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WESTBURY, N.Y. (
New York Community Bancorp(NYB) has an interesting way of checking up on properties that are funded by a loan from the bank -- it sends a board member along with management out to inspect.
"Our board has been incredibly proactive with regards to determining that we are in fact undertaking reasonable credit risks," Chairman and CEO Joseph Ficalora said at an investor conference in mid-May. "That consistency over the course of decades has resulted in the people that bring product (loans) to the table knowing that they shouldn't waste their time and shouldn't waste our time bringing something that wouldn't qualify."
In addition, multi-family and commercial real estate loans need approval from the bank's mortgage and/or credit committees. The unique process may seem like an above and beyond measure, but it's indicative of how New York Community does business and a big part of why the commercial lender was able to avoid large disaster during the credit crisis.
Listen to CEO Ficalora in an interview with TheStreet on the uniqueness of its board of directors.
Of the 14 members on its board of directors, the fact that more than one director has the expertise to assess property sites is one of several advantages the $42 billion-asset thrift has in an industry where many troubled banks turned out to have boards composed of
directors with little to no specific banking experience.
"What it shows is that the board is very connected to the loan portfolio and an integral part of the underwriting process," says Mark Fitzgibbon, director of research at Sandler O'Neill & Partners. "They know the markets, they know the building owners, they're uniquely suited to be able to render an opinion on the likelihood of getting repaid on the loan. There's no question it's a unique thing."
New York Community is the 22nd largest bank holding company in the United State. It doesn't make residential or consumer loans (referring customers to third-party outlets, such as
PHH Corp.(PHH) ), but rather focuses on originating multi-family loans, particularly loans for apartment buildings that are either rent-stabilized or rent-controlled in the metro New York area. Losses tend to be lower on these types of loans because of the steady cash flow from tenants as well as the thrift's own tight underwriting standards.