NEW YORK … February 14, 2008 … Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, today announced results for its 2007 fourth quarter and year ended December 31, 2007.
Net loss for the quarter was $3.0 million, or $0.10 diluted loss per share, compared with net income of $8.9 million, or $0.30 diluted earnings per share, for the 2006 fourth quarter. The fourth quarter results include a $21.4 million other than temporary impairment write-down on investment securities. Excluding the after-tax effect of the impairment write-down on investment securities, net income for the quarter was $8.9 million, or $0.30 diluted earnings per share. The quarter's results reflect an increase of $5.5 million in the provision for loan losses, predominantly driven by two loans placed on non-accrual in the fourth quarter of 2007.
Additionally, the quarter's results also reflect a rise in net interest income of $5.4 million, or 16.4 percent, fueled by an increase in average interest earning assets of $790.6 million, as well as an increase in commission and fee income.
Total assets were $5.85 billion at year-end 2007, up $445.7 million, or 8.3 percent, when compared with $5.40 billion at year-end 2006. Average assets for 2007 were $5.42 billion, representing an increase of $811.9 million, or 17.6 percent, when compared with average assets of $4.61 billion for 2006.
Deposits increased $121.7 million in the fourth quarter, reaching $4.51 billion at December 31, 2007. This amount includes core deposit growth of $164.0 million and an expected decrease of $42.4 million in short-term escrow deposits, which due to their nature were released during the quarter. The overall deposit growth for 2007 was $300.7 million when compared with deposits at December 31, 2006. Excluding short-term escrow deposits of $550.3 million at year-end 2006 and $145.5 million at year-end 2007, core deposits increased $705.6 million, or 19.3 percent, for the year. Average total deposits for 2007 were $4.13 billion, representing an increase of $734.5 million, or 21.6 percent, when compared to average total deposits of $3.40 billion for 2006.
For the year ended December 31, 2007, net income was $27.3 million, or $0.91 diluted earnings per share, versus $33.4 million, or $1.12 diluted earnings per share, last year. The decrease of $6.1 million, or 18.2 percent, in net income for the year was primarily attributable to a $21.4 million other than temporary impairment write-down on investment securities reflected in fourth quarter earnings, partially offset by an increase of $24.7 million, or 20.3 percent, in net interest income. Additionally, there was an increase of $4.5 million, or 54.6 percent, in commission income and an increase of $3.0 million, or 32.3 percent, in fees and service charges. Excluding the after-tax effect of the $21.4 million impairment write-down, net income for the year was $39.2 million, or $1.30 diluted earnings per share.
"We fully recognize the challenges brought about by the dislocated and illiquid mortgage securities marketplace. The fourth quarter events have not and will not deter us from continuing to successfully pursue our fundamental strategy - one that is strongly intact as evidenced by our core deposit and loan growth, where we surpassed targets on both fronts," said Joseph J. DePaolo, President and Chief Executive Officer.
"In 2007, we added seven teams in total and opened two private client offices to specifically accommodate new teams in areas where they developed their clientele. During the fourth quarter, we added our largest team to date, which consists of four Group Directors and three Associate Group Directors. Their capabilities and long-standing client relationships with many of New York's largest real estate families, coupled with those of our other established teams, will help to attract additional opportunities for the Bank and further augment our presence in the entire New York metro area.
"Overall, our fundamentals are consistent. We remain focused on executing our business plan by successfully recruiting seasoned banking professionals and providing clients with a single point of contact to meet all their financial services needs. This model continues to clearly distinguish Signature Bank in the marketplace," DePaolo stated.
Scott A. Shay, Chairman of the Board, noted: "In 2007, we relentlessly focused on our core strategy and the successful execution of our business plan. However, the mortgage market dislocation and illiquidity impacted the availability of reliable market prices for even highly rated and performing securities such as those for which we recognized an other than temporary impairment write-down. Even with the impact of this dislocation on about one percent of our balance sheet, our capital levels remain strong and well above most of our peers and larger banks. As we look to 2008, we will continue to take advantage of the unprecedented consolidation that is occurring in our marketplace and further deliver on our plan. This is why the Bank has emerged as a $6 billion financial institution in less than seven years - one that effectively competes with the mega-banks in, by far, the nation's largest deposit market."
Net Interest Income
Net interest income on a tax-equivalent basis for the fourth quarter of 2007 was $38.3 million, an increase of $5.6 million, or 17.2 percent, from the comparable period a year ago. Average interest-earning assets for the 2007 fourth quarter increased $790.6 million, up 17.1 percent from the same period last year. Asset yields for the 2007 fourth quarter expanded to 5.89 percent, an increase of 18 basis points when compared with the 2006 fourth quarter. The increase was predominantly due to an increase in loans as a percentage of average interest-earning assets. Average costs of deposits and funds for the 2007 fourth quarter increased by 35 and 18 basis points to 2.94 and 3.18 percent, respectively, versus the 2006 fourth quarter. The increase in the costs of deposits and funds is reflective of the competitive marketplace.
Net interest income on a tax-equivalent basis for the year ended December 31, 2007 was $147.1 million, an increase of $25.0 million, or 20.5 percent, from the 2006 year-end. The increase in net interest income for the year is predominantly due to an increase in average earning assets of $760.8 million and expanding net interest margins.
The net interest margin on a tax-equivalent basis for the 2007 fourth quarter increased one basis point to 2.81 percent when compared with the fourth quarter of 2006. On a linked quarter basis, net interest margin on a tax-equivalent basis decreased ten basis points, approximately five basis points of which were attributable to a New York state government-mandated increase in interest rates paid on Interest On Lawyer (Deposit) Accounts (IOLA). Additionally, another two basis points of the decrease in margin can be attributed to the higher level of non-accruing loans. The net interest margin on a tax-equivalent basis for the year increased eight basis points to 2.88 percent. This increase is primarily the result of an increase in loans as a percentage of assets.
Non-Interest Income and Non-Interest Expense
Non-interest income for the fourth quarter of 2007 was a loss of $13.0 million, a decrease of $19.2 million compared with $6.3 million reported in the 2006 fourth quarter. For 2007, non-interest income was $8.7 million versus $21.3 million reported in 2006, down $12.6 million. The decline for the quarter and the year was the result of a $21.4 million other than temporary impairment write-down on investment securities reflected in fourth quarter earnings. The decrease was partially offset by an increase in commissions associated with off-balance sheet escrow deposits as well as an increase in fees and service charges related to client expansion. Excluding the effect of the other than temporary impairment write-down, non-interest income for the fourth quarter and full year 2007 increased $2.2 million and $8.8 million, respectively.
The securities written down in the fourth quarter consisted of six collateralized debt obligations (CDOs) issued in 2004-2005 and six asset-backed securities (ABSs) issued principally in 2004-2005 with total amortized costs of $40.0 million and $23.3 million, respectively, prior to the impairment write-down. The estimated market values of the CDOs and ABSs at December 31, 2007 totaled $23.2 million and $18.7 million, respectively, representing declines in value of $16.8 million on the CDOs and $4.6 million on the ABSs. All principal and interest payments have been made to date in accordance with the terms of each security and, except for a $0.4 million ABS, none of the securities have been downgraded (substantially all of the securities, based on dollar values, are rated AA). Although the securities have performed well and maintained their ratings, management concluded that the securities were other than temporarily impaired within the meaning of generally accepted accounting principles (GAAP) based on the extent and duration of the decline in market value below amortized cost, giving consideration to the current illiquid conditions and the uncertainty of a near-term recovery in value.
As required by GAAP, the securities were written down to their market values at December 31, 2007 and the impairment write-down totaling $21.4 million was charged to fourth quarter non-interest income. After taxes, the impairment write-down reduced net income for the fourth quarter and full year by $11.9 million. Refer to the detailed schedule included in the Financial Tables.
Non-interest expense for the fourth quarter was $25.1 million compared with $21.9 million reported in last year's fourth quarter, up $3.2 million, or 14.6 percent. This increase was primarily due to the addition of new private client banking teams and offices, as well as additional costs of $553,000 related to FDIC deposit assessment fees enacted in 2007.
For the year, non-interest expense reached $99.1 million, an increase of $17.8 million when compared with 2006. This increase was primarily due to the addition of new private client banking teams and offices, growth in client activity, including operating expenses associated with short-term escrow deposits, and additional costs of $2.0 million related to FDIC deposit assessment fees enacted in 2007.
The Bank's efficiency ratio was 53.9 percent for the 2007 fourth quarter after excluding the impairment write-down versus 55.9 percent for the 2007 third quarter. This improvement was primarily due to growth in net interest income, coupled with expense containment.
Loans, excluding loans held for sale, for the 2007 fourth quarter rose $122.8 million, or 6.5 percent, to $2.03 billion at December 31, 2007 versus $1.90 billion at September 30, 2007. At December 31, 2007, loans increased $448.0 million or 28.4 percent when compared with loans at December 31, 2006. Loans to total assets at December 31, 2007 were at 34.6 percent compared with 33.9 percent at the end of the 2007 third quarter and 29.2 percent at the end of 2006. Average loans, excluding loans held for sale, for the fourth quarter of 2007 reached $2.0 billion, an increase of $138.9 million, or 7.5 percent, from the third quarter of 2007 and an increase of $541.9 million, or 37.3 percent, from the fourth quarter of 2006.
Loans held for sale were $172.4 million as of December 31, 2007, a decrease of $9.9 million, or 5.4 percent, from September 30, 2007. Periodic fluctuations of loans held for sale are predominantly due to the timing of SBA loan purchases and subsequent pool sales.
At December 31, 2007, non-performing loans were $18.6 million, representing 0.92 percent of total loans compared to non-performing loans of $2.6 million at September 30, 2007. At December 31, 2007, the ratio of allowance for loan losses to total loans was at 0.90 percent and the ratio of allowance for loan losses to total non-performing loans was 98.3 percent.
The increase in non-performing loans is predominantly attributed to two loans. One loan, for $5.9 million, is collateralized by a commercial property. The second loan is approximately $9.2 million following a charge-off of $2.0 million during the quarter. The Bank is working toward a resolution following several unexpected events that occurred in this client's business. The loan has been specifically reserved for through the Bank's allowance for loan losses.
Signature Bank's capital ratios remain strong. The Bank's tier 1 risk-based, total risk-based and leverage capital ratios were approximately 14.82 percent, 15.43 percent and 7.75 percent, respectively, as of December 31, 2007, well in excess of regulatory requirements. The ratios reflect the relatively low risk profile of the balance sheet.
In conclusion, DePaolo noted: "Signature Bank continues to cement its market position and reputation as a premier financial services provider throughout the New York area, offering clients - which include privately owned businesses, their owners and senior managers -- unparalleled service and responsiveness through our single point of contact approach. This single-minded dedication to client attention has undoubtedly defined our role in the industry among both clients and bankers alike."
Signature Bank's management will host a conference call to review results of the 2007 fourth quarter and year-end on Thursday, February 14, 2008, at 10:00 AM ET. Participants should dial 800-867-1054 at least ten minutes prior to the start of the call. International callers should dial 303-205-0055.
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 the "Investor Relations" tab, then select "Company News," followed by "Conference Calls," to access the link to the call. To listen to a telephone replay of the conference call, please dial 303-590-3000 and enter reservation identification number 11108838. The replay will be available from approximately 12:00 PM ET on Thursday, February 14, 2008, through 11:59 PM ET on Tuesday, February 19, 2008.
About Signature Bank
Signature Bank, member FDIC, is a New York-based full-service commercial bank with 20 private client offices located in the New York metropolitan area, serving the needs of privately owned businesses, their owners and senior managers through dozens of private client groups. The Bank offers a wide variety of business and personal banking products and services as well as investment, brokerage, asset management and insurance products and services through its subsidiary, Signature Securities Group Corporation, a licensed broker-dealer, investment adviser and member NASD/SIPC.
Signature Bank's 20 offices are located throughout the metropolitan New York area. In Manhattan - 261 Madison Avenue; 300 Park Avenue; 71 Broadway; 565 Fifth Avenue; 950 Third Avenue; 200 Park Avenue South and 1020 Madison Avenue. Brooklyn - 26 Court Street; 84 Broadway and 6321 New Utrecht Avenue. Westchester - 1C Quaker Ridge Road, New Rochelle and 360 Hamilton Avenue, White Plains. Long Island - 1225 Franklin Avenue, Garden City; 279 Sunrise Highway, Rockville Centre; 58 South Service Road, Melville; 923 Broadway, Woodmere and 40 Cuttermill Road in Great Neck. Queens - 36-36 33rd Street, Long Island City and 78-27 37th Avenue, Jackson Heights. Bronx - 421 Hunts Point Avenue, Bronx.
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. 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 team hires, new office openings and business strategy. These statements often include words such as "may," "believe," "expect," "anticipate," "intend," "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. These factors include but are not limited to: (i) prevailing economic conditions; (ii) changes in interest rates, loan demand, real estate values, and competition, which can materially affect origination levels and gain on sale results in our business, as well as other aspects of our financial performance; (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; and (iv) competition for qualified personnel and desirable office locations. 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.
For Further Information:
Eric R. Howell, Chief Financial Officer
Susan J. Lewis, 646-822-1825, email@example.com