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New York Community Bancorp Inc.’s stock fell 37% Wednesday after it posted a surprise loss, built up its reserves and signaled trouble with two loans.
The bank also said it would cut its dividend by more than two-thirds to build up capital to meet regulatory requirements as a larger Category IV bank with assets of $100 billion to $250 billion.
The Hicksville, N.Y.-based bank missed Wall Street’s revenue and net interest income estimates, and reported an increase in net charge-offs, which is money it doesn’t expect to be paid back.
New York Community Bancorp’s stock
NYCB,
fell 37%. The stock was paused during the session but had resumed trading.
If the losses hold through the session, it’ll be the largest one-day percentage loss it its history, surpassing its 13.8% drop on Sept. 22, 2008.
Jefferies analyst Casey Haire said New York Community Bancorp built up its reserves “to address multi-family/office weakness” and it absorbed $185 million in losses tied to two loans.
The bank’s guidance for 2024 implies a roughly 40% downside to the latest analyst estimates for pre-provision net revenue, he said.
“Despite the changes, NYC still lags Category IV peers on capital/reserve/liquidity and carries a riskier credit profile,” Haire said.
New York Community Bancorp reported a fourth-quarter loss of $260 million, or 36 cents a share. In the year-ago quarter, it reported net income of $199 million, or 27 cents a share.
Breaking out one-time items, New York Community Bancorp’s adjusted loss was 27 cents a share, below the FactSet consensus estimate for earnings of 26 cents a share.
Fourth-quarter revenue of $886 million rose from $577 million in the year-ago quarter but missed the analyst estimate of $929.5 million, according to FactSet data.
Fourth-quarter net interest income of $740 million also missed the $788.1 million estimate.
The bank said its net-charge offs to $185 million in the fourth quarter from $24 million in the third quarter, mostly due to two loans.
The first loan had a unique feature that pre-funded capital expenditures, the bank said.
“Although the borrower was not in default, the loan was transferred to held for sale during the fourth quarter,” the banks said.
It expects the loan to be sold during the first quarter.
The bank said it performed a review of other co-op loans and did not find any other loans with similar characteristics.
The second charge-off came on an office loan that went non-accrual during the third quarter, based on an updated valuation, the bank said.
“Given the impact of recent credit deterioration within the office portfolio, we determined it prudent to increase the allowance for credit losses coverage ratio,” the bank said.
Janney analyst Christopher Marinac said the bank “is taking sincere action to address credit risk, build capital faster and not lose long-term credibility.”
He said the stock faces “short-term pain” but will avoid problems down the road of not waiting to recognize credit risk.
The bank cut its dividend to 5 cents a share from 17 cents a share as it builds up capital to meet larger-bank requirements after it acquired ailing Signature Bank last year in a deal brokered by the Federal Deposit Insurance Corp.
“We recognize the importance and impact of the dividend reduction on all of our stockholders and it was not made lightly,” said Chief Executive Thomas R. Cangemi. “We believe this is the prudent decision as it will allow us to accelerate the building of capital to support our balance sheet as a Category IV bank.”
After acquiring ailing Signature Bank and its $38 billion in assets last year, New York Community Bancorp now meets the regulatory definition of a Category IV bank. It also closed its acquisition of Flagstar Bank in late 2022.
As of Dec. 31, total assets were $116.3 billion, up from $111.2 billion on Sept. 30 and $90.1 billion as of Dec. 31.
