Fitch Affirms New York Community's Ratings at 'BBB+'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the ratings for New York Community Bancorp, Inc. (NYCB) at 'BBB+/F2'. The Rating Outlook remains Stable. . A full list of rating actions follows at the end of this release.

Fitch reviewed NYCB as part of its Niche Bank Peer Review, which also includes Astoria Financial Corporation, Inc., Dime Community Bancshares, Inc. and Emigrant Bancorp Inc. Niche banks are defined by their narrow business models, limited deposit franchises and geographic concentrations. Fitch views these limitations as ratings constraints across the peer group. The group is composed of banks with total assets ranging from $4 billion to $49 billion that lend primarily in the New York City metropolitan residential real estate market.

KEY RATING DRIVERS - IDRS, VRs AND SENIOR DEBT

NYCB's ratings primarily reflect the bank's consistent performance. The bank has exhibited strong asset quality with low credit losses over many business cycles. Ratings are further supported by stable earnings during the most recent financial crisis and other real estate downturns. These strengths are partially offset by NYCB's relatively higher risk funding profile and geographically concentrated loan portfolio.

Fitch views NYCB's asset quality as the company's primary rating strength. NYCB's net charge offs peaked at 35bps in 2011 and totaled only 1bp in 2014, which is well below industry averages. Fitch expects asset quality to remain strong due to the company's conservative underwriting practices across its multifamily, commercial real estate and residential loan portfolios.

On a risk-adjusted basis, Fitch considers earnings performance to be reasonable with an ROA of 1.01% in 2014 and in line with historical averages for the company. Fitch expects NYCB will face earnings pressures in the near term and believes refinancing activity will slow further in 2015, which would negatively impact mortgage banking income and prepayment fee income on commercial properties. NYCB spread income could also be adversely impacted with higher interest rates given the liability sensitive balance sheet. This is further compounded by a very high reliance on net interest income.

NYCB's liquidity profile is a weakness for the company's overall credit profile. The company is relatively more reliant on non-core funding sources, such as FHLB advances and repurchase agreements, than its peer banks. In 2015, average borrowings totaled 35% of total liabilities. Since NYCB has relatively higher reliance on wholesale funding, the company can be vulnerable to disruptions in the wholesale markets and also carries a higher cost of funds.

The Stable Outlook assumes that asset quality will remain strong and capital levels will remain relatively stable over the near term. The Outlook also incorporates that earnings could face headwinds in 2015 from lower prepayment revenue. Spread income may also come under pressure given NYCB's liability sensitive balance sheet, and presumably higher interest rates over the near to intermediate term.

RATING SENSITIVITIES - IDRS and VRs and SENIOR DEBT

NYCB's ratings are solidly situated at its current levels. Fitch foresees limited upside given the more limited business model of the company. The deposit franchise and broker originated business are relatively weaker than similarly sized, rated banks. Conversely, NYCB's ratings are sensitive to the multifamily market in the New York City area. Material loosening of rent-regulations in the New York area could be a negative rating driver for the institution since rent regulations help maintain stable cash flows and valuations for multifamily properties in New York.

Although seen as unlikely given past performance, material deterioration of asset quality metrics could result in negative ratings pressure. Aggressive capital management would also be viewed negatively. NYCB's tangible common equity ratio of 7.24% is on the lower end compared to its rating category.

NYCB continues to eye potential large accretive acquisitions. Fitch would evaluate any acquisition to assess the financial impact, potential changes to strategy, or integration challenges to determine if there are any rating implications.

KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

NYCB's preferred issuances are notched below NYCB's VR. The notch differential reflects loss severity and an assessment of increment non-performance risk

RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

NYCB's preferred issuances are sensitive to changes in NYCB's VR. The rating sensitivities for the VR are listed above.

KEY RATING DRIVERS - HOLDING COMPANY

NYCB's IDR and VR are equalized with those of its bank subsidiaries reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries.

RATING SENSITIVITIES - HOLDING COMPANY

Should NYCB begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company's IDR and VR below the ratings of its bank subsidiaries.

KEY RATING DRIVERS - LONG AND SHORT TERM DEPOSIT RATINGS

NYCB's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. Fitch believes U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

RATING SENSITIVITIES - LONG AND SHORT TERM DEPOSIT RATINGS

The ratings of long and short-term deposits issued by NYCB are primarily sensitive to any change in the company's IDR. Should the long-term IDR be downgraded, deposit ratings would be similarly impacted

KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR

NYCB's Support Rating and Support Rating Floor of '5' and 'NF' reflect Fitch's view that the company is unlikely to procure extraordinary support should such support be needed

RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

NYCB's Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need.

Fitch affirms the following:

New York Community Bancorp

--Long-term IDR at 'BBB+';

--Viability rating at 'bbb+';

--Short-term IDR at 'F2';

--Support at '5';

--Support floor at 'NF'.

New York Community Bank

--Long-term IDR at 'BBB+';

--Long-term deposits at 'A-';

--Viability rating at 'bbb+';

--Short-term IDR at 'F2';

--Support at '5';

--Support floor at 'NF';

--Short-term deposits at 'F2'.

New York Commercial Bank

--Long-term IDR at 'BBB+';

--Long-term deposits at 'A-';

--Viability rating at 'bbb+'.

--Short-term IDR at 'F2';

--Support at '5';

--Support floor at 'NF';

--Short-Term deposits at 'F2'.

Richmond County Capital Corporation

--Preferred stock at 'BB-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Bank Rating Criteria' (March 20, 2015);

--'U.S. Banking Quarterly Comment: 4Q14' (Jan. 28, 2015);

--'U.S. Basel III and Dodd Frank Act Regulatory Guide' (Nov. 21, 2014);

--'2015 Outlook: U.S. Banks (Growth in a Challenging Rate Environment)' (Nov. 12, 2014);

--'U.S. Banks: Implications of an Interest Rate Shock Scenario' (Oct. 30, 2014);

--'U.S. Banks: Liquidity and Deposit Funding' (Aug. 8, 2013);

--'U.S. Banks: Interest Rate Risks (What Happens When Rates Rise)' (June 18, 2013);

--'U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In?' (July 11, 2013);

--'Fitch Fundamentals Index (4Q14)' (Jan. 15, 2015);

--'Risk Radar Global 1Q15' (March 30, 2015).

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982540

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Contacts

Fitch Ratings
Primary Analyst:
Jaymin Berg, +1-212-908-0368
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Doriana Gamboa, +1-212-908-0865
Senior Director
or
Committee Chairperson:
Christopher Wolfe, +1-212-908-0771
Managing Director
or
Alyssa Castelli, +1-212-908-0540
Media Relations, New York
alyssa.castelli@fitchratings.com
or
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Jaymin Berg, +1-212-908-0368
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Doriana Gamboa, +1-212-908-0865
Senior Director
or
Committee Chairperson:
Christopher Wolfe, +1-212-908-0771
Managing Director
or
Alyssa Castelli, +1-212-908-0540
Media Relations, New York
alyssa.castelli@fitchratings.com
or
Elizabeth Fogerty, +1-212-908-0526
Media Relations, New York
elizabeth.fogerty@fitchratings.com