Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of NYCB and Flagstar as an acquisition by NYCB of Flagstar. The merger was announced on April 26, 2021, and provides that each share of Flagstar common stock issued and outstanding immediately prior to the effective time, except for certain shares owned by NYCB or Flagstar (subject to certain exceptions described in the merger agreement), will be converted into the right to receive 4.0151 shares of NYCB common stock.
The unaudited pro forma condensed combined financial information has been prepared to give effect to the following:
• | the acquisition of Flagstar by NYCB under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, ASC 805, “Business Combinations,” where the assets and liabilities of Flagstar will be recorded by NYCB at their respective fair values as of the date the merger is completed; |
• | the distribution of shares of NYCB common stock to Flagstar’s shareholders in exchange for shares of Flagstar common stock (based upon a 4.0151 exchange ratio); and |
• | transaction costs in connection with the merger. |
The following unaudited pro forma condensed combined financial information and related notes are based on and should be read in conjunction with (i) the historical audited consolidated financial statements of NYCB and the related notes included in NYCB’s Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated by reference into this amended prospectus; (ii) the historical unaudited consolidated financial statements and related notes included in NYCB’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which is incorporated by reference into this amended prospectus; (iii) the historical audited consolidated financial statements of Flagstar and the related notes included in Flagstar’s Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated by reference into this amended prospectus; and (iv) the historical unaudited consolidated financial statements and related notes included in Flagstar’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which is incorporated by reference into this amended prospectus.
The unaudited pro forma condensed combined income statements for the six months ended June 30, 2022 and for the year ended December 31, 2021 combine the historical consolidated income statements of NYCB and Flagstar, each giving effect to the merger as if it had been completed on January 1, 2022 and January 1, 2021, respectively. The accompanying unaudited pro forma condensed combined balance sheet as of June 30, 2022 combines the historical consolidated balance sheets of NYCB and Flagstar, giving effect to the merger as if it had been completed on June 30, 2022.
The unaudited pro forma condensed combined financial information is provided for illustrative information purposes only. The unaudited pro forma condensed combined financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The pro forma financial information has been prepared by NYCB in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures About Acquired and Disposed Businesses, as adopted by the SEC on May 21, 2020.
The unaudited pro forma condensed combined financial information also does not consider any potential effects of changes in market conditions on revenues, expense efficiencies, asset dispositions and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon consummation of the merger.
1
As of the date of this amended prospectus, NYCB has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of the Flagstar assets to be acquired or liabilities to be assumed, other than a preliminary estimate for intangible assets and certain financial assets and financial liabilities. Accordingly, apart from the aforementioned, certain Flagstar assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. A final determination of the fair value of Flagstar’s assets and liabilities will be based on Flagstar’s actual assets and liabilities as of the closing date and, therefore, cannot be made prior to the consummation of the merger. In addition, the value of the merger consideration to be paid by NYCB in shares of NYCB common stock upon the consummation of the merger will be determined based on the closing price of NYCB common stock on the closing date and the number of issued and outstanding shares of Flagstar common stock immediately prior to the closing. Actual adjustments may differ from the amounts reflected in the unaudited pro forma condensed combined financial information, and the differences may be material.
Further, NYCB has not identified all adjustments necessary to conform Flagstar’s accounting policies to NYCB’s accounting policies. Upon consummation of the merger, or as more information becomes available, NYCB will perform a more detailed review of Flagstar’s accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, could have a material impact on NYCB’s financial information following the consummation of the merger.
Merger related expenses are estimated to be $239 million ($65 million of which has been incurred prior to 6/30/22) on a combined pre-tax basis, with contractually obligated pre-tax merger expenses of $148 million ($108 million net of tax) due at closing. The merger expenses at closing are reflected in the unaudited pro forma condensed combined financial information. See Note H and Note R to those pro formas for additional details.
As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma condensed combined financial information. NYCB estimated the fair value of certain Flagstar assets and liabilities based on a preliminary valuation analysis, due diligence information, information presented in Flagstar’s SEC filings and other publicly available information. Until the merger is completed, both companies are limited in their ability to share certain information.
Upon consummation of the merger, a final determination of the fair value of Flagstar’s assets acquired and liabilities assumed will be performed. Any changes in the fair values of the net assets or total purchase consideration as compared with the information shown in the unaudited pro forma condensed combined financial information may change the amount of the total purchase consideration allocated to the bargain purchase gain, and may instead include an allocation to goodwill. The final fair value determination may impact NYCB’s statement of income and statement condition following the consummation of the merger. The final purchase consideration allocation may be materially different than the preliminary purchase consideration allocation presented in the unaudited pro forma condensed combined financial information.
2
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (As of June 30, 2022)
(in millions, except share data) | NYCB | Flagstar | Pro forma Adjustments | Notes | Proforma Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||
Cash & due from banks | 147 | 198 | 345 | |||||||||||||||||
Interest bearing deposits | 3,130 | 237 | 3,367 | |||||||||||||||||
Available-for-sale securities | 5,664 | 2,346 | 8,010 | |||||||||||||||||
Held-to-maturity securities | 173 | (1 | ) | A | 172 | |||||||||||||||
Equity investments | 14 | — | 14 | |||||||||||||||||
Loans held for sale | 3,482 | 3,482 | ||||||||||||||||||
Loans with government guarantees | 1,144 | (15 | ) | B | 1,129 | |||||||||||||||
Loan and leases | 48,537 | 14,655 | (277 | ) | B | 62,915 | ||||||||||||||
Allowance for credit losses | (216 | ) | (122 | ) | C | (338 | ) | |||||||||||||
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Net loans and leases | 48,321 | 15,677 | (292 | ) | 63,706 | |||||||||||||||
Mortgage servicing rights | 622 | 622 | ||||||||||||||||||
Federal Home Loan Bank Stock | 635 | 329 | 964 | |||||||||||||||||
Premises and equipment | 252 | 354 | 606 | |||||||||||||||||
Bank owned life insurance | 1,192 | 370 | 1,562 | |||||||||||||||||
Goodwill & intangible assets | 2,426 | 142 | (80 | ) | D | 2,488 | ||||||||||||||
Other assets | 1,312 | 969 | 66 | E | 2,347 | |||||||||||||||
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Total assets | 63,093 | 24,899 | (307 | ) | 87,685 | |||||||||||||||
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Liabilities | ||||||||||||||||||||
Deposits | 41,244 | 16,648 | (34 | ) | F | 57,858 | ||||||||||||||
Wholesale borrowings | 13,650 | 4,001 | (14 | ) | G | 17,637 | ||||||||||||||
Other debt | 657 | 394 | (56 | ) | G | 995 | ||||||||||||||
Other liabilities | 718 | 1,163 | 105 | H | 1,986 | |||||||||||||||
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Total liabilities | 56,269 | 22,206 | 1 | 78,476 | ||||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Preferred stock | 503 | — | 503 | |||||||||||||||||
Common Stock | 5 | 1 | 1 | I | 7 | |||||||||||||||
Additional paid in capital | 6,114 | 1,358 | 811 | J | 8,283 | |||||||||||||||
Retained earnings | 893 | 1,433 | (1,219 | ) | K | 1,107 | ||||||||||||||
Treasury stock | (238 | ) | — | (238 | ) | |||||||||||||||
Accumulated other comprehensive income | (453 | ) | (99 | ) | 99 | L | (453 | ) | ||||||||||||
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Total stockholders’ equity | 6,824 | 2,693 | (308 | ) | 9,209 | |||||||||||||||
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Total liabilities and stockholders’ equity | 63,093 | 24,899 | (307 | ) | 87,685 | |||||||||||||||
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See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
3
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT (For the Six Months Ended June 30, 2022)
(in millions, except share data) | NYCB | Flagstar | Pro forma Adjustments | Notes | Pro Forma Consolidated | |||||||||||||||
Interest income | ||||||||||||||||||||
Mortgage & other loans | 817 | 357 | 30 | M | 1,204 | |||||||||||||||
Securities and money market investments | 85 | 29 | 17 | N | 131 | |||||||||||||||
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Total interest income | 902 | 386 | 47 | 1,335 | ||||||||||||||||
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Interest expense | ||||||||||||||||||||
Deposits | 73 | 13 | 7 | O | 93 | |||||||||||||||
Borrowed funds | 138 | 15 | 6 | P | 159 | |||||||||||||||
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Total interest expense | 211 | 28 | 13 | 252 | ||||||||||||||||
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Net interest income | 691 | 358 | 34 | 1,083 | ||||||||||||||||
Provision for credit losses (benefit) | 7 | (13 | ) | (6 | ) | |||||||||||||||
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Net interest income after Provision for credit losses | 684 | 371 | 34 | 1,089 | ||||||||||||||||
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Non-interest income | ||||||||||||||||||||
Mortgage banking income | — | 72 | 72 | |||||||||||||||||
Fee income | 12 | 74 | 86 | |||||||||||||||||
Bank-owned life insurance | 14 | — | 14 | |||||||||||||||||
Net (loss) gain on securities | (1 | ) | — | (1 | ) | |||||||||||||||
Other | 7 | 145 | 152 | |||||||||||||||||
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Total non-interest income | 32 | 291 | — | 323 | ||||||||||||||||
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Non-interest expense | ||||||||||||||||||||
Compensation, commissions and benefits | 159 | 297 | 456 | |||||||||||||||||
Occupancy and equipment | 45 | 91 | 136 | |||||||||||||||||
General and administrative | 64 | 118 | 182 | |||||||||||||||||
Merger-related-expenses | 11 | 6 | 17 | |||||||||||||||||
Amortization of core deposit intangibles | — | 5 | 6 | S | 11 | |||||||||||||||
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Total non-interest expense | 279 | 517 | 6 | 802 | ||||||||||||||||
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Income before income taxes | 437 | 145 | 28 | 610 | ||||||||||||||||
Income tax expense | 111 | 32 | 8 | T | 151 | |||||||||||||||
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Net income | 326 | 113 | 20 | 459 | ||||||||||||||||
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Preferred stock dividends | 16 | — | — | 16 | ||||||||||||||||
Net income available to common shareholders | 310 | 113 | 20 | 443 | ||||||||||||||||
Basic earnings per common share | $ | 0.66 | $ | 2.12 | $ | 0.65 | ||||||||||||||
Diluted earnings per share | $ | 0.66 | $ | 2.11 | $ | 0.65 | ||||||||||||||
Dividends declared per common share | $ | 0.17 | $ | 0.06 | $ | 0.17 | ||||||||||||||
Weighted average common shares: | ||||||||||||||||||||
Basic | 464,092,927 | 53,244,886 | 681,093,022 | |||||||||||||||||
Diluted | 464,894,538 | 53,556,607 | 681,894,633 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
4
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT (For the Year Ended December 31, 2021)
(in millions, except share data) | NYCB | Flagstar | Pro forma Adjustments | Notes | Pro Forma Consolidated | |||||||||||||||
Interest income | ||||||||||||||||||||
Mortgage & other loans | 1,525 | 764 | 59 | M | 2,348 | |||||||||||||||
Securities and money market investments | 164 | 46 | 34 | N | 244 | |||||||||||||||
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Total interest income | 1,689 | 810 | 93 | 2,592 | ||||||||||||||||
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Interest expense | ||||||||||||||||||||
Deposits | 114 | 32 | 14 | O | 160 | |||||||||||||||
Borrowed funds | 286 | 31 | 11 | P | 328 | |||||||||||||||
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Total interest expense | 400 | 63 | 25 | 488 | ||||||||||||||||
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Net interest income | 1,289 | 747 | 68 | 2,104 | ||||||||||||||||
Provision for credit losses (benefit) | 3 | (112 | ) | 54 | Q | (55 | ) | |||||||||||||
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Net interest income after provision for credit losses | 1,286 | 859 | 14 | 2,159 | ||||||||||||||||
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Non-interest Income | ||||||||||||||||||||
Mortgage banking income | — | 655 | 655 | |||||||||||||||||
Fee income | 23 | 176 | 199 | |||||||||||||||||
Bank-owned life insurance | 29 | — | 29 | |||||||||||||||||
Net (loss) gain on securities | — | — | — | |||||||||||||||||
Other | 9 | 213 | 222 | |||||||||||||||||
Bargain purchase gain | — | — | 337 | U | 337 | |||||||||||||||
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Total non-interest income | 61 | 1,044 | 337 | 1,442 | ||||||||||||||||
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Non-interest expense | ||||||||||||||||||||
Compensation, commissions and benefits | 303 | 728 | 1,031 | |||||||||||||||||
Occupancy and equipment | 88 | 188 | 276 | |||||||||||||||||
General and administrative | 127 | 267 | 394 | |||||||||||||||||
Merger-related-expenses | 23 | 19 | 105 | R | 147 | |||||||||||||||
Amortization of core deposit intangibles | — | 11 | 11 | S | 22 | |||||||||||||||
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Total non-interest expense | 541 | 1,213 | 116 | 1,870 | ||||||||||||||||
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Income before income taxes | 806 | 690 | 235 | 1,731 | ||||||||||||||||
Income tax expense | 210 | 157 | (28 | ) | T | 339 | ||||||||||||||
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Net income | 596 | 533 | 263 | 1,392 | ||||||||||||||||
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Preferred stock dividends | 33 | — | — | 33 | ||||||||||||||||
Net income available to common shareholders | 563 | 533 | 263 | 1,359 | ||||||||||||||||
Basic earnings per common share | $ | 1.20 | $ | 10.10 | $ | 2.00 | ||||||||||||||
Diluted earnings per share | $ | 1.20 | $ | 9.96 | $ | 1.99 | ||||||||||||||
Dividends declared per common share | $ | 0.68 | $ | 0.24 | $ | 0.68 | ||||||||||||||
Weighted average common shares: | ||||||||||||||||||||
Basic | 463,865,661 | 52,792,931 | 680,865,756 | |||||||||||||||||
Diluted | 464,632,719 | 53,519,086 | 681,632,814 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.
5
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1. Basis of Presentation
The accompanying unaudited pro forma condensed combined financial information and related notes were prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined income statement for the six months ended June 30, 2022 and for the year ended December 31, 2021 combine the historical consolidated income statement of NYCB and Flagstar, each giving effect to the merger as if it had been completed on January 1, 2022 and January 1, 2021, respectively. The accompanying unaudited pro forma condensed combined balance sheet as of June 30, 2022 combines the historical consolidated balance sheets of NYCB and Flagstar, giving effect to the merger as if it had been completed on June 30, 2022.
The unaudited pro forma condensed combined financial information and explanatory notes have been prepared to illustrate the effects of the merger involving NYCB and Flagstar under the acquisition method of accounting with NYCB treated as the acquirer. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined company had the companies actually been combined at the beginning of each period presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of NYCB. Under the acquisition method of accounting, the assets and liabilities of Flagstar, as of the effective time, will be recorded by NYCB at their respective fair values, and the excess of the merger consideration over the fair value of Flagstar’s net assets will be allocated to goodwill.
The merger provides for Flagstar shareholders to receive 4.0151 shares of NYCB common stock for each share of Flagstar common stock they hold immediately prior to the merger. Based on an assumed share price of $10.00, which approximates the average stock price between June 30, 2022 and the date of this amended prospectus, the exchange ratio represented approximately $40.15 in value for each share of Flagstar common stock.
The pro forma allocation of the purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments may include, but are not be limited to, changes in (i) Flagstar’s balance sheet through the effective time; (ii) the aggregate value of merger consideration paid if the price of shares of NYCB common stock varies from the assumed $10.00 per share; (iii) total merger-related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market conditions differ from current assumptions.
The accounting policies of both NYCB and Flagstar are in the process of being reviewed in detail. Upon completion of such review, additional conforming adjustments or financial statement reclassification may be necessary.
6
Note 2. Preliminary Purchase Price Allocation
The following table summarizes the determination of the purchase price consideration with a sensitivity analysis assuming a 10% increase and 10% decrease in the price per share of NYCB common stock based on an assumed share price of $10.00, which approximates the average stock price between June 30, 2022 and the date of this amended prospectus, and its impact on the preliminary goodwill/(bargain purchase gain).
(Dollars in millions, except per share data, shares in thousands) | Amount | 10% Increase | 10% Decrease | |||||||||
FBC common shares as of 6/30/22 | 53,245 | 53,245 | 53,245 | |||||||||
FBC equity award plans as 6/30/22 | 801 | 801 | 801 | |||||||||
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Total shares of FBC | 54,046 | 54,046 | 54,046 | |||||||||
Exchange ratio | 4.0151 | 4.0151 | 4.0151 | |||||||||
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NYCB shares to be issued | 217,000 | 217,000 | 217,000 | |||||||||
Price per share of NYCB common stock (assumed) | $ | 10.00 | $ | 11.00 | $ | 9.00 | ||||||
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Total pro forma purchase price consideration | 2,170 | 2,387 | 1,953 | |||||||||
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Preliminary goodwill/(bargain purchase gain) | -337 | -120 | -554 | |||||||||
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Purchase price consideration | 2,170 | |||||||||||
Fair value of assets acquired: | ||||||||||||
Cash & due from Banks | 198 | |||||||||||
Interest bearing deposits | 237 | |||||||||||
Available-for-sale securities | 2,346 | |||||||||||
Held-to-maturity securities | 172 | |||||||||||
Loans held for sale | 3,482 | |||||||||||
Loans with government guarantees | 1,129 | |||||||||||
Loan and leases held for investment | 14,378 | |||||||||||
Mortgage servicing rights | 622 | |||||||||||
Federal Home Loan Bank stock | 329 | |||||||||||
Premises and equipment | 354 | |||||||||||
Bank owned life insurance | 370 | |||||||||||
Intangible assets | 62 | |||||||||||
Other assets | 1,035 | |||||||||||
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Total assets acquired | 24,714 | |||||||||||
Fair value of liabilities assumed: | ||||||||||||
Deposits | 16,614 | |||||||||||
Wholesale Borrowings | 3,987 | |||||||||||
Other Debt | 338 | |||||||||||
Other Liabilities | 1,268 | |||||||||||
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Total liabilities assumed | 22,207 | |||||||||||
Fair value of net assets acquired | 2,507 | |||||||||||
Preliminary goodwill/(bargain purchase gain) | -337 |
Note 3—Pro Forma Merger Adjustments
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All taxable adjustments were calculated using a 27% tax rate to arrive at deferred tax asset or liability adjustments. All adjustments are based on current assumptions and valuations, which are subject to change.
7
Balance Sheet
(Dollars in millions)
A. Adjustments to investment securities to reflect estimated acquired fair value | ||||
Estimated fair value of the acquired investment securities classified as held-to-maturity | $ | (1 | ) | |
B. Adjustments to loans, net of unearned income | ||||
Loans with government guarantees: | ||||
Estimate of fair value related to current interest rates and liquidity | $ | (15 | ) | |
Loans and Leases: | ||||
Estimate of lifetime credit losses on acquired Flagstar loans | $ | (122 | ) | |
Estimate of fair value related to current interest rates and liquidity | (155 | ) | ||
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Net fair value pro forma adjustments | (277 | ) | ||
Gross up of Purchase Credit Deteriorated (“PCD”) loans for credit mark-See C below for allowance for credit loss | 15 | |||
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$ | (262 | ) | ||
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C. Adjustments to allowance for credit losses | ||||
To reflect elimination of Flagstar allowance for credit losses on loans | $ | 122 | ||
Establishment of the Allowance for Credit Losses (“ACL”) for PCD loans estimated lifetime losses | (15 | ) | ||
Establishment of the ACL for non-PCD loans estimated lifetime losses | (107 | ) | ||
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For purposes of this presentation, the loans portfolio was assumed to have a 3-year weighted average life | ||||
D. Adjustments to goodwill and other intangible assets | ||||
To reflect elimination of Flagstar’s goodwill and other intangibles | $ | (142 | ) | |
To record the estimated fair value of acquired identifiable intangible assets related to Flagstar’s non-time deposits, based on third-party estimates. The acquired core deposit intangible is assumed to be amortized over 10 years using the sum-of-the-years-digits method | 62 | |||
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$ | (80 | ) | ||
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E. Adjustments to other assets | ||||
Net deferred tax asset/(liability)-Pre core deposit intangible (“CDI”) | $ | 50 | ||
Tax Liability on CDI | (17 | ) | ||
Deferred tax asset on established allowance for credit losses under CECL | 33 | |||
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Total deferred taxes at NYCB’s estimated rate of 27% | $ | 66 | ||
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F. Adjustment to deposits | ||||
To reflect estimated fair value at merger date based on current market rates for similar products. | $ | (34 | ) | |
G. Adjustment to borrowed funds | ||||
To reflect estimated fair value of wholesale borrowings at merger date based on current market rates for similar products. | (14 | ) | ||
To reflect estimated fair value of subordinated and preferred trust notes at the merger date based on current market rates for similar products. | (56 | ) | ||
H. Adjustments to other liabilities | ||||
Merger related expenses necessary to close the transaction are estimated at $105 million, which includes a $25 million contribution to the Flagstar Foundation | $ | 105 |
8
I. Adjustments to common stock | ||||
To reflect elimination of Flagstar’s common stock | $ | (1 | ) | |
To reflect issuance of NYCB common stock in connection with the acquisition | 2 | |||
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$ | 1 | |||
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J. Adjustments to paid-in capital in excess of par | ||||
To reflect elimination of Flagstar’s paid-in capital in excess of par | $ | (1,358 | ) | |
To reflect issuance of NYCB common stock in excess of par value | 2,169 | |||
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$ | 811 | |||
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K. Adjustment to retained earnings | ||||
To reflect elimination of Flagstar’s retained earnings | $ | (1,433 | ) | |
Adjustment to reflect preliminary estimate of bargain gain from business combination | 337 | |||
Net impact to retained earnings of Flagstar’s one-time transaction costs, purchase accounting adjustments and the establishment of the allowance for credit losses | (123 | ) | ||
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| |||
$ | (1,219 | ) | ||
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L. Adjustment to accumulated other comprehensive loss, net of tax | ||||
To reflect elimination of Flagstar’s accumulated other comprehensive income | $ | 99 |
Note 4. Pro Forma Merger Adjustments to the Unaudited Pro Forma Condensed Combined Income Statements
Income | Statement | |||||||
(Dollars in millions) | ||||||||
Six Months Ended June 30, 2022 | Year Ended December 31, 2021 | |||||||
M. Adjustment to loan interest income | ||||||||
To reflect accretion of loan discount from estimated value adjustments over the estimated remaining terms to maturity of the loans | $ | 30 | $ | 59 | ||||
N. Adjustment to securities interest income | ||||||||
To reflect accretion of investment securities discount from estimated fair value adjustment | $ | 17 | $ | 34 | ||||
O. Adjustment to deposit interest expense | ||||||||
To reflect amortization of deposit premium resulting from deposit estimated fair value adjustment over the remaining terms to maturity of the deposits | $ | 7 | $ | 14 | ||||
P. Adjustment to borrowed funds interest expense | ||||||||
To reflect amortization of borrowed funds premium resulting from borrowed funds fair value adjustment | $ | 6 | $ | 11 | ||||
Q. Adjustment for the provision for credit losses | ||||||||
To reflect the increase in the provision for credit losses for non-PCD loans estimated lifetime losses | $ | 54 | ||||||
R. Merger costs | ||||||||
Merger related expenses necessary to close the transaction are estimated at $109 million, which includes a $25 million contribution to the Flagstar Foundation upon close of the transaction. | $ | 105 | ||||||
S. Adjustment to amortization of core deposit intangibles | ||||||||
To reflect amortization of acquired identifiable intangible assets based on amortization period of 10 years and using the sum-of-the-years-digits method of amortization | $ | 6 | $ | 11 | ||||
T. Adjustment to income tax expense | ||||||||
To reflect the income tax effect of pro forma adjustments for the periods | $ | 8 | $ | 28 | ||||
U. Bargain Purchase Gain | ||||||||
To reflect the bargain purchase gain which is non-taxable. | $ | 337 |
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