Failed Signature Bank Finds a Buyer

The 40 branches of Signature Bank were acquired by a subsidiary of New York Community Bancorp on March 19.

Signature Bank in New York, the third bank to fail in March, was acquired by Flagstar Bank, the FDIC said on Sunday.

The New York bank was taken over by a federal regulator on March 12 after the New York State Department of Financial Services closed the bank, only two days after Silicon Valley Bank was shut down by the FDIC.

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Flagstar, a subsidiary of New York Community Bancorp  (NYCB) - Get Free Report, acquired the former 40 branches of Signature Bank. 

The acquisition includes the purchase of $38.4 billion of Signature Bridge Bank, N.A.'s assets, including loans of $12.9 billion purchased at a discount of $2.7 billion. 

The bridge bank's $60 billion in loans will remain in the receivership for disposition by the FDIC at a later date.

The deal did not include approximately $4 billion of deposits related to the former Signature Bank's digital banking business, the FDIC said.

The deposits from the digital banking business will be provided "directly to customers whose accounts are associated with the digital banking business," the FDIC said.

Investigations

The former former Signature Bank had total deposits of $88.6 billion and total assets of $110.4 billion as of December 31, 2022.

The FDIC received common stock of New York Community Bancorp that has a "potential value of up to $300 million."

The failure of Signature Bank to its Deposit Insurance Fund is approximately $2.5 billion, the FDIC estimates. The exact cost will be determined when the FDIC terminates the receivership. 

The FDIC had named Greg D. Carmichael as CEO of Signature Bridge Bank, N.A. He recently served as president and CEO of Fifth Third Bancorp.

Signature Bank branched out into the cryptocurrency industry unlike other banks who stayed away from the virtual currencies.

The bank's involvement with its customers in the crypto industry was being investigated by prosecutors in the U.S. before it was shut down by regulators, sources told Bloomberg.

The investigators in Washington and Manhattan from the Justice Department were looking into whether Signature Bank had looked into if its clients were conducting money laundering, the article said.

Banks are required to follow steps to determine if they know their customers, such as examining who an account holder is. They are also required to look into the types of transactions made by customers and if they resemble any kind of criminal wrongdoing.

Sources told Bloomberg that the Securities and Exchange Commission was also investigating Signature Bank. 

The collapse of Signature Bank followed the failure of Silicon Valley Bank. 

SVB's parent company, SVB Financial, filing for bankruptcy protection on March 17. The bank's assets were not included in the filing. The Chapter 11 filing is the largest bankruptcy for a bank since Washington Mutual filed in 2008.

SVB was the second-largest bank failure in U.S. history and has shaken many investors. It was the result of a bank run, caused by the firm’s announcement that it failed to raise the additional capital to increase liquidity.

The bank made investments into long-dated government securities, including Treasury securities. When depositors demanded their funds, the bank sold the securities, taking a $1.8 billion loss. The Santa Clara, Calif., bank then attempted to raise $2.25 billion in capital by issuing new common and convertible preferred shares to cover the shortfall.

Depositors made a run on the bank, withdrawing their cash and transferring it into other banks.