New York Community Bancorp and Flagstar Bancorp are extending the deadline for their merger until late October and have decided the combined entity would be a national — not a state-chartered — bank.
The $2.6 billion deal had an original deadline of April 24 — one year after it was
To date, only the New York State Department of Financial Services has approved the deal. The shift in charter plans means that the merger would only need to be approved by the Federal Reserve and the Office of the Comptroller of the Currency instead of the state Department of Financial Services, Fed and the Federal Deposit Insurance Corp.
Under the terms of the newly amended merger agreement, New York Community in Hicksville, New York, and Flagstar in Troy, Michigan, have agreed to change the structure of the merger so that Flagstar Bank, the federally chartered state savings bank subsidiary of Flagstar Bancorp, will convert into a national banking association. When the conversion occurs, New York Community Bank, the New York state-chartered savings bank arm of New York Community, would merge into the new national bank, which will be the surviving bank in the merger.
The two banks have now set a deadline of Oct. 31 to finalize the transaction.
New York Community CEO Thomas Cangemi told analysts Wednesday that the company is “comfortable with that time frame based on where [it is] in the regulatory process.”
“We can’t really dive into [it] specifically, but … we’re hopeful that we will meet that time frame and we feel that’s a reasonable time frame,” he said during the bank’s quarterly earnings call.
In an email Wednesday, the state Department of Financial Services said that it gave its blessing on April 26 after “collaborating with federal counterparts in processing the merger application” and completing its own “thorough review of competitive considerations, financial stability, [New York Community’s] supervisory record and managerial and operational resources in 2021.
“Regardless of a bank’s charter status, [the department] remains focused on preserving the health of the entities that we regulate and ensuring that all New Yorkers have access to a variety of banking services and are protected from financial harm,” the department said in the email.
During the call, analyst Steven Alexopolous of JPMorgan asked Cangemi if the FDIC was “a roadblock” in getting the deal approved.
Cangemi said he would not talk about any specific agency, but did point out that the deal has been in the works for a year now.
“I will tell you that we truly believe that with the national banking platform, and where we're heading the bank in the future, that the OCC charter is the way to go,” Cangemi said. “So clearly we're very much appreciative of DFS’ approval, and I'm not going to comment on any other regulatory discussions there.”
The FDIC did not immediately respond to a request for comment. [Late Wednesday, the agency said it doesn't comment on such matters tied to open institutions.]
In a press release Wednesday announcing the change in merger strategy, the $61 billion-asset New York Community and $23 billion-asset Flagstar said they “each believe that a national bank charter is an appropriate charter for the combined company’s banking operations,” especially in light of the fact that Flagstar’s national mortgage banking business has been under the supervision of the OCC for several years.
Flagstar’s longtime relationship with the OCC could be useful in securing regulatory approval, bank analyst David Rochester of Compass Point said Wednesday in a research note.
“Given [that Flagstar] is an OCC[-regulated] bank, we expect that existing regulatory familiarity/relationship with [Flagstar] could prove helpful in achieving that approval,” he wrote.
When it was announced a year ago, the New York Community-Flagstar transaction was originally expected to close during the fourth quarter of 2021. The deal is intended to help New York Community diversify its business by tapping into Flagstar’s legacy businesses as part of a plan to remix its funding base and accelerate its shift to more of a full-service commercial bank.
In October 2021, Cangemi said the company was looking for a closing date in 2022 as it
The change in strategy comes three months after New York Community said it would provide $28 billion in loans and other support to neighborhoods and small businesses across both banks’ footprints. The plan, which was negotiated with the National Community Reinvestment Coalition, is among a recent string of such agreements that are thought to help pave the way for bank mergers as federal regulators apply
Shareholders in both companies voted in favor of the planned transaction in August. If it is eventually approved, it would be New York Community’s first bank acquisition in 12 years.
New York Community hasn’t completed an acquisition since March 2010. A bid to acquire Astoria Financial in Lake Success, New York,
Separately, Flagstar confirmed this week that it has
Despite the decline, Cangemi told analysts on Wednesday’s call that the deal still makes sense.
“We truly feel confident that this is a significant opportunity to really change the financial mix [and] change the financial measures of this company toward shareholder value with a well-rounded, diversified balance sheet [and] a vision of a unique commercial banking model,” he said.
