New York Community Bancorp (NYCB) experienced a significant drop in its shares after reporting “material weaknesses” in its internal controls and a $2.4 billion hit to earnings. The bank’s CEO, Thomas Cangemi, has stepped down following the announcement. In after-hours trading on Thursday, NYCB’s shares plummeted by 19%, adding to the ongoing decline in its stock value. This decline has raised concerns about the regional banking sector in the United States.
NYCB initially raised concerns in January when it disclosed an unexpected quarterly loss and reduced its dividend for shareholders. The subsequent decline in its stock price, which has fallen by 54% this year, has further intensified worries about the stability of the US regional banking industry.
The bank’s struggles come less than a year after the collapse of Silicon Valley Bank (SVB), which triggered a regional banking crisis. In May of last year, First Republic became the largest US lender to fail since 2008.
NYCB’s assets grew significantly last year after acquiring the assets of Signature Bank, which failed following SVB’s collapse. However, the bank announced a $2.4 billion impairment charge for the fourth quarter, related to historical transactions. NYCB emphasized that this charge has no impact on regulatory capital ratios or outstanding credit agreements.
An assessment of NYCB’s internal controls revealed “material weaknesses” in its loan review process, resulting from ineffective oversight, risk assessment, and monitoring activities. This disclosure was made in a regulatory filing, along with the announcement of Thomas Cangemi’s immediate resignation as president and CEO.
Alessandro DiNello, who previously served as executive chairman at NYCB, has been appointed as the new CEO. DiNello expressed confidence in the bank’s future, stating that the changes in the board and leadership team mark the beginning of a new chapter.
NYCB, headquartered in Hicksville, New York, concluded last year with deposits amounting to $81.4 billion and operates 420 branches.
