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New York Community Bancorp, Inc. (NYB)

Q2 2012 Earnings Call

July 25, 2012 09:30 a.m. ET


Joseph Ficalora – President, Chief Executive Officer

Thomas Cangemi – Senior Executive Vice President, Chief Financial Officer

Ilene Angarola – Director of Investor Relations and Corporate Communications


Bob Ramsey – FBR Capital Markets

Bradley Ball – Evercore Partners

David Hochstim – Buckingham Research

Collyn Gilbert – Stifel Nicolaus

Moshe Orenbuch – Credit Suisse

Steven Alexopoulos – JPMorgan

Ken Zerbe – Morgan Stanley

Dave Rochester – Deutsche Bank

Matthew Kelley – Sterne Agee

Mark DeVries – Barclays

Mike Turner – Compass Point

Mark Fitzgibbon – Sandler O’Neill



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Good day everyone and welcome to The New York Community Bancorp’s Second Quarter 2012 Earnings conference call. Today’s call is being recorded. At this time all participants have been placed in a listen-only mode. For opening remarks and introductions, I would like to turn the call over to Ilene Angarola, Director of Investor Relations and Corporate Communications. Please go ahead.

Ilene Angarola

Thank you. Good morning and thank you all for joining the management team of New York Community Bancorp for our quarterly post-earnings release conference call. Leading today’s discussion of our first quarter 2012 earnings will be our President and Chief Executive Officer, Joseph Ficalora, together with our Chief Financial Officer, Thomas Cangemi. Also joining us on the call are Robert Wann, our Chief Operating Officer, and John Pinto, our Chief Accounting Officer.

Certain of our comments will contain forward-looking statements which are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those we currently anticipate due to a number of factors, many of which are beyond our control. Among those factors are general economic conditions and trends, both nationally and in our local markets; changes in interest rates which may affect our net income, prepayment penalty income, mortgage banking income and other future cash flows, or the market value of our assets, including our investment securities; changes in the demand for deposit loan and investment products and other financial services; and changes in legislation, regulation and policies. You will find more about the risk factors associated with our forward-looking statements on Page 8 of this morning’s earnings release and in our SEC filings, including our 2011annual report on Form 10-Know and our first quarter 2012 10-Q.

The release also includes reconciliations in certain GAAP and non-GAAP earnings and capital measures which will be discussed during the conference call. If you would like a copy of the earnings release, please call our investor relations department at 516-683-4420 or visit us on the web at

To start the discussion, I’ll now turn the call over to Mr. Ficalora who will provide a brief overview of our second quarter performance before opening the line for Q&A. Mr. Ficalora?

Joseph Ficalora

Thank you, Ilene, and thank you all for joining us this morning as we discuss our strong second quarter performance and the various factors that contribute to our earnings and asset growth.

We are very pleased to report diluted GAAP and diluted operating earnings per share of $0.30 for the quarter together with diluted cash earnings per share of $0.32. Our GAAP earnings rose 11% on a linked quarter basis and were up 9.8% for the year earlier amount. Our operating earnings rose 11.3% on a linked quarter basis and up nearly 16% year-over-year. As you might expect we also saw an increase in our returns on average tangible equity and tangible assets. On an operating basis our ROTE was 17.39% in the current second quarter and our ROTA was an equally healthy 1.36%.

Our ability to grow our earnings despite the challenges and the difficult rate environment can be attributed to three core components of our business strategy. The production of multi-family loans for investment, the quality of our assets, and the production of one to four family loans for [inaudible].

For the purposes of this morning’s call I would like to begin by talking about multi-family lending and our ongoing ability to compete for loans in a very attractive niche. Despite what you may have read or heard about others competing for product, we originated $1.3 billion of multi-family loans in the second quarter, boosting the current year’s production to $2.3 billion. At the end of June, multi-family loans totaled $18.2 billion, reflecting a $753.5 million increase since the end of December and an annualized growth rate of 8.6%. One of the benefits of this lending niche is the way we structure our product with a fixed rate of interest in the first five years and a fixed or adjustable rate of interest in years 6 through 10.

A vast majority of our multi-family loans are refinanced within three to four years of origination. And when they do, they generate income to form a pre-payment penalty. With interest rates at historical lows and refinancing activity rising, prepayment penalty income reached a record $32 million in the second quarter, increasing our net interest income and our average loan and asset yields. As a result, our margin rose six basis points on a linked quarter basis to 3.30%. The growth of our earnings also was due to an increase in non-interest income, largely reflecting the higher mortgage banking revenues. With mortgage rates still at historical lows, one to four family lending increased as did the income we produced by originating and selling such loans. In fact, more than $2.6 billion of one to four family loans were funded in the current second quarter reflecting a linked quarter increase of $180.2 million and a year-over-year increase of $1.5 billion.

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