New York Community Bancorp has successfully closed a $1 billion capital infusion deal with an investor group, as announced on Monday. The deal was agreed upon the previous week and includes plans for a one-for-three reverse stock split of its common stock to shareholders.
Joseph Otting, former Comptroller of the Currency in the Trump administration, was appointed as NYCB’s chief executive as part of this capital injection, which involved investment from notable figures such as former U.S. Treasury Secretary Steven Mnuchin. Additionally, the bank has added Otting, Mnuchin, Milton Berlinski, and Allen Puwalski as new directors to the board, reducing the board’s strength to 10 members.
Following this news, NYCB’s shares saw a significant increase of 5.8% to $3.44 in extended trading on Monday. The bank also revealed its intention to outline a new business plan in April after experiencing a surprise quarterly loss and a 70% reduction in its dividend in January. The bank faced further challenges when it reported a “material weakness” in internal controls and revised its loss significantly higher due to a goodwill impairment charge.
The equity investment involved various investment firms, institutional investors, and members of NYCB’s management, including Hudson Bay Capital, Reverence Capital Partners, Citadel Global Equities, among others. NYCB plans to raise funds through stocks and warrants, with investors expected to own approximately 39.6% of the company on a fully-diluted basis after the latest fundraising.
While the bank aims for a turnaround, concerns have been raised by several Wall Street analysts regarding the length of time it may take for NYCB to recover, particularly as profits continue to be impacted by efforts to bolster reserves for potential bad loans in its commercial real estate portfolio.