Customers of New York Community Bank (NYCB) pulled $6 billion worth of deposits between February 5 and March 5, leaving the bank’s deposit base 7% lower, at $77 billion.
However, the pattern is not indicative of a bank run, which these days can drain a lender of funds in mere hours. Shortly ahead of its demise, depositors at Silicon Valley Bank tried withdrawing $42 billion in one day over fears they wouldn’t be able to access their funds if the bank failed.
NYCB provided the updated figures on an investor conference call Thursday morning after it announced it secured a $1 billion investment from former Treasury Secretary Steven Mnuchin’s firm, Liberty Strategic Capital, among other private equity companies.
Shares of NYCB opened 13% higher Thursday morning after a rollercoaster of a day Wednesday when the stock plunged more than 40% at one point.
Before the company disclosed in a filing last Thursday it had identified “material weakness” in the company’s controls, there weren’t significant changes in the bank’s level of deposits, said Alessandro DiNello, NYCB’s outgoing CEO, appointed just last week.
“Friday was not a great day,” he said. “Over the weekend, Monday and Tuesday deposits were strong again.”
But when a Wall Street Journal story was published Wednesday saying the bank was actively looking for a cash infusion, “there certainly were some people that lined up to withdraw [their money],” DiNello said. But after the $1 billion investment was announced, “it was back to normal.”
NYCB has been in crisis mode since the regional lender reported a surprise loss of $252 million last quarter, compared to a $172 million profit in the fourth quarter of 2022. That caused the stock to plunge, bringing it to its lowest level since 1997.
Additionally, NYCB was recently downgraded to junk status by both Moody’s Investors Service and Fitch Ratings. That’s significant because many depositors often require banks to have higher credit ratings considered “investment grade” to keep their money there.
On Thursday’s call, NYCB also announced it’s slashing its dividend to one penny a share. This comes after the company announced in January it was cutting its dividend from $0.17 a share to $0.05 a share.
The looming concern from an investor standpoint is how aggressive the Long Island-based bank will be when it comes to setting aside more reserves and estimating how much it expects to lose from soured loans.
Increasing both means the bank has fewer funds available to lend, which as a result would limit its profitability.
NYCB executives on Thursday’s call declined to comment on any specifics, noting that they need more time to perform a proper analysis.
