New York (CNN) A week after the failure of Signature Bank, the Federal Deposit Insurance Corporation said it had sold most of its deposits to Flagstar Bank, a subsidiary of the Community Bank of New York.
On Monday, Signature Bank’s 40 branches will begin operating as Flagstar Bank. Signature customers will not need to make any changes to do their banking on Monday.
The New York Community Bank substantially purchased all of Signature’s deposits and a total of $38.4 billion in the company’s assets. That includes $12.9 billion in Signature Loans, which the New York Community Bank bought at a steep discount — it paid just $2.7 billion for it. Community Bank of New York also paid 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.
About $60 billion in other assets is not included in the deal, which will remain in FDIC receivership. Nor does it include $4 billion in deposits from Signature’s digital banking business.
As the banking crisis spreads, banks are increasingly wary of risk. This is likely why the New York Community Bank was not willing to take over all of Signature’s assets.
“We’re not surprised the FDIC holds loans as we expect banks to be cautious about buying loans quickly without liability and loss protection,” said Garrett Siberg, an analyst at TD Cowan. “More broadly, we see it as positive for consumer confidence that the branches open on Monday as many as the ones in New York City.”
The FDIC said Sunday that it expects those assets to be sold over time, and the total cost to the government will ultimately be about $2.5 billion.
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