Signature bank increases floating-rate loans significantly amid rising rates

Floating-rate loans now account for 49% of Signature Bank's loan portfolio, as the bank positions itself to take advantage of the rising rates, executives said on a fourth-quarter earnings call Jan. 18.

"We significantly increased floating-rate loans as a percentage of assets. We are now firmly asset tested and well positioned for the rising rate environment," President and CEO Joseph DePaolo said.

In the fourth quarter of 2021, Signature Bank grew net interest income to $536 million, up 11% from the third quarter. The growth of net interest income in 2021 can be attributed to its record deployment of cash, which led to an increase of $27.5 billion across the bank's securities and loan portfolios, said COO Eric Howell.

During the quarter, interest earning asset yields decreased 2 basis points from the prior quarter to 2.16%. "The rate of decline in asset yields has significantly slowed and it appears that we are at or near the bottom," Howell said. Yields on the securities portfolio increased 3 basis points to 1.52% due to higher reinvestment rates, and a slowdown on conditional prepayment rate on its mortgage-backed securities portfolio, Howell added.

Signature Bank's banking services for digital assets drew $5.7 billion in deposits during the fourth quarter, including $2.4 billion of growth generated through its blockchain-enabled payment platform Signet, DePaolo said. Its non-interest bearing deposits increased by $9.98 billion during the quarter, and $7.7 billion of it can be attributed to Signet, DePaolo said. Non-interest bearing deposits currently account for 41.8% of total deposits.

The bank added 139 new digital asset customers during the fourth quarter, and the total count is now 1,042, Howell said.

While more banks are testing the waters of bank-minted stablecoins, the executives did not reveal details regarding whether Signature Bank will be issuing stablecoins at some point. The bank plans to announce more enhancements to Signet during the first quarter of 2022, DePaolo said. "Everything you asked will be announced as part of what we're doing with the enhancements," DePaolo said in the Q&A portion of the call.