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  • Writer's pictureAndre Watson

Ex-Signature Bank execs lose small fortune in collapse

3 founders could still get severance, but $285M in stock is gone

By:Keith Larsen & Christian Bautista

From left: Illustration of former Signature Bank executives Scott Shay, Joseph DePaolo and John Tamberlane (Getty, Business Wire, Scott Shay; Illustration by Kevin Rebong for The Real Deal)

Over the past three years, Signature Bank executives’ compensation and net worth ballooned as the regional lender grew at a breakneck pace.

Known for its New York City real estate loans, the bank turned to speculative areas like crypto and private equity lending, swelling its assets by 140 percent to $121.9 billion between December 2019 and March 2022.

The top brass reaped the rewards, ranking near the top among regional banks for executive compensation and seeing the value of their stock holdings skyrocket.

But the stock deflated over 14 months and became worthless when the bank suddenly collapsed on March 12, as state regulators seized the institution and forced out its senior executives. Over that time, three co-founders’ Signature stock lost all of its value — about $285 million.

New York’s banking regulator stepped in to interrupt a run on the bank, saying Signature “failed to provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership.” This week, New York Community Bank agreed to acquire most of Signature’s deposits.

Scrutiny of the executives and their compensation is likely to intensify as regulators do a post-mortem and try to sell the bank’s remaining assets. The Biden administration is already discussing ways to claw back stock compensation from its executives, as well as those from Silicon Valley Bank, which collapsed at the same time.

Here’s a look at the former leaders of Signature Bank and the wealth they reaped during its spectacular rise and fall.

Joseph DePaolo, former CEO

DePaolo graduated in 1981 from Iona College, where he studied accounting. A former point guard for his high school basketball team, he turned down a possible career in coaching to earn a C.P.A. After seven years at KPMG, he joined Republic National Bank of New York in 1988, rising to managing director. He left when Republic was acquired by HSBC, then co-founded Signature in 2001.

The bank began a remarkable ascent, becoming one of the nation’s 25 largest without making a single acquisition. DePaolo said he focused on building the bank, lending to entrepreneurs and private companies. The bank was famous for not advertising or marketing.

In 2020, DePaolo’s compensation totaled $6.7 million. It increased to $9 million in 2021, including $4.2 million in stock awards, before falling to $8.7 million in 2022.

His stock holdings, however, were worth far more. Signature’s share price peaked at $372.50 in January 2022. Two months later, the bank disclosed that DePaolo held 186,022 shares, which at their apex would have been worth $69.3 million.

DePaolo announced in February that he would transition into an advisory role this year and that COO Eric Howell would take over as president. But DePaolo was still CEO and on the board of directors when mass withdrawals by nervous depositors prompted the government takeover.

Scott Shay, former chairman

Shay was raised in Chicago and earned an MBA from Northwestern University. After graduation, he joined the investment banking powerhouse Salomon Brothers Group where he worked closely with Lewis Ranieri, the godfather of mortgage backed securities — the product at the heart of the 2008 financial crisis.

Shay stayed with his mentor, becoming managing director of Ranieri Strategies, an asset manager. He also served as a director of Bank Hapoalim, one of Israel’s largest banks, from 1997 to 2005, and helped start Signature in 2001.

Shay earned $4.4 million in 2020, $5.1 million in 2021 and $6.1 million in 2022. More significantly, he held the biggest insider position in the bank a year ago: 490,945 shares, worth $182.9 million at the stock’s peak.

Shay has supported a number of Jewish nonprofits, including the Chai Mitzvah movement, his Modern Orthodox synagogue Kehilath Jeshurun, and Birthright Israel. He describes himself as a theologian on his website and has written a few books, including In Good Faith: Questioning Religion and Atheism.

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