As A Result Of Its Acquisition Of Signature Bank Assets, This Bank's Stock Is Soaring.

A subsidiary of the New York Community Bancorp is going to acquire most of what was once Signature Bank of New York, according to the Federal Deposit Insurance Corporation, which shut down the bank a week ago. The stock of New York Community Bancorp NYCB +34.40% soared on Monday after it was shut down by regulators one week ago.

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It is expected that Signature Bank's 40 branches will be operating under , a subsidiary of New York Community Bancorp (ticker: NYCB), the FDIC announced. The FDIC also explained that all deposits assumed by Flagstar under its new structure will be insured by the agency up to $250,000.

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The FDIC said the funds held by Signature's Digital banking business, which is owned by Flagstar, would be provided directly to the customers rather than being made available to Flagstar through its bid.

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Until Signature exits receivership, it is uncertain exactly how much the FDIC has lost due to Signature's failure.

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In addition to the $4 billion in deposits, Signature still had $60 billion worth of loans on its books. Signature's assets were purchased by Flagstar for $38.4 billion, including $12.9 billion in loans, which Flagstar purchased at a 21% discount for $10.2 billion.

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An analyst was impressed by the deal.

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In a report that was published by Wedbush on Monday, David Chiaverini wrote that, as a result of the FDIC pricing assets to move quickly, NYCB benefits from the sweetheart deal.

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It is in his opinion that the Signature deal offers the chance for a material increase in earnings per share, which is why he increased the stock's rating to Outperform from Neutral. According to the analyst, the earnings per share for 2023 and 2024 are being raised, and his price target for the stock is rising from $10 to $11.

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This is largely due to a retracement of the 27.5% slide the bank suffered from $9 to $5.81 this month following fears for small banks and as a result, the bank's stock jumped 41% to $9.23 on Monday morning.

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In the case of NYCB doing this transaction, the FDIC probably would not allow them to do it unless they are very sure that

The fact that NYCB is buying this company strikes us as something along the lines of a good housekeeping seal of approval for NYCB as we are comfortable with the strength of their balance sheet," wrote Piper Sandler analyst Mark Fitzgibbon, whose firm advised the FDIC on the deal.

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With the deal signed Sunday, the FDIC received $300 million in stock appreciation rights for New York Community Bancorp. By trimming its loan-to-deposit ratio from a worrisome 118%, to a healthy 88%, the agency will be able to reduce the bank's borrowings and enhance liquidity by giving $25 billion to the bank.

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While their business models differ and there are some differences between them, the event that caused Signature Bank to fail last week and Silicon Valley Bank to fail the same day was ultimately the same: an overwhelming demand for cash from depositors as they sought to get their money out of their banks. 

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A number of San Francisco-area venture capitalists and start-up founders used Silicon Valley Bank as their clientele, while Signature's clientele included commercial real estate investors, cryptocurrencies, and taxi drivers. Due to the contraction of the market conditions over the past year, the deposit bases at both banks became susceptible to quick flight.

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In the history of the United States, Silicon Valley Bank collapsed into bankruptcy in 1969, while Signature Bank succumbed in 1973, making it the third biggest failure in the country's history.

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It would appear that New York Community Bancorp have taken full advantage of the slowdown by making a deal that has made the company a good deal. The analysts at Keefe, Bruyette & Woods also upgraded New York Community Bancorp's stock to Outperform, after Sunday's announcement.

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In addition to boosting New York Community's earnings per share by 70%, Keefe, Bruyette analyst Christopher McGratty believes the transaction will ensure the company's dividend. It almost seems too good to be true, and the deal marks [New York Community Bank] as an official winner with regulators.