New York Community Bancorp's Recent Acquisition Is a Good Start on Its Planned Transformation
New York Community Bancorp (NYSE: NYCB) kept the wave of regional bank consolidation going with its recent announcement that it plans to acquire the Michigan-based Flagstar Bancorp (NYSE: FBC). The deal will create an $87-billion-asset institution with a presence mainly in the Northeast and Midwest. It also makes meaningful progress toward NYCB CEO Thomas Cangemi's main goal of transitioning the bank from its current thrift model into the more typical commercial banking model that has become popular today.
NYCB is a nearly $58-billion-asset bank that operates largely in New York, but also has a presence in New Jersey, Ohio, Florida, and Arizona. Nearly three-quarters of its loan book is in multifamily lending. The bank has long operated on a thrift model, meaning much of its loan portfolio is composed of fixed-rate loans, while much of its funding comes from higher-cost deposits and borrowings.
The thrift model, which has really fallen out of favor with investors, has made NYCB liability-sensitive. That means that unlike most banks today, the bank actually performs better in an environment of falling interest rates, where the cost of its funding reprices downward along with the benchmark federal funds rate, while many of its fixed-rate loans maintain their yield.
Source Fool.com