Shares of Signature Bank (SBNY) traded roughly 8.5% lower as of 11:37 a.m. ET today after the company reported earnings results for the second quarter of the year.
For the quarter, Signature reported record diluted earnings per share of $5.26 on total revenue of nearly $687 million -- both numbers that came in above or matched analyst estimates.
Signature Bank has morphed into a niche bank in recent years with the creation of its Signet real-time payments platform, which helps better facilitate crypto trading between institutional investors and large crypto exchanges.
The U.S. banking system doesn't operate in real time, while cryptocurrencies trade around the clock, making Signet very appealing. Clients that are onboarded onto Signet bring large sums of non-interest-bearing deposits with them, which Signature pays no interest on.
The sell-off today can likely be attributed to the fact that the bank saw non-interest-bearing deposits decline by roughly $5.3 billion in the quarter. The bank said the reduction in deposits came from a $2.4 billion reduction both from its New York banking team and digital asset banking team.
"While we cannot control the ebb and flow of macro-economic cycles, our ability to overcome obstacles and continuously build our franchise value is based on the deep experience of our colleagues," Signature Bank's president and CEO, Joseph DePaolo, said in a statement.
"These veteran bankers are experts and the expansion of their books of business directly results in diversification of our balance sheet," DePaolo added.
The second quarter was tricky for banks like Signature that operate in the crypto trading space because cryptocurrencies had a brutal quarter, with most prices falling significantly, as well as crypto interest. Investors are likely concerned about the declining deposits and wondering how stable the rest of Signature's digital currency deposits are.
While there was a significant decline in the quarter, I am of the belief that crypto trading is only going to become more ingrained into the mainstream financial system, making networks like Signet a critical piece of infrastructure.
Signature also has a lot of diversified niche lending verticals, which is why I would consider the stock a buy after the dip today.