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New York Community Bancorp’s stock price plummeted at the opening bell on Friday following the sudden resignation of the bank’s longtime CEO. The bank has postponed its financial disclosure obligations to regulators after discovering “material weaknesses” related to the loan.
New York Community Bancorp, which grew significantly overnight last year after absorbing failed Signature Bank, reported significant losses on commercial real estate loans earlier this month. The company’s credit rating was downgraded to “junk” by Moody’s.
The bank said late Thursday that Thomas Cangemi, who has spent much of this year reassuring investors about the bank’s viability, will step down as president and CEO after 27 years. Announced. He will be succeeded by Alessandro Dinero, who will also serve as Executive Chairman. Mr. Cangemi will continue to hold a seat on the board of directors.
The filing also notified regulators of a $2.4 billion goodwill impairment charge, meaning the bank is reassessing the value of its assets.
New York Community Bancorp stock fell 30% at market open on Friday and is now down 65% for the year.
Mr. Dinero joined New York Community Bancorp following the completion of the acquisition of Flagstar Bank in December 2022. Mr. Dinero previously served as President and CEO of Flagstar.
New York Community Bancorp also disclosed in a regulatory filing late Thursday that it cannot file annual reports with the U.S. Securities and Exchange Commission. The bank said it would need to submit an amendment to its original filing for the fourth quarter.
The bank said it needed to address 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. stated in the submission.
New York Community Bancorp said it plans to disclose in its 2023 annual report that its disclosure controls and procedures and internal controls over financial reporting were not effective, although an assessment of its internal controls has not yet been completed. .
The bank said remediation plans related to material weaknesses will be included in its annual report.
NYCB said it plans to submit its annual report within a 15-day grace period.
“Disclosure of material weaknesses in the loan review process is important and will likely require significant changes to how credit risk is monitored going forward. This could lead to more proactive recognition of issues in the future. “We expect that there will be,” Citi’s Keith Horowitz said in a client note.
Horowitz said the delay in the bank’s annual report “may be intended to give auditors sufficient time to ensure there is no financial impact from material weaknesses in the control environment. “This means spending more time examining individual loans.”
Industry analysts have not expressed concern about any outbreak in the banking sector, given the unique circumstances that led to recent problems at New York Community Bancorp.
Once a relatively unknown community lender, New York Community Bancorp acquired most of Signature Bank’s assets in 2023, becoming a larger bank. Signature was one of his two banks that went bankrupt one weekend in mid-March of that year. The Signature acquisition would bring NYCB’s assets to more than $100 billion, and the law would put it under even more pressure from regulators.
The bank had to cut its dividend and increase its capital and liquidity ratios to meet regulatory requirements.
In addition to regulatory requirements, investors are also concerned about the bank’s commercial real estate portfolio. The bank reported an unexpected loss of $252 million in the fourth quarter, including a $552 million allowance for credit losses, much of which was related to real estate.
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