\n NYCB,
\n
\n remained mixed, however, as Moody\u2019s Investors Service issued its second debt downgrade on the bank in about a month. <\/p>\n
New York Community Bancorp\u2019s stock fell 11.4% to $3.15 on Monday.<\/p>\n
Janney stock analyst Christopher Marinac said the bank has more loss capacity to handle any loan stress than investors understand.<\/p>\n
\u201cThere is sufficient loss coverage from existing PPNR (pre tax pre provision revenues) or operating cash flow to recognize problem credits and incur loan loss write-offs,\u201d Marinac said Monday.<\/p>\n
Marinac said New York Community Bancorp has a $2.04 billion loss severity forecast from 2024 to 2026, with combined reserves, provision charges, and residual pre-provision net revenue (PPNR) after paying dividends of $2.97 billion, Marinac said.<\/p>\n
\u201cThis enables substantial loss capacity and problem loan recognition by the company,\u201d he said.<\/p>\n
The bank\u2019s available capacity to recognize credit problems and absorb credit losses on its own with existing reserves and PPNR or operating cash flow \u201cshould enable the company to raise additional capital to position the company for future success,\u201d Marinac said.<\/p>\n
The bank is preparing to file its financial information with a remedy for internal control weaknesses and should enable a real understanding of actual criticized loans, he said. <\/p>\n
\u201cWe feel the company could raise \u2018comfort capital\u2019 to increase its \u2026regulatory ratio,\u201d he said. <\/p>\n
In its downgrade late Friday, Moody\u2019s analysts said the bank faces the possibility of rising provisions for credit losses and higher funding costs, which would \u201ccomplicate the bank\u2019s ability to organically raise capital.\u201d <\/p>\n
Moody\u2019s downgraded all long-term and some short-term ratings and assessments of New York Community Bancorp Flagstar Bank, NA, the operating business of holding company New York Community Bancorp, was downgraded to Ba3 from Baa2, lowering it from investment-grade to speculative-grade, or junk, status.<\/p>\n Moody\u2019s said the company\u2019s Feb. 29 disclosures \u201care further signals\u2026that it is undergoing substantial changes in governance, oversight, risk management and internal controls\u201d during a \u201cparticularly challenging\u201d operating environment which includes risks in its loan portfolio.<\/p>\n The bank\u2019s challenges may also \u201cnegatively affect\u201d confidence among depositors and investors, Moody\u2019s said.<\/p>\n \u201cMoody\u2019s believes that NYCB may have to further increase its provisions for credit losses over the next two years because of credit risk on its office loans, and that there is substantial repricing risk on its multifamily loans,\u201d analysts said. <\/p>\n The bank also faces higher funding costs on its interest-bearing liabilities due to higher-for-longer interest rates expected in 2024.<\/p>\n The bank now faces $3.4 billion of multifamily loans maturing in 2024 and $5.1 billion of loans maturing in 2025, Moody\u2019s said. It has about $18.3 billion in multifamily loans to rent-regulated apartments on its balance sheet.<\/p>\n The risk-weights on seasoned multifamily loans could rise to 150% from 50% if the loans become non-performing, Moody\u2019s said. <\/p>\n A non-performing loan (NPL) is\u00a0defined as borrowed money whose scheduled payments have not been made by the debtor for a period\u00a0of time, usually 90 or 180 days.<\/p>\n <\/p>\n The U.S. Supreme Court on Feb. 20 declined to hear challenges to New York\u2019s rent stabilization laws, Moody\u2019s said. Those laws have prevented landlords from raising rents to help combat the impact of higher interest rates.<\/p>\n The case stemmed from 2019\u2019s Housing Stability and Tenant Protection Act, which was crafted to create more affordable housing. It also changed rules that had allowed landlords to increase rents on rent-controlled multifamily units.<\/p>\n Since then, property expenses have been growing due to inflation, putting pressure on net operating income and stressing debt-service coverage ratios, Moody\u2019s said.<\/p>\n New York Community Bancorp\u2019s and Flagstar\u2019s bonds continued falling on Monday on the heels of its latest disclosures, as the following chart from data solutions provider BondCliQ Media Services shows. <\/p>\n <\/p>\n Moody\u2019s said the bank also faces $313 million of office loans maturing in 2024 and $237 million in 2025. About 54% of the bank\u2019s office loans are in Manhattan, which currently has a vacancy rate of about 15%, Moody\u2019s said. <\/p>\n The risk weights on office loans that become non-performing would rise to 150% from 100%. <\/p>\n The rating cut by Moody\u2019s move comes about a month after it downgraded NYCB\u2019s ratings to junk territory, on the heels of the bank\u2019s surprise loss that crushed its stock price<\/a>.<\/p>\n On the positive side for the bank, on Friday it named a new chief risk officer as well as a chief audit executive. <\/p>\n Also read: <\/strong>New York Community Bancorp \u2018is on its own\u2019 to work out accounting mess, analyst says<\/a><\/p>\n
\n NYCB,
\n
\n further into junk territory, after the bank said it had \u201cmaterial weaknesses\u201d in its accounting protocols and said it would delay its financial filings<\/a>.<\/p>\n\n <\/div>
New York Community Bancorp, the parent of Flagstar bank, faces a higher percentage of total loans to rent-controlled multifamily homes<\/h4>\n
\n MarketWatch\/Terrence Horan
\n <\/span>
\n <\/figcaption><\/figure>\n<\/p><\/div>\n\n <\/div>
Bond prices for NY Community Bancorp and its Flagstar unit both fell Monday but have not tested their recent lows.<\/h4>\n
\n BondCliQ Media Services
\n <\/span>
\n <\/figcaption><\/figure>\n<\/p><\/div>\n