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New York Community Shares Climb on Deal

Stocks in this article: NYB

WESTBURY, N.Y. ( TheStreet) -- Investors responded enthusiastically after New York Community Bancorp (NYB) took over the failed AmTrust Bank of Cleveland Friday night and announced an offering of 60 million shares before the market opened Monday.

The shares closed up 8.7% to $13.40 Monday, after rising as much as 11% earlier in the day, despite the coming dilution. The stock has climbed 22% this year, beating the 9% advance of the S&P 400 Financials Index.

New York Community acquired $11 billion in assets, $8 billion in deposits and $3 billion in wholesale borrowings in the government-assisted transaction Friday. The Federal Deposit Insurance Corp. agreed to share losses from $6 billion in single-family mortgages and consumer loans. The FDIC retained AmTrust's nonperforming loans, private-label mortgage-backed securities and mortgage servicing rights.

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New York Community said the deal boosted its total assets to $42 billion, making it the 24th-largest regional bank. Its deposits rose 55% to $22 billion. The company expanded its footprint to Ohio, Arizona and Florida.

Last month, we included New York Community Bancorp in a profile of three banks that pay high dividends. The shares yielded 9.4% at the time, but the stock had dropped as investors questioned the company's ability to keep paying its annual dividend of $1. The company's payout has exceeded earnings for the past three years.

The transaction boosted the portion of funding that comes from retail deposits to 60% from 50% as of Sept. 30. New York Community plans to use the $4 billion in cash acquired from AmTrust to pay down wholesale borrowings. The company has been trying to reduce its reliance on wholesale funding.

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