New York Community Bank “Sitting on Lots of Cash”: CEO

On the heels of last month’s twin bank collapses, New York Community Bank managed to hold on to the vast majority of its deposits, avoiding the run that crippled another survivor this quarter.

Excluding its acquisition of failed Signature Bank’s assets in March, the Long Island-based NYCB saw deposits drop about 9 percent to $53 billion in the first quarter.

Signature’s demise prompted New York real estate clients to yank deposits from other regional lenders, moving their money to national banks they believed were better positioned to withstand a run.

On the West Coast, First Republic Bank, an institution caught in the banking maelstrom, reported a $102 billion deposit loss in the first quarter, about half of its assets.

NYCB CEO Thomas Cangemi said the bank had modeled a 20 percent plunge given “the turmoil going on in March.”

“We felt that was a conservative number and we actually came in less than 10 percent,” the executive said.

The bank is still projecting a 20 percent loss over the course of the year, which figures to curtail the real estate lending on which many industry players in the New York market depend.

New York Community Bank assumed all of Signature’s deposits in the first quarter, but snubbed the bank’s commercial real estate loans, citing a need for diversification. Some observers saw that as an indictment of the health of those Signature loans.

Including the acquisition of Signature’s assets, New York Community Bank had a net gain of $26 billion in deposits, up 44 percent from the fourth quarter.

“We are sitting on lots of cash right now,” Cangemi said. He called it “a pretty good place to be — having tremendous optionality about the business and where we’re going to deploy that excess liquidity.”

A big question for the New York real estate industry is how willing the bank will be to lend on rent-stabilized and office buildings. The CFO said excess cash would be used to pay down borrowings.

After the Signature acquisition, NYCB closed out the quarter with more deposits than loans, a mix that could be a liability amid higher interest rates that have suppressed loan originations. Executives did note that the bank does not need to pay interest on 27 percent of its deposits.

NYCB grew its loan book by $13.5 billion or 20 percent in the quarter to $82.5 billion. The acquisition of $12 billion in Signature loans — the majority of which were commercial and industrial — comprised nearly all of that increase.

Industry insiders speculated NYCB declined to buy Signature’s commercial real estate debt over concerns about the rent-stabilized loans in particular. Owners and brokers claim rent-regulated buildings are facing distress because of rising operating costs, higher interest rates and the 2019 rent law’s limits on rent increases.

As a “low-leverage lender,” New York Community Bank has “no delinquencies, no late pays” in its rent-stabilized loan portfolio, the CEO said.

He also touted zero delinquencies or late payments among its office borrowers, which primarily own Class A and B properties. “All office exposure remains very manageable,” Cangemi said.

“We’re working with our customers in the event there are some issues on just changes in square-foot rent rolls,” the CEO added. “However, the [loan-to-value ratio] is very low and the relationships are strong.”

The bank reported that just 0.18 percent of its $82.5 billion loan book was non-performing, meaning 90 days past due, in the first quarter. By comparison, delinquent loans peaked at 2.63 percent of its portfolio in 2010, in the wake of the Financial Crisis.

Signature reported similarly low delinquency rates right up until its collapse, which was caused by customers withdrawing money — spooked by Signature’s dalliance with cryptocurrency investors and Silicon Valley Bank’s demise.

NYCB did expand its provision for credit losses — cash set aside to absorb loans that go bad — by 37 percent in the quarter from $124 million to $170 million in the quarter, as a result of the Signature acquisition.

The bank reported adjusted diluted earnings of 23 cents per common share, down 8 percent from the previous quarter. Net income jumped 1,066 percent quarter-over-quarter to $2 billion, powered by the Signature acquisition.