After the US stock market closed on Thursday, New York Community Bank, which is at the forefront of the current US banking crisis, disclosed a series of negative news, including CEO Thomas Cagemi's resignation, weak internal controls, and a fourth quarter loss of $2.7 billion, which further intensified the turmoil surrounding the bank.
The stock of this commercial real estate lending agency headquartered in Hixville, New York, USA, plummeted by 20% in post market trading.
Over the past month, this financial institution, which played the role of "savior" in the 2023 regional banking crisis a year ago, has gone through a series of twists and turns, and its announcement on Thursday is the latest dramatic change.
In an updated document submitted by New York Community Bank on Thursday, the fourth quarter loss was revised to $2.71 billion, more than ten times the previously disclosed figure, to reflect a $2.4 billion goodwill write down.
The bank stated that the conclusion drawn from the evaluation completed on February 23 was that the goodwill of historical transactions (2007 and prior) had been fully impaired as of December 31, 2023, which has been confirmed by the company's current market value.
The New York Community Bank stated that this impairment has "no impact" on the company's regulatory capital ratio and does not affect compliance with outstanding credit agreements. Impairment expenses will not result in any current cash expenditures.
At the end of January this year, the Q4 performance released by the bank was far below market expectations, indicating a loss of $252 million in the fourth quarter of 2023. The main reason for this loss is that the loan loss provision for the quarter reached $552 million, which is ten times higher than analyst expectations and far exceeds the previous quarter's $62 million.
The bank also stated in its latest document that management "found significant deficiencies in the company's internal controls related to internal loan reviews due to inadequate supervision, risk assessment, and monitoring activities.".
The company has taken measures to delay the submission of annual reports in order to "complete the work related to evaluating and planning to remedy major deficiencies.".
In another press release released on its official website, the New York Community Bank also announced a significant leadership change. The bank will appoint Alessandro Dinello as the company's President and CEO. Current CEO Thomas Cangemi notified the company on February 23 that he has decided to resign from these positions but will continue to remain on the board.
Dinello previously served as the CEO of Flag Star Bank, headquartered in Troy, Michigan, which was acquired by New York Community Bank at the end of 2022. After the acquisition was completed, he served as the non-executive chairman of the New York Community Bank.
Dinello stated in a press release, "Although we have recently faced challenges, we are confident in the direction of the bank's development and its ability to provide long-term services to customers, employees, and shareholders. The adjustments we have made to the board of directors and leadership team reflect a new chapter we are turning.".
The New York Community Bank also announced other board changes on Thursday: Marshall Lux, who has been serving as an independent director since 2022, has been appointed as the Chief Director, and former Chief Director Hanif& Quota; Wally& Quota; Dahya has stepped down from the board of directors.
Wind and rain sway
After nearly a year of the collapse of three sizable regional banks in the United States due to deposit runs last year, the emergence of new bearish news at New York Community Bank in the past month has raised greater concerns about the US regional banking sector.
The bank was sued by shareholders for reporting unexpected losses on commercial real estate loans and significantly reducing dividends on January 31st, and its stock price has since fallen to a nearly 27 year low.
In a class action lawsuit filed in the Brooklyn Federal Court, shareholders stated that the regional bank deceived them by not disclosing that it would allocate more funds for credit losses and cut dividends by 71% to support its balance sheet.
Since the release of the industry performance report in early February, more than ten securities firms have lowered their target prices for the bank's stocks. Moody's, an international rating agency, also downgraded the ratings of all long-term and some short-term issuers of New York Community Bank to "junk" and warned of the possibility of further downgrades.
Piper Sandler analyst Mark Fitzgibbon wrote in a note to clients that the weaknesses in control were the most concerning among the newly disclosed information, and he downgraded the recommended rating of the stock from "overweight" to "neutral".
Fitzgibbon said, "There is no doubt that the situation at New York Community Bank is a bit uncertain. We are concerned that with the new team taking office, more problems may arise."
Raymond James analyst Steve Moss stated that one of the risks is that with the repair of internal regulations, credit costs may rise for a longer period of time.