Hicksville-based Flagstar Bank’s parent company on Wednesday reported a loss for the January-March period, but executives said “the bank has a clear path to profitability over the next two years.”
New York Community Bancorp lost $327 million in the first quarter despite receiving $1.1 billion from former Treasury Secretary Steven Mnuchin and other investors. The cash injection stabilized the bank’s finances even as it became insolvent and some expected it would be taken over by federal regulators.
The losses in the first three months compared to a $2 billion profit a year ago when NYCB acquired some of Signature Bank’s assets that were seized by regulators.
NYCB posted a $2.7 billion loss in the October-December 2023 period after discovering deficiencies in loan screening procedures and other operational issues.
Equity analysts blame NYCB’s woes on its large portfolio of real estate loans, especially those for rent-controlled apartments, where operating costs are soaring and vacancy rates in office buildings are rising as employees work from home. It is said that it is.
The bank also became subject to stricter regulation as it grew in size with its 2021 acquisition of the private banking divisions of Michigan-based Flagstar and Signature.
Still, CEO Joseph Otting, who was invited by Secretary Mnuchin, told analysts on Wednesday: [were taken in January-March] Laying the foundation for returning to long-term, sustainable profitability [that is] It is at the same level as local banks. … We’ve done this before, and we feel we can do it again,” he said, referring to past turnarounds of distressed banks.
On Wall Street, investors reacted to Otting’s comments by pushing NYCB stock higher. The stock was trading at $3.37 per share as of 2 p.m., up 27% from Tuesday’s closing price.
For decades, NYCB branches in metropolitan areas bore the Roslyn Savings Bank, Queens County Savings Bank, and New York Community Bank nameplates. The name was changed to Flagstar Bank in February.
On a conference call with analysts Wednesday, Otting said there were no plans for a major sale of the bank’s loan portfolio, but that the bank was considering selling $5 billion in private assets in the “next week or so.”
Otting, a former director of the U.S. Office of the Comptroller of the Currency, which regulates banks, said NYCB will “aim for a balanced balance sheet” by reducing real estate lending and increasing business lending. He also wants to increase the number of certificates of deposit and other savings options for consumers.
Otting confirmed that 200 NYCB employees who worked in commercial lending and participated in the Signature acquisition have since left due to recent turmoil at NYCB. He said they took about $200 million in customer deposits to rivals such as Dime Community Bank in Hauppauge.
“There hasn’t been a mass exodus of employees,” Otting said. “We were able to hold a significant amount of deposits.”
NYCB’s new leadership is also trying to cut costs. Otting said he and his colleagues “know how to squeeze the nickel out of it…We will be proactive in looking at our cost structure.”
