New York Community Bancorp has already crossed off several items on its merger to-do list: It has formed an integration team, chosen a senior management team and selected the products and services that it will offer to customers.
Now the Westbury, New York, company, which is
During the company’s second-quarter earnings call on Wednesday, New York Community Chairman and CEO Thomas Cangemi talked up the growth opportunities in deposits, loans and fee income, and ways that New York Community plans to tap into Flagstar’s legacy businesses to help remix its funding base and accelerate its shift to more of a full-service commercial bank.
“This, in my opinion, is not a traditional merger,” Cangemi told analysts. “It is an alliance where we are taking the best of both companies and forming a much stronger, better positioned organization and creating significant value for everyone. The more time I spend looking at the two companies becoming one, the more excited I become about the combination.”
Shareholders of both companies are scheduled to vote on the proposed deal on Aug. 4.
For decades, the $57.5 billion-asset New York Community has focused on two products: multifamily loans and certificates of deposit. In the fourth quarter of 2020, multifamily lending made up 75% of the loan portfolio while higher-cost CDs made up 32% of total deposits.
But under Cangemi, who was promoted to chief executive six months ago after the
By acquiring Flagstar, which operates the second-largest mortgage warehousing business in the country behind JPMorgan Chase, Cangemi expects to make significant progress on both fronts.
The key will be cross-selling products and services, he said. That includes encouraging Flagstar’s warehouse customers to take out commercial loans and keep their lower-cost deposits with New York Community.
Flagstar has “some very strong relationships … and we believe we can hold that and grow it very nicely,” Cangemi said. “It’s a very low-risk business model, if managed well.”
In addition, the deal offers “a lot of liquidity regarding escrow opportunities inside that business model and there are going to be some opportunities” to gain deposits from warehouse clients, Cangemi said. Flagstar “turn[s] away deposits, they have so much liquidity. We will accept [them].”
At the same time, New York Community hopes to draw more deposits by enhancing its digital banking capabilities. Last week, in a
“This is going to build up to a nice line of business for us as we focus on getting our fair share of the payment space over time and trying to catch up on the technology side,” Cangemi said.
New York Community’s pending deal, announced in late April, is one of a number of merger combinations announced by regional banks in recent months.
On Wednesday,
As for New York Community’s second-quarter results, net income totaled $152 million, up 44.8% from last year’s second quarter when the company recorded a loan-loss provision expense of $18 million. In the most recent quarter, New York Community had a provision credit of $4 million.
Earnings per share rose to 30 cents, up 9 cents from a year earlier and matching the mean estimates of analysts polled by FactSet Research Systems.
Total loans and leases held for investments grew 3% year over year while deposits climbed 8%. Meanwhile, CDs as a percentage of total deposits declined from 38% in the year-earlier quarter to 26%, though total deposits rose 8% over the same time frame.
The company incurred $10 million in merger-related charges for the quarter.
