Net income for the 2015 first quarter reached a record $83.4 million, or $1.64 diluted earnings per share, versus $66.0 million, or $1.37 diluted earnings per share, for the 2014 first quarter. The record net income for the 2015 first quarter, versus the comparable quarter last year, is primarily due to an increase in net interest income, fueled by strong deposit growth and record loan growth. These factors were partially offset by an increase in non-interest expense.
Net interest income for the 2015 first quarter reached $222.5 million, up $36.0 million, or 19.3 percent, when compared with the 2014 first quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $28.59 billion at March 31, 2015, an increase of $5.48 billion, or 23.7 percent, from $23.10 billion at March 31, 2014. Average assets for the 2015 first quarter reached $27.98 billion, an increase of $5.28 billion, or 23.3 percent, compared with the 2014 first quarter.
Deposits for the 2015 first quarter rose $1.41 billion, or 6.2 percent, to $24.03 billion at March 31, 2015. When compared with deposits at March 31, 2014, overall deposit growth for the last twelve months was 31.2 percent, or $5.72 billion. Excluding short-term escrow and brokered deposits of $3.38 billion at the end of the 2015 first quarter and $3.08 billion at year-end 2014, core deposits increased $1.11 billion for the quarter. Average deposits for the 2015 first quarter reached $23.38 billion, an increase of $1.24 billion, or 5.6 percent.
“2015 is off to an outstanding start as we again set records in both earnings and loan growth while also delivering very strong deposit growth,” stated Joseph J. DePaolo, President and Chief Executive Officer.
“Equally important is the continuation of our investment in the future of this institution. To date this year, we added three private client banking teams that bring significant experience to the Bank, demonstrating the vast opportunity that continues to exist in the marketplace we serve. We remain hungry for further expansion of our network through additional talent acquisition. We have consistently proven that the veteran bankers we are attracting prefer and thrive in the single-point-of-contact business model and culture found here. Now, with 95 private client banking teams serving our growing clientele base, we are excited about the contributions they will make in the coming year and look forward to identifying more opportunities to onboard other talent,” DePaolo explained.
Scott A. Shay, Chairman of the Board, commented: “We are frequently asked when the law of large numbers will begin to affect Signature Bank. However, our business momentum continues to grow due to the network effect, which is the strength of our private client banking teams. The Bank is gaining further traction from our organic growth and relationship-based business model, resulting from our commitment to service and safety. Many new companies become clients because they are continually hearing about the level, quality and consistency of our service from their colleagues and friends. Once they become clients, they then wonder why they waited so long to move to Signature Bank. The word is spreading quickly that banking at Signature Bank is truly a different experience than banking elsewhere. Within the niche market to which we cater -- privately owned businesses -- we have solidified our position as the bank of choice.”
The Bank’s Tier 1 leverage, common equity Tier 1 risk-based, Tier 1 risk-based, and total risk-based capital ratios were approximately 9.25 percent, 12.27 percent, 12.27 percent, and 13.08 percent, respectively, as of March 31, 2015. 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 9.16 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 2015 first quarter was $222.5 million, an increase of $36.0 million, or 19.3 percent, versus the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $27.68 billion for the 2015 first quarter represent an increase of $5.35 billion, or 24.0 percent, from the 2014 first quarter. Yield on interest-earning assets for the 2015 first quarter decreased 20 basis points, to 3.72 percent, compared with the 2014 first quarter. This decrease was primarily attributable to prolonged low interest rates.
Average cost of deposits and average cost of funds for the first quarter of 2015 decreased by six and seven basis points, respectively, versus the 2014 first quarter to 0.43 percent and 0.50 percent. These decreases were predominantly due to prolonged low interest rates.
Net interest margin for the 2015 first quarter was 3.26 percent versus 3.39 percent reported in the same period a year ago. On a linked quarter basis, net interest margin increased three basis points. Excluding loan prepayment penalties in both quarters, linked quarter core margin increased four basis points to 3.17 percent. Approximately two basis points of the respective linked quarter increases were due to two less days in the 2015 first quarter.
Provision for Loan Losses
The Bank’s provision for loan losses for the first quarter of 2015 was $7.9 million, compared with $7.6 million for the 2014 fourth quarter and $8.2 million for the 2014 first quarter.
Net charge offs for the 2015 first quarter were $1.5 million, or 0.03 percent, of average loans on an annualized basis, versus net recoveries of $181,000, or 0.00 percent, for the 2014 fourth quarter and net recoveries of $244,000, or 0.01 percent, for the 2014 first quarter.
Non-Interest Income and Non-Interest Expense
Non-interest income for the 2015 first quarter was $10.1 million, up $3.0 million when compared with $7.2 million reported in the 2014 first quarter. The increase was led by a $2.7 million increase in net gains on sales of loans predominantly from our SBA pool assembly business.
Non-interest expense for the first quarter of 2015 was $81.7 million, an increase of $11.7 million, or 16.7 percent, versus $70.0 million reported in the 2014 first quarter. The increase was primarily a result of the addition of new private client banking teams and our continued investment in Signature Financial, as well as an increase in costs in our risk management and compliance related activities.
The Bank’s efficiency ratio improved to 35.1 percent for the 2015 first quarter versus 36.2 percent for the comparable period last year. The improvement was primarily due to growth in net interest income.
Loans, excluding loans held for sale, grew a record $1.44 billion, or 8.1 percent, during the first quarter of 2015 to $19.30 billion, compared with $17.86 billion at December 31, 2014. At March 31, 2015, loans accounted for 67.5 percent of total assets, versus 65.4 percent at the end of the 2014 fourth quarter and 61.5 percent at the end of 2014 first quarter. Average loans, excluding loans held for sale, reached $18.43 billion in the 2015 first quarter, growing $1.37 billion, or 8.1 percent, from the 2014 fourth quarter and $4.63 billion, or 33.5 percent, from the 2014 first quarter. The increase in loans for the first quarter was primarily driven by growth in commercial real estate and multi-family loans.
At March 31, 2015, non-accrual loans were $27.8 million, representing 0.14 percent of total loans and 0.10 percent of total assets, compared with non-accrual loans of $21.0 million, or 0.12 percent of total loans, at December 31, 2014 and $36.2 million, or 0.25 percent of total loans, at March 31, 2014. The ratio of allowance for loan and lease losses to total loans at March 31, 2015 was 0.88 percent, versus 0.92 percent at December 31, 2014 and 1.01 percent at March 31, 2014. Additionally, the ratio of allowance for loan and lease losses to non-accrual loans, or the coverage ratio, was 614 percent for the 2015 first quarter versus 783 percent for the fourth quarter of 2014 and 396 percent for the 2014 first quarter.
Signature Bank’s management will host a conference call to review results of the 2015 first quarter on Tuesday, April 21, 2015, 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 #22573423. 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," then under "Company News," select "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 #22573423. The replay will be available from approximately 1:00 PM ET on Tuesday, April 21, 2015 through 11:59 PM ET on Friday, April 24, 2015.
About Signature Bank
Signature Bank, member FDIC, is a New York-based full-service commercial bank with 29 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.
Signature Bank offers a wide variety of business and personal banking products and services. Its specialty finance subsidiary, Signature Financial, LLC, provides equipment finance and leasing as well as transportation and taxi medallion financing. 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.
Signature Bank was named the Best Bank in America by Forbes for 2015 and the only large cap bank to appear on Forbes’ list of America’s 50 Most Trustworthy Financial Companies. Signature Bank also was voted Best Business Bank by the New York Law Journal in the publication’s fifth annual reader survey; named the nation’s fifth top-performing bank by ABA Banking Journal; and ranked seventh on Bank Director magazine’s 2014 Bank Performance Scorecard for banks with assets between $5 and $50 billion.
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 and business strategy. These statements often include words such as "may," "believe," "expect," "anticipate," "intend," “potential,” “opportunity,” “could,” “project,” “seek,” “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 and (vi) competition for qualified personnel and desirable office locations. 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
CONSOLIDATED STATEMENTS OF INCOME
|Three months ended March 31,|
|(dollars in thousands, except per share amounts)||2015||2014|
|INTEREST AND DIVIDEND INCOME|
|Loans held for sale||$||596||943|
|Loans and leases, net||185,763||148,167|
|Other short-term investments||1,289||1,414|
|Total interest income||253,962||215,768|
|Federal funds purchased and securities sold under|
|agreements to repurchase||3,721||4,420|
|Federal Home Loan Bank advances||2,927||3,209|
|Total interest expense||31,465||29,300|
|Net interest income before provision for loan and lease losses||222,497||186,468|
|Provision for loan and lease losses||7,887||8,188|
|Net interest income after provision for loan and lease losses||214,610||178,280|
|Fees and service charges||5,021||4,457|
|Net gains on sales of securities||418||445|
|Net gains on sales of loans||3,467||743|
|Other-than-temporary impairment losses on securities:|
|Total impairment losses on securities||(933||)||(1,475||)|
|Portion recognized in other comprehensive income (before taxes)||592||857|
|Net impairment losses on securities recognized in earnings||(341||)||(618||)|
|Total non-interest income||10,149||7,170|
|Salaries and benefits||55,077||46,417|
|Occupancy and equipment||5,926||5,239|
|FDIC assessment fees||3,813||2,887|
|Other general and administrative||9,987||9,737|
|Total non-interest expense||81,698||70,036|
|Income before income taxes||143,061||115,414|
|Income tax expense||59,671||49,407|
|PER COMMON SHARE DATA|
|Earnings per share – basic||$||1.66||1.39|
|Earnings per share – diluted||$||1.64||1.37|
|CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION|
|March 31,||December 31,|
|(dollars in thousands, except per share amounts)||(unaudited)|
|Cash and due from banks||$||232,515||274,247|
|Total cash and cash equivalents||258,286||299,078|
|Securities held-to-maturity (fair value $2,251,879 at March 31, 2015|
|and $2,222,177 at December 31, 2014)||2,213,291||2,208,551|
|Federal Home Loan Bank stock||81,163||86,338|
|Loans held for sale||256,240||548,297|
|Loans and leases, net||19,128,824||17,693,316|
|Premises and equipment, net||40,310||40,996|
|Accrued interest and dividends receivable||82,958||79,687|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Federal funds purchased and securities sold under agreements|
|Federal Home Loan Bank advances||1,220,163||1,335,163|
|Accrued expenses and other liabilities||153,512||151,964|
|Preferred stock, par value $.01 per share; 61,000,000 shares authorized;|
|none issued at March 31, 2015 and December 31, 2014||-||-|
|Common stock, par value $.01 per share; 64,000,000 shares authorized;|
|51,738,170 shares issued and 50,669,910 shares outstanding at March 31, 2015;|
|51,398,685 shares issued and 50,317,609 shares outstanding at December 31, 2014||507||503|
|Additional paid-in capital||1,363,557||1,348,661|
|Net unrealized gains on securities, net of tax||38,538||13,124|
|Total shareholders' equity||2,619,942||2,496,238|
|Total liabilities and shareholders' equity||$||28,589,191||27,318,640|
|FINANCIAL SUMMARY, CAPITAL RATIOS, ASSET QUALITY|
|Three months ended|
|(in thousands, except ratios and per share amounts)||
|PER COMMON SHARE|
|Net income - basic||$||1.66||$||1.62||$||1.39|
|Net income - diluted||$||1.64||$||1.60||$||1.37|
|Average shares outstanding - basic||50,352||50,316||47,318|
|Average shares outstanding - diluted||50,892||50,936||48,170|
|SELECTED FINANCIAL DATA|
|Return on average total assets||1.21%||1.20%||1.18%|
|Return on average shareholders' equity||13.22%||13.19%||14.42%|
|Efficiency ratio (1)||35.12%||34.05%||36.17%|
Efficiency ratio excluding net gains on sales of securities
and net impairment losses on securities recognized
in earnings (1) (2)
|Yield on interest-earning assets||3.72%||3.71%||3.92%|
|Cost of deposits and borrowings||0.50%||0.53%||0.57%|
|Net interest margin||3.26%||3.23%||3.39%|
|(1)||The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income before provision for loan and lease losses and non-interest income.|
|(2)||The efficiency ratio excluding net gains on sales of securities and net impairment losses on securities recognized in earnings 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. This ratio is a metric used by management to evaluate the performance of the Bank's core business activities.|
|Tangible common equity (3)||9.16%||9.14%||8.28%|
|Tier 1 leverage||9.25%||9.25%||8.51%|
|Common equity Tier 1 risk-based (4)||12.27%||-||-|
|Tier 1 risk-based||12.27%||13.49%||14.05%|
|Allowance for loan and lease losses||$||170,776||$||164,392||$||143,503|
|Allowance for loan and lease losses to non-accrual loans||614.10%||782.52%||396.32%|
|Allowance for loan and lease losses to total loans||0.88%||0.92%||1.01%|
|Non-accrual loans to total loans||0.14%||0.12%||0.25%|
Quarterly net (charge-offs) recoveries to average loans,
|(3)||We define tangible common equity as the ratio of tangible common equity to adjusted tangible assets (the "TCE ratio") and calculate this ratio by dividing total consolidated common shareholders' equity by consolidated total assets (we had no intangible assets at any of the dates presented above). Tangible common equity is considered to be a non-GAAP financial measure and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The TCE ratio is a metric used by management to evaluate the adequacy of our capital levels. In addition to tangible common equity, management uses other metrics, such as Tier 1 capital related ratios, to evaluate capital levels.|
As part of the final rules implementing Basel III regulatory capital reforms, a new common equity Tier 1 risk-based capital ratio was added to existing minimum capital requirements as of January 1, 2015.
|NET INTEREST MARGIN ANALYSIS|
|Three months ended||Three months ended|
|March 31, 2015||March 31, 2014|
|(dollars in thousands)||
|Commercial loans, mortgages and leases||18,099,019||182,631||4.09%||13,457,376||144,803||4.36%|
|Residential mortgages and consumer loans||334,845||3,132||3.79%||349,544||3,364||3.90%|
|Loans held for sale||205,406||596||1.18%||337,957||943||1.13%|
|Total interest-earning assets||27,682,562||253,962||3.72%||22,327,818||215,768||3.92%|
|NOW and interest-bearing demand||$||1,777,131||1,720||0.39%||950,106||898||0.38%|
|Non-interest-bearing demand deposits||7,190,660||-||-||5,331,071||-||-|
|Total deposits and borrowings||25,282,264||31,465||0.50%||20,702,969||29,300||0.57%|
|Other non-interest-bearing liabilities|
|and shareholders' equity||2,695,593||1,993,148|
|Total liabilities and shareholders' equity||$||27,977,857||22,696,117|
|Net interest income / interest rate spread||222,497||3.22%||186,468||3.35%|
|Net interest margin||3.26%||3.39%|
|Ratio of average interest-earning assets|
|to average interest-bearing liabilities||109.49%||107.85%|
NON-GAAP FINANCIAL MEASURES
Management believes that the presentation of certain non-GAAP financial measures assists investors when comparing results period-to-period in a more consistent manner and provides a better measure of Signature Bank's results. These non-GAAP measures include the Bank's (i) net income and diluted earnings per share excluding the after tax effect of net gains on sales of securities and net impairment losses on securities recognized in earnings, (ii) tangible common equity ratio, (iii) efficiency ratio excluding net gains on sales of securities and net impairment losses on securities recognized in earnings, and (iv) core net interest margin excluding loan prepayment penalty income. These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results. We strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.
The following table presents a reconciliation of net income and diluted earnings per share (as reported) to net income and diluted earnings per share excluding the after tax effect of gains from the sales of securities and net impairment losses on securities recognized in earnings:
|Three months ended March 31,|
|(dollars in thousands, except per share amounts)||2015||2014|
|Net income (as reported)||$||83,390||66,007|
|Net gains on sales of securities||(418||)||(445||)|
|Net impairment losses on securities recognized in earnings||341||618|
|Net income - excluding after tax effect of net gains on sales of securities|
|and net impairment losses on securities recognized in earnings||$||83,345||66,106|
|Diluted earnings per share (as reported)||$||1.64||1.37|
|Net gains on sales of securities||(0.01||)||(0.01||)|
|Net impairment losses on securities recognized in earnings||0.01||0.01|
|Diluted earnings per share - excluding after tax effect of net gains on sales of securities|
|and net impairment losses on securities recognized in earnings||$||1.64||1.37|
The following table reconciles net interest margin (as reported) to core net interest margin excluding loan prepayment penalty income:
|Three months ended March 31,|
|Net interest margin (as reported)||3.26%||3.39%|
|Margin contribution from loan prepayment penalty income||(0.09)%||(0.14)%|
|Core net interest margin - excluding loan prepayment penalty income||3.17%||3.25%|