New York Community Bancorp (NYCB) announced on Thursday that it would be getting more than $1 billion from investors to help stabilize the bank, including from a firm run by a former Trump administration Treasury secretary.

The bank will receive $450 million from Mnuchin Liberty Strategic Capital, headed by former Treasury Secretary Steven Mnuchin, as well as a $250 million and $200 million investment from Hudson Bay Capital and Reverence Capital, according to an announcement from the bank. NYCB posted a $252 million loss in the fourth quarter of 2023, sending its stock to the lowest level since 1997 and worrying investors about another potential crisis in the banking sector, accordingto CNN.

“In evaluating this investment, we were mindful of the Bank’s credit risk profile,” Mnuchin said in the announcement. “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.”

NYCB will also add four new directors to its board, including Mnuchin, former Comptroller of the Currency Joseph Otting, Allen Puwalski of Hudson Bay and Milton Berlinski at Reverence Capital, according to the announcement.

The infusion of cash comes just days after NYCB announced that Alessandro DiNello was taking over as president and CEO and that the current CEO, Thomas Cangemi, was stepping down. The bank also announced a slew of new members to the management team and a greater risk framework.

“We welcome the approach that Liberty and its partners took in its evaluation of the Bank and look forward to incorporating their insights going forward,” DiNello said in the announcement. “The strategic investment involving former Secretary Steven Mnuchin, former Comptroller Joseph Otting and Milton Berlinski, along with the other institutional investors is a positive endorsement of the turnaround that is underway and allows us to execute on our strategy from a position of strength. We enter this next chapter with a strong balance sheet and liquidity position supported by a diversified and retail focused deposit base.”

The banking sector experienced a crisis in early 2023 after Silicon Valley Bank (SVB) kicked off a string of sector failures after a bank run. First Republic and Signature banks followed SVB as nervous depositors pulled their cash, with the latter being acquired by NYCB.

Investors have been increasingly worried about small and midsized banks like NYCB triggering another bank crisis due to their outsized exposure to commercial real estate loans, which developers are struggling to pay due to high interest rates and low commercial space demand.

Will Kessler on March 6, 2024

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