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FDIC Sells Signature Bank’s Deposits to Flagstar Bank
New York(CNN) The Federal Deposit Insurance Corporation (FDIC) announced it has sold most of Signature Bank’s deposits to Flagstar Bank, a subsidiary of New York Community Bank, following Signature Bank’s failure.
Effective Monday, all 40 of Signature Bank’s branches will begin operating as Flagstar Bank. Customers of Signature Bank will not need to make any changes to continue banking with Flagstar Bank.
New York Community Bank purchased a majority of Signature’s deposits, worth $38.4 billion, including $12.9 billion of Signature’s loans. The bank purchased the loans at a significant discount, paying only $2.7 billion. In addition, New York Community Bank paid FDIC stock, which has a potential value of up to $300 million.
Signature Bank’s Assets and Deposits
With over $110 billion in assets at the end of last year, including $88.6 billion in deposits, the recent run against Signature Bank led to a massive decline in deposits.
Although not included in the transaction, Signature Bank’s digital bank business has $4 billion in deposits. FDIC is retaining about $60 billion in Signature Bank’s other assets.
Banks Maintain Caution Against Risk
As the banking crisis spreads, banks have become wary of taking on risk, which is why New York Community Bank declined to take on all of Signature Bank’s assets.
“We are unsurprised the FDIC retained loans as we would expect banks to be cautious on quickly buying loans without liability and loss protections,” said Jaret Seiberg, analyst at TD Cowan.
Selling Off Assets
The FDIC expects to sell off the retained assets over time, and the total cost to the government will ultimately be about $2.5 billion.
