New York Community Bank (NYCB) headquarters in Hicksville, New York, United States, on Thursday, February 1, 2024.
Bing Guan | Bloomberg | Getty Images
Community Bank of New York It said Thursday it lost 7% of its deposits in the turbulent month before announcing a capital infusion of more than $1 billion from investors led by former Treasury Secretary Steven Mnuchin's Liberty Strategy Capital.
The New York Commercial Bank said in an investor presentation tied to the capital increase that the bank had $77.2 billion in deposits as of March 5. That's down from the $83 billion it had as of February 5, the day before Moody's Investors Service downgraded the bank's credit rating to junk.
NYCB also said it would cut its quarterly dividend for the second time this year, to 1 cent per share from 5 cents, a decline of 80%. The bank paid a 17-cent dividend until it reported a surprise loss in the fourth quarter that started a negative news cycle for the Long Island-based lender.
Before announcing a crucial lifeline Wednesday from a group of private equity investors led by Mnuchin's Liberty Strategy Capital, NYCB stock was in disarray over concerns about the bank's loan book and deposit base. In just over a month, the bank has changed its CEO twice, seen two rounds of rating agency downgrades and announced deepening losses.
At its lows, NYCB stock fell below $2 per share on Wednesday, down more than 40%, before eventually rebounding and ending the day higher. Shares rose 10% in Thursday morning trading.
The capital infusion announced Wednesday raised hopes that the bank will now have enough time to resolve lingering questions about its exposure to multifamily apartment loans in the New York area, as well as “material weaknesses” around the loan review it uncovered. The bank last week.
Mnuchin told CNBC in an interview Thursday that he started looking at New York Commercial Bank “a long time ago.”
“The issue was really about perceived risk in the loans, and with $1 billion of capital on the balance sheet, it really strengthens the franchise and whatever problems there are in the loans we will be able to solve,” Mnuchin said. “Squawking in the street.”
He added: “I think there is a great opportunity to transform this bank into a very attractive regional commercial bank.”
Mnuchin said he had done “extensive diligence” on the New York Commercial Bank's loan portfolio and that the “biggest problem” he found were its New York office's loans, though he expected the bank to build reserves over time.
“I don’t see the New York office doing well or improving in the future,” Mnuchin said.
New CEO Joseph Otting, a former Comptroller of the Currency, told analysts on Thursday that the bank will look to boost its capital and liquidity levels and reduce its concentration in commercial real estate loans.
New York Commercial Bank will likely have to sell assets as well as build reserves and accept write-downs, according to Piper Sander analysts led by Mark Fitzgibbon.
While the investment news is generally good for regional banks, Wells Fargo analyst Mike Mayo warned that the cycle of commercial real estate losses was just beginning as loans come due this year and next, which will likely cause more problems. For lenders.
CNBC's Laia Neelakandan and Ritika Shah contributed to this report.
