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$4,165,000,000 in Deposit Flight Hits New York Bank As Federal Reserve Chair Jerome Powell Warns More Lenders Will Collapse

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$4,165,000,000 in Deposit Flight Hits New York Bank As Federal Reserve Chair Jerome Powell Warns More Lenders Will Collapse

A New York-based bank is witnessing the exodus of billions of dollars in deposits amid an industry-wide warning from Fed Chair Jerome Powell.

New York Community Bank’s (NYCB) new earnings report shows total deposits fell from $81.365 billion at the end of start of the year to $77.2 billion on March 6th – a drop of $4.165 billion in less than three months.

NYCB’s declining deposits come amid concerns about the bank’s commercial real estate exposure and its overall balance sheet after the firm’s acquisition of a majority of Signature Bank after its failure a year ago.

The bank’s declining deposit data comes as Powell warns that more bank failures are on the way.

Speaking before the House Financial Services Committee, Powell says that small and medium-sized US banks are particularly vulnerable due to their exposure to the struggling commercial real estate market.

“We have identified the banks that have high commercial real estate concentrations, particularly office and retail and other ones that have been affected a lot. We identify them and we are in dialogue with them around, ‘Do you have your arms around this problem. Do you have enough capital? Do you have enough liquidity? Do you have a plan? You’re going to take losses here. Are you being truthful with yourself and with your owners?’

And so we’ve been working with them. For some time we’ve been doing that. This is a problem that we’ll be working on for years more, I’m sure.

There will be bank failures, but this is not the big banks. If you look at the very big banks, it is not a first-order issue for any of the very large banks. It’s more smaller and medium-sized banks that have these issues. We’re working with them, we’re getting through it. I think it’s manageable is the word I would use, but it’s a very active thing for us and the other regulators and it will be for some time.”

Citing data from real estate intelligence firm Trepp, Reuters reports that NYCB’s commercial real estate (CRE) concentration ratio is hovering at 477% as of Q3 2023.

Trepp notes that a bank’s CRE concentration ratio shows how much of its loan portfolio is made up of commercial and multifamily mortgages as well as construction and land loans. Says Trepp,

“Banks with high levels of CRE concentration may face challenges, as they endure significant losses if borrowers are unable to make their scheduled loan payments.”

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