Signature Bank in New York was able to stabilize its net interest margin in the fourth quarter.
The $50.6 billion-asset bank, which has been reducing its concentration in commercial real estate, said that it expects to maintain or improve its margin during the first half of this year.
The core net interest margin, which excludes loan prepayment penalty income, increased by 1 basis point to 2.67%. That reversed significant declines earlier in the year; the margin had narrowed by 14 basis points over the prior three quarters.
Signature said it is seeing an easing of competitive pressure on deposits. While deposits increased by 11% to $40.4 billion, the overall cost of funds fell by 14 basis points to 1.26%.
Executives said they expect deposit costs to keep falling.
“I can't tell you how much that will be, but there is an expectation that we have some room at least in the first quarter,” President and CEO Joseph DePaolo said during an earnings call.
Signature’s fourth-quarter profit fell slightly to $148.2 million, or $2.78 a share.
Net interest income rose 1% to $338.3 million. Total loans rose by 7.4% to $39.1 billion, despite a $428 million reduction in outstanding CRE loans.
The loan-loss provision increased by 53% to $9.7 million. Fourth-quarter net charge-offs totaled 0.03% of average loans, on par with the previous quarter.
DePaolo said the bank expects its provision to increase by 15% to 20% in the first quarter to reflect its implementation of the Current Expected Credit Loss standard.
“As for the provision moving forward, we expect greater volatility and it is difficult to project, given a heavy reliance on macroeconomic variables, loan portfolio composition and the product mix,” he added.
