Signature Bank Reports Growth in CRE Loans in Q3

Joseph DePaolo of Signature Bank (Getty)

Signature Bank’s commercial real estate arm led the company’s overall third-quarter loan growth, a sign that rising interest rates have yet to scare off New York investors.

The bank, which is a major lender of rent-regulated buildings, expanded its loan portfolio by $1.84 billion during the period, up 2.6% from the previous quarter, it said. she revealed on Tuesday.

Commercial real estate loans contributed $2.1 billion, slightly offset by declines in other sectors. This increase exceeded the commercial loan growth of $1.3 billion reported by Signature in the second quarter.

Debt brokers expected commercial lending to fall between July and September as higher rates and still-high house prices made it harder for banks to underwrite deals.

“It’s just harder to make deals work because pricing hasn’t been fully adjusted to reflect where the funding is and especially the new economic environment,” said Marc Sznajderman, who oversees capital markets at the East for the debt arm of Marcus & Millichap. The real deal.

But so far, that has yet to result in Signature.

Annually, loans increased by 26% during the period, strengthening the bank’s bottom line. The company reported earnings of $5.57 per share in the quarter, a 44% increase from the $3.88 reported a year ago. Total revenue jumped 40% to nearly $718 million in the same 12 months.

“Now it’s been a good quarter,” CEO Joseph DePaolo joked during an earnings call Tuesday morning.

The bane on Signature’s revenue was the drop in deposits. For the second consecutive quarter, digital asset customers withdrew funds from Signet, the bank’s blockchain-backed digital payments platform.

Customers drained $3 billion in digital deposits from the bank in the third quarter, resulting in a net decrease of $1.3 billion or 1% from the same quarter of 2022. Deposit growth of 1. $7 billion from other businesses offset the decline.

DePaolo attributed the drop in deposits to higher interest rates. This year’s rises have sent markets tumbling, sending the value of cryptocurrencies in particular plummeting. Bitcoin plunged 58% year over year.

Some investors have withdrawn their crypto investments, preferring to invest funds in more stable asset classes.

Signature executives acknowledged the ongoing “crypto winter.” As a consolation, DePaolo offered that the declines weren’t as steep in the third quarter as they were in the second.

“I don’t know what the background is,” the general manager said. “But I know we’ve been in this position for a while and it’s only going to go up instead of down.”

Signature’s declining deposits are consistent with what banks have experienced as a whole. S&P Global reported that US banks saw deposits slide 1.1% from the second quarter with the rise in interest rates.

The concern over falling deposits is that banks may not have enough cash reserves to fund loans.

But DePaolo claimed that although the bank’s loan-to-debt ratio fell from 61% to 72% year-over-year – higher ratios imply less cash – the bank “had no problems cash at all.

The executive said Signature will focus on increasing deposits in the fourth quarter with initiatives that include “releasing customers who don’t give us deposits.”

“We have a number of filing initiatives, which makes us feel very good and positive for the future,” DePaolo said.

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