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New York Community Bancorp reports a quarterly loss, predicts profit by 2026

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2 weeks ago

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The Hicksville-based parent company of Flagstar Bank on Wednesday reported a loss for the January-March period, but executives said, “We have a clear path to profitability over the following two years.”

New York Community Bancorp lost $327 million in the first quarter despite receiving $1.1 billion from former U.S. Treasury Secretary Steven Mnuchin and other investors. The cash infusion stabilized the bank’s finances when some predicted it would become insolvent and be taken over by federal regulators.

The January-March loss compared with a profit of $2 billion one year earlier that stemmed from NYCB’s purchase of some of the assets of Signature Bank, which was seized by regulators.

In October-December 2023, NYCB posted a loss of $2.7 billion after a review showed poor loan review procedures and other operational problems.

Stock analysts have blamed NYCB’s woes on its large portfolio of real estate loans, particularly those for rent-controlled apartments that are facing higher operating expenses and office buildings with high vacancy rates due to employees working from home.

The bank also became subject to stricter regulations when it got bigger by purchasing both Michigan-based Flagstar in 2021 and Signature’s private-banking unit.

Still, CEO Joseph Otting, who was brought in by Mnuchin, told analysts on Wednesday that “a number of actions [were taken in January-March] to lay down the groundwork for a return to long-term, sustainable profitability [that is] more in line with our regional bank peers. … We have done this before and we feel we can do it again,” he said, referring to previous turnarounds of struggling banks.

Mnuchin ran the Treasury Department and Otting led the Office of the Comptroller of the Currency, a bank regulator, in the administration of then-President Donald Trump.

On Wall Street, investors responded to Otting’s comments by sending NYCB shares higher. The stock closed up 74 cents to $3.39 per share, or 28% from Tuesday’s close on the New York Stock Exchange.

For decades, NYCB branches in the metropolitan area bore the Roslyn Savings Bank, Queens County Savings Bank and New York Community Bank nameplates. In February, they were changed to Flagstar Bank.

In Wednesday’s conference call with analysts, Otting said there are no plans for a large-scale sale of the bank’s loan portfolio, though it is considering the sale of $5 billion in undisclosed assets “in the next week or so.”

He said NYCB “will look to have a balanced balance sheet” with fewer real estate loans and more business loans. It also wants to increase the number of certificates of deposit and other savings options for consumers.

Otting acknowledged that 200 NYCB employees who were part of the Signature acquisition have since left because of NYCB’s recent turmoil. They took about $200 million in customer deposits to rivals, such as Dime Community Bank in Hauppauge, he said.

“It isn’t like we had a big wholesale” exodus of employees, Otting said. “We’ve been able to retain a significant amount of deposits.”

The new leadership of NYCB is also looking to reduce expenses.

Otting said he and his colleagues know “how to squeeze nickels … We will aggressively look at our cost structure.”

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.

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