Regulators lift CRE concentration cap at New York Community

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Regulators have removed a key commercial real estate concentration limit for New York Community Bancorp in Westbury, N.Y.

The $51.2 billion-asset New York Community disclosed in a regulatory filing that its regulators lifted a cap that had limited its portfolio of multifamily, non-owner-occupied CRE, and acquisition, development and construction loans to 850% of total risk-based capital at its banks.

New York Community had a CRE concentration ratio of 757% at Sept. 30.

All banks are subject to an unofficial cap on commercial real estate loans that is equal to 300% of total risk-based capital. Banks that exceed that ratio often get added scrutiny, though many banks have negotiated higher limits with regulators, based on their charge-off histories.

The decision to lift New York Community’s concentration cap is “a clear sign of a gentler regulatory touch,” Mark Fitzgibbon, an analyst at Sandler O’Neill, wrote in a Thursday note to clients.

New York Community is regulated by the Federal Deposit Insurance Corp. and the Federal Reserve Board.

New York Community persuaded regulators that, over time, “its risk management is outstanding and that risk of losses in its core" multifamily and CRE portfolio, Fitzgibbon said after discussing the change with the company's executives. “Presumably the regulators felt that the 850% cap was simply unwarranted.”

Even with the cap removed, Fitzgibbon said, he doesn’t expect New York Community to “meaningfully” increase the size of its CRE book. New York Community held nearly $30 billion of multifamily loans at Sept. 30, representing about three-quarters of total loans. Its total commercial real estate book stood at about $37 billion.

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