February 10, 2024 / VOLUME NO. 300

An Unwelcome Surprise

New York Community Bancorp surprised investors last week, but not in a good way. The $116 billion bank announced it would slash its dividend and take a $260 million loss in the fourth quarter of 2023 after beefing up its allowance for credit losses. The bank has high levels of commercial real estate and rent-controlled apartment loans in the New York City area.

This week, Moody’s Investors Service downgraded the bank’s debt rating to junk status. Bloomberg reported that the bank’s chief risk officer and chief audit officer have left the bank. The company hasn’t offered an explanation, but the board elevated nonexecutive chairman Alessandro DiNello, the former CEO of Flagstar Bank, to the job of executive chairman to reassure investors. The stock had lost more than half its value by Tuesday. 

As detailed for subscribers in Bank Director magazine’s first quarter 2024 issue, Hicksville, New York-based New York Community Bancorp is the midst of a transformation under Tom Cangemi, who became CEO in 2020 after nearly 20 years as chief financial officer. The bank has moved away from being a longtime multi-family lender and thrift into a commercial bank, which will make the company more stable in terms of low-cost deposits and loan diversity. If it hadn’t made those moves, the bank would be in even worse shape today. 

New York Community Bancorp is almost nothing like the banks that failed last spring. It reported a deposit base with uninsured, uncollateralized deposits of 28% as of Wednesday morning, in line with other banks. The bank also reported more than enough liquidity to cover all those uninsured deposits, an apparent response to Moody’s concerns the night before about its liquidity profile. 

What’s behind the surface is that the bank recently jumped a key regulatory hurdle: the $100 billion asset mark. Under the new CEO, the bank has nearly doubled in size. It purchased Troy, Michigan’s Flagstar Bancorp in December 2022, and gained a new regulator — the Office of the Comptroller of the Currency. It quickly followed that deal with the opportunistic purchase of the failed Signature Bank’s liabilities in March 2023. Presumably, regulator demands around capital, liquidity and risk management have caught up with this rapidly growing bank.

Investors like dividends, not surprises. Even if slashing the dividend would help boost capital, investors may have lost confidence in the bank’s executives. Let’s hope Cangemi and his team can regain it. 

• Naomi Snyder, editor-in-chief for Bank Director

Why Sellers Don’t Like to Talk About Selling 

Secret meetings and plenty of hurdles await bankers who sell. 

“Asking an investment banker if you should sell is like asking your barber if you need a haircut.” — Kurt Knutson, Freedom Bank

• Naomi Snyder, editor-in-chief for Bank Director

Critical Oversight: Assessing Internal and External Audit

The similarities and differences between internal and external audit functions and what boards and audit committees should know about evaluating their performance.

The Human Touch: How Effective Banker Coaching Can Drive Long-Term Growth

Instilling a positive, confident mindset through reinforcement and recognition can help bankers generate greater value for customers — and the bank.

How Banks Can Leverage Local Business Relationships to Fuel Growth

Identifying and building trust with top businesses can set the table for sustainable long-term success.

A Closer Look at the Use of Machine Learning in Credit

FinRegLab’s Kelly Thompson Cochran joins Bank Director’s Kiah Lau Haslett to talk about recent research into the transparency, fairness and accuracy of different credit models that use machine learning.