Signature Bank breaks fourth-quarter profit record

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Joseph DePaolo, President and CEO of Signature Bank (iStock)

Signature Bank, a major rent-regulated lender, posted another record quarter and unveiled plans to bolster commercial lending after pulling out during the pandemic.

Its fourth-quarter earnings and revenue beat estimates and rose from the same period last year. The bank reported record earnings per share of $4.34, up from $3.26 in the last quarter of 2020. Revenue for the last quarter reached more than $569 million, a record increase of around $419 million compared to a year ago.

The bank has also strengthened its liquidity. Total deposits reached $106 million, up 40% year-over-year, and loans reached nearly $65 billion, up 25%. The bank cut its loan-to-deposit ratio to 61%, a target for the company, said Signature President and CEO Joseph DePaolo.

DePaolo said the bank has increased its deposits by nearly $66 billion during the pandemic, “equivalent to acquiring one of the top 50 U.S. banks in each of the past two years.”

“Not bad for a 20-year-old bank,” DePaolo said.

The bank plans to increase its commercial real estate lending, which accounts for the majority of its assets. DePaolo said he has reduced his concentration of home loans in recent years.

In the first year of the pandemic, the bank faced deferrals among commercial borrowers. This time last year, 9% of the bank’s $49 billion loan portfolio was in some form of deferral.

This number is practically nil. Signature on Tuesday brought in just $8.3 million in deferrals, a decrease of 99.8%.

“We basically put the full Covid changes behind us without payment,” DePaolo said.

The CEO now expects the profit potential lurking in the investment sales market to further encourage commercial investors to borrow.

The pandemic initially dampened investment sales, pushing property prices down. Since then, investors betting on a comeback have snapped up discounted multi-family buildings, pushing fourth-quarter transactions and sales volume above pre-pandemic levels, according to a report by Avison Young.

However, transactions and dollar volume are still lower than they were in 2019, suggesting there remains an opportunity for more borrowers to enter the market.

“Now is a good time to make loans because the current situation probably wouldn’t get worse,” DePaolo said, referring to the pandemic. New York Covid cases, which surged over the holidays through January, have steadily declined over the past week.

The threat of higher interest rates could also prompt multi-family buyers to finance deals now, when things are going well, creating a stronger lending opportunity for Signature in the near term.

The bank, which is headquartered in New York and has expanded into California in recent years, said it plans to open another office in New Jersey and expand “west of the Mississippi”.

“Very close to California,” DePaolo said.

Last week, Signature announced it would double its office space at Empire State Realty Trust’s 1400 Broadway to 280,000 square feet.

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