New York, October 29, 2015 -- Moody's Investors Service affirmed all the ratings of New York Community
Bancorp, Inc. and its subsidiaries including New York Community
Bank (collectively NYCB) following the announcement that it has agreed
to acquire Astoria Financial Corporation in a stock and cash transaction
scheduled to close in late 2016. New York Community Bank has long-
and short-term bank deposit ratings of A2 and Prime-1,
respectively. Moody's also affirmed the bank's standalone baseline
credit assessment (BCA) and adjusted BCA of baa1 and its Counterparty
Risk (CR) Assessment of A3 (cr)/Prime-2 (cr). New York Community
Bancorp, Inc. has an issuer rating of Baa2 and New York Community
Capital Trust V has a preferred stock rating of Baa3 (hyb). The
rating outlook is stable.
In a related action, the long- and short-term ratings
of Astoria Financial Corporation and its lead bank subsidiary, Astoria
Bank (collectively Astoria), were placed on review for upgrade.
The bank's BCA, adjusted BCA and long-term CR Assessment
were also placed on review for upgrade. The bank's short-term
CR Assessment was affirmed. Astoria Bank has long- and short-term
bank deposit ratings of A3 and Prime-2, respectively,
a BCA and adjusted BCA of baa2, and a CR Assessment of Baa1(cr)/Prime-2(cr).
Astoria Financial Corporation has a senior unsecured rating of Baa3.
RATINGS RATIONALE
The affirmation of NYCB's ratings with a stable outlook was based on Moody's
view that the integration risks of the proposed acquisition of Astoria
are minimal, and that NYCB should maintain its solid financial metrics.
Moody's said that combining Astoria into NYCB's operations
is made easier by the fact that Astoria has a similar lines of business
in a similar region: multifamily commercial real estate (CRE) in
the New York City area. Astoria has history of good credit quality,
similar to NYCB and its core deposit base will improve NYCB's funding
profile. The acquisition could reduce NYCB's funding costs
while the banks' overlapping footprints should provide for cost
save opportunities.
Moody's added that the acquisition is conservatively funded,
primarily with equity. Additionally, NYCB simultaneously
announced a balance sheet restructuring and $650 million common
equity raise, meaning that NYCB's capital ratios should remain
unchanged following the acquisition.
Moody's noted that the acquisition will increase NYCB's CRE
concentration. CRE accounts for approximately 88% and 41%
of NYCB's and Astoria's loans, respectively.
For both, multifamily lending in the New York City metropolitan
area accounts for at least 75% of CRE. NYCB's long-established,
sound underwriting practices and the unique characteristics of the New
York City market, specifically a large proportion of rent-stabilized
or rent-controlled properties, partly mitigates the concentration
risk.
After the acquisition is completed, Astoria's holding company
and bank will be merged into NYCB's holding company and bank,
respectively. As such, Moody's expects to upgrade Astoria's
ratings to match those of NYCB at that time.
WHAT COULD CHANGE THE RATING UP
For NYCB's standalone BCA to get upgraded, it would need to 1) successfully
diversify so as to reduce its commercial real estate exposure without
significantly increasing its asset risk and 2) improve its core funding
to levels comparable with peers.
For Astoria, Moody's expects to upgrade its ratings,
as well as the BCA, adjusted BCA and long-term CR Assessment,
immediately following the closing of the acquisition by NYCB.
WHAT COULD CHANGE THE RATING DOWN
Future downward rating pressure on NYCB's standalone BCA would emerge
if there are signals that NYCB's underwriting standards are slipping,
either because of looser internal practices or in response to the more
competitive market. Additional sizeable acquisitions in a short
time frame or missteps in the acquisition of Astoria could create downward
rating pressure.
For Astoria, if the acquisition does not close, then downward
movement in its standalone BCA would occur if Astoria's profitability
or liquidity metrics weaken further or if we believe that rapid growth
in the multifamily portfolio will lead to greater asset risk. Currently,
we believe its multifamily underwriting is sufficiently sound.
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rita Sahu
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms New York Community (Issuer Baa2); reviews Astoria Financial (Senior Baa3) for upgrade