On Friday (March 1), shares of New York Community Bancorp (NYCB) plunged 25.89% after longtime CEO Thomas Cangemi unexpectedly resigned and postponed the release of its annual financial report, citing "the completion of work related to the assessment and planning to address material weaknesses."

Mr. Thomas has spent much of this year trying to reassure investors about the bank’s viability, with NYCB shares down 65% year to date.

Headquartered in Hicksville, New York, NYCB is worth $114 billion and is one of the 30 largest banks in the US. In the fourth quarter of 2024, they recorded a 10-fold increase in losses, to $2.7 billion. The reason is that this bank was heavily affected by the difficult real estate market value.

In addition to the office real estate segment weakened by the post-pandemic slump, NYCB also has a lot of exposure to the apartment market with controlled rents, accounting for 22% of total loans. According to David Chiaverini, managing director of equity research at Wedbush, this is a major risk when NYCB is a large lender to the owners of these properties in New York City.

The bank also faced difficulties because it grew in size almost overnight when it took over the bankrupt Signature Bank in March 2023. At that time, Flagstar Bank - a subsidiary of NYCB - received most of the entire deposit of about $4 billion, about $60 billion in loans and all 40 branches of this bank.

That puts NYCB in a new category, requiring a difficult transition and greater regulatory scrutiny. In a filing with the Securities and Exchange Commission late on March 29, the bank disclosed a $2.4 billion goodwill impairment, meaning it is reassessing the value of its assets.

"Management identified significant weaknesses related to internal review of loans, resulting from ineffective monitoring and risk assessment activities," the report stated.

Industry analysts are not concerned about the risk of contagion in the banking sector if NYCB falls into trouble, saying it is an isolated case, given the bank’s large exposure to commercial real estate and its jump in size after taking over Signature Bank.

“We continue to view the situation at NYCB as highly isolated and not representative of broader stress/uncertainty with regional banks,” said Steven Alexopoulos, an analyst at JPMorgan.

Similarly, Citi CEO Keith Horowitz suggested that the delay in NYCB's annual report may be to give auditors enough time to thoroughly examine each individual loan.

“Disclosing a major weakness in the loan review process is important and will require significant changes to credit risk monitoring in the future. We think this could make them more proactive in identifying future problems,” he said.

Former CEO Thomas Cangemi's hot seat will be filled by Alessandro DiNello, executive chairman of the board. DiNello was CEO of Flagstar Bank, a bank that NYCB acquired in late 2022.

Phien An ( according to AP, Yahoo Finance )