Kroll Bond Rating Agency Comments on Signature Bank’s Second Quarter Results

NEW YORK--()--Kroll Bond Rating Agency (KBRA) comments on Signature Bank’s second quarter results, making the following points:

  • Signature Bank (NASDAQ:SBNY) (“the Bank”), based in New York, N.Y., initiated considerable actions to address the issues within its New York City taxi medallion portfolio, including significant payoffs and charge-offs of $236 million - representing 44% of its net medallion portfolio balance prior to the loss recognition. The measures were aimed at resolving the matter so that management may move past this challenged portfolio.
  • The increase in SBNY’s nonaccrual loans during the quarter to 1.29% of total loans, was entirely associated with all taxi medallion loans being transferred to nonaccrual. Medallions were reserved for or written down to a value of approximately $358,000. Remaining net exposure equated to 1.07% of total loans. Credit quality metrics continued to be strong outside of the challenged taxi medallion portfolio, where other nonaccrual loans represented just 0.09% of total loans.
  • Despite the magnitude of the measures taken to move past the taxi issues, SBNY reported a profitable quarter and capital ratios remained solid. Excluding provision expense and write-downs for the taxi medallion portfolio, net income would have totaled $120.2 million.
  • Kroll Bond Rating Agency (KBRA) has conducted extensive stress testing on the taxi portfolio specifically, the results of which were incorporated into the ratings, and as such, KBRA believes any future write-downs and remaining exposure can be comfortably covered by earnings.
  • KBRA ultimately views the decision to write down the New York City taxi portfolio as an aggressive action aimed at reducing future uncertainty.
  • The Bank's efficiency ratio remained peer-leading, notwithstanding an increase to 36.7%, up from 31.3% in the year-ago period. The increase was precipitated by higher general and administrative expenses of $12.6 million largely associated with the write-down on repossessed New York City taxi medallion loans.
  • SBNY posted another quarter of healthy deposit growth. Two additional private client banking teams joined to further strengthen deposit and loan growth efforts. KBRA views the bank’s depositor-first model as a benefit in periods of disruption, particularly when combined with an overall strong balance sheet.
  • In October of 2016, KBRA affirmed the senior unsecured debt and deposit ratings of A+, subordinated debt rating of A, and a short-term debt and deposit ratings of K1 for Signature Bank. The Outlook on all long-term ratings is Stable.

The ratings are based on KBRA’s Global Bank and Bank Holding Company Rating Methodology published on February 19, 2016.

To view the report, please click here.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Kroll Bond Rating Agency
Analytical:
Ashley Phillips, 301-969-3185
Director
aphillips@kbra.com
or
Ian Jaffe, 301-969-3302
Senior Director
ijaffe@kbra.com
or
Joseph Scott, 646-731-2438
Managing Director
jscott@kbra.com
Follow us on Twitter!
@KrollBondRating

Contacts

Kroll Bond Rating Agency
Analytical:
Ashley Phillips, 301-969-3185
Director
aphillips@kbra.com
or
Ian Jaffe, 301-969-3302
Senior Director
ijaffe@kbra.com
or
Joseph Scott, 646-731-2438
Managing Director
jscott@kbra.com
Follow us on Twitter!
@KrollBondRating