New York munity Bancorp(NYCB) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The net loss to shareholders for the quarter was $333 million, primarily driven by a provision for loan losses of $390 million, which included $350 million in charge-offs and approximately $40 million in reserve build [32] - The net interest margin ended the quarter at 1.98%, experiencing margin pressure from interest reversals associated with non-accruals, which had a negative impact of about 7 to 8 basis points [32][34] - The allowance for loan loss increased to 1.7% of the total portfolio, with the credit loss reserve rising to 1.78%, up from about 1.5% [31] Business Line Data and Key Metrics Changes - The company has made significant progress in addressing credit risk management, having reviewed approximately 75% of its commercial real estate (CRE) portfolio, which includes 80% of the multi-family portfolio [11][24] - The office portfolio review is at 82%, with only about $500 million remaining under review, resulting in significant charge-offs this quarter [12] - The company reported a $3.2 billion increase in customer deposits in the retail space and a $500 million growth in the private banking sector [13] Market Data and Key Metrics Changes - The company has seen a reduction in its CRE exposure, with a long-term goal to decrease it from roughly $45 billion to between $30 billion and $33 billion [24] - The multi-family loans that have hit their reprice dates have shown strong payoffs, with 69% repricing to an average of 8.19%, up from 3.85% [30] Company Strategy and Development Direction - The company aims to simplify its business model and strengthen its balance sheet through strategic sales, which are expected to add about 130 basis points to its CET ratio [22][23] - There is a focus on expanding the commercial and industrial (C&I) business, with a goal to grow C&I assets from around $20 billion to $30 billion to $35 billion over the next three to five years [25] - The company is actively hiring experienced personnel to enhance its C&I and private banking initiatives, viewing these as key growth engines [7][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, noting that over 70% of the commercial real estate portfolio continues to perform as agreed, despite recognizing future risks associated with interest payments [43] - The company anticipates continued charge-offs but expects them to decrease in the third and fourth quarters as the review of the remaining portfolio progresses [69] - Management highlighted the importance of maintaining strong relationships with borrowers to mitigate risks and enhance future performance [110] Other Important Information - The company has closed on the sale of its mortgage warehouse loans to JPMorgan Chase, receiving $5.9 billion in liquidity, which is seen as a significant milestone [22] - The company is evaluating an additional $2 billion to $5 billion in non-core activities for potential sales by the end of the year [40][87] Q&A Session Summary Question: What is the appetite among GSEs for refinancing? - Management noted that there has been a pickup in refinancing activity with agencies, which could trigger more loans being refinanced out of the bank [18] Question: What is the outlook for the company's earnings forecast? - The reduction in earnings forecast for 2026 is attributed to the sale of the mortgage warehouse and servicing, with expectations of redeploying capital into lending [39][40] Question: How is the company managing its non-accrual loans? - Management indicated that over 60% of non-accrual loans are still performing, and they are focused on reducing these through sales and appraisals [57][106] Question: What is the current cost of deposit growth? - The company is not significantly increasing costs in the private client and commercial space, with most growth coming from typical pricing in the retail space [95] Question: What is the strategy for reducing non-accrual loans? - The company is actively studying pools of loans for potential sales and has added experienced personnel to lead these efforts [106]