New York Community Bancorp in Hicksville, which bought the failed Signature Bank last year, slashed its dividend after credit issues led to a surprise quarterly loss.
The $116.3 billion-asset company said in a press release that it lost $260 million in the fourth quarter, largely due to a $552 million loan-loss provision. The company cut its dividend by 71%, to 5 cents a share.
Net charge-offs totaled $185 million, a large jump from $24 million in the third quarter, mostly a result of two loans – a co-op loan and an office loan.
The co-op loan has a feature that pre-funded capital expenditures – it was transferred to held-for-sale status even though the borrower wasn’t in default. New York Community, which plans to sell the loan in the first quarter, reviewed other co-op loans “and did not find any other loans with similar characteristics.”
The office loan went on non-accrual status during the third quarter, based on an updated valuation. “Given the impact of recent credit deterioration within the office portfolio, we determined it prudent to increase the allowance for credit losses coverage ratio,” the company said.
New York Community said that buying Signature pushed it into a regulatory category that requires higher capital levels, prompting its decision to cut the dividend. The company remains well-capitalized.
“We recognize the importance and impact of the dividend reduction on all of our stockholders and it was not made lightly,” CEO Thomas Cangemi said in the release.
“We believe this is the prudent decision as it will allow us to accelerate the building of capital to support our balance sheet as a Category IV bank,” he added. “While these necessary actions negatively impacted our fourth-quarter results, we are confident they better align our larger organization with our new peers and provide a solid foundation going forward.
New York Community Bancorp bought Flagstar in a traditional acquisition before buying Signature after it was closed and sold by the Federal Deposit Insurance Corp.