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Dear Mr. Berko:

Dear W.P.:

No, the economy is not turning around. It’s still in the doldrums, and those silly “green shoots” are not sprouting higher; they will remain “shoots” for several years to come. Unemployment is not improving; rather, it’s getting worse at a slower rate. Corporate sales are not recovering; they’re just off less. Corporate profits, which were really nasty, are still nasty but getting less nasty. In Los Angeles, the median price of homes rose 4.2 percent in June. But that’s after plunging nearly 55 percent in 2009.

The gross domestic product growth rate for the first quarter of 2009 was minus 6.1 percent, and in the second quarter it was minus 5.8 percent adjusted for inflation.

It will be a long time until we see Merck ($30.22) at $60 again, or Bank of America ($16.25) at $55, Lennar ($13.39) at $60, U.S. Steel ($45.18) at $190, FedEx ($66.40) at $120, or Ford ($7.75) at $60. It will to be some time until corporate revenues and profits reach 2006/2007 levels again, and it will be a long, long time till consumer disposable income reaches the historic levels of 2006-07. As the song says, “Those were the days, my friend, we thought they’d never end …” But they did, with a resounding “thud” felt around the world.

New York Community Bancorp Inc. (NYB-$11.13), which has been in business since 1859, has $31 billion in assets, used to trade in the mid-$30s, and operates 180 branches in New York’s five boroughs plus a 37-branch commercial network. It’s notable that NYB did not take a pfennig in TARP funds, allowing it to maintain its dividend policy and compensate management without government meddling.

However, NYB’s $17 billion multifamily mortgage business (70 percent of its loans portfolio) has been stable. These mortgages, with an average 60 percent loan-to-value ratio, are secured by rent-control regulation and rent-stabilized properties in the Big Apple. This cushion is the reason NYB has avoided loan losses in its multifamily portfolio for 28 years. It also gives NYB a reliable loan base, because New Yorkers wait in line when one of these properties is foreclosed. New buyers usually refinance with NYB, often increasing the mortgage to cover renovation costs.

NYB is not without weaknesses, however. The bank’s profitability has been hampered by high deposit costs and low-yielding loans, and some folks are concerned that the New York real estate market is becoming soft.

Barring deterioration in its loan portfolio and barring further deterioration in the New York real estate market, the $1 dividend appears safe. The Street believes earnings will improve nicely this year, next year and in 2011. The 9 percent dividend yield is attractive, and I’m comfortable with a 450-share speculation.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service