New York Community Bank (NYCB) is the target of a class-action lawsuit alleging securities fraud.
The lawsuit comes after the bank acquired certain assets of Signature Bridge Bank on March 20, 2023, and reported a fourth quarter net loss of $252 million on Jan. 31, law firm Glancy Prongay & Murray LLP said in a Wednesday (Feb. 7) press release.
It was filed on behalf of those who acquired NYCB Securities between March 1, 2023, and Jan. 30 and suffered a loss on their investments, according to the release.
“The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations and prospects,” the release said.
NYCB did not immediately reply to PYMNTS’ request for comment.
The class action alleges that the defendants failed to disclose that NYCB was experiencing higher net charge-offs and deterioration in its office portfolio, that it was likely to incur higher loan losses, that it was likely to increase its allowance for credit losses, that its financial results would be adversely affected, that it would reduce its common dividend, and that defendants’ statements about the company’s business were materially misleading, according to the release.
NYCB announced Jan. 31 that it had suffered an unexpected loss and would make a dividend cut. Bank executives attributed the loss to a rise in expected loan losses, particularly from loans tied to office buildings.
In addition, NYCB CEO Thomas Cangemi said that the bank was cutting its dividend to comply with banking regulations, because its acquisition of Signature Bank pushed NYCB’s assets over $100 billion, triggering stricter capital requirements.
On Tuesday (Feb. 6), Moody’s Investment Services cut NYCB’s credit rating to “junk,” leading its shares to tumble 60%.
In its assessment, Moody’s said the bank is dealing with “multifaceted” financial risks and governance challenges, per a report by Bloomberg News. The group said it could take its rating even lower if conditions continue to decline.
NYCB responded Tuesday with a press release in which it reported updated financial information, as of Monday (Feb. 5), and Cangemi said that the bank had taken actions to fortify its balance sheet and strengthen its risk management processes.
“Despite the Moody’s ratings downgrade, our deposit ratings from Moody’s, Fitch and DBRS remain investment grade,” Cangemi said in the release.