Signature Bank hit a major milestone in the third quarter as strong demand for commercial loans — especially from private equity firms — helped push total assets above the $100 billion mark.
The New York-based bank said Tuesday that total loans in its funds banking division climbed 31% from just three months earlier to $21.2 billion and that its portfolio of loans to private equity and venture capital firms is up by nearly 130% since last year’s third quarter.
The torrid pace of growth within the specialized unit, combined with a sharp decline in its loan-loss provision, led to a 74% increase in the bank’s third-quarter profits from the same period last year, to $241.4 million. Signature’s earnings per share of $3.88 were 16 cents higher than the average estimates of analysts polled by FactSet Research Systems.
On a call discussing the bank’s third-quarter results, President and CEO Joseph DePaolo said the growth in the funds banking division in particular was a combination of borrowers drawing down existing lines of credit and seeking new loans. Signature Bank has expanded its fund banking and venture banking division in recent years, and the business has been a meaningful differentiator for Signature at a time when loan demand across the banking industry has been lackluster.
Signature executives said that despite the higher-than-expected loan growth in the third quarter, they still expect overall loans to increase by another $1.5 billion to $2 billion this quarter.
The growth in the loan book boosted Signature’s total assets more than 11% in the quarter from just three months earlier, to $107.8 billion. Year over year, total assets are up nearly 70%, and all of the growth has been organic. Signature has never made an acquisition in its 20-year history.
Crossing the $100 billion-asset mark means that Signature will be
“Our banking models are pretty straightforward and simple,” he said. “It really shouldn't be difficult for us to put together.”
Net interest income before provision for credit losses jumped 24% year over year to $480.9 million. Signature recorded a $4 million provision for credit losses in the third quarter, compared with $52.7 million in the same quarter last year.
Net charge-offs rose to $17.3 million, or 0.12% of average loans, from $10.5 million, or 0.09%, in the same quarter last year.
Noninterest income increased nearly 30% to $31.4 million, while noninterest expenses rose 13% to $181.2 million, largely because Signature hired additional private banking teams and operational support.
Deposits climbed 76% year over year to $95.6 billion in the third quarter. Signature’s blockchain-based payments platform, Signet, drove much of the growth in non-interest-bearing deposits. Signet
