New York Community Bancorp’s (NYSE:NYCB) subsidiary Flagstar Bank has agreed to buy the shuttered Signature Bank’s deposits and some of its loans, the Federal Deposit Insurance Corp. (FDIC) announced on Sunday. The 40 former branches of Signature Bank will operate under Flagstar Bank, effective Monday, March 20, 2023.
New York state regulators shut down Signature Bank, a leading lender in the crypto industry, on March 12 in an attempt to protect depositors and prevent the spreading of a banking crisis. The move came just days after regulators closed down the Silicon Valley Bank (SIVB).
Details of the Deal
Signature Bank had deposits of $88.6 billion and assets worth $110.4 billion as of December 31, 2022. Under the deal announced by the FDIC, Flagstar purchased about $38.4 billion of Signature Bank assets, including loans of $12.9 billion bought at a steep discount of $2.7 billion. However, loans worth $60 billion will remain with the FDIC in the receivership for later disposition. (Note that when a financial institution is closed, the FDIC is appointed as the receiver and the shuttered financial institution is placed into receivership).
It’s worth noting that Flagstar Bank’s bid didn’t include nearly $4 billion of deposits related to Signature Bank’s digital banking business. The FDIC will provide these deposits directly to customers. Overall, the FDIC estimates the collapse of Signature Bank to cost its Deposit Insurance Fund about $2.5 billion. However, the exact cost will be known once the FDIC terminates the receivership.
The FDIC is still trying to find a solution for the Silicon Valley Bank. On Sunday, Reuters reported that the FDIC would relaunch its auction for SVB’s assets after failing to find buyers for the whole bank.
Is NYCB stock a Good Buy?
Wall Street is cautiously optimistic about New York Community Bancorp, with a Moderate Buy consensus rating based on five Buys and four Holds. The average NYCB stock price target suggests nearly 60% upside potential. Shares have declined 23% year-to-date.
