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New York Community (NYCB), Flagstar Merger Gets Shareholders' Nod

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Shareholders of New York Community Bancorp, Inc. NYCB and Flagstar Bancorp, Inc. FBC have approved the proposed all-stock merger deal between the two companies. The transaction, announced this April, is expected to close in the fourth quarter of 2021, subject to regulatory consents. The merger is likely to boost the New York Community Bancorp’s transformation strategies through geographical as well as product diversification.

The transaction will create an entity with mammoth scale in varied lines of businesses, apart from boosting the transition toward the formation of a dynamic commercial bank. The move will also aid in boosting its financial results as well as refining capital generation. Post completion, the combined entity will have total assets worth $85 billion, and a network of 400 branches across nine states and 86 retail lending offices spread across 28 states. The company will be headquartered on Long Island, NY with regional headquarters in Troy, MI.

The chairman, president and CEO of New York Community Bancorp, Thomas R. Cangemi, remarked, "The strong approval confirms the financial and strategic benefits of the transaction. I am looking forward to working with Flagstar to create one of the top regional banks in the country."

The president and CEO of Flagstar, Sandro DiNello, said, " The entire organization is very excited about the opportunities which lie ahead for the combined company while maintaining a strong commitment to our employees, customers, and to all the communities we serve."

Per the agreement’s terms announced in April, Flagstar shareholders will receive 4.0151 shares of New York Community for each Flagstar share owned. The implied total transaction value based on closing prices as of Apr 23, 2021, is $2.6 billion.

Post completion, New York Community will own 68% of the combined company and the remaining will be held by the Flagstar shareholders. The new company will maintain the Flagstar Bank brand in the Midwest. New York Community’s president and CEO Thomas R. Cangemi will be the president and chief executive officer of the combined entity as well.

According to the announced press release in April, the companies also expect to derive some financial benefits from this deal. The deal is expected to be 16% accretive to New York Community Bancorp’s earnings per share in 2022, assuming fully phased-in cost savings. The bank also expects the transaction to be 3.5% accretive to its tangible book value per share.

The company projects return on average assets of 1.2% and return on average tangible common shareholders’ equity of 16%. Management also expects strong reserve coverage and pro-forma capital ratios. The company estimates honed capital generation after dividend of $500 million per annum.

The merger between New York Community Bancorp and Flagstar is expected to open up solid growth prospects and the creation of shareholder value. Notably, shares of New York Community Bancorp and Flagstar have rallied 15% and 2.7%, respectively, over the past six months.

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Currently, New York Community Bancorp sports a Zacks Rank #1 (Strong Buy), while Flagstar carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The banking sector has been witnessing an increase in mergers & acquisition activities to dodge the heightened costs of regulatory compliance and increased investments in technology, in a bid to be competitive.

In July, Citizens Financial Group, Inc. CFG and Investors Bancorp, Inc. ISBC announced entering into a definitive agreement to team up, under which Citizens Financial will acquire the outstanding shares of Investors Bancorp in a stock-and-cash combination. The transaction is expected to close in the first or second quarter of 2022, subject to approval of Investors Bancorp shareholders and other customary closing conditions.


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Flagstar Bancorp, Inc. (FBC) : Free Stock Analysis Report

New York Community Bancorp, Inc. (NYCB) : Free Stock Analysis Report

Investors Bancorp, Inc. (ISBC) : Free Stock Analysis Report

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