NEW YORK COMMUNITY BANCORP, INC. (NYCB)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 reflected an intensive balance-sheet cleanup: NYCB posted a GAAP net loss to common of $333M (−$1.14 diluted EPS), with adjusted net loss to common of $308M (−$1.05 diluted EPS) as provisioning and charge-offs rose amid a portfolio review and CRE downgrades .
• Management executed strategic divestitures to simplify and de-risk: sale of the mortgage warehouse loans to JPMorgan and agreement to sell mortgage servicing assets and third‑party origination platform to Mr. Cooper; pro‑forma CET1 rises to 11.2% and pro‑forma liquidity to ~$40B, covering uninsured deposits by ~300%+ .
• Core banking metrics were pressured near term: net interest margin fell 30 bps q/q to 1.98% (down 123 bps y/y) on funding mix and interest reversals; PPNR was negative, and efficiency ratio spiked as revenue fell and expenses remained elevated .
• Credit costs and asset quality: provision was $390M; net charge‑offs $349M; NPLs rose to $1.94B (2.61% of LHFI), ACL increased to 1.78% of loans as multi‑family and office stress was recognized via forward‑looking re‑underwriting and appraisals .
• Guidance recalibration: FY24 provision now expected at $900M–$1.0B; peer‑median returns timeline pushed out by two quarters (to Q2 2027) as mortgage exits reduce near-term earnings but bolster capital/liquidity; management expects later NIM lift from multi‑family repricing and C&I growth .

What Went Well and What Went Wrong

• What Went Well

  • Simplification and capital/liquidity: “These two transactions… bolster our liquidity profile and result in higher capital ratios… pro-forma CET1… 11.2%… pro-forma liquidity… nearly $40 billion… over a 300% coverage on our uninsured deposits.” — CEO Joseph Otting .
  • Deposit growth in focus areas: total deposits +5.6% q/q to $79.0B, led by retail and private banking, aiding liquidity build .
  • Strategic repositioning momentum: leadership hires (risk/C&I/private banking) to build diversified, relationship-driven bank; clear multi‑year plan to scale C&I and reduce CRE concentration .

• What Went Wrong

  • Earnings pressure: GAAP net loss to common of $333M; adjusted loss to common of $308M as provisioning and charge‑offs spiked; efficiency ratio rose to 95% .
  • NIM compression: NIM fell to 1.98% (−30 bps q/q) on higher cost of funds, mix shift to CDs/high‑yield savings, higher borrowings, and interest income reversals on new non‑accruals .
  • Asset quality: NPLs rose sharply to $1.94B (2.61% of LHFI), reflecting CRE/multi‑family downgrades; ACL coverage increased to 1.78% of loans as forward‑looking review captured stress .

Financial Results

Notes: Q2 2024 EPS reflects 1‑for‑3 reverse stock split effective July 12, 2024 .

Actual vs Estimates (Q2 2024)

• Primary EPS Consensus Mean: Unavailable via S&P Global for NYCB (tool mapping unavailable).
• Revenue Consensus Mean: Unavailable via S&P Global for NYCB (tool mapping unavailable).
  We attempted to retrieve S&P Global consensus but the mapping for NYCB was unavailable in the tool; therefore, estimate comparisons could not be presented.

Segment/Revenue Mix

Key KPIs and Balance Sheet

Liquidity/Capital (Q2 2024)

• Pro‑forma liquidity nearly $40B; uninsured deposit coverage ~310% .
• Pro‑forma CET1 11.2% after mortgage warehouse and MSR sales and preferred conversion .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “These two transactions… bolster our liquidity profile and result in higher capital ratios… pro‑forma liquidity was nearly $40 billion… over a 300% coverage on our uninsured deposits… pro‑forma CET1 capital ratio at 11.2% following the sale of our two businesses and the conversion of our Series B Preferred Stock.” — CEO Joseph Otting .
• “We did record $390 million of provision expense for the quarter, $350 million of that was charge-offs… our net interest margin ended the quarter at 1.98%… interest reversals… had about a 7 to 8 bps negative impact on margin.” — CFO Craig Gifford .
• “We are now through roughly 75% of the CRE portfolio… we… re-underwrote the loans… if the debt service coverage and the loan to values were… above 90%, we move those loans into the classified section.” — CEO Joseph Otting .

Q&A Highlights

• Credit outlook and provisioning: Management guided FY24 provision to $900M–$1.0B and expects charge‑offs to continue but taper from Q2 levels; nonaccruals reflect appraisal‑based collateral values; further reserve increases would be driven by worsening market conditions .
• CRE paydowns and repricing: ~$1B CRE payoffs in Q2 (all at par), ~50% from classified; multi‑family repricing from ~3.85% to ~8.19% average coupons is driving payoffs to agencies and margin lift on retained loans .
• NIM trajectory: Near-term NIM “this level to slightly down” as warehouse sale reduces earning assets; accretable yield adds ~7–8 bps but tapers into mid‑2025; longer‑term NIM rebuild expected from repricing and C&I deployment .
• Additional portfolio actions: Evaluating $2–$5B of additional non-core exits; expect to sell portions of nonaccruals by year‑end; focus on reducing wholesale borrowings with proceeds .
• Capital/regulatory: Officially Cat 4 since Oct‑2023; Fed-run stress test expected for 2026 cycle; ongoing company-run stress testing in 2024–2025 .

Estimates Context

• We attempted to retrieve Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue and prior periods, but NYCB’s mapping was unavailable in the tool at this time; therefore, consensus comparisons and beat/miss determinations could not be presented. We will update when S&P Global data becomes available.

Key Takeaways for Investors

• Near-term P&L pain for long-term resilience: Elevated provisioning, charge-offs, and NIM pressure will weigh on 2024 results, but capital (pro‑forma CET1 11.2%) and liquidity (~$40B; >300% uninsured coverage) are improving materially after divestitures — de‑risking is ahead of earnings rebuild .
• Credit risk recognized and front‑loaded: Aggressive, appraisal‑based classification raised NPLs/ACL; subsequent charge‑offs and potential NPA sales aim to stabilize asset quality trajectory into late‑2024/early‑2025 .
• Structural NIM upside from repricing: Multi‑family repricing (5–8% coupons) and C&I mix shift should lift NIM through 2026–2027, partially offsetting higher funding costs and warehouse/MSR exits .
• Execution catalysts in 2H24: Closing of MSR/platform sale (cash proceeds), paydown of wholesale borrowings, potential NPA portfolio sales, and continued deposit growth/stability in private banking .
• Regulatory path clear: Cat 4 alignment underway; stress‑test cadence clarified (Fed‑run in 2026), reducing uncertainty around regulatory milestones .
• Watchlist: pace of CRE payoffs vs. NPA sales, NIM stabilization, deposit mix/cost normalization, and expense reduction progress toward $300M+ net cost takeout, net of risk/C&I build .
• Medium‑term thesis: Re‑rating potential hinges on delivering peer‑level returns by mid‑2027 as capital/liquidity remain strong, CRE concentration declines, and a higher‑ROE, relationship-driven C&I/private bank takes hold .

Relevant source citations throughout:

• Q2 2024 8‑K earnings press release and tables .
• Q2 2024 earnings call transcript .
• Q1 2024 8‑K earnings release .
• Q4 2023 transcript and 8‑K for historical context .