New York Community in Westbury will clearly get bigger with its purchase of Astoria Financial, but will it be any better off?

The $49 billion-asset company has long wanted a significant acquisition to make the leap and become a systemically important financial institution. Adding the $15.2 billion-asset Astoria certainly accomplishes that goal.

Some have been quick to call the acquisition a transformative deal, but it is equally easy to argue that the $2 billion purchase doesn't qualify since it merely adds size without expanding the buyer's geography or meaningfully diversifying its product mix. From that perspective, the company might have missed out on a rare opportunity to reinvent itself and move away from its reliance on multifamily lending.

Such concerns surfaced during a Thursday conference call to discuss the deal's mechanics, when Collyn Gilbert, an analyst at Keefe, Bruyette & Woods, openly wondered if Astoria was the right partner at the moment for New York Community.

"How did you guys balance buying another real estate centric company versus something that is more diversified?" Gilbert asked. "It just seems like an odd time to me to get even more concentrated on real estate assets."

Joseph Ficalora, New York Community's president and chief executive, gave a response that focused on familiarity.

"We have a very high level of confidence with regard to the kind of product that we are in fact inheriting in this transaction," Ficalora said. "You have a really good asset that is not likely to lose money or is less likely to lose money than the alternative assets. … More of a good thing in a bad time is certainly good to have."

Ficalora also asserted that buying Astoria would make for an easier integration and provide more low-cost deposits. "It is a straightforward business model," he said, adding that his company plans to shed nonperforming assets and "higher-risk loans" to proactively address concerns about credit quality.

By buying a bank similar to itself, New York Community should understand the underwriting and may have a clearer path to regulatory approval, some industry observers said.

Bob Ramsey, an analyst at FBR Capital Markets, took issue with the pricing, noting that New York Community is paying about 1.5 times Astoria's tangible book value and about 30 times the seller's earnings per share. That seems high — most deals are closer to 20 times earnings — especially since most of the deal accretion will come from cost-cutting and an aggressive restructuring of New York Community's balance sheet, he said.

"New York Community has always done well when it has stuck to its game," Ramsey said. "The issue is more with price. I'm surprised New York Community is paying as much as they are for Astoria."

Ficalora said during the conference call that the company was likely to cross the $50 billion threshold in the second quarter of next year, absent an acquisition. Getting increasingly closer to the SIFI threshold could have motivated Ficalora to finally pull the trigger on a big deal.

New York Community, which would have nearly $64 billion of assets, said it expects to complete the acquisition by December 2016. Ficalora said during Thursday's call that his team had been in "extensive dialogue" with regulators for several years as the company neared $50 billion in assets.

It is likely that the company's timeline was influenced by the fact that deals, such as M&T Bank's purchase of Hudson City Bancorp, have taken a long time to gain regulatory approval, said Craig Miller, a lawyer at Manatt, Phelps & Phillips. "You can always exceed expectations, but it is better not to fall short of them for shareholders," he said.

An acquisition of this size is likely to face additional scrutiny, Miller said. Compliance with Bank Secrecy Act and anti-money laundering laws, opposition from community groups and capital management are typically the biggest sticking points in getting approval, he added.

The expected closing date isn't particularly far out, given the various moving parts, Ramsey said. Not only is the deal large, but New York Community is looking to prepay roughly $10 billion of wholesale borrowings this quarter.

New York Community is addressing capital concerns with plans to raise $650 million. A reduced dividend is planned to help offset dilution tied to the planned stock offering, management said during the conference call.

New York Community and Astoria have likely vetted each other already to make sure there are no lurking regulatory issues, especially over BSA or anti-money laundering compliance, industry experts said. Still, they are likely to face pressure from community groups.

"There's always a reaction from community groups," Ramsey said. "There's no reason to believe this will be any worse or different."

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