The Long Island-based bank was under more pressure after rating agencies Fitch and Moody’s downgraded its debt ratings on March 1. This followed the company’s disclosure of internal control deficiencies and a $2.4 billion goodwill impairment.
DiNello said in a statement that the investment is “a positive endorsement of the turnaround that is underway.” It also allows the bank to “enter this next chapter with a strong balance sheet and liquidity position supported by a diversified and retail-focused deposit base,” he added.
“In evaluating this investment, we were mindful of the Bank’s credit risk profile,” Mnuchin said in a prepared 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.”
On a call on February 7, management told analysts that the bank’s total liquidity was $37.3 billion, with a coverage ratio of 163%. Its capitalization ratio, measured by its common equity tier 1 (CET1), fell to 9.1% as of December 31, 2023, down from 9.59% in the third quarter.
Targeting a 10% CET1 ratio, the bank cut its quarterly dividend from $0.17 to $0.05 to assist with capital generation. Analysts at Keefe, Bruyette and Woods (KBW) estimate a mortgage servicing rights sale (MSR) could improve the bank’s CET1 ratio by 10 to 15 bp basis points.
NYCB became a large residential mortgage servicer after the acquisition of Flagstar. Its owned servicing portfolio reached $78 billion in unpaid principal value (UPB) at the end of 2023, with a carrying value of $1.1 billion, according to the KBW analysts.
In connection with the transaction, which is expected to close on March 11, NYCB will sell and issue shares of common stock at $2 and a series of convertible preferred stock with a conversion price of $2. NYCB stock was trading at $3.80 on Wednesday around 3 p.m. EST, up 18% compared to the previous closing.
Jefferies LLC is the exclusive financial advisor and sole placement agent to NYCB in the transaction.
