Flagstar Bancorp Inc. in Troy and New York Community Bancorp Inc. jointly announced today they have entered into a definitive merger agreement under which the two companies will combine in an all-stock merger.
Under terms of the agreement, which was unanimously approved by the boards of directors of both companies, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own.
Following completion of the transaction, the New York Community shares held by New York Community shareholders immediately prior to the transaction are expected to collectively represent approximately 68 percent of the combined company, and the New York Community shares issued to Flagstar shareholders in the merger are expected to represent approximately 32 percent of the combined company.
The implied total transaction value based on closing prices as of April 23, 2021 is approximately $2.6 billion.
The new company will have more than $87 billion in assets and operate nearly 400 traditional branches in nine states and 87 loan production offices across a 28-state footprint. It will have its headquarters on Long Island, N.Y. with regional headquarters in Troy, including Flagstar’s mortgage operations.
The combined company will maintain the Flagstar Bank brand in the Midwest. Flagstar’s mortgage division will also maintain the Flagstar brand. Other states will retain their current branding.
Thomas R. Cangemi will be president and CEO of the combined company and Alessandro (Sandro) P. DiNello, Flagstar’s current president and CEO, will become non-executive chairman, with John Pinto serving as senior executive vice president and CFO of the combined company.
Lee M. Smith will continue to lead the mortgage division as senior executive vice president and president of mortgage, and Reginald Davis will head up consumer and commercial banking and serve as senior executive vice president and president of banking.
The remaining key roles will combine the best talent from both companies. The new board will be comprised of 12 directors — eight from New York Community and four from Flagstar.
“When I was appointed president and CEO of New York Community earlier this year, one of my top priorities was to seek out a like-minded partner that would provide NYCB with a diversified revenue stream, an improved funding mix, and leverage our scale and technology, as we transition away from a traditional thrift model,” says Cangemi.
“In Flagstar, we have found such a like-minded partner. The combination of our two companies will allow each of us to continue our transformation to a full-service commercial bank by broadening our product offerings while expanding our geographic reach with no branch overlap.
“The merger of our two organizations will provide us with a larger platform, a more robust product offering, a strong employee talent pool, and significant balance sheet size to accelerate our transformation into a high performing commercial bank.”
For Flagstar, the merger represents “a unique opportunity,” says DiNello. “With our existing Flagstar platform, we had every expectation of continuing to build on our success as a leader in creating value in the mid-size bank space. Now, in partnership with NYCB, we are positioned to further accelerate everything we’ve been doing.”
The transaction is expected to close by the end of 2021, subject to the satisfaction of customary closing conditions, including the receipt of the requisite regulatory approvals and the requisite approval by the shareholders of each company.
Financial Metrics:
- The transaction is expected to be 16 percent accretive to NYCB’s earnings per share in 2022 (assuming fully phased-in cost savings).
- Also expected to be 3.5 percent accretive to NYCB’s tangible book value per share
- Exceptional pro-forma profitability with ROAA of 1.2 percent and ROATCE of 16 percent.
- Strong pro-forma capital ratios and reserve coverage.
- Enhanced capital generation after dividend of $500 million, annually.
- NYCB dividend maintained.
- Accelerates our transition towards building a dynamic commercial banking organization
- Creates a top-tier regional bank with significant scale and geographic and business line diversification.
- Drives strong financial results and enhances capital generation.
- Improves funding profile and interest rate risk positioning.
- Market-leading rent-regulated multi-family lender, mortgage originator and servicer.
- Maintains each Bank’s unique low credit risk model.
- Combines two strong management teams and boards.
Piper Sandler & Co. and Goldman Sachs & Co. served as financial advisors to New York Community in connection with the transaction. Sullivan & Cromwell served as legal advisor.
Morgan Stanley & Co. and Jefferies acted as financial advisors to Flagstar. Skadden, Arps, Slate, Meagher & Flom served as legal advisor.
Based in Westbury, N.Y., New York Community Bancorp Inc. is a leading producer of multi-family loans on non-luxury, rent-regulated apartment buildings in New York City, and the parent of New York Community Bank. At March 31, 2021, New York Community reported assets of $57.7 billion, loans of $43.1 billion, deposits of $34.2 billion, and stockholders’ equity of $6.8 billion.
New York Community operates 236 branches through eight local divisions: Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, and Atlantic Bank in New York; Garden State Community Bank in New Jersey; Ohio Savings Bank in Ohio; and AmTrust Bank in Florida and Arizona.
Flagstar Bancorp Inc. is a $29.4 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 branches in Michigan, Indiana, California, Wisconsin, and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 87 retail locations in 28 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division.
Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $247.4 billion of loans representing almost 1.1 million borrowers. For more information, visit investors.flagstar.com.
