Flagstar, based in Troy, to be acquired by New York Community Bancorp
Troy-based Flagstar Bank is set to be bought by a New York bank in a $ 2.6 billion interim deal announced on Monday.
New York Community Bancorp plans to acquire Flagstar as part of the all-equity transaction, which, pending shareholder and regulatory approvals, is expected to close by year-end.
Troy would become the regional headquarters of the NYCB, with the bank’s main headquarters on Long Island in New York.
The Flagstar Bank brand would survive and the newly merged entity would have 394 traditional bank branches in nine states – 236 NYCB branches and 158 Flagstar branches – and 87 mortgage bureaus in 28 states. It is said to have total assets of $ 87 billion.
The new NYCB board would have 12 members: eight from the old NYBC, four from Flagstar.
Bank executives told Wall Street analysts on Monday that the deal will generate $ 125 million in savings through future cost cuts, with 30% of those savings coming from the non-mortgage aspects of Flagstar’s business. However, there would be “zero” branch closings – at least initially, bank executives said.
Flagstar employs more than 5,200 people, approximately 2,350 of whom live in Wayne, Oakland and Macomb counties, and has $ 29.4 billion in assets. NYCB employed 2,948 people at the start of the year and had $ 57.7 billion in assets.
As part of the deal, Flagstar President and CEO Alessandro “Sandro” DiNello would become NYCB’s non-executive chairman.
“In a message to our employees earlier this morning, I described the combination of Flagstar and NYCB as a unicorn,” DiNello told Wall Street analysts on Monday. “We were doing very well on our own, recording profits quarter after quarter, reliably increasing shareholder value and executing our business plan to become a true commercial bank.
“When the opportunity to join forces with NYCB presented itself, and after considering it very carefully, we felt it was an exceptional way to accelerate our internal plans for the future,” said DiNello. “It’s the right deal at the right time with the right partner.”
NYCB President and CEO Thomas Cangemi said his bank aims to become more of a commercial bank, which usually takes a lot of time and resources.
“Partnering with Flagstar, which is already on its way to becoming a high performing commercial bank, is significantly accelerating this process,” he said.
Flagstar has a historic strength in the mortgage industry and last year ranked 18th nationally among mortgage lenders.
It was started in 1987 in Bloomfield Hills by Tom Hammond as a small savings and loan association, or thrift, under the original name First Security Savings Bank. In the mid-1990s, the bank partnered with Security Bank of Jackson and changed its name to Flagstar Bank. Flagstar went public on NASDAQ in 1997.
In recent years, Flagstar has worked to expand its traditional banking services with more business and community loans.
Following the 2008 financial crisis, Flagstar received a government bailout of $ 267 million through the Troubled Asset Relief Program or TARP. He repaid the funds in 2016.
The Flagstar-NYCB deal isn’t the only major Michigan bank merger on the horizon.
The merger of Detroit-based TCF Bank with Columbus, Ohio-based Huntington Bancshares announced late last year is should close this quarter, and involve the closure of 198 bank branches, including 97 Meijer stores in Michigan. The agreement would also remove the name TCF.
Wall Street analysts have asked why Flagstar would want exposure to the New York market, which has been hit hard by the COVID-19 pandemic. DiNello said it was a numbers game.
“It’s the largest metropolitan area in the country, so I think that makes a lot of sense,” he said. “There are a lot of people living there and a lot of people we can sell banking to.”
Free Press editor Adrienne Roberts contributed to this report.