PYMNTS Intelligence Banner June 2024

NYCB Sells $5 Billion in Loans to JPMorgan

New York Community Bank (NYCB) is selling $5 billion in loans to J.P. Morgan Chase.

The sale of these “mortgage warehouse loans” is designed to strengthen the regional bank’s capital and liquidity, according to a Tuesday (May 14) press release.

“Consistent with my guidance during our recent earnings call, we are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” NYCB President and CEO Joseph Otting said in the release. “The mortgage team at Flagstar [a NYCB subsidiary bank] built a first-class warehouse business, which is reflected in our ability to execute on an accretive transaction with J.P. Morgan. The mortgage business remains an important business for the company, and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar.”

NYCB ran into trouble earlier this year when it announced a dividend cut and an unexpected loss. The news came as a surprise to investors, as the bank had been viewed as one of the winners of the 2023 crisis, with Flagstar acquiring failed Signature Bank.

The bank has been downgraded by Moody’s, seen several leadership changes this year (including Otting, a former comptroller of the currency and its third CEO since January), and in March received a $1 billion equity investment from a trio of venture capital groups.

Difficulties at NYBC and other regional banks led a former chair of the Federal Deposit Insurance Corp. to sound a note of caution on the sector.

“I’m worried about a handful of them,” Sheila Bair, who headed the FDIC during the financial crisis of 2008, said in April. “I think some of them are still overly reliant on industry deposits, have a lot of concentrated commercial real estate exposure, and then I think the larger picture really is the potential instability of their uninsured deposits even for the healthy ones if we have another bank failure.”

As those banks began reporting earnings, Bair said she was worried that issues that hurt the industry last year remain unresolved.

“Congress should reinstate the FDIC’s transaction account guarantee authority so that they can stabilize those deposits,” she said. “This is still a problem for the regional banks, and fingers crossed that there’s [not] another failure. We’re just not quite sure what’s going to happen.”