New York Community Bancorp Inc. took another step Monday in its balance-sheet restructuring by accepting $20 million of municipal deposits from New York City and New York State.
Joseph R. Ficalora, the president and chief executive of the $24.6 billion-asset thrift company, said it is ahead of schedule on the restructuring, which began last year and to date has reduced securities and debt on the balance sheet.
He said New York Community, which is based in Westbury, on Long Island, chose to restructure after failing to seal a deal to buy a New York-area banking company that would have given it deposits and could have helped it avoid the type of makeover it is now undergoing.
Mr. Ficalora spoke Monday morning in an interview in Queens after accepting $20 million in checks from the city and the state. He was in Queens for the opening ceremony of a branch that has received the Banking Development District designation under a state program for underserved communities.
Diana L. Taylor, the superintendent of banks for the New York State Banking Department, said at the ceremony that the state program "gives banks time to build deposits on their own."
New York Community has broadly pledged to boost deposits on its balance sheet. It recently obtained a charter that allows it to establish a limited-purpose bank and to gather municipal deposits at all branches.
On Monday Mr. Ficalora said his company has looked at new ways to gather deposits since failing to reach a deal with one of three companies it had talks with. It was set to announce one on March 27, 2004, but the seller was not ready, he said.
"We were still in dialogue and gave them a little longer," Mr. Ficalora said.
That proved harmful. New York Community's stock price fell during the negotiations, robbing it of currency, and the deal fell apart. From March 29, 2004, to June 1 of that year its shares fell 31.1%.
It has emerged that one of the three companies New York Community courted was GreenPoint Financial Corp. of Manhattan, which was sold to North Fork Bancorp Inc. of Melville, N.Y., in October (the deal was announced in February 2004).
On Monday, Mr. Ficalora did not name the other two targets but said one of the three was is available and that he would still be interested in buying it once his company's stock recovers. The stock's performance has been volatile this year fell 12.3% Monday, to $18.04.
On March 31 last year, New York Community had $12.7 billion of borrowings and $12.1 billion of securities. An acquisition would have made reducing borrowings and securities less painful, Mr. Ficalora said.
With no deal in hand, the company sold $5 billion of securities in last year's second quarter and paid down the same amount of debt, a move that cost it $95 million.
Mr. Ficalora said at the time that his company would focus more on collecting retail deposits, and last year it established a deposit relationship with New York City's largest housing cooperative, Coop-City.
In April, when New York Community announced first-quarter earnings, it unveiled a string of initiatives to further improve its deposit base, including the creation of the limited-purpose bank.
"All of these various programs we put in place … we intend to cultivate over time," Mr. Ficalora said Monday. "These retail funding sources have all different audiences, but they have one purpose: They bring us funds from various sources."
The CEO made clear that the limited-purpose bank and Monday's checks are only the beginning of efforts to bring in municipal deposits. New York-area thrifts are not allowed to accept municipal deposits, but the new charter allows all New York Community branches to accept them, he said.
Municipal deposits are an attractive but fiercely competitive business. One of New York Community's rivals, Commerce Bancorp Inc. of Cherry Hill, N.J. has been very successful in gathering municipal deposits.
On March 31 almost 20% of Commerce's $28.1 billion of deposits were from municipalities and government agencies.
Considering New York Community's ties to the communities it serves, Mr. Ficalora said he sees no reason why it could not eventually have a similar share of municipal business. Its low efficiency ratio - 26.5% in the first quarter - would allow it to go after municipal deposits aggressively, he said. "We certainly have the capacity to compete with any other bank."
But analysts say it could be costly. "You are talking about getting very large chunks of deposits when you win the business, but you are also taking about deposits that are very competitively priced," said James Ackor of Royal Bank of Canada's RBC Capital Markets.
