NEW YORK (CNN) – A week after the Signature Bank collapse, the Federal Deposit Insurance Corporation announced that it had sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.
On Monday, Signature Bank’s 40 branches will begin operations as Flagstar Bank. Signature customers don’t need to make any changes on Monday to complete their banking.
New York Community Bank bought essentially all of Signature’s deposits and company assets, totaling $38.4 billion. That includes $12.9 billion in loans from Signature, which New York Community Bank bought at a steep discount – paying just $2.7 billion for it. The New York Community Bank also paid for the FDIC shares, which could be worth as much as $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 on the bank two weeks ago led to a massive drop in deposits .
Not included in the transaction are approximately $60 billion in other assets that will remain in the FDIC’s receivership. It also doesn’t include $4 billion in deposits from Signature’s digital banking business.
As the banking crisis has spread, banks have become increasingly cautious about taking risks. That’s probably why New York Community Bank wasn’t willing to take over all of Signature’s assets.
“We are not surprised that the FDIC has withheld loans as 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 broadly, we see it as a positive for consumer confidence that branches will open as NYCB branches on Monday.”
The FDIC said Sunday it expects to sell those assets over time, and the total cost to the government would ultimately be about $2.5 billion.