New York Community Bancorp : Reports 3Q 2014 Diluted Non-GAAP Cash Earnings Per Share of $0.29 (1) and Diluted GAAP Earnings Per Share of $0.27

New York Community Bancorp, Inc. (NYSE:NYCB) (the “Company”) today reported GAAP earnings of $120.3 million, or $0.27 per diluted share, for the three months ended September 30, 2014, exceeding the year-earlier level by $6.1 million, or $0.01 per diluted share.

For the nine months ended September 30, 2014 and 2013, the Company reported earnings of $354.2 million and $355.4 million, respectively, both of which were equivalent to $0.80 per diluted share.

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Please Note: Footnotes are located on the last page of text. As further discussed in the footnotes, “cash earnings,” “tangible assets,” “average tangible assets,” “tangible stockholders’ equity,” “average tangible stockholders’ equity,” and the related measures are all non-GAAP financial measures.

In addition, the Company reported cash earnings of $129.6 million, or $0.29 per diluted share, for the current third quarter, and $383.9 million, or $0.87 per diluted share, for the current nine-month period. ⁽¹⁾

Commenting on the Company’s current third-quarter performance, President and Chief Executive Officer Joseph R. Ficalora stated, “We were very pleased by the results we reported this morning as they served to verify our fundamental strengths: our solid multi-family lending niche, the exceptional quality of our assets, and our hallmark efficiency.

“While our assets rose substantially from the December 31st balance, the sequential increase was modest, particularly as compared to the growth we saw at the end of March and June. Nonetheless, our portfolio of held-for-investment loans rose $266.1 million quarter-over-quarter, driven by a $553.0 million increase in multi-family loans.

"Our ability to limit our balance sheet growth while still growing our principal asset was supported by various strategic actions, including the sale of certain one-to-four family loans that were previously held for investment. In the current quarter, we expect to sell additional loans--C&I, as well as one-to-four family--that had been held for investment and were subsequently classified as 'held for sale' at quarter-end.

“Meanwhile, the quality of our assets was reflected in the absence of any net charge-offs for the second consecutive quarter and the fact that we, once again, recorded net recoveries. Furthermore, non-performing non-covered assets represented 0.31% of total non-covered assets at the end of September, while non-performing non-covered loans represented 0.25% of total non-covered loans.

“Our efficiency was largely supported by a decline in operating expenses, mainly reflecting a decrease in the cost of managing foreclosed properties, as well as a reduction in our FDIC insurance premiums.

“Our earnings were also supported by a linked-quarter increase in net interest income, as a rise in the average yield on interest-earning assets was coupled with a rise in the average balance, and our cost of funds held firm. The increase in net interest income also was driven by a $6.1 million rise in prepayment penalty income, which contributed 24 basis points to our third-quarter margin of 2.69%.

“Reflecting these factors and others, we reported third quarter earnings of $120.3 million, equivalent to diluted earnings per share of $0.27.”

Board of Directors Declares $0.25 per Share Dividend Payable on November 20, 2014

“Given the strength of our earnings and our capital position, the Board of Directors last night declared a quarterly cash dividend of $0.25 per share, payable on November 20, 2014 to shareholders of record at the close of business on November 7, 2014. This is our 82nd consecutive quarterly cash dividend as a public institution and our 43rd consecutive quarterly cash dividend of $0.25 per share,” Mr. Ficalora said.

Balance Sheet Summary

In the three and nine months ended September 30, 2014, total assets grew $75.0 million and $2.0 billion, respectively, to $48.7 billion. Total loans accounted for $35.4 billion of the September 30th balance, while total securities accounted for $7.5 billion.

Non-Covered Loans Held for Investment

Non-covered loans held for investment represented $32.3 billion, or 91.0%, of total loans at the end of September, reflecting a nine-month increase of $2.4 billion, or 8.1% (non-annualized). The Company originated $8.3 billion of held-for-investment loans in the first nine months of this year, exceeding the year-earlier nine-month volume by $229.6 million. Third-quarter originations accounted for $2.6 billion of the current year-to-date total, a $271.8 million decrease from the trailing-quarter volume and a $775.5 million decrease year-over-year.

Multi-family loans represented $5.7 billion, or 68.8%, of loans produced for investment in the current nine-month period, reflecting a $138.2 million increase from the year-earlier amount. Third-quarter originations accounted for $1.6 billion of year-to-date originations, down $465.0 million from the trailing-quarter volume and $972.9 million year-over-year.

Commercial real estate (“CRE”) loans represented $1.2 billion of loans produced for investment in the first nine months of 2014, an $86.3 million decrease from the year-earlier amount. Third-quarter originations accounted for $434.2 million of the year-to-date volume, reflecting a sequential increase of $97.8 million and a year-over-year increase of $161.3 million.

The following table provides additional information about the Company’s multi-family and CRE loan portfolios:

Also included in the September 30th balance of loans held for investment were one-to-four family loans of $404.8 million; acquisition, development, and construction (“ADC”) loans of $310.1 million; and commercial and industrial (“C&I”) loans of $959.7 million, including $471.2 million of specialty finance loans and leases. While one-to-four family loans and ADC loans each declined over the three and nine months ended September 30, 2014, C&I loans fell $8.5 million over the course of the quarter but rose $145.1 million from the balance at year-end. The nine-month increase was driven by a rise in specialty finance loans and leases, which represented $258.0 million, or 61.9%, of the C&I loans produced in the current third quarter, up $68.8 million and $171.2 million, respectively, from the volumes produced in the earlier periods.

Loans Held for Sale

Loans held for sale totaled $680.1 million at September 30, 2014, exceeding the June 30th balance by $371.3 million and the December 31st balance by a comparable amount. Included in the September 30th amount were $397.3 million of one-to-four family and C&I loans that had been held for investment at the end of the trailing quarter and that the Company expects to sell in the fourth quarter of this year. The remainder of the September 30th balance (i.e., $282.8 million) consisted of one-to-four family loans that were originated for sale.

In the three and nine months ended September 30, 2014, one-to-four family loans originated for sale totaled $817.1 million and $2.1 billion, as compared to $1.1 billion and $5.5 billion, respectively, in the year-earlier periods. The average balance of loans held for sale was $348.0 million in the current third quarter, as compared to $274.5 million and $451.0 million, respectively, in the trailing and year-earlier three months. In the first nine months of 2014, demand for one-to-four family loans was substantially weakened by the comparatively higher level of residential mortgage interest rates.

Covered Loans

Primarily reflecting repayments, loans acquired in FDIC-assisted transactions declined $284.0 million from the December 31, 2013 balance to $2.5 billion, representing 7.1% of total loans, at September 30, 2014.

In the three months ended September 30, 2014, June 30, 2014, and September 30, 2013, accretion on the covered loan portfolio was $34.6 million, $34.9 million, and $38.2 million, respectively. For the nine months ended September 30, 2014 and 2013, accretion on the covered loan portfolio was $104.2 million and $118.5 million, respectively.

Pipeline

The Company currently has a loan pipeline of approximately $3.0 billion, including loans held for investment of approximately $2.3 billion and one-to‐four family loans held for sale of approximately $683.4 million.

Asset Quality

The following discussion pertains only to the Company's portfolio of non-covered loans held for investment and non-covered other real estate owned ("OREO").

Non-performing non-covered assets fell $30.2 million, or 17.2%, from the balance at the end of December, to $144.8 million at September 30, 2014. The decrease was the combined result of a $22.5 million, or 21.7%, decline in non-performing non-covered loans to $81.0 million and a $7.7 million decline in non-covered OREO to $63.7 million. Reflecting the nine-month declines, non-performing non-covered assets represented 0.31% of total non-covered assets and non-performing non-covered loans represented 0.25% of total non-covered loans at the current third quarter-end. The comparable measures were 0.40% and 0.35%, respectively, at December 31st. The declines in non-performing non-covered assets and loans were primarily due to a group of non-performing multi-family loans to a single borrower, in the amount of $32.2 million, that transitioned to OREO in the second quarter and were subsequently sold at a gain in June.

While non-performing non-covered loans rose $2.4 million sequentially, the impact was exceeded by the benefit of a $3.4 million decline in non-covered OREO.

Similarly, the balance of non-covered loans 30 to 89 days past due declined $30.7 million from the December 31st balance to $6.4 million at September 30th. As a result, total non-covered delinquencies amounted to $151.2 million at the end of September, reflecting a nine-month improvement of $60.9 million, or 28.7%. The nine-month decline was primarily due to a $31.2 million reduction in past due multi-family loans. On a linked-quarter basis, loans 30 to 89 days past due rose $2.4 million, reflecting modest increases in multi-family, one-to-four family, and other loans.

The Company’s asset quality was further reflected in the net recoveries it recorded in the current third quarter, as well as in the second quarter of 2014. Net recoveries totaled $271,000 and $112,000 during the respective quarters, each representing (0.00)% of average loans. In the third quarter of 2013, the Company recorded net charge-offs of $4.4 million, representing a still-modest 0.01% of average loans. For the nine months ended September 30, 2014 and 2013, net charge-offs totaled $2.2 million and $14.6 million, representing 0.01% and 0.05% of average loans, respectively.

The following table summarizes the Company’s non-performing non-covered loans and assets at September 30, 2014, June 30, 2014, and December 31, 2013:

The following table presents the Company's asset quality measures at or for the three months ended September 30, 2014, June 30, 2014, and December 31, 2013:

Securities

Securities represented $7.5 billion, or 15.4%, of total assets at September 30, 2014, a $439.7 million reduction from the December 31st balance and a $281.7 million reduction from the June 30th amount. Securities held to maturity accounted for $7.3 billion, or 96.8%, of the September 30th balance, and were down $402.0 million and $279.7 million, respectively, from the earlier balances. Government-sponsored enterprise (“GSE”) obligations represented 95.6% of total securities at the end of September, comparable to the percentages at the earlier period-ends.

Funding Sources

Deposits totaled $28.3 billion at the end of September, reflecting a three-month increase of $955.3 million and a nine-month increase of $2.6 billion, or 10.3% non-annualized. Reflecting the results of a strategic campaign to attract and retain core deposits, NOW and money market accounts rose $530.0 million and $1.9 billion, respectively, to $12.4 billion and savings accounts rose $753.3 million and $1.2 billion, respectively, to $7.2 billion at the current third quarter-end. Deposit growth was also fueled by a $66.9 million rise in non-interest-bearing accounts over the course of the quarter and a $151.2 million increase year-to-date. The growth of deposits was partly tempered by a reduction in certificates of deposit (“CDs”) to $6.3 billion, from $6.7 billion and $6.9 billion, respectively, at June 30, 2014 and December 31, 2013. Deposits represented 58.2% of total assets at the end of September, an increase from 56.3% and 55.0%, respectively, at the earlier dates.

Borrowed funds fell $708.1 million in the first nine months of this year, to $14.4 billion, reflecting a $708.3 million decrease in wholesale borrowings to $14.0 billion. As a result, wholesale borrowings represented 28.8% of total assets at the end of September, as compared to 31.6% at December 31st.

Stockholders’ Equity

Stockholders’ equity totaled $5.8 billion at the end of September, a $42.3 million increase from the balance at December 31, 2013. Excluding goodwill and core deposit intangibles (“CDI”) from the respective balances, tangible stockholders’ equity rose $48.8 million to $3.3 billion at September 30, 2014. ⁽²⁾

In addition, the regulatory capital ratios for both New York Community Bank and New York Commercial Bank (together, the “Banks”) continued to exceed the federal requirements for “well capitalized” classification, as indicated in the table on the last page of this release. Furthermore, if the Basel III Capital Rules, as fully phased in, had been effective at the end of September, it is management’s expectation that the Company and the Banks would have met all capital adequacy requirements under such rules at that date.

Earnings Summary for the Three Months Ended September 30, 2014

The Company generated GAAP earnings of $120.3 million in the current third quarter, as compared to $118.7 million and $114.2 million, respectively, in the trailing and year-earlier three months. The Company’s earnings were equivalent to $0.27 per diluted share in this year’s third and second quarters and $0.26 per diluted share in the third quarter of 2013.

Net Interest Income

Net interest income rose $5.5 million sequentially, to $289.0 million, as a $9.2 million increase in interest income exceeded a $3.7 million increase in interest expense. Year-over-year, net interest income fell $5.2 million as interest income declined $604,000 and interest expense rose $4.6 million. In addition, the Company’s net interest margin rose three basis points quarter-over-quarter and fell 35 basis points year-over-year to 2.69%.

The following factors contributed to the linked-quarter increase in net interest income and net interest margin:

• Prepayment penalty income contributed $25.4 million to net interest income in the current third quarter, up $6.1 million from the trailing-quarter amount. In addition, prepayment penalty income contributed 24 basis points to the current third-quarter margin, exceeding the trailing-quarter contribution by six basis points. Absent the contribution of prepayment penalty income, the current third-quarter margin would have declined by three basis points.
• The average balance of interest-earning assets rose $614.9 million sequentially, to $43.2 billion, the net effect of a $924.2 million increase in the average balance of loans to $35.1 billion and a $309.3 million decrease in the average balance of securities and money market investments to $8.1 billion. The benefit of the increase in the average balance of interest-earning assets was complemented by a two-basis point rise in the average yield to 3.95%. The higher yield was largely driven by a nine-basis point rise in the average yield on securities and money market investments, and supported by the stability of the average yield on loans. The average yield on securities and money market investments rose to 3.28% in the current third quarter, while the average yield on loans held steady at 4.11%.
• The average balance of interest-bearing liabilities rose $700.4 million sequentially to $40.0 billion, as a $958.1 million increase in the average balance of interest-bearing deposits to $25.4 billion was tempered by a $257.8 million decline in the average balance of borrowed funds to $14.6 billion. The average cost of interest-bearing liabilities was 1.37% in both the current third and trailing quarters, even as the average costs of interest-bearing deposits and borrowed funds rose one and five basis points, respectively, to 0.60% and 2.70%.

Provision for (Recovery of) Loan Losses

Provision for Losses on Non-Covered Loans

Reflecting management’s assessment of the adequacy of the allowance for losses on non-covered loans, no provision for such losses was recorded in the first three quarters of 2014. In the third quarter of 2013, the Company recorded a $5.0 million provision for losses on non-covered loans.

(Recovery of) Provision for Losses on Covered Loans

Largely reflecting an increase in expected cash flows from certain pools of acquired loans covered by FDIC loss-sharing agreements, the Company recovered $3.9 million from the allowance for covered loan losses in the three months ended September 30, 2014. The recovery was partly offset by FDIC indemnification expense of $3.2 million, which was recorded in non-interest income as further discussed below. In the trailing and year-earlier quarters, the Company recorded respective provisions for losses on covered loans of $188,000 and $9.5 million, primarily reflecting a decrease in expected cash flows from certain pools of covered loans. The respective provisions were partly offset by FDIC indemnification income of $150,000 and $7.6 million, which were recorded in non-interest income in the corresponding periods.

Non-Interest Income

Non-interest income totaled $41.3 million in the current third quarter, reflecting a linked-quarter reduction of $11.3 million and a year-over-year reduction of $9.4 million.

In addition to the FDIC indemnification expense mentioned above, the linked-quarter reduction was attributable to a $9.1 million decrease in other income to $11.6 million and far lesser declines in fee income and net securities gains. In the second quarter of this year, the Company recorded a gain of $6.0 million on the sale of multi-family buildings that previously had been classified as OREO; no comparable gain was recorded in the third quarter of this year.

The year-over-year decline in non-interest income was largely due to the $10.7 million difference between the FDIC indemnification expense recorded in the current third quarter and the FDIC indemnification income recorded in the third quarter of 2013. The impact of this difference was partly offset by a $3.4 million increase in other income, primarily reflecting a $2.6 million increase in revenues from Peter B. Cannell & Co., Inc.

Mortgage banking income accounted for $16.6 million of non-interest income in the current third quarter, a $1.3 million increase from the trailing-quarter level and a more modest increase from the year-earlier amount. The linked-quarter increase was the net effect of a $1.7 million rise in income from originations to $6.6 million and a $369,000 decrease in servicing income to $10.0 million.

Non-Interest Expense

Non-interest expense fell $2.6 million sequentially and $5.1 million year-over-year to $145.2 million in the three months ended September 30, 2014. The sequential decline was the result of a $2.6 million decrease in operating expenses to $143.2 million and a far more modest reduction in CDI amortization to $2.0 million. The year-over-year decline was attributable to a $3.0 million decrease in operating expenses, together with a $2.1 million decrease in the amortization of CDI.

While compensation and benefits expense rose $3.2 million and $950,000, respectively, to $78.0 million, the impact of these increases was exceeded by the benefit of sequential and year-over-year declines in both occupancy and equipment expense and general and administrative (“G&A”) expense. Occupancy and equipment expense fell $761,000 and $723,000, respectively, to $23.6 million, while G&A expense feIl $5.0 million and $3.3 million, respectively, to $41.5 million. The declines in G&A expense largely reflect a decrease in expenses related to the management and sale of foreclosed properties, together with a decrease in FDIC insurance premiums.

Income Tax Expense

Income tax expense totaled $68.8 million in the current third quarter, reflecting a linked-quarter reduction of $566,000 and a year-over-year increase of $2.8 million. While pre-tax income rose $1.0 million and $8.9 million, respectively, to $189.1 million, the effective tax rate declined to 36.4% in the current third quarter from 36.9% and 36.6%, respectively, in the trailing and year-earlier three months.

About New York Community Bancorp, Inc.

One of the largest U.S. bank holding companies, with assets of $48.7 billion, New York Community Bancorp, Inc. is a leading producer of multi-family loans on rent-regulated buildings in New York City and the parent of New York Community Bank and New York Commercial Bank. With deposits of $28.3 billion and 272 branches in Metro New York, New Jersey, Florida, Ohio, and Arizona, the Company also ranks among the largest depositories in the United States.

Reflecting its growth through a series of acquisitions, the Community Bank operates through seven local divisions, each with a history of service and strength: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, and Roosevelt Savings Bank, all in New York; Garden State Community Bank in New Jersey; Ohio Savings Bank in Ohio; and AmTrust Bank in Florida and Arizona. Similarly, New York Commercial Bank operates 18 of its 30 New York-based branches under the divisional name Atlantic Bank. Additional information about the Company and its bank subsidiaries is available at www.myNYCB.com and www.NewYorkCommercialBank.com.

Post-Earnings Release Conference Call

As previously announced, the Company will host a conference call on Wednesday, October 22, 2014, at 8:30 a.m. (Eastern Time) to discuss its third quarter 2014 performance and strategies. The conference call may be accessed by dialing (866) 952-1906 (for domestic calls) or (785) 424-1825 (for international calls) and providing the following access code: 3Q14NYCB. A replay will be available approximately two hours following completion of the call through midnight on October 26th, and may be accessed by calling (800) 374-1375 (domestic) or (402) 220-0682 (international) and providing the same access code. In addition, the conference call will be webcast at ir.myNYCB.com, and archived through 5:00 p.m. on November 19, 2014.

Forward-Looking Statements

This earnings release and the associated conference call may include forward‐looking statements by the Company and our authorized officers pertaining to such matters as our goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of probable losses on loans; our assessments of interest rate and other market risks; and our ability to achieve our financial and other strategic goals.

Forward‐looking statements are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Additionally, forward‐looking statements speak only as of the date they are made; the Company does not assume any duty, and does not undertake, to update our forward‐looking statements. Furthermore, because forward‐looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those anticipated in our statements, and our future performance could differ materially from our historical results.

Our forward‐looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of our loan or investment portfolios; changes in competitive pressures among financial institutions or from non‐financial institutions; our ability to retain key members of management; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations, and our ability to realize related revenue synergies and cost savings within expected time frames; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties and/or are beyond our control.

Greater detail regarding some of these factors is provided in our Form 10‐K for the year ended December 31, 2013 and our Forms 10-Q for the three months ended March 31 and June 30, 2014, including in the Risk Factors section of these and other SEC reports we file. Our forward‐looking statements may also be subject to other risks and uncertainties, including those we may discuss elsewhere in this news release, on our conference call, during investor presentations, or in our SEC filings, which are accessible on our website and at the SEC’s website, www.sec.gov.

- Financial Statements and Highlights Follow -

NEW YORK COMMUNITY BANCORP, INC.
RECONCILIATIONS OF GAAP EARNINGS AND NON-GAAP EARNINGS (CASH EARNINGS)
(unaudited)

Although cash earnings are not a measure of performance calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe that they are important because of their contribution to tangible stockholders’ equity. (Please see the discussion and reconciliations of stockholders’ equity and tangible stockholders’ equity that appear under “Reconciliations of GAAP and Non-GAAP Capital Measures” on page 11 of this release.) We calculate cash earnings by adding back to GAAP earnings certain items that have been charged against them but that are added to, rather than subtracted from, tangible stockholders’ equity. For this reason, we believe that cash earnings, although non-GAAP, are useful to investors seeking to evaluate our financial performance and to compare our performance with that of other companies in the banking industry that also report cash earnings.

Cash earnings should not be considered in isolation or as a substitute for net income, cash flows from operating activities, or other income or cash flow statement data calculated in accordance with GAAP. Moreover, the manner in which we calculate cash earnings may differ from that of other companies reporting non-GAAP measures with similar names.

Reconciliations of our GAAP and cash earnings for the three months ended September 30, 2014, June 30, 2014, and September 30, 2013, and for the nine months ended September 30, 2014 and 2013, follow:

NEW YORK COMMUNITY BANCORP, INC.
RECONCILIATIONS OF GAAP AND NON-GAAP CAPITAL MEASURES
(unaudited)

Although tangible stockholders’ equity, adjusted tangible stockholders’ equity, tangible assets, and adjusted tangible assets are not calculated in accordance with GAAP, management uses these non-GAAP capital measures in their analysis of our financial performance. We believe that these non-GAAP capital measures are an important indication of our ability to grow both organically and through business combinations, and, with respect to tangible stockholders’ equity and adjusted tangible stockholders’ equity, our ability to pay dividends and engage in various capital management strategies.

Tangible stockholders’ equity, adjusted tangible stockholders’ equity, tangible assets, adjusted tangible assets, and the related non-GAAP capital measures should not be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP measures may differ from that of other companies reporting non-GAAP measures with similar names.

Reconciliations of our stockholders’ equity, tangible stockholders’ equity, and adjusted tangible stockholders’ equity; total assets, tangible assets, and adjusted tangible assets; and the related measures at or for the three months ended September 30, 2014, June 30, 2014, and December 31, 2013, and the nine months ended September 30, 2014 and 2013, follow: