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Signature Bank

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Signature Bank
Company typePublic company
Industry
  • Banking
  • Financial Services
Founded2001; 23 years ago (2001)
DefunctMarch 12, 2023; 19 months ago (2023-03-12)
FateFailed due to systemic risk and taken into receivership by the Federal Deposit Insurance Corporation
HeadquartersNew York City, New York, U.S.
Key people
  • Scott Shay (chairman)
  • Joseph J. DePaolo (president, CEO)
  • John Tamberlane (vice chairman and director)
Increase US$918 million (2021)[1]
Total assetsIncrease US$118 billion (2021)[1]
Total equityIncrease US$6.84 billion (Q2 2021)[1]
Number of employees
1,854 (2021)[1]
ParentFederal Deposit Insurance Corporation
Subsidiaries
  • Signature Securities Group Corporation
  • Signature Financial LLC
  • Signature Public Funding Corp.
Websitesignatureny.com

Signature Bank[2] was a New York-based full-service commercial bank with 40 private client offices throughout New York, Connecticut, California, Nevada, and North Carolina.[3] Signature Bank's specialty finance subsidiary, Signature Financial LLC, provides equipment finance and leasing.[4] Signature Securities Group Corporation, a wholly owned subsidiary, is a licensed broker-dealer and investment adviser offering investment, brokerage, asset management, and insurance products and services.[5] At the end of 2022, the bank had total assets of $110.4 billion and deposits of $82.6 billion;[6] as of 2021, it had loans of $65.25 billion.[7]

Signature Bank was founded in 2001 by former executives and employees of Republic National Bank of New York after its purchase by HSBC. It focused on wealthy clients with a personal relationship model, only maintaining offices in the New York City area for most of its history. In the late 2010s, it began to expand geographically and in terms of services, though it was most noted for its 2018 decision to open itself to the cryptocurrency industry. By 2021, cryptocurrency businesses represented 30 percent of its deposits.

Banking officials in the state of New York closed the bank on March 12, 2023, two days after the failure of the Silicon Valley Bank. It was the third-largest bank failure in U.S. history.

History

Establishment and expansion

Signature Bank opened on May 1, 2001. It was founded by Joseph J. DePaolo, the bank's president and chief executive officer; Scott A. Shay, chairman of the board; and John Tamberlane, vice chairman and director. DePaolo and Tamberlane had left Republic National Bank of New York after it was purchased by HSBC the year prior.[8] Six branches were opened simultaneously across the New York City area, with the goal to cater to wealthy clients and middle-market business managers with $250,000 in assets:[9] DePaolo described the target audience as "the guy who started his business in Brooklyn and is now worth $20 million". The bank was a subsidiary of Bank Hapoalim of Israel, which provided over $60 million in initial capital.[10] Among its first employees were 65 former Republic Bank employees, who left en masse on April 27, days before Signature opened its branches.[11] The bank quickly grew to $950 million in assets by February 2003, ranking in the top five percent of US commercial banks just 20 months after being founded and beginning to turn a profit. It also made relatively few loans: adopting a strategy once used by Republic Bank, it put its assets in instruments with lower yields. This led to a net interest margin of 2.8 percent, lower than many comparable banks.[12]

The bank completed its initial public offering in March 2004 and began trading on the NASDAQ under the symbol SBNY.[13] While remaining solely focused on the New York metropolitan area, Signature continued to rapidly grow, becoming one of the fastest-growing public companies in New York and one of the fastest-growing public banks for loan growth.[14] It made a practice of hiring bankers—and luring their clients—from recently merged banks;[11][15] it emphasized personal relationships so thoroughly that it did not advertise and its bank branches did not have street signs.[16][15] From 2004 to 2014, its stock price rose 650 percent, a return 10 times the S&P 500 and double Silicon Valley Bank's parent, SVB Financial Group, the next highest-performing institution; a 2014 article in Crain's New York Business hailed Signature as "New York's most successful bank".[15]

In its history, it continued expansion into other areas of business. 2007 saw the launch of a multifamily lending unit.[16] The bank expanded into equipment finance in 2012 through its Signature Financial unit.[17] Additionally, Signature cultivated a major business in servicing the New York area's law firms.[18] An increase in loan activity offset its traditional reliance on mortgage-backed securities; its large capital cushion helped it to protect the many depositors whose accounts were larger than the Federal Deposit Insurance Corporation (FDIC)-insured $250,000.[16] However, Signature Financial's taxi medallion lending business was hurt by the rise of car sharing platforms such as Uber.[19] Signature continued to post profits despite losses associated with medallion loans.[20] The bank's assets approached $50 billion by 2017.[21]

In 2018, the bank expanded its footprint and commenced operations on the West Coast with the opening of its first private client banking office in San Francisco.[22] The move came the year after DePaolo, once reluctant to geographic expansion,[14] opened the door to adding additional markets in comments made at an investors' conference.[21] In 2020, the bank continued its expansion throughout southern California, opening new offices in Newport Beach, Woodland Hills, and Ontario.[23] 2022 brought the opening of an office in Reno, Nevada, and a West Coast operations center in City of Industry, California.[24]

In addition to the West Coast, Signature Bank also began an operation in North Carolina by luring a group of high-profile bankers from the former Square 1 Bank, a part of PacWest Bancorp, in 2019. By 2021, it was the fourth-largest bank by deposits in the Durham–Chapel Hill metropolitan area.[25][26]

Cryptocurrency expansion and failure

Cryptocurrency became a focus of the bank's activities in its final years after deciding to accept customers from the industry in 2018.[27] In 2021, more than 16 percent of its deposits came from the sector,[28] a figure that had risen to 30 percent by February 2023,[29] and it also held reserve monies from the Circle-managed USDC.[28] While cryptocurrency enthusiasts boosted the bank's stock from $75 to $375 a share in little over a year,[29] this strategy proved risky and gave the bank an image of being a "crypto bank", a label founder DePaolo tried to shed in an interview with the Financial Times in July 2022. After consistently growing deposits, it began to experience outflows of deposits from the bank evenly split between crypto clients and its New York private banking customers. Some investors privately raised concern about liquidity: per the Financial Times, "as Signature banks eight of the 12 largest crypto brokers, for instance, an implosion of the industry in a credit crunch could see their deposits rapidly evaporate".[27] The bank in response reduced its involvement in the sector.[29] On February 20, 2023, DePaolo, the bank's only CEO in its nearly 22-year history, announced his departure effective March 1—unrelated to the crash of the cryptocurrency bubble—to become a senior adviser.[29]

On March 12, 2023—a Sunday—citing systemic risk, Signature Bank was closed by the New York State Department of Financial Services. The closure came days after the collapse of Silicon Valley Bank and the failure of Silvergate Bank, the other major bank for the cryptocurrency industry.[30][31] As of December 2022, 90 percent of $89 billions in bank deposits were uninsured by the FDIC.[32] All depositors are expected to be made whole.[2] Holders of Signature Bank equity and bonds may face losses.[30] The failure of the bank was rapid in nature and surprised insiders. Even though the bank had experienced significant outflows of deposits on Friday, executives with the bank believed they were well-capitalized and could absorb their losses.[18] It was the third-largest bank failure in U.S. history, behind the Silicon Valley Bank collapse and Washington Mutual's closure in 2008.[33]

The FDIC was appointed as the bank's receiver and immediately established Signature Bridge Bank, N.A., which the FDIC would operate as it marketed its assets to bidders.[6]

Services and operations

Signature Bank offered business and personal banking products and services with a focus on lending and deposits. The bank utilized a team model, paying its bankers on an eat-what-you-kill basis reminiscent of brokerage firms.[16][34] In 2015, nearly 150 senior bankers reported directly to DePaolo; some made more than the CEO.[34] It cultivated a reputation of being loyal to its clients, which in turn incentivized them to conduct further banking business with Signature.[35] Irv Gotti became a loyal Signature customer after it allowed him to use its services while on trial for federal money laundering charges in 2005.[34]

The core of its cryptocurrency business was Signet, a payment network opened in 2019 for approved clients that allowed the real-time gross settlement of fund transfers through the blockchain without third parties or transaction fees, similar to Ripple. By the conclusion of 2020, Signature Bank had 740 clients using Signet.[28][36]

Signature Bank's Fund Banking Division was created in 2018 to provide financing and banking services to the private equity industry.[37] The Venture Banking Group, which was formed in early 2019, served venture capital firms and the portfolio companies in which they invest.[25] The Specialized Mortgage Banking Solutions team, whose focus was on servicing commercial and residential mortgage servicers among other related companies, launched in July 2019.[38]

Controversies

West End Financial Advisors LLC Ponzi scheme

In early 2016, some investors filed suit against Signature after the company lost $66 million of investor cash in a Ponzi scheme run by William Landberg, a money manager who pleaded guilty to the crime.[39] They alleged that Signature helped Landberg by ordering him to shift money around dozens of accounts to cover up long-term overdrafts. Landberg was sentenced to three and a half years in federal prison.[40]

Relationship with Trump family

On July 13, 2018, The New York Times featured a full-length article on Signature Bank being the "go-to bank" to Donald Trump and the Trump family. The bank helped finance Trump's Florida golf course.[41] President Trump's daughter Ivanka Trump served on Signature Bank's board of directors between 2011 and 2013, before stepping down on April 24, 2013.[42] Over the past decade, the bank provided loans to people connected with the Trump Organization while Ivanka Trump sat on its board of directors.[43]

On January 11, 2021, the bank closed two of Trump's personal accounts containing $5.3 million and called for Trump to resign from office in the aftermath of the 2021 storming of the United States Capitol, citing "the best interests of our nation and the American people".[44]

Tenant harassment

Signature Bank was the center of numerous protests due to mistreatment of tenants by landlords who receive loans from the bank.[45][46] Despite these accusations, the Association for Neighborhood & Housing Development applauded the bank's commitment to responsible lending practices as it pertains to low- and middle income-tenants.[47]

Economic Growth, Regulatory Relief and Consumer Protection Act

Barney Frank, both a former U.S. congressman (1981–2013) and a member of Signature Bank's board of directors (2015 to at least 2022),[48] voted in favor of raising the Dodd/Frank threshold. He also went on record in 2018 stating "My being on the board has not changed my position on this at all. These efforts began well before I began at Signature Bank."[49]

Signature Bank provided financial support for re-election races to a number of US Senators for their support of the Economic Growth, Regulatory Relief and Consumer Protection Act, according to Federal Election Commission data tallied by OpenSecrets. This bill exempted Signature Bank from post-crisis oversight rules. "We find it ridiculous and unacceptable that by virtue of … growing one day past $50bn, we will be burdened with rules intended for the mega 'too big to fail' banks," Scott Shay, chairman of Signature, said.[50]

References

  1. ^ a b c d Signature Bank. "Form 10-K Annual Report". Archived from the original on March 12, 2023. Retrieved March 24, 2022.
  2. ^ a b "Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC" (Press release). Washington: Department of the Treasury. March 12, 2023. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
  3. ^ "Private Client Offices". Signature Bank. Archived from the original on November 14, 2018. Retrieved August 11, 2020.
  4. ^ "Navigating The Future" (PDF). Archived (PDF) from the original on November 14, 2018. Retrieved January 12, 2021.
  5. ^ Ensign, Rachel Louise. "The Only Bank This Hip-Hop Mogul Will Use". The Wall Street Journal. Archived from the original on October 20, 2018. Retrieved November 13, 2018.
  6. ^ a b "FDIC Establishes Signature Bridge Bank, N.A., as Successor to Signature Bank, New York, NY". Federal Deposit Insurance Corporation (Press release). March 12, 2023.
  7. ^ "Form 10Q Quarterly Report". FDIC. Archived from the original on March 12, 2023. Retrieved March 24, 2022.
  8. ^ Agosta, Veronica (May 4, 2001). "Signature: We'll Fill NYC 'Vacuum'". American Banker. p. 5. ProQuest 249811436.
  9. ^ Pristin, Terry (May 1, 2001). "Bank for Small Businesses". The New York Times. p. 8. ProQuest 431759721.
  10. ^ Wipperfurth, Heike (April 30, 2001). "Signature sees lucrative gap; new bank takes aim at rich". Crain's New York Business. ProQuest 219186825.
  11. ^ a b Pellet, Jennifer (November 2008). "Banking on Businesses". Chief Executive. pp. 13–19. ProQuest 212104475.
  12. ^ Fredrickson, Tom (February 17, 2003). "Signature Bank grows fast with personal touch". Crain's New York Business. p. 4. ProQuest 219169336.
  13. ^ Gelsi, Steve. "Signature Bank makes its mark". MarketWatch. Archived from the original on November 16, 2018. Retrieved November 15, 2018.
  14. ^ a b Goodspeed, Linda (December 29, 2011). "Signature Bank: Relationships Matter". Banking New York. Archived from the original on June 4, 2016. Retrieved November 15, 2018.
  15. ^ a b c Elstein, Aaron (April 28, 2014). "NY's most successful bank". Crain's New York Business. p. 1. ProQuest 1521398598.
  16. ^ a b c d Davis, Paul (October 11, 2012). "Joseph DePaolo's Signature Bank Is Hard to Copy". American Banker. ProQuest 1095581934.
  17. ^ Kline, Alan (April 4, 2012). "Signature of N.Y. Expands into Asset-Based Lending". American Banker. ProQuest 963730445.
  18. ^ a b Smialek, Jeanna; Rappeport, Alan (March 12, 2023). "Regulators Close Another Bank and Move to Protect Deposits". The New York Times. ISSN 0362-4331. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
  19. ^ Sidel, Robin (October 22, 2015). "Uber's Rise Presses Taxi Lenders". The Wall Street Journal. p. C1. ProQuest 1724852293.
  20. ^ Eha, Brian Patrick (January 20, 2017). "Signature posts healthy profit despite medallion-loan losses". American Banker. ProQuest 1860170022.
  21. ^ a b Broughton, Kristin (September 14, 2017). "Signature's ideal buyer? A foreign bank that preserves its independence". American Banker. ProQuest 1938259908.
  22. ^ "Signature Bank Appoints Two Teams to Its New San Francisco Banking Office". Archived from the original on November 16, 2018. Retrieved November 15, 2018.
  23. ^ "Signature Bank to Open Office in Warner Center". San Fernando Valley Business Journal. July 8, 2020. Archived from the original on August 14, 2020. Retrieved August 11, 2020.
  24. ^ "ON THE MOVE: Signature Bank opens Vegas [sic] office". Las Vegas Business Press. November 1, 2022. Archived from the original on December 5, 2022. Retrieved March 13, 2023.
  25. ^ a b "Square 1 vet Mara Huntington reveals reasons for jumping ship to form new venture group". WRAL TechWire. April 26, 2019. Archived from the original on April 26, 2019. Retrieved August 11, 2020.
  26. ^ Ohnesorge, Lauren (September 7, 2021). "Smaller banks gain Triangle market share, but big banks still dominate". Triangle Business Journal. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
  27. ^ a b McCrum, Dan; Franklin, Joshua (July 29, 2022). "Signature stock goes out of style following crypto sector debacle: Investors ditch last year's US digital darling amid fears rapid growth is being thrown into reverse". Financial Times. p. 11. ProQuest 2707266859.
  28. ^ a b c Adams, John (April 23, 2021). "Signature Bank raises its bet on cryptocurrency". American Banker. ProQuest 2516512682.
  29. ^ a b c d Elstein, Aaron (February 20, 2023). "Signature Bank CEO to step down after 22 years". Crain's New York Business. p. 2. ProQuest 2779159714.
  30. ^ a b Yun, Li (March 12, 2023). "Regulators close New York's Signature Bank, citing systemic risk". CNBC. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
  31. ^ Lopatto, Elizabeth (March 12, 2023). "Signature Bank is closed by regulators, the third US bank failure in a week". The Verge. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
  32. ^ Smith, Colby; Politi, James; Fontanella-Khan, James; Masters, Brooke (March 12, 2023). "Federal Reserve announces emergency lending facility to shore up US banks". Financial Times. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
  33. ^ Sweet, Ken; Rugaber, Christopher; Megerian, Chris; Bussewitz, Cathy (March 12, 2023). "US government moves to stop potential banking crisis". Associated Press. Archived from the original on March 12, 2023. Retrieved March 13, 2023.
  34. ^ a b c "The Only Bank This Hip-Hop Mogul Will Use". The Wall Street Journal. ProQuest 1708108075. Archived from the original on October 20, 2018. Retrieved May 11, 2016.
  35. ^ Starzee, Bernadette (May 13, 2015). "Expanding the concept of a full-service bank". Long Island Business News. ProQuest 1681389855.
  36. ^ Adams, John (December 26, 2018). "Can blockchain jolt energy payments? What about real estate?". American Banker. ProQuest 2160050934.
  37. ^ "Signature Bank Expands Its Fund Banking Division and Venture Banking Group With Appointment of New Banking Professionals". Bloomberg.com. June 25, 2019. Archived from the original on March 12, 2023. Retrieved August 11, 2020.
  38. ^ "Signature Bank Establishes Mortgage Servicing Banking Initiative With Appointment of New Team; Also Adds Fifth Private Client Banking Team to San Francisco Office". www.businesswire.com. July 9, 2019. Retrieved February 21, 2021.
  39. ^ Vanderford, Richard (March 30, 2012). "SEC Wants Up To $13M In Fraud Case Against West End Exec". Law360. Archived from the original on June 9, 2016. Retrieved May 11, 2016.
  40. ^ Moyer, Liz (February 23, 2016). "Signature Bank Sued Over Connection to Ponzi Schem". The New York Times. ISSN 0362-4331. Archived from the original on April 26, 2017. Retrieved March 3, 2017.
  41. ^ Flitter, Emily; Drucker, Jesse (July 23, 2018). "How a Small Bank Became a Go-To Lender to the Trump Family". The New York Times. ISSN 0362-4331. Archived from the original on December 18, 2018. Retrieved December 17, 2018.
  42. ^ "Ivanka Trump Leaves Signature Bank's Board". American Banker. Archived from the original on July 22, 2018. Retrieved July 21, 2018.
  43. ^ "8 banks entangled in Trump-related probes". American Banker. August 20, 2018. Archived from the original on January 8, 2019. Retrieved January 6, 2019.
  44. ^ Alexander, Sophie; Basak, Sonali (January 11, 2021). "Trump's Long-Favored Banks Pull Back Amid Fallout From Riot". Bloomberg. Archived from the original on January 12, 2021. Retrieved January 12, 2021.
  45. ^ "Local Tenants and Activists Demand Changes in Signature Bank's Lending Practices". Archived from the original on February 15, 2019. Retrieved February 15, 2019.
  46. ^ Bockmann, Rich (August 30, 2017). "Banks say they were totally blindsided by Public Advocate's "worst landlords" list". The Real Deal New York. Archived from the original on August 10, 2019. Retrieved August 10, 2019.
  47. ^ "ANHD Applauds Signature Bank's Newly Released Commitment to Best Practices for Multifamily Real Estate Lending". Association for Neighborhood and Housing Development. August 30, 2018. Archived from the original on March 17, 2019. Retrieved March 13, 2019.
  48. ^ "Board of Directors – Signature Bank". Signature Bank. Archived from the original on July 3, 2022. Retrieved June 22, 2022.
  49. ^ Stein, Jeff (May 24, 2018). "A lot of people heard what Barney Frank said about the new banking law. Few knew he works for a bank". Washington Post. Archived from the original on January 6, 2019. Retrieved June 22, 2022.
  50. ^ McLannahan, Ben; Jopson, Barney (February 22, 2018). "Democrats get campaign cash from banks ahead of deregulation vote". Financial Times. Archived from the original on January 14, 2019. Retrieved January 10, 2019.
  • Official website
  • Business data for Signature Bank:
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