Troy-based Flagstar Bank was officially acquired Thursday by a New York bank after more than a year’s wait amid heightened federal antitrust scrutiny. It will continue to use the Flagstar name.
The all-stock acquisition by New York Community Bancorp, first announced in April 2021, creates one of the top 25 banks in the U.S., based on assets, or slightly larger than Comerica bank, according to Thursday’s announcement.
The merger will not result in any branch closures and few, if any, layoffs because the two banks had minimal geographic overlap and different banking service specialties, said outgoing Flagstar President and CEO Alessandro “Sandro” DiNello, whose new role is non-executive chairman of the combined bank’s 14-member board of directors.
“The merger is very unique in that there isn’t any branch being closed, and there isn’t any notable reduction in force that’s taken place in connection with the combination of the two banks,” DiNello said in a phone interview Thursday.
“One of the things that really interested me about this (merger) opportunity was the fact that it wasn’t going to be rationalize based on cutting costs,” he added. “It was rationalized based on being able to improve and enhance the earnings opportunity of the company, because of the differences in the two companies.”
The combined bank has more than $88 billion in assets, $58 billion in deposits, 395 branches in nine states and about 7,800 employees.
Customers at both banks will not experience any immediate changes to their accounts, loan payments, online access or ATM use, a news release said.
At some point in the future, all 395 bank branches will operate under the Flagstar Bank name, DiNello said. The organization opted to go with the Flagstar name because it is unique and already a national brand, he said, as Flagstar Bank does mortgage lending in all 50 states though brokers and 81 retail-lending offices.
The acquisition deal was originally expected to close by the end of last year, but encountered delays. Bank executives had been reluctant to detail the reasons for the delays during regular earnings calls.
The deal ultimately was approved this fall by the Federal Reserve Board and the Office of the Comptroller of the Currency.
DiNello told the Free Press on Thursday that the process dragged out because of heightened antitrust scrutiny, stemming in part from President Joe Biden’s summer 2021 executive order calling on regulators to get tough on various anti-competitive behaviors in the U.S. economy.
“It was a difficult political and regulatory environment that we got kind of caught up in,” he said.
Going into the deal, New York Community Bancorp was the larger organization of the two based on assets, with $63 billion compared with Flagstar’s $25.4 billion.
Even so, Flagstar employed more people. It had about 5,400 full-time equivalent employees at the start of the year, compared with the New York bank’s 2,800. However, several hundred employees in Flagstar’s mortgage division have been let go this year amid the nationwide downturn in the mortgage business.
DiNello said Flagstar employed more people than the pre-merger New York bank because it had more customer-facing banking services. One of New York Community Bancorp’s traditional strengths is lending for multifamily housing in New York, which it does through outside brokers.
Flagstar’s Troy office is now the combined bank’s regional headquarters. The bank’s main headquarters are in Hicksville, N.Y.
As part of the deal, five new members of the combined bank’s 14-member board are former directors of the legacy Flagstar.
DiNello said that about half of the combined bank’s executive team comes from the Flagstar side, including President of Banking Reggie Davis and Chief Human Resources Officer David Hollis.
“It’s also very unusual for the executive team to be 50/50 between the two companies,” he said. “And that wasn’t a goal for it to be 50/50. We looked at every part of the organization and we picked who we thought was the best person, and it turned out to be 50/50.”
DiNello, in addition to being the non-executive board chairman, is to receive a $6 million lump-sum payment for signing a three-year non-compete deal.
Flagstar Bank was started in 1987 in Bloomfield Hills by Tom Hammond as a small savings and loan association, or thrift, under the original name First Security Savings Bank. In the mid-1990s, the bank combined with Security Bank of Jackson and changed its name to Flagstar Bank. It went public on NASDAQ in 1997.
Flagstar Bank has in recent years been among the top 20 mortgage lenders in the country.
“We are tremendously pleased and very excited to announce the completion of our merger with Flagstar,” Thomas Cangemi, president and CEO of the newly combined bank, said in the release. “The merger creates a company with significant scale and capabilities with a more diversified loan portfolio, an improved funding mix, and a much better interest-rate risk profile.”
