New York Community Bank Buys A Third of Signature's Assets

New York Community Bank has agreed to acquire about a third of the assets of Signature Bank, the regional New York-based bank that collapsed and was shut down by federal regulators last week.

The Federal Deposit Insurance Corp. announced a $2.7B deal on Sunday in which Community Bank agreed to purchase assets worth $38.4B from Signature, according to a report in the New York Post.

Beginning this morning, Signature’s 40 bank branches will become Flagstar Bank outlets, a subsidiary of New York Community Banks. The balance of Signature’s assets, more than $60B,  will remain in receivership until they are sold off, FDIC said.

Signature Bank has been one of the top commercial real estate lenders in the city for the past decade. The collapse of the bank, headquartered on Fifth Avenue, has blown a big hole in the already challenged financial ecosystem of CRE in NYC.

No other bank has issued a higher number of commercial real estate mortgages backed by New York City buildings since the beginning of 2020, according to an analysis by Pincus; only Wells Fargo and JPMorgan Chase have lent more money than Signature overall to CRE developers and building owners in NYC during the same period.

A portfolio of real estate loans encompasses more than a third of Signature’s $110B in assets, about $36B—almost all of it backed by NYC buildings—according to year-end 2022 data from the Federal Deposit Insurance Corp. FDIC data also shows the bank’s CRE loan portfolio grew more than fourfold over the past decade.

Signature’s collapse also eliminates the leading lender by far in NYC for apartments serving low-to-middle income households at a moment of maximum demand for affordable housing. Going back to 2009, Signature consistently has been a perennial leading lender to the multifamily sector in the city.

According to a report last week in the Wall Street Journal, a run on Signature by NYC landlords and real-estate investors played a major role in the bank’s collapse. Many of the developers, wealthy real estate families and property funds who borrowed from Signature also keep sizeable deposits at the bank, WSJ reported.

Rent payments for offices and apartment buildings throughout NYC are channeled through Signature accounts and vast sums wired from property buyers      to sellers move through escrow accounts at the bank, which is the “bank of choice” for numerous real estate lawyers and accountants, the report said.

These CRE bank customers were spooked by the collapse of Silicon Valley Bank (SVB)—a leading repository in the US for venture capital seed money for startups—and by Signature’s exposure to cryptocurrency firms, which the New York bank aggressively has been courting for the past two years.

After regulators closed Signature Bank, the FDIC created a new entity called Signature Bridge Bank. Federal regulators and the Treasury Department said it would guarantee all Signature deposits.