Signature Bank (SBNY) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Signature Bank's 2009 fourth-quarter and year-end results conference call. Our hosts for today's call will be Joseph J. DePaolo, Chief Executive Officer; and Eric R. Howell, Chief Financial Officer.

During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open to your questions. (Operator Instructions). This conference is being recorded today, Tuesday, January 26 of 2010. I would now like to turn the conference over to Joseph J. DePaolo. Please go ahead sir.

Good morning and thank you for joining us today for the Signature Bank 2009 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, operation, competition, capitalization, new private client team hires, new office openings, the regulatory environment, 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 and regulatory 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; four, competitions for clients, loans, deposits, 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 those 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 statements made in this conference call or elsewhere might not reflect actual results.

Now I'd like to turn the call back to Joe.

Before Eric Howell, our Chief Financial Officer, and I review the results for the fourth quarter, I'd like to highlight Signature Bank's achievements in 2009. Eric and I will address your questions at the end of our remarks.

For 2009 we reported strong results in all key areas. We strengthened our already strong capital position by raising $127 million of common stock, achieved record core deposit growth of $1.82 billion or 36%. Other institutions would literally have to acquire a banks or banks to achieve this type of extraordinary growth. We grew loans for the year by $905 million or 26%, while credit quality remained stable. Increased net income available to common shareholders to record levels totaling $50.5 million, up $7.6 million or 17.6%. Now remember, this increase in earnings is after the significant increase in FDIC expense of $9 million, a top deemed noncash dividend of $10 million, an increased provision of $16 million. And finally, added 13 teams, the most in any year since the bank's pounding.

Now let's discuss the bank's results for the fourth quarter. Total deposits for the fourth quarter increased $418 million, or 6%, to $7.2 billion. This includes core deposit growth of $498 million along with a decrease of $14 million in short-term escrow deposits and a decrease of $66 million in brokered deposits. Average deposits for the year were $6.29 billion, an increase of $1.54 billion or 32% compared with the $4.75 billion recorded in 2008. This is a key deposit metric which we closely monitor due to fluctuations in short-term escrow deposits.

Non-interest-bearing deposits of $1.97 billion represented 27% of total deposits. Off-balance-sheet money market deposits declined in the fourth quarter to $863 million, a decrease of approximately $140 million versus the 2009 third quarter.

Total assets reached $9.15 billion, up $545 million or 6.3% since the 2009 third quarter and an increase of $1.95 billion or 27% since the end of 2008.

Let's take a look at loans. Loans during the fourth quarter increased $247.5 million or 6%, reaching $4.38 billion, which represented 47.8% of total assets at year-end. The loan increase in the quarter was primarily driven by growth in commercial real estate and multi-family loans with more conservative underwriting standards.

Nonperforming loans decreased 1.07% of total loans, or $46.6 million, versus 1.24% of total loans or $51.2 million for the 2009 third quarter.

The provision for loan losses for the 2009 fourth quarter was $11.8 million compared with $11.9 million in the 2009 third quarter, and once again was well in excess of charge-offs. The elevated level of provisioning in 2009 was primarily driven by the growth in the loan portfolio combined with increases in charge-offs, nonperforming loans, and provisions for the current economic environment.

Net charge-offs for the 2009 fourth quarter were $6.4 million, or an annualized 61 basis points, compared with $66 million, or 66 basis points, for the 2009 third quarter and $2.7 million, or 32 basis points, for the 2008 fourth quarter.

During the fourth quarter we saw a modest increase in our 30 to 89 day past due loans, which increased $4.5 million to $26.3 million, and the 90 day plus past due category increased slightly, by $2.5 million, to $16.4 million for the quarter. These levels, however, remain below earlier periods. Furthermore, our small -- our smaller, more granular business loans continued to comprise the majority of our charge-offs this quarter. We did, however, see a slowdown in these credits making their way to nonaccrual status.

We are well aware of the impact the current economic environment could have on our portfolio. Therefore, once again this quarter our provision for loan losses remains high, and we expect that this will continue.

On to earnings. Net income available to common shareholders for the 2009 fourth quarter reached a record $21 million or $0.51 diluted earnings per share, an increase of $7.9 million or 60.4% when compared with $13.1 million or $0.37 diluted earnings per share for the fourth quarter of last year. The increase in net income available to common shareholders for the quarter was primarily the result of growth in net interest income which was fueled by strong core deposit growth and solid loan expansion. These factors were partially offset by an increase in the provision for loan losses, a decrease in commissions, and an increase in non-interest expenses.

Turning to overall team growth, we added 13 teams in 2009 with one of those joining in the fourth quarter. These teams joined from an array of institutions. As I said earlier, this marked the highest number of teams joining in any year since the bank's founding. We now have 68 teams headed by 88 group directors in our network, and we'll continue to capitalize on recruiting opportunities in the marketplace to attract new veteran banking professionals.

Now I will turn the call over to Eric, and he will review the financial results in greater detail.

Thank you Joe, and good morning everyone.

I'll start by reviewing net interest income and margin. Net interest income for the fourth quarter reached $75.7 million, up $16.8 million or 29% versus the 2008 fourth quarter, and an increase of 10% or $7.1 million from the 2009 third quarter.

Net interest margin on a tax equivalent basis declined 3 basis points in the quarter versus the same period last year, and grew 9 basis points on a linked quarter basis to 3.48%. The linked quarter expansion was primarily due to our ability to further lower deposit costs.

Let's look at asset yields and funding costs for a moment. Overall interest-earning asset yields declined 6 basis points to 4.90%, once again driven by higher than normal excess cash balances. In keeping with our conservative investment philosophy, we are selectively deploying cash while maintaining our high quality, short duration investment portfolio. Yields on investment securities decreased 15 basis points to 4.57% this quarter versus last quarter. We expect this trend will continue in the first quarter of 2010 as we are going to remain cautious in deploying cash in the first quarter. He believed that spreads should widen in the second half of the year, allowing for more appropriate investing opportunities after the Fed's quantitative easing measures subside.

Turning to our loan portfolio, we saw a slight improvement in yields on average commercial loans and commercial mortgages of 3 basis points to 5.55% this quarter from last quarter. We continued to selectively identify quality lending opportunities at appropriate pricing.

Now on to our liabilities. Cost of liabilities for the quarter further decreased 12 basis points to 1.21% due to lower prevailing interest rates as we gradually reduced deposit costs given the abnormally low interest rate environment. We are employing our relationship-based pricing philosophy to attract new core depositors, which will prove beneficial in a rising rate environment.

Let's turn to the allowance for loan losses. As Joe pointed out, our provisions remain elevated this quarter, and they've once again exceeded net charge-offs. This provisioning led to a further increase in our allowance for loan losses, which was 1.26% of loans compared with 1.20% in the 2009 third quarter and 1.07% at the end of 2008. Additionally the coverage ratio, or the ratio of allowance for loan losses to nonaccrual loans is 118%.

Although our leading credit indicators declined slightly this quarter, they remain below earlier period levels, and credit remains manageable. We however are mindful of the current economic environment and therefore continue to prudently increase our credit reserves.

Looking at non-interest income and expense, non-interest income for the 2009 fourth quarter was $9.6 million, an increase of $5.3 million versus the 2008 fourth quarter. The 2008 fourth quarter included a $6.9 million OTTI write-down on bank pooled trust preferred securities. In the 2009 fourth quarter we recognized $523,000 in OTTI write-downs, primarily on one trust.

Remember, with the change in the accounting literature that occurred in 2009, OTTI write-down's are to the extent of the estimated credit loss only.

Commission income declined by $3.8 million versus the fourth quarter of 2008 as deposits and off-balance-sheet money market funds decreased $803 million and commissions we earn on off-balance-sheet money market accounts continued to be significantly reduced, and for some funds even eliminated, to maintain positive yields on the funds in this unusually low interest rate environment.

Non-interest expense for the fourth quarter of 2009 was $38.4 million versus $31.8 million for the same period a year ago. The $6.6 million or 21% increase was primarily due to two factors. First, the addition of new private client banking teams, offices, and growth in client activity. And second, increased costs of $1.6 million related to FDIC deposit assessment fees and the FDIC deposit guarantee program. For the year, the bank paid approximately $9 million more in various FDIC fees.

The bank's efficiency ratio improved to 45% for the 2009 fourth quarter compared with 50.3% for the 2008 fourth quarter, despite substantially higher FDIC assessment fees, as we continued to leverage our operating infrastructure. For the year the bank's efficiency ratio improved to 50.5% from 55.6% for 2008.

Now turning to capital, our capital levels remain among the strongest industry wide, with a tangible common equity of 8.79%, tier one risk-based of 13.57%, total risk-based ratio of 14.47%, and leveraged capital ratio of 9.39% as of December 31, 2009. Our regulatory capital ratios were all well in excess of revelatory requirements and reflect the relatively low risk profile of the balance sheet.

And before I turn the call back to Joe, just a quick note on taxes. As we pointed out in the 2009 third quarter, we established a real estate investment trust in 2007 which reduced taxes over the past couple of years. The New York state legislature, in their budget plan, enacted the phase-out of the tax benefits of REITs for banks with average assets in excess of $8 billion. We were slightly under the $8 billion average and therefore did not lose the benefits of the REIT for 2009. We will, however, lose 75% of the tax benefit in 2010. Therefore we expect our effective tax rate in 2010 to increase to approximately 43% as compared with 40% in 2009.

Now I'll turn the call back to Joe. Thank you.

We've said from the beginning our low-cost commercial bank model would continue to improve as we leverage our infrastructure. Our efficiency ratio of 50.5% for the year and 45% for the fourth quarter certainly ratifies this. We expect continued improvement in this ratio.

We've said from the beginning our credit quality would remain relatively stable, and it has. We've remained within our philosophy, our marketplace, and the clientele we know.

We've said from the beginning we would maintain a quality, sleep-at-night balance sheet and control interest rate risks. And we have.

We've strived to become the bank of choice for the top relationship banking teams in our marketplace, and we have. We attribute our success and sustained growth to date to the execution of our core business model. With our bankers offering clients a single point of contact to meet all their needs, we clearly show our commitment to the delivery of distinctive financial care. This commitment coupled with our strong capital position, core funding discipline, and prudent balance sheet management strategies has repeatedly demonstrated the enduring strength of Signature Bank.

With our depositor oriented model serving as the key to Signature Bank's continued success, we have built a safe haven for our depositors because quite simply we provide a well-capitalized, solid and strong institution with high quality investment and loan portfolios. We remain a well-positioned -- we remain well-positioned as we further enhance our leadership role throughout the metro New York area.

Now we are happy to answer any questions you might have. Britney, I'll turn it over to you.

(Operator Instructions). Amanda Larsen, Raymond James.

Have you seen a pickup in properties changing hands at all in the five boroughs?

We still have not seen any real pickup in any activity relating to purchases or properties changing hands, although we suspect that there will be more in 2010 than there were in 2009, although I can't tell you when the real activity will start.

Okay, thanks for that. And then additionally I believe you just recently wrapped up an FDIC exam. How did that go?

Well, without getting into specifics, we did have a full scope safety and soundness exam by the FDIC in the fourth quarter. You can assume that commercial real estate is a substantial focus for most FDIC exams. You can assume that commercial real estate was a major focus because of our growth in that area. You see no major changes in our provisioning in the fourth quarter, so the bottom line is, we were very pleased with the results of the exam.

Excellent, thanks so much.

Bob Ramsey, FBR Capital Markets.

I couldn't find -- what is the total nonperforming asset number including REO?

Well, REO is just still that $700,000, so I guess it's, what, 47.3 -- put us at.

Okay. And then I think you gave it and I missed it, but what was the 90 day plus day past due bucket? And then what's in the 30 to 89 day bucket?

The 30 to 89 day bucket went from 21.8 to 26.3, which -- and again, as Joe said in remarks, that it's well below levels where we were in prior periods. And the 90 day bucket went from $14 million to $16 million. So a marginal increase there.

Great. And then I think you guys said that you expect efficiency will continue to improve, which is great. Is that a year, full year over year? Or where are you thinking about it from the fourth quarter, given I guess very strong efficiency in the fourth quarter?

I think of it year over year. So we're at 50.5% for the year. So I would expect that we would be below 50%. I can't predict how much below, but we'd be below 50% for 2010 -- for the full year.

Okay. And then how much was the impact of I guess some favorable accrual benefits on expenses in the fourth quarter?

It was approximately $1 million, I would say.

$1 million?

But it's important to look at year over year, because the fourth quarter typically is a good expense quarter for us. So we've seen that now over the last several years.

That's very helpful, thank you guys.

Matthew Clark, KBW.

Can you talk to the loan growth here in the quarter? Obviously it slowed a little bit here. It's about 6%. Can you just maybe talk to how much of that was trying to keep under that $8 billion bogey for the year? And maybe as a follow-on, or maybe to help us with talking to what the originations were in the quarter, maybe versus the prior quarter, and what the pipeline might be?

Well, in terms of trying to keep under the $8 billion, it was more on the deposit side than it was on the loan side, because enough funding to really support any loan growth. The one thing that we have in the fourth quarter that doesn't happen in the other quarters is all the holidays. And so I don't want to call it seasonality, but you see a slowdown in loan growth. Although there are some people, some clients who want to close by year-end, you do see generally a slowdown because of the holidays. And we've seen that over the past several years in the fourth quarter. So that's in terms of the growth of 6%.

In terms of the pipeline, what we've actually seen this quarter is more of an uptick in C&I demand, and we saw a decent amount of C&I loans close this quarter. Although it's still not anywhere near the levels of demand and growth potential as it was two years ago, we did see a slight uptick. And so the pipeline for loans is very good both on the commercial real estate and the C&I side, 2010.

Great. And on TDRs, you still don't have any, do you?

No.

Okay. And then on the watch list, just trying to get a better sense for the migration that you're seeing there and the types of credits, the types of situations.

We saw a pickup in the watch list from about $117 million to $132 million. Predominantly it was from C&I loans in the smaller, more granular credits. Nothing really on the CRE front there. So a couple larger C&I loans, but we've been very aggressive in putting loans on watch list. If there's anything that doesn't smell quite right, we're going to put it on watch, so nothing that we are overly concerned about, but (technical difficulty) it was predominantly on the C&I front.

Thanks again.

Steven Alexopoulos, JPMorgan.

When we look at the reserve you added, I guess around almost -- a little over $5 million each quarter in the second half of 2009, just wondering, is that $5 million a good run rate to expect here in the early part of 2010? Or should that essentially grow as this commercial real estate portfolio continues to season?

That's a very good question. I would agree that that run rate is pretty good early on. It's hard to predict when you would have an expansion where that run rate would get actually larger, because we think things are going to get worse before they get better, so we are very cautious about the uncertain credit markets. That's why we keep on having the provisioning that we have where it's almost -- not quite but almost double the charge-offs. It's very hard to predict when that would occur, whether it's the end of 2010 or 2011.

That's helpful. How should we be thinking about the pipeline to hire new teams here in 2010? Could the pace be on par with 2009? And then I was hoping you could drill down into what you look for expense growth. I know you talk about efficiency. I was hoping you could take it down to the growth level.

I'll have Eric talk about the expense growth. It's highly unlikely that we would hit the same number of teams in 2010 as we did in 2009 with 13 teams. Just if you recall, we projected a growth of four teams in 2009. We probably think in 2010 we are going to have a growth of about four teams. But we had six very large, high-producing teams hired in 2008, we had 13, a combination of some high-powered large teams and small teams, in 2009, and the combination of that plus all the legacy teams that we've had since the beginning, the 68 teams in total, should give us sufficient headway for growth in 2010 and 2011 without even adding on any teams. So the pipeline right now is relatively light, but I would look -- or we would look to maybe hire four teams.

In looking at the expenses, we're slightly over 21% expense growth, 2009 to 2008. With the substantial hirings we did in the mid to latter part of 2009, I would expect we'd still have some robust expense growth, probably not quite as high as the 21% but somewhere in the 20% range, maybe 18% to 20% in the expenses.

That's helpful. Maybe just one final question. The cost of money market accounts dropped quite a bit this quarter. Is there room to drop that another 20 bps here near term? And I'm just wondering where does that start to stabilize?

Well, we -- it's down at a 161. We did some reductions during the fourth quarter. We've already done some reductions in the first quarter on the money market side, in January, there will be some in February. We think our cost of deposits can be reduced but not nearly to the level that you had suggested. And it probably bottoms out in the first quarter, and the -- whatever reduction you can get in the first quarter is probably not going to happen any further than that because most of our money market account pricing is really done on a total relationship. So if they are keeping ETA, non-interest-bearing, you look at the total cost of funds.

So this -- so to sum it up, there's still some room in the first quarter for a reduction in the cost of deposits, particularly the money market, but not nearly as much as we have seen this quarter.

Thanks. Your answers are very hopeful. Thanks.

Christopher Nolan, Maxim Group.

A quick question. Joe, with -- given that the robust pace of team hirings -- and it looks like you're attracting some really great talent, as these new talents bring over the larger clients, I guess my core question is, are we seeing this continued robust deposit growth from just you're attracting a larger sized client than you may have been two years ago?

No. I think the mix of clients, both small, medium and large in terms of deposits and loans is kind of the same as it has been throughout our history. I think that there are more opportunities maybe now than there had been earlier in our history because of the situations going on with the too large -- the too big to fail, I should say -- too big to -- the too large to fail banks. So that has created some real opportunity for us. I wouldn't say that there are more white elephants today than there were earlier on.

Great. And you did not provide any guidance in terms of 2010 deposit growth, did you?

No, we haven't provided any guidance. To give you an idea of why, I can give you some thoughts. In 2009 we projected that our deposit growth was going to be $650 million. So we missed the boat by almost 3 time, because our core deposit growth was $1.82 billion as opposed to the $650 million growth.

And there are a couple of things that are occurring this year. The transaction account guarantee program by the government goes away -- or by the FDIC. That goes away on June 30. So there's some uncertainty there. If there's any meaningful movement -- and I'm not saying there will be, but if there is any meaningful movement on treasuries in the off-balance-sheet money market funds, any meaningful movement in interest rates, that will certainly create competition for deposits.

If real estate prices, whether it's the real estate itself or the notes that banks want to sell, if they become available at the right price and clients will take some of their deposits off the table for down payments, however then there would be significant potential for loan growth because they will need to borrow to get those deals done.

And then finally, all the craziness that's going on at the too big to fail banks, all of that together makes us feel that it's hard to project what 2010 will be, although we expect that we're going to be greater than the $650 million we projected last year, and probably somewhere south or less than the $1.82 billion that we had in 2009.

Great. Eric, quickly, is the balance sheet asset-sensitive at the moment? Or neutral?

Oh, it's neutral to slightly asset-sensitive.

Thank you, and nice quarter.

[Kevin] Usdin, Bank of America Merrill Lynch.

One question on the investment portfolio. With regards to reinvesting all the extra liquidity and trying to keep some powder dry, I'm wondering, can you give us an idea of where portfolio duration stands, how that's changed, and what you are reinvesting in with your new cash flows?

Yes. Well, duration's about 2.35 years right now, so it's still short, very tight, hitting about $100 million -- $85 million to $100 million a month in cash flows coming off of that.

We are going to stay pretty heavy in cash, so the effect of the cash that we've been holding onto, that obviously brings in the duration of a little bit. But we are staying heavy in cash as we expect yields will improve in the latter half of this year when quantitative easing ends.

We've been mostly buying agencies with very protective structures, and we've been doing a very -- a small amount of re-remics, but spreads there have tightened a bit, so we don't see too much more of an opportunity to do those.

And the second question is, can you give us a sense of where you're getting incremental security deals at versus where you're putting on incremental loans at?

Loans are coming in at between say 5.75 and 6.25. So to have 3 basis points of loan margin expansion or yield expansion is pretty good now off a pretty large number. And the securities portfolio we are reinvesting at about 3.75 to 4.25.

Great. And the last question just on credit quality. Are you -- when you set aside the incremental provisions, are you setting aside specific reserves against each incremental loan that's coming on the books, meaning that are you just -- are you over-providing for a general deterioration? Or is every incremental reserve build going against specific credits that have come on the books in the current quarter?

No, it's a general reserve. There's a range, and as a credit comes on, it's risk-rated, and there's a certain amount of general provision that is attached to it.

So there was nothing like incrementally sizable that you had -- that you felt like you had to set up an incremental reserve for this quarter at all?

No.

No.

Great, thanks a lot guys.

Andy Stapp, B. Riley & Company.

Nice quarter.

Could you provide some more color on the impact of your net interest margin as the Fed begins to raise rates, including the impact on interest rate floors and loans?

Well, we really didn't start putting in interest rate floors on loans until the latter half of this year. So I don't expect that that will have too much of an impact as rates rise, because predominantly that's C&I loans, and we haven't done a lot of C&I loans due to the lack of demand.

So we've got about 35% of our loans that will re-price as interest rates rise. Obviously our core deposits will be beneficial to us in a rising interest rate environment, as we should be able to significantly impact the rising rates there. And hopefully when interest rates rise, it's a signal that the economy is coming back around, and we will see loan demands, especially on the C&I front, come back, which will allow us to ratchet up the mix shift in the balance sheet and shift those securities that are running off the portfolio into loans that are much higher yield. And that's where we expect to really see the margin expansion come from.

Great. Thanks again, nice quarter.

Tom Alonso, Macquarie.

Just a couple of quick ones here. On the -- Joe, you'd mentioned the tickup in C&I. Is that new demand? Or is that just people pulling down more on existing lines?

No, we saw some new demand, some nice new loans in the fourth quarter. But again, I caution you, it was a small uptick. We have seen quite a bit in C&I. Like some of our bankers, particularly in the middle market, have said for everyone they are doing they are turning away nine or 10 because there's a lot of really not very good loans out there, to be [honest] (technical difficulty). So we've been fortunate to find some decent, well-structured credits that we were able to put on in the fourth quarter.

Great. And then on the NPA balance, you said there was -- that 700 in OREO was still there. Is there still any -- are there still any nonperforming investment securities, what that balance was?

I don't have the balance of the nonperforming investment securities, but, yes, there were nonperforming securities.

Okay. I would kind of -- just to assume it's flat, is that fair enough for now?

Yes, that's fair.

All right. Great. And then just on the deposit side, given you guys were kind of bucking to stay under that $8 billion number, do you expect there to be any kind of catch-up in the first quarter as maybe some people who were potentially dissuaded from becoming customers in 2009 become customers in 2010?

I sure hope so. We -- and we don't mind saying this. We actually asked some prospects and some clients not to make deposits in December so we could stay under the $8 billion average. There's one in particular I have in mind. Everyone thought that, okay, now all the deposits are going to come in on January 4. Well, that's not what happened. There's one particular deposit that's let's say between $50 million and $70 million. We asked the client not to make the deposit in December. In all likelihood it's going to come in next week, in the first week in February, which is fine, because it saves us $[3] million in taxes by staying under the $8 billion average.

So I can't tell you if there's going to be this rush of deposits in the first quarter, but clearly we delayed some deposit taking and slowed down the growth in order to save on the tax side.

Fair enough, thanks guys.

[Matt Delorfano], Arch Capital.

Thanks for taking the time to explain. Would you -- sorry. It was answered to some degree, but could you talk a bit about the loans that you are making, the incremental loans, what the yields look like on those? And ex-cash, discuss what the yield on the asset portfolio might look like going forward?

On the commercial real estate side, somewhere between 5.75 and 6.25 with a fixed term of five years. And on the C&I side, we are doing -- everything is mostly based off of prime or LIBOR, but if it's LIBOR-based, we floor LIBOR at 3%, so if it's LIBOR plus, that LIBOR is at 3% plus. And prime, it's -- we are flooring it at somewhere between 3.75 and 4.00, depending upon the type of credit and how much the client keeps in balances.

And I'll turn it over to Eric on the investment portfolio.

I think you asked, yield on the asset side, and that's going to come in at -- I think ex the cash, it would be in a [four] (technical difficulty) range in the first quarter. So somewhere around there. It's really going to be dependent on how much cash we are sitting on.

That's fair. I'm sorry. Could you repeat the number. I just broke up for a second (multiple speakers)

I'm sorry. 4.80 to 4.90 -- 4.80 to 4.9.

Great. Got you. And the percent -- understood. And you'd sort of -- what percentage cash are you thinking of in terms of that? Or low yield are you thinking of (multiple speakers) when you state that number?

It's really hard (multiple speakers). We averaged $176 million this quarter in cash. It could be north of that, certainly.

Great. Thanks guys.

Lana Chan, BMO Capital Markets.

Most of my questions have been answered, but I was wondering if there's any way to quantify, of the 13 teams that you hired this year, how much of their book of business do you think that they've brought over so far? And how much more is there to go for 2010?

I would say, without giving numbers, very little in 2009, and a substantial upside in 2010 and 2011. It just takes time to bring over the business, particularly operating accounts, and we're bringing some of the interest-bearing over first. We expect the non-interest-bearing or the checking accounts to start coming over now. So there's some substantial upside. Very little of the deposit growth you saw in 2009 is attributable to the new teams.

Great Joe. That's very helpful, thank you.

Avi Barak, Sandler O'Neill.

Two quick questions for you. First, though you haven't done one in the past, would you consider doing an FDIC-assisted deal here, or just stick with the traditional team hiring that you've done historically?

Well, every time we've looked at an FDIC-assisted deal, usually somebody in the senior management group says, you can hire a team to do that -- meaning that the amount of business we'd bring on, you could hire a team or two and bring in that same business. So it really comes down to the economics.

Where we would probably do one, if we did one at all, would be so that we can have an entry or an entree into New Jersey or Connecticut. Because if we can have an entree into New Jersey and Connecticut and that be an extension of Signature Bank without forming a holding company, that would be appealing to us. But here in the New York area there hasn't been anything that appeals to us in terms of size. And we truly believe that we could, instead of getting involved in a deal like that, just have the same growth by hiring another team.

Thanks. And then secondly, run rate, you usually go with a pretty thick TCE ratio. It's still much better than peers, as you mentioned. Just could you give us some color or outlook on future capital raises given the continued robust growth in hiring that you've been doing?

Great question. The [question] (technical difficulty), it's really, is new -- will a capital raise be necessary? And one thing we are going to have for the first time in our history in 2010 is we're going to have a double-digit, billion-dollar balance sheet. We are going to be a $10 billion balance sheet. So we are thinking, well, we will be nine years old in May, a $10 billion balance sheet. Do we need to keep capital at a higher level, as we have in the past?

So one of the things that we have to compare to is, what are our competitors going to do? There has been much discussion about increased capital from the regulators. So until we hear what the new levels of capital will be, it's hard for us to judge. Do we want to have a tangible common equity of 8%? Do we want to have a leverage ratio of 8%? Now it's closer to 10%. We're just not sure.

One of the things that's positive for us is we seem to have a stability of earnings, which helps on the capital side.

When you take that altogether, I'm not really giving you an answer as to whether or not a capital raise would be necessary. But I think you know we are not shy about raising capital because we immediately use it for growth. I think it all comes down to what are the regulators going to say about where your capital levels need to be. But we do have some positives. We're $10 billion for the first time in the nine years, and a stability of earnings.

That's helpful, I appreciate it. Thank you.

(Operator Instructions). Peyton Green; Sterne, Agee.

Congratulations on a great quarter. One question though was, how big were the off-balance-sheet escrows that y'all keep in other people's money market accounts in the fourth quarter?

Actually, on-balance-sheet escrows seem to be a little bit larger comparable than we've had in the off-balance-sheet escrows. In fact the off-balance-sheet dropped about $140 million from third quarter to fourth quarter, and we are not seeing much activity on the off-balance-sheet as much as we are seeing it on the on-balance-sheet.

Okay. And is that -- that's probably just because yields are so low in those funds?

Right.

Yes. That, and there seems to be a little less activity right now.

Okay. And then in terms of the money market reductions that y'all effected in the fourth quarter -- I think it was mid October and early November, how much of a lag is there in those pricing changes that might benefit the first quarter?

It's some. There is going to be some lag. We did a reduction. I think it was the middle of October and then at the beginning of November. So we didn't see the full effect. In fact the one in the beginning of November was more on the business accounts, where they were -- the interest rates were actually higher. So we will see some of that effect in January and February and March.

And then we then did another reduction on January 15, and we will do a few more isolated ones in February. But once that is done, I think it will be hard -- you may see some of that effect in the second quarter, but that's because of a lag. I think there will be -- we'll be hard pressed to reduced rates in the second quarter.

Great. Thank you very much.

There are no further questions in the queue. I would like to turn the call back to Mr. DePaolo for any closing comments at this time.

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.

Britney, I'll turn it back to you.

Ladies and gentlemen, this concludes Signature Bank's 2009 fourth-quarter and year-end results conference call. A replay of this call can be accessed at SignatureNY.com. We thank you for your participation, and you may now disconnect.