Silicon Valley Bank Auction and Signature Bank Sale


Bank Asset Auction: Bids for Silicon Valley Bridge Bank, N.A. (“SVB”) and its subsidiary Silicon Valley Private Bank, together or separately, in whole or in part, are due by Wednesday, March 22, 2023 at 8 p.m. and Friday, March 24, 2023 at 8 p.m. We’ve previously reported that SVB is open for operations for a minimum of ninety days until it is sold or liquidated. According to the Federal Deposit Insurance Corporation (“FDIC”), the pool of potential bidders has been expanded: “Qualified, insured banks, and qualified, insured banks in alliance with nonbank partners, will be able to submit whole-bank bids or bids on the deposits or assets of the institutions. Bank and non-bank financial firms will be permitted to bid on the asset portfolios.”[1] The FDIC states that the bridge bank continues to operate and will meet its obligations, and reminds contract counterparties, presumably including borrowers, that they are “legally obligated to perform under the contracts.”

Bank Sale: The FDIC entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association (“SB”), by Flagstar Bank, National Association, Hicksville, New York (“Flagstar”), a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, New York (“NYCB”).

According to the FDIC, the sale is only for certain assets and liabilities:

  • Roughly $38.4 billion of SB's assets, including loans of $12.9 billion, purchased at a discount of $2.7 billion;
  • Approximately $60 billion in loans will remain in the receivership for later disposition by the FDIC;
  • Flagstar's bid did not include approximately $4 billion of deposits related to the former Signature Bank's digital banking business; and
  • The FDIC received equity appreciation rights in NYCB, common stock with a potential value of up to $300 million.[2]

According to NYCB:

  • Acquired cash will be used to pay down a substantial amount of its wholesale borrowings, leaving the balance sheet in an even stronger cash position;
  • Purchased loans consist exclusively of commercial and industrial loans ("C&I");
  • Flagstar is in discussions about sub-servicing unpurchased loans;
  • Flagstar did not acquire any crypto-related assets or deposits; and
  • Flagstar will take over all of Signature's branches.[3]

As of this writing, the purchase and sale agreement was not publicly available. Because the FDIC anticipates a cost of $2.5 billion to its Deposit Insurance Fund, the details of the purchase and sale may be relevant, particularly to customers whose relationships are not transitioned to Flagstar Bank. More details to follow as they become available.

Original Article