New York Community Bancorp (NYCB) faced a significant setback as its shares plummeted by 38% on Wednesday, January 31, in response to the unexpected revelation of a dividend cut and a substantial loss. The market reaction was surprising, considering NYCB had been perceived as one of the winners amid the banking crises of 2023, which witnessed the downfall of institutions like Signature Bank, Silicon Valley Bank, and First Republic.
During the regional banking turmoil last year, NYCB had acquired the failed Signature Bank, taking control of a majority of its deposits and a third of its assets, including $13 billion in loans. Initially, investors responded positively to this move, driving NYCB shares higher. However, the tide turned when NYCB reported a loss of $260 million in the fourth quarter of 2023, a stark contrast to the $164 million gain in the same period the previous year.
Bank executives attributed the unexpected loss to an increase in anticipated loan losses, particularly associated with loans tied to office buildings. CEO Thomas Cangemi, during an earnings call, explained that the bank was reducing its dividend to comply with banking regulations, triggered by NYCB’s assets surpassing $100 billion after the Signature Bank acquisition, leading to stricter capital requirements.
The decline in NYCB’s stock, reaching as much as a 46% drop before closing at 38%, also had a ripple effect on other smaller banks, causing the KBW Regional Bank index to fall by 6%.
Analyst Alexander Yokum of CFRA downgraded NYCB’s shares to “hold,” expressing dwindling confidence in the bank’s ability to efficiently integrate recent acquisitions. NYCB admitted that the integration of the Signature acquisition would take longer than expected, possibly extending into the next year.
Despite the challenges and market reaction, Cangemi remained optimistic, commending the teams involved in the acquisition. NYCB subsidiary Flagstar Bank completed the acquisition of Signature on March 19, 2023, a week after the Federal Deposit Insurance Corp. (FDIC) took control of the failed bank on March 12. Signature Bank, previously known for its crypto-friendly stance, faced collapse, leading to the divestment of its crypto business by its buyer, NYCB.