New York Community Bancorp Inc.’s stock fell 36% on heavy volume in premarket trading on Wednesday after it said it would cut its dividend by more than two-thirds as the company builds up capital to meet regulatory requirements as a larger bank.
The bank also reported a surprise fourth-quarter loss and missed Wall Street’s revenue and net interest income estimates, as well as problems with two of its loans that caused its net charge-offs to increase from the third quarter.
New York Community Bancorp’s stock
fell in premarket trading to $6.60 a share on a volume of 7 million shares.
“We recognize the importance and impact of the dividend reduction on all of our stockholders and it was not made lightly,” said Chief Executive Thomas R. Cangemi. “We believe this is the prudent decision as it will allow us to accelerate the building of capital to support our balance sheet as a Category IV bank.”
After acquiring ailing Signature Bank and its $38 billion in assets last year, New York Community Bancorp now meets the regulatory definition of a Category IV bank with assets of $100 billion to $250 billion. It also closed its acquisition of Flagstar Bank in late 2022.
The bank said it’s cutting its dividend to 5 cents a share from 17 cents a share as it builds up capital and makes other moves to meet the requirements of a Category IV bank.
As of Dec. 31, total assets were $116.3 billion, up from $111.2 billion on Sept. 30 and $90.1 billion as of Dec. 31.
New York Community Bancorp reported a fourth-quarter loss of $260 million, or 36 cents a share. In the year-ago quarter, it reported net income of $199 million, or 27 cents a share.
Breaking out one-time items, New York Community Bancorp’s adjusted loss was 27 cents a share, below the FactSet consensus estimate for earnings of 26 cents a share.
Fourth-quarter revenue of $886 million rose from $577 million in the year-ago quarter but missed the analyst estimate of $929.5 million, according to FactSet data.
Fourth-quarter net interest income of $740 million also missed the $788.1 million estimate.
The bank said its net-charge offs — the money it doesn’t expect to be paid back — to $185 million in the fourth quarter from $24 million in the third quarter, mostly due to two loans.
The first loan had a unique feature that pre-funded capital expenditures, the bank said.
“Although the borrower was not in default, the loan was transferred to held for sale during the fourth quarter,” the banks said.
It expects the loan to be sold during the first quarter.
The bank said it performed a review of other co-op loans and did not find any other loans with similar characteristics.
The second charge-off came on an office loan that went non-accrual during the third quarter, based on an updated valuation, the bank said.
“Given the impact of recent credit deterioration within the office portfolio, we determined it prudent to increase the allowance for credit losses coverage ratio,” the bank said.