New York Community Bank Reports More Losses, Weak Controls

The financial system was already on tenterhooks after New York Community Bancorp reported higher-than-expected future losses on its commercial real estate loans last month. Now the lender has reported $2.4 billion more in losses amid the discovery of “material weaknesses” in its internal controls. Specifically, it has booked a goodwill impairment in the fourth quarter tied to the value of transactions before the 2008 financial crisis.  Earlier this month NYCB had reported a 2023 Q4 loss of $252 million.

At first it was thought that the bank’s losses were largely related to the deposits and loan assets it acquired from failed Signature Bank last year. It added a $552 million provision for future credit losses, plus $185 million in net charge-offs, plus cut dividends by 70% to bolster capital. Since then the bank has spent weeks trying to assuage the market’s concerns about its stability.

It is unclear how much trouble the bank may be in now. It disclosed its new fourth quarter losses in a securities filing late Thursday and did not provide new information on its assets and deposits. As of this month, NYCB had $83 billion in deposits and more than $100 billion in overall assets.  It also said in its filing that the weaknesses “related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities.” The goodwill impairment won’t affect its regulatory capital, it said.

The weaknesses in controls is “most worrisome,” Piper Sandler analyst Mark Fitzgibbon wrote in a note to clients that was reported by Bloomberg. “Without a doubt, the situation feels a bit uncertain at NYCB right now,” he said. “We fear that there could be additional issues that get raised as a new team takes the reins.”

The bank also announced that Alessandro DiNello will become CEO effective immediately, succeeding Thomas Cangemi.

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