New York Community Bancorp Inc. NYCB recently disclosed that it has completed the strategic balance sheet repositioning in connection with its proposed $2 billion merger deal with Lake Success, NY-based Astoria Financial Corporation AF.
According to the company’s statement released on Tuesday, New York Community prepaid $10.4 billion of wholesale borrowings with an average cost of 3.16% and replaced them with a similar amount of wholesale borrowings carrying an average cost of 1.58% in the current quarter. Notably, this 158-basis points decline in the average cost is expected to result in an annual after-tax benefit to earnings of around $100 million, commencing in 2016.
New York Community also booked a one-time after-tax prepayment charge of around $547 million as a result of the repositioning, which will be reflected in fourth-quarter and full-year 2015 results. However, the impact of this charge on capital will be more than offset by net proceeds reaped from the common stock offering which was revealed on Oct 29 along with the merger announcement. The company realized net proceeds of $630.5 million from the offering which was completed on Nov 4.
Through the merger with Astoria Financial, New York Community is likely to boost its share in New York City’s multi-family lending market as well as strengthen its residential mortgage lending capabilities.
On a proforma basis, the merged entity will have assets of around $64.1 billion, including net loans of about $37.6 billion, securities totaling $9.4 billion and around $37.3 billion in deposits.
The combined entity will have 241 banking offices in Metro New York, together with all the branches in New York City, Long Island and Westchester County. Including New York Community’s branches in Ohio, Arizona, Florida and New Jersey, the bank will operate over 350 branches.
Regarding the repositioning move, President and Chief Executive Officer Joseph R. Ficalora mentioned, “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. 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 December 31, 2015.”
New York Community currently carries a Zacks Rank #2 (Buy). A couple of other top-ranked stocks in the finance space include Talmer Bancorp, Inc. TLMR and TFS Financial Corp TFSL, both sporting a Zacks Rank #1 (Strong Buy).
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