Signature Bank


Signature Bank was an American full-service commercial bank headquartered in New York City and with 40 private client offices in the states of New York, Connecticut, California, Nevada, and North Carolina. In addition to banking products, specialty national businesses provided services specific to industries such as commercial real estate, private equity, mortgage servicing, and venture banking; subsidiaries of the bank provided equipment financing and investment services. At the end of 2022, the bank had total assets of US$110.4 billion and deposits of $82.6 billion; as of 2021, it had loans of $65.25 billion.
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 and built personal relationships with them. For most of its history, it had offices only in the New York City area. In the late 2010s, it began to expand its services and geographic reach, 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 Silicon Valley Bank. After SVB failed and in light of the closure of the cryptocurrency-friendly Silvergate Bank earlier in the week, nervous customers withdrew more than $10 billion in deposits. It was the third-largest bank failure in U.S. history. Two days after Signature was closed, it became known that the bank was being investigated by the United States Department of Justice concerning its failure to properly scrutinize clients' activities for signs of money laundering. At the time of its closure by state banking officials, the bank was rated as the fourth U.S. bank by uninsured banking deposits, with 89.3 percent of deposits being uninsured; internal reviews by the Federal Deposit Insurance Corporation and New York state regulators noted that Signature's risk control and corporate governance had not grown commensurate with an increase in deposits in the late 2010s and early 2020s.
On March 19, 2023, a week after the bank closure, the FDIC sold the resulting bridge bank, most of its deposits, and its 40 branches to New York Community Bancorp to be absorbed by its Flagstar Bank subsidiary. Some $4 billion in digital asset banking deposits and $60 billion in loans were excluded from the transaction. Customers Bancorp acquired Signature's venture banking portfolio and hired 30 of that unit's former employees.

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. 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: 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 US$60 million in initial capital. Among its first employees were 65 former Republic Bank employees, who left en masse on April 27, days before Signature opened its branches. 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.
The bank completed its initial public offering in March 2004 and began trading on the NASDAQ under the symbol SBNY. 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. It made a practice of hiring bankers—and luring their clients—from recently merged banks; it emphasized personal relationships so thoroughly that it did not advertise and its bank branches did not have street signs. CEO DePaolo refused to decorate his office with art, finding it a sign of complacency, and usually ate a deli lunch at his desk. After the 2008 financial crisis, Signature's style of relationship banking led to years of double-digit increases in loans and deposits. 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".
Beginning in 2007, it expanded into other areas of business, starting with the launch of a multifamily lending unit. The bank expanded into equipment finance in 2012 through its Signature Financial unit. Additionally, Signature cultivated a major business in servicing the New York area's law firms. 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 -insured $250,000. Signature Financial's taxi medallion lending business was hurt by the rise of car sharing platforms such as Uber. Signature continued to post profits despite losses associated with medallion loans. The bank's assets approached $50 billion by 2017.
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. The move came the year after DePaolo, once reluctant to expand beyond New York, opened the door to adding additional markets in comments made at an investors' conference. In 2020, the bank continued its expansion throughout southern California, opening new offices in Newport Beach, Woodland Hills, and Ontario. 2022 brought the opening of an office in Reno, Nevada, and a West Coast operations center in City of Industry, California.
In addition to the West Coast, Signature Bank also began a private client 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.
The bank's focus on commercial clients meant that it always had a high percentage of uninsured deposits—those beyond $250,000. However, in its final years, the bank's share of uninsured deposits increased significantly from 63 percent in 2018 to 82 percent in 2021 and 89.3 percent at its closure.

Operations in the final years

General services

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. In 2015, nearly 150 senior bankers reported directly to DePaolo; some made more than the CEO. It cultivated a reputation of being loyal to its clients, which in turn incentivized them to conduct further banking business with Signature. 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; even though he had not been found guilty, other banks refused to let him maintain accounts. Among the company's nine national businesses in 2022 were commercial real estate lending, fund banking for private equity investors, venture banking for the technology industry, specialized mortgage banking, and corporate mortgage finance. The fund banking business in particular had been a source of rapid growth; four years after being created, the fund banking portfolio had become Signature's largest asset, representing 41 percent of the bank's loan portfolio at the end of 2021.
In addition to banking products, two Signature subsidiaries provided additional services: Signature Securities Group Corporation, an investment advisory firm, and Signature Financial LLC, an equipment financing and leasing division.
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; chief operating officer Eric Howell was to replace DePaolo as CEO at a later date. A later analysis by the Wall Street Journal found that DePaolo, Howell, and Shay had sold significant amounts of their Signature stock during the stock's cryptocurrency-fueled price surge in 2021, which eluded attention because the bank filed its insider trading reports with the FDIC, not the SEC, unusual for institutions of Signature's size. Only one other S&P 500 member, First Republic Bank, did not file insider trading reports at the SEC. Additionally, some of the reports it did file were mischaracterized.
2007200820092010201120122013201420152016201720182019202020212022
Revenue0.3110.3510.4210.5090.6230.6970.7870.9591.1441.3601.5061.7321.9732.0072.3113.711
Net income0.0270.0430.0630.1020.1500.1850.2290.2970.3730.3960.3870.5050.5860.5280.9181.337
Assets5.8457.1929.14611.6714.6717.4622.3827.3233.4539.0543.1247.3650.5973.89118.4110.4
Total equity0.4260.6980.8040.9451.4081.6501.8002.4962.8923.6124.0324.4074.7455.8277.8418.013