New York Community hopes Signature deal brings back depositors that fled

The acquisition by New York Community Bancorp Inc.'s subsidiary Flagstar Bank NA for parts of Signature Bridge Bank NA's portfolio should attract deposit inflow from Signature customers who withdrew their cash prior to the collapse of Signature Bank, executives said.

Prior to the transaction, New York Community was having conversations with some of the customers it shared with Signature in hopes of taking on some of those pulled deposits, New York Community President and CEO Thomas Cangemi said during an investor call on the deal. Now, New York Community is acquiring $34 billion in deposits of Signature Bridge Bank, giving the company an even better shot at getting more deposits from customers that fled prior to the failure of Signature Bank, the CEO said.

Assuming the $34 billion in deposits that New York Community is acquiring is what's left of Signature Bank's approximate prior deposit base of $89 billion, "That's a significant amount of outflow," Cangemi said on the call. "There's an opportunity to bring some of that money back."

While there's no guarantee New York Community can bring back all of that $89 billion, "we're going to work real hard," he said. Signature Bank reported $88.59 billion in deposits at Dec. 31, 2022, according to S&P Global Market Intelligence data.

The chief executive pointed to New York Community's 2009 acquisition of failed AmTrust Bank, which also experienced a run. After New York Community acquired the failed bank, "deposits came back pretty quickly," Cangemi said. However, ongoing market volatility and the implication of uninsured deposits make this situation different, he added.

In addition to the opportunity to garner more than just the $34 billion in deposits it is acquiring, New York Community is also excited for the opportunity to accelerate its initiative to become a more traditional commercial bank, a transformation that was "set in motion" by the company's acquisition of Flagstar, Cangemi said.

"This is where we're moving towards rounding out the commercial bank strategy," he said. "This is a significant infusion of that change."

In addition to the deposits, the company is acquiring $25 billion in cash and $13 billion in commercial and industrial (C&I) loans, Cangemi said. Notably, the transaction did not include any of Signature's cryptocurrency assets or its Signet platform.

Cangemi said New York Community acquired "only certain financially attractive and strategically complementary" parts of Signature. The addition of the C&I book will add new lending verticals such as Small Business Administration lending and healthcare banking, he said.

Following the deal's announcement, New York Community's stock was up 35.85% as of 11:37 a.m. ET.

The transaction should provide a "boost of confidence" for customers during an uncertain moment in the banking industry, Cangemi said, adding that he hopes the government continues to build confidence in the necessity of regional banks like New York Community.

Given the recent market volatility, New York Community provided an update on its deposit base. Since March 9, the company's total deposits are down $6 billion. However, $2 billion of that is normal outflows from things such as monthly escrow payments and another $3 billion is related to one relationship. Removing the impact of those two items, "we were down about 2% in deposits since March 9. So an extremely stable base," CFO John Pinto said.

Separately, the company feels well prepared for the challenges and risks associated with becoming a larger bank, Cangemi said.

"We're going to ensure that we have all of the appropriate risk management tools to be a $100 billion bank," he said. "We've made sizable investments. Now we get some of the operating leverage now because we have more scale."