Pitter 2121 – Stock.adobe.com
Shares of New York Community Bancorp fell 35% Wednesday as the Long Island-based regional bank posted a steep quarterly loss, reported problems in its commercial real estate portfolio and cut its dividend.
Investors were caught off guard by the bank's earnings report, which revealed a series of moves the company has taken to prepare.
New York Communities paid off two large real estate loans last quarter, one for an office building and one for an apartment complex. It also keeps large amounts of cash in case other borrowers default, resulting in a net loss of $260 million in the fourth quarter. The company lowered its dividend from 17 cents per share to 5 cents.
“We recognize the importance of reducing the dividend and the impact it will have on all shareholders, and we did not make this decision lightly,” Thomas Cangemi, the bank's chief executive officer, said in a news release.
Investors sold shares of New York Community, which fell 35% to $6.75 in mid-morning trading.
RBC Capital Markets analyst Jon Erfstrom wrote that the dividend cut was “highly unusual” and occurred without “any warning to investors.” All of the reasons cited by the New York community for the move were “viable,” he wrote in a note to clients, but the suddenness came as a complete surprise.
“These trends and decisions were completely unexpected,” Afstrom wrote.
New York Communities wrote off approximately $185 million of loans during the quarter, primarily due to two real estate loans.
One was a so-called “co-op” loan for a multifamily property that was in trouble but had not defaulted. Bank executives said they plan to sell the loan this quarter and that an extensive review of cooperative loans found no other loans with “similar characteristics.”
“We remain very satisfied with the quality of our multifamily portfolio,” Chief Financial Officer John Pinto told analysts on a fourth-quarter earnings call.
The second real estate loan charge-off involved an office building that began experiencing problems last year and suffered a decline in appraised value.
New York Community's loan portfolio has faced increased scrutiny in recent months. The main reason for this is its exposure to office loans and multifamily loans for rent-stabilized buildings, two parts of the real estate market that are drawing concern.
New York Communities' multifamily loans totaled $37.2 billion as of Dec. 31, accounting for 44% of its total outstanding loans, according to the company's financial supplement. Office loans totaled much less, at about $3.4 billion at the end of December.
Cangemi said the dividend cut would help increase the company's capital cushion. This is an important consideration since the company's asset size currently exceeds $100 billion, which makes it subject to some more stringent regulatory rules.
new york community
Exceeding $100 billion in assets means regulators will supervise New York Community as a so-called “Category IV” bank, imposing a series of more stringent standards, including regular stress tests and increased capital requirements. means.
Regarding the signing contract, Cangemi said:
“We believe this is a wise decision as it allows us to accelerate our recapitalization to support our balance sheet as a Category IV bank,” he said in a news release.
David Rochester, an analyst at Compass Point Research and Trading, said in a note to clients that the capital build-up will not be a one-time event as New York communities look to make their balance sheets more similar. He said it was “highly likely” that it had happened. Bigger banks.
Autonomous Research analyst David Smith said in a separate research note that the bank's earnings release on Wednesday was “painful” as the bank continues to adapt to its new regulatory status. .
“While management has attempted to paint a positive picture of the long-term outlook for the New York community, the short-term outlook appears very challenging,” he wrote.
New York Community leaders also announced Wednesday that they have decided to postpone the signature system transition, which was expected to take place this year, to 2025. The goal is to avoid confusion for customers and minimize expenses for the New York community. Complete the Flagstar integration.
The conversion to Flagstar is scheduled for mid-February 2024, Cangemi said in a conference call.
