NYCB Hit With First Investor Lawsuit Over Share Price Collapse

February 8, 2024 by

New York Community Bancorp is facing the first of what are likely to be several securities fraud lawsuits alleging the bank and its top executives misled shareholders about the health of its commercial real estate loan portfolio.

Shareholder Walter Edward Lemm, Jr. filed a proposed class action Tuesday in federal court in Brooklyn, New York. Along with the bank itself, the suit names NYCB Chief Executive Officer Thomas Cangemi and Chief Financial Officer John Pinto as defendants.

NYCB shares have plummeted since it said in its Jan. 31 earnings announcement that it was setting aside $552 million for possible loan losses, far above estimates. The Hicksville, New York-based bank’s stock was down around 12% in Wednesday morning trading, and by more than 60% over the past week.

The shareholder suit, which was first reported by Reuters, highlights several instances in the past when the company had reassured investors about the quality of its loans and underestimated expected losses.

“Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis,” plaintiffs allege.

NYCB representatives didn’t immediately respond to requests for comment on the suit. In a statement issued Tuesday, Cangemi said the bank had taken “decisive actions to fortify our balance sheet and strengthen our risk management processes during the fourth quarter,” calling the charge “an investment in enhancing a risk management framework commensurate with the size and complexity of our bank and providing a solid foundation going forward.”

The case is Lemm v. New York Community Bancorp, 24-cv-903, US District Court, Eastern District of New York (Brooklyn).

Top photo: The New York Community Bank (NYCB) headquarters in Hicksville, New York, US, on Thursday, Feb. 1, 2024. New York Community Bancorp plunged a record 46% after reporting a surprise loss tied to deteriorating credit quality and a cut to its dividend. Photographer: Bing Guan/Bloomberg.