Magazine article American Banker

Debt Purchases Worry N.Y. Community Investors

Magazine article American Banker

Debt Purchases Worry N.Y. Community Investors

Article excerpt

New York Community Bancorp Inc.'s balance-sheet maneuvering in the first quarter included an increase of almost 30% in its securities portfolio from the end of last year.

That strategy does not sit well with investors concerned about rising interest rates.

During its first-quarter earnings report Wednesday, the $26.5 billion-asset Westbury, N.Y., company said it added $2.6 billion of securities, mostly mortgage-backed paper, and $2.7 billion of wholesale borrowings.

New York Community financed part of the securities purchase with a Jan. 30 secondary offering of 13.5 million shares, which generated $400 million of capital.

It has always maintained that its sizable securities portfolio and borrowing strategy guarantee a stable cash flow to satisfy customer loan demand, and in a telephone interview Thursday, Joseph R. Ficalora, its president and chief executive, said that is still its strategy.

And it has done nothing that should surprise investors, Mr. Ficalora said. "In January we told the Street very clearly that we were going to leverage the $400 million in capital we raised, and that would, of course, necessitate near-term the growth of our securities portfolio."

As for the risk, he said, "we are preparing to adjust how we positioned ourselves and have been doing that since February."

The securities portfolio now holds $12.1 billion, over half of it in mortgage-backed paper held for sale. Securities make up 45.7% of New York Community's balance sheet.

Mr. Ficalora has said repeatedly that it does not use securities as an investment vehicle, but rather uses mortgage-backed paper to adjust cash flow to satisfy loan demand. Rising rates lengthen the portfolio's duration but does not disrupt cash flow.

New York Community originated $1.1 billion of loans in the first quarter, for an annual growth rate of 23%, which exceeded even its own prediction this year of 20% growth in 2004. …

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