The second-quarter performance of New York’s largest multifamily lender shows the city’s rental market has regained its footing.
New York Community Bank reported 4 percent annualized growth in its multifamily loan portfolio last quarter to $32.6 billion. In the same period, multifamily loan originations jumped by 42 percent to $2.1 billion, powering a 21 percent overall increase in originations.
Meanwhile, rent collection by the bank’s loan recipients was steady at pre-pandemic levels and loan deferrals dropped to $1 billion at the end of June, an 86 percent decrease from $7.4 billion in the same quarter last year. Deferrals had been edging down for several quarters until the second-quarter plunge.
“We have zero clients on full deferral right now, which is great,” said NYCB’s president and CEO Thomas Cangemi, adding that he expects deferrals to continue to decline.
Multifamily loans, which account for over 60 percent of the firm’s $1.4 billion loan portfolio, drove overall growth in the quarter. The bank saw net income surge 45 percent year-over-year to $152 million while revenue jumped 23 percent to $347 million.
Cangemi pegged Manhattan’s reopening as the catalyst for the firm’s rental portfolio recovery. Rents have risen as tenants have returned to the city, gobbling up supply.
The CEO said he feels confident that New York Community Bank can grow its multifamily portfolio by 5 percent over the next year.
Cangemi, who took over for CEO Joe Ficalora in December, said the bank met the goals he had outlined.
“Since being named CEO it has been one of my top initiatives to bring in more core deposits from our multifamily and commercial real estate borrowers,” Cangemi said. “These initiatives are beginning to bear fruit.”
The bank’s commercial lending poses longer-term problems.
Cangemi admitted there was “some work to do in office and retail,” which saw loans dip quarter-over-quarter by 12 percent to $215 million and 1 percent year to date.
The firm has approximately $500 million in commercial loans in danger of default, but Cangemi told analysts on the call that the firm held sufficient equity to stave off a loss to the bank.
While demand among residential tenants has risen, office landlords have struggled. In the second quarter, 17 percent of all office space was vacant.
The executive pointed to the firm’s late-April merger with Michigan-based bank Flagstar as a means to offset those declines by diversifying the banks’ portfolio and expanding into Florida, Phoenix and Michigan markets, where Flagstar has traction.
“Given the bigger balance sheet, we will have the opportunity to leverage off a number of businesses and increase market share,” said Cangemi. He named direct and indirect family lending, mortgage warehouse lending, mortgage banking and commercial and industrial lending as growth areas.