May 24, 2024

Joseph Otting, the newly-minted CEO of New York Community Bank, painted a pretty hopeful picture for the lender’s future — even after posting millions in first-quarter losses. Investors seemed to like it.

Otting, who stepped in to head the bank exactly one month ago, said that the steps the bank took during the quarter — including a $1.05 billion capital investment by Liberty Strategic Capital and a senior leadership shakeup — has laid the foundation for “future growth and sustainable profitability.” 

He said in the earnings report before the bell on Wednesday:

Since taking on the CEO role, my focus has been on transforming New York Community Bank into a high-performing, well-diversified regional bank. While this year will be a transitional year for the Company, we have a clear path to profitability over the following two years.

The lender’s stock popped 20% in pre-market trading following the report, despite posting significant losses. It had previously been trading at around $3 per share, the result of a runaway drop in its stock price spurred by last year’s bank failures and concerns over the bank’s exposure to the commercial real estate (CRE) sector.

NYCB reported a loss of $335 million for the first quarter of 2024, equal to a loss of 45 cents per share. That’s compared with a net income of $2 billion, or $2.87 per share a year earlier.

Adjusted for items related to its Flagstar merger, the net loss for the quarter ended March 31 was $182 million, or $0.25 per diluted share.

In March, the bank slashed its quarterly dividend, to 1 cent per share from 5 cents — its second cut in 2024 alone. It lost 7% of its deposits in February, with $77.2 billion in deposits as of March 5, down from $83 billion it reported as of Feb. 5. Nearly 20% of its deposits were uninsured.

As part of efforts to turn the bank’s performance around and reassure nervous shareholders, NYCB has announced plans to reduce its exposure to the CRE industry. It took significant charges in the final three months of 2023 related to potential bad loans in the sector.

Otting said that the bank is targeting a return on average earnings assets of 1% by the end of 2026, as well as a return on average tangible common equity of 11% to 12% and a common equity tier 1 capital target in the range of 11% to 12%.

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