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New York Community Bancorp posted a wider-than-expected loss in the third quarter due to a decline in net interest income, ongoing costs related to its merger with Flagstar Bank and the sale of its mortgage warehousing business.
For the three months ended September 30, the company reported a net loss of $280 million, or 79 cents per share, compared with a profit of $207 million, or 81 cents per share, a year ago. Analysts polled by S&P had estimated the third-quarter loss would be $141 million.
Net interest income fell 42% from a year ago to $510 million due to higher average interest-bearing liabilities and an increase in the cost of funds. The decline was partially offset by growth in average interest-bearing assets, New York Community said.
The net interest margin fell to 1.79% from 3.27% in the same quarter last year.
Non-interest income fell to $113 million from $160 million a year ago, including $23 million in fees and costs related to the sale of the mortgage warehouse, which closed in late July, the bank said.
Deposits rose 5% to $83 billion. Chairman, President and CEO Joseph Otting said the Private Bank division experienced strong growth as customers returned to Flagstar and as the New York Community forged new relationships.
The New York Community used some of its liquidity from deposit growth to pay off some of its loans, which fell 31% from a year ago to $19 billion. “This positive shift in our overall financing mix will help reduce our overall financing costs,” Otting said.
The New York community has been trying to cover potentially bad loans. Between the fourth quarter of 2023 and the second quarter of 2024, loan loss provisions totaled $1.2 billion. In the third quarter, provisions were $242 million, down from $390 million in the second quarter, but still nearly fourfold from the $62 million set aside a year ago.
Net charge-offs also fell from the second quarter, from $349 million to $240 million, but well above the $24 million figure a year ago. The write-offs included about $45 million taken on non-accruing loans that were moved to the sales floor, New York Community said.
Charge-offs represented 0.31% of average outstanding loans in the third quarter, compared to 0.03% a year ago.
Otting said New York Community has taken significant writedowns on its multifamily and commercial real estate portfolio. “Our CRE exposure continues to decline through a combination of par disbursements and proactively managing problem loans,” he said.
Total CRE loans fell 6% from a year ago, and of the $2.1 billion of multifamily loans reviewed this year, more than 90% have paid off or remain current, Otting said.
New York Community’s stock price fell 4.6% to $10.97 in pre-market trading.
It’s been an uncertain — and often excruciatingly difficult — nine months at New York Community, the Long Island-based parent company of Flagstar Bank. In late January and well into February, the stock price plummeted due to problems with commercial real estate loans, deficiencies in internal controls and numerous leadership changes. After weeks of turmoil, the company received a $1.05 billion capital injection from an investment group led by former Treasury Secretary Steven Mnuchin and former Comptroller Joseph Otting. Otting was then appointed chairman and CEO.
He and his new management team worked to create a new strategic plan for the New York community. The overhaul includes simplifying the business model by selling off non-core divisions.
In July, the company announced plans to sell it company for servicing residential mortgages to Mr. Cooper in a deal expected to close in the fourth quarter. That announcement came a few weeks after the bank sold about $5.9 billion worth of stock mortgage loans to JPMorganChase.
The company said last week that it has laid off about 800 employees, or 8% of its workforce, and expects to terminate another 1,200 employees when the sale to Mr. Cooper is completed.
More change is coming. The bank is dropping the name New York Community Bancorp as a holding company will rebrand as Flagstar Financial after hours on Friday. Starting Monday, the stock price symbol will change from NYCB to FLG, the company said.
New York Community acquired Troy, Michigan-based Flagstar Bancorp in late 2022 as part of a strategy to diversify its loan portfolio. A few months later, as the banking crisis of spring 2023 unfolded, that happened acquired a large portion of the failed Signature Bank in New York City.
The pair of deals pushed New York Community’s total assets higher above the $100 billion threshold.
