Signature Bank Reports 2016 Third Quarter Results

NEW YORK--(BUSINESS WIRE)--Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, today announced results for its third quarter ended September 30, 2016. Net income for the 2016 third quarter was $76.1 million, or $1.41 diluted earnings per share, versus $96.2 million, or $1.88 diluted earnings per share, for the 2015 third quarter. The decrease in net income for the 2016 third quarter, versus the comparable quarter last year, is primarily due to an increase in the provision for loan losses of $69.1 million. $61.7 million of the increase in provision for loan losses was due to the Chicago taxi medallion portfolio.

Net interest income for the 2016 third quarter reached $290.5 million, up $40.5 million, or 16.2 percent, when compared with the 2015 third quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $37.79 billion at September 30, 2016, an increase of $5.87 billion, or 18.4 percent, from $31.92 billion at September 30, 2015. Average assets for the 2016 third quarter reached $37.30 billion, an increase of $6.10 billion, or 19.6 percent, compared with the 2015 third quarter.

Deposits for the 2016 third quarter rose $1.82 billion, or 6.1 percent, to $31.40 billion at September 30, 2016. When compared with deposits at September 30, 2015, overall deposit growth for the last twelve months was 18.0 percent, or $4.78 billion. Average deposits for the 2016 third quarter reached $30.52 billion, an increase of $1.44 billion, or 4.9 percent.

“This quarter, Signature Bank effectively put the Chicago taxi medallion portfolio issues behind us, while growing deposits in excess of $1.8 billion. As we grow, we continue to expand our geographic outreach for securing deposits on a national basis across a number of industries. Our capabilities, service and trusted reputation for safety have always enabled the Bank to compete with major financial institutions throughout the New York metropolitan area. Now, these attributes afford us the opportunity to garner deposits in other regions of the country as well,” stated Joseph J. DePaolo, President and Chief Executive Officer.

“The client service differentiators Signature Bank brings do not go unnoticed. This quarter, the Bank was ranked Best Business Bank by New York Law Journal readers. Since the New York Law Journal, a leading trade publication for the legal market in New York, introduced its reader survey seven years ago, the Bank has continually secured the top spot or ranked within the top three positions in each category in which it was named. Law firms are a meaningful constituent within our client base, and this ranking is a testament to the fact that the Bank truly stands out amongst professional services organizations. Additionally, Weiss Ratings, a national independent provider of financial strength ratings for the bank and insurance industries, recently ranked Signature Bank amongst the top five highest-rated, largest banks in the U.S., depicting yet another example of our commitment to depositor-first, sleep-at-night, safety,” DePaolo explained.

Scott A. Shay, Chairman of the Board, commented: “At Signature Bank, we recognize that our core asset is trust. Our clients trust us to do two things: first, to keep their money safe; and secondly, to ensure all of their banking activities are conducted within their best interests. We value the great confidence our clients place in us, and we are dedicated to ensuring we deliver on that conviction with every client transaction. We also believe we have to keep our balance sheet pristine to maintain that trust and our actions this quarter demonstrate that commitment.

“And, then there is trust amongst our colleagues to serve our clients with integrity in both good and bad economic times. Our relationship-based approach has been the foundation of our business model since our inception. As we have demonstrated since our founding, we prosper as our clients prosper. We will continue to execute on our client-centric philosophy.”

Capital

The Bank’s Tier 1 leverage, common equity Tier 1 risk-based, Tier 1 risk-based, and total risk-based capital ratios were approximately 9.51 percent, 12.00 percent, 12.00 percent, and 13.56 percent, respectively, as of September 30, 2016. Each of these ratios is well in excess of regulatory requirements. The Bank’s strong risk-based capital ratios reflect the relatively low risk profile of the Bank’s balance sheet. The Bank’s tangible common equity ratio remains strong at 9.41 percent. The Bank defines tangible common equity ratio as the ratio of total tangible common shareholders’ equity to total tangible assets.

Net Interest Income

Net interest income for the 2016 third quarter was $290.5 million, an increase of $40.5 million, or 16.2 percent, versus the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $36.89 billion for the 2016 third quarter represent an increase of $6.08 billion, or 19.7 percent, from the 2015 third quarter. Yield on interest-earning assets for the 2016 third quarter decreased two basis points, to 3.62 percent, compared with the 2015 third quarter. This decrease was primarily attributable to prolonged low interest rates and lower prepayment penalty income.

Average cost of deposits and average cost of funds for the third quarter of 2016 increased by two and seven basis points, respectively, versus the 2015 third quarter to 0.42 percent and 0.53 percent.

Net interest margin on a tax-equivalent basis for the 2016 third quarter was 3.14 percent versus 3.22 percent reported in the same period a year ago. On a linked quarter basis, net interest margin on a tax-equivalent basis decreased five basis points. Excluding loan prepayment penalties in both quarters, linked quarter core margin decreased five basis points to 3.07 percent.

Provision for Loan Losses

The Bank’s provision for loan losses for the third quarter of 2016 was $80.5 million, compared with $33.3 million for the 2016 second quarter and $11.4 million for the 2015 third quarter. The elevated provision in the 2016 third quarter was predominantly due to the Chicago taxi medallion portfolio.

Net charge-offs for the 2016 third quarter were $100.5 million, or 1.46 percent of average loans on an annualized basis, versus $15.4 million, or 0.24 percent, for the 2016 second quarter and $5.5 million, or 0.10 percent, for the 2015 third quarter. $95.1 million of the charge-offs in the 2016 third quarter were for the Chicago taxi medallion portfolio. The remaining Chicago taxi medallion portfolio balance is $58.4 million with an associated allowance for loan losses of $12.6 million for a net exposure of $45.8 million.

Non-Interest Income and Non-Interest Expense

Non-interest income for the 2016 third quarter was $11.1 million, up $3.2 million when compared with $7.9 million reported in the 2015 third quarter. The increase in non-interest income was driven by increases in net gains on sales of securities and loans.

Non-interest expense for the third quarter of 2016 was $96.2 million, an increase of $10.0 million, or 11.7 percent, versus $86.2 million reported in the 2015 third quarter. The increase was primarily a result of the addition of new private client banking teams, as well as an increase in costs in our risk management and compliance related activities. The Bank also incurred additional FDIC assessment fees.

The Bank’s efficiency ratio improved to 31.9 percent for the 2016 third quarter versus 33.4 percent for the comparable period last year. The improvement was primarily due to growth in net interest income.

Loans

Loans, excluding loans held for sale, grew $1.06 billion, or 4.0 percent, during the third quarter of 2016 to $27.77 billion, compared with $26.71 billion at June 30, 2016. At September 30, 2016, loans accounted for 73.5 percent of total assets, versus 73.1 percent at the end of the 2016 second quarter and 69.6 percent at the end of 2015 third quarter. Average loans, excluding loans held for sale, reached $27.33 billion in the 2016 third quarter, growing $1.27 billion, or 4.9 percent, from the 2016 second quarter and $5.94 billion, or 27.8 percent, from the 2015 third quarter. The increase in loans for the quarter was primarily driven by growth in commercial real estate and multi-family loans.

At September 30, 2016, non-accrual loans were $162.8 million, representing 0.59 percent of total loans and 0.43 percent of total assets, compared with non-accrual loans of $129.5 million, or 0.48 percent of total loans, at June 30, 2016 and $59.6 million, or 0.27 percent of total loans, at September 30, 2015. At the end of the 2016 third quarter, $140.1 million of non-accrual loans were taxi medallions. At September 30, 2016, the ratio of allowance for loan and lease losses to total loans was 0.74 percent, versus 0.84 percent at June 30, 2016 and 0.82 percent at September 30, 2015. Additionally, the ratio of allowance for loan and lease losses to non-accrual loans, or the coverage ratio, was 126 percent for the 2016 third quarter versus 174 percent for the second quarter of 2016 and 307 percent for the 2015 third quarter.

Conference Call

Signature Bank’s management will host a conference call to review results of the 2016 third quarter on Thursday, October 20, 2016, at 10:00 AM ET. All participants should dial 866-359-8135 at least ten minutes prior to the start of the call and reference conference ID #94265857. International callers should dial 901-300-3484.

To hear a live web simulcast or to listen to the archived web cast following completion of the call, please visit the Bank’s web site at www.signatureny.com, click on "Investor Information," then, under "Company News," select "Conference Calls" to access the link to the call. To listen to a telephone replay of the conference call, please dial 800-585-8367 or 404-537-3406 and enter conference ID #94265857. The replay will be available from approximately 1:00 PM ET on Thursday, October 20, 2016 through 11:59 PM ET on Monday, October 24, 2016.

About Signature Bank

Signature Bank, member FDIC, is a New York-based full-service commercial bank with 30 private client offices throughout the New York metropolitan area, including those in Manhattan, Brooklyn, Westchester, Long Island, Queens, the Bronx, Staten Island and Connecticut. The Bank’s growing network of private client banking teams serves the needs of privately owned businesses, their owners and senior managers.

Signature Bank offers a wide variety of business and personal banking products and services. Its specialty finance subsidiary, Signature Financial, LLC, provides equipment finance and leasing. Signature Securities Group Corporation, a wholly owned Bank subsidiary, is a licensed broker-dealer, investment adviser and member FINRA/SIPC, offering investment, brokerage, asset management and insurance products and services.

Signature Bank ranked sixth best on Forbes' Best and Worst Banks in America 2016 list and was recently named Best Business Bank for the third consecutive year by the New York Law Journal in the publication’s seventh annual reader survey. The Bank also ranked second in the Best Private Bank and Best Attorney Escrow Services categories in the listing.

For more information, please visit www.signatureny.com.

This press release and oral statements made from time to time by our representatives contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You should not place undue reliance on those statements because they are subject to numerous risks and uncertainties relating to our operations and business environment, all of which are difficult to predict and may be beyond our control. Forward-looking statements include information concerning our future results, interest rates and the interest rate environment, loan and deposit growth, loan performance, operations, new private client teams and other hires, new office openings and business strategy. These statements often include words such as "may," "believe," "expect," "anticipate," "intend," “potential,” “opportunity,” “could,” “project,” “seek,” “should,” “will,” would,” "plan," "estimate" or other similar expressions. As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements and can change as a result of many possible events or factors, not all of which are known to us or in our control. These factors include but are not limited to: (i) prevailing economic conditions; (ii) changes in interest rates, loan demand, real estate values and competition, any of which can materially affect origination levels and gain on sale results in our business, as well as other aspects of our financial performance, including earnings on interest-bearing assets; (iii) the level of defaults, losses and prepayments on loans made by us, whether held in portfolio or sold in the whole loan secondary markets, which can materially affect charge-off levels and required credit loss reserve levels; (iv) changes in monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System; (v) changes in the banking and other financial services regulatory environment and (vi) competition for qualified personnel and desirable office locations. Although we believe that these forward-looking statements are based on reasonable assumptions, beliefs and expectations, if a change occurs or our beliefs, assumptions and expectations were incorrect, our business, financial condition, liquidity or results of operations may vary materially from those expressed in our forward-looking statements. Additional risks are described in our quarterly and annual reports filed with the FDIC. You should keep in mind that any forward-looking statements made by Signature Bank speak only as of the date on which they were made. New risks and uncertainties come up from time to time, and we cannot predict these events or how they may affect the Bank. Signature Bank has no duty to, and does not intend to, update or revise the forward-looking statements after the date on which they are made. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this release or elsewhere might not reflect actual results.