雅虎香港財經 New York Community Bancorp, Inc. (NYSE:NYCB) Q4 2022 Earnings Call Transcript
New York Community Bancorp, Inc. (NYSE:NYCB) Q4 2022 Earnings Call Transcript January 31, 2023
Sal DiMartino: Good morning, everyone. This is Sal DiMartino. Thank you for joining the management team of New York Community for today's conference call. We apologize for the long wait time for the call, but we were having technical issues with our vendor. Today's discussion of the company's 2022 results will be led by President and CEO, Thomas Cangemi, along with the company's Chief Financial Officer, John Pinto; and Lee Smith, President of Mortgage. Before the discussion begins, I'd like to remind you that certain comments made today by the management team of New York Community may include forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements we may make are subject to the safe harbor rules.
Please review the forward-looking disclaimer and safe harbor language in today's press release and investor presentation for more information about risks and uncertainties which may affect us. Now I would like to turn the call over to Mr. Cangemi.
Thomas Cangemi: Thank you, Sal. Good morning, everyone, and thank you for joining us today. This morning, we're going to focus on four topics: the Flagstar acquisition, the decision to restructure the mortgage business and our operating performance, along with our outlook for the new Flagstar. 2022 was a watershed year for New York Community, culminating in our acquisition of Flagstar, our largest acquisition to-date, which closed on December 1. As you have heard me say many times on these calls and in one-on-one meeting, this is a transformational acquisition for us, and we've already seen some of the benefits you've outlined when the transaction was first announced. The transaction into a dynamic commercial banking model is underway, with a more diversified balance sheet, which was evident at year-end, as commercial loans represented 33% of total loans compared to 24% before the merger announcement.
Legacy Flagstar brings a number of new lending-related businesses to the new company, both of which are C&I businesses. All of these are higher-margin businesses, and they are typically tied to floating interest rates. These new businesses include a nationally recognized mortgage warehouse business, where we currently rank number two in the country based on $11.5 billion of commitments outstanding. Building Finance is another great business, where we do business with 70% of the top 100 builders nationwide. These spreads in this marketplace is approaching 400 basis points in that particular business. In addition, Flagstar has a significant wholesale banking operation focusing on several verticals. These loans are conservatively underwritten and also generate significant fee income that legacy NYCB did not have.
Going forward, we plan to allocate more capital to these higher-margin businesses. The same is also true on the funding side. Legacy Flagstar contributes a significantly lower cost deposit base, including traditional retail deposits and a large amount of commercial balances related to mortgage businesses, including escrow balances. Additionally, both companies have a very strong market share position within each of the respective core markets, which will aid in acquiring more deposits as we grow. The benefits of Flagstar's deposit base are already evident in the fourth quarter results, as non-interest-bearing deposits increased to 21% of total deposits, compared to 9% prior to the merger announcement. Another important benefit is to our interest rate sensitivity.
Our sensitivity to interest rate changes has improved materially due to the acquisition. As you will recall, legacy New York Community has historically been liability-sensitive, while legacy Flagstar was significantly asset-sensitive. On a combined basis, the new company will have a more balanced interest rate sensitivity position, and we will have more flexibility in managing our sensitivity to market rate changes. Given the nature of our new asset classes, paired with lower cost funding mix, the new company will be able to enjoy a stronger margin going forward. As for our mortgage business, we disclosed earlier today actions aim to optimize our mortgage platform. The substantial and aggressive shift in Fed monetary policy over the past year resulted in significantly higher mortgage rates.
Photo by Mark OFlynn on Unsplash
This rapid increase has cycled refinancing activity and also dampened purchase activity. While legacy Flagstar was proactive throughout 2022 in rightsizing its mortgage business, the mortgage market is expected to remain challenged in 2023, with annual originations volume expected to decline by 25% year-over-year to $1.8 trillion after dropping 46% last year compared to 2021. Therefore, shortly after the transaction closed, we made the strategic decision to swiftly restructure the business, which occurred late last week. To better reflect demand and a line where our strength lies, our distributed retail channel will shift to a branch footprint only model resulting in a 69% reduction in the number of retail home lending offices. Mortgage origination headcount is expected to decline to less than 800 FTEs compared to a high of 2,100 FTEs in 2021.
Headcount reduction represents approximately 10% of total employees at the defined company's pre-restructuring. These decisions are among the most difficult our senior leadership team has to make However, they are necessary to ensure the long-term success and viability of our mortgage business. These actions are expected to improve profitability in the mortgage business during the current down-cycle, while still allowing us to participate in the upside in the event the interest rate environment becomes more favorable. Despite these actions, we remain one of the top players in the mortgage business. We are a leading bank originator for the mortgages, the sixth largest sub-servicer and the second largest warehouse lender. In addition, we continue to lend in all six channels and remain committed to the correspondent broker business.
Turning now to our 2022 operating performance. Despite the significant shift in Fed policy last year, 2022 was still another record year for the company. On a non-GAAP basis, we reported fully diluted EPS of $1.23 for full year 2022, relatively unchanged compared to the $1.24 we reported for 2021. Net income available to common stockholders, as adjusted, totaled $603 million for full year 2022 compared to $585 million in 2021. Our net income in 2021 was a record at that time, and in 2022, we broke that record. While our financials were impacted by one month of combined results, legacy New York Community performed extremely well with strong organic growth in loans and deposits. Multi-family loans increased $3.5 billion or 10% to $38.1 billion compared to 2021, with virtually all of the growth coming organically.
Specialty finance loans rose $912 million or 26% during the year to $4.4 billion. At the same time, organic deposit growth was $7.6 billion, up 22%. This includes about $3 billion in growth during the fourth quarter related to our government banking as a service business. Our fourth quarter net interest margin improved six basis points to 2.28% compared to the prior quarter. Excluding the impact from prepayment income, the fourth quarter margin was 2.24%, up nine basis points compared to the previous quarter, which is better than our original guidance. Our credit quality remains -- metric remain solid, and reflect the strong credit culture of both legacy organizations. NPAs to total assets equaled 17 basis points, while NPLs on total loans were 20 basis points, continuing to rank us among the best in the industry.
These metrics are proof positive that our conservative underwriting standards have served us well over various business cycles. This one is a high-quality balance sheet should serve us well in the event of a downturn in the economy. As for real estate trends in our primary New York City market, the residential rental market remains healthy, despite some moderation in the effective median rent due to weaker performance in the luxury market, while our bread and butter non-luxury rent regulation niche remains very strong. Manhattan monthly median rents in November rose nearly 20% year-over-year to 4,033, up month-over-month following three straight months of decline and up -- and was up 15.2% above the pre-pandemic levels. On the office front, Manhattan direct asking rents in the fourth quarter decreased 0.6% from the third quarter to $74.29 per square foot, while the office availability rate was up 18.7% or 30 basis points.
Manhattan retail average asking rents recorded a 2.2% uptick quarter-over-quarter to $607 per square foot, the first increase since the fourth quarter of 2016 due to a resurgence in travel and tourism and consumer demand. Also, as of year-end, our capital ratios remain very strong. Accordingly, last week, our Board of Directors declared a quarterly cash dividend of $0.17 per share on the company's common stock. The dividend is payable on February 16 to common shareholders record of February 6, based on last night's closing prices reflects a dividend yield of approximately 7%. Looking forward to 2023. This is what you can expect from the new company throughout the year and into 2024. First, we're going to have one brand across the combined organization.
The divisional bank concept has worked well for legacy NYCB, but we're mostly in the New York City metro region. Now that we are one of the largest regional banks in the country with 395 branches in nine states, along with a national presence in several businesses, we are confident that a unified brand will position us to thrive. We will have one bank, one brand, one culture. A new brand will be Flagstar. While the Flagstar name will remain, the associated brand, look feel, logo, purpose and what the name stance will change. We plan to officially roll out the new logo and brand publicly in late 2023, but it will not be fully operational and use externally until systems conversion, which is scheduled to occur during the first quarter of 2024.
As for guidance, given the current outlook, we expect average loan growth of 5%, first quarter NIM to expand from fourth quarter levels to a range of 2.55 to 2.65, including prepayments, which are expected to have less of an impact on the NIM going forward. First quarter gain on sale of mortgage loans of $18 million to $22 million; full year non-interest expense range of $1.3 billion to $1.4 billion, excluding merger-related expenses and intangible asset amortization; and a full year tax rate of approximately 25.5%. Finally, I would like to send a big shout out to all of our employees at both banks, none of what we have accomplished so far would have been possible without their patience, support and hard work. Their commitment to our customers and borrowers over the past several years has truly been remarkable.
My sincere thanks for them all. With that, we would be happy to answer any questions you may have. We will do our very best to get to all of you within the time remaining. But if we don't, please feel free to call us later today. Operator, please open the line for questions.
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