New York Community Bancorp's
In documents filed ahead of a shareholder meeting, new CEO Joseph Otting acknowledged it will "take time and consistent results" to regain shareholders' trust.
Otting, a former Comptroller of the Currency, stepped into the job April 1. His installment as CEO was
As part of the deal, the $114-billion asset bank agreed to increase the number of shares it can issue to absorb its new investors. Though the capital infusion averted a more dire scenario, it massively dilutes existing shareholders' positions, and some changes require their approval at the upcoming annual meeting. The Long Island-based company's materials did not say when the meeting will take place, though it noted it will be virtual.
In a letter to shareholders, Otting wrote that the new team is doing everything it can to mitigate the hits New York Community has taken to its balance sheet recently, driven by stress in its
"We have a dedicated leadership team, a talented workforce, strong liquidity, and a clear vision for the future," Otting wrote. "I believe we will emerge from this challenging period a more resilient, successful bank with a more diverse, balanced business model and a stronger risk management framework."
New York Community, however, needs shareholder approval for a final rubber stamp on the deal because of the amount of stock it plans to issue.
The $1 billion and additional shares will boost capital levels, the company said, strengthening its position in the case of potential loan losses. While it's unclear what losses New York Community may take going forward, bolstering its protection is a salient advantage, since its troubles were set off
"That's why we raised capital, right?" DiNello said. "All the people that I've spoken to in the last month, the first question is always about credit. We want to put to bed the concern that we can't handle whatever that might be."
A chunk of the capital raise is happening through preferred shares, though the deal envisions converting them into common shares with shareholders' approval. The bank noted that doing so would increase the type of loss-absorbing cushion regulators like best: common equity. If the conversions occur, the bank's common equity tier 1 capital ratio would rise from 9.1% last year to 10.3%.
If shareholders don't sign off on the deal, the company warned of negative impacts to its capital ratios and said it would be saddled with high dividends to preferred shareholders. New York Community also said in its proxy that, if the investment doesn't win approval, the bank "would be severely limited in options should it need to raise capital."
Bank consultant Bert Ely said the proposals seem prudent for the convalescing bank, adding that the proposals represent "corporate cleanup" work to give New York Community more flexibility if future issues arise.
"What they're doing is preparing themselves for more pain," Ely said. "Now, whether that's going to be enough or not, who knows?"
He added that the actions also position the company better for a future acquisition.
Mnuchin and Otting reaped major gains the last time they partnered on a bank turnaround after the financial crisis. Mnuchin had led a group that bought IndyMac during a Federal Deposit Insurance Corp. auction. After installing Otting as CEO and rebranding the bank as OneWest, the two turned around the bank and sold it in 2015 to CIT Group.
The troubled Long Island-based lender laid out steps that it's taking to improve its loan-review process. The remediation efforts follow a massive loan provision last quarter, which led to a management shake-up and a $1 billion rescue led by former Treasury Secretary Steven Mnuchin.
While proposals related to the capital infusion make up the lion's share of the proxy, the company also addressed some other housekeeping items subject to approval.
The bank is also asking shareholders to reapprove the accounting firm KPMG as its auditor, a role it's held since 1993. New management has had to grapple with accounting-related questions and whether it had the proper controls in place for reporting financial metrics. The shortcomings
KPMG said in its most recent audit that New York Community's board of directors hadn't exercised enough oversight, which led to ineffective risk assessment and monitoring.
The proxy statement also shed light on how the bank's former CEO, Thomas Cangemi, would be compensated for last year's performance. Cangemi, who resigned at the end of February, received just under $1.3 million in base salary in 2023. Upon leaving the company, Cangemi also forfeited unvested equity awards, the market value of which totaled nearly $9.5 million.
Additionally, New York Community disclosed it didn't meet certain criteria to pay out short-term incentive awards, missing earnings per share thresholds and internal milestone progress.
New York Community has made a number of changes in the last two months to get back on track, including overhauling its board, packing its executive bench with risk management leaders, reassessing its loan-review process and portfolio and beefing up risk practice assessments.
"We believe our actions will be effective in remediating the material weaknesses, and we continue to devote significant time and attention to these efforts," the company said in its annual report, released in mid-March.
