New York Community Bancorp in Westbury has finished the balance sheet repositioning it previewed as part of its agreement to buy Astoria Financial in Lake Success, N.Y.
The $44.9 billion-asset company said in a press release Tuesday that it prepaid $10.4 billion in wholesale borrowings. It replaced the borrowings, which had an average cost of 3.16%, with a similar amount with an average cost of 1.58%.
The reduced cost should provide an annual after-tax benefit of roughly $100 million starting next year. As a result of the company's repositioning, future dividends will require regulatory clearance for the next four quarters.
The repositioning cost the company $547 million in a one-time after-tax prepayment charge, which will be reflected in its fourth quarter results. New York Community said the charge was more than offset by the $630.5 million in net proceeds it generated through a common stock offering completed in early November. The prepayment charge also fell short of the $614 million that the company forecast when the repositioning was announced in October.
"It is encouraging that this strategy, together with the offering completed in November, will be even more beneficial to the combined company than we originally thought," New York Community President and Chief Executive Joseph Ficalora said in the release. "In addition to the positive impact on our earnings going forward, the combination of these strategies will add approximately $83 million to our capital" at Dec. 31.
Ficalora pushed for derisking New York Community's balance sheet ahead of the merger, saying it would strengthen the financial performance. Nevertheless, Astoria's board reportedly worried during negotiations with Ficalora that the repositioning — along with the roughly $600 million capital raise and dividend reduction — would harm New York Community's stock.
Astoria ultimately chose New York Community because the other, unnamed financial institution competing for the deal featured greater execution risk in the board's eyes. The companies expect the merger to close by the end of next year.