What occurred

Shares of New York Neighborhood Bancorp (NYCB 33.30%) had shot up practically 32% as of 9:38 a.m. ET at this time after the financial institution and the Federal Deposit Insurance coverage Company (FDIC) introduced that NYCB would take over sure components of Signature Financial institution (SBNY -22.87%).

So what

As many now know, Signature Financial institution was closed by state banking regulators on March 11 after the financial institution skilled vital deposit outflows and regulators misplaced confidence in administration.

NYCB in its announcement famous that the financial institution solely acquired “sure financially and strategically complementary components” of Signature, together with $38 billion of belongings, $25 billion of which is money, and roughly $13 billion of loans. The deal doesn’t embody Signature’s crypto enterprise or its fund banking enterprise, which had been lending to personal fairness and enterprise capital companies.

Included within the money portion of the deal is a $2.7 billion low cost to Signature’s web asset worth. NYCB additionally assumed $34 billion of deposits and 40 Signature financial institution branches, 30 of that are in New York Metropolis. The deal will price the FDIC’s insurance coverage fund, which had roughly $128 billion in it on the finish of 2022, roughly $2.5 billion, though that quantity might change.

NYCB may also get Signature’s wealth administration and broker-dealer companies and is engaged on an settlement to service Signature’s multi-family, industrial actual property and different loans that it did not purchase.

“This transaction continues our transformation from a predominantly multi-family lender to a diversified full-service industrial financial institution,” NYCB’s CEO Thomas Cangemi stated in a press release. “It builds upon and accelerates the transformation set in movement by the merger of New York Neighborhood and Flagstar, and we consider the monetary metrics are extraordinarily enticing.”

Now what

Effectively, misery creates alternative, and what an ideal deal that is for NYCB. The financial institution has traditionally had a liability-sensitive stability sheet, that means its earnings struggles greater than most in a rising rate of interest surroundings as a result of its deposits aren’t sticky and deposit prices rise.

However NYCB has been working for just a few years to remix its stability sheet. It lately accomplished its acquisition of Flagstar Financial institution to assist do that, a deal that took a really very long time to finish.

The acquisition of Signature will proceed to assist additional this mission. Not solely will it proceed to diversify NYCB’s deposit base, however it’ll additionally add new lending verticals that may assist diversify NYCB’s asset base from largely a multi-family lender. Signature Financial institution brings mortgage warehouse lending, specialty finance, healthcare lending, and U.S. Small Enterprise Administration lending as properly.

Moreover, given NYCB’s giant New York presence, the financial institution will doubtless have the ability to consolidate Signature’s branches over time. NYCB expects the deal to develop tangible ebook worth or the financial institution’s web price by 15%, and enhance earnings by greater than 20%. Each numbers are unusually enticing for a financial institution acquisition, so NYCB shareholders must be fairly happy.