OREANDA-NEWS. Fitch Ratings affirms the Long-term Issuer Default Rating (IDR) of New York Community Bancorp (NYCB) at 'BBB+' following the announcement of NYCB's merger with Astoria Financial Group, Inc. (AF). NYCB's. NYCB's Rating Outlook remains Stable.

Fitch has placed AF's 'BBB-' long-term IDR on Rating Watch Positive. Upon completion of the merger (expected to close 4Q16), Fitch expects to upgrade AF's ratings to be aligned with NYCB's current ratings. The merger transaction is valued at $2 billion.

A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS

IDRS, VRs
Fitch views the proposed merger with AF as neutral to NYCB's current ratings. Fitch believes integration risks are low given AF's simplistic business model, the relatively good credit performance of AF's loan book, and solid knowledge of the common footprint. Further, the financial aspects of the transaction seem reasonable, and NYCB's capital position remains appropriate for its current rating and its risk profile. Fitch expects NYCB to maintain its CET1 ratio at 11.5% at close of the transaction.

For a combined entity perspective, the deal offers NYCB a good opportunity to deepen its mortgage lending business given AF is essentially a niche mortgage real estate lender. NCYB should benefit from some diversification, although it continues to be heavily-weighted in real estate loans. Pro forma, NYCB's multi-family loans will account for 58.1% of the loan book from 65.7% as of June 30, 2015. Residential mortgages will account for 19% of the combined pro forma loan book compared to 7.3% for NYCB. Despite the continued concentration in real estate assets, Fitch expects credit performance to remain solid given this attribute has been a rating strength for both companies.

In support of facilitating the close of this transaction, NYCB launched $650 million of common equity raise. As such, NYCB expects to have a pro forma Common Equity Tier 1 ratio of 11.4%, and a Tier 1 Leverage ratio of 7.5% with the closing of the transaction.

Although integration and execution risks exist, Fitch believes should challenges arise, they would be manageable for NYCB. In Fitch's opinion AF's balance sheet is not complex, which should help the integration process. Additionally, NYCB has demonstrated a good track record of successfully completing acquisitions through the years.

As NYCB crosses the $50 billion threshold and becomes a D-SIB bank, it will be part of the CCAR process. As such, NYCB may face some challenges given its loan mix and concentration in real estate. Nonetheless, NYCB has been preparing for the regulatory changes as it grew closer to the $50 billion asset size and the company has some time given it would be part of the 2018 CCAR process.

The Rating Watch Positive reflects Fitch's view that NYCB's acquisition addresses AF's challenges regarding earnings pressures as well as interest rate risk. Fitch expects to resolve AF's Rating Watch upon the completion of the transaction with NYCB. Closing is expected in 4Q16 and subject to customary closing conditions, including required regulatory approvals.

SUPPORT RATING AND SUPPORT RATING FLOOR
NYCB and AF have a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, NYCB and AF are not systemically important and therefore, the probability of support is unlikely. IDRs and VRs do not currently incorporate any support.

HOLDING COMPANY
NYCB's IDR and VR are equalized with those of its operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary default probabilities

AF's IDR and VR are equalized with those of its bank subsidiary, Astoria Bank, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary default probabilities.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
NYCB's preferred securities are rated five notches below its VR. Preferred stock is notched two times from the VR for loss severity, and three times for non-performance. Hybrid securities ratings are in accordance with Fitch's criteria and assessment of the instruments' non-performance and loss severity risk profiles. Thus, these ratings have been affirmed due to the affirmation of the VR.

AF's preferred securities are rated five notches below its VR. Preferred stock is notched two times from the VR for loss severity, and three times for non-performance. Hybrid securities ratings are in accordance with Fitch's criteria and assessment of the instruments' non-performance and loss severity risk profiles. Thus, these ratings have been affirmed due to the affirmation of the VR.

SUBSIDIARY AND AFFILIATED COMPANY
The IDRs and VRs of NYCB's bank subsidiary benefits from the cross-guarantee mechanism in the U.S. under FIRREA, and therefore the IDRs and VRs of New York Community Bank are equalized across the group.

The IDRs and VRs of AF's bank subsidiary benefits from the cross-guarantee mechanism in the U.S. under FIRREA, and therefore the IDRs and VRs of Astoria Bank are equalized across the group.

LONG- AND SHORT-TERM DEPOSIT RATINGS

NYCB's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

AF's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND SENIOR DEBT

Should operational and integration risks challenges arise, which lead to changes in our base assumption NYCB's rating could be reviewed for possible downgrade. Incorporated in Fitch's affirmation is the view that the combined entity asset quality performance will continue to be better than peers, regulators will approve the merger, and NYCB's projected figures for the transaction materialize. Additionally, Fitch's ratings incorporate the view that NYCB will successfully complete the CCAR process. Negative changes to these assumptions will likely pressure NYCB's current ratings.

AF's ratings will likely be upgraded upon NYCB's completion of the acquisition. Should NYCB be unable or unwilling to complete the acquisition of AF, Fitch would evaluate the reason and assess AF's ratings accordingly.

SUPPORT RATING AND SUPPORT RATING FLOOR
NYCB's and AF's Support Rating and Support Rating Floor are sensitive to Fitch's assumption as to capacity to procure extraordinary support in case of need.

HOLDING COMPANY
Should NYCB begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, Fitch could notch the holding company IDR and VR from the ratings of New York Community Bank.

Should AF begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of Astoria Bank.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The ratings of subordinated debt and other hybrid capital issued by NYCB and its subsidiary are primarily sensitive to any change in NYCB's VR.

The ratings of subordinated debt and other hybrid capital issued by AF and its subsidiary are primarily sensitive to any change in AF's VR.

SUBSIDIARY AND AFFILIATED COMPANIES
As the IDRs and VRs of the subsidiaries are equalized with those of NYCB to reflect support from their ultimate parent, they are sensitive to changes in the parent's propensity to provide support, which Fitch currently does not expect, or from changes in NYCB's IDRs.

As the IDRs and VRs of the subsidiaries are equalized with those of AF to reflect support from their ultimate parent, they are sensitive to changes in the parent's propensity to provide support, which Fitch currently does not expect, or from changes in AF's IDRs.

LONG- AND SHORT-TERM DEPOSIT RATINGS

The ratings of long- and short-term deposits issued by NYCB and its subsidiaries are primarily sensitive to any change in NYCB's long- and short-term IDRs.

The ratings of long- and short-term deposits issued by AF and its subsidiaries are primarily sensitive to any change in AF''s long- and short-term IDRs.

FULL LIST OF RATING ACTIONS

Fitch has affirmed the following ratings:

New York Community Bancorp
--Long-term IDR at 'BBB+';
--Viability rating at 'bbb+';
--Short-term IDR at 'F2';
--Support at '5';
--Support floor at 'NF'.

New York Community Bank
--Long-term IDR at 'BBB+';
--Long-term deposits at 'A-';
--Viability rating at 'bbb+';
--Short-term IDR at 'F2';
--Support at '5';
--Support floor at 'NF';
--Short-term deposits at 'F2'.

New York Commercial Bank
--Long-term IDR at 'BBB+';
--Long-term deposits at 'A-';
--Viability rating at 'bbb+'.
--Short-term IDR at 'F2';
--Support at '5';
--Support floor at 'NF';
--Short-Term deposits at 'F2'.

Richmond County Capital Corporation
--Preferred stock at 'BB-'.

Astoria Financial Corporation
Astoria Bank (Formerly Astoria Federal Savings and Loan Association)
--Viability Rating at 'bbb-';
--Support Rating at '5';
--Support Rating Floor at 'NF'.

Fitch has placed the following ratings on Rating Watch Positive:

Astoria Financial Corporation
--Long-term IDR at 'BBB-';
--Short-term IDR at 'F3';
--Senior Debt 'BBB-';
--Preferred Stock 'B'.

Astoria Bank (Formerly Astoria Federal Savings and Loan Association)
--Long-term IDR at 'BBB-';
--Short-term IDR at 'F3';
--Long-term Deposits at 'BBB';
--Short-term Deposits at 'F2'.