New York Community Bancorp Inc. (NYB) on Wednesday posted a 10% jump in second-quarter profits driven by robust refinancing activity on multifamily loans and strong prepayment penalty income.
The $43.5 billion-asset bank reported net income of $131.2 million, or 30 cents a share, beating analysts' estimates by three cents a share, according to Thomson Reuters. Shares of New York Community were up nearly 2% midday Wednesday, to $12.58.
Mortgage banking income in the quarter surged fivefold, to $58.3 million, from a year earlier, an increase Chief Executive Joseph Ficalora attributed to increased market share.
"We clearly are solidifying our position in this market," Ficalora said on a conference call with analysts. "We're generating a tremendous amount of loans. And at every turn in interest rates, we've had the same benefit of prepayment activity going up."
Chief Financial Officer Thomas Cangemi described how New York Community "lends in the 5-year belly of the curve," with loan products structured with fixed interest rates for the first five years, and then adjustable or fixed for the remaining term. Because most of the bank's multifamily and commercial borrowers refinance early, before a loan's scheduled maturity, the borrowers incur a prepayment penalty fee.
In the second quarter, prepayment penalty income added $32 million to the bank's net interest income of $296.7 million, which dipped 1.7% from a year earlier.
Cangemi cited Wells Fargo's (WFC)
"There has been some serious dislocation with some of the major players exiting," he said.
Asset quality continued to improve as the balances of nonperforming loans, delinquent loans and net chargeoffs all declined in the quarter.
The market for mergers and acquisitions "is definitely rich with discussion," Ficalora said on a conference call with analysts. To that end, New York Community has shied away from small bank deals and instead is preparing for the regulatory burden of a deal that would put it above $50 billion in assets.
"There's a lot of preparatory effort going in to making sure everyone is on board including regulators because the rules from your regulator change once you go over $50 billion," he said.
