Flagstar acquisition to cost Detroit area another bank headquarters
Michigan loses another bank in its hometown when New York Community Bancorp announced Monday its plans to purchase Troy-based Flagstar Bancorp Inc.
The Long Island-based company’s acquisition of Flagstar follows an announcement late last year that TCF Financial Corp. and Huntington Bancshares Inc. will merge. That announcement promised a 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 is more clearly the loss of a bank headquarters,” said Erik Gordon, a professor at the University of Michigan’s Ross Business School. “You never like it when a headquarters go. I wasn’t happy to see Comerica headquarters go to Texas, I wasn’t happy to see TCF headquarters actually go to Ohio. “
The transaction is an all-stock deal with an equity value of approximately $ 2.54 billion. For every Flagstar share they own, Flagstar shareholders will receive 4,0151 shares of common stock in the New York community, the two companies said in a statement on Monday.
“The combination of our two companies will enable each of us to continue our transformation into a full-service commercial bank by expanding our product offerings while expanding our geographic reach without overlapping offices,” said Thomas Cangemi, CEO of the New York Community , in the statement. Cangemi remains CEO of the combined company, which will be based on Long Island.
US regional banks have come together to grapple with low interest rates, weak credit demand, and the need to boost technology spending. Giants like JPMorgan Chase & Co., who are moving to new states and spending billions annually on digital offerings, are under pressure. Last week, Webster Financial Corp. agreed to buy Sterling Bancorp of Pearl River, New York in an all-stock transaction that valued the target at $ 5.14 billion.
The loss of a local bank headquarters is due to the fact that Michigan still has the largest mortgage companies, Quicken Loans, based in Detroit, and United Wholesale Mortgage Holdings Corp. based in Pontiac.
“I think the mortgage business is a more easily scalable business and, in some ways, a better business,” said Gordon. “If we had lost one of the two big mortgage companies, I would have been more miserable than losing another medium-sized bank.”
Flagstar said Monday it will meet its local commitments. These include a five-year $ 5 million commitment made in 2019 for Detroit’s Old Redford neighborhood as part of a partnership in support of the city’s Strategic Neighborhood Fund and the City’s Affordable Housing Leverage Fund.
“We will continue to be very involved in all of our communities, including Old Redford,” said Flagstar spokeswoman Susan Bergesen on Monday. “No changes for our communities or our customers.”
Troy Mayor Ethan Baker said he didn’t expect any major changes in relation to Flagstar’s presence in his city, at least in the near future. He expects the merged company to have a regional hub in Troy.
“Certainly if things move up and things get a little bit more normal there will likely be some changes, but I hope they are as present as possible in Troy as we are used to.” he said.
Baker said Flagstar was a good neighbor of the company.
“When I know who you are, I believe that you will continue to work for Troy and the region,” he said.
The mayor said the TCF Bank had a strong presence in Troy too. The company expects the Huntington’s disease collaboration to be completed around June 1.
“We’re watching all of these bank mergers in real life in Troy, Michigan,” he said.
After the New York community completes the acquisition of Flagstaf, which is expected by the end of this year, the combined company will have more than $ 87 billion in assets and approximately 400 offices in nine states and 87 loan production offices in 28 states, said it in the joint opinion of the companies.
Bloomberg contributed to this report.