New York Community Bank (NYCB) announced on Wednesday that it has successfully secured $1 billion in funding from investors, a move that includes prominent names such as former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital. The bank also disclosed the appointment of Joseph Otting, former Comptroller of the Currency, as its new CEO.
Facing recent pressures stemming from financial performance concerns, NYCB revealed that the investment consortium comprises Liberty Strategic Capital, Hudson Bay Capital, Reverence Capital Partners, Citadel Global Equities, other institutional investors, and select members of the bank’s management team.
The regional bank has grappled with challenges since reporting an unexpected fourth-quarter loss on January 31, sparking investor apprehensions regarding its exposure to the troubled commercial real estate (CRE) sector. To bolster its financial position in response to regulatory requirements, NYCB slashed its quarterly dividend by 70%. This move was prompted by the bank’s acquisitions of Flagstar Bank in 2022 and Signature Bank’s assets last year, which pushed its asset total over the $100 billion threshold.
Additionally, NYCB acknowledged “material weaknesses” in its internal controls, specifically relating to internal loan review processes, as outlined in a recent filing with the Securities and Exchange Commission.
Steven Mnuchin, representing Liberty Strategic Capital, emphasized the importance of addressing the bank’s credit risk profile. Mnuchin stated, “With the over $1 billion of capital invested in the bank, we believe we now have sufficient capital should reserves need to be increased in the future to be consistent with or above the coverage ratio of NYCB’s large bank peers.”
The breakdown of the investment includes $450 million from Liberty Strategic, $250 million from Hudson Bay, and $200 million from Reverence Capital. Jefferies served as the exclusive financial adviser and sole placement agent for NYCB in securing this funding.
In response to challenges in the CRE sector, NYCB signaled its intention to mitigate exposure, with analysts from Wedbush noting potential reserve building related to the bank’s New York City rent-regulated multifamily properties.
The appointment of Joseph Otting as CEO marks a significant leadership change for NYCB, with Alessandro DiNello transitioning to the role of non-executive chair.
Following the announcement, NYCB’s stock experienced a notable surge of over 8% during Wednesday’s trading session. This positive momentum continued in after-hours trading, with the stock climbing approximately 1.3% to $3.50 per share as of Wednesday evening.
This development comes after NYCB’s stock had earlier dipped to $1.76 per share during early afternoon trading, marking its lowest price since 1995.
