Signature Bank (SBNY) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by. Welcome to Signature Bank's 2008 fourth-quarter and year-end results conference call. At this time, all participants are in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, January 29, 2008. I would now like to turn the conference over to Joseph J. DePaolo, President and Chief Executive Officer and Eric R. Howell, Chief Financial Officer of Signature Bank. Mr. DePaolo, please go ahead.

Thank you, Mitch. Good morning and thank you for joining us today for the Signature Bank 2008 fourth-quarter and year-end results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.

Thank you, Joe. This conference call and oral statements made from time to time by our representatives contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. Forward-looking statements include information concerning our future results, interest rates and the interest rate environment, loan and deposit growth, loan performance, operations, new private client team hires, new office openings and business strategy.

These statements often include words such as may, believe, expect, anticipate, intend, plan, estimate or other similar expressions. As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements.

These factors include, but are not limited to, one, prevailing economic conditions; two, changes in interest rates, loan demand, real estate values and competition, which can materially affect origination levels and gain-on-sale results in our business, as well as other aspects of our financial performance; three, the level of defaults, losses and prepayments on loans made by us whether held in portfolio or sold in the whole loan secondary markets, which can materially affect charge-off levels and required credit loss reserve levels; and four, competition for qualified personnel and desirable office locations. Additional risks are described in our quarterly and annual reports filed with the FDIC.

You should keep in mind that any forward-looking statements made by Signature Bank speak only as of the date on which they were made. New risks and uncertainties come up from time to time and we cannot predict these events or how they may affect the bank. Signature Bank has no duty to and does not intend to update or revise the forward-looking statements after the date on which they are made. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this conference or elsewhere might not reflect actual results. Now I would like to turn the call back to Joe.

Thank you, Susan. Before Eric and I review the results for the quarter, I would like to highlight Signature Bank's achievements in 2008, one of the most challenging years ever for the financial services sector. We strengthened our already strong capital position by successfully raising $148 million of common stock in a public offering. Remember, this offering increased by 35% due to overwhelming demand from the investment community and we issued $120 million in senior preferred securities through the Treasury's Capital Purchase Program. These raises increased our Tier 1 leverage capital ratio to 10.61% and total risk-based capital ratio to 17.83%. These levels are among the highest in the industry and nearly two times that needed to be considered well-capitalized by the FDIC.

We increased core deposits by $649 million, or 15%. We increased our loan portfolio $1.44 billion, which now represents 48% of our balance sheet. Our credit quality remains stable despite the current difficult environment. We expanded our net interest margin, resulting in record highs and reported solid earnings growth of 58% over 2007 or if you exclude OTTI in both years, annual earnings increased 33%.

Overall, we grew across all key metrics -- teams, deposits, loans, margins, capital and earnings -- while maintaining strong asset quality and building credit reserves. We remain committed to our depositor-focused core business model, which continues to deliver solid performance.

Now, let's discuss the Bank's results for the fourth quarter. Total deposits for the quarter increased $423 million, reaching $5.39 billion at year-end. This includes core deposit growth of $214 million and an increase in short-term escrow deposits of $66 million and brokered deposits of $143 million.

In this environment, liquidity is critical and even though we have abundant liquidity, we wanted to test another avenue. Therefore, this quarter, we tapped into the broker deposit market for the first time at fairly attractive rates. Again, we have abundant liquidity and this new avenue gives us further availability.

Average total deposits for the quarter rose more than $153 million, or 3.2%. As previously mentioned, this is a key deposit metric we closely monitor due to fluctuations in short-term escrow deposits. Non-interest-bearing deposits increased $173 million from last quarter to $1.56 billion, representing 29% of total deposits. Off-balance sheet money market deposits declined in the fourth quarter to $1.67 billion, a decrease of $120 million versus last quarter. Total assets reached $7.19 billion, up $493 million since last quarter or $1.35 billion since the end of 2007. And average assets for the fourth quarter grew $1.41 billion compared with the fourth quarter of 2007.

Let's look at loans. Loans in the fourth quarter were up $386 million or 12.5%, reaching $3.47 billion, representing 48% of total assets at the end of the fourth quarter. This quarter's loan growth stemmed from high quality commercial real estate multifamily loans with even tighter underwriting standards, led mostly by the seasoned team of banking and real estate professionals that joined during the fourth quarter of 2007. Nonperforming loans remained stable at $31.9 million or 0.92% of total loans in the fourth quarter when compared with the third quarter at $30.8 million, or 1% of total loans.

As we have continually noted during 2008, we are well aware of the impact the current economic situation has had on the marketplace and obviously, the potential for more turbulence is evident. As such, once again for this quarter, our provision for loan losses remains high and we expect this will continue.

Now let's review earnings. Net income for the quarter was $13.1 million or $0.37 diluted earnings per share versus a net loss of $3 million, or $0.10 diluted loss per share for the fourth quarter of 2007. Excluding the after-tax effect of the impairment write-down on securities of $6.9 million, net income for the fourth quarter was $16.9 million or $0.48 diluted earnings per share.

Net income for 2008 was $43 million, or $1.35 diluted earnings per share, up 58% from the $27.3 million, or $0.91 diluted earnings per share reported in 2007. Excluding the after-tax effect of OTTI for 2008 and 2007, net income for 2008 was $52.2 million, or $1.64 diluted earnings per share versus $39.2 million, or $1.30 diluted earnings per share in 2007. This represents an increase of $13 million or 33%.

The growth in net income for both the quarter and the year is predominately due to several factors -- an increase in loans as a percentage of assets, growth in deposits, net margin expansion and an increase in non-interest income. Also, the net income growth was offset for both the quarter and the year by a significant increase in the provision for loan losses.

I want to briefly review private client banking team expansion. In 2008, we added six teams, including another three from North Fork/Capital One. We also opened two new offices -- one in Jericho, Long Island and one in Staten Island -- where we introduced Signature Bank to that marketplace with the addition of two teams during the fourth quarter. With 56 teams headed by 72 group directors, we continue to generate solid deposit and loan growth and grow this institution as evidenced by the strong quarterly and full-year performance.

At this point, I will turn the call over to Eric Howell, our CFO, who will review the financial results in greater detail.

Thank you, Joe and good morning, everyone. Before I review net interest income and margin, I would like to briefly address the OTTI for the quarter. We took OTTI on two Bank-pooled trust preferred securities that were downgraded during the quarter with an original book value of $10 million and a fair value of $3.4 million. Additionally, we took a small impairment on one ABS security for $300,000 with an original book value of less than $1 million. Conversely, we accreted $1.7 million into interest income for securities written down in previous quarters.

Now let me get into net interest income and margin. Net interest income in the fourth quarter reached $58.9 million, up $20.8 million, or 55% when compared with the 2007 fourth quarter and an increase of 18% or $8.8 million over the 2008 third quarter. These increases were attributable to the growth in earning assets and margin expansion.

Net interest margin on a tax-equivalent basis rose 25 basis points this quarter to 3.51% versus the 2008 third quarter, reaching an all-time high for the Bank. This is predominately due to the increase in loans as a percentage of assets wherein the last year, we have seen loans grow to 48% of the balance sheet from 35% a year ago.

Additionally, this was positively impacted by the accretion of OTTI taken on securities in previous quarters. This accretion of $1.7 million added approximately 10 basis points to this quarter's margin. Net interest margin on a tax-equivalent basis for the year expanded 37 basis points to 3.25%, also primarily as a result of an increase in loans as a percentage of assets and a decrease of 92 basis points in the Bank's cost of funds.

Let's look at asset yields and funding costs for a moment. Yields on investment securities increased 44 basis points to 5.34% this quarter versus the last quarter due to the runoff of lower yielding positions and an attractive market. Adjusting for the accretion of OTTI, the yield was approximately 5.12% for the quarter. All the securities that we took OTTI write-downs on in prior periods, other than the one Lehman Brothers bond, continued to perform in line with expectations when we originally purchased them. Overall, the portfolio quality remains strong with a contained average duration of 1.84 years and continues to provide consistent cash flow for reinvestment in higher-yielding loans.

Turning to our loan portfolio, yields on average commercial loans and commercial mortgages decreased 10 basis points to 5.68% this quarter from last quarter. This decrease was primarily driven by the reduction in prime for the quarter.

Now to liabilities. Cost of deposits for the quarter increased two basis points to 1.73%. Despite the reduction in Fed funds, we lagged the reduction to capture additional core relationships. Our cost of borrowings decreased 62 basis points this quarter as we strategically lowered the duration of our borrowings to capitalize on the extremely low short-term borrowing alternatives. The key drivers for margin expansion remain raising core deposits and increasing loans as a percentage of our balance sheet. Yet again, we achieved both this quarter and expect to continue this trend.

Now onto non-interest income and expense. Non-interest income for the fourth quarter was $4.3 million, an increase of $17.3 million when compared with the same period last year. Excluding OTTI on investment securities for the fourth quarters of both 2007 and 2008, non-interest income increased $2.8 million, or 33.5%. This was mostly due to an increase in commissions of $2.3 million.

Non-interest income for the year increased $18.9 million. Excluding OTTI and investment securities for both 2007 and 2008, non-interest income increased $14 million, or 47%. The primary drivers of this growth were an increase in commissions of $7.2 million and an increase in gains on sales of securities of $5.5 million.

Taking a look at noninterest expense, noninterest expense for the 2008 fourth quarter was $31.8 million compared with $25.1 million for the comparable period last year. The increase of $6.7 million, or 27%, was mainly due to the addition of new private client banking teams and office openings.

The Bank's efficiency ratio in the 2008 fourth quarter improved to 50.3%. Excluding OTTI for the fourth quarters of 2008 and 2007, the efficiency ratio improved to 45.3% from 53.9%. The improvement stems from several factors, including a wider net interest margin, stronger fee income and a further leveraging of our operating infrastructure.

Looking at capital, our already strong capital ratios were further enhanced this quarter due to the $120 million raised from the senior preferred shares as part of the Treasury's Capital Purchase Program. This coupled with the nearly $150 million raised in our September 2008 offering considerably bolstered our capital ratios. Our Tier 1 leverage ratio and total risk-based capital ratios of 10.61% and 17.83% respectively are almost twice the required amounts to be considered well-capitalized by the FDIC. Now I will turn the call back to Joe. Thank you.

Thanks, Eric. In the worst year in banking history since the Great Depression, Signature Bank thrived. This institution consistently delivers solid results across all our key metrics because of our relationship-based model, prudent capital management, diversified investment portfolio and distinctive commitment to client care.

Signature Bank stands on a solid footing with significant capital, liquidity and a well-positioned balance sheet that should allow us not only to weather the storm, but to take advantage of the turmoil in our industry. There is little doubt that 2009 will prove even more challenging and demanding for the financial services sector. However, as we look ahead to these tough times, we are confident in our foundation, our depositor-focused model and our ability to execute.

Let me conclude by giving you some insight for 2009, keeping in mind that given the current environment, it is difficult to project. Although we expect the competition for deposits to be intense -- remember, in New York, we compete against all too-big-to-fail banks -- we believe our core deposit growth in 2009 will be similar to last year's growth of $650 million.

We believe that loan growth, given the current environment, will be more challenging in 2009. Therefore, we expect our growth in loans to be less than $1 billion. And lastly, we plan to add four teams. In fact, our first team for 2009 joined yesterday. More details will follow in a press release on this new team next week. And now we would be happy to answer any questions you might have. Mitch, I will turn it back you.

(Operator Instructions). Dave Rochester, FBR.

Hey, guys, good morning.

Good morning.

Great quarter. It was really good to see the core deposit growth come back. Can you talk about what drove that and as a second part to that, do you think you'll be able to bring those costs down next quarter given the strong competition you were just talking about?

Sure. I will answer the second part first. We believe our deposit costs will come down. A couple of reasons. One, as Eric mentioned earlier in the call, we lagged the drop in deposit interest rates, so we are starting to really drop them now compared to the fourth quarter, in particular in the month of December. And also we are seeing our competitors drop their rate significantly, almost to the point that we were one of the leading interest rates for deposits. So they came down significantly. So we will be able to bring the cost of deposits down.

To answer the first part of your question, I think it was several reasons. One, I believe that the brand of the too-big-to-fail institutions had dents and those dents really woke up some of their clients that weren't being treated very well. That helped. I believe that -- and this kills me for saying it -- but the FDIC insurance, which we never had to worry about here, we believe that helped because the unlimited FDIC insurance on non-interest-bearing deposits and now accounts up to 50 basis points. When you compare one institution to the next, why be at a too-big-to-fail institution where you are getting no service when you could be at Signature and you are on a level playing field with the FDIC insurance.

I think thirdly our teams, our private client teams did a very good job of educating their clients and prospects. One avenue they used was all the additional capital that we raised in September and December and I think in comparing that and educating the clients, we were able to move those clients over.

One area that we were able to move some of the clients over were from the off-balance sheet money market deposits. I think the low interest rates in those Treasury funds, the Treasury money market funds coupled with the good job the teams did in educating the clients, we were able to move some of that over. I still think the competition for the first quarter and in 2009 will be intense. That is why we are saying that our growth will be similar. Although it will be intense, we still have a lot more educating to do to bring clients over with their deposits to be had.

So it sounds like, even though there is still strong competition, deposit costs are still coming down and that is going to help you out in terms of the margin going forward?

Yes.

Sounds good. In terms of -- just switching to credit real quick. Can you give us just a couple of quick data points on the 90-day delinquencies and the 30 to 89-day delinquencies buckets and talk about any of the increases that you saw during the quarter and any changes since quarter-end?

Sure. On the 30 to 89-day bucket, we saw it go from about $13 million up to about $32 million. There was one particular credit in there that was $10 million that paid and caught up yesterday, as a matter of fact, so that will come out of that number. At $30 million, it is less than 1% of our overall loan portfolio and it is at a level where we have been in the past before. So it is not an alarming level to us. The $12 million that we had at the end of September is probably a pretty low number, so we are really back up to what we consider to be a normal level of past dues 30 to 89 days.

On the 90-day bucket, we went up to $6 million from about $4 million. Again, that $6 million is a very normal number for us. It is well below what we have seen in prior quarters going back several years. So again, we are not uncomfortable with that. A lot of that happens to be our SBA business where there is significant delays in the timing of payments going through the system there. So that is not alarming to us either.

Got you. So the real number on the 30 to 89 is really more like $22 million effectively?

Probably more like $21 million.

$21 million? Okay. And you guys had mentioned and everybody is talking about New York and the challenges there. At this point, what are the expectations for unemployment in the New York metro area that you're working into your underwriting?

Somewhere between 9% and 12%. We're looking at unemployment going up. We're looking at vacancies increasing. So therefore, we don't think it is going to get any better. In fact, it is going to get worse. So therefore, as you can tell in 2008, our provision for loan losses was more than 100% over that of 2007 and the levels for 2009 will be at least that of 2008 if not more for the provisions just because we are getting ready for everything we are seeing and hearing to happen on the East Coast and in particular in New York and we want to stay ahead of the curve. I think for us the one word that we are concentrating on is uncertainty. We just don't know what is going to happen, so it is best to prepare for it as soon as you can.

All right, great. Thanks, guys. I appreciate it.

Thanks, Dave.

John Pancari, JPMorgan.

Good morning. Can you talk a little bit more -- I know we briefly chatted about it before, but the income-producing properties, some of the credit trends specifically for that portfolio that you are seeing, if you could talk a little bit about by type, by industry type where you might be seeing some pressure and then by market?

Well, in terms of -- we meet weekly to discuss commercial real estate and the income-producing properties. And we talk -- we have a conference call once a week and we actually meet face-to-face monthly to go over this. And in our last meeting, we addressed what are we seeing and right now, we have not seen any dents in the portfolio. We actually have not seen anything alarming so far in the portfolio. We don't know if it is -- it's a combination of things. I mean strong underwriting standards that we have had, conservative viewpoints that we take and some luck.

However, as I said earlier, we don't believe it is going to get any better. But I will say this. We think that the owners of real estate, in particular our clients, who came over because of the banker that have had the long-term relationships with them, and this is throughout, since 2001 on up now current, that our clients are smarter today than they are in the '90s. They have more cash on hand today than they had in the '90s. They are more willing to negotiate with their tenants. What I mean -- more particular the commercial tenants -- to keep tenants in their offices or in their retail stores, unless of course something goes bankrupt.

So we are just looking now at statistics that are telling us that, in retail, it is going to get very bad, that 25% of retailers may close and because we are seeing some sort of data, we are taking that to heart and trying to build provisions and be even more conservative in our underwriting standards. But in terms of our own portfolio in the fourth quarter and even right now in the beginning of the year, we haven't seen too much in the way of dents.

Okay. And on that note, Joe, do you happen to have the granularity of the loan loss reserve levels by loan bucket, specifically for the income-producing CRE versus C&I and then if you slice out multifamily I guess as well?

Yes, we have, in fact for the first time, we did it in the third quarter Q and it will be in the 10-K. So for instance, in multifamily residential properties, we put on 57 basis points, would be an allowance against that versus C&I where we would have 207 basis points against a C&I portfolio as an example. So right now, the allowance for loan loss as a percentage of loans is 1.07. But as you can see, there is a vast difference between what we think we need to have on multifamily versus that of C&I.

And do you have income-producing CRE ex multifamily?

Yes, we have -- yes, that would be 75 basis points on commercial properties ex the multifamily.

Got you.

And we will have that schedule -- there will be a more detailed schedule in the 10-K. We thought it was important in the third quarter to break it out because, as our loan portfolio was growing and everyone was growing their allowance as a percentage of loans, we needed to break it out and show everyone now on C&I. We are approaching -- I think we were at 1.86 at the end of the third quarter and now we are 2.07, but that we needed to show everyone that there was a vast difference and that is why we started to break it out in the third quarter and we'll continue to do so quarter-by-quarter.

Okay, all right. And then lastly, can you talk a little bit more about loan demand? I know the growth that you are seeing has been a result of the hiring and some of the renewals of credits as these relationships are coming over. Can you talk about organic demand right now that you are seeing, where are you seeing some good demand in your markets?

Well, demand seems to be down, but what we are also -- part of that demand is down maybe due to people knowing that we are going to cherry pick and only pick or do business with prospects and clients that have had some sort of relationship with our bankers. One thing I want to point out that I think part of the reason we haven't seen, at least not yet, any troubles in our portfolio is the clients that own these, whether it is multifamily or commercial properties other than the multifamily, have been long-term owners.

We have recently looked at two different deals where the owners actually had the properties for 50 years. There was one that owned the property since 1959. I was born in 1959 and they owned the property that long. So that has been helpful to us. However, our pipeline is down and I think it is a combination of demand and us being able to cherry pick.

Great. Thank you.

Lana Chan, BMO Capital Markets.

Hi, good morning. Most of my questions have been answered, but I just wanted to ask about the expected increase in FDIC insurance premiums for 2009, how much would that add?

Sure. In the first quarter, we expected to add $920,000 and then in the second quarter, we expected to add an additional $750,000 on top of the $920,000.

Okay. Are you thinking of any ways to potentially offset those costs and maybe some savings in any other areas on the expense side?

I mean it is difficult to do. We are clearly a growing organization and there is always ways to cut expense. I think the biggest offset to that will be in the cost of deposits. A lot of that is to ensure those deposits and I think the depositors are going to have to pay some of that.

Okay. Thanks, Eric.

Gary Townsend, Hill Townsend Capital.

Hill Townsend Capital, of course, how are you?

Hey, Gary. Good morning.

Could you discuss a couple of things? Just go over the rationale for participating in the -- and taking the government preferred and why that was necessary. And then secondly, you have moved in the direction of brokered deposits for the first time and it just strikes me that your need for liquidity doesn't seem to be particularly compelling, that it seems to run contrary to the model that you have set forth for yourself over the years.

Yes, Gary, I will answer the second part first. We almost look at the brokered deposits as a borrowing and that is why we made sure we broke out for you how much was in the -- how much in total deposits included brokered deposits and although we do have an abundance of liquidity, we just wanted to have another avenue to use and that simply was nothing to do with the model whatsoever, more as a liquidity avenue, a test.

Regarding the TARP, the one issue we have in the New York area is that not one or two, but all too-big-to-fail banks are here and we have always, since we started the Bank in 2001, talked about capital ratios. It seems to be now the fashion. Everyone is coming into talking to their capital ratios, but I have to tell you, we did that in 2001 all the way through our history and I was at Republic National Bank. All we did was talk about capital ratios.

So our feeling was, because we are dealing with these too-big-to-fail institutions that can have low capital ratios and just simply are going to be kept alive by the government, that it was important for us to have ratios that just would blow people away. And that was simply what we decided to do to have our clients, because before the FDIC insurance changes in 2008, most of our deposits were uninsured and it was just to give an extra level of comfort to the client.

Washington, as you know, is planning to serve up an aggregator bank in some fashion that has yet to be determined. Do you see any possible set of circumstances under which you would use that?

I think it is a little hard to say right now, Gary. There is just too much noise about how they are going to do it. But we will have to see how it comes out in the end.

Okay, thank you.

David Long, William Blair & Co.

Good morning, guys. To follow up on Gary's question regarding the brokered deposits, can you talk about the rate there compared to some of your other borrowings? And maybe what type of maturities you are targeting there?

It was mostly in the mid-twos on those, pretty short duration, three months, six months. And really the key there is it is unsecured and that is one of the avenues that we wanted to pursue. People in the past have asked us about our securities portfolio being fairly large and could we bring that down and our explanation had always been that we need a certain level of securities for liquidity and to secure some of the borrowings that we had. So we are looking for an avenue of unsecured borrowings and really, as Joe said, we were just testing out that avenue in the brokered market. But mid-twos was a pretty good rate for us on unsecured borrowings, so it made sense for us to layer some of that in.

The rates were actually more favorable than what we would have had to pay in the New York area.

Okay. And then secondly, regarding expenses, compared to the third quarter, your expenses were down and it looks like it was driven by the salary line item. Any one-timers or anything in there that we need to consider going forward?

Really I'd just say, as we've always had in the fourth quarter of every year, we did have a true-up of our bonus accrual that probably took out about $1.5 million out of that line item. So effectively looked at -- we were maybe a little overaccrued in the prior three quarters of the year and then we trued that up in the fourth quarter. So if you wanted to normalize that, I would add about $1.5 million back in for the first quarter. Other than that, everything is pretty much in line with prior quarters. We did pay about $175,000 additional FDIC insurance for the guaranteed debt program and again, we spoke about how that is going to increase for the first quarter.

Okay, great. Thanks, guys.

Mac Hodgson, SunTrust.

Good morning. I had a question on multifamily. I know it has become a decent size of the overall loans portfolio and I was curious if you guys had an in-house concentration limit on that portfolio.

It is about 20% now, Mac and I think it is safe to say that we are really not that close to an in-house limit at this point.

Okay, so you expect it to become a bigger part of the portfolio going forward?

We expect it could certainly become a bigger part of the portfolio, yes.

Okay. And then Joe, you mentioned kind of in the early prepared remarks just generally that you all have improved your underwriting or tightened your underwriting and I was curious if you could give us some specifics on that, just across different loan categories.

Just generally on -- other than commercial real estate, we are just taking a harder look and we are looking at a client's EBITDA and earnings, cash flow, how would they function in today or tomorrow's environment if they had sales down. You do some stress testing a little bit more than you would have done a couple years ago because you don't expect two years ago sales to be down significantly, so you just do some of that.

On the commercial real estate portfolio, back in October, we made some changes in terms of loan-to-value. We made some changes in terms of vacancy rates, cap rates and just would run models so that, instead of having a 5% vacancy rate in a commercial real estate or office building, we have a 15% vacancy rate and whether or not we could lend on that. Cap rates were up -- we are using cap rates probably in the 7s, but that is when you -- if you increase the loan-to-value -- I mean decrease the loan-to-value from 75% to 65%, if you increase the vacancy rates and you change your cap rates, that is going to make it a lot more tighter in terms of underwriting. So that is what we have done across the board.

Okay, thanks. And then maybe just finally a question on -- you talked about kind of the outlook for '09, deposit growth of north of $650 million, a $1 billion in loan growth. Is the expectation to fund the remainder of the loan growth with borrowings or bring the securities portfolio down a little bit?

Borrowings. Although, what I said -- I said -- I didn't -- I was a little less definitive on the loan side. I just think we are going to be under $1 billion in loans, not quite sure where. But we would do it with borrowings.

Got you. That makes sense.

Because our borrowing level is at 15%, 16%, so it is very, very reasonable.

Okay, thanks.

Julienne Cassarino, Prospector Partners.

Hi, this is Julienne Cassarino. Can you tell me what the current amount of off-balance sheet deposits are at the end of the fourth quarter?

Sure. Total off-balance sheet money market fund deposits were $1.67 billion at the end of the quarter.

$1.67 billion?

Correct.

And what was that at the end of the third quarter?

$1.79 billion. So it was down approximately $120 million.

Okay. Has the rate you earn on those off-balance sheet deposits changed at all? Is it still a round a quarter point?

Yes, it has come down. Obviously, as the yields in those money market funds have come down, we have had to make some concessions on the amount that we earn on those.

Okay. What is it around now? Is it around 15?

It is less. We have really never given out how much we've earned on those.

Okay. And then I was wondering, with what the current balance of private label CMOs are, it was around $600 million at the end of the third quarter, I was just wondering what that was now.

It is pretty flat to last quarter. It is really right around -- still right around that range of $600 million.

Are those held in available-for-sale?

Yes, they are.

Okay, okay. And what about the current balance of the total trust preferreds? You had some single issues, some pooled more than the two issues I think you took marked. I was just wondering what the total balance was in the fourth quarter?

Well, the total balance of the pool trust preferreds are $30.3 million. And single issuer trust preferreds and corporate debt, just straight corporate debt, was about $98 million.

Okay and that includes the straight corporate debt?

Correct.

Okay. Those are all in available-for-sale as well, right?

Yes, they are.

Okay. And about what percent of your commercial exposure, whether it is CRE or C&I, is to the retail sector?

You know what? I don't have the overall number as to C&I and CRE. I can tell you, of the CRE portfolio, it is about 11% of the overall loans or of 21% of the commercial real estate portfolio.

Okay. And that is largely -- or all in the greater New York area, right?

Yes, it is.

Yes.

Okay, great. Okay, thank you.

(Operator Instructions). David Darst, FTN Midwest.

Good morning. Could you give us a sense of what your current C&I and CRE loan yields are in the current spreads?

Of what we are putting on today?

Yes.

Anywhere from 625 to 650 for the most part.

Okay. And then should we expect to see any securities portfolio growth in '09?

There may be some growth there. We have got a significant amount of capital to put to use and we will be opportunistic in the current environment as to what we do with that securities portfolio. So there could be some growth there. I wouldn't expect it to be massive growth, but there could be some growth.

Okay. Thank you.

Just a clarification we wanted to make on the retail. Eric had given the figures on retail and commercial real estate. In the C&I, the retail is de minimis, very little on the C&I part.

Avi Barak, Sandler O'Neill.

Hey, guys. Joe, in the past, you had given some thoughts on the breakeven for new teams, that it was somewhere between call it 12 and 18 months and that for newer teams that was starting to extend out. Has your thought process changed at all or have you seen a change in the breakeven for the new teams and what is your outlook there?

I have not seen -- my viewpoint hasn't changed. I will say, although this is probably quite obvious, we have seen some teams really have a breakeven much quicker and in those that it has taken a little bit longer, I think where it has taken longer is because of the current environment and convincing. Although they have great relationships, convincing a client to go from a bigger institution to a smaller institution, albeit our capital ratios are literally through the roof, it is still a $7 billion institution. And so I think in part the current environment where it seems like anybody -- any company that has the word bank in their name starts off with a black mark. It has taken a little bit longer to bring those depositors over in particular.

Okay, thank you.

Tom Alonso, Fox-Pitt Kelton.

Good morning, guys. It is actually Al Savastano pinchhitting for Tom here.

Good morning, Al.

Just a question on your margin outlook. With the Fed reducing rates and you guys lowering deposit costs, does that mean stable margin or should we expect some expansion going forward?

I think we can expect some modest expansion going forward. Obviously, you have to back out the 10 basis points or so from the writing off of the OTTIs that we took down, but from that base, we can expect some modest expansion as we grow loans as a percentage of the balance sheet.

But the OTTI accretion will continue in the next couple of quarters?

The OTTI accretion will probably continue over the next several years. Everything that we have written down, other than Lehman Brothers, is performing as we expected it to perform and we need to start accreting that back up. So you will see that for quite some time I would imagine.

But it should still be, what, about $1.7 million a quarter?

No, a little bit of that was catch-up for the full year '08, so I would expect about between $500,000 to $600,000 a quarter going forward.

Great. Thank you.

(Operator Instructions). Andy Stapp, B. Riley.

Good morning. Just want to confirm, you said that your retail CRE is about 11% of total loans.

That's right.

And is that -- am I incorrect or was that up from 7% at September 30?

I don't have September 30s numbers in front of me, Andy.

Okay, all right, thank you.

We have no further questions at this time. I would like to turn the conference back over to Mr. DePaolo for any closing statements.

Thank you for joining us today. We appreciate your interest in Signature Bank and as always, we look forward to keeping you apprised of our developments. Thank you.

Ladies and gentlemen, this concludes the Signature Bank's 2008 fourth-quarter and year-end results conference call. As a reminder, a Web replay of this conference can be accessed through the Signature Bank's website at www.signatureny.com by clicking on the Investor Relations tab, then selecting Company News followed by Conference Calls. Thank you for calling AT&T and you may now disconnect.