New York Community Bancorp (NYCB) Shares Cross Below 200 DMA

In the first case, to prepare its balance sheet to absorb Astoria Financial’s low-priced deposits, New York Community Bancorp will prepay $10 billion worth of wholesale borrowings.

Astoria, which has 87 branches, has been under pressure from activist investor Basswood Capital Management LLC to boost its share price. The Company has two bank subsidiaries: New York Community Bank, with 178 branches serving customers throughout Metro New York and New Jersey; and New York Commercial Bank, with 36 branches serving customers in Manhattan, Queens, Brooklyn, Long Island, and Westchester County in New York. New York Community has also commenced a follow-on offering of its common stock in order to reduce the impact of the aforementioned charge to its capital.

New York Community was advised by Goldman Sachs Group Inc. and Credit Suisse Group AG in the transaction, and legal counsel was provided by Sullivan & Cromwell LLP. The Westbury-headquartered New York Community was valued at $19.16 per share at the closing bell on Wednesday, so the merger means each Astoria share was valued at $19.66. Sales are expected to drop at a.90% rate.

The bank generated $3.7 billion in commercial real estate loans in the city in the first half of 2015, according to CrediFi, a property loan analysis firm.

The merger and acquisition provides the necessary scale for the bank to cross the domestic systemically important bank, or D-SIB, threshold of $50 billion, a spokesman confirmed.

NYCB is the nation’s fourth largest thrift bank, and the largest in New York State. The elevated net interest income alone should take care of the $614 million prepayment penalty in roughly three years, and the strengthening of New York Community Bancorp’s franchise in its bread-and-butter market seems commensurate with the middle-of-the-road 1.5 times tangible book value that it’s paying to absorb Astoria Financial. Only time will tell if the deal lives up to expectations, of course, but shareholders can rest assured that it has a lot of potential.