Insiders Are Buying New York Community Bancorp Stock: Should They Do It?
It was less than a year ago that local financial institution New York Community Bancorp (NYSE:NYCB) purchased Signature Bank’s assets. Surprisingly, New York Community Bancorp is in a completely different position today, as it may be at risk of failure.
On the other hand, NYCB’s stock price has been cut in half, and there may be a chance for a comeback here. Is it possible that all the bad news about New York Community Bancorp has already been factored into the stock price?
You can also get information about recent insider buying activity by keeping your ear to the ground. The risks are high and the future is uncertain. But New York Community Bancorp may have a turnaround story that strong investors can take to the bank.
Dividend Ruin and Write-off Wreck
January 31, 2023 will be a “day in infamy” (to borrow a phrase from a famous speech) for the New York Community Bancorp. You might not know it from the company’s fourth quarter and full year 2023 financial press release. .
In its press release, New York Community Bancorp touted “decisive actions” and “significant achievements.” Certainly, using strong adjectives and all capital letters can change almost anything in a positive way.
Focusing on financial results, New York Community Bancorp reported full-year net income available to common stockholders of $576 million in 2023, down slightly from $603 million in 2022. But that’s not what shocked Wall Street.
In the fourth quarter, New York Community Bancorp recorded some non-performing loans, labeled in a press release as “credit impairment” and “charge-off” provisions. As a result, the community bank posted a surprising net loss of $193 million in the fourth quarter of 2023. In contrast, the previous quarter saw net income of $266 million.
If that wasn’t bad enough, New York Community Bancorp cut its quarterly dividend per share from 17 cents to just 5 cents.
However, CEO Thomas Cangemi reassured shareholders, saying, “We recognize the importance and impact of the dividend cut on all shareholders and this was not done lightly.”
Of course, the CEO’s statement did not calm investors’ astonishment. NYCB stock lost more than 40% of its value that terrible day as rumors spread that another epidemic had struck local banks. Moody’s then downgraded New York Community Bancorp’s credit rating to “junk” status.
Here’s the billion dollar question. Value investors should buy when there is blood on the streets. Yes? This old principle is being tested in practice with NYCB stock in 2024.
For what it’s worth, New York Community Bancorp appointed Alessandro DiNello as chairman and promised to strengthen “all aspects of the company” to build a “fortress balance sheet.” DiNello also signaled his intention to shrink New York Community Bancorp’s balance sheet through loan sales.
New York Community Bancorp even has analysts who are reliably optimistic. Piper Sandler’s Mark Fitzgibbon reiterated a buy rating on NYCB stock.
In fact, his firm assigned an $8 price target on the stock, writing, “(W)e believe it is very cheap and the risk/reward from here is very attractive.”
Giving a buy rating to a stock is one thing. Actually purchasing it is another thing entirely. So it’s a notable act of confidence for New York Community Bancorp’s insiders to purchase company stock amid apparent turmoil. Insider buying activity as reported by Barron’s includes:
- DiNello: 50,000 shares, valued at $209,480
- Cangemi: 11,310 shares, valued at $49,900
- Director Peter Schoels: 100,000 shares, valued at $414,750
- Lee M. Smith, senior vice president and president of mortgages: 25,000 shares, valued at $101,250.
- Reginald E. Davis, senior vice president and president of the bank: 1,200 shares, valued at $4,920.
- Julie Signorille-Browne, Executive Vice President and Chief Operating Officer: 2,000 shares, valued at $9,500.
- Director David Treadwell: 15,000 shares, valued at $62,550.
- Director Jennifer R. Whip: 5,100 shares, valued at $21,267.
I’m sure you get the idea by now. Janney Montgomery Scott analyst Christopher Marinac reached the same conclusion. “The current insider buying is a very positive development. This is exactly what investors wanted to see. “It is a new promise: ‘I will eat food I cook myself.’”
So there may indeed be some bloody moments that you can capture with NYCB stock. Keep in mind that New York Community Bancorp, regardless of insiders’ apparent confidence, could one day join Signature Bank in the dustbin of financial history.
disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.
