Embattled bank NYCB lands $1B investment from group including Mnuchin's firm

New York Community Bank (NYCB) on Wednesday said it raised $1 billion from investors including former Treasury Secretary Steven Mnuchin's Liberty Strategic Capital and named a former Comptroller of the Currency as its new CEO.

NYCB, which has been under pressure in recent weeks, said the investment group also included Hudson Bay Capital, Reverence Capital Partners, Citadel Global Equities, other institutional investors and certain members of the bank's management.

The regional bank has been under pressure since it posted a surprise fourth-quarter loss on Jan. 31 and investors worried about its exposure to the beleaguered commercial real estate (CRE) sector. 

It also cut its quarterly dividend by 70% to shore up its balance sheet to deal with more stringent regulations on banks with more than $100 billion in assets. The bank's acquisition of Flagstar Bank in 2022 and Signature Bank's assets last year pushed it over that threshold.

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Last week, the bank said in a filing with the Securities and Exchange Commission that it "identified material weaknesses in the Company's internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities."

"In evaluating this investment, we were mindful of the bank's credit risk profile," Mnuchin said in a statement. "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 bank said that Liberty Strategic is infusing it with $450 million, Hudson Bay $250 million and Reverence Capital $200 million. Jefferies was the exclusive financial adviser and sole placement agent for NYCB as it secured this investment.

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The lender has signaled it will look to reduce its exposure to the troubled CRE sector. Wedbush wrote in a note earlier this month that NYCB's review of internal controls "could lead to additional CRE-related reserve building, particularly related to the company's NYC rent-regulated multifamily exposure."

NYCB also named Joseph Otting, former Comptroller of the Currency, as its new CEO, replacing Alessandro DiNello, who will serve as the non-executive chair.

NYCB's stock rallied over 8% during Wednesday's trading session on the news. The rise continued in after-hours trading, where it rose about 1.3% to $3.50 a share as of Wednesday evening.

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This comes after the stock had slid to $1.76 a share during early afternoon trading – its lowest price since 1995.

Reuters contributed to this report.