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NYCB FLAGS WEAKNESSES IN LOAN OVERSIGHT AND NAMES NEW CEO

 * Shares of the regional bank tumble after new disclosures
 * Alessandro DiNello to succeed Thomas Cangemi as firm’s CEO

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NYCB Cites Weakness in Loan Oversight, Replaces CEO
NYCB Cites Weakness in Loan Oversight, Replaces CEO
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NYCB Cites Weakness in Loan Oversight, Replaces CEO
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By Hannah Levitt and Sally Bakewell
February 29, 2024 at 10:24 PM GMT+1
Updated on
March 1, 2024 at 4:24 PM GMT+1
BookmarkSave

Listen

3:37

Commercial real estate lender New York Community Bancorp said it discovered
“material weaknesses” in how it tracks loan risks, wrote down the value of
companies acquired years ago and replaced its leadership to grapple with the
turmoil. The stock plunged.

Alessandro DiNello will become chief executive officer effective immediately,
succeeding Thomas Cangemi, the lender said in a statementBloomberg Terminal late
Thursday. The company expects to miss a deadline for filing an annual report as
it shores up controls.

Expand

Alessandro DiNelloPhotographer: Anthony Lanzilote/Bloomberg

The weaknesses “related to internal loan review, resulting from ineffective
oversight, risk assessment and monitoring activities,” the firm said in a
regulatory filing. It separately took a $2.4 billion goodwill impairment tied to
past transactions, which won’t affect its regulatory capital.



The stock tumbled 20% at 10:24 a.m. in New York, extending this year’s slump to
63%.

Listen • 10m54


BIG TAKE: A BRUTAL RECKONING IN COMMERCIAL REAL ESTATE (PODCAST)





The announcement reignites a drama that erupted at the end of January when the
company — a major lender to New York apartment landlords — said it’s stockpiling
cash to cover potential problems with loans. Investors in regional banks have
been on edge ever since, focused on whether multifamily residential complexes
can generate enough revenue to maintain financing after New York toughened rent
controls in 2019.

Read a Big Take: NYC Apartment Buildings Are Going On Sale for 50% Off

While vacant office towers are also a concern for bank shareholders, NYCB’s
largest real estate exposure comes from about $37 billion in apartment loans —
with almost half backed by rent-regulated complexes.



Among the fresh disclosures, the weakness in controls is “most worrisome,” Piper
Sandler analyst Mark Fitzgibbon wrote in a note to clients, cutting his
recommendation for the stock to neutral from overweight.

“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.”

One risk is that credit costs could be higher for longer as internal oversight
is fixed, Raymond James analyst Steve Moss said.

Expand


The company said it doesn’t expect the material weaknesses to result in changes
to its allowance for credit losses, according to a separate statementBloomberg
Terminal Friday. The bank also on Friday named George F. Buchanan chief risk
officer and Colleen McCullum chief audit executive. Those executives’
predecessors left their posts in the months before the bank slashed its dividend
and stockpiled cash against future loan losses in late January.



Separately, NYCB said Thursday that it retroactively booked a $2.4 billion
goodwill impairment in the fourth quarter tied to the value of transactions
before the 2008 financial crisis. The hit has “no impact” on the firm’s
regulatory capital ratios, nor does it affect compliance with outstanding credit
agreements, NYCB said. The impairment charge also didn’t result “in any current
cash expenditures.”



DiNello was appointedBloomberg Terminal executive chairman earlier in February
to help the bank improve operations. The former head of Flagstar Bancorp joined
NYCB when it acquired that firm in December 2022.

DiNello’s rising clout was already on display when the firm held a conference
call to address its troubles weeks ago. He fielded most of the questions from
analysts, effectively sidelining Cangemi.

“It is my mandate as president and CEO, alongside our board, to continue our
transformation into a larger, more diversified commercial bank,” DiNello said in
the statement. “While we’ve faced recent challenges, we are confident in the
direction of our bank.”

Cangemi will remain on NYCB’s board. Marshall Lux, who has served as an NYCB
independent director since 2022, was named presiding director, effective
immediately, succeeding Hanif Dahya in that role. In a resignation letter, Dahya
said he didn’t support DiNello’s appointment to CEO.



— With assistance from Bre Bradham

(Updates with additional management changes in the 10th paragraph, updates
shares in fourth.)

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