Signature Bank (SBNY) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen and thank you for standing by. Welcome to Signature Bank's 2012 second-quarter results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is also being recorded today, Tuesday, July 24, 2012. I would now like to turn the conference over to our host for today, Mr. Joseph J. DePaolo. Please go ahead, sir.

Good morning and thank you for joining us today for the Signature Bank 2012 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 also 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. You should not place undue reliance on those statements because they are subject to numerous risks and uncertainties relating to our operations and business environment, all of which are difficult to predict and may be beyond our control.

Forward-looking statements include information concerning our future results, interest rates and the interest rate environment, loan and deposit growth, loan performance, operations, new product client team hires, new office openings and business strategy. These statements often include words such as may, believe, expect, anticipate, intend, potential opportunity, could, project, seek, should, will, would, plan, estimate or other similar expressions.

As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements.

These factors include, but are not limited to, one, prevailing economic conditions; two, changes in interest rates, loan demand, real estate values and competition, any of which can materially affect origination levels and gain on sale results in our business, as well as other aspects of our financial performance, including earnings and interest-bearing assets; three, the level of default losses and prepayments on loans made by us whether held in portfolio or sold in the whole loan secondary markets, which can materially affect charge-off levels and required credit loss reserve levels; four, changes in monetary and fiscal policies of the US government, including policies of the US Treasury and the Board of Governors or the Federal Reserve system; five, changes in the banking and other financial services regulatory environment; and six, competition for qualified personnel and desirable office locations.

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 and can change as a result of many possible events or factors, not all of which are known to us or in our control. Although we believe that these forward-looking statements occur or our beliefs, assumptions and expectations were incorrect, our business, financial condition, liquidity or results of operations may vary materially from those expressed in our forward-looking statements.

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 on this conference call or elsewhere might not affect 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.

We continued 2012 on another solid note with strong deposit growth, record loan growth and our 11th consecutive quarter of record net income while also improving our already strong credit quality position. Moreover, we are excited to have launched Signature Financial, which will further diversify our revenue streams and broaden our asset deployment.

Let's discuss earnings. Net income for the 2012 second quarter reached a record $45.3 million, or $0.96 diluted earnings per share, an increase of $8.7 million, or 24% compared with $36.6 million, or $0.87 diluted earnings per share reported in the same period last year. The considerable improvement in net income is mainly the result of an increase in net interest income driven by continued core deposit and loan growth. These factors were partially offset by an increase in non-interest expense.

Looking at deposits, deposits increased $450 million to $12.95 billion this quarter. For the trailing 12-month period, deposits increased over $2 billion, or 19%. Average deposits in the second quarter were $12.7 billion, up $2 billion or 19% compared with $10.7 billion for the 2011 second quarter. Non-interest-bearing deposits of $3.5 billion represent 27% of total deposits. With our considerable deposit growth and capital generation, total assets reached $15.9 billion, an increase of $2.8 billion, or 21%, versus last year's second quarter.

Now let's take a look at loans. Loans during the 2012 second quarter surpassed $8 billion, up a record $665 million, or 9%. This marks the first time that loans represent more than 50% of total assets. For the past -- in the past 12 months, loans have increased over $1.9 billion, or 31%. The increase in loans this quarter was mostly due to growth in commercial real estate and multifamily loans, as well as the launching of the bank's specialty finance business, which hit the ground running.

Non-accrual loans again declined to $31.9 million representing 0.4% of total loans in the quarter compared with $35.5 million, or 0.48% for the 2012 first quarter and $44.2 million, or 0.72% for the 2011 second quarter. The allowance for loan losses was 1.21% of loans versus 1.25% in the 2012 first quarter and 1.28% for the 2011 second quarter.

Additionally, the coverage ratio, or the ratio of allowance for loan losses to non-accrual loans, further improved to 305%. The provision for loan losses for the 2012 second quarter was $10.3 million compared with $10.7 million for the 2012 first quarter and $12.9 million for the 2011 second quarter.

Net charge-offs for the second quarter of 2012 were $4.7 million, or annualized 25 basis points, versus $5 million, or 29 basis points, for the 2012 first quarter and $7.7 million, or 53 basis points, for the 2011 second quarter.

Now turning to past-due loans and the watchlist. During the 2012 second quarter, our 30 to 89 past-due loans remained stable at $58 million. The 90-day plus past-due category decreased $18.2 million from $34.8 million to $16.6 million. Last quarter, we noted there was one client experiencing issues that owned five properties totaling $23.5 million. These loans were successfully resolved during the second quarter leading to the decrease in our 90-day plus past-due category.

Watchlist credits again decreased this quarter by $15 million to $200 million, or 2.49% of total loans. While we are pleased our non-accrual and watchlist loans decreased this quarter and our credit metrics remain strong, we are mindful of the uncertainty in the economic environment and we again conservatively reserved.

Just to review recruiting for a moment, we had a busy second quarter. Signature Financial, our specialty finance subsidiary, grew by 21 colleagues on top of the 26 professionals that joined at the very end of the first quarter for a total of 47. As we indicated last quarter, given our recent hirings, we would not need to hire another team this year to fuel continued growth. However, if an opportunity presents itself, we will not be shy.

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 second quarter reached $134.2 million, up $21.2 million or 19% when compared with the 2011 second quarter, an increase of 6% or $7.4 million from the 2012 first quarter.

Net interest margin was down 10 basis points in the quarter versus the comparable period a year ago and increased 4 basis points on a linked-quarter basis to 3.54%. The linked-quarter increase was mostly due to a $1.8 million increase in loan prepayment penalty income. When you exclude prepayment penalty income from the 2012 first quarter and the 2012 second quarter, core net interest margin for the linked quarter remained unchanged at 3.44%.

Let's look at asset yields and funding costs for a moment. Overall interest-earning asset yields declined only 2 basis points this quarter to 4.28% as it was assisted by an improved earning asset mix and an increase of $1.8 million in prepayment penalty income on loans to offset the continued low interest rate environment. And given the continued low interest rate market and tighter spreads, coupled with strong loan growth, we were very selective in securities deployment. As a result, yields on investment securities declined 9 basis points to 3.41% and the duration reduced to 2.8 years.

Turning to our loan portfolio, yields on average commercial loans, mortgages and leases declined 5 basis points to 5.16% compared with the first quarter of 2012. Excluding prepayment penalties from both quarters, yields would have declined 14 basis points.

Now looking at liabilities, money market deposit costs this quarter further declined 8 basis points to 86 basis points as we again decreased deposit costs given the low interest rate environment. This decrease coupled with an increase of $142 million, or 4% in average non-interest-bearing deposits, helped lead to a decline of 5 basis points in our overall deposit costs.

Now onto non-interest income and expense. Non-interest income for the 2012 second quarter was $9.9 million, a decrease of $361,000 when compared with the 2011 second quarter. We had a strong quarter in our SBA business and net gains on sales of securities included a $2.6 million gain on sale of an SBA interest-only strip security and our core SBA pool assembly business produced gains on sales of loans of $2.7 million, an increase of $1.9 million from the 2011 second quarter and $1.3 million from the 2012 first quarter.

Additionally, other income was negatively affected by a scheduled amortization of low income housing tax credit investments of $2.2 million. The offset to this amortization are related low income housing tax credits that helped to reduce our quarterly tax rate to approximately 42.6%.

Non-interest expense for the second quarter of 2012 was $54.9 million versus $45.2 million for the same period a year ago. The $9.6 million, or 21% increase, was principally due to the addition of new private client banking teams and the Signature Financial hirings.

The bank's efficiency ratio increased slightly to 38.1% for the 2012 second quarter compared with 36.7% for the same period last year, again driven by the Signature Financial hirings.

Turning to capital, our capital levels remain strong with a tangible common equity ratio of 9.55%, tier 1 risk-based of 16.45%, total risk-based ratio of 17.55% and leverage capital ratio of 9.57% as of the 2012 second quarter. 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 will turn the call back to Joe. Thank you.

Thanks, Eric. Signature Bank had another successful quarter with solid deposit growth and record loan growth leading to our 11th consecutive quarter of record earnings. For the past 12 months, loan growth has just about matched deposit growth of $2 billion. This is transformative to our balance sheet and for the first time in our history, loans exceed 50% of total assets at 50.6%.

Our client-centric approach and steadfast commitment to depositor safety first and foremost is allowing Signature Bank to flourish in these tumultuous times and positions us for future success. Now we are happy to answer any questions you might have. Patricia, I will turn it over to you.

(Operator Instructions). Dave Rochester, Deutsche Bank.

Hey, guys, nice quarter.

Thanks, Dave.

Hey, Dave, good morning.

Good morning. On the mix of the loan growth, can you just quantify the breakdown of that, so what the contribution was from Signature Financial and then the growth in multifamily commercial real estate?

The $665 million -- slightly more than $200 million of that $665 million growth was from Signature Financial and the rest was primarily the commercial real estate group, including the multifamily.

Great, but the $200 million that you saw this quarter in growth or a little bit more than $200 million, is that sort of a good run rate to expect from this group going forward or do you think it could potentially be a little higher outside of any seasonal slowness you might see in 3Q?

Well, Dave, it's a great question. I think we are going to need a couple of more quarters. I will tell you why. They continue to grow the book in July, but, in discussions, we have learned that August is a treacherously slow month for specialty finance nationwide. So there is some seasonality there and then the fourth quarter is usually the best quarter for specialty finance. So there is seasonality there.

So it is very hard to predict what the run rate would look like until after we see several more quarters. But needless to say, we expect to continue to have robust loan growth during the third quarter. It is hard to predict whether it is going to be that record growth that we had of $512 million, which was the first quarter, or the $665 million that we had in the second quarter. If I were to bet, I would say we would be closer to the first quarter because of the slowness in August. And even in the commercial real estate world, you have a tendency to have a slowdown in the month of August. But we will have continued robust growth, but with the seasonality built in over the next couple of quarters, I think it would be better that we give you an idea in January what our thoughts are.

Yes, that sounds good. I appreciate that. And just switching to loan pricing, so we heard throughout the quarter for the brokers that rates would come in on multifamily commercial real estate pretty much for all the banks in this market. Just as an aside, they consistently said you were getting higher rates because of the reasons you talked about in the past, the fast closings and whatnot. But I was just wondering if you could update us on where you guys are now on that step-up rate and the 5/1 ARM rate and then if you have the CRE rate as well that would be great.

On the multifamily, on the five-year, we are getting mid to high 3%s. We are seeing our competitors on the low 3%s. So what we are seeing here is that competitors only have a pricing advantage and that is how they are trying to win some business. And like you said, what we have said in the past, because of the efficiency, because we close in 45 days, the wonderful team, the commercial real estate banking team that we have that is able to keep the rates where they are, it is because of that efficiency and because of the service that they give. So we are kind of a mid to high 3%s. I would say that differential is anywhere between 25 basis points to 3/8, could possibly get to 50, but once you get close to there, it is very hard to win business if you are that far away. On the other than multifamily, we are seeing low to mid 4%.

Great. All right and just one last one real quick on the securities reinvestment rate, so you can just kind of update us what you are seeing at this point. You said you are being more selective. Are you still around the 3% handle?

Yes, and we are starting to dip down into the high 2%s, Dave. Again, the key there is being very selective and the loan growth has allowed us to do that. So we are seeing anywhere from the high 2%s to low 3%s. If we had to invest in a heavy way, we would probably be more in the mid-2%s.

Okay. Great, thanks, guys.

Bob Ramsay, FBR.

Hey, good morning, guys. So I just want to be sure that I heard you correctly on the loan growth. It sounds like your expectation would be in the third quarter, you are somewhere between the first and the second and probably closer to the first. Is that a good summary of what you all said?

I would say that was a very good summary, but it is just because of the seasonality of what happens in August that it is very hard to predict.

Sure. And other than seasonality, does the second quarter seem to feel like a good representation of what this business is capable of?

I would say so, yes.

Great. And then could you maybe talk a little bit too about what the average yield was on the loans that came from the specialty lending business and the average loan size? And remind me are these loans or leases or a mix and maybe just give a little more color there.

It is loans and leases, but it is predominantly loans, the vast majority are loans. The weighted average yield is a little over 4% and that is way down a bit by the taxi medallion business where the yields are coming in in the mid to low 3%s. That business line made up about half of their growth in the second quarter and we were able to really hit the ground running there because we had an existing taxi medallion business already. So yields are generally a little over 4%, but the -- I'm sorry -- the yields in the remaining business lines are in the mid to high 4%s. And the overall is weighed down a little bit by the medallion business.

Okay, great. And then with the new hires that you all had this quarter, they were part of this group, where they fairly early in the quarter or should we see a little bit more of sort of a full quarter expense impact in the third quarter?

They really came in right at the beginning of the quarter and there were quite a few hires at the end of the first quarter as well, Bob. So I think we got a pretty good picture of what the expense run rate is on that group.

Great. And then the guidance I think you all gave before was 20% to 25% year over year in expenses. That still is how you all see the world right now?

That is correct. We expect that the third and fourth quarters will be 20% to 25% over the prior year's quarters. That is right.

All right. And then last question, just could you share your thoughts on sort of where you expect margin will go from here? Do you think you can continue to stay flattish on a core basis or with the yield curve where it is, does that just get tough?

Well, I mean we expect that margins will be pressured given the interest rate environment and loan competition. Margins will most likely be down in the coming quarters, but we should be able to control the rate of decline and we will definitely have net interest income growth. But the positives obviously to control the rate of decline are our loan growth, which we saw this quarter and really a little bit more room for continued deposit costs to decline. So those couple things should help us to stem off the margin decline.

Okay, great. Thank you, guys.

Steven Alexopoulos, JPMorgan.

Hey, good morning, guys.

Good morning, Steve.

Maybe I will follow up on the comments of lower deposit costs. Looking at the money market yield at 86 bps, given what your competitors are offering, could you push that much lower here?

Well, we can push it a little bit lower. I know what our competitors are offering and that is why it is making it somewhat difficult. But we did move it down 8 basis points this quarter from 94 to 86. So it would be hard to duplicate that in the third quarter. But I will tell you for the month of June, the average was 84 basis points. So we are already starting to bring that down a little bit further and we are going to try to get it closer to 80.

We have seen significant deposit flows -- well, let me retract that. We have seen deposit flows coming in at 65 and 75 basis points. So if we can bring in new clients from other institutions at 65 to 75 that will help us drive down the rate a little bit further. And like I said, we are already starting off the quarter at 84 where the average was 86 for the second quarter. So there is some room, albeit not at 8 basis points.

Got you. And to follow up on Eric's comment to expect margin pressure in the third quarter, is the right way to think about this, if we have a seasonal slowdown in loan growth, there is some offsets on the deposit side, but with the change in the earning asset mix, we will see some pressure, but then loan growth comes back seasonally strong in 4Q, we should see the pressure go away then. Is that how we should think about this?

Well, I don't think the pressure is going to be because loan growth could be seasonally pressured. I think the loan growth is still going to be robust. I just think it is because the pressure we are seeing on the entire planet of margins. We just think that we are better equipped to handle that pressure because of the loan growth.

I think part of it is going to be how much of that deposit growth that we have because we have the deposit growth and we have the cash flow coming off the investment portfolio. This is a great quarter for us because the deposit growth was $450 million and loan growth was $665 million. So if deposit growth is $300 million and loan growth is $400 million that bodes well for us.

Another thing that will help us a little bit on the margin are borrowings. We have $75 million in borrowings coming due this quarter, $25 million already on July 3, was 4.77. We have another $25 million at 3.17 and a third, $25 million at 2.97. And both of -- the last two are in August. So the borrowings of $75 million in addition to us being able to bring down some deposit costs will help us.

We just feel that what we are seeing in reinvestment opportunities on the investment portfolio and some of the things we are seeing on the C&I world in terms of rate, the spread to LIBOR, that is going to be pressure for us. The good news is that we do have some opportunities to build the loan portfolio.

Okay, great. Maybe just a final question. Eric, any initial thoughts on the impact to your capital ratios from the proposed Fed rules? Thanks.

Yes, I mean the proposed rules really should have very little impact on us. 95% of our balance sheet is in securities, mostly government securities, as well as commercial real estate. Both of those asset classes are basically unaffected by Basel III. So we should really see minimal impact. The other 5% of our balance sheet, really there is some pluses and minuses, but again it is 5% of our balance sheet. So overall, I think that we will be largely unaffected and certainly relative to peers, we will be quite a bit less affected than our peer group.

Okay, thanks for all the color.

Casey Haire, Jefferies.

Yes, good morning, guys. How are you doing?

Good morning, Casey, how are you?

Just to follow up on the Signature Financial business, I was just wondering do you guys have a view, and if you could just help us out with some of the assumptions behind the view of what breakeven is for this business in terms of the amount of loans?

We haven't stated it as it relates to amount of loans. I think what we have said is that we expect breakeven in 18 months. We still believe that that will be the case with a bias towards them breaking even sooner than that. But we think we are looking at an 18-month breakeven.

Okay. And then I guess switching to credit, obviously, a pretty good result on the net charge-offs this quarter. Was there a big level of recoveries this quarter or are we kind of at -- can they stay at this level going forward?

No, recoveries certainly can stay at this level going forward. We had about $400,000 in recoveries. That is a very manageable number for us. That is what we have seen more or less, $300,000 to $500,000 over the last several quarters. We really just saw a reduction in the charge-off level.

Okay. And then just lastly on the loan growth [fund]. I know that 2008 was a big year for you guys, multifamily production-wise. As we look ahead to 2013, how should we think about sort of the roll-off of what was a massive production year five years earlier?

Well, we are actually starting to see that now. I mean there is much refinances going on because they are usually not waiting until the end of the five-year period. They want to refinance now. Some of that is contributing to the prepayment penalty that we have had over the last several quarters. So we are not seeing a massive amount, but we are seeing a moderated amount throughout the quarters and we would expect to continue to see that. They are not all going to come due at once. They are really trying to refinance sooner and take advantage of the low rates.

Okay, thank you.

Chris McGratty, KBW.

Good morning, guys. The deposit insurance from $250,000 to $100,000, can you just talk about potential impact on deposits or any expectations here? I think it is resetting at the end of the year.

It's a great question. De minimis. We really don't have a retail base where clients are worrying too much about the deposit insurance here. We really have our banking teams, the 78 banking teams stress the safety and soundness of the institution. Hence, we keep higher levels of capital than our competitors. Most of our deposits are actually uninsured if you look at the interest-bearing piece anyway. I know that the non-interest-bearing is totally insured at least through the end of the year.

But on the interest-bearing, most of our deposits are above $250,000, so whether it goes down to $100,000 or goes elsewhere, we think it will be effectively de minimis. I think the bigger question may be is TAG going to continue on the non-interest-bearing? Is that going to go away and the jury is out as to whether or not that will go away because we see the American Bankers Association and a couple of other banking associations support the continuation of TAG where non-interest-bearing deposits are uninsured -- excuse me -- insured unlimited. We think that will have a de minimis effect on us as well.

Okay, great. Just a further question on the size of the investment portfolio. Can you maybe talk, Joe, about the expectations? I don't think it grew much or maybe even shrunk a little bit this quarter. Just on the earning asset piece of the equation, how much do you expect securities to go either up or down in the next two quarters?

Yes, this is actually the first quarter that I can really remember where we shrunk the securities portfolio. I mean ultimately our goal would be to have deposits really reinvested into loans and to keep that securities portfolio flat to even down. It is really going to be a function of deposit growth and deposit growth, as you know, is much more difficult for us to predict than loan growth. So we have had quarters of $300 million, we have had quarters of $750 million. So that will really be what the securities portfolio will be based on. But our goal is to really just maintain it at a flat level for now.

Okay, great, last question. The tax rate is 42%. Is that about right going forward?

I would use 43% going forward. We got a little bit more of a benefit this quarter, but our effective tax rate for now going forward should be 43%.

Okay, thanks a lot.

Herman Chan, Wells Fargo Securities.

Thanks, good morning, guys. Can you talk about what you are seeing on the C&I side in terms of the contribution there and how did utilization rates run in the quarter?

I will hit the utilization first. I mean utilization rates were flat to down a little bit this quarter. It seems like our clients are still concerned about the environment and weary of what is going on there and not looking to draw down and increase inventory and build product. So it was a little disappointing this quarter.

On the C&I activity, we are seeing more activity in the second quarter and as we start the third quarter. It hasn't equated to increases in loan balances, but we are seeing more activity and based on the pipeline, we should expect in the third quarter there to be growth there unlike the second quarter. So our expectation is across the board in the third quarter that we will have the specialty finance, the continued robust growth in the commercial real estate area and we will start seeing some of that growth that we talked about and the activity that we talked about earlier this year in the C&I book more towards the third quarter and the fourth quarter.

Great. And a second question, I wanted to talk about team recruitment and retention going forward. With a couple of new competitors entering the New York marketplace, how are you thinking new recruitment will play out, especially with the roughly 50 hires you have with specialty finance already in place? And also wanted to get your thoughts on retention, as well as these new competitors start to build out their operations. Thanks.

Sure. We think it's best that there is competition and that the competitors would always want to go after the best, which means they would want to target our teams because we believe our teams are the best. But we have an established organization here now of more than 11 years and the competitors that are coming in have different stories that are unlike ours and they are coming from really more out of market and we believe that we have the advantage because we are in market, we are seeing more opportunities for our teams and for our business because clients want to do business with us.

So we are actually surprised it has taken this long. There were some great institutions -- Republic National bank, EAB, NatWest, North Fork. All these great institutions are all gone and there is certainly a void in the marketplace and we were able to fill that void. So we are surprised that it has taken this long for competitors to come in. The market is wide and we welcome them.

From a retention standpoint, the teams that are performing very well, which is most, if not all, have real opportunities to continue to do well here and we hope that they will continue to do well here.

Okay, great. Thanks for taking my questions.

Jason O'Donnell, Marian Research.

Good morning. Just stepping back a bit from this quarter's financial results, can you just comment on your intermediate to long-term growth strategy at this point geographically speaking? I am wondering specifically sort of what markets outside of the greater New York City market you are keeping an eye on and whether you would consider a whole bank transaction to enter a new market.

Wow, that's a mouthful. Let's start with the traditional private client banking business that we have, including the commercial real estate business. That is still a robust business and we see robust opportunities for growth in the major metropolitan New York area, which includes New Jersey and Connecticut. We try to build out in concentric circles and we haven't seen any real opportunities for us to grow outside this market because that opportunity has to be far greater than the in-market opportunity. And our in-market opportunity is just fantastic. This is the largest market for deposits by far, I think 2.5 to 3 times greater than the number two market. It is the largest market for privately owned businesses. So from that aspect, we are not considering, other than maybe some possibilities of growth in New Jersey and Connecticut, which haven't occurred yet, we are not considering any other market.

When it comes to the Signature Financial business, which is more of a nationalized business, think of it as the NBA -- where the NBA cities are, where the teams are in the NBA, and that is where we will have an opportunity to do that business because the team we brought over not only had in-market business, but had national opportunity. So from that aspect, some of the equipment financing will be out of the New York market, but we have no, at least in the short to intermediate plan to go outside our private client banking and commercial real estate business out of this great area of New York.

Great. Thanks, guys.

Erika Penala, Bank of America.

Hi, guys, good morning. It's Russell Gunther on for Erika. At this point, our questions have been asked and answered. Thank you.

Okay, thank you.

John Pancari, Evercore Partners.

Good morning, guys. A quick follow-up on the securities book. Can you just discuss what you are seeing in terms of prepay speeds in the securities portfolio particularly given the pullback in yields?

Yes, we have certainly seen a pickup in prepayments. I would say we had about $1.5 million more in amortization this quarter than we did the prior quarter, John. But we view selective strategies to try to stem that. That's the risk, but certainly given when rates are and given what the government's looking to do, we have got some pressures there.

Okay. And what type of strategies -- if you could just give us a little bit more detail about what you're doing to mitigate that.

I mean, listen, generally we are looking for securities with prepayment characteristics that are different from the market based on underlying collateral. So we are adding selectively in agency CMOs with locked-out structures and again with more predictable prepayment characteristics. We are adding to our re-REMIC portfolio. We are doing a small amount of financial corporates and CMBS.

Okay. All right. And then lastly, I know you indicated that it doesn't sound like you have any additional teams to announce here, but just wanted to get your thoughts. Is it likely that we could see some additional team hires here in the near term at all?

Sure. We have about one or two that we are discussing in the pipeline, so sure, we could see a team hire sometime in the third quarter.

Great, thank you.

Thank you and there are no further questions in the queue. Management, please continue.

Well, I want to thank everyone for joining us today. We appreciate your interest in Signature Bank and as always, we look forward to keeping you apprised of our developments and Patricia, I will turn it back to you.

Thank you. Ladies and gentlemen, this does conclude Signature Bank's 2012 second-quarter results conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or the toll-free number of 1-800-406-7325 and enter the access code of 4548825. Thank you for your participation and you may now disconnect.