Signature Bank Reports 2020 Fourth Quarter and Year-end Results

Signature Bank (Nasdaq: SBNY), a New York-based full-service commercial bank, today announced results for its fourth quarter ended December 31, 2020.

Net income for the 2020 fourth quarter was $173.0 million, or $3.26 diluted earnings per share, versus $147.6 million, or $2.76 diluted earnings per share, for the 2019 fourth quarter. The increase in net income for the 2020 fourth quarter, versus the comparable quarter last year, is primarily the result of an increase in net interest income, fueled by strong average deposit and loan growth. This is partially offset by an increase in the provision for credit losses of $25.8 million predominantly due to effects of COVID-19 on the U.S. economy. Pre-tax, pre-provision earnings were $261.5 million, representing an increase of $45.2 million, or 20.9 percent, compared with $216.3 million for the 2019 fourth quarter.

Net interest income for the 2020 fourth quarter rose $56.7 million, or 16.8 percent, to $395.0 million, when compared with the fourth quarter of 2019. This increase is primarily due to growth in average interest-earning assets. Total assets reached $73.89 billion at December 31, 2020, expanding $23.30 billion, or 46.0 percent, from $50.59 billion at December 31, 2019. Average assets for the 2020 fourth quarter reached $71.81 billion, an increase of $21.41 billion, or 42.5 percent, versus the comparable period a year ago.

Deposits for the 2020 fourth quarter increased $8.98 billion, or 16.5 percent to $63.32 billion, including non-interest bearing deposit growth of $2.47 billion. Non-interest bearing deposits now represent 29.6 percent of total deposits. Overall deposit growth for the last twelve months was 56.8 percent, or $22.93 billion, when compared with deposits at the end of 2019. Average total deposits for 2020 were $50.56 billion, growing $12.51 billion, or 32.9 percent, versus average total deposits of $38.06 billion for 2019.

"2020 was a year where many worldwide suffered immensely due to the effects of the COVID-19 pandemic. With the distribution of the vaccines, we hope the world will be a safer place soon and look forward to 2021 being a year where we return to normal and all whose lives have been horribly affected can heal. During these difficult times, Signature Bank focused on providing assistance for colleagues and clients alike through several beneficial programs, including PPP, to help them through their struggles. 2020 also marked the time where recent initiatives put forth by the Bank developed into full-fledged businesses as the pandemic did not slow their progress. These new businesses, coupled with efforts emanating from our existing franchise, flourished throughout the year. The Bank saw remarkable record deposit growth and significant record loan growth leading to nearly $1 billion in pretax, pre-provision earnings, which increased 16.1 percent for the year. Furthermore, we strengthened our West Coast presence meaningfully utilizing our core banking model in California. To this end, 17 teams were appointed in Los Angeles and San Francisco in 2020 alone,” explained Signature Bank President and Chief Executive Officer Joseph J. DePaolo.

“Signature Bank enters 2021 as a stronger financial institution through the bolstering of our capital position in excess of $1 billion with the issuance of $375 million in subordinated debt and $730 million in preferred stock. Moreover, we’ve reached asset/liability neutrality by significantly increasing floating rate assets as a percentage of the balance sheet while also notably reducing our commercial real estate concentration. Additionally, we have meaningfully improved our liquidity position through significant record core deposit inflows and reduced borrowings which contributed to a decline in our loan-to-deposit ratio to 77.1 percent. Signature Bank now has a multi-faceted growth profile, with traditional private client banking teams leading the charge in New York, San Francisco and Los Angeles. Further fortifying the Bank’s market position are our multitude of national businesses, including Signature Financial, Asset Based Lending, Fund Banking, Venture Banking, Digital Banking, and Specialized Mortgage Banking Solutions, as well as Signet^TM, our state-of-the-art blockchain-based payments platform. We look forward to a healthier 2021 as recovery from the COVID-19 pandemic commences, and life begins to return to normal,” DePaolo concluded.

Scott A. Shay, Chairman of the Board, added: “2020 was a dramatically difficult year from many perspectives. At Signature Bank, sadly, we saw some of our colleagues lose loved ones. The real human toll of COVID-19 was central to many of our activities in 2020 in relation to our colleagues and clients. We are ever mindful that our real assets are those with whom we work every day. Concurrently, during 2020, Signature Bank’s amazing organic growth was widespread across all areas of focus including the aforementioned new businesses. To support our growth, the Bank raised more than $1 billion in capital while remaining focused on credit quality. In difficult times, clients care about the basics, namely good, unbiased advice that puts them and their sleep-at-night safety first and foremost. We provide these levels of comfort through our dedicated bankers, who, throughout 2020, catered to clients at all hours.”

“Additionally, part of being a safe bank amid this landscape is paying close attention to technological advances. We have been at the forefront, as evidenced by the first to launch a blockchain-based payments platform, and we intend to keep it that way. Hence the reason we invested in developing Signet before most investors -- and even our clients -- recognized the emergence of and massive changes in the digital payments economy.”

“As the rapid and safe deployment of vaccines penetrates the nation, we look forward to an end to the pandemic, and the new opportunities that lie ahead,” Shay concluded.

Capital

In the 2020 fourth quarter, the Bank issued $375.0 million of subordinated debt and successfully raised $730.0 million in a public offering of Noncumulative Perpetual Series A Preferred Stock. Proceeds from both offerings will be used for general corporate purposes, including to support our growth. The Bank’s Tier 1 leverage, common equity Tier 1 risk-based, Tier 1 risk-based, and total risk-based capital ratios were approximately 8.55 percent, 9.87 percent, 11.20 percent, and 13.54 percent, respectively, as of December 31, 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 6.89 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 February 12, 2021 to common stockholders of record at the close of business on February 1, 2021. In the fourth 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 November 2, 2020.

Net Interest Income

Net interest income for the 2020 fourth quarter was $395.0 million, up $56.7 million, or 16.8 percent, when compared with the same period last year, primarily due to growth in average interest-earning assets. Average interest-earning assets of $70.83 billion for the 2020 fourth quarter represent an increase of $21.27 billion, or 42.9 percent, from the 2019 fourth quarter. Due to the current low interest rate environment, the yield on interest-earning assets for the 2020 fourth quarter fell 112 basis points to 2.75 percent, compared to the fourth quarter of last year.

Average cost of deposits and average cost of funds for the fourth quarter of 2020 decreased 66 and 69 basis points, to 0.42 percent and 0.57 percent, respectively, versus the comparable period a year ago.

Net interest margin on a tax-equivalent basis for the 2020 fourth quarter was 2.23 percent versus 2.72 percent reported in the 2019 fourth quarter and 2.55 percent in the 2020 third quarter. Excluding loan prepayment penalties in both quarters, linked quarter core net interest margin on a tax-equivalent basis decreased 31 basis points to 2.21 percent.

Provision for Credit Losses

The Bank’s provision for credit losses for the fourth quarter of 2020 was $35.6 million, an increase of $25.84 million, or over 100 percent, versus the 2019 fourth quarter. The Bank’s elevated provision for credit losses for the fourth quarter was predominantly attributable to effects of COVID-19 on the U.S. economy. Additionally, the bank adopted CECL on January 1, 2020.

Net charge-offs for the 2020 fourth quarter were $11.4 million, or 0.10 percent of average loans, on an annualized basis, versus $10.5 million, or 0.09 percent, for the 2020 third quarter and net charge-offs of $2.5 million, or 0.03 percent, for the 2019 fourth quarter.

Non-Interest Income and Non-Interest Expense

Non-interest income for the 2020 fourth quarter was $24.2 million, up $8.2 million from $16.0 million reported in the fourth quarter of last year. The increase was primarily driven by a $5.5 million increase in fees and service charges.

Non-interest expense for the fourth quarter of 2020 was $157.7 million, an increase of $19.6 million, or 14.2 percent, versus $138.0 million reported in the 2019 fourth quarter. The increase was predominantly due to an increase of $11.4 million in salaries and benefits from the significant hiring of private client banking teams.

The Bank’s efficiency ratio improved to 37.6 percent for the 2020 fourth quarter compared with 39.0 percent for the same period a year ago, and 38.9 percent for the third quarter of 2020.

Loans

Loans, excluding loans held for sale, expanded $2.62 billion, or 5.7 percent, during the 2020 fourth quarter to $48.83 billion, versus $46.21 billion at September 30, 2020. Average loans, excluding loans held for sale, reached $47.39 billion in the 2020 fourth quarter, growing $1.96 billion, or 4.3 percent, from the 2020 third quarter and $9.28 billion, or 24.4 percent, from the fourth quarter of 2019. For the ninth consecutive quarter, the increase in loans was primarily driven by growth in commercial and industrial loans.

At December 31, 2020, non-accrual loans were $120.2 million, representing 0.25 percent of total loans and 0.16 percent of total assets, compared with non-accrual loans of $81.3 million, or 0.18 percent of total loans, at September 30, 2020 and $57.4 million, or 0.15 percent of total loans, at December 31, 2019. At December 31, 2020, the ratio of allowance for credit losses for loans and leases to total loans, was 1.04 percent, versus 1.05 percent at September 30, 2020 and 0.64 percent at December 31, 2019. Additionally, the ratio of allowance for credit losses for loans and leases to non-accrual loans, or the coverage ratio, was 423 percent for the 2020 fourth quarter versus 596 percent for the third quarter of 2020 and 436 percent for the 2019 fourth quarter.

COVID-19 Related Loan Modifications

As of December 31, 2020, total principal and interest deferrals significantly decreased to $1.31 billion, or 2.7 percent of the Bank’s total loan portfolio from their peak level as of June 30, 2020. The positive trend is the result of the Bank’s ability to work closely with its clients toward reasonable resolutions.

				Principal and Interest Deferrals
(dollars in millions)	Portfolio Balance 12/31/2020			Deferral Balance		% of Loan Category
Multi-family	$	15,173		615		4.1	%
Retail	5,637			369		6.5	%
Office	3,930			150		3.8	%
Acquisition, Development, and Construction (ADC)	1,367			12		0.9	%
Industrial	574			3		0.5	%
Hotel	77			—		0.0	%
Land	38			—		0.0	%
Other	297			10		3.4	%
Total Commercial Real Estate	27,093			1,159		4.3	%
Fund Banking and Venture Banking	11,416			—		0.0	%
Asset Based Lending	319			—		0.0	%
Signature Financial	5,046			35		0.7	%
Traditional Commercial & Industrial	2,537			80		3.2	%
Total Commercial & Industrial	19,318			115		0.6	%
PPP Loans	1,874			—		0.0	%
Consumer and Residential	584			37		6.3	%
Premium, deferred fees, and costs	(36)			—		0.0	%
Total Loans	$	48,833		1,311		2.7	%

Additionally, the Bank has made other COVID-19 related modifications that have resulted in the receipt of modified principal and interest payments totaling 6.6 percent of the loan book.

Conference Call

Signature Bank’s management will host a conference call to review results of the 2020 fourth quarter on Thursday, January 21, 2021 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 #4079502. 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 #4079502. The replay will be available from approximately 1:00 PM ET on Thursday, January 21, 2021 through 11:59 PM ET on Sunday, January 24, 2021.

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 those in Connecticut as well as in California and North Carolina. Through its single-point-of-contact approach, the Bank’s private client banking teams primarily serve the needs of privately owned businesses, their owners and senior managers. The Bank has two wholly owned subsidiaries: Signature Financial, LLC, provides equipment finance and leasing: Signature Securities Group Corporation, a licensed broker-dealer, investment adviser and member FINRA/SIPC, offers investment, brokerage, asset management and insurance products and services. Signature Bank was the first FDIC-insured bank to launch a blockchain-based digital payments platform. Signet allows commercial clients to make real-time payments in U.S. dollars, 24/7/365 and was also the first solution to be approved for use by the NYS Department of Financial Services.

Signature Bank is one of the top 40 largest banks in the U.S., based on deposits (S&P Global Market Intelligence).

For more information, please visit https://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 December 31,					Twelve months ended December 31,
(dollars in thousands, except per share amounts)	2020			2019		2020		2019
INTEREST INCOME
Loans held for sale	$	1,321		1,325		3,655		4,978
Loans and leases, net	427,018			399,609		1,661,912		1,579,268
Securities available-for-sale	41,886			54,003		186,569		227,535
Securities held-to-maturity	12,675			14,551		55,335		60,843
Other investments	5,658			11,908		24,175		39,052
Total interest income	488,558			481,396		1,931,646		1,911,676
INTEREST EXPENSE
Deposits	65,990			108,928		297,349		440,730
Federal funds purchases and securities sold under agreements to repurchase	595			733		2,742		14,170
Federal Home Loan Bank borrowings	17,420			28,323		85,333		129,138
Subordinated debt	9,570			5,117		27,130		16,045
Total interest expense	93,575			143,101		412,554		600,083
Net interest income before provision for credit losses	394,983			338,295		1,519,092		1,311,593
Provision for credit losses	35,599			9,755		248,094		22,636
Net interest income after provision for credit losses	359,384			328,540		1,270,998		1,288,957
NON-INTEREST INCOME
Commissions	3,731			3,673		13,441		14,504
Fees and service charges	14,625			9,174		46,397		32,926
Net (losses) gains on sales of securities	(17)			—		3,606		1,034
Net gains on sale of loans	3,099			1,957		12,651		10,836
Other income (1)	2,753			1,225		(847)		2,415
Total non-interest income	24,191			16,029		75,248		61,715
NON-INTEREST EXPENSE
Salaries and benefits	95,703			84,301		389,125		335,054
Occupancy and equipment	10,934			10,357		44,371		42,833
Information technology	11,420			9,410		43,217		36,961
FDIC assessment fees	3,955			2,894		13,742		12,432
Professional fees	5,355			3,996		18,286		14,689
Other general and administrative	30,284			27,065		105,313		87,300
Total non-interest expense	157,651			138,023		614,054		529,269
Income before income taxes	225,924			206,546		732,192		821,403
Income tax expense (1)	52,915			58,932		203,833		234,917
Net income	$	173,009		147,614		528,359		586,486
Preferred stock dividends	—			—		—		—
Net income available to common shareholders	$	173,009		147,614		528,359		586,486
PER COMMON SHARE DATA
Earnings per common share - basic (1)	$	3.28		2.78		10.00		10.87
Earnings per common share - diluted (1)	$	3.26		2.76		9.96		10.82
Dividends per common share	$	0.56		0.56		2.24		2.24

(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
	December 31,
	2020			2019
(dollars in thousands, except shares and per share amounts)	(unaudited)
ASSETS
Cash and due from banks	$	12,208,997		702,277
Short-term investments	139,334			87,555
Total cash and cash equivalents	12,348,331			789,832
Securities available-for-sale (amortized cost $8,894,719 at December 31, 2020 and $7,186,494 at December 31, 2019); (allowance for credit losses $4 at December 31, 2020)	8,890,417			7,143,864
Securities held-to-maturity (fair value $2,329,378 at December 31, 2020 and $2,115,541 December 31, 2019); (allowance for credit losses $51 at December 31, 2020)	2,282,830			2,101,970
Federal Home Loan Bank stock	171,678			231,339
Loans held for sale	407,363			290,593
Loans and leases	48,833,098			39,109,623
Allowance for credit losses for loans and leases	(508,299)			(249,989)
Loans and leases, net	48,324,799			38,859,634
Premises and equipment, net	80,274			66,419
Operating lease right-of-use assets	237,407			217,578
Accrued interest and dividends receivable	277,801			147,527
Other assets (1)	867,444			743,053
Total assets	$	73,888,344		50,591,809
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest-bearing	$	18,757,771		13,016,931
Interest-bearing	44,557,552			27,366,276
Total deposits	63,315,323			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	828,588			456,119
Operating lease liabilities	265,354			242,587
Accrued expenses and other liabilities	662,925			472,554
Total liabilities	68,061,435			45,846,611
Shareholders' equity
Preferred stock, par value $.01 per share; 61,000,000 shares authorized, 730,000 shares issued and outstanding at December 31, 2020; and none issued and outstanding at December 31, 2019	7			—
Common stock, par value $.01 per share; 64,000.000 shares authorized; 55,520,417 shares issued and 53,564,573 outstanding at December 31, 2020; 55,427,631 shares issued and 53,519,644 outstanding at December 31, 2019	555			554
Additional paid-in capital	2,583,514			1,871,571
Retained earnings (1)	3,548,260			3,172,273
Treasury stock, 1,899,336 shares at December 31, 2020 and 1,907,987 shares at December 31, 2019	(232,531)			(233,570)
Accumulated other comprehensive loss	(72,896)			(65,630)
Total shareholders' equity	5,826,909			4,745,198
Total liabilities and shareholders' equity	$	73,888,344		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 December 31,					Twelve months ended December 31,
(in thousands, except ratios and per share amounts)	2020			2019 (6)		2020			2019 (6)
PER COMMON SHARE
Earnings per common share - basic	$	3.28		2.78		$	10.00		10.87
Earnings per common share - diluted	$	3.26		2.76		$	9.96		10.82
Weighted average common shares outstanding - basic	52,673			53,008		52,641			53,774
Weighted average common shares outstanding - diluted	52,970			53,234		52,889			54,011
Book value per common share	$	95.56		88.66		$	95.56		88.66
SELECTED FINANCIAL DATA
Return on average total assets	0.96%			1.16%		0.87%			1.19%
Return on average common shareholders' equity	13.59%			12.38%		10.75%			12.85%
Efficiency ratio (1)	37.61%			38.95%		38.51%			38.54%
Yield on interest-earning assets	2.74%			3.85%		3.24%			3.95%
Yield on interest-earning assets, tax-equivalent basis (1) (2)	2.75%			3.87%		3.25%			3.96%
Cost of deposits and borrowings	0.57%			1.26%		0.75%			1.37%
Net interest margin	2.22%			2.71%		2.55%			2.71%
Net interest margin, tax-equivalent basis (2)(3)	2.23%			2.72%		2.56%			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.

	December 31, 2020				September 30, 2020				December 31, 2019 (6)
CAPITAL RATIOS
Tangible common equity (4)		6.89	%			7.75	%			9.30	%
Tier 1 leverage (5)		8.55	%			8.56	%			9.55	%
Common equity Tier 1 risk-based (5)		9.87	%			10.26	%			11.56	%
Tier 1 risk-based (5)		11.20	%			10.26	%			11.56	%
Total risk-based (5)		13.54	%			11.98	%			13.26	%
ASSET QUALITY
Non-accrual loans	$	120,171			$	81,305			$	57,355
Allowance for loan and lease losses	$	508,299			$	484,923			$	249,989
Allowance for loan and lease losses to non-accrual loans		422.98	%			596.42	%			435.86	%
Allowance for loan and lease losses to total loans		1.04	%			1.05	%			0.64	%
Non-accrual loans to total loans		0.25	%			0.18	%			0.15	%
Quarterly net charge-offs to average loans, annualized		0.10	%			0.09	%			0.03	%

(4) We define tangible common equity as the ratio of total tangible common equity to total tangible assets (the "TCE ratio"). TCE represents the Company's common stock shareholders' equity (i.e., total stockholders' equity less preferred equity) less intangible assets. The TCE ratio 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) December 31, 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 December 31, 2020										Three Months Ended December 31, 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	$	12,511,429			3,569			0.11	%		1,743,038			7,755			1.77	%
Investment securities	10,631,245				56,650			2.13	%		9,541,382			72,707			3.05	%
Commercial loans, mortgages and leases (1)	47,223,197				427,210			3.60	%		37,903,214			398,935			4.18	%
Residential mortgages and consumer loans	162,349				1,444			3.54	%		203,066			2,131			4.16	%
Loans held for sale	305,885				1,321			1.72	%		169,495			1,325			3.10	%
Total interest-earning assets	70,834,105				490,194			2.75	%		49,560,195			482,853			3.87	%
Non-interest-earning assets (2)	972,433										808,272
Total assets	$	71,806,538									50,368,467
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW and interest-bearing demand	$	12,362,930			19,334			0.62	%		4,722,763			19,727			1.66	%
Money market	28,511,134				39,934			0.56	%		20,183,695			75,138			1.48	%
Time deposits	1,898,286				6,722			1.41	%		2,430,110			14,063			2.30	%
Non-interest-bearing demand deposits	19,203,186				—			—	%		12,750,429			—			—	%
Total deposits	61,975,536				65,990			0.42	%		40,086,997			108,928			1.08	%
Subordinated debt	808,454				9,570			4.73	%		389,730			5,117			5.25	%
Other borrowings	2,989,245				18,015			2.40	%		4,460,079			29,056			2.58	%
Total deposits and borrowings	65,773,235				93,575			0.57	%		44,936,806			143,101			1.26	%
Other non-interest-bearing liabilities	854,144										700,680
Preferred equity	115,818										—
Common equity (2)	5,063,341										4,730,981
Total liabilities and shareholders' equity	$	71,806,538									50,368,467
OTHER DATA
Net interest income / interest rate spread (1)					396,619			2.18	%					339,752			2.61	%
Tax-equivalent adjustment					(1,636)									(1,457)
Net interest income, as reported					394,983									338,295
Net interest margin								2.22	%								2.71	%
Tax-equivalent effect								0.01	%								0.01	%
Net interest margin on a tax-equivalent basis (1)								2.23	%								2.72	%
Ratio of average interest-earning assets
to average interest-bearing liabilities								107.69	%								110.29	%

(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)
	Twelve Months Ended December 31, 2020										Twelve Months Ended December 31, 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	$	5,887,909			11,748			0.20	%		1,007,237			21,127			2.10	%
Investment securities	9,812,898				254,331			2.59	%		9,561,736			306,303			3.20	%
Commercial loans, mortgages and leases (1)	43,612,057				1,661,455			3.81	%		37,449,199			1,575,074			4.21	%
Residential mortgages and consumer loans	175,560				6,742			3.84	%		212,254			9,463			4.46	%
Loans held for sale	196,948				3,655			1.86	%		152,571			4,978			3.26	%
Total interest-earning assets	59,685,372				1,937,931			3.25	%		48,382,997			1,916,945			3.96	%
Non-interest-earning assets (2)	920,531										764,837
Total assets	$	60,605,903									49,147,834
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW and interest-bearing demand	$	8,783,053			67,948			0.77	%		4,297,419			82,180			1.91	%
Money market	23,924,076				191,353			0.80	%		19,103,463			299,874			1.57	%
Time deposits	2,132,466				38,048			1.78	%		2,498,190			58,676			2.35	%
Non-interest-bearing demand deposits	15,722,196				—			—	%		12,155,929			—			—	%
Total deposits	50,561,791				297,349			0.59	%		38,055,001			440,730			1.16	%
Subordinated debt	545,031				27,130			4.98	%		291,532			16,045			5.50	%
Other borrowings	3,804,585				88,075			2.31	%		5,516,093			143,308			2.60	%
Total deposits and borrowings	54,911,407				412,554			0.75	%		43,862,626			600,083			1.37	%
Other non-interest-bearing liabilities	750,691										685,008
Preferred equity	29,112										—
Common equity (2)	4,914,693										4,600,200
Total liabilities and shareholders' equity	$	60,605,903									49,147,834
OTHER DATA
Net interest income / interest rate spread (1)					1,525,377			2.50	%					1,316,862			2.59	%
Tax-equivalent adjustment					(6,285)									(5,269)
Net interest income, as reported					1,519,092									1,311,593
Net interest margin								2.55	%								2.71	%
Tax-equivalent effect								0.01	%								0.01	%
Net interest margin on a tax-equivalent basis (1)								2.56	%								2.72	%
Ratio of average interest-earning assets
to average interest-bearing liabilities								108.69	%								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, and (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)	December 31, 2020		September 30, 2020	December 31, 2019 (1)
Consolidated total shareholders' equity	$	5,826,909	4,983,199	4,745,198
Less: Preferred equity	708,019		—	—
Common shareholders' equity	$	5,118,890	4,983,199	4,745,198
Intangible assets	32,301		43,768	45,907
Tangible common shareholders' equity (TCE)	$	5,086,589	4,939,431	4,699,291
Consolidated total assets	$	73,888,344	63,760,313	50,591,809
Intangible assets	32,301		43,768	45,907
Consolidated tangible total assets (TTA)	$	73,856,043	63,716,545	50,545,902
Tangible common equity ratio (TCE/TTA)	6.89%		7.75%	9.30%

The following table presents the efficiency ratio calculation:
	Three months ended December 31,				Twelve months ended December 31,
(dollars in thousands)	2020		2019 (1)		2020	2019 (1)
Non-interest expense (NIE)	$	157,651	138,023		614,054	529,269
Net interest income before provision for credit losses	394,983		338,295		1,519,092	1,311,593
Other non-interest income	24,191		16,029		75,248	61,715
Total income (TI)	$	419,174	354,324		1,594,340	1,373,308
Efficiency ratio (NIE/TI)	37.61%		38.95%		38.51%	38.54%

(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 yield on interest-earning assets to the yield on interest-earning assets on a tax-equivalent basis:
	Three months ended December 31,				Twelve months ended December 31,
(dollars in thousands)	2020		2019		2020	2019
Interest income (as reported)	$	488,558	481,396		1,931,646	1,911,676
Tax-equivalent adjustment		1,636	1,457		6,285	5,269
Interest income, tax-equivalent basis	$	490,194	482,853		1,937,931	1,916,945
Interest-earnings assets	$	70,834,105	49,560,195		59,685,372	48,382,997
Yield on interest-earning assets		2.74%	3.85%		3.24%	3.95%
Tax-equivalent effect		0.01%	0.02%		0.01%	0.01%
Yield on interest-earning assets, tax-equivalent basis		2.75%	3.87%		3.25%	3.96%

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 December 31,		Three months ended September 30,			Twelve months ended, December 31,
(dollars in thousands)	2020	2019	2020	2019		2020		2019
Net interest margin (as reported)	2.22%	2.71%	2.54%	2.67%		2.55%		2.71%
Tax-equivalent adjustment	0.01%	0.01%	0.01%	0.01%		0.01%		0.01%
Margin contribution from loan prepayment penalty income	(0.02)%	(0.05)%	(0.03)%	(0.02)%		(0.07)%		(0.03)%
Core net interest margin, tax-equivalent basis excluding loan prepayment penalty income	2.21%	2.67%	2.52%	2.66%		2.49%		2.69%

The following table reconciles net income (as reported) to pre-tax, pre-provision earnings:
	Three months ended December 31,						Twelve months ended December 31,
(dollars in thousands)	2020			2019 (1)			2020		2019 (1)
Net income (as reported)	$	173,009		147,614			528,359		586,486
Income tax expense	52,915			58,932			203,833		234,917
Provision for credit losses	35,599			9,755			248,094		22,636
Pre-tax, pre-provision earnings	$	261,523		216,301			980,286		844,039

(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)	December 31, 2020			September 30, 2020		December 31, 2019
Loans and leases (as reported)	$	48,833,098		46,212,092		39,109,623
PPP loans		1,874,447		1,985,357		—
Core loans (excluding PPP loans)	$	46,958,651		44,226,735		39,109,623

 

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