FDIC sells most of the failed Signature Bank to Flagstar

New York (CNN) A week after Signature Bank filed for bankruptcy, the Federal Deposit Insurance Corporation said it sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.

On Monday, Signature Bank’s 40 branches will operate as Flagstar Bank. Signature customers don’t need to make any changes to do their banking on Monday.

New York Community Bank bought virtually all of Signature’s deposits and a total of $38.4 billion in company assets. That includes $12.9 billion in loans from Signature, which New York Community Bank bought at a hefty discount — it only paid $2.7 billion for it. New York Community Bank also paid for the FDIC shares that could be worth up to $300 million.

At the end of last year, Signature had more than $110 billion in assets, including $88.6 billion in deposits, showing how the run against the bank two weeks ago led to a massive drop in deposits.

Not included in the transaction are approximately $60 billion in other assets, which will remain under the trusteeship of the FDIC. It also doesn’t include $4 billion in deposits from Signature’s digital banking business.

As the banking crisis deepens, banks have become increasingly reluctant to take risks. That’s probably why New York Community Bank was unwilling to take over all of Signature’s assets.

“We are not surprised that the FDIC is holding loans because we would expect banks to be cautious about buying loans quickly without liability and loss protection,” said Jaret Seiberg, an analyst at TD Cowan. “More generally, we see it as positive for consumer confidence that the branches will open as NYCB branches on Monday.”

The FDIC said on Sunday it expects to sell these assets over time, and the total cost to the government will ultimately be about $2.5 billion.






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