Signature Bank Reports 2020 Third Quarter Results

Rhea-AI Summary

Signature Bank (Nasdaq: SBNY) reported a net income of $138.6 million, or $2.62 per share, for Q3 2020, a decline from $148.1 million, or $2.74 per share, in Q3 2019. The decrease was primarily due to a $51.5 million increase in provisions for credit losses linked to COVID-19 impacts. However, pre-tax, pre-provision earnings rose by 21.1% to $252.4 million. Net interest income reached $388.7 million, an increase of 18.5%, with total assets at $63.76 billion, up 29.1% year-over-year. Deposit growth was substantial, with a rise of $15.28 billion, or 39.1%, from the previous year.

Positive

• Pre-tax, pre-provision earnings rose by 21.1% to $252.4 million.
• Net interest income increased by 18.5% to $388.7 million due to growth in average interest-earning assets.
• Total assets reached $63.76 billion, representing a 29.1% year-over-year increase.
• Deposits grew by $15.28 billion, or 39.1%, from the previous year.

Negative

• Net income decreased from $148.1 million to $138.6 million year-over-year.
• Provision for credit losses increased by $51.5 million due to COVID-19 effects.
• Net interest margin on a tax-equivalent basis decreased to 2.55% from 2.68% in Q3 2019.

NEW YORK--(BUSINESS WIRE)--Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, today announced results for its third quarter ended September 30, 2020.

Net income for the 2020 third quarter was $138.6 million, or $2.62 diluted earnings per share, versus $148.1 million, or $2.74 diluted earnings per share, for the 2019 third quarter. The decrease in net income for the 2020 third quarter, versus the comparable quarter last year, is due to an increase in the provision for credit losses of $51.5 million predominantly due to effects of COVID-19 on the U.S. economy. Pre-tax, pre-provision earnings were $252.4 million, representing an increase of $43.9 million, or 21.1 percent, compared with $208.4 million for the 2019 third quarter.

Net interest income for the 2020 third quarter reached $388.7 million, up $60.7 million, or 18.5 percent, when compared with the 2019 third quarter. This increase is primarily due to growth in average interest-earning assets. Total assets reached $63.76 billion at September 30, 2020, an increase of $14.37 billion, or 29.1 percent, from $49.39 billion at September 30, 2019. Average assets for the 2020 third quarter reached $61.56 billion, an increase of $11.96 billion, or 24.1 percent, compared with the 2019 third quarter.

Deposits for the 2020 third quarter rose $4.11 billion to $54.34 billion at September 30, 2020. When compared with deposits at September 30, 2019, overall deposit growth for the last twelve months was 39.1 percent, or $15.28 billion. Average deposits for the 2020 third quarter reached $51.62 billion, an increase of $4.24 billion.

“Signature Bank continues to realize extraordinary growth during a protracted and challenging recovery from the COVID-19 pandemic. Our founding business philosophy to provide a client-centric, single point-of-contact model led by experienced group directors still distinguishes Signature Bank in the marketplace, particularly in times of distress. We’ve successfully navigated many challenges before and inevitably there will be others. While we don’t always know when or in what form they will materialize, we always knew it was important to be well diversified. As expected, our new initiatives are being embraced by clients, allowing us to continue to deliver solid results during these unsettling times,” explained Signature Bank President and Chief Executive Officer Joseph J. DePaolo.

“I want to take this opportunity to thank all our colleagues for their continued unwavering commitment to the Bank and its clients as well as their ability to stay focused on the positive throughout this pandemic. They clearly recognized the enormity of the challenge in front of all of us, and met it head on. This dedication and effort is reflected in our third quarter performance, our corporate culture and the strength of our franchise, as we executed on many fronts. Our strong deposit growth, which is up $13.96 billion for the first nine months of 2020 was again driven by across-the-board performance stemming from all our deposit gathering initiatives. Core loans increased solidly again this quarter, up $5.12 billion year-to-date. And, the Bank’s pre-tax pre-provision earnings grew $43.9 million, or 21.1 percent. Additionally, we were able to dramatically reduce principal and interest deferrals to 5.0 percent of total loans, and are proud of the ways in which we worked closely with our clients,” DePaolo concluded.

Scott A. Shay, Chairman of the Board, added: “While current times are very challenging on both the personal and professional fronts for our Signature Bank colleagues, it is also an appropriate time to be proud of what we have accomplished as an organization. Clients often share how grateful they are that their bankers stand ready to listen while offering sage advice and acting as a sounding board on difficult strategic decisions. We believe we have never been closer to our clients, and throughout these unprecedented times, they know we are in the trenches right alongside them. This message has been resounding with both current and new clients as we have achieved greater deposit growth in the first nine months of this year than in our first nine years of business. The Bank continues to expand its business lines and geographic presence as we witness the first fruits of a variety of initiatives put into place over the past several years. We diversified our business in ways that those who remember our NYC roots find pleasantly surprising.”

Capital

At the start of the 2020 fourth quarter, the Bank issued $375.0 million of subordinated debt in a public offering. Proceeds from the offering will be used for general corporate purposes. The Bank’s Tier 1 leverage, common equity Tier 1 risk-based, Tier 1 risk-based, and total risk-based capital ratios were approximately 8.56 percent, 10.26 percent, 10.26 percent, and 11.98 percent, respectively, as of September 30, 2020. 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 7.75 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.

The Bank declared a cash dividend of $0.56 per share, payable on or after November 13, 2020 to common stockholders of record at the close of business on November 2, 2020. In the third quarter of 2020, the Bank paid a cash dividend of $0.56 per share to common stockholders of record at the close of business on July 31, 2020.

Net Interest Income

Net interest income for the 2020 third quarter was $388.7 million, an increase of $60.7 million, or 18.5 percent, versus the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $60.81 billion for the 2020 third quarter represent an increase of $11.98 billion, or 24.5 percent, from the 2019 third quarter. Yield on interest-earning assets on a tax-equivalent basis for the 2020 third quarter decreased 78 basis points to 3.16 percent, compared to the third quarter of last year.

Average cost of deposits and average cost of funds for the third quarter of 2020 decreased by 70 and 74 basis points, to 0.51 percent and 0.66 percent, respectively, versus the comparable period a year ago.

Net interest margin on a tax-equivalent basis for the 2020 third quarter was 2.55 percent versus 2.68 percent reported in the 2019 third quarter and 2.77 percent in the 2020 second quarter. Excluding loan prepayment penalties in both quarters, linked quarter core net interest margin on a tax-equivalent basis decreased 17 basis points to 2.52 percent. The 2020 third quarter net interest margin was negatively affected by 21 basis points due to significant excess cash balances driven by strong deposit growth.

Provision for Credit Losses

The Bank’s provision for credit losses for the third quarter of 2020 was $52.7 million, compared with $93.0 million for the 2020 second quarter and $1.2 million for the 2019 third quarter. The Bank’s elevated provision for credit losses for the third quarter was predominantly attributable to effects of COVID-19 on the U.S. economy. Additionally, this is the third quarter since the bank adopted CECL on January 1, 2020.

Net charge-offs for the 2020 third quarter were $10.5 million, or 0.09 percent of average loans, on an annualized basis, versus $4.6 million, or 0.04 percent, for the 2020 second quarter and net charge-offs of $2.9 million, or 0.03 percent, for the 2019 third quarter.

Non-Interest Income and Non-Interest Expense

Non-interest income for the 2020 third quarter was $24.2 million, up $9.5 million when compared with $14.7 million reported in the 2019 third quarter. The increase was driven by increases in fees and service charges, net gains on sales of securities and net gains on sales of loans.

Non-interest expense for the third quarter of 2020 was $160.6 million, an increase of $26.3 million, or 19.6 percent, versus $134.3 million reported in the 2019 third quarter. The increase was predominantly due to a rise of $14.9 million in salaries and benefits from the significant hiring of 17 private client banking teams on the West Coast during the first three quarters of 2020. Additionally, the Bank incurred $6.8 million in penalty expense associated with the prepayment of $1.05 billion in borrowings.

The Bank’s efficiency ratio was 38.9 percent for the 2020 third quarter compared with 39.2 percent for the same period a year ago, and 38.0 percent for the second quarter of 2020.

Loans

Loans, excluding loans held for sale, grew $1.01 billion, or 2.2 percent, during the third quarter of 2020 to $46.21 billion, compared with $45.20 billion at June 30, 2020. Average loans, excluding loans held for sale, reached $45.42 billion in the 2020 third quarter, growing $2.69 billion, or 6.3 percent, from the 2020 second quarter and $7.59 billion, or 20.1 percent, from the 2019 third quarter. For the eighth consecutive quarter, the increase in loans was primarily driven by growth in commercial and industrial loans, led by capital call facilities to private equity funds.

At September 30, 2020, non-accrual loans were $81.3 million, representing 0.18 percent of total loans and 0.13 percent of total assets, compared with non-accrual loans of $46.9 million, or 0.10 percent of total loans, at June 30, 2020 and $32.5 million, or 0.09 percent of total loans, at September 30, 2019. The ratio of allowance for credit losses for loans and leases to total loans at September 30, 2020 was 1.05 percent, versus 0.98 percent at June 30, 2020 and 0.64 percent at September 30, 2019. Additionally, the ratio of allowance for credit losses for loans and leases to non-accrual loans, or the coverage ratio, was 596 percent for the 2020 third quarter versus 947 percent for the second quarter of 2020 and 746 percent for the 2019 third quarter.

COVID-19 Related Loan Modifications

As of October 15, 2020, total principal and interest (P&I) deferrals significantly decreased to $2.31 billion, or 5.0 percent of the Bank’s total loan portfolio from their peak level as of June 30, 2020. Additionally, 2.1 percent of the loan book is currently comprised of modified 90 day interest-only payments. The positive trend is the result of the Bank’s ability to work closely with its clients toward reasonable resolutions.

	As of September 30, 2020						As of October 15, 2020
(dollars in millions)	Total Portfolio						P&I Deferrals
	Balance		LTV		DSCR		Balance		% of Portfolio		LTV		DSCR
Multi Family	$ 15,297		59%		1.36		642		4.2%		58%		1.26
Retail
Neighborhood	2,160		57%		1.66		191		8.8%		54%		1.61
Mixed Use	1,122		58%		1.35		168		15.0%		58%		1.24
Commercial Condo / Co-op	988		55%		1.26		223		22.6%		55%		1.05
Single Tenant	692		53%		1.65		8		1.2%		57%		1.53
Other	605		56%		1.58		62		10.2%		52%		1.52
Total Retail	5,567		56%		1.52		652		11.7%		55%		1.31
Office	4,036		55%		1.66		524		13.0%		54%		1.36
Acquisition, Development, and
Construction (ADC)(1)	1,376		51%		0.42		171		12.4%		60%		0.27
Industrial	557		51%		1.83		9		1.6%		39%		1.38
Hotel	77		44%		1.81		-		0.0%		-		-
Land	38		21%		1.98		-		0.0%		-		-
Other	284		47%		1.48		27		9.5%		58%		1.33
Total CRE	27,232		57%		1.40		2,025		7.4%		56%		1.22
Fund Banking, Venture
Banking, and ABL	9,216						-		0.0%
Signature Financial	4,739						127		2.7%
Traditional C&I	2,486						130		5.2%
Total C&I	16,441						257		1.6%
PPP Loans	1,985						-		0.0%
Residential and Consumer	593						31		5.2%
Other Loans, premiums,
deferred fees, and costs	(39)						-		0.0%
Total Portfolio	$ 46,212						2,313		5.0%

(1) ADC loans predominantly consist of loans for properties that have been acquired by our clients for refurbishment and are not ground up construction loans. The DSCR reported for ADC loans does not include credit enhancements, such as rental holdbacks, reserves, and personal guarantees.

Conference Call

Signature Bank’s management will host a conference call to review results of the 2020 third quarter on Tuesday, October 20, 2020, 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 #7186596. 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,” "Quarterly Results/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 #7186596. The replay will be available from approximately 1:00 PM ET on Tuesday, October 20, 2020 through 11:59 PM ET on Friday, October 23, 2020.

About Signature Bank

Signature Bank, member FDIC, is a New York-based, full-service commercial bank with 36 private client offices throughout the metropolitan New York area, including Connecticut as well as in California and North Carolina. The Bank’s growing network of private client banking teams serves the needs of privately owned businesses, their owners and senior managers.

Signature Bank’s specialty finance subsidiary, Signature Financial, LLC, provides equipment finance and leasing. 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.

The Bank’s revolutionary blockchain-based digital payments platform, Signet™, allows the Bank’s commercial clients to make real-time payments in U.S. dollars, 24/7/365. Signature Bank is the first FDIC-insured bank to launch a blockchain-based digital payments platform, and Signet is the first such platform to be approved for use by the NYS Department of Financial Services.

Since commencing operations in May 2001, the Bank has emerged as one of the top 40 largest banks in the U.S., based on deposits (S&P Global Market Intelligence).

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, our business strategy and the impact of the COVID-19 pandemic on each of the foregoing and on our business overall. These statements often include words such as "may," "believe," "expect," "anticipate," "intend," “potential,” “opportunity,” “could,” “project,” “seek,” “target”, “goal”, “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, (vi) our ability to maintain the continuity, integrity, security and safety of our operations and (vii) competition for qualified personnel and desirable office locations. All of these factors are subject to additional uncertainty in the context of the COVID-19 pandemic, which is having an unprecedented impact on all aspects of our operations, the financial services industry and the economy as a whole. 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

SIGNATURE BANK
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
		Three months ended September 30,			Nine months ended September 30,
(dollars in thousands, except per share amounts)		2020	2019		2020		2019
INTEREST AND DIVIDEND INCOME
Loans held for sale		$ 692	1,284		2,334		3,653
Loans and leases, net		416,617	399,552		1,234,894		1,179,659
Securities available-for-sale		45,251	56,534		144,683		173,532
Securities held-to-maturity		14,036	15,238		42,660		46,292
Other investments		4,896	11,447		18,517		27,144
	Total interest income	481,492	484,055		1,443,088		1,430,280
INTEREST EXPENSE
Deposits		66,069	118,308		231,359		331,802
Federal funds purchased and securities sold under
agreements to repurchase		680	1,154		2,147		13,437
Federal Home Loan Bank borrowings		20,174	32,929		67,914		100,814
Subordinated debt		5,856	3,645		17,560		10,928
	Total interest expense	92,779	156,036		318,980		456,981
Net interest income before provision for credit losses		388,713	328,019		1,124,108		973,299
Provision for credit losses		52,664	1,164		212,495		12,881
Net interest income after provision for credit losses		336,049	326,855		911,613		960,418
NON-INTEREST INCOME
Commissions		3,183	3,452		9,710		10,831
Fees and service charges		10,871	8,178		31,772		23,752
Net gains on sales of securities		3,623	120		3,623		1,034
Net gains on sales of loans		4,996	2,752		9,552		8,880
Other income (1)		1,540	214		(3,600	)	1,191
	Total non-interest income	24,213	14,716		51,057		45,688
NON-INTEREST EXPENSE
Salaries and benefits		101,306	86,438		293,422		250,753
Occupancy and equipment		11,618	10,854		33,437		32,476
Information technology		11,324	10,098		31,797		27,552
FDIC assessment fees		3,190	3,191		9,787		9,538
Professional fees		3,399	4,075		12,931		10,693
Other general and administrative		29,726	19,639		75,028		60,235
	Total non-interest expense	160,563	134,295		456,402		391,247
Income before income taxes		199,699	207,276		506,268		614,859
Income tax expense		61,149	59,158		150,918		175,985
Net income		$ 138,550	148,118		355,350		438,874
PER COMMON SHARE DATA
Earnings per share – basic		$ 2.62	2.75		6.73		8.10
Earnings per share – diluted		$ 2.62	2.74		6.70		8.07
Dividends per common share		$ 0.56	0.56		1.68		1.68

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		September 30,	December 31,
		2020	2019
(dollars in thousands, except shares and per share amounts)		(unaudited)
ASSETS
Cash and due from banks		$ 6,255,490	702,277
Short-term investments		157,747	87,555
	Total cash and cash equivalents	6,413,237	789,832
Securities available-for-sale (amortized cost $7,463,431 at September 30, 2020
and $7,186,493 at December 31, 2019); (allowance for credit losses
$4 at September 30, 2020)		7,501,267	7,143,864
Securities held-to-maturity (fair value $2,148,286 at September 30, 2020
and $2,115,541 at December 31, 2019); (allowance for credit losses
$60 at September 30, 2020)		2,084,252	2,101,970
Federal Home Loan Bank stock		171,678	231,339
Loans held for sale		420,170	290,593
Loans and leases		46,212,092	39,109,623
Allowance for credit losses for loans and leases		(484,923)	(249,989)
Loans and leases, net		45,727,169	38,859,634
Premises and equipment, net		79,370	66,419
Operating lease right-of-use assets		216,311	217,578
Accrued interest and dividends receivable		249,926	147,527
Other assets (1)		896,933	743,053
	Total assets	$ 63,760,313	50,591,809
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest-bearing		$ 16,284,599	13,016,931
Interest-bearing		38,054,106	27,366,276
	Total deposits	54,338,705	40,383,207
Federal funds purchased and securities sold under agreements
to repurchase		150,000	150,000
Federal Home Loan Bank borrowings		2,839,245	4,142,144
Subordinated debt		457,156	456,119
Operating lease liabilities		243,827	242,587
Accrued expenses and other liabilities		748,181	472,554
	Total liabilities	58,777,114	45,846,611
Shareholders’ equity
Preferred stock, par value $.01 per share; 61,000,000 shares authorized;
none issued at September 30, 2020 and December 31, 2019		-	-
Common stock, par value $.01 per share; 64,000,000 shares authorized;
55,520,128 shares issued and 53,563,305 outstanding at September 30, 2020;
55,427,631 shares issued and 53,519,644 outstanding at December 31, 2019		555	554
Additional paid-in capital		1,862,142	1,871,571
Retained earnings (1)		3,405,273	3,172,273
Treasury stock, 1,900,315 shares at September 30, 2020 and 1,907,987 shares at December 31, 2019		(232,647)	(233,570)
Accumulated other comprehensive loss		(52,124)	(65,630)
	Total shareholders' equity	4,983,199	4,745,198
	Total liabilities and shareholders' equity	$ 63,760,313	50,591,809

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK
FINANCIAL SUMMARY, CAPITAL RATIOS, ASSET QUALITY
(unaudited)
		Three months ended September 30,				Nine months ended September 30,
(in thousands, except ratios and per share amounts)		2020		2019 (6)		2020		2019 (6)
PER COMMON SHARE
Net income - basic		$ 2.62		$ 2.75		$ 6.73		$ 8.10
Net income - diluted		$ 2.62		$ 2.74		$ 6.70		$ 8.07
Average shares outstanding - basic		52,673		53,722		52,631		54,032
Average shares outstanding - diluted		52,835		53,830		52,824		54,224
Book value		$ 93.03		$ 86.98		$ 93.03		$ 86.98
SELECTED FINANCIAL DATA
Return on average total assets		0.90%		1.18%		0.83%		1.20%
Return on average shareholders' equity		11.20%		12.56%		9.76%		12.89%
Efficiency ratio (1)		38.88%		39.18%		38.84%		38.40%
Yield on interest-earning assets		3.15%		3.93%		3.45%		3.99%
Yield on interest-earning assets, tax-equivalent basis (1)(2)		3.16%		3.94%		3.46%		4.00%
Cost of deposits and borrowings		0.66%		1.40%		0.83%		1.40%
Net interest margin		2.54%		2.67%		2.68%		2.71%
Net interest margin, tax-equivalent basis (2)(3)		2.55%		2.68%		2.69%		2.72%

(1) See "Non-GAAP Financial Measures" for related calculation.

(2) Based on the 21 percent U.S. federal statutory tax rate for the periods presented. The tax-equivalent basis is considered 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 impact of tax-exempt assets on the Bank's yield on interest-earning assets and net interest margin.

(3) See "Net Interest Margin Analysis" for related calculation.

		September 30, 2020		June 30, 2020		December 31, 2019 (6)		September 30, 2019 (6)
CAPITAL RATIOS
Tangible common equity (4)		7.75%		7.99%		9.30%		9.46%
Tier 1 leverage (5)		8.56%		8.76%		9.55%		9.61%
Common equity Tier 1 risk-based (5)		10.26%		10.43%		11.56%		11.89%
Tier 1 risk-based (5)		10.26%		10.43%		11.56%		11.89%
Total risk-based (5)		11.98%		12.16%		13.26%		13.14%
ASSET QUALITY
Non-accrual loans		$ 81,305		$ 46,939		$ 57,355		$ 32,539
Allowance for loan and lease losses		$ 484,923		$ 444,672		$ 249,989		$ 242,754
Allowance for loan and lease losses to non-accrual loans		596.42%		947.34%		435.86%		746.04%
Allowance for loan and lease losses to total loans		1.05%		0.98%		0.64%		0.64%
Non-accrual loans to total loans		0.18%		0.10%		0.15%		0.09%
Quarterly net charge-offs (recoveries) to average loans, annualized		0.09%		0.04%		0.03%		0.03%

(4) We define tangible common equity as the ratio of total tangible common equity to total tangible assets (the "TCE ratio"). 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. See "Non-GAAP Financial Measures" for related calculation.

(5) September 30, 2020 ratios are preliminary.

(6) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK
NET INTEREST MARGIN ANALYSIS
(unaudited)
	Three months ended				Three months ended
	September 30, 2020				September 30, 2019
(dollars in thousands)	Average Balance	Interest Income/ Expense	Average Yield/ Rate		Average Balance	Interest Income/ Expense	Average Yield/ Rate
INTEREST-EARNING ASSETS
Short-term investments	$ 5,584,666	1,877	0.13%		1,285,289	7,173	2.21%
Investment securities	9,633,122	62,306	2.59%		9,569,671	76,046	3.18%
Commercial loans, mortgages and leases (1)	45,251,833	416,597	3.66%		37,621,834	398,523	4.20%
Residential mortgages and consumer loans	172,233	1,623	3.75%		213,251	2,385	4.44%
Loans held for sale	172,154	692	1.60%		139,332	1,284	3.66%
Total interest-earning assets	60,814,008	483,095	3.16%		48,829,377	485,411	3.94%
Non-interest-earning assets (2)	745,523				767,483
Total assets	$ 61,559,531				49,596,860
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW and interest-bearing demand	$ 9,476,192	15,728	0.66%		4,304,971	21,078	1.94%
Money market	24,114,937	42,131	0.70%		19,431,159	81,088	1.66%
Time deposits	2,034,445	8,210	1.61%		2,677,536	16,142	2.39%
Non-interest-bearing demand deposits	15,991,893	-	-		12,266,945	-	-
Total deposits	51,617,467	66,069	0.51%		38,680,611	118,308	1.21%
Subordinated debt	456,927	5,856	5.13%		258,636	3,645	5.64%
Other borrowings	3,732,941	20,854	2.22%		5,212,259	34,083	2.59%
Total deposits and borrowings	55,807,335	92,779	0.66%		44,151,506	156,036	1.40%
Other non-interest-bearing liabilities
and shareholders' equity (2)	5,752,196				5,445,354
Total liabilities and shareholders' equity	$ 61,559,531				49,596,860
OTHER DATA
Net interest income / interest rate spread (1)		390,316	2.50%			329,375	2.54%
Tax-equivalent adjustment		(1,603)				(1,356)
Net interest income, as reported		388,713				328,019
Net interest margin			2.54%				2.67%
Tax-equivalent effect			0.01%				0.01%
Net interest margin on a tax-equivalent basis (1)			2.55%				2.68%
Ratio of average interest-earning assets
to average interest-bearing liabilities			108.97%				110.60%

(1) Presented on a tax-equivalent, non-GAAP, basis for municipal leasing and financing transactions using the U.S. federal statutory tax rate of 21 percent for the periods presented.

(2) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK
NET INTEREST MARGIN ANALYSIS
(unaudited)
	Nine months ended				Nine months ended
	September 30, 2020				September 30, 2019
(dollars in thousands)	Average Balance	Interest Income/ Expense	Average Yield/ Rate		Average Balance	Interest Income/ Expense	Average Yield/ Rate
INTEREST-EARNING ASSETS
Short-term investments	$ 3,664,001	8,179	0.30%		759,275	13,372	2.35%
Investment securities	9,538,078	197,681	2.76%		9,568,596	233,596	3.26%
Commercial loans, mortgages and leases (1)	42,399,557	1,234,245	3.89%		37,296,197	1,176,139	4.22%
Residential mortgages and consumer loans	179,996	5,298	3.93%		215,350	7,331	4.55%
Loans held for sale	160,371	2,334	1.94%		146,868	3,653	3.33%
Total interest-earning assets	55,942,003	1,447,737	3.46%		47,986,286	1,434,091	4.00%
Non-interest-earning assets (2)	910,273				750,381
Total assets	$ 56,852,276				48,736,667
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW and interest-bearing demand	$ 7,581,051	48,614	0.86%		4,158,317	62,453	2.01%
Money market	22,383,896	151,419	0.90%		18,710,445	224,736	1.61%
Time deposits	2,211,097	31,326	1.89%		2,521,132	44,613	2.37%
Non-interest-bearing demand deposits	14,553,396	-	-		11,980,330	-	-
Total deposits	46,729,440	231,359	0.66%		37,370,224	331,802	1.19%
Subordinated debt	456,584	17,560	5.13%		258,440	10,928	5.64%
Other borrowings	4,078,348	70,061	2.29%		5,871,966	114,251	2.60%
Total deposits and borrowings	51,264,372	318,980	0.83%		43,500,630	456,981	1.40%
Other non-interest-bearing liabilities
and shareholders' equity (2)	5,587,904				5,236,037
Total liabilities and shareholders' equity	$ 56,852,276				48,736,667
OTHER DATA
Net interest income / interest rate spread (1)		1,128,757	2.63%			977,110	2.60%
Tax-equivalent adjustment		(4,649)				(3,811)
Net interest income, as reported		1,124,108				973,299
Net interest margin			2.68%				2.71%
Tax-equivalent effect			0.01%				0.01%
Net interest margin on a tax-equivalent basis (1)			2.69%				2.72%
Ratio of average interest-earning assets
to average interest-bearing liabilities			109.12%				110.31%

(1) Presented on a tax-equivalent, non-GAAP, basis for municipal leasing and financing transactions using the U.S. federal statutory tax rate of 21 percent for the periods presented.

(2) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK
NON-GAAP FINANCIAL MEASURES
(unaudited)
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) tangible common equity ratio, (ii) efficiency ratio, (iii) yield on interest-earning assets, tax-equivalent basis, (iv) core net interest margin, tax-equivalent basis excluding loan prepayment penalty income, (v) pre-tax, pre-provision earnings, (vi) loans and leases to core loans excluding Paycheck Protection Program loans. 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 the tangible common equity ratio calculation:
(dollars in thousands)	September 30, 2020	June 30, 2020		December 31, 2019 (1)	September 30, 2019 (1)
Consolidated common shareholders' equity	$ 4,983,199	4,862,582		4,745,198	4,717,841
Intangible assets	43,768	46,385		45,907	49,213
Consolidated tangible common shareholders' equity (TCE)	$ 4,939,431	4,816,197		4,699,291	4,668,628
Consolidated total assets	$ 63,760,313	60,349,808		50,591,809	49,387,741
Intangible assets	43,768	46,385		45,907	49,213
Consolidated tangible total assets (TTA)	$ 63,716,545	60,303,423		50,545,902	49,338,528
Tangible common equity ratio (TCE/TTA)	7.75%	7.99%		9.30%	9.46%
The following table presents the efficiency ratio calculation:
	Three months ended September 30,			Nine months ended September 30,
(dollars in thousands)	2020	2019 (1)		2020	2019 (1)
Non-interest expense (NIE)	$ 160,563	134,295		456,402	391,247
Net interest income before provision for loan and lease losses	388,713	328,019		1,124,108	973,299
Other non-interest income	24,213	14,716		51,057	45,688
Total income (TI)	$ 412,926	342,735		1,175,165	1,018,987
Efficiency ratio (NIE/TI)	38.88%	39.18%		38.84%	38.40%
The following table reconciles yield on interest-earning assets to the yield on interest-earning assets on a tax-equivalent basis:
	Three months ended September 30,			Nine months ended September 30,
(dollars in thousands)	2020	2019 (1)		2020	2019 (1)
Interest income (as reported)	$ 481,492	484,055		1,443,088	1,430,280
Tax-equivalent adjustment	1,603	1,356		4,649	3,811
Interest income, tax-equivalent basis	$ 483,095	485,411		1,447,737	1,434,091
Interest-earnings assets	$ 60,814,008	48,829,377		55,942,003	47,986,286
Yield on interest-earning assets	3.15%	3.93%		3.45%	3.99%
Tax-equivalent effect	0.01%	0.01%		0.01%	0.01%
Yield on interest-earning assets, tax-equivalent basis	3.16%	3.94%		3.46%	4.00%

(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.

SIGNATURE BANK
NON-GAAP FINANCIAL MEASURES
(unaudited)
The following table reconciles net interest margin (as reported) to core net interest margin on a tax-equivalent basis excluding loan prepayment penalty income:
	Three months ended September 30,			Nine months ended September 30,
	2020	2019		2020	2019
Net interest margin (as reported)	2.54%	2.67%		2.68%	2.71%
Tax-equivalent adjustment	0.01%	0.01%		0.01%	0.01%
Margin contribution from loan prepayment penalty income	(0.03)%	(0.02)%		(0.06)%	(0.02)%
Core net interest margin, tax-equivalent basis excluding loan prepayment penalty income	2.52%	2.66%		2.63%	2.70%
The following table reconciles net income (as reported) to pre-tax, pre-provision earnings:
	Three months ended September 30,			Nine months ended September 30,
(dollars in thousands)	2020	2019 (1)		2020	2019 (1)
Net income (as reported)	$ 138,550	148,118		355,350	438,874
Income tax expense	61,149	59,158		150,918	175,985
Provision for credit losses	52,664	1,164		212,495	12,881
Pre-tax, pre-provision earnings	$ 252,363	208,440		718,763	627,740
(1) Effective January 1, 2020, we changed our accounting policy for Low Income Housing Tax Credit ("LIHTC") investments from the equity method to the proportional amortization method as it was determined to be the preferable method. All applicable prior period amounts have been retroactively restated to conform to the new accounting policy.
The following table reconciles loans and leases (as reported) to core loans excluding Paycheck Protection Program ("PPP") loans :
(dollars in thousands)	September 30, 2020	June 30, 2020		December 31, 2019	September 30, 2019
Loans and leases (as reported)	$ 46,212,092	45,200,572		39,109,623	37,937,031
PPP loans	1,985,357	1,961,966		-	-
Core loans excluding PPP loans	$ 44,226,735	43,238,606		39,109,623	37,937,031