Flagstar acquisition to cost Detroit area another bank HQ
Michigan is losing another hometown bank as New York Community Bancorp announced Monday its plans to buy Troy-based Flagstar Bancorp Inc.
The acquisition of Flagstar by the Long Island-based company follows an announcement late last year that TCF Financial Corp. and Huntington Bancshares Inc. would merge. That announcement promised dual headquarters, with the CEO of the merged company based in Columbus, Ohio. In 2007, Comerica Bank moved its headquarters from downtown Detroit to Dallas.
“This one is more clearly the loss of a bank headquarters,” said Erik Gordon, professor at the University of Michigan's Ross Business School. “You never like to see a headquarters go. I wasn’t happy to see Comerica’s headquarters go to Texas, I wasn’t happy about TCF’s headquarters really going to Ohio.”
The transaction is an all-stock deal with an equity value of about $2.54 billion. Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own, the two companies said Monday in a statement.
“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,” New York Community CEO Thomas Cangemi said in the statement. Cangemi will remain CEO of the combined company, which will be based on Long Island.
U.S. regional banks have been merging to grapple with low interest rates, weak loan demand and the need to boost technology spending. Pressure is coming from giants such as JPMorgan Chase & Co., which is moving into new states and spending billions annually on digital offerings. Last week, Webster Financial Corp. agreed to purchase Pearl River, New York-based Sterling Bancorp in an all-stock transaction that valued the target at $5.14 billion.
The loss of a local bank headquarter comes as Michigan remains home to the largest mortgage companies, Detroit-based Quicken Loans and Pontiac-based United Wholesale Mortgage Holdings Corp.
"I think the mortgage business is a more easily scalable business and in some ways a better business to be in," Gordon said. "If we had lost one of the big two mortgage companies, I would have been more unhappy than losing another midsize bank."
Flagstar said Monday that it will keep its local commitments. Among them is a five-year, $5 million pledge made in 2019 for the Old Redford neighborhood in Detroit through a partnership supporting the city's Strategic Neighborhood Fund and Affordable Housing Leverage Fund.
"We will stay highly engaged in all our communities, including Old Redford," Flagstar spokeswoman Susan Bergesen said Monday. "No changes for our communities or our customers."
Troy Mayor Ethan Baker said he doesn't expect much of a change regarding Flagstar's presence in his city, at least in the immediate future. He expects the merged company will maintain a regional hub in Troy.
"Certainly as things play out and everything gets back to a little bit more normal, there's likely to be some changes, but I sure hope they maintain as much of a presence in Troy as they can, as we've become accustomed to," he said.
Baker said Flagstar has been a good corporate neighbor.
"Knowing who they are, I believe they'll stay committed to Troy and the region," he said.
The mayor said TCF Bank has also had a large presence in Troy. The company has said it expects its tie-up with Huntington to be finalized around June 1.
"We're watching all these bank mergers play out in real life in Troy, Michigan," he said.
After New York Community completes its acquisition of Flagstar, which is expected by the end of this year, the combined company will have more than $87 billion in assets and about 400 branches in nine states, as well as 87 loan-production offices in 28 states, the companies' joint statement said.
Bloomberg contributed to this report.