Buyer Takes On Signature Bank’s Deposits, Rejects Its Commercial Real Estate Loans
By: Ethan Rothstein
The Signature Bank branch on Madison Avenue in Manhattan.
A week after the Federal Deposit Insurance Corp. took control of Signature Bank, it has found a buyer for all of its deposits and the portion of its assets that excludes its sizable commercial real estate loan portfolio.
Flagstar Bank, a subsidiary of New York Community Bancorp, has agreed to buy $38.4B of the assets controlled by Signature Bridge Bank, the receiver established last Sunday by the FDIC, which announced the deal in a press release Sunday night.
The deal includes $12.9B of the loans on Signature Bridge Bank's books at a discount of $2.7B and the assumption of all of the bank's deposits, except for its $4B of cryptocurrency deposits, which the FDIC will handle directly, its press release said.
Roughly $60B of Signature Bridge Bank's assets aren't included in the deal and will need to be moved to a new buyer or buyers. Signature Bank's 40 branches will reopen Monday as Flagstar branches, the FDIC said. NYBC said Monday the assets it acquired didn’t include Signature’s $35.8B commercial real estate loan portfolio or the $19.5B in multifamily loans it owns, The Real Deal reported.
“We did not acquire any multifamily or commercial real estate loans,” NYBC spokesperson Salvatore DiMartino told TRD. “Zero.”
In a conference call with reporters Monday, Long Island-based NYBC CEO Tom Cangemi said the bank wasn’t interested in increasing its exposure to commercial real estate — it’s already an active lender in the city, especially on rent-regulated apartments, much like Signature was.
“We have to acknowledge how concentrated we are,” Cangemi said on the call, Crain’s New York Business reported.
The FDIC still needs to find some takers for roughly $50B of CRE debt, and it said Sunday that it expects the Deposit Insurance Fund — which is funded by bank assessments, not taxpayer dollars — to take a $2.5B loss from the Signature failure. The nature of the sale to NYCB shows how the value of debt backed by New York City office and multifamily buildings has fallen since the onset of the pandemic and the passage of more restrictive rent regulations in 2019.
“As long as the loans are out there, they grow hair on them,” Community Housing Improvement Program CEO Jay Martin told TRD. “The longer they sit, the larger the concern will be that there’s something wrong with those loans.”
Signature Bank was the second bank to collapse last week, roughly 48 hours after Silicon Valley Bank failed and was taken over by the FDIC. Unlike SVB, Signature was a major commercial real estate player, lending more money since January 2020 on New York CRE than every bank except for JPMorgan and Wells Fargo, according to PincusCo.
Regulators said a crisis of confidence in the bank's leadership led to its downfall, and real estate players fueled the run by pulling billions in deposits immediately after SVB's collapse, The Wall Street Journal reported.
By the end of last week, commercial real estate players in New York said the industry had regained some normalcy after a few days of "freaking out," Bisnow reported. But the failures of Signature and SVB, the Sunday takeover of Credit Suisse by UBS and the concerns over the solvency of First Republic Bank have deepened fears of a global credit crunch kicking off a recession — and will make the Federal Reserve's decision on interest rates at its meeting Tuesday and Wednesday all the more difficult.
"Banking crises by their definition, the one silver lining is they're probably deflationary because it takes money out of the system, so that's a good thing," BentallGreenOak co-CEO Sonny Kalsi said on the Bisnow Reports podcast this week. "They're bad as it relates to capital being there for growth, confidence for people to invest in things and everything else."
New York Community Bank acquired Flagstar in December, but the slowdown in mortgage lending caused its originations to plummet and the parent company laid off 10% of its staff last month, TRD previously reported. It now emerges as a possible winner, with its estimated earnings jumping 70%, 40 new bank branches and growing its deposits to $93B at no cost and the death of its primary competitor.
“The deal almost seems too good to be true,” Keefe Burettye & Woods analyst Chris McGratty wrote of NYCB’s Signature takeover, per Crain’s.