“It’s a good time to make loans:” Multifamily lender smashes earnings record

Signature Bank says loan deferrals vanished as rental market revived

Signature Bank president and chief executive officer Joseph DePaolo (iStock)
Signature Bank president and chief executive officer Joseph DePaolo (iStock)

Signature Bank, a major lender on rent-regulated buildings, posted another record quarter and unveiled plans to beef up commercial lending after pulling back during the pandemic.

Its fourth-quarter earnings and revenue trounced estimates and gained over the same period last year. The bank reported record earnings per share of $4.34, up from $3.26 in the last quarter of 2020. Revenue last quarter clocked in at over $569 million, a record increase of about $419 million from a year ago.

The bank also boosted its liquidity. Total deposits hit $106 million, up 40 percent year-over-year, and loans grew to nearly $65 billion, a 25 percent increase. The bank cut its loan-to-deposit ratio to 61 percent, a goal for the company, said Signature president and CEO Joseph DePaolo.

DePaolo said the bank had increased deposits by nearly $66 billion over the course of the pandemic, “which is the equivalent of acquiring a top-50 U.S. Bank in each of the last two years.”

“Not bad for a 20-year-old bank,” DePaolo said.

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Signature Bank president Joseph DePaolo (Getty Images; iStock)
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The bank plans to ramp up its commercial real estate lending, which accounts for the majority of its assets. DePaolo said it had reduced its concentration of real estate loans over the past several years.

In the first year of the pandemic, the bank struggled with deferrals among commercial borrowers. At this time last year, 9 percent of the bank’s $49 billion loan portfolio was in some form of deferral.

That number has virtually zeroed out. Signature on Tuesday reported just $8.3 million in deferrals, a decrease of 99.8 percent.

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“We have essentially put full non-payment Covid modifications behind us,” said DePaolo.

The CEO now expects profit potential lurking in the investment sales market to drive more borrowing among commercial investors.

The pandemic initially stunted investment sales, driving down property prices. Since then, investors betting on a comeback have scooped up multifamily buildings at a discount, pushing fourth-quarter transactions and sales volume above pre-pandemic levels, according to an Avison Young report.

However, both deals and dollar volume are still below where they were in 2019, suggesting there remains an opportunity for more borrowers to enter the market.

“It’s a good time to make loans because the current situation would not likely get any worse,” DePaolo said, referring to the pandemic. New York Covid cases, which surged through the holidays into January, have declined steadily over the past week.

The threat of rising interest rates could also spur multifamily buyers to finance transactions now, while the getting’s good, creating a more robust lending opportunity for Signature in the near term.

The bank, which is headquartered in New York and expanded into California over the past several years, said it plans to open another office in New Jersey and grow “west of the Mississippi.”

“Very close to California,” DePaolo said.

Last week, Signature said it would double its office space at Empire State Realty Trust’s 1400 Broadway to 280,000 square feet.

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