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Signature Bank Reports 2020 Third Quarter Results

·35 min read
  • Net Income for the 2020 Third Quarter Was $138.6 Million, or $2.62 Diluted Earnings Per Share, Versus $148.1 Million, or $2.74 Diluted Earnings Per Share, Reported in the 2019 Third Quarter

  • Pre-Tax, Pre-Provision Earnings for the 2020 Third Quarter Were $252.4 Million, an Increase of $43.9 Million, or 21.1 Percent, Compared with $208.4 Million for the 2019 Third Quarter

  • The Bank Declared a Cash Dividend of $0.56 Per Share, Payable on or After November 13, 2020 to Common Stockholders of Record at the Close of Business on November 2, 2020

  • Total Deposits in the Third Quarter Grew $4.11 Billion to $54.34 Billion, While Average Deposits Increased $4.24 Billion. Total Deposits for the Prior Twelve Months Have Grown $15.28 Billion, or 39.1 Percent

  • For the 2020 Third Quarter, Loans Increased $1.01 Billion, or 2.2 Percent, to $46.21 Billion. Since the End of the 2019 Third Quarter, Core Loans (Excluding Paycheck Protection Program Loans) Have Increased 16.6 Percent, or $6.29 Billion

  • Non-Accrual Loans Were $81.3 Million, or 0.18 Percent of Total Loans, at September 30, 2020, Versus $46.9 Million, or 0.10 Percent, at the End of the 2020 Second Quarter and $32.5 Million, or 0.09 Percent, at the End of the 2019 Third Quarter

  • Total Principal and Interest Deferrals as of October 15, 2020 Decreased Sharply to $2.31 Billion, or 5.0 Percent of Total Loans From a High of $11.08 Billion, or 24.5 Percent of Total Loans, as of June 30, 2020

  • Significant Excess Cash Balances From Continued Strong Deposit Flows Impacted Core Net Interest Margin by 21 Basis Points. Net Interest Margin on a Tax-Equivalent Basis was 2.55 Percent, Compared With 2.77 Percent for the 2020 Second Quarter and 2.68 Percent for the 2019 Third Quarter. Core Net Interest Margin on a Tax-Equivalent Basis Excluding Loan Prepayment Penalty Income Decreased 17 Basis Points to 2.52 Percent, Compared with 2.69 Percent for the 2020 Second Quarter

  • Tier 1 Leverage, Common Equity Tier 1 Risk-Based, Tier 1 Risk-Based, and Total Risk-Based Capital Ratios were 8.56 Percent, 10.26 Percent, 10.26 Percent, and 11.98 Percent, Respectively, at September 30, 2020. Signature Bank Remains Significantly Above FDIC "Well Capitalized" Standards. Tangible Common Equity Ratio was 7.75 Percent

  • On October 6, 2020, the Bank Completed a Public Offering of $375.0 Million in Subordinated Debt

  • In the 2020 Third Quarter, the Bank On-Boarded Three Private Client Banking Teams: One Team in New York and Two in the Greater Los Angeles Marketplace. Together With Our San Francisco Office, the Bank Now Has a Total of 22 Private Client Banking Teams on the West Coast

Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, today announced results for its third quarter ended September 30, 2020.

Net income for the 2020 third quarter was $138.6 million, or $2.62 diluted earnings per share, versus $148.1 million, or $2.74 diluted earnings per share, for the 2019 third quarter. The decrease in net income for the 2020 third quarter, versus the comparable quarter last year, is due to an increase in the provision for credit losses of $51.5 million predominantly due to effects of COVID-19 on the U.S. economy. Pre-tax, pre-provision earnings were $252.4 million, representing an increase of $43.9 million, or 21.1 percent, compared with $208.4 million for the 2019 third quarter.

Net interest income for the 2020 third quarter reached $388.7 million, up $60.7 million, or 18.5 percent, when compared with the 2019 third quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $63.76 billion at September 30, 2020, an increase of $14.37 billion, or 29.1 percent, from $49.39 billion at September 30, 2019. Average assets for the 2020 third quarter reached $61.56 billion, an increase of $11.96 billion, or 24.1 percent, compared with the 2019 third quarter.

Deposits for the 2020 third quarter rose $4.11 billion to $54.34 billion at September 30, 2020. When compared with deposits at September 30, 2019, overall deposit growth for the last twelve months was 39.1 percent, or $15.28 billion. Average deposits for the 2020 third quarter reached $51.62 billion, an increase of $4.24 billion.

"Signature Bank continues to realize extraordinary growth during a protracted and challenging recovery from the COVID-19 pandemic. Our founding business philosophy to provide a client-centric, single point-of-contact model led by experienced group directors still distinguishes Signature Bank in the marketplace, particularly in times of distress. We’ve successfully navigated many challenges before and inevitably there will be others. While we don’t always know when or in what form they will materialize, we always knew it was important to be well diversified. As expected, our new initiatives are being embraced by clients, allowing us to continue to deliver solid results during these unsettling times," explained Signature Bank President and Chief Executive Officer Joseph J. DePaolo.

"I want to take this opportunity to thank all our colleagues for their continued unwavering commitment to the Bank and its clients as well as their ability to stay focused on the positive throughout this pandemic. They clearly recognized the enormity of the challenge in front of all of us, and met it head on. This dedication and effort is reflected in our third quarter performance, our corporate culture and the strength of our franchise, as we executed on many fronts. Our strong deposit growth, which is up $13.96 billion for the first nine months of 2020 was again driven by across-the-board performance stemming from all our deposit gathering initiatives. Core loans increased solidly again this quarter, up $5.12 billion year-to-date. And, the Bank’s pre-tax pre-provision earnings grew $43.9 million, or 21.1 percent. Additionally, we were able to dramatically reduce principal and interest deferrals to 5.0 percent of total loans, and are proud of the ways in which we worked closely with our clients," DePaolo concluded.

Scott A. Shay, Chairman of the Board, added: "While current times are very challenging on both the personal and professional fronts for our Signature Bank colleagues, it is also an appropriate time to be proud of what we have accomplished as an organization. Clients often share how grateful they are that their bankers stand ready to listen while offering sage advice and acting as a sounding board on difficult strategic decisions. We believe we have never been closer to our clients, and throughout these unprecedented times, they know we are in the trenches right alongside them. This message has been resounding with both current and new clients as we have achieved greater deposit growth in the first nine months of this year than in our first nine years of business. The Bank continues to expand its business lines and geographic presence as we witness the first fruits of a variety of initiatives put into place over the past several years. We diversified our business in ways that those who remember our NYC roots find pleasantly surprising."

Capital

At the start of the 2020 fourth quarter, the Bank issued $375.0 million of subordinated debt in a public offering. Proceeds from the offering will be used for general corporate purposes. The Bank’s Tier 1 leverage, common equity Tier 1 risk-based, Tier 1 risk-based, and total risk-based capital ratios were approximately 8.56 percent, 10.26 percent, 10.26 percent, and 11.98 percent, respectively, as of September 30, 2020. 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 7.75 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 of $0.56 per share, payable on or after November 13, 2020 to common stockholders of record at the close of business on November 2, 2020. In the third quarter of 2020, the Bank paid a cash dividend of $0.56 per share to common stockholders of record at the close of business on July 31, 2020.

Net Interest Income

Net interest income for the 2020 third quarter was $388.7 million, an increase of $60.7 million, or 18.5 percent, versus the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $60.81 billion for the 2020 third quarter represent an increase of $11.98 billion, or 24.5 percent, from the 2019 third quarter. Yield on interest-earning assets on a tax-equivalent basis for the 2020 third quarter decreased 78 basis points to 3.16 percent, compared to the third quarter of last year.

Average cost of deposits and average cost of funds for the third quarter of 2020 decreased by 70 and 74 basis points, to 0.51 percent and 0.66 percent, respectively, versus the comparable period a year ago.

Net interest margin on a tax-equivalent basis for the 2020 third quarter was 2.55 percent versus 2.68 percent reported in the 2019 third quarter and 2.77 percent in the 2020 second quarter. Excluding loan prepayment penalties in both quarters, linked quarter core net interest margin on a tax-equivalent basis decreased 17 basis points to 2.52 percent. The 2020 third quarter net interest margin was negatively affected by 21 basis points due to significant excess cash balances driven by strong deposit growth.

Provision for Credit Losses

The Bank’s provision for credit losses for the third quarter of 2020 was $52.7 million, compared with $93.0 million for the 2020 second quarter and $1.2 million for the 2019 third quarter. The Bank’s elevated provision for credit losses for the third quarter was predominantly attributable to effects of COVID-19 on the U.S. economy. Additionally, this is the third quarter since the bank adopted CECL on January 1, 2020.

Net charge-offs for the 2020 third quarter were $10.5 million, or 0.09 percent of average loans, on an annualized basis, versus $4.6 million, or 0.04 percent, for the 2020 second quarter and net charge-offs of $2.9 million, or 0.03 percent, for the 2019 third quarter.

Non-Interest Income and Non-Interest Expense

Non-interest income for the 2020 third quarter was $24.2 million, up $9.5 million when compared with $14.7 million reported in the 2019 third quarter. The increase was driven by increases in fees and service charges, net gains on sales of securities and net gains on sales of loans.

Non-interest expense for the third quarter of 2020 was $160.6 million, an increase of $26.3 million, or 19.6 percent, versus $134.3 million reported in the 2019 third quarter. The increase was predominantly due to a rise of $14.9 million in salaries and benefits from the significant hiring of 17 private client banking teams on the West Coast during the first three quarters of 2020. Additionally, the Bank incurred $6.8 million in penalty expense associated with the prepayment of $1.05 billion in borrowings.

The Bank’s efficiency ratio was 38.9 percent for the 2020 third quarter compared with 39.2 percent for the same period a year ago, and 38.0 percent for the second quarter of 2020.

Loans

Loans, excluding loans held for sale, grew $1.01 billion, or 2.2 percent, during the third quarter of 2020 to $46.21 billion, compared with $45.20 billion at June 30, 2020. Average loans, excluding loans held for sale, reached $45.42 billion in the 2020 third quarter, growing $2.69 billion, or 6.3 percent, from the 2020 second quarter and $7.59 billion, or 20.1 percent, from the 2019 third quarter. For the eighth consecutive quarter, the increase in loans was primarily driven by growth in commercial and industrial loans, led by capital call facilities to private equity funds.

At September 30, 2020, non-accrual loans were $81.3 million, representing 0.18 percent of total loans and 0.13 percent of total assets, compared with non-accrual loans of $46.9 million, or 0.10 percent of total loans, at June 30, 2020 and $32.5 million, or 0.09 percent of total loans, at September 30, 2019. The ratio of allowance for credit losses for loans and leases to total loans at September 30, 2020 was 1.05 percent, versus 0.98 percent at June 30, 2020 and 0.64 percent at September 30, 2019. Additionally, the ratio of allowance for credit losses for loans and leases to non-accrual loans, or the coverage ratio, was 596 percent for the 2020 third quarter versus 947 percent for the second quarter of 2020 and 746 percent for the 2019 third quarter.

COVID-19 Related Loan Modifications

As of October 15, 2020, total principal and interest (P&I) deferrals significantly decreased to $2.31 billion, or 5.0 percent of the Bank’s total loan portfolio from their peak level as of June 30, 2020. Additionally, 2.1 percent of the loan book is currently comprised of modified 90 day interest-only payments. The positive trend is the result of the Bank’s ability to work closely with its clients toward reasonable resolutions.

As of September 30, 2020

As of October 15, 2020

(dollars in millions)

Total Portfolio

P&I Deferrals

Balance

LTV

DSCR

Balance

% of Portfolio

LTV

DSCR

Multi Family

$ 15,297

59%

1.36

642

4.2%

58%

1.26

Retail

Neighborhood

2,160

57%

1.66

191

8.8%

54%

1.61

Mixed Use

1,122

58%

1.35

168

15.0%

58%

1.24

Commercial Condo / Co-op

988

55%

1.26

223

22.6%

55%

1.05

Single Tenant

692

53%

1.65

8

1.2%

57%

1.53

Other

605

56%

1.58

62

10.2%

52%

1.52

Total Retail

5,567

56%

1.52

652

11.7%

55%

1.31

Office

4,036

55%

1.66

524

13.0%

54%

1.36

Acquisition, Development, and

Construction (ADC)(1)

1,376

51%

0.42

171

12.4%

60%

0.27

Industrial

557

51%

1.83

9

1.6%

39%

1.38

Hotel

77

44%

1.81

-

0.0%

-

-

Land

38

21%

1.98

-

0.0%

-

-

Other

284

47%

1.48

27

9.5%

58%

1.33

Total CRE

27,232

57%

1.40

2,025

7.4%

56%

1.22

Fund Banking, Venture

Banking, and ABL

9,216

-

0.0%

Signature Financial

4,739

127

2.7%

Traditional C&I

2,486

130

5.2%

Total C&I

16,441

257

1.6%

PPP Loans

1,985

-

0.0%

Residential and Consumer

593

31

5.2%

Other Loans, premiums,

deferred fees, and costs

(39)

-

0.0%

Total Portfolio

$ 46,212

2,313

5.0%

(1) ADC loans predominantly consist of loans for properties that have been acquired by our clients for refurbishment and are not ground up construction loans. The DSCR reported for ADC loans does not include credit enhancements, such as rental holdbacks, reserves, and personal guarantees.

Conference Call

Signature Bank’s management will host a conference call to review results of the 2020 third quarter on Tuesday, October 20, 2020, 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 #7186596. 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," "Quarterly Results/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 #7186596. The replay will be available from approximately 1:00 PM ET on Tuesday, October 20, 2020 through 11:59 PM ET on Friday, October 23, 2020.

About Signature Bank

Signature Bank, member FDIC, is a New York-based, full-service commercial bank with 36 private client offices throughout the metropolitan New York area, including Connecticut as well as in California and North Carolina. 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.

The Bank’s revolutionary blockchain-based digital payments platform, Signet™, allows the Bank’s commercial clients to make real-time payments in U.S. dollars, 24/7/365. 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.

Since commencing operations in May 2001, the Bank has emerged as one of the top 40 largest banks in the U.S., based on deposits (S&P Global Market Intelligence).

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, our business strategy and the impact of the COVID-19 pandemic on each of the foregoing and on our business overall. These statements often include words such as "may," "believe," "expect," "anticipate," "intend," "potential," "opportunity," "could," "project," "seek," "target", "goal", "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, (vi) our ability to maintain the continuity, integrity, security and safety of our operations and (vii) competition for qualified personnel and desirable office locations. All of these factors are subject to additional uncertainty in the context of the COVID-19 pandemic, which is having an unprecedented impact on all aspects of our operations, the financial services industry and the economy as a whole. 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.

FINANCIAL TABLES ATTACHED

SIGNATURE BANK

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Three months ended
September 30,

Nine months ended
September 30,

(dollars in thousands, except per share amounts)

2020

2019

2020

2019

INTEREST AND DIVIDEND INCOME

Loans held for sale

$ 692

1,284

2,334

3,653

Loans and leases, net

416,617

399,552

1,234,894

1,179,659

Securities available-for-sale

45,251

56,534

144,683

173,532

Securities held-to-maturity

14,036

15,238

42,660

46,292

Other investments

4,896

11,447

18,517

27,144

Total interest income

481,492

484,055

1,443,088

1,430,280

INTEREST EXPENSE

Deposits

66,069

118,308

231,359

331,802

Federal funds purchased and securities sold under

agreements to repurchase

680

1,154

2,147

13,437

Federal Home Loan Bank borrowings

20,174

32,929

67,914

100,814

Subordinated debt

5,856

3,645

17,560

10,928

Total interest expense

92,779

156,036

318,980

456,981

Net interest income before provision for credit losses

388,713

328,019

1,124,108

973,299

Provision for credit losses

52,664

1,164

212,495

12,881

Net interest income after provision for credit losses

336,049

326,855

911,613

960,418

NON-INTEREST INCOME

Commissions

3,183

3,452

9,710

10,831

Fees and service charges

10,871

8,178

31,772

23,752

Net gains on sales of securities

3,623

120

3,623

1,034

Net gains on sales of loans

4,996

2,752

9,552

8,880

Other income (1)

1,540

214

(3,600

)

1,191

Total non-interest income

24,213

14,716

51,057

45,688

NON-INTEREST EXPENSE

Salaries and benefits

101,306

86,438

293,422

250,753

Occupancy and equipment

11,618

10,854

33,437

32,476

Information technology

11,324

10,098

31,797

27,552

FDIC assessment fees

3,190

3,191

9,787

9,538

Professional fees

3,399

4,075

12,931

10,693

Other general and administrative

29,726

19,639

75,028

60,235

Total non-interest expense

160,563

134,295

456,402

391,247

Income before income taxes

199,699

207,276

506,268

614,859

Income tax expense

61,149

59,158

150,918

175,985

Net income

$ 138,550

148,118

355,350

438,874

PER COMMON SHARE DATA

Earnings per share – basic

$ 2.62

2.75

6.73

8.10

Earnings per share – diluted

$ 2.62

2.74

6.70

8.07

Dividends per common share

$ 0.56

0.56

1.68

1.68

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30,

December 31,

2020

2019

(dollars in thousands, except shares and per share amounts)

(unaudited)

ASSETS

Cash and due from banks

$ 6,255,490

702,277

Short-term investments

157,747

87,555

Total cash and cash equivalents

6,413,237

789,832

Securities available-for-sale (amortized cost $7,463,431 at September 30, 2020

and $7,186,493 at December 31, 2019); (allowance for credit losses

$4 at September 30, 2020)

7,501,267

7,143,864

Securities held-to-maturity (fair value $2,148,286 at September 30, 2020

and $2,115,541 at December 31, 2019); (allowance for credit losses

$60 at September 30, 2020)

2,084,252

2,101,970

Federal Home Loan Bank stock

171,678

231,339

Loans held for sale

420,170

290,593

Loans and leases

46,212,092

39,109,623

Allowance for credit losses for loans and leases

(484,923)

(249,989)

Loans and leases, net

45,727,169

38,859,634

Premises and equipment, net

79,370

66,419

Operating lease right-of-use assets

216,311

217,578

Accrued interest and dividends receivable

249,926

147,527

Other assets (1)

896,933

743,053

Total assets

$ 63,760,313

50,591,809

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

Non-interest-bearing

$ 16,284,599

13,016,931

Interest-bearing

38,054,106

27,366,276

Total deposits

54,338,705

40,383,207

Federal funds purchased and securities sold under agreements

to repurchase

150,000

150,000

Federal Home Loan Bank borrowings

2,839,245

4,142,144

Subordinated debt

457,156

456,119

Operating lease liabilities

243,827

242,587

Accrued expenses and other liabilities

748,181

472,554

Total liabilities

58,777,114

45,846,611

Shareholders’ equity

Preferred stock, par value $.01 per share; 61,000,000 shares authorized;

none issued at September 30, 2020 and December 31, 2019

-

-

Common stock, par value $.01 per share; 64,000,000 shares authorized;

55,520,128 shares issued and 53,563,305 outstanding at September 30, 2020;

55,427,631 shares issued and 53,519,644 outstanding at December 31, 2019

555

554

Additional paid-in capital

1,862,142

1,871,571

Retained earnings (1)

3,405,273

3,172,273

Treasury stock, 1,900,315 shares at September 30, 2020 and 1,907,987 shares
at December 31, 2019

(232,647)

(233,570)

Accumulated other comprehensive loss

(52,124)

(65,630)

Total shareholders' equity

4,983,199

4,745,198

Total liabilities and shareholders' equity

$ 63,760,313

50,591,809

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK

FINANCIAL SUMMARY, CAPITAL RATIOS, ASSET QUALITY

(unaudited)

Three months ended
September 30,

Nine months ended
September 30,

(in thousands, except ratios and per share amounts)

2020

2019 (6)

2020

2019 (6)

PER COMMON SHARE

Net income - basic

$ 2.62

$ 2.75

$ 6.73

$ 8.10

Net income - diluted

$ 2.62

$ 2.74

$ 6.70

$ 8.07

Average shares outstanding - basic

52,673

53,722

52,631

54,032

Average shares outstanding - diluted

52,835

53,830

52,824

54,224

Book value

$ 93.03

$ 86.98

$ 93.03

$ 86.98

SELECTED FINANCIAL DATA

Return on average total assets

0.90%

1.18%

0.83%

1.20%

Return on average shareholders' equity

11.20%

12.56%

9.76%

12.89%

Efficiency ratio (1)

38.88%

39.18%

38.84%

38.40%

Yield on interest-earning assets

3.15%

3.93%

3.45%

3.99%

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

3.16%

3.94%

3.46%

4.00%

Cost of deposits and borrowings

0.66%

1.40%

0.83%

1.40%

Net interest margin

2.54%

2.67%

2.68%

2.71%

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

2.55%

2.68%

2.69%

2.72%

(1) See "Non-GAAP Financial Measures" for related calculation.

(2) Based on the 21 percent U.S. federal statutory tax rate for the periods presented. The tax-equivalent basis is considered a non-GAAP financial measure and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. This ratio is a metric used by management to evaluate the impact of tax-exempt assets on the Bank's yield on interest-earning assets and net interest margin.

(3) See "Net Interest Margin Analysis" for related calculation.

September 30,
2020

June 30,
2020

December 31,
2019
(6)

September 30,
2019
(6)

CAPITAL RATIOS

Tangible common equity (4)

7.75%

7.99%

9.30%

9.46%

Tier 1 leverage (5)

8.56%

8.76%

9.55%

9.61%

Common equity Tier 1 risk-based (5)

10.26%

10.43%

11.56%

11.89%

Tier 1 risk-based (5)

10.26%

10.43%

11.56%

11.89%

Total risk-based (5)

11.98%

12.16%

13.26%

13.14%

ASSET QUALITY

Non-accrual loans

$ 81,305

$ 46,939

$ 57,355

$ 32,539

Allowance for loan and lease losses

$ 484,923

$ 444,672

$ 249,989

$ 242,754

Allowance for loan and lease losses to non-accrual loans

596.42%

947.34%

435.86%

746.04%

Allowance for loan and lease losses to total loans

1.05%

0.98%

0.64%

0.64%

Non-accrual loans to total loans

0.18%

0.10%

0.15%

0.09%

Quarterly net charge-offs (recoveries) to average loans, annualized

0.09%

0.04%

0.03%

0.03%

(4) We define tangible common equity as the ratio of total tangible common equity to total tangible assets (the "TCE ratio"). Tangible common equity is considered to be a non-GAAP financial measure and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The TCE ratio is a metric used by management to evaluate the adequacy of our capital levels. In addition to tangible common equity, management uses other metrics, such as Tier 1 capital related ratios, to evaluate capital levels. See "Non-GAAP Financial Measures" for related calculation.

(5) September 30, 2020 ratios are preliminary.

(6) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK

NET INTEREST MARGIN ANALYSIS

(unaudited)

Three months ended

Three months ended

September 30, 2020

September 30, 2019

(dollars in thousands)

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

INTEREST-EARNING ASSETS

Short-term investments

$ 5,584,666

1,877

0.13%

1,285,289

7,173

2.21%

Investment securities

9,633,122

62,306

2.59%

9,569,671

76,046

3.18%

Commercial loans, mortgages and leases (1)

45,251,833

416,597

3.66%

37,621,834

398,523

4.20%

Residential mortgages and consumer loans

172,233

1,623

3.75%

213,251

2,385

4.44%

Loans held for sale

172,154

692

1.60%

139,332

1,284

3.66%

Total interest-earning assets

60,814,008

483,095

3.16%

48,829,377

485,411

3.94%

Non-interest-earning assets (2)

745,523

767,483

Total assets

$ 61,559,531

49,596,860

INTEREST-BEARING LIABILITIES

Interest-bearing deposits

NOW and interest-bearing demand

$ 9,476,192

15,728

0.66%

4,304,971

21,078

1.94%

Money market

24,114,937

42,131

0.70%

19,431,159

81,088

1.66%

Time deposits

2,034,445

8,210

1.61%

2,677,536

16,142

2.39%

Non-interest-bearing demand deposits

15,991,893

-

-

12,266,945

-

-

Total deposits

51,617,467

66,069

0.51%

38,680,611

118,308

1.21%

Subordinated debt

456,927

5,856

5.13%

258,636

3,645

5.64%

Other borrowings

3,732,941

20,854

2.22%

5,212,259

34,083

2.59%

Total deposits and borrowings

55,807,335

92,779

0.66%

44,151,506

156,036

1.40%

Other non-interest-bearing liabilities

and shareholders' equity (2)

5,752,196

5,445,354

Total liabilities and shareholders' equity

$ 61,559,531

49,596,860

OTHER DATA

Net interest income / interest rate spread (1)

390,316

2.50%

329,375

2.54%

Tax-equivalent adjustment

(1,603)

(1,356)

Net interest income, as reported

388,713

328,019

Net interest margin

2.54%

2.67%

Tax-equivalent effect

0.01%

0.01%

Net interest margin on a tax-equivalent basis (1)

2.55%

2.68%

Ratio of average interest-earning assets

to average interest-bearing liabilities

108.97%

110.60%

(1) Presented on a tax-equivalent, non-GAAP, basis for municipal leasing and financing transactions using the U.S. federal statutory tax rate of 21 percent for the periods presented.

(2) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK

NET INTEREST MARGIN ANALYSIS

(unaudited)

Nine months ended

Nine months ended

September 30, 2020

September 30, 2019

(dollars in thousands)

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

INTEREST-EARNING ASSETS

Short-term investments

$ 3,664,001

8,179

0.30%

759,275

13,372

2.35%

Investment securities

9,538,078

197,681

2.76%

9,568,596

233,596

3.26%

Commercial loans, mortgages and leases (1)

42,399,557

1,234,245

3.89%

37,296,197

1,176,139

4.22%

Residential mortgages and consumer loans

179,996

5,298

3.93%

215,350

7,331

4.55%

Loans held for sale

160,371

2,334

1.94%

146,868

3,653

3.33%

Total interest-earning assets

55,942,003

1,447,737

3.46%

47,986,286

1,434,091

4.00%

Non-interest-earning assets (2)

910,273

750,381

Total assets

$ 56,852,276

48,736,667

INTEREST-BEARING LIABILITIES

Interest-bearing deposits

NOW and interest-bearing demand

$ 7,581,051

48,614

0.86%

4,158,317

62,453

2.01%

Money market

22,383,896

151,419

0.90%

18,710,445

224,736

1.61%

Time deposits

2,211,097

31,326

1.89%

2,521,132

44,613

2.37%

Non-interest-bearing demand deposits

14,553,396

-

-

11,980,330

-

-

Total deposits

46,729,440

231,359

0.66%

37,370,224

331,802

1.19%

Subordinated debt

456,584

17,560

5.13%

258,440

10,928

5.64%

Other borrowings

4,078,348

70,061

2.29%

5,871,966

114,251

2.60%

Total deposits and borrowings

51,264,372

318,980

0.83%

43,500,630

456,981

1.40%

Other non-interest-bearing liabilities

and shareholders' equity (2)

5,587,904

5,236,037

Total liabilities and shareholders' equity

$ 56,852,276

48,736,667

OTHER DATA

Net interest income / interest rate spread (1)

1,128,757

2.63%

977,110

2.60%

Tax-equivalent adjustment

(4,649)

(3,811)

Net interest income, as reported

1,124,108

973,299

Net interest margin

2.68%

2.71%

Tax-equivalent effect

0.01%

0.01%

Net interest margin on a tax-equivalent basis (1)

2.69%

2.72%

Ratio of average interest-earning assets

to average interest-bearing liabilities

109.12%

110.31%

(1) Presented on a tax-equivalent, non-GAAP, basis for municipal leasing and financing transactions using the U.S. federal statutory tax rate of 21 percent for the periods presented.

(2) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK

NON-GAAP FINANCIAL MEASURES

(unaudited)

Management believes that the presentation of certain non-GAAP financial measures assists investors when comparing results period-to-period in a more consistent manner and provides a better measure of Signature Bank's results. These non-GAAP measures include the Bank's (i) tangible common equity ratio, (ii) efficiency ratio, (iii) yield on interest-earning assets, tax-equivalent basis, (iv) core net interest margin, tax-equivalent basis excluding loan prepayment penalty income, (v) pre-tax, pre-provision earnings, (vi) loans and leases to core loans excluding Paycheck Protection Program loans. These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results. We strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

The following table presents the tangible common equity ratio calculation:

(dollars in thousands)

September 30,
2020

June 30,
2020

December 31,
2019 (1)

September 30,
2019 (1)

Consolidated common shareholders' equity

$ 4,983,199

4,862,582

4,745,198

4,717,841

Intangible assets

43,768

46,385

45,907

49,213

Consolidated tangible common shareholders' equity (TCE)

$ 4,939,431

4,816,197

4,699,291

4,668,628

Consolidated total assets

$ 63,760,313

60,349,808

50,591,809

49,387,741

Intangible assets

43,768

46,385

45,907

49,213

Consolidated tangible total assets (TTA)

$ 63,716,545

60,303,423

50,545,902

49,338,528

Tangible common equity ratio (TCE/TTA)

7.75%

7.99%

9.30%

9.46%

The following table presents the efficiency ratio calculation:

Three months ended
September 30,

Nine months ended
September 30,

(dollars in thousands)

2020

2019 (1)

2020

2019 (1)

Non-interest expense (NIE)

$ 160,563

134,295

456,402

391,247

Net interest income before provision for loan and lease losses

388,713

328,019

1,124,108

973,299

Other non-interest income

24,213

14,716

51,057

45,688

Total income (TI)

$ 412,926

342,735

1,175,165

1,018,987

Efficiency ratio (NIE/TI)

38.88%

39.18%

38.84%

38.40%

The following table reconciles yield on interest-earning assets to the yield on interest-earning assets on a tax-equivalent basis:

Three months ended
September 30,

Nine months ended
September 30,

(dollars in thousands)

2020

2019 (1)

2020

2019 (1)

Interest income (as reported)

$ 481,492

484,055

1,443,088

1,430,280

Tax-equivalent adjustment

1,603

1,356

4,649

3,811

Interest income, tax-equivalent basis

$ 483,095

485,411

1,447,737

1,434,091

Interest-earnings assets

$ 60,814,008

48,829,377

55,942,003

47,986,286

Yield on interest-earning assets

3.15%

3.93%

3.45%

3.99%

Tax-equivalent effect

0.01%

0.01%

0.01%

0.01%

Yield on interest-earning assets, tax-equivalent basis

3.16%

3.94%

3.46%

4.00%

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK

NON-GAAP FINANCIAL MEASURES

(unaudited)

The following table reconciles net interest margin (as reported) to core net interest margin on a tax-equivalent basis excluding loan prepayment penalty income:

Three months ended
September 30,

Nine months ended
September 30,

2020

2019

2020

2019

Net interest margin (as reported)

2.54%

2.67%

2.68%

2.71%

Tax-equivalent adjustment

0.01%

0.01%

0.01%

0.01%

Margin contribution from loan prepayment penalty income

(0.03)%

(0.02)%

(0.06)%

(0.02)%

Core net interest margin, tax-equivalent basis excluding loan prepayment penalty income

2.52%

2.66%

2.63%

2.70%

The following table reconciles net income (as reported) to pre-tax, pre-provision earnings:

Three months ended
September 30,

Nine months ended
September 30,

(dollars in thousands)

2020

2019 (1)

2020

2019 (1)

Net income (as reported)

$ 138,550

148,118

355,350

438,874

Income tax expense

61,149

59,158

150,918

175,985

Provision for credit losses

52,664

1,164

212,495

12,881

Pre-tax, pre-provision earnings

$ 252,363

208,440

718,763

627,740

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

The following table reconciles loans and leases (as reported) to core loans excluding Paycheck Protection Program ("PPP") loans :

(dollars in thousands)

September 30,
2020

June 30,
2020

December 31,
2019

September 30,
2019

Loans and leases (as reported)

$ 46,212,092

45,200,572

39,109,623

37,937,031

PPP loans

1,985,357

1,961,966

-

-

Core loans excluding PPP loans

$ 44,226,735

43,238,606

39,109,623

37,937,031

View source version on businesswire.com: https://www.businesswire.com/news/home/20201020005331/en/

Contacts

Investor Contact:
Eric R. Howell, Senior Executive Vice President – Corporate & Business Development
646-822-1402, ehowell@signatureny.com

Media Contact:
Susan Turkell Lewis, 646-822-1825, slewis@signatureny.com