Thursday, April 25

New York Community Bank reports $2.4 billion in additional losses following CEO resignation

New York Community Bank, the lender reeling under mounting real estate-related losses, shared several bad news Thursday: Its fourth-quarter losses were $2.4 billion worse than it previously reported; its general director and an allied member of the board of directors are absent; and the bank identified what it called “material weaknesses in internal controls.”

The sudden revelations, released Thursday evening in securities filings, are a troubling reminder of the price the bank is paying for a meteoric expansion strategy that included the acquisition of a struggling rival years ago. less than a year. They sent the bank’s shares, already under pressure, into another slump, down more than 20 percent in after-hours trading. The stock had already fallen 54 percent this year.

These dismal developments were the last thing NYCB needed after weeks of trying to assuage investor concerns about its financial health. For weeks, questions have swirled around the extent of their losses on investments and loans tied to office and apartment buildings — an area of ​​concern for banks in general, but one in which NYCB is particularly focused.

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. Headquartered on Long Island, NYCB operates more than 400 branches under brands including Flagstar Bank in the Midwest and beyond. Flagstar is one of the nation’s largest residential mortgage servicers, making the bank particularly exposed 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 possible future losses. NYCB’s disclosures Thursday mean it took an additional $2.4 billion writedown for the fourth quarter.

The bank’s woes resurrect fears from a year ago about how small lenders have coped with the sharp rise in interest rates since March 2022, even as NYCB’s revelations last month did not trigger massive sales.

Last spring, Silicon Valley Bank’s financial health problems triggered an exodus of depositors that ended in collapse as customers withdrew their money. That spooked investors at other banks whose large portions of deposits were not protected by the Federal Deposit Insurance Corporation, which guarantees accounts up to $250,000.

By the time the dust had settled, three banks had failed, including First Republic Bank, which was the second largest collapsed U.S. bank 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 overall assets as of this month. Documents filed Thursday did not provide more recent figures, and an attorney did not respond to a request for comment.

The extent of the bank’s difficulties – past and future – remains unclear. Its new disclosures indicate that its “controls, 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 executive chairman of its 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 chief executive resigned around the same time.