Community Bancorp of New York posted a surprise loss as it wrote down bad real estate loans, sending its stock down 36%, dragging down the share prices of regional banks across the country.
Commercial real estate, especially the office sector, has taken a hit since the pandemic forced millions of Americans to work from home. Regional banks tend to make more real estate loans and are more exposed to losses than large money center banks.
New York Community Bancorp cut its quarterly dividend and increased its loan-loss reserves. In its morning conference call, the bank said its dramatic moves would meet the tighter standards applied to big banks, whose recent acquisitions have boosted its assets to more than $100 billion. The bank's cash, capital and risk positions will face their first regulatory stress test in April, CEO Thomas R. Canjemi said.
While Canjemi told listeners that the moves to increase reserves and cash do not reflect sudden problems in the bank's large book of commercial real estate loans, investors are wondering whether his bank's ranking among less tightly regulated regional banks is enough of a reserve. left
The SPDR S&P Regional Banking ETF fell 4% in a flat market Wednesday.
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“It was a big negative surprise,” John G. Orfstrom, an analyst at RBC Capital Markets, said in a note Wednesday.
The Hicksville, NY-based bank cut its common dividend from $0.17 to $0.05 per quarter, while posting a net loss of $260 million in the fourth quarter, compared with $164 million in the same period a year ago. Analysts were expecting earnings of 26 cents per share, according to FactSet.
Community Bancorp of New York, which bought Signature Bank during the regional banking crisis last year, posted a $552 million provision for loan losses, which the bank says brings its allowance for loan losses in line with big banks. The provision compares with a provision of $62 million for the three months ended September 30, the company said.
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In the company's earnings call, CEO Thomas R. Kangemi said the moves are more about a negative outlook on credit than bringing New York Community Bancorp into line with larger “Type IV” banks. By the end of 2024, he expects the bank's regulatory capital to reach the 10% of assets expected of such large banks.
“It's laser-focused on looking at the company's long-term plan and being part of a new Type IV banking company,” Canjemi told listeners, “and having a capital position as we grow it to a level where we were among our peer groups. .”
Matt Preece, an analyst at Stephens, asked whether regulators had pressured the bank to take prudent measures.
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“We're not going to talk specifically about our regulatory conversations,” Kangemi said. “But the fact is, we have an April submission. We have adjusted our capital position significantly.
Regulators have targeted U.S. banks since last year's failure of Silicon Valley Bank and Signature, says Sonny Kalsi, co-CEO of real estate investment and lending firm Bendall GreenOak. It prevented widespread failures, but regional banks froze lending to the real estate industry.
For real estate loans, New York Community Bancorp's originations are down 90% by 2023, Congemi said. Borrowers seem to be betting that the Fed will cut interest rates in the second half of 2024, so they are putting off long-term borrowing. Until then results.
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Looking ahead to 2024, the bank expects total loans to decline by 3% to 5%, while deposits will increase by 3% to 5%.
Net charges were $185 million in the fourth quarter, compared with $24 million in the three months ended Sept. 30, which was attributed to two loans. 2024 First Quarter and Third Quarter of Uncollected Office Loan.
Total loans past due 30 to 89 days were $250 million as of Dec. 31, up from $169 million as of Sept. 30, according to the company's earnings report.
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The bank has a large footprint in the Northeast and Midwest. This includes multi-family lending, mortgage origination and servicing, and warehouse lending. The company says it is the nation's second-largest multifamily portfolio lender and the leading multifamily portfolio lender in the New York City market area.
The company's total commercial and industrial loans were $25.3 billion at December 31, compared to $24.4 billion at September 30. Total commercial loans accounted for 46% of total loans held for investment, and multifamily loans accounted for 44% of the total. Loans held for investment at December 31 reflect a significant diversification from a year ago. Home loans and other loans account for 7% and 3% of the total loans held for investment respectively.
Total deposits at Dec. 31 were $81.4 billion, down $1.3 billion, or 2%, from Sept. 30, the bank said. The bank said the decline was related to the signature deal. Deposits actually grew by 2%, but that deal is displacement.
CEO Cangemi said the decision to cut the dividend was not taken lightly, but was a prudent move to help the company accelerate efforts to build capital to support its balance sheet.
“While these necessary actions negatively impacted our fourth quarter results, we believe they will better align our larger organization with our new peers and provide a solid foundation going forward,” he said in a statement.
Kangemi said the moves will help it as it continues to grow. “We successfully grew into a $50 billion-plus bank in 2018, and we believe the steps we are taking now will make our transition to a $100 billion-plus bank even more successful,” he said.
The company has greatly expanded its reach with the acquisitions of Signature Bank and Flagstar Bank, a regional lender in Michigan. It closed with the latter acquisition shortly before last year's regional banking crisis that brought down three lenders, including Signature.
Write to Andrew Welsch at [email protected] and Bill Albert at [email protected]
