New York Community Bank, a mid-sized financial institution under pressure over real estate lending and internal controls, on Wednesday secured more than $1 billion in emergency cash, added former Treasury Secretary Steven Mnuchin to its board of directors, and appointed former Treasury Secretary Steven Mnuchin to its board of directors. He announced comprehensive reforms, including: This is the third CEO in the past month.
The deal is an attempt to turn around the bank, which has suffered shock after shock this year, and has attracted the attention of regulators in Washington who want to avoid another banking crisis on the eve of the one-year anniversary of the Silicon Valley bank’s collapse.
The more than $1 billion investment includes cash from Mnuchin’s private equity firm Liberty Strategic Capital and Kenneth Griffin’s Citadel Global Equities, among others.
The bank’s new chief executive, Joseph Otting, has worked closely with Mnuchin in the past. He ran OneWest Bank, then owned by Mnuchin, for five years. He also oversaw the Office of the Comptroller of the Currency, one of the banking industry’s main regulators, during the Trump administration.
Otting is a controversial figure in government, with feuds with other regulators and critics saying his proposals could break rules requiring banks to invest in poor areas and lend to low-income people. This angered the family.
New York Community Bank’s troubles began when the bank posted a $240 million loss in its most recent financial report in January, much of it related to investments in apartments and office buildings. Shocking analysts and investors, the stock price plummeted.
Just last week, the company replaced its CEO after disclosing billions of dollars in additional writedowns dating back to 2008, and questioned whether previous years’ worth of financial disclosures were accurate. He announced that he would investigate. Several credit rating agencies also downgraded the bank’s ratings.
The Long Island-based lender, which operates more than 400 branches including Flagstar Bank, has since acquired most of the assets of Signature Bank, another bank that collapsed in the banking crisis last March. , has grown rapidly over the past year.
Thomas R. Cangemi, who led NYCB’s signature asset acquisitions as chief executive until he resigned last month, publicly blamed the company’s recent woes on rapidly growing pressures. He said he was forced to follow regulations that he did not follow as a small bank.
Mnuchin, the Trump administration official, said in a statement that while he was “mindful of the bank’s credit risk profile,” he believed NYCB had “a solid foundation for future growth.”
It remains to be seen whether this move will work. The bank’s stock price plunged early Wednesday after the Wall Street Journal reported that it was looking to raise capital. The New York Stock Exchange then halted trading in the stock, but when trading resumed after the bank’s overhaul was announced, NYCB stock soared, before falling flat for the day.
It is still down nearly 70% this year.
As of last month, NYCB had $83 billion in deposits and more than $100 billion in total assets. Flagstar is one of the nation’s largest mortgage servicers, and the bank’s fortunes are relatively closely tied to the fortunes of the housing market.
