NYCB Stock Crash Stokes Fears of Crisis, Regional Bank ETF Fallout

One year after the 2023 regional bank crisis, NYCB spotlights lingering risk.

Research Lead
Reviewed by: Staff
Edited by: Ron Day

The regional bank crisis of 2023 hit capital markets almost exactly one year ago, as Silicon Valley Bank (SVB) failed, and regional bank ETFs dropped 30% in the first two weeks of March. 

Wednesday’s intraday price crash of over 40% for Long Island-based New York Community Bank, Inc. (NYCB) was a stark reminder that weakness in the regional bank sector still lingers. 

Investors are wise to revisit what caused the 2023 crisis, how markets reacted and how it impacted regional bank ETFs, for a deeper understanding of what risks remain and if such a crisis can happen again in 2024. 

What Happened in the 2023 Regional Bank Crisis? 

The 2023 regional bank crisis was a series of bank failures and bankruptcies that took place in the early months of 2023 with the largest impact on regional bank ETFs occurring in March. Here's a summary of the key events and contributing factors: 

  • March 2023: Silicon Valley Bank (SVB), a California bank heavily involved with tech startups, became the first major casualty. Facing a $1.8 billion loss and a credit downgrade, it experienced a bank run as high-net-worth customers withdrew billions of dollars, leading to its collapse. 
  • Following SVB's failure: Other regional banks like Signature Bank and First Republic Bank also faced difficulties. Their share prices dropped significantly, and concerns about the health of the regional banking sector mounted. 
  • Federal intervention: The Federal Deposit Insurance Corporation (FDIC) stepped in to handle the failed banks, protecting insured deposits and facilitating their sale or merger with other institutions. 
  • Regional bank ETF impact: Exchange-traded funds investing in regional banks fell by nearly 30% in the first two weeks of March 2023, as measured by the SPDR S&P Regional Bank ETF (KRE).  

How Higher Interest Rates Impact Commercial Real Estate

The underlying weaknesses that caused the 2023 regional bank crisis linger in 2024. Today’s higher interest rate environment and lower occupancy rates pressure commercial real estate companies and the regional banks that lend money to them. Here’s a summary of key factors still present in 2024 that may negatively impact regional banks: 

  • Higher rates and borrowing costs: The Federal Reserve began raising interest rates in late 2022 to combat inflation. This increase in borrowing costs squeezed profit margins for banks, as they earn interest on loans but pay interest on deposits. 
  • Vulnerability of regional banks: Compared to larger national banks, many regional banks rely more heavily on short-term funding and have greater exposure to specific sectors like commercial real estate. This makes them more vulnerable to sudden changes in economic conditions. 
  • Commercial real estate weakness: The commercial real estate market was facing headwinds due to factors like remote work trends and oversupply in certain areas. This led to loan defaults and increased risk exposure for banks heavily invested in this sector. Occupancy rates for commercial real estate are at record lows now. 
  • Asset and liability duration mismatch: Some regional banks had a mismatch between the duration of their assets and liabilities. They held long-term assets (loans) funded by short-term liabilities (deposits). When interest rates rose, the cost of funding (paying interest on deposits) increased quicker than the income from existing loans (fixed interest rates), leading to losses. 

What Caused the NYCB Stock Crash?

On March 6, the share price of New York Community Bancorp (NYCB) experienced a significant plunge. Here's a breakdown of the events and the turnaround: 

  • Early trading slump: During the trading day on March 6th, NYCB's stock price started with a sharp decline, falling by as much as 42% to its intraday low. This steep drop came amid financial media reports that the struggling regional bank was seeking a cash infusion from external investors to bolster its balance sheet. 
  • Cause for concern: This news raised concerns about NYCB's financial health. The bank had already revealed some troubling signs earlier in 2024, including a disclosure of "material weaknesses" in its internal loan review controls, reporting a significant loss in the fourth quarter of 2023, and appointing a new CEO after the previous one stepped down. 
  • Market response: The combination of these factors, coupled with the news of seeking a cash infusion, triggered a sell-off by investors, leading to the significant drop in the stock price. 
  • Unexpected reversal: However, the story took a surprising turn later in the day. NYCB announced a deal with an investor group, led by investment banker and former Treasury Secretary Steven Mnuchin’s firm, for a capital infusion. This news seemingly restored some confidence in the market, and NYCB's stock price rebounded significantly. By the end of the trading day, it had closed over 7% higher than the opening price. 
  • Regional bank ETF impact: The KRE ETF declined only about 3% on March 6, as much of the declines were isolated to NYCB stock, which only represents only 1.3% of the fund’s portfolio.  

Bottom Line on Regional Bank ETFs in 2024

The March 6 stock crash and recovery for NYCB was a reminder to investors that the regional bank sector weakness exposed in 2023 still lingers. Commercial real estate properties face tremendous economic headwinds, including high interest rates and low occupancy rates, increasing risk of default on loans with regional banks., 

The 2023 regional bank crisis and the 2024 NYCB stock crash highlighted the interconnectedness of the financial system and the potential vulnerabilities of regional institutions during periods of higher rates and slowing economic activity. It also underscored the importance of risk management and diversification for banks of all sizes and the ETFs that hold them.  

Kent Thune is Research Lead for, focusing on educational content, thought leadership, content management and search engine optimization. Before joining, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 


Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 


Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.