N
ew York Community Bank (NYCB) is facing significant challenges due to the 2019 rent law, which has led to a surge in delinquent multifamily debts. The bank reported a 990% increase in non-performing loans year-to-date, with $1.5 billion not accruing interest in the third quarter. About half of NYCB's multifamily loans are tied to rent-stabilized properties, where revenue restrictions have severely impacted cash flow.

    To address these issues, NYCB has nearly quadrupled its loss reserves, setting aside $242 million for loan losses in the third quarter and projecting $1.1 billion to $1.2 billion for the year. This has resulted in a net loss of $289 million, or 79 cents per diluted share, compared to a profit of $199 million a year ago.

    The bank's Chief Credit Officer, Kris Gagnon, warned that nearly $20 billion of its multifamily loans will reset at market interest rates between now and 2027, increasing the risk of default. NYCB is trying to chart a course toward repayment, but with only about one-third of the $2.1 billion in multifamily debt repriced this year being paid off.

    To stem reported losses, NYCB is attempting to sell bad debts, moving $174 million in non-accrual loans to its held for sale bucket in the quarter. However, the bank's Chief Financial Officer, Craig Gifford, expects a similar level of charge-offs in the fourth quarter or slightly less.

    NYCB has made some progress, reducing its loan book by 11% year-over-year and boosting cash balances by 118%. The bank also reported 11% deposit growth since March. Despite this, NYCB is rebranding itself as Flagstar Financial, changing its holding company name and ticker symbol in an effort to distance itself from past challenges.