New York Community Bancorp (NYSE:NYCB) stock is up 30% today and trending on social media. The regional bank’s subsidiary is going to buy assets from New York-based Signature Bank, which was closed by New York regulators amid mass withdrawals by its depositors.
More About New York Community Bancorp’s Purchases
New York Community’s subsidiary, Flagstar Bank, is acquiring Signature’s 40 branches and most of its remaining deposits from the Federal Deposit Insurance Corporation. However, the subsidiary will not acquire the bank’s crypto deposits.
Regarding loans, Flagstar obtained $12.9 billion of Signature’s deals for just $2.7 billion. The latter component of the deal is probably what is causing NYCB stock to rally sharply today.
That’s because, unless the U.S. economy goes into a complete tailspin, the bank will, in all likelihood, make a huge profit on the loans that it obtained from the FDIC. Indeed, since the FDIC is still holding $60 billion of Signature’s loans, NYCB probably chose to acquire Signature’s safest lending deals.
More Background on Signature
Signature became the victim of a classic bank run after its larger, California-based peer, Silicon Valley Bank, failed. That’s because, like Silicon Valley, a high percentage of the value of Signature’s deposits was not insured by the FDIC. Additionally, the two banks both had significant crypto businesses and had lent a meaningful amount to tech firms.
Portions of the tech sector have been badly hit by interest rate hikes, while the Federal Reserve, the FDIC, and the Comptroller of the Currency had previously urged banks to avoid “issuing or holding as principal crypto-assets.”
Speaking of cryptos, it will be interesting to see whether the FDIC will fully ensure Signature’s crypto deposits, since they, of course, are not dollar-denominated.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.