Interview With The President And CEO: New York Community Bancorp, Inc. (NYB) - Joseph R. Ficalora
April 3, 2012 - The Wall Street Transcript has just published S&Ls, Investment Banks and Asset Management Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
Joseph R. Ficalora is the President and Chief Executive Officer and a Director of New York Community Bancorp, Inc., the 21st-largest bank holding company in the nation, with assets of 42 billion, and of its two primary subsidiaries, New York Community Bank and New York Commercial Bank. Since 1965, when he joined the community bank, Mr. Ficalora has held various positions of increasing responsibility across all lines of operations. Named President and Chief Operating Officer of the community bank in 1989, he spearheaded the establishment of New York Community Bancorp four years later, and has served as President and CEO of the company since its inception in July 1993. From January 2007 to December 2010, Mr. Ficalora also served as Chairman of the company, a position he had held previously from July 1993 to July 2001. A graduate of Pace University with a degree in business and finance, Mr. Ficalora provides leadership to several professional banking organizations.
TWST: What kind of loan growth has New York Community Bank been experiencing over the past several quarters and in which categories are you seeing the best growth?
Mr. Ficalora: I'd say that our business model today is very much the same as it's been over the course of many decades. And from time to time, depending on the opportunities in the market, we have a little bit more in the way of commercial loan growth - primarily multifamily, or a little bit more residential. We originate multifamily loans for portfolio. We do not portfolio one-to-four family loans, even though we, in fact, have generated about 18.5 billion to 19 billion in house loans in the last two-plus years through our mortgage bank. Those loans are generated for sale, so we basically hold those loans for about 13 days and we typically sell those loans to either Fannie Mae, Freddie Mac or one of our bank clients.
We have several bank clients that want us to generate loans for them. So in the range of 19 billion in one-to-four family loans have been generated by our mortgage bank in the past two years. However, last year was also the most robust year we've had in terms of generating loans for our portfolio as well. So in the year ahead we would expect our loan production to be as strong as or stronger than it was in the year past. Having said that, I should also say that we are most active as a lender in New York City, principally on rent-controlled and rent-stabilized buildings - although we also do commercial real estate loans, which in some cases are purely commercial and in other cases are mixed use - a residential building above a first floor that is retail in nature. And if 25% of the income stream of that building comes from retail, it's classified as a commercial real estate loan. So there has been little change in our business model. If anything, our portfolio today is more clearly representative of how we've been lending for decades, because a lot of the loans that were residual from our merger transactions are no longer in the portfolio. They've either been satisfied or foreclosed upon and removed. So a good deal of what was left over from our various transactions is now gone.
TWST: On the bank's fourth-quarter earnings call, you said earnings growth can be attributed in part to NYB's stable net interest income even in this environment of declining interest rates. Would you please elaborate on that and share some insights on how New York Community Bank has been able to maintain that stable net interest income?
Mr. Ficalora: The reality is that our business model, unlike that of many others, has a fixed rate of return based on the existing portfolio plus a refinancing fee that typically ranges from five basis points in the first year of the mortgage to one basis point in year five. If we refinance our loans in the three-to-four-year period, we might get a three-point refinancing fee. So over the course of time, we've had a great deal of support for net interest margins coming from our structured lending, wherein the loan itself pays us a coupon, and then, upon refinancing in the third or fourth year, we are paid a prepayment penalty fee. For example, last year, we had the largest volume of prepayment fees ever collected by our bank, and we would expect the year ahead to be very strong as well. Prepayment penalty income doesn't come with any consistency - it varies from quarter to quarter - but, lo and behold, it does support our net interest margin. So we're in a period of time when rates on existing portfolios - not just ours, but for all banks - are higher than the rates of new loans being generated. So the yield on assets is likely to go down. But as we refinance those portfolios into lower rates, we're also getting the benefit of the prepayment penalty income.
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