Business context and reporting period
This is New York Community Bancorp, Inc.’s consolidated Form 10-K for the year ended December 31, 2023, including Flagstar Bank, N.A. It is not a Flagstar-only filing. The business combines branch banking, mortgage origination and servicing, warehouse lending, and commercial lending. The March 2023 FDIC-assisted Signature Bridge Bank transaction materially expanded the balance sheet; Flagstar Bancorp was acquired in December 2022.
Financial performance and position
| Metric | FY 2023 / Dec. 31, 2023 | Prior comparable period |
|---|---|---|
| Net interest income | $3.077 billion | $1.396 billion in 2022 |
| Net interest margin | 2.99% | 2.35% in 2022 |
| Net income (loss) | $(79) million; diluted EPS $(0.16) | $650 million; diluted EPS $1.26 in 2022 |
| Provision for credit losses | $833 million | $133 million in 2022 |
| Assets | $114.1 billion | $90.1 billion |
| Loans held for investment | $84.6 billion gross; $83.6 billion net of allowance | $69.0 billion gross |
| Deposits | $81.5 billion | $58.7 billion |
| Borrowed funds | $21.3 billion | $21.3 billion |
| Allowance for credit losses on loans | $992 million; 1.17% of loans | $393 million; 0.57% in 2022 |
| Non-performing loans / assets | $428 million / $442 million; 0.51% of loans / 0.39% of assets | $141 million / $153 million; 0.20% / 0.17% |
Revenue and balance-sheet growth chiefly reflect the acquisitions and higher interest rates. Interest expense rose substantially: average interest-bearing deposit cost increased to 3.12% from 1.06%, and average borrowing cost to 3.66% from 2.04%. Operating cash flow was $263 million; investing cash flow was $20.7 billion, largely reflecting acquired cash; financing cash flow was $(11.4) billion. Cash and cash equivalents ended the year at $11.5 billion. Reported ready liquidity, including cash, unencumbered securities and available borrowing capacity, was $27.9 billion.
Material changes and unusual items
- FY 2023 net loss includes a $2.426 billion goodwill impairment charge and is partly offset by a $2.131 billion bargain purchase gain from the Signature transaction. The gain is acquisition-related and not a recurring operating revenue measure.
- Signature added approximately $33.5 billion of deposits and $11.7 billion of loans, net of purchase accounting adjustments. The acquisition’s fair values and FDIC settlement remain subject to measurement-period adjustments.
- The $833 million credit-loss provision included a significant fourth-quarter reserve build. Net charge-offs were $208 million versus net recoveries of $4 million in 2022; management cited office-sector weakness, possible multifamily repricing risk and higher classified assets.
- Multifamily loans were $37.3 billion, or 44% of loans, down from 55% a year earlier. CRE loans were $10.5 billion; $3.4 billion was secured by office properties. Non-performing multifamily and CRE loans increased by $125 million and $108 million, respectively.
- Uninsured deposits were $29.3 billion, or 35.9% of deposits. Brokered deposits were $9.5 billion; $17.3 billion of certificates of deposit were due to mature or reprice within one year.
- All securities were available-for-sale; the net unrealized loss was $581 million after tax. The bank reported regulatory capital above minimum requirements at year-end, though the holding-company common equity tier 1 ratio was 9.05%.
Outlook, risks and contingencies
The filing provides no specific earnings or financial guidance. Management said it was adding on-balance-sheet liquidity and building reserves and capital while preparing for enhanced Category IV prudential standards. Key risks include concentrated multifamily and CRE exposure, particularly office lending; higher funding costs and deposit outflows; rate and real-estate-market movements; integration and valuation uncertainty related to acquisitions; and regulatory, operational and litigation risks.
Subsequent events disclosed in the filing are significant: the common dividend was reduced from $0.17 to $0.05 per share in January 2024 and further to $0.01 per share in March. On March 11, 2024, the company closed an approximately $1.05 billion equity investment involving common shares, convertible preferred stock and warrants, with potential substantial dilution. The filing also reports a proposed reverse stock split and increase in authorized common shares, subject to shareholder action. KPMG issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. Identified material weaknesses included board oversight, risk assessment and monitoring, and loan-review processes; remediation was underway but not complete. The company also disclosed shareholder class and derivative actions concerning, among other matters, acquisition disclosures and CRE exposures; outcomes are uncertain.
Investor verification priorities
- Track remediation and independent testing of the material weaknesses, particularly loan ratings, problem-loan identification and allowance adequacy.
- Review subsequent credit trends, criticized and classified assets, office and multifamily exposure, collateral values, charge-offs and reserve coverage.
- Validate liquidity and deposit stability, including uninsured and brokered balances, deposit maturities, borrowing capacity and any collateral needs.
- Assess the $1.05 billion capital raise’s final terms, dilution and warrant contingencies, and confirm the status of proposed shareholder approvals and reverse split.
- Monitor Signature transaction settlement and final purchase accounting, including possible changes to the bargain purchase gain.
- Confirm the future dividend policy, regulatory approvals for bank-to-parent dividends, and effects of higher funding costs on net interest margin.