Signature Bank (NASDAQ:SBNY) Q2 2016 Earnings Conference Call - Final Transcript

Jul 20, 2016 • 10:00 am ET

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Signature Bank (NASDAQ:SBNY) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Welcome to Signature Bank's 2016 Second Quarter Results Conference Call. Hosting the call today from Signature Bank are Joseph J. DePaolo, President and Chief Executive Officer; and Eric R. Howell, Executive Vice President, Corporate & Business Development. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. (Operator Instructions).

It is now my pleasure to turn the floor over to Mr. Joseph J. DePaolo, President and Chief Executive Officer. You may begin, sir.

Executive
Joseph DePaolo

Thank you, Crystal. Good morning and thank you for joining us today for the Signature Bank 2016 second quarter results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.

Executive
Susan Lewis

Thank you, Joe.

(Forward-Looking Cautionary Statements)

Now I would like to turn the call back to Joe.

Executive
Joseph DePaolo

Thank you, Susan. I will provide some overview into the quarterly results and then Eric Howell, EVP of Corporate & Business Development, will review the Bank's financial performance in greater detail. Eric and I will address your questions at the end of our remarks.

Signature Bank had another exceptional quarter of growth and performance. For the first time in 6.5 years, we did not report record net income this quarter. However, we are really quite pleased with the 13% increase. First and foremost, we strengthened our franchise by growing deposits and loans substantially and adding two new banking teams. Secondly, we increased our allowance for loan losses on Chicago taxi medallion loans to 30% by providing $24 million more than the previous year's second quarter, while continuing to see the New York taxi medallion market stabilize. We believe this will have less of an impact going forward.

Additionally, we saw a decrease of $6 million in loan prepayment penalty income, which alleviates our reliance on this unpredictable revenue stream in future quarters. So just think about that. Our provision for loan losses was $24 million more than last year and $13.5 million more than the first quarter and we were down $6 million in prepayment penalty income; that's nearly $20 million less in earnings than the first quarter, yet we still earned more than $100 million. Finally, during the second quarter, we successfully issued $260 million in subordinated debt to support our future growth.

Now let's take a further look into earnings. Net income for the 2016 second quarter reached $102.2 million or $1.90 per diluted earnings per share, an increase of $11.8 million or 13% compared with $90.5 million or $1.77 diluted earnings per share reported in the same period last year. The considerable improvement in net income is mainly the result of an increase in net interest income primarily driven by strong deposit and loan growth during the quarter.

These factors are partially offset by an increase in provision for loan losses primarily due to Chicago taxi medallion valuations and non-interest expense attributable to our revenue growth initiatives as well as