Embattled New York Community Bancorp to Sell $5 Billion of Mortgage Warehouse Loans to JPMorgan Chase

By Jace Dela Cruz

May 15, 2024 03:05 AM EDT

New York Community Bancorp (NYCB), a regional lender facing financial challenges, announced Tuesday its agreement to sell approximately $5 billion in mortgage warehouse loans to JPMorgan Chase.

According to Reuters, this move aims to enhance NYCB's liquidity and capital, facilitating a turnaround to achieve profitability within the next two years.

New York Community Bank Stock Plummets After Troubled Earnings Report — NEW YORK, NEW YORK - FEBRUARY 08: A New York Community Bank stands in Brooklyn on February 08, 2024 in New York City. New York Community Bancorp, a regional lender, shed about 60% of its value over the past eight days and its credit rating has been downgraded to Junk by Moody's.
(Photo : Spencer Platt/Getty Images)

New York Community Bancorp Sells $5 Billion in Mortgage Warehouse Loans to JPMorgan Chase

NYCB believes the transaction will increase its Common Equity Tier 1 (CET1) capital ratio by 65 basis points and improve its liquidity profile by reinvesting the sale proceeds into cash and securities.

The bank also expects its pro forma ratio of cash and securities to total assets to increase to 24% from 20% as of March 31, while its pro forma loan-to-deposit ratio was seen to drop to 104% from 110% at the end of this year's first quarter.

This loan sale supports NYCB's plan to reduce its balance sheet by shedding non-core assets.

New York Community Bancorp to Cut Commercial Real Estate Holdings

NYCB had previously announced intentions to reduce its commercial real estate sector, which was affected by higher borrowing costs and lower occupancy rates.

The bank aims to cut its commercial real estate loans to around $30 billion from almost $47 billion by the end of March. In March, the lender also disclosed it had sold $899 million in consumer loans and a commercial cooperative loan in February.

NYCB reportedly wants to increase its share in the commercial and industrial lending business, easing investors' concerns about the bank's higher exposure to rent-regulated multi-family estates and office facilities in New York.

This troubled regional bank previously disclosed a loss related to loans tied to office buildings, resulting in a significant drop in its share price. Steven Mnuchin, the US Treasury Secretary under former president Donald Trump, has previously helped the struggling lender to raise the needed capital.

In March, NYCB raised over $1 billion in a fundraising effort that included Mnuchin's firm, Liberty Strategic Capital. After the announcement of the cash infusion, NYCB stock reportedly recovered.