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NYCB Shares Plunge 42% Before Rebound on $1 Billion Capital Raise

New York Community Bancorp (NYCB) made headlines on Wednesday as its stock experienced a dramatic plunge of 42% before staging a rebound following the announcement of a $1 billion capital raise. 

The bank also unveiled a leadership shake-up, featuring former Treasury Secretary Steven Mnuchin as one of the new board members.

In a press release issued on Wednesday afternoon, NYCB confirmed that it had struck a deal with several investment firms, including Liberty Strategic Capital (led by Mnuchin), Hudson Bay Capital, and Reverence Capital Partners, to raise over $1 billion in exchange for equity in the bank.

As part of the agreement, Mnuchin and Joseph Otting, former comptroller of the currency, would join the board of directors, with Otting taking over as CEO.

Following the announcement, NYCB’s stock experienced a sharp rebound, although trading remained highly volatile throughout the day. 

The shares briefly halted trading, surging nearly 30% before retracing some gains when trading resumed. 

Ultimately, the stock closed the day up over 7% after several additional halts.

NYCB Faces Challenging Year After Crypto Bank Acquisition


The capital raise and leadership changes come after NYCB faced a challenging start to the year. 

In late January, the bank disclosed a significant increase in its allowance for potential loan losses, primarily attributed to its exposure to commercial real estate. 

Moody’s Investors Service subsequently downgraded NYCB’s credit rating to junk status, and the bank appointed former Flagstar bank CEO Alessandro DiNello as executive chairman.

Last week, NYCB revealed the identification of material weaknesses in its internal loan review controls and announced DiNello’s brief tenure as CEO before transitioning to nonexecutive chairman, as stated in the press release on Wednesday.

The recent developments surrounding NYCB evoke memories of the struggles faced by regional banks such as Silicon Valley Bank, Signature Bank, and First Republic, which failed in the spring of 2023. 

Signature bank was one of the major crypto banks that offered fiat and banking services to crypto startups.

The lender was shut down on March 12, 2023, after depositors withdrew large sums of money on the heels of the collapse of Silicon Valley Bank (SVB).

At the time, NYCB, based in suburban New York, acquired a significant portion of Signature Bank’s assets, including deposits and loans, totaling nearly $13 billion.

US Banks Face Difficulty Amid Crypto Involvement


Last year, Heartland Tri-State Bank, a community bank in Elkhart, Kansas, was forced to shut down after its CEO, Shan Hanes, lost millions of dollars in a cryptocurrency scam. 

The Kansas Office of the State Bank Commissioner launched an investigation into the bank and declared it insolvent on July 28.

The Federal Deposit Insurance Corp. (FDIC), which was appointed as the bank’s receiver, has estimated a loss of $54 million from its insurance fund to protect depositors. 

The collapse of Heartland came as four major US lenders failed last year, including Silvergate BankSignature BankSilicon Valley Bank, and First Republic Bank.

Among these banks, the failure of Silvergate and Signature was partly related to the 2022 crypto meltdown. 

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