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A surprise fourth-quarter loss

NYCB’s fourth quarter loss was blamed on “decisive actions to build capital, reinforce our balance sheet, strengthen our risk management processes,” by the bank’s then-CEO Thomas Cangemi. He said the actions were “necessary” after NYCB almost doubled in size through two quick-fire acquisitions for Flagstar Bank and certain assets of Signature Bank, which failed last March.

However, in the same fourth-quarter earnings report, the bank also confirmed investors’ fears about the impact of a worsening credit environment for commercial real estate, where it had significant exposure.

NYCB announced it had increased its allowance for credit losses up to $992 million in the fourth quarter, from $619 million at Sept. 30, to “address weakness in the office sector [and] potential repricing risk in the multi-family portfolio,” among other things.

The lender held total loans of $84.6 billion, in the fourth quarter, with its top three borrowers being: multi-family properties (44%), commercial and industrial entities (24%) and commercial real estate (12%).

Of the bank’s vast multi-family loan portfolio — which is made up primarily of non-luxury, rent-regulated buildings in New York City — around 37% of the loans are due to mature or reprice in the next three years.

After disclosing “material weaknesses” in its controls — as the bank put it in a February SEC filing under new CEO Alessandro DiNello — the bank suffered several headaches, including the withdrawal of deposits.

But NYCB has managed to turn things around and regain stability — thanks, in part, to a $1 billion investment from former Treasury Secretary Steven Mnuchin’s firm, Liberty Strategic Capital, among other private equity companies.

While NYCB seems to have averted a crisis for now, this saga — hot on the heels of the 2023 banking crisis — may cause consumers to ask the dreaded question: “What if my bank fails?”

Here are a few things to keep in mind.

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Bank runs are 'very rare'

While any fragility in the U.S. banking system is concerning, a bank run is “very, very rare,” Joseph Maugeri, CFP, Managing Director of Corporate Relations at CFP Board, told Moneywise during the banking crisis in spring 2023.

“Customers rarely lose money,” he said. “It's the investors or bondholders that are normally hurt the most in these kinds of situations.”

Panic can cause people to make poor decisions, Maugeri added, pointing to the SVB collapse as a prime example.

“Many customers making quick decisions are what caused the bank run at SVB,” he said. “It was the panic that caused the crisis. Without the run on the bank, it would probably still be solvent at this point.”

If you’re concerned about the health of your bank, Maugeri suggests seeking the help of a financial adviser who can drown out the noise and explain your unique situation along with the options you have available to you.

Keep in mind that nearly all U.S. banks carry Federal Deposit Insurance Corporation (FDIC) coverage for their depositors. This would protect you from financial loss in the worst-case scenario of a bank run.

Typically, deposits are protected up to $250,000 per depositor, per insured bank, per ownership category. This means a joint account with your spouse, for example, would be covered up to $500,000.

“FDIC insurance is something you should have full confidence in,” Maugeri said. “I don't believe there's ever been a case where the FDIC has not paid the insurance for banks.”

If you’re concerned about the stability of the U.S. banking system, you could always spread your money between different insured banks, but Maugeri stressed that “in most cases, your money is probably safe.”

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.


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