N.Y. Community Mortgage Volumes Rise

The company reported a large increase in mortgage origination volume.
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New York Community Bancorp


Wednesday reported third-quarter net income of $135.6 million, or 31 cents a share, matching the consensus estimates among analysts polled by Thomson Reuters.

In comparison, net income was $136.3 million, or 31 cents a share, during the second quarter, and $98.6 million, or $28 cents a share, during the third quarter of 2009.

The main factor in the year-over-year improvement in earnings were rises in noninterest income and net interest income, as the company integrated the former

Amtrust Bank

, which New York Community acquired from the Federal Deposit Insurance Corp. in December 2009, after Amtrust failed.

Noninterest income for the third quarter was $107.1 million, increasing from $80.4 million the previous quarter and from just $15.1 million during the third quarter of 2009. New York Community reported mortgage banking income of $76.5 million during the third quarter, as it originated $3.5 billion in one-to-four family mortgages for sale to government-sponsored enterprises.

CEO Joseph Ficalora said the company's third-quarter earnings were "notable not only for the strength of our earnings, but also for the increasing strength of our balance sheet and continued improvement in our asset quality."

Third-quarter net interest income after the provision for loan losses was $254.2 million, declining from $272.2 million in the second quarter but rising from $211.4 million a year earlier. The provision for loan losses increased to $32 million during the third quarter from $22 million the previous quarter and $15 million a year earlier.

The company's net interest margin -- essentially the difference between a bank's average yield on loans and investment securities and its average cost for deposits and borrowings -- was 3.36 % during the third quarter. The margin was 3.42% in the second quarter and 3.17% in the third quarter of 2009.

Nonperforming assets -- including nonaccrual loans and repossessed real estate but excluding government-guaranteed assets -- were 1.63% of total assets as of Sept. 30, rising 1.59% the previous quarter and 1.45% a year earlier. Net charge-offs -- loan losses less recoveries -- totaled $16.7 million during the third quarter, compared to $18.9 million in the second quarter and $6.4 million in the third quarter of 2009.

New York Community's annualized ratio of net charge-offs to average loans for the third quarter was a very low 0.06%, compared to 0.07% the previous quarter and 0.03% a year earlier. Loan loss reserves covered 0.56% of total loans held for investment as of September 30.

Despite the low rate of loan losses, New York Community added $15.3 million in loan loss reserves during the third quarter, which directly impacted earnings and ran counter to the trend for the largest U.S. bank holding companies, including


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, which released $1.8 billion from loan loss reserves;

Bank of America

(BAC) - Get Report

, which also released $1.8 billion from reserves;

Wells Fargo

(WFC) - Get Report

, which released $650 million from reserves; and

JPMorgan Chase

(JPM) - Get Report

, which released $1.7 billion from reserves during the third quarter.

The company said the Tier 1 leverage ratio for its main subsidiary

New York Community Bank

was 8.56% as of Sept. 30, well above the 5% required for most banks to be considered


by regulators. The parent company's tangible common equity ratio was 7.59%.

New York Community Bancorp's shares closed at $16.79 Tuesday, returning 21% year to date. Out of 17 analysts covering the company, nine rate the shares a buy, seven recommend holding the shares and one analyst recommends investors sell the shares.

Based on the quarterly dividend payout of 25 cents, the shares have a yield of 5.96%. The company's net earnings have exceeded the dividend for the past five quarters.


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.