Hochul says she acted on Signature Bank after it bled deposits

The takeover Sunday of Signature Bank of New York, with offices across Long Island, by state and federal regulators was "not a bailout" but a necessary step to protect deposit holders and project calm in the banking sector, Gov. Kathy Hochul said Monday.

The Manhattan-based lender, which had assets of $110.36 billion and deposits of $88.59 billion as of Dec. 31, saw a rapid increase Friday of withdrawals following the Friday failure of Silicon Valley Bank in California, state officials said during a news conference in Manhattan.

On Sunday, the state Department of Financial Services took temporary possession of Signature before the Federal Deposit Insurance Corp., which insures bank accounts up to $250,000, was appointed receiver of the bank. The management of Signature was immediately terminated and a new board will be appointed by the FDIC, Hochul said.

"Our view was to make sure that the entire banking community here in New York was stable; that we can project calm," Hochul said. "That this is a time when we could manage a certain narrow situation and to make sure that did not get any worse."

Assets, deposits protected

Hochul on Monday said that Signature Bank branches are open and assets and deposits are protected. Seven branches of the Manhattan-based bank are on Long Island. Some worried customers who showed up at local branches Monday said they were reassured but others moved to get their funds out.

And while Hochul said the state's action's were "unusual," she insisted the move was "not a bailout of government taxpayer dollars. This is simply using fees that are assessed on all banks by the FDIC in such a time they would need them so that money is there. It's not from the taxpayers."

Signature has offices throughout the metropolitan area, including in Garden City, Great Neck, Hauppauge, Jericho, Melville, Rockville Centre and Woodmere as well as in California, Nevada and North Carolina.

A state-chartered lender that is traded on the Nasdaq stock exchange, Signature focuses on lending to small businesses and commercial real estate companies but also has become a leader in cryptocurrency lending.

The company was one of two banks widely used in cryptocurrency deposits. The other, Silvergate Capital Corp, collapsed March 8.

Former Democratic Rep. Barney Frank, who chaired the House Financial Services Committee and has served on Signature’s board since 2015, attributed the bank's failure to a panic that began with last year’s cryptocurrency collapse. Others, including U.S. Sen. Elizabeth Warren (D-Mass.), attributed Signature's collapse to relaxed oversight of the banking industry that began during the Trump administration.

U.S. regulators closed Silicon Valley Bank on Friday after it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once.

Silicon Valley Bank and Signature now rank as the second and third largest bank failures in U.S. history, respectively, behind only the 2008 failure of Washington Mutual.

The Federal Reserve Sunday announced the creation of a new Treasury-backed lending program that banks, savings associations and credit unions can draw on to meet customer requests to withdraw money. The move is intended to prevent the failures from spreading throughout the banking sector.

'Shocked and disappointed'

A trickle of customers arrived at Signature's Rockville Centre branch Monday morning and were reassured their money and accounts were safe.

“They said it’s all backed up by government,” said Steve Smith, 63, of Rockville Centre. “As long as the government steps in and backs it up we’re all good. I’m not concerned.”

Other customers, however, said they were surprised and withdrew funds. A building manager where the bank operates said he wasn’t concerned.

Yas Lowe, of Baldwin, said she came to check on her business accounts for a small recycling company. Lowe said she keeps her personal accounts separate and may move some of her business accounts away from Signature.

“I had a concern when I heard about Silicon Valley Bank and this morning I heard about this bank,” she said. “They said it’s ‘business as usual’ and I don’t trust that. I just wanted to make sure we could access our funds to operate as a small business.”

Tony Cancellieri, who has used the bank to run an autism charity for about seven years, said he will continue banking with Signature. 

“I was shocked and disappointed,” said Cancellieri, 74, of Rockville Centre. “They’re a terrific bank and I wanted to reassure myself. The staff was wonderful and reassuring and I hope they get through this as quickly as possible.”

At the Woodmere branch, five customers waited in the lobby Monday morning to see a Signature representative.

Bettina Kramer, president of the advertising agency Creative Effects Inc. in Cedarhurst, said she was "sad" about Signature's failure because she likes her longtime bank representative. But she nonetheless took out the bulk of her money.

"I cannot close the account because it's tied to other things" with her business, Kramer said.

Shortly after 10 a.m., Bill Rosenberg of Woodmere exited the branch looking frustrated. Rosenberg said he wanted to make a withdrawal from his account but was unable to do so without prior approval of his primary branch in Brooklyn.

“They are willing to give me the money, but they have to get approval from the Brooklyn office first and I cannot get through to Brooklyn,” Rosenberg said.

Suffolk 'dodged a bullet'

President Joe Biden told Americans on Monday that the nation's financial systems are sound and deposits will "be there when you need them."

Biden said "no losses" would be borne by taxpayers and promised to hold accountable those responsible for the crisis.

"Americans can have confidence that the banking system is safe," Biden said at the White House.

Adrienne Harris, New York State's financial services superintendent, said her office on Friday was carefully monitoring Signature and a number of other regional banks to ensure there was not a run on deposits.

"There was a little bit of panic from depositors who weren't sure that their uninsured deposits were going to be safe," Harris said. "And so we were watching the entire system — regulators around the country, the federal regulators. A number of banks were under everyone's watchful eye. So … because of the amount of outflows we saw on Friday, we knew we were going to have to take action over the weekend so that they can open on Monday."

The bank failures staggered the shares of regional banks with the S & P Regional Banking ETF falling 12.3% to $44.45.

Long Island based banks were not immune. Dime Community Bancshares Inc. tumbled 19.6% to $23.08, while New York Community Bancorp lost 13.2% to $6.40. First of Long Island Corp. shed 7.9% to $14.20, and Flushing Financial Corp. slid 6.9% to $15.59.

Chris Boyle, spokesman for Nassau County Executive Bruce Blakeman, said the county has approximately $95 million in certificates of deposit that are fully collateralized and FDIC insured at Signature Bank.

"This represents less than 5% of our cash balances," Boyle said. "The county executive, comptroller, and treasurer are monitoring the situation regarding the bank and we are confident all taxpayer funds are safe … Our top priority is protecting Nassau County taxpayer dollars and ensuring the continued fiscal stability of our county.”

While Suffolk County had more than $70 million in deposits with Signature Bank in 2010, it “dodged a bullet” by withdrawing almost all of the remaining funds deposited there about a year and a half ago, according to county Comptroller John Kennedy.

The Suffolk Legislature authorized Signature as one of the county’s 17 authorized depositories at its organizational meeting in January. 

But the county reduced the number of banks that holds its deposits with from 11 to six in the past two years — a move designed to streamline its cash handlings, Kennedy said. Under state law, Suffolk cannot hold more than $750 million in deposits in any single bank

The Suffolk County Clerk’s office had about $250,000 in a Signature account it used to deposit daily receipts for office transactions, the comptroller said. Kennedy said the money had been withdrawn Monday morning and moved to a Capital One account which has already recognized the deposit. He noted the money would have been within or near the FDIC insured amount.

“As soon as they saw indication of a problem, they jumped on it,” Kennedy said of the clerk’s staff. “There’s no exposure. Nothing.”

Blumenfeld Development Group, a Syosset-based real estate company, was both a borrower and depositor at Signature, said Edward Blumenfeld, the company’s president.

He said Signature was one of several banks for BDG and its deposits there weren’t so large that they would have affected its business. Still, the Fed’s announcement Sunday night that it would make Signature depositors whole had a calming effect, he said.

“We’ll all be fine,” Blumenfeld said, adding that Signature was likely not a large enough player on Long Island that its absence will be felt by developers looking to finance construction projects.

 “There was great concern and great anxiety in the marketplace, he said, "but all fears have been alleviated."