NYCB lost 7% of deposits in one month, highlighting challenges of new rescue

New York Community Bancorp (NYCB) said Thursday it lost 7% of its deposits over the last month, highlighting the challenges facing a new investor group led by Steve Mnuchin that infused $1 billion into the troubled lender earlier this week.

The bank disclosed in an investor presentation that its total deposits dropped to $77.2 billion as of March 5, compared with $83 billion that it had on Feb. 5.

Roughly 80% of its deposits are currently backstopped by insurance from the Federal Deposit Insurance Corporation, while 20% are uninsured. NYCB lost $7.8 billion in uninsured deposits over the last month.

The disclosure came one day after NYCB made a dramatic attempt to regain investor confidence by announcing a new CEO and a capital raise from a group led by Mnuchin, the former US Treasury Secretary and Goldman Sachs partner.

Its stock jumped after the market open Thursday, up more than 13%.

The firms that lined up to provide the infusion include Liberty Strategic Capital, a firm founded by Mnuchin in 2021, as well as Hudson Bay Capital, Reverence Capital Partners, and Citadel Global Equities.

They and some bank managers will purchase common and convertible-preferred stock, effectively taking control of the Hicksville, N.Y.-based company.

The deal also comes with a new change at the top.

Former Treasury Secretary Steven Mnuchin. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images) (Tom Williams via Getty Images)

Former Comptroller of the Currency Joseph Otting will become NYCB’s new CEO, the third person to hold that title in just the last few weeks.

He replaces Alessandro DiNello, who had been acting as the bank’s true boss since Feb. 6 and officially became CEO last week following the exit of longtime CEO Thomas Cangemi. The transaction is scheduled to close by March 11 and is still subject to regulatory approvals.

Otting and DiNello held a call with analysts Thursday to explain their plans for the bank going forward.

Otting said the company’s dividend will be reduced to 1 cent from 5 cents, after having been reduced from 17 cents earlier this year.

“We’ll continue to enhance our capital position and liquidity profile, as well as our credit management practices will evaluate opportunities to reduce commercial real estate concentration,” said Otting.

DiNello told analysts last Friday — which followed a disclosure of weaknesses in its internal controls and a tenfold increase in its fourth quarter loss to $2.7 billion — was “not a great day” for deposits, but that things improved Monday and Tuesday of this week.

FILE PHOTO: FILE PHOTO: A man walks past a closed branch of the New York Community Bank in New York City, U.S., January 31, 2024. REUTERS/Mike Segar/File Photo

A branch of the New York Community Bank in New York City. REUTERS/Mike Segar/File Photo (Reuters / Reuters)

He emphasized that deposits are down only 5% compared with the level at the beginning of the year and “I think that’s unbelievably outstanding performance by our team” given the turmoil surrounding NYCB.

He also told one analyst who asked about the costs NYCB is paying for deposits that “we didn’t do anything crazy” or offer 6% CDs “to make the numbers look good.”

The executives were asked if they were sure the bank wouldn’t need to raise more capital. Otting said the bank and its board need “a little bit of time” to come up with “the vision of the way we see the future of the bank.”

“We’re gonna work hard over the next 30 days to be able to put that together” so it can be shared when NYCB reports first-quarter earnings.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.

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