Signature Bank (SBNY) 2014 Q4 法說會逐字稿

Welcome to Signature Bank's 2014 fourth-quarter and year-end 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 and Business Development.

Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. (Operator Instructions).

It is now my pleasure to turn the floor over to Joseph J. DePaolo, President and Chief Executive Officer. You may begin.

Good morning and thank you for joining us today for the Signature Bank 2014 fourth-quarter and year-end 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. 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 client team hires, new office openings and business strategy.

As you considered 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 would like to turn the call back to Joe.

Thank you, Susan. I will provide some overview into the quarterly results, and then Eric Howell, our EVP of Corporate and 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.

Signature Bank delivered another exceptional year of record growth and performance, resulting in our seventh consecutive year of record earnings. And for the fourth quarter, we again delivered strong deposit and loan growth, expanded topline revenues and maintained stellar credit quality, culminating in our 21st consecutive quarter of record earnings. Moreover, while achieving these substantial results, we spent this past year building an even stronger foundation for the future success of Signature Bank.

I will start by reviewing quarterly earnings. Net income for the 2014 fourth quarter reached a record $81.4 million or $1.60 diluted earnings per share, an increase of $17.1 million or 26.5% compared with $64.3 million or $1.34 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 strong deposit and loan growth, each again surpassing $1 billion. These factors were partially offset by an increase in noninterest expense, attributable to our revenue growth initiatives and in part regulatory and compliance costs.

Looking at deposits, deposits increased $1.3 billion or 6% to $22.6 billion this quarter, including core deposit growth of $1 billion and average deposit growth of $1.49 billion. For the year, deposits increased $5.56 billion, core deposits increased $4.14 billion, and average deposits increased $4.3 billion, all representing record increases.

Non-interest-bearing deposits or $7.1 billion represented 31% of total deposits and grew $1.67 billion or 31% for the year. The substantial deposit and loan growth, coupled with earnings retention and our midyear capital raise, led to an increase of $4.9 billion or 22% in total assets this year, which reached $27.3 billion. The ongoing, strong core 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 for their clients.

Now let's take a look at our lending businesses. Loans during the 2014 fourth quarter increased $1.31 billion or 7.9%. For the year, loans grew a record $4.34 billion and represent 65.4% of total assets compared with 60.4% one year ago.

The increase in loans this quarter was primarily driven by growth in commercial real estate, multifamily loans and specialty finance. Our credit quality remained exceptional this quarter with nonaccrual loans decreasing to $21 million or 12 basis points of total loans compared with $24.4 million or 15 basis points for the 2014 third quarter and $31.3 million or 23 basis points for the 2013 fourth quarter. The provision for loan losses for the 2014 fourth quarter was $7.6 million compared with $7.7 million for the 2014 third quarter and $11 million for the 2013 fourth quarter.

Net recoveries for the 2014 fourth quarter were $181,000 or an annualized zero basis points compared with net charge-offs of $1.5 million or 4 basis points for the 2014 third quarter and $2.8 million or 9 basis points for the 2013 fourth quarter.

Consequently, the allowance for loan losses was 0.92% of loans versus 0.95% in the 2014 third quarter and 1% for the 2013 fourth quarter.

Additionally, the coverage ratio further improved to a very strong 783%.

Now turning to the watchlist and past-due loans. Watchlist credits increased slightly by $3.4 million this quarter to $117.5 million or a low 0.66% of loans. During the 2014 fourth quarter, we saw a decrease of $8.3 million in our 30- to 89-day past-due loans to $22.9 million, and our 90-day plus past-due loans increased slightly by $800,000 to $3.2 million.

While we are pleased that our credit metrics remain strong again this quarter, we remain mindful of the uncertainty in the global economic and political environments, and again we appropriately reserved.

Just to review teams for a moment, in 2014 we added five teams. Additionally in 2014, three experienced banking group directors joined teams.

We also added two new business lines to Signature Financial, National Franchise Finance and Commercial Marine Finance, which expand our product offerings and further diversify our revenue streams and asset composition.

Also, in December, we opened our 28th office in Forest Hills, Queens, and shortly we anticipate opening our first out-of-state banking office in Greenwich, Connecticut.

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

Thank you, Joe, and good morning, everyone. I will start by reviewing net interest income and margin.

Net interest income for the fourth quarter reached $215.7 million, up $37.4 million or 21% when compared with the 2013 fourth quarter, an increase of 5.1% or $10.4 million from the 2014 third quarter.

Net interest margin was down 9 basis points in the quarter versus the comparable period a year ago and decreased 2 basis points on a linked quarter basis to 3.23%. Excluding prepayment penalty income, core net interest margin for the linked quarter declined 1 basis point to 3.13%. The linked quarter decreases in overall and core margins are due to an excess in average cash resulting from continued exceptional deposit growth, and cautious deployment for security investments given the challenging market. The excess cash was deployed in December where we funded more than 50% of our quarterly loan growth, and approximately $570 million of loans were funded in the second half of December, which will be beneficial for the first-quarter margin.

And let's look at asset yields and funding costs for a moment. Due to the prolonged low interest rate environment and heightened competitive landscape, interest earning asset yields declined 14 basis points from a year ago and were down 4 basis points from the linked quarter to 3.71%. Yields on the securities portfolio declined 5 basis points linked quarter to 3.2%, given the challenging market for securities reinvestment due to compressed spreads and lower treasury yields. The duration of the portfolio decreased slightly to 3.2 years.

Turning to our loan portfolio, yields on average commercial loans and commercial mortgages declined 5 basis points to 4.17% compared with the 2014 third quarter. Excluding prepayment penalties from both quarters, yields would have declined 4 basis points, again driven by increased refinance activity in commercial real estate.

And now looking at liabilities. Our overall deposit costs this quarter declined 1 basis point to 45 basis points, mostly due to an increase of 11% or $669 million in average non-interest-bearing deposits. With the substantial deposit growth in the quarter, average borrowings decreased $106 million to $2.1 billion or only 7.7% of our average balance sheet. Given the short-term low cost nature of the borrowings we paid off, the average borrowing cost increased 4 basis points from the prior quarter to 1.36%.

As a result, the overall cost of funds for the quarter decreased 1 basis point to 53.

On to noninterest income and expense. Noninterest income for the 2014 fourth quarter was $7.4 million, an increase of $1.3 million when compared with the 2013 fourth quarter. The increase is mostly due to a rise in net gains on sales of loans, along with a decline in write-downs on other than temporary impairment of securities. These improvements were offset by a decrease in net gains on sales of securities and an increase in other loss from CRA tax credit investments.

Noninterest expense for the 2014 fourth quarter was $76 million versus $64.5 million for the same period a year ago. The $11.5 million or 17.8% increase was principally due to the addition of new private client banking teams, our continued investment in the growth of Signature Financial, as well as an increase in cost in our risk management and compliance activities.

Factoring in the significant hiring since last year and increased regulatory costs, the bank's efficiency ratio still improved slightly to 34.1% for the 2014 fourth quarter compared with 35% for the 2013 fourth quarter.

Turning to capital, our capital levels remained strong with tangible common equity ratio of 9.14%, Tier 1 risk base of 13.49%, total risk-based ratio of 14.39%, and leverage capital ratio of 9.25% as of the 2014 fourth 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. In summary the 2014 fourth quarter contributed to yet another exceptional year for Signature Bank where we grew deposits of record $5.56 billion or 33%. Increased loans of record were $4.34 billion or 32%. Loans now account for 65.4% of assets. Maintain stellar credit quality with nonaccrual loans at only 8 basis points of total assets. Expanded net interest income by $152.8 million or 23.6%. That's topline revenue growth. Added five private client banking teams. Expanded Signature Financial with the addition of National Franchise Finance and Commercial Marine Finance. Successfully raised nearly $300 million in common equity to further solidify our solid capital position. And delivered a 30% increase in net income to a record $296.7 million.

In closing, I would like to thank all my fellow colleagues for their efforts and execution, leading to our 21st consecutive quarter and our seventh consecutive year of record earnings.

Additionally, I would like to congratulate all my fellow colleagues on Signature Bank being named the best Bank in America by Forbes for 2015.

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

(Operator Instructions). Bob Ramsey, FBR Capital Markets.

This is [Martin] in for Bob. Given efficiency gains this quarter, what could be the catalyst for further improvement, and how should we think about expenses in 2015?

Well, I'll answer the second part of that first. Given the heightened regulatory environment that we are in, we expect that expenses will be in the midteen range for growth in 2015 compared to 2014.

Traditionally we would have probably been closer to that 10% to 12% growth range in expenses, but we are up against a lot on the regulatory front.

As it relates to efficiencies, we continue to leverage the large infrastructure that we've had in place, and as we grow net interest income and keep other expenses in line, we should be able to garner further efficiencies, and we should slowly see the efficiency ratio continue to trickle down, similar to what we saw in 2014.

Got it. Thank you very much. That's helpful. And what's year NIM outlook given the current rate environment?

Well, fortunately for us we have a fairly robust loan pipeline, so that's going to be beneficial for us as it relates to NIM, and as we continue to grow loans as a percentage of the balance sheet, we expect that the NIM will be fairly stable with a slight downward bias over the next several quarters.

Got it. And given your loan pipeline, it seems like your loan growth was on the ramp up in Q4 compared to the rest of the year. How do you think that will impact your total earning assets in Q1?

Well, it bodes well, because a large part of that growth, as Eric said in our comments, more than 50% was in the month of December, and $570 million were in the last two weeks of the year. So we used up all of that excess cash, and it bodes well as we head into the month of January.

Got it. That's very helpful. And just kind of last question, can you give us some color around what you see in the market in terms of pricing pressure for your loan products?

Well, I'll talk about commercial real estate. We have on the five-year product for multifamily, we haven't changed that rate since March. That was still 3 3/8% for that product, and although there is some pressure, we have, as Eric said, a robust pipeline for loans, and so we are getting our fair share on the five year.

Where we are seeing most of the pressure -- and we don't do nearly as many seven-year product as we do the five year, that's where we are seeing the pressure. We had held our rate since the middle of the year at 3 3/4%. We have done some deals at 3 5/8% and 3.5% where they were very quality assets and quality client. We decided to go below our 3 3/4%. That's where we are seeing most of the pressure.

Got it. Thank you very much for answering the questions.

Jared Shaw, Wells Fargo Securities.

Good morning. Thanks for taking the question. Looking at the loan growth, the backend of Q4, you had mentioned, is that really coming at the expense of growth in the first quarter, or was that just a general increase in the pipeline? How much of that was timing with people trying to get in before the end of the year?

I think it's the latter. People trying to get in before the end of the year. We didn't do anything to try to push the business to close in 2014. So I don't believe that the first quarter is affected, so to speak, because of the amount that we closed in the last two weeks and in the last month of the quarter. The pipeline is still robust. In fact, if you look relative to the first quarter of 2014, 2015 has the much bigger pipeline. And although traditionally the first quarter is very slow, last year our first quarter was $699 million in growth. So we expect to surpass that. But yet we probably think we'll have a typical first quarter where it's slower than the rest of the year.

And as you look at the components of that growth, is it similar to what we've seen this quarter, or will specialty finance increase their contributions in that overall growth rate?

I think finance will increase over the year over 2015. I don't know in any one particular quarter where I would be able to say that, but they have been averaging slightly over $200 million per quarter.

Great. As you look at the securities portfolio for the decline in total balance this quarter and then the pullback in the duration, was that duration, the 3.2%, was that for the overall portfolio, or was that just for the AFS portion?

That's for the overall portfolio.

Given where we seeing rates here, is that a trend that we can expect to see continue well the 10 years down here?

Yes. We would expect duration to continue to pull in.

Great. Thank you very much.

Steven Alexopoulos, JPMorgan.

Good morning, guys. I'd like to start -- so you hired five teams in 2014. Could you talk about the pipeline of teams today compared to where you were when you began 2014? Just general comments, is 2015 shaping up to be a better or worse year do you think for new team hires?

Pipeline for 2015 is relatively active. We expect that you will be hearing through a press release here and there of some teams that will be coming on board before the end of the quarter.

I would say that if there's active for this quarter than it was the first quarter of 2014, and in 2014 it was fairly active. We brought on five teams plus three additional group directors. So we were happy with the amount of growth that we had during 2014, and we would expect something similar in 2015.

You mentioned that you're going to shortly open your first out-of-state office in Connecticut. As of 2015, should we be thinking about this trend of you going to other markets playing out?

Good question. It's not -- we said in our comments that it was our first out-of-state banking office, but it's actually closer than some of our offices in Long Island are to our headquarters. So even though geographically it's a different state, we don't treat it as that being different.

So that trend, so to speak, of opening out-of-state could be some more. We are looking at opportunities to in concentric circles, meaning continuing in Connecticut, continuing in New Jersey, but I wouldn't expect anything different for the rest of this year.

We also have an office that we are projecting to open in 2015 in Bay Ridge, Brooklyn. So there's no trend there with the office opening up in Greenwich.

Maybe I wanted to follow up -- I know I asked this a quarter or two ago on the taxi medallion business, that it doesn't look like there are any nonperformers in the quarter. But could you remind us what were the current outstandings at the end of the year? How much of that is in New York City? Maybe talk about the pressure you might be seeing in that business, just given that medallion prices continue to fall?

The overall book value is around $800 million, $625 million in New York and approximately $175 million in Chicago. Ultimately it's good to be paranoid, Stephen, but at the end of the day, we are going to get repaid through those loans by cash flows and not for newspaper articles.

And the cash flows there are quite strong. We have 1.67 times debt service coverage in New York and a 1.66 times in Chicago. So the cash flows that have remained strong in some cases have strengthened, actually, and we feel pretty comfortable about our ability to get repaid there.

Okay. That's helpful. And maybe just finally, could you provide some more color on Signature Financial? Maybe talk about the balance of outstandings at the end of the year? And I know that I think the team had $4 billion or $5 billion or so of outstandings at their prior institution. Is a lot of that low hanging fruit now taken? Is the plan just really to go into additional cities? Maybe some commentary on that business. Thanks.

Sure. Signature Financial's overall balances are a little over $2.6 billion now. As Joe said earlier, they are growing at about $200 billion pace. $200 billion pace -- $200 million pace, excuse me, per quarter.

We would expect that trend to continue. We have added on a couple business lines there in Marine Finance and Franchise Finance, but that's really helping us to offset the amount of principal repayments that we have coming back at us because it is a very short duration portfolio of three- and five-year self-amortizing portfolios.

So, if they can continue that pace of $800 million to $1 billion a year, we would be fairly pleased. We do have a couple business lines that we are looking at. This year other than the municipal, which we've talked about in the past, we haven't announced the other business line, and we will let people know about that once we get that up and running. But, again, those should help us really to maintain the leveled growth that we've had. And if you look at their portfolio going back to their prior institution, they are about $4.5 billion at their prior institution. But they could've been much larger than that. Unfortunately the bureaucracy that they had to put up with at their prior institution really put the brakes on their business. So we would expect that they can grow to that $4.5 billion and beyond here.

A good example of a team doing well at their previous organization like Signature Financial and then surpassing that business that they had there with the business they are doing here is our Commercial Real Estate Banking team that we brought on at the end of the fourth quarter, I should say the end of 2007. That team has now surpassed their outstandings here at Signature compared to what they did at North Fork/Capital One. And they took North Fork/Capital One a number of years more than the success they've had here. So I believe that teams that come on board here can do better over time than where they came from.

Can you guys confirm there's no direct exposure to the energy sector in that business, correct?

Very little in some of the yellow metals that we play in, but nothing that we are really concerned about.

Got it. Okay. I appreciate all the comments.

Thank you, Steve.

Lana Chan, BMO Capital Markets.

Good morning. Could you talk about opportunities for some potentially larger sized transactions on the lending side? I think you talked in the past on potentially taking some market from the CMBS deals and then so much of what we saw in the fourth quarter of 2013?

Sure. We had one transaction that was multiple loans in multiple buildings in the fourth quarter that came from the CMBS world. It was $198.5 million. It was really expected to close originally for us in August, in September, October -- you kind of get the idea -- and then ultimately closed in December. So we had an opportunity to close one large transaction.

We have another one, not nearly as large, probably around $100 million or so, that may close in the first -- may close in the first or second quarter. Not sure, but in the first half of the year, we have at least one if not two. So we are getting more opportunities to do that.

Each of these transactions are multiple buildings and multiple loans. It's not one loan.

And just curious what the sort of average pricing was on the deal that closed in December.

I think it was 3.5%.

Great. Thanks, Joe.

I'm sorry. It was 3 3/8%. It was 3 3/8%.

Thanks, Joe.

Ken Zerbe, Morgan Stanley.

Thank you. Eric, you mentioned that the timing that you redeployed your cash into those loans in December would benefit your margin in first quarter. But I know you also give the full-year guidance of stable to slightly down. Should we expect -- just trying to get the right base for that -- should we expect an increase in margin in first quarter and then stable to slightly down, or does it go up and then you are only talking around a full-year basis? Just trying to understand the timing of NIM. Thanks.

I think the first quarter we are still looking at a stable to slightly down. A lot of the NIM going forward is going to be predicated upon the level of deposit flows that we have. And as in prior quarters, we are very happy to grow deposits and have that trade-off with the NIM. We will take that trade-off every day. So that's really what's going to be the primary driver as to which way the NIM goes at this point.

Got it. Okay. And then second question, in terms of the office in Greenwich, what kind of businesses are you guys pursuing there? I can understand Brooklyn and Queens and Manhattan are all very CIRI focused, but in Greenwich are you still dealing with the New York City folks, or are you doing other business?

You would deal with -- we have an office in White Plains, and the team in Greenwich will deal with some of the business in Westchester, Northern Westchester, and then they can go fairly a large distance in Connecticut. Their tentacles, so to speak, go out to Fairfield County. For us you can do business without having multiple branches today with scanners and the like. So it's kind of a wide-ranging geographical reach.

Understood. But can you just remind us what kinds of loans are you doing in, say, Connecticut versus in New York?

Well, right now we are doing the same. We're doing a number of multifamily and some C&I. Nothing different. We will have an opportunity to do some of the private equity firms and some of the hedge funds that are in Greenwich. Some of them we deal with now out of our White Plains office, but some were hesitant because they like the idea of us being in Greenwich. So we will get an opportunity to hopefully take some of that business away from the larger institutions. It won't require in many instances borrowing. It's really the banking and handling wires and transfers and the like.

Great. All right. Thank you.

Casey Haire, Jefferies.

Good morning, guys. So a question, I guess, on the loan-loss reserve ratio. Look, obviously asset quality is not an issue for you guys with nonaccruals at 12 bps in loans. But at 92 bps LLR, are we kind of in the final innings of bleeding that down, or is there still more runway there?

I think there is still some more runway there. A lot of it is going to be predicated obviously upon our credit performance, which we don't really see changing in the near term. But if we continue to predominantly grow commercial real estate and multifamily loans as a percentage of our loans, those tend to not need a very high level of reserves on them. So I would expect it to continue to trickle down from here.

Okay. And then just, Eric, looking ahead regarding expenses, it sounds like some of the regulatory pressures are keeping you in that midteens range this year. I was just curious as we look ahead to next year, do you feel like this is the last kind of year of heavy lifting there and that next year we can go down to that low double-digit area where you guys have been historically?

I think we are going to have heavy lifting for many years to come, and that's what we are anticipating. I think naturally growing off of a larger base we will see it come down to the low teens in 2016. But, again, it probably would have been in the high single digits had we not had the regulatory expenses. So we are anticipating a fair level of regulatory spend for the foreseeable future.

There's going to be continued refinements on anything we submit. There are going to be things that we're going to be asked to do that haven't even been thought of yet by the regulators because they are learning. And that's not a criticism. They are just learning as they are going along, and we are learning as we are going along.

And then not only do we have to worry about DFAS, although we are years away from CCAR, we are going to be building up on that if that is required for institutions at $50 billion. So we wanted to have that expense over a period of time and not all at once. So, as Eric said, we should expect to continue to have that expense.

Understood. Just then lastly, the other income line, like I know you guys have some tax strategies at work there, but it did work against you this quarter with the other loss kind of increasing and the tax rate holding steady. Is that just one-time in nature, or should we expect a similar dynamic going forward?

No, the amount that we had this quarter should be the new run rate going forward. Each year we receive K-1s from the partnerships that we participate in CRE tax credit, so we have to go through the process of determining what the new expense rate is going to be. So that should be your new run rate going forward. Ultimately we will see it be beneficial to the taxes in future periods.

So the tax rate could -- so [2.2] sticks, but we should see a better tax rate than 41.6%.

Slightly better, but it will take some time for it to work through. So I would stick with the 41.6% for now.

Understood. Thank you.

Dave Rochester, Deutsche Bank.

Good morning, guys. Nice quarter. Eric, I was just wondering what your assumption was for securities premium and expenses baked into the NIM guidance that you gave. And then I just wanted to confirm that you guys are just assuming that the current interest rate curve persists through 2015 in that asset, right?

Yes, that's right. We expect premium amortization to pick up a little bit in the first quarter and then pick up even more so in the second quarter. But ultimately we will be able to fight our way through that as we grow loans as a percentage of the balance sheet.

Perfect. And then just one last one. Could you give us an update on the ABL team on how large that portfolio is today and what your expectations for growth are there for the next year?

The ABL has got lines of a little under $100 million now outstanding. We had said when we brought that team on board that they had lines of $300 million, outstandings of around $200 million at their prior institution where that institution unfortunately had an MOU and other things that didn't really allow them to grow at the pace that they had wanted. Here we would expect for them to get to that $200 million to $300 million over the course of the next couple years. So we really look at that as a large team.

Okay. Great. Thanks, guys.

Chris McGratty, KBW.

The investment portfolio, if you look at it as a percentage of earning assets, it has obviously come down as you guys have remixed the balance sheet. Maybe I missed it in your prepared remarks, looking out the next 12 to 24 months, how should we be thinking about kind of the mix of securities in this rate environment? It's about a third today. Is kind of a 25% to 30% number reasonable, or do you think it will come in a little bit lower?

Ultimately in this environment, we don't really anticipate us growing the securities portfolio from where it is today. We'll probably maintain this level, maybe slightly reduced from the level that we are at today. And then layer on top your growth assumptions and loans and you can come up with what that number is going to be, Chris. We really don't talk about what we anticipate that to be.

On the FASB proposal, with the LIFO loan loss, can you comment on your expectations of whether we're going to see any kind of material adjustment once this does come into effect? Are you guys thinking about it? Thank you.

We really feel like we've pretty adequately reserved for the level of losses that we anticipate in that portfolio, but there still a bit of work to be done there. so it's a little premature for us to comment on whether or not we will have any one-time adjustments or not.

Okay. Thank you.

Peyton Green, Sterne Agee.

Yes, good morning. I was just wondering maybe, Eric, I know you don't have much energy exposure to the leasing business, but what would be the amount of exposure maybe in the state of Texas?

Actually we don't have that number. I'll have to get back to you. But, again, we are not really concerned about our exposure there.

Okay. Great. And with regard to deposit pricing, this change in kind the rate outlook year-to-date, do you think that that gives you any opportunity to reduce rates any further, or is the segment of your market still pretty stable?

Good question. Because the timing is such that we are reducing some rates across the board, both in business money market and personal money market. We will be doing that over the course of the quarter in February and in March. But we've already announced to our teams to start looking into what needs to be done.

So there is some room in the cost of the deposits in bringing it down somewhat because of the reductions we are making.

Okay. Great. Thank you very much.

Ebrahim Poonawala, Bank of America Merrill Lynch.

I'm sorry if I missed it, but I was wondering if you talked about any additional verticals that you think you could add to Signature Financial in terms of, is there opportunity to do that, and if so, if you can provide any color there?

We mentioned that we are going to be doing municipality business, and then there are a few other lines that we are looking at, but we are not making any announcement until we actually bring the people on board because of the recruiting that we are doing, and we don't want to give a heads up to our competitors as to what we are thinking. Other than the municipality, I won't mention anything else at the moment.

Got it. That's the only question I had. Thank you.

There appear to be no further questions. This does conclude today's teleconference. If you would like to listen to the replay of today's conference, please dial 800-585-8367 and refer to conference ID number 60466509. 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.