We are approaching almost exactly the anniversary of the crisis that brought down several mid-sized banks, and the troubles of another banking giant are once again drawing unwanted attention to the industry. What is it?

New York Community Bancorp $NYCB is trying to quell concerns about its financial stability after the bank's stock plunged a week ago when the company posted poor quarterly results and cut its dividend to shareholders.

NYCB posted a net loss of $252 million in the latest quarter after earning $207 million in the third quarter and $172 million a year ago. Interest income fell 4% from the previous quarter to $1.45 billion, while interest expense rose 12% from the third quarter to $707 million.

This, along with the bank's 790% provision for loan losses, caused net interest income after provisions to decline 77% quarter-over-quarter. As a result, the bank cut its quarterly dividend to 5 cents per share, a reduction of more than 70%.

This rapid decline in $NYCB' s results and share price comes less than a year after the collapse of Silicon Valley Bank (SVB) sparked a regional banking crisis that shook the entire industry. Last year also saw First Republic become the largest U.S. bank to fail since 2008.

What is the situation at NYCB?

New York Community Bancorp has grown significantly over the past year, with assets surpassing the $100 billion mark after it took over the failed Signature Bank last spring in an auction orchestrated by federal regulators.

The major shock for New York Community Bancorp came with its admission that the value of its real estate loans had plummeted, prompting it to cut its dividend and put up half a billion dollars to protect against future losses. In its annual report, the bank identified a pair of loans - one related to an office complex and the other for a "cooperative apartment building" - that were responsible for losses of up to $185 million.

Bank officials, who did not respond to requests for comment, further stoked concerns by deflecting analysts' questions about their expectations for future earnings. The bank's shares fell nearly 40 percent after the results were released and have continued to fall since, dropping 11 percent on Monday and more than 20 percent on Tuesday.

Moody's therefore downgraded the bank's rating to junk later on Tuesday, citing "multifaceted financial, risk and governance challenges" facing the bank.

Could this be another area "contagion" of the sector?

A wide range of other banks, including commercial banks and private banks, could also face losses associated with commercial real estate loans, many of which were made before the shift to telecommuting and hybrid schemes during and after the pandemic, putting pressure on office owners and driving down the value of their buildings.

Major banks in the United States, such as JPMorgan Chase and Citigroup, have been putting money aside for months to hedge against potential losses on real estate. These large banks are typically considered more able to withstand a downturn because of their diverse base of borrowers and depositors. The stock prices of the largest banks have held up better than those of smaller banks recently, and JPM announced Tuesday that it will open 500 more branches over the next three years, which has greatly reassured investors.

Jerome Powell, chairman of the Federal Reserve, said during an interview on "60 Minutes" that he considers a banking crisis caused by real estate unlikely. He said that some smaller and regional banks are a "challenge" but that the U.S. central bank is working with them.

How do investors feel about the bank?

While retail investors dropped NYCB stock like a hot potato, it is interesting to note that many insiders bought the stock. However, they may now regret that decision as New York Community Bancorp stock has lost nearly 40% in the last 5 days.

It is bizarre to see that NYCB stock is now technically trading in penny-stock territory as it is below the $5 level. This was almost unimaginable at the end of 2023 when NYCB stock was comfortably settled around $10.

However, the falls of Silicon Valley Bank, Signature Bank and First Republic Bank were also very unexpected. That's why it's hard to compare New York Community Bancorp to these other regional banks, because the circumstances are quite different.

For Signature Bank and others that failed last year, the main problem centered on excessive investments in cryptocurrencies and/or Treasuries. When cryptocurrency and bond prices fell, Signature Bank and several other regional banks failed to "pass the stress test" so to speak.

WILL REGULATORS GET INVOLVED?

Axios (a news site) notes that regulators would be right to take over NYCB this weekend, but speculation is that they are unlikely to be inclined to do so because they will want to avoid a situation similar to the one we experienced last year with Silicon Valley Bank.