Freed by Dodd-Frank, NYCB is on the hunt for M&A deals

New York Community Bank is preparing for a growth spurt despite major headwinds.

The lender, which focuses on rent-regulated and below-market rate apartments in New York City is expecting to restart its growth months after sweeping legislative changes and the looming spectre of a coming recession.

“We want the company to be a successful acquirer of other banks,” said CEO and president Joseph Ficalora last week at Raymond James U.S. Bank Conference. NYCB was the fourth largest non-construction lender in New York City commercial real estate in the past year, originating nearly $5 billion in loans, according to The Real Deal’s recent ranking.

Ficalora’s comment came as he explained how last year’s amendments to the Dodd-Frank Act will benefit NYCB. The changes lift the regulatory threshold for banks from $50 billion to $250 billion. As of June this year, more than 77 percent of the bank’s $52.8 billion assets were loans ⁠— $30.5 billion categorized as multifamily.

According to the company’s slides, NYCB’s compound annual growth rate from 1993 to 2009 was 25.7 percent. Following Dodd-Frank’s enactment, the rate fell to 2.4 percent over the last decade. Ficalora attributed the slowed growth to the Act’s added oversight.

He said regulators prevented at least one deal from closing because it would have put the bank at over $50 billion in assets. A representative later clarified that Ficalora was referring to NYCB’s attempt to merge with Astoria Financial in 2015. Both parties abandoned the deal in 2017 after the Federal Reserve refused to sign off, The Street reported. Later that year, Sterling Bancorp acquired Astoria. “It was hell,” Ficalora said.

Now, Ficalora expects future growth to come through acquisition.

In July, the company’s CFO Thomas Cangemi said in an earnings call that the bank expected to grow 5 percent this year and noted that rate could increase up to 35 percent if acquisitions occur. He said NYCB was “going to be very proactive.”

When it comes to how the new rent laws will impact the bank, Ficalora addressed the issue during the conference’s question-answer period. He said the new laws were “so far removed from reality that they’ve had meaningful, discernible, adverse consequence.” But he said NYCB’s portfolios are “perfectly fine.”

“We never actually lent on the future value of those portfolios. We lent on the existing value of those rent streams,” he said, adding that a distressed market means opportunity.

“In the worst of times, we’re positioned to take advantage of those that actually lose,” he said.