"[New York Community Bancorp], which acquired part of Signature Bank last year, stockpiled cash as it contends with lending risks — including a pair of troubled loans for a co-op complex and office space — as well as stiffer regulation due to its size. The bank’s provision for loan losses surged to $552 million, shocking analysts and shareholders.
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The stock fell as much as 46% Wednesday, and was down 38% at the close of New York trading. The KBW Regional Banking Index dropped 6%, its worst day since a deposit run toppled Silicon Valley Bank last March.
Investors have been trying to gauge the potential fallout for US banks that held about $2.7 trillion in commercial real estate loans late last year, as property values tumble and borrowers desperate for new financing face heightened interest rates. The provision for loans was more than 10 times what analysts had estimated — and greater than the firm’s total provisions for the prior decade.
Executives emphasized that such measures, which resulted in a fourth-quarter loss, were part of a broader effort to bolster the bank for tougher capital requirements as it grows. Steps included slashing the firm’s quarterly payout to shareholders to 5 cents from 17 cents.
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New York Community Bancorp has swelled rapidly in the past 18 months through a pair of acquisitions, lifting total assets above the $100 billion threshold that brings more regulatory scrutiny. The bank’s 9.1% key capital ratio is below peers such as KeyCorp and Regions Financial Corp. that are in that category.
The firm said it wanted to build up loan-loss reserves to be better in line with other banks of its size and get ahead of potential weakness in the office and multifamily property markets. The amount of the company’s loans that were 30 to 89 days past due jumped 48% in the last three months of the year.
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The two loans accounted for the bulk of the $185 million of net charge-offs the bank took during the fourth quarter, which also was more than its combined net charge-offs over the past 10 years.
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New York Community Bancorp, through its Flagstar Bank unit, agreed to buy $38 billion of Signature’s assets, including $25 billion in cash and about $13 billion in loans, from the Federal Deposit Insurance Corp.
Acquiring those deposits moved New York Community Bancorp into a regulatory category that requires additional capital levels. The company said that was responsible for the dividend cut and the boost to its provision for loan losses. The provision was $552 million, compared with analysts’ estimates of just $45 million.
The loss for the final three months of last year was $252 million, compared with a $206 million profit analysts had predicted. Revenue of $886 million fell short of expectations for almost $932 million."
