NYCB to Sell $5B in Mortgage Warehouse Loans to JP Morgan Unit

New York Community Bancorp (NYCB), Inc., the parent company of Flagstar Bank, N.A., has agreed to sell about $5 billion in mortgage warehouse loans to JPMorgan Chase Bank, a subsidiary of JPMorgan Chase.

The transaction is expected to add 65 basis points to NYCB’s CET1 capital ratio, as converted to the preferred, resulting in a pro-forma CET1 capital ratio of 10.8% as of March 31. The deal will also bolster its liquidity profile, as the proceeds of the sale will be reinvested into cash and securities.

Warehouse loans made up 6%, or $5.2 billion, of NYCB’s $82.3 billion in loans as of March 31, according to Reuters.

The sale, which remains subject to completion of due diligence, is expected to close in the third quarter of 2024.

“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,” said president and CEO Joseph Otting.

The transaction follows NYCB’s goal to reduce its commercial real estate exposure from $47 billion at the end of March to around $30 billion. CRE exposure was the underlying reason of the bank’s unexpected $252 million loss in January.

Between January 31 and March 6, NYCB’s stock lost approximately 84% of its value, until a group of investors led by former Treasury Secretary Steven Mnuchin agreed to offer the bank a $1.05 billion financial infusion and appoint Otting as CEO.

“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,” added Otting.