Real-estate lender NYCB is in turmoil, shredding nerves on Wall Street

• The turmoil at New York Community Bancorp continued Thursday with a string of announcements that sent shares down over 20%.
• It appointed a new CEO and disclosed "material weaknesses" relating to how it reviews loans.
• The news comes about a year after NYCB acquired assets from the defunct Signature Bank.

The turmoil at New York Community Bancorp, or NYCB, is getting worse.

On Thursday, the Long Island-based bank released several announcements that spooked investors — who were already on edge since the lender reported a surprise net loss on January 31.

NYCB also appointed a new CEO, Alessandro DiNello, who succeeded Thomas Cangemi immediately.

More worryingly, it added in regulatory filings that its management "identified material weaknesses in the Company's internal controls related to internal loan review." The bank attributed the problems to "ineffective oversight, risk assessment and monitoring activities."

The lender is also retroactively booking a $2.4 billion goodwill impairment charge in the fourth quarter and said it will file its 2023 annual report late because it's still assessing its internal controls.

The string of disclosures sent NYCB shares 20% lower in after-hours trade. The stock is 53% lower this year-to-date after crashing as much as 60% over the same period.

The turmoil comes about a year after NYCB acquired assets from the defunct Signature Bank, which failed shortly after the implosion of Silicon Valley Bank.

This acquisition made NYCB so big that its assets breached the $100 billion threshold, subjecting it to more stringent banking regulations.

A major real-estate lender

NYCB's troubles are closely watched because it's the parent company of Flagstar Bank — one of the biggest regional lenders in the US — and the country's second-largest lender to the multifamily property sector.

As BI's Theron Mohamed explained last month, the NYCB's issues have spawned concerns that its loans and assets in the real-estate sectors are in difficult times.

The commercial property sector in particular is facing challenges from the rise of remote work and higher borrowing costs.

Mark Fitzgibbon, an analyst at Piper Sandler, described the situation at NYCB as a case of "whack-a-mole." He downgraded the bank's stock from "overweight" to "neutral" on Thursday.

"Without a doubt, the situation feels a bit uncertain at NYCB right now," wrote Fitzgibbon, per Bloomberg. "We fear that there could be additional issues that get raised as a new team takes the reins."

NYCB shares slumped 21.7% to $3.75 apiece after hours, reversing a 5.5% gain at their close on Thursday.