New York Community Bancorp laying off 700 Flagstar Bank employees
NYCB did not announce how many Long Island Flagstar employees would be affected. Shown is Flagstar Bank headquarters in Hicksville. Credit: Rick Kopstein
Struggling New York Community Bancorp Inc. is laying off about 700 workers at its Flagstar Bank subsidiary “as part of its strategic transformation plan,” according to the Hicksville company.
The layoffs represent about 8% of Flagstar's workforce, New York Community Bancorp — which bought Flagstar in 2022 — said in a statement Thursday.
NYCB declined to answer Newsday's questions about the job cuts, including an inquiry about how many Long Island employees were being affected.
The job cuts are in addition to a reduction of about 1,200 employees associated with the impending sale of Flagstar’s mortgage servicing and third-party origination business for $1.4 billion to Mr. Cooper Group Inc., NYCB said in the statement.
Most of those 1,200 employees will have the opportunity to transfer to the buyer, said NYCB, which announced the planned sale in July.
The sale is expected to take place in the fourth quarter of this year, the statement said. Headquartered in the Dallas area, Mr. Cooper is a non-bank servicer of residential mortgage loans.
NYCB this year began undertaking a strategy to strengthen its management, improve efficiency and enhance credit oversight, president and CEO Joseph Otting said in the statement Thursday.
“While these strategic actions involve difficult decisions, including impacts on jobs, we believe they are essential for strengthening our financial foundation and building a more agile, competitive company. This will enable us to focus on strategic investments in other areas and better serve our clients and shareholders, ensuring long-term sustainability and profitability,” he said.
Also, on Wednesday, NYCB announced that its name will change to Flagstar Financial Inc., effective Oct. 25, which is the same day its third-quarter earnings results will be released.
Flagstar Bank N.A. operates 419 branches in 12 states, with a significant presence in the Northeast and Midwest. The bank has more than 40 branches on Long Island.
Flagstar Mortgage operates across the United States via a wholesale network of about 3,000 third-party mortgage originators, NYCB said.
As of Dec. 31, NYCB had 8,766 employees, according to its annual report.
NYCB has been struggling due to several issues, including increased scrutiny after the company’s $2.7 billion purchase in March 2023 of most of the assets of Signature Bank after it failed and was taken over by government regulators.
In February, NYCB’s stock price plummeted — from $10 per share to less than $3 — on news of a $2.4 billion charge against last year’s earnings over problems with loans for office buildings and apartment buildings that were rent controlled.
The fallout led to the resignation of CEO and President Thomas R. Cangemi. He was succeeded temporarily by board member Alessandro “Sandro” DiNello, who then helped arrange a $1.1 billion cash infusion from an investors’ group in March.
Steven Mnuchin, who was U.S. Treasury secretary under former President Donald Trump, led the investors group and had Otting, who had been the comptroller of the currency under Trump, named NYCB’s new CEO and president.
Otting replaced NYCB’s entire management team, and he’s been trying to diversify the loan portfolio away from multifamily, office and non-core residential mortgage businesses, which can be volatile depending on interest rates, Peter Winter, managing director at investment firm D.A. Davidson in Manhattan, said Friday.
The $1.1 billion from investors helped NYCB to add $642 million to its reserves and charge off $615 million on the loans to be more aggressive in recognizing current and future credit issues, he said.
Also, using the capital from selling the two mortgage businesses, including $5.9 billion in mortgage warehouse loans to JPMorgan Chase Bank in July, is helping Otting to build out NYCB’s business and private banking, which are more profitable and have more consistent earnings streams, Winter said.
“By selling the non-core residential mortgage businesses, it’s allowing him to accelerate the transition into business banking and private banking,” he said.
NYCB reported a second-quarter 2024 net loss of $323 million compared to net income of $413 million in the same period last year.
The company's stock closed Friday at $12.18, down 1.62% from $12.38 Thursday.
With James T. Madore
Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.
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