New York Community Bank reports another $2.4 billion in losses as its CEO resigns
New York Community Bank, the lender teetering under mounting real estate-related losses, shared several new bad news Thursday: Fourth-quarter losses were $2.4 billion worse than previously explained; the CEO and an allied board member are absent; and the bank identified what it called “material weaknesses in internal controls.”
The tell-all revelations, released in securities filings late Thursday, were an uncomfortable reminder of the price the bank is paying for a breakneck expansion strategy that included acquiring an ailing rival 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 assuage investor concerns about its financial health. For weeks, questions have been swirling about the extent of the losses in investments and loans associated with both office and apartment buildings – an area of concern to banks generally, but in which NYCB is particularly concentrated.
Despite its name, the bank has a national presence, thanks in part to its acquisition of a large part of Signature Bank, which collapsed during last year’s banking crisis. NYCB, based on Long Island, operates more than 400 branches under brands including Flagstar Bank in the Midwest and elsewhere. Flagstar is one of the nation’s largest mortgage lenders, making the bank particularly at risk of some housing market weakness in an era of persistently high interest rates.
In January, NYCB shocked investors and peers when it unexpectedly posted a $252 million loss for the fourth quarter, cut its dividend and set aside a significant amount of reserves to cover any future losses. NYCB’s revelations on Thursday mean an additional $2.4 billion in impairment charges will be required for the fourth quarter.
The bank’s troubles are resurrecting fears from a year ago about how small lenders have weathered the sharp rise in interest rates since March 2022, although NYCB’s revelation last month did not spark a widespread sell-off.
Last spring, financial health problems at Silicon Valley Bank caused an exodus of depositors that ended with its collapse as customers withdrew their money. That spooked investors at other banks, which had large chunks of deposits not protected by the Federal Deposit Insurance Corporation, which backs accounts of up to $250,000.
By the time the dust settled, three banks had failed, including First Republic Bank, the second largest U.S. bank to collapse 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 the month. Thursday’s filings did not provide more recent figures and a spokeswoman did not respond to a request for comment.
The extent of the bank’s problems – both past and future – remains unclear. The new disclosures stated that “the 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 CEO, Alessandro DiNello, was appointed executive chairman of the board this month. Mr. DiNello, who led Flagstar before NYCB bought it in 2022, replaced Thomas R. Cangemi, who had been with the company for nearly three decades. A board member who did not support Mr. DiNello’s appointment as CEO resigned at about the same time.