• Pro Forma CET1 Ratio: 11.4% including the impact of the sale of the MSR and third-party origination business.
• Actual GAAP CET1 Ratio: 10.8% at the end of the quarter.
• Liquidity: Over $41 billion, approximately 300% coverage to uninsured deposits.
• Net Loss: $289 million or $0.79 per share attributable to common stockholders.
• Deposit Growth: Retail deposits up $2.5 billion (8%), Private Bank deposits up $1.8 billion (11%).
• Charge-offs: $240 million net of recoveries in the third quarter.
• Allowance for Credit Losses: Increased to 1.87% from 1.78% in the prior quarter.
• Non-accrual Loans: Increased by approximately $600 million, with 68% performing as agreed.
• Commercial Real Estate Payoffs: Over $1 billion in the third quarter, $2.6 billion year-to-date.
• Provision for Loan Losses: Expected $1.1 billion to $1.2 billion for the full year 2024.

• Warning! GuruFocus has detected 3 Warning Sign with NYCB.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• New York Community Bancorp Inc (NYSE:NYCB) reported solid deposit growth for the second consecutive quarter, with significant increases in both retail and private banking deposits.
• The company has made substantial progress in reducing operating expenses through workforce reductions and cost controls while continuing to invest in key areas.
• NYCB's liquidity remains strong, with over $41 billion in total liquidity, providing approximately 300% coverage to uninsured deposits.
• The company is actively building out its middle market commercial banking and specialized industry lending verticals, with over 30 new hires in the past 90 days.
• NYCB is on track to meet its earnings forecast goals by year-end 2027, with a focus on improving its funding profile and executing its C&I strategy.

Negative Points

• NYCB reported a net loss attributable to common stockholders of $289 million for the third quarter, driven by provisions and expenses.
• The company expects nonaccrual loans to remain elevated through 2026, impacting interest income and overall financial performance.
• There is an anticipated higher level of FDIC assessment costs through 2026, related to criticized and classified loan levels.
• NYCB's commercial real estate (CRE) exposure remains a concern, with ongoing efforts to reduce the portfolio to about $30 billion over time.
• The company faces challenges in managing its nonperforming loans, with a significant portion of nonaccrual loans still performing as agreed.

Q & A Highlights

Q: Can you talk about how the balance sheet is positioned for rate cuts? A: Craig Gifford, Senior EVP & CFO, explained that the company is slightly liability-sensitive and will benefit from lower rates. They have been successful in reducing deposit rates recently, which will impact deposit gathering in the retail bank, but they expect continued growth in the Private Bank.

Q: What's causing non-accrual loans to remain on the balance sheet longer, and would you consider selling them? A: Kris Gagnon, Senior EVP & Chief Credit Officer, stated they are exploring all opportunities to reduce the non-accrual portfolio, including working with borrowers and considering market sales. However, they believe they can achieve better outcomes by working them out internally.

Q: How confident are you in the revised projections, and are we likely to see similar variability in the future? A: Craig Gifford expressed increased confidence in the projections due to improved visibility into the portfolio and financial performance. They have taken significant actions to improve expense profiles and continue to identify efficiency opportunities.

Q: What inning are you in with building out the C&I platform, and how far are you with revamping risk control functions? A: Joseph Otting, President & CEO, mentioned they are rounding first base with the C&I platform, planning to increase hires significantly. In risk management, they have made substantial progress, adding experienced personnel and building out risk governance infrastructure.

Q: What is the target for normalized borrowings, and how will they come down from here? A: Craig Gifford noted that they will match loan growth with deposit growth and use excess liquidity to reduce broker deposit funding in 2025. They expect to repay some wholesale borrowings but not materially in the near term.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.