ABA Banking Journal - December 2008 - (Page 27)

The bank that hates “customers” Signature Bank, thrives in a too-big-to-fail market by giving veteran bankers breathing room and a chance to stick around oe DePaolo hates customers—not the people, of course, but the term “customer.” “I can’t stand it when someone refers to a ‘customer’.” says the president and CEO of New York City’s Signature Bank. “A customer is somebody who goes to the grocery store. We have clients—someone you have a deep relationship with. You never hear a lawyer refer to a ‘customer’.” He points out that the private, middle-market businesses on which the bank focuses have more of a relationship on a daily basis with their banker than with their lawyer, accountant, or doctor. Signature Bank is a small New York City player with big ideas about what a bank should be, and a compensation approach that makes them work. Calling a $6.9 billion-assets bank “small” is relative. Compared to JPMorgan Chase, Citibank, Bank of America, Capital One, HSBC, and other megabanks stalking the canyons of Manhattan and its suburbs, Signature Bank is a blip. The only reason it might get on their radar is when it lifts out a team of veteran bankers—which it has been doing regularly for seven and a half years. Hiring people from the big guys is a standard operating procedure for small and midsize banks, but in Signature’s case, the practice is combined with an unusual operating philosophy that so far has propelled its growth from $50 million in assets to nearly $7 billion since 2001, without an acquisition. It also allowed the bank to go public three years after opening, and to take out its initial capital partner, Bank Hapoalim, in four years. This September, the bank raised $140 million in an oversubscribed secondary offering, bringing its Tier 1 capital to 9.64%. (The bank applied for $120 million under the “TARP” Capital Purchase Program, which, if approved, would bring its Tier 1 capital to a pro forma 11.49%.) Maintaining high levels of capital, says DePaolo, is the only way a $6.9 billion bank can compete for deposits against the toobig-to-fail banks, all of which it competes against. Signature focuses on privately owned small businesses. It provides every client a single point of contact at one of its dozens of By Bill Streeter, editor-in-chief J private client groups. It concentrates more on deposits than loans, and it puts everyone on incentive compensation balanced to pay for sustainable business and client support. The bank’s growth comes from the business brought in by the teams of bankers it hires away from the big banks, and from the new business that these teams develop. It does not advertise. The bank is the brainchild of DePaolo, a 49-year-old former CPA, and two colleagues, Scott Shay, chairman, and John Tamberlane, vice-chairman. DePaolo and Tamberlane formerly Signature Bank CEO Joseph DePaolo runs the bank as a professional services firm worked for the old Republic Bank of New York, where parts of the strategy described above were used. But when Republic was acquired by HSBC Bank, the two joined with Shay, a client, and set out on their own. Attracting the “fiercely loyal” There have a been a raft of mergers in the New York market in the last decade in which middle market banks were swallowed by larger institutions. What typically happens, says DePaolo, is that the big banks take private business clients and homogenizes them, often moving them into the retail group. “Now, all of a sudden, if you have a question,” says DePaolo, referring to clients, “you can’t call the banker that you’ve Subscribe at www.ababj.com ABA BANKING JOURNAL/DECEMBER 2008 27 http://www.signatureny.com http://www.ababj.com

Table of Contents for the Digital Edition of ABA Banking Journal - December 2008

ABA Banking Journal - December 2008
Contents
Editor’s Column
Cover Story
ABA Resources
ABA Chairman’s Position
Community Banking
Pass the Aspirin
The Bank that Hates "Customers"
"Ivan the Terrible"�Wreaks Havoc, but Adds New Business Line
New Twist on Philanthropy:�the "Second-Chance" Account
Risk Management
Tech Topics
Webnotes
Compliance Clinic
MailBox
Banker’s Mart
To Advertise/Index of Advertisers
The Economy

ABA Banking Journal - December 2008