Why New York Community Bancorp Stock Slumped on Monday

New York Community Bancorp (NYCB -0.20%) stock suffered another fall on Monday, but the drop wasn’t as severe as in some recent trading sessions. In what was more a price correction than anything else, the struggling lender’s share price eased by 0.2% following a bit of a rally the preceding Friday.

The insider buy high didn’t last long

That Friday pop was due to insider stock buying, as several New York Community Bancorp executives and members of its board of directors purchased shares of the troubled bank.

Chief among these buys was a 50,000-share purchase by the board’s executive chairman, Alessandro DiNello. Insider buys were also made by fellow board member Peter Schoels and the company’s president of mortgage Lee M. Smith, among others. All told, regulatory documents filed that day indicate these individuals collectively spent $870,000 on the bank’s stock.

That level of insider buying bolstered confidence in New York Community Bancorp’s beaten-down stock price, but only temporarily. It doesn’t address the fundamental problems revealed in the bank’s latest set of quarterly results, which featured an unexpected net loss stemming from significant net charge-offs. These derived from a pair of relatively sizable loans on its books.

Serious concerns remain

Other moves by New York Community Bancorp and entities tracking it are weighing heavily on investor sentiment. In order to shore up its finances, the bank slashed its dividend by a steep 70%; meanwhile influential credit rating agency Moody’s downgraded its long-term rating on the company to Ba2, its “junk” designation.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moody’s. The Motley Fool has a disclosure policy.

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