New York CNN —
Shares of New York Community Bank (NYCB) plunged more than 40% Wednesday afternoon after The Wall Street Journal reported that the beleaguered regional lender is seeking a major cash infusion.
The report, citing people familiar with the matter, said bankers are actively trying to “gauge investors’ interest in buying stock in the company.”
Around 12:30 pm ET the stock was halted from trading pending imminent news.
All of this raises more questions over whether the Long Island-based bank is seeing depositors pull their funds. In an update last month, the bank said that deposits were stable and had even increased slightly in the last quarter of 2023. That update came after NYCB reported a surprise loss last quarter in part because of soured commercial real estate loans.
Then last week, the bank said in a filing it had identified “material weakness” in the company’s controls. The issues caused a $2.4 billion loss to shareholders last quarter, NYCB said.
It delayed the release of its required annual financial disclosure, known as a 10-K, to focus on addressing the issues it identified. The bank said it now expects to file its 10-K by March 15. Unless the company provides an additional update, the 10-K will be the latest source of information on whether depositors are withdrawing their funds. The delay draws eerie parallels to First Republic Bank, which postponed reporting its quarterly earnings shortly before it failed last year.
First Republic Bank similarly needed an emergency cash infusions not long before it collapsed.
NYCB didn’t immediately respond to CNN’s request for a comment and the US Treasury Department declined to comment.
On top of that, the bank shook up its management causing a commotion on its board of directors last week. The bank named Alessandro DiNello, its recently appointed executive chairman, president and CEO and an independent board member resigned over his opposition to the promotion.
At less than $2 a share, the stock is nearing an all-time low. It’s down more 80% year to date.
The stress NYCB is under is having a limited impact on similarly sized regional banks that also have high exposures to commercial real estate.
For instance, Valley National Bank (VLY), which has the highest exposure to commercial real estate among the 100 largest banks in the US, was down less than 3% on Wednesday. The KBW Regional Bank Index was also down less than 3%.
This is a developing story and will be updated.
