It’s been almost exactly a 12 months since talk of regional-bank contagion hit the headlines, and now it’s back with a vengeance. Perhaps it’s only a coincidence, however the implications and/or opportunities could also be much more far-reaching this time around.

Last 12 months, the targets of heated discussion were Silicon Valley Bank, Signature Bank and First Republic Bank. In early 2024, it’s Latest York Community Bancorp (NYSE:NYCB) that needs a bailout. Now after a pointy drop-off in NYCB stock, some investors could also be wondering whether that is time to purchase the dip.

From savior to potential failure

There’s a twist of irony here, as Latest York Community Bancorp was once considered Signature Bank’s potential savior. Nonetheless, the tables have been turned, and now it’s Latest York Community Bancorp that needs a rescue mission. The corporate’s fourth-quarter financial press release revealed a shocking net lack of $193 million, versus net income of $266 million within the prior quarter.

Moreover, Latest York Community Bancorp cut its per-share quarterly dividend from 17 cents to only 5 cents. Soon afterwards, Moody’s lowered the bank’s credit standing to “junk” status.

While retail investors dropped NYCB stock like a hot potato, interestingly enough, numerous insiders bought up shares. They might regret that call now though, as Latest York Community Bancorp shares took an extra 25% haircut on March 1.

It’s bizarre to see NYCB stock technically trading in penny-stock territory now, because it’s below the $5 level. This was almost unimaginable in late 2023, when NYCB shares sat comfortably at around $10.

Yet, the downfalls of Silicon Valley Bank, Signature Bank and First Republic Bank were also widely unexpected. Nonetheless, it’s hard to check Latest York Community Bancorp with those other regional banks because the circumstances are quite different.

With Signature Bank and the others that failed last 12 months, the predominant issue centered around excessive investments in cryptocurrency and/or government bonds. When cryptocurrency and bond prices each fell, Signature Bank and a couple of other regional banks couldn’t “pass the stress test,” so to talk.

This jogs my memory of an old Warren Buffett quote about the way you’ll see who’s swimming naked when the tide goes out. Now it’s Latest York Community Bancorp that’s apparently swimming with none clothes on.

“Material weakness” points to deep trouble

Latest York Community Bancorp won’t have over-leveraged itself on cryptocurrency and/or government bonds like Signature Bank and the others did. Nonetheless, its current problems don’t appear to be easily fixable.

Here’s some language that should scare away any prospective buyers. Latest York Community Bancorp management identified “material weaknesses in the corporate’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities.”

Those words come directly from the bank itself, not from a reporter’s interpretation of management commentary. If that isn’t startling enough, Latest York Community Bancorp also disclosed that CEO Thomas Cangemi is leaving, to get replaced by Executive Chairman Alessandro DiNello.

DiNello’s appointment doesn’t come without controversy. In a Feb. 25 letter, Latest York Community Bancorp Director Hanif “Wally” Dahya declared that he “didn’t support the proposed appointment” of DiNello because the bank’s chief executive.

As if that’s not enough, a filing reveals a latest (or no less than, newly disclosed) $2.4 billion “goodwill” impairment charge for Latest York Community Bancorp. Because the old saying goes, that’s a “wonderful how-do-you-do.”

It’s too soon to definitively declare that Latest York Community Bancorp will likely be the subsequent Signature Bank. Yet, the signs of trouble are difficult to disregard.

No less than investors can take some comfort in Wedbush analyst David Chiaverini’s suggestion that the bank’s troubles won’t metastasize into banking-sector contagion.

“NYCB’s problems are mostly idiosyncratic to itself due to its outsize exposure to rent-regulated multifamily loans,” Chiaverini assured investors.

That’s nice to listen to, but it surely shouldn’t quell investors’ concerns about Latest York Community Bancorp. On the very least, it’s going to take a while before DiNello can show his fitness as the corporate’s latest CEO.

Finally, keep in mind that a low share price isn’t the identical thing as an incredible value, and falling knives aren’t at all times meant to be caught. Thus, so long as the negative news keeps on coming for Latest York Community Bancorp, there’s no discernible reason to go on a dip-buying expedition with its stock.

Disclaimer: All investments involve risk. By no means should this text be taken as investment advice or constitute responsibility for investment gains or losses. The data on this report shouldn’t be relied upon for investment decisions. All investors must conduct their very own due diligence and seek the advice of their very own investment advisors in making trading decisions.