Signature Bank reported that about 5,100 clients representing $5.6 billion of loans, or 14% of its portfolio, have asked for payment relief so far. Most of the loans are backed by commercial properties, including multifamily residential buildings, although borrowers representing about 25%, or $1.2 billion, of the bank's $4.6 billion portfolio in its business financing and equipment leasing unit have also asked for deferrals.

The $53.07 billion-in-assets bank is based in New York, which has been an epicenter of COVID-19 infections and subject to strict quarantine measures. Signature said it is protected by strong collateral positions, with a loan-to-value ratio of 61% in its $14.88 billion multifamily portfolio, and 56% in its $10.53 billion portfolio of other commercial property. During a conference call on first-quarter results, executives said many of its clients are multi-generational property-owning families and "neighborhood retail" landlords in New York's outer boroughs, and Long Island and Westchester County.

Signature's clients "recognize that this could be a temporary situation," Executive Vice President Eric Howell said about the retail property portfolio. "They're not looking to hand over their building and give up their 30% to 50% equity in the property." President and CEO Joseph DePaolo said many multifamily borrowers had not asked for deferrals, and are sitting on cash and looking for opportunities to buy.

"We just don't see a level of losses really, or any losses really meaningfully coming out of this," Howell said. He said the deferral requests in the specialty finance subsidiary, Signature Financial, have been concentrated in restaurant franchises and transportation, including trucks and charter buses. "They're not about to give us the property, or the collateral and equipment that they need to run their business," he said.

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The bank is offering payment deferrals for three months and may extend them by another three months. Howell acknowledged that an extended freeze in business activity could damage the bank. "Beyond six months, that's where it's going to get a bit more difficult for us," he said.

DePaolo said the bank's understanding is that market-rate residential landlords are collecting about 80% of rent, and that the figure is about 50% for rent-controlled properties. Signature's multifamily portfolio is split evenly between market-rate and rent-controlled.

The bank's provision for credit losses increased to $66.8 million in the first quarter of 2020 from $6.3 million the year prior, with the first-quarter provision "wholly attributable" to the pandemic. Along with a $45.8 million addition to its reserves on Jan. 1 in connection with its adoption of the current expected credit loss standard, Signature's allowance for credit losses for loans and leases increased $106.3 million from Dec. 31, 2019, to $356.3 million on March 31, or to 0.87% of total loans and leases.

Signature also posted strong deposit growth, with total balances increasing 15% from the year prior to $42.24 billion at March 31, which the company attributed in part to hiring new teams in California. DePaolo said he hopes the bank's presence on the West Coast will grow to equal its presence on the East Coast over the next several years as it seeks to become a $100 billion-in-assets bank.