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New York Community Bancorp Acquires $38B of Assets of Signature Bridge Bank from FDIC

March 20, 2023, 07:48 AM
Filed Under: Banking News

New York Community Bancorp, Inc. announced its bank subsidiary, Flagstar Bank, N.A. (the "Bank") has acquired certain assets and assumed certain liabilities of Signature Bridge Bank ("Signature") from the Federal Deposit Insurance Corporation (the FDIC).  All regulatory approvals, including approval from the OCC, have been obtained, and the transaction has closed.

The Bank acquired only certain financially and strategically complementary parts of Signature that are intended to enhance its future growth. Under terms of the Purchase and Assumption Agreement (the Agreement) with the FDIC, the Bank:

  • Purchased assets of approximately $38 billion, including cash totaling approximately $25 billion and approximately $13 billion in loans. Included in the $25 billion of cash is $2.7 billion arising from a discounted bid to net asset value.
  • Assumed liabilities approximating $36 billion, including deposits of approximately $34 billion and other liabilities of approximately $2 billion.
  • The Company is working on an agreement to sub-service the legacy Signature multi-family, commercial real estate (CRE), and other loans it did not acquire.
  • Also included in the transaction is Signature's wealth-management and broker-dealer business.

The deal includes all of legacy Signature's core bank deposit relationships, including both the New York and the West Coast Private Client teams, as well as the wealth management and broker-dealer business.  The Private Client teams account for the majority of deposits we assumed.

The Company plans to use its significant liquidity position to pay down a substantial amount of its wholesale borrowings, leaving the balance sheet in an even stronger cash position.

The purchased loans consist exclusively of commercial and industrial loans (C&I). The Company did not acquire any digital asset banking or crypto-related assets or deposits, nor did it acquire loans or deposits related to the fund banking business.  

In connection with the transaction, the Bank will take over all of Signature's branches. This includes 30 branches in the New York City metro area and several branches on the West Coast. These branches will open tomorrow morning and operate under the Flagstar Bank brand.

On the lending side, the Bank added several attractive new verticals, including middle market specialty finance, healthcare lending and SBA lending, while adding to its existing verticals in mortgage warehouse lending, as well as traditional C&I lending.

Commenting on the transaction, President and Chief Executive Officer Thomas R. Cangemi said, "I would like to first and foremost extend a warm welcome to all of our new employees joining us from Signature.  Over the past 20 years, Signature and New York Community have operated in the same markets and we have great respect and admiration for the employee base.  Secondly, I would like to welcome our new customers and assure them that they are supported by an organization that has been a mainstay in its communities since 1859. We look forward to serving each of you and the new communities which we have entered."

Cangemi continued, "This transaction continues our transformation from a predominantly multi-family lender to a diversified full-service commercial bank. It builds upon and accelerates the transformation set in motion by the merger of New York Community and Flagstar, and we believe the financial metrics are extremely attractive. The deal is expected to significantly strengthen our deposit base, lower the loan-to-deposit ratio, provide the opportunity to pay down a substantial amount of our wholesale funding, and further diversify our loan portfolio away from CRE loans and more toward commercial loans.  Financially, the deal is expected to be significantly accretive to both earnings per share and to tangible book value per share.  The net interest margin expands due to lower funding costs, the additional deposits reduce the loan-to-deposit ratio to less than 90 percent, improves our profitability ratios, adds liquidity, and we maintain strong pro-forma capital ratios."

Further, he added, "Both the Company and the Bank were well positioned prior to the recent market turmoil, with strong capital, a stable retail deposit franchise, and ample liquidity.  Moreover, our asset quality metrics remain solid, as they have over multiple business cycles.  After this transaction, we will be even better positioned to deal with any residual market issues, including by now operating with a significantly lower loan-to-deposit ratio. Overall, we are happy that our conservative business model and balance sheet put us in a position to quickly consummate this important transaction."

Indicative Key Financial Metrics:

  • Pro-forma assets: $111 billion
  • Pro-forma deposits: $91 billion
  • Pro-forma loans: $81 billion
  • Expected earnings per share accretion: +20 percent
  • Expected tangible book value accretion: +15 percent
  • Substantial improvement in the net interest margin
  • Loan-to-deposit improves to 88 percent from 120 percent
  • Pro-forma capital ratios remain strong

Pro-forma assumptions based on NYCB data as of Dec. 31, 2022 and Signature data as of March 17, 2023 (as provided by the FDIC).

Jefferies LLC and Morgan Stanley & Co. LLC acted as financial advisors to New York Community in connection with the transaction. Sullivan & Cromwell LLP acted as legal advisor.

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