The Daily Dirt: Rocky road for New York Community Bank
Company cuts dividend, makes fewer multifamily loans
New York Community Bank had a not-so-great day.
In fact, in terms of multifamily loan originations, the regional bank had a no-so-great year. The bank acknowledged a 90 percent decrease in multifamily loan originations in 2023 during its fourth-quarter earnings call Wednesday.
The bank’s stock plummeted to $5.96 per share when the market opened, bringing it to a 23-year low, Suzannah Cavanaugh reports. The share price recovered a bit to $6.47 but still finished the day down 38 percent.
The company is cutting its dividend by 70 percent to five cents per share “to accelerate the building of capital to support our balance sheet as a Category IV bank,” CEO Thomas Cangemi said in a statement.
Investors who buy bank stocks are often doing so for high dividends, so big dividend cuts don’t go over well. But NYCB may be taking a long-term view.
The bank’s acquisition of $13 billion of Signature Bank’s loan pushed New York Community Bank into a category of bank with $100 billion in assets or more. Such banks face different requirements for capital, liquidity and risk management. The company’s executives repeatedly pointed to this new designation as the impetus behind its capital-boosting measures.
Since September 2022, the bank’s allowance for credit losses (loans it does not expect to recover) has increased by $774 million. In the fourth quarter, the bank put $552 million aside for credit losses, after having sequestered $62 million in the previous quarter. The company pointed to “weakness in the office sector and potential re-pricing risk primarily within the multifamily portfolio” for the increase in loss reserves.
Also of note: The bank indicated that 14 percent of its $18 billion rent-stabilized loan portfolio was at risk of default. Less than 1 percent of the book was marked as non-performing, however.
Jay Martin, executive director of the Community Housing Improvement Program, pointed to the 2019 rent law, which cut off most avenues for increasing rents on stabilized apartments, as a driving force behind the bank’s challenges.
“If NYCB collapses (and I hope it doesn’t), HSTPA will have taken down 2 financial institutions, thousands of small businesses, hundreds of billions of dollars, and irreparably damaged the financial well being of NYC,” he tweeted, using the acronym for the Housing Stability and Tenant Protection Act.
The U.S. Supreme Court has still not weighed in on two remaining challenges to the rent law. The state legislature has not shown much interest in changing the law or passing measures that would give landlords more options to boost revenue from stabilized properties.
A thing we’ve learned: A group of feral cats is called “a destruction.” A pack of hippos, which usually gather in groups of 10 to 20, is “a bloat,” according to this handy BBC list.
Elsewhere in New York…
— A judge on Wednesday tossed convictions against two men who were found guilty in the 1987 fatal mugging of a French tourist in Times Square, Gothamist reports. Eric Smokes and David Warren have fought for nearly 40 years to clear their names. All but one of the witnesses who testified against the pair have recanted their accounts of the incident, saying they were pressured by law enforcement to lie.
— Five people have been arrested in connection with an attack on two NYPD officers outside a shelter in Times Square, NBC New York reports. The officers were trying to break up a group of migrants when they were attacked. The five arrested were charged with assault or attempted assault on an officer and gang assault. Police are still looking for seven more individuals.
— A new report by Comptroller Tom DiNapoli found that the state Department of Labor is lagging in its investigation of labor law violations, Politico New York reports. The report found that 80 percent of wage theft cases are not resolved within one year, and two-thirds of child labor investigations were not completed in the target three-month timeframe.
Residential: The priciest residential closing Wednesday was $3.5 million for a condo at 121 East 22nd Street in Gramercy Park.
New to the Market: The priciest residence to hit the market Wednesday was a condo at 28 East 70th Street in Lenox Hill asking $14 million. Brown Harris Stevens has the listing.
Breaking Ground: The largest new building filing of the day was for a 377,000-square-foot, 14-story, mixed-use building at 275 Chestnut Street, Brooklyn. — Jay Young
Correction: An earlier version of this newsletter misstated the size of New York Community Bank’s rent-stabilized portfolio. It’s $18 billion.