2008 after setting aside zero for loan losses in 2007.

Yet while Ficalora is optimistic about his company's main business, analysts are more guarded.

Anthony Davis, a managing director with Stifel, Nicolaus & Co., said New York's historically stable rental market now faces enormous turbulence. The city's unemployment rate is projected to rise to as high as 11.5% by yearend as financial firms, its economic engine, continue to shed workers.

Widespread rent declines in the market are another concern. Landlords are absorbing broker frees and granting one to three months of free rent.

"The New York City apartment market is feeling the stress of what is happening on Wall Street," Davis said. But he said New York Community may be insulated, given its conservative lending standards and that most of its landlords already charge below-market rates.

Matthew Kelley, an analyst at Sterne, Agee & Leach Inc. in Birmingham, Ala., agreed that pressures in the local rental market could take a toll on New York Community. It has navigated previous downturns, but there is no guarantee it will coast through this exceptionally steep decline, he said. Last month Kelley downgraded New York Community shares to "sell," from "hold."

"They are really in a show-me type stage," he said. "I don't think that New York multifamily is going to be immune from the recession."

Beyond such broader economic challenges, two recent developments also could have implications for New York Community. The first involves a court decision rendered this month that could force the real estate firm Tishman Speyer Properties to repay millions of dollars in rent to its tenants. The property owner was found to have illegally deregulated 3,000 apartments after getting a tax break from the city.

Tishman Speyer is appealing the decision. If upheld, the ruling could set a precedent forcing other landlords that converted apartments to repay back rent. That could depress the New York rental market, making it harder for New York Community's borrowers to repay their loans.

Meanwhile, legislation in Albany would limit rent increases on vacated, rent-controlled apartments and reregulate tens of thousands of apartments that have been converted to market rate, among other effects. That, in turn, could impinge on New York Community's business because it depends on landlords' ability to secure and repay their loans. Most of the bank's borrowers also take out loans to fix up their properties and eventually raise rents. But falling rents discourage such borrowing. The New York State Assembly passed the measure in February, and the state Senate is expected to debate it after the state budget is finalized.

Ficalora said he is keeping close tabs on the Tishman Speyer case and the rent bill, though he said it is too soon to speculate on how those issues might affect his company.

One key to New York Community's future financial strength may be its ability to resume making acquisitions. The company aggressively bought up other banks earlier in the decade. Ficalora said it is again on the lookout for deals — focusing on failed East Coast banks with strong fundamentals — after shying away from them since 2007.

In January, New York Community's board rejected nearly $600 million in financial aid from the Treasury's Troubled Asset Relief Program.

"Congress felt the recipients of Tarp should not use that money to buy banks — we're going to buy banks," Ficalora said. "We are not an appropriate recipient of" Tarp funds, "and we can do fine without it."

Maclovio Pina, an equity analyst with Morningstar Inc., said New York Community has a sound enough capital base to pursue acquisitions: a tangible common equity ratio of 5.6% and Tier 1 ratio of 11.5%. Those figures are strong compared with other banking companies of New York Community's size, he said.

"Their biggest risk would be overpaying for something, which is unlikely these days," Pina said. "In general their history speaks to their growth, mostly through acquisitions."

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