The Federal Deposit Insurance Corp. said late Sunday that New York Community Bank has agreed to purchase a substantial portion of the bankrupt Signature Bank for $2.7 billion. The Signature Bank’s 40 branches will be renamed Flagstar Bank starting Monday. Flagstar is one of the units of New York Community Bank. The transaction will involve the purchase of $38.4 billion in Signature Bank’s capital, which represents slightly more than a third of the bank’s total when it collapsed in the previous week.
The FDIC stated that $60 billion in Signature Bank loans will stay in bankruptcy and will be auctioned off over time.
Signature Bank became the second bank to dissolve in this banking crisis, approximately 48 hours after the downfall of Silicon Valley Bank. Signature, located in New York, was a major commercial lender in the tristate area before venturing into cryptocurrency as a possible growth sector in recent years.
Depositors grew anxious about Signature Bank’s viability when Silicon Valley Bank failed, owing to the bank’s large quantity of unsecured deposits as well as its commitment to crypto and other tech-focused loans. Signature was the third-largest bank collapse in U.S. history when it was shuttered by authorities.
The FDIC estimates that Signature Bank’s bankruptcy would cost the deposit insurance fund $2.5 billion, although that amount is subject to change as the regulator sells assets. The deposit insurance fund is funded via bank assessments, and taxpayers face no direct expense when a bank fails.