FDIC sells Signature Bridge Bank to Flagstar Bank, with Flagstar set to operate the former’s branches starting March 20.
The Federal Deposit Insurance Corporation (FDIC) has announced a purchase and assumption agreement with Flagstar Bank, National Association, to take over substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association. This comes after the New York State Department of Financial Services closed the bank and appointed the FDIC as receiver.
Starting Monday, March 20, 2023, the 40 former branches of Signature Bank will operate under Flagstar Bank, N.A., a wholly-owned subsidiary of New York Community Bancorp, Inc. Customers of Signature Bridge Bank, N.A., are advised to continue using their current branch until they receive notice from Flagstar Bank that full-service banking is available at its branches. All deposits assumed by Flagstar Bank will continue to be insured by the FDIC up to the insurance limit. However, the bid submitted by Flagstar Bank did not include approximately $4 billion of deposits related to the former Signature Bank’s digital banking business. The FDIC will directly provide these deposits to customers associated with the digital banking business.
As of December 31, 2022, the former Signature Bank had total deposits of $88.6 billion and total assets of $110.4 billion. The purchase of approximately $38.4 billion of Signature Bridge Bank, N.A.’s assets by Flagstar Bank includes loans of $12.9 billion purchased at a discount of $2.7 billion. Meanwhile, approximately $60 billion in loans will remain in the receivership for later disposition by the FDIC. As part of the agreement, the FDIC received equity appreciation rights in New York Community Bancorp, Inc. common stock with a potential value of up to $300 million.
Is FDIC Telling the Truth?
Depositors of Signature Bridge Bank, N.A., excluding depositors related to the digital banking business, will automatically become depositors of Flagstar Bank. Furthermore, The FDIC estimates that the cost of the failure of Signature Bank to its Deposit Insurance Fund will be approximately $2.5 billion. Authorities will determine the exact cost when the FDIC terminates the receivership.
Castle Island Ventures partner Nic Carter believes that the latest announcement shows that the FDIC was not truthful in its earlier denial. Last week, a report by Reuters suggested that any buyer of Signature must “divest” crypto activities as part of a potential rescue plan. However, an FDIC spokesperson denied this, stating that the agency did not require crypto divestment as part of any sale.
In light of these developments, customers who would like more information about today’s transaction can visit the FDIC’s website. The FDIC urges customers to remain vigilant and to contact the agency if they receive any suspicious communication purporting to be from the acquiring bank.