nycb dividend cut

New York Community Bancorp (NYCB) Dividend Cut

New York Community Bancorp (NYCB) cut its dividend because of a strategic shift after acquisitions, which required setting aside reserves and improving the balance sheet. Higher interest rates and share count were contributing factors.

After reducing the dividend in 2016, the bank has held it constant. The dividend cut caused the share price to plummet about 44%. Investors typically sell off a stock after a dividend cut. However, we do not expect another reduction unless the bank must increase reserves again.


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Overview of New York Community Bancorp 

New York Community Bancorp (NYCB) is a regional bank founded in 1859 as the Queens County Savings Bank. The firm acquired Flagstar in 2022, making it one of the ten largest mortgage originators, sub-servicers, and warehouse lenders. Today, NYCB has 420 branches and 134 private banking teams. The bank operates in New York, New Jersey, Florida, Michigan, Ohio, Wisconsin, Indiana, California, and Arizona. At the end of 2023, the bank had $116,322 million in assets, $81,365 million in deposits, and $83,627 million in loans.

Net interest income (NII) was $3,077 million, and non-interest income was $556 million in 20923 and the past twelve months.

NYCB Overview
Source: New York Community Bancorp Investor Relations

Dividend Cut Announcement

New York Community Bancorp (NYCB) cut its dividend on Wednesday, January 31, 2024. The retailer’s quarterly dividend was $0.17 per share before the announcement. The dividend is now $0.05 per share, an almost 71% reduction. In a press release, the company’s CEO, Thomas R. Cangemi, provided a detailed explanation about becoming a Category IV large bank with $100 – $250 billion in assets,

“…Alongside the integration of our three banks and in anticipation of our initial capital plan submission in April of this year, we have pivoted quickly and accelerated some necessary enhancements that come with being a $100 billion-plus Category IV bank.”

“With this in mind, during the fourth quarter, we took decisive actions to build capital, reinforce our balance sheet, strengthen our risk management processes, and better align ourselves with the relevant bank peers. We significantly built our reserve levels by recording a $552 million provision for loan losses, bringing our ACL coverage more in line with these peer banks. In addition, we added on-balance sheet liquidity as we prepare for the enhanced prudential standards that apply to banks with $100 billion or more in total assets.”

“To this end, we are also building capital by reducing our quarterly common dividend to $0.05 per common share. We recognize the importance and impact of the dividend reduction on all of our stockholders and it was not made lightly. 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.”

By announcing a dividend cut, New York Community Bancorp (NYCB) is apparently trying to shore up its balance sheet and build its capital position for potential losses. In addition, after becoming a Category IV large bank, the firm is under greater regulatory scrutiny.

NYCB’s dividend has been constant since 2016, so it was not a dividend growth stock.


New York Community Bancorp is attempting to become a large commercial bank through acquisitions. However, since 2022, it acquired Flagstar and the assets and liabilities of Signature Bank, likely producing operational challenges.

Change to a Category IV Large Bank

New York Community Bancorp is proliferating by acquisition. The addition of Flagstar and the assets and liabilities of Signature Bank catapulted the bank into the Category IV large bank. This change required substantial increases to liquidity, reserves, and the balance sheet.

Before the acquisitions, NYCB was focused on residential mortgages. Consequently, its allowance for credit losses (ACLs), non-performing assets (NPAs), and net charge-offs (NCOs) were lower. In fact, they were below the bank average. After the acquisitions, these values increased to more closely match those of commercial banks.

In addition, the Common Equity Tier 1 (CET1) capital was adequate. However, after the acquisitions, the values were below the peer median. Similarly, cash plus securities was only 13% before the acquisitions and 18% afterward. However, the commercial bank peer median was higher at 25%.

Clearly, NYCB needed to increase its reserve levels and improve its balance sheet.

Rising Interest Rates

Slowly rising interest rates are sometimes favorable for banks because they can increase the rate charged on loans faster than paid on deposits. As a result, the net interest margin (NIM) expands, making banks more profitable. However, when interest rates rise quickly, loan demand drops, and gaining deposits is more costly as customers chase yield. Hence, the net interest margin contracts, impacting profitability. NYCB is no exception, and its NIM is under pressure.

Share Count Soaring

The surging share count added to pressure on the dividend. The company partially used stock to acquire Flagstar, increasing the number issued from ~467 million to ~683 million at the end of 2022. In turn, the cash flow needed to pay the dividend rose. 

Dividend Safety

NYCBs’ dividend safety was probably acceptable before the acquisitions but declined afterward. The bank’s business model changed drastically, and the risk profile increased.

After reducing the dividend by approximately 71%, the forward dividend yield is still around 3.5%. The quarterly rate is $0.05 per share. The forward dividend yield is more than double the mean value of the S&P 500 Index. That said, it is below that of many regional and national banks.

The annual dividend now requires about $144.4 million ($0.20 yearly dividend x 722 million shares) compared to roughly $489 million in FY 2023. In addition, the dividend payout ratio will improve to about 24%. Because the dividend reduction was so drastic, the safety has improved. However, if NYCB needs to improve liquidity further, management may do so at the expense of the dividend.

Portfolio Insight - Dividend Growth NYCB
Source: Portfolio Insight*

Final Thoughts on New York Community Bancorp (NYCB) Dividend Cut

New York Community Bancorp’s desire to become a commercial bank has caused a dramatic increase in assets, loans, and deposits. The firm is now more of a commercial bank than a residential community bank. However, the issuance of shares and the need to increase reserves to strengthen the balance sheet were apparent. Consequently, New York Community Bancorp (NYCB) cut its dividend.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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