New York Community Bank CEO Thomas Cangemi is out and the bank has disclosed “internal controls” issues linked to internal loan review.
The bank, one of the largest commercial real estate lenders in the country, said it would need more time to file its annual report as a result.
Alessandro DiNello, NYCB’s executive chairman and former CEO of Flagstar Bank, which NYCB acquired in late 2022, will take on the role of CEO.
Shares dropped 18 percent in extended trading Thursday.
The leadership change and disclosure come after NYCB slashed its dividend during a January earnings call and hiked its provision for credit losses to address office sector weakness and multifamily default risk. Shares tumbled to a 23-year low the same day.
During the call, the bank said it expected more distress to hit its sizable multifamily loan book, half of which is debt backed by rent-stabilized buildings. Some owners of rent-regulated buildings have struggled to stay current on mortgage since the 2019 rent law effectively capped property revenues.
NYCB said management had identified weaknesses in the company’s “internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities.”
The bank said it expects to disclose in its 10-K that “its disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2023.”
Multiple investor suits have claimed NYCB issued false or misleading statements about the health of its loan book, failing to report “higher net charge-offs and deterioration of its office portfolio,” which would likely result in higher loan losses.
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The bank related the dividend cut to its acquisition of Flagstar and some of Signature Bank’s loans, which bumped it into a larger bank class.
Bloomberg later reported that mounting pressure from the Office of the Comptroller of the Currency had led it to slash its dividend.
Moody’s, after the dividend chop, cut the bank’s credit rating to junk.
Cangemi will remain on the NYCB board.