Shares of New York Community Bank jumped 30 per cent on Monday morning after one of its subsidiaries agreed to buy most of Signature Bank, the failed crypto-focused lender.
The Federal Deposit Insurance Corporation announced the deal on Sunday, one week after the US banking regulator and deposit insurer took control of Signature.
The seizure came on the heels of the collapse of Silicon Valley Bank and led to heightened worries about the health of the nation’s regional banks. On Friday, 11 of the largest US banks deposited $30bn into accounts at First Republic in order to shore up confidence in that bank and calm fears of further bank failures.
As part of the Signature deal, the FDIC said NYCB would acquire “substantially all” of the deposits of Signature Bank and just over a third of its assets, including nearly $13bn in loans, which were sold at a discount.
NYCB will also take over all 40 of Signature’s bank branches, which will be rebranded as Flagstar branches. NYCB bought Michigan-based Flagstar in December and is in the process of converting all of its branches to the Flagstar brand.
The FDIC had sought to sell Signature in one piece, but a bidder for all of the bank’s assets did not materialise as the sale process progressed over last week and through the weekend.
The deal excludes Signature’s crypto unit Signet, which facilitates the buying and selling of digital currencies. The assets in that division, which had been one of the fastest-growing in the bank, have sunk to just $4bn, from nearly $30bn a year ago. The FDIC said it would seek to return those assets to account holders but could still sell the Signet business.
The FDIC said it would retain about $60bn worth of Signature’s loans, bonds and other assets. A spokesperson for the FDIC said it was still trying to find a buyer for those assets, but the agency would act as the servicer for the loans it was retaining for the time being.
NYCB paid just over $10bn for the nearly $13bn in Signature loans it bought from the FDIC, less than the loans’ face value of $0.80 per dollar.
As compensation for the deal, NYCB is granting the FDIC the right to buy shares in NYCB that could be worth as much as $300mn. In all, the FDIC estimates the deal will end up costing the bank regulator’s deposit fund $2.5bn.
“Flagstar has gotten a very fair deal,” said Christopher Whalen, a banking analyst and chair of Whalen Global Advisors. “And it doesn’t surprise me that the FDIC is going to have to take a loss, in part because of the low quality of the remaining assets.”
