New York Community Bank, the lender plagued by mounting real estate-related losses, shared more bad news Thursday: Fourth-quarter losses were $2.4 billion worse than it had previously reported. its CEO and an allied board member are out. and the bank has identified what it called “material weaknesses in internal controls”.
The simultaneous disclosures, released in securities filings late Thursday, were a reminder of the price the bank is paying for a frenetic expansion strategy that included acquiring a troubled rival less than a year ago. They sent the bank’s already-stressed shares into another slump, down more than 20% in after-hours trading. The stock had already fallen 54 percent this year.
The ugly developments were the last thing NYCB needed after weeks of trying to assuage investor concerns about its financial health. For weeks, questions have swirled about the depth of its losses on investments and loans tied to both office buildings and apartment buildings — an area of concern for banks in general, but one in which NYCB has a particular focus.
Despite its name, the bank has a national presence, due in part to its acquisition of much of Signature Bank, which collapsed during last year’s banking crisis. Based in Long Island, NYCB operates more than 400 branded branches, including Flagstar Bank throughout the Midwest and elsewhere. Flagstar is one of the nation’s largest providers of residential mortgage loans, which makes the bank particularly vulnerable to any weakness in the housing market in an era of persistently high interest rates.
In January, NYCB shocked investors and peers when it unexpectedly posted a fourth-quarter loss of $252 million, cut its dividend and set aside a significant amount of reserves to cover any future losses. NYCB’s disclosures on Thursday mean it took an additional $2.4 billion write-down for the fourth quarter.
The bank’s woes resurface fears a year ago about how small lenders would cope with a sharp rate hike from March 2022, although NYCB’s disclosure last month did not trigger a widespread sell-off.
Last spring, financial health problems at Silicon Valley Bank sparked a depositor flight that ended in its collapse as customers pulled their money out. That spooked investors at other banks that had large portions of deposits not protected by the Federal Deposit Insurance Corporation, which protects accounts up to $250,000.
By the time the dust settled, three banks had failed, including First Republic Bank, which was the second largest US bank failure by 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 this month. Thursday’s filings did not provide more recent data, 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 “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 appointed executive chairman of its board this month. Mr. DiNello, who ran Flagstar before NYCB bought it in 2022, replaces Thomas R. Cangemi, who was with the company for nearly three decades. A board member who did not support Mr. DiNello’s appointment as chief executive resigned around the same time.
