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Concerns about regional banks were revived this week after New York Community Bank (NYCB) disclosed its failure $2.7 billion In the last three months of 2023, $252 million As it was originally reported on January 31.
NYCB StockThe bank, which has traded as low as $3.32 and as high as $14.22 over the past 12 months, plunged 26% on Friday after a series of surprising information emerged from a regulatory disclosure filed by the bank after Thursday’s close.
New York City Commerce Department revealed The company said it discovered “material deficiencies” in internal controls related to internal loan reviews and wrote down $2.4 billion in goodwill from historical transactions in 2007 and earlier. A goodwill impairment must be recognized when a company pays more than its carrying value for an asset that later declines in value.
The bank also revealed that its president and CEO Thomas Canjimi resigns He resigned as chief executive on February 23, although he continued to serve on the boards of the bank and its parent company. NYCB chief risk officer Nick Munson and chief audit officer Meagan Belfinger previously left the company unannounced ahead of the earnings release.
Cangemi, who led NYCB’s 2022 acquisition of Flagstar Bank, was replaced as CEO on Thursday by former Flagstar Bank President and CEO Sandro DiNello. Appointed as Executive Chairman The company’s board of directors meeting was held on February 7.
NYCB downplayed the impact of the $2.4 billion goodwill impairment, saying it would not weaken the company’s cash reserves and had “no impact on any of the company’s regulatory capital ratios” nor would it affect the company’s compliance with covenants under any outstanding credit agreements.
“In the past three weeks since being appointed executive chairman, the company has taken rapid action to improve every aspect of our operations,” Dinello said. declare Appointed new Chief Risk Officer George F. Buchanan and Chief Audit Executive Colleen McCullum.
Sandro Dinello
“The leadership team identified the material weaknesses disclosed yesterday and has been taking necessary steps to address them, including appointing new executives,” Dinello said. “Our credit loss provision takes into account these weaknesses and is not expected to change . The company has strong liquidity and a solid deposit base, and I am confident that we will execute our turnaround plan to increase shareholder value.”
but director raymond james Steve Moss tells wall street journal It’s “particularly troubling” when companies disclose material deficiencies because such language “creates a lot of risk and uncertainty.”
Investors worry that BNY is not the only regional bank that may need new capital if the performance of its loans to commercial developers continues to deteriorate. Post-pandemic, office and retail vacancies remain high in many markets, and properties used as collateral for loans are often worth less than the outstanding balances on those loans.
Philadelphia-based stocks republic first bank This month it was trading for just a penny on a deal that would have provided more capital Thursday’s decline After the bank revealed Material defects found in its internal controls.
Impact on jumbo mortgages
The collapse of Silicon Valley Bank, Signature Bank and First Republic Bank last year – largely due to rising interest rates – brought regional banks under intense scrutiny from ratings agencies. But NYCB saw Signature Bank’s failure as a development opportunity, and its subsidiary Flagstar Bank spent $2.7 billion to take over Signature Bank’s retail branches.
When the deal closes, NYCB has $116 billion in assets — about the same size as Signature but half the size of Silicon Valley Bank and First Republic. wall street journal the report said. Republic First Bancorp has only $6 billion in assets, limiting the impact of its troubles.
Jumbo mortgages have become more expensive amid concerns about the impact of falling commercial real estate values on regional banks, which have traditionally been the main providers of mortgages that exceed Fannie Mae and Freddie Mac’s $766,550 conforming loan limit.
Huge mortgage loan “interest spreads” widen
The “spread” between jumbo mortgages and conforming mortgage rates has widened since Silicon Valley Bank closed on March 10, 2023, a trend this year, according to daily rate lock data tracked by the Best Blue Mortgage Market Index Still going on.
During January and February 2023, Optimal Blue data shows that the spread between jumbo mortgages and conforming mortgages averaged about 1 basis point (a basis point is one percent).
Interest rates on jumbo mortgages are sometimes lower than the rates on conforming mortgages in early 2023. But over the rest of the year, from March to December, spreads grew to an average of 19 basis points.
So far this year, as of February 29, the spread has widened to an average of 42 basis points, sometimes exceeding half a percentage point.
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