New York Community Bancorp Stock Recovers On $1-Billion Financing Deal: Regional Bank Names New CEO, Former Treasury Secretary Mnuchin Joins Board (UPDATED)

Editor’s Note: This article has been updated with details on New York Community Bancorp’s recent equity investment, board appointments, and CEO transition. The article was further updated at 5:15 p.m. ET with a new headline, reorganized information and updated price action for the stock.

New York Community Bancorp Inc NYCB shares ended a volatile session higher Wednesday after the regional bank announced an equity investment of more than $1 billion from Liberty Strategic Capital, Hudson Bay Capital, Reverence Capital Partners, Citadel Securities, other institutional investors and some members of New York Community Bancorp’s management team.

What Happened: Liberty Strategic Capital is expected to invest $450 million, Hudson Bay will invest $250 million and Reverence Capital will invest $200 million as part of the transaction.  

New York Community Bancorp will sell and issue shares of its common stock to the new investors at a price of $2 per share, as well as a series of convertible preferred stock for an aggregate investment amount of $1.05 billion. The transaction is expected to close on or around March 11.

In connection with the financing announcement, New York Community Bancorp said it will add four new directors to its board, including former Treasury Secretary Steven Mnuchin, former Comptroller of the Currency Joseph Otting, Hudson Bay’s Allen Puwalski and Reverence Capital’s Milton Berlinski.

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

The company also named Otting as its new CEO, replacing Alessandro (Sandro) DiNello, who was appointed CEO and president last week after former CEO Thomas Cangemi stepped down from this role. DiNello has been named non-executive chairman.

Why It’s Important: New York Community Bancorp shares were halted several times in early trading Wednesday after The Wall Street Journal reported that the company was seeking capital to shore up confidence in the regional bank.

People familiar with the matter reportedly said New York Community Bancorp had tasked bankers with gauging investor interest in potentially buying stock in the company.

Concerns about New York Community Bancorp began circling at the end of January after the company reported weak financial results, reduced its quarterly dividend and sparked fears over potential commercial real estate loan losses.

The company noted that it was still adjusting to the demands of being a large bank after it was selected by the FDIC to purchase certain assets and liabilities of Signature Bank following its collapse. Signature Bank was one of three U.S. banks that collapsed last year as part of a banking crisis that was spurred by a rapid increase in interest rates.

The selling pressure on New York Community Bancorp shares picked up in February after Moody's downgraded all of the company’s long-term issuer ratings and some short-term issuer ratings to junk. Several analysts also started downgrading the stock and slashing price targets.

Last week, the selloff in New York Community Bancorp shares accelerated after the company identified material weakness in internal controls and replaced its CEO and director of the board.

New York Community Bancorp shares are now down about 80% since the start of the year. The company’s 2024 annual meeting of shareholders is scheduled for May 17.

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NYCB Price Action: New York Community Bancorp shares were halted several times on Wednesday. The stock closed the regular session 7.45% higher at $3.46 and was gaining an additional 5.78% in after-hours trading, according to Benzinga Pro.

Photo: Shutterstock.