New York Community Bancorp will soon have an open runway to book more loans now that the Westbury company has finally landed its big acquisition.
Management had been keeping an eye on its portfolio — and conducting loan sales — in recent quarters as it tiptoed around the $50 billion mark in assets, a threshold that triggers added regulatory scrutiny.
New York Community agreed late last year to buy the $15.2 billion-asset Astoria Financial in Long Island City, N.Y., a deal that should bring cheaper funding while helping offset the negative effects of becoming a systemically important financial institution, or SIFI.
While the company had $50.3 billion in assets at Dec. 31, it will not become a SIFI until it averages $50 billion over four quarters. Executives said during a conference call Wednesday to discuss quarterly results that the company will likely meet that requirement on April 1.
New York Community, in an effort to slow down asset growth, sold $1.2 billion of multifamily loans and $633 million of commercial real estate loans last year. Absent those sales, the multifamily book would have grown by more than 13% last year, Joseph Ficalora, the company's president and chief executive, said during the call.
While management no longer views such sales as a strategic imperative, executives said they could still sell loans from time to time as a way to boost revenue.
"We have a unique position in the marketplace, and our gains on sales for loans have been very attractive," said Thomas Cangemi, New York Community's chief financial officer. "You can expect more activity this quarter to straddle the SIFI threshold, but going forward we will be opportunistic."
Astoria should give New York Community significant liquidity, which should help lower a loan-to-deposit ratio that was more than 130% at Dec. 31. Total loans rose 4% between Sept. 30 and Dec. 31 after the company originated $3.7 billion of held-for-investment loans. That total was $12.7 billion for 2015.
"Our business model is to create significant liquidity in the closing of a transaction," along with an improved loan-to-deposit ratio, Ficalora said. "That will be the case here. It's just a matter of when that happens."
New York Community said in October when it agreed to buy Astoria that it expected the deal to close by the end of 2016. An analyst asked whether it could close sooner given that other recent deals had shorter time frames.
"It is dependent on regulatory approval and obviously that is beyond our control," Cangemi said. "We will work real hard to close it as soon as possible. … We were conservative in our approach."
Executives also said that other recently announced acquisitions are a positive sign for the industry. On Tuesday, Huntington Bancshares in Columbus, Ohio, said it would buy FirstMerit for $3.4 billion, and Chemical Financial in Midland, Mich., announced a deal to buy Talmer Bancorp for $1.1 billion.
"We're very pleased that the M&A environment has continued to be robust," Cangemi said. "Obviously there was a very large announcement yesterday, which would lead you to believe that there's an understanding that M&A is now part of the fabric of the market, and I think it's a positive."