Signature Bank (SBNY) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Signature Bank's fiscal 2011 third-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 October 25, 2011.

I would now like to turn the conference over to 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 2011 third-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, 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 statement.

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 default, 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; 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 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 statements 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.

In the 2011 third quarter, Signature Bank again posted record net income driven by strong core deposit growth and strong loan growth, as well as both stable core net interest margin and credit quality. Our results continue to validate the success of our proven business model.

Additionally, at the onset of the third quarter, we completed a $253 million equity raise that will allow the Bank to further strengthen its position by capitalizing on growth opportunities. I will begin by reviewing the earnings results for the third quarter.

Net income reached a record $38.4 million or $0.83 diluted earnings per share, up $11 million or 40% versus the $27.4 million or $0.66 diluted earnings per share reported in the 2010 third quarter. The continued strong growth in net income when compared with the 2010 third quarter is primarily the result of an increase in net interest income, fueled by strong core deposit growth and strong loan growth.

These factors were partially offset by increases in the provision for loan losses and non-interest expense.

On to deposits. Deposits this quarter grew $314 million to $11.2 billion. This includes strong quarterly core deposit growth of $526 million and a decrease in short-term escrow deposits of $219 million. Since the third quarter of last year, total deposits grew $2.14 billion or 23.6% during the past 12 months. Average deposits in the third quarter were $11.3 billion, an increase of $553 million.

Please keep in mind this is a key deposit metric we closely monitor and due to fluctuations in relationship-based, short-term escrow deposits.

Non-interest-bearing deposits of $2.7 billion represented 24.2% of total deposits. Without continued deposit growth, total assets rose $2.9 billion to $13.86 billion, up 27% when compared with the third quarter of last year. The solid core deposit growth can be attributed to the unparalleled level of service provided by our now 78 teams who continue to serve as the single point of contact us to their clients.

Now onto loans. Loans during the 2011 third quarter increased $336 million to $6.4 billion, representing 46.5% of total assets at the end of the quarter. The increase in loans was mostly due to growth in commercial real estate and multifamily loans with continued conservative underwriting standards. Our loan growth of $1.2 billion through three quarters of 2011 already exceeds the total loan growth in each of 2010 and 2009. This growth was achieved while maintaining exceptional credit metrics.

Non-accrual loans fluctuated to $51.1 million or 0.79% of total loans in the quarter. By way of comparison, if you recall, two years ago at September 30, 2009, non-accrual loans were at $51.2 million or 1.24% of total loans. Last year at September 30, 2010, they fluctuated to the low end of the range at $33.8 million or 0.69%. And last quarter, non-accrual loans were $44.2 million or 0.72%. The provision for loan losses for the 2011 third quarter was $12.1 million compared with $12.9 million for the 2011 second quarter and $10.4 million for the 2010 third quarter. The increase from the prior year was primarily driven by the growth in the loan portfolio.

Net charge offs for the 2011 third quarter were $7.0 million or an annualized 44 basis points, compared with $7.7 million or an annualized 53 basis points for the 2011 second quarter and $6.8 million or 56 basis points for the 2010 third quarter. The allowance for loan losses was 1.30% of loans compared with 1.28% of loans in the 2011 second quarter. Additionally, the coverage ratio or the ratio of allowance for loan losses to non-accrual loans remains strong at 163%.

Now looking at past due loans and the watch list, during the 2011 third quarter, 30 to 89 day past due loans were $52 million compared with $20.2 million for the 2011 second quarter and $63.3 million for the 2010 third quarter. And 90 day plus past due loans decreased to $17.8 million from $18.1 million in the 2011 second quarter.

Watch was credits decreased this quarter by approximately $500,000 to $197.7 million or 3.0% of total loans. While we are pleased that watch list credits decreased this quarter and our credit metrics remain strong, given our loan growth and the economic environment, we feel it is appropriate to conservatively reserve as necessary.

I'd like to highlight our recent team growth.

One private client banking team joined during the 2011 third quarter and a total of six joined in the first nine months of 2011. In addition, during the quarter, we extended three teams adding a veteran banking professional to each one. Opportunity still prevails in the marketplace. In fact, we added another team, our seventh, just yesterday.

As I mentioned, the proceeds from the capital raised at the onset of the third quarter is expected to sustain the Bank's growth long-term. We intend to deploy this capital to grow our network of private client banking teams and to further strengthen the bank's position across our coverage area, that being 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 will begin by focusing on net interest income and margin. Net interest income for the 2011 third quarter reached $117.9 million, an increase of $28.8 million or 32% versus the 2010 third quarter, an increase of 4% or $4.9 million from the 2011 second quarter.

Net interest margin was 3.51% in the quarter compared with 3.64% for the 2011 second quarter and 3.41% for the 2010 third quarter. The linked quarter decline was due to the effect of the prolonged low interest rate environment, a decrease in loan prepayment penalty income of $1.5 million or five basis points in margin, and increased average cash balances from the capital raised that took 4 basis points out of the margin.

When you exclude prepayment penalty income from the third and second quarters of 2011 and take into consideration the excess cash from the capital raised in the third quarter, core net interest margin for the quarter was 3.50% compared with 3.54% for the 2011 second quarter.

And turning to asset yields and funding costs, overall interest earning asset yields decreased 20 basis points in the third quarter of 4.43%. Five basis points of this decline is due to excess cash on hand from the capital raised in early July. This cash was fully deployed by the end of the third quarter and should prove beneficial for the fourth quarter.

Another five basis points of decline was due to a decrease of $1.5 million in prepayment penalty income on loans. Despite the volatile market, we remain pleased with the stability of our asset yields. We were able to selectively purchase securities this quarter and take advantage of market volatility while maintaining our high-quality investment portfolio.

Yields on investment securities decreased 17 basis points to 3.74% this quarter when compared with the 2011 second quarter. The reduction was predominately due to an increase in mortgage prepayments and lower reinvestment yields on new purchases. The duration remained relatively stable at 3.17 years.

In turning to our loan portfolio, yields on average commercial loans and commercial mortgages despite competitive pressures remained relatively stable at 5.38%, down 17 basis points from the second quarter. The decline was entirely due to the decrease in prepayment penalty income. In fact, yields on commercial loans would have increased one basis point, factoring out prepayment penalties.

And now looking at liabilities, cost of deposits for the quarter further declined four basis points to 83 basis points as we again decreased deposit costs given the low interest rate environment. We expect to continue this gradual trend of reducing deposit costs, given the expected low interest rate environment.

Turning to non-interest income and expense, non-interest income for the 2011 third quarter was $8.8 million, down $2.4 million from the same period last year. This was driven by a decrease of $3.3 million in net gains on sales of securities, which was partially offset by a decrease in other than temporary impairment of securities of $1.9 million. Non-interest expense for the third quarter of 2011 was $45.7 million versus $42.5 million for the 2010 third quarter. The $3.2 million or 7.6% increase was mainly the result of the addition of new private client banking teams.

The Bank's efficiency ratio further improved to 36.1% for the third quarter compared with 42.3% reported for the same period last year. The improvement is once again attributable to growth in net interest income, coupled with expense containment.

Now, let's address capital. The Bank's capital levels remain strong and were further enhanced with the equity raise we completed in early July. The tangible common equity ratio was 9.85%. Tier 1 risk base was 17.28%. The total risk-based ratio was 18.37% and the leverage capital ratio was 9.84% for the third quarter.

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

Thanks, Eric. Once again, we delivered our eighth consecutive quarter of record net income, not because of reserve releases, not because of security gains, and not because of expense cuts. Rather, due to topline revenue growth. So far this year, we have grown deposits by $1.75 billion. We have grown loans by $1.2 billion. We are well-positioned to stay on this same trajectory.

We will continue to emphasize our proven deposit of focus model and take advantage of the market disarray by seizing every appropriate opportunity. Now, we are happy to answer any questions you might have.

(Operator Instructions). John Pancari with Evercore Partners.

Good morning. Eric, can you talk a little bit about the margin outlook here over the next couple of quarters, given the pressure on securities yields and loan yields as well?

Sure. We have several positives going on here. I mean, first, we have loan growth which many of our competitors don't have; and I think that is very key to the margin equation. We have a further ability to reprice down deposits. We can certainly continue to move that down. And we have an actively managed securities portfolio with superior capabilities.

So, you put all those things together and obviously the flat yield curve and low interest rate environment is not beneficial to really any bank out there. But, we ultimately expect to be in a range, the high 340s to 350-ish range now for the next several quarters given our ability to grow loans and reprice deposit costs down further and where we have been investing in the securities portfolio.

And in terms of the prepayment that is impacting your securities book, can you talk about the trajectory of the prepayments you expect and how you are modeling that in terms of the trajectory of your overall yields for that book?

Well, yes -- I mean we expect that with HARP II out there and some of the things going on in the environment that the prepayments will pick up a little bit. But we have been really selectively adding to the RMBS into positions that will be protective of prepayments and rotating out of securities that will prepay a bit faster and actually taking gains on those securities that we rotate out of.

So we expect that will be somewhat impacted, but we don't really think it is going to be too meaningful and we certainly expect it to be manageable. So we've got run-off roughly in the 390 range on the securities portfolio and we are reinvesting right now in the mid 3s. So we feel pretty good about what we have been doing in that securities portfolio.

Okay, great. Thank you.

Steven Alexopoulos with JPMorgan.

Good morning. Maybe I will start given the pipeline and pace of hiring new teams, how should we be thinking about expense growth in 2012?

Expenses have been growing in the clip between 10% or 15% for a while now. This quarter was good as 7.6%, but remember we had quite a bit of benefit out of the FDIC assessment fees and we picked up a bit there. So we have always been hiring teams at a pretty consistent pace so I would expect that we will still be in that 10% to 14% range on expense growth looking out.

I wouldn't really see too much of a change there one way or the other because of the consistent way that we've been hiring teams over the last several years.

Eric, when you think about the efficiency ratio, how low can this realistically go?

That is a great question. We certainly think that we are going to gain further efficiencies and that it can go lower. The pace has slowed down. I would expect it to continue to slow down, but we have really -- we are only continuing to grow into the infrastructure that we have built out a decade ago and we think we still have some efficiency gains there. I don't want to get into predicting how low it can go. We are happy with where it is, we think it will go down gradually for the next several quarters at least, if not for the next couple of years.

Maybe just one final question. What was the thought behind pushing the reserve to loan ratio up a few basis points in the quarter?

We have been always saying every quarter and we have been very consistent about this for the last several years, we have been using the same that we always thought -- it was cloudy out there. And it certainly in the recent weeks and months it hasn't gotten any better and we thought that with the current economic environment, while we are surprised although it's slowed down a bit, we are seeing reserve releases by others and I know that started several quarters ago. We didn't think it was a prudent thing to do several quarters ago, and we certainly don't think now with the current economic environment, reserve releases are the way to go.

In fact, just the contrary, that you continue to build reserves. Unemployment is not getting any better even in the New York area and until prospects start to brighten in the economic environment, you can expect that in the next year that we will continue to build the reserves.

Thanks for taking my questions.

Matthew Clark with KBW.

Good morning. Can you give us a sense for the margin in the month of September and whether or not that incorporates any benefit from some borrowings that are coming due that you might just replace as deposits?

Great question. The month of September was actually very positive for us and that is why we are very pleased with where we expect the margin to be. We had the benefit of a few things happen. I will start on the liability side.

First, we had reduced some of our interest rates throughout the quarter. We got the benefit in September, if you look at the total cost of deposits, it went from 87 basis points in the third quarter to 83 basis points -- 87 in the second quarter to 83 basis points in the third quarter. In the month of September, that was 80 basis points.

Certainly part of that was driven by the interest-bearing money markets which went from 113 in the second quarter to 105 in the third quarter. But in the month of September that was 1%. So 1% and 80 basis points as a start probably -- not necessarily a proxy, but certainly a good start for the fourth quarter.

Another thing was the cash. Eric mentioned in his script that we had significant amounts of cash because of the capital raised. We were in the $80 million average range in cash in the month of September and in the month of August, that was $340 million average. So it came down significantly because we were able to take that cash and prudently invest it and get it invested by the end of the quarter.

So that certainly bodes well for us. And loan growth, loan growth continued. So all those positives when you put it together without prepayments, we saw our margin in the month of September in the high 350s. And again, we're not -- we are better on execution than projections and we are not saying that is what the projection is for the fourth quarter, but we kind of lay out for you what we've seen in the month of September and that kind of moves into October.

And does that include the benefit of borrowings that are coming due?

Good question again. The borrowings, we had about $80 million in borrowings that actually came due in the third quarter at a rate of 417. So those are gone. And then we had one more borrowing that actually already matured I think it was October 17 for $25 million at about 273, 276, something along those lines. And that is another borrowing that we are not acting upon.

So those are all positives as we -- actually we are almost a third into the fourth quarter. But those were all positives as we enter the fourth quarter.

Great and then on the securities portfolio, with new money being put to work in the mid-350s or mid-3s, I'm sorry, can you give us a sense for what your appetite is for the type of securities you are buying and I think your corporate securities for a small portion of your overall book and whether or not you have an increased appetite today to increase [net] exposure, for example?

Yes, we do. And we have been adding to our corporate portfolio so that is early one of the areas we've been looking at. We have been adding some AAA, CMBS like that as well and like I said some selective RMBS that will be protective of prepayments.

So those have been really three areas that we've been focusing on as well as a few other strategies.

Great. Thanks, guys.

[Erica Penalo] with Bank of America Merrill Lynch.

Good morning. Given what we have seen during this earnings season, I think we're all used to much more significant pressure on commercial loan deals. So could you give us a sense of what the pricing is currently for commercial real estate and multifamily originations in the New York area, and what you are doing strategically -- because I assume that is competitive as well -- what you are doing strategically to keep your yields where they are?

Well, strategically why the yields have held up is we have a group that is that handles a significant amount of the commercial real estate very efficiently. One, once we quote a rate and it is accepted that rate stays where it is. So the client is very comfortable that there is no movement in that rate. And we close it within 45 days which also allows us to tell the client we are not going to move the rate. It is not a 90-day process. So that's two things.

The third is we don't securitize and sell the loans. So they know that once there is an issue with a loan or if they improve the cash flow of the loan, they need to refinance. They will be speaking with the team or individuals within the team that originally made the loan. And so, they are not talking to a service or where they are not going to be able to get any satisfaction.

So those are some of the things strategically that we have the benefit of allowing us to continue to offer the rates that or get the rates that we've been getting.

I would say that on the multifamily, we are getting somewhere between 25 to 37 to 50 basis points more than our competitors. And that would be a rate somewhere between 425 and something which is closer to 450. On the real -- commercial real estate other than multifamily, I would say high 4s, low 5s, and we are saying that that is like I said slightly better in rate or I should say better for us than what our competitors are offering out there.

And it is the three things that I pointed out that allows us to get that.

Okay and I appreciate the color that you date in terms of the borrowings that rolled recently in October. Could you give us a sense of how much this could be a lever for 2012 in terms of how much is coming due? How much you are allowed -- or you going to let just roll off your balance sheet and at what rate they are rolling off?

Sure. We have let's see, by quarter, in the first quarter we have $30 million that rolls off at a rate of 4.5%. In the second quarter we have another $25 million coming due at 77 basis points. So the first half of the year there is not too much going on.

But if you look at the next two quarters, the third and fourth quarters of 2012, we have $75 million coming due in each quarter. In the third quarter that is coming due at 3.64% and in the fourth quarter it comes due at 2.77%.

Given interest rate expectations, we would probably just fund that runoff would deposit growth. But we are going to actively manage that to see where we need to plug gaps in our asset liability management and --. But either way we will get significant savings out of those borrowings that are coming due next year.

And what is the replacement rate? Let's say you refinance some of it. What is the replacement rate right now?

About 1% I would say.

Great, thanks for taking my questions.

Bob Ramsey with FBR Capital Markets.

Good morning. Given the, I guess the margin that you all had in September and the benefits of some of these borrowings and the deployment of the excess liquidity, could you actually see margin in the fourth quarter being flat or up a little bit if you have a comparable amount of loan growth as a third quarter?

Yes, we could. I mean it is mostly going to be predicated upon deposit growth. If we have similar levels to the third quarter, it's certainly a potential that will have margin expansion. If we have a really exceptional deposit growth quarter, then margins could be impacted, but so will net interest income to a very positive amount.

So it is really, we're going to get it one way or another. So we feel good about the margin outlook, but we wouldn't mind having a quarter with substantial deposit growth either. It would only be beneficial to net interest income.

Sure. Could you remind me too, I know you all normally see a seasonal expense benefited in the fourth quarter as you true up compensation expense. Could you just remind me how that works and what your expectation is in the compensation line in the fourth quarter?

A little too early to tell. We kind of true it up as we get closer to the end of the year; and it really is just a true up as we are doing accruals throughout the year, and compensation being the largest part of the accruals. So it is a little too early.

I do know that when we release earnings in January, Eric will certainly let everyone know in terms of run rate when you look at the fourth quarter what the effect of some of the reversals were and whether you should add back for future quarters. But it is a little too early to tell.

Okay. And then maybe this last question, could you comment at all sort of on the new team pipeline? I know you all highlighted also that you are seeing significant opportunity to attract new clients just given the bigger picture backdrop.

Are you asking specifically about the pipeline, or --?

I guess the pipeline for new teams and then also sort of new clients coming into existing teams. Both aspects, if you would.

Well, at the end of the year as we get toward the end of the year, we don't -- we start having -- we have discussions but it is more for 2012 than next year because it is very hard to bring on teams toward the end of the year because you usually have to pay their bonuses. And if you are bringing them on at the very end, there is really no chance to bring in any revenue to offset some of that expense.

So right now, the pipeline grows and it depletes and grows and depletes as the year goes on. I would say it is a little light right now but that is because we are not heavily meeting with teams for the remainder of this year. It is more for 2012.

What is really helping is bringing on new clients. We are seeing quite a bit of activity and I think it is a great combination of what the teams are out there doing, getting their referrals in place, getting their spheres of influence to refer more to us, but I will do -- I will give some credit to the large institutions as well because they are keeping their eye away from the ball, so to speak. And it has been giving us some clear opportunities to bring in clients.

They are doing things such as -- let me give you a great example.

If a client comes to us and says they have this large escrow on a transaction, the client has been with us nine years. What is happening at the big banks is they will turn that escrow away. We can't turn the escrow away; it is a client relationship. Why would you upset the client?

The fact that we are not paying them anything on the deposit is not an issue. It's that they need to place the money in order for them to close a deal. And sometimes that could take weeks. As you can tell we talk about escrow deposits in our release.

That hurts our margin, but it certainly is -- as Eric says, it hurts the margin but it helps net income, net interest income. And it also keeps the client in place. And I think that is an example where the big institutions will not only say they don't the deposit, but if they want the deposit they will charge the client for it. That is just not a relationship-based model and that is the one we employ.

So you are seeing that we are getting some additional business because the word gets out that we a place that can do business on a relationship basis. So it has gotten even more exciting than it was years ago when banks -- I'm sorry, when teams were bringing over their existing clientele. Let me give you a good example.

In 2000 -- the teams that came in in 2001, the deposit growth that they had in 2010 was 23%. They are not bringing over clients of their former bank because they have been now with us over nine years. They are bringing new business over. So that is a good example of us being able to bring new business over.

And is that reflective of similar cases of growth for the teams from 2000 to 2005?

We had -- .

-- and with all the age teams are they growing at about that pace?

We had growth throughout all the years except for one and that one year the teams that came in it was because some large escrows left, which kind of offset the deposit growth that they had. But of the 10 years or nine years we have been bringing teams on with the exception of one year, we had growth all across the board.

Okay, great. Thank you, guys.

Christopher Nolan with CRT Capital Group.

How much of the loan growth was refinanced as opposed to new purchase deals?

I would say the majority of it. The vast majority was refinances.

Okay. And then, how do -- I mean then how could the prepayment penalties go down or are you just seeing more deals mature later in (multiple speakers) returns?

It's refinances from other people's books. We are taking market share. It is not refinances off of our own book.

Got it. Eric, did you say the [core nim] was 350? I didn't hear you clearly there.

Correct.

And finally, Joe, your comments on talking about the $1.75 billion deposit growth and you are on the trajectory to stay that way going forward, is that sort of --? Could we read that as sort of implied guidance?

You'll get the implied guidance -- and you know it's not always specific, but you will get some implied guidance in January for 2012. We are not prepared to give you the guidance for 2012 yet. We always do it in January. We will give you some guidance on deposit growth, loan growth, and team growth.

Great, thanks for taking my questions.

Andy Stapp with B. Riley & Co.

Good morning. How much were your TDRs at quarter end?

TDRs were -- nonaccruing TDRs were $1 million and accruing TDRs were $15.6 million.

All right. The rest of my questions have been answered. Nice quarter.

Jason O'Donnell with Boenning & Scattergood.

Good morning. In thinking about the issue of resignation risk can use give us an update on how much the loan book stems from [George Collett] and his team currently and how his portion of the business has been trending in recent quarters just in general terms?

I won't talk about anyone specific, but most of the commercial real estate growth comes from that team that joined us four years ago headed by George. Most of the growth in the commercial real estate arena comes from that team.

Okay.

I'm not sure I understand your question though.

Well, I just wondered on thing about the risks to the story longer term and obviously I think part of the risks are sort of if the key players at some point leave. That is something that obviously we should be focused on.

Okay. But we're not --.

So -- yes but that's helpful and then I guess the only other question I had was on the -- was just actually one housekeeping items. Can you just give us what the OREO balance was at the end of the quarter?

$566,000.

Thanks, Eric. That's it.

Casey Haire with Jefferies & Company.

Good morning. My question is on credit quality so the net charge-off rate slipped down seven basis points this quarter. I was wondering what was driving that if you guys were getting some easing in some of the later vintages in the C&I book and whether or not we can expect that kind of trend to continue?

It is being a C&I lender and the size of our portfolio, those numbers can get a big copy. So we have been in a range between 50 and 60 basis points for a while. We dipped down to 49 basis points in the first quarter and back up to 53 in the second and now down to 44. I think we are going to be in a range between 40 and 60, 70 and potentially even 80 at any given point. But it certainly has not popped up to a meaningful level. It is certainly very manageable, but we do continue to work through the older vintage 2005, 2006 and 2007 C&I credits. And I would expect that sometime later next year we might get some pullback there.

But for now I would expect similar dollar levels that we have seen for the last several quarters.

Okay, and then the early-stage bucket ticked up pretty meaningfully. I know that is choppy as well quarter to quarter. But what was kind of driving that and is anything there that is worrisome?

No. I mean really $20 million last quarter was really the anomaly, I would say. $52 million is more -- much more of a normal level on the early-stage delinquencies. If you look back at the first quarter of this year, we were at $68 million. The fourth quarter, we are at $57 million. The third quarter of last year, we were at $63 million.

So that's $52 million is much more the normal amount I would say. The $20 million was really an anomaly, we just had a fantastic quarter last quarter on that front.

Okay, great. And then just one last one on the loan growth. In the past you guys have talked about sort of going after taking bigger pieces of credits beyond that $25 million limit. Can you talk about where you are? Are you going to start doing that more?

And if so, does that increase the provision level for taking bigger credits?

Well, we have selectively taken some greater than $25 million, very selectively. We have been discussing it. We haven't yet decided to move past making it more of a regular occurrence. I don't think that that would move our provision. I just -- it would move the provision just simply because as we have loan growth, you have -- you grow the provision just simply because you have -- we have loan growth whether it is granular or large.

If we are doing the larger one, in all likelihood, the risk rating of those larger credits are going to be on the lower end or the better end. They are going to be like a three rated credit or a four rated credit. You are not going to take a five or six rated credit and go ahead and do a $30 million or $40 million piece.

So it really -- only the actual dollar amount will drive it. Not necessarily the risk that we are taking.

Thank you.

Tom Alonso with Macquarie Group.

Good morning. Just one little nit to fill in a hole in the model here. What was the nonperforming investment securities number?

It was $7.7 million.

Thanks, that's all I had.

Peyton Green with Sterne, Agee.

Good morning. Congratulations on another great quarter. Joe, a question and this is a follow-up to some of the organic growth that you've got out of your existing and some more mature teams. They just don't seem to be very mature, and I was wondering if it seems like a lot of the hiring activity recently has been to augment existing teams.

So I was just wondering maybe if you could shed a little bit on that? I mean it seems like those teams really didn't start running out of capacity until maybe a year or so ago. Do you -- would you expect to hire and augment more existing teams going forward as opposed to adding teams or will it still be a combination?

I think it will be a combination. What I have to say is, it's actually the teams themselves that are doing the augmentation. It is the teams coming to [Tam Bulaine] and myself saying that they want to add on. They see that there's an opportunity to -- just like, it is great because just like we see opportunities to add teams on, the teams are seeing opportunities to add to their existing team.

So it's really -- they come to us, they want to work with us to run some numbers to see whether or not it makes sense. And then if it makes sense, they want to add to their teams because that helps their bonus pool. So as there are examples of successes out there, I believe others will then say to us that they want to add as well.

But there also -- one other point for the teams is that they left colleagues. They had many colleagues at their former institutions and some of them don't necessarily have a team, but would love to join Signature Bank, and they are getting an opportunity now because some of the teams have been around for a while. As you said, they are maturing but not necessarily totally at the maturity level.

I'm not sure that our teams ever get out of maturity level. I'm sure some do, but like we said, if you look at the 2001 teams that came on board, they had an average of 23% increase in 2010. So I hope they never get mature.

Peyton Green Exactly. And then I guess another question is with regard to moving up market on the loan side, I mean wouldn't your credit quality get better?

Yes.

Yes.

Yes, we would expect that and I think that is what Joe alluded to earlier. We are going to make $30 million, $40 million loans they are going to be very solid credit quality.

Okay, great. Thank you.

Thank you. I show no further questions in the queue at this time. I would 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 and we shall turn it back to you to close it up.

Ladies and gentlemen, this concludes the Signature Bank's fiscal 2011 third-quarter results conference call. If you would like to listen to a replay of today's conference, please dial 1-800-406-7325 or 303-590-3030 and enter the access code of 44-78567. Also an archive for this call can be found on the Company's website at www.signatureny.com.

Thank you for your participation. You may now disconnect.