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NYCB shares plunge: Breaking down the bank's newest troubles

New York Community Bancorp's (NYCB) tumultuous sage enters a new chapter as shares plummet further Friday morning. The regional bank has filed to delay the release of its annual report amid internal weaknesses while also seeing a leadership change with Executive Chairman Alessandro DiNello stepping up as both president and CEO.

Yahoo Finance Banking Reporter David Hollerith explains NYCB's latest developments, noting its commercial real estate portfolio.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

AKIKO FUJITA: Shares of New York Community Bancorp falling to its lowest level since 1996. The bank amending its Q4 results showing steeper losses and adding a disclosure about its weaknesses in its internal risk management controls. And the bank's CEO is now stepping down, but it's taking steps to build more confidence, appointing a new chief risk officer and chief audit executive today.

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To break this all down, let's bring in Yahoo Finance's David Hollerith. David, you have been covering this story for some time. We are seeing pressure build across all the regional banks today as a result of this as well.

DAVID HOLLERITH: Yeah, Akiko, I think, you know, we'll start by just talking about New York Community Bank. So they put out three filings yesterday evening and then another one-- another press release about an hour ago. And essentially, they're going to be late on their annual report. They cited that due in part to material weakness in their internal loan review.

So New York City-- New York Community Bank has a very high amount of multifamily, rent-regulated apartment complexes in New York City. And that is complicated for a number of reasons, meaning that those-- a lot of those properties are assumed to have lost value. So that's sort of the nature of a lot of this stress.

And that is pretty-- people use the term idiosyncratic. It's pretty unique in terms of what the kind of exposure other regional banks have to that. That being said, the CEO has also stepped down, and the new executive chairman is stepping into the role of CEO.

Now, we want to point out that earlier in February, it was already made that the new executive chairman would become the de facto boss, and the CEO would report to him. So that's not quite as new as much as it is the fact, as you pointed out, that the CEO is stepping down. He's still going to stay on the board of directors, though.

But the big change that, you know, has come from this has been this huge goodwill impairment that the bank did disclose, even though it's not completely done with re-reviewing its financials for the quarter. So that's a $2.4 billion goodwill impairment.

And that's honestly-- it's more about stock valuation in the past compared to where the stock is now. It has a lot to do with merger transactions. And it doesn't-- it's not connected to the banks to recent mergers, assets from Signature Bank, which failed last year, and before that, Flagstar Bank, which they closed an acquisition on in late 2022.

So a lot going on here. But I think as far as what it means for the other regional banks in terms of what this information has told us, the goodwill impairments is probably the most important area. We spoke to Chris Marinac with Janney, who actually covers NYCB earlier today. And he said he would not be surprised at all if more companies, as the year goes on, begin disclosing these impairments.

Again, this has a lot to do with stock valuations. So this is only going to be relative for banks who have done transactions or mergers in the past and have since then or maybe over the last year significantly had their stock value drop, changing sort of the valuation of some of these things. But importantly, this kind of impairment-- it doesn't affect NYCB's bank capital rules, which are obviously crucial to the bank's liquidity. It also doesn't affect their cash. So it's a very fluid situation.

The last thing on the positive side I think I would just add is just that they have appointed a new chief risk officer and a new chief audit executive. Both of those positions were empty as of the end of last year. And that wasn't really reported by the bank. Bloomberg actually came out with a story revealing this. And that was a part of some concern investors had, just about the governance overall of the bank. So the fact that those positions are filled is quite good.