U.S. banks face a tough operating environment, but some community banks still manage to produce strong performance.

Most banks' net interest margins are under pressure as decreases in interest rates have pushed earning-asset yields lower, while deposit costs have not declined as quickly as bankers hoped.

Rosemont, Ill.-based Signature Bank is not immune to the challenging interest rate environment, but the institution with nearly $900 million in assets boasted a return on average assets of 1.94% in the third quarter and a return on average equity of 18.83% in the period. Both figures are close to the results reported through the first half of 2019, when Signature's returns stood well above the 1.26% ROAA and 10.57% ROAE recorded by community banks in aggregate.

In the latest Street Talk podcast, Signature President and CEO Mick O'Rourke discussed how the bank has outperformed most institutions, built a deposit base less sensitive to changes in rates, and maintained an efficiency ratio in the mid-40s in the face of pressures to net interest income. The executive also discussed the changing operating environment in his home market of metro Chicago. Unfortunately for Signature and other institutions in the area, the Federal Reserve's shift toward easing interest rates has not eased competition for deposits, O'Rourke said.

"To say it was hypercompetitive would be an understatement," he said in the episode. "It is truly a knife fight every day to obtain what I would say are the most vital deposits, the noninterest-bearing."

The executive said the bank primarily focuses on commercial customers and attracts deposits through superior treasury services and technology. O'Rourke said Signature was one of the first banks of its size in the area to offer remote deposit capture and that it continues to offer new services aimed at making customers' lives easier. He noted that Signature plans to roll out a new account payable product soon.

He also said Signature incentivizes its bankers to bring in deposits and, in particular, noninterest-bearing funds, which equated to just more than 35% of Signature's deposits at the end of the third quarter. O'Rourke said he emphasizes pursuing deposit relationships over loan opportunities when speaking with his bankers and noted the importance of changing their mindset.

When he worked at a large bank years ago, O'Rourke said, he would have loved a customer that regularly used a line of credit. Now that he has moved to the C-suite, he is much more concerned with potential deposit relationships.

"I'd love a customer with a small-to-medium-sized line of credit that they never use and they maintain a noninterest-bearing deposit in the low seven figures. I'd give them one of my kids," O'Rourke said in the episode.

Signature does not shy away from loan opportunities but would prefer consistent business over a long period. While the loan market remains competitive, banks tend to cut price rather than structure, he said. Cutting structure could introduce more risk since it would offer lenders less recourse in the event of default, whereas cutting price simply eats into returns.

O'Rourke said Signature has not changed its growth goals due to current market conditions or the extended length of the credit cycle, but he noted that the company is always mindful of the risk in its portfolio.

"Every day, you have to think that something horrible is going to happen to you, and you have to be ready for it," O'Rourke said.

The executive further noted that Signature cannot rest on its laurels. He said the company is always focused on becoming more efficient and using technology to improve its product offerings.

"We always have to be thinking, what can make us better? And if you think you're the best, get ready to get run over because there's always somebody coming behind you," O'Rourke said.