Signature Bank (SBNY) 2011 Q2 法說會逐字稿

Welcome to the Signature Bank 2011 second-quarter results conference call. With us today are Joseph DePaolo, President and CEO, and Eric Howell, CFO of Signature Bank. Mr. DePaolo, please go ahead.

Good morning and thank you for joining us today for the Signature Bank 2011 second-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 all 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, and tend, 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 a comic 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 [hold on] secondary market which can materially affect charge-off levels and required credit loss reserves levels; and four, competition 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. 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'd 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.

The results across the board -- income growth, deposit growth, loan growth -- reflect the continued validation of our business model. The successful completion of our equity raise provides the foundation for continued growth opportunities. Once again, the Bank posted record net income driven by strong deposit and loan growth, a wider net interest margin and stable credit quality.

I will begin by taking a look at earnings results for the second quarter. Net income for the 2011 second quarter reached a record $36.6 million, or $0.87 diluted earnings per share, up $14.3 million or 64% versus the $22.3 million or $0.54 diluted earnings per share reported in the second quarter of last year. Net income includes a $2.1 million pretax gain on the sale of an SBA interest-only strip security. Excluding this gain, net income was $35.4 million, or $0.84 diluted earnings per share.

The continued strong growth in net income when compared with the 2010 second quarter is primarily the result of an increase in net interest income fueled by significant core deposit growth and strong loan growth. These factors were partially offset by increases in the provision for loan losses and non-interest expense.

Turning to deposits, deposits this quarter grew $685 million to $10.87 billion. Since the second quarter of last year, total deposits grew in excess of $2.4 billion, or 28%, during the past 12 months. Average deposits in the second quarter were $10.7 billion, up a record $893 million. Non-interest-bearing deposits increased $239 million to $2.8 billion, representing 26% of total deposits. With our considerable deposit growth, total assets crossed $13 billion, up $2.7 billion, or 26%, when compared with the 2010 second quarter.

The solid deposit growth is a true testament to the skill and efforts of our 76 teams. They continue to prove that our single point of contacted approach differentiates this institution through the level of service the teams provide.

Now on to loans. Loans during the 2011 second quarter rose $467 million to $6.1 billion, representing 47% of total assets at quarter end. The increase in loans is mostly due to growth in commercial real estate and multifamily loans with continued conservative underwriting standards. Nonaccrual loans remain stable at $44.2 million, or 0.72% of total loans in the quarter, compared with $39 million or 0.69% for the 2011 first quarter and $44.6 million or 0.95% for the 2010 second quarter.

The provision for loan losses for the second quarter of 2011 was $12.9 million versus $12.3 million for the 2011 first quarter and $11.1 million for the 2010 second quarter. The increase was primarily driven by the growth in the loan portfolio.

Net charge-offs for the 2011 second quarter were $7.7 million or an annualized 53 basis points compared with $6.5 million or an annualized 49 basis points for the 2011 first quarter and $6.3 million or 55 basis points for the 2010 second quarter. The allowance for loan losses was 1.28% of loans, compared with 1.30% of loans in the 2011 first quarter. Additionally, the coverage ratio, or the ratio of allowance for loan losses to nonaccrual loans, remained strong at 177%.

Now looking at past due loans and the watchlist, during the 2011 second quarter, we saw a substantial decrease in the 30- to 89-day past due loans of $48 million to $20.2 million and an increase of $5.8 million in the 90-day plus past-due category to $18.1 million. Watch list credits increased this quarter by $23.1 million to $198.2 million, or 3.25% 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 still view credit issues as manageable, given the continued uncertainty in the economic environment, we feel it is appropriate to conservatively reserve as necessary.

Let's take a moment to review team growth. Two private client banking teams joined during the 2011 second quarter and a total of five joined for the first half of 2011. Opportunity remains in the marketplace.

I would like to take a moment to comment on the successful equity raise we completed on July 11. The $253 million in proceeds is expected to sustain the Bank's growth over the long term as we plan to use this capital to draw our network of private client banking teams and further strengthen the Bank's position throughout the metro New York area.

At this point, I'll 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'll begin by highlighting net interest income and margin.

Net interest income for the 2011 second quarter reached $113 million, an increase of $31.9 million or 39% versus the 2010 second quarter and an increase of 9% or $9.3 million from the 2011 first quarter. Net interest margin was up 26 basis points in the quarter when compared with the same period last year and is up 5 basis points on a linked-quarter basis to 3.64%. The linked-quarter increase is mostly due to a further decrease in our deposit costs, continued loan growth, and an increase of $600,000 in loan prepayment penalty income. Excluding prepayment penalty income in both quarters, the linked-quarter margin would have increased 3 basis points from 3.51% to 3.54%.

Let's move on to asset yields and funding costs. Overall interest-earning asset yields increased 3 basis points in the second quarter to 4.63%. We are pleased with the stability of our asset yields where we've benefited from an improved earning asset mix despite the volatile marketplace. We were able to selectively purchase securities this quarter and take advantage of market volatility while maintaining our high quality investment portfolio.

Additionally, we saw a slowdown in amortization of premiums on mortgage-backed securities from slower prepayments. As a result, yields on investment securities increased 8 basis points to 3.91% this quarter when compared with the 2011 first quarter. Further, our duration modestly extended.

Turning to our loan portfolio, yields on average commercial loans and commercial mortgages, despite market pressures, remained relatively stable at 5.55%, down 4 basis points from the first quarter, benefiting from increased prepayment penalties.

Now, looking at liabilities, cost of deposits for the quarter further declined 4 basis points to 87 basis points as we again decreased deposit costs, given the low interest rate environment, while increasing non-interest bearing deposits.

Let's review non-interest income expense. Non-interest income for the 2011 second quarter was $10.2 million, down $100,000 from the 2010 second quarter. This was driven by a decrease of $1.5 million in net gains on sales of securities. This quarter, we again benefited from the sale of an SBA interest-only strip security with a principal balance of $16 million that was sold for a gain of $2.1 million.

Non-interest expense for the 2011 second quarter was $45.2 million versus $41.7 million for the comparable period last year. The $3.5 million, or 8.4%, increase was principally due to the addition of new private client banking teams. We also saw a decline of $455,000 in other general and administrative expenses due to lower FDIC assessment fees of approximately $1.4 million.

The Bank's efficiency ratio further improved to 36.7% during the second quarter versus 45.7% reported for the comparable period last year. Excluding the gain on sale of the SBA interest-only strip security, the efficiency ratio was 37.3%. The improvement was primarily due to growth in net interest income, coupled with expense containment.

Let's discuss capital. The Bank's capital levels remain strong and were further enhanced with the equity raise in July. The tangible common equity ratio was 8.08%, and on a pro forma basis, adjusting for the equity raise, it's 10.01%. Tier 1 risk-based was 14.2% and a pro forma 17.67%. The total risk-base ratio was 15.29%, an 18.75% pro forma, and the leverage capital ratio was 8.15% and 10.14% pro forma for the second quarter.

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

Thanks Eric.

This marks the seventh consecutive quarter where Signature Bank posted record earnings and demonstrated continued strong deposit and loan growth as well as net interest margin expansion.

Looking ahead, with our successful equity raise now complete, we remain focused on executing our relationship-based business model and further solidifying our reputation as we attract some of the industry's most seasoned bankers, prudently manage our balance sheet, keep depositors' safety our first and foremost priority, and offer clients a single point of contact to meet all their needs.

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

(Operator Instructions). Steven Alexopoulos, JPMorgan.

Good morning guys. Maybe I'll start -- total operating expenses are up I think only 8% year-over-year, being helped by the lower FDIC premium cost. Are you guys still thinking around roughly 15% or so full-year costs, or should we take the expectation down now?

Yes, I think you've got to I guess level set it against this quarter now that the FDIC fees are down, Steven. So I would expect that we'll still be in a 12% to 15% band increase. We are still hiring teams and adding one new location in the third quarter. So, I think we'll go back to that 12% to 15%, but you do have to factor in the lower FDIC assessment fees.

Eric, how low can the efficiency ratio realistically go here? Is there any pressure just to build up infrastructure? Just it was very low.

We have a very efficient model that we've seen us grow into over the last decade. We still have tremendous scalability in our IT infrastructure and systems there where we use Fidelity, one of the largest -- or the largest outsource provider to banks in the country. We predominately are adding teams without adding much brick-and-mortar --

Yes.

-- so that really helps us to lever everything. So I would expect it to continue to decrease, albeit at a slower pace than we've seen in the past, but I think we still have some room to bring it down. How low it can go, that's hard to say, but I do expect, over the next year or two, that will continue to slowly decrease and bring the efficiencies down further.

Erika Penala, Bank of America Merrill Lynch.

Good morning gentlemen. I was wondering, could you give us a sense of what further opportunities you have in terms of loan growth for the remainder of the year outside of the portfolios that you expect these new teams to bring over?

We continue to see a very nice pipeline on the commercial real estate, including the multifamily. That growth that we had in the first half of the year, which was primarily through that venue, will continue in the second half of the year albeit maybe not at the same levels because the third quarter is usually a quarter where you have a lot of vacation time by clients. That tends to slow down some of the growth in the quarter, but we'll still have robust growth.

The teams that we're bringing on board, their loans primarily would be in the C&I area where they continue to see the market be very slow, particularly in the last two quarters, although anecdotally we are seeing some more activity right now. The question is whether that actually ends up resulting in growth depending upon some of the pay-downs we have. We are I guess a little bit more optimistic that we are seeing some C&I activity this quarter.

Okay, thank you. Also, my second question and I'll step back -- could you give us a sense of what the competition is like, and if you could specifically address separately in multifamily and non-multifamily commercial real estate and in C&I?

I'll do the multifamily first. We are proud to say that the teams that we've brought on board, very proud to say the teams that we brought on board that have the expertise in this particular area, the CRE and -- with a heavy concentration on multifamily, run a very efficient operation. That has enabled us to increase the loan growth substantially over the years. That has allowed us to bring loans on board at a rate that's -- an interest rate that's somewhere between 25 to let's say 37.5 to 50 basis points higher than our competitors, which we're very proud of. The pipeline is still there, even with our rates being higher.

One advantage we have is that we are balance sheet lenders and we don't keep -- I'm sorry, we do keep the loans on our books. I think that's an advantage for us because those clients really don't want to deal with the CMBS market, which means that they would not be able to negotiate renewals, early renewals, because of maybe the improvement that they're having in their cash flow. We can be very flexible for them. So those are advantages for us.

On the C&I side, I think that, from the competition, all the loans that are great loans to do, what we are seeing is the pricing really come down. For us, it's got to be a decision of will we step in and do loans that are so low that it almost makes no sense to do them, and then you have to wait two or three years before the rates to start moving up. So the competition on the C&I side has been intense from really good credits from the pricing side. That's what we are seeing.

Thank you for the color.

Matthew Clark, KBW.

Good morning guys. Just on the growth on the loan front, can you give us a better sense as to the mix that's coming from legacy -- the team's legacy relationships in the form of refinancing, I would guess. Then the other piece that might be coming from what might be brand-new market share gains for some, I guess for some reason, including I guess your ability to close these deals pretty quickly. Any sense for like a percentage breakdown in the first half of the year?

I don't have a -- we don't have a percentage breakdown, but I will say this. We have been fortunate with the teams that we've brought on board with expertise in commercial real estate. That reputation has actually helped us with the other teams. So, what we've been seeing is some of the other teams are getting opportunities now to bring on commercial real estate deals that we weren't having an opportunity let's say five years ago. I think that's because of the reputation that was built by the team that we've brought on board. That has enabled us to actually bring on some new business that we hadn't had a chance to do so.

Actually, most of the business we are bringing on is new. It just happens to be the business of the former teams. It's new for us, so it's almost like a zero-sum game. These are not new -- these are not purchases. These are refinances whereby we are doing the refinance, and the previous bank, where they were, is losing out on the business. So it's predominantly existing clients that are new to the institution, existing of the previous bankers at their previous institutions; it's predominantly that.

We, again, to reiterate, we are getting opportunities now to bring on new clients that were never clients of the bankers before, because of the reputation that we've gotten from our group out in Melville to do the business in a very efficient manner.

Great. Then your -- I guess your expectation on team hiring in the second half here?

We actually have a pipeline in varying stages, so the expectation is in all likelihood we will add on a team or teams. To give you a number would be hard to do because we're in various stages of discussions. I'll just leave it at we'll probably add on more than the five teams we've added on thus far.

Great. On the [Durbin] front, I can't recall if you guys sell into that $10 billion level. I think it was as of -- wasn't it measured as of year-end 2009? Just curious whether or not you might have a fourth-quarter impact here out of the gate at least.

Are you talking about the interchange fees?

Yes.

Yes, we had very little to begin with, so no effect, or very, very little effect.

Thanks.

Bob Ramsey, FBR.

Good morning. Talking about the pricing pressure, particularly on C&I loans, I was wondering if you could sort of share thoughts more broadly and sort of what your net interest margin outlook looks like from here.

For the third quarter, we think, as Eric was saying, we are at 3.54% core, 3.64% overall when you include the prepayment penalty income. One of the things you have to think about is, with the capital we just raised, there will be some time to deploy that capital. So until it's deployed and it's in cash, that's going to have a little pressure on the margin.

On the liability side, we have $80 million in borrowings coming off at a rate of approximately, an average rate of 4.17%. There's to borrowings in July and two and August, so we won't have a full-quarter impact but we'll have a decent impact helping us on our cost of funds. Again, that was about $80 million in borrowings coming off, and we are going to let those mature and not renew, at least for the short term, the short term being at least the third quarter.

Also on the liability side, the interest-bearing money market, we are reduced those costs from $119 million to $113 million. So there's a 6 basis point drop. We're probably not going to be able to drop it another 6 basis points in the third quarter, although we see some savings on continuing rate reductions. There will be some of that. But having said all that, so that kind of gives you all the pieces, there will be some pressure because of the capital raise. I don't know, Eric, if you want to add.

Yes, we are also going to see some pressure in the securities reinvestment and tenures pull back over the last month or so, so seeing runoff in the portfolio in a range of 3% to 3.90%, and we are reinvesting in the [3.30%] to [3.50] range. So we'll get some pressure in the securities portfolio. We are selectively deploying there when we see our opportunities.

So all that being said, we'll probably be in a [3.50%] range on the margin give or take a few basis points. But [around the] 3.50% range we're very happy to operate at that level given those low-risk profile of our balance sheet.

Okay. With the funds that were raised as part of the capital raise, could you maybe tell us how much of that has been invested in investment securities, how much maybe is targeted for investment securities, and how much is sitting maybe more liquid in cash right now?

Really it's dependent more so on our deposit growth and the levels of deposit growth. We have short-term escrows that are going in and out, so really ultimately we're looking to deploy that capital into loans. We've deployed some into the securities portfolio but we are sitting fairly cash-heavy. We are picking our opportunities when you see the ten-year across 3%. That's when we'll look to deploy into the securities portfolio. But our ability to put that capital out will really be based on how much in deposit growth we get.

Okay, great. Thank you guys.

Christopher Nolan, CRT Capital.

Hey guys. Given the superb deposit growth, can you give some characterization as to are these more -- are these larger customers, or are you still seeing a large number of smaller customers [or it's] more volume of new clients coming through the door?

We're seeing larger deposits coming through. What's exciting about that, it's not only just existing -- it's not only clients of -- that were previous clients of the bankers at their previous institutions. We're now getting some real opportunities to bring on brand-new business that were never clients of the bankers at their previous institutions. So it's not only large deposits, it's also brand new business.

Got you. As you bring in these larger clients, does that put any pressure in terms of cash management or treasury type products you need to develop or offer them?

Certainly. Cash management is very important. We feel that our cash management products are fairly consistent with the bigger institutions, although more recently we're talking with, in fact over the next week or two we're going to be meeting with some of our group directors to talk more about how we can make our products more robust to prepare for the near future and the bigger clients that we'd bring on. But so far things are working pretty well.

Great. Eric, what sort of tax rate should we use for the second half of the year?

44%

Then what's the duration on the securities book?

3.5 years.

Thank you very much.

Tom Alonso, Macquarie Capital.

Just a real quick follow-up on the team adds there. I kind of missed what you said. In the back half of the year, did you say you were going to add another five teams? Did I hear that correct, or was I hallucinating?

You weren't hallucinating, maybe I was if I said so. But no, what I said was on top of the existing five teams we've already hired, in all likelihood we will add on some more teams but we are in varying stages of discussions, so it would be very hard to say if it's one or more, but we probably will be adding on teams already on top of the existing five.

Great, thank you guys. That's all I had.

John Pancari, Evercore Partners.

Good morning. On the C&I loan front, can you just remind us the size of that loan book as of June 30, and how that loan book -- what the change was, what the growth was linked quarter?

Yes, the C&I book was $1.05 billion. It was down $82 million from the prior quarter. We saw our utilizations go from 47% at the end of the first quarter to 45% at the end of the second quarter, so we saw utilizations come down. We had a couple of pay-downs in some larger credits. We are certainly, with all the noise in the economy in Washington, we are not seeing our C&I clients really look to build capacity and hire and do all those things that are going to lead to growth. We just see too much noise out there.

That being said, in the third quarter, we do have some nice deals in the pipeline that we expect to close, but it's hard to say what will pay down as well. But we are seeing some positive deals line up for us in the third quarter that will hopefully lead to growth. But again, I have to put the caveat out there that we just don't know what might pay down as well.

The competitive front on the C&I side, would you say that's largely coming from the larger banks that are obviously here in this market?

Yes.

Then just lastly, I've got to ask about it. In terms of John Kanas' return to the market, can you talk a little bit about the competitive front there, whether you have some concerns around the potential poaching of teams, or just is it more of a general competitor back-to-the-market type of viewpoint where you could see some increased general competition?

I will say this. Competition is good because it certainly makes us as an institution and me personally better. And just rest assured we will not be asleep at the switch.

Okay, thank you.

Ebrahim Poonawala, Morgan Keegan.

Eric, I just wanted to follow-up on your NIM. Thanks for the color. Now, you said the core NIM is going to be in the 3.50%-ish, but there's obviously the 10 basis point benefit from the prepayment. Is your best guess that 10 basis points is going to go up, down, or is this going to remain kind of at that level? If you can say what the trigger of that prepayment is, like is it something that happens in matured -- obviously (inaudible) the rates are where they are, why is it that everyone is not kind of trying to prepay in the same quarter? Like what's begetting prepayment? If you can give any color on that, that would be helpful.

Sure. If I really have to give a guess, which I hate to do, I predict it would be down from the level that we saw in the second quarter. These prepayments are predominately happening on the five-year fixed-rate CRE loans that we made back in 2008. As those loans are coming into their -- the last two years, remember they have a 5-4-3-2-1 penalty built into them. So as they come into that window where they're in the last couple of years, our clients have to make a decision of we are in a low interest-rate environment. They probably see interest rates going up in the future, and they have to make that decision do they lock in that lower interest rate. So it's really based upon the loans that were made several years ago and how many of those loans are coming due.

In 2008, we had pretty consistent loan growth throughout 2008, so I would expect we're going to have a similar amount of loans as we did in the first and second quarters come into that window where our clients will have to make that decision as to whether or not they refinance now and try to lock in these lower rates so -- but it's really hard to gauge. We only have two quarters worth of history, so it's just difficult for us to predict. That's why we try to give everyone an idea as to what our core margin is without the prepayment penalty income.

That's helpful. I guess one question for Joe. In terms of given the growth that you had him on the loan portfolio side and the focus on C&I, if you can give any color in terms of how you beefed up the credit review process in terms of where things stand today versus 6 or 12 months ago?

Our credit review process was pretty strong. I don't think it needed to change from where it was since six or nine months ago. We have our risk manager who does three credit reviews on an annual basis. We started that several years ago, so the portfolio is looked at three different times during the year.

We also have KPMG come in, and they do a review. In addition to reviewing our review, they do their own review. Then we have the regulators come in and do two separate reviews, one on the C&I portfolio and then on the CRE portfolio separately. So we feel pretty confident that -- and I'm sure our teams out there are sometimes fatigued at all the reviews, but we feel pretty confident that the reviews cover a large part of the portfolio that is necessary for us to get comfortable with the allowance.

All right, that's all I had. Thanks guys.

Casey Haire, Jefferies.

Good morning guys. My question is on the charge-offs. They've been running pretty stable the last six quarters or so, around $6 million, $7 million, with the one exception being the fourth quarter. Is this mostly still C&I 2005, 2007 vintage? When might we expect to see that -- what's the outlook going forward?

This is still predominately the older vintage C&I. We expect that to continue to be the case. I really don't see charge-offs meaningfully coming down from this level until sometime next year, probably second, third, fourth quarter of next year. Then we should hopefully see those start to come back in line. But at 53 basis points, we are not overly concerned with that level.

Got you. Then just quickly on the expense, guys, at 12% to 15%, that's based on no incremental team hires, correct?

No, that's inclusive of team hires. It's kind of baked into our run rate that we'll consistently have new teams coming in.

Okay, so if you added more teams, you would be still within that 12% to 15% on the year?

Correct.

Got you. Thanks guys.

Gary Townsend, Hill-Townsend Capital.

Good morning. An earlier question discussed competitive changes. I'm just curious though if we could just expand on it. You're taking market share clearly, just looking at the deposit growth, from your largest competitors I would assume. Do you see any changes? Are they really able to adapt or are they so ingrained in what they do? Are you seeing any changes in behavior that -- coming from your major competitors that is (multiple speakers)?

I think they still continue to focus on two areas that we don't. One, they focus on the retail. Everyone is killing themselves over marketing, advertising, and putting new branches out there. So, that's the mass-market retail, which we don't compete in. Then the Fortune 500, they can't spend enough time on those clients, so we continue. As great as our teams are in bringing in business, what's been helping is what we've been hearing, whether it's the JPMorgan Chases of the world and the Bank of Americas of the world. I'm sorry if some of our analyst are on the call and I'm mentioning their banks, but they don't have anything to do with the banks. They are not focusing on the clientele that we focus on.

So when I was mentioning earlier that we are excited about the business that we're bringing in that whenever clients of the bankers at their previous institutions, it's a combination of us being around ten years and now building a reputation because of the teams and the poor job that the larger institutions are performing for those clients. We hear it more and more. It's great. I actually -- I'll give you an anecdote. I called a client in the Hunts Point fish market last week. I was asked by somebody to call them up and -- the owner of the business -- to thank him for coming on board. They were with Chase 50 years, and they decided that they couldn't take it anymore, and we are hearing more and more of those stories.

As you grow in size, it's been from $4 billion in assets, you are now approaching $11 billion. That is giving you access to the larger clients, I would guess. Is that correct?

Yes. Actually, we're at $13 billion now, Gary. I don't know if $13 billion -- I think $13 billion is a lucky number in this case. We are -- I think being a larger bank helps us to -- gives us an opportunity now to speak to prospects that we didn't have in the past. I think also surpassing $1 billion in equity. Now it's $1 billion -- with the capital we're at $1.3 billion in equity. That helps us to talk to some clients or prospects that we didn't have a chance to before.

Do you see many acquisition opportunities?

No. We haven't seen any come across our desk in a while.

Just on the team front Gary, and that's our focus.

Thanks very much.

Peyton Green, Sterne Agee.

Good morning. Congratulations on a strong quarter. One question would be more of an evolutionary one, I think. But as the Company has grown over time, you all have increased your lending limit, certainly not anywhere near your legal lending limit and with the capital raise in this quarter. What opportunity is there for you to move up the funnel, so to speak, and go after a little bit larger business? Is that a likely focus for the coming year?

It's a great question because it's something we've been talking about for a while and something we hope now -- we'll be having actually discussions, believe it or not, we have a scheduled discussion after this call that will be focusing on things that we can do on the asset side. We think that there really is a great opportunity to move it up let's say in the middle market in the commercial real estate side above the $25 million limit or so that we say. You have to temper that, though, with like on the C&I side, where you start doing some of these larger loans. The interest rates are much lower than on the lower end of the middle market perspective. So, we have to temper our excitement that we think we can do a better job than those big banks that I just talked about in the previous call. But the competition and the rates are even more fierce.

But you are right. We've had the $25 million limit for, God, maybe four, for five years or so. We've more than, much more than doubled the Bank. Our capital certainly grew by more than double. We feel that we have the people to do the underwriting on the larger loans, and we just have to pick our spots to do them. I think that pretty much answers the question.

And a follow-up -- as long as deposit growth is running as strong as it is, is your expectation that it will remain strong?

Yes. Our expectation is that it will -- we'll have some choppiness in each quarter. I think Eric mentioned earlier we have choppiness because of escrows moving in and out, which we really don't talk much about anymore, now that we're approaching $11 billion in total deposits. There is choppiness. For instance, we get opportunities to bring in $85 million to $100 million deposits almost on a weekly to monthly basis. Then they go out, so there's escrows. But all in all, the average deposits will continue to rise and it will be somewhat robust.

Okay. Then just one last question. On the prepayments, if my math is not too far off, did you all originate about $1 billion in multifamily between '08 and '09, and so shouldn't the prepayments, given the interest rate and conditions that existed and the competitive conditions at that point, shouldn't the prepayments remain elevated for a period of time?

You would think so. But like I said, given the fact that we've only really had two quarters history in prepayments, we don't want to start making predictions on that. But you are right. We had consistent, steady loan growth in 2008, 2009. We're going to have a similar level of loans come into that prepayment window this quarter as we did the last couple of quarters. But it's hard to say what decision the clients are going to make on those.

Great. Thank you very much for taking my questions.

Christopher Nolan, CRT Capital.

Hey guys. A quick question on the loan growth -- how much of that was sourced from brokers and some of the property management companies that you work with in terms of them referring property owners to you for mortgage loans?

We don't keep those statistics, so it would be very hard for me to give you an idea.

Okay, thank you Joe.

There are no further questions. Mr. DePaolo, please proceed.

Thank you Luke. Thank you, everyone, for joining us today. We appreciate your interest in Signature Bank. As always, we look forward to keeping you apprised of our development. Luke, I'll turn it back to you.

This concludes the Signature Bank 2011 second-quarter results conference call.

If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 800-406-7325 with access code 4452514. Additionally, an archive of this call can be found on the Company's website at www.SignatureNY.com.

ACT would like to thank you for your participation. You may now disconnect.