Shares of New York Community Bancorp are plunging at the opening bell Friday after the abrupt departure of the longtime CEO of the bank, which has now delayed mandatory financial disclosures with regulators after finding “material weakness” tied to loans.
New York Community Bancorp, which grew massively overnight last year after absorbing the failed Signature Bank, reported significant losses on commercial real estate loans earlier this month. Its credit rating was downgraded to “junk” by Moody’s.
Late Thursday the bank said that Thomas Cangemi, who has spent much of this year reassuring investors about the bank’s viability, was stepping down as president and CEO after 27 years. He’s being succeeded by Alessandro DiNello, who also serves as executive chairman. Cangemi will still hold a seat on the board.
The filing also notified regulators of a $2.4 billion goodwill impairment charge, meaning that the bank is reassessing the value of its assets.
Shares of New York Community Bancorp tumbled 30% when the market opened Friday and are now down 65% for the year.
DiNello joined New York Community Bancorp after it completed its acquisition of Flagstar Bank in December 2022. DiNello had served as president and CEO at Flagstar.
New York Community Bancorp also disclosed in a regulatory filing late Thursday that it’s unable to file its annual report with the U.S. Securities and Exchange Commission. The bank said that it had to file an amendment to its original filing for its fourth-quarter results.
The bank said it must contend with internal control issues.
“As part of management’s assessment of the company’s internal controls, management identified material weaknesses in the company’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities,” the bank said in the filing.
New York Community Bancorp said that even though its internal controls assessment isn’t complete yet, it anticipates disclosing in its 2023 annual report that its disclosure controls and procedures and internal control over financial reporting were not effective.
The bank said its remediation plan related to the material weaknesses is expected to be described in its annual report.
NYCB said that it anticipates filing its annual report within the 15-day grace period.
“The disclosure of a material weakness in its loan review process is important, and significant changes will need to be made with respect to how they monitor credit risk going forward which we expect may lead to them being more proactive on recognizing issues going forward,” Citi’s Keith Horowitz said in a client note.
Horowitz said that the delay in the bank’s annual report “is likely meant to give auditors sufficient time to ensure that there was no financial impact from the material weakness in the control environment, which means a lot of time for individual loan testing.”
Industry analysts are not voicing concerns over any sort of contagion in the banking sector given the unique circumstances that have led up to recent issues at New York Community Bancorp.
Once a relatively low profile regional lender, New York Community Bancorp became a much bigger bank in 2023 when it bought most of the assets of Signature Bank. Signature was one of two banks that failed in one weekend in mid-March of that year. The purchase of Signature pushed NYCB above $100 billion in assets, which by law puts it under more pressure from regulators.
The bank had to cut its dividend and increase its capital and liquidity ratios to meet regulators’ requirements.
Coupled with the regulatory demands, investors have also had concerns about the bank’s commercial real estate portfolio. The bank reported a surprise loss of $252 million for the fourth quarter, including a provision for credit losses of $552 million, much of it tied to real estate.
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