New York Community Bank (NYCB) will acquire Troy, Michigan-based Flagstar Bank in an all-stock deal worth $2.6 billion, the banks announced Monday.
Under the terms of the deal, Flagstar shareholders will receive 4.02 shares of NYCB common stock for each Flagstar share they own. Following completion of the transaction, NYCB's shareholders will own 68% of the combined company, while Flagstar shareholders will own the rest.
The combined bank will have over $87 billion in assets and operate nearly 400 branches in nine states and 87 loan production offices across a 28-state footprint, the banks said. The deal, which is subject to shareholder and regulatory approvals, is expected to close by the end of the year.
The deal fulfills a promise made by NYCB President and CEO Thomas Cangemi when he was named the $58 billion-asset bank’s leader just four months ago.
"[O]ne 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," he said in a statement. "In Flagstar, we have found such a like-minded partner."
The combination allows the two companies to continue their transformation to a full-service commercial bank by broadening product offerings and expanding geographic reach with no branch overlap, Cangemi said.
"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," he said.
The new bank’s primary headquarters will be located on Long Island, with regional headquarters in Michigan, which will include the $29.4 billion-asset Flagstar's mortgage operations.
The combined bank will maintain the Flagstar Bank brand in the Midwest. Flagstar's mortgage division will also maintain that brand, while other states will retain their current branding, the banks said.
NYCB estimates the merger will result in additional capital generation of $500 million annually, as well as $125 million in annual cost savings. The bank expects to incur $220 million in merger-related expenses.