A month after causing a stir in the regional bank industry with a surprising provision for loan losses, New York Community Bancorp has once again grabbed attention with a significant $2.4 billion earnings hit during the December quarter. The bank attributed this setback to the identification of “material weaknesses” in its loan review process, leading to an abrupt change in CEOs.
Time Needed for Annual Report Filing
New York Community Bancorp disclosed that it requires additional time to file its annual report as it continues to review internal controls. The bank anticipates reporting that its disclosure controls, procedures, and internal control over financial reporting were ineffective as of Dec. 31, 2023.
Impacts and Repercussions
Despite the $2.4 billion charge, the bank assured that this will not impact its regulatory capital or credit agreements. Furthermore, the impairment charge did not result in any immediate cash expenditures. New York Community Bancorp acknowledged that the weaknesses stemmed from lapses in oversight, risk assessment, and monitoring activities.
Market Response
Following the wave of unfavorable news, NYCB shares plummeted by 23% during Thursday’s after-hours trading, settling at $3.70. This decline marks a stark contrast to the stock’s more than 60% drop since the unfolding of events on Jan. 30.
NYCB CEO Thomas Cangemi to Step Down
After 27 years with the New York-based lender, Chief Executive Thomas Cangemi is set to step down. The board chairman, Sandro DiNello, who had already taken on an executive role after the bank’s recent announcement of a significant dividend cut and reserve boost, will assume Cangemi’s position.
Transition in Leadership
DiNello previously led a successful turnaround at Michigan-based Flagstar Bank before merging it with NYCB. His role at NYCB had been shared with Cangemi until this announcement.
“It is my mandate as President and CEO, alongside our Board, to continue our transformation into a larger, more diversified commercial bank,” said DiNello in Thursday’s statement. Despite recent challenges, he expressed confidence in the bank’s direction and its ability to deliver for customers, employees, and shareholders long-term.
NYCB has yet to respond to requests for comment on the leadership transition.
Financial Updates
The bank disclosed a $2.4 billion charge due to a recent assessment of goodwill value on its balance sheet. In addition, approximately $30 million in other balance sheet adjustments are necessary, all tied to NYCB’s acquisition of assets from the failed Signature Bank in the previous year.
