Signature Bank Gains $1B Deposits in Q3, With Notable Growth From Stablecoin Issuers

The Takeaway:

Deposits at crypto-friendly Signature Bank grew by $4.11 billion in the third quarter, an 8% increase from the previous quarter.
Over the past year, deposits have grown by $15.28 billion or nearly a 40% increase, according to the bank's earnings release. Signature reports $54.34 billion in total deposits.
Crypto firms are often a rich source of low-cost deposits for the few banks that openly serve the sector. As such, analysts have paid close attention to deposit growth at Signature, Silvergate Bank and Metropolitan Commercial Bank.

The $1 billion in deposit growth from digital asset banking at crypto-friendly Signature Bank was driven in part by the bank holding the dollars backing stablecoins, CEO Joseph DePaolo said on a third-quarter earnings call Tuesday.

Prominent stablecoins like USDC, PAX and TUSD are backed by actual dollars held in bank accounts. While it's unclear which stablecoin issuers Signature is serving, the statement by DePaolo is the first time the bank has said it's banking such firms.

For years, Signature has been one of the handful of banks to offer accounts where crypto firms could securely hold fiat. The New York-based bank competes with California's Silvergate Bank and other institutions for low-cost crypto deposits by offering an Ethereum-based payments platform called Signet, which rivals the Silvergate Exchange Network as a fiat on-ramp. The bank also extended around 40 Paycheck Protection Program (PPP) loans to firms in the crypto space this year.

Signature’s disclosure Tuesday comes after the U.S. Office of the Comptroller of the Currency published new guidance in September clarifying that national banks could hold fiat for stablecoin issuers.

By the numbers

The banking team at Signature that focuses on crypto companies added the same amount of new deposits it produced in the second quarter. DePaolo attributed the back-to-back billion-dollar quarters to clients becoming used to Signature's presence in the space.

"The clients we're bringing on board were hesitant at first," he said. "They wanted to see that we were going to stay in the business."

The $1 billion added in Q3 made up a quarter of the bank's $4.11 billion new deposits, an 8% increase.

Around 30% of Signature's $54.34 billion in total deposits, or $16.2 billion, are non-interest-bearing, which usually accounts for crypto-industry deposits. Signature's cost of deposits increased slightly to 66 basis points from 56 basis points in the second quarter.

Crypto firms are often a rich source of low-cost deposits for the few banks that openly serve the sector. As such, analysts have paid close attention to deposit growth at Signature, Silvergate Bank and Metropolitan Commercial Bank.

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UPDATE (Oct. 20, 16:49 UTC): Adds additional information from Signature’s Q3 earnings call.

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