A large writedown on its portfolio of taxi medallion loans marred an otherwise strong fourth quarter for Signature Bank in New York.
The $43.1 billion-asset company said Thursday that it earned $114.9 million in the quarter that ended Dec. 31, up just 0.8% from the fourth quarter of 2016. Its earnings per share of $2.11 fell 12 cents short of consensus estimates of analysts polled by FactSet Research Systems.
Signature, which often reports double-digit earnings growth, attributed the weaker-than-expected results to continued deterioration in its loans to the taxi industry.
Net chargeoffs in the quarter increased by 185% year over year to $38.6 million, nearly all of which were tied to taxi medallion loans. Taxi ridership in its markets has declined sharply as more and consumers have turned to services such as Uber and Lyft. Signature also said that nonaccrual loans more than doubled year over year, to $326.9 million.
Still, the weakness in the taxi portfolio was more than offset by strong growth elsewhere. Total loans increased 12.3% year over year to $32.6 billion, driven largely by gains in commercial real estate and multifamily loans. Net interest income climbed 8% from a year earlier to nearly $320 million.
Average deposits for the quarter increased 11.5% to $33.2 billion as Signature continued to add new teams of bankers who bring in new clients.
In a news release, CEO Joseph DePaolo said that the recently passed tax law should help accelerate the bank’s growth as it moves into new business lines and markets.
“We plan to strengthen our foundation by making major investments in our loan operation and origination systems, payments architecture platform and new foreign exchange system,” DePaolo said. “We also will look to expand our geographic presence in areas where we have significant client synergies, such as the West Coast, after we successfully tested the waters in 2017 with the appointment of a team and the opening of our new accommodation office in San Francisco.”