New York Community Bank, the lender reeling from mounting real estate-related losses, shared several new pieces of bad news Thursday: Fourth-quarter losses were $2.4 billion higher than previously reported; its CEO and a board member allied with him are out; and the bank identified what it called “material weaknesses in internal controls.”
The extensive disclosures made in securities filings late Thursday were a troubling reminder of the price the bank is paying for a breakneck expansion strategy that included acquiring a troubled competitor less than a year ago. They sent the bank’s already under-pressure shares into another nosedive, falling more than 20 percent in after-hours trading. The stock had already fallen by 54 percent this year.
The ugly developments were the last thing NYCB needed after weeks of trying to allay investor concerns about its financial health. Questions have been swirling for weeks about the extent of losses on investments and loans related to office and residential buildings – an area of concern for banks in general but one that NYCB is particularly focused on.
Despite its name, the bank has a nationwide presence, thanks in part to its acquisition of much of Signature Bank, which collapsed during last year’s banking crisis. Based on Long Island, NYCB operates more than 400 branches under brands such as Flagstar Bank throughout the Midwest and elsewhere. Flagstar is one of the nation’s largest residential mortgage servicers. Therefore, the bank is particularly at risk at a time of persistently high interest rates when the real estate market weakens.
In January, NYCB shocked investors and competitors when it unexpectedly posted a fourth-quarter loss of $252 million, cut its dividend and set aside a significant amount of reserves to cover future losses. NYCB’s disclosures on Thursday mean it took an additional $2.4 billion in impairment charges for the fourth quarter.
The bank’s problems revive fears from a year ago about how small lenders will weather the sharp rise in interest rates since March 2022, although NYCB’s disclosure last month did not trigger a widespread sell-off.
Last spring, financial problems at Silicon Valley Bank triggered an exodus of depositors that ended in collapse as customers withdrew their money. That spooked investors at other banks, many of whose deposits were not protected by the Federal Deposit Insurance Corporation, which insures accounts up to $250,000.
When the dust settled, three banks had failed, including First Republic Bank, which was the second-largest bank failure in the United States in terms of total assets. Silicon Valley Bank was sold to First Citizens Bank, Signature to NYCB and First Republic to JPMorgan Chase.
NYCB had $83 billion in deposits and more than $100 billion in total assets as of the month. The filing Thursday did not contain more recent numbers, and a spokeswoman did not respond to a request for comment.
The extent of the bank’s problems – past and future – remains unclear. Its new disclosures said its “controls and procedures and internal control over financial reporting were not effective as of December 31, 2023,” and the bank promised future updates.
The bank’s new chief executive, Alessandro DiNello, was named chief executive this month. Mr. DiNello, who led Flagstar before NYCB bought it in 2022, replaced Thomas R. Cangemi, who worked at the company for nearly three decades. At about the same time, a board member who did not support Mr. DiNello’s appointment as board chairman resigned.
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2024-03-01 00:54:58
www.nytimes.com
