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, 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.

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.