Safe and Sound

Signature Bank

Minnetonka, MN
5
Star Rating
Signature Bank is an FDIC-insured bank started in 2003 and currently headquartered in Minnetonka, MN. The bank has equity of $39.3 million on assets of $409.2 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 57 full-time employees, the bank has amassed loans and leases worth $335.3 million, $184.9 million of which are for real estate. The bank currently holds $368.1 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Signature Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three major criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for account holders when a bank is experiencing financial instability. Therefore, when it comes to measuring an a bank's financial strength, capital is essential. When looking at safety and soundness, the more capital, the better.

Signature Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Signature Bank's Tier 1 capital ratio was 10.74 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Signature Bank held equity amounting to 9.60 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.

Having extensive holdings of these types of assets could eventually force a bank to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Signature Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.47 percent of Signature Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Signature Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Signature Bank scored 26 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Signature Bank was 17.48 percent, above the national average of 8.10 percent.

The bank reported net income of $6.6 million on total equity of $39.3 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.67 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.