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That easily exceeded the net loss of 40 cents per share predicted by analysts surveyed by FactSet Research Systems, and it followed a
The company's stock price, which is down about 67% year to date, tumbled about 10% on Thursday morning and was down about 4% by mid-afternoon.
One huge factor in the latest results: New York Community's provision for credit losses totaled $390 million, up from the $315 million of provisions in the prior quarter. The uptick was largely driven by a surge in net charge-offs, which totaled $349 million in the second quarter, up from $81 million in the first quarter.
In May, New York Community executives warned that the firm's provisions would be elevated this year, and they forecasted a range of $750 million to $800 million. The company revised that guidance Thursday, saying they expect provisions of $900 million to $1 billion for the full year, which will then decline in 2025 and 2026.
During New York Community's second-quarter earnings call, analyst Jon Arfstrom of RBC Capital Markets wanted to know how much confidence executives have in their latest forecast.
Chief Financial Officer Craig Gifford said confidence is higher than it was the previous quarter, in part because of the addition of Kris Gagnon as chief credit officer. Gagnon,
"The management team was not only new, not all of them were here" in May, said Gifford, who has only been at New York Community since April. As a result of hiring Gagnon and increasing the level of financial information about borrowers, "we have a lot more visibility," he added.
New York Community — which has been
He's also aiming to keep building up liquidity and capital ratios, and to lower the bank's efficiency ratio. The work comes on the heels of two acquisitions — the late 2022 purchase of Flagstar Bancorp in Troy, Michigan, and the March 2023 deal to buy much of the failed Signature Bank in New York City — which moved the company above the $100 billion-asset threshold.
Critics have said that NYCB was not prepared, especially from a risk perspective, to grow so quickly. Amid the turmoil in March, an investment group led by former Treasury Secretary Steven Mnuchin — who had previously worked with Otting to turn around OneWest, which emerged from the failure of IndyMac Bank —
There has been "a lot of really good progress on behalf of the team here [and] great momentum, I think, amongst people in the bank," Otting said Thursday. "They can see the finish line that this company can be a really successful regional bank, and there's a lot of good energy and excitement."
Part of the new strategy is to simplify NYCB's business model by selling divisions that executives deem to be "noncore," such as the residential mortgage servicing business.
In a press release Thursday, Otting said that while the mortgage servicing business has made "great contributions" to the bank, it brings "financial and operational risk" given the volatility of interest rates and increased regulatory oversight.
The announcement of the all-cash, $1.4 billion sale to Mr. Cooper, a nonbank mortgage originator and servicer, came three days after New York Community completed its
And there's more to come. Another $200 million of mortgage warehouse loans are expected to be sold within the next 30 days, Otting said Thursday. Separately, the company has an additional $2 billion to $5 billion of assets in noncore businesses that it is currently evaluating, Otting added.
"We do plan to probably move on some of that activity" by the end of the year, he said.
For the quarter, New York Community reported net interest income of $557 million, down 28% year over year, and fee income of $114 million, down 62.5% from the year-ago period.
The company's latest guidance calls for net interest income to be in the range of $2.2 billion to $2.25 billion for the full year, with fee income totaling somewhere between $350 million and $400 million.
NYCB's quarterly expenses totaled $705 million, compared with $661 million in the second quarter of 2023. For the full year, expenses are slated to be $2.35 billion to $2.4 billion, the company said.
The net charge-offs during the quarter were mostly related to office loans, with some multifamily loans also in the mix, Gifford said. The upswing in charge-offs came amid a deep dive into the bank's $74.6 billion commercial real estate portfolio. Through June, NYCB had reviewed roughly 75% of its CRE loans, including about 80% of its multifamily loan portfolio and 80% of its office book, Gifford said.
In the second quarter, nonperforming loans more than doubled from three months earlier, jumping from $798 million to $1.9 billion. The increase stemmed from recent appraisals on certain multifamily and office properties, which resulted in some loans moving into classified status.
Notably, more than 60% of the loans categorized as substandard continue to perform, Otting said.
Given the ambitious turnaround plan, some analysts are counseling patience.
In a research note Thursday, Mark Fitzgibbon, an analyst at Piper Sandler, wrote that the turnaround is "likely to be very bumpy for a while, making it difficult to forecast earnings with any specificity in the near-term." Still, he had an optimistic message for investors.
"We believe that the company is making smart strategic decisions that will allow it to turn profitability meaningfully higher over the next few years," Fitzgibbon wrote. "We think investors should be more focused on the balance sheet positioning than earnings for a while."
