New York Community Bancorp faced a significant downturn on Friday, with its shares plummeting by 26% following the revelation of “material weaknesses” in its loan risk tracking procedures and the departure of its CEO, Thomas Cangemi.
The New York-based financial institution made the announcement late Thursday, disclosing Cangemi’s departure after a notable 27-year tenure at NYCB. Alessandro DiNello, the bank’s executive chairman, assumed the role of CEO with immediate effect. DiNello had been effectively leading the bank for some time, acting as the de facto CEO in the preceding weeks while Cangemi was still in office. This transition was formalized through changes to the bank’s bylaws, reflecting DiNello’s increasing leadership responsibilities.
Interestingly, Hanif “Wally” Dahya, a NYCB director, expressed dissent regarding DiNello’s appointment as CEO in a letter dated February 25, without providing specific reasons for his opposition. Subsequently, Dahya, who previously served as presiding director, resigned from the board on Thursday.
Following Dahya’s departure, Marshall Lux assumed the role of presiding director. Lux, who joined NYCB’s board in early 2022, brings a wealth of experience to the position, having served as a senior partner at Boston Consulting Group. Additionally, Lux previously held the position of global chief risk officer for Chase Consumer Bank at JP Morgan from 2007 to 2009, as indicated in a press release detailing the leadership changes.
The sudden leadership transition and the discovery of material weaknesses in loan risk tracking procedures have undoubtedly shaken investor confidence in New York Community Bancorp. The appointment of DiNello as CEO and Lux as presiding director signals a strategic shift for the bank as it navigates through these challenging circumstances.
On Thursday, New York Community Bancorp, ranked among the top 30 banks in the US, revised its fourth-quarter losses from $252 million to $2.7 billion and disclosed “internal control issues.” The bank identified material weaknesses in its internal controls related to internal loan review due to ineffective oversight, risk assessment, and monitoring activities, according to a filing with the Securities and Exchange Commission. Despite these challenges, Alessandro DiNello, the bank’s executive chairman, expressed confidence in NYCB’s future direction and its ability to serve customers, employees, and shareholders in the long term. The changes in the board and leadership team were described as reflective of a new chapter for the bank. Representatives for NYCB did not immediately respond to The Post’s request for comment.
This development is the latest in a month-long saga that began in late January when NYCB surprised analysts by slashing its dividend to accumulate more cash for loan losses. This move reignited concerns about the commercial real estate market, particularly in New York City, where the “urban doom loop” phenomenon caused by remote work during the pandemic has persisted despite return-to-office mandates. Additionally, worries about the stability of regional banks surfaced after the collapse of three high-profile lenders last year: Silicon Valley Bank, Signature Bank, and First Republic Bank. NYCB acquired Signature Bank in a $2.7 billion deal in March 2023.
Shares of NYCB closed at $3.55, marking its lowest level since 1997, and the stock has declined by 65% year to date.