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New York Community (NYCB) Q4 Loss Widens on Goodwill Impairment

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New York Community Bancorp, Inc. (NYCB - Free Report) announced a tenfold increase in its fourth-quarter 2023 earnings loss to $2.7 billion due to a new $2.4-billion goodwill impairment charge. Simultaneously, the company said that it identified “material weaknesses” in its loan review process.

Per a filing, the bank decided to take charge after an assessment completed on Feb 23 showed that “goodwill from historical transactions (2007 and prior) was fully impaired as of Dec 31, 2023, as confirmed by the company’s current market capitalization."

Particularly, the $2.4-billion charge does not affect its regulatory capital or credit agreements, nor does the impairment charge result in any current cash expenditure. The weaknesses in the internal loan review process are due to weak oversight, risk assessment and monitoring activities, per the company.

With these developments, the bank has said that it needs more time to file its annual report.

NYCB, which acquired parts of the failed Signature Bank in early 2023, had set aside bigger-than-expected provisions for potential bad loans mainly due to its commercial real estate (CRE) exposure.Provision for credit losses was $552 million in fourth-quarter 2023, which increased substantially from $124 million in the prior-year quarter. The rise was aimed at addressing weaknesses in the office sector, potential repricing risks in the multi-family portfolio and an increase in classified assets.

Last month, NYCB reported the fourth-quarter 2023 loss of 27 cents per share against earnings of 36 cents in the year-ago quarter. After the bank posted the unexpected huge fourth-quarter loss, there has been a significant drop in faith regarding its ability to repay debt holders. 

As the operating environment turned challenging, the company had to take huge reserves in the fourth quarter of 2023 to cover delinquencies in commercial real estate loans. This substantially hurt its financials and led Moody’s to place NYCB’s ratings under review for a downgrade.

The rating agency named New York Community’s subdued earnings, exposure to office and multi-family real estate loans and a fall in capital levels as the major reasons behind the move. Also, it noted that a rise in regulations results in increased compliance costs.

NYCB’s shares have declined 51.3% in the past three months compared with the industry’s 5.9% fall.


Zacks Investment Research
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NYCB presently carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

A couple of better-ranked stocks from the banking space are JPMorgan Chase & Co. (JPM - Free Report) and Park National Corporation (PRK - Free Report) . Both JPM and PRK currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JPM’s earnings estimates for 2024 have moved marginally upward over the past 30 days. In the past year, its shares have risen 31.9%.

The Zacks Consensus Estimate for PRK’s current-year earnings has moved north 3.7% over the past 30 days. Its shares have risen 1.2% in the past year.

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