October 14, 2024
New York Community Bancorp ( NYCB ) shares fell Thursday after the troubled regional bank ’s path to profitability was muddied by disappointing second-quarter earnings results.
NYCB slashed its 2025 diluted core earnings per share guidance to a high of just 5 cents, down from its previous estimate of 35 cents to 40 cents. For 2024, the bank expects to lose between $2.20 and $2.30 per share, wider than a previously expected 50 cents to 55 cents.
Shares of NYCB fell 3% on Thursday. The stock has lost roughly two-thirds of its value this year.
“Our second-quarter performance reflects the ongoing actions management is taking during this transitional year as we reposition the bank for long-term success,” Chief Executive Officer (CEO) Joseph Otting said in a statement.
Otting, who was appointed in March , has pledged to reduce NYCB’s reliance on commercial real estate (CRE) , which includes multifamily loans. CRE loans for the bank fell 4% year-over-year, or by $362 million, in the period, while multifamily loans declined 2%, or $848 million.
“During the quarter, we expanded our comprehensive review of the loan portfolio beyond the top 350 commercial real estate and multifamily loans to encompass 75% of these two portfolios and increased our loan loss provision and charge-off levels, accordingly,” Otting said.
A pain point for NYCB is its loans to rent-regulated multifamily buildings in New York City. High interest rates, persistent inflation and falling property values are putting owners of such buildings in a bind, jeopardizing their ability to repay loans.
NYCB has reduced its multifamily portfolio to $33.9 billion at the end of June from $35.4 billion as of June 30, 2023. In May, NYCB agreed to sell about $6 billion of mortgage warehouse loans to JPMorgan Chase ( JPM ). The transaction closed on Monday.
NYCB also said Thursday that its Flagstar Bank unit agreed to sell its residential mortgage servicing business to Mr. Cooper Group ( COOP ) for $1.4 billion.
“While the mortgage servicing business has made significant contributions to the Bank, we also recognize the inherent financial and operational risk in a volatile interest rate environment, along with increased regulatory oversight for such businesses,” Otting said.
The transaction is expected to close in the fourth quarter.
NYCB posted a loss of $1.14 per diluted share, much wider than the 43 cents expected by analysts, per Visible Alpha. Net interest income was $557 million, below expectations of $587.6 million.
