New York (CNN) A week after Signature Bank failed, the Federal Deposit Insurance Corp. said it sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.
On Monday, 40 branches of Signature Bank will start functioning as Flagstar Bank. Signature customers will not have to make any changes to their banking on Monday.
Community Bank of New York acquired all of Signature’s deposits and total company assets valued at $38.4 billion. That includes $12.9 billion in Signature’s loans, which Community Bank of New York bought at a steep discount — and it paid just $2.7 billion for them. Community Bank of New York also paid $300 million worth of FDIC stock.
At the end of last year, Signature held more than $110 billion in assets, including $88.6 billion in deposits, and the run against the bank two weeks ago led to a steep decline in deposits.
Not included in the transaction are about $60 billion in other assets that will remain in receivership with the FDIC. It also doesn’t include $4 billion in deposits from Signature’s digital banking business.
As the banking crisis spreads, banks have grown more cautious about taking risks. That’s why Community Bank of New York doesn’t want to take over all of Signature’s assets.
“We are not surprised that the FDIC has retained the loans because we expect banks to be wary of quickly buying loans without liability and loss protections,” said Jared Seeberg, an analyst at TD Cowen. “More broadly, we see Monday’s opening of branches as NYCB branches positive for consumer confidence.”
The FDIC on Sunday expects to sell those assets over time, and the total cost to the government will ultimately be about $2.5 billion.