New York Community warns about heated competition in multifamily lending

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Shares of New York Community Bancorp fell 13.5% Wednesday after it reported lower third-quarter profits, said nonperforming assets rose and offered a tepid outlook on multifamily lending.

Net income fell 7% from a year earlier to $99 million because of a higher provision for loan losses and a reduction in net interest income, according to the $52.5 billion-asset company's quarterly results. Earnings per share declined by a penny to 19 cents and matched the consensus estimate compiled by FactSet Research Systems.

Nonperforming assets rose 8% from the previous quarter to $67.9 million, driven by a $5.4 million increase in nonaccrual mortgages. The loan-loss provision more than doubled to $4.8 million.

But New York Community, based in Westbury, N.Y., said the provision increase did not reflect any material credit quality issues. On a call with analysts, CEO Joseph Ficalora said that nonperforming assets, while up, represented only 13 basis points of total assets. “Our asset quality metrics remain solid,” he said.

Ficalora added that the company, in order to protect credit quality, is passing on multifamily loan deals where competitors are offering relatively loose refinancing terms. Total net loans of $40.7 billion were essentially flat from the previous quarter.

“During the quarter, we experienced a number of loans refinancing away from us, as the dollars offered by alternative lenders did not meet our stringent underwriting standards,” Ficalora said in the company’s earnings release.

Executives said on the call that they were taking a cautious approach to the heated competition in multifamily refinancing and that it could continue to constrain loan growth.

Deposits also tapered off in the third quarter. Total deposits slipped 2% from the previous quarter as interest-bearing checking and money market accounts fell 8%.

“As we adjust to a lower-interest-rate environment, we are aggressively managing our deposit costs lower and proactively reducing higher cost deposit balances,” Ficalora said.

Total funding costs declined moderately while asset yields remained unchanged. As a result, the third-quarter net interest margin was 1.99%, down just one basis point from the previous quarter.

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Multifamily Risk appetite Loan-loss provisions Credit quality Earnings Regional banks