New York Community Bancorp reported a drop in its first-quarter profit as rising interest rates depressed demand for its core multifamily loan product and pushed up its cost of funds. Costs related to its impending impending crossover to systemically important financial institution status also hurt results.
The $48.8 billion-asset company said Wednesday that net income dropped 20% to $104 million from last year’s first quarter.
According to Chief Financial Officer Thomas R. Cangemi, New York Community originated $2.2 billion of loans in the first quarter, down 28% year over year.
Cangemi said he is hopeful production will pick up in the second half of 2017, but both he and Chairman and CEO Joseph R. Ficalora left no doubt that the company is continuing to angle for a major acquisition. Such a deal would create enormous value for New York Community shareholders, Ficalora said.
“Clearly, economically it would be much better to approach $50 billion with a sizable transaction,” Ficalora said in a conference call with analysts. “Any deal we announce, because we’re never going to do a bad deal, will make a discernibly better bank.”
New York Community, based in Westbury, N.Y., thought it landed that deal with the $14.6 billion-asset Astoria Financial in Lake Success, N.Y., but the $2 billion transaction fell through in December.
Until the next one comes along, New York Community will have to navigate conditions made tricky by rising interest rates, not to mention the looming SIFI question. Barring a deal, the company has room to generate about $1.5 billion of loans a quarter, before it would have to confront a decision about crossing the $50 billion-asset SIFI threshold in the fourth quarter, Cangemi said.
Reflecting the drop in loan production, New York Community’s balance sheet expansion was muted. Average loans totaled $39.1 billion, up 1.6% year over year, while average deposits increased 0.6% to $28.9 billion.
New York Community said its net interest margin shrunk 15 basis points during the quarter to 2.71%. Revenue totaled $331.1 million, down 8.8% year over year.
Noninterest expenses, which totaled $166.8 million for the three months that ended March 31, rose 7% from the same period in 2016. The company is hoping to keep quarterly noninterest expense costs for the remainder of 2017 in the $165 million range, Cangemi said.
Asset quality remained a bright spot. First-quarter chargeoffs totaled just $9.2 million and they were confined to the troubled $147 million taxi medallion portfolio. New York Community did not report any credit losses from its core multifamily and commercial real estate portfolios.