New York Community Bancorp's executives have long said that it is relatively safe for a bank its size, and the results of its company-run stress test appear to back up that claim.
The Westbury, N.Y., thrift on Wednesday released the results of its Dodd-Frank Act Stress Test, or DFAST exam, as several dozen other regional banks must also do by June 30. New York Community's results showed it would clear regulatory capital hurdles fairly easily under the most severe economic shock it forecast, involving economic contraction on the scale of the last financial crisis.
The $48.3 billion-asset company said its Tier 1 common equity ratio would be 8.88% under this scenario, compared with a regulatory minimum of 5%, at the end of 2016.It would earn a profit of more than $660 million and continue paying out a dividend over the nine-quarter period specified in the test, it said.
New York Community is very close to the $50 billion-asset threshold that would subject it to the Comprehensive Capital Analysis and Review exam, a much more extensive stress test run by the
Chief Executive Joseph Ficalora has said he wants Congress to change the threshold and thinks the stress-testing process should take into account banks' individual risk profile. New York Community's loan portfolio is concentrated on rent-regulated multifamily properties in the New York City metro area, which have very low vacancy rates and consistent cash flows, leading to a low rate of loan losses, Ficalora argues.
Under the toughest stress model it ran, New York Community said it would lose $304 million on its loan-and-lease portfolio and have to take a provision of $573 million over the nine-quarter projection horizon.
First Republic Bank in San Francisco, another lender on the verge of the enhanced stress-testing process, also said this week that it would easily clear the most stressed economic scenarios.
Meanwhile, reports from other banks continue to dribble in.
The $16.3 billion-asset F.N.B. in Pittsburgh said that its Tier 1 common equity ratio would fall to 8.37% from 9.6% over the nine-quarter period ending in the fourth quarter of 2016. F.N.B. would report cumulative net income of $30.1 million over the period.
"These results validate the company's current capital management strategies and management's approach to operating with a low-risk balance sheet," F.N.B. said in a news release.
As part of its stress testing, F.N.B. directed staff members to challenge assumptions or other projections in the tests.
"Challenges are designed to foster candid, informed, and effective discussion regarding projection methodologies and results," F.N.B. said its eight-page report. "They occur throughout the projection development process and at multiple organizational levels, including the board of directors."
This is the first year that banks are required to release the results of the DFAST exam, which is mandatory for banks with assets of $10 billion to $50 billion. Banks cannot fail the exam, but it can have implications for capital planning.
Andy Peters contributed to this article
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Corrected June 19, 2015 at 5:27PM: An earlier headline on this story mistakenly said that New York Community projected a net loss.