New York Community to buy Flagstar for $2.6 billion

Just four months into his tenure as president and CEO of New York Community Bancorp, Thomas Cangemi has made good on his promise to accelerate his company’s growth through an acquisition.

Early Monday, the $58 billion-asset New York Community announced that it is acquiring Flagstar Bancorp in Troy, Mich.

New York Community said it will pay $2.6 billion in stock for the $29.4 billion-asset Flagstar. The deal, which is expected to close by the end of this year, priced Flagstar at 115% of its tangible book value.

New York Community will have nearly 400 branches, 87 loan production offices and more than $87 billion of assets after the deal closes. The Westbury, N.Y., company will still be based on Long Island, though it will maintain a regional headquarters in Troy. The company will keep the Flagstar Bank brand in the Midwest. Flagstar’s mortgage division will also retain its brand.

Cangemi took over as chief executive in late December after longtime CEO Joseph Ficalora abruptly retired. Since then, Cangemi, previously New York Community’s chief financial officer, had made no secret of his desire to acquire another financial institution in an effort to bring in more low-cost deposits and diversify its revenue streams. New York Community is primarily a multifamily lender and certificates of deposit make up a large share of its deposits.

“When I was appointed president and CEO … one 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,” Cangemi said in a press release.

“In Flagstar, we have found such a like-minded partner,” he added. “The combination of our two companies will allow each of us to continue our transformation to a full-service commercial bank by broadening our product offerings while expanding our geographic reach with no branch overlap.”

The acquisition would be New York Community’s first in more than a decade. An active acquirer of New York-area thrifts in the early 2000s, it had not made a whole-bank deal since buying two failed banks during the financial crisis. In 2016 it agreed to acquire rival Astoria Financial for $2 billion, but the deal was later terminated.

The Flagstar deal is expected to be 16% accretive to New York Community’s 2022 earnings per share and 3.5% to its tangible book value per share. New York Community plans to cut about 8% of the combined company’s annual noninterest expenses, or $125 million. It expects to incur $220 million in merger-related expenses.

Cangemi, 52, would become president and CEO of the combined company while Flagstar’s president and CEO, Alessandro DiNello, would become nonexecutive chairman. Eight of the combined company’s 12 directors will come from New York Community.

Piper Sandler, Goldman Sachs and Sullivan & Cromwell advised New York Community. Morgan Stanley, Jefferies and Skadden, Arps, Slate, Meagher & Flom advised Flagstar.

Alan Kline contributed to this story.