New York Community Bancorp has spent several quarters selling assets to stay just below the $50 billion-asset threshold. Those sales paid off in another way in the fourth quarter, providing fee income that helped the Westbury, N.Y., company beat earnings forecasts.
The company said Thursday that it earned $131.2 million in the fourth quarter, up 9% from the same period a year earlier. Per-share earnings of 30 cents were 3 cents higher than the average estimate of analysts polled by Bloomberg.
The $48.6 billion-asset lender has spent years preparing to crossing the $50 billion threshold, which would make it subject to new regulations as a systematically important financial institution.
But on a Thursday conference call, Chief Executive Joe Ficalora said that all the debate about the asset threshold may soon be settled. Based on his conversations in Washington, he thinks the bar could soon be raised.
"We are closer to actually having that happen than we've been the at any other time," he said. "There are both Democrats and Republicans advocating that we move the bar. So it could happen relatively quickly."
Whether or not there is reform, Ficalora still hopes to jump past the threshold with a large acquisition. The bank has been working with its regulators to prepare for possible large deals, and the talks have been fruitful, he said.
"The reality is that the regulators need to discuss those deals in advance of the deal actually materializing," he said, adding that the bank is now in a "very good place" with the regulators involved in the decision.
New York Community is also planning to build up its securities portfolio over the course of the year to prepare to comply with the liquidity coverage ratio, executives said on the conference call.
In the meantime, New York Community is managing its balance sheet to stay just below the $50 billion threshold. Its balance sheet shrunk slightly from the end of the third quarter, as it sold $601 million in loans and reduced its securities book by $355 million through a combination of sales and calls.
These securities sales contributed to a strong fourth quarter. Noninterest income increased by 82%, to $70.5 million. It recorded a $17.3 million recovery on a security it had previously written off, and its revenue from securities sales increased by more than $5 million, to $8.7 million. It also recorded higher mortgage-banking income and lower costs tied to Federal Deposit Insurance Corp. indemnification.
The stronger noninterest revenue made up for a 5% decline in net interest income, which reflected both lower interest income and higher cost of funding. New York Community's prepayment penalties declined, and its net interest margin contracted by 31 basis points, to 2.61%.
Noninterest expense declined by around $1 million, to $148.1 million, as slightly higher compensation costs were offset by lower administrative costs. The bank plans to hire more people and invest in systems over the course of the year to meet liquidity-coverage requirements, executives said.
"There's a great deal of time and money that goes into being ready to be a SIFI... and we believe that we're very, very, very close to actually having everybody lined up so that we can make that step a reality," Ficalora said.