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Troy-based Flagstar to be acquired by New York bank in $2.6B deal

Detroit Free Press logo Detroit Free Press 4/26/2021 JC Reindl, Detroit Free Press
a building with grass and trees: Flagstar Bank headquarters, Troy, Mich. © Flagstar Bank, Flagstar Bank Flagstar Bank headquarters, Troy, Mich.

Troy-based Flagstar Bank is to be purchased by a New York bank in a tentative $2.6 billion deal announced Monday.

New York Community Bancorp plans to acquire Flagstar in the all-stock deal, which, pending shareholder and regulatory approvals, is expected to close by year's end.

Troy would become NYCB's regional headquarters, with the bank's primary headquarters on Long Island in New York.

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The Flagstar Bank brand name would survive, and the newly combined entity would have 394 traditional bank branches in nine states — 236 NYCB branches and 158 Flagstar branches — and 87 mortgage lending offices in 28 states. It would have a total $87 billion in assets.

The new NYCB board of directors would have 12 members: eight from legacy NYBC, four from Flagstar.

Bank executives told Wall Street analysts Monday that the deal will generate $125 million in savings from future cost cuts, with 30% of that savings coming from non-mortgage aspects of Flagstar's business. However, there would be "zero" branch closures — at least at first, bank executives said.

More: How southeast Michigan became a mortgage power center

More: These Detroit mortgage lenders faded away as others thrived

Flagstar employs more than 5,200 people, of whom about 2,350 live in Wayne, Oakland and Macomb counties, and it has $29.4 billion in assets. NYCB employed 2,948 people at the start of the year and had $57.7 billion in assets.

Under the deal, Flagstar President and CEO Alessandro “Sandro” DiNello would become non-executive chairman of NYCB.

"In a message to our employees earlier this morning, I described the combination of Flagstar and NYCB as a unicorn," DiNello told Wall Street analysts Monday. "We were doing great on our own, posting quarter after quarter of profits, reliably increasing shareholder value and executing on our business plan to become a true commercial bank.

“When the opportunity to join forces with NYCB came our way, and after considering it very carefully, we felt this was an outstanding way to accelerate our internal plans for the future," DiNello said. “It’s the right deal at the right time with the right partner."

NYCB President and CEO Thomas Cangemi said his bank had been aiming to become more of a commercial bank, which ordinarily takes a lot of time and resources.

"Partnering with Flagstar, which is already on its way to becoming a high-performing commercial bank, significantly accelerates this process," he said.

Flagstar has a historic strength in the mortgage business and ranked nationwide last year as the No. 18 mortgage lender.

It 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. Flagstar went public on NASDAQ in 1997.

a man wearing a suit and tie: Sandro DiNello © Dave Budnick, Flagstar Bank Sandro DiNello

In recent years, Flagstar has worked to expand its traditional banking services with more commercial and community lending.

In the wake of the 2008 financial crisis, Flagstar received a $267 million government bailout through the Troubled Asset Relief Program or TARP. It repaid the funds in 2016. 

The Flagstar-NYCB deal isn't the only major Michigan bank merger on the horizon.

The merger of Detroit-based TCF Bank into Columbus, Ohio-based Huntington Bancshares, announced late last year, is expected to close sometime this quarter and involve the closure of 198 bank branches, including 97 in-store Meijer bank locations in Michigan. The deal also would retire the TCF name.

Wall Street analysts asked why Flagstar would want exposure to the New York City market, which has been hard hit by the COVID-19 pandemic. DiNello said it’s a numbers game.

“It’s the largest metro area in the country so I think it makes a whole lot of sense,” he said. “There’s a lot of people that live there and a lot of people we can sell banking to.”

Free Press staff writer Adrienne Roberts contributed to this report.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.

This article originally appeared on Detroit Free Press: Troy-based Flagstar to be acquired by New York bank in $2.6B deal

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