Signature Bank (SBNY) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Signature Bank's fiscal 2010 fourth-quarter results conference call. During today's presentation all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions). Today's conference is being recorded January 25, 2011. I would now like to turn the conference over to our host, Joseph J. DePaolo, President and CEO; and Eric R. Howell, CFO of Signature Bank. Mr. DePaolo, please go ahead.

Good morning and thank you for joining us today for the Signature Bank 2010 fourth quarter 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, 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, intends, 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 market, which can materially affect charge-off levels and required credit loss reserve levels; four, competition for client 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 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 call or elsewhere might not reflect actual results. Now I would like to turn the call back to Joe.

Thank you, Susan. I will provide some overview into the quarterly results; and then Eric Howell, our Chief Financial Officer, will review the Bank's financial performance in greater detail. Eric and I will address your questions at the end of our remarks.

Signature Bank ended 2010 on a very strong note with another quarter of stellar financial performance. This quarter, we again achieved solid deposit growth, strong loan growth, net interest margin expansion and stable credit quality, which all led to record net income. I will start by reviewing earnings.

Net income available to common shareholders for the 2010 fourth quarter reached a record $30.3 million, or $0.72 diluted earnings per share, an increase of $9.4 million or 45% compared with $21 million or $0.51 diluted earnings per share recorded in the same period last year. The considerable improvement in net income when compared with the fourth quarter of last year is mainly the result of an increase in net interest income fueled by significant core deposit growth and continued loan growth. These factors were partially offset by increases in the provision for loan losses and non-interest expense.

Looking at deposits, deposits increased $391 million to $9.44 billion. This includes quarterly core deposit growth of $459 million, or 5.5%. For the year, total deposits grew in excess of $2.2 billion, or 30%.

Also in the quarter, relationship-based short-term escrow deposits decreased $74 million and now total $619 million. Average deposits in the fourth quarter were $9.23 billion, an increase of $2.05 billion or 28% versus $7.18 billion for the 2009 fourth quarter. Please keep in mind; this is a key deposit metric we closely monitor due to fluctuations in relationship-based, short-term escrow deposits.

Non-interest-bearing deposits of $2.4 billion represented 26% of total deposits and grew $480 million, or 24% for the year. With the considerable deposit growth, total assets reached $11.67 billion, an increase of $2.5 billion or 28% since the fourth quarter of last year.

Taking a look at loans now, loans during the 2010 fourth quarter reached $5.24 billion, up $350 million or 7%, representing nearly 45% of total assets at quarter end. The increase in loans was primarily driven by growth in commercial real estate and multi-family loans with continued conservative underwriting standards.

Non-performing loans were $34.1 million, or 0.65% of total loans this quarter, compared with $33.8 million or 0.69% for the 2010 third quarter and $46.6 million, or 1.07% for the 2009 fourth quarter. The allowance for loan losses was 1.29% of loans versus 1.40% of loans in the 2010 third quarter and 1.26% for the 2009 fourth quarter. Additionally, the coverage ratio or the ratio of allowance for loan losses to non-performing loans remained healthy at 197%.

The provision for loan losses for the 2010 fourth quarter was $13.6 million compared with $10.4 million for the 2010 third quarter and $11.8 million for the 2009 fourth quarter. Net charge-offs for the 2010 fourth quarter were $14.6 million or an annualized 1.16% compared with $6.8 million or 56 basis points for the 2010 third quarter and $6.4 million or 61 basis points for the 2009 fourth quarter.

The increase in charge-offs was due to a charge-off of $10 million on one commercial and industrial loan that originated from a fourth-quarter 2009 overdraft caused by a Canadian check clearing incident which we are disputing with the clearing bank in Canada. Excluding this $10 million charge-off, charge-offs for the quarter would have been $4.6 million or 37 basis points. This matter is clearly not indicative of our overall credit quality.

Now turning to past due loans on the watch list, during the 2010 fourth quarter we saw a decrease in our 30- to 89-day past-due loans of $6.2 million to $57.1 million and a slight increase of $1.2 million in the 90-day-plus past-due category to $17.5 million. The 30- to 89-day category remains elevated due to one relationship where the client is selling some of his properties this week to pay off some loans and bring others current. This will reduce our 30- to 89-day past-due category by $15.1 million and will reduce the 90-day-plus category by $2.8 million.

Watch list credits this quarter increased by $27 million to $158 million, or 3.01% of total loans. This percentage of watch list credits is in line with our historical averages going all the way back to year end 2007. Although our credit metrics remain strong and we see credit as manageable, we remain mindful of the uncertainty in the economic environment, and we will continue to conservatively reserve as necessary.

Just to review teams for a moment, in 2010 we had forecasted adding four teams, and we added five. In addition, one team already joined us in 2011, bringing our total teams to 74, headed by 96 group directors. Our pipeline remains relatively active, and we look forward to opportunities for attracting new, talented banking professionals to our network.

At this point, I will turn the call over to Eric, and he will review the quarter's financial results in greater detail.

Thank you, Joe, and good morning, everyone. I will start by reviewing net interest income and margin. Net interest income for the fourth quarter reached $95.9 million, up $20.2 million, or nearly 27% when compared with the 2009 fourth quarter and an increase of 8% or $6.8 million from the 2010 third quarter.

Net interest margin was up 2 basis points in the quarter versus the comparable period a year ago and increased 9 basis points on a linked-quarter basis to 3.50%. The linked-quarter increase was mostly due to a further decrease in our deposit costs, continued loan growth, the deployment of cash on hand during the quarter and the runoff of higher-cost borrowings.

Let's look at asset yields and funding costs for a moment. Overall interest-earning asset yields declined 4 basis points this quarter to 4.56% due to the continued low interest rate environment. In keeping with our conservative investment philosophy, we are selectively deploying cash while maintaining our high-quality, stable-duration investment portfolio. As a result, yields on investments securities decreased 11 basis points to 3.85% this quarter versus the third quarter of 2010.

Turning to our loan portfolio, yields on average commercial loans and commercial mortgages declined 2 basis points to 5.60% compared with the third quarter of 2010. We continue to selectively identify quality lending opportunities at appropriate pricing.

Now looking at liabilities, cost of deposits for the quarter further declined 8 basis points to 94 basis points as we again decreased deposit costs, given the low interest rate environment. Our borrowing costs substantially declined by 55 basis points this quarter as $50 million in long-term borrowings at an average rate of 4.44% rolled off in October. There are no long-term borrowings coming due in the first quarter of 2011. However, we have approximately $150 million coming due in the second through fourth quarters of 2011.

Onto non-interest income and expense -- non-interest income for the 2010 fourth quarter was $10 million, an increase of $400,000 when compared with the 2009 fourth-quarter. This increase was driven by an increase in commission income. Non-interest expense for the fourth quarter of 2010 was $41 million versus $38.4 million for the same period a year ago. The $2.6 million or 7% increase was principally due to the addition of new private client banking teams.

The Bank's efficiency ratio further improved to 38.7% for the 2010 fourth quarter compared with 45% in the same quarter of last year. The improvement was primarily due to growth in net interest income coupled with expense containment.

And turning to capital, our capital levels remained strong with a tangible common equity ratio of 8.09%, Tier 1 risk base of 14.2%, total risk-based ratio of 15.21% and leveraged capital ratio of 8.62% as of year-end 2010. Our capital ratios were all well in excess of regulatory requirements and augment the relatively low-risk profile of the balance sheet.

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

Thanks, Eric. The fourth-quarter capped another year of exceptional achievements for Signature Bank. In 2010, we grew deposits a record $2.22 billion, or 30%. Other institutions would literally have to acquire a bank or banks to achieve this type of extraordinary growth. We grew loans a solid $869 million or 20% while maintaining strong credit quality. We increased margins by 4 basis points for the year to 3.45%. We added five private banking groups. We increased expenses only 10%, helping to drive our efficiency ratio below 40% in the fourth quarter. And, we delivered a 100% increase in net income available to common shareholders, surpassing $100 million for the year.

A decade ago, we formulated a business plan focused on meeting the needs of privately-owned businesses through a distinctive, single point of contact approach. We knew our banking philosophy would allow us to compete with the megabanks in the largest marketplace for privately-owned businesses in the country. When we commenced operations in 2001, there were 8000 banks larger than Signature Bank.

We now enter our second decade not as an idea, a thought or a vision, but among the 75 largest commercial banks in the country and confident in our ability to meet the challenges that lie ahead. With our depositor-focused model, we have built a safe haven for our depositors because, quite simply, we provide a well-capitalized, strong institution with high-quality investment and loan portfolios. We remain well-positioned as we further enhance our leadership role.

Now we are happy to answer any questions you may have. Alicia, I'll turn it to you.

(Operator instructions) Bob Ramsey, FBR Capital Markets.

I was hoping you could talk a little bit about the 2011 outlook and any targets you may have for loan and deposit growth, new teams and expenses.

Well, Bob, I'll tell you; Eric and I feel as an institution we are much better at executing then we are at projecting, but we will try to give you an idea of what we budgeted for in our 2011 business plan. We budgeted for $1 billion in deposit growth for the year, $800 million in loan growth and four new teams.

But if you look at our results over the last several years, you will see that, as I said, we are much better at executing than we are at projecting.

Okay, and how about expenses? As you all highlighted, efficiency was below 40% this quarter. Is that sustainable under that 40% mark?

Well, the fourth quarter, Bob, is typically a good one for us because we always have that true up of the bonus accrual. I would expect it to pop up a little bit from there, but then to see the trend in improving efficiencies that we've had over the last several years continue. Expenses were very strong at 10% year-over-year. We added one location in the fourth quarter of 2010; we have another location planned for the second quarter of 2011. We brought on a team very late in 2010; we've already bought on a team already in 2011. So I would expect that we would see expenses pop up a little bit this year compared to last year.

So we're looking at more of an expense increase in the 12% to 15% range, as compared to the 10% that we had in 2010.

Okay, and then maybe you could just give a little bit more color on the new team that you all have already added so far this year?

It's a team from a smaller institution than ours, MetBank. They used to work prior to that at HSBC. It's a three-member team.

Okay, thank you, guys.

Dave Rochester, Credit Suisse.

Hey, good morning, guys, nice quarter. Just to follow up real quick on Bob's questions on the expenses -- what was the bonus accrual reversal this quarter?

I don't want to get into specifics about the dollar amount, but it was in line with what it was in the prior years.

Okay, no problem. Next question -- on the average balance sheet, just looking through the yields, it looked like the combined commercial loan yield really held in there nicely this quarter. Was there a pickup in prepayment novelties during the quarter, and could you talk about where product is pricing today?

The prepayments were -- there wasn't much in prepayment activity. We did have some there, but it was similar to prior quarters. So that really wasn't where the help was coming from, or that really wasn't helping to buoy the yields on those.

As it relates to the pricing now, on multi-family, it's approximately 4.875%, and on all the other CRE, we are in the mid-5s.

Okay, and given what you have seen, I guess, so far in January in terms of pricing trends, what is your outlook going in through the rest of this quarter on the loan yield and, really, on the margin in general? Are you looking for more stability there on the margin, or further expansion?

I would say it's within a range. On the pricing that Eric just gave on the loan side, we started off the year with no change, so the pricing he gave you was kind of where we ended up the year, at where we're at beginning the year. In terms of the margin, we've been able to bring down our money market costs. This last quarter, we brought them down 9 basis points, and the previous quarter was 8 basis points decline. It's going to be hard to bring down the money market rates at those levels. We feel we have a little room, but not nearly as much room as we've had.

I think the key for the cost is going to be the mix and how much we can continue to grow the DDA side of the equation.

And one last one -- it's kind of strange asking you guys about a dividend because there has been such a strong focus on growth. But as return on tangible equity improves further later this year and into the next year, what are your thoughts on initiating a dividend at some point?

I can tell you, in terms of a dividend for at least 2011 -- and we only look out, really out one year at a time -- it's hard to get in any sort of discussion about a dividend right now for future years. In 2011, we don't expect there to be one. We would like to achieve -- we're at almost $11.7 billion. We are now looking at $12 billion and $13 billion. There's just so much opportunity in this market, the New York metropolitan area, to grow the institution that we would like to use our capital to continue to grow the institution.

Okay, great, thanks guys.

John Pancari, Evercore Partners.

In terms of your loan growth expectations, I know you gave the number earlier in terms of what you're projecting or budgeting. But can you talk about the type of loan growth over the next couple quarters? What are you seeing in terms of C&I demand? Could C&I begin to pick up here as the economy improves?

We saw at least -- I can tell you what happened in the fourth quarter. We saw growth in our C&I portfolio greater than we had in several quarters previously. So the total growth, although it's predominantly or primarily in the commercial real estate area, we did see an uptick in the growth in C&I.

The activity that we've seen in the loans in December has continued in January. So we are actually seeing some pretty decent activity right now -- again, predominantly on the commercial real estate side, but we are still continuing to see a little bit of movement on the C&I side as well.

And your utilization rate on your C&I side -- can you remind us what that is?

Utilization spiked up a little bit, I mean a little bit, from where it was in the third quarter. In December, it was just slightly under 47%. So we had seen a trend throughout the year of utilization going down. From January all the way through September, utilization rates had gone down. This is the first quarter that we've seen an uptick in our utilization, albeit a slight one.

Okay, and then last question, on the reserve -- you under-provided this quarter. And the reserve-to-loan-level came down to about 129 basis points of loans, but coverage is still -- you're still two times covered on NPLs. Can you talk about your expectation for the level? Is it likely stable here on a relative-to-loan basis?

I think, obviously, we are comfortable at two times covered, John. Really, where we go with reserves is going to be dependent on the economy and clarity in the economy. We haven't had that over the last couple of years and we have been over-providing over the last few years. So until we get clarity I think it's safe to assume we are still going to be conservative in our provisioning. I think that really points to what our mindset is.

Okay, thank you.

Matthew Clark, KBW.

On non-interest-bearing deposit growth this quarter, was there anything lumpy or unusual in that growth and any expectation that we might see that -- I wouldn't say reverse itself, but maybe see some of that growth given back here in the first-quarter?

I think it was a combination of core, and then there was some escrow in there. The fourth quarter was very strong. It would be hard to duplicate that every quarter in 2011. So I wouldn't say that you would see a reversal; you just may see a slowdown.

Okay, and then in terms of the mix of earning assets, with loan growth ticking up, is there any expectation that we might start to see a shift more toward loans and earning assets and maybe start to bring down the securities portfolio a little bit?

Well, that's ultimately what we are looking to do, Matthew, but a lot of that is going to be dependent on how strong deposit flows are. We still expect to have some pretty decent deposit flows. But we'd love to get back to a year like 2008 where we saw the loan portfolio significantly outpace deposit growth; that would be a great equation for us. We are not so sure if that's going to happen this year. We still see quite a bit of deposit to be had out there.

But, loan growth, the pipeline, as Joe said, has been good coming into January. We expect to have solid loan growth and we'll see where deposits take us.

Okay, thanks guys.

Steven Alexopoulos, JP Morgan.

Maybe I'll start -- the $1 billion budget for deposit growth is good for the typical bank your size, but for you guys it's well -- way off from where your growth rates have been. Can you just give us color on why you are budgeting so much less deposit growth this year, particularly given all these new teams that are still ramping?

Well, that's pretty much what we've budgeted each of the last three years, and what I said was we are much better at executing than we are projecting. I'm not so sure I totally agree with you, Steven, about a bank -- this may be what's acceptable to a bank our size. I don't know banks that are growing in deposits $1 billion a year.

I think, for us, we understand that the $4 billion in deposit growth over the last two years included some excess deposits. And what I mean by that -- there were deposits that shifted from off-balance-sheet money markets onto the balance sheet because the yields they were getting in the off-balance-sheet money markets were nearly zero. So we had that benefit.

We have the benefit of clients, not -- let's say in the real estate world, not building cash reserves and not doing anything with it yet. And that causes some excess deposits. So we are hoping that the deposit growth that we've had in the last two years actually slows down because some of our clients are seeing opportunities to use their excess deposits to invest by either investing in their businesses, which means they'd also have to borrow from us, or to buy some real estate, which means they'd have to borrow for it. That would bode well in that -- remember, you've got to understand, that $1 billion growth is net growth. That includes net of outflows. And so if we have some outflows for our clients to invest, that means the loan side will grow and help margins.

So that's what we are actually hoping for, because we realize that some of the growth over the last two years is excess that, when the economy starts to come back, the excess deposits will be used in the economy. And hopefully, they will be borrowing from us to use that and we won't have the investment portfolio growing, that the loan portfolio [won't] be growing, and that will add to the margins.

Given your comp model, if you do see a runoff of just excess liquidity, wouldn't that drive expenses down a bit, then?

No, because the comp model is such that you get paid for your business that you've build from day one. So if you've had a tremendous growth over the last several years, you get paid not only for bringing it in, but for keeping and maintaining those deposit levels and loan levels. So if your deposit side slows down, that means that it may slow down a little bit, but then you are going to pick it up on the asset side, on the loan side and on the fee side. So your comp model will still continue to grow.

Got you, okay. Turning back to the margin for a second, Eric, looking where you're now adding new securities, is this 3.85% yield on securities book a bottom, would you say here?

I don't know if it's a bottom, Steven. I think we'll see a slowdown in the rate at which those yields were coming down. Certainly, steepness in the yield curve has helped out there a little bit.

Okay. And, finally, could you just give a little color on this one large C&I credit, maybe nature of the loan and maybe timing for when you might see a resolution?

Resolution will be a long time off. This was a situation that occurred in the fourth -- became a loan in the fourth quarter -- I'm sorry -- in the first quarter of 2010 as a result of a check-clearing incident in the fourth quarter of 2009. The client stopped paying in the fourth quarter of 2010. We got aggressive with it by charging off the $10 million. We're actively pursuing legal remedies not only against the client and guarantors, but against the Canadian correspondent bank, and it could be years away -- any resolution. That's why we decided to be aggressive with it. If we thought it was going to be a quick resolution, we may not have been as aggressive.

Okay, got it now; okay, thanks guys.

Christopher Nolan, CRT Capital.

Hey, guys, nice quarter. Quick question -- turning to the teams for a second, in the past you mentioned that it takes typically 12 to 18 months for a new team to come up to speed and start transitioning their client base over to Signature. Are you seeing that is happening faster now?

No, I wouldn't say it's happening any faster, no.

Okay, and then, Eric, the yields on new loans -- did you mention that earlier, or --

We did. It's, for multi-family, approximately 4.875%; for all other CRE, 5.5%, or mid-5s.

Great, and I know you mentioned earlier about borrowing cost reductions. So you are not seeing any maturations in the first quarter. But how about the second quarter?

Yes, we do have some borrowings coming due in the second quarter. The second through fourth quarters, we have about $150 million coming due in borrowings.

Great, thank you very much.

Tom Alonso, Macquarie Group.

Just going back to that $10 million loan, just to make sure I understand sort of where that -- how that moved through, that was never on NPL or anything. You said it went non-performing in the fourth quarter and you just charged it off straight away?

Yes, exactly.

That's correct.

Okay, all right, I just wanted to make sure that I understood that. Okay, great. And then just turning back to the borrowings, I know you said you had a bunch that are coming due later in the year. Is the big bounce up in FHLB advances on a linked-quarter basis -- is that you guys taking advantage of some lower rates and maybe pre-funding some of that?

Well, there was a bunch of reasons for the FHLB bump. First thing is, we did have escrow deposits flow out late in the year, so we borrowed to match up against those flowing out. We had significantly more loan growth than we had expected in December, so we borrowed in order for the loan growth to fund that growth.

We were a little opportunistic. It was a good time for us to invest, and we really just wanted to make sure that we didn't have another quarter where we're sitting on a significant amount of cash. So the worst-case scenario right now in this environment is that we have to borrow short and replace later with deposits to make sure that we are fully invested, and while -- there's not much downside to that. So we wanted to make sure that we had all that cash out, fully invested.

And then, so looking at the decline in cash on a linked-quarter basis, is it safe to assume that that went out earlier in the quarter, and then the loan growth picked up and you had to go and borrow to fill the hole, if you will?

That's right.

Exactly.

Okay, fair enough. And then just one quick sort of tweak modeling question here -- anything going on with the tax rate? It was a little bit lower than what it's been running for the past few quarters. Is 42.5%, 43% still a good run rate going forward?

Yes. I would expect it to go up to approximately 43%. We do lose -- we had a little bit of a benefit still from that REIT that we had established several years ago. We had 25% of the benefit there. That goes away, so we'll lose that benefit. So I would expect taxes to pop up to about 43%.

Okay, great, thanks guys.

Andy Stapp, B. Riley & Co.

Is your pipeline for your private client teams, as well as your Q1 team that you got on board -- is that skewed more towards loan or deposit generators?

Probably a little bit more on the deposits side than on the loan side.

Okay, all right, that's it. All of my other questions have been answered.

Bruce Harting, Barclays Capital.

Technically, you would consider yourselves asset-sensitive; right? But your margin keeps going up even in this rate environment. So, thanks to your non-interest bearings, are we just -- are you just sort of blessed right now with the balance sheet that you could see margin go up in any environment? And if the Fed did start to put on the brakes a little bit and raise 100 or 150, can you just remind sort of the stair-step on the asset and liabilities? And am I correct in thinking the margin might actually expand?

And then, just to finish, the other question would be, do you generally seek out the people you hire? Do you find them, or do they find you through word-of-mouth? Thanks.

I'll take the first one here. I think we've been fortunate in that we have had the ability to further lower our deposit costs in this environment, where many banks just slash their costs early on, especially retail-oriented banks, and really met their floor. We still haven't met our floor yet on lowering deposit costs. So that has certainly helped in this environment. The mix of bringing in DDA certainly helps as well, and we expect that we'll get some further improvement there.

So that's really what has helped us in the short term, and also the steepness of the yield curve helped, especially this quarter. I got a little bit steeper curve that helped on the securities portfolio.

In a rising interest rate environment, the big question is, does loan demand come back into the equation? We expect that it does come back. And, if we see loan demand come back, that certainly is going to help us in a rising rate environment. We will see the securities portfolio runoff be reinvested into higher-yielding loans, and that's really the key in a rising interest rate environment. And obviously, our core funding is the other key, and we expect that we will be able to significantly lag on the way up with our core funding. So that's really how the margin should play out in a rising interest rate environment.

Joe, I don't know if you want to tackle -- what was the second part of that question, Bruce?

On your key hires, do you generally find them through -- I forget. Do you find them through headhunters, or is it now word of mouth or -- ?

It's usually through -- well, it's not usually; it is through word-of-mouth. We don't use any executive search firms or headhunters. Fortunately, as we've gotten, as we are about to, in May, celebrate or at least recognize that we're here 10 years as an institution, we've had more teams looking at us, coming to us and having an interest in joining us.

So I think it's a combination. In the past, we were seeking them out. Now they are seeking us out as well as us seeking them out.

Thank you.

Lana Chan, BMO Capital Markets.

On the expenses, can you talk about if anything it's really changed there in terms of the overall operating expense base? Because this year the 10% growth was significantly half what it's been running at for the last two to three years, and the guidance is also significantly below what you've historically guided to, of 18% to 20%.

Well, I think we just continue to see further leveraging of that infrastructure that we built out many years ago to compete with the megabanks, Lana. In 2010, we hired a few less teams than we did in the prior year, so that certainly helped out. We didn't open any locations, so that certainly helped out.

So I would expect that will pop back up from that 10% level . As we do, we've brought on a location recently. We're going to open up a new office in the second quarter. The pipeline for teams is pretty good. We've already hired a team this year. We hired a team late in 2010. So I don't know if we're going to be able to maintain that 10%, but I don't think we're going to go back up to the 20% level, either. We did build an infrastructure to compete with the megabanks early on, and we have great scalability in that infrastructure and in the technology that we employ.

So I think that we'll continue to see a containment in expenses. I just don't know if we can keep it at the 10% level. That's pretty strong, given the growth that we've been putting on.

Okay, thanks Eric. And just another question on the loan growth projection in your budget -- it seems pretty conservative, given the pipeline looks pretty strong going into the first quarter. And we seem to be slowly recovering in this economy. Can you just remind me, do you -- when you do the budget, are you factoring in potential growth also from the expected team hires for this year?

We -- it includes the growth from the expected team hires. It also -- it's a net number, because as our Chief Credit Officer likes to remind us, that we do like clients who pay us back. So there are loan payments that occur. So that growth that we projected clearly includes the new teams.

But you don't expect, in the budget, for teams that you bring on in 2011, for them to add a lot to that growth. Your expectations is they're really going to be adding to that growth in the year following when they come on board. So, even though we put some of it in there, it's not a large amount for the teams that would be coming on board this year.

Great, thank you.

Casey Haire, Jefferies & Co.

Just a question on capital, actually. So, based on your projections of loans and deposit growth and with Tier 1 leverage at 8.6 right now, would that -- based on your projections, would that keep you above the 8% through the year?

Yes, it would.

Yes.

Okay, with a decent cushion?

Yes. Our earnings right now support approximately $375 million to $400 million in asset growth per quarter, so that would give us a pretty good cushion.

Go you, okay, and then switching into margin, actually, can you give us a sense as we look forward to 2011 how margin exited the quarter? Like where was it in December?

It was slightly higher than the average for the quarter. That being said, the first quarter we have a couple less days, so that does impact the margin a little bit. We are really -- we are very pleased to be operating at a 350 margin on this low-risk profile of balance sheet. So we're looking to maintain that margin within a few basis points up or down in the near-term. To really meaningfully move that margin any higher, we need to see loan demand come back into the equation.

And the last one from me -- just on provision, you mentioned the charge-offs ex the loan C&I credit. What would provision have been without the $10 million loss?

We would have approximately almost doubled the charge-offs, so we would have over-provided again and been in excess of the charge-offs that we had.

Got you, thanks guys.

Peyton Green, Sterne Agee.

Just a question, Eric, on the securities book -- you all have had to fight pretty significant repricing down over the past 2.5 years, so I was just wondering if you could talk about the expectation of cash flow over 2011 and kind of what the roll-off yield is, and where you are seeing opportunity.

The roll-off's yield is around 4%, or low 4s. Right now, we are buying a lot of agencies along the curve, mid-to low 3s. We are still selectively buying CMBS, or at least we did during the quarter. Re-REMICs is still a strategy we like, you know, straight corporate bullet. So I would expect that what we're adding on would be below what's running off, still. And that's why we'll probably still see our average security yields come down, but not nearly at the pace as they did last year, Peyton.

Ultimately, our goal is, as we stated earlier, is to take that securities cash flow and redeploy it into loans.

Okay, and then this is maybe more of a qualitative rather than a quantitative question. But as you become a 10-year-old bank and a $12 billion to $15 billion balance sheet, what kinds of things are you going to do differently maybe than you would have in the past couple of years that could help the growth rate out, particularly on the lending side? Are there any new opportunities, just by being a more mature and larger company?

Yes, well, there are two things. One, for the market that we are targeting, there is still a tremendous opportunity in geographically where we are. But as you get bigger, there's an opportunity for privately-owned businesses that are a little bit larger that we have not -- that are underserved, that continue to be underserved, that we have not targeted.

So there's a whole other market of clients that we have not yet targeted that are, let's say -- could be in commercial real estate, could be in the market area, because right now we do loans up to $25 million. And at some point, if we do loans a little bit larger, that will allow us to enter some markets that we are not in. It's still the same geographic and still the same target, being privately owned businesses, just a little bit larger. So it bodes well for our growth.

Okay, great, thank you very much.

Bob Ramsey, FBR Capital Markets.

Just a couple quick housekeeping notes -- what was the REO balance this quarter and non-performing securities as well?

The REO remained flat at $1.67 million, so there was no change in that. And the non-accrual investment securities slightly declined to $4.4 million.

And what happened with, I guess, off-balance-sheet money market balances? Obviously, that commission line had another good quarter. And I'm just sort of curious; what is the balance that's off-balance sheet right now? What is your outlook for that commission line?

The off-balance-sheet money market funds are around $600 million. We've really seen those stabilize from the second, third and fourth quarters. They really remained flat, flattish, at that $600 million mark. We would expect that to stay there until we see interest rates move up. When interest rates increase meaningfully, the yields on those off-balance-sheet money market funds will increase at a faster pace than the on-balance sheet, and we would expect to see some off-flow from on-balance sheet to off.

Okay, that's all, thanks again.

Jeff Bernstein, AH Lisanti Capital.

Hi, guys. Congratulations on the quarter. Just have been hearing that the pace of real estate transactions in New York City really picked up in December and particularly -- in particular, and that there was a fair amount of note purchases going on as a percentage of the activity. Just wondering if you guys are involved in that. You have talked about potentially backing some customers to do those kinds of transactions and what the outlook is there.

We will do those, the note purchases. We usually finance them at 50% loan to value of the discounted note with a PG. We've done very little, less than a handful of those. So most of our activity has been continued refinancings on multi-family, multi-tenant and commercial properties. Although people now or our clients know that we are out there doing them, we haven't seen as many as we had expected.

And then a quick follow-up -- you talked about $150 million of loans coming due in 2011. Are those -- do they have options to renew on them, or those are coming due -- and what is the risk there that they won't re-underwrite, and how do you handle that?

Those were borrowings coming due.

Oh, I'm sorry. Can you talk about loans coming due in commercial real estate in 2011?

We don't have a preponderance because we started to do a significant amount of our commercial real estate at the very, very end of 2007. And it really started at the beginning of 2008. And most of those are five-year, and so we will probably see some of the clients wanting to refinance sooner than the five-year maturity because of where interest rates are. And if they're going to remain clients and they have large deposit balances with us, we would refinance those at a discounted prepayment penalty. However, it's really 2012 we would expect -- 2012 where you would have a majority of our five-year maturities coming up.

That's great, thanks very much.

Thank you, and I show no further questions in the queue. At this time, I'd like to turn the conference back to Mr. DePaolo for closing remarks.

Thank you for joining us today. We appreciate your interest in Signature Bank, as always. We look forward to keeping you apprised of our developments. Alicia, if you can close it out.

Ladies and gentlemen, this concludes the Signature Bank fiscal 2010 fourth quarter results conference call. If you would like to listen to a replay of today's conference, please dial 1-800-406-7325, or 1-303-590-3030 and enter the access code of 4400266, followed by the pound sign. An archive of this call can also be found on the Company's web site at www.signatureny.com. Thank you for your participation, you may now disconnect.