Signature Bank Reports 2019 Second Quarter Results

  • Net Income for the 2019 Second Quarter Was $147.9 Million, or $2.72 Diluted Earnings Per Share, Versus $154.6 Million, or $2.83 Diluted Earnings Per Share, Reported in the 2018 Second Quarter
  • The Bank Declared a Cash Dividend of $0.56 Per Share, Payable on or After August 15, 2019 to Common Stockholders of Record at the Close of Business on August 1, 2019
  • During the 2019 Second Quarter, the Bank Repurchased 412,977 Shares of Common Stock For a Total of $50.0 Million. Thus Far, the Bank Has Repurchased $114.7 Million of Common Stock From Its $500 Million Authorization
  • Total Deposits in the Second Quarter Grew $917.9 Million to $37.54 Billion; Total Deposits Have Grown $2.55 Billion, or 7.3 Percent, Since the End of the 2018 Second Quarter. Average Deposits Increased $456.0 Million in the 2019 Second Quarter
  • For the 2019 Second Quarter, Loans Increased $466.5 Million, or 1.2 Percent, to $37.93 Billion. Since the End of the 2018 Second Quarter, Loans Have Increased 11.1 Percent, or $3.78 Billion. During the 2019 Second Quarter, the Bank Sold $46.4 Million of Taxi Medallion Loans and Sold a $91.8 Million Portfolio of Signature Financial Equipment Loans. Excluding These Sales, Loans Would Have Increased $604.7 Million
  • Non-Accrual Loans Were $41.3 Million, or 0.11 Percent of Total Loans, at June 30, 2019, Versus $94.7 Million, or 0.25 Percent, at the End of the 2019 First Quarter and $158.1 Million, or 0.46 Percent, at the End of the 2018 Second Quarter. Excluding Taxi Medallion Loans, Non-Accrual Loans Were $22.5 Million, or Six Basis Points of Total Loans
  • Net Interest Margin on a Tax-Equivalent Basis was 2.74 Percent, Compared with 2.75 Percent for the 2019 First Quarter and 2.94 Percent for the 2018 Second Quarter. Core Net Interest Margin on a Tax-Equivalent Basis Excluding Loan Prepayment Penalty Income Decreased Two Basis Points to 2.71 Percent, Compared with 2.73 Percent for the 2019 First Quarter
  • Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based, and Total Risk-Based Capital Ratios were 9.70 Percent, 11.59 Percent, 11.59 Percent, and 12.82 Percent, Respectively, at June 30, 2019. Signature Bank Remains Significantly Above FDIC “Well Capitalized” Standards. Tangible Common Equity Ratio was 9.46 Percent
  • In the 2019 Second Quarter, the Bank Appointed Two Private Client Banking Teams. Thus Far in 2019, Four Teams have Joined the Bank, Including the 28 Person Venture Banking Group and the Eight Person Kanno-Wood Team Which Specializes in Banking to Mortgage Servicing Clients

NEW YORK–(BUSINESS WIRE)–Signature Bank (Nasdaq: SBNY), a New York-based full service commercial bank, today announced results for its second quarter ended June 30, 2019.

Net income for the 2019 second quarter was $147.9 million, or $2.72 diluted earnings per share, versus $154.6 million, or $2.83 diluted earnings per share, for the 2018 second quarter. The decrease in net income for the 2019 second quarter, versus the comparable quarter last year, is due to an increase of $19.3 million in non-interest expenses mostly due to the significant hiring of private client banking teams, including nearly 50 employees added for the Fund Banking Division, Venture Banking Group and the Kanno-Wood Team.

Net interest income for the 2019 second quarter reached $326.3 million, up $5.3 million, or 1.6 percent, when compared with the 2018 second quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $48.88 billion at June 30, 2019, an increase of $3.66 billion, or 8.1 percent, from $45.22 billion at June 30, 2018. Average assets for the 2019 second quarter reached $48.78 billion, an increase of $4.20 billion, or 9.4 percent, compared with the 2018 second quarter.

Deposits for the 2019 second quarter rose $917.9 million to $37.54 billion at June 30, 2019. When compared with deposits at June 30, 2018, overall deposit growth for the last twelve months was 7.3 percent, or $2.55 billion. Average deposits for the 2019 second quarter reached $36.93 billion, an increase of $456.0 million.

“During the past several years, and particularly over the last twelve months, Signature Bank has been focused on expanding our franchise and securing a larger presence throughout the national banking landscape. To reflect, we began diversifying our revenue streams with the launch of Signature Financial, our specialty finance subsidiary. We continued the diversification and expansion of the Bank with the addition of the Digital Banking Team and the Fund Banking Division, which have both already made meaningful contributions. Moreover, we recently added the Venture Banking Group as well as the Kanno-Wood team, which will provide treasury management products and services to residential and commercial mortgage servicers. We also launched Signet, our 24/7 payments platform, which today continues to be the only such platform offered by an FDIC-insured institution. All these banking teams, which are national in scope, have raised Signature Bank’s profile and offerings and are contributing to a more diversified credit and asset liability position over the short and long term,” explained Joseph J. DePaolo, President and Chief Executive Officer.

“Signature Bank is establishing a banking presence across the country. We have always grown this institution prudently and methodically, utilizing our strong reputation and solid capital position to attract the best bankers available in their industry and keeping the needs of our clients and their depositor safety at the forefront of all we do,” DePaolo concluded.

“In spite of a challenging deposit environment, we once again delivered solid deposit and loan growth leading to strong earnings. Also, we further reduced our risk in the Taxi Medallion portfolio with the sale of $46.4 million in NYC taxi loans on 375 medallions. Additionally, we have put in place several major new initiatives, which will provide significant benefit to our institution over the coming years. Personally, I have never been more positive on our future growth prospects. Our model of doing business remains robust, and we will continue to build value for our long-term investors,” explained Scott A. Shay, Chairman of the Board.

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 9.70 percent, 11.59 percent, 11.59 percent, and 12.82 percent, respectively, as of June 30, 2019. 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 9.46 percent. The Bank defines tangible common equity ratio as the ratio of tangible common equity to adjusted tangible assets and calculates this ratio by dividing total consolidated common shareholders’ equity by consolidated total assets.

The Bank declared a cash dividend for the second quarter of $0.56 per share, payable on or after August 15, 2019 to common stockholders of record at the close of business on August 1, 2019. In the second quarter of 2019, the Bank paid the first quarter’s cash dividend of $0.56 per share to common stockholders of record at the close of business on May 1, 2019. Additionally, during the 2019 second quarter, the Bank repurchased 412,977 shares of common stock for a total of $50.0 million. Since the 2018 fourth quarter, the Bank has repurchased $114.7 million of common stock from its $500 million authorization.

Net Interest Income

Net interest income for the 2019 second quarter was $326.3 million, an increase of $5.3 million, or 1.6 percent, versus the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $47.94 billion for the 2019 second quarter represent an increase of $4.05 billion, or 9.2 percent, from the 2018 second quarter. Yield on interest-earning assets for the 2019 second quarter increased 21 basis points to 4.03 percent, compared to the second quarter of last year.

Average cost of deposits and average cost of funds for the second quarter of 2019 increased by 43 and 46 basis points, to 1.19 percent and 1.42 percent, respectively, versus the comparable period a year ago.

Net interest margin on a tax-equivalent basis for the 2019 second quarter was 2.74 percent versus 2.94 percent reported in the 2018 second quarter and 2.75 percent in the 2019 first quarter. Excluding loan prepayment penalties in both quarters, linked quarter core net interest margin on a tax-equivalent basis decreased two basis points to 2.71 percent.

Provision for Loan Losses

The Bank’s provision for loan losses for the second quarter of 2019 was $5.4 million, compared with $6.3 million for the 2019 first quarter and $8.0 million for the 2018 second quarter.

Net recoveries for the 2019 second quarter were $3.7 million, or 0.04 percent of average loans, on an annualized basis, versus net charge offs of $879,000, or 0.01 percent, for the 2019 first quarter and net charge offs of $3.0 million, or 0.04 percent, for the 2018 second quarter.

Non-Interest Income and Non-Interest Expense

Non-interest income for the 2019 second quarter was $8.6 million, up $3.0 million when compared with $5.6 million reported in the 2018 second quarter. The increase was driven by a $3.0 million increase in net gains on sales of loans, mostly due to a portfolio sale of Signature Financial equipment loans.

Non-interest expense for the second quarter of 2019 was $131.9 million, an increase of $19.3 million, or 17.1 percent, versus $112.6 million reported in the 2018 second quarter. The increase was predominantly due to an increase of $8.7 million in salaries and benefits from the significant hiring of private client banking teams, including nearly 50 employees added for the Fund Banking Division, the Venture Banking Group and the Kanno-Wood Team.

The Bank’s efficiency ratio was 39.4 percent for the 2019 second quarter versus 34.5 percent for the comparable period last year. The Bank’s efficiency ratio was negatively impacted by the decline in net interest margin as well as an increase in salaries and benefits predominantly due to the aforementioned hiring of private client banking teams.

Loans

Loans, excluding loans held for sale, grew $466.5 million, or 1.2 percent, during the second quarter of 2019 to $37.93 billion, compared with $37.47 billion at March 31, 2019. Average loans, excluding loans held for sale, reached $37.82 billion in the 2019 second quarter, growing $950.9 million, or 2.6 percent, from the 2019 first quarter and $4.15 billion, or 12.3 percent, from the 2018 second quarter. For the third consecutive quarter, the increase in loans for the second quarter was primarily driven by growth in commercial and industrial loans.

In the 2019 second quarter, the Bank sold $46.4 million of its non-performing New York City taxi medallion loans. The Bank now has $18.8 million in non-performing taxi medallion loans and $43.8 million in repossessed taxi medallions remaining. Additionally, capitalizing on the interest rate environment and as part of our ongoing management of credit exposures to our clients, Signature Financial’s Capital Markets Desk sold a $91.8 million portfolio of performing equipment loans for a gain of $2.4 million.

At June 30, 2019, non-accrual loans were $41.3 million, representing 0.11 percent of total loans and 0.08 percent of total assets, compared with non-accrual loans of $94.7 million, or 0.25 percent of total loans, at March 31, 2019 and $158.1 million, or 0.46 percent of total loans, at June 30, 2018. Excluding non-accruing loans secured by taxi medallions of $18.8 million, non-accrual loans for the remainder of the portfolio are $22.5 million, or six basis points of total loans. The ratio of allowance for loan and lease losses to total loans at June 30, 2019 was 0.64 percent, up one basis point from March 31, 2019 and June 30, 2018. Additionally, the ratio of allowance for loan and lease losses to non-accrual loans, or the coverage ratio, was 593 percent for the 2019 second quarter versus 249 percent for the first quarter of 2019 and 135 percent for the 2018 second quarter.

Conference Call

Signature Bank’s management will host a conference call to review results of the 2019 second quarter on Thursday, July 18, 2019, 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 #6935767. 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 #6935767. The replay will be available from approximately 1:00 PM ET on Thursday, July 18, 2019 through 11:59 PM ET on Monday, July 22, 2019.

About Signature Bank

Signature Bank, member FDIC, is a New York-based full-service commercial bank with 31 private client offices throughout the New York metropolitan area and Connecticut as well as San Francisco. The Bank’s growing network of private client banking teams serves the needs of privately owned businesses, their owners and senior managers.

Signature Bank’s 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 recently introduced its revolutionary, blockchain-based digital payments platform, Signet™, enabling real-time payments for its commercial clients. The Signet Platform allows the Bank’s commercial clients to make payments in U.S. dollars, 24/7/365, safely and securely, without transaction fees. Signature Bank is the first FDIC-insured bank to launch a blockchain-based digital payments platform, and Signet is the first such platform to be approved for use by the NYS Department of Financial Services.

Signature Bank is one of the top 40 largest banks in the U.S., based on deposits (S&P Global Market Intelligence). The Bank recently earned several third-party recognitions, including: appeared on Forbes’ Best Banks in America list for the ninth consecutive year in 2019; and named Best Business Bank, Best Private Bank and Best Attorney Escrow Services provider by the New York Law Journal in the publication’s annual “Best of” survey for 2018, earning it a place in the New York Law Journal’s Hall of Fame (awarded to companies that have ranked in the “Best of” survey for at least three of the past four years). The Bank also ranked second nationally in the Best Business Bank, Best Private Bank and Best Attorney Escrow Services categories of the National Law Journal’s 2019 “Best of” survey.

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.

SIGNATURE BANK
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 
Three months ended
June 30,
Six months ended
June 30,
(dollars in thousands, except per share amounts)

 

2019

 

2018

 

2019

 

2018

 

INTEREST AND DIVIDEND INCOME
Loans held for sale

$

646

 

3,499

 

2,369

 

5,763

 

Loans and leases, net

 

398,746

 

337,584

 

780,107

 

660,021

 

Securities available-for-sale

 

57,897

 

54,428

 

116,998

 

106,692

 

Securities held-to-maturity

 

15,441

 

14,510

 

31,054

 

29,043

 

Other investments

 

7,931

 

6,783

 

15,697

 

12,355

 

Total interest income

 

480,661

 

416,804

 

946,225

 

813,874

 

INTEREST EXPENSE
Deposits

 

109,447

 

65,201

 

213,494

 

120,063

 

Federal funds purchased and securities sold under
agreements to repurchase

 

6,063

 

3,003

 

11,892

 

5,390

 

Federal Home Loan Bank borrowings

 

35,219

 

23,945

 

68,276

 

41,980

 

Subordinated debt

 

3,644

 

3,643

 

7,283

 

7,283

 

Total interest expense

 

154,373

 

95,792

 

300,945

 

174,716

 

Net interest income before provision for loan and lease losses

 

326,288

 

321,012

 

645,280

 

639,158

 

Provision for loan and lease losses

 

5,408

 

7,970

 

11,717

 

148,732

 

Net interest income after provision for loan and lease losses

 

320,880

 

313,042

 

633,563

 

490,426

 

NON-INTEREST INCOME
Commissions

 

3,739

 

3,280

 

7,379

 

6,455

 

Fees and service charges

 

7,546

 

7,152

 

15,574

 

13,794

 

Net gains on sales of securities

 

361

 

357

 

914

 

798

 

Net gains on sales of loans

 

4,133

 

1,183

 

6,128

 

3,202

 

Other-than-temporary impairment losses on securities:
Total impairment losses on securities

 

 

 

 

(2

)

Portion recognized in other comprehensive income (before taxes)

 

 

 

 

(14

)

Net impairment losses on securities recognized in earnings

 

 

 

 

(16

)

Tax credit investment amortization

 

(9,439

)

(7,423

)

(18,592

)

(13,285

)

Other Income

 

2,255

 

1,066

 

3,279

 

1,870

 

Total non-interest income

 

8,595

 

5,615

 

14,682

 

12,818

 

NON-INTEREST EXPENSE
Salaries and benefits

 

84,446

 

75,720

 

164,315

 

148,883

 

Occupancy and equipment

 

10,524

 

8,335

 

21,622

 

16,534

 

Information technology

 

8,968

 

6,291

 

17,454

 

12,578

 

FDIC assessment fees

 

3,164

 

7,447

 

6,347

 

14,434

 

Professional fees

 

3,731

 

3,503

 

6,619

 

6,778

 

Other general and administrative

 

21,055

 

11,297

 

40,594

 

50,718

 

Total non-interest expense

 

131,888

 

112,593

 

256,951

 

249,925

 

Income before income taxes

 

197,587

 

206,064

 

391,294

 

253,319

 

Income tax expense

 

49,676

 

51,479

 

99,318

 

64,261

 

Net income

$

147,911

 

154,585

 

291,976

 

189,058

 

PER COMMON SHARE DATA
Earnings per share – basic

$

2.72

 

2.84

 

5.37

 

3.48

 

Earnings per share – diluted

$

2.72

 

2.83

 

5.36

 

3.47

 

Dividends per common share

$

0.56

 

 

1.12

 

 

 
SIGNATURE BANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 

June 30,

December 31,

2019

2018

(dollars in thousands, except shares and per share amounts) (unaudited)
ASSETS
Cash and due from banks

$

204,863

 

269,204

 

Short-term investments

 

119,511

 

48,051

 

Total cash and cash equivalents

 

324,374

 

317,255

 

Securities available-for-sale

 

7,139,529

 

7,301,604

 

Securities held-to-maturity (fair value $2,016,610 at June 30, 2019
and $1,845,198 at December 31, 2018)

 

2,002,476

 

1,883,533

 

Federal Home Loan Bank stock

 

286,249

 

264,877

 

Loans held for sale

 

308,801

 

485,305

 

Loans and leases, net

 

37,687,653

 

36,193,122

 

Premises and equipment, net

 

56,854

 

59,051

 

Operating lease right-of-use assets (1)

 

222,473

 

 

Accrued interest and dividends receivable

 

145,583

 

141,829

 

Other assets

 

702,886

 

718,240

 

Total assets

$

48,876,878

 

47,364,816

 

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest-bearing

$

12,265,712

 

12,016,197

 

Interest-bearing

 

25,274,744

 

24,362,576

 

Total deposits

 

37,540,456

 

36,378,773

 

Federal funds purchased and securities sold under agreements
to repurchase

 

254,000

 

820,000

 

Federal Home Loan Bank borrowings

 

5,362,364

 

4,970,000

 

Subordinated debt

 

258,568

 

258,174

 

Operating lease liabilities (1)

 

244,114

 

 

Accrued expenses and other liabilities

 

555,652

 

530,729

 

Total liabilities

 

44,215,154

 

42,957,676

 

Shareholders’ equity
Preferred stock, par value $.01 per share; 61,000,000 shares authorized;
none issued at June 30, 2019 and December 31, 2018

 

 

 

Common stock, par value $.01 per share; 64,000,000 shares authorized;
55,443,414 shares issued and 54,869,794 outstanding at June 30, 2019;
55,405,531 shares issued and 55,039,433 outstanding at December 31, 2018

 

554

 

554

 

Additional paid-in capital

 

1,847,042

 

1,862,896

 

Retained earnings

 

2,960,963

 

2,730,899

 

Treasury stock, 573,620 shares at June 30, 2019 and 366,098 shares
at December 31, 2018

 

(71,345

)

(42,680

)

Accumulated other comprehensive loss

 

(75,490

)

(144,529

)

Total shareholders’ equity

 

4,661,724

 

4,407,140

 

Total liabilities and shareholders’ equity

$

48,876,878

 

47,364,816

 

(1)

Effective January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842) and elected not to restate comparative prior periods, a transition option provided by ASU 2018-11, Leases- Targeted Improvements (Topic 842).
 
SIGNATURE BANK
FINANCIAL SUMMARY, CAPITAL RATIOS, ASSET QUALITY
(unaudited)
 
Three months ended
June 30,
Six months ended
June 30,
(in thousands, except ratios and per share amounts)

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

PER COMMON SHARE
Net income – basic

$

2.72

 

$

2.84

 

$

5.37

 

$

3.48

 

Net income – diluted

$

2.72

 

$

2.83

 

$

5.36

 

$

3.47

 

Average shares outstanding – basic

 

54,213

 

 

54,527

 

 

54,189

 

 

54,336

 

Average shares outstanding – diluted

 

54,250

 

 

54,599

 

 

54,334

 

 

54,558

 

Book value

$

84.96

 

$

74.93

 

$

84.96

 

$

74.93

 

 
SELECTED FINANCIAL DATA
Return on average total assets

 

1.22

%

 

1.39

%

 

1.22

%

 

0.86

%

Return on average shareholders’ equity

 

12.88

%

 

15.22

%

 

12.98

%

 

9.32

%

Efficiency ratio (1)

 

39.38

%

 

34.47

%

 

38.93

%

 

38.33

%

Yield on interest-earning assets

 

4.02

%

 

3.81

%

 

4.01

%

 

3.78

%

Yield on interest-earning assets, tax-equivalent basis (1)(2)

 

4.03

%

 

3.82

%

 

4.02

%

 

3.78

%

Cost of deposits and borrowings

 

1.42

%

 

0.96

%

 

1.41

%

 

0.89

%

Net interest margin

 

2.73

%

 

2.93

%

 

2.74

%

 

2.97

%

Net interest margin, tax-equivalent basis (2)(3)

 

2.74

%

 

2.94

%

 

2.75

%

 

2.97

%

Contacts

Investor Contact:

Eric R. Howell, Executive Vice President – Corporate & Business Development

646-822-1402, ehowell@signatureny.com

Media Contact:

Susan J. Lewis, 646-822-1825

slewis@signatureny.com

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