Swallowing Signature’s assets made sense for NYCB, since the two banks operated in many of the same markets. But the Long Island bank was also still integrating new and old assets from its acquisition of Flagstar, one of the country’s largest residential mortgage servicers.
At the same time, the real estate market was beginning to show cracks resulting from the Federal Reserve’s multiple rate increases and the postpandemic drop in office occupancy. That put much of Signature’s portfolio, containing older loans made in a different economic environment, at risk.
Some of those loans may need to be refinanced at interest rates that are higher than they were earlier, and others may simply need to be written off as losses. NYCB cut its dividend last week to preserve cash.
“Should they have known that was coming? Yes,” said Todd Baker, a banking and finance expert who is a senior fellow at the Richman Center at Columbia University. “It feels clear to me that they really didn’t know how fast they were going to have to adjust. The regulators, having been burned once, are coming down like a ton of bricks.”
Representatives for the F.D.I.C. and the Office of the Comptroller of the Currency, another banking regulator, declined to comment. A representative of the Fed did not immediately respond to a request for comment.