Signature Bank (SBNY) 2014 Q2 法說會逐字稿

Welcome to Signature Bank's 2014 second-quarter results conference call. Hosting the call today from Signature Bank are Joseph J. DePaolo, President and Chief Executive Officer and Eric R. Howell, Executive Vice President, Corporate & Business Development. Today's call is being recorded. (Operator Instructions). It is now my pleasure to turn the floor over to Joseph J. DePaolo, President and Chief Executive Officer. You may begin.

Thank you. Good morning and thank you for joining us today for the Signature Bank 2014 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 oral statements made from time to time by a representative 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 private clients team hires, new office openings and business strategy. 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 those described in our quarterly and annual reports filed with the FDIC, which you should review carefully for further information. 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. 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 EVP of Corporate & Business Development, will review the bank's financial performance in greater detail. Eric and I will address your questions at the end of our remarks.

The 2014 second quarter marked our 19th consecutive quarter of record earnings led by strong performance across all key metrics. We again achieved record deposit growth, exceptional loan growth and expanded top-line revenues while maintaining stellar credit quality. Moreover, we successfully raised nearly $300 million in capital to further strengthen our bank.

I will start by reviewing earnings. Net income for the second quarter reached a record $72.5 million, or $1.48 diluted earnings per share, an increase of $18.9 million, or 35% compared with $53.6 million, or $1.12 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 primarily driven by record deposit growth and exceptional loan growth. These factors were partially offset by an increase in noninterest expense attributable to our revenue growth initiatives.

Looking at deposits that once again played a key role in results, deposits increased a record $1.45 billion, or 8%, to $19.8 million this quarter, including core deposit growth of $1 billion and average deposit growth of $1.3 billion. For the past 12 months, total deposits have grown $4.5 billion. Core deposits grew $3 billion and average deposits increased $4 million. Noninterest-bearing deposits of $5.7 billion represented 28.9% of total deposits. The substantial deposit and loan growth coupled with earnings retention and our recent capital raise resulted in total assets reaching $24.5 billion, an increase of $4.8 billion or 24% since the second quarter of last year. The ongoing strong deposit growth is attributable to the superior level of service provided by all of our private client banking teams who continue to serve as a single point of contact to their clients.

Now let's take a look at our lending businesses. Loans during the second quarter increased $1.2 billion, or 8.5%. For the past 12 months, loans grew $4.4 billion and now represent 62.9% of total assets compared with 56.1% one year ago. The increase in loans this quarter was primarily driven by growth in commercial real estate, multifamily loans and specialty finance. Non-accrual loans decreased to $32.7 million, or 21 basis points of total loans this quarter compared with $36.2 million, or 25 basis points for the 2014 first quarter and $35.9 million, or 32 basis points one year ago. The provision for loan losses for the second quarter was $7.6 million compared with $8.2 million for the 2014 first quarter and $9.7 million in the 2013 second quarter.

Net charge-offs for the second quarter were only $718,000, or an annualized 2 basis points compared with net recoveries of $244,000, or 1 basis point for the 2014 first quarter. In the 2013 second quarter, net charge-offs were $3.5 million or 13 basis points. Consequently, the allowance for loan losses was 0.98% of loans versus 1.01% of loans in the 2014 first quarter and 1.08% one year ago. Additionally, the coverage ratio was a very healthy 459%.

Now turning to the watchlist and past-due loans. Watchlist credits again decreased $6.4 million this quarter to $116.1 million or a very low 0.75% of loans. During the quarter, we saw a decrease of $14.8 million in our 30 to 89 day past-due loans to $29.8 million and an increase of $1.7 million in the 90 day plus past-due category to only $2.4 million. While we are satisfied that all our credit metrics are stellar again this quarter, we remain mindful of the prevailing uncertainty in the economic environment and continue to conservatively reserve.

Just to review teams for a moment, we added one private client banking team in the second quarter bringing the year-to-date total to five. Additionally, we will be opening three offices later this year to permanently house existing teams. Also, within Signature Financial, we recently added two new business lines, franchise lending and commercial marine equipment finance, which will help to expand our product offerings within specialty finance.

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 $193.7 million, up $39.2 million, or 25.4% when compared with the 2013 second quarter and an increase of 3.9% or $7.2 million from the 2014 first quarter. Net interest margin was down 5 basis points in the quarter versus the comparable period a year ago and decreased 8 basis points on a linked-quarter basis to 3.31%. The linked-quarter decrease was mostly due to a decline of $2 million in loan prepayment penalty income. When loan prepayment penalty income is excluded from the 2014 first and second quarters, core net interest margin for the linked quarter decreased 3 basis points to 3.22%. Two basis points of the linked quarter decrease were due to there being one more day in the second quarter.

Let's look at asset yields and funding costs for a moment. Interest earning asset yields declined 9 basis points from both a year ago and from the linked quarter to 3.83%. Given the considerable growth in average deposits for the quarter of $1.32 billion and growth in capital, we slightly increased the average investment securities portfolio by $92 million this quarter. Yields on the portfolio decreased 2 basis points to 3.3% this quarter due to lower reinvestment yields and the duration of the portfolio decreased slightly to 3.74 years.

Turning to our loan portfolio, yields on average commercial loans, mortgages and leases declined 13 basis points to 4.23% compared with the 2014 first quarter. Excluding prepayment penalties from both quarters, yields would have declined 6 basis points driven by continued pressure from refinance activity and lower yields on new loan production.

Now let's look at liabilities. Money market deposit costs this quarter declined 3 basis points, which helped drive a decrease of 1 basis point in our overall deposit costs to 48 basis points. Given our strong average deposit and capital growth, average borrowings decreased $336 million to $2.59 billion or only 10.9% of our average balance sheet. During the quarter, we replaced short-term borrowings with deposits and modestly extended the duration of our fixed term borrowings. This led to an 11 basis point increase in average borrowing costs for the quarter.

And onto noninterest income and expense. Noninterest income for the 2014 second quarter was $12.4 million, an increase of $3.1 million when compared with the 2013 second quarter. The increase was driven by a $4.4 million gain on sale of an SBA interest-only strip security. Noninterest expense for the 2014 second quarter was $73 million versus $61.4 million for the same period a year ago. The $11.5 million, or 18.8% increase was principally due to the addition of new private client banking teams, the new asset-based lending team and our continued investment in Signature Financial. We anticipate these investments will lead to further growth. Considering all the significant hiring over the last several years, the bank's efficiency ratio still improved to 35.4% for the 2014 second quarter compared with 37.5% for the 2013 second quarter.

And turning to capital, with another quarter of record earnings and the proceeds from the common stock offering in late June, our already strong capital levels were significantly enhanced positioning the bank for further growth. The bank's tangible common equity ratio now stands at 9.34%, tier 1 risk-based ratio of 15.65%, total risk-based ratio of 16.69% and leverage capital ratio of 9.55% as of the 2014 second quarter. And now I will turn the call back to Joe. Thank you.

Thanks, Eric. During the past several years, we have invested time, effort and capital to diligently and prudently broaden our offerings and capabilities, extend our geographic footprint and diversify our revenue stream through the addition of complementary business. We are proud of these ongoing accomplishments, which are achieved through the efforts of our colleagues. We also continue to grow across all facets of Signature Bank as evidenced by our second-quarter results with record deposit growth, exceptional loan growth, further team expansion, top-line revenue growth and record earnings. Now we are happy to answer any questions you might have. Jackie, I will turn it back to you.

(Operator Instructions). John Pancari, Evercore.

Hi, this is Rahul Patil on behalf of John. A question on your loan growth. Could you give us some color on where exactly are you seeing the loan growth coming in and how much -- and what is the total balance for the specs as of 2Q? Thank you.

What was the latter part of that question? I'm sorry.

The specialty finance business, what is the balance as of second quarter?

The specialty finance is just shy of $2.1 billion right now. It is $2.08 billion in outstandings. They had growth of about $275 million for the quarter. And most of our growth continues to be from the multifamily arena where we saw over $600 million in growth and from other CRE where we had over $300 million in growth.

Okay, all right. Thank you. And then a question on your expenses. Looking forward, I know looking beyond the hiring expenses, beyond the expenses related to branch openings, how comfortable are you with the spend on the regulatory-related expenses going forward given the growth that you guys are seeing and as you fast approach that $50 billion mark, it almost seems like the regulators are pushing or nudging companies to increase their spend on compliance on BSA, AML. How comfortable are you (multiple speakers)?

We've been keeping pace in terms of the costs related and what's necessary for BSA and AML. Our regulatory costs over the last several years have increased several millions of dollars, not nearly as much as some of the larger institutions for several reasons. One, we have simplicity versus competitor complexity. We are pretty straightforward, take deposits and lend to our clients' bank. We have no trading operations, we don't have a derivatives book, we have no global operations that are risky, we have no commodity operations. So we are pretty straightforward.

Having said all that, we have incurred several millions of dollars because of the regulatory burdens that are cast upon institutions. As it relates coming closer to $50 billion, being nearly $25 billion, there are a few banks ahead of us that are closer and our belief is that we are not going to be the trailblazer they will and we will learn from them and from the regulators as to what exactly needs to be done and what the costs or the burden of those costs involve. Certainly there will be additional costs, but probably not nearly as much as those that would be incurred today for a bank that crosses the $50 billion threshold because they are trailblazing. It is not something that has happened. By the time we get there in a number of years, several will have gone through it and we will be the better for it.

That's helpful. Thank you, guys.

Thank you.

Casey Haire, Jefferies.

Hey, guys, good morning. So just following up on the expense question from earlier. So as you guys have been playing a little bit of offense here and building out some new business lines, you've been -- the expectation was a high teens year-over-year comp. Just curious as we look forward to next year, and you digest these sort of growth costs, can we expect the expenses, the expense growth to moderate to that sub 15% comp where it has been historically?

I think that if you look next year over this year, we should get back down to that mid-teen range, Casey. (multiple speakers) reasonable.

Got you.

Casey, there is one thing you have to take into account. Should we be fortunate enough to hire 10, 12, 15, 18 teams, we are not going to be worried about where the expense growth is because the revenues will follow. So it is really an opportunistic thing for us. It could moderate, as Eric said, but you will know in advance because we will be announcing team hires.

Understood. Right, okay. And then just on the loan pipeline, obviously a pretty good quarter here. How are we shaping up headed into the third quarter, which has been a seasonally challenged one for you guys historically?

Well, I will go a little step further. I think it is better than pretty good growth; it is very good growth. We are seeing a robust pipeline for loans. I think the question is, and I think you hit it on the head about the third quarter, whether they close in the third quarter or whether they close in the fourth quarter. The reason why I am saying that is, on those transactions where there is a purchase and sale involved, in all likelihood, they will close in the third quarter and we will be the beneficiary of those that we have in the pipeline. Those that are refinancing away from other institutions into Signature, vacation time gets in the way and I don't mean vacation time on our end; I mean vacation time on the client end. So our belief there is that the pipeline is very robust, but whether it closes in the third or the fourth quarter is the question.

Got you. Okay. And just lastly, NIM dynamics, can you just highlight any changes quarter to quarter where you are seeing pressure, reinvestment yields, etc.?

Well, certainly, we are seeing reinvestment yields across the board being pressured. There is tremendous competition on the loan front and with the pullback in the 10 year, we are being pressured a little bit in the securities portfolio. Ultimately, we see margins being stable ex the day count. We do have one more day in the third quarter versus the second, so that will probably cost us another 2 basis points. But ex the day count, we expect to be stable to down a few basis points.

Got you. Thank you.

Bob Ramsey, FBR Capital Markets.

Hey, good morning. This is actually Travis from Bob's team. I just had a quick question on the new SpecFin business lines. Sort of what is the goal there? When can you start making -- funding your first loans and what's sort of the growth targets for those businesses?

We really expect to be able to start funding loans relatively soon and we have the team on board in Signature Financial in the underwriting operations side who have familiarity with these business lines, so it shouldn't really take us that long to start to fund some transactions and hopefully that will happen in the third quarter. Ultimately, we expect these business lines to add -- each business line to add $50 million to $100 million in growth per year.

Okay, thank you. And then what does a typical loan look like in those businesses just in terms of yield or charge-offs or average size?

In yield, you are looking at 3.5% to 4.5% in the franchise business and 4% plus in the commercial marine side. Average size can be $500,000 to a few million. As I said, growth, we are looking at $50 million to $100 million. Typically term is seven-year fully amortizing for the franchise loans and seven year with 10-year amortization on the commercial marine loans.

All right, great. Thanks a lot, guys.

Steven Alexopoulos, JPMorgan.

Hey, good morning, everyone.

Good morning, Steven. How are you doing?

Good. I wanted to first follow up on your comments regarding regulatory costs and recognize a bunch of us are hitting you on this topic. I hear you that the model is simple and you will see how this plays out for others. With that said, simplicity did not help First Republic really at all and we are now seeing banks half your size announcing AML, BSA compliance issues. From our view, you are one of the most efficient banks, which makes it hard to see the level of investment and compliance, etc. So given your growth, one, are you seeing increased regulatory focus at all on your systems, processes, anything like that and should we be concerned at some point you have to ramp the regulatory spend here?

We are ramping and we have been ramping. You are talking about someone here as the CEO who was an external auditor and an internal auditor. You are talking someone in Eric Howell who was an auditor as well. So we have a number of us that come from the audit background that fully understand, and I am not saying if you don't come from the audit background you don't understand, but we fully understand what it takes and how detrimental it could be for business if something comes out for an institution that they have to sign some sort of memorandum of understanding. So we are very -- you can be rest assured we are very comfortable and our regulators are very comfortable with where we are. We take it very seriously.

But on the other hand, you have to understand that we are not a retail institution, so we don't have clients coming in off the street. We don't have that situation whereby we don't know who we are bringing on board. For the most part, we are out there trying to bring those clients in; they are not trying to come in. And that helps knowing your client. That helps hiring people that have a book of business. But from the AML, BSA standpoint, we are in very good shape. We have been hiring on the compliance side. We have been hiring on the internal audit side and we have been hiring on the operational side.

When Eric talks about the increase of noninterest expense and it's team-related and what that does is drive our revenue businesses, it also can drive your revenue businesses and for it to be team-related, you have to add on in wire transfer and in account-opening areas. So we are very cognizant of the regulatory standpoint and I dare say that when you hear about others having issues, you could put us at the top of the list of those that are not even close to having any issues.

That's helpful, Joe. I appreciate all that color. Secondly and unrelated, you guys had good loan growth in the quarter, but with prepayment penalties falling quite a bit actually from the prior quarter or prior year, are you seeing less demand from investors to pull equity out of buildings?

No, I don't think so. We had less because there was one thing I'd like to remind you is that, in the first quarter, at the end of the quarter in the last week in March, we had a group of loans that were totaling $77 million that prepaid because they were getting over $100 million from another institution and that led to a $3.1 million prepayment penalty. So if that didn't happen in the first quarter then actually prepayment penalty income would have been slightly up.

Okay, that is actually a good data point. And final question, the taxi medallion business has been basically taking a beating with Uber and the city selling more medallions. What is your outlook for the business? Are you tightening lending standards there, slowing growth at all given what is going on with the collateral? Maybe you could just remind us what are the balances of loans against that type of collateral. Thanks.

Well, we are certainly mindful of the environment, mindful of the competition. We are taking that into account in our underwriting standards. We see New York as being a little bit more highly regulated and Uber is regulated and we expect the Uber-like institutions to be well-regulated here as well. So we see less risk in the New York area, but we are taking a step back in areas such as Chicago and waiting to see how the regulations change there. So we are taking a bit of a slowdown in certain other marketplaces. Our overall taxi medallion business right now has a current book value of about $717 million, which is predominantly New York-based and we feel pretty comfortable with that New York business.

Okay. Thanks, Eric. Thanks, Joe. I appreciate all the color.

Thank you, Steve.

Ken Zerbe, Morgan Stanley.

Great, thanks. Eric, you mentioned that you extended the duration of your borrowings. Does your NIM guidance of flat to down a couple basis points from here take into account any additional changes to your liability structure?

Yes, maybe a little bit more extension there. As borrowings come due, we will look to continue to extend those, Ken.

Got you. And when would you -- I guess is the vast majority of that done this year? I'm just trying to get a sense of when you say slight extension, just trying to get a sense of how much we are talking about?

Well, I mean we have some coming due over the next couple of years and we are looking to go out, take those out to a two, three-year duration.

Okay and have you guys seen any material change in the competitive environment? Just given where rates are, it seems -- just wondering if other banks are getting a little more competitive from here?

Well, one of the things that we are seeing is a real competitive underpricing and that is one of the things that we are following very, very closely. To give you a data point, we are doing five-year fixed multifamily at 3 3/8% and we have held that pretty steady since around the beginning to middle of the first quarter. And it's interesting that we are seeing some five-year and some four-year loans at sub 3%. So we are doing 3 3/8% and we are seeing some at sub 3%. We are seeing also some banks doing special at four years at even below 2 7/8%. So you are seeing some underpricing there. We are also seeing more importantly dollars, more dollars.

So on a refinance, we use the first quarter as an example where we were going to refinance a client out of a group of loans in multiple buildings at $77 million in loans. We were going to refinance them out at $89 million and they were refinanced out at $100 million, which is a pretty substantial difference between $100 million and $89 million and then the $100 million and the $77 million, which was refinanced out. So we are seeing that as well and maybe because times seem to be getting a little bit better, standards are being a little bit more liberal, but that is what we are seeing, Ken.

All right, great. Thank you.

Dave Rochester, Deutsche Bank.

Good morning. This is actually [Timor Braziler] filling in for Dave. Sorry to keep beating a dead horse here, but just following up on Casey's question on expenses, it looks like for the quarter it was up 20% year over year. Should we expect a similar run rate for the remainder of the year or would you expect to see it tick down a little bit.

Yes, we expect it to be elevated for the remainder of this year and then tick down in the following year.

Okay, great. And then just switching over to the loan side, can you give us an update on the ABL team and just maybe what the total number of loans were at the end of the quarter?

They had about $48 million in outstandings, I'm sorry, in lines at the end of the quarter, so we are pleased with where they are given it is their first couple of quarters of growth and they have a number of loans in the pipeline right now.

Okay. And what about outstanding balances?

I don't have outstandings.

Okay. And then just I guess a couple of modeling questions. Securities premium amortization expense for the quarter, I think it was 16.2 last quarter. Do you have that number?

It was about the same this quarter.

Okay. Okay, thank you very much.

Chris McGratty, KBW.

Good morning, guys. Eric, on the credit, you've provided it at a 20 basis point rate. I think last quarter it was closer to 24, 25. Obviously charge-offs were near zero. How should we be thinking about the provisioning rate kind of going forward given your growth outlook?

Well, we really like to maintain a fortress balance sheet, so we are going to continue to -- I would expect to continue to overprovide, especially given the growth that we've had. But we've had some really exceptional credit quality and we are providing close to 1% on some very well-secured commercial real estate and multifamily lending. So ultimately, I would expect to see that the allowance percentage to continue to trend down as we don't really foresee any credit issues on the horizon.

Okay, that's helpful. And one more on prepayment penalty. I think you said it was 9 basis points in the quarter. If you kind of look out maybe over the next year or two, Eric, how should we be thinking about normalized levels, especially when rates go back? Obviously, there will be some level of prepayments in a quarter, but are we going to go much lower than 6, 7, 8 basis points or is this -- am I thinking about this the right way?

I think ultimately we've been saying this for a while now, Chris. We expect that prepayment penalty income is going to slow significantly. If you haven't refied by now, you must have your head in the sand. But what we are seeing and what has continued the prepayments is the fact that people are now prepaying to extend duration, which is something that we didn't anticipate happening quite as much. So that wave will eventually end as well and as rates rise, there will be little incentive to prepay other than to cash out, which is always there as owners improve the property values and improve the cash flows of their businesses. So that will continue, but it will lead to a far less number of prepay every quarter.

Understood. Just one last one, I think in the back half of last year, you had a couple large transactions. Can you talk about whether you are continuing to get looks on larger deals in the market and maybe how should we expect the back half of the year to play out? Thanks.

Yes, we are continuing to get some major looks at some deals. In fact, during the second quarter, we had a number of deals not nearly as large as the ones from the other quarter, but let me give you an example. We did a 14-loan package, multiple buildings for $32 million. We did a 12-loan package, multiple buildings -- these were all multifamily, by the way -- for $39 million. We did a 12-loan multiple building package for $125 million and then we did three single loans each for $25 million, $53 million and $35 million. So we are getting the opportunity and they were all multifamily except one $35 million was a mixed use. We are clearly getting an opportunity to do more of not only single loans being more than $25 million, but we are getting larger package opportunities more so than we had been let's say a year ago.

I think that is a testament to the group, the commercial real estate team that is able to do it efficiently and get it done in an effective manner that allows the client to understand that they can get it closed within the timeframe that is necessary if there's time of the essence. So clearly that helps -- we are still doing our standard $2 million and $3 million and $4 million loan closings and doing quite a bit of them. But what is also driving the increase even further than where we have been are these opportunities to do the larger deals.

Thanks a lot.

Matt Schultheis, Boenning & Scattergood.

I just wanted to get your take on the marine lending and see if this was driven mostly by the availability of the team or if this was a function of sort of macroeconomic developments in sort of the Ohio River region and barge traffic and the amount of barge traffic that is being done in this country right now, a combination of both and what your expansion plans are for that if there is some sort of competitive advantage with people say exiting the business. Is this just going to be a line that you can grow substantially?

Really, as is the case with most of our businesses, it all starts with the people and this again was that where we had an opportunity to bring on board a gentleman who has 20 plus years experience in the commercial marine finance arena. So that is where it really started. He had a long-standing relationship with the people at Signature Financial for us and it really all started there. There is quite a bit of I don't want to say upheaval, but people coming and going from that business, so it will create opportunities for us. But it really all started with our opportunity to bring on board the gentleman who has a book of business and an established reputation.

Okay, thank you.

Peyton Green, Sterne Agee.

Good morning, Joe. I was wondering if you could talk a little bit about the moves that you are making from a balance sheet repricing perspective. From the fourth quarter to the first quarter, you became -- I guess you went from basically slightly liability-sensitive to slightly asset-sensitive. How does the interest rate risk profile look at the end of the second quarter?

I think we are still slightly asset-sensitive, Peyton. We've shortened the duration a little bit on the securities portfolio. We've done more in Signature Finance, which gives us shorter duration assets. We are really trying not to go out much more than five years on our commercial real estate and multifamily lending. So that is certainly helping and we are raising core deposits, which is really the key for us. It has always been the key, but as we look to position for a rising rate environment, we really want to be core deposit funded and we were able to do that again this quarter. So I think we are well-positioned for a rising rate environment, but we continue to look to extend the duration of our liabilities and our borrowings as they come due and stay short on the asset side.

Okay. And then, Joe, is there a point -- I mean the deposit growth certainly is extraordinary and has accelerated. Is there a point at which you say, okay, we are not going to play the repricing and term game that others are -- well, I know you are not doing that now, but is there a point at which the environment becomes too problematic to play in the game and you just go back to kind of the old playbook and buy bonds with the excess deposit growth or extraordinary deposit growth that you all are generating?

Well, we have a lot of faith in our treasury group that should we have access deposits and it's outgrowing the loan growth that we would have more opportunities to invest in bonds. But we are trying to, on the loan side, with Eric just talking about the previous question about marine, we are adding on -- we added on the marine, we added on the franchise. Signature Financial is only here 2.5 years. Something, Peyton, that we have talked about in the past on the commercial real estate side doing some more larger loans, we actually, from the first quarter through the second quarter on a comparative basis, we have done five more loans above $25 million. I think we have 32 loans above $25 million, so we are getting opportunities to do larger loans and larger loan packages so that we hope that our lending and our deposit growth stay neck and neck with the differential being growth in the bond portfolio if need be. We always feel we need a certain amount of the investment portfolio to be there for liquidity purposes.

Sure. No, I guess in looking at the quarterly numbers, if we were modeling around $1 billion for each category and certainly the loan number, the average loan number increased about $1.1 billion, the linked quarter average deposit growth of $1.3 billion. That just seems truly extraordinary, but it seems very well-intended on your part. So I mean that could very much keep a very strong earning asset growth rate regardless of what the loan environment is like. Is that fair to say?

That is fair and it is also good to be lucky.

Okay, great.

If you look at it, it came out almost perfectly and we'd love for it to happen every quarter and have that similar growth. In fact, if you look over the last four quarters, deposit growth and loan growth is almost exactly the same over the last four quarters. In fact, deposit growth was $4.5 billion over four quarters and loan growth was I believe $4.4 billion over four quarters. It's hard to continue that match, but we are certainly going to try.

Okay, great. And then kind of strategically, I mean do you see any other avenues? Certainly the growth in Signature Finance has been great, but do you see anything that you are not doing today that maybe with the capital that you now have in pocket and kind of with the recognition that you have gotten and your reputation, has it opened you up to any more opportunities that could maybe keep the growth rate at this extraordinary rate easier than maybe it would have seemed?

Well, one area that we can do more business in is ex-Signature Financial because that is included in the C&I is doing more C&I. I think that area is a little tougher because, with the commercial real estate, you have a number of players and they are very competitive. With C&I, you don't have just the number of competitors; you have all competitors. It seems like everyone is in the C&I business and that includes all the too big to fail institutions that are driving the pricing there pretty low.

When you talk about LIBOR-based loans, which we will gladly participate in, and we will gladly take floaters and sacrifice the NIM to have some floaters for our asset liability purposes, not when they are LIBOR plus 100 or LIBOR plus 125 or LIBOR plus 150 and that certainly is difficult to swallow. But the C&I area is one area where we have another avenue to grow.

Great, thank you very much, Joe.

Thank you, Peyton.

There appear to be no further questions at this time. I'd now like to turn the floor back over to Joe DePaolo for any additional or closing remarks.

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

This does conclude today's teleconference. If you'd like to listen to a replay of today's conference, please dial 800-585-8367 and refer to conference ID 70924569. A webcast archive of this call can also be found at www.signatureny.com. Please disconnect your lines at this time and have a wonderful day.