New York Community Bancorp Is Making Progress on Its Transition to a Commercial Banking Model

There is a lot going on at New York Community Bancorp (NYSE: NYCB) these days. Earlier this year, the nearly $58 billion asset bank announced its intention to acquire the Michigan-based Flagstar Bancorp in a deal that will grow NYCB to roughly $87 billion in assets once the acquisition is closed at the end of the year.

The deal is also expected to accelerate NYCB's plan to transition from a more thrift-like model to a traditional commercial banking model, a goal that NYCB CEO Thomas Cangemi has had since he took the reins of NYCB at the start of this year. In the second quarter, the bank made organic progress on this transition and appears very committed to seeing it through. Let's take a look.

NYCB is different from most banks in that up until pretty recently, it still operated like a thrift, which is an older type of banking model that has fallen out of favor today. Thrifts are known for relying on higher-cost deposits and funding and making lots of fixed-rate loans, typically home mortgages. A lot of times, this can make a thrift liability sensitive, meaning that more of its deposits and debt reprice with interest rates than its assets such as loans, which also means these banks do well when interest rates are falling. NYCB still looks more like a thrift, with the majority of its loans in fixed-rate multifamily loans, while the bulk of its deposits are still primarily in higher-cost certificates of deposits (CDs) and money market accounts.

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Source Fool.com