DBRS Confirms New York Community Bancorp, Inc. Changes Trend to Negative after AmTrust Acquisition

DBRS has today confirmed the ratings of New York Community Bancorp, Inc. (NYB or the Company) and its related entities, including its Issuer & Senior Debt rating of BBB (high). The Company’s FDIC guaranteed debt remains at AAA with a Stable trend. The trend for all other ratings is Negative. The confirmation and change in trend follows NYB’s recent acquisition of certain assets and liabilities of AmTrust Bank (AmTrust) from the Federal Deposit Insurance Corporation (FDIC) and a subsequent capital raise of $754 million (excluding over-allotment).

NYB’s ratings reflect the Company’s solid and augmented capital position, improved liquidity and sound asset quality. Ratings also indicate the Company’s conservative business management and long-standing and prominent presence in its niche business, banking rent controlled and rent stabilized multifamily building customers in New York City.

Today’s rating confirmation also considers that the acquisition of select assets and liabilities of AmTrust and the subsequent capital raise are accretive to earnings and tangible common equity. The acquired assets include $6 billion in loans, consisting of single-family residential mortgages and consumer loans, $4 billion in cash, and roughly $1 billion in good quality securities. The assumed liabilities include $8 billion in deposits and $3 billion of wholesale borrowings. The acquisition included 29 branches in Ohio, 25 in Florida and 12 in Arizona.

The revision of the trend to Negative indicates DBRS’s concern regarding the near- to medium-term risk related to NYB successfully integrating and operating the AmTrust franchise. Although NYB has a history of successful bank integrations, DBRS believes that managing a geographically diverse franchise outside of NYB’s strong core competence of lending on unique multifamily real estate structures in the New York metropolitan area amidst a struggling economy will be challenging for the Company. Evidence of a troubled integration, the announcement of additional acquisitions prior to integration or significant customer and deposit attrition could lead to negative rating actions. Conversely, successful operational integration with minimal deposit attrition, strong financial performance and customer retention could justify the strategic rationale and restore the trends to Stable.

Positively, AmTrust deposits and branches enhance NYB’s liquidity and deposit generating ability, while the capital raise increases its loss absorption capacity. Furthermore, DBRS notes that future credit costs related to the acquired loans will be mitigated by a loss sharing agreement with the FDIC.

Despite the strong economic headwinds, NYB’s credit costs remain modest and overall asset quality sound. Although the Company’s loan loss reserves to non-performing asset ratio is fairly low at 23% (September 30, 2009), its income before provisions and taxes is robust ($159 million for Q3 2009) and provides ample loss absorption capacity, at current loss rates.

DBRS notes that the addition of AmTrust’s deposits and cash will result in a lower level of wholesale funding reliance, while the capital raise will boost NYB’s capital metrics. On a pro-forma basis, including the acquisition, along with some anticipated balance sheet shrinkage, NYB’s tangible common equity, Tier 1 and Total regulatory capital ratios are expected to be 6.4%, 13.7% and 14.2%, respectively.

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

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.