NEW YORK — Embattled New York Community Bancorp announced a lifeline of more than $1 billion from a group of investors on Wednesday, after seeing its stock plunge by more than 80% so far this year.
The deal will bring four new directors to the bank’s board, including Steven Mnuchin, the former U.S. Treasury secretary under President Donald Trump. Joseph Otting, a former comptroller of the currency, will become the bank’s CEO.
Under the deal, which the bank said still needs “finalization of definitive documentation” and regulatory approvals, the bank would get investments of $450 million from Mnuchin’s Liberty Strategic Capital, $250 million from Hudson Bay Capital and $200 million from Reverence Capital. Cash from other institutional investors and some of the bank’s managers will take the total over $1 billion, the banks aid.
The investors will receive stock in the company valued at $2 per share, along with convertible preferred stock that pays dividends every three months.
The stock had tumbled 42.2% to $1.86 earlier Wednesday, before its trading was halted at 12:34 p.m. Eastern time, pending news. A report from The Wall Street Journal on Wednesday said the lender is considering raising cash through the sale of stock in order to shore up confidence in it.
Trading in NYCB’s stock remained halted, as of 2:30 p.m. Eastern time.
NYCB was a relatively unknown bank until last year, when it bought the Signature Bank’s assets at auction on March 19 for $2.7 billion. The resulting increase in its size meant it had to face increased regulatory scrutiny. That’s been one of the challenges for the bank, which is trying to reassure depositors and investors that it can digest the purchase of Signature Bank and its struggling real estate portfolio.
Pressure rose further after rating agencies cut NYCB’s credit rating.
NYCB said this year that found significant weakness in how it internally reviews loans, caused by ineffective oversight, risk assessment and monitoring activities. Many of those issues are being tied to Signature, which put the bank into a new regulatory class with stricter oversight. It also replaced its longtime chief executive officer.
Several financial analysts still say NYCB’s troubles appear unique to the bank and downplayed the risk of contagion in the banking sector.
“It’s very interesting that they ended up being an amalgamation of a few bank acquisitions that seems to just not worked out,” said Chris Caulfield, a banking industry consultant and analyst with West Monroe, who focuses on mid sized banks.
But weakness in commercial real estate is a looming challenge for all kinds of banks, as changes in how people work following the pandemic leave many office buildings with more vacancies.
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AP Business Writer Ken Sweet contributed.
