New York Community Bancorp shares decline as it posts sharp loss and cuts dividend

New York Community Bancorp cut its quarterly dividend and increased its loan loss reserves. In its morning conference call, the bank said its dramatic measures were aimed at meeting the tougher standards that apply to large banks, after recent acquisitions pushed its assets above $100 billion. CEO Thomas R. Cangemi said the bank's cash, capital and risk levels will face their first stress test from regulators in April.

While Cangemi told listeners that the moves to boost reserves and liquidity do not reflect sudden problems in the bank's huge book of commercial real estate loans, investors appear to be wondering whether there is enough reserve among the less regulated regional banks that his bank ranks second. Departure.

The SPDR S&P Regional Banking Fund fell 4% in a flat market on Wednesday, on the news.

“This was a significant negative surprise,” John J. Arfstrom, an analyst at RBC Capital Markets, said in a note on Wednesday.

The Hicksville, New York-based bank cut its combined dividend from $0.17 per quarter to $0.05 per share, while reporting a net loss of $260 million for the fourth quarter compared to a gain of $164 million for the same period last year. Analysts had expected earnings per share of 26 cents, according to FactSet.

New York Community Bancorp, which acquired Signature Bank during last year's regional banking crisis, has booked a $552 million provision for loan losses, a move the bank says brings its provision for credit losses more in line with larger banks. The provision compares to a provision of $62 million for the three months ended September 30, according to the company.

On the company's earnings call, CEO Thomas R. Cangemi said the moves were intended to bring New York Community Bancorp more in line with large “Tier 4” banks, rather than a negative credit outlook. By the end of 2024, the bank's regulatory capital is expected to reach 10% of the projected assets of such large banks.

“This is very focused on looking at the long-term plan of the company and being part of a new Tier 4 banking institution, and having a capital position as we grow it to a level that was there in our peer groups,” Cangemi told listeners. “.

Analyst Matt Breeze of Stevens wondered whether regulators had pressured the bank to take precautionary measures.

“We're not going to talk specifically about our regulatory conversations,” Cangemi said. “But the fact is that we have a report in April. We have adjusted our capital position significantly.”

Regulators have swarmed U.S. banks since the failure of Silicon Valley Bank and Signature last year, says Sonny Kalsi, co-CEO of real estate investment and lending firm BentallGreenOak. This has prevented wider failures, but has also hampered lending by regional banks to the property industry.

Regarding mortgages, Cangemi said Community Bank of New York Bancorp's assets are down 90% in 2023. Borrowers appear to be betting that the Fed will cut interest rates in the second half of 2024, so they are postponing long-term borrowing. decisions until then.

Looking to 2024, the bank expects total loans to decline by 3% to 5%, while deposits to rise by 3% to 5%.

The bank said that net discounted amounts amounted to $185 million for the fourth quarter, compared to $24 million for the three months ending September 30. The bank attributed the jump to two loans: a cooperative loan that the bank expects to sell during the period. The first quarter of 2024 and an office loan that does not become due during the third quarter.

Loans that were 30 to 89 days delinquent totaled $250 million as of Dec. 31, up from $169 on Sept. 30, according to the company's earnings report.

The bank has a large footprint in the Northeast and Midwest. It engages in multifamily lending, mortgage origination and servicing, and warehouse lending. The company says it is the second-largest multifamily portfolio lender in the country and the leading multifamily portfolio lender in the New York City market area, where it specializes in non-luxury, rent-regulated residential buildings.

The company's commercial and industrial borrowings totaled $25.3 billion as of December 31, compared to $24.4 billion as of September 30. Total commercial loans represent 46% of total loans held for investment, and multifamily loans represent 44% of the total, the bank said. Loans held for investment at December 31, reflecting greater diversification compared to last year. Housing loans and other loans represented 7% and 3%, respectively, of the total loans held for investment.

The bank reported total deposits of $81.4 billion on December 31, down $1.3 billion, or 2%, compared with September 30. The bank said the decline was related to the signing deal. Deposits actually grew by 2%, but for this deal unraveled.

CEO Kangemi said the decision to cut the dividend was not taken lightly but was a prudent move to help the company accelerate efforts to build capital to shore up its balance sheet.

“Although these necessary actions negatively impacted our fourth-quarter results, we are confident that they better align our larger organization with our new peers and provide a solid foundation moving forward,” he said in a statement.

These moves will help it as it continues to grow, Cangemi said. “We successfully grew into a $50 billion-plus bank in 2018, and we believe the actions we are taking now will make our transition to a $100 billion-plus bank even more successful,” he said.

The company significantly expanded its reach through the acquisition of Signature Bank and Flagstar Bank, a regional bank based in Michigan. It closed the last acquisition before last year's regional banking crisis, which took down three lenders, including Signature.

Write to Andrew Welsch at [email protected] and Bill Albert at [email protected]