[Fox Business] Bank that purchased failed community bank close to credit downgrade
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New York Community Bank’s stock slide continued Thursday as it faces a potential downgrade from Moody’s after posting a surprise loss and announcing a dividend cut. NYCB is looking to build reserves on its balance sheet after it bought some of Signature Bank’s assets last year after it failed amid the regional banking crisis.
Moody’s said Wednesday it was reviewing NYCB for a downgrade that could put it in “junk” territory after the credit ratings agency raised concerns about the bank’s losses in office and multi-family properties in New York.
Moody’s also raised concerns about weak earnings, a material decline in its capitalization and reliance on wholesale funding.
NYCB’s stock fell by over 11% during Thursday’s trading, bringing its decline in the last five days to more than 43%. Most of the decline occurred on Wednesday and Thursday. Having closed at $5.75 a share at the end of Thursday’s session, NYCB’s stock is trading at its lowest level since 2000.
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NYCB said this week it was cutting its dividend by 70% to bolster its balance sheet with additional capital reserves. This comes after NYCB’s acquisitions last year pushed it above the $100 billion asset threshold that requires banks to follow more stringent capital and liquidity requirements under banking regulations.
Last year, NYCB acquired $34 billion in deposits, $13 billion in loans and $25 billion in cash from the failed Signature Bank. Those acquisitions left NYCB with $116.3 billion in total assets, $85.8 billion in loans and $81.4 billion in deposits as of Dec. 31.
NYCB CEO Thomas Cangemi said on an analyst call Wednesday the Signature Bank acquisition “allows us to advance our strategy while strengthening and diversifying our balance sheet. However, we will become a $100 billion-plus bank sooner than we had anticipated.”
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NYCB set aside more capital to meet regulatory requirements this quarter and also put more funding into its rainy day funds to cover potential losses, which resulted in an adjusted loss of $185 million for the quarter.
NYCB was founded in 1859 and has long served as a small regional bank. Between 2000 and 2023, it completed 13 acquisitions to grow to its current size. It also recently acquired Flagstar Bank, which allowed it to expand its footprint around the country.
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Last year’s regional banking crisis saw some of the largest bank failures in U.S. history. First Republic Bank’s failure became the second largest, trailing only Washington Mutual’s failure in 2008 and surpassing the 2023 failures of Silicon Valley Bank and Signature Bank.
Reuters contributed to this report.
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