Regional lender New York Community Bancorp (NYCB) reminded again Friday that commercial real estate problems are not entirely in the rearview mirror of U.S. banks.
The Hicksville, New York-based regional lender posted higher provisions for credit losses and loan write-offs in the third quarter than Wall Street expected. It also reported its fourth consecutive quarterly loss of $280 million and pushed back its goal of becoming profitable by a year to 2026.
The stock fell more than 8% on Friday morning. As of Friday morning, it is down 66% since the start of the year.
NYCB is a major lender for office buildings and rent-regulated apartment complexes, especially in New York City. With $114 billion in assets, it is one of the 30 largest banks in the country.
Stock prices began plunging in January after the bank set aside more money to cover real estate loan losses partly tied to its New York City-area apartment complexes.
NYCB was able to calm the market with an emergency injection of shares from a group that also included former Treasury Secretary Steven Mnuchin. A new team began reducing the bank’s exposure to commercial real estate while selling businesses, cutting costs and laying off employees.
Earlier this year, the bank pledged to make a profit or break even by 2025 as part of its turnaround.
But on Friday the bank pushed that forecast to 2026, while also cutting the revenue it expects in that breakthrough year.
“The company is going through tremendous change, and that commercial bank will do better in 2026 and 2027 from an earnings, structure and franchise value perspective,” Janney analyst Chris Marinac told Yahoo Finance. “It will simply be more expensive for them to make the switch in 2025.”
NYCB isn’t the only bank still clawing its way through commercial real estate costs.
Wells Fargo (WFC) CEO Charlie Scharf said Thursday that his bank could lose $2 billion to $3 billion on its commercial real estate loan portfolio and that the problems are expected to materialize over the next three to four years.
“We’re going to lose two to three billion dollars, it’s a lot of money,” Scharf said at an event in Washington on Thursday. “On the other hand, we all made reservations for it.”
Two weeks ago, Wells announced it had a $2.42 billion provision for future credit losses.
Scharf said concerns about commercial real estate are waning, however, as interest rates begin to fall again, and most of the problems are concentrated in office buildings that are emptier than before the pandemic.
It is “not something that we view as crippling or that should have an impact on any other asset class.”
An October Mortgage Bankers Association survey released Thursday shows that delinquencies on non-office CRE loans are beginning to decline, while those on office building loans continue to rise.
NYCB has roughly $2.6 billion in office loans, but is more heavily exposed to multifamily.
As of the third quarter, approximately 45% of loans held for investments are tied to apartment complexes – many of which are rent-regulated buildings in New York State that were affected by a 2019 New York law change.
New CEO Joseph Otting, former head of the U.S. Office of the Comptroller of the Monetary Fund, has led a comprehensive investigation into its multifamily and other commercial real estate loans as part of an effort to get the bank back on track .
It also recently announced plans to eliminate about 22% of its employees. Of that total, 700 positions have already been eliminated. The company plans to make another 1,200 cuts before the end of the year as it completes the sale of its mortgage services and third-party mortgage lending businesses.
Today at 5:00 PM ET, the bank will also officially change its name to Flagstar Financial Inc. On Monday, the bank’s shares will no longer trade under the current NYCB ticker symbol, but instead under the symbol FLG.
The name Flagstar comes from the Troy, Michigan-based lender that NYCB acquired in December 2022.
A key reason for the change in the bank’s profitability forecasts is that expenses will be $50 million to $100 million higher in 2024, and $100 to $150 million higher in 2025 and 2026.
“I really feel good about the people and the direction we’re going,” Otting told analysts on Friday.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other financial areas.
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