New York Community’s challenge: Keeping Signature’s remaining deposits

“I think having stability where we step in should bring some comfort,” Thomas Cangemi, President and CEO of New York Community Bancorp, said Monday in reference to Signature Bank’s deposit base. “But, you should know that there is no guarantee.” “But, you know, there’s no guarantee.” This is only 38% of Signature’s $88.6billion total deposits as of Dec. 31, 2022. Analysts pressed New York Community executives Monday to explain their plans to retain the deposits. Cangemi pointed out that the “vast majority of remaining deposits are tied directly to private client groups. Of that 40%, approximately 40% are tied directly to private-client group’s businesses and operating accounts. Cangemi stated that stability, where we step into here, should provide some comfort. There is no guarantee. We will work hard to ensure that our clients understand that we are here for them and that we are here for the relationship mangers. The FDIC was appointed receiver. Signature’s collapse was the third-largest U.S. bank bankruptcy. It occurred just two days after Silicon Valley Bank in Santa Clara, California, which was the second-largest U.S. banking failure, was closed down by the New York State Department of Financial Services. The FDIC was appointed receiver. Signature, a New York Community bank, had completed its last acquisition, the twice-delayed acquisition of Flagstar Bancorp, Troy, Michigan, less than four months ago. The company stated that the integration of the two companies was in progress and will be completed during the first quarter 2024. The FDIC didn’t immediately respond to questions about the vesting period, how long the rights will be held, how it would cash them out, and whether they are transferable. New York Community plans on using the cash, which includes a $2.7billion discount on acquired loans to pay down “a substantial portion” of wholesale borrowings. The additional commercial loans will help New York Community diversify its loan portfolio, which has for decades been heavily dominated multifamily lending. The deal gives the bank entry into new business lines such as Small Business Administration lending, health care lending and middle-market specialty financing, and adds to existing specialties within mortgage warehouse lending.Of the $34 billion of incoming deposits, a substantial portion is non-interest-bearing, which should aid in the bank’s efforts to remix its funding base.Adding those deposits to New York Community’s existing balance sheet will reduce the company’s loan-to-deposit ratio, a liquidity metric that measures total loans to total deposits, from 118% to 88%, according to New York Community. The new ratio is “in line with other commercial banks,” Cangemi said.The deal also includes Signature’s wealth management and broker-dealer business and 40 branches, including 30 offices in the New York metropolitan area and several others in California.Importantly, the deal excludes any of Signature’s crypto-related deposits, which are said to total about $4 billion. According to the FDIC, Signature’s failure will cost the Deposit Insurance Fund approximately $2.25 billion. However, New York Community is currently working on a subservice agreement for those loans. Multifamily loans accounted to 55.3% of New York Community’s loan book as of Dec. 31, while commercial real estate loans comprise 12.3%, according the company’s fourth quarter earnings presentation. Cangemi stated that the goal is to diversify away from multifamily lending. He said, “We have to admit how concentrated we are.” Investors seemed to approve of this deal. After the announcement, shares of New York Community rose more than 30% Monday.