New York Community (NYCB) Buys $38B Signature Bank's Assets

New York Community Bancorp, Inc. NYCB announced that its bank subsidiary, Flagstar Bank, has acquired $38 billion in assets and assumed $36 billion of liabilities of Signature Bridge Bank, N.A., from the Federal Deposit Insurance Corporation ("FDIC").

The deal comes after Signature Bank was closed by the regulators, following the collapse of Silicon Valley Bank. The FDIC took over the fallen bank and transferred all the deposits and substantially all the assets to Signature Bridge Bank, N.A.

NYCB has received all the required regulatory approvals, including approval from the Office of the Comptroller of the Currency ("OCC"), and the deal has been closed.

Specifically, $38 billion in assets consists of several loan portfolios aggregating $13 billion and cash totaling $25 billion (including $2.7 billion arising from a discounted bid to net asset value). The acquired loans exclusively consisted of commercial and industrial loans (C&I). The expected loan balance post-acquisition will be around $81 billion.

The liabilities of $36 billion consisted of deposits of $34 billion and other liabilities of $2 billion. It also includes its core bank deposit relationships, including both the New York and the West Coast private client teams.

The deal also includes Signature Bank’s wealth-management and broker-dealer business. The acquisition included 30 branches, which will now be operated under the Flagstar Bank brand.

Given the uncertainty in the digital asset space, NYCB did not acquire any digital asset banking, crypto-related assets or the fund banking business. This aside, NYCB is working on an agreement to sub-service the Signature Bank’s multi-family, commercial real estate (CRE), and other loans it did not acquire.

Deal Rational

Management expects the transformation of Flagstar Bank from a multi-family lender to a diversified full-service commercial bank successive to the completion of the deal. The deal is expected to increase the bank’s deposit base to around $91 billion, reducing the loan-to-deposit ratio to 88% from 120%.

The company plans to use its significant liquidity position to pay a substantial amount of its wholesale borrowing. This along with the addition of low-cost deposits will reduce funding costs, hence, the net interest margin is expected to expand.

The acquisition is expected to be significantly accretive to earnings per share, which are expected to increase 20%. It will lead to value accretion of tangible book value by around 15%.

Our Take

The deal will strengthen the balance sheet position and improve liquidity. This along with the diversification of business verticals will help establish the company’s position as a high-performing scheduled commercial bank. Hence, enhancing the bank’s competitive position on the back of strategic acquisitions will improve profitability in the long term.

Over the past six months, shares of NYCB have lost 4.5% compared with the industry’s 18.3% decline.

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Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Expansion Efforts by Other Firms

Amid a challenging operating backdrop due to the expectations of an economic slowdown, finance companies are undertaking expansion moves through acquisitions. Recently, Bank of Montreal BMO announced the closure of its acquisition of Bank of the West from BNP Paribas BNPQY.

With the deal, BMO expands its presence across more than 500 additional branches and commercial and wealth offices in the major U.S. growth markets. For BNPQY, the sale is part of its efforts to streamline operations and enhance operating efficiency.

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