565 Fifth Avenue
866-SIG-LINE (866-744-5463)
New York, NY 10017
www.signatureny.com
r e l a t i o n s h i p s m a t t e r
2 0 14 a n n u a l r e p o r t
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C O M P A N Y P R O F I L E
C O R P O R A T E I N F O R M A T I O N
BOARD OF DIRECTORS
LOCATIONS
STOCKHOLDER INFORMATION
Signature Bank (NASDAQ:SBNY), member FDIC, is a full-service commercial bank with 29
private client offi ces located throughout the New York metropolitan area. Th e Bank primarily
serves privately owned businesses, their owners and senior managers. Signature Bank off ers a broad
range of business and personal banking products and services as well as investment, brokerage,
asset management and insurance products and services through its subsidiary, Signature Securities
Group Corporation, a licensed broker-dealer, investment adviser and member FINRA/SIPC.
In addition, Signature Bank’s wholly owned specialty fi nance subsidiary, Signature Financial LLC,
provides equipment fi nance and leasing along with taxi medallion and transportation fi nancing.
F I N A N C I A L H I G H L I G H T S
(in thousands)
Total assets
Total loans
Total deposits
2010
2011
2012
2013
2014
$ 11,673,089
14,666,120
17,456,057
22,376,663
27,318,640
5,244,664
6,850,726
9,771,770
13,519,471
17,857,708
9,441,227
11,754,138
14,082,652
17,057,097
22,620,275
Shareholders’ equity
944,547
1,408,116
1,650,327
1,799,939
2,496,238
Net interest income after provision
for loan losses
Non-interest income
Non-interest expense
Income before income taxes
Net income
298,486
42,648
164,896
176,238
$ 102,051
407,911
42,038
182,724
267,225
149,526
508,379
36,239
218,243
326,375
185,483
606,700
32,011
247,177
391,534
228,744
770,041
34,982
293,244
511,779
296,704
Scott A. Shay
Chairman of the Board
Signature Bank
Kathryn A. Byrne, CPA
Partner
WeiserMazars LLP
Alfonse M. D’Amato
Managing Director
Park Strategies, LLC
Former U.S. Senator
Alfred B. DelBello
Partner
DelBello Donnellan Weingarten
Wise & Wiederkehr, LLP
Former New York State
Lieutenant Governor
Joseph J. DePaolo
President & Chief Executive Offi cer
Signature Bank
Judith A. Huntington
President
Th e College of New Rochelle
Jeff rey W. Meshel
Founder, President and
Chief Executive Offi cer
Paradigm Capital Corp.
Michael V. Pappagallo
President & Czhief Financial Offi cer
Brixmor Property Group
John Tamberlane
Vice Chairman
Signature Bank
SENIOR MANAGEMENT
Scott A. Shay
Chairman of the Board of Directors
Joseph J. DePaolo
President & Chief Executive Offi cer
John Tamberlane
Vice Chairman
Mark T. Sigona
Executive Vice President &
Chief Operating Offi cer
Michael J. Merlo
Executive Vice President &
Chief Credit Offi cer
Eric R. Howell
Executive Vice President -
Corporate & Business Development
Peter S. Quinlan
Executive Vice President &
Treasurer
Michael Sharkey
Senior Vice President &
Chief Technology Offi cer
Vito Susca
Senior Vice President &
Chief Financial Offi cer
Manhattan
261 Madison Avenue
300 Park Avenue
71 Broadway
565 Fifth Avenue
950 Th ird Avenue
200 Park Avenue South
1020 Madison Avenue
50 West 57th Street
2 Penn Plaza
111 Broadway
(Accommodation Offi ce)
Brooklyn
26 Court Street
6321 New Utrecht Avenue
97 Broadway
84 Broadway
(Accommodation Offi ce)
Queens
36-36 33rd Street, Long Island City
78-27 37th Avenue, Jackson Heights
8936 Sutphin Boulevard, Jamaica
118-35 Queens Boulevard, Forest Hills
Bronx
421 Hunts Point Avenue
Staten Island
2066 Hylan Boulevard
1688 Victory Boulevard
Westchester
1C Quaker Ridge Road, New Rochelle
360 Hamilton Avenue, White Plains
Long Island
1225 Franklin Avenue, Garden City
53 North Park Avenue, Rockville Centre
68 South Service Road, Melville
923 Broadway, Woodmere
40 Cuttermill Road, Great Neck
100 Jericho Quadrangle, Jericho
360 Motor Parkway, Hauppauge
Connecticut
75 Holly Hill Lane, Greenwich
(Opened February 2015)
Signature Securities Group
Institutional Trading
9 Greenway Plaza, Houston, TX 77046
(Services limited to institutional clients)
Signature Financial LLC
225 Broadhollow Road, Suite 132W
Melville, NY 11747
Counsel
Paul, Weiss, Rifkind, Wharton & Garrison LLP
Signature Bank
565 Fifth Avenue
New York, NY 10017
646-822-1500
866-SIG-LINE (866-744-5463)
www.signatureny.com
1285 Avenue of the Americas
New York, NY 10019
212-373-3000
Independent Auditors
KPMG LLP
345 Park Avenue
New York, NY 10154-0102
212-758-9700
Stock Transfer Agent & Registrar
American Stock Transfer
6201 15th Avenue
Brooklyn, NY 11219
718-921-8200
Stock Trading Information
Th e Bank’s common stock is traded on
the NASDAQ National Market under
the symbol SBNY.
Annual Meeting
Th e annual meeting of stockholders will
be held on April 23, 2015, 9:00 AM at:
Th e Roosevelt Hotel
45 East 45th Street
New York, NY 10017
212-661-9600
Form 10-K
A copy of Signature Bank’s Annual
Report on Form 10-K fi led with the FDIC is
available without charge by download from
www.signatureny.com, or by written request to:
Signature Bank
Attention: Investor Relations
565 Fifth Avenue
New York, NY 10017
Certain statements in this Annual Report that
are not historical facts constitute “forward-
looking statements” within the meaning of
the Private Securities Litigation Reform Act of
1995 (the “Reform Act”). Such forward-looking
statements are based on the Bank’s current
expectations, speak only as of the date on which
they are made and are susceptible to a number of
risks, uncertainties and other factors. Th e Bank’s
actual results, performance and achievements
may diff er materially from any future results,
performance or achievements expressed or
implied by such forward-looking statements. For
those statements, the Bank claims the protection
of the safe harbor for forward-looking state-
ments contained in the Reform Act. See “Private
Securities Litigation Reform Act Safe Harbor
Statement” and “Part I, Item 1A. Risk Factors,”
appearing in the Bank’s Annual Report on Form
10-K for the fi scal year ended December 31, 2014,
included herein.
T O O U R S H A R E H O L D E R S
Signature Bank ’s business
model was built around the
importance of relationships.
Today, nearly 14 years since
we opened our doors, relation-
ships remain the bedrock of our institution. In our modern
technology- and data-driven world, it is easy to lose sight of
the fact that every successful business endeavor is built on trust
and relationships.
(Left to right) Joseph J. DePaolo, President and
Chief Executive Offi cer and
Scott A. Shay, Chairman of the Board
then to 2nd before taking
the top spot for 2015.
Th is extraordinary
placement is the result
of the relationship-based
approach to banking upon which we continually execute
and the eff orts of all our colleagues.
Our approach to relationship banking is very diff erent
than most banks, and is what sets Signature Bank apart.
It is our client-centric values that drive our record results,
year after year.
While it may sound boring to repeat, 2014 was more of the
same in terms of Signature Bank’s performance. It was a year
fi lled with both record-setting annual deposit and loan growth
and also one that marked the Bank’s seventh consecutive year
of achieving record earnings. Furthermore, the 2014 fourth
quarter was the 21st in a row where we reported record earnings.
During 2014, prominent third parties once again recognized
the strength and success of the Bank’s relationship-based
model. Just prior to year-end, Signature Bank was named the
Best Bank in America by Forbes magazine for 2015. We had
previously ranked in this prestigious listing for the past fi ve
consecutive years, moving from 9th place to 5th, to 3rd, and
Our success stems from the enduring relationships we have
formed since deciding to build a new bank from the ground
up back in 2000. At that time, we identifi ed an overlooked
niche in the marketplace, realizing that privately held busi-
nesses were underserved by many of the larger fi nancial
institutions. Th ese types of clients were becoming increasingly
frustrated at the mega banks, due to a lack of personalized
service. Also, the silo approach – still utilized by most mega
banks – categorizes every client request by type, only then
to be separately addressed. Consequently, multiple banking
professionals comprise the client-banker relationship, which
becomes muddled by red tape and hindered by slower turn-
around times. Th ese silos and lack of attention, coupled with
consolidation among the too-big-to-fail (TBTF) banks, pres-
ent ongoing viable and valuable opportunities for Signature
Bank to attract some of the best bankers in the marketplace,
provide unparalleled service and excel in today’s commercial
banking landscape.
2 0 1 4 A N N U A L R E P O R T
2 0 1 4 A N N U A L R E P O R T
1
1
2
2
DEEP-ROOTED RELATIONSHIPSSignature Bank’s philosophy is completely diff erent. By developing a network of who we believe to be among the most talented bankers, we created our distinctive single-point-of-contact approach. We attract veteran bankers in the market that, over their decades of experience in the banking sector, have forged long-standing relationships with their clients. Th ey join the Bank as teams, bringing with them their relationships with each other as well as those with their clients. Here, the teams can better wow their clients with unrivaled service by acting as a single point of contact for meeting all their needs. At Signature Bank, it is the team that services the client, and it is the team with whom the client has a relationship. Perhaps equally important are the ways Signature Bank eliminates much of the bureaucracy found at the mega banks. Th is is what relationship bankers crave. At our Bank, Group Directors lead their teams and manage their own books of business as well as the relationships they have established. To further strengthen our relationship-based business model, in 2007, we appointed a veteran commercial real estate bank-ing team that continually helps to fuel loan growth. At the close of 2014, our loan portfolio reached $17.86 billion, of which $12.31 billion was derived from loans made through this expert commercial real estate banking team. We made a similar move when we launched our wholly owned subsidiary, Signature Financial LLC, in March 2012. We attracted a seasoned specialty fi nance team of approxi-mately 50 people to lead this eff ort for the Bank, bringing a new business line and key relationships. Today, Signature Financial comprises about $2.62 billion of our loan portfolio, an increase of $996 million over 2013. Signature Financial employs more than 80 colleagues in 19 states, and extends our footprint beyond the New York metropolitan area. In 2014, Signature Financial expanded its lending off ering with the addition of two business lines – commercial marine lending and franchise fi nance. We anticipate signifi cant lend-ing opportunities in both these spaces, and with the recent appointment of veteran bankers to lead each of these eff orts, we are now poised to grow these businesses as well.Our disciplined diversifi cation is paying off . Aside from introducing our specialty fi nance arm, the Bank announced its entry into asset-based lending in late 2013, through the appointment of a team that brought decades of experience in this area and, subsequently, relevant relationships to us. Th is added another capability to the Bank’s carefully chosen off er-ings, and the eff orts of our ABL team are gaining traction.We ended the year 92 teams strong, led by 129 Group Directors. We appointed fi ve new teams during 2014 and expect to further bolster our enterprise as we identify the right professionals. We now operate from 29 fi nancial centers, many of which cannot be found on the ground fl oor of any building. Since we are not a mass-market retail-centered bank, ground fl oor locations are irrelevant. For example, during 2014, our 28th fi nancial center opened in Forest Hills, New York (Queens), on the fourth fl oor of an offi ce building. Another diff erentia-tor for Signature Bank is that we open our banking offi ces only when a team is identifi ed. We are not sold on the “build it and they will come” strategy; instead, we “build it once they come.” As such, we recently opened our newest offi ce in Greenwich, Connecticut, on the heels of hiring a new team with established relationships there. Th ey are now expanding the Bank’s presence throughout Fairfi eld County. While all of the ways in which we build and cultivate relation-ships go against the typical grain of traditional banking, they truly are the reasons for Signature Bank’s success. DEPOSITS
(in billions)
22.6
17.1
14.1
14.1
11.8
9.4
LOANS
(in billions)
17.9
13.5
9.8
6.9
5.2
NET INCOM E
(in millions)
296.7
228.7
185.5
149.5
102.1
10
11
12
YEAR
13 14
10
11
12
YEAR
13 14
10
11
12
YEAR
13 14
2 0 1 4 A N N U A L R E P O R T
2 0 1 4 A N N U A L R E P O R T
3
3
FORMULA FOR SUCCESS2014 was a stellar year for the Bank in terms of our fi nancial performance as we fortifi ed our strong relationships with our depositors. Net income for the fi scal year ended December 31, 2014 again reached record levels, increasing to $296.7 million, or $5.95 diluted earnings per share, compared with $228.7 million, or $4.76 diluted earnings per share, reported in 2013. Th is repre-sents an increase of $68.0 million, or 29.7 percent, over last year’s then-record. Th e record net income is predominantly due to an increase in net interest income, fueled by record annual growth in both deposits and loans. For 2014, we continued to gather deposits at record levels as well. Deposits grew a record $5.56 billion, or 32.6 percent, over deposits at the close of 2013, to $22.62 billion. Excluding short-term escrow and brokered deposits of $3.08 billion at year-end 2014 and $1.66 billion at year-end 2013, core depos-its increased a record $4.14 billion, or 26.9 percent, for 2014. Our lending eff orts produced strong results in our loan portfo-lio during 2014, which reached $17.86 billion versus $13.52 billion for 2013, increasing $4.34 billion, or 32.1 percent, since the end of 2013. Th e signifi cant increase in loans for the year was mostly fueled by growth in both commercial real estate and multi-family loans as well as loans extended by Signature Financial. At year-end, loans accounted for 65.4 percent of total assets, compared with 60.4 percent at the end of 2013. In the past sixyears, loans to assets grew from 48.3 to 65.4 percent, ontop of more than $20.13 billion, or 279.8 percent, of balance sheet growth.Th e Bank’s strong lending discipline resulted in a low nonperforming loans to loan ratio of just 0.12 percent, with nonperforming loans to assets reaching 0.08 percent. Quarterly net charge-off s were zero basis points at year-end 2014 versus four basis points at September 30, 2014 and nine basis points as of December 31, 2013. Th e Bank still possesses among the strongest capital positions in the industry. At the end of 2014, Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios were approxi-mately 9.25 percent, 13.49 percent and 14.39 percent, respectively. Our strong risk-based capital ratios refl ect the relatively low risk profi le of the Bank’s balance sheet. Also, the Bank’s tangible common equity ratio remained strong at 9.14 percent.Over the years, we have constantly proven the strength of our prudently managed balance sheet to our depositors and shareholders. We have maintained exceptional credit qual-ity while continually delivering fi nancial performance that outperforms our peers and the sector. Our rigorous disciplines, vigilant processes and underlying values contributed to the leading position Signature Bank holds in commercial banking. We will continue to leverage our capabilities as we judiciously elevate our status in a changing banking landscape that is overly dominated by TBTF institutions. Moreover, we will keep working toward legislative relief to reduce the regulatory advantage possessed by the TBTF banks. EXCELLING IN ASSET GROW TH A ND MIX
$ 5.8 billion
12%
34%
54%
2007
Total Loans, net
Investment Securities
Other Assets
ON SOLID GROUND
Signature Bank ends 2014 stronger than any other time in the
history of our growing franchise. Our concrete improvement in
organic growth – year after year – is evidence that our model is
embraced by our clients, bankers, colleagues and shareholders.
From a start-up bank to the Best Bank in America, the road trav-
eled has been fueled by our commitment to relationships – the
core of our business – then and now.
When we began our journey in 2001, we knew the New York
metropolitan area was a market ripe for our model. With New
York being home to the largest number of businesses in the U.S.
with fewer than 500 employees (our target market), signifi cant
opportunities still abound here.
Since relationships are the hallmark of our business, it’s perhaps
no surprise that readers of Th e New York Law Journal, a trade
publication focused on the New York-area legal marketplace,
named Signature Bank the Best Business Bank in its 2014
annual reader survey. Th e Bank also ranked second in both the
Best Private Bank and Best Attorney Escrow Service Provider
categories. For the past fi ve years, since the survey was
introduced, Signature Bank has continually earned a top-three
position in each of the categories in which it ranked.
During 2014, Signature Bank also was recognized in various
banking industry publications. It was named the nation’s fi fth
top-performing bank by ABA Banking Journal, and ranked
seventh on Bank Director magazine’s 2014 Bank Performance
Scorecard for banks with assets between $5 and $50 billion.
4
4
$ 27.3 billion
4%
31%
65%
2014
Clearly, being named Best Bank in America by Forbes was the
pinnacle of third-party recognitions, one we were humbled to
earn. And, interestingly, earlier in 2014, the same publication
also produced a list of America’s 50 Most Trustworthy Financial
Companies, on which Signature Bank was the only large cap
bank to appear.
As we refl ect on 2014, we believe we could not have earned any
of these high honors without the diligence of our colleagues. We
thank each and every one for their dedication to serving our
growing client base, and providing exceptional care to our clients
through the relationships they’ve worked hard to nurture.
We also take this opportunity to thank our Board of Directors
for their contributions and vision, and our shareholders for plac-
ing their trust in our management team and the Bank’s model.
We continue to emphasize our banking relationships by ensuring
we always pick up the phone and make that connection with
both existing as well as potential clients. We do the same within
our current banking network and amongst new bankers seeking
to join our franchise. After all, relationship banking, in our opin-
ion, can truly be as simple as that. Ongoing attentiveness to client
care is what it takes to achieve and sustain solid relationship
banking. We pledge to stick to our relationship-based blueprint.
Respectfully,
Scott A. Shay
Chairman of the Board
Joseph J. DePaolo
President and Chief Executive Offi cer
UNITED STATES
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
FDIC Certificate Number 57053
SIGNATURE BANK
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction
of incorporation or organization)
565 Fifth Avenue, New York, New York
(Address of principal executive offices)
13-4149421
(I.R.S. Employer
Identification No.)
10017
(Zip Code)
Registrant’s telephone number, including area code: (646) 822-1500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.01 par value
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No
The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing sales price of the
registrant’s Common Stock as quoted on the NASDAQ Global Select Market on June 30, 2014 was $6.21 billion.
As of February 27, 2015, the Registrant had outstanding 50,322,040 shares of Common Stock.
Portions of the registrant’s definitive Proxy Statement for Annual Meeting of Stockholders to be held April 23, 2015. (Part III)
DOCUMENTS INCORPORATED BY REFERENCE
SIGNATURE BANK
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
INDEX
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . .
Item 14.
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15.
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
6
26
42
42
42
42
43
46
48
82
83
84
84
86
86
86
86
86
86
87
89
F-1
2
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
This Annual Report on Form 10-K 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. You
should not place undue reliance on such statements because they are subject to numerous risks and uncertainties
relating to our operations and the business environment in which we operate, all of which are difficult to predict
and many of which are beyond our control. Forward-looking statements include information concerning our
possible or assumed future results of operations, including descriptions of our business strategy, expectations,
beliefs, projections, anticipated events or trends, growth prospects, financial performance, and similar expressions
concerning matters that are not historical facts. These statements often include words such as “may,” “believe,”
“expect,” “anticipate,” “potential,” “opportunity,” “intend,” “plan,” “estimate,” “could,” “project,” “seek,” “should,” “will,”
or “would,” or the negative of these words and phrases or similar words and phrases.
All forward-looking statements may be impacted by a number of risks and uncertainties. These statements are
based on assumptions that we have made in light of our industry experience as well as our perception of historical
trends, current conditions, expected future developments and other factors we believe are appropriate under the
circumstances including, without limitation, those related to:
• earnings growth;
• revenue growth;
• net interest margin;
• deposit growth, including short-term escrow deposits, brokered deposits and off-balance sheet deposits;
• future acquisitions;
• performance, credit quality and liquidity of investments made by us, including our investments in certain mortgage-
backed and similar securities;
• loan and lease origination volume;
• the interest rate environment;
• non-interest income levels, including fees from product sales;
• credit performance on loans made by us;
• 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;
• our ability to maintain, generate and/or raise capital;
• changes in the regulatory environment and government intervention in the banking industry; including the impact of
the Dodd-Frank Wall Street Reform and Consumer Protection Act;
• Federal Deposit Insurance Corporation insurance assessments;
• margins on sales or securitizations of loans;
• market share;
• expense levels;
• hiring of new private client banking teams;
• results from new business initiatives;
• other business operations and strategies;
• changes in federal, state, or local tax laws; and
• new accounting pronouncements.
As you read and consider forward-looking statements, you should understand that these statements are not
guarantees of performance or results. They involve risks, uncertainties, and assumptions and can change as a
result of many possible events or factors, not all of which are known to us or in our control. Although we believe
that these forward-looking statements are based on reasonable assumptions, beliefs, and expectations, if a
change occurs or our beliefs, assumptions, or expectations were incorrect, our business, financial condition,
liquidity, or results of operations may vary materially from those expressed in our forward-looking statements. You
should be aware that many factors could affect our actual financial results or results of operations and could cause
actual results to differ materially from those in the forward-looking statements. See “Part I, Item 1A. – Risk
Factors” for a discussion of the most significant risks that we face, including, without limitation, the following
factors:
• disruption and volatility in global financial markets;
3
• difficult market conditions adversely affecting our industry;
• monetary and currency fluctuations;
• our inability to successfully implement our business strategy;
• our inability to successfully integrate new business lines into our existing operations;
• our vulnerability to changes in interest rates;
• our vulnerability to changes in inflation;
• competition with many larger financial institutions which have substantially greater financial and other resources
than we have;
• government intervention in the banking industry, new legislation and government regulation;
• illiquid market conditions and downgrades in credit ratings;
• adverse developments in the residential mortgage market;
• inability of U.S. agencies or U.S. government-sponsored enterprises to pay or to guarantee payments on their
securities in which we invest;
• material risks involved in commercial lending;
• a downturn in the economy of the New York metropolitan area;
• a downturn in the economy of the U.S.;
• under-collateralization of our loan portfolio due to a material decline in the value of real estate;
• risks associated with our loan portfolio growth;
• our failure to effectively manage our credit risk;
• lack of seasoning of mortgage loans underlying our investment portfolio;
• our allowance for loan and lease losses may not be sufficient to absorb actual losses;
• our reliance on the Federal Home Loan Bank of New York for secondary and contingent liquidity sources;
• our dependence upon key personnel;
• our inability to acquire suitable private client banking teams or manage our growth;
• our charter documents and regulatory limitations may delay or prevent our acquisition by a third party;
• curtailment of government guaranteed loan programs could affect our SBA business;
• our extensive reliance on outsourcing to provide cost-effective operational support;
• system failures or breaches of our network security;
• decreases in trading volumes or prices;
• potential responsibility for environmental claims;
• our inability to raise additional funding needed for our operations;
• inflation or deflation;
• misconduct of employees or their failure to abide by regulatory requirements;
• fraudulent or negligent acts on the part of our clients or third parties;
• failure of our brokerage clients to meet their margin requirements;
• severe weather;
• acts of war or terrorism;
• technological changes;
• work stoppages, financial difficulties, fire, earthquakes, flooding or other natural disasters;
• changes in federal, state, or local tax laws;
• changes in accounting standards, policies, and practices or interpretation in new or existing standards, policies
and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards
Board, the Securities and Exchange Commission (the “SEC”) and the Public Company Accounting Oversight
Board;
• changes in our reputation and negative public opinion;
• increases in FDIC insurance premiums;
• regulatory net capital requirements that constrain our brokerage business;
• soundness of other financial institutions; and
• changes in the financial condition or future prospects of issuers of securities that we own.
See “Part I, Item 1A. – Risk Factors” for a full discussion of these risks.
4
You should keep in mind that any forward-looking statement made by us speaks only as of the date on which we
make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or
how they may affect us. We have no duty to, and do not intend to, and disclaim any obligation to, update or revise
any industry information or 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 document or
elsewhere might not reflect actual results.
5
ITEM 1. BUSINESS
PART I
In this annual report filed on Form 10-K, except where the context otherwise requires, the “Bank,” the “Company,”
“Signature,” “we,” “us,” and “our” refer to Signature Bank and its subsidiaries, including Signature Securities Group
Corporation (“Signature Securities”) and Signature Financial, LLC (“Signature Financial”).
Introduction
We are a New York-based full-service commercial bank with 28 private client offices located in the New York
metropolitan area, offering a wide variety of business and personal banking products and services. The Bank’s
growing network of private client banking teams serves the needs of privately owned businesses, their owners and
senior managers.
We provide brokerage, asset management and insurance products and services through our Signature Securities
subsidiary, a licensed broker-dealer and investment adviser. Additionally, through Signature Securities, we
purchase, securitize and sell the guaranteed portions of U.S. Small Business Administration (“SBA”) loans.
Through our Signature Financial subsidiary, a specialty finance company based in Melville, Long Island, we offer a
variety of financing and leasing products to clients located throughout the United States. Signature Financial’s
products include equipment finance and leasing, transportation financing, taxi medallion financing, commercial
marine financing, and national franchise financing.
Signature Bank’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and all amendments to those reports, Proxy Statement for its Annual Meeting of Stockholders and Annual Report
to Stockholders are made available, free of charge, on our website at www.signatureny.com as soon as
reasonably practicable after such reports have been filed with or furnished to the Federal Deposit Insurance
Corporation (“FDIC”). You may also obtain any materials that we file with the FDIC at the Federal Deposit
Insurance Corporation’s offices located at 550 17th Street N.W., Washington, DC 20429.
Since commencing operations in May 2001, we have grown to $27.32 billion in assets, $22.62 billion in deposits,
$17.86 billion in loans, $2.50 billion in equity capital and $3.57 billion in other assets under management as of
December 31, 2014. We intend to continue our growth and maintain our position as a premier relationship-based
financial services organization in the New York metropolitan area, guided by our Chairman and senior
management team who have extensive experience developing, managing and growing financial service
organizations.
Recent Highlights
Common Stock Offering
On June 13, 2014, we completed a public offering of 2,100,000 shares of common stock and on July 1, 2014, the
underwriter exercised in full the option we had granted the firm to purchase 315,000 additional shares of common
stock. The net proceeds from this offering, including the option exercise, added approximately $295.8 million to
our shareholders’ equity, which will be used for general corporate purposes and to facilitate our continued growth.
Core Deposit Growth
During 2014, our deposits grew $5.56 billion, or 32.6%, to $22.62 billion. Deposits at December 31, 2014 included
$211.2 million of brokered deposits and approximately $2.87 billion of short-term escrow deposits, which due to
their nature and as expected, have been or will be released over the next several quarters. At year end 2013,
deposits included $404.2 million of brokered deposits and approximately $1.26 billion of short-term escrow
deposits. Core deposits, which exclude brokered deposits and short-term escrow deposits, increased $4.14
billion, or 26.9%, during 2014 as a result of the addition of new private client banking teams, who assist us in
growing our client base, as well as additional deposits raised by our existing private client banking teams. We
primarily focus our deposit gathering efforts in the greater New York metropolitan area market with money center
6
banks, regional banks and community banks as our primary competitors. We distinguish ourselves from
competitors by focusing on our target market: privately owned businesses and their owners and senior managers.
This niche approach, coupled with our relationship-banking model, provides our clients with a personalized
service, which we believe gives us a competitive advantage. Our deposit mix has remained favorable, with non-
interest-bearing and NOW deposits accounting for 38.6% of our total deposits and time deposits accounting for
only 4.5% of our total deposits as of December 31, 2014. Our average cost for total deposits was 0.47% for the
year ended December 31, 2014.
Short-Term Escrow Deposits
At December 31, 2014 and 2013, approximately $2.87 billion and $1.26 billion, respectively, of short-term escrow
deposits were included in the Bank’s total deposits. We have developed a core competency in catering to the
needs of law firms, accounting firms, claims administrators, and title companies, amongst others, which allows us
to obtain from our clients short-term escrow deposits.
Strategic Hires
During 2014, we increased our network of seasoned banking professionals by adding five new private client
banking teams and three new banking group directors. Additionally, we added three professional employees to
lead Signature Financial's expansion into direct finance services for both the franchise and commercial marine
industries on a national basis. Our full-time equivalent number of employees grew from 945 to 1,010 during 2014.
Private Client Banking Teams and Offices
As of December 31, 2014, we had 92 private client banking teams located throughout the New York metropolitan
area. With the on-going consolidation of financial institutions in our marketplace and market segmentation by our
competitors, we continue to actively recruit experienced private client banking teams with established client
relationships that fit our niche market of privately owned businesses, their owners and their senior managers. Our
typical group director joins us with 20 years of experience in financial services and an established team of two to
four additional professionals to assist with business development and client services. Each additional private
client banking team brings client relationships that allow us to grow our core deposits as well as expand our
lending opportunities.
To facilitate our growth, we opened one additional private client office during 2014 located in Forest Hills, New
York. We currently operate 28 private client offices located in the New York metropolitan area. While our strategy
does not call for us to have an expansive office presence, we will continue to add offices to meet the needs of the
private client banking teams that we recruit.
Our Business Strategy
We intend to increase our presence as a premier relationship-based financial services organization serving the
needs of privately owned business clients, their owners and senior managers in the New York metropolitan area
by continuing to:
Focus on our niche market of privately owned businesses, their owners and their senior managers
We generally target closely held commercial clients with revenues of less than $200 million and fewer than 1,000
employees. Our business clients are representative of the New York metropolitan area economy and include real
estate owners/operators, real estate management companies, law firms, accounting firms, entertainment business
managers, medical professionals, retail establishments, money management firms and not-for-profit philanthropic
organizations. We also target the owners and senior management of these businesses who typically have a net
worth of between $500,000 and $20 million.
Provide our clients a wide array of high quality banking, brokerage and insurance products and services
through our private client group structure and a seamless financial services solution
We offer a broad array of financial products and services with a seamless financial services solution through our
private client banking team structure.
Most of our competitors that sell banking products as well as investment and insurance products do so based on a
“silo” approach. In this approach, different sales people from different profit centers within the bank, brokerage
7
firm or insurance company separately offer their particular products to the client. This approach creates client
confusion as to who is servicing the relationship. Because no single relationship manager considers all of the
needs of a client in the “silo” approach, some products and services may not be presented at all to the client. We
market our banking, investment and insurance services seamlessly, thus avoiding the “silo” approach of many of
our competitors in the New York metropolitan area. Our cash management, investment and insurance products
and services are presented to clients by the private client banking team professional but provided or underwritten
by others.
Our business is built around banking and investment private client groups. We believe that our ability to hire and
retain top-performing relationship group directors is our major competitive advantage. Our group directors have
primary responsibility for attracting client relationships and, on an on-going basis, through them and their groups,
servicing those relationships. Our group directors are experienced financial service professionals who come from
the following disciplines: private banking, middle market banking, high-end retail banking, investment and
insurance and institutional brokerage. Our group directors each have their own private client banking team
(typically two to four professionals) who assists the group director in business development and client service.
Recruit experienced, talented and motivated private client group directors who are top producers and who
believe in our banking model
A key to our success in developing a relationship-based bank is our ability to recruit and retain experienced and
motivated financial services professionals. We recruit group directors and private client banking teams who we
believe are top performers. While recruitment channels differ and our recruitment efforts are largely opportunistic
in nature, the continuing merger and acquisition activity in the New York financial services marketplace provides
an opportunity to selectively target and recruit qualified teams. We believe the current market to be a favorable
environment for locating and recruiting qualified private client banking teams. Our experience has been that such
displacement and change leads select private client banking teams to smaller, less bureaucratic organizations
such as Signature.
Offer incentive-based compensation that rewards private client banking teams for developing their
business and retaining their clients
Our private client banking team variable compensation model adds to the foundation for our relationship-based
banking discipline. A key part of our strategy for growing our business is the incentive-based compensation that
we employ to help us retain our group directors while ensuring that they continue to develop their business and
retain their clients. Under our private client banking team variable compensation model, annual bonuses are paid
to members of the client relationship team based upon the profit generated from their business. In order to
mitigate the inherent risk in our incentive-based compensation model, we have in place an internal control
structure that includes segregation of duties. For example, the underwriting and ultimate approval of any loan is
performed by loan officers who are separate from the private client banking teams and report to our Chief Credit
Officer.
Maintain a flat organization structure that provides our clients and group directors with direct access to
senior management
Another key element of our strategy is our organizational structure. We operate with a flat organizational and
reporting structure, through which our group directors report directly to senior management. More importantly, it
gives our clients direct access to senior management.
Develop and maintain operations support that is client-centric and service oriented
We have made a significant investment in our infrastructure, including our support staff. Although we have
centralized many of our critical operations, such as finance, information technology, client services, cash
management services, loan administration and human resources, we have located some functions within the
private client offices so they are closer to the group directors and our clients. For example, most of our private
client offices have a senior lender on location, who is part of our credit group, to assist the private client banking
teams with the lending process. In addition, most of our private client offices have an investment group director or
team that provides brokerage and/or insurance services, as necessary. We believe that our existing infrastructure
(physical and systems infrastructure, as well as people) can accommodate additional growth without substantial
additional support area personnel or significant spending on technology and operations in the medium term.
8
Be committed to a sound risk management process while focusing on profitability
Risk management is an important element of our business. We evaluate the inherent risks that affect our
business, including interest rate risk, credit risk, operational risk, regulatory risk, and reputation risk. We have a
Director of Risk Management whose responsibility is the oversight of our risk management processes.
Additionally, members of our senior management group have significant experience in risk management, credit,
operations, finance and auditing. We have put internal controls in place that help to mitigate the risks that affect
our business. In addition, we have policies and procedures that further help mitigate risk and regulatory
requirements that mandate that we evaluate, test and opine on the effectiveness of internal controls. No system of
internal control or policies and procedures will ever totally eliminate risk. However, we believe that our risk
management processes will help keep our risks to a manageable level.
Maintain an appropriate balance between cost control, incentive compensation and business expansion
initiatives
We have established an internal approval process for capital and operating expenses. We maintain cost control
practices and policies to increase efficiency of operations. A key expense for financial service companies is
compensation. Controlling this expense is an important element in keeping overall expenses down. Our group
directors and their teams receive base salaries and benefits; however, a significant portion of their compensation
is variable and based upon the profit generated from the business they create. This variable compensation model
helps us control expenses as employees do not receive variable compensation unless revenue is generated.
Virtually all expenditures (both current and capital) in excess of certain thresholds must be approved by a member
of senior management and are reviewed and approved by our Purchasing and Capital Expenditures Committee,
which includes our Chief Operating Officer and our Chief Financial Officer.
We make extensive use of outsourcing to provide cost-effective operational support with service levels consistent
with large-bank operations. We focus on our financial services business and have outsourced many of our key
banking and brokerage systems to third-party providers. This has several advantages for an institution like ours,
including the ability to cost-effectively utilize the latest technology to better serve, and stay focused on, the needs
of our clients. Some of our key outsourcing partners include Fidelity Information Services and National Financial
Services (the brokerage and investments systems division of Fidelity Investments). We maintain management
oversight of these providers. Each of these providers was the subject of a due diligence investigation prior to their
selection and continues to be reviewed on an on-going basis.
Historical Development
We were incorporated as a New York State-chartered bank in September 2000. On April 5, 2001, our date of
inception, we received approval to commence operations from the New York State Banking Department (known as
the New York State Department of Financial Services as of October 3, 2011). Since commencing operations on
May 1, 2001, the following subsequent historical developments have occurred in relation to our ownership and
capital structure:
We completed our initial public offering in March 2004 and a follow-on offering in September 2004. Our
common stock trades on the Nasdaq Global Select Market under the symbol “SBNY.”
In March 2005, Bank Hapoalim B.M. sold its controlling stake in us in a secondary offering. After the
offering, Bank Hapoalim beneficially owned 5.7% of our common stock on a fully diluted basis. Bank
Hapoalim no longer owns any shares of our stock.
In September 2008, we completed a public offering of 5,400,000 shares of our common stock generating
net proceeds of $148.1 million.
In December 2008, we issued 120,000 shares of senior preferred stock (with an aggregate liquidation
preference of $120.0 million) and a warrant to purchase 595,829 common shares to the U.S. Treasury in
the Troubled Asset Relief Program Capital Purchase Program (the “TARP Capital Purchase Program”),
for an aggregate purchase price of $120.0 million.
In light of the restrictions of the American Recovery and Reinvestment Act of 2009, on March 31, 2009,
we repurchased the 120,000 shares of preferred stock we issued to the U.S. Treasury for $120.0 million
plus accrued and unpaid dividends of $767,000.
9
In June 2009, we completed a public offering of 5,175,000 shares of our common stock generating net
proceeds of $127.3 million.
In March 2010, the U.S. Treasury sold, in a public offering, a warrant to purchase 595,829 shares of our
common stock that was received from us in the TARP Capital Purchase Program. As of December 31,
2014, 348,134 of these warrants have been exercised, which resulted in the creation of 85,138 shares of
treasury stock that have been reissued in connection with the exercise of options granted under the
Bank’s equity incentive plan.
In July 2011, we completed a public offering of 4,715,000 shares of our common stock generating net
proceeds of approximately $253.3 million.
In July 2014, we completed a public offering of 2,415,000 shares of our common stock generating net
proceeds of approximately $295.8 million.
Products and Services
Business Clients
We offer a full range of products and services oriented to the needs of our business clients, including:
Deposit products such as non-interest-bearing checking accounts, money market accounts, and time
deposits;
Escrow deposit services;
Cash management services;
Commercial loans and lines of credit for working capital and to finance internal growth, acquisitions and
leveraged buyouts;
Equipment finance and leasing, transportation financing, taxi medallion financing; commercial marine
financing, and national franchise financing;
Asset-based lending;
Permanent real estate loans;
Letters of credit;
Investment products to help better manage idle cash balances, including money market mutual funds and
short-term money market instruments;
Business retirement accounts such as 401(k) plans; and
Business insurance products, including group health and group life products.
Personal Clients
We offer a full range of products and services oriented to the needs of our high net worth personal clients,
including:
Interest-bearing and non-interest-bearing checking accounts, with optional features such as debit/ATM
cards and overdraft protection and, for our top clients, rebates of certain charges, including ATM fees;
Money market accounts and money market mutual funds;
Time deposits;
Personal loans, both secured and unsecured;
Mortgages, home equity loans and credit card accounts;
Investment and asset management services; and
Personal insurance products, including health, life and disability.
Deposit Products
The market for deposits continues to be very competitive. We primarily focus our deposit gathering efforts in the
greater New York metropolitan area with money center banks, regional banks and community banks as our
primary competitors. We distinguish ourselves from competitors by focusing on our target market: privately owned
businesses and their owners and senior managers. This niche approach, coupled with our relationship-banking
model, provides our clients with a personalized service, which we believe gives us a competitive advantage.
10
We offer a variety of deposit products to our clients at interest rates that are competitive with other banks. Our
business deposit products include commercial checking accounts, money market accounts, escrow deposit
accounts, cash concentration accounts and other cash management products. Our personal deposit products
include checking accounts, money market accounts and certificates of deposit. We also allow our personal and
business deposit clients to access their accounts, transfer funds, pay bills and perform other account functions
over the internet and through automated teller machines.
The following table presents the composition of our deposit accounts as of December 31, 2014 and 2013:
(dollars in thousands)
Amount
Percentage
Amount
Percentage
December 31,
2014
2013
Personal demand deposit accounts (1)
Business demand deposit accounts (1)
Rent security
Personal NOW
Business NOW
Personal money market accounts
Business money market accounts
Personal time deposits
Business time deposits
Brokered time deposits
Total
Demand deposit accounts (1)
NOW
Money market accounts
Time deposits
Brokered time deposits
Total
Personal
Business
Brokered time deposits
Total
(1) Non-interest bearing.
Lending Activities
$
585,689
6,479,270
127,792
47,813
1,623,337
3,370,141
9,368,774
368,725
437,545
211,189
22,620,275
7,064,959
1,671,150
12,866,707
806,270
211,189
22,620,275
4,372,368
18,036,718
211,189
22,620,275
$
$
$
$
$
2.59%
28.65%
0.56%
0.21%
7.18%
14.90%
41.42%
1.63%
1.93%
0.93%
100.00%
31.24%
7.39%
56.88%
3.56%
0.93%
100.00%
19.33%
79.74%
0.93%
100.00%
511,911
4,879,572
98,987
38,797
812,100
3,172,224
6,318,277
415,040
405,959
404,230
17,057,097
5,391,483
850,897
9,589,488
820,999
404,230
17,057,097
4,137,972
12,514,895
404,230
17,057,097
3.00%
28.61%
0.58%
0.23%
4.76%
18.60%
37.04%
2.43%
2.38%
2.37%
100.00%
31.61%
4.99%
56.22%
4.81%
2.37%
100.00%
24.26%
73.37%
2.37%
100.00%
Our traditional commercial and industrial lending is generally limited to existing clients with whom we have or
expect to have deposit and/or brokerage relationships in order to assist in monitoring and controlling credit risk.
We target our lending to privately owned businesses, their owners and senior managers, generally high net worth
individuals who meet our credit standards. Our credit standards are set by the Credit Committee of our Board of
Directors (the “Credit Committee”) with the assistance of our Chief Credit Officer, who is charged with ensuring
that credit standards are met by loans in our portfolio. In addition, we have a credit authorization policy under
which no single individual is authorized to approve a loan regardless of dollar amount. Smaller loans may be
approved by concurring authorized officers. Larger loans require the approval of the Credit Committee. Our
largest loan category requires the approval of our Board of Directors. Our credit standards for commercial
borrowers reference numerous criteria with respect to the borrower, including historical and projected financial
information, the strength of management, acceptable collateral and associated advance rates, and market
conditions and trends in the borrower’s industry. In addition, prospective loans are analyzed based on current
industry concentrations in our loan portfolio to prevent an unacceptable concentration of loans in any particular
industry. We believe our credit standards are similar to the standards generally employed by large nationwide
banks in the markets we serve. We seek to differentiate ourselves from our competitors by focusing on and
aggressively marketing to our core clients and accommodating, to the extent permitted by our credit standards,
11
their individual needs. We generally limit unsecured lending for consumer loans to private banking clients who we
believe demonstrate ample net worth, liquidity and repayment capacity.
We make loans that are appropriately collateralized under our credit standards. Approximately 99% of our funded
loans are secured by collateral. Unsecured loans are typically made to individuals with substantial net worth.
Commercial and Industrial Loans
Our commercial and industrial (“C&I”) loan portfolio is comprised of lines of credit for working capital and term
loans to finance equipment and other business assets, along with commercial overdrafts. Our lines of credit for
working capital are generally renewed on an annual basis and our term loans generally have terms of two to five
years. C&I loans can be subject to risk factors unique to the business of each client. In order to mitigate these
risks and better serve our clients, we seek to gain an understanding of the business of each client and the
reliability of their cash flow, so that we can place appropriate value on collateral taken and structure the loan to
maintain collateral values at appropriate levels. In analyzing credit risk, we generally focus on the business
experience of our borrowers’ management. We prefer to lend to borrowers with an established track record of
loan repayment and predictable growth and cash flow. We also rely on the experience of our bankers and their
relationships with our clients to aid our understanding of the client and its business. Our lines of credit typically are
limited to a percentage of the value of the assets securing the line. Lines of credit are generally reviewed annually
and are typically supported by accounts receivable, inventory and equipment. Depending on the risk profile of the
borrower, we may require periodic aging of receivables, as well as borrowing base certificates representing current
levels of inventory, equipment, and accounts receivable. Our term loans are typically also secured by the assets
of our clients’ businesses. Commercial borrowers are required to provide updated personal and corporate
financial statements at least annually. At December 31, 2014, funded C&I loans totaled approximately 20% of our
total funded loans. Loans extended to borrowers within the services industries include loans to finance working
capital and equipment, as well as loans to finance investment and owner-occupied real estate.
12
The following table presents information regarding the distribution of our C&I loans among select industries in
which we had the largest concentration of loans outstanding at December 31, 2014.
(dollars in thousands)
Taxi Medallions
Transportation Services
Real Estate and Real Estate Management
Building and Construction Contractors
Manufacturing
Wholesale Trade
Professional Services
Financial Services
Health Services
Business Services
Mining
Retail Trade
Accomodation and Food Services
Special Trade Contractors
Legal Services
Recreational Services
Educational Services
Audio/Video Services
Membership Organizations
Utilities
Other Industries
Total
December 31, 2014
Loan Amount
Percentage
$
847,225
645,819
323,900
294,853
281,894
195,100
146,584
99,896
93,514
83,615
76,420
63,051
48,862
47,949
46,663
31,009
21,644
17,928
13,281
10,459
308,059
3,697,725
$
22.91%
17.47%
8.76%
7.97%
7.62%
5.28%
3.96%
2.70%
2.53%
2.26%
2.07%
1.71%
1.32%
1.30%
1.26%
0.84%
0.59%
0.48%
0.36%
0.28%
8.33%
100.00%
As of December 31, 2014, the largest component of our C&I portfolio consisted of loans to finance taxi medallions,
which are the licenses required to operate taxicabs. We conduct this business in stable, well-regulated markets,
such as New York City, where the supply of these medallions is limited. Accordingly, these loans have historically
had strong credit performance. “Other Industries” include a diverse range of industries, including service-oriented
firms that provide introductions to new client relationships and private households.
Real Estate Loans
Our real estate loan portfolio includes loans secured by commercial and residential properties. We also provide
temporary financing for commercial and residential property. Our permanent real estate loans generally have
terms of up to ten years. We generally avoid longer term loans for commercial real estate held for investment.
Our permanent real estate loans have both floating and fixed rates. Depending on the financial status of the
borrower, we may require periodic appraisals of the property to verify the ongoing adequacy of the collateral. At
December 31, 2014, funded real estate loans totaled approximately $14.13 billion, representing approximately
77% of our total funded loans.
13
The following table shows the distribution of our real estate loans as of December 31, 2014 by collateral type:
(dollars in thousands)
Multi-family residential property
Commercial property
1-4 family residential property
Home equity lines of credit
Construction and land
Total
December 31, 2014
Loan Amount
8,607,989
$
4,833,123
463,420
160,890
64,824
14,130,246
$
Percentage
60.92%
34.20%
3.28%
1.14%
0.46%
100.00%
We do not consider personal residential real estate loans a core part of our business, however, we offer these
loans as part of our full service strategy. These loans consist of first and second mortgage loans for residential
properties. These loans are typically made to high net worth individuals as part of our private client services. We
generally do not retain long-term, fixed rate residential real estate loans in our portfolio due to interest rate and
collateral risks and low levels of profitability.
Substantially all of the collateral for our real estate loans is located within the New York metropolitan area. As a
result, our financial condition and results of operations may be affected by changes in the economy and the real
estate market of the New York metropolitan area. A prolonged period of economic recession or other adverse
economic conditions in the New York metropolitan area may result in an increase in nonpayment of loans, a
decrease in collateral value, and an increase in our allowance for loan and lease losses (“ALLL”).
Letters of Credit
We issue standby or performance letters of credit, and can service the international needs of our clients through
correspondent banks. At December 31, 2014, our commitments under letters of credit totaled approximately
$291.9 million.
Consumer Loans
Our personal loan portfolio consists of personal lines of credit and loans to acquire personal assets. Our personal
lines of credit generally have terms of one year and our term loans usually have terms of three to five years. Our
lines of credit typically have floating interest rates. If the financial situation of the client is sufficient, we will grant
unsecured lines of credit. We also examine the personal liquidity of our individual borrowers, in some cases
requiring agreements to maintain a minimum level of liquidity, to insure that the borrower has sufficient liquidity to
repay the loan. Due to low levels of profitability, interest rate risks and collateral risks, we do not consider secured
personal loans, such as automobile loans, a core part of our business. At December 31, 2014, our consumer
loans totaled $10.2 million, representing less than 1% of our total funded loans.
Investment and Asset Management Products and Services
Investment and asset management products and services are provided through our subsidiary, Signature
Securities. Signature Securities is a licensed broker-dealer and is a member of the Financial Industry Regulatory
Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Signature Securities is an
introducing firm and, as such, clears its trades through National Financial Services, LLC, a wholly-owned
subsidiary of Fidelity Investments. Signature Securities is also registered as an investment adviser. Our
investment group directors work with our clients to define objectives, goals and strategies for their investment
portfolios, whether our clients are looking for a relationship based provider or are looking for assistance with a
particular transaction.
We offer a wide array of asset management and investment products, including the ability to purchase and sell all
types of individual securities such as equities, options, fixed income securities, mutual funds, and annuities. We
offer our clients an asset management program whereby we work with our clients to tailor their asset allocation
according to their risk profile and then invest the client’s assets either directly with a select group of high quality
money managers, no load mutual funds, or a combination of both. We contract with a third party to perform
investment manager due diligence for us on these money managers and mutual funds. We offer no proprietary
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products or services. We do not perform and we do not provide our clients with our own branded investment
research. Instead, we have contracted with a number of third-party research providers and are able to provide our
clients with traditional Wall Street research from a number of sources.
We also offer retirement products such as individual retirement accounts (“IRAs”) and administrative services for
retirement vehicles such as pension, profit sharing, and 401(k) plans to our clients. These products are not
proprietary products.
Signature Securities offers wealth management services to our high net worth personal clients. Together with our
client and their other professional advisors, including attorneys and certified public accountants, we develop a
sophisticated financial plan that can include estate planning, business succession planning, asset protection,
investment management, family office advisory services, bill payment, art and collectible advisory services and
concentrated stock services.
SBA Loans and Pools
We are an active participant in the SBA loan and SBA pool secondary market by purchasing, securitizing, and
selling the guaranteed portions of SBA Section 7(a) loans. Most SBA Section 7(a) loans have adjustable rates
and float at a spread to the prime rate and reset monthly or quarterly. SBA loans consist of a guaranteed portion
of the loan and an un-guaranteed balance, which typically represents 25% of the original balance that is retained
by the originating lender. The guaranteed portions of SBA loans are backed by the full faith and credit of the U.S.
government and, therefore, have minimal credit risk and carry a 0% risk weight for capital purposes. At
December 31, 2014, we had $548.3 million in SBA loans held for sale, representing approximately 3.0% of our
total funded loans, compared to $420.8 million at December 31, 2013.
Signature Securities acts as an agent and as a consultant to the Bank on the purchase, sale and assembly of SBA
loans and pools. Signature Securities is one of the largest SBA pool assemblers in the United States. The
primary business of the group is to be an active market maker in the SBA loan and pool secondary market by
purchasing, securitizing and selling the government guaranteed portions of the SBA loans. Signature Bank is
approved by the SBA as a pool assembler and is approved by the FDIC to engage in government securities dealer
activities.
We purchase the guaranteed portion of SBA loans from various SBA lender clients. Once purchased, we typically
warehouse the guaranteed loan for approximately 30 to 180 days. From this warehouse, we aggregate like SBA
loans by similar characteristics into pools for securitization and sale to the secondary market. In order to meet the
SBA’s rate requirement, we may strip excess servicing from loans with different coupons to create a pool at a
common rate. This has resulted in the creation of two assets: a par pool and excess servicing strips. Excess
servicing represents the portion of the coupon stripped from a loan. At December 31, 2014, the carrying amount
of our SBA excess servicing strip assets totaled $86.8 million.
Colson Services Corp. (“Colson”) is the third party government appointed fiscal and transfer agent for the SBA’s
Secondary Market Program. As the designated servicer, Colson provides transaction processing, record keeping
and loan servicing functions, including document review and custody, payment collection and disbursement, and
data collection and exchange for us.
Insurance Services
We offer our business and private clients a wide array of individual and group insurance products, including health,
life, disability and long-term care insurance products through our subsidiary, Signature Securities. We do not
underwrite insurance policies. We only act as an agent in offering insurance products and services underwritten
by insurers that we believe are the best for our clients in each category.
Competition
There is significant competition among commercial banking institutions in the New York metropolitan area. We
compete with other bank holding companies, national and state-chartered commercial banks, savings and loan
associations, consumer finance companies, credit unions, securities brokerage firms, insurance companies,
mortgage banking companies, money market mutual funds, asset-based non-bank lenders, and other financial
institutions. Many of these competitors have substantially greater financial resources, lending limits and larger
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office networks than we do and are able to offer a broader range of products and services than we can. Because
we compete against larger institutions, our failure to compete effectively for deposits, loans, and other clients in
our markets could cause us to lose market share, slow our growth rate and may have an adverse effect on our
financial condition and results of operations.
The market for banking and brokerage services is extremely competitive and allows consumers to access financial
products and compare interest rates and services from numerous financial institutions located across the United
States. As a result, clients of all financial institutions, including those within our target market, are sensitive to
competitive interest rate levels and services. Our future success in attracting and retaining client deposits
depends, in part, on our ability to offer competitive rates and services. Our clients are particularly attracted to the
level of personalized service we provide. Our business could be impaired if our clients believe other banks
provide better service or if they come to believe that higher rates are more important to them than better service.
Finally, over the past several years there has been significant government intervention in the banking industry,
including equity investments, liquidity facilities and guarantees. These actions have changed and have the
potential to change the competitive landscape significantly. For example, clients may view some of our
competitors as “too big to fail” and such competitors may thereby benefit from an implicit U.S. government
guarantee beyond those provided to all banks and their clients. In addition, some of these government programs
have, or may have, the ability to give rise to new competitors. For instance, the FDIC has introduced a bidding
process for institutions that have been or will be placed into receivership by federal or state regulators. This
process is open to existing financial institutions, as well as groups without pre-existing operations. The impact of
ongoing government intervention is difficult to predict and could adversely affect our competitive standing and
profitability.
The New York Market
The majority of our business is located in the New York metropolitan area. We believe the New York metropolitan
area economy presents an attractive opportunity to further grow an independent financial services company
oriented to the needs of the New York metropolitan area economic marketplace. The New York Metropolitan
Statistical Area (“MSA”) is, by far, the largest market in the United States for bank deposits. The MSA of New
York, Long Island and Northern New Jersey is – with approximately $1.4 trillion in total deposits, as of June 30,
2014 – more than two and a half times larger than the second largest MSA in the U.S. (Philadelphia, Camden,
Wilmington). The New York MSA is also home to the largest number of businesses with fewer than 500
employees in the nation.
As of December 31, 2014, we operated 28 private client offices located in the New York metropolitan area. These
28 offices housed a total of 92 private client banking teams. As part of the continuing development of our
business strategy, we expect to open additional offices in 2015. We believe these private client offices will allow
us to expand our current operations in the New York metropolitan area.
Information Technology and System Security
We rely on industry leading technology companies to deliver software, support and certain disaster recovery
services. Our core banking application software (Demand Deposit, Savings, Commercial Loans, Compliance,
General Ledger, Teller, and Internet Banking) is provided by Fidelity Information Services. Our core brokerage
systems are provided by and run at our clearing firm, National Financial Services, LLC, a subsidiary of Fidelity
Global Brokerage Group, Inc. Our personnel connect to the system via both dedicated and internet based
connections to National Financial Services in Boston, Massachusetts.
Our information technology environment uses Fidelity Information Services’ technology center in Little Rock,
Arkansas. This technology center includes dedicated “lights out” computer raised-floor space, as well as
designated office space for information technology support personnel. A combination of backup power generation,
uninterruptible power systems and 24 hour a day monitoring of the facility perimeters, hardware, operating system
software, network connectivity, and building environmental systems minimizes the risk of any serious outage or
security breach. For disaster recovery purposes, full redundancy of the Little Rock technology center is provided
through a separate facility located in Jacksonville, Florida.
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Employees
As of December 31, 2014, we had 1,010 full-time equivalent employees, 615 of whom were officers. None of our
employees is represented by a collective bargaining agreement. We consider our relations with our employees to
be good.
Regulation and Supervision
The following is a general summary of the material aspects of certain statutes and regulations applicable to
Signature Bank and its subsidiaries. These summary descriptions are not complete, and you should refer to the
full text of the statutes, regulations, and corresponding guidance for more information. These statutes and
regulations are subject to change, and additional statutes, regulations, and corresponding guidance may be
adopted. We are unable to predict these future changes or the effects, if any, that these changes could have on
the business, revenues, and results of Signature Bank and its subsidiaries.
As a state-chartered bank, the deposits of which are insured by the FDIC, we and our subsidiaries are subject to a
comprehensive system of bank supervision administered by federal and state banking agencies. Because we are
chartered under the laws of the State of New York, the New York State Department of Financial Services is our
primary regulator. We are also subject to the regulations of the other states in which we do business. The FDIC is
our primary federal banking regulator because we are not a member of the Federal Reserve System. These
regulators oversee our compliance with applicable federal and New York laws and regulations governing our
activities, operations, and business. We are not controlled by a parent holding company, which would be subject
to primary federal supervision by the Federal Reserve as a bank holding company.
The primary purpose of the U.S. system of bank supervision is to ensure the safety and soundness of banks in
order to protect depositors, the FDIC insurance fund, and the financial system generally. It is not primarily
intended to protect the interest of shareholders. Thus, if we were to violate banking law and regulations, including
engaging in unsafe or unsound practices, we could be subject to enforcement actions and other sanctions that
could be detrimental to shareholders.
The federal government has recently implemented and announced programs designed to bolster the capital of
U.S. banks. Some of these programs have, and any future programs may, impose additional rules and regulations
on us, some of which may affect the way we conduct our business and/or limit our ability to compete effectively.
See “Risk Factors – We are subject to significant government regulation.”
Safety and Soundness Regulation
New York law governs our authority to engage in deposit-taking, lending, investing, and other activities. New York
law also imposes restrictions intended to ensure our safety and soundness, including limitations on the amount of
money we can lend to a single borrower (generally, 15% of capital; 25% if the loan is secured by certain types of
collateral), prohibitions on engaging in activities such as investing in equity securities or non-financial
commodities, and prohibitions on making loans secured by our own capital stock.
We are subject to comprehensive capital adequacy requirements intended to protect against losses that we may
incur. Prior to January 1, 2015, FDIC regulations required that we maintain a minimum ratio of qualifying total
capital to total risk-weighted assets (including off-balance sheet items) of 8.0%, at least one-half of which must be
in the form of Tier 1 capital, and a ratio of Tier 1 capital to total risk-weighted assets of 4.0%. Tier 1 capital is
generally defined as the sum of core capital elements less goodwill and certain other deductions. Core capital
includes common shareholders’ equity, non-cumulative perpetual preferred stock, and minority interests in equity
accounts of consolidated subsidiaries. Supplementary capital, which qualifies as Tier 2 capital and counts towards
total capital subject to certain limits, includes allowances for loan and lease losses, perpetual preferred stock,
subordinated debt, and certain hybrid instruments. At December 31, 2014, our total risk-based capital ratio was
14.39%, and our Tier 1 risk-based capital ratio was 13.49%.
We are also required to maintain a minimum leverage capital ratio - the ratio of Tier 1 capital (net of intangibles) to
adjusted total assets. Prior to January 1, 2015, banks that received the highest rating of five categories used by
regulators to rate banks and were not anticipating or experiencing any significant growth were required to maintain
a leverage capital ratio of at least 3.0%. All other institutions were required to maintain a leverage capital ratio of
4.0%. At December 31, 2014, our leverage capital ratio was 9.25%.
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On July 9, 2013, the Federal Deposit Insurance Corporation approved final rules that substantially amend the
regulatory risk-based capital rules applicable to Signature Bank. The final rules were adopted following the
issuance of proposed rules by the federal banking regulators in June 2012, and implement the “Basel III”
regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative
documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in
December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank
capital, leverage and liquidity requirements.
The rules include new risk-based capital and leverage ratios, which are being phased in from 2015 to 2019, and
refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital
level requirements applicable to Signature Bank under the final rules are the following: (i) a new common equity
Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total
capital ratio of 8% (unchanged from current rules); and (iv) a leverage ratio of 4% for all institutions. The final
rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which
must consist entirely of common equity Tier 1 capital. Common equity Tier 1 capital consists of common stock
instruments that meet the eligibility criteria in the final rules, retained earnings, accumulated other comprehensive
income and common equity Tier 1 minority interest. The capital conservation buffer will be phased-in over four
years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for
2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter, resulting in the following minimum
ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii)
a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends,
engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the buffer
amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for
such actions.
Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5%
of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive
credit growth. However, the final rules permit the countercyclical buffer to be applied only to “advanced approach
banks” ( i.e., banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures), which
currently excludes Signature Bank. The final rules also implement revisions and clarifications consistent with
Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and
losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which will be phased out
over time.
The final rules also contain revisions to the prompt corrective action (“PCA”) framework, which is designed to
place restrictions on insured depository institutions, including Signature Bank, if their capital levels begin to show
signs of weakness. These revisions took effect January 1, 2015. Under the PCA requirements, which are
designed to complement the capital conservation buffer, insured depository institutions will be required to meet the
following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity
Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10%
(unchanged from current rules); and (iv) a leverage ratio of 5% (increased from 4%).
The final rules set forth certain changes for the calculation of risk-weighted assets, which we have been required
to utilize as of January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk
exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness
consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules
for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-
style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in
total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion
in consolidated assets. Based on our current capital composition and levels, we believe that we would be in
compliance with the requirements as set forth in the final rules if they were presently in effect.
The federal banking agencies in September 2014 issued a final rule that implements a new “liquidity coverage
ratio” (“LCR Rule”) based upon Basel III requirements that will for the first time regulate bank liquidity in detail.
The LCR Rule does not apply to depository institutions, including Signature Bank, with less than $50 billion in
consolidated assets. Based on our anticipated rate of growth, we do not expect that the LCR rule will impact our
operations or financial condition over the next several years.
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The federal banking agencies have also adopted guidelines establishing safety and soundness standards for all
insured depository institutions. The safety and soundness guidelines relate to our internal controls, information
systems, internal audit systems, loan underwriting and documentation, compensation, and interest rate exposure.
The standards assist the federal banking agencies with early identification and resolution of problems at insured
depository institutions. If we were to fail to meet these standards, the FDIC could require us to submit a
compliance plan and take enforcement action if an acceptable compliance plan were not submitted.
Federal law generally limits the equity investments of state-chartered banks insured by the FDIC to those that are
permissible for national banks. Under regulations dealing with equity investments, an insured state bank generally
may not, directly or indirectly, acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank. An insured state bank is not prohibited from, among other things: (i) acquiring or
retaining a majority interest in a subsidiary that is engaged in permissible activities; (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation,
or new construction of a qualified housing project, provided that such limited partnership investments may not
exceed 2% of the bank’s total assets; (iii) acquiring up to 10% of the voting stock of a company that solely
provides or reinsures liability insurance for directors, trustees or officers, or blanket bond group insurance
coverage for insured depository institutions; and (iv) acquiring or retaining the voting shares of a depository
institution if certain requirements are met. The direct or indirect activities of a state bank are similarly generally
limited to those of a national bank. Exceptions include where approval is received for the activity from the FDIC.
In addition, payments of dividends on our common stock may be subject to the prior approval of the New York
State Department of Financial Services, and the FDIC. Under New York law, we are prohibited from declaring a
dividend so long as there is any impairment of our capital stock. In addition, we would be required to obtain the
approval of the New York State Department of Financial Services if the total of all our dividends declared in any
calendar year would exceed the total of our net profits for that year combined with retained net profits of the
preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock. We
would also be required to obtain the approval of the FDIC prior to declaring a dividend if after paying the dividend
we would be undercapitalized, significantly undercapitalized, or critically undercapitalized.
We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend
to retain any earnings to finance our operations and the expansion of our business, and we do not anticipate
paying any cash dividends on our common stock. Any future determination to pay dividends will be at the
discretion of our Board of Directors and will be dependent upon then-existing conditions, including our financial
condition and results of operations, capital requirements, contractual restrictions, business prospects and other
factors that the Board of Directors considers relevant.
Prompt Corrective Action and Enforcement Powers
We are also subject to FDIC regulations that apply to every FDIC-insured commercial bank and thrift institution, a
system of mandatory and discretionary supervisory actions that generally become more severe as the capital
levels of an individual institution decline. The regulations establish five capital categories for purposes of
determining our treatment under these PCA provisions: “well capitalized,” “adequately capitalized,”
“undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” As of December 31, 2014, the
capital ratios of Signature Bank exceeded the minimum ratios established for a “well capitalized” institution.
As of January 1, 2015, the definitions of these capital categories have changed in accordance with the federal
banking agencies’ final rule to implement Basel III and new minimum leverage and risk-based capital
requirements. Under the revised PCA capital category definitions, we would be categorized as “well capitalized” if
(i) we have a total risk-based capital ratio of 10.0% or greater; (ii) we have a Tier 1 risk-based capital ratio of 8% or
greater; (iii) we have a common equity Tier 1 risk-based capital ratio of 6.5% or greater; (iv) we have a leverage
ratio of 5.0% or greater; and (v) we are not subject to any written agreement, order, capital directive, or PCA
directive issued by the FDIC to meet and maintain a specific capital level.
We would be categorized as “adequately capitalized” if (i) we have a total risk-based capital ratio of 8.0% or
greater; (ii) we have a Tier 1 risk-based capital ratio of 6.0% or greater; (iii) we have a common equity Tier 1
capital ratio of 4.5% or greater; and (iv) we have a leverage ratio of 4.0% or greater (3.0% if we are rated in the
highest supervisory category).
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We would be categorized as “undercapitalized” if (i) we have a total risk-based capital ratio that is less than 8.0%;
(ii) we have a Tier 1 risk-based capital ratio that is less than 6.0%; (iii) we have a common equity Tier 1 capital
ratio that is less than 4.5%; or (iv) we have a leverage ratio that is less than 4.0%.
We would be categorized as “significantly undercapitalized” if (i) we have a total risk-based capital ratio that is less
than 6.0%; (ii) we have a Tier 1 risk-based capital ratio that is less than 4.0%; (iii) we have a common equity Tier 1
capital ratio that is less than 3.0%; or (iv) we have a leverage ratio that is less than 3.0%.
We would be categorized as “critically undercapitalized” and subject to provisions mandating appointment of a
conservator or receiver if we have a ratio of “tangible equity” to total assets that is 2.0% or less. “Tangible equity”
generally includes core capital plus cumulative perpetual preferred stock.
In addition to measures taken under the PCA provisions, insured banks may be subject to potential actions by the
federal regulators for unsafe or unsound practices in conducting their businesses or for violations of any law, rule,
regulation or any condition imposed in writing by the agency or any written agreement with the agency.
Enforcement actions may include the issuance of cease and desist orders, the imposition of civil money penalties,
the issuance of directives to increase capital, formal and informal agreements, or removal and prohibition orders
against “institution-affiliated” parties, and termination of insurance of deposits. The New York State Department of
Financial Services also has broad powers to enforce compliance with New York laws and regulations. The New
York State Department of Financial Services and/or the FDIC examine us periodically for safety and soundness
and for compliance with applicable laws.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), signed into law on July
21, 2010, makes extensive changes to the laws regulating financial services firms. The Dodd-Frank Act also
requires significant rulemaking and mandates multiple studies that have resulted and are likely to continue to
result in additional legislative and regulatory actions that will impact the operations of the Bank. Under the Dodd-
Frank Act, federal bank regulatory agencies are required to draft and implement enhanced supervision,
examination and capital and liquidity standards for depository institutions. The capital provisions of the Dodd-
Frank Act include, among other things, changes to capital, leverage limits and limitations on the use of hybrid
capital instruments. The Dodd-Frank Act also imposes new restrictions on investments and other activities by
depository institutions, particularly with respect to derivatives activities and proprietary trading. The Dodd-Frank
Act also gives federal bank regulatory agencies, such as the Federal Reserve and the FDIC, additional latitude to
monitor the systemic safety of the financial system and take responsive action, which could include imposing
restrictions on the business activities of the Bank. In addition, the Dodd-Frank Act authorizes the federal
regulators to impose various new assessments and fees, which could increase the Bank’s operational costs.
The Dodd-Frank Act requires banks with total consolidated assets of more than $10 billion to conduct annual
stress tests. The Dodd-Frank Act also requires the FDIC, in coordination with federal financial regulatory
agencies, to issue regulations establishing methodologies for stress testing that provide for at least three different
sets of conditions, including baseline, adverse, and severely adverse. The regulations must also require banks to
publish a summary of the results of the stress tests. In October 2012, the FDIC issued a final rule regarding
annual stress tests requiring a bank subject to the rule to assess the quarterly impact of stress scenarios on the
bank’s capital over a horizon of nine quarters. For institutions, such as Signature Bank, with total consolidated
assets of more than $10 billion but less than $50 billion, the final rule delayed the implementation of stress testing
until September 2013, with initial results to be submitted by March 31, 2014. The final rule also delayed the initial
public disclosure requirement of stress test results until 2015 (disclosing the 2014 stress test results). In
November 2014, the FDIC issued a final rule further altering the stress testing timeline, beginning January 1, 2016,
to require the submission of results by July 31, based on financial data as of December 31 of the preceding year.
The public disclosure of the results will be required to occur during a period beginning October 15 and ending
October 31. The Bank has developed a process to comply with the stress testing requirements, which involves
Senior Management, Risk Management and Finance, along with third-party consultants who assist in this process.
The Risk Committee of the Board of Directors receives quarterly updates as to the progress and challenges in
complying with this new regulatory requirement. We believe the stress testing results will affirm the adequacy of
the Bank’s capital, even under severe economic conditions. As the related methodologies and best practices for
banks of Signature’s size continue to evolve, the stress testing process requires significant investment and we
continue to seek ways to maximize shareholder value from the process while complying with regulatory
requirements.
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In addition, in December 2013 federal regulators adopted a final rule implementing the “Volcker Rule” enacted as
part of the Dodd-Frank Act. The Volcker Rule prohibits (subject to certain exceptions) banks and their affiliates
from engaging in short-term proprietary trading in securities and derivatives and from investing in and sponsoring
certain unregistered investment companies (including not only such things as hedge funds, commodity pools and
private equity funds, but also a range of asset securitization structures that do not meet exemptive criteria in the
final rules). The new rules also require banks to develop compliance and control programs, including board of
directors oversight, appropriate for the size of the bank and the types and complexity of its activities. The rules are
complex and it is not clear how they will be implemented over time. In January 2014, the federal regulators
adopted an exemptive rule on an emergency basis to address the unanticipated impact of the new rules on bank
ownership of certain trust preferred securities. It is possible that as the requirements of the Volcker Rule as
applied to other assets become more clear, there will be additional similar situations in which ownership by
depository institutions of pooled, securitized or participated loans and credit products (or other assets) will be
determined to be prohibited by the Volcker Rule and, absent exemptive relief, required to be divested and
(pending divestment) accounted for as assets “held for sale” that are marked to market. Signature Bank, however,
does not currently anticipate that the Volcker Rule will have a material effect on the bank, because it does not
have material exposure to the prohibited activities.
All federal prohibitions on the ability of financial institutions to pay interest on demand deposit accounts were
repealed as part of the Dodd-Frank Act. As a result, beginning on July 21, 2011, financial institutions could
commence offering interest on demand deposits to compete for clients. As of December 31, 2014, $7.06 billion, or
31.2%, of our total deposits were held in non-interest bearing demand deposit accounts. Our interest expense will
increase and our net interest margin will decrease if we have to offer higher rates of interest than we currently offer
on demand deposits to attract additional clients or maintain current clients, which could have a material adverse
effect on our business, financial condition and results of operations. Thus far, the change has not had a
meaningful effect on our business.
The Dodd-Frank Act also established the federal Consumer Financial Protection Bureau (“CFPB”). This agency is
responsible for enforcing federal consumer financial laws as defined by the Dodd-Frank Act that, among other
things, govern the provision of deposit accounts along with mortgage origination and servicing. Some federal
consumer financial laws enforced by the CFPB include the Equal Credit Opportunity Act, the Truth in Lending Act
(“TILA”), the Truth in Savings Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act
(“RESPA”), the Equal Credit Opportunity Act, and the Fair Credit Reporting Act. In 2012, the CFPB proposed an
integrated disclosure in connection with mortgage origination that incorporates disclosure requirements under
RESPA and TILA. The CFPB issued a final rule regarding the integrated disclosure in December 2013, and the
disclosure requirement will become effective in August 2015. In accordance with deadlines set by the Dodd-Frank
Act, the CFPB issued final rules in January 2013 related to new mortgage servicing standards, and mortgage
lending requirements that establish a “qualified mortgage” which will fulfill the Dodd-Frank Act requirement that
mortgage lenders consider a borrower’s ability to repay. These mortgage servicing and lending rules became
effective in January 2014. These and other CFPB regulations will increase the Bank’s compliance expenses and
limit the terms under which the Bank can provide consumer financial products.
Additionally the CFPB has the authority to take supervisory and enforcement action against banks and other
financial services companies under the agency’s jurisdiction that fail to comply with federal consumer financial
laws. As an insured depository institution with total assets of more than $10 billion, the Bank is subject to the
CFPB’s supervisory and enforcement authorities. The Dodd-Frank Act also permits states to adopt stricter
consumer protection laws and state attorneys general to enforce consumer protection rules issued by the CFPB.
As a result of these aspects of the Dodd-Frank Act, the Bank will be operating in a stringent consumer compliance
environment. Therefore, the Bank is likely to incur additional costs related to consumer protection compliance,
including but not limited to potential costs associated with CFPB examinations, regulatory and enforcement
actions and consumer-oriented litigation, which is likely to increase as a result of the consumer protection
provisions of the Dodd-Frank Act.
At this time, it is difficult to predict the full extent that the Dodd-Frank Act or the related regulations will impact the
Bank’s business. However, compliance with these new laws and regulations could result in restraints on, and
additional costs to, our business. It is also difficult to predict the impact that the Dodd-Frank Act will have on our
competitors and on the financial services industry as a whole. In addition to the recent regulatory initiatives
described above, competitive and industry factors could also adversely impact our results, the cost of our
operations, our financial condition and our liquidity.
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Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting,
executive compensation, and enhanced and timely disclosure of corporate information. As directed by the
Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer are required to certify that our
quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the SEC
under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are
responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over
financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of
Directors about our internal control over financial reporting; and they have included information in our quarterly
and annual reports about their evaluation and whether there have been changes in our internal control over
financial reporting or in other factors that could materially affect internal control over financial reporting.
Other Regulatory Requirements
We are subject to certain requirements and reporting obligations under the Community Reinvestment Act (“CRA”).
The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the
credit needs of its local communities, including low- and moderate-income neighborhoods. The CRA further
requires the agencies to take into account our record of meeting community credit needs when evaluating
applications for, among other things, new branches or mergers. We are also subject to analogous state CRA
requirements in New York and other states in which we may establish branch offices. The performance standards
and examination frequency of CRA evaluations differ depending on whether a bank falls into the small or large
bank categories. The FDIC’s most recent CRA examination concluded as of October 25, 2012 and the New York
State Department of Financial Services’ most recent examination concluded on December 31, 2010. Signature
Bank was evaluated under the large bank standards. In measuring our compliance with these CRA obligations,
the regulators rely on a performance-based evaluation system that bases our CRA rating on our actual lending
service and investment performance. In connection with their assessments of CRA performance, the FDIC and
New York State Department of Financial Services assign a rating of “outstanding,” “satisfactory,” “needs to
improve,” or “substantial noncompliance.” Signature Bank received a “satisfactory” CRA Assessment Rating from
both regulatory agencies in its most recent examinations.
Federal and state banking laws also require us to take steps to protect consumers. Bank regulatory agencies are
increasingly focusing attention on compliance with consumer protection laws and regulations. These laws include
disclosures regarding truth in lending, truth in savings, funds availability, and prohibitions on discrimination in the
provision of banking services. Also, under privacy protection provisions of the Gramm-Leach-Bliley Act of 1999,
we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties.
These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow
consumers to prevent disclosure of certain personal information to a nonaffiliated third party. Federal banking
agencies, including the FDIC, have adopted guidelines for establishing information security standards and
programs for implementing safeguards under the supervision of the board of directors. In addition, the CFPB is
responsible for interpreting and enforcing a broad range of consumer protection laws governing the provision of
deposit accounts and the making of loans, including the regulation of mortgage lending and servicing. For further
discussion on consumer protection and the role of the CFPB, see “- Dodd-Frank Act.” We have incurred and may
in the future incur additional costs in complying with these requirements.
We must also comply with the anti-money laundering provisions of the Bank Secrecy Act, as amended by the USA
PATRIOT Act, and implementing regulations issued by the FDIC and the U.S. Department of the Treasury. As a
result, we must obtain and maintain certain records when opening accounts, monitor account activity for
suspicious transactions, impose a heightened level of review on private banking accounts opened by non-U.S.
persons and, when necessary, make certain reports to law enforcement or regulatory officials that are designed to
assist in the detection and prevention of money laundering and terrorist financing activities. To this end, we are
also required to maintain an anti-money laundering compliance program that includes policies, procedures, and
internal controls; the appointment of an anti-money laundering compliance officer; an internal training program;
and internal audits.
Under FDIC regulations, we are required to pay premiums to the Deposit Insurance Fund to insure our deposit
accounts. The FDIC utilizes a risk-based premium system in which an institution pays premiums for deposit
insurance on the institution’s average consolidated total assets minus average tangible equity. For large insured
depository institutions, generally defined as those with at least $10 billion in total assets, the assessment rate
schedules combine regulatory ratings, PCA capital evaluations, and financial measures into two scorecards, one
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for most large insured depository institutions and another for highly complex insured depository institutions, to
calculate assessment rates. A highly complex institution is generally defined as an insured depository institution
with more than $50 billion in total assets that is controlled by a parent company with more than $500 billion in total
assets. The assessment rate schedule includes an adjustment for significant amounts of brokered deposits
applicable to large institutions that are either less than well capitalized or have a composite rating of “3,” “4,” or “5”
under the Uniform Financial Institution Rating System. For these institutions, an assessment rate adjustment
applies when the ratio of brokered deposits to domestic deposits is greater than 10%. Under the assessment rate
schedules, the total base assessment rates range from two and one-half to forty-five basis points.
In addition, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on
bonds issued by the Financing Corporation (“FICO”), an agency of the federal government established to
recapitalize the Federal Savings and Loan Insurance Corporation. The FICO assessment rates, which are
determined quarterly, averaged 0.62 basis points of insured deposits on an annualized basis in fiscal year 2014.
These assessments will continue until the FICO bonds mature in 2017.
We must maintain reserves on transaction accounts. The maintenance of reserves increases our cost of funds
because reserves must generally be maintained in cash balances maintained directly or indirectly with a Federal
Reserve Bank.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended by Section 613 of the
Dodd-Frank Act, regulates interstate banking activities by establishing a framework for nationwide interstate
banking and branching. As amended, this interstate banking and branching authority generally permits a bank in
one state to establish a de novo branch in another host state if state banks chartered in such host state would also
be permitted to establish a branch in that state. Under these amendments, Signature Bank is permitted to
establish branch offices in other states in addition to our existing New York branch offices.
The Gramm-Leach-Bliley Act of 1999 eliminated most of the barriers to affiliations among banks, securities firms,
insurance companies, and other financial companies previously imposed under federal banking laws if certain
criteria are satisfied. Certain subsidiaries of well-capitalized and well-managed banks may be treated as “financial
subsidiaries,” which are generally permitted to engage in activities that are financial in nature, including securities
underwriting, dealing, and market making; sponsoring mutual funds and investment companies; and activities that
the Federal Reserve has determined to be closely related to banking.
Signature Securities is registered as a broker-dealer with and subject to supervision by the SEC. The SEC is the
federal agency primarily responsible for the regulation of broker-dealers. Signature Securities is also subject to
regulation by one of the brokerage industry’s self-regulatory organizations, FINRA. As a registered broker-dealer,
Signature Securities is subject to the SEC’s uniform net capital rule. The purpose of the net capital rule is to
require broker-dealers to have at all times enough liquid assets to satisfy promptly the claims of clients if the
broker-dealer goes out of business. If Signature Securities fails to maintain the required net capital, the SEC and
FINRA may impose regulatory sanctions including suspension or revocation of its broker-dealer license. A change
in the net capital rules, the imposition of new rules, or any unusually large charge against Signature Securities’ net
capital could limit its operations. As a subsidiary of Signature Bank, Signature Securities is also subject to
regulation and supervision by the New York State Department of Financial Services. Signature Securities
currently is permitted to act as a broker and as a dealer in certain bank eligible securities.
Signature Securities is also subject to state insurance regulation. In July 2004, Signature Securities received
approval from the New York State Banking Department and the New York State Department of Insurance
(collectively known as the New York State Department of Financial Services as of October 3, 2011) to act as an
agent in the sale of insurance products. Signature Securities’ insurance activities are subject to extensive
regulation under the laws of the various states where its clients are located. The applicable laws and regulations
vary from state to state, and, in every state of the United States, an insurance broker or agent is required to have a
license from that state. These licenses may be denied or revoked by the appropriate governmental agency for
various reasons, including the violation of state regulations and conviction for crimes.
Transactions with Related Parties
Transactions between banks and their related parties or affiliates are limited by Sections 23A and 23B of the
Federal Reserve Act. An affiliate of a bank is any company or entity that controls, is controlled by or is under
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common control with the bank. In a holding company context, the parent bank holding company and any
companies which are controlled by such parent holding company are affiliates of the bank.
Generally, Sections 23A and 23B of the Federal Reserve Act and Regulation W (i) limit the extent to which the
bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0%
of such institution’s capital stock and surplus, and contain an aggregate limit on all such transactions with all
affiliates to an amount equal to 20.0% of such institution’s capital stock and surplus and (ii) require that all such
transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as those
provided to non-affiliates. The term “covered transaction” includes the making of loans, purchase of assets,
issuance of a guarantee and other similar transactions. In addition, loans or other extensions of credit by the
financial institution to the affiliate are required to be collateralized in accordance with the requirements set forth in
Section 23A of the Federal Reserve Act.
The Sarbanes-Oxley Act of 2002 generally prohibits loans by a company to its executive officers and directors.
However, the law contains a specific exception for loans by a depository institution to its executive officers and
directors in compliance with federal banking laws, assuming such loans are also permitted under the law of the
institution’s chartering state. Under such laws, Signature Bank’s authority to extend credit to executive officers,
directors and 10% shareholders (“insiders”), as well as entities under such person’s control, is limited. The law
limits both the individual and aggregate amount of loans Signature Bank may make to insiders based, in part, on
Signature Bank’s capital position and requires certain Board approval procedures to be followed. Such loans are
required to be made on terms substantially the same as those offered to unaffiliated individuals and not involve
more than the normal risk of repayment. There is an exception for loans made pursuant to a benefit or
compensation program that is widely available to all employees of the institution and does not give preference to
insiders over other employees. Loans to executive officers are further limited to specific categories.
Change in Control
The approval of the New York State Banking Board is required before any person may acquire “control” of a
banking institution, which includes Signature Bank and any company controlling Signature Bank. “Control” is
defined as the possession, directly or indirectly, of the power to direct or cause the direction of management and
policies of a banking institution through ownership of stock or otherwise and is presumed to exist if, among other
things, any company owns, controls, or holds the power to vote 10% or more of the voting stock of a banking
institution. As a result, any person or company that seeks to acquire 10% or more of our outstanding common
stock must obtain prior regulatory approval.
In addition to the New York requirements, the Bank Holding Company Act prohibits a company from, directly or
indirectly, acquiring 25% or more (5% if the acquirer is a bank holding company) of any class of our voting stock or
obtaining the ability to control in any manner the election of a majority of our directors or otherwise directing the
management or policies of our company without prior application to and the approval of the Federal Reserve.
Moreover, under the Change in Bank Control Act, any individual who intends to acquire 10% or more of any class
of our voting stock or otherwise obtain control over us could be required to provide prior notice to and obtain the
non-objection of the FDIC.
Incentive Compensation
Guidelines adopted by the federal banking agencies pursuant to the Federal Deposit Insurance Act prohibit
excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the
amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee,
director or principal shareholder.
In June 2010, the federal banking agencies jointly adopted the Guidance on Sound Incentive Compensation
Policies intended to ensure that banking organizations do not undermine the safety and soundness of such
organizations by encouraging excessive risk-taking. This guidance, which covers all employees that have the
ability to expose the organization to material amounts of risk, either individually or as part of a group, is based
upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide
employee incentives that appropriately balance risk in a manner that does not encourage employees to expose
their organizations to imprudent risk, (ii) be compatible with effective controls and risk management, and (iii) be
supported by strong corporate governance, including active and effective oversight by the organization’s board of
directors. Any deficiencies in the Bank’s compensation practices could lead to supervisory or enforcement actions
by the FDIC.
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Section 956 of the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint
regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, such
as us, having at least $1 billion in total assets that encourage inappropriate risk-taking by providing an executive
officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could
lead to material financial loss to the entity. In addition, these regulators must establish regulations or guidelines
requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies
proposed such regulations in April 2011, but the regulations have not been finalized. If the regulations are
adopted in the form initially proposed, they will impose limitations on the manner in which we may structure
compensation for our executives. The regulations would also incorporate the three principles of the Guidance on
Sound Incentive Compensation Policies discussed above.
The scope and content of the federal banking regulators’ policies on incentive compensation are continuing to
develop and are likely to continue evolving in the near future.
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ITEM 1A. RISK FACTORS
If any of the following risks actually occur, our business, financial condition or operating results could be materially
adversely affected. Additional risks and uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations. As a result, we cannot predict every risk factor, nor can we
assess the impact of all of the risk factors on our businesses or to the extent to which any factor, or combination of
factors, may impact our financial condition and results of operations.
Risks Relating to Our Business
Current disruption and volatility in global financial markets might continue and the federal government
has and may continue to take measures to intervene.
Since late 2007, global financial markets have experienced periods of extraordinary disruption and volatility
following adverse changes in the global economy and, in particular, the credit markets. The federal government
has taken significant measures in response to these events, such as enactment of the Emergency Economic
Stabilization Act of 2008 and other regulatory actions applicable to financial institutions. We cannot predict the
federal government’s responses to any further dislocation and instability and potential future government
responses and changes in law or regulation, may affect our business, results of operations and financial
conditions.
Economic conditions in Europe remain uncertain, particularly with respect to the sovereign debt and currency
exchange rates of certain countries within the European Union. Although we are not directly exposed to risk
associated with European sovereign debt and are not materially exposed to risk associated with European non-
sovereign debt and currency exchange rates, we do hold corporate debt securities issued by U.S. financial
institutions that have material exposure to European sovereign and non-sovereign debt as well as European
currency exchange rates. As such, further deterioration of the economic conditions in Europe could have an
adverse effect on the issuers of corporate debt that we hold. If such an effect were to negatively impact the ability
of such issuers to pay their debts, it could have an adverse effect on our results of operations and financial
condition.
Difficult market conditions have adversely affected our industry.
Volatility in the housing market over the past several years, together with persistent unemployment and under-
employment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-
downs of asset values by financial institutions. The market for commercial loans (including commercial and
industrial loans and loans secured by commercial real estate) and multi-family mortgage loans has also been
adversely affected. Recent uncertainty and decline in oil and gas prices may have adverse effects on certain
industries, including the oil and gas industries, and may have an adverse effect on the market for commercial and
industrial loans. Fragile conditions could lead to a return of the adverse effects of these difficult market conditions
on us. In particular, we may face the following risks in connection with these events:
Commercial loans (including commercial and industrial loans and loans secured by commercial real estate)
and multi-family mortgage loans constitute a substantial portion of our loan activity and loan portfolio. If the
difficult market conditions that we have faced over the last several years continue, losses on such loans
could increase significantly, which could adversely affect our financial condition and results of operations.
Market developments may affect confidence levels and may cause declines in credit usage and adverse
changes in payment patterns, causing increases in delinquencies and default rates, which we expect
would impact our provision for loan and lease losses.
The process we use to estimate losses inherent in our credit exposure requires difficult, subjective, and
complex judgments, including forecasts of economic conditions and how these economic predictions might
impair the ability of our borrowers to repay their loans, which may no longer be capable of accurate
estimation which may, in turn, impact the reliability of the process.
We may be unable to successfully implement our business strategy.
We intend to continue to pursue our strategy for growth. In order to execute this strategy successfully, we must,
among other things:
assess market conditions for growth;
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build our client base;
maintain credit quality;
properly manage risks, including operational risks, credit risks and interest rate risks;
attract sufficient core deposits to fund our anticipated loan growth;
identify and attract new banking group directors;
identify and pursue suitable opportunities for opening new banking locations; and
maintain sufficient capital to satisfy regulatory requirements.
Failure to manage our growth effectively could have a material adverse effect on our business, future prospects,
financial condition or results of operations and could adversely affect our ability to successfully implement our
growth strategy.
We may be unable to successfully integrate new business lines into our existing operations.
During 2013, we added a team focused on asset-based lending, marking our entry into that arena, in order to
diversify revenue streams and further broaden our offerings to middle market commercial clients. Subsequently,
in 2014, we expanded the product lines of Signature Financial by adding national franchise financing and
commercial marine financing. Although we continue to expend substantial managerial, operating and financial
resources as our business grows, we may be unable to successfully continue the integration of these new
business lines, and we may be unable to realize the expected revenue contributions. We will be required to
employ and maintain qualified personnel, and as our business expands into new and existing markets, we may be
required to install additional operational and control systems. Our failure to successfully manage the integration
into our existing operations may adversely affect our future financial condition and results of operations.
Our operations are significantly affected by interest rate levels and we are vulnerable to changes in
interest rates.
We incur interest rate risk. Our income and cash flows and the value of our assets depend to a great extent on
the difference between the interest rates we earn on interest-earning assets, such as loans and investment
securities, and the interest rates we pay on interest-bearing liabilities such as deposits and borrowings. These
rates are highly sensitive to many factors which are beyond our control, including general economic conditions and
policies of various governmental and regulatory agencies, in particular, the Federal Reserve. Changes in
monetary policy, including changes in interest rates, significantly influence the interest we earn on our loans and
investment securities and the amount of interest we pay on deposits. In addition, such changes can significantly
affect our ability to originate loans and obtain deposits and our costs in doing so.
If the rate of interest we pay on our deposits and other borrowings increases more than the rate of interest we earn
on our loans and other investments, our net interest income and, therefore, our earnings could be materially
adversely affected. Our earnings could also be materially adversely affected if the interest rates on our loans and
other investments fall more quickly than those on our deposits and other borrowings or if they remain low relative
to the rates on our deposits and other borrowings. Furthermore, an increase in interest rates may negatively affect
the market value of securities in our investment portfolio. Our fixed-rate securities, generally, are more negatively
affected by these increases. A reduction in the market value of our portfolio will increase the unrealized loss
position of our available-for-sale investments. Any of these events could materially adversely affect our results of
operations or financial condition. For a discussion of our interest rate risk management process, see Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
We compete with many larger financial institutions which have substantially greater financial and other
resources than we have.
There is significant competition among commercial banking institutions in the New York metropolitan area. We
compete with bank holding companies, national and state-chartered commercial banks, savings and loan
associations, consumer finance companies, credit unions, securities brokerage firms, insurance companies,
mortgage banking companies, money market mutual funds, asset-based non-bank lenders, and other financial
institutions. Many of these competitors have substantially greater financial resources, lending limits and larger
office networks than we do, and are able to offer a broader range of products and services than we can. Because
we compete against larger institutions, our failure to compete effectively for deposit, loan and other clients in our
27
markets could cause us to lose market share or slow our growth rate and could have a material adverse effect on
our financial condition and results of operations.
The market for banking and brokerage services is extremely competitive and allows consumers to access financial
products and compare interest rates and services from numerous financial institutions located across the United
States. As a result, clients of all financial institutions, including those within our target market, are sensitive to
competitive interest rate levels and services. Our future success in attracting and retaining client deposits
depends, in part, on our ability to offer competitive rates and services. Competition with respect to the rates we
pay on deposits relative to the rates we obtain on our loans and other investments may put pressure on our
profitability. Our clients are also particularly attracted to the level of personalized service we can provide. Our
business could be impaired if our clients believe other banks provide better service or if they come to believe that
higher rates are more important to them than better service.
In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of
new technology-driven products and services. In addition to improving the ability to serve clients, the effective use
of technology increases efficiency and enables financial institutions to reduce costs. These technological
advancements also have made it possible for non-financial institutions to offer products and services that have
traditionally been offered by financial institutions. Our future success will depend, in part, upon our ability to
address the needs of our clients by using technology, including the use of the Internet, to provide products and
services that will satisfy client demands for convenience, as well as to create additional efficiencies in our
operations. Because many of our competitors have substantially greater resources to invest in technological
improvements than we do, these institutions could pose a significant competitive threat to us.
Government intervention in the banking industry has the potential to change the competitive landscape.
There has been significant government intervention in the banking industry in response to the economic crisis,
including equity investments, liquidity facilities and guarantees. Given the state of the global economy, it is
possible that the government could take further steps to intervene in the banking industry. These actions have
changed and have the potential to further change the competitive landscape significantly. For example, clients
may view some of our competitors as being “too big to fail” and such competitors may thereby benefit from an
implicit U.S. government guarantee beyond that provided to banks generally. Any such intervention could
adversely affect our competitive standing and profitability.
In addition, certain government programs introduced during the economic crisis may give rise to new competitors.
For instance, the FDIC introduced a bidding process for institutions that have been or will be placed into
receivership by federal or state regulators. This process is open to existing financial institutions, as well as groups
without pre-existing operations. This program and others like it that exist now or that may be developed in the
future could give rise to a significant number of new competitors, which could have a material adverse effect on
our business and results of operations.
We are vulnerable to downgrades in credit ratings for securities within our investment portfolio.
Although over 97% of our portfolio of investment securities was rated investment grade as of December 31, 2014,
we remain exposed to potential investment rating downgrades by credit rating agencies of the issuers and
guarantors of securities in our investment portfolio. A significant volume of downgrades would negatively impact
the fair value of our securities portfolio, resulting in a potential increase in the unrealized loss in our investment
portfolio, which could negatively affect our earnings. Rating downgrades of securities to below investment grade
level and other events may result in impairment of such securities, requiring recognition of the credit component of
the other-than-temporary impairment as a charge to current earnings.
We are vulnerable to illiquid market conditions, resulting in potential significant declines in the fair value
of our investment portfolio.
In cases of illiquid or dislocated marketplaces, there may not be an available market for certain securities in our
portfolio. For example, mortgage-related assets have experienced, and are likely to continue to experience,
periods of illiquidity, caused by, among other things, an absence of a willing buyer or an established market for
these assets, or legal or contractual restrictions on sale. In addition, recent market conditions have created
dislocations in the market for bank-collateralized pooled trust preferred securities and limited other securities that
we hold. Continued adverse market conditions, including continued bank failures, could result in a significant
decline in the fair value of these securities. We have in the past, and depending on the probability of a near-term
market recovery, may in the future be required to recognize the credit component of the additional other-than-
28
temporary impairments as a charge to current earnings resulting from the decline in the fair value of these
securities.
We primarily invest in mortgage-backed obligations and such obligations have been, and are likely to
continue to be, impacted by market dislocations, declining home values and prepayment risk, which may
lead to volatility in cash flow and market risk and declines in the value of our investment portfolio.
Our investment portfolio largely consists of mortgage-backed obligations primarily secured by pools of mortgages
on single-family residences.
The value of mortgage-backed obligations in our investment portfolio may fluctuate for several reasons, including
(i) delinquencies and defaults on the mortgages underlying such obligations, due in part to high unemployment
rates, (ii) falling home prices, (iii) lack of a liquid market for such obligations, (iv) uncertainties in respect of
government-sponsored enterprises such as the Federal National Mortgage Association (“Fannie Mae”) or the
Federal Home Loan Mortgage Corporation (“Freddie Mac”), which guarantee such obligations, and (v) the
expiration of government stimulus initiatives. Home values have declined significantly over the last several years.
Although home prices appear to have leveled off, if the value of homes were to further materially decline, the fair
value of the mortgage-backed obligations in which we invest may also decline. Any such decline in the fair value
of mortgage-backed obligations, or perceived market uncertainty about their fair value, could adversely affect our
financial position and results of operations.
In addition, when we acquire a mortgage-backed security, we anticipate that the underlying mortgages will prepay
at a projected rate, thereby generating an expected yield. Prepayment rates generally increase as interest rates
fall and decrease when rates rise, but changes in prepayment rates are difficult to predict. In light of historically
low interest rates, many of our mortgage-backed securities have a higher interest rate than prevailing market
rates, resulting in a premium purchase price. In accordance with applicable accounting standards, we amortize
the premium over the expected life of the mortgage-backed security. If the mortgage loans securing the
mortgage-backed security prepay more rapidly than anticipated, we would have to amortize the premium on an
accelerated basis, which would thereby adversely affect our profitability.
Adverse developments in the residential mortgage market may adversely affect the value of our
investment portfolio.
Although there has been some recent improvement, over the last several years the residential mortgage market in
the United States has experienced a variety of difficulties resulting from changed economic conditions, including
increased unemployment rates, heightened defaults, credit losses and liquidity concerns. These disruptions have
adversely affected the performance and fair value of many of the types of financial instruments in which we invest
and may continue to do so. Many residential mortgage-backed securities have been downgraded by rating
agencies over the past several years. As a result of these difficulties and changed economic conditions, many
companies operating in the mortgage sector have failed and others are facing serious operating and financial
challenges. While the Federal Reserve has taken certain actions in an effort to ameliorate market conditions, its
efforts may be ineffective. As a result of these factors, among others, the market for these securities may be
adversely affected for a significant period of time.
Adverse conditions in the residential mortgage market have also negatively impacted other sectors in which the
issuers of securities in which we invest operate, which has adversely affected, and may continue to adversely
affect, the fair value of such securities, including private collateralized mortgage obligations and bank-
collateralized pooled trust preferred securities, in our investment portfolio.
If the U.S. agencies or U.S. government-sponsored enterprises were unable to pay or to guarantee
payments on their securities in which we invest, our results of operations would be adversely affected.
A large portion of our investment portfolio consists of mortgage-backed securities and collateralized mortgage
obligations issued or guaranteed by Fannie Mae or Freddie Mac and debentures issued by the Federal Home
Loan Banks, Fannie Mae, and Freddie Mac. Fannie Mae, Freddie Mac, and the Federal Home Loan Banks are
U.S. government-sponsored enterprises but their guarantees and debt obligations are not backed by the full faith
and credit of the United States.
The economic crisis, especially as it relates to the residential mortgage market, adversely affected the financial
results and stock values of Fannie Mae and Freddie Mac and resulted in the value of the debt securities issued or
guaranteed by Fannie Mae and Freddie Mac becoming unstable and relatively illiquid compared to prior periods.
Fannie Mae and Freddie Mac have reported substantial losses in prior years and experienced significant
29
difficulties stemming from the market disruptions of the economic crisis, including significant increases in credit-
related expenses and credit losses. In July 2008, the U.S. Congress enacted the Housing and Economic
Recovery Act (“HERA”) granting the U.S. Treasury Department the authority to extend additional credit to Fannie
Mae and Freddie Mac in order to prevent their failure and creating the Federal Housing Finance Agency to
regulate the government-sponsored enterprises. On September 7, 2008, under the authority of HERA, the U.S.
Treasury Department announced that the U.S. government would place Fannie Mae and Freddie Mac into
conservatorship, purchase senior preferred equity shares in each entity, establish a new secured lending credit
facility available to both entities and purchase mortgage-backed securities of Fannie Mae and Freddie Mac.
Should the U.S. government contain, reduce or eliminate support for the financial stability of Fannie Mae, Freddie
Mac and the Federal Home Loan Banks, the ability for those entities to operate as independent entities is
questionable. Any failure by Fannie Mae, Freddie Mac, or the Federal Home Loan Banks to honor their
guarantees of mortgage-backed securities, debt or other obligations will have severe ramifications for the capital
markets and financial industry. Any failure by Fannie Mae, Freddie Mac, or the Federal Home Loan Banks to pay
principal or interest on their mortgage guarantee and debentures when due could also materially adversely affect
our results of operations and financial condition.
The future of Fannie Mae and Freddie Mac remains uncertain. Congress has recently introduced bills reforming
the housing finance system and government-sponsored enterprises. Among some of these bills is a proposal to
wind down Fannie Mae and Freddie Mac over a period of time, and restrict the activities of these enterprises
before the wind down. We are unable to predict whether this or another proposal will be adopted, and, if so, what
the effect of such proposal may be.
There are material risks involved in commercial lending that could adversely affect our business.
Commercial loans represented approximately 96% of our total loan portfolio as of December 31, 2014, and our
business plan calls for continued efforts to increase our assets invested in commercial loans. Our credit-rated
commercial loans include commercial and industrial loans to our privately-owned business clients along with loans
to commercial borrowers that are secured by real estate (commercial property, multi-family residential property, 1-
4 family residential property, and construction and land). Commercial loans generally involve a higher degree of
credit risk than residential mortgage loans due, in part, to their larger average size and less readily-marketable
collateral. In addition, unlike residential mortgage loans, commercial loans generally depend on the cash flow of
the borrower’s business to service the debt. A significant portion of our commercial loans depend primarily on the
liquidation of assets securing the loan for repayment, such as real estate, inventory, and accounts receivable.
These loans carry incrementally higher risk, because their repayment is often dependent solely on the financial
performance of the borrower’s business. Adverse economic conditions or other factors adversely affecting our
target market segment may have a greater adverse effect on us than on other financial institutions that have a
more diversified client base. Additionally, the recent development of car-service applications has increased
competition within the taxi industry and has affected the value of medallions that serve as collateral for our taxi
medallion loans.
For all of these reasons, increases in nonperforming commercial loans could result in operating losses, impaired
liquidity and the erosion of our capital, and could have a material adverse effect on our financial condition and
results of operations. Credit market tightening could adversely affect our commercial borrowers through declines
in their business activities and adversely impact their overall liquidity through the diminished availability of other
borrowing sources or otherwise.
Our business and substantially all of our real estate collateral is concentrated in the New York
metropolitan area and a downturn in the economy of the New York metropolitan area may adversely affect
our business.
A large portion of our business is located in the New York metropolitan area, and substantially all of the real estate
collateral for the loans in our portfolio is located within the New York metropolitan area. As a result, our financial
condition and results of operations may be affected by changes in the economy and the real estate market of the
New York metropolitan area, including policy changes enacted by local governments affecting multi-family
borrowers, such as rent freezes on stabilized apartments and escalation of real estate taxes. A prolonged period
of economic recession or other adverse economic and political conditions in the New York metropolitan area may
result in an increase in nonpayment of loans, a decrease in collateral value, and an increase in our ALLL.
In addition, our geographic concentration in the New York metropolitan area heightens our exposure to future
terrorist attacks or other disasters, which may adversely affect our business and that of our clients and result in a
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material decrease in our revenues. Future terrorist attacks or other disasters cannot be predicted, and their
occurrence can be expected to further negatively affect the U.S. economy generally and specifically the regional
market in which we operate.
If the value of real estate were to decline materially, a significant portion of our loan portfolio could
become under-collateralized, which would have a material adverse effect on us.
As of December 31, 2014, approximately 77% of the collateral for the loans in our portfolio consisted of real
estate. The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a
short period of time as a result of market conditions in the geographic area in which the real estate is located. If
the value of the real estate serving as collateral for our loan portfolio were to decline materially, a portion of our
loan portfolio could become under-collateralized. If the loans that are collateralized by real estate become
troubled during a time when market conditions are declining or have declined, we may not be able to realize the
value of the collateral that we anticipated at the time of originating the loan, which could have a material adverse
effect on our provision for loan and lease losses and our financial condition and results of operations.
As the size of our loan portfolio grows, the risks associated with our loan portfolio may be exacerbated.
As we grow our business and hire additional banking teams, the size of our loan portfolio grows, which can
exacerbate the risks associated with that portfolio. Although we attempt to minimize our credit risk through certain
procedures, including monitoring the concentration of our loans within specific industries, we cannot assure you
that these procedures will remain as effective when the size of our loan portfolio increases. This may result in an
increase in charge-offs or underperforming loans, which could adversely affect our business.
Our failure to effectively manage our credit risk could have a material adverse effect on our financial
condition and results of operations.
There are risks inherent in making any loan, including repayment risks associated with, among other things, the
period of time over which the loan may be repaid, changes in economic and industry conditions, dealings with
individual borrowers and uncertainties as to the future value of collateral. Although we attempt to minimize our
credit risk by monitoring the concentration of our loans within specific industries and through what we believe to be
prudent loan application approval procedures, we cannot assure you that such monitoring and approval
procedures will reduce these lending risks.
In addition, we are subject to credit risk in our investment portfolio. Our investments include debentures,
mortgage-backed securities and collateralized mortgage obligations issued or guaranteed by U.S. government-
sponsored enterprises, such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks, as well as
collateralized mortgage obligations, bank-collateralized pooled trust preferred securities and other debt securities
issued by private issuers. The issuers of our trust preferred securities include several depositary institutions that
have suffered significant losses since the onset of the economic crisis. We are exposed to credit risks associated
with the issuers of the debt securities in which we invest. Further, with respect to the mortgage-backed securities
in which we invest, we also are affected by the credit risk associated with the borrowers of the loans underlying
these securities.
Lack of seasoning of the mortgage loans underlying our investment portfolio may increase the risk of
credit defaults in the future.
The mortgage loans underlying certain mortgage-backed obligations in which we invest also may not begin to
show signs of credit deterioration until they have been outstanding for some period of time. Because the
mortgage loans underlying certain of the mortgage-backed obligations in our investment portfolio are relatively
new, the level of delinquencies and defaults on such loans may increase in the future, thus adversely affecting the
mortgage-backed obligations we hold.
Our ALLL may not be sufficient to absorb actual losses.
Experience in the banking industry indicates that a portion of our loans will become delinquent, and that some of
these loans may be only partially repaid or may never be repaid at all. Despite our underwriting criteria, we
experience losses for reasons beyond our control, including general economic conditions. A prolonged period of
economic recession or other adverse economic conditions in the New York metropolitan area may result in an
increase in nonpayment of loans, a decrease in collateral value, and an increase in our ALLL. Although we
believe that our ALLL is maintained at a level adequate to absorb any inherent losses in our loan portfolio, these
estimates of loan losses are necessarily subjective and their accuracy depends on the outcome of future events,
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some of which are beyond our control. We may need to make significant and unanticipated increases in our loss
allowances in the future, which would materially adversely affect our financial condition and results of operations.
In addition, bank regulators, as an integral part of their supervisory functions, periodically review our loan portfolio
and related ALLL. These regulatory agencies may require us to increase our provision for loan and lease losses
or to recognize further loan charge-offs based upon their judgments, which may be different from ours. An
increase in the ALLL required by these regulatory agencies could materially adversely affect our financial condition
and results of operations.
We rely on the Federal Home Loan Bank of New York for secondary and contingent liquidity sources.
We utilize the Federal Home Loan Bank (or “FHLB”) of New York for secondary and contingent sources of
liquidity. Also, from time to time, we utilize this borrowing source to capitalize on market opportunities to fund
investment and loan initiatives. Our FHLB borrowings were approximately $1.34 billion at December 31, 2014.
Because we rely on the FHLB for liquidity, if we were unable to borrow from the FHLB, we would need to find
alternative sources of liquidity, which may be available only at a higher cost and on terms that do not match the
structure of our liabilities as well as FHLB borrowings do.
As a member of the FHLB, we are required to purchase capital stock of the FHLB as partial collateral and to
pledge marketable securities or loans for this borrowing. At December 31, 2014, we held $86.3 million of FHLB
stock.
We are dependent upon key personnel.
Our success depends to a significant extent upon the performance of certain key executive officers and
employees, the loss of any of whom could have a material adverse effect on our business. Our key executive
officers and employees include our Chairman, Scott Shay, our President and Chief Executive Officer, Joseph
DePaolo, and our Vice-Chairman, John Tamberlane. Although we have entered into agreements with
Messrs. Shay and DePaolo, we have not entered into an agreement with Mr. Tamberlane and we generally do not
have employment agreements with our key personnel. We adopted an equity incentive plan and a change of
control plan for key personnel in connection with the consummation of our initial public offering. Even though we
are party to these agreements and sponsor these plans, we cannot assure you that we will be successful in
retaining any of our key executive officers and employees.
Our business is built around group directors, who are principally responsible for our client relationships. A
principal component of our strategy is to increase market penetration by recruiting and retaining experienced
group directors, their groups, loan officers and other management professionals. Competition for experienced
personnel within the commercial banking, specialty finance, brokerage and insurance industries is strong and we
may not be successful in attracting and retaining the personnel we require. We cannot assure you that our
recruiting efforts will be successful or that they will enhance our business, results of operations or financial
condition.
In addition, our group directors or other key professionals may leave us at any time for any reason. They are not
under contractual restrictions to remain with us and would not be bound by non-competition agreements or non-
solicitation agreements if they were to leave us. If a number of our key group directors or other key professionals
were to leave, our business could be materially adversely affected. We cannot assure you that such losses will
not occur.
Our SBA division is also dependent upon relationships our SBA professionals have developed with clients from
whom we purchase loans and upon relationships with investors in pooled securities. The loss of a key member of
our SBA division team may lead to the loss of existing clients. We cannot assure you that we will be able to recruit
qualified replacements with a comparable level of expertise and relationship base.
We may not be able to acquire suitable client relationship groups or manage our growth.
A principal component of our growth strategy is to increase market penetration and product diversification by
recruiting group directors and their teams. However, we believe that there are a limited number of potential group
directors and teams that will meet our development strategy and other recruiting criteria. As a result, we cannot
assure you that we will identify potential group directors and teams that will contribute to our growth. Even if
suitable candidates are identified, we cannot assure you that we will be successful in attracting them, as they may
opt instead to join our competitors.
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Even if we are successful in attracting these group directors and teams, we cannot assure you that they will be
successful in bringing additional clients and business to us. Furthermore, the addition of new teams involves
several risks including risks relating to the quality of the book of business that may be contributed, adverse
personnel relations and loss of clients because of a change of institutional identity. In addition, the process of
integrating new teams could divert management time and resources from attention to existing clients. We cannot
assure you that we will be able to successfully integrate any new team that we may acquire or that any new team
that we acquire will enhance our business, results of operations, cash flows or financial condition.
Provisions in our charter documents may delay or prevent our acquisition by a third party.
Our restated Certificate of Organization (as amended) and By-laws contain provisions that may make it more
difficult for a third party to acquire control of us without the approval of our Board of Directors. For example, our
Certificate of Organization authorizes our Board of Directors to determine the rights, preferences, privileges and
restrictions of unissued series of common stock and preferred stock, without any vote or action by our
stockholders. As a result, our Board of Directors can authorize and issue shares of preferred stock with voting or
conversion rights that could adversely affect the voting or other rights of holders of our common stock.
Additionally, our By-laws contain provisions that separate our Board of Directors into three separate classes with
staggered terms of office and provisions that restrict the ability of shareholders to take action without a meeting.
These provisions could delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other
transaction that might otherwise result in our stockholders receiving a premium over the market price for their
common stock.
There are substantial regulatory limitations on changes of control.
Federal law prohibits a company or a group of persons deemed to be “acting in concert” from, directly or indirectly,
acquiring 25% or more (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining
the ability to control in any manner the election of a majority of our directors or otherwise to direct the management
or policies of our company without prior application to and the approval of the Board of Governors of the Federal
Reserve System. Moreover, any individual who acquires 10% or more of our voting stock or otherwise obtains
control over Signature Bank would be required to notify, and could be required to obtain the non-objection of, the
FDIC. Finally, any person acquiring 10% or more of our voting stock would be required to obtain approval of the
New York State Department of Financial Services. Accordingly, prospective investors need to be aware of and
comply with these requirements, if applicable, in connection with any purchase of shares of our common stock.
This may effectively reduce the number of investors who might be interested in investing in our stock and also
limits the ability of investors to purchase us or cause a change in control.
Curtailment of government guaranteed loan programs could affect our SBA business.
Our SBA business relies on the purchasing, pooling and selling of government guaranteed loans, in particular
those guaranteed by the SBA. From time to time, the government agencies that guarantee these loans reach their
internal limits and cease to guarantee loans for a period of time. In addition, these agencies may change their
rules for loans or Congress may adopt legislation that would have the effect of discontinuing or changing the
programs. If changes occur, the volumes of loans that qualify for government guarantees could decline. Lower
volumes of origination of government guaranteed loans may reduce the profitability of our SBA business.
We rely extensively on outsourcing to provide cost-effective operational support.
We make extensive use of outsourcing to provide cost-effective operational support with service levels consistent
with large bank operations, including key banking, brokerage and insurance systems. For example, under the
clearing agreement Signature Securities has entered into with National Financial Services, LLC (a Fidelity
Investments company), National Financial Services, LLC processes all securities transactions for the account of
Signature Securities and the accounts of its clients. Services of the clearing firm include billing and credit
extension and control, receipt, custody and delivery of securities. Signature Securities is dependent on the ability
of its clearing firm to process securities transactions in an orderly fashion. In addition, Fidelity Information
Services provides us with all our core banking applications. Our outsourcing agreements can generally be
terminated by either party upon notice. The termination of some of our outsourcing agreements, including the
agreements with National Financial Services and Fidelity Information Services, could result in a disruption of
service that could have a material adverse effect on our financial condition and results of operations.
Our third party outsourcing relationships are subject to regulatory requirements regarding vendor management.
Federal banking guidance requires us to conduct due diligence and oversight in third party business relationships
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and to control risks in the relationship to the same extent as if the activity were directly performed by the Bank. If
our regulators conclude that we are not exercising proper oversight and control over third party vendors, or that
third parties are not performing their services appropriately, then we could be subject to enforcement actions.
These enforcement actions could have a material adverse effect on our business and our ability to use third party
services to receive cost-effective operational support.
System failures or breaches of our network security could subject us to increased operating costs as well
as litigation and other liabilities.
The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our
operations are dependent upon our ability to protect our computer equipment against damage from fire, power
loss, telecommunications failure or other similar catastrophic events. Any damage or failure that causes an
interruption in our operations could have a material adverse effect on our financial condition and results of
operations. In addition, our operations are dependent upon our ability to protect our computer systems and
network infrastructure against damage from physical break-ins, security breaches, hackers, viruses and other
malware and other disruptive problems, including through coordinated attacks sponsored by foreign nations and
criminal organizations to disrupt business operations and other compromises to data and systems for political or
criminal purposes. Such computer break-ins, whether physical or electronic, and other disruptions could
jeopardize the security of information stored in and transmitted through our computer systems and network
infrastructure, which may result in significant liability to us and deter potential clients. Although we, with the help of
third-party service providers, have and intend to continue to implement security technology and establish
operational procedures to prevent such damage, there can be no assurance that these security measures will be
successful. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other
developments could result in a compromise or breach of the algorithms we and our third-party service providers
use to protect client transaction data. A failure of such security measures could have a material adverse effect on
our financial condition and results of operations.
Although we carry specific “cyber” insurance coverage, which would apply in the event of various breach
scenarios, the amount of coverage may not be adequate in any particular case. In addition, cyber threat scenarios
are inherently difficult to predict and can take many forms, some of which may not be covered under our cyber
insurance coverage. Furthermore, the occurrence of a cyber threat scenario could cause interruptions in our
operations, which could in turn have a material adverse effect on our financial condition and results of operations.
Risks and exposures related to cyber security attacks are expected to remain high for the foreseeable future due
to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet
banking, mobile banking and other technology-based products and services by us and our clients.
Decreases in trading volumes or prices could harm the business and profitability of Signature Securities.
Declines in the volume of securities trading and in market liquidity generally result in lower revenues from our
brokerage and related activities. The profitability of our Signature Securities business would be adversely affected
by a decline in revenues because a significant portion of its costs are fixed. For these reasons, decreases in
trading volume or securities prices could have a material adverse effect on our business, financial condition and
results of operations.
We have not historically paid, and do not presently intend to pay, cash dividends. Furthermore, our ability
to pay cash dividends is restricted.
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends on
our common stock in the near future. We intend to retain earnings to finance operations and the expansion of our
business. Therefore, any return on your investment in our common stock must come from an increase in its
market price.
In addition, payments of dividends will be subject to the prior approval by the FDIC if, after having paid a dividend,
we would be undercapitalized, significantly undercapitalized or critically undercapitalized, and by the New York
State Department of Financial Services under certain conditions. Our ability to pay dividends will also depend
upon the amount of cash available to us from our subsidiaries. Restrictions on our subsidiaries’ ability to make
dividends or advances to us will tend to limit our ability to pay dividends to our shareholders.
We may be responsible for environmental claims.
There is a risk that hazardous or toxic waste could be found on the properties that secure our loans. In such
event, we could be held responsible for the cost of cleaning up or removing such waste, and such cost could
34
significantly exceed the value of the underlying properties and adversely affect our profitability. Additionally, even
if we are not held responsible for these cleanup and removal costs, the value of the collateralized property could
be significantly lower than originally projected, thus adversely affecting the value of our security interest. Although
we have policies and procedures that require us to perform environmental due diligence prior to accepting a
property as collateral and an environmental review before initiating any foreclosure action on real property, there
can be no assurance that this will be sufficient to protect us from all potential environmental liabilities associated
with collateralized properties.
We may not be able to raise the additional funding needed for our operations.
If we are unable to generate profits and cash flow on a consistent basis, we may need to arrange for additional
financing to support our business. Although we have completed a number of successful capital raising
transactions, including the 2014 public offering of 2,415,000 shares of our common stock, we cannot assure you
that, if needed or desired, we would be able to obtain additional capital or financing on commercially reasonable
terms or at all, especially in light of current capital and credit market conditions. Our failure to obtain sufficient
capital or financing could have a material adverse effect on our growth, on our ability to compete effectively and on
our financial condition and results of operations.
Inflation or deflation could adversely affect our business and financial results.
Inflation can adversely affect us by increasing costs of capital and labor. In addition, inflation is often
accompanied by higher interest rates, which may negatively affect the market value of securities in our investment
portfolio. Moreover, the cost of capital increases as a result of inflation and the purchasing power of our cash
resources declines. Current or future efforts by the government to stimulate the economy may increase the risk of
significant inflation and its adverse impact on our financial condition and results of operations.
Alternatively, a significant period of deflation could cause a decrease in overall spending and borrowing levels.
This could lead to a further deterioration in economic conditions, including an increase in the rate of
unemployment. Deflation is often accompanied by lower interest rates, which may lower the rate of interest we
earn on our loans and may have a material adverse effect on our net interest income and earnings. Declining oil
and gas prices may increase the risk of significant deflation and its adverse impact on our financial condition and
results of operations.
The misconduct of employees or their failure to abide by regulatory requirements is difficult to detect and
deter.
Employee misconduct could subject us to financial losses or regulatory sanctions and seriously harm our
reputation. It is not always possible to deter employee misconduct, and the precautions we take to prevent and
detect this activity may not be effective in all cases. Misconduct by our employees could include hiding
unauthorized activities from us, improper or unauthorized activities on behalf of clients or improper use of
confidential information.
Employee errors in recording or executing transactions for clients could cause us to enter into transactions that
clients may disavow and refuse to settle. These transactions expose us to risks of loss, which can be material,
until we detect the errors in question and unwind or reverse the transactions. As with any unsettled transaction,
adverse movements in the prices of the securities involved in these transactions before we unwind or reverse
them can increase these risks.
All of our securities professionals are required by law to be licensed with our subsidiary, Signature Securities, a
licensed securities broker-dealer. Under these requirements, these securities professionals are subject to our
supervision in the area of compliance with federal and applicable state securities laws, rules and regulations, as
well as the rules and regulations of self-regulatory organizations such as FINRA. The violation of any regulatory
requirements by us or our securities professionals could jeopardize Signature Securities’ broker-dealer license or
other licenses and could subject us to liability to clients.
We are subject to losses resulting from fraudulent or negligent acts on the part of our clients or other
third parties.
We rely heavily upon information supplied by our clients and by third parties, including the information included in
loan applications, property appraisals, title information, and employment and income documentation, in deciding
which loans we will originate, as well as the terms of those loans. If any of the information upon which we rely is
misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to loan
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funding, the value of the loan may be significantly lower than we had expected, or we may fund a loan that we
would not have funded or on terms that we would not have extended. Whether a misrepresentation is made by
the loan applicant, a mortgage broker, or another third party, we generally bear the risk of loss associated with the
misrepresentation. A loan subject to a material misrepresentation is typically unable to be sold or subject to
repurchase if sold prior to the detection of the misrepresentation. The sources of the misrepresentation are often
difficult to locate and it is often difficult to recover any of the monetary losses we have suffered. Although we
maintain a system of internal controls to mitigate against such occurrences and maintain insurance coverage for
such risks that are insurable, we cannot assure you that we have detected or will detect all misrepresented
information in our loan originations operations.
The failure of our brokerage clients to meet their margin requirements may cause us to incur significant
liabilities.
The brokerage business of Signature Securities, by its nature, is subject to risks related to potential defaults by our
clients in paying for securities they have agreed to purchase and for securities they have agreed to sell and
deliver. National Financial Services provides clearing services to our brokerage business, including the
confirmation, receipt, execution, settlement, and delivery functions involved in securities transactions, as well as
the safekeeping of clients’ securities and assets and certain client record keeping, data processing, and reporting
functions. National Financial Services makes margin loans to our clients to purchase securities with funds they
borrow from National Financial Services. We must indemnify National Financial Services for, among other things,
any loss or expense incurred due to defaults by our clients in failing to repay margin loans or to maintain adequate
collateral for those loans. We are subject to risks inherent in extending margin credit, especially during periods of
rapidly declining markets.
Our business may be adversely impacted by severe weather, acts of war or terrorism, public health
issues, and other external events.
Our primary markets are located near coastal waters, which could generate naturally occurring severe weather
that could have a significant impact on our business. In addition, New York City remains a central target for
potential civil unrest, acts of war or terrorism against the United States, and other acts of violence or threats to
national security and our operations and the operations of our vendors, suppliers and clients may be subject to
disruption from a variety of causes, including work stoppages, financial difficulties, fire, earthquakes, flooding or
other natural disasters. Moreover, a public health issue such as a major epidemic or pandemic could adversely
affect economic conditions. The United States and other countries have experienced, and may experience in the
future, outbreaks of contagious diseases that affect public perception of health risk. In the event of a widespread,
prolonged, actual or perceived outbreak of a contagious disease, our operations could be negatively impacted by
a reduction in customer traffic, quarantines or closures of our offices and facilities, the decline in productivity of our
key officers and employees or other factors. Such events could have a significant impact on our ability to conduct
our business and could affect the ability of our borrowers to repay their loans, impair the value of the collateral
securing our loans, and could cause significant property damage, thus increasing our expenses and/or reducing
our revenues. In addition, such events could affect the ability of our depositors to maintain their deposits with us
and adverse consequences may also result with regard to the disruption in the operations of our vendors,
suppliers and clients, which could have a material effect upon our business. Although we have established
disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect
on our business which, in turn, could have a material adverse effect on our financial condition and results of
operations.
Changes in the federal, state, or local tax laws may negatively impact our financial performance.
We are subject to changes in tax law that could increase our effective tax rates. These law changes may be
retroactive to previous periods and as a result could negatively affect our current and future financial performance.
Changes in accounting standards or interpretation in new or existing standards could materially affect our
financial results.
From time to time the Financial Accounting Standards Board (“FASB”) and the SEC change accounting
regulations and reporting standards that govern our preparation of financial statements. In addition, the FASB,
SEC, bank regulators and the outside independent auditors may revise their previous interpretations regarding
existing accounting regulations and the application of these accounting standards. These revisions in their
interpretations are out of our control and may have a material impact on our financial statements.
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We depend upon the accuracy and completeness of information about clients.
In deciding whether to extend credit or enter into other transactions with clients, we may rely on information
provided to us by clients, including financial statements and other financial information. We may also rely on
representations of clients as to the accuracy and completeness of that information and, with respect to financial
statements, on reports of independent auditors. For example, in deciding whether to extend credit to a business,
we may assume that the client’s audited financial statements conform with generally accepted accounting
principles and present fairly, in all material respects, the financial condition, results of operations and cash flows of
the customer, and we may also rely on the audit report covering those financial statements. Our financial
condition and results of operations could be negatively impacted to the extent we rely on financial statements that
do not comply with generally accepted accounting principles or that are materially misleading.
Negative public opinion could damage our reputation and adversely affect our earnings.
Reputational risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business.
Negative public opinion can result from the actual or perceived manner in which we conduct our business
activities; our management of actual or potential conflicts of interest and ethical issues; and our protection of
confidential client information. Our brand and reputation may also be harmed by actions taken by third parties that
we contract with to provide services to the extent such parties fail to meet their contractual, legal and regulatory
obligations or act in a manner that is harmful to our clients. If we fail to supervise these relationships effectively,
we could also be subject to regulatory enforcement, including fines and penalties. Negative public opinion can
adversely affect our ability to keep and attract clients and can expose us to litigation and regulatory action. We
take steps to minimize reputation risk in the way we conduct our business activities and deal with our clients,
communities and vendors but our efforts may not be sufficient.
Risks Related to Our Industry
We are subject to stringent regulatory capital requirements, which may adversely impact our return on
equity, require us to raise additional capital, or constrain us from paying dividends or repurchasing
shares.
As a state-chartered bank, we are subject to various regulatory capital requirements administered by state and
federal regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and
possible additional discretionary—actions by regulators that, if undertaken, could have a direct material adverse
effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets,
liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital
amounts and classifications are also subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
In July 2013, the FDIC approved a new rule that substantially amended the regulatory risk-based capital rules
applicable to Signature Bank. The final rule implements the “Basel III” regulatory capital reforms and changes
required by the Dodd-Frank Act. The final rule includes new minimum risk-based capital and leverage ratios,
which became effective for Signature Bank on January 1, 2015, and refines the definition of what constitutes
“capital” for purposes of calculating these ratios. The new minimum capital requirements include: (i) a new
common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from
4%); (iii) a total capital ratio of 8% (unchanged from prior rules); and (iv) a Tier 1 leverage ratio of 4%. The final
rule also established a “capital conservation buffer” of 2.5%, resulting in the following minimum ratios; (i) a
common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total
capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January
2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. An
institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying
discretionary bonuses if its capital level falls below the buffer amount. See – Regulation and Supervision – Safety
and Soundness Regulation.
The application of more stringent capital requirements for Signature Bank could, among other things, result in
lower returns on equity, require the raising of additional capital, and result in regulatory actions such as the
inability to pay dividends or repurchase shares if we were to be unable to comply with such requirements. The
impact of these requirements could also change the competitive landscape in which we seek deposits, lending
opportunities, clients, banking professionals and otherwise conduct our business.
37
In addition, we are subject to the provisions of the Federal Deposit Insurance Corporation Improvement Act of
1991, which imposes a number of mandatory supervisory measures. Among other matters, this Act established
five capital categories ranging from “well capitalized” to “critically undercapitalized.” Such classifications are used
by regulatory agencies to determine a bank’s deposit insurance premium and the approval of applications
authorizing institutions to increase their asset size or otherwise expand their business activities or acquire other
institutions.
To be categorized as “well capitalized” under the Act and, thus, subject to the fewest restrictions, a bank must
have a common equity Tier 1 capital ratio of 6.5 % or greater, a leverage capital ratio of 5.0% or greater, a Tier 1
risk-based capital ratio of at least 8.0% or greater, and a total risk-based capital ratio of 10.0% or greater, and
must not be subject to any written agreement, order, capital directive or prompt corrective action directive issued
by the FDIC to meet and maintain a specific capital level. These capital requirements may limit asset growth
opportunities and restrict our ability to increase earnings.
Our failure to comply with our minimum capital requirements would have a material adverse effect on our financial
condition and results of operations.
FDIC insurance premiums fluctuate materially, which could negatively affect our profitability.
The FDIC insures deposits at FDIC insured financial institutions, including Signature Bank. The FDIC charges the
insured financial institutions premiums to maintain the Deposit Insurance Fund at a certain level. During 2008 and
2009, there were higher levels of bank failures, which dramatically increased resolution costs of the FDIC and
depleted the deposit insurance fund. The FDIC collected a special assessment in 2009 to replenish the Deposit
Insurance Fund and also required a prepayment of an estimated amount of future deposit insurance premiums.
In accordance with the Dodd-Frank Act, the FDIC adopted new rules that redefined how deposit insurance
assessments are calculated. The new rate schedule and other revisions to the assessment rules became
effective April 1, 2011, and had the effect of reducing the assessment that we would otherwise pay. As the new
assessment rules currently stand, we expect the rules will have a continued positive impact on our future FDIC
deposit insurance assessment fees compared to the assessment rules in effect prior to the changes. However,
the FDIC’s rules could be subject to future changes, especially if there are additional bank or financial institution
failures or the government or FDIC develop new regulatory goals with respect to the banking sector. Any increase
in assessment fees could have a materially adverse effect on our results of operations and financial condition.
We are subject to significant government regulation.
We operate in a highly regulated environment and are subject to supervision and regulation by a number of
governmental regulatory agencies, including, among others, the FDIC, the New York State Department of
Financial Services, the Federal Reserve, the New York State Insurance Department, the CFPB, and FINRA. As
we expand our operations, we will become subject to regulation by additional states. Regulations adopted by
these agencies, which are generally intended to provide protection for depositors and clients rather than
shareholders, govern a comprehensive range of matters relating to ownership and control of our shares, our
acquisition of other companies and businesses, the activities in which we are permitted to engage, maintenance of
adequate capital levels, and other aspects of our operations. These regulatory agencies possess broad authority
to prevent or remedy unsafe or unsound practices or violations of law. For example, bank regulators view certain
types of clients as “high risk” clients under the Bank Secrecy Act, and other laws and regulations, and require
enhanced due diligence and enhanced monitoring with respect to such clients. While we believe that we
adequately perform such enhanced due diligence and monitoring with respect to our clients that fall within this
category, if the regulators believe that our efforts are not adequate or that we have failed to identify suspicious
transactions in such accounts, they could bring an enforcement action against us, which could result in bad
publicity, fines and other penalties, and could have a material adverse effect on our business. In addition, laws
and regulations enacted over the last several years have had, and are expected to continue to have, a significant
impact on the financial services industry. Some of these laws and regulations, including the Dodd-Frank Act, the
Sarbanes-Oxley Act of 2002 and the USA PATRIOT Act of 2001, have increased and may in the future further
increase our costs of doing business, particularly personnel and technology expenses necessary to maintain
compliance with the expanded regulatory requirements. Future legislation and government policy could adversely
affect the banking industry as a whole, including our results of operations.
The securities markets and the brokerage industry in which Signature Securities operates are also highly
regulated. Signature Securities is subject to regulation as a securities broker and investment adviser, and many of
the regulations applicable to Signature Securities may have the effect of limiting its activities, including activities
38
that might be profitable. Signature Securities is registered with and subject to supervision by the SEC and FINRA
and is also subject to state insurance regulation. As a subsidiary of Signature Bank, Signature Securities is also
subject to regulation and supervision by the New York State Department of Financial Services. The securities
industry has been subject to several fundamental regulatory changes, including changes in the rules of self-
regulatory organizations such as the NYSE and FINRA. In the future, the industry may become subject to new
regulations or changes in the interpretation or enforcement of existing regulations. We cannot predict the extent to
which any future regulatory changes may adversely affect our business.
In addition, we are subject to periodic examination by the FDIC, the New York State Department of Financial
Services, the SEC, the CFPB, self-regulatory organizations, and various state authorities. Our banking
operations, sales practice operations, trading operations, record-keeping, supervisory procedures, and financial
position may be reviewed during such examinations to determine if they comply with the rules and regulations
designed to protect clients and protect the solvency of banks and broker-dealers. Examinations may result in the
issuance of a letter to us noting perceived deficiencies and requesting us to take corrective action. Deficiencies
could lead to further investigation and the possible institution of administrative proceedings, which may result in
the issuance of an order imposing sanctions upon us and/or our personnel, including our investment professionals.
Sanctions against us may include a censure, cease and desist order, monetary penalties, or an order suspending
us for a period of time from conducting certain or all of our operations. Sanctions against individuals may include
a censure, cease and desist order, monetary penalties, or an order restricting the individual’s activities or
suspending the individual from association with us. In egregious cases, either we, our personnel, or both, could
be expelled from a self-regulatory organization or barred from the banking industry or the securities industry.
The Dodd-Frank Act may continue to affect our results of operations, financial condition or liquidity.
The Dodd-Frank Act, signed into law on July 21, 2010, makes extensive changes to the laws regulating financial
services firms. The Dodd-Frank Act also requires significant rulemaking and mandates multiple studies which
could result in additional legislative or regulatory action.
Under the Dodd-Frank Act, federal banking regulatory agencies are required to draft and implement enhanced
supervision, examination and capital standards for depository institutions and their holding companies. The
enhanced requirements include, among other things, changes to capital, leverage and liquidity standards and
numerous other requirements. For example, the Dodd-Frank Act (i) requires the establishment of minimum
leverage and risk-based capital requirements for insured depository institutions such as us, (ii) places restrictions
on investment and other activities by depository institutions, including significant increases in the regulation of
mortgage lending and servicing and prohibitions on proprietary trading and investing in and sponsoring certain
unregistered investment companies, (iii) provides for a new risk-based approach to financial services regulation
giving federal bank regulatory agencies new authority to monitor the systemic safety of the financial system and
(iv) authorizes various new assessments and fees. The Dodd-Frank Act also establishes the CFPB with broad
authority and permits states to adopt stricter consumer protection laws and enforce consumer protection rules
issued by the Consumer Financial Protection Bureau.
In December 2013, federal regulators adopted a final rule implementing the Volcker Rule enacted as part of the
Dodd-Frank Act. The Volcker Rule prohibits (subject to certain exceptions) banks and their affiliates from
engaging in short-term proprietary trading in securities and derivatives and from investing in and sponsoring
certain unregistered investment companies (including not only such things as hedge funds, commodity pools and
private equity funds, but also a range of asset securitization structures that do not meet exemptive criteria in the
final rules). The Federal Reserve has exercised its authority to extend the divestiture period for such pre-2014
investments to July 21, 2016, and stated its intent to further extend the divestiture period to July 21, 2017. We
hold certain securities in our available-for-sale investment portfolio that do not meet these exemptive criteria for
continued ownership and, therefore, must be divested within the divestiture period. These securities, which are
predominantly collateralized mortgage obligations, had a fair value totaling $146.5 million and an amortized cost of
$144.0 million as of December 31, 2014. Although these securities had an unrealized gain as of December 31,
2014, future market illiquidity or other adverse market conditions could negatively impact the fair value of these
securities. Accordingly, it is possible that we will be required to recognize additional other-than-temporary
impairments as a charge to current earnings if the fair value of these securities declines in the future.
It remains difficult to predict the full extent to which the Dodd-Frank Act or the resulting regulations will impact our
business. However, compliance with these new laws and regulations has resulted in, and will continue to result in,
additional costs to our business. It is also difficult to predict the impact of the Dodd-Frank Act on our competitors
and on the financial services industry as a whole. Competitive and industry factors could also adversely impact
our results of operations, financial condition or liquidity.
39
New regulations could restrict our ability to originate, service, and sell mortgage loans.
The CFPB has issued rules establishing mortgage lending and servicing requirements, which became effective in
January 2014. The mortgage lending requirements ensure that mortgage lenders consider a borrower’s ability to
repay a mortgage during the loan’s origination and underwriting. Loans that meet a “qualified mortgage” definition
will be presumed to have complied with the new ability-to-repay standard. Under the CFPB’s rule, a “qualified
mortgage” loan must not contain certain specified features, including:
excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount
points” for prime loans);
interest-only payments;
negative-amortization; and
terms longer than 30 years.
Also, to qualify as a “qualified mortgage,” a borrower’s total monthly debt-to-income ratio may not exceed 43%.
Lenders must also verify and document the income and financial resources relied upon to qualify the borrower for
the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during
the first five years, taking into account all applicable taxes, insurance and assessments. The CFPB’s mortgage
servicing requirements establish regulatory procedures and obligations for various areas of the servicing process
including periodic disclosures, error resolution, borrower information requests, and loss mitigation. The CFPB’s
mortgage lending and servicing rules could limit our ability or desire to make certain types of loans or loans to
certain borrowers, or could make it more expensive and time consuming to make or service these loans, which
could limit our growth or profitability. See – Regulation and Supervision – Dodd-Frank Act.
The financial services industry may be subject to new legislation.
The regulatory environment in which we operate is constantly undergoing change. Legislation is pending before
Congress that would further increase regulation of the financial services industry and impose restrictions on the
ability of firms within the industry to conduct business consistent with historical practices, including aspects such
as compensation, consumer protection regulations and mortgage regulation, among others. Federal and state
regulatory agencies also propose and adopt changes to their regulations or change the manner in which existing
regulations are applied. We cannot predict the substance or impact of pending or future legislation or regulation,
or the application thereof, and any such future regulation can adversely affect our business.
The soundness of other financial institutions could adversely affect us.
Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.
We have exposure to many different industries and counterparties, and we routinely execute transactions with
counterparties in the financial services industry, including brokers and dealers, commercial banks, investment
banks, mutual and hedge funds and other institutional clients. Many of these transactions expose us to credit risk
in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the
collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of
the loan or derivative exposure due us. There can be no assurance that any such losses would not materially and
adversely affect our results of operations.
Regulatory net capital requirements significantly affect and often constrain our brokerage business.
The SEC, FINRA, and various other regulatory bodies in the United States have rules with respect to net capital
requirements for broker-dealers that affect Signature Securities. These rules require that at least a substantial
portion of a broker-dealer’s assets be kept in cash or highly liquid investments. Signature Securities must comply
with these net capital requirements, which limit operations that require intensive use of capital, such as trading
activities. These rules could also restrict our ability to withdraw capital from our broker-dealer subsidiary, even in
circumstances where this subsidiary has more than the minimum amount of required capital. This, in turn, could
limit our ability to pay dividends, implement our business strategies and pay interest on and repay the principal of
our debt. A change in these rules, or the imposition of new rules, affecting the scope, coverage, calculation, or
amount of net capital requirements could have material adverse effects. Significant operating losses or any
unusually large charge against net capital could also have a material negative impact on our business.
40
The repeal of federal prohibitions on the payment of interest on demand deposits could increase our
interest expense.
All federal prohibitions on the ability of financial institutions to pay interest on demand deposit accounts were
repealed as part of the Dodd−Frank Act beginning on July 21, 2011. As a result, some financial institutions have
commenced offering interest on demand deposits to compete for clients. Currently, market interest rates are at
near-historic lows. We do not yet know what interest rates other institutions may offer as market interest rates
increase. Our interest expense will increase and our net interest margin will decrease if we begin offering interest
on demand deposits to attract new customers or maintain current customers, which could have a material adverse
effect on our business, financial condition and results of operations, particularly as interest rates return to higher
levels.
41
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive offices are located at 565 Fifth Avenue, New York, New York, 10017, in space leased by
the Bank. In addition, we conduct our business at the following locations in facilities that are leased for various
terms and rates. Many of the lease contracts include modest annual escalation agreements.
Location
Private Client Offices
Manhattan
Long Island
Queens
Brooklyn
Westchester
Bronx
Staten Island
Private Client Accomodation Offices
Manhattan
Brooklyn
Bank and Brokerage Operations and Support
Manhattan
Long Island
SBA & Institutional Trading
Houston, TX
Signature Financial Sales
Littleton, CO
Milton, GA
Norwell, MA
Prairie, MN
Redmond, WA
Total Locations
Number of
Offices
9
7
4
3
2
1
2
1
1
2
1
1
1
1
1
1
1
39
For additional information on our lease commitments, see Note 19 to our Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
We are subject to various pending and threatened legal actions relating to the conduct of our normal business
activities. In the opinion of management, the ultimate aggregate liability, if any, arising out of any such pending or
threatened legal actions will not be material to our Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES
None.
42
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the NASDAQ Global Select Market under the symbol “SBNY.” As of December 31,
2014, 51,398,685 shares of our common stock were issued and 50,317,609 shares were outstanding. The
following table lists, on a quarterly basis, the range of high and low intra-day sale prices per share of our common
stock in U.S. dollars:
2014
Fourth quarter
Third quarter
Second quarter
First quarter
2013
Fourth quarter
Third quarter
Second quarter
First quarter
Common Stock
High
Low
$
128.38
128.46
130.86
133.09
$
110.40
95.29
84.47
79.25
101.87
111.64
110.22
105.40
90.71
83.42
70.58
71.81
On December 31, 2014, the last reported sale price of our common stock was $125.96 and there were 10 holders
of record of our common stock, including record holders on behalf of an indeterminate number of beneficial
holders.
43
Performance Graph
The following graph compares the performance of our common stock with the performance of the Standard &
Poor’s 500 Index, the Industry Classification Benchmark (“ICB”) 8300 Banks Index, and the Nasdaq Bank Stocks
Index1:
400
350
300
250
200
150
100
50
December 31,
2009
December 31,
2010
December 31,
2011
December 31,
2012
December 31,
2013
December 31,
2014
Signature Bank
Standard & Poor's 500 Index
ICB 8300 Banks Index (1)
Nasdaq Bank Stocks Index (1)
The performance period reflected below assumes that $100 was invested in our common stock and each of the
indexes listed below on December 31, 2009. The performance of our common stock reflected below is not
indicative of our future performance.
Company Name/Index
Signature Bank
Standard & Poor's 500 Index
ICB 8300 Banks Index (1)
Nasdaq Bank Stocks Index (1)
2009
2010
2011
2012
2013
2014
$
100.00
100.00
100.00
100.00
156.93
112.78
111.35
118.30
188.06
112.78
83.04
105.72
223.64
127.90
111.88
125.85
336.74
165.76
152.85
180.15
394.86
184.64
170.93
-
December 31,
The Performance Graph does not constitute soliciting material and should not be deemed filed or incorporated by
reference into any Signature Bank filing under the Securities Exchange Act of 1934, except to the extent we specifically
incorporate the Performance Graph therein by reference.
1 As a result of a change in the total return data provided by our third-party index provider, information for the
Nasdaq Bank Stocks Index is provided only from December 31, 2009, through December 31, 2013, the last day
this data was made available by our provider. Our performance graphs going forward will use the ICB 8300 Banks
Index, a comparable index provided by Nasdaq OMX Global Indexes.
44
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend
to retain any earnings to finance our operations and the expansion of our business and we do not anticipate
paying any cash dividends on our common stock. Any future determination to pay dividends will be at the
discretion of our Board of Directors and will be dependent upon then existing conditions, including our financial
condition and results of operations, capital requirements, contractual restrictions, business prospects and other
factors that the Board of Directors considers relevant.
In addition, payments of dividends may be subject to the prior approval of the New York State Department of
Financial Services and the FDIC. Under New York law, we are prohibited from declaring a dividend so long as
there is any impairment of our capital stock. In addition, we would be required to obtain the approval of the New
York State Department of Financial Services if the total of all our dividends declared in any calendar year would
exceed the total of our net profits for that year combined with retained net profits of the preceding two years, less
any required transfer to surplus or a fund for the retirement of any preferred stock. We would also be required to
obtain the approval of the FDIC prior to declaring a dividend if after paying the dividend we would be
undercapitalized, significantly undercapitalized or critically undercapitalized. Our ability to pay dividends also
depends upon the amount of cash available to us from our subsidiaries. Restrictions on our subsidiaries’ ability to
make dividends and advances to us will tend to limit our ability to pay dividends to our shareholders.
45
ITEM 6. SELECTED FINANCIAL DATA
The information set forth below should be read in conjunction with our Consolidated Financial Statements and
related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
each of which is included elsewhere in this Annual Report on Form 10-K.
(dollars in thousands, except per share amounts)
SELECTED OPERATING DATA
Interest income
Interest expense
Net interest income before provision for loan and lease losses
Provision for loan and lease losses
Net interest income after provision for loan and lease losses
Non-interest income:
Non-interest income excluding net impairment losses on
securities recognized in earnings
Net impairment losses on securities recognized in earnings
Total non-interest income
Non-interest expense
Income before income taxes
Income tax expense
Net income
2014
At or for the years ended December 31,
2013
2011
2012
2010
$
924,273
123,122
801,151
31,110
770,041
36,706
(1,724)
34,982
293,244
511,779
215,075
296,704
755,150
106,807
648,343
41,643
606,700
38,160
(6,149)
32,011
247,177
391,534
162,790
228,744
228,744
660,556
110,750
549,806
41,427
508,379
39,312
(3,073)
36,239
218,243
326,375
140,892
185,483
185,483
580,516
120,729
459,787
51,876
407,911
44,127
(2,089)
42,038
182,724
267,225
117,699
149,526
149,526
466,530
121,672
344,858
46,372
298,486
56,824
(14,176)
42,648
164,896
176,238
74,187
102,051
102,051
Net income available to common shareholders
$
296,704
PER COMMON SHARE DATA
Earnings per share - basic
Earnings per share - diluted
BALANCE SHEET DATA
Total assets
Securities available-for-sale
Securities held-to-maturity
Loans held for sale
$
6.05
$
5.95
4.84
4.76
3.98
3.91
3.43
3.37
2.49
2.46
$
27,318,640
22,376,663
17,456,057
14,666,120
11,673,089
6,073,459
5,632,233
6,130,356
6,512,855
5,249,286
2,208,551
2,175,844
548,297
420,759
739,835
369,468
556,044
392,025
447,896
382,463
Loans, net of allowance for loan and lease losses
17,693,316
13,384,400
9,664,337
6,764,564
5,177,268
Allowance for loan and lease losses
164,392
135,071
107,433
86,162
67,396
Deposits
Borrowings
Shareholders' equity
22,620,275
17,057,097
14,082,652
11,754,138
9,441,227
2,050,163
3,370,313
1,585,000
1,425,800
1,222,200
2,496,238
1,799,939
1,650,327
1,408,116
944,547
(Continued on the next page)
46
(dollars in thousands, except per share amounts)
2014
At or for the years ended December 31,
2013
2011
2012
2010
OTHER DATA
Assets under management
Average interest-earning assets
Full-time employee equivalents
Private client offices
SELECTED FINANCIAL RATIOS
Performance Ratios:
Return on average assets
Return on average shareholders' equity
Return on average common shareholders' equity
Yield on average interest-earning assets
Average rate on deposits and borrowings
Net interest margin
Efficiency ratio (1)
Efficiency ratio excluding net impairment losses on
securities recognized in earnings (1)
Efficiency ratio excluding net gains on sales of securities
and net impairment losses on securities recognized
in earnings (1) (2)
Asset Quality Ratios:
Net charge-offs to average loans
ALLL to total loans
ALLL to non-accrual loans
Non-accrual loans to total loans
Non-performing assets to total assets
Capital and Liquidity Ratios:
Tier 1 Leverage Capital Ratio
Tier 1 Risk-Based Capital Ratio
Total Risk-Based Capital Ratio
Average equity to average assets
Average tangible equity to average assets (2)
Per common share data:
Number of weighted average common
shares outstanding
Book value per common share
$
3,566,595
$
2,240,723
$
1,741,054
$
1,674,206
$
1,856,653
$
24,340,755
$
19,324,652
$
15,556,626
$
12,889,784
$
10,000,270
1,010
28
945
27
844
26
720
25
660
24
1.20%
13.81%
13.81%
3.80%
0.55%
3.29%
1.16%
13.26%
13.26%
3.91%
0.60%
3.36%
1.17%
12.13%
12.13%
4.25%
0.78%
3.53%
1.14%
12.71%
12.71%
4.50%
1.01%
3.57%
0.99%
11.67%
11.67%
4.67%
1.30%
3.45%
35.07%
36.33%
37.24%
36.41%
42.55%
35.00%
36.01%
37.05%
36.26%
41.05%
35.22%
36.33%
37.48%
37.33%
43.82%
0.01%
0.92%
0.12%
1.00%
0.25%
1.10%
0.55%
1.26%
0.73%
1.29%
782.52%
430.96%
395.12%
204.09%
197.45%
0.12%
0.08%
9.25%
13.49%
14.39%
8.69%
8.69%
0.23%
0.16%
8.54%
14.07%
15.10%
8.76%
8.76%
0.28%
0.19%
9.51%
15.32%
16.35%
9.64%
9.64%
0.62%
0.33%
9.67%
17.08%
18.17%
8.94%
8.94%
0.65%
0.34%
8.62%
14.21%
15.21%
8.47%
8.47%
49,066
47,267
46,633
43,622
40,923
$
49.61
$
38.06
$
34.94
$
30.49
$
22.84
(1)
(2)
The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income before provision for loan and lease losses
and non-interest income.
These ratios are considered to be non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to,
financial measures determined in accordance with GAAP. We believe these non-GAAP ratios, when viewed together with the corresponding
ratios calculated in accordance with GAAP, provide meaningful supplemental information regarding our performance.
47
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with “Selected Financial Data” and our Consolidated
Financial Statements and related notes, each of which is included elsewhere in this Annual Report on Form 10-K.
Some of the statements in the following discussion are forward-looking statements. See “Cautionary Note
Regarding Forward-Looking Statements.”
Overview
We have grown to $27.32 billion in assets, $22.62 billion in deposits, $17.86 billion in loans, $2.50 billion in equity
capital and $3.57 billion in other assets under management as of December 31, 2014.
We believe the growth in our profitability is based on several key factors, including:
the significant growth of our interest-earning asset base each year;
our ability to maintain and grow core deposits, a key funding source, which has resulted in increased net
interest income from 2001 onward; and
our ability to control non-interest expense, which has contributed to our low efficiency ratio of 35.1% for the
year ended December 31, 2014.
An important aspect of our growth strategy is the ability to provide personalized, high quality service and to
effectively manage a large number of client relationships throughout the New York metropolitan area. Since the
commencement of our operations, we have successfully recruited and retained more than 430 experienced private
client banking team professionals. We believe that our existing operations infrastructure will allow us to grow our
business over the next few years both geographically within the New York metropolitan area and with respect to
the size and number of client relationships without substantial additional capital expenditures.
Critical Accounting Policies
We follow financial accounting and reporting policies that are in accordance with U.S. generally accepted
accounting principles (“GAAP”). Some of these significant accounting policies require management to make
difficult, subjective or complex judgments. The policies noted below, however, are deemed to be our “critical
accounting policies” under the definition given to this term by the Securities and Exchange Commission (“SEC”) -
those policies that are most important to the presentation of a company’s financial condition and results of
operations, and require management’s most difficult, subjective or complex judgments, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain.
The judgments used by management in applying the critical accounting policies may be affected by a further and
prolonged deterioration in the economic environment, which may result in changes to future financial results.
Specifically, subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in
significant changes in the allowance for loan and lease losses (“ALLL”) in future periods, and the inability to collect
on outstanding loans could result in increased loan losses. In addition, the valuation and management’s projected
cash flows for certain securities in our investment portfolio could be negatively impacted by deteriorating collateral
performance and illiquidity or dislocation in marketplaces resulting in significantly depressed market prices thus
leading to further impairments.
Allowance for Loan and Lease Losses
We consider our policies related to the ALLL as critical to our financial statement presentation. The ALLL is
established through a provision for loan and lease losses charged to current earnings. The ALLL is maintained at
a level estimated by management to absorb probable losses inherent in the loan portfolio and is based on
management’s continuing evaluation of the portfolio, the related risk characteristics, and the overall economic and
48
environmental conditions affecting the portfolio. This estimation is inherently subjective as it requires measures
that are susceptible to significant revision as more information becomes available.
Our methodology to determine the ALLL includes segmenting the loan portfolio into various components and
applying various loss factors to estimate the amount of probable losses. The largest segment of our loan portfolio
is comprised of credit-rated commercial loans, comprising 97.9% of our total loan portfolio, excluding loans held
for sale, as of December 31, 2014. Our credit-rated commercial loans include commercial and industrial loans
along with loans to commercial borrowers that are secured by real estate (commercial property, multi-family
residential property, 1-4 family residential property, and construction and land). For each loan within this segment,
a credit rating is assigned based on a review of specific risk factors including (i) historical and projected financial
results of the borrower, (ii) market conditions of the borrower’s industry that may affect the borrower’s future
financial performance, (iii) business experience of the borrower’s management, (iv) nature of the underlying
collateral, if any, and (v) history of the borrower’s payment performance.
When assigning a credit rating to a loan, we use an internal nine-level rating system in which a rating of one
carries the lowest level of credit risk and is used for borrowers exhibiting the strongest financial condition. Loans
rated one through six are deemed to be acceptable quality and are considered “Pass.” Loans that are deemed to
be of questionable quality are rated seven (special mention). Loans with adverse classifications (substandard or
doubtful) are rated eight or nine, respectively. A loan is considered substandard if it is inadequately protected by
the current net worth and paying capacity of the borrower, or by the collateral pledged. Substandard loans are
characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Loans classified as doubtful have all of the weaknesses inherent in those classified substandard with the added
characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
The outstanding amounts of credit-rated commercial loans are aggregated by credit rating, and we estimate the
allowance for losses for each credit rating using loss factors based on historical loss experience. We supplement
our historical loss experience by considering qualitative factors that may cause estimated losses to differ from our
historical losses. These qualitative factors are intended to address developing external and environmental trends,
and include adjustments for items such as changes in current economic and business conditions, changes in the
nature and volume of our loan portfolio, the existence and effects of credit concentrations, the trend and severity of
our problem loans, along with other external factors such as competition and legal and regulatory requirements.
These qualitative adjustments reflect the imprecision that is inherent in the estimation of probable loan losses, and
are intended to ensure adequacy of the overall allowance amount.
Our internal review process results in the periodic review of assigned credit ratings to reflect changes in specific
risk factors. Commercial lines of credit are generally issued with terms of one year, and upon annual renewal our
lenders perform a full review of the specific risk factors to assess the appropriateness of the assigned credit
ratings. Furthermore, loans classified as special mention, substandard or doubtful are placed on our internal
watch list, and our lenders perform a credit rating review on a quarterly basis (special mention loans) or monthly
basis (substandard and doubtful loans). In addition, our Risk Management function performs periodic credit
reviews that provide an independent evaluation of the assigned credit ratings. These reviews focus on those
loans with higher-risk attributes, such as lines of credit with higher utilization percentages and loan facilities with
delinquencies, and generally cover, in aggregate, between 30-40% of the commercial loan portfolio, including all
commercial loans over $500,000 with adverse credit ratings, on an annual basis. The results of these credit
reviews are presented to both the Risk and the Credit Committees of the Board of Directors.
Our methodology to determine the ALLL for the non-rated segments of our loan portfolio is based on historical loss
experience and qualitative factors. Non-rated loans include commercial loans with outstanding principal balances
below $100,000, overdrafts, residential mortgages, and consumer loans. The outstanding amounts of loans in
each of these segments are aggregated, and we apply percentages based on historical losses and qualitative
factors by segment to estimate the required allowance. Non-rated loans comprise 2.1% of our total loan portfolio,
excluding loans held for sale, as of December 31, 2014.
We consider all nonaccrual loans to be impaired loans, and the related specific allowances for losses are
determined on an individual (non-homogeneous) basis. Factors contributing to the determination of specific
allowances on impaired loans include the creditworthiness of the borrower and, more specifically, changes in the
expected future receipt of principal and interest payments or, for collateral-dependent loans, the value of pledged
collateral. For impaired loans in excess of $750,000 that are collateral-dependent, we generally record a charge-
49
off when the carrying amount of the loan exceeds the fair value of collateral less estimated selling costs, if
appropriate. For non-collateral dependent loans in excess of $750,000, a specific allowance is recorded when the
carrying amount of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest
rate. For smaller impaired loans, in the absence of other factors affecting the collectability of the loan, we
generally determine the amount of specific allowance using estimated loss percentages based on the amount of
time the loan has been impaired.
The methodology used in the periodic review of reserve adequacy, which is performed at least quarterly, is
designed to be responsive to changes in portfolio credit quality and inherent credit losses. The changes are
reflected in both the pooled formula reserve and in specific reserves as the collectability of larger classified loans
is regularly recalculated with new information as it becomes available. As our portfolio matures, historical loss
ratios are closely monitored. Currently, the review of reserve adequacy is performed by our senior management,
assessed by a credit review function, and presented to our Board of Directors for their review and consideration on
a quarterly basis.
In addition, bank regulators, as an integral part of their supervisory functions, periodically review our loan portfolio
and related ALLL. These regulatory agencies may require us to increase our provision for loan and lease losses
or to recognize further loan charge-offs based upon their judgments, which may be different from ours. An
increase in the ALLL required by these regulatory agencies could materially adversely affect our financial condition
and results of operations.
For economic reasons and to maximize the recovery of loans, we may work with borrowers experiencing financial
difficulties and will consider modifications to a borrower’s existing loan terms and conditions that we would not
otherwise consider, commonly referred to as troubled debt restructurings (“TDRs”). We record a provision for
impairment loss associated with TDRs, if any, based on the present value of expected future cash flows
discounted at the original loan’s effective interest rate or, if the loan is collateral dependent, based on the fair value
of the collateral less estimated costs to sell. At the time of restructuring, we determine whether a TDR loan should
accrue interest based on the accrual status of the loan immediately prior to modification. A nonaccrual TDR loan
will be returned to accrual status when all the principal and interest amounts contractually due are brought current
and future payments are reasonably assured. Additionally, there should be a sustained period of repayment
performance (generally a period of six months) by the borrower in accordance with the modified contractual terms.
In years after the year of restructuring, the loan is not reported as a TDR loan if it was restructured at a market
interest rate and it is performing in accordance with its modified terms. Other TDR loans are reported as such for
as long as the loan remains outstanding.
Valuation and Impairment of Investment Securities
We consider our policies related to the valuation of investment securities to be critical to our financial statement
presentation. The Bank uses various inputs to determine the fair value of its investment portfolio, which are
classified within a three-level fair value hierarchy based on the transparency and reliability of inputs to valuation
methodologies. To the extent they are available, we use quoted market prices (Level 1) to determine fair value. If
quoted market prices are not available, we use valuation techniques such as matrix pricing to determine fair value
(Level 2). In cases where there is little, if any, related market activity, fair value estimates are based upon
internally-developed valuation techniques that use inputs such as discount rates, credit spreads, default and
delinquency rates, and prepayment speeds (Level 3). A significant degree of judgment is involved in valuing
investments using Level 3 inputs, and the use of different assumptions could have a positive or negative effect on
our financial condition or results of operations. See Note 3 to our Consolidated Financial Statements for more
details on our security valuation techniques.
We regularly evaluate our securities to identify declines in fair value that are considered other-than-temporary.
Our evaluation of securities for impairments is a quantitative and qualitative process, which is subject to risks and
uncertainties. If the amortized cost of an investment exceeds its fair value, we evaluate, among other factors,
general market conditions, the duration and extent to which the fair value is less than amortized cost, the
probability of a near-term recovery in value, whether we intend to sell the security and whether it is more likely
than not that we will be required to sell the security before full recovery of our investment or maturity. We also
consider specific adverse conditions related to the financial health, projected cash flow and business outlook for
the investee, including industry and sector performance, operational and financing cash flow factors and rating
agency actions. Once a decline in fair value is determined to be other-than-temporary, for equity securities, an
impairment charge is recorded through current earnings based upon the estimated fair value of the security at time
50
of impairment and a new cost basis in the investment is established. For debt investment securities deemed to be
other-than-temporarily impaired, the investment is written down to fair value with the estimated credit loss charged
to current earnings and the noncredit-related impairment loss charged to other comprehensive income.
Securities are reviewed at least quarterly to determine if an other-than-temporary impairment is present based on
certain quantitative and qualitative factors. For securities other than securitized financial assets, the primary
factors considered in evaluating whether a decline in value is other-than-temporary include: (a) the length of time
and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of
the security, (b) the financial condition, credit rating, and future prospects of the issuer, (c) whether the debtor is
current on contractually-obligated interest and principal payments, and (d) whether we intend to sell or whether we
will be required to sell these instruments before recovery of their cost basis.
In performing our other-than-temporary impairment analysis for securitized financial assets with contractual cash
flows (asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities and
mortgage-backed securities), we estimate future cash flows for each security based upon our best estimate of
future delinquencies, estimated defaults, loss severity, and prepayments. We review the estimated cash flows to
determine whether we expect to receive all originally expected cash flows. Projected credit losses are compared
to the current level of credit enhancement to assess whether the security is expected to incur losses in any future
period and therefore would be deemed other-than-temporarily impaired.
New Accounting Standards
In January 2014, the FASB issued ASU 2014-01, Accounting for Investments in Qualified Affordable Housing
Projects, to revise the accounting for investments in qualified affordable housing projects, allowing investors in
Low Income Housing Tax Credit (“LIHTC”) programs that meet specified conditions to present the net tax benefits
(net of the amortization of the cost of the investment) within income tax expense. The cost of the investments that
meet the specified conditions will be amortized in proportion to (and over the same period as) the total expected
tax benefits, including the tax credits and other tax benefits, as they are realized on the tax return. The
amortization of the cost of the investments will be presented in income tax expense along with the related tax
benefits. If the investors do not qualify for the proportional amortization method or do not elect it, they would
account for their investments under the equity or cost method based on current U.S. GAAP. This guidance will be
effective for interim and annual periods beginning after December 15, 2014 and will be applied retrospectively if
investors elect the proportional amortization method. Early adoption is permitted. We do not expect the adoption
of ASU 2014-01 to have a material impact on our Consolidated Financial Statements.
In January 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure, which clarifies when banks and similar institutions (creditors)
should reclassify mortgage loans collateralized by residential real estate properties from the loan portfolio to other
real estate owned (“OREO”). The ASU also requires certain interim and annual disclosures. ASU 2014-04 is
effective for public business entities for annual periods, and interim periods within those annual periods, beginning
after December 15, 2014. An entity can elect either a modified retrospective or a prospective transition method,
and early adoption is permitted. We do not expect the adoption of ASU 2014-04 to have a material impact on our
Consolidated Financial Statements.
In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (ASC 860): Repurchase-to-Maturity
Transactions, Repurchase Financings, and Disclosures. The new standard amends the accounting guidance for
“repo-to-maturity” transactions and repurchase agreements executed as repurchase financings. In addition, the
new standard requires a transferor to disclose more information about certain transactions, including those in
which it retains substantially all of the exposure to the economic returns of the underlying transferred asset over
the transaction’s term. Public business entities are required to apply the accounting changes and comply with the
enhanced disclosure requirements for the first interim or annual reporting period beginning after December 15,
2014. However, for repurchase and securities lending transactions reported as secured borrowings, the new
standard’s enhanced disclosures are effective for annual periods beginning after December 15, 2014 and interim
periods beginning after March 15, 2015. A public business entity may not early adopt the standard’s provisions.
We expect that the adoption of ASU 2014-11 will have no impact on our Consolidated Financial Statements.
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which requires a
51
reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite
service period as a performance condition. Therefore, an entity would not record compensation expense related
to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target
until it becomes probable that the performance target will be met. No new disclosures are required under the ASU.
For all entities, ASU 2014-12 is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2015. Early adoption is permitted. ASU 2014-12 may be adopted either
prospectively for share-based payment awards granted or modified on or after the effective date, or
retrospectively, using a modified retrospective approach. The modified retrospective approach would apply to
share-based payment awards outstanding as of the beginning of the earliest annual period presented in the
financial statements on adoption, and to all new or modified awards thereafter. We expect that the adoption of
ASU 2014-12 will have no impact on our Consolidated Financial Statements.
In August 2014, the FASB issued ASU 2014-14, Receivables -Troubled Debt Restructurings by Creditors
(Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure, which
requires that, upon foreclosure, a guaranteed mortgage loan be derecognized and a separate other receivable be
recognized when specific criteria are met. ASU 2014-14 is effective for public business entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2014. We expect that the
adoption of ASU 2014-14 will have no impact on our Consolidated Financial Statements.
52
Results of Operations
The following is a discussion and analysis of our results of operations for the year ended December 31, 2014
compared to the year ended December 31, 2013 and for the year ended December 31, 2013 compared to the
year ended December 31, 2012.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Net Income
Net income for the year ended December 31, 2014 was $296.7 million, or $5.95 diluted earnings per share,
compared to $228.7 million, or $4.76 diluted earnings per share, for year ended December 31, 2013. The
increase in net income was driven by increased net interest income. The returns on average shareholders’ equity
and average total assets for the year ended December 31, 2014 were 13.81% and 1.20%, compared to 13.26%
and 1.16% for the year ended December 31, 2013.
(in thousands)
Interest income
Interest expense
Net interest income before provision for loan and lease losses
Provision for loan and lease losses
Non-interest income:
Non-interest income excluding net impairment losses on securities
recognized in earnings
Net impairment losses on securities recognized in earnings
Total non-interest income
Non-interest expense
Income tax expense
Net income
Years ended December 31,
2014
2013
$
924,273
123,122
801,151
31,110
36,706
(1,724)
34,982
293,244
215,075
296,704
$
755,150
106,807
648,343
41,643
38,160
(6,149)
32,011
247,177
162,790
228,744
53
Net Interest Income
Net interest income is the difference between interest earned on assets and interest incurred on liabilities. The
following table presents an analysis of net interest income by each major category of interest-earning assets and
interest-bearing liabilities for the years ended December 31, 2014 and 2013:
(dollars in thousands)
INTEREST-EARNING ASSETS
Short-term investments
Investment securities
Commercial loans, mortgages and leases (1)
Residential mortgages and consumer loans (1)
Loans held for sale
Total interest-earning assets
Non-interest-earning assets
Total assets
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW and interest-bearing demand
Money market
Time deposits
Non-interest-bearing demand deposits
Total deposits
Borrowings
Total deposits and borrowings
Other non-interest-bearing liabilities
and shareholders' equity
Total liabilities and shareholders' equity
OTHER DATA
Net interest income / interest rate spread
Net interest margin
Ratio of average interest-earning assets
to average interest-bearing liabilities
Years ended December 31,
2014
2013
Average
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Average
Yield/
Rate
$
387,213
8,198,481
15,069,896
344,356
340,809
24,340,755
365,143
24,705,898
$
$
1,276,342
11,592,917
1,155,702
5,906,454
19,931,415
2,443,596
22,375,011
2,330,887
24,705,898
$
928
267,722
639,014
13,271
3,338
924,273
4,900
75,974
12,620
-
93,494
29,628
123,122
0.24%
3.27%
4.24%
3.85%
0.98%
3.80%
0.38%
0.66%
1.09%
-
0.47%
1.21%
0.55%
446
235,430
500,712
14,224
4,338
755,150
3,081
64,095
13,033
-
80,209
26,598
106,807
126,995
7,549,126
10,907,825
374,938
365,768
19,324,652
362,127
19,686,779
819,164
8,959,324
1,065,139
4,782,428
15,626,055
2,192,788
17,818,843
1,867,936
19,686,779
0.35%
3.12%
4.59%
3.79%
1.19%
3.91%
0.38%
0.72%
1.22%
-
0.51%
1.21%
0.60%
801,151
3.25%
3.29%
108.79%
648,343
3.31%
3.36%
108.45%
(1) Average loan balances include non-accrual loans along with deferred fees and costs.
54
Interest income and interest expense are affected both by changes in the volume of interest-earning assets and
interest-bearing liabilities and by changes in yields and interest rates. The table below analyzes the impact of
changes in volume (changes in average outstanding balances multiplied by the prior period's rate) and changes in
interest rate (changes in interest rates multiplied by the current period's average balance). Changes that are
caused by a combination of interest rate and volume changes are allocated proportionately to both changes in
volume and changes in interest rate. For purposes of calculating the changes in our net interest income, the effect
of nonperforming assets is included in the change due to rate.
(in thousands)
INTEREST INCOME
Short-term investments
Investment securities
Commercial loans, mortgages and leases
Residential mortgages and consumer loans
Loans held for sale
Total interest income
INTEREST EXPENSE
Interest-bearing deposits
NOW and interest-bearing demand
Money market
Time deposits
Total interest-bearing deposits
Borrowings
Total interest expense
Net interest income
Year ended December 31,
2014 vs. 2013
Change
Due to Rate
Change
Due to
Volume
Total
Change
$
(432)
12,041
(52,753)
207
(704)
(41,641)
914
20,251
191,055
(1,160)
(296)
210,764
482
32,292
138,302
(953)
(1,000)
169,123
99
(6,962)
(1,521)
(8,384)
(12)
(8,396)
(33,245)
$
1,720
18,841
1,108
21,669
3,042
24,711
186,053
1,819
11,879
(413)
13,285
3,030
16,315
152,808
Net interest income for the year ended December 31, 2014 was $801.2 million, an increase of $152.8 million, or
23.6%, over the year ended December 31, 2013. The increase in net interest income for 2014 was largely driven
by increases in average interest-earning assets and average deposits, which increased $5.02 billion and $4.31
billion, respectively, compared to the previous year. Although net interest income for 2014 was positively
impacted by lower rates paid on deposits, the impact of lower deposit rates was more than offset by the negative
effects of the ongoing low interest rate environment on asset yields. Net interest margin for the year ended
December 31, 2014 decreased to 3.29%, compared to 3.36% for the previous year, primarily due to the continued
effect of the prolonged low interest rate environment.
Total investment securities averaged $8.20 billion for the year ended December 31, 2014, compared to $7.55
billion for the year ended December 31, 2013. The overall yield on the securities portfolio for the year ended
December 31, 2014 was 3.27%, up 15 basis points from the previous year. The increase in yield was
predominantly due to higher reinvestment yields and a slowdown in premium amortization. Our portfolio primarily
consists of high quality and highly-rated mortgage-backed securities, commercial mortgage-backed securities, and
collateralized mortgage obligations issued by government agencies, government-sponsored enterprises, and
private issuers. We mitigate extension risk through our overall strategy of purchasing relatively stable duration
securities that, by their nature, have lower yields. At December 31, 2014, the baseline average duration of our
investment securities portfolio was approximately 3.17 years, compared to 4.13 years at December 31, 2013.
55
Total commercial loans, mortgages and leases averaged $15.07 billion for the year ended December 31, 2014, an
increase of $4.16 billion or 38.2% over the year ended December 31, 2013. The average yield on this portfolio
decreased 35 basis points to 4.24% when compared to the year ended December 31, 2013. The decrease in
average yield reflects the impact of the low prevailing interest rate environment on recent loan originations and
refinancing along with a heightened competitive environment.
We are an active participant in the SBA loan and SBA pool secondary market by purchasing, securitizing, and
selling the guaranteed portions of SBA loans, most of which have adjustable rates and float at a spread to the
prime rate. Once purchased, we typically warehouse the guaranteed loan for approximately 30 to 180 days and
classify them as loans held for sale. From this warehouse, we aggregate like SBA loans by similar characteristics
into pools for securitization to the secondary market. The timing of the purchase and sale of such loan pools
drives the quarter-to-quarter fluctuations in average balances of loans held for sale, which averaged $340.8 million
and $365.8 million for the years ended December 31, 2014 and 2013, respectively.
Average total deposits and borrowings increased $4.56 billion, or 25.6%, to $22.38 billion during the year ended
December 31, 2014, compared to $17.82 billion for the previous year. Overall cost of funding was 0.55% during
2014, decreasing five basis points from 0.60% in 2013.
For the year ended December 31, 2014, average non-interest-bearing demand deposits were $5.91 billion,
compared to $4.78 billion for the year ended December 31, 2013, an increase of $1.12 billion, or 23.5%. Non-
interest-bearing demand deposits continue to comprise a significant component of our deposit mix, representing
31.2% of all deposits at December 31, 2014. Additionally, average NOW and interest-bearing checking and
money market accounts totaled $12.87 billion for the year ended December 31, 2014, an increase of $3.09 billion,
or 31.6%, over the year ended December 31, 2013. Core deposits have provided us with a source of stable, low
cost funding, which has positively affected our net interest margin and income. Furthermore, short-term escrow
deposits have provided us with an additional low cost funding alternative. As a result of lower short-term interest
rates, our funding cost for money market accounts decreased to 0.66% for the year ended December 31, 2014
compared to 0.72% for the prior year. Our funding cost for NOW and interest-bearing checking accounts was
0.38% for each of the years ended December 31, 2014 and 2013.
Average time deposits, which are relatively short-term in nature, totaled $1.16 billion for the year ended December
31, 2014 and carried an average cost of 1.09% in 2014, down 13 basis points from 1.22% in 2013. Time deposits
are offered to supplement our core deposit operations for existing or new client relationships, and are not
marketed through retail channels.
For the year ended December 31, 2014, average total borrowings were $2.44 billion, compared to $2.19 billion for
the previous year, an increase of $250.8 million, or 11.4%. The increase in our average total borrowings for 2014,
when compared to the previous year, reflects funding needs as a result of our continued loan growth. At
December 31, 2014, total borrowings represent approximately 8.3% of all funding liabilities, compared to 16.5% at
December 31, 2013. The average cost of our total borrowings was 1.21% for each of the years ended December
31, 2014 and 2013.
Provision and Allowance for Loan and Lease Losses
Our provision for loan and lease losses was $31.1 million for the year ended December 31, 2014, compared to
$41.6 million for the prior year, a decrease of $10.5 million, or 25.3%. The decrease in the provision for the year
ended December 31, 2014, when compared to the same period last year, was primarily driven by reductions in the
level of charge-offs. For additional information about the provision for loan and lease losses, see the discussion of
asset quality and the ALLL later in this report. Our ALLL increased $29.3 million to $164.4 million at December 31,
2014 from $135.1 million at December 31, 2013, primarily as a result of our loan growth during the year.
56
The following table allocates our ALLL based on our judgment of inherent losses in each respective portfolio
category according to our methodology for allocating reserves.
(dollars in thousands)
Mortgage loans:
Multi-family residential property
Commercial property
1-4 family residential property
Home equity lines of credit
Construction and land
Other loans:
Commercial and industrial
Consumer
Total
2014
2013
December 31,
Loan
Amount
Allowance
Amount
Allowance
as a % of
Loan Amount
Loan
Amount
Allowance
Amount
Allowance
as a % of
Loan Amount
$
8,607,989
4,833,123
463,420
160,890
64,824
3,697,725
10,245
17,838,216
$
63,091
39,449
7,178
3,522
477
50,217
458
164,392
0.73%
0.82%
1.55%
2.19%
0.74%
1.36%
4.47%
0.92%
6,637,353
3,651,538
346,795
170,441
125,334
2,565,016
11,479
13,507,956
47,814
44,415
3,600
1,406
1,323
35,745
768
135,071
0.72%
1.22%
1.04%
0.82%
1.06%
1.39%
6.69%
1.00%
For additional information about our provision and ALLL, see the related discussions of asset quality later in this
report.
Non-Interest Income
For the year ended December 31, 2014, non-interest income was $35.0 million, an increase of $3.0 million, or
9.3%, when compared with 2013. The increase in non-interest income was driven by a decrease in net other-
than-temporary impairment losses on securities recognized through earnings. In addition, the change in non-
interest income reflects increases in commissions and fees and service charges, which were partially offset by
increased other losses along with reductions in the amounts of net gains on sales of securities and loans.
We recognized through earnings net other-than-temporary impairment losses on securities totaling $1.7 million
during the year ended December 31, 2014, compared to $6.1 million for the prior year. For further discussion of
our other-than-temporary impairment losses, see Note 4 to our Consolidated Financial Statements.
Commissions increased $1.3 million, or 13.7%, to $10.6 million for the year ended December 31, 2014 from $9.4
million for 2013. Additionally, fees and service charges increased $2.0 million, or 11.3%, to $19.3 million for the
year ended December 31, 2014, compared to $17.3 million for 2013. The increases in both commissions and fees
and service charges were driven by increased client activity as a result of our growth.
Other losses totaled $3.8 million for the year ended December 31, 2014, compared to $1.0 million for 2013. The
increase in other losses was driven by additional amortization of our low income housing tax credit investments
recorded during the year. Additionally, net gains on sales of securities and loans totaled $5.3 million and $5.4
million, respectively, for the year ended December 31, 2014, compared to $6.2 million and $6.3 million during the
prior year.
Non-Interest Expense
Non-interest expense increased $46.0 million, or 18.6%, to $293.2 million for the year ended December 31, 2014
from $247.2 million for the year ended December 31, 2013. This increase was primarily driven by a $33.1 million
increase in salaries and benefits mostly attributable to the addition of five private client banking teams and our
continued hiring for the expansion of Signature Financial, along with increased incentive-based compensation
costs driven by the growth of our business. The increase also reflects a $2.8 million increase in occupancy and
equipment expenses, resulting from the expansion of existing offices, along with a $10.1 million increase in other
general and administrative expenses, reflecting increased expenses mostly resulting from additional client activity
as a result of our growth.
57
Stock-Based Compensation
We recognize compensation expense in our Consolidated Statement of Income for all stock-based compensation
awards over the requisite service period with a corresponding credit to equity, specifically additional paid-in capital.
Compensation expense is measured based on grant date fair value and is included in salaries and benefits (non-
interest expense).
As of December 31, 2014, our total unrecognized compensation cost related to unvested restricted shares was
$54.2 million, which is expected to be recognized over a weighted-average period of 2.62 years. During the years
ended December 31, 2014 and 2013, we recognized compensation expense of $27.7 million and $15.6 million,
respectively, for restricted shares. The total fair value of restricted shares that vested during the years ended
December 31, 2014 and 2013 was $45.6 million and $2,600, respectively.
Income Taxes
We recognized income tax expense for the years ended December 31, 2014 and 2013 of $215.1 million and
$162.8 million, respectively. Our effective tax rates for the years ended December 31, 2014 and 2013 were 42.0%
and 41.6%, respectively.
The components of our income tax expense are reflected in the following table:
(in thousands)
Current expense
Deferred income tax expense
Total income tax expense
Years ended December 31,
2014
2013
$
$
178,475
36,600
215,075
155,273
7,517
162,790
The increase in income tax expense for the year ended December 31, 2014, when compared to the previous year,
was primarily driven by an increase in our pre-tax income, along with a $1.8 million tax charge related to New York
State corporate income tax reform (the “reform”) enacted on March 31, 2014.
The reform included several changes to existing tax legislation that are effective for tax years beginning January 1,
2015 (except as noted), the most pertinent of which are as follows:
Merges the Article 32 Bank Franchise Tax into the Article 9-A Corporate Franchise Tax;
Implements a single receipts apportionment factor using customer-based sourcing rules. The new rules
include sourcing a fixed 8 percent of income for mortgage-backed securities to New York State. Also
special rules apply to the sourcing of receipts from “qualified financial instruments” which are defined as
instruments that are marked to market under IRC sections 475 or 1256. An annual irrevocable election
can be made to source a fixed 8 percent of income from all qualified financial instruments to New York
State in place of customer-based sourcing.;
Lowers the business income tax base rate from 7.1% to 6.5% for tax years beginning on or after January
1, 2016; and
Streamlines the computation of the Metropolitan Transportation Authority (“MTA”) Surcharge, makes it
permanent, and increases the rate from 17% to 25.6% of the corporate income tax rate.
In accordance with GAAP, we revalued our New York State net deferred tax assets to consider the effects of the
enacted provisions outlined above. While we do not anticipate a material impact on our Consolidated Financial
Statements prospectively, we will continue to evaluate the effects of the reform on our income tax expense and net
deferred tax assets.
58
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Net Income
Net income for the year ended December 31, 2013 was $228.7 million, or $4.76 diluted earnings per share,
compared to $185.5 million, or $3.91 diluted earnings per share, for year ended December 31, 2012.
The return on average shareholders’ equity for the year ended December 31, 2013 was 13.26% compared to
12.13% for the year ended December 31, 2012. The return on average assets was 1.16% for the year ended
December 31, 2013 compared to 1.17% for the year ended December 31, 2012.
(in thousands)
Interest income
Interest expense
Net interest income before provision for loan and lease losses
Provision for loan and lease losses
Non-interest income:
Non-interest income excluding net impairment losses on securities
recognized in earnings
Net impairment losses on securities recognized in earnings
Total non-interest income
Non-interest expense
Income tax expense
Net income
Years ended December 31,
2013
2012
$
755,150
106,807
648,343
41,643
38,160
(6,149)
32,011
247,177
162,790
228,744
$
660,556
110,750
549,806
41,427
39,312
(3,073)
36,239
218,243
140,892
185,483
59
Net Interest Income
Net interest income is the difference between interest earned on assets and interest incurred on liabilities. The
following table presents an analysis of net interest income by each major category of interest-earning assets and
interest-bearing liabilities for the years ended December 31, 2013 and 2012:
(dollars in thousands)
INTEREST-EARNING ASSETS
Short-term investments
Investment securities
Commercial loans, mortgages and leases (1)
Residential mortgages and consumer loans (1)
Loans held for sale
Total interest-earning assets
Non-interest-earning assets
Total assets
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW and interest-bearing demand
Money market
Time deposits
Non-interest-bearing demand deposits
Total deposits
Borrowings
Total deposits and borrowings
Other non-interest-bearing liabilities
and shareholders' equity
Total liabilities and shareholders' equity
OTHER DATA
Net interest income / interest rate spread
Net interest margin
Ratio of average interest-earning assets
to average interest-bearing liabilities
Years ended December 31,
2013
2012
Average
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Average
Balance
Interest
Income/
Expense
Average
Yield/
Rate
$
126,995
7,549,126
10,907,825
374,938
365,768
19,324,652
362,127
19,686,779
$
$
819,164
8,959,324
1,065,139
4,782,428
15,626,055
2,192,788
17,818,843
1,867,936
19,686,779
$
446
235,430
500,712
14,224
4,338
755,150
3,081
64,095
13,033
-
80,209
26,598
106,807
0.35%
3.12%
4.59%
3.79%
1.19%
3.91%
0.38%
0.72%
1.22%
-
0.51%
1.21%
0.60%
338
238,873
402,019
15,818
3,508
660,556
3,145
66,696
14,322
-
84,163
26,587
110,750
100,289
7,114,310
7,699,659
384,659
257,709
15,556,626
299,368
15,855,994
705,604
7,874,582
925,267
3,569,645
13,075,098
1,161,784
14,236,882
1,619,112
15,855,994
0.34%
3.36%
5.22%
4.11%
1.36%
4.25%
0.45%
0.85%
1.55%
-
0.64%
2.29%
0.78%
648,343
3.31%
3.36%
108.45%
549,806
3.47%
3.53%
109.27%
(1) Average loan balances include non-accrual loans along with deferred fees and costs.
60
Interest income and interest expense are affected both by changes in the volume of interest-earning assets and
interest-bearing liabilities and by changes in yields and interest rates. The table below analyzes the impact of
changes in volume (changes in average outstanding balances multiplied by the prior period’s rate) and changes in
interest rate (changes in interest rates multiplied by the current period’s average balance). Changes that are
caused by a combination of interest rate and volume changes are allocated proportionately to both changes in
volume and changes in interest rate. For purposes of calculating the changes in our net interest income, the effect
of nonperforming assets is included in the change due to rate.
(in thousands)
INTEREST INCOME
Short-term investments
Investment securities
Commercial loans, mortgages and leases
Residential mortgages and consumer loans
Loans held for sale
Total interest income
INTEREST EXPENSE
Interest-bearing deposits
NOW and interest-bearing demand
Money market
Time deposits
Total interest-bearing deposits
Borrowings
Total interest expense
Net interest income
Year ended December 31,
2013 vs. 2012
Change
Due to Rate
Change
Due to
Volume
Total
Change
$
18
(18,043)
(68,814)
(1,194)
(641)
(88,674)
90
14,600
167,507
(400)
1,471
183,268
108
(3,443)
98,693
(1,594)
830
94,594
(570)
(11,789)
(3,454)
(15,813)
(23,583)
(39,396)
(49,278)
$
506
9,188
2,165
11,859
23,594
35,453
147,815
(64)
(2,601)
(1,289)
(3,954)
11
(3,943)
98,537
Net interest income for the year ended December 31, 2013 was $648.3 million, an increase of $98.5 million, or
17.9%, over the year ended December 31, 2012. The increase in net interest income for 2013 was largely driven
by increases in average interest-earning assets and average deposits, which increased $3.77 billion and $2.55
billion, respectively, compared to the previous year. Although net interest income for 2013 was positively
impacted by lower rates paid on deposits, the impact of lower deposit rates was more than offset by the negative
effects of the ongoing low interest rate environment on asset yields. Net interest margin for the year ended
December 31, 2013 decreased to 3.36%, compared to 3.53% for the previous year, primarily due to the continued
effect of the prolonged low interest rate environment.
Total investment securities averaged $7.55 billion for the year ended December 31, 2013, compared to $7.11
billion for the year ended December 31, 2012. The overall yield on the securities portfolio for the year ended
December 31, 2013 was 3.12%, down 24 basis points from the previous year. The decline in yield was
predominantly due to the reinvestment of principal pay-downs from higher-yielding securities in the current low
interest rate environment. Our portfolio primarily consists of high quality and highly-rated mortgage-backed
securities, commercial mortgage-backed securities, and collateralized mortgage obligations issued by government
agencies, government-sponsored enterprises, and private issuers. We mitigate extension risk through our overall
strategy of purchasing relatively stable duration securities that, by their nature, have lower yields. At
December 31, 2013, the baseline average duration of our investment securities portfolio was approximately 4.13
years, compared to 2.75 years at December 31, 2012.
61
Total commercial loans, mortgages and leases averaged $10.91 billion for the year ended December 31, 2013, an
increase of $3.21 billion or 41.7% over the year ended December 31, 2012. The average yield on this portfolio
decreased 63 basis points to 4.59% when compared to the year ended December 31, 2012. The decrease in
average yield reflects the impact of the low prevailing interest rate environment on recent loan origination and
refinancing activity. The average yield for 2013 reflects the benefit of a $6.5 million increase in prepayment
penalty income, compared to the previous year. Our commercial real estate loans (including multi-family loans)
normally have a term of ten years, with a fixed rate of interest for the first five years and a rate that either adjusts
annually or is fixed for the five years that follow. Loans that prepay in the first five years generate prepayment
penalties ranging from one to five percentage points of the then-current loan balance, depending on the remaining
term of the loan. If a loan is still outstanding in the sixth year and the borrower selects the fixed rate option, the
prepayment penalties typically reset to a range of one to five percentage points over years six through ten. The
current low prevailing interest rate environment, coupled with borrowers’ expectations of higher rates in future
periods, contributed to the increase in prepayment activity during 2013. It is difficult to predict the level of
prepayment activity in future periods as it depends on market conditions, real estate values, the actual or
perceived direction of market interest rates and the contractual repricing and maturity dates of commercial real
estate loans.
We are an active participant in the SBA loan and SBA pool secondary market by purchasing, securitizing, and
selling the guaranteed portions of SBA loans, most of which have adjustable rates and float at a spread to the
prime rate. Once purchased, we typically warehouse the guaranteed loan for approximately 30 to 180 days and
classify them as loans held for sale. From this warehouse, we aggregate like SBA loans by similar characteristics
into pools for securitization to the secondary market. The timing of the purchase and sale of such loan pools
drives the quarter-to-quarter fluctuations in average balances of loans held for sale, which averaged $365.8 million
and $257.7 million for the years ended December 31, 2013 and 2012, respectively.
Average total deposits and borrowings increased $3.58 billion, or 25.2%, to $17.82 billion during the year ended
December 31, 2013, compared to $14.24 billion for the previous year. Overall cost of funding was 0.60% during
2013, decreasing 18 basis points from 0.78% in 2012.
For the year ended December 31, 2013, average non-interest-bearing demand deposits were $4.78 billion,
compared to $3.57 billion for the year ended December 31, 2012, an increase of $1.21 billion, or 34.0%. Non-
interest-bearing demand deposits continue to comprise a significant component of our deposit mix, representing
31.6% of all deposits at December 31, 2013. Additionally, average NOW and interest-bearing checking and
money market accounts totaled $9.78 billion for the year ended December 31, 2013, an increase of $1.20 billion,
or 14.0%, over the year ended December 31, 2012. Core deposits have provided us with a source of stable, low
cost funding, which has positively affected our net interest margin and income. Furthermore, short-term escrow
deposits have provided us with an additional low cost funding alternative. As a result of lower short-term interest
rates, our funding cost for money market accounts and NOW accounts decreased to 0.72% and 0.38%,
respectively, for the year ended December 31, 2013 compared to 0.85% and 0.45%, respectively, for the prior
year.
Average time deposits, which are relatively short-term in nature, totaled $1.07 billion for the year ended December
31, 2013 and carried an average cost of 1.22% in 2013, down 33 basis points from 1.55% in 2012. Time deposits
are offered to supplement our core deposit operations for existing or new client relationships, and are not
marketed through retail channels.
For the year ended December 31, 2013, average total borrowings were $2.19 billion, compared to $1.16 billion for
the previous year, an increase of $1.03 billion, or 88.7%. The increase in our average total borrowings for 2013,
when compared to the previous year, reflects funding needs for increased loan growth along with purchases of
investment securities as a result of advantageous interest rates. At December 31, 2013, total borrowings
represent approximately 16.5% of all funding liabilities, compared to 10.1% at December 31, 2012. The average
cost of total borrowings was 1.21% and 2.29% for the years ended December 31, 2013 and 2012, respectively.
The decrease in the average cost of borrowings reflects the replacement of matured borrowings with lower cost
short-term borrowing positions.
62
Provision and Allowance for Loan and Lease Losses
Our provision for loan and lease losses was $41.6 million for the year ended December 31, 2013, compared to
$41.4 million for the prior year, an increase of 216,000, or 0.5%. The increase in our provision was driven by our
2013 loan growth, which was partially offset by a reduction in charge-off activity. Our ALLL increased $27.6 million
to $135.1 million at December 31, 2013 from $107.4 million at December 31, 2012, primarily as a result of our loan
growth during the year.
The following table allocates the ALLL based on our judgment of inherent losses in each respective lending area
according to our methodology for allocating reserves.
(dollars in thousands)
Mortgage loans:
Multi-family residential property
Commercial property
1-4 family residential property
Home equity lines of credit
Construction and land
Other loans:
Commercial and industrial
Consumer
Total
2013
2012
December 31,
Loan
Amount
Allowance
Amount
Allowance
as a % of
Loan Amount
Loan
Amount
Allowance
Amount
Allowance
as a % of
Loan Amount
$
6,637,353
3,651,538
346,795
170,441
125,334
2,565,016
11,479
13,507,956
$
47,814
44,415
3,600
1,406
1,323
35,745
768
135,071
0.72%
1.22%
1.04%
0.82%
1.06%
1.39%
6.69%
1.00%
4,380,453
2,919,708
307,158
190,782
99,475
1,860,866
10,291
9,768,733
31,292
38,292
4,794
1,099
1,127
30,176
653
107,433
0.71%
1.31%
1.56%
0.58%
1.13%
1.62%
6.35%
1.29%
In determining the ALLL, management considers the imprecision inherent in the process of estimating credit
losses. A portion of the allowance is based on management’s review of factors affecting the determination of
probable losses inherent in the portfolio that are not necessarily captured by the application of historical loss
experience factors, such as the current regional economic environment.
Commercial loans (including commercial and industrial loans along with loans to commercial borrowers that are
secured by real estate) constitute a significant portion of our loan activity and loan portfolio. As of December 31,
2013, substantially all of the real estate collateral for the loans in our portfolio is located within the New York
metropolitan area. As a result, our financial condition and results of operations may be affected by changes in the
economy and the real estate market of the New York metropolitan area. A prolonged period of economic
recession or other adverse economic conditions in the New York metropolitan area may result in an increase in
nonpayment of loans, a decrease in collateral value, and an increase in our ALLL.
For additional information about the provision and ALLL, see the related discussions of asset quality later in this
report.
Non-Interest Income
For the year ended December 31, 2013, non-interest income was $32.0 million, a decrease of $4.2 million, or
11.7%, when compared with 2012. The decrease in non-interest income was driven by an increase in net other-
than-temporary impairment losses on securities recognized through earnings and reductions in the amounts of net
gains on sales of loans, which were partially offset by an increase in commissions and fees and service charges.
We recognized through earnings net other-than-temporary impairment losses on securities totaling $6.1 million
during the year ended December 31, 2013, compared to $3.1 million for the prior year. The increase in other-
than-temporary impairment losses on securities for 2013 reflects $2.1 million of write-downs that were recorded
due to the effects of the final Volcker rule. For further discussion of our other-than-temporary impairment losses,
see Note 4 to our Consolidated Financial Statements.
63
During the year ended December 31, 2013, net gains on sales of loans totaled $6.3 million, compared to $9.3
million recorded during the prior year. The decrease in net gains on sales of loans was primarily due to reduced
client demand driven by the current interest rate environment.
Commissions increased $1.2 million, or 14.1%, to $9.4 million for the year ended December 31, 2013 from $8.2
million for 2012. Additionally, fees and service charges increased $1.8 million, or 11.6%, to $17.3 million for the
year ended December 31, 2013, compared to $15.5 million for 2012. The increases in both commissions and fees
and service charges were driven by increased client activity as a result of our growth.
Non-Interest Expense
Non-interest expense increased $28.9 million, or 13.3%, to $247.2 million for the year ended December 31, 2013
from $218.2 million for the year ended December 31, 2012. This increase was primarily driven by a $16.9 million
increase in salaries and benefits mostly attributable to the addition of ten private client banking teams, the addition
of an asset-based lending team, and our continued hiring for Signature Financial. The increase also reflects a
$2.4 million increase in occupancy and equipment expenses, resulting from the expansion of existing offices,
along with a $9.7 million increase in other general and administrative expenses, reflecting increased expenses
mostly resulting from additional client activity as a result of our growth.
Stock-Based Compensation
We recognize compensation expense in our Consolidated Statement of Income for all stock-based compensation
awards over the requisite service period with a corresponding credit to equity, specifically additional paid-in capital.
Compensation expense is measured based on grant date fair value and is included in salaries and benefits (non-
interest expense).
As of December 31, 2013, our total unrecognized compensation cost related to unvested restricted shares was
$39.9 million, which is expected to be recognized over a weighted-average period of 2.91 years. During the years
ended December 31, 2013 and 2012, we recognized compensation expense of $15.6 million and $17.6 million,
respectively, for restricted shares. Included in compensation expense for the year ended December 31, 2012 was
$3.2 million from the December 10, 2012 accelerated vesting of 276,016 restricted shares originally scheduled to
vest on March 22, 2013. The total fair value of restricted shares that vested during the years ended December 31,
2013 and 2012 was $2,600 and $34.1 million, respectively.
Income Taxes
We recognized income tax expense for the years ended December 31, 2013 and 2012 of $162.8 million and
$140.9 million, respectively. The components of our income tax expense are reflected in the following table:
(in thousands)
Current expense
Deferred income tax expense (benefit)
Total income tax expense
Years ended December 31,
2013
2012
$
$
155,273
7,517
162,790
149,949
(9,057)
140,892
The increase in current income tax expense for the year ended December 31, 2013, when compared to the
previous year, was primarily driven by an increase in our pre-tax income, which was partially offset by the benefits
of increased low income housing tax credits recognized during 2013. Our effective tax rate for the year ended
December 31, 2013 decreased to 41.6%, compared to 43.2% for the prior year as a result of low income housing
tax credits recognized.
64
Financial Condition
Securities Portfolio
Securities in our investment portfolio are designated as either available-for-sale (“AFS”) or held-to-maturity
(“HTM”) based upon various factors, including asset/liability management strategies, liquidity and profitability
objectives and regulatory requirements. AFS securities may be sold prior to maturity, based upon asset/liability
management decisions, and are carried at fair value. Unrealized gains or losses on AFS securities are recorded
in accumulated other comprehensive income, net of tax, in shareholders’ equity. HTM securities are carried at
cost and adjusted for amortization of premiums or accretion of discounts. Other-than-temporary impairment
losses on AFS and HTM debt securities attributable to credit losses are recorded in current earnings, while losses
attributable to noncredit factors are recorded in accumulated other comprehensive income. Amortization of
premiums and accretion of discounts on mortgage-backed securities are periodically adjusted for estimated
prepayments.
At December 31, 2014, our total securities portfolio was $8.28 billion and primarily consisted of mortgage-backed
securities (“MBSs”) and collateralized mortgage obligations (“CMOs”) issued by U.S. Government agencies
($911.6 million), government-sponsored enterprises ($5.97 billion) and private issuers ($436.5 million). As of
December 31, 2014, 89.1% of our securities portfolio had a AAA credit rating, 94.7% had a credit rating of A or
better, and 97.5% was rated investment grade or better. Also, we did not hold sovereign debt of Euro-zone
countries currently experiencing financial difficulty. Overall, our securities portfolio had a weighted average
duration of 3.17 years and a weighted average life of 4.40 years as of December 31, 2014. For further discussion
of our investment securities and the related determination of fair value, see Notes 3 and 4 to our Consolidated
Financial Statements.
During the second quarter of 2013, we transferred $806.3 million of AFS securities to HTM due to expected
market volatility. The securities transferred consisted primarily of CMOs, MBSs, and corporate bonds. The
securities were transferred at fair value, which became the cost basis for the HTM securities. The net unrealized
loss, net of tax, on these securities at the date of transfer was $19.2 million, and continues to be reported, net of
tax, as a component of accumulated other comprehensive income. This net unrealized loss will be accreted to
interest income over the remaining life of the securities, and will be offset by the amortization of the net discount
created by the transfer, resulting in no current or future impact to our net interest income as a result of this
transfer. Also, there were no gains or losses recognized as a result of this transfer.
The agency MBS portfolio primarily consists of adjustable rate hybrid securities, fixed rate balloon, and seasoned
15-year structures. The agency CMO portion of our portfolio primarily consists of short duration planned
amortization and sequential structures, collateralized by conforming first lien residential mortgages. The private
CMO portfolio consists of prime borrowers with seasoned underlying mortgages and supportive credit
enhancement. Our asset-backed portfolio primarily consists of intermediate term fixed rate AAA and floating rate
AA/A rated credit card, auto and home equity collateralized securities and collateralized debt obligations.
At December 31, 2014, the net unrealized gain on securities, net of tax effect, was $13.1 million as reflected in
accumulated other comprehensive income, compared to a net unrealized loss of $51.7 million at December 31,
2013. The fair value of our AFS securities is affected by several factors, including (i) credit spreads, (ii) the
interest rate environment, (iii) unemployment rates, (iv) delinquencies and defaults on the mortgages underlying
such obligations, (v) changes in interest rates resulting from expiration of the fixed rate portion of adjustable rate
mortgages (“ARMs”), (vi) changing home prices, (vii) market liquidity for such obligations, and (viii) uncertainties
with respect to government-sponsored enterprises such as Fannie Mae and Freddie Mac, which guarantee many
of the debt securities we own. The estimated effect of possible changes in interest rates on our earnings and
equity is discussed in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”
On December 10, 2013, federal regulators issued a final rule implementing the “Volcker Rule” enacted as part of
the Dodd-Frank Act. The Volcker Rule prohibits banking organizations and their affiliates from investing in or
sponsoring certain types of funds, including a range of asset securitization structures, that do not meet the
exemptive criteria for continued ownership (defined as “Covered Funds”). The Federal Reserve has exercised its
authority to extend the divestiture period for such pre-2014 investments to July 21, 2016, and stated its intent to
further extend the divestiture period to July 21, 2017. We hold certain AFS securities that meet the definition of
Covered Funds and, therefore, must be divested within the divestiture period. These securities, which are
65
predominantly collateralized mortgage obligations, had a total fair value and amortized cost of $146.5 million and
$144.0 million, respectively, as of December 31, 2014. We continue to actively monitor the Covered Funds held in
our investment portfolio, and we currently anticipate that a substantial portion will be paid down through principal
remittances within the divestiture period. In the interim, we expect to sell certain securities when appropriate to
take advantage of market conditions. During 2014, we sold seven such securities, resulting in a net realized gain
of $710,000.
We continue to closely monitor the securities in our investment portfolio, and other than those securities for which
we have recorded other-than-temporary impairment losses, we believe the declines in fair value are temporary.
With the exception of those securities that are Covered Funds under the Volcker Rule, we have no intent to sell
these securities, and we believe it is not more likely than not that we will be required to sell these investments
before recovery of their amortized cost basis. In the event these securities demonstrate an adverse change in
expected cash flows and we no longer expect to recover the amortized cost basis or if we change our intent to
hold these securities, we would recognize additional other-than-temporary impairment losses through earnings.
The following table summarizes the components of our securities portfolios as of the dates indicated:
(in thousands)
AVAILABLE-FOR-SALE
U.S. Treasury securities
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
2014
December 31,
2013
2012
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
$
500
501
500
501
-
-
24,830
1,427,438
26,018
1,464,606
24,171
1,049,867
25,004
1,050,217
32,456
844,503
34,315
878,385
543,752
2,708,345
431,961
549,757
2,713,168
430,888
578,012
2,451,274
494,920
576,738
2,408,166
491,319
576,709
2,872,130
696,593
586,825
2,900,066
694,986
Commercial mortgage-backed securities
278,517
282,819
345,560
348,707
373,750
392,637
Single issuer trust preferred & corporate
debt securities
Pooled trust preferred securities
Collateralized debt obligations
Other
Equity securities (1)
Total available-for-sale
HELD-TO-MATURITY
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
387,308
26,034
4,511
173,426
15,802
6,022,424
$
395,216
19,927
4,541
170,723
15,295
6,073,459
399,214
26,735
4,926
300,420
16,724
5,692,323
401,733
13,093
4,926
296,060
15,769
5,632,233
418,918
27,863
5,282
186,478
16,290
6,050,972
426,855
8,601
2,952
188,539
16,195
6,130,356
$
8,610
468,218
8,759
477,579
2,358
493,979
2,452
478,462
3,010
67,904
3,156
68,648
327,253
1,328,435
5,616
331,043
1,324,998
4,942
312,405
1,288,749
6,525
310,599
1,241,417
5,473
142,358
485,918
8,852
148,130
498,277
7,192
Commercial mortgage-backed securities
18,152
19,351
18,260
19,119
-
-
Single issuer trust preferred & corporate
debt securities
Collateralized debt obligations
Other
Total held-to-maturity
45,862
-
6,405
2,208,551
$
49,104
-
6,401
2,222,177
43,650
-
9,918
2,175,844
42,911
-
9,857
2,110,290
-
4,739
27,054
739,835
-
2,739
27,327
755,469
(1) Equity securities represent Community Reinvestment Act (“CRA”) qualifying closed-end bond fund investments.
66
The following table presents the credit rating distribution of our securities portfolio as of December 31, 2014:
Credit Rating
AAA
AA
A
BBB
Below BBB
Total
Percentage of
Portfolio
89.08%
1.93%
3.72%
2.76%
2.51%
100.00%
The following table provides the estimated change in fair value of our debt securities for various interest rate
shocks as of December 31, 2014:
Interest Rate Shock
+100 basis points
+200 basis points
+300 basis points
+400 basis points
Estimated Fair
Value Change
(2.62%)
(7.21%)
(12.16%)
(16.92%)
67
The following table presents the contractual maturity distribution and the weighted average yields of our combined
AFS and HTM securities portfolio as of December 31, 2014. Due to prepayments of collateral underlying the
securities, actual maturity may differ from contractual maturity.
(dollars in thousands)
Less than one year
U.S. Treasury securities
Collateralized mortgage obligations
Other securities (1)
Total
One year to less than five years
Mortgage-backed securities
Collateralized mortgage obligations
Other securities
Total
Five years to less than 10 years
Mortgage-backed securities
Collateralized mortgage obligations
Other securities
Total
10 years and longer
Mortgage-backed securities
Collateralized mortgage obligations
Other securities
Total
All maturities
U.S. Treasury securities
Mortgage-backed securities
Collateralized mortgage obligations
Other securities (1)
Total
Amortized Cost
Fair Value
Average Yield
$
$
$
$
$
500
2,845
2,001
5,346
3,838
15,277
162,417
181,532
8,459
104,698
282,016
395,173
$
$
$
$
1,916,799
5,222,542
493,781
7,633,122
500
1,929,096
5,345,362
940,215
8,215,173
$
501
2,900
2,003
5,404
4,062
15,507
169,183
188,752
8,956
106,805
286,282
402,043
1,963,944
5,229,584
490,614
7,684,142
501
1,976,962
5,354,796
948,082
8,280,341
0.39%
5.02%
5.05%
4.60%
5.47%
4.36%
3.35%
3.48%
3.58%
2.65%
3.00%
2.92%
3.07%
3.08%
5.45%
3.23%
0.39%
3.07%
3.07%
4.35%
3.22%
(1) Excludes equity securities, which do not have maturities.
68
Loan Portfolio
The following table presents information regarding the composition of our loan portfolio, including loans held for
sale, as of the dates indicated:
(dollars in thousands)
Mortgage loans:
2014
2013
December 31,
2012
2011
2010
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Multi-family residential property
$
8,607,989
46.97%
6,637,353
47.81%
4,380,453
43.38%
3,003,428
41.68%
1,716,248
30.68%
Commercial property
4,833,123
26.37%
3,651,538
26.30%
2,919,708
28.90%
2,218,053
30.78%
1,799,162
32.16%
1-4 family residential property
Home equity lines of credit
Construction and land
463,420
160,890
64,824
2.53%
0.88%
0.35%
346,795
170,441
125,334
2.50%
1.23%
0.90%
307,158
190,782
99,475
3.04%
1.89%
0.98%
259,418
198,375
63,775
3.60%
2.75%
0.88%
266,011
192,027
115,195
4.76%
3.43%
2.06%
Other loans:
Commercial and industrial
3,697,725
20.18%
2,565,016
18.48%
1,860,866
18.42%
1,098,805
15.24%
1,146,110
20.49%
Commercial - SBA
guaranteed portion
Consumer
Sub-total / Total
Premiums, deferred
fees and costs
Total
486,750
10,245
2.66%
0.06%
375,501
11,479
2.70%
0.08%
332,430
10,291
3.29%
0.10%
354,060
11,837
4.91%
0.16%
346,454
13,086
6.19%
0.23%
18,324,966
100.00%
13,883,457
100.00%
10,101,163
100.00%
7,207,751
100.00%
5,594,293
100.00%
81,039
$
18,406,005
56,773
13,940,230
40,075
10,141,238
35,000
7,242,751
32,834
5,627,127
Total loans increased by $4.47 billion to $18.41 billion at December 31, 2014 from $13.94 billion at December 31,
2013. Our total loan-to-deposit ratio, excluding loans held for sale, decreased to 78.9% at December 31, 2014
from 79.3% at December 31, 2013.
Substantially all of the real estate collateral for the loans in our portfolio is located within the New York
metropolitan area. As a result, our financial condition and results of operations may be affected by changes in the
economy and the real estate market of the New York metropolitan area. A prolonged period of economic
recession or other adverse economic conditions in the New York metropolitan area may result in an increase in
nonpayment of loans, a decrease in collateral value, and an increase in our ALLL.
We only securitize the U.S. Government guaranteed portion of SBA loans, and we have not securitized any of our
loans secured by real estate. As a result, we have not made any representations to, and do not have obligations
to, third-party purchasers regarding any such loans.
At December 31, 2014, loans fully secured by cash and marketable securities represented 0.6% of outstanding
loan balances. The SBA portfolio, consisting only of the guaranteed portion of the SBA loans, represented 2.7%
of outstanding loan balances. Our fully unsecured loan portfolio represented 1.2% of our total outstanding loan
portfolio at December 31, 2014. We generally limit unsecured lending for consumer loans to private clients who
we believe possess ample net worth, liquidity and repayment capacity. The remainder of our loan portfolio is
secured by real estate, company assets, personal assets and other forms of collateral.
In order to assist in managing credit quality, we view the Bank’s loan portfolio by various segments and classes of
loans. For commercial loans, we assign individual credit ratings ranging from 1 (lowest risk) to 9 (highest risk) as
an indicator of credit quality. These ratings are based on specific risk factors, including (i) historical and projected
financial results of the borrower, (ii) market conditions of the borrower’s industry that may affect the borrower’s
future financial performance, (iii) business experience of the borrower’s management, (iv) nature of the underlying
collateral, if any, and (v) history of the borrower’s payment performance.
69
The following table summarizes the recorded investment of our portfolio of commercial loans by credit rating as of
the dates indicated:
(in thousands)
December 31, 2014
Pass
Rating 1-6
Special
Mention
Rating 7
Substandard
Rating 8
Doubtful
Rating 9
Non-rated
Total
Commercial loans secured by real estate:
Multi-family residential property
$
8,593,573
-
Commercial property
1-4 family residential property
Construction and land
Commercial and industrial loans
Total commercial loans
December 31, 2013
4,798,950
3,509
297,148
64,642
-
-
3,598,738
17,353,051
$
16,191
19,700
Commercial loans secured by real estate:
Multi-family residential property
$
6,619,472
Commercial property
1-4 family residential property
Construction and land
Commercial and industrial loans
Total commercial loans
3,593,283
166,917
123,171
2,487,590
12,990,433
$
5,159
27,375
3,706
-
3,661
39,901
13,021
30,664
5,507
182
33,615
82,989
11,161
30,791
5,623
2,163
19,282
69,020
-
-
-
-
-
-
130
-
4,762
4,762
44,419
44,549
-
89
-
-
-
-
65
-
8,343
8,432
46,140
46,205
8,606,594
4,833,123
302,785
64,824
3,697,725
17,505,051
6,635,792
3,651,538
176,311
125,334
2,565,016
13,153,991
For consumer loans, including residential mortgages and home equity lines of credit, we consider the borrower’s
payment history and current payment performance as leading indicators of credit quality. A consumer loan is
considered nonperforming generally when it becomes 90 days delinquent based on contractual terms, at which
time the accrual of interest income is discontinued. In the case of residential mortgages and home equity lines of
credit, exceptions may be made if the loan has sufficient collateral value, based on a current appraisal, and is in
process of collection.
The following table summarizes the recorded investment of our portfolio of consumer loans by performance status
as of the dates indicated:
(in thousands)
December 31, 2014
Residential mortgages
Home equity lines of credit
Other consumer loans
Total consumer loans
December 31, 2013
Residential mortgages
Home equity lines of credit
Other consumer loans
Total consumer loans
Performing
Nonperforming
Total
$
$
$
$
159,911
156,253
10,134
326,298
168,557
167,701
11,337
347,595
2,119
4,637
111
6,867
3,488
2,740
142
6,370
162,030
160,890
10,245
333,165
172,045
170,441
11,479
353,965
70
The following table presents commercial and industrial loans and construction and land loans at fixed and variable
rates, by maturity for the period indicated:
As of December 31, 2014
Within One
Year
One to Five
Years
After Five
Years
$
$
820,154
22,444
842,598
2,498,203
42,380
2,540,583
2,129,517
411,066
2,540,583
379,368
-
379,368
368,951
10,417
379,368
Total
3,697,725
64,824
3,762,549
(in thousands)
Loan Type
Commercial and industrial
Construction and land
Total
Loans at fixed interest rates
Loans at variable interest rates
Total
Asset Quality
Nonperforming Assets
Nonperforming assets include nonaccrual loans and investment securities as well as other real estate owned and
other repossessed assets. Loans are generally placed on nonaccrual status upon becoming 90 days past due, or
three months delinquent for single family property loans, based on contractual terms. In the case of commercial
loans and loans secured by real estate, exceptions may be made if the loan has sufficient collateral value, based
on a current appraisal, and is in process of collection. Consumer loans that are not secured by real estate,
however, are generally placed on nonaccrual status when deemed uncollectible; such loans are generally charged
off when they reach 180 days past due.
At the time a loan is placed on nonaccrual status, the accrued but uncollected interest receivable is reversed and
accounted for on a cash basis or cost recovery basis, until qualifying for return to accrual status. Management’s
classification of a loan as nonaccrual does not necessarily indicate that the principal of the loan is uncollectible in
whole or in part.
The following table summarizes our nonperforming assets, accruing troubled debt restructured loans, accruing
loans that were 90 days past due as to principal or interest, and certain asset quality indicators as of the dates
indicated:
(dollars in thousands)
Non-accrual assets:
Loans
Troubled debt restructured loans
Investment securities, at fair value
Other real estate owned
Other repossessed assets
Total nonperforming assets
Accruing troubled debt restructured loans
Accruing loans past due 90 days or more:
Loans
Loans held for sale
Asset Quality Ratios:
Total non-accrual loans to total loans
Total nonperforming assets to total assets
ALLL to non-accrual loans
2014
2013
December 31,
2012
2011
2010
$
13,843
7,165
948
-
245
22,201
$
$
36,125
$
1,839
$
1,407
0.12%
0.08%
21,414
9,928
4,778
-
800
36,920
33,098
1,288
1,151
0.23%
0.16%
24,001
3,189
5,927
-
-
33,117
52,554
27,176
1,579
0.28%
0.19%
40,432
31,155
1,786
5,772
566
-
48,556
44,685
9,000
1,307
0.62%
0.33%
2,979
4,445
1,667
-
40,246
8,530
15,740
1,778
0.65%
0.34%
782.52%
430.96%
395.12%
204.09%
197.45%
71
The following table summarizes the delinquency and accrual status of our loan portfolio, excluding loans held for
sale, as of the dates indicated:
(in thousands)
December 31, 2014
Commercial loans
Past Due
30-89 Days
Past Due
90+ Days
Total
Past Due
Current
Total
Loans
Accruing
Loans Past
Due 90+ Days
Non-accruing
Loans
Loans secured by real estate:
Multi-family residential property
$
2,800
Commercial property
1-4 family residential property
Construction and land
Commercial and industrial loans
Consumer loans
Residential mortgages
Home equity lines of credit
Consumer loans
Total
December 31, 2013
Commercial loans
794
1,122
-
15,535
2,059
596
16
22,922
$
Loans secured by real estate:
Multi-family residential property
$
15,105
Commercial property
1-4 family residential property
Construction and land
16,462
-
-
-
3,819
5,011
183
6,666
2,421
4,637
111
22,848
-
7,308
4,973
2,162
2,800
4,613
6,133
183
8,603,794
8,606,594
4,828,510
4,833,123
296,652
64,641
302,785
64,824
22,201
3,675,524
3,697,725
4,480
5,233
127
45,770
157,550
155,657
162,030
160,890
10,118
17,792,446
10,245
17,838,216
15,105
23,770
4,973
2,162
6,620,687
6,635,792
3,627,768
3,651,538
171,338
123,172
176,311
125,334
Commercial and industrial loans
18,229
10,529
28,758
2,536,258
2,565,016
Consumer loans
Residential mortgages
Home equity lines of credit
Consumer loans
Total
2,441
2,558
76
54,871
$
4,276
3,240
142
32,630
6,717
5,798
218
87,501
165,328
164,643
172,045
170,441
11,261
13,420,455
11,479
13,507,956
-
712
-
-
825
302
-
-
1,839
-
-
-
-
-
788
500
-
1,288
-
3,106
5,011
183
5,841
2,119
4,637
111
21,008
-
7,308
4,973
2,162
10,529
3,488
2,740
142
31,342
Significant nonaccrual loans at December 31, 2014 consisted of one commercial and industrial loan for $4.0
million, two commercial real estate loans totaling $3.1 million, one residential mortgage for $5.0 million, and four
home equity lines of credit totaling $3.0 million. Each nonaccrual loan is being actively managed by the Bank, and
the ALLL includes a specific allocation for each such loan.
Nonaccrual investment securities at December 31, 2014 consisted of one collateralized debt obligation and one
bank-collateralized pooled trust preferred security, with fair values of $572,000 and $376,000, respectively. These
securities were classified as nonperforming because of a deferral of their interest payments.
Accruing loans past due 90 days or more, which are excluded from the nonperforming category, are presented in
the above tables. At December 31, 2014, accruing loans past due 90 days or more were primarily comprised of
matured performing loans in the normal course of renewal. Accruing loans held for sale past due 90 days or more
at December 31, 2014 are comprised of U.S. Government guaranteed SBA loans.
For economic reasons and to maximize the recovery of loans, we may work with borrowers experiencing financial
difficulties and will consider modifications to a borrower’s existing loan terms and conditions that we would not
otherwise consider, commonly referred to as TDRs. Our TDR loans consist of those loans where we modify the
contractual terms of the loan, such as (i) a deferral of the loan’s principal amortization through either interest-only
or reduced principal payments, (ii) a reduction in the loan’s contractual interest rate or (iii) an extension of the
loan’s contractual term. For a summary of our accounting methodologies relating to TDRs, see the Allowance for
Loan and Lease Losses section of our Critical Accounting Policies. Additionally, for a discussion of our TDR loans
and the related financial effects, see Note 8 to our Consolidated Financial Statements.
72
Allowance for Loan and Lease Losses
Our ALLL is maintained at a level estimated by management to absorb probable losses inherent in the loan
portfolio and is based on management’s continuing evaluation of the portfolio, the related risk characteristics, and
the overall economic conditions affecting the loan portfolio. The estimation is inherently subjective as it requires
measurements that are susceptible to significant revision as more information becomes available. At December
31, 2014, 2013, and 2012, our ALLL totaled $164.4 million, $135.1 million, and $107.4 million, respectively, which
represents 0.92%, 1.00%, and 1.10% of total loans and leases (excluding loans held for sale) at December 31,
2014, 2013 and 2012, respectively. For a summary of our accounting methodologies relating to the ALLL, see the
Allowance for Loan and Lease Losses section of our Critical Accounting Policies.
The provision for loan and lease losses is a charge to earnings to maintain the ALLL at a level consistent with
management’s assessment of the loan portfolio in light of current economic conditions and market trends. For the
years ended December 31, 2014, 2013, and 2012, we recorded provisions of $31.1 million, $41.6 million, and
$41.4 million, respectively. These provisions were made to reflect management’s assessment of the inherent and
specific risk of losses relative to the growth of the portfolio.
The following table presents our ALLL and outstanding loan balances by segment of our loan portfolio, based on
the methodology followed in determining the ALLL:
(in thousands)
As of December 31, 2014
ALLL:
Credit-rated
Commercial Loans
Commercial
Loans
Residential
Mortgages
Consumer
Loans
Total
Non-rated
Individually evaluated for impairment
$
4,645
Collectively evaluated for impairment
151,526
Recorded investment in loans:
Individually evaluated for impairment
Collectively evaluated for impairment
As of December 31, 2013
ALLL:
46,919
17,413,583
Individually evaluated for impairment
$
9,628
Collectively evaluated for impairment
118,564
Recorded investment in loans:
Individually evaluated for impairment
Collectively evaluated for impairment
56,676
13,051,110
288
1,945
575
43,974
399
2,398
813
45,392
3,531
1,999
45
413
8,509
155,883
9,528
313,392
111
10,134
57,133
17,781,083
1,250
2,064
71
697
11,348
123,723
6,809
335,677
142
11,337
64,440
13,443,516
The following table allocates our ALLL to the respective portfolio categories and includes the percentage of loans
in each category to total loans at the dates indicated:
(dollars in thousands)
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
2014
2013
2012
2011
2010
December 31,
Mortgage Loans:
Multi-family residential property
$
63,091
48.26%
47,814
49.14%
31,292
44.84%
25,160
43.83%
7,401
32.70%
Commercial property
39,449
27.09%
44,415
27.03%
38,292
29.89%
23,844
32.36%
14,521
34.28%
1-4 family residential property
Home equity lines of credit
Construction and land
Other loans:
7,178
3,522
477
2.60%
0.90%
0.36%
3,600
1,406
1,323
2.57%
1.26%
0.93%
4,794
1,099
1,127
3.14%
1.95%
1.02%
3,096
818
4,836
3.79%
2.89%
0.93%
3,352
831
2,386
5.07%
3.66%
2.20%
Commercial and industrial
50,217
20.73%
35,745
18.99%
30,176
19.05%
27,622
16.03%
37,545
21.84%
Consumer
Total
458
0.06%
768
0.08%
653
0.11%
786
0.17%
1,360
0.25%
$
164,392
100.00%
135,071
100.00%
107,433
100.00%
86,162
100.00%
67,396
100.00%
73
Summary of Loan Loss Experience
The following table presents a summary by loan portfolio segment of our ALLL, loan loss experience, and
provision for loan and lease losses for the periods indicated:
(dollars in thousands)
Beginning balance - ALLL
Charge-offs:
Credit-rated commercial loans
Non-rated commercial loans
Residential mortgages
Consumer loans
Total charge-offs
Recoveries:
Credit-rated commercial loans
Non-rated commercial loans
Residential mortgages
Consumer loans
Total recoveries
Net charge-offs
Provision
Ending balance - ALLL
Ratios:
ALLL to total loans
Net charge-offs to average loans
Years ended December 31,
2014
2013
2012
2011
2010
$
135,071
107,433
86,162
67,396
55,120
(4,586)
(1,297)
(1,597)
(380)
(7,860)
4,764
701
460
146
6,071
(1,789)
31,110
$
164,392
0.92%
0.01%
(14,137)
(1,384)
(753)
(407)
(18,657)
(2,439)
(635)
(425)
(29,502)
(4,467)
(350)
(1,074)
(28,070)
(6,369)
(644)
(500)
(16,681)
(22,156)
(35,393)
(35,583)
1,309
1,166
33
168
2,676
(14,005)
41,643
135,071
1.00%
0.12%
262
1,540
4
194
2,000
(20,156)
41,427
107,433
1.10%
0.25%
508
1,498
-
277
2,283
(33,110)
51,876
86,162
1.26%
0.55%
40
1,172
212
63
1,487
(34,096)
46,372
67,396
1.29%
0.73%
Our net charge-offs during 2014 decreased to $1.8 million compared to $14.0 million for the prior year. Significant
charge-offs during 2014 consisted of one commercial and industrial loan for $1.2 million, one construction loan for
$1.2 million, and one home equity line of credit for $651,000. The remainder of 2014 charge-offs were primarily
comprised of small business and overdraft line of credit relationships, for which the individual charge-off did not
exceed $500,000. Additionally, during 2014 our significant recoveries on loans previously charged off consisted of
four commercial and industrial loans totaling $1.8 million, two commercial loans secured by 1-4 family residential
property totaling $1.0 million, and two home equity lines of credit totaling $453,000.
Net Deferred Tax Asset
At December 31, 2014, after considering all available positive and negative evidence, management concluded that
a valuation allowance for deferred tax assets was not necessary because it is more likely than not that these tax
benefits will be fully realized. While we will continue to monitor the need for a valuation allowance prospectively,
we do not expect a valuation allowance will be required based upon projected profitability and taxable income in
the carry-back period. Net deferred tax assets are included in other assets in our Consolidated Statements of
Financial Condition.
74
The following table presents the components of our net deferred tax asset as of the dates indicated:
(in thousands)
DEFERRED TAX ASSETS
Allowance for loan and lease losses
Unearned compensation - restricted shares
Non-accrual interest
Write-down for other-than-temporary impairment of securities
Other
Total deferred tax assets recognized in earnings
Net unrealized losses on securities available-for-sale
Net unrealized losses on securities transferred to held-to-maturity
Total deferred tax assets
DEFERRED TAX LIABILITIES
Depreciation
Prepaid expenses
Other
Total deferred tax liabilities recognized in earnings
Net unrealized gains on securities available-for-sale
Total deferred tax liabilities
Net deferred tax asset
December 31,
2014
2013
$
69,553
11,557
1,338
18,337
17,197
117,982
-
11,968
129,950
72,194
839
13,480
86,513
21,592
108,105
21,845
$
59,078
8,900
1,834
18,273
7,376
95,461
26,236
13,815
135,512
16,951
674
9,767
27,392
-
27,392
108,120
In accordance with GAAP, we revalued our New York State deferred tax assets and liabilities in consideration of
the New York State corporate income tax reform enacted on March 31, 2014. The revaluation resulted in a
decrease of $1.8 million to our net deferred tax asset. For more information, refer to the income taxes discussion
under Results of Operations for the year ended December 31, 2014 compared to the year ended December 31,
2013.
Deferred tax assets arise from expected future tax benefits attributable to temporary differences and carry-
forwards. Deferred tax liabilities arise from expected future tax expense attributable to temporary differences.
Temporary differences are defined as differences between the tax basis of an asset or liability and its reported
amount in the financial statements that will result in taxable or deductible amounts in future years. Carry-forwards
are defined as deductions or credits that cannot be currently utilized for tax purposes that may be carried forward
to reduce taxable income or taxes payable in a future year.
Deposits
Excluding brokered deposits, total deposits at December 31, 2014 and 2013 were $22.41 billion and $16.65 billion,
respectively. Our deposits at December 31, 2014 and 2013 included short-term escrow deposits of approximately
$2.87 billion and $1.26 billion, respectively. We have developed a core competency that allows us to obtain short-
term escrow deposits from our clients by catering to the needs of law firms, accounting firms, claims administrators
and title companies, amongst others. Due to the nature of these deposits, we anticipate that a considerable
amount of our short-term escrow deposits outstanding at December 31, 2014 will be released over the next
several quarters. Excluding our short-term escrow deposits and brokered deposits at December 31, 2014 and
2013, total core deposits increased approximately $4.14 billion during 2014 as a result of the addition of new
private client banking teams, as well as additional deposits raised by our existing private client banking teams.
75
The following table presents the composition of our deposit accounts as of the dates indicated:
(dollars in thousands)
Amount
Percentage
Amount
Percentage
December 31,
2014
2013
Personal demand deposit accounts (1)
Business demand deposit accounts (1)
Rent security
Personal NOW
Business NOW
Personal money market accounts
Business money market accounts
Personal time deposits
Business time deposits
Brokered time deposits
Total
Demand deposit accounts (1)
NOW
Money market accounts
Time deposits
Brokered time deposits
Total
Personal
Business
Brokered time deposits
Total
(1) Non-interest bearing.
$
585,689
6,479,270
127,792
47,813
1,623,337
3,370,141
9,368,774
368,725
437,545
211,189
22,620,275
7,064,959
1,671,150
12,866,707
806,270
211,189
22,620,275
4,372,368
18,036,718
211,189
22,620,275
$
$
$
$
$
2.59%
28.65%
0.56%
0.21%
7.18%
14.90%
41.42%
1.63%
1.93%
0.93%
100.00%
31.24%
7.39%
56.88%
3.56%
0.93%
100.00%
19.33%
79.74%
0.93%
100.00%
511,911
4,879,572
98,987
38,797
812,100
3,172,224
6,318,277
415,040
405,959
404,230
17,057,097
5,391,483
850,897
9,589,488
820,999
404,230
17,057,097
4,137,972
12,514,895
404,230
17,057,097
3.00%
28.61%
0.58%
0.23%
4.76%
18.60%
37.04%
2.43%
2.38%
2.37%
100.00%
31.61%
4.99%
56.22%
4.81%
2.37%
100.00%
24.26%
73.37%
2.37%
100.00%
The following table presents our average deposits and average interest rates accrued for the periods indicated:
(dollars in thousands)
NOW and interest-bearing demand
Money market
Time deposits
Brokered time deposits
Non-interest-bearing demand deposits
Total deposits
Years ended December 31,
2014
2013
Average
Balance
Average
Rate
Average
Balance
Average
Rate
$
1,276,342
11,592,917
840,530
315,172
5,906,454
19,931,415
$
0.38%
0.66%
1.29%
0.55%
-
0.47%
819,164
8,959,324
827,389
237,750
4,782,428
15,626,055
0.38%
0.72%
0.15%
0.45%
-
0.51%
76
The following table presents time deposits of $100,000 or more by their maturity as of December 31, 2014:
(in thousands)
Three months or less
Over three months through six months
Over six months through one year
Over one year
Total
December 31, 2014
$
166,002
99,867
202,058
230,978
698,905
$
Borrowings
The following table presents information regarding our borrowings:
At or for the year ended December 31,
2014
2013
2012
(dollars in thousands)
Amount
Federal Home Loan Bank advances
$
1,335,163
Repurchase agreements
Federal funds purchased
Total borrowings
Maximum total outstanding at any
month-end
Average balance
Average rate
620,000
95,000
$
2,050,163
$
2,815,313
$
2,443,596
Weighted
Average
Rate
0.90%
2.48%
0.26%
1.35%
Weighted
Average
Rate
0.60%
2.43%
0.28%
0.95%
Amount
2,305,313
695,000
370,000
3,370,313
3,370,313
2,192,788
Weighted
Average
Rate
0.88%
2.86%
0.33%
1.57%
Amount
590,000
645,000
350,000
1,585,000
1,585,000
1,161,784
1.21%
1.21%
2.29%
At December 31, 2014, our borrowings were $2.05 billion, or 8.3% of our funding liabilities, compared to $3.37
billion, or 16.5% of our funding liabilities, at December 31, 2013. The decrease in our borrowings, when compared
to December 31, 2013, reflects our substantial deposit growth during 2014 combined with the proceeds from our
2014 public offering of common stock. These borrowings are collateralized by mortgage-backed and collateralized
mortgage obligation securities, along with commercial real estate loans. We also hold $60.1 million in Federal
Home Loan Bank of New York (“FHLB”) capital stock as required collateral for our outstanding borrowing position
with the FHLB. Based on our financial condition, our asset size, the available capacity under our repurchase
agreement lines and our FHLB line, and the amount of securities and loans available for pledging, we estimate our
available consolidated capacity for additional borrowings to be approximately $6.09 billion at December 31, 2014.
The following table presents the maturity or re-pricing of our borrowings at December 31, 2014.
Maturity or repricing period (in thousands)
3 months or less
3 - 12 months
1 - 3 years
Over 3 years
Total
$
295,000
550,000
1,100,163
105,000
2,050,163
77
Fair Value of Financial Instruments
Our AFS securities, which represent $6.07 billion of our total assets at December 31, 2014, are carried at fair
value. Held-for-sale loans totaling $548.3 million at December 31, 2014, are carried at the lower of cost or fair
value.
U.S. GAAP establishes a three-level fair value hierarchy that prioritizes techniques used to measure the fair value
of assets and liabilities, based on the transparency and reliability of inputs to valuation methodologies. An
instrument’s categorization within the hierarchy is based upon the lowest level of input that is significant to the fair
value measurement. Therefore, for assets classified in Levels 1 and 2 of the hierarchy where inputs are principally
based on observable market data, there is less judgment applied in arriving at a fair value measurement. For
instruments classified within Level 3 of the hierarchy, judgments are more significant.
Where available, the fair value of AFS securities is based upon valuations obtained from third-party pricing
sources. In order to ensure the fair valuations obtained are appropriate, we typically compare data from two or
more independent third-party pricing sources. If there is a large price discrepancy between the two pricing
sources for an individual security, we utilize industry market spread data to assist in determining the most
appropriate valuation.
The valuations provided by the pricing services are derived from quoted market prices or using matrix pricing.
Matrix pricing is a valuation technique consistent with the market approach of determining fair value. The market
approach uses prices and other relevant information generated by market transactions involving identical or
comparable assets. Matrix pricing is a mathematical technique used principally to value debt securities without
relying exclusively on quoted prices of specific securities, but rather on the securities’ relationship to other
benchmark quoted securities. Most of our securities portfolio is priced using this method, and such securities are
classified as Level 2.
Securities are classified within Level 3 of the valuation hierarchy in cases where there is limited activity or less
transparency around inputs to the valuation. In these cases, we determine fair value based upon in-depth analysis
of the cash flow structure and credit analysis for each position. Relative market spreads are utilized to discount
the cash flow to determine current market values, as well as analysis of relative coverage ratios, credit
enhancements, and collateral characteristics. SBA interest-only strip securities, pooled trust preferred securities,
and private CMOs are all included in the Level 3 fair value hierarchy.
Our held-for-sale loans predominantly consist of variable rate SBA loans, which are fully guaranteed by the U.S.
Government. Accordingly, the cost of these loans typically approximates fair value. We validate the fair value of
these loans through our active market participation in the SBA secondary market, where we are one of the top
market makers in the industry.
We believe our valuation methods are appropriate and consistent with other market participants; however, the use
of different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different estimate of fair value at the reporting date. For further discussion of the determination of fair value, see
Note 3 to our Consolidated Financial Statements.
Contractual Obligations
The following table presents our significant contractual obligations as of December 31, 2014:
(in thousands)
Information technology contract
Borrowings
Operating leases
Total contractual cash obligations
Payments due by period
Less than
1 year
1 - 3
years
3 - 5
years
More than
5 years
$
3,460
845,000
16,904
865,364
2,416
1,100,163
32,632
1,135,211
-
75,000
28,939
103,939
-
30,000
62,099
92,099
$
Total
5,876
2,050,163
140,574
2,196,613
78
Off-Balance Sheet Arrangements
In the normal course of business, we have various outstanding commitments and contingent liabilities that are not
reflected in the accompanying Consolidated Financial Statements.
We enter into transactions that involve financial instruments with off-balance sheet risks in the ordinary course of
business to meet the financing needs of our clients. Such financial instruments include commitments to extend
credit, standby letters of credit, and unused balances under confirmed letters of credit, all of which are primarily
variable rate. Such instruments involve, to varying degrees, elements of credit and interest rate risk.
Our exposure to credit loss in the event of nonperformance by the other party with regard to financial instruments
is represented by the contractual notional amount of those instruments. Financial instrument transactions are
subject to our normal credit policies and approvals, financial controls and risk limiting and monitoring procedures.
We generally require collateral or other security to support financial instruments with credit risk.
The following table presents a summary of our commitments and contingent liabilities:
(in thousands)
Unused commitments to extend credit
Financial standby letters of credit
Commercial and similar letters of credit
Other
Total
December 31,
2014
2013
$
$
695,435
257,006
34,921
1,312
988,674
578,771
209,136
20,516
1,135
809,558
For further discussion of our commitments and contingent liabilities, see Note 19 to our Consolidated Financial
Statements.
Capital Resources
We are subject to comprehensive capital adequacy requirements intended to protect against losses that we may
incur. Prior to January 1, 2015, FDIC regulations required that we maintain a minimum ratio of qualifying total
capital to total risk-weighted assets (including off-balance sheet items) of 8.0%, at least one-half of which must be
in the form of Tier 1 capital, and a ratio of Tier 1 capital to total risk-weighted assets of 4.0%. Tier 1 capital is
generally defined as the sum of core capital elements less goodwill and certain other deductions. Core capital
includes common shareholders’ equity, non-cumulative perpetual preferred stock and minority interests in equity
accounts of consolidated subsidiaries. Supplementary capital, which qualifies as Tier 2 capital and counts towards
total capital subject to certain limits, includes allowances for loan and lease losses, perpetual preferred stock,
subordinated debt and certain hybrid instruments.
We are also required to maintain a certain leverage capital ratio - the ratio of Tier 1 capital (net of intangibles) to
adjusted total assets. Prior to January 1, 2015, banks that received the highest rating of five categories used by
regulators to rate banks and were not anticipating or experiencing any significant growth were required to maintain
a leverage capital ratio of at least 3.0%. All other institutions were required to maintain a minimum leverage
capital ratio of 4.0%.
For an institution to be considered “well capitalized” prior to January 1, 2015, it must maintain a minimum leverage
capital ratio of 5.0% and a minimum risk-based capital ratio of 10.0%, of which at least 6.0% must be Tier 1
capital.
79
The actual capital amounts and ratios presented in the following table demonstrate that we are “well capitalized”
under the capital adequacy guidelines outlined above as of December 31, 2014 and 2013:
(dollars in thousands)
As of December 31, 2014:
Total capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
As of December 31, 2013:
Total capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
Basel III
Actual
Amount
Ratio
Required for Capital
Adequacy Purposes
Ratio
Amount
Required to be
Well Capitalized
Amount
Ratio
$
2,647,871
2,482,607
2,482,607
14.39%
13.49%
9.25%
1,472,033
736,016
1,073,288
$
1,986,694
1,850,668
1,850,668
15.10%
14.07%
8.54%
1,052,562
526,281
866,469
8.00%
4.00%
4.00%
8.00%
4.00%
4.00%
1,840,041
1,104,025
1,341,611
10.00%
6.00%
5.00%
1,315,702
789,421
1,083,087
10.00%
6.00%
5.00%
On July 9, 2013, the Federal Deposit Insurance Corporation approved final rules that substantially amend the
regulatory risk-based capital rules applicable to Signature Bank. The final rules were adopted following the
issuance of proposed rules by the federal banking regulators in June 2012, and implement the “Basel III”
regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative
documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in
December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank
capital, leverage and liquidity requirements.
The rules include new risk-based capital and leverage ratios, which are being phased in from 2015 to 2019, and
refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital
level requirements applicable to Signature Bank under the final rules are the following: (i) a new common equity
Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total
capital ratio of 8% (unchanged from current rules); and (iv) a leverage ratio of 4% for all institutions. The final
rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which
must consist entirely of common equity Tier 1 capital. Common equity Tier 1 capital consists of common stock
instruments that meet the eligibility criteria in the final rules, retained earnings, accumulated other comprehensive
income and common equity Tier 1 minority interest. The capital conservation buffer will be phased-in over four
years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for
2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter, resulting in the following minimum
ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii)
a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends,
engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the buffer
amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for
such actions.
Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5%
of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive
credit growth. However, the final rules permit the countercyclical buffer to be applied only to “advanced approach
banks” ( i.e., banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures), which
currently excludes Signature Bank. The final rules also implement revisions and clarifications consistent with
Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and
losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which will be phased out
over time.
The final rules also contain revisions to the prompt corrective action (“PCA”) framework, which is designed to
place restrictions on insured depository institutions, including Signature Bank, if their capital levels begin to show
signs of weakness. These revisions took effect January 1, 2015. Under the PCA requirements, which are
designed to complement the capital conservation buffer, insured depository institutions will be required to meet the
following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity
80
Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10%
(unchanged from current rules); and (iv) a leverage ratio of 5% (increased from 4%).
The final rules set forth certain changes for the calculation of risk-weighted assets, which we have been required
to utilize as of January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk
exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness
consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules
for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-
style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in
total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion
in consolidated assets. Based on our current capital composition and levels, we believe that we would be in
compliance with the requirements as set forth in the final rules if they were presently in effect.
Liquidity
Liquidity is the measurement of our ability to meet our cash needs. Our objective in managing liquidity is to
maintain our ability to meet loan commitments and deposit withdrawals, purchase investments and pay other
liabilities in accordance with their terms, without an adverse impact on our current or future earnings. Our liquidity
management is guided by policies developed and monitored by our asset/liability management committee and
approved by our Board of Directors. The asset/liability management committee consists of, among others, our
Chairman, President and Chief Executive Officer, Vice-Chairman, Chief Operating Officer, Chief Financial Officer
and Treasurer. These policies take into account the marketability of assets, the source and stability of deposits,
our wholesale borrowing capacity and the amount of our loan commitments. For the years ended December 31,
2014, 2013 and 2012, our primary source of liquidity has been core deposit growth.
Additionally, we have borrowing sources available to supplement deposit flows, including the FHLB and
repurchase agreement lines with other financial institutions. We also have access to the brokered deposit market,
through which we have numerous alternatives and significant capacity, if needed.
Credit availability at the FHLB is based on our financial condition, our asset size and the amount of collateral we
hold at the FHLB. At December 31, 2014, our FHLB borrowings consisted of $1.34 billion in advances with an
average rate of 0.90% that mature by December 2017.
We also have repurchase agreement lines with several leading financial institutions totaling $2.23 billion. At
December 31, 2014, we had $620.0 million of securities sold under repurchase agreements to five of these
institutions.
Based on our financial condition, our asset size, the available capacity under our repurchase agreement lines and
our FHLB line, and the amount of securities and loans available for pledging, we estimate our available
consolidated capacity for additional borrowings to be approximately $6.09 billion as of December 31, 2014.
The federal banking agencies in September 2014 issued a final rule that implements a new “liquidity coverage
ratio” (“LCR Rule”) based upon Basel III requirements that for the first time regulate bank liquidity in detail. The
LCR Rule does not apply to depository institutions, including Signature Bank, with less than $50 billion in
consolidated assets. Based on our anticipated rate of growth, we do not expect that the LCR rule will impact our
operations or financial condition over the next several years.
81
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is defined as the sensitivity of income, fair values and capital to changes in interest rates, foreign
currency exchange rates, commodity prices and other relevant market prices and rates. The primary risk to which
we are exposed is interest rate movement inherent in our lending, investment management, deposit taking and
borrowing activities. Substantially all of our interest rate risk arises from these activities, which are entered into for
purposes other than trading.
The principal objective of asset/liability management is to manage the sensitivity of net income to changes in
interest rates. Asset/liability management is governed by policies approved by our Board of Directors. Day-to-day
oversight of this function is performed by our asset/liability management committee. Senior management and our
Board of Directors, on an ongoing basis, review our overall interest rate risk position and strategies.
Interest Rate Risk Management
Our asset/liability management committee seeks to manage our interest rate risk by structuring our balance sheet
to maximize net interest income while maintaining an acceptable level of risk exposure to changes in market
interest rates. The achievement of this goal requires a balance among liquidity, interest rate risk, and profitability
considerations. The committee meets regularly to review the sensitivity of assets and liabilities to interest rate
changes, deposit rates and trends, the book and market values of assets and liabilities, unrealized gains and
losses, purchase and sales activities, and the maturities of investments and borrowings.
We use various asset/liability strategies to manage and control the interest rate sensitivity of our assets and
liabilities. These strategies include pricing of loans and deposit products, adjusting the terms of loans and
borrowings, and managing the deployment of our securities and short-term assets to manage mismatches in
interest rate re-pricing.
To effectively measure and manage interest rate risk, we use simulation analysis to determine the impact on net
interest income under various hypothetical interest rate scenarios. Based on these simulations, we quantify
interest rate risk and develop and implement appropriate strategies. At December 31, 2014, we used a simulation
model to analyze net interest income sensitivity to both (i) a parallel shift in interest rates, in which the base market
interest rate forecast was increased in quarterly increments over the first twelve months, followed by rates holding
constant thereafter (“ramp scenario”) and (ii) a parallel and sustained shift in interest rates, in which the base
market interest rate forecast was immediately increased by 100, 200, 300 and 400 basis points (“shock scenario”).
Given the exceptionally low interest rate environment, including the federal funds rate and other short-term interest
rates, we did not analyze net interest income sensitivity to a downward market interest rate forecast.
82
The following table indicates the sensitivity of projected annualized net interest income to the interest rate
movements described above at December 31, 2014:
(dollars in thousands)
Ramp scenario:
Base
Up 100 basis points
Up 200 basis points
Up 300 basis points
Up 400 basis points
Shock scenario:
Base
Up 100 basis points
Up 200 basis points
Up 300 basis points
Up 400 basis points
Adjusted Net
Interest Income
Change
from Base
$
809,002
852,972
850,097
834,152
812,625
$
809,002
852,613
848,972
836,815
822,930
-
1.4%
1.1%
(0.8)%
(3.4)%
-
1.4%
1.0%
(0.5)%
(2.2)%
We also use a simulation model to measure the impact that hypothetical market interest rate changes will have on
the net present value of assets and liabilities, which is defined as market value of equity. At December 31, 2014,
we used a simulation model to analyze the market value of equity sensitivity to a parallel and sustained shift in
interest rates, in which the base market interest rate forecast was immediately increased by 100, 200, 300 and
400 basis points. Given the current low interest rate environment, including the federal funds rate and other short-
term interest rates, we did not analyze the market value of equity sensitivity to a downward market interest rate
forecast.
The following table indicates the sensitivity of market value of equity at December 31, 2014 to the interest rate
movements described above (base case market value of equity is $4.41 billion):
(dollars in thousands)
Up 100 basis points
Up 200 basis points
Up 300 basis points
Up 400 basis points
Sensitivity
$
86,684
(89,477)
(472,613)
(874,162)
Change
from Base
2.0%
(2.0)%
(10.7)%
(19.8)%
The market value of equity sensitivity analysis assumes an immediate parallel shift in interest rates and yield
curves. The computation of prospective effects of hypothetical interest rate changes is based on numerous
assumptions, including relative levels of interest rates, asset prepayments, deposit decay and changes in re-
pricing levels of deposits to general market rates, and should not be relied upon as indicative of actual results.
Further, the computations do not take into account any actions that we may undertake in response to future
changes in interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For our Consolidated Financial Statements, see index on page F-1.
83
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s principal executive officer and principal
financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
‘‘Exchange Act’’)) as of the end of the period covered by this report. Based on such evaluation, the Company’s
Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the
Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act, including this report, is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is accumulated and communicated to the Company’s management,
including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding the required disclosure.
a) Management’s Report on Internal Control over Financial Reporting
The management of Signature Bank (the “Company”) is responsible for establishing and maintaining effective
internal control over financial reporting. Our system of internal control is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s
consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted
accounting principles.
Internal control over financial reporting includes procedures that pertain to the maintenance of records that, in
reasonable detail, accurately reflect transactions and dispositions of assets; provide reasonable assurances that
transactions are recorded to permit preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures are made only in accordance with the authorization of
management and the Board of Directors; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect
on our consolidated financial statements.
All internal control systems, no matter how well designed, have inherent limitations, including the possibility of
human error and the circumvention of controls. Furthermore, because of changes in conditions, the effectiveness
of internal control may vary over time. Accordingly, internal control over financial reporting may not prevent or
detect misstatements on a timely basis. Since these limitations are known features of the financial reporting
process, however, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of December 31, 2014, management evaluated the effectiveness of internal control over financial reporting
based on the framework in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this evaluation, management believes that the
Company’s internal control over financial reporting as of December 31, 2014 is effective using these criteria.
The Company’s internal control over financial reporting as of December 31, 20134 has been audited by KPMG
LLP, the independent registered public accounting firm that has also audited the Company’s consolidated financial
statements as of and for the year ended December 31, 2014. The report of KPMG LLP on the effectiveness of the
Company’s internal control over financial reporting is included below.
84
b) Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Signature Bank:
We have audited Signature Bank and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control – Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (1992) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated statements of financial condition of the Company as of December 31, 2014 and
2013, and the related consolidated statements of income, comprehensive income, changes in shareholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2014, and our report
dated March 2, 2015 expressed an unqualified opinion on those consolidated financial statements.
New York, New York
March 2, 2015
85
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference to Signature Bank’s Proxy Statement for the Annual Meeting of Stockholders to be held
April 23, 2015.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to Signature Bank’s Proxy Statement for the Annual Meeting of Stockholders to be held
April 23, 2015.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Incorporated by reference to Signature Bank’s Proxy Statement for the Annual Meeting of Stockholders to be held
April 23, 2015.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated by reference to Signature Bank’s Proxy Statement for the Annual Meeting of Stockholders to be held
April 23, 2015.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference to Signature Bank’s Proxy Statement for the Annual Meeting of Stockholders to be held
April 23, 2015.
86
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
A. Financial Statements and Financial Statement Schedules
PART IV
(1) The Consolidated Financial Statements of the Registrant are listed and filed as part of this report on
pages F-1 to F-49. The Index to the Consolidated Financial Statements appears on page F-1.
(2) Financial Statement Schedules: All schedule information is included in the notes to the Audited
Consolidated Financial Statements or is omitted because it is either not required or not applicable.
B. Exhibit Listing
Exhibit No.
Exhibit
3.1 Restated Organization Certificate (Incorporated by reference to Signature Bank’s Quarterly Report on
Form 10-Q for the period ended June 30, 2005.)
3.2 Certificate of Amendment, dated December 5, 2008, to the Bank's Restated Organization Certificate
with respect to Signature Bank’s Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, par
value $0.01 per share (Incorporated by reference to Signature Bank’s Current Report on Form 8-K
filed on December 17, 2008.)
3.3 Amended and Restated By-laws of the Registrant (Incorporated by reference to Signature Bank’s
Current Report on Form 8-K filed on October 17, 2007.)
4.1 Specimen Common Stock Certificate (Incorporated by reference to Signature Bank’s Registration
Statement on Form 10 or amendments thereto, filed with the Federal Deposit Insurance Corporation
on March 17, 2004.)
4.2 Specimen Warrant (Incorporated herein by reference to Exhibit 4.2 of the Bank’s Form 8-A filed on
March 10, 2010.)
10.1 Signature Bank Amended and Restated 2004 Long-Term Incentive Plan (Incorporated by reference
from Appendix A to the 2013 Definitive Proxy Statement on Schedule 14A, filed with the Federal
Deposit Insurance Corporation on March 18, 2013.)
10.2 Amended and Restated Signature Bank Change of Control Plan (Incorporated by reference to
Signature Bank’s Current Report on Form 8-K, filed with the Federal Deposit Insurance Corporation
on September 19, 2007.)
10.4 Networking Agreement, effective as of April 18, 2001, between Signature Securities and Signature
Bank (Incorporated by reference to Signature Bank’s Registration Statement on Form 10 or
amendments thereto, filed with the Federal Deposit Insurance Corporation on March 17, 2004.)
10.7
Brokerage and Consulting Agreement, dated August 6, 2001, by and between Signature Bank and
Signature Securities (Incorporated by reference to Signature Bank’s Registration Statement on
Form 10 or amendments thereto, filed with the Federal Deposit Insurance Corporation on March 17,
2004.)
10.13 Employment Agreement, dated March 22, 2004, between Signature Bank and Joseph J. DePaolo
(Incorporated by reference to Signature Bank’s Registration Statement on Form 10 or amendments
thereto, filed with the Federal Deposit Insurance Corporation on March 17, 2004.)
10.14 Master Agreement for the provision of Hardware Software and/or Services, dated as of September 9,
2005, between Fidelity Information Services, Inc. and Signature Bank (Incorporated by reference to
Signature Bank’s Quarterly Report on Form 10-Q for the period ended September 30, 2005.)
10.15 Warrant Agreement, dated March 10, 2010, between Signature Bank and American Stock Transfer &
Trust Company, LLC, as warrant agent (Incorporated herein by reference to Exhibit 4.1 of the Bank’s
Form 8-A filed on March 10, 2010.)
14.1 Code of Ethics (Incorporated by reference from Signature Bank’s 2004 Form 10-K, filed with the
Federal Deposit Insurance Corporation on March 16, 2005.)
87
Exhibit No.
Exhibit
21.1 Subsidiaries of Signature Bank
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
88
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SIGNATURE BANK
By: /s/ JOSEPH J. DEPAOLO
Joseph J. DePaolo
President, Chief Executive Officer and Director
Date: March 2, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
March 2, 2015 by the following persons on behalf of the registrant in the capacities indicated.
Signature
Title
/s/ SCOTT A. SHAY
(Scott A. Shay)
/s/ JOHN TAMBERLANE
(John Tamberlane)
Chairman of the Board of Directors
Vice Chairman, Director
/s/ VITO SUSCA
(Vito Susca)
Senior Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
/s/ KATHRYN A. BYRNE
(Kathryn A. Byrne)
/s/ ALFONSE M. D’AMATO
(Alfonse M. D’Amato)
/s/ ALFRED B. DELBELLO
(Alfred B. DelBello)
/s/ JUDITH HUNTINGTON
(Judith Huntington)
/s/ JEFFREY W. MESHEL
(Jeffrey W. Meshel)
/s/ MICHAEL PAPPAGALLO
(Michael Pappagallo)
Director
Director
Director
Director
Director
Director
89
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Financial Condition as of December 31, 2014 and 2013 . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the years ended December 31, 2014, 2013, and 2012 . . . . . . . . . .
F-2
F-3
F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013, and
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2014,
2013, and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012 . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
F-7
F-8
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Signature Bank:
We have audited the accompanying consolidated statements of financial condition of Signature Bank
and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of
income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the
three-year period ended December 31, 2014. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2014 and 2013, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 2, 2015 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
New York, New York
March 2, 2015
F-2
SIGNATURE BANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks
Short-term investments
Total cash and cash equivalents
Securities available-for-sale
Securities held-to-maturity (fair value $2,222,177 and $2,110,290 at
December 31, 2014 and 2013)
Federal Home Loan Bank stock
Loans held for sale
Loans and leases, net
Premises and equipment, net
Accrued interest and dividends receivable
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest-bearing
Interest-bearing
Total deposits
Federal funds purchased and securities sold under agreements
to repurchase
Federal Home Loan Bank advances
Accrued expenses and other liabilities
Total liabilities
Shareholders’ equity
Preferred stock, par value $.01 per share; 61,000,000 shares authorized;
none issued at December 31, 2014 and December 31, 2013
Common stock, par value $.01 per share; 64,000,000 shares authorized;
51,398,685 shares issued and 50,317,609 shares outstanding at December 31, 2014;
48,404,175 shares issued and 47,293,162 shares outstanding at December 31, 2013
Additional paid-in capital
Retained earnings
Net unrealized gains (losses) on securities, net of tax
Total shareholders' equity
Total liabilities and shareholders' equity
December 31,
2014
2013
$
274,247
24,831
299,078
6,073,459
2,208,551
86,338
548,297
17,693,316
40,996
79,687
288,918
27,318,640
$
119,479
24,498
143,977
5,632,233
2,175,844
130,785
420,759
13,384,400
36,331
71,668
380,666
22,376,663
$
7,064,959
15,555,316
22,620,275
5,391,483
11,665,614
17,057,097
715,000
1,335,163
151,964
24,822,402
1,065,000
2,305,313
149,314
20,576,724
-
-
503
1,348,661
1,133,950
13,124
2,496,238
27,318,640
$
473
1,013,900
837,250
(51,684)
1,799,939
22,376,663
See accompanying notes to Consolidated Financial Statements.
F-3
SIGNATURE BANK
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
INTEREST AND DIVIDEND INCOME
Loans held for sale
Loans and leases, net
Securities available-for-sale
Securities held-to-maturity
Other short-term investments
Total interest income
INTEREST EXPENSE
Deposits
Federal funds purchased and securities sold under
agreements to repurchase
Federal Home Loan Bank advances
Total interest expense
Net interest income before provision for loan and lease losses
Provision for loan and lease losses
Net interest income after provision for loan and lease losses
NON-INTEREST INCOME
Commissions
Fees and service charges
Net gains on sales of securities
Net gains on sales of loans
Other-than-temporary impairment losses on securities:
Total impairment losses on securities
Portion recognized in other comprehensive income (before taxes)
Net impairment losses on securities recognized in earnings
Other losses
Total non-interest income
NON-INTEREST EXPENSE
Salaries and benefits
Occupancy and equipment
Other general and administrative
Total non-interest expense
Income before income taxes
Income tax expense
Net income
PER COMMON SHARE DATA
Earnings per share – basic
Earnings per share – diluted
Years ended December 31,
2013
2014
2012
$
3,338
652,285
193,629
69,762
5,259
924,273
4,338
514,936
186,170
46,198
3,508
755,150
3,508
417,837
216,974
20,158
2,079
660,556
93,494
80,209
84,163
16,965
12,663
123,122
801,151
31,110
770,041
10,649
19,250
5,272
5,377
(3,930)
2,206
(1,724)
(3,842)
34,982
196,679
22,490
74,075
293,244
511,779
215,075
296,704
$
19,217
7,381
106,807
648,343
41,643
606,700
9,367
17,299
6,228
6,287
(9,208)
3,059
(6,149)
(1,021)
32,011
163,554
19,681
63,942
247,177
391,534
162,790
228,744
22,132
4,455
110,750
549,806
41,427
508,379
8,210
15,503
6,887
9,273
(11,593)
8,520
(3,073)
(561)
36,239
146,696
17,294
54,253
218,243
326,375
140,892
185,483
$
$
6.05
5.95
4.84
4.76
3.98
3.91
See accompanying notes to Consolidated Financial Statements.
F-4
SIGNATURE BANK
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income, net of tax:
Net change in unrealized gains (losses) on securities
Tax effect
Net of tax
Reclassification adjustment for net gains on sales of securities
included in net income
Tax effect
Net of tax
Amortization of net unrealized loss on securities transferred to held-to-maturity
Tax effect
Net of tax
Other-than-temporary impairment on securities related to noncredit factors
Tax effect
Net of tax
Reclassification adjustment for other-than-temporary impairment losses on
securities related to credit factors included in net income
Tax effect
Net of tax
Total other comprehensive income, net of tax
Comprehensive income, net of tax
At or for the years ended December 31,
2013
2012
2014
$
296,704
228,744
185,483
114,166
(47,984)
66,182
(162,973)
67,765
(95,208)
(5,272)
2,227
(3,045)
3,357
(1,412)
1,945
(2,206)
936
(1,270)
1,724
(728)
996
64,808
361,512
$
(6,228)
2,585
(3,643)
2,599
(1,063)
1,536
(3,059)
1,261
(1,798)
6,149
(2,547)
3,602
(95,511)
133,233
36,980
(15,905)
21,075
(6,887)
2,953
(3,934)
-
-
-
(8,520)
3,666
(4,854)
3,073
(1,322)
1,751
14,038
199,521
See accompanying notes to Consolidated Financial Statements.
F-5
Additional
paid-in
capital
Retained
earnings
Treasury
stock
SIGNATURE BANK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
Common stock
Balance at December 31, 2011
$
462
Common stock issued
Stock options activity, net
Restricted stock activity, net
Other
Net income
Other comprehensive income, net of tax
5
5
-
-
-
-
954,833
45
20,672
21,967
-
-
-
423,032
-
-
-
(4)
185,483
-
Balance at December 31, 2012
$
472
997,517
608,511
Stock options activity, net
Restricted stock activity, net
Stock warrant activity, net
Other
Net income
Other comprehensive income, net of tax
1
-
-
-
-
-
1,419
14,193
771
-
-
-
-
-
-
(5)
228,744
-
Balance at December 31, 2013
$
473
1,013,900
837,250
Common stock issued
Stock options activity, net
Restricted stock activity, net
Stock warrant activity, net
Other
Net income
Other comprehensive income, net of tax
24
3
3
-
-
-
-
295,893
380
28,774
9,714
-
-
-
-
-
-
-
(4)
296,704
-
Balance at December 31, 2014
$
503
1,348,661
1,133,950
Accumulated
other
comprehensive
income
Total
shareholders'
equity
29,789
1,408,116
-
-
-
-
-
14,038
43,827
-
-
-
-
-
(95,511)
(51,684)
-
-
-
-
-
-
64,808
13,124
45
20,677
21,972
(4)
185,483
14,038
1,650,327
1,420
14,193
771
(5)
228,744
(95,511)
1,799,939
295,917
380
38,494
-
(4)
296,704
64,808
2,496,238
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,717
(9,717)
-
-
-
-
See accompanying notes to Consolidated Financial Statements.
F-6
SIGNATURE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Provision for loan and lease losses
Net impairment losses on securities recognized in earnings
Net amortization/accretion of premium/(discount)
Stock-based compensation expense
Net gains on sales of securities and loans
Purchases and originations of loans held for sale
Proceeds from sales and principal repayments of loans held for sale
Net increase in accrued interest and dividends receivable
Deferred income tax expense (benefit)
Net decrease (increase) in other assets
Net increase in accrued expenses and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale ("AFS")
Proceeds from sales of securities AFS
Maturities, redemptions, calls and principal repayments on securities AFS
Purchases of securities held-to-maturity ("HTM")
Maturities, redemptions, calls and principal repayments on securities HTM
Net redemptions (purchases) of Federal Home Loan Bank stock
Net increase in loans and leases
Net purchases of premises and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in non-interest-bearing deposits
Net increase in interest-bearing deposits
Proceeds from the issuance of Federal Home Loan Bank advances
Repayment of Federal Home Loan Bank advances
Proceeds from the issuance of other borrowings
Repayment of other borrowings
Tax benefit (expense) from stock-based compensation
Issuance of common stock and exercise of options
Other
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Interest paid during the year
Income taxes paid during the year
Non-cash investing activities:
Transfer of securities from AFS to HTM, at fair value
Transfer of securities from HTM to AFS, at fair value
Transfer of loans to repossessed assets, at fair value
Years ended December 31,
2013
2014
2012
$
296,704
228,744
185,483
8,904
31,110
1,724
94,355
27,690
8,220
41,643
6,149
117,417
15,565
6,931
41,427
3,073
118,175
17,609
(10,649)
(12,515)
(16,160)
(1,321,745)
(1,416,265)
(1,035,761)
1,256,077
1,204,420
1,065,038
(8,019)
36,600
5,473
2,650
420,874
(7,301)
7,517
(2,324)
11,236
202,506
(3,834)
(9,057)
(51,990)
60,012
380,946
(1,450,961)
(2,106,010)
(1,636,034)
191,730
308,346
391,301
797,027
1,388,967
1,546,005
(168,576)
(829,303)
(305,866)
122,608
44,447
179,399
(80,773)
116,266
(1,860)
(4,338,604)
(3,761,333)
(2,941,193)
(13,569)
(12,359)
(8,549)
(4,815,898)
(4,913,066)
(2,839,930)
1,673,476
3,889,702
946,519
2,027,926
620,000
2,155,313
1,296,528
1,031,986
475,000
(1,590,150)
(440,000)
(560,000)
220,000
520,000
450,000
(570,000)
(450,000)
(205,800)
11,067
296,034
(4)
(175)
994
(5)
15,839
9,246
(4)
4,550,125
4,760,572
2,512,795
155,101
143,977
299,078
$
50,012
93,965
143,977
53,811
40,154
93,965
$
123,817
$
189,314
105,876
151,663
111,676
133,376
$
-
806,338
$
-
$
245
654
800
-
-
-
See accompanying notes to Consolidated Financial Statements.
F-7
SIGNATURE BANK
Notes to Consolidated Financial Statements
(1) Organization
Signature Bank (the “Bank” and together with its subsidiaries, the “Company,” “we,” or “us”) is a New York State
chartered bank. On April 5, 2001, the Bank received its charter from the New York State Banking Department
(now known as the New York State Department of Financial Services) and commenced business on May 1, 2001.
The Bank currently operates 28 private client offices located in the New York metropolitan area, from which private
client banking teams serve the needs of privately owned businesses, their owners and senior managers.
The Bank operates Signature Financial LLC (“Signature Financial”), a specialty finance subsidiary focused on
equipment finance and leasing, transportation financing, and taxi medallion financing, commercial marine
financing, and national franchise financing. The Bank also operates Signature Securities Group Corporation
(“Signature Securities”), a licensed broker-dealer and investment advisor offering investment, brokerage, asset
management and insurance products and services.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation and Consolidation
The accompanying Consolidated Financial Statements of the Bank have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”) and practices within the banking industry. These financial
statements have been prepared to reflect all adjustments necessary to present fairly the financial condition and
results of operations as of the dates and for the periods shown. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(b) General Accounting Policy
The accompanying Consolidated Financial Statements are presented on the accrual basis of accounting.
(c) Management’s Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues
and expenses during the reporting period. Actual results may differ from those estimates.
The most significant estimates include the adequacy of the allowance for loan and lease losses (“ALLL” or the
“allowance”), valuation of securities, and the evaluation of other-than-temporary impairment of securities. Current
market conditions increase the risk and complexity of the judgments involved in these estimates.
(d) Cash and Cash Equivalents
For the purpose of presentation in the Consolidated Statements of Cash Flows, we have defined cash and cash
equivalents to include cash and due from banks and short-term investments with original maturities of 90 days or
less. Short-term investments consist of federal funds sold, interest-bearing deposits with banks and money
market mutual funds.
Cash and cash equivalents at December 31, 2014 consisted of cash and due from banks of $274.2 million,
interest-bearing deposits with banks of $1.7 million and money market mutual funds of $23.1 million. Cash and
cash equivalents at December 31, 2013 consisted of cash and due from banks of $119.5 million, interest-bearing
deposits with banks of $2.8 million and money market mutual funds of $21.7 million.
F-8
We are required by the Federal Reserve System to maintain non-interest bearing cash reserves equal to a
percentage of certain deposits. The reserve requirement amounted to $209.2 million and $135.4 million for the
periods that included December 31, 2014 and 2013, respectively.
(e) Securities Available-for-Sale and Securities Held-to-Maturity
The designation of a security as held-to-maturity (“HTM”) is made at the time of acquisition. Securities that we
have the positive intent and ability to hold to maturity are classified as HTM and carried at amortized cost.
Amortization of premiums and accretion of discounts are recognized using the level yield method.
Securities classified as available-for-sale (“AFS”) include debt and equity securities that are carried at estimated
fair value. Unrealized gains or losses on securities available-for-sale are included as a separate component of
shareholders’ equity, net of tax effect. Amortization of premiums and accretion of discounts are recognized using
the level yield method. Realized gains and losses on sales of securities are computed using the specific
identification method and are reported in non-interest income.
The Bank uses various inputs to determine the fair value of its investment portfolio, which are classified within a
three-level fair value hierarchy based on the transparency and reliability of inputs to valuation methodologies. To
the extent they are available, we use quoted market prices (Level 1) to determine fair value. If quoted market
prices are not available, we use valuation techniques such as matrix pricing to determine fair value (Level 2). In
cases where there is little, if any, related market activity, fair value estimates are based upon internally-developed
valuation techniques that use inputs such as discount rates, credit spreads, default and delinquency rates, and
prepayment speeds (Level 3). A significant degree of judgment is involved in valuing investments using Level 3
inputs, and the use of different assumptions could have a positive or negative effect on our financial condition or
results of operations. See Note 3 for more details on our security valuation techniques.
One of the significant estimates related to securities is the evaluation of securities for other-than-temporary
impairment. We regularly evaluate our securities to identify declines in fair value that are considered other-than-
temporary. Our evaluation of securities for impairments is a quantitative and qualitative process, which is subject
to risks and uncertainties. If the amortized cost of an investment exceeds its fair value, we evaluate, among other
factors, general market conditions, the duration and extent to which the fair value is less than amortized cost, the
probability of a near-term recovery in value, whether we intend to sell the security and whether it is more likely
than not that we will be required to sell the security before full recovery of our investment or maturity. We also
consider specific adverse conditions related to the financial health, projected cash flow and business outlook for
the investee, including industry and sector performance, operational and financing cash flow factors and rating
agency actions. Once a decline in fair value is determined to be other-than-temporary, for equity securities, an
impairment charge is recorded through current earnings based upon the estimated fair value of the security at time
of impairment and a new cost basis in the investment is established. For debt investment securities deemed to be
other-than-temporarily impaired, the investment is written down to fair value with the estimated credit loss charged
to current earnings and the noncredit-related impairment loss charged to other comprehensive income.
Securities are reviewed at least quarterly to determine if an other-than-temporary impairment is present based on
certain quantitative and qualitative factors. For securities other than securitized financial assets, the primary
factors considered in evaluating whether a decline in value is other-than-temporary include: (a) the length of time
and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of
the security, (b) the financial condition, credit rating, and future prospects of the issuer, (c) whether the debtor is
current on contractually-obligated interest and principal payments, and (d) whether we intend to sell or whether we
will be required to sell these instruments before recovery of their cost basis.
In performing our other-than-temporary impairment analysis for securitized financial assets with contractual cash
flows (asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities and
mortgage-backed securities), we estimate future cash flows for each security based upon our best estimate of
future delinquencies, estimated defaults, loss severity, and prepayments. We review the estimated cash flows to
determine whether we expect to receive all originally expected cash flows. Projected credit losses are compared
to the current level of credit enhancement to assess whether the security is expected to incur losses in any future
period and therefore would be deemed other-than-temporarily impaired.
Equity securities, including FHLB stock, which are not quoted on an exchange and not considered to be readily
marketable are recorded at cost, less impairment (if any).
F-9
(f) Loans Held for Sale
Loans originated and held for sale in the secondary market are carried at the lower of cost or estimated fair value.
Net unrealized losses, if any, are recognized through a valuation allowance by charges to current earnings. Gains
or losses resulting from sales of loans held for sale, net of unamortized deferred fees and costs, are recognized at
the time of sale and are included in net gains on sales of loans on the Consolidated Statements of Income.
(g) Loans and Leases, Net
Loans are carried at the principal amount outstanding, less unearned discounts, net of deferred loan origination
fees and costs and the ALLL. Unearned income and net deferred loan fees and costs are accreted/amortized into
interest income over the loan term on a basis that approximates the level yield method.
The accrual of interest income is generally discontinued at the time a loan becomes 90 days delinquent based on
contractual terms. In the case of commercial loans, residential mortgages, and home equity lines of credit,
exceptions may be made if the loan has sufficient collateral value, based on a current appraisal, and is in process
of collection. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of
principal or interest is considered doubtful.
Once a loan is placed on nonaccrual status, our accounting policies are applied consistently, regardless of loan
type. All interest previously accrued but not collected for loans that are placed on nonaccrual status is reversed
against interest income. Payments received on nonaccrual loans are applied against the outstanding loan
principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are
brought current and future payments are reasonably assured.
Impaired loans include nonaccrual loans and troubled debt restructured loans. Loans classified as troubled debt
restructurings include those loans where a borrower experiences financial difficulty and the Bank makes certain
concessionary modifications to contractual terms, such as a reduction of the stated interest rate or face amount of
the loan, a reduction of accrued interest, or an extension of the maturity date(s) at a stated interest rate lower than
the current market rate for a new loan with similar risk.
(h) Allowance for Loan and Lease Losses
The ALLL is established through a provision for loan and lease losses charged to current earnings. The ALLL is
maintained at a level estimated by management to absorb probable losses inherent in the loan portfolio and is
based on management’s continuing evaluation of the portfolio, the related risk characteristics, and the overall
economic and environmental conditions affecting the loan portfolio. This estimation is inherently subjective as it
requires measures that are susceptible to significant revision as more information becomes available.
Our methodology to determine the ALLL includes segmenting the loan portfolio into various components and
applying various loss factors to estimate the amount of probable losses. The largest segment of our loan portfolio
is comprised of credit-rated commercial loans, comprising 97.9% of our total loan portfolio, excluding loans held
for sale, as of December 31, 2014. Our credit-rated commercial loans include commercial and industrial loans
along with loans to commercial borrowers that are secured by real estate (commercial property, multi-family
residential property, 1-4 family residential property and construction and land). For each loan within this segment,
a credit rating is assigned based on a review of specific risk factors including (i) historical and projected financial
results of the borrower, (ii) market conditions of the borrower’s industry that may affect the borrower’s future
financial performance, (iii) business experience of the borrower’s management, (iv) nature of the underlying
collateral, if any, and (v) history of the borrower’s payment performance.
When assigning a credit rating to a loan, we use an internal nine-level rating system in which a rating of one
carries the lowest level of credit risk and is used for borrowers exhibiting the strongest financial condition. Loans
rated one through six are deemed to be acceptable quality and are considered “Pass.” Loans that are deemed to
be of questionable quality are rated seven (special mention). Loans with adverse classifications (substandard or
doubtful) are rated eight or nine, respectively. A loan is considered substandard if it is inadequately protected by
the current net worth and paying capacity of the borrower, or by the collateral pledged. Substandard loans are
characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Loans classified as doubtful have all of the weaknesses inherent in those classified substandard with the added
F-10
characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing
facts, conditions, and values, highly questionable and improbable.
The outstanding amounts of credit-rated commercial loans are aggregated by credit rating, and we estimate the
allowance for losses for each credit rating using loss factors based on historical loss experience. We supplement
our historical loss experience by considering qualitative factors that may cause estimated losses to differ from our
historical losses. These qualitative factors are intended to address developing external and environmental trends,
and include adjustments for items such as changes in current economic and business conditions, changes in the
nature and volume of our loan portfolio, the existence and effects of credit concentrations, the trend and severity of
our problem loans, along with other external factors such as competition and legal and regulatory requirements.
These qualitative adjustments reflect the imprecision that is inherent in the estimation of probable loan losses, and
are intended to ensure adequacy of the overall allowance amount.
Our internal review process results in the periodic review of assigned credit ratings to reflect changes in specific
risk factors. Commercial lines of credit are generally issued with terms of one year, and upon annual renewal our
lenders perform a full review of the specific risk factors to assess the appropriateness of the assigned credit
ratings. Furthermore, loans classified as special mention, substandard or doubtful are placed on our internal
watch list, and our lenders perform a credit rating review on a quarterly basis (special mention loans) or monthly
basis (substandard and doubtful loans). In addition, our Risk Management function performs periodic credit
reviews that provide an independent evaluation of the assigned credit ratings. These reviews focus on those
loans with higher-risk attributes, such as lines of credit with higher utilization percentages and loan facilities with
delinquencies, and generally cover, in aggregate, between 40-50% of the commercial loan portfolio, including all
commercial loans over $500,000 with adverse credit ratings, on an annual basis. The results of these credit
reviews are presented to both the Risk and the Credit Committees of the Board of Directors.
Our methodology to determine the ALLL for the non-rated segments of our loan portfolio is based on historical loss
experience and qualitative factors. Non-rated loans include commercial loans with outstanding principal balances
below $100,000, overdrafts, residential mortgages, and consumer loans. The outstanding amounts of loans in
each of these segments are aggregated, and we apply percentages based on historical losses and qualitative
factors by segment to estimate the required allowance. Non-rated loans comprise 2.1% of our total loan portfolio,
excluding loans held for sale, as of December 31, 2014.
We consider all nonaccrual loans to be impaired loans, and the related specific allowances for losses are
determined on an individual (non-homogeneous) basis. Factors contributing to the determination of specific
allowances on impaired loans include the creditworthiness of the borrower and, more specifically, changes in the
expected future receipt of principal and interest payments or, for collateral-dependent loans, the value of pledged
collateral. For impaired loans in excess of $750,000, that are collateral-dependent, we generally record a charge-
off when the carrying amount of the loan exceeds the fair value of the collateral less estimated selling costs, if
appropriate. For non-collateral dependent loans in excess of $750,000, a specific allowance is recorded when the
carrying amount of the loan exceeds the discounted estimated cash flows using the loan’s initial effective interest
rate. For smaller impaired loans, in the absence of other factors affecting the collectability of the loan, we
generally determine the amount of specific allowance using estimated loss percentages based on the amount of
time the loan has been impaired.
The methodology used in the periodic review of reserve adequacy, which is performed at least quarterly, is
designed to be responsive to changes in portfolio credit quality and inherent credit losses. The changes are
reflected in both the pooled formula reserve and in specific reserves as the collectability of larger classified loans
is regularly recalculated with new information as it becomes available. As our portfolio matures, historical loss
ratios are closely monitored. Currently, the review of reserve adequacy is performed by our senior management,
assessed by a credit review function, and presented to our Board of Directors for their review and consideration on
a quarterly basis.
In addition, bank regulators, as an integral part of their supervisory functions, periodically review our loan portfolio
and related ALLL. These regulatory agencies may require us to increase our provision for loan and lease losses
or to recognize further loan charge-offs based upon their judgments, which may be different from ours. An
increase in the ALLL required by these regulatory agencies could materially adversely affect our financial condition
and results of operations.
F-11
For economic reasons and to maximize the recovery of loans, we may work with borrowers experiencing financial
difficulties and will consider modifications to a borrower’s existing loan terms and conditions that we would not
otherwise consider, commonly referred to as troubled debt restructurings (“TDRs”). We record a provision for
impairment loss associated with TDRs, if any, based on the present value of expected future cash flows
discounted at the original loan’s effective interest rate or, if the loan is collateral dependent, based on the fair value
of the collateral less estimated costs to sell. At the time of restructuring, we determine whether a TDR loan should
accrue interest based on the accrual status of the loan immediately prior to modification. A nonaccrual TDR loan
will be returned to accrual status when all the principal and interest amounts contractually due are brought current
and future payments are reasonably assured. Additionally, there should be a sustained period of repayment
performance (generally a period of six months) by the borrower in accordance with the modified contractual terms.
In years after the year of restructuring, the loan is not reported as a TDR loan if it was restructured at a market
interest rate and it is performing in accordance with its modified terms. Other TDR loans are reported as such for
as long as the loan remains outstanding.
(i) Charge-off of Uncollectible Loans
Loan losses are charged-off in the period the loans, or a portion thereof, are deemed uncollectible. For collateral
dependent risk-rated commercial loans, charge-offs are generally recorded when the collateral value is less than
the carrying value and in all cases no later than when we take possession of collateral. Charge-offs are generally
measured as the excess of the loan carrying value over the estimated fair value of the collateral, net of selling
costs. Fair value is estimated based on credible, verifiable indicators of value such as appraisals, evaluations,
documented discussions with brokers, or recent sales or market listings of comparable properties. In the case of
other loan segments, including non-rated commercial loans, consumer loans, and residential mortgages, charge-
offs are generally recorded when a loan reaches 180 days of delinquency unless there are extenuating
circumstances that can be clearly evidenced. Such circumstances include loans that are well secured and in
process of collection along with loans undergoing extensive restructuring/settlement discussions with the
borrower.
(j) Loan Origination and Commitment Fees
Loan origination and commitment fees are deferred and amortized into interest income on a basis that
approximates the level yield method. Net commitment fees on revolving lines of credit are recognized in interest
income on the straight-line method over the period the revolving line is active. Any fees that are unamortized at
the time a loan is paid off or a commitment is closed are recognized into income immediately.
(k) Securitizations
The Bank purchases, securitizes and sells the government-guaranteed portions of U.S. Small Business
Administration (“SBA”) loans. When the Bank securitizes SBA loans, we may retain interest-only strips, which are
generally considered residual interests in the securitized assets. These SBA interest-only strips are accounted for
and classified as AFS securities. Gains and losses upon sale of the securitized SBA loans depend, in part, on our
allocation of the previous carrying amount of the loans to the retained interests. Previous carrying amounts are
allocated in proportion to the relative fair values of the loans sold and interests retained. The Bank uses an
internal valuation process to determine the fair value of its SBA interest-only strip securities.
The excess of cash flows expected to be received over the amortized cost of the retained interests is recognized
as interest income using the effective yield method. If the fair value of the retained interest has declined below its
carrying amount and there has been an adverse change in estimated cash flows of the underlying loans, then the
decline in fair value is considered to be other-than-temporary and the retained interest is written down to fair value
with a corresponding charge to earnings.
(l) Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of
furniture, fixtures, and equipment is computed by the straight-line method over the estimated useful lives of the
related assets. Furniture and fixtures are normally amortized over seven years and equipment, computer
hardware, and computer software are normally amortized over three years. Amortization of leasehold
improvements is computed by the straight-line method over their estimated useful lives or the terms of the leases,
whichever is shorter.
F-12
(m) Bank-owned Life Insurance
The Bank has purchased life insurance policies on certain employees. These Bank-owned life insurance (“BOLI”)
policies are carried at the amount that could be realized under our BOLI policies as of the date of the Consolidated
Statements of Financial Condition and are included in other assets. Increases in the carrying value are recorded
as “Other Income” in the Consolidated Statements of Income and insurance proceeds received are generally
recorded as a reduction of the carrying value. The carrying value consists of cash surrender value of $64.2 million
at December 31, 2014, and $63.0 million at December 31, 2013, and deferred acquisition costs of $62,000 at
December 31, 2014, and $187,000 at December 31, 2013. Our investment in BOLI generated income of $1.7
million, $1.6 million, and $2.4 million for the years ended December 31, 2014, 2013, and 2012, respectively.
(n) Repossessed Assets
Repossessed assets are comprised of any property (“other real estate” or “ORE”) or other asset acquired through
loan restructurings, foreclosure proceedings, or acceptance of a deed-in-lieu of foreclosure. Repossessed assets
are carried at the lower of cost or fair value, less estimated selling costs, and are included in other assets. Any
write-downs at the date of acquisition are charged to the ALLL. Expenses incurred to maintain repossessed
assets, unrealized losses resulting from write-downs after the date of acquisition, and realized gains and losses
upon sale of the assets are included in other non-interest expense and other non-interest income, as appropriate.
As of December 31, 2014 and 2013, our repossessed assets totaled $245,000 and $800,000, respectively.
(o) Securities Sold Under Agreements to Repurchase
When we maintain effective control over the underlying securities, securities sold under agreements to repurchase
are accounted for as financings (rather than as sales) and the obligations to repurchase securities sold are
reflected as liabilities in the Consolidated Statements of Financial Condition at the amounts at which the securities
will be subsequently repurchased. All of our agreements have been accounted for as financings through
December 31, 2014. The dollar amount of securities underlying the agreements remains in the asset accounts,
although the securities underlying the agreements are delivered to the counterparties who arranged the
transactions. In certain instances, the counterparties may have sold, loaned, or disposed of the securities to other
parties in the normal course of their operations, and have agreed to resell to us substantially similar securities at
the maturity of the agreements.
(p) Income Taxes
Signature Bank files consolidated federal and combined New York State and New York City income tax returns
with its subsidiaries, with the exception of Signature Preferred Capital, Inc. which files separately as a real estate
investment trust. Additionally, Signature Financial and Signature Securities file other state and local returns on a
separate basis.
Income tax expense consists of current and deferred income tax expense (benefit). Deferred income tax expense
(benefit) is determined by recognizing deferred tax assets and liabilities for future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and certain unused carry-forward deductions and credits. The realization of deferred tax assets is
assessed and if necessary, a valuation allowance is provided to reduce the asset to the amount that will more
likely than not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary differences are expected to be recovered or settled
and carry-forward deductions and credits are expected to be utilized. The effect on deferred tax assets and
liabilities of a change in tax laws or rates is recognized in income tax expense in the period that includes the
enactment date of the change.
(q) Stock-Based Compensation
We recognize compensation expense in our Consolidated Statement of Income for all stock-based compensation
awards over the requisite service period with a corresponding credit to equity, specifically additional paid-in capital.
Compensation expense is measured based on grant date fair value and is included in salaries and benefits (non-
interest expense).
F-13
(r) Earnings Per Common Share
Basic earnings per common share is computed by dividing net income available to common shareholders by the
weighted-average common shares outstanding during the year.
Diluted earnings per common share is computed using the same method as basic earnings per share, but includes
the potential dilutive effect of stock options outstanding and the unvested portions of restricted stock awards. The
dilutive effect is calculated using the treasury stock method.
(s) New Accounting Standards
In January 2014, the FASB issued ASU 2014-01, Accounting for Investments in Qualified Affordable Housing
Projects, to revise the accounting for investments in qualified affordable housing projects, allowing investors in
Low Income Housing Tax Credit (“LIHTC”) programs that meet specified conditions to present the net tax benefits
(net of the amortization of the cost of the investment) within income tax expense. The cost of the investments that
meet the specified conditions will be amortized in proportion to (and over the same period as) the total expected
tax benefits, including the tax credits and other tax benefits, as they are realized on the tax return. The
amortization of the cost of the investments will be presented in income tax expense along with the related tax
benefits. If the investors do not qualify for the proportional amortization method or do not elect it, they would
account for their investments under the equity or cost method based on current U.S. GAAP. This guidance will be
effective for interim and annual periods beginning after December 15, 2014 and will be applied retrospectively if
investors elect the proportional amortization method. Early adoption is permitted. We do not expect the adoption
of ASU 2014-01 to have a material impact on our Consolidated Financial Statements.
In January 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure, which clarifies when banks and similar institutions (creditors)
should reclassify mortgage loans collateralized by residential real estate properties from the loan portfolio to other
real estate owned (“OREO”). The ASU also requires certain interim and annual disclosures. ASU 2014-04 is
effective for public business entities for annual periods, and interim periods within those annual periods, beginning
after December 15, 2014. An entity can elect either a modified retrospective or a prospective transition method,
and early adoption is permitted. We do not expect the adoption of ASU 2014-04 to have a material impact on our
Consolidated Financial Statements.
In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (ASC 860): Repurchase-to-Maturity
Transactions, Repurchase Financings, and Disclosures. The new standard amends the accounting guidance for
“repo-to-maturity” transactions and repurchase agreements executed as repurchase financings. In addition, the
new standard requires a transferor to disclose more information about certain transactions, including those in
which it retains substantially all of the exposure to the economic returns of the underlying transferred asset over
the transaction’s term. Public business entities are required to apply the accounting changes and comply with the
enhanced disclosure requirements for the first interim or annual reporting period beginning after December 15,
2014. However, for repurchase and securities lending transactions reported as secured borrowings, the new
standard’s enhanced disclosures are effective for annual periods beginning after December 15, 2014 and interim
periods beginning after March 15, 2015. A public business entity may not early adopt the standard’s provisions.
We expect that the adoption of ASU 2014-11 will have no impact on our Consolidated Financial Statements.
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which requires a
reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite
service period as a performance condition. Therefore, an entity would not record compensation expense related
to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target
until it becomes probable that the performance target will be met. No new disclosures are required under the ASU.
For all entities, ASU 2014-12 is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2015. Early adoption is permitted. ASU 2014-12 may be adopted either
prospectively for share-based payment awards granted or modified on or after the effective date, or
retrospectively, using a modified retrospective approach. The modified retrospective approach would apply to
share-based payment awards outstanding as of the beginning of the earliest annual period presented in the
financial statements on adoption, and to all new or modified awards thereafter. We expect that the adoption of
ASU 2014-12 will have no impact on our Consolidated Financial Statements.
F-14
In August 2014, the FASB issued ASU 2014-14, Receivables -Troubled Debt Restructurings by Creditors
(Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure, which
requires that, upon foreclosure, a guaranteed mortgage loan be derecognized and a separate other receivable be
recognized when specific criteria are met. ASU 2014-14 is effective for public business entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2014. We expect that the
adoption of ASU 2014-14 will have no impact on our Consolidated Financial Statements.
(3) Fair Value Measurements
The Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to
determine fair value disclosures. Fair value measurements are recorded on a recurring basis for certain assets
and liabilities when fair value is the measure for accounting purposes, such as investment securities classified as
available-for-sale and derivatives. Certain other assets and liabilities are measured at fair value on a nonrecurring
basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of
impairment.
U.S. GAAP establishes a three-level fair value hierarchy that prioritizes techniques used to measure the fair value
of assets and liabilities, based on the transparency and reliability of inputs to valuation methodologies. The three
levels are defined as follows:
Level 1 – Valuations are based on quoted prices in active markets for identical assets or liabilities.
Accordingly, valuation of these assets and liabilities does not entail a significant degree of judgment.
Examples include most U.S. Government securities and exchange-traded equity securities.
Level 2 – Valuations are based on either quoted prices in markets that are not considered to be active or
significant inputs to the methodology that are observable, either directly or indirectly. Examples include
U.S. Government Agency securities, municipal bonds, corporate bonds, certain residential and
commercial mortgage-backed securities, deposits, and most structured notes.
Level 3 – Valuations are based on inputs to the methodology that are unobservable and significant to the
fair value measurement. These inputs reflect management’s own judgments about the assumptions that
market participants would use in pricing the assets and liabilities. Examples include certain commercial
loans, certain residential and commercial mortgage-backed securities, private equity investments, and
complex over-the-counter derivatives.
Valuation Methodology
The Bank has an established and well documented process for determining fair values. The Bank uses quoted
market prices, when available, to determine fair value and classifies such items as Level 1. In many cases, the
Bank utilizes valuation techniques, such as matrix pricing, to determine fair value, in which case the items are
classified as Level 2. Fair value estimates may also be based upon internally-developed valuation techniques that
use current market-based inputs such as discount rates, credit spreads, default and delinquency rates, and
prepayment speeds. Items valued using internal valuation techniques are classified according to the lowest level
input that is significant to the valuation, and are typically classified as Level 3.
We utilize independent third-party pricing sources to value most of our investment securities. In order to ensure
the fair valuations obtained are appropriate, we typically compare data from two or more independent third-party
pricing sources. If there is a large price discrepancy between the two pricing sources for an individual security, we
utilize industry market spread data to assist in determining the most appropriate valuation. In addition, the third-
party pricing sources have an established challenge process in place for all security valuations, which facilitates
identification and resolution of potentially erroneous prices. We believe that the prices received from our pricing
sources are representative of prices that would be received to sell the assets at the measurement date (exit
prices) and are classified appropriately in the hierarchy.
The valuations provided by the pricing services are derived from quoted market prices or using matrix pricing.
Matrix pricing is a valuation technique consistent with the market approach of determining fair value. The market
approach uses prices and other relevant information generated by market transactions involving identical or
F-15
comparable assets. Matrix pricing is a mathematical technique used principally to value debt securities without
relying exclusively on quoted prices of specific securities, but rather on the securities’ relationship to other
benchmark quoted securities. Most of our securities portfolio is priced using this method, and such securities are
classified as Level 2.
Securities are classified within Level 3 of the valuation hierarchy in cases where there is limited activity or less
transparency around inputs to the valuation. In these cases, the valuations are determined based upon an
analysis of the cash flow structure and credit analysis for each position. Relative market spreads are utilized to
discount the cash flow to determine current market values, as well as analysis of relative coverage ratios, credit
enhancements, and collateral characteristics. Small Business Administration (“SBA”) interest-only strip securities,
pooled trust preferred securities, and private collateralized mortgage obligations (“CMOs”) are all included in the
Level 3 fair value hierarchy.
Markets for SBA interest-only strip securities are relatively inactive, with limited observable secondary market
transactions. Our SBA interest-only strip securities are classified as other debt securities available-for-sale
(“AFS”) and reported at fair value, with changes in fair value recognized in accumulated other comprehensive
income. The securities are valued using Level 3 inputs and had fair values of $86.8 million at December 31, 2014
and $89.4 million at December 31, 2013. Since the cash flows of the SBA interest-only strip securities are
guaranteed by the U.S. Government, there is limited credit risk involved in the cash flows. Therefore, the primary
assumption built into the pricing model to generate the projected cash flows used to compute the fair values of the
SBA interest-only strip securities is the discount yield. If the discount yield were to change by 100 basis points,
the fair values of our SBA interest-only strip securities would increase or decrease accordingly by approximately
20%. The Bank determined the inputs to the discounted cash flow model based on historical performance and
information provided by brokers.
Our pooled trust preferred securities are classified as AFS and had fair values of $19.9 million at December 31,
2014 and $13.1 million at December 31, 2013. Due to a relatively inactive market for pooled trust preferred
securities with limited observable secondary market transactions, the fair values of these securities are determined
using a discounted cash flow analysis. Unobservable inputs are used in the discounted cash flow model, the most
significant of which is the market risk premium. If this assumption were to change by 300 basis points, the fair
values of our Level 3 pooled trust preferred securities would increase or decrease accordingly by approximately
40%.
Level 3 private CMOs classified as AFS had fair values of $9.9 million at December 31, 2014 and $8.3 million at
December 31, 2013. The fair values for these securities are determined based upon a discounted cash flow
model, with the market risk premium as the most significant unobservable input. If this assumption were to
change by 300 basis points, the fair values of our Level 3 private CMOs would increase or decrease accordingly
by approximately 25%.
F-16
Financial Instruments Measured at Fair Value on a Recurring Basis
The following tables present the assets and liabilities measured at fair value on a recurring basis as of December
31, 2014 and 2013, classified according to the three-level valuation hierarchy:
(in thousands)
December 31, 2014
ASSETS
Securities available-for-sale:
U.S. Treasury securities
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
Commercial mortgage-backed securities
Single issuer trust preferred & corporate
debt securities
Pooled trust preferred securities
Collateralized debt obligations
Other
Equity securities (1)
Total securities available-for-sale
Derivatives
Total assets
LIABILITIES
Derivatives
Total liabilities
December 31, 2013
ASSETS
Securities available-for-sale:
U.S. Treasury securities
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
Commercial mortgage-backed securities
Single issuer trust preferred & corporate
debt securities
Pooled trust preferred securities
Collateralized debt obligations
Other
Equity securities (1)
Total securities available-for-sale
Derivatives
Total assets
LIABILITIES
Derivatives
Total liabilities
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Total Carrying
Value
$
501
-
-
-
-
-
-
-
-
-
-
-
-
501
$
-
501
$
-
$
-
26,018
1,464,606
549,757
2,713,168
420,947
282,819
395,216
-
-
83,884
15,295
5,951,710
442
5,952,152
444
444
$
501
-
-
-
-
-
-
-
-
-
-
-
-
501
$
-
501
$
-
$
-
25,004
1,050,217
576,738
2,408,166
482,970
348,707
401,733
-
-
206,625
14,549
5,514,709
57
5,514,766
59
59
-
-
-
-
-
9,941
-
-
19,927
4,541
86,839
-
121,248
-
121,248
93
93
-
-
-
-
-
8,349
-
-
13,093
4,926
89,435
1,220
117,023
-
117,023
50
50
501
26,018
1,464,606
549,757
2,713,168
430,888
282,819
395,216
19,927
4,541
170,723
15,295
6,073,459
442
6,073,901
537
537
501
25,004
1,050,217
576,738
2,408,166
491,319
348,707
401,733
13,093
4,926
296,060
15,769
5,632,233
57
5,632,290
109
109
(1) Equity securities primarily represent Community Reinvestment Act (“CRA”) qualifying closed-end bond fund investments.
F-17
Changes in Level 3 Fair Value Measurements
We recognize transfers between levels of the valuation hierarchy at the end of reporting periods. There were no
transfers of assets between Level 1 and Level 2 for the years ended December 31, 2014, 2013 and 2012.
Additionally, the following table presents information for AFS securities and derivatives measured at fair value on a
recurring basis and classified by the Bank within Level 3 of the valuation hierarchy for the periods indicated:
(in thousands)
Year ended December 31, 2014
Beginning balance - Level 3
Transfers into Level 3
Transfers out of Level 3
Total gains or (losses) (realized/unrealized):
Included in earnings
Included in other comprehensive income
Sale of AFS securities
Sale of risk participation agreement
Ending balance - Level 3
Year ended December 31, 2013
Beginning balance - Level 3
Transfers into Level 3
Transfers out of Level 3
Total gains or (losses) (realized/unrealized):
Included in earnings
Included in other comprehensive income
Sale of AFS securities
Sale of risk participation agreement
Ending balance - Level 3
Year ended December 31, 2012
Beginning balance - Level 3
Transfers into Level 3
Transfers out of Level 3
Total gains or (losses) (realized/unrealized):
Included in earnings
Included in other comprehensive income
Sale of AFS securities
Sale of risk participation agreement
Ending balance - Level 3
Fair Value Measurements Using
Significant Unobservable Inputs (Level 3)
AFS
Securities
Derivative
Liabilities
$
117,023
-
-
-
3,780
22,990
(22,545)
-
$
121,248
$
91,801
-
-
-
(3,065)
28,287
-
-
$
117,023
$
87,051
-
-
-
2,588
12,309
(10,147)
$
-
91,801
(50)
-
-
-
(43)
-
-
-
(93)
-
-
-
-
-
-
-
(50)
(50)
-
-
-
-
-
-
-
-
-
Assets Measured at Fair Value on a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis. These assets are not measured at fair value
on an on-going basis but are subject to fair value adjustments only in certain circumstances, such as when there is
impairment or when an adjustment is required to reduce the carrying value to the lower of cost or fair value.
These assets may include collateral-dependent impaired loans, HTM securities that are other-than-temporarily
impaired, loans held-for-sale, repossessed assets, and certain long-lived assets.
F-18
The following tables present the assets measured at fair value on a nonrecurring basis as of December 31, 2014
and 2013, classified according to the three-level valuation hierarchy:
(in thousands)
December 31, 2014
Collateral-dependent impaired loans:
Multi-family residential property
Commercial property
1-4 family residential property
Home equity lines of credit
Construction and land
Commercial and industrial
Other repossessed assets
Total assets
December 31, 2013
Collateral-dependent impaired loans:
Multi-family residential property
Commercial property
1-4 family residential property
Home equity lines of credit
Construction and land
Commercial and industrial
Other repossessed assets
Total assets
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Total Carrying
Value
$
-
-
-
-
-
-
-
$
-
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,698
12,358
5,770
2,001
183
3,962
245
35,217
10,589
8,357
6,975
1,058
2,101
7,884
800
37,764
10,698
12,358
5,770
2,001
183
3,962
245
35,217
10,589
8,357
6,975
1,058
2,101
7,884
800
37,764
Impaired loans that are secured by collateral (“collateral-dependent loans”) are reported at the fair value of the
underlying collateral. Fair value estimates for collateral-dependent loans are determined based on individual
appraisals that may be discounted by management for unobservable factors resulting from its knowledge of the
property. Fair value adjustments for collateral-dependent impaired loans are recorded through direct loan charge-
offs and/or through a specific allocation of the ALLL. During the years ended December 31, 2014, 2013 and 2012,
we recorded fair value adjustments totaling $2.7 million, $17.2 million and $16.2 million, respectively, on collateral-
dependent impaired loans.
Repossessed assets are comprised of any property (“other real estate” or “ORE”) or other asset acquired through
loan restructurings, foreclosure proceedings, or acceptance of a deed-in-lieu of foreclosure. Repossessed assets
are carried at the lower of cost or fair value, less estimated selling costs. Fair value is determined through current
appraisals, and fair value adjustments are reported through a valuation allowance against the asset. During the
year ended December 31, 2014, we recorded a fair value adjustment of $128,000 on repossessed assets. There
were no fair value adjustments on repossessed assets during the years ended December 31, 2013 and 2012.
Other Fair Value Disclosures
The preparation of financial statements in accordance with U.S. GAAP requires disclosure of the fair value of
financial assets and liabilities, including those items that are not measured and reported at fair value on a recurring
or nonrecurring basis. The methodologies for estimating the fair value of financial assets and liabilities that are
measured at fair value on a recurring or nonrecurring basis are discussed above. The methodologies for
estimating the fair value of other items, which are carried on the Consolidated Statements of Financial Condition at
cost or amortized cost, are discussed below.
Fair value estimates for our financial instruments are made at a specific point in time, based on relevant market
information and information about the financial instrument. Fair value estimates are not necessarily representative
of our total enterprise value.
The carrying amounts for cash and cash equivalents are reasonable estimates of fair value.
Federal Home Loan Bank stock, which is required as part of membership, has no trading market and is
redeemable at par. Accordingly, its fair value is presented at the redemption (par) value.
F-19
Our loans held for sale consist of the government-guaranteed portion of SBA loans. The fair value of our loans
held for sale approximates cost, as these loans have adjustable rates and are backed by the full faith and credit of
the U.S. Government.
The estimated fair value of our loans and leases, net, was based on the discounted value of contractual cash flows
using interest rates that approximated those offered for loans with similar maturities and collateral requirements to
borrowers of comparable credit worthiness. Since this method of estimating fair value is based on a comparison
to current market rates for similar loans, it does not fully incorporate an exit-value approach to estimating fair
value, which would also consider adjustments for other factors such as liquidity and credit quality. The fair value
estimate could be affected significantly by these other factors.
Deposits are mostly non-interest-bearing or NOW and money market deposits that bear floating interest rates that
are re-priced based on market considerations and the Bank’s strategy. Therefore, the carrying value
approximates fair value. The carrying and fair values do not include the intangible fair value of core deposit
relationships, which comprise a significant portion of our deposit base. Management believes that the Bank’s core
deposit relationships represent a relatively stable, low-cost source of funding that has a substantial intangible
value separate from the deposit balances. Time deposits, 68.3% of which mature within one year, had a carrying
value of $1.02 billion and an estimated fair value of $1.02 billion at December 31, 2014. The estimated fair value
is based on the discounted value of contractual cash flows using interest rates that approximated those offered for
time deposits with similar maturities and terms.
The estimated fair value of borrowings is based on the discounted value of contractual cash flows using interest
rates that approximate those offered for borrowings with similar maturities and collateral requirements.
F-20
The following table summarizes the carrying amounts and estimated fair values of our financial assets and
liabilities:
Estimated Fair Value Measurements
Carrying
Amount
Total
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
(in thousands)
December 31, 2014
FINANCIAL ASSETS
Cash and cash equivalents
Securities available-for-sale
Securities held-to-maturity
Federal Home Loan Bank stock
Loans held for sale
Loans and leases, net (1)
Derivatives
Total financial assets
FINANCIAL LIABILITIES
Deposits (2)
Repurchase agreements
Federal funds purchased
$
299,078
6,073,459
2,208,551
86,338
548,297
299,078
6,073,459
2,222,177
86,338
548,297
17,693,316
17,870,221
442
26,909,481
$
442
27,100,012
$
22,620,275
22,621,704
620,000
95,000
632,824
95,000
Federal Home Loan Bank advances
1,335,163
1,337,023
Derivatives
Total financial liabilities
December 31, 2013
FINANCIAL ASSETS
Cash and cash equivalents
Securities available-for-sale
Securities held-to-maturity
Federal Home Loan Bank stock
Loans held for sale
Loans and leases, net (1)
Derivatives
Total financial assets
FINANCIAL LIABILITIES
Deposits (2)
Repurchase agreements
Federal funds purchased
537
24,670,975
$
537
24,687,088
$
143,977
5,632,233
2,175,844
130,785
420,759
143,977
5,632,233
2,110,290
130,785
420,759
13,384,400
13,589,108
57
21,888,055
$
57
22,027,209
$
17,057,097
17,063,751
695,000
370,000
716,782
370,000
Federal Home Loan Bank advances
2,305,313
2,306,871
Derivatives
Total financial liabilities
109
20,427,519
$
109
20,457,513
299,078
501
-
-
-
-
-
299,579
-
-
-
-
-
-
143,977
501
-
-
-
-
-
144,478
-
-
-
-
-
-
-
5,951,710
2,222,177
86,338
548,297
-
442
8,808,964
22,621,704
632,824
95,000
1,337,023
444
24,686,995
-
5,514,709
2,110,290
130,785
420,759
-
57
8,176,600
17,063,751
716,782
370,000
2,306,871
59
20,457,463
-
121,248
-
-
-
17,870,221
-
17,991,469
-
-
-
-
93
93
-
117,023
-
-
-
13,589,108
-
13,706,131
-
-
-
-
50
50
(1)
The estimated fair value measurements for loans and leases include adjustments related to market interest rates. No adjustments are made related to credit quality,
liquidity, and to reflect the related allowances for loan and lease losses.
(2) The carrying and fair values of deposits do not include the intangible fair value of core deposit relationships.
(4) Securities
We generally invest in U.S. Government agency obligations, securities guaranteed by U.S. Government-
sponsored enterprises, and other investment grade securities. The fair value of these investments fluctuates
based on several factors, including general interest rate changes. For collateralized mortgage obligations and
certain other debt securities, fair value fluctuates based on credit quality, changes in credit spreads, and the
degree of market liquidity, among other factors.
F-21
The following table summarizes the components of our securities portfolios as of the dates indicated:
2014
Gross
Gross
2013
Gross
Gross
December 31,
(in thousands)
AVAILABLE-FOR-SALE
U.S. Treasury securities
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
Amortized
Cost
Unrealized Unrealized
Gains
Losses
Fair
Value
Amortized Unrealized Unrealized
Gains
Losses
Cost
Fair
Value
$
500
1
24,830
1,427,438
543,752
2,708,345
431,961
1,188
37,733
10,881
29,911
4,975
-
-
501
500
26,018
24,171
1
882
-
501
(49)
25,004
(565)
1,464,606
1,049,867
14,497
(14,147)
1,050,217
(4,876)
549,757
578,012
(25,088)
2,713,168
2,451,274
(6,048)
430,888
494,920
8,187
20,358
6,484
(9,461)
576,738
(63,466)
2,408,166
(10,085)
491,319
Commercial mortgage-backed securities
278,517
4,789
(487)
282,819
345,560
7,502
(4,355)
348,707
Single issuer trust preferred & corporate
debt securities
Pooled trust preferred securities
Collateralized debt obligations
Other
Equity securities (1)
Total available-for-sale
HELD-TO-MATURITY
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
387,308
26,034
4,511
173,426
15,802
6,022,424
$
$
8,610
468,218
327,253
1,328,435
5,616
10,623
13
30
708
-
100,852
149
10,758
6,054
13,455
-
(2,715)
(6,120)
-
395,216
19,927
4,541
(3,411)
170,723
(507)
(49,817)
15,295
6,073,459
399,214
26,735
4,926
300,420
16,724
5,692,323
-
8,759
(1,397)
477,579
2,358
493,979
(2,264)
331,043
312,405
(16,892)
1,324,998
1,288,749
(674)
4,942
6,525
10,019
(7,500)
401,733
-
-
2,258
-
70,188
94
459
5,438
5,902
-
(13,642)
-
13,093
4,926
(6,618)
296,060
(955)
(130,278)
15,769
5,632,233
-
2,452
(15,976)
478,462
(7,244)
310,599
(53,234)
1,241,417
(1,052)
5,473
Commercial mortgage-backed securities
18,152
1,199
Single issuer trust preferred & corporate
debt securities
Collateralized debt obligations
Other
Total held-to-maturity
45,862
-
6,405
2,208,551
$
3,242
-
62
34,919
-
-
-
19,351
18,260
859
-
19,119
49,104
43,650
-
(66)
(21,293)
6,401
2,222,177
-
9,918
2,175,844
-
-
(739)
42,911
-
-
84
12,836
(145)
(78,390)
9,857
2,110,290
(1) Equity securities represent Community Reinvestment Act (“CRA”) qualifying closed-end bond fund investments.
On December 10, 2013, federal regulators issued a final rule implementing the “Volcker Rule” enacted as part of
the Dodd-Frank Act. The Volcker Rule prohibits banking organizations and their affiliates from investing in or
sponsoring certain types of funds, including a range of asset securitization structures, that do not meet the
exemptive criteria for continued ownership (defined as “Covered Funds”). The Federal Reserve has exercised its
authority to extend the divestiture period for such pre-2014 investments to July 21, 2016, and stated its intent to
further extend the divestiture period to July 21, 2017. We hold certain AFS securities that meet the definition of
Covered Funds and, therefore, must be divested within the divestiture period. These securities, which are
predominantly collateralized mortgage obligations, had a total fair value and amortized cost of $146.5 million and
$144.0 million, respectively, as of December 31, 2014. We continue to actively monitor the Covered Funds held in
our investment portfolio, and we currently anticipate that a substantial portion will be paid down through principal
remittances within the divestiture period. In the interim, we expect to sell certain securities when appropriate to
take advantage of market conditions. During 2014, we sold seven such securities, resulting in a net realized gain
of $710,000.
Gross realized gains on sales of AFS securities for the years ended December 31, 2014, 2013 and 2012 were
$7.3 million, $11.5 million, and $9.3 million, respectively. Gross realized losses on sales of AFS securities for the
years ended December 31, 2014, 2013 and 2012 were $2.0 million, $5.3 million, and $2.4 million, respectively.
We use securities as collateral for debtor-in-possession deposit accounts in excess of FDIC insurance limits,
clients’ treasury tax and loan deposits, public deposits, securities sold under agreements to repurchase and
F-22
advances from the Federal Home Loan Bank of New York. As of December 31, 2014 and 2013, the carrying
value of our pledged securities totaled $5.14 billion and $5.53 billion, respectively.
During the years ended December 31, 2014, 2013 and 2012, we recognized other-than-temporary impairment
losses on debt securities as summarized in the tables below. With the exception of those securities that are
Covered Funds under the Volcker Rule, we do not intend to sell the securities for which we have recognized other-
than-temporary impairment losses, and it is not more likely than not that we will be required to sell the securities
prior to recovery.
(in thousands)
December 31, 2014
AVAILABLE-FOR-SALE
Collateralized debt obligations
Pooled trust preferred securities
Collateralized mortgage obligations
Equity securities
Total other-than-temporarily impaired securities
December 31, 2013
AVAILABLE-FOR-SALE
Collateralized debt obligations
Pooled trust preferred securities
Collateralized mortgage obligations
Total other-than-temporarily impaired securities
December 31, 2012
AVAILABLE-FOR-SALE
Collateralized debt obligations
Pooled trust preferred securities
Collateralized mortgage obligations
Total other-than-temporarily impaired securities
Number of
Securities
Total Other-than-
temporary
Impairment Losses
Less:
Noncredit Portion
Recognized in OCI
Net Impairment
Losses Recognized
in Earnings (1)
2
1
13
1
17
3
1
12
16
1
10
11
$
(368)
(1,378)
(2,147)
$
(37)
(3,930)
$
(3,348)
(1,571)
$
(4,289)
(9,208)
$
(3,312)
-
-
$
(8,281)
(11,593)
-
1,228
978
-
2,206
21
873
2,165
3,059
2,567
-
5,953
8,520
(368)
(150)
(1,169)
(37)
(1,724)
(3,327)
(698)
(2,124)
(6,149)
(745)
-
(2,328)
(3,073)
(1)
The year ended December 31, 2014 includes losses totalling $368,000, $128,000, and $37,000 on CDOs, CMOs, and an equity security, respectively, that meet
the definition of Covered Funds under the Volcker Rule. The year ended December 31, 2013 includes losses totalling $3.3 million and $217,000 on CDOs and
CMOs, respectively, that meet the definition of Covered Funds under the Volcker Rule.
F-23
The following table presents a roll forward of activity related to the credit component of other-than-temporary
impairments recognized in pre-tax earnings on debt securities held at period-end for which a portion of the
impairment was recognized in other comprehensive income at period-end:
(in thousands)
Year ended December 31, 2014
Cumulative credit component of other-than-temporary impairment losses
at beginning of period
Additions for the credit component on debt securities for which other-than-temporary
impairment was not previously recognized
Additions for the credit component on debt securities for which other-than-temporary
impairment was previously recognized
Reduction for realized losses on debt securities sold
Cumulative credit component of other-than-temporary impairment losses
at end of period (1)
Year ended December 31, 2013
Cumulative credit component of other-than-temporary impairment losses
at beginning of period
Additions for the credit component on debt securities for which other-than-temporary
impairment was not previously recognized
Additions for the credit component on debt securities for which other-than-temporary
impairment was previously recognized
Reduction for realized losses on debt securities sold
Cumulative credit component of other-than-temporary impairment losses
at end of period (2)
Year ended December 31, 2012
Cumulative credit component of other-than-temporary impairment losses
at beginning of period
Additions for the credit component on debt securities for which other-than-temporary
impairment was not previously recognized
Additions for the credit component on debt securities for which other-than-temporary
impairment was previously recognized
Cumulative credit component of other-than-temporary impairment losses
at end of period
$
41,803
295
1,429
-
$
43,527
$
42,475
1,217
4,932
(6,821)
$
41,803
$
39,402
519
2,554
$
42,475
(1)
(2)
The cumulative credit component of other-than-temporary losses at December 31, 2014 includes $4.1 million of losses on
securities that meet the definition of Covered Funds under the Volcker Rule.
The cumulative credit component of other-than-temporary losses at December 31, 2013 includes $3.5 million of losses on
securities that meet the definition of Covered Funds under the Volcker Rule.
When estimating the portion of loss attributable to credit, we use a discounted cash flow model that considers
credit enhancement and structural protection. The estimation of cash flow incorporates numerous assumptions
including default rates, severity estimates, recovery rates, prepayment speeds and structural enhancement
characteristics. Assumptions will vary based upon the specific underlying characteristics and collateral profiles of
the underlying securities. Specifically, assumptions are determined based upon collateral vintage, borrower
characteristics, geographical data and payment performance. Market data and third-party inputs are utilized to
validate assumptions. Subsequent assessments may result in additional estimated credit losses on previously
impaired securities. These additional estimated credit losses are recorded as reclassifications from the portion of
other-than-temporary impairment previously recognized in other comprehensive income to earnings in the period
of such assessments.
In our review of CDOs and CMOs for other-than-temporary impairment, we evaluated the collateral performance
and structural credit enhancement assumptions, along with other market considerations, for each security. In our
review of bank-collateralized pooled trust preferred securities for other-than-temporary impairment, we considered
various annual default scenarios. Additionally, the collateral was reviewed to determine if additional bank issuers
should be assumed to be an immediate default or would cure (resume paying interest) based on Fitch credit
scoring, participation in the U.S. Treasury’s Troubled Asset Relief Program, ratio of non-performing assets to
tangible common equity and loan loss reserves, capital levels, and FDIC quarterly trends. Based on this review,
F-24
we assumed that certain bank issuers on our watch list will default and others will cure in the future. Utilizing our
assumptions, we then discounted the cash flows to assess the amount of credit loss.
The following table presents information regarding AFS securities, categorized by type of security and length of
time that individual securities have been in a continuous unrealized loss position at the dates indicated.
Unrealized losses on other-than-temporarily impaired securities include noncredit impairments recorded in other
comprehensive income.
(in thousands)
December 31, 2014
Temporarily-impaired securities
Residential mortgage-backed securities:
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
Less than 12 months
12 months or longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
$
3,245
(16)
60,009
(549)
63,254
(565)
71,253
653,380
90,462
(720)
(6,284)
(540)
31,898
332,267
31,350
(4,156)
(16,722)
(1,812)
103,151
985,647
121,812
(4,876)
(23,006)
(2,352)
Commercial mortgage-backed securities
44,262
(431)
5,352
(56)
49,614
(487)
Single issuer trust preferred & corporate
debt securities
Pooled trust preferred securities
Other
Equity securities (1)
125,311
(1,737)
-
5,169
-
-
(19)
-
Total temporarily-impaired securities
993,082
(9,747)
Other-than-temporarily impaired securities
Collateralized mortgage obligations:
Government-sponsored enterprises
Private
Other debt securities:
Pooled trust preferred securities
Other
Total other-than-temporarily impaired securities
Total temporarily-impaired and other-than-
temporarily impaired securities
December 31, 2013
Temporarily-impaired securities
Residential mortgage-backed securities:
U.S. Government Agency
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Private
Other debt securities:
Other-than-temporarily impaired securities
Collateralized mortgage obligations:
Government-sponsored enterprises
Private
Other debt securities:
Pooled trust preferred securities
Other
Total other-than-temporarily impaired securities
Total temporarily-impaired and other-than-
temporarily impaired securities
56,089
4,075
127,442
15,295
663,777
1,326
24,270
13,024
16,388
55,008
(978)
(2,333)
(1,486)
(507)
181,400
4,075
132,611
15,295
(2,715)
(2,333)
(1,505)
(507)
(28,599)
1,656,859
(38,346)
(2,082)
(3,671)
(3,787)
(1,592)
(11,132)
1,326
28,003
13,024
17,022
59,375
(2,082)
(3,696)
(3,787)
(1,906)
(11,471)
-
3,733
-
634
4,367
-
(25)
-
(314)
(339)
$
997,449
(10,086)
718,785
(39,731)
1,716,234
(49,817)
$
3,611
(49)
-
-
3,611
(49)
466,183
(13,400)
18,213
(747)
484,396
(14,147)
224,610
1,263,546
67,628
(4,854)
(39,385)
(2,110)
28,347
175,358
33,183
(4,607)
252,957
(22,745)
1,438,904
(2,325)
100,811
(9,461)
(62,130)
(4,435)
94,453
3,348
142,059
15,769
517,621
2,470
29,859
9,226
16,004
57,559
(3,493)
(3,256)
(2,910)
(955)
180,607
3,348
152,372
15,769
(7,500)
(3,256)
(3,184)
(955)
(41,272)
2,771,462
(109,472)
(1,336)
(5,542)
(9,523)
(3,434)
(19,835)
2,470
34,055
9,745
16,004
62,274
(1,336)
(5,650)
(10,386)
(3,434)
(20,806)
-
4,196
519
-
4,715
-
(108)
(863)
-
(971)
$
2,258,556
(69,171)
575,180
(61,107)
2,833,736
(130,278)
Commercial mortgage-backed securities
131,796
(4,121)
6,891
(234)
138,687
(4,355)
Single issuer trust preferred & corporate
debt securities
Pooled trust preferred securities
Other
Equity securities (1)
86,154
(4,007)
-
10,313
-
-
(274)
-
Total temporarily-impaired securities
2,253,841
(68,200)
(1) Equity securities represent Community Reinvestment Act (“CRA”) qualifying closed-end bond fund investments.
F-25
The following table presents information regarding HTM securities, categorized by type of security and length of
time that individual securities have been in a continuous unrealized loss position at the dates indicated.
Unrealized losses on other-than-temporarily impaired securities include noncredit impairments recorded in other
comprehensive income.
(in thousands)
December 31, 2014
Temporarily-impaired securities
Mortgage-backed securities:
Government-sponsored enterprises
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Other debt securities:
Other
Total temporarily-impaired securities
Other-than-temporarily impaired securities
Collateralized mortgage obligations - private
Total other-than-temporarily impaired securities
Total temporarily-impaired and other-than-
temporarily impaired securities
December 31, 2013
Temporarily-impaired securities
Mortgage-backed securities:
Less than 12 months
12 months or longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
$
-
-
105,939
(1,397)
105,939
(1,397)
21,647
317,161
4,447
343,255
-
-
(166)
(3,300)
(66)
(3,532)
-
-
74,801
445,523
(2,098)
(13,592)
96,448
762,684
(2,264)
(16,892)
-
-
4,447
(66)
626,263
(17,087)
969,518
(20,619)
4,942
4,942
(674)
(674)
4,942
4,942
(674)
(674)
$
343,255
(3,532)
631,205
(17,761)
974,460
(21,293)
Government-sponsored enterprises
$
428,532
(14,515)
22,114
(1,461)
450,646
(15,976)
Collateralized mortgage obligations:
U.S. Government Agency
Government-sponsored enterprises
Other debt securities:
Single issuer trust preferred & corporate
debt securities
Other
168,994
902,463
(7,244)
(42,690)
-
-
168,994
100,823
(10,545)
1,003,286
(7,244)
(53,234)
42,911
5,077
(739)
(51)
-
2,788
-
(94)
42,911
7,865
(739)
(145)
Total temporarily-impaired securities
1,547,977
(65,239)
125,725
(12,100)
1,673,702
(77,338)
Other-than-temporarily impaired securities
Collateralized mortgage obligations - private
Total other-than-temporarily impaired securities
Total temporarily-impaired and other-than-
temporarily impaired securities
-
-
-
-
5,473
5,473
(1,052)
(1,052)
5,473
5,473
(1,052)
(1,052)
$
1,547,977
(65,239)
131,198
(13,152)
1,679,175
(78,390)
The unrealized losses in our securities portfolio are primarily due to the prevailing interest rate environment and
reduced levels of liquidity in the mortgage and credit markets. The prolonged weakness in the residential housing
market, coupled with elevated unemployment levels, among other factors, led to decreased market liquidity for
certain assets and increased credit risk for certain securities in our portfolio.
Deterioration in general market conditions could have a negative effect on the projected cash flows and ultimate
recoverability of our securities. If a security is deemed to be other-than-temporarily impaired, we are required to
write down the security to fair value. Losses on securities that become other-than-temporarily impaired (where we
do not intend to sell the security and it is not more likely than not that we will be required to sell before recovery of
the security’s amortized cost) are bifurcated with the credit portion of the loss recognized in earnings and the
noncredit loss portion of the impairment recognized in other comprehensive income, net of tax.
Our private CMOs and other debt securities are the securities in our portfolio that are the most exposed to
impairment losses. In performing our other-than-temporary impairment analysis for these securities, we estimated
future cash flows for each security based upon our best estimate of future delinquencies, estimated defaults, loss
severity, and prepayments. We reviewed the estimated cash flows to determine whether we expect to receive all
originally scheduled cash flows. Projected credit losses were compared to the current level of credit enhancement
to assess whether the security is expected to incur losses in any future period and therefore would be deemed
other-than-temporarily impaired at December 31, 2014.
F-26
It is reasonably possible that the underlying collateral of these securities may perform at a level below our current
expectations, which may result in adverse changes in cash flows for these securities and potential other-than-
temporary impairment losses in the future. Events that may cause material declines in fair values for these
securities include, but are not limited to, the deterioration of credit metrics, higher default levels, further illiquidity,
or increased levels of losses in underlying collateral.
The contractual maturities of investments in AFS and HTM debt securities are summarized in the following table.
Expected maturities will differ from contractual maturities since borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
(in thousands)
AVAILABLE-FOR-SALE
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total available-for-sale debt securities
HELD-TO-MATURITY
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total held-to-maturity debt securities
(5) Federal Home Loan Bank Stock
December 31, 2014
Amortized Cost
Fair Value
$
4,290
170,546
342,549
5,489,237
6,006,622
$
$
1,056
10,986
52,624
2,143,885
2,208,551
$
4,316
177,137
346,785
5,529,926
6,058,164
1,088
11,615
55,258
2,154,216
2,222,177
As a member of the Federal Home Loan Bank (“FHLB”) of New York, Signature Bank is required to maintain a
specified minimum investment in the FHLB’s Class B capital stock. The minimum stock investment requirement is
the sum of the membership stock purchase requirement, determined on an annual basis at the end of each
calendar year, and the activity-based stock purchase requirement, determined on a daily basis.
At December 31, 2014 and 2013, Signature Bank was in compliance with the FHLB’s minimum investment
requirement with stock investments of $86.3 million and $130.8 million, respectively, carried at cost on the
Consolidated Statements of Financial Condition. Collateral pledged for outstanding FHLB borrowings at
December 31, 2014 and 2013 included $60.1 million and $103.7 million, respectively, of FHLB capital stock.
In performing our other-than-temporary impairment analysis of FHLB stock, we evaluated, among other things, (i)
the FHLB’s earnings performance, including the significance of any decline in net assets of the FHLB as compared
to the regulatory capital amount of the FHLB, (ii) the commitment by the FHLB to make dividend payments, and
(iii) the liquidity position of the FHLB. We do not consider this security to be other-than-temporarily impaired at
December 31, 2014.
(6) Loans Held for Sale
Loans held for sale at December 31, 2014 and 2013 were $548.3 million and $420.8 million, respectively. Gains
on sales associated with the securitization of pooled loans and sale of mortgage loans for the years ended
December 31, 2014, 2013 and 2012 amounted to $5.4 million, $6.3 million and $9.3 million, respectively.
We are an active participant in the SBA loan and SBA pool secondary market by purchasing, securitizing, and
selling the guaranteed portions of SBA loans. Most SBA loans have adjustable rates and float at a spread over
prime and reset monthly or quarterly. The guaranteed portions of SBA loans are backed by the full faith and credit
of the U.S. Government and therefore carry a 0% risk weight for regulatory capital purposes.
F-27
We utilize the services of Signature Securities to act as agent for and consultant to the Bank on the purchase,
assembly, and sale of SBA loans and pools.
We warehouse loans for generally up to 180 days until there are sufficient loans with similar characteristics to
securitize the pool. We may strip excess servicing from loans with different coupons to create a pool at a common
rate. This process results in the creation of two assets: a par pool, which is sold to accredited investors, and an
interest-only strip, which we retain as an available-for-sale security. The interest-only strip represents the portion
of the coupon stripped from a loan.
(7) Loans and Leases, Net
The following table summarizes our loan portfolio as of the dates indicated:
(in thousands)
Mortgage loans:
Multi-family residential property
Commercial property
1-4 family residential property
Home equity lines of credit
Construction and land
Total mortgage loans
Other loans:
Commercial and industrial
Consumer
Total other loans
Less:
Net deferred fees and costs
ALLL
Net loans
December 31,
2014
December 31,
2013
$
8,607,989
4,833,123
463,420
160,890
64,824
14,130,246
3,697,725
10,245
3,707,970
19,492
(164,392)
17,693,316
$
6,637,353
3,651,538
346,795
170,441
125,334
10,931,461
2,565,016
11,479
2,576,495
11,515
(135,071)
13,384,400
As of December 31, 2014 and 2013, commercial and industrial loans include overdrafts of commercial deposit
accounts totaling $35.0 million and $32.4 million, respectively, and other consumer loans include overdrafts of
personal deposit accounts totaling $3.8 million and $4.4 million, respectively.
In order to assist in managing credit quality, we view the Bank’s loan portfolio by various segments and classes of
loans. For commercial loans, we assign individual credit ratings ranging from 1 (lowest risk) to 9 (highest risk) as
an indicator of credit quality (“credit-rated commercial loans”). These ratings are based on specific risk factors
including (i) historical and projected financial results of the borrower, (ii) market conditions of the borrower’s
industry that may affect the borrower’s future financial performance, (iii) business experience of the borrower’s
management, (iv) nature of the underlying collateral, if any, and (v) history of the borrower’s payment
performance. Non-rated loans generally include commercial loans with outstanding principal balances below
$100,000, overdrafts, residential mortgages, and consumer loans.
F-28
The following table summarizes the recorded investment of our portfolio of commercial loans by credit rating as of
the dates indicated:
(in thousands)
December 31, 2014
Pass
Rating 1-6
Special
Mention
Rating 7
Substandard
Rating 8
Doubtful
Rating 9
Non-rated
Total
Commercial loans secured by real estate:
Multi-family residential property
$
8,593,573
-
Commercial property
1-4 family residential property
Construction and land
Commercial and industrial loans
Total commercial loans
December 31, 2013
4,798,950
3,509
297,148
64,642
-
-
3,598,738
17,353,051
$
16,191
19,700
Commercial loans secured by real estate:
Multi-family residential property
$
6,619,472
Commercial property
1-4 family residential property
Construction and land
Commercial and industrial loans
Total commercial loans
3,593,283
166,917
123,171
2,487,590
12,990,433
$
5,159
27,375
3,706
-
3,661
39,901
13,021
30,664
5,507
182
33,615
82,989
11,161
30,791
5,623
2,163
19,282
69,020
-
-
-
-
-
-
130
-
4,762
4,762
44,419
44,549
89
-
-
-
-
-
-
65
8,343
8,432
46,140
46,205
8,606,594
4,833,123
302,785
64,824
3,697,725
17,505,051
6,635,792
3,651,538
176,311
125,334
2,565,016
13,153,991
For consumer loans, including residential mortgages and home equity lines of credit, we consider the borrower’s
payment history and current payment performance as leading indicators of credit quality. A consumer loan is
considered nonperforming generally when it becomes 90 days delinquent based on contractual terms, at which
time the accrual of interest income is discontinued. In the case of residential mortgages and home equity lines of
credit, exceptions may be made if the loan has sufficient collateral value, based on a current appraisal, and is in
process of collection.
The following table summarizes the recorded investment of our portfolio of consumer loans by performance status
as of the dates indicated:
(in thousands)
December 31, 2014
Residential mortgages
Home equity lines of credit
Other consumer loans
Total consumer loans
December 31, 2013
Residential mortgages
Home equity lines of credit
Other consumer loans
Total consumer loans
Performing
Nonperforming
Total
$
$
$
$
159,911
156,253
10,134
326,298
168,557
167,701
11,337
347,595
2,119
4,637
111
6,867
3,488
2,740
142
6,370
162,030
160,890
10,245
333,165
172,045
170,441
11,479
353,965
Loans to related parties include loans to directors and their related companies and our executive officers. Such
loans are made in the ordinary course of business on substantially the same terms as loans to other individuals
and businesses of comparable risks. Related party loans totaled $868,000 and $1.6 million at December 31, 2014
and 2013, respectively, and all related party loans are current as to payments.
F-29
The following table summarizes the delinquency and accrual status of our loan portfolio, excluding loans held for
sale, as of the dates indicated:
(in thousands)
December 31, 2014
Commercial loans
Past Due
30-89 Days
Past Due
90+ Days
Total
Past Due
Current
Total
Loans
Accruing
Loans Past
Due 90+ Days
Non-accruing
Loans
Loans secured by real estate:
Multi-family residential property
$
2,800
Commercial property
1-4 family residential property
Construction and land
Commercial and industrial loans
Consumer loans
Residential mortgages
Home equity lines of credit
Consumer loans
Total
December 31, 2013
Commercial loans
794
1,122
-
15,535
2,059
596
16
22,922
$
Loans secured by real estate:
Multi-family residential property
$
15,105
Commercial property
1-4 family residential property
Construction and land
16,462
-
-
-
3,819
5,011
183
6,666
2,421
4,637
111
22,848
-
7,308
4,973
2,162
2,800
4,613
6,133
183
8,603,794
8,606,594
4,828,510
4,833,123
296,652
64,641
302,785
64,824
22,201
3,675,524
3,697,725
4,480
5,233
127
45,770
157,550
155,657
162,030
160,890
10,118
17,792,446
10,245
17,838,216
15,105
23,770
4,973
2,162
6,620,687
6,635,792
3,627,768
3,651,538
171,338
123,172
176,311
125,334
Commercial and industrial loans
18,229
10,529
28,758
2,536,258
2,565,016
Consumer loans
Residential mortgages
Home equity lines of credit
Consumer loans
Total
2,441
2,558
76
54,871
$
4,276
3,240
142
32,630
6,717
5,798
218
87,501
165,328
164,643
172,045
170,441
11,261
13,420,455
11,479
13,507,956
-
712
-
-
825
302
-
-
1,839
-
-
-
-
-
788
500
-
1,288
-
3,106
5,011
183
5,841
2,119
4,637
111
21,008
-
7,308
4,973
2,162
10,529
3,488
2,740
142
31,342
Nonaccrual loans at December 31, 2014 and 2013 totaled $21.0 million and $31.3 million, respectively, and there
were no commitments at either date to lend additional funds on such loans.
Accruing loans past due 90 days or more at December 31, 2014 and December 31, 2013 totaled $1.8 million and
$1.3 million, respectively, excluding loans held for sale. At December 31, 2014, accruing loans past due 90 days
or more were primarily comprised of matured performing loans in the normal course of renewal. At December 31,
2013, accruing loans past due 90 days or more were comprised of residential mortgages that are well secured and
in process of collection.
As of December 31, 2014, the Bank had pledged $2.62 billion of commercial real estate loans through a blanket
assignment to secure borrowings from the Federal Home Loan Bank (“FHLB”), although only approximately
$544.9 million was required in connection with the outstanding FHLB advances. We had no loans pledged as of
December 31, 2013.
Commercial loans (including commercial and industrial loans and loans to commercial borrowers that are secured
by real estate) constitute a substantial portion of our loan portfolio. Substantially all of the real estate collateral for
the loans in our portfolio is located within the New York metropolitan area. As a result, our financial condition and
results of operations may be affected by changes in the economy and the real estate market of the New York
metropolitan area. A prolonged period of economic recession or other adverse economic conditions in the New
York metropolitan area may result in an increase in nonpayment of loans, a decrease in collateral value, and an
increase in our ALLL.
F-30
(8) Allowance for Loan and Lease Losses
The table below presents a summary by loan portfolio segment of our ALLL, loan loss experience, and provision
for loan and lease losses for the periods indicated:
(in thousands)
For the year ended December 31, 2014
Beginning balance - ALLL
Provision
Charge-offs
Recoveries
Ending balance - ALLL
For the year ended December 31, 2013
Beginning balance - ALLL
Provision
Charge-offs
Recoveries
Ending balance - ALLL
For the year ended December 31, 2012
Beginning balance - ALLL
Provision
Charge-offs
Recoveries
Ending balance - ALLL
Credit-rated
Commercial Loans
Commercial
Loans
Non-rated
Residential
Mortgages
Consumer
Loans
Total
$
128,192
27,801
(4,586)
$
4,764
156,171
$
100,092
40,928
(14,137)
$
1,309
128,192
$
78,853
39,634
(18,657)
$
262
100,092
2,797
32
(1,297)
701
2,233
4,269
(1,254)
(1,384)
1,166
2,797
4,954
214
(2,439)
1,540
4,269
3,314
3,353
(1,597)
460
5,530
2,419
1,615
(753)
33
3,314
1,569
1,481
(635)
4
2,419
768
(76)
(380)
146
458
653
354
(407)
168
768
786
98
(425)
194
653
135,071
31,110
(7,860)
6,071
164,392
107,433
41,643
(16,681)
2,676
135,071
86,162
41,427
(22,156)
2,000
107,433
The following table presents our ALLL and outstanding loan balances by loan portfolio segment, based on the
methodology followed in determining the allowance:
(in thousands)
As of December 31, 2014
ALLL:
Credit-rated
Commercial Loans
Commercial
Loans
Residential
Mortgages
Consumer
Loans
Total
Non-rated
Individually evaluated for impairment
$
4,645
Collectively evaluated for impairment
151,526
Recorded investment in loans:
Individually evaluated for impairment
Collectively evaluated for impairment
As of December 31, 2013
ALLL:
46,919
17,413,583
Individually evaluated for impairment
$
9,628
Collectively evaluated for impairment
118,564
Recorded investment in loans:
Individually evaluated for impairment
Collectively evaluated for impairment
56,676
13,051,110
288
1,945
575
43,974
399
2,398
813
45,392
3,531
1,999
45
413
8,509
155,883
9,528
313,392
111
10,134
57,133
17,781,083
1,250
2,064
71
697
11,348
123,723
6,809
335,677
142
11,337
64,440
13,443,516
F-31
In determining whether a loan is impaired, we review the payment performance and we consider a loan to be
impaired once it is placed on nonaccrual status. In addition, if a loan is restructured as troubled debt, we consider
the TDR loan as impaired during the year of restructuring. In subsequent years, we do not consider the
restructured loan as impaired if it was restructured at a market rate and continues to perform in accordance with
the modified terms. Other TDR loans, however, are reported as such for as long as the loan remains outstanding.
The following table summarizes the recorded investment, unpaid principal balance, and related allowance for our
impaired loans as of the dates indicated:
(in thousands)
With no related allowance recorded:
Commercial loans secured by real estate:
Commercial property
Construction and land
Multi-family residential property
1-4 family residential property
Commercial and industrial loans
Residential mortgages
Home equity lines of credit
With an allowance recorded:
Commercial loans secured by real estate:
Commercial property
Construction and land
Multi-family residential property
1-4 family residential property
Commercial and industrial loans
Residential mortgages
Home equity lines of credit
Other consumer loans
Total:
Commercial loans secured by real estate
Commercial and industrial loans
Residential mortgages
Home equity lines of credit
Other consumer loans
Total impaired loans
December 31, 2014
December 31, 2013
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
$
9,293
1,757
7,140
7,457
5,262
-
1,990
7,337
-
3,606
55
9,112
3,544
5,458
111
36,645
14,374
3,544
7,448
111
9,293
182
7,140
5,507
5,262
-
1,990
7,337
-
3,606
55
9,112
2,900
4,638
111
33,120
14,374
2,900
6,628
111
$
62,122
57,133
-
-
-
-
-
-
-
981
-
48
28
3,876
1,212
2,319
45
1,057
3,876
1,212
2,319
45
8,509
9,600
9,600
-
-
5,623
2,800
2,235
2,074
11,829
2,545
11,161
-
18,023
2,345
894
142
40,758
20,823
4,580
2,968
142
-
-
5,623
2,638
2,235
2,074
11,829
2,162
11,161
-
14,476
1,834
666
142
40,375
17,114
4,069
2,740
142
-
-
-
-
-
-
-
3,428
62
572
-
5,965
917
333
71
4,062
5,965
917
333
71
69,271
64,440
11,348
F-32
The following table summarizes the average recorded investment of impaired loans and interest income
recognized on impaired loans for the periods indicated:
(in thousands)
With no related allowance recorded:
Commercial loans secured by real estate:
Commercial property
Construction and land
Multi-family residential property
1-4 family residential property
Commercial and industrial loans
Residential mortgages
Home equity lines of credit
Other consumer loans
With an allowance recorded:
Commercial loans secured by real estate:
Commercial property
Construction and land
Multi-family residential property
1-4 family residential property
Commercial and industrial loans
Residential mortgages
Home equity lines of credit
Other consumer loans
Total:
Commercial loans secured by real estate
Commercial and industrial loans
Residential mortgages
Home equity lines of credit
Other consumer loans
Total
Years ended December 31,
2014
2013
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
$
7,463
740
5,861
2,616
3,114
656
813
-
11,456
432
5,067
3,004
12,136
2,580
4,000
152
36,639
15,250
3,236
4,813
152
9
-
331
27
376
-
13
-
239
-
159
-
158
21
-
-
765
534
21
13
-
$
60,090
1,333
8,727
-
-
4,437
5,867
3,494
1,232
-
13,448
2,565
11,946
1,167
17,821
1,608
790
243
42,290
23,688
5,102
2,022
243
73,345
165
-
-
22
262
-
-
-
133
-
419
-
307
4
-
-
739
569
4
-
-
1,312
For economic reasons and to maximize the recovery of loans, we may work with borrowers experiencing financial
difficulties, and will consider modifications to a borrower’s existing loan terms and conditions that we would not
otherwise consider, commonly referred to as TDR loans. Our TDR loans consist of those loans where we modify
the contractual terms of the loan, such as (i) a deferral of the loan’s principal amortization through either interest-
only or reduced principal payments, (ii) a reduction in the loan’s contractual interest rate or (iii) an extension of the
loan’s contractual term.
F-33
The following table presents loans that were classified as TDRs during the years ended December 31, 2014,
2013, and 2012. The pre-modification balances represent the recorded investment immediately prior to
modification, and the post-modification balances represent the recorded investment as of the dates indicated:
(dollars in thousands)
Commercial loans secured by real estate:
Commercial property
Multi-family residential property
1-4 family residential property
Construction and land
Commercial and industrial loans
Home equity lines of credit
Residential mortgages
Total
December 31, 2014
Pre-
Modification
Balance
Post-
Modification
Balance
December 31, 2013
Pre-
Modification
Balance
Post-
Modification
Balance
December 31, 2012
Pre-
Modification
Balance
Post-
Modification
Balance
Number
of Loans
Number
of Loans
Number
of Loans
3
-
-
1
2
1
1
8
$
4,504
5,490
-
-
2,140
6,982
1,990
495
-
-
183
6,189
1,990
495
$
16,111
14,347
1
-
1
-
4
-
1
7
7,703
4,400
-
650
-
6,143
-
325
-
650
-
6,308
-
290
14,821
11,648
6
4
-
-
11
-
1
22
18,309
11,577
-
-
12,527
11,534
-
-
22,735
21,576
-
315
-
298
52,936
45,935
The following table summarizes how the TDR loans recorded for the years ended December 2014, 2013, and
2012 were modified:
Term
Extension
Term Extension with
Other Concession (1)
Deferred Principal
Amortization
Deferred Principal
Amortization
with Other
Concession (1)
Rate Reduction
Total
(in thousands)
December 31, 2014
Commercial loans secured by real estate:
Commercial property
Construction and land
Commercial and industrial loans
Home equity lines of credit
Residential mortgages
Total
December 31, 2013
$
5,490
183
6,189
-
-
$
11,862
Commercial loans secured by real estate:
Commercial property
$
4,400
1-4 family residential property
Commercial and industrial loans
Residential mortgages
Total
December 31, 2012
Commercial loans secured by real estate:
650
3,653
-
$
8,703
Commercial property
$
5,903
Multi-family residential property
Commercial and industrial loans
Residential mortgages
Total
7,378
14,146
-
$
27,427
-
-
-
-
-
-
-
-
2,655
-
2,655
-
-
-
-
-
-
-
-
1,990
495
2,485
-
-
-
-
-
-
-
5,101
-
5,101
-
-
-
-
-
-
-
-
-
290
290
3,865
4,156
2,329
298
10,648
-
-
-
-
-
-
-
-
-
-
-
2,759
-
-
-
2,759
5,490
183
6,189
1,990
495
14,347
4,400
650
6,308
290
11,648
12,527
11,534
21,576
298
45,935
(1) Other concessions may include a reduction of the loan's interest rate and/or extension of the loan's contractual maturity date.
Our impaired loans at December 31, 2014 and 2013 include TDR loans totaling $43.3 million and $43.0 million,
respectively.
During the year of restructuring, we consider a TDR loan as impaired. In subsequent years, we do not consider
the restructured loan as impaired if it was restructured at a market rate and continues to perform in accordance
with its modified terms. Other TDRs loans, however, are reported as such for as long as the loan remains
outstanding. For all loans classified as a TDR, we record an impairment loss, if any, based on the present value of
expected future cash flows discounted at the original loan’s effective interest rate, or, if the loan is collateral
dependent, based on the fair value of the collateral less estimated costs to sell.
As of December 31, 2014 and 2013, there were no loans that were modified as a TDR within the previous 12
months that subsequently defaulted on payments. As of December 31, 2012, we had eight loans modified as
F-34
TDRs within the previous 12 months that subsequently defaulted on payments, including three commercial and
industrial loans for $8.1 million, four commercial property loans for $5.9 million, and one residential mortgage loan
for $300,000.
For the years ended December 31, 2014, 2013 and 2012, we recorded interest income on impaired loans during
the period of impairment totaling $1.3 million, $1.3 million and $1.9 million, respectively. If all impaired loans had
been performing in accordance with their original terms, we would have recorded interest income, with respect to
such loans, of approximately $3.1 million, $4.9 million, and $5.2 million for the years ended December 31, 2014
2013, and 2012, respectively. Average impaired loans for the years ended December 31, 2014, 2013 and 2012
totaled $60.1 million, $73.3 million, and $83.1 million, respectively.
(9) Premises and Equipment
Premises and equipment are summarized as follows as of the dates indicated:
(in thousands)
Leasehold improvements
Furniture, fixtures and equipment
Less accumulated depreciation and amortization
Premises and equipment, net
December 31,
2014
2013
$
56,124
42,179
98,303
(57,307)
40,996
$
50,618
32,804
83,422
(47,091)
36,331
Depreciation and amortization expense totaled $8.9 million, $8.2 million and $6.9 million for the years ended
December 31, 2014, 2013 and 2012, respectively.
(10) Deposits
The types of deposits are summarized as follows as of the dates indicated:
December 31,
(in thousands)
Non-interest-bearing demand
NOW and interest-bearing demand
Money market
Time deposits
Brokered time deposits
Total deposits
$
2014
7,064,959
1,671,150
12,866,707
806,270
211,189
22,620,275
$
2013
5,391,483
850,897
9,589,488
820,999
404,230
17,057,097
The aggregate amounts of time deposits in denominations of $100,000 or more at December 31, 2014 and 2013
were $698.9 million and $696.0 million, respectively. The related interest expense on these types of deposits for
the years ended December 31, 2014 and 2013 amounted to $11.0 million and $11.1 million, respectively.
F-35
At December 31, 2014, the scheduled maturities of time deposits are as follows:
(in thousands)
2015
2016
2017
2018
2019
Total time deposits
Amount
$
694,673
234,965
77,239
5,529
5,053
1,017,459
$
At December 31, 2014 and 2013, we had approximately $51.2 million and $28.9 million, respectively, in deposits
held by our directors and their related interests.
(11)
Incentive Savings Plan
We have a 401(k) program under which employees may make personal contributions of up to 60% of their pretax
earnings by means of payroll deductions. We match 100% of the first 3% of compensation contributed to the plan
and 50% of the next 4% of compensation contributed. Our contributions, included in salaries and benefits
expense, were $4.4 million, $3.7 million and $3.1 million, respectively, for the years ended December 31, 2014,
2013 and 2012.
(12) Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
The following is a summary of federal funds purchased and securities sold under agreements to repurchase at or
for the years ended:
(dollars in thousands)
Federal Funds Purchased
Year-end balance
Maximum amount outstanding at any month-end
Average outstanding balance
Weighted-average interest rate paid
Weighted-average interest rate at year-end
Securities Sold Under Agreements to Repurchase
Year-end balance
Maximum amount outstanding at any month-end
Average outstanding balance
Weighted-average interest rate paid
Weighted-average interest rate at year-end
December 31,
2014
2013
$
$
$
95,000
424,000
122,860
0.27%
0.26%
$
$
$
370,000
529,000
415,849
0.29%
0.28%
$
$
$
620,000
695,000
673,904
2.47%
2.48%
$
$
$
695,000
695,000
665,753
2.70%
2.43%
During the years ended December 31, 2014, 2013, and 2012, we recorded interest expense on federal funds
purchased and securities sold under agreements to repurchase totaling $17.0 million, $19.2 million, and $22.1
million, respectively.
At December 31, 2014, securities with a fair value of $858.1 million and a carrying value of $856.1 million were
pledged to meet our collateral requirement of $651.0 million on repurchase agreements. At December 31, 2013,
F-36
securities with a fair value of $891.7 million and a carrying value of $907.4 million were pledged to meet our
collateral requirement of $729.9 million on repurchase agreements.
The federal funds purchased at December 31, 2014 were overnight transactions, while the securities sold under
repurchase agreements at December 31, 2014 have contractual maturities as follows:
(in thousands)
2015
2016
2017
2018
2019
Thereafter
Total
Amount
$
200,000
95,000
220,000
75,000
-
30,000
620,000
$
(13) Federal Home Loan Bank Advances
As a member of the FHLB of New York, we are required to acquire and hold shares of capital stock in the FHLB in
an amount at least equal to 1% of the aggregate principal amount of our unpaid residential mortgage loans and
similar obligations at the beginning of each year, 4.5% of our borrowings from the Federal Home Loan Bank, or
0.3% of assets, whichever is greater. As of December 31, 2014, we were in compliance with this requirement.
The following table provides a summary of Federal Home Loan Bank (“FHLB”) advances at or for the years ended:
(dollars in thousands)
Year-end balance
Maximum amount outstanding at any month-end
Average outstanding balance
Weighted-average interest rate paid
Weighted-average interest rate at year-end
December 31,
$
$
$
2014
1,335,163
1,955,313
1,646,832
0.77%
0.90%
$
$
$
2013
2,305,313
2,305,313
1,111,144
0.66%
0.60%
During the years ended December 31, 2014, 2013, and 2012, interest expense recorded on FHLB advances
totaled $12.7 million, $7.4 million, and $4.5 million, respectively.
At December 31, 2014, securities with a fair value and a carrying value of $1.93 billion were available to meet our
collateral requirement of $829.8 million on FHLB advances. At December 31, 2013, securities with a fair value of
$2.56 billion and a carrying value of $2.57 billion were available to meet our collateral requirement of $2.42 billion
on FHLB advances.
As of December 31, 2014, the Bank had pledged $2.62 billion of commercial real estate loans through a blanket
assignment to secure borrowings from the Federal Home Loan Bank (“FHLB”), although only approximately
$544.9 million was required in connection with the outstanding FHLB advances. We had no loans pledged as of
December 31, 2013.
F-37
FHLB advances at December 31, 2014 have contractual maturities as follows:
(in thousands)
2015
2016
2017
2018
2019
Amount
$
550,000
529,263
255,900
-
-
Total advances
$
1,335,163
Certain of our long-term FHLB advances are callable by the FHLB for redemption prior to their scheduled maturity
date. The table above includes $35.0 million in advances that are callable in 2015, which have interest rates
ranging from 3.87% to 3.92% and a weighted average interest rate of 3.88%.
(14) Other Short-Term Borrowings
The following table summarizes our Federal Reserve Treasury Tax and Loan borrowings at or for the years ended:
(dollars in thousands)
Year-end balance
Maximum amount outstanding at any month-end
Average outstanding balance
Weighted-average interest rate paid
Weighted-average interest rate at year-end
December 31,
2014
2013
$
-
$
-
-
$
-
-
$
-
$
-
$
41
0.75%
0.00%
(15)
Income Taxes
Provision for Income Taxes
The following table presents the components of income tax expense for the periods indicated:
(in thousands)
FEDERAL
Current expense
Deferred income tax expense (benefit)
Total federal
STATE AND LOCAL
Current expense
Deferred income tax expense (benefit)
Total state and local
TOTAL
Current expense
Deferred income tax expense (benefit)
Total
F-38
Years ended December 31,
2014
2013
2012
$
$
117,994
27,545
145,539
$
$
60,481
9,055
69,536
$
$
178,475
36,600
215,075
100,939
8,851
109,790
54,334
(1,334)
53,000
155,273
7,517
162,790
100,636
(6,020)
94,616
49,313
(3,037)
46,276
149,949
(9,057)
140,892
The increase in income tax expense for the year ended December 31, 2014, when compared to the previous year,
was primarily driven by an increase in our pre-tax income, along with a $1.8 million tax charge related to New York
State corporate income tax reform enacted on March 31, 2014 (“the reform”).
New York State Corporate Income Tax Reform
The reform included several changes to existing tax legislation that are effective for tax years beginning January 1,
2015 (except as noted), the most pertinent of which are as follows:
Merges the Article 32 Bank Franchise Tax into the Article 9-A Corporate Franchise Tax;
Implements a single receipts apportionment factor using customer-based sourcing rules. The new rules
include sourcing a fixed 8 percent of income for mortgage-backed securities to New York State. Also
special rules apply to the sourcing of receipts from “qualified financial instruments” which are defined as
instruments that are marked to market under IRC sections 475 or 1256. An annual irrevocable election
can be made to source a fixed 8 percent of income from all qualified financial instruments to New York
State in place of customer-based sourcing.;
Lowers the business income tax base rate from 7.1% to 6.5% for tax years beginning on or after January
1, 2016; and
Streamlines the computation of the Metropolitan Transportation Authority (“MTA”) Surcharge, makes it
permanent, and increases the rate from 17% to 25.6% of the corporate income tax rate.
In accordance with GAAP, we revalued our New York State net deferred tax assets to consider the effects of the
enacted provisions outlined above. While we do not anticipate a material impact on our Consolidated Financial
Statements prospectively, we will continue to evaluate the effects of the reform on our income tax expense and net
deferred tax assets.
Deferred Tax Assets and Liabilities
The following table presents the significant components of our net deferred tax asset as of the dates indicated:
(in thousands)
DEFERRED TAX ASSETS
Allowance for loan and lease losses
Unearned compensation - restricted shares
Non-accrual interest
Write-down for other-than-temporary impairment of securities
Other
Total deferred tax assets recognized in earnings
Net unrealized losses on securities available-for-sale
Net unrealized losses on securities transferred to held-to-maturity
Total deferred tax assets
DEFERRED TAX LIABILITIES
Depreciation
Prepaid expenses
Other
Total deferred tax liabilities recognized in earnings
Net unrealized gains on securities available-for-sale
Total deferred tax liabilities
Net deferred tax asset
December 31,
2014
2013
$
69,553
11,557
1,338
18,337
17,197
117,982
-
11,968
129,950
72,194
839
13,480
86,513
21,592
108,105
21,845
$
59,078
8,900
1,834
18,273
7,376
95,461
26,236
13,815
135,512
16,951
674
9,767
27,392
-
27,392
108,120
F-39
At December 31, 2014, after considering all available positive and negative evidence, management concluded that
a valuation allowance for deferred tax assets was not necessary because it is more likely than not that these tax
benefits will be fully realized. While we will continue to monitor the need for a valuation allowance prospectively,
we do not expect a valuation allowance will be required based upon projected profitability and taxable income in
the carry-back period. Net deferred tax assets are included in other assets in our Consolidated Statements of
Financial Condition.
In accordance with GAAP, we revalued our New York State deferred tax assets and liabilities in consideration of
the previously-described reform. The revaluation resulted in a decrease of $1.8 million to our net deferred tax
asset.
Effective Tax Rate
The following table presents a reconciliation of statutory federal income tax expense to Bank’s combined effective
income tax expense for the periods indicated:
(dollars in thousands)
Years ended December 31,
2014
2013
2012
Expense
(Benefit)
Rate
Expense
(Benefit)
Rate
Expense
(Benefit)
Rate
Statutory federal income tax expense
$
179,122
35%
137,037
35%
114,231
35%
State and local income taxes, net of
federal income tax benefit
Tax exempt income
Other items, net
Effective income tax expense
* - Less than 1%.
Unrecognized Tax Benefits
45,198
(378)
(8,867)
215,075
$
9%
*
(2)%
42%
34,451
(351)
(8,347)
162,790
9%
*
(2)%
42%
30,080
(618)
(2,801)
140,892
9%
*
(1)%
43%
We have not recognized any liabilities for unrecognized tax benefits related to uncertain tax positions. Our policy
is to recognize interest and penalties on income taxes in income tax expense. We file U.S. federal and various
state and local income tax returns. For our federal and New York State income tax returns, we remain subject to
examination for tax years 2011 and after, while for our New York City income tax returns, we remain subject to
examination for tax years 2010 and after.
F-40
(16) Equity Incentive Plan
We have an equity incentive plan designed to assist us in attracting, retaining, and motivating officers, employees,
directors, and/or consultants and to provide us and our subsidiaries and affiliates with incentives directly related to
increases in our shareholder value. Activity related to the equity incentive plan for the years ended December 31,
2014 and 2013 is summarized as follows:
Shares available for future awards at beginning of the year
Additional shares approved at the 2013 Annual Meeting of Shareholders
Options
Years ended December 31,
2013
2014
2,178,000
1,417,517
- 1,082,483
Granted
Forfeited or expired
Shares sold to cover minimum tax withholding and/or option price upon exercise
- -
- -
24,803
2,470
Restricted stock
Granted
Forfeited
Shares sold to cover minimum tax withholding upon vesting
Shares available for future awards at end of the year
(328,414) (348,093)
1,275
214
15
165,438
2,017,708
2,178,000
Stock Options
As of December 31, 2014, all outstanding options were fully vested and exercisable. Accordingly, no additional
compensation cost will be expensed for these options. During the years ended December 31, 2014 and 2013, we
recognized no compensation expense with respect to stock options. All options granted under the equity incentive
plan expire ten years from the date of grant. At the time of grant, all options vested in whole or in part over three
years from the date of issuance.
The following table summarizes information regarding the stock option component of the 2004 equity incentive
plan for the years ended December 31, 2014 and 2013:
Years ended December 31,
2014
2013
Shares
Underlying
Options
Weighted
Average
Exercise Price
Shares
Underlying
Options
Weighted
Average
Exercise Price
Outstanding at beginning of the year
Granted
Exercised
Forfeited or expired
Outstanding at end of the year
16,750
$ 25.20
- -
(5,175) 22.60
- -
$ 26.36
11,575
62,750
$ 22.57
- -
21.61
(46,000)
- -
$ 25.20
16,750
The intrinsic value of stock options exercised during the years ended December 31, 2014 and 2013 totaled
$499,000 and $2.7 million, respectively, and the cash received from those exercises during the respective periods
totaled $117,000 and $994,000. Available authorized common shares are issued for stock options that are
exercised.
F-41
The following table presents a summary of outstanding and exercisable stock options as of December 31, 2014:
Exercise Price
$ 24.98
26.11
26.87
Shares
Underlying
Options
Weighted Average
Remaining Contractual
Life in Years
1,750
3,325
6,500
11,575
1.05 years
0.47 years
0.80 years
As of December 31, 2014, the intrinsic value of outstanding and exercisable options totaled $1.2 million.
Restricted Stock
The following table summarizes information regarding outstanding grants of restricted stock for the years ended
December 31, 2014 and 2013:
Years ended December 31,
2014
2013
Weighted
Average
Grant Price
Shares
Weighted
Average
Grant Price
Shares
Outstanding at beginning of the year
Granted
Vested
Forfeited
Outstanding at end of the year
1,111,013
328,414
(358,137)
(214)
1,081,076
$ 54.15
127.96
58.14
68.95
$ 75.34
764,230
348,093
(35)
(1,275)
1,111,013
$ 43.25
78.12
63.55
67.42
$ 54.15
As of December 31, 2014, our total unrecognized compensation cost related to unvested restricted shares was
$54.2 million, which is expected to be recognized over a weighted-average period of 2.62 years. During the years
ended December 31, 2014, 2013, and 2012, we recognized compensation expense of $27.7 million, $15.6 million,
and $17.6 million, respectively, for restricted shares. Included in the compensation expense for the year ended
December 31, 2012 was $3.2 million from the December 10, 2012 accelerated vesting of 276,016 restricted
shares, originally scheduled to vest on March 22, 2013. The total fair value of restricted shares that vested during
the years ended December 31, 2014, 2013 and 2012 were $45.6 million, $2,600, and $34.1 million, respectively.
F-42
(17) Accumulated Other Comprehensive Income
The following table presents information regarding items reclassified out of Accumulated Other Comprehensive
Income (“AOCI”) for the years ended December 31, 2014 and 2013:
(in thousands)
Details About AOCI
Years ended December 31,
2014
Amount
Reclassified
Out of AOCI
2013
Amount
Reclassified
Out of AOCI
Affected Line Item in the
Consolidated Statement of Income
Net unrealized (losses) gains on AFS securities
$ 5,272
6,228
Net (losses) gains on sales of securities
Total reclassifications, before tax
Total reclassifications, net of tax
(1,724)
3,548
(1,499)
$
2,049
(6,149)
79
(38)
41
Net other-than-temporary impairment losses
on securities recognized in earnings
Income tax expense
The following table presents changes in AOCI, net of tax, for the years ended December 31, 2014 and 2013:
(in thousands)
For the year ended December 31, 2014
Balance at December 31, 2013
Net change in unrealized gain (loss)
Net unrealized loss on securities transferred from AFS to HTM
Amortization of net unrealized loss on securities transferred to HTM
Amounts reclassified out of AOCI
Net current period other comprehensive income
Balance at December 31, 2014
For the year ended December 31, 2013
Balance at December 31, 2012
Net change in unrealized gain (loss)
Net unrealized loss on securities transferred from AFS to HTM
Amortization of net unrealized loss on securities transferred to HTM
Amounts reclassified out of AOCI
Net current period other comprehensive income
Balance at December 31, 2013
(18) Earnings Per Share
AFS
Securities
HTM Securities
transferred
from AFS
Total
$
$
$
(34,007)
64,912
-
-
(2,049)
62,863
28,856
43,827
(97,006)
19,213
-
(41)
(77,834)
(34,007)
$
(17,677)
-
-
1,945
-
1,945
(15,732)
-
-
(19,213)
1,536
-
(17,677)
(17,677)
(51,684)
64,912
-
1,945
(2,049)
64,808
13,124
43,827
(97,006)
-
1,536
(41)
(95,511)
(51,684)
The following table shows the computation of basic and diluted earnings per common and common equivalent
share for the years indicated:
(in thousands, except per share amounts)
Net income
Common and common equivalent shares:
Weighted average common shares outstanding
Weighted average common equivalent shares
Weighted average common and common equivalent shares
Basic earnings per share
Diluted earnings per share
F-43
Years ended December 31,
2013
2014
2012
$
296,704
228,744
185,483
49,066
804
49,870
6.05
5.95
$
$
47,267
762
48,029
4.84
4.76
46,633
753
47,386
3.98
3.91
For the years ended December 31, 2014, 2013 and 2012, there were no anti-dilutive options or warrants excluded
from the computation of diluted earnings per share as their exercise price did not exceed the average market price
of the Company’s common shares.
(19) Commitments and Contingent Liabilities
In the normal course of business, we have various outstanding commitments and contingent liabilities that are not
reflected in the accompanying Consolidated Financial Statements.
(a) Lease Commitments
We have entered into non-cancelable operating lease agreements for premises and equipment with expiration
dates through the year 2027. Our premises are used principally for private client offices and administrative
operations. Rental expense for our premises for the years ended December 31, 2014, 2013, and 2012 totaled
$18.6 million, $16.3 million and $14.1 million, respectively.
The required minimum rental payments under the terms of the non-cancelable leases at December 31, 2014 are
summarized as follows:
(in thousands)
2015
2016
2017
2018
2019
Thereafter
Total
Amount
$
16,904
16,933
15,699
14,559
14,380
62,099
140,574
$
(b) Information Technology Services Contract
On September 9, 2005, we entered into a Master Agreement for the Provision of Hardware, Software and/or
Services (the “Agreement”) with Fidelity Information Services, Inc. (“Fidelity”). Under the terms of the agreement,
Fidelity provides us with hardware, software and account processing services related to our core banking
applications. Particularly, Fidelity supplies us with enterprise banking services, core data processing services and
managed operations services. Fidelity also provides implementation and training services for the software and
hardware provided under the Agreement.
We began making monthly payments on July 1, 2006, and during the years ended December 31, 2014, 2013, and
2012, we incurred contractual costs of $3.5 million, $3.3 million, and $3.4 million, respectively. During 2010, the
original 84 month contractual term was extended by 38 months, and the Agreement now terminates in August
2016. We have the right to terminate the Agreement upon a change of control of us, or a failure by Fidelity to
meet the terms of the Agreement, subject to certain penalties.
F-44
The required payments under the terms of the Agreement at December 31, 2014 are as follows:
(in thousands)
2015
2016
2017
2018
2019
Thereafter
Total
Amount
$
3,460
2,416
-
-
-
-
5,876
$
(c) Financial Instruments with Off-Balance Sheet Risks
In the normal course of business, we have various outstanding commitments and contingent liabilities that are not
reflected in the accompanying Consolidated Financial Statements.
We enter into transactions that involve financial instruments with off-balance sheet risks in the ordinary course of
business to meet the financing needs of our clients. Such financial instruments include commitments to extend
credit, standby letters of credit, and unused balances under confirmed letters of credit, all of which are primarily
variable rate. Such instruments involve, to varying degrees, elements of credit and interest rate risk.
Our exposure to credit loss in the event of nonperformance by the other party with regard to financial instruments
is represented by the contractual notional amount of those instruments. Financial instrument transactions are
subject to our normal credit policies and approvals, financial controls and risk limiting and monitoring procedures.
We generally require collateral or other security to support financial instruments with credit risk.
The following table presents a summary of our commitments and contingent liabilities:
(in thousands)
Unused commitments to extend credit
Financial standby letters of credit
Commercial and similar letters of credit
Other
Total
December 31,
2014
2013
$
$
695,435
257,006
34,921
1,312
988,674
578,771
209,136
20,516
1,135
809,558
Commitments to extend credit consist of agreements having fixed expiration or other termination clauses and may
require payment of a fee. Total commitment amounts may not necessarily represent future cash requirements.
We evaluate each client's creditworthiness on a case-by-case basis. Upon the extension of credit, we will obtain
collateral, if necessary, based on our credit evaluation of the counterparty. Collateral held varies but may include
deposits held in financial institutions, commercial properties, residential properties, accounts receivable, property,
plant and equipment and inventory. At December 31, 2014 and 2013, our reserves for losses on unused
commitments to extend credit totaled $747,000 and $825,000, respectively, and are included in accrued expenses
and other liabilities in our Consolidated Statements of Financial Condition.
We recognize a liability at the inception of the guarantee that is equivalent to the fee received from the guarantor.
This liability is amortized over the term of the guarantee on a straight-line basis. At December 31, 2014 and
December 31, 2013, we had deferred revenue for commitment fees paid for the issuance of standby letters of
credit in the amounts of $879,000 and $809,000, respectively.
Standby letters of credit are conditional commitments issued by us to guarantee the performance of our clients’
obligations to third parties. Standby letters of credit are primarily used to support clients' business trade
F-45
transactions and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to clients. We had a reserve for credit losses on standby letters
of credit totaling $124,000 and $130,000 at December 31, 2014 and 2013, respectively. We recorded provisions
for losses related to standby letters of credit totaling $(6,000) and $24,000 for the years ended December 31, 2014
and 2013, respectively. During the years ended December 31, 2014 and 2013, there were no charge-offs
recorded on standby letters of credit.
At December 31, 2014 and 2013, we had commitments to sell loans totaling $6.0 million and $920,000,
respectively.
(d) Litigation
In the normal course of business, the Bank has been named as a defendant in various legal actions. In the
opinion of management, after reviewing such claims with legal counsel, resolution of these matters will not have a
material adverse impact on our financial condition, results of operations or liquidity.
(20) Regulatory Capital
We are subject to various regulatory capital requirements administered by state and federal regulatory agencies.
Failure to meet minimum capital requirements can initiate certain mandatory—and possible additional
discretionary—actions by regulators that, if undertaken, could have a direct material adverse effect on our financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we
must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-
balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications
are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
In addition, we are subject to the provisions of the Federal Deposit Insurance Corporation Improvement Act of
1991 (“FDICIA”) which imposes a number of mandatory supervisory measures. Among other matters, FDICIA
established five capital categories ranging from “well capitalized” to “critically undercapitalized.” Such
classifications are used by regulatory agencies to determine a bank’s deposit insurance premium, approval of
applications authorizing institutions to increase their asset size or otherwise expand business activities or acquire
other institutions. Under the provisions of FDICIA, a “well capitalized” bank must maintain minimum leverage, Tier
1 and Total Capital ratios of 5%, 6% and 10%, respectively.
Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum
amounts and ratios of total and Tier 1 capital to risk-weighted assets (as defined), and of Tier 1 capital (as defined)
to average assets (as defined). As of December 31, 2014 and 2013, we met all capital adequacy requirements to
which we were subject.
The most recent notification from the Federal Deposit Insurance Corporation categorized us as well capitalized
under the regulatory framework for prompt corrective action. There are no conditions or events since that
notification that management believes have changed the Bank’s category.
F-46
Our actual capital amounts and ratios are presented in the table below.
(dollars in thousands)
As of December 31, 2014:
Total capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
As of December 31, 2013:
Total capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
Actual
Amount
Ratio
Required for Capital
Adequacy Purposes
Ratio
Amount
Required to be
Well Capitalized
Amount
Ratio
$
2,647,871
2,482,607
2,482,607
14.39%
13.49%
9.25%
1,472,033
736,016
1,073,288
$
1,986,694
1,850,668
1,850,668
15.10%
14.07%
8.54%
1,052,562
526,281
866,469
8.00%
4.00%
4.00%
8.00%
4.00%
4.00%
1,840,041
1,104,025
1,341,611
10.00%
6.00%
5.00%
1,315,702
789,421
1,083,087
10.00%
6.00%
5.00%
On June 13, 2014, we completed a public offering of 2,100,000 shares of common stock. Subsequently, on July
1, 2014, the underwriter exercised in full the option we had granted the firm to purchase 315,000 additional shares
of common stock. The net proceeds from this offering, including the option exercise, added approximately $295.8
million to our shareholders’ equity, which will be used for general corporate purposes and to facilitate our
continued growth.
Basel III
On July 9, 2013, the Federal Deposit Insurance Corporation approved final rules that substantially amend the
regulatory risk-based capital rules applicable to Signature Bank. The final rules were adopted following the
issuance of proposed rules by the federal banking regulators in June 2012, and implement the “Basel III”
regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative
documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in
December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank
capital, leverage and liquidity requirements.
The rules include new risk-based capital and leverage ratios, which are being phased in from 2015 to 2019, and
refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital
level requirements applicable to Signature Bank under the final rules are the following: (i) a new common equity
Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total
capital ratio of 8% (unchanged from current rules); and (iv) a leverage ratio of 4% for all institutions. The final
rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which
must consist entirely of common equity Tier 1 capital. Common equity Tier 1 capital consists of common stock
instruments that meet the eligibility criteria in the final rules, retained earnings, accumulated other comprehensive
income and common equity Tier 1 minority interest. The capital conservation buffer will be phased-in over four
years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for
2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter, resulting in the following minimum
ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii)
a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends,
engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the buffer
amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for
such actions.
Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5%
of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive
credit growth. However, the final rules permit the countercyclical buffer to be applied only to “advanced approach
banks” ( i.e., banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures), which
currently excludes Signature Bank. The final rules also implement revisions and clarifications consistent with
Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and
losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which will be phased out
over time.
F-47
The final rules also contain revisions to the prompt corrective action (“PCA”) framework, which is designed to
place restrictions on insured depository institutions, including Signature Bank, if their capital levels begin to show
signs of weakness. These revisions took effect January 1, 2015. Under the PCA requirements, which are
designed to complement the capital conservation buffer, insured depository institutions will be required to meet the
following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity
Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10%
(unchanged from current rules); and (iv) a leverage ratio of 5% (increased from 4%).
The final rules set forth certain changes for the calculation of risk-weighted assets, which we have been required
to utilize as of January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk
exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness
consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules
for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-
style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in
total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion
in consolidated assets. Based on our current capital composition and levels, we believe that we would be in
compliance with the requirements as set forth in the final rules if they were presently in effect.
Dividends
In addition, payments of dividends on our common stock may be subject to the prior approval of the New York
State Department of Financial Services, and the FDIC. Under New York law, we are prohibited from declaring a
dividend so long as there is any impairment of our capital stock. In addition, we would be required to obtain the
approval of the New York State Department of Financial Services if the total of all our dividends declared in any
calendar year would exceed the total of our net profits for that year combined with retained net profits of the
preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock. We
would also be required to obtain the approval of the FDIC prior to declaring a dividend if after paying the dividend
we would be undercapitalized, significantly undercapitalized, or critically undercapitalized.
We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend
to retain any earnings to finance our operations and the expansion of our business, and we do not anticipate
paying any cash dividends on our common stock. Any future determination to pay dividends will be at the
discretion of our Board of Directors and will be dependent upon then-existing conditions, including our financial
condition and results of operations, capital requirements, contractual restrictions, business prospects and other
factors that the Board of Directors considers relevant.
F-48
(21) Quarterly Data (unaudited)
(dollars in thousands, except per share amounts)
March 31
June 30
September 30 December 31
2014 QUARTER
Interest income
Interest expense
Net interest income
Provision for loan and lease losses
Net interest income after provision for loan and lease losses
Non-interest income
Other-than-temporary impairment losses on
securities, net
Non-interest income excluding other-than-
temporary impairment losses on securities
Non-interest expense
Income before taxes
Income tax expense
Net income
Basic earnings per common share
Diluted earnings per common share
2013 QUARTER
Interest income
Interest expense
Net interest income
Provision for loan and lease losses
Net interest income after provision for loan and lease losses
Non-interest income
Other-than-temporary impairment losses on
securities, net
Non-interest income excluding other-than-
temporary impairment losses on securities
Non-interest expense
Income before taxes
Income tax expense
Net income
Basic earnings per common share
Diluted earnings per common share
$
215,767
29,299
186,468
8,188
178,280
7,170
224,067
30,353
193,714
7,637
186,077
12,383
236,513
31,247
205,266
7,672
197,594
8,055
247,926
32,223
215,703
7,613
208,090
7,374
(618)
(436)
(260)
(410)
7,788
70,036
115,414
49,407
$
66,007
$
$
1.39
1.37
$
173,631
25,523
148,108
9,926
138,182
8,836
12,819
72,971
125,489
53,007
72,482
1.50
1.48
180,286
25,755
154,531
9,669
144,862
9,287
8,315
74,272
131,377
54,572
76,805
1.54
1.52
194,639
27,244
167,395
11,005
156,390
7,854
7,784
75,965
139,499
58,089
81,410
1.62
1.60
206,594
28,285
178,309
11,043
167,266
6,034
(1,272)
(893)
(1,400)
(2,584)
10,108
58,930
88,088
37,454
$
50,634
$
$
1.07
1.06
10,180
61,446
92,703
39,101
53,602
1.13
1.12
9,254
62,339
101,905
41,737
60,168
1.27
1.25
8,618
64,462
108,838
44,498
64,340
1.36
1.34
F-49
(This page has been left blank intentionally.)
Exhibit No.
Exhibit Index
Exhibit
3.1 Restated Organization Certificate. (Incorporated by reference to Signature Bank’s Quarterly Report
on Form 10-Q for the period ended June 30, 2005.)
3.2 Certificate of Amendment, dated December 5, 2008, to the Bank's Restated Organization Certificate
with respect to Signature Bank’s Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, par
value $0.01 per share. (Incorporated by reference to Signature Bank’s Current Report on Form 8-K
filed on December 17, 2008.)
3.3 Amended and Restated By-laws of the Registrant. (Incorporated by reference to Signature Bank’s
Current Report on Form 8-K filed on October 17, 2007.)
4.1 Specimen Common Stock Certificate. (Incorporated by reference to Signature Bank’s Registration
Statement on Form 10 or amendments thereto, filed with the Federal Deposit Insurance Corporation
on March 17, 2004.)
4.2 Specimen Warrant (Incorporated herein by reference to Exhibit 4.2 of the Bank’s Form 8-A filed on
March 10, 2010.)
10.1 Signature Bank Amended and Restated 2004 Long-Term Incentive Plan. (Incorporated by reference
from Appendix A to the 2013 Definitive Proxy Statement on Schedule 14A, filed with the Federal
Deposit Insurance Corporation on March 18, 2013.)
10.2 Amended and Restated Signature Bank Change of Control Plan. (Incorporated by reference to
Signature Bank’s Current Report on Form 8-K, filed with the Federal Deposit Insurance Corporation
on September 19, 2007.)
10.4 Networking Agreement, effective as of April 18, 2001, between Signature Securities and Signature
Bank. (Incorporated by reference to Signature Bank’s Registration Statement on Form 10 or
amendments thereto, filed with the Federal Deposit Insurance Corporation on March 17, 2004.)
10.7
Brokerage and Consulting Agreement, dated August 6, 2001, by and between Signature Bank and
Signature Securities. (Incorporated by reference to Signature Bank’s Registration Statement on
Form 10 or amendments thereto, filed with the Federal Deposit Insurance Corporation on March 17,
2004.)
10.13 Employment Agreement, dated March 22, 2004, between Signature Bank and Joseph J. DePaolo.
(Incorporated by reference to Signature Bank’s Registration Statement on Form 10 or amendments
thereto, filed with the Federal Deposit Insurance Corporation on March 17, 2004.)
10.14 Master Agreement for the provision of Hardware Software and/or Services, dated as of September 9,
2005, between Fidelity Information Services, Inc. and Signature Bank. (Incorporated by reference to
Signature Bank’s Quarterly Report on Form 10-Q for the period ended September 30, 2005.)
10.15 Warrant Agreement, dated March 10, 2010, between Signature Bank and American Stock Transfer &
Trust Company, LLC, as warrant agent (Incorporated herein by reference to Exhibit 4.1 of the Bank’s
Form 8-A filed on March 10, 2010.)
14.1 Code of Ethics (Incorporated by reference from Signature Bank’s 2004 Form 10-K, filed with the
Federal Deposit Insurance Corporation on March 16, 2005.)
21.1 Subsidiaries of Signature Bank.
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
EXHIBIT 21.1
As of March 2, 2015, Signature Bank has the following significant subsidiary:
SUBSIDIARIES OF SIGNATURE BANK
Subsidiary
Signature Preferred Capital, Inc.
State or Jurisdiction
Under Which Organized
New York
EXHIBIT 31.1
I, Joseph J. DePaolo, certify that:
CERTIFICATION
1.
I have reviewed this annual report on Form 10-K of Signature Bank for the fiscal year ended
December 31, 2014;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the Examining Committee of the registrant's
Board of Directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: March 2, 2015
/s/ JOSEPH J. DEPAOLO
Joseph J. DePaolo
President, Chief Executive Officer and Director
CERTIFICATION
EXHIBIT 31.2
I, Vito Susca, certify that:
1.
I have reviewed this annual report on Form 10-K of Signature Bank for the fiscal year ended
December 31, 2014;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the Examining Committee of the registrant's
Board of Directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: March 2, 2015
/s/ VITO SUSCA
Vito Susca
Senior Vice President and Chief Financial Officer
Certification
Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of
title 18, United States Code), each of the undersigned officers of Signature Bank, a New York bank (the "Company"),
does hereby certify, to the best of such officer's knowledge, that:
The Annual Report on Form 10-K for the year ended December 31, 2014 (the "Form 10-K") of the Company fully
complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information
contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Dated: March 2, 2015
Dated: March 2, 2015
/s/ JOSEPH J. DEPAOLO
Joseph J. DePaolo
President, Chief Executive Officer and Director
/s/ VITO SUSCA
Vito Susca
Senior Vice President and Chief Financial Officer
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of
the Form 10-K or as a separate disclosure document.
(This page has been left blank intentionally.)
C O M P A N Y P R O F I L E
C O R P O R A T E I N F O R M A T I O N
BOARD OF DIRECTORS
LOCATIONS
STOCKHOLDER INFORMATION
Signature Bank (NASDAQ:SBNY), member FDIC, is a full-service commercial bank with 29
private client offices located throughout the New York metropolitan area. The Bank primarily
serves privately owned businesses, their owners and senior managers. Signature Bank offers a broad
range of business and personal banking products and services as well as investment, brokerage,
asset management and insurance products and services through its subsidiary, Signature Securities
Group Corporation, a licensed broker-dealer, investment adviser and member FINRA/SIPC.
In addition, Signature Bank’s wholly owned specialty finance subsidiary, Signature Financial LLC,
provides equipment finance and leasing along with taxi medallion and transportation financing.
F I N A N C I A L H I G H L I G H T S
(in thousands)
Total assets
Total loans
Total deposits
2010
2011
2012
2013
2014
$ 11,673,089
14,666,120
17,456,057
22,376,663
27,318,640
5,244,664
6,850,726
9,771,770
13,519,471
17,857,708
9,441,227
11,754,138
14,082,652
17,057,097
22,620,275
Shareholders’ equity
944,547
1,408,116
1,650,327
1,799,939
2,496,238
Net interest income after provision
for loan losses
Non-interest income
Non-interest expense
Income before income taxes
Net income
298,486
42,648
164,896
176,238
$ 102,051
407,911
42,038
182,724
267,225
149,526
508,379
36,239
218,243
326,375
185,483
606,700
32,011
247,177
391,534
228,744
770,041
34,982
293,244
511,779
296,704
Scott A. Shay
Chairman of the Board
Signature Bank
Kathryn A. Byrne, CPA
Partner
WeiserMazars LLP
Alfonse M. D’Amato
Managing Director
Park Strategies, LLC
Former U.S. Senator
Alfred B. DelBello
Partner
DelBello Donnellan Weingarten
Wise & Wiederkehr, LLP
Former New York State
Lieutenant Governor
Joseph J. DePaolo
President & Chief Executive Offi cer
Signature Bank
Judith A. Huntington
President
Th e College of New Rochelle
Jeff rey W. Meshel
Founder, President and
Chief Executive Offi cer
Paradigm Capital Corp.
Michael V. Pappagallo
President & Chief Financial O ffi cer
Brixmor Property Group
John Tamberlane
Vice Chairman
Signature Bank
SENIOR MANAGEMENT
Scott A. Shay
Chairman of the Board of Directors
Joseph J. DePaolo
President & Chief Executive Offi cer
John Tamberlane
Vice Chairman
Mark T. Sigona
Executive Vice President &
Chief Operating Offi cer
Michael J. Merlo
Executive Vice President &
Chief Credit Offi cer
Eric R. Howell
Executive Vice President -
Corporate & Business Development
Peter S. Quinlan
Executive Vice President &
Treasurer
Michael Sharkey
Senior Vice President &
Chief Technology Offi cer
Vito Susca
Senior Vice President &
Chief Financial Offi cer
Manhattan
261 Madison Avenue
300 Park Avenue
71 Broadway
565 Fifth Avenue
950 Th ird Avenue
200 Park Avenue South
1020 Madison Avenue
50 West 57th Street
2 Penn Plaza
111 Broadway
(Accommodation Offi ce)
Brooklyn
26 Court Street
6321 New Utrecht Avenue
97 Broadway
84 Broadway
(Accommodation Offi ce)
Queens
36-36 33rd Street, Long Island City
78-27 37th Avenue, Jackson Heights
8936 Sutphin Boulevard, Jamaica
118-35 Queens Boulevard, Forest Hills
Bronx
421 Hunts Point Avenue
Staten Island
2066 Hylan Boulevard
1688 Victory Boulevard
Westchester
1C Quaker Ridge Road, New Rochelle
360 Hamilton Avenue, White Plains
Long Island
1225 Franklin Avenue, Garden City
53 North Park Avenue, Rockville Centre
68 South Service Road, Melville
923 Broadway, Woodmere
40 Cuttermill Road, Great Neck
100 Jericho Quadrangle, Jericho
360 Motor Parkway, Hauppauge
Connecticut
75 Holly Hill Lane, Greenwich
(Opened February 2015)
Signature Securities Group
Institutional Trading
9 Greenway Plaza, Houston, TX 77046
(Services limited to institutional clients)
Signature Financial LLC
225 Broadhollow Road, Suite 132W
Melville, NY 11747
Signature Bank
565 Fifth Avenue
New York, NY 10017
646-822-1500
866-SIG-LINE (866-744-5463)
www.signatureny.com
Counsel
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
212-373-3000
Independent Auditors
KPMG LLP
345 Park Avenue
New York, NY 10154-0102
212-758-9700
Stock Transfer Agent & Registrar
American Stock Transfer
6201 15th Avenue
Brooklyn, NY 11219
718-921-8200
Stock Trading Information
Th e Bank’s common stock is traded on
the NASDAQ National Market under
the symbol SBNY.
Annual Meeting
Th e annual meeting of stockholders will
be held on April 23, 2015, 9:00 AM at:
Th e Roosevelt Hotel
45 East 45th Street
New York, NY 10017
212-661-9600
Form 10-K
A copy of Signature Bank’s Annual
Report on Form 10-K fi led with the FDIC is
available without charge by download from
www.signatureny.com, or by written request to:
Signature Bank
Attention: Investor Relations
565 Fifth Avenue
New York, NY 10017
Certain statements in this Annual Report that
are not historical facts constitute “forward-
looking statements” within the meaning of
the Private Securities Litigation Reform Act of
1995 (the “Reform Act”). Such forward-looking
statements are based on the Bank’s current
expectations, speak only as of the date on which
they are made and are susceptible to a number of
risks, uncertainties and other factors. Th e Bank’s
actual results, performance and achievements
may diff er materially from any future results,
performance or achievements expressed or
implied by such forward-looking statements. For
those statements, the Bank claims the protection
of the safe harbor for forward-looking state-
ments contained in the Reform Act. See “Private
Securities Litigation Reform Act Safe Harbor
Statement” and “Part I, Item 1A. Risk Factors,”
appearing in the Bank’s Annual Report on Form
10-K for the fi scal year ended December 31, 2014,
included herein.
565 Fifth Avenue
866-SIG-LINE (866-744-5463)
New York, NY 10017
www.signatureny.com
r e l a t i o n s h i p s m a t t e r
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