How to blow up a bank in 365 days...
1. Ignore regulatory changes
Housing Justice For All: "After decades of organizing, the tenant movement dramatically strengthened New York State’s rent stabilization law. Tenants’ rights are now stronger than they have been in a generation."
2. Concentrate your loan business
Nearly 4x more multifamily exposure than peer banks (most in rent-regulated properties, where values have fallen by 40%) shouldn't be a problem.
3. Be greedy when others are fearful
"New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The deal will include the purchase of $38.4 billion in Signature Bank's assets..."
4. Invite regulatory scrutiny
Buy, buy, buy. Ignore the thresholds that require public stress testing and the Fed's direct oversight of your capital planning. What's the worst that can happen?
5. Act surprised when regulators add pressure
"Under a deal that allowed NYCB to acquire Flagstar in 2022, the OCC has the right to object to any dividends NYCB sets, according to regulatory filings."
6. Displace your Chief Audit Officer
"NYCB’s most recent chief auditing officer, Meagan Belfinger, is listed on the October version of the bank’s website but not December’s."
7. Have your Chief Risk Officer resign
"New York Community Bank’s chief risk officer left the bank in the months leading up to the surprise fourth-quarter loss..."
[Pro tip: No need to publicly announce steps 5 and 6; let analysts discover them by comparing archived company websites.]
8. Frantically build your reserves
"NYCB posted an adjusted loss of $185M due to a chunky $552M provision for credit losses. The lion's share of those provisions was allocated to its commercial real estate portfolio..."
9. Have your bond rating cut to "junk"
Moody's: "NYCB faces high governance risks from its transition with regards to the leadership of its second and third line of defenses, the risk and audit functions of the bank, at a pivotal time."
10. Ignore the "internal controls" email from your auditor
"...as part of management’s assessment of the Company’s internal controls, management identified material weaknesses in the Company’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities. ...the Company expects to disclose in the 2023 Form 10-K that its disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2023." (SEC filing)
11. Delay your 10K filing with a $2.4 billion bomb
Goodwill at 9/30/23 = $2.426M
Goodwill at 12/31/23 = $0
Implied loss = $2.426M
(SEC filing)
12. Have your CEO quit after 27 years at the bank
"Thomas Cangemi has stepped down as chief executive of New York Community Bancorp, the embattled company said Thursday..."
COMMENTS