Flagstar acquires $38B in assets, assumes $34B deposits from Signature

Flagstar Bank, a top-20 U.S. mortgage lender owned by New York Community Bancorp, announced on Sunday that it has assumed most deposits and acquired certain assets, business lines and liabilities of Signature Bridge Bank, N.A. from the Federal Deposit Insurance Corporation (FDIC). 

Signature Bank, a New York-based large multifamily lender that disastrously bet big on crypto, collapsed last week after lacking liquidity amid a deposit run. Ultimately, the New York state chartering authority closed the bank on March 12. In a joint statement, the U.S. Department of Treasury, the Federal Reserve (Fed) and the FDIC cited “systemic risk” to justify the decision.   

Flagstar, the 19th-largest mortgage lender in the country, acquired $38 billion in Signature’s assets, including approximately $25 billion in cash and $13 billion in loans, which were exclusively commercial and industrial loans. It says the transaction adds new verticals, including middle market specialty finance, healthcare lending and SBA lending. 

With the deal, Flagstar will assume Signature’s $36 billion in liabilities, which includes $34 billion in deposits. The bank will also take 30 branches in the New York City metro area and several on the West Coast. 

However, Flagstar’s bid did not include $4 billion of deposits related to the former Signature’s digital banking business. The bank did not acquire crypto-related assets. Deposits at Signature have been in free fall since the fourth quarter of 2022 due to the arduous rate environment and challenges in the digital asset space, the company said in the Q4 2022 earnings release.  

Flagstar got Signature’s wealth management and broker-dealer business and is negotiating to sub-service the multifamily, commercial real estate and other loans it did not acquire. 

“This transaction continues our transformation from a predominantly multifamily lender to a diversified full-service commercial bank,” Thomas Cangemi, CEO at New York Community Bancorp, said in a statement. The deal expands the bank’s net interest margin due to lower funding costs and reduces the loan-to-deposit ratio to less than 90%, Cangemi said.

The FDIC received equity appreciation rights in New York Community Bancorp common stock with a potential value of up to $300 million.

New York Community Bancorp announced a $2.6 billion deal to acquire Flagstar Bank in April 2021, a transaction completed in December 2022. The deal diversified NYCB’s portfolio with warehouse lending business, commercial and industrial loans, commercial real estate loans and residential mortgage loans, the bank said. 

According to Inside Mortgage Finance estimates, Flagstar Bancorp was the second-largest warehouse lender in Q4 2022, with $12 billion in commitments and an 11% market share. (JPMorgan was the leader with $20 billion and an 18% share.) And the Signature’s transaction adds to the mortgage warehouse lending, Flagstar said. 

Flagstar has obtained all regulatory approvals for the deal. However, the Office of the Comptroller of the Currency stated the transaction was conditionally approved, requiring Flagstar to allocate appropriate resources to the assets and liabilities acquired, and will require a supervisory non-objection before paying a dividend to shareholders. 

According to the FDIC, approximately $60 billion in Signature’s loans will remain in the receivership for later disposition. The FDIC estimates the cost of the failure of Signature Bank to its deposit insurance fund to be approximately $2.5 billion.