New York Community Bancorp sent shockwaves through the regional bank industry once again, announcing a $2.4 billion earnings hit for the December quarter due to identified “material weaknesses” in its loan review process. This revelation, coupled with the abrupt change in CEOs, follows the earlier surprise provision for loan losses, shaking investor confidence.
The bank stated it needs additional time to file its annual report, noting ongoing reviews of internal controls. While it anticipates reporting ineffective disclosure controls and procedures as of Dec. 31, 2023, it reassured that the $2.4 billion charge won’t impact regulatory capital or credit agreements, nor entail current cash expenditures. The weaknesses were attributed to deficient oversight, risk assessment, and monitoring activities.
This string of negative developments led to a sharp decline in NYCB shares by 23% in after-hours trading, totaling a more than 60% decrease since the initial turmoil on Jan. 30.
Following these events, Chief Executive Thomas Cangemi, with 27 years at the bank, will step down. Sandro DiNello, the board chairman who previously assumed executive leadership after the Jan. 30 announcement of a dividend cut and reserve boost, will take over as CEO.
Sandro DiNello, the CEO who previously led the turnaround of Michigan-based Flagstar Bank before merging it with NYCB, will now take sole command of NYCB following the departure of Chief Executive Thomas Cangemi. DiNello had been earlier seen as co-leading NYCB with Cangemi.
In Thursday’s announcement, DiNello stated, “It is my mandate as President and CEO, alongside our Board, to continue our transformation into a larger, more diversified commercial bank.” Despite recent challenges, he expressed confidence in the bank’s direction and its ability to deliver for customers, employees, and shareholders in the long term.
The $2.4 billion charge announced by NYCB resulted from a reassessment of the value of goodwill on its balance sheet. Additionally, the bank indicated that approximately $30 million in other balance sheet changes are required, related to NYCB’s acquisition of assets from the failed Signature Bank last year.
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