Signature Bank (NASDAQ:SBNY), a New York-based, full-service commercial bank, addressed an article today that appeared in the Monday, January 23, 2023 edition of the Wall Street Journal titled “U.S. Home-Loan Banks Help Crypto Lenders Stem Outflows.” The article includes inaccurate statements that the Bank would like to clarify.
The headline falsely refers to Signature Bank as a “crypto lender.” Signature Bank does not lend in the crypto space, nor does it have loans that are backed by crypto assets. Additionally, the Bank does not invest, does not hold, and does not custody crypto assets. Signature Bank’s relationships with clients in the crypto space are limited to U.S. dollar-denominated deposits only.
The article also incorrectly states that Signature Bank is “rushing to stem a flood of customer withdrawals.” In the fourth quarter of 2022, the Bank announced a plan to purposely decrease deposits in the digital asset banking space by reducing the size of relationships; thus, these deposits are declining as the Bank is intentionally managing them to a lower level. Signature Bank is replacing these deposits primarily with advances from the Federal Home Loan Bank of New York (FHLBNY) in the short-term.
The Bank’s relationship with the FHLBNY spans more than two decades. Signature Bank, a well-diversified institution spanning many business lines, naturally aligns with the FHLB, particularly with its multifamily lending, and is deeply committed to providing funds to support housing within the local communities it serves. As evidence of this commitment, Signature Bank has been a top three multi-family lender in the New York metro area since 2009; in some years, the Bank was the leading multi-family lender. Signature Bank is also one of the largest financers of low-to-moderate income multifamily housing in New York. Again, this commitment to housing is completely aligned with the FHLBNY’s mission to meet the housing finance and community development needs of its members’ communities. Signature Bank’s total portfolio for multifamily lending was $19.5 billion as of December 31, 2022, and the Bank originated $5.4 billion over the course of the last year.
As of year-end, Signature Bank’s FHLB advances amounted to 10 percent of total assets, which is within its normal range, as the Bank has historically operated over 10 percent. This level of FHLB advances is in line with peers. Although the Bank remains well positioned with sufficient liquidity ($25.3 billion in borrowing capacity as of year-end), the Bank plans to reduce its borrowings with other deposits over time. Signature heavily invests in highly liquid government agency securities, totaling $24.5 billion, of which $23.5 billion is pledged with the FHLB. The FHLB can easily liquidate these securities, if necessary.
In a statement, the Federal Home Loan Bank of New York said: “The FHLBNY is proud to serve as a liquidity partner to each of our more than 300 members, including Signature Bank, with which we have a longstanding relationship that has significantly supported multifamily lending across New York City. FHLBNY credit products enhance the financial strength of local lenders like Signature, providing them with a reliable source of liquidity to meet the housing finance and credit needs of their communities and support their balance sheet management strategies in all operating environments. Our privately sourced funding is secured by high-quality, mission-eligible collateral pledged by our members, and available to all members in good standing with our cooperative.”