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, 2016. Net income for the 2016 second quarter reached $102.2 million, or $1.90 diluted earnings per share, versus $90.5 million, or $1.77 diluted earnings per share, for the 2015 second quarter. The increase in net income for the 2016 second quarter, versus the comparable quarter last year, is primarily due to an increase in net interest income, fueled by strong deposit and loan growth. These factors were partially offset by an increase in the provision for loan losses of $24.3 million and an increase in non-interest expenses, as well as a decrease in loan prepayment penalty income.

Net interest income for the 2016 second quarter reached $281.6 million, up $45.3 million, or 19.2 percent, when compared with the 2015 second quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $36.55 billion at June 30, 2016, an increase of $6.58 billion, or 21.9 percent, from $29.97 billion at June 30, 2015. Average assets for the 2016 second quarter reached $36.01 billion, an increase of $6.66 billion, or 22.7 percent, compared with the 2015 second quarter.

Deposits for the 2016 second quarter rose $1.47 billion, or 5.2 percent, to $29.58 billion at June 30, 2016. When compared with deposits at June 30, 2015, overall deposit growth for the last twelve months was 21.0 percent, or $5.12 billion. Average deposits for the 2016 second quarter reached $29.08 billion, an increase of $1.39 billion, or 5.0 percent.

“There are many uncertainties in the current global environment - political, economic and regulatory, among others. However, the one constant is our conviction to depositor safety. In times of turmoil, volatility and market disruption, we rely on the strength and success of Signature Bank’s highly focused depositor-first model to sustain our growth. This deposit first-and-foremost strategy continues to allow us to not only weather storms, but also to seize opportunities arising from changing market conditions,” explained Joseph J. DePaolo, Signature Bank President and Chief Executive Officer.

“We have always emphasized the importance of building our franchise by attracting core relationship deposits, and since our founding, have never ceased to focus on that philosophy. We continue to add talented banking teams that complement and contribute to our growing, depositor-centric network. Our strong growth this quarter speaks directly to the single-point-of-contact approach that is the hallmark of our business and distinguishes us in the marketplace,” DePaolo concluded.

Scott A. Shay, Chairman of the Board, commented: “At Signature Bank, we strive to provide our clients with answers to questions that assist them as they grow their companies and build a sound financial future. We are always here to serve and support our clients. We are not like other banks that oftentimes dictate what their clients should be doing or determine how they should fit into their pre-set bank parameters. Rather, we are a straightforward institution that stands behind all our clients in times of economic and financial turmoil. Sadly, there are too few financial institutions offering straightforward solutions. Nevertheless, we will continue to drive this point home by relentlessly putting our depositors first and keeping our balance sheet at rock-solid levels. This commitment is demonstrative of the ways in which we serve our clients and allows us to better navigate through whatever effects the changing economy might present.”

Capital

In the 2016 second quarter, the Bank issued $260.0 million in subordinated debt to institutional investors. Proceeds from the offering will be used to continue the Bank’s growth in serving its niche market of privately owned businesses. The Bank’s Tier 1 leverage, common equity Tier 1 risk-based, Tier 1 risk-based, and total risk-based capital ratios were approximately 9.60 percent, 12.00 percent, 12.00 percent, and 13.67 percent, respectively, as of June 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 9.52 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.

Net Interest Income

Net interest income for the 2016 second quarter was $281.6 million, an increase of $45.3 million, or 19.2 percent, versus the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $35.61 billion for the 2016 second quarter represent an increase of $6.62 billion, or 22.8 percent, from the 2015 second quarter. Yield on interest-earning assets for the 2016 second quarter decreased four basis points, to 3.66 percent, compared with the 2015 second 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 second quarter of 2016 increased by one and six basis points, respectively, versus the 2015 second quarter to 0.41 percent and 0.53 percent, respectively.

Net interest margin for the 2016 second quarter was 3.18 percent versus 3.27 percent reported in the same period a year ago. On a linked quarter basis, net interest margin decreased 14 basis points. Excluding loan prepayment penalties in both quarters, linked quarter core net interest margin decreased five basis points to 3.12 percent. Four basis points of the decline are attributable to the April 2016 subordinated debt issuance.

Provision for Loan Losses

The Bank’s provision for loan losses for the second quarter of 2016 was $33.3 million, compared with $19.8 million for the 2016 first quarter and $9.0 million for the 2015 second quarter. The increase was primarily due to additional reserves for Chicago taxi medallion loans. The Bank now has an allowance for loan losses to loans ratio of 30.0% for Chicago taxi medallion loans.

Net charge-offs for the 2016 second quarter were $15.4 million, or 0.24 percent of average loans on an annualized basis, versus $7.8 million, or 0.13 percent, for the 2016 first quarter and $2.6 million, or 0.05 percent, for the 2015 second quarter. $11.2 million of the charge-offs were for Chicago taxi medallion loans.

Non-Interest Income and Non-Interest Expense

Non-interest income for the 2016 second quarter was $13.1 million, up $3.4 million when compared with $9.8 million reported in the 2015 second quarter. The increase was due to a $4.4 million increase in net gains on sales of securities.

Non-interest expense for the second quarter of 2016 was $92.3 million, an increase of $7.4 million, or 8.7 percent, versus $84.9 million reported in the 2015 second 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’s efficiency ratio improved to 31.3 percent for the 2016 second quarter versus 34.5 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 $1.67 billion, or 6.7 percent, during the second quarter of 2016 to $26.71 billion, compared with $25.04 billion at March 31, 2016. At June 30, 2016, loans accounted for 73.1 percent of total assets, versus 71.8 percent at the end of the 2016 first quarter and 68.5 percent at the end of 2015 second quarter. Average loans, excluding loans held for sale, reached $26.05 billion in the 2016 second quarter, growing $1.66 billion, or 6.8 percent, from the 2016 first quarter and $6.07 billion, or 30.4 percent, from the 2015 second quarter. The increase in loans for the quarter was primarily driven by growth in commercial real estate and multi-family loans.

At June 30, 2016, non-accrual loans were $129.5 million, representing 0.48 percent of total loans and 0.35 percent of total assets, compared with non-accrual loans of $105.0 million, or 0.42 percent of total loans, at March 31, 2016 and $41.6 million, or 0.20 percent of total loans, at June 30, 2015. At the end of the 2016 second quarter, $104.9 million of non-accrual loans were taxi medallions. At June 30, 2016, the ratio of allowance for loan and lease losses to total loans was 0.84 percent, versus 0.83 percent at March 31, 2016 and 0.86 percent at June 30, 2015. Additionally, the ratio of allowance for loan and lease losses to non-accrual loans, or the coverage ratio, was 174 percent for the 2016 second quarter versus 197 percent for the first quarter of 2016 and 426 percent for the 2015 second quarter.

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.