Signature Bank Back on Track after Taxi Medallion Episode

Signature Bank announced Q3/17 net income was $124.5 million versus $76.1 million for the same quarter in 2016, which included $61.7 million of provision expense for the Chicago taxi medallion portfolio. Excluding this provision expense, net income would have been $113.7 million and non-accrual loans of $24.0 million or eight basis points of total loans.

“While we recognize there have been some near-term challenges for Signature Bank, including the recent impact on our taxi medallion loan portfolio and commercial real estate headwinds, our ability to attract veteran bankers and on-board core clients has continued unabated. We have never veered from the differentiated, relationship-based banking model upon which this institution was founded. Our single-point-of-contact, client-centric approach remains fully intact, allowing us to deliver solid growth – quarter after quarter – albeit not quite at the extraordinary pace of the past few years. However, a slower growth rate for Signature Bank still far outpaces that of our average peer group,” said Joseph J. DePaolo, president and chief executive officer.

The bank’s provision for loan losses for Q3/17 was $14.3 million, compared with $187.6 million for Q2/17 and $80.5 million for Q3/16. The elevated provisions in Q2/17 and Q3/16 were predominantly due to the taxi medallion portfolio.

Net charge-offs for Q3/17 were $3.8 million, or 0.05% of average loans on an annualized basis, versus $229.0 million, or 3.04%, for Q2/17 and $100.5 million, or 1.46%, for Q3/16. In addition, $229.7 million of the Q2/17 charge-offs and $98.7 million of the charge-offs in Q3/16 were for taxi medallion loans.

At September 30, 2017, non-accrual loans were $376.9 million, representing 1.21% of total loans and 0.91% of total assets, compared with non-accrual loans of $392.9 million, or 1.29% of total loans, at June 30, 2017 and $162.8 million, or 0.59% of total loans, at September 30, 2016.

Excluding non-accruing loans secured by taxi medallions of $352.9 million, non-accrual loans for the remainder of the entire portfolio are $24.0 million, or eight basis points of total loans. At September 30, 2017, the ratio of allowance for loan and lease losses to total loans was 0.62%, versus 0.60% at June 30, 2017 and 0.74% at September 30, 2016. Additionally, the ratio of allowance for loan and lease losses to non-accrual loans, or the coverage ratio, was 51% for Q3/17 versus 46% for the Q2/17 and 126% for Q3/16.

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