DBRS Confirms New York Community Bancorp, Inc. at BBB (high) – Trend Stable

DBRS has today confirmed the ratings of New York Community Bancorp, Inc. (NYB or the Company) and its principal operating bank subsidiary, New York Community Bank. The trend for all ratings remains Stable. The rating action followed a review by DBRS of the Company’s operating performance, financial fundamentals and future prospects.

Despite a year-to-date $24 million loss (through September 30, 2008), which reflects significant one-time debt re-positioning and securities impairment charges, NYB’s franchise remains on solid footing. When most banks have experienced rapidly deteriorating credit quality and corresponding high credit costs, NYB stands out with low delinquencies and minimal net charge-offs. NYB’s franchise is supported by a strong and sustainable niche business in financing rent-regulated multi-family apartment buildings in the greater New York City area. The company’s market share in this business ranges from 13% to 15% and is underpinned by long standing relationships with both property owners and agents.

NYB’s ratings are underpinned by its strong asset quality and a low cost operating platform, which provides ample financial flexibility under adverse market conditions and sufficient capitalization. Ratings also take into consideration the Company’s acceptable yet pressured funding profile. Indeed, although the Company has historically supported its assets with a high degree of wholesale funding reliance, current elevated levels are of concern and could place pressure on NYB’s ratings, if sustained.

For the nine month period ending September 30, 2008, the Company reported a $24 million GAAP loss, which largely reflects a one-time pre-tax $325 million debt re-positioning charge and $94 million in other than temporarily impaired (OTTI) securities charges, the bulk of which were related to the Company’s Lehman Brothers preferred stock holdings. Offsetting the debt re-positioning charge, the Company issued common stock.

Not surprisingly, the Company’s asset quality continues to outperform its rated peers. At September 30, 2008, nonperforming loans (NPLs) were modest at 0.29% of total loans and net charge-offs were insignificant at 0.005% of average loans for Q3 2008. That said, DBRS notes that NYB has significance concentration risk, as its loan portfolio contains large relationship exposures and is less granular than many of its peers. Most large relationships, however, consist of multiple loans covered by a blanket lien over the separate properties financed, mitigating the aggregate relationship loss potential. Although DBRS believes that further asset quality erosion is likely, conservative underwriting standards and its lower risk loan profile should allow the Company to maintain sound asset quality.

Similar to other thrifts, NYB supports its assets with a high degree of wholesale funding. At September 30, 2008, the Company’s wholesale funding reliance was 63%, somewhat above its historical mid-to-high 50% range. During the year, NYB utilized higher levels of lower cost funding sources in lieu of higher cost retail CDs. DBRS notes that the risk for the Company is that an increasing dependence on potentially costlier, less stable wholesale borrowings could significantly raise funding costs, compress margins and constrain profitability. Rounding out its liquidity profile, NYB has a moderately sized core deposit base, a good quality securities portfolio and access to the Federal Home Loan Bank.

Capital is solid, as evidenced by the Company’s tangible equity ratio of 5.85%. Recently New York Community Bank and the Company issued $512 million and $90 million, respectively, in FDIC guaranteed debt under the Temporary Liquidity Guarantee Program.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Banks and Bank Holding Companies operating in the United States, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.