Signature Bank (SBNY) 2018 Q4 法說會逐字稿

Welcome to Signature Bank's 2018 Fourth Quarter and Full Year 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. (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 2018 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 oral 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 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 and annual 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.

2018 was a volatile time for the banking industry, driven by a variety of external factors. However, we continue to perform in keeping with our founding mission to be a leader in serving privately held businesses.

Our focus, initiatives and proven capabilities should differentiate us from the pack, and we are prepared to address any challenges ahead.

This year was highlighted by several achievements, starting with hiring 8 teams including the Fund Banking Division, growing assets by over $2.4 billion, putting the medallion portfolio behind us, and increasing net income by 30% exceeding $500 million.

Additionally, we ended the year with a really strong fourth quarter. Assets grew $1.5 billion, driven by solid C&I growth, earnings topped $160 million, ROE was nearly 15% and capital levels remained strong while paying a solid dividend and buying back stock for the first time.

Now let's take a closer look at earnings. Net income for the 2014 -- excuse me, for the 2018 fourth quarter was $160.8 million or $2.94 diluted earnings per share, compared with $114.9 million or $2.11 diluted earnings per share reported in the same period last year.

The improvement in net income was mainly the result of the increase in net interest income primarily driven by strong average deposit and loan growth as well as a decrease in the provision for loan losses attributable to taxi medallion loans.

The improvement was partially offset by an increase in non-interest expenses resulting from hiring new private client banking teams, including the Fund Banking Division as well as increased compliance costs.

Looking at deposits. Deposits increased $288 million or -- to $36.4 billion this quarter while average deposits grew by $541 million.

For the year, deposits increased $2.9 billion and average deposits increased $2 billion.

Noninterest-bearing deposits of $12 billion represented 33% of total deposits and grew $663 million or 6% for the year.

Our deposit and loan growth led to an increase of $4.2 billion or 10% in total assets for the year, which cost $47 billion.

Now let's take a look at our lending businesses. Loans during the 2018 fourth quarter increased $1.3 billion or 3.7% and for the year, loans grew $3.8 billion or 12%.

The increase in loans this quarter was primarily driven by growth in commercial and industrial loans and specialty finance. This is the first time in at least 11 years that C&I growth outpaced CRE growth substantially and speeds up the transformation of the balance sheet to include more floating-rate assets.

Turning to credit quality. Our core portfolio continues to perform remarkably well. Excluding medallion loans, nonaccrual loans are $20.1 million or just 6 basis points of total loans.

Overall, nonaccrual loans decreased again this quarter by $26 million to $109 million as we further work down our remaining medallion portfolio.

Our pass-through loans remained in their normal range with 30 to 89-day pass-through loans at $63 million, while 90-day plus pass-through loans remained low at $8.8 million.

For the 2018 fourth quarter, we had net recoveries of $2.9 million compared with net charge-offs of just $11,000 for the 2018 third quarter.

The provision for loan losses for the 2018 fourth quarter was $6.4 million compared with $7.4 million for the 2018 third quarter and $41.7 million for the 2017 fourth quarter.

The allowance for loan losses held flat at 62 basis points of loans while our coverage ratio climbs back to over 200%.

Now onto the team front. In 2018, we added 8 product client banking teams, including the Fund Banking Division. Additionally, we appointed 8 banking professionals to our asset-based lending business in specialty finance subsidiary.

Looking ahead to 2019, the pipeline for teams is solid, in fact we've already hired a team in 2019. And we look forward to the ongoing opportunities to attract talented banking professionals to our network.

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

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

Net interest income for the fourth quarter reached $335 million, up $15 million or 4.8% when compared with the 2017 fourth quarter, and an increase of 3.2% or $10.2 million from the 2018 third quarter.

Net interest margin on a linked quarter basis improved 2 basis points, and compared with last year's fourth quarter decreased 17 basis points to 2.9%.

Excluding prepayment penalty income, core net interest margin for the linked quarter decreased 5 basis points to 2.8%.

And let's look at yields -- at asset yields and funding costs for a moment. Interest-earning asset yields for the 2018 fourth quarter increased 14 basis points linked quarter and 28 basis points when compared to the 2017 fourth quarter to 3.99%.

The increase was predominantly driven by a rise in loan prepayment penalty income and higher reinvestment rates.

Yields on the securities portfolio increased 2 basis points linked quarter to 3.28%, due to a slowdown in premium amortization from reduced CPR speeds and higher reinvestment yields. Also the duration of the portfolio came in a little to 3.3 years, given lower market rates at the end of the year.

In turning to our loan portfolio, yields on average commercial loans and commercial mortgages increased 16 basis points to 4.21% compared with the 2018 third quarter.

This was mostly due to a rise in prepayment penalty income. Excluding prepayment penalties from both quarters, yields increased by 7 basis points, which is our largest quarterly increase in core loan yields in many years.

Now looking at liabilities. Our overall deposit cost this quarter increased 10 basis points to 98 basis points.

Average borrowings excluding subordinated debt increased $436 million to $5.3 billion or 11% of our average balance sheet.

The average borrowing cost increased 24 basis points from the linked quarter to 2.41%, given the higher short-term interest rate environment.

The overall cost of funds for the quarter increased 13 basis points to 1.19%, predominantly driven by increased borrowings this quarter.

And on to noninterest income and expense. Noninterest income for the 2018 fourth quarter was $5.9 million, a decrease of $2.6 million when compared with the 2017 fourth quarter.

The decrease was all due to an increase of $4.2 million and other losses from additional amortization of low income housing tax credit investments, which positively impacts our effective tax rate.

Noninterest expense for the 2018 fourth quarter was $119 million versus $110 million for the same period a year ago. The $9 million or 8% increase was principally due to the addition of new private client banking teams as well as further costs in our risk management and compliance activities.

The banks efficiency ratio remains stable at 34.9% for the 2018 fourth quarter versus 33.5% for the comparable period last year and 35.6% for the 2018 third quarter.

And turning to capital, in the fourth quarter of 2018, the bank paid a cash dividend of $0.56 per share, additionally during the 2018 fourth quarter, the bank repurchased approximately 358,000 shares of common stock for a total of $41.8 million.

The dividend and share buybacks had a negligible effect on capital ratios, which all remained well in excess of regulatory requirements and augment the relatively low risk profile of the balance sheet. As evidenced by a Tier 1 leverage ratio, that improved slightly to 9.7% and total risk-based ratio of 13.39% as of the 2018 fourth quarter.

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

Thanks, Eric.

In summary, in 2018, we grew deposits $2.9 billion or 9%. We increased total loans by $3.8 billion or 12%.

Commercial and industrial loans comprised 42% of the increase for the year and 85% for the fourth quarter alone.

Total assets increased by $4.2 billion or 10%, slightly above the midpoint of our guidance of $3 billion to $5 billion in asset growth.

We significantly reduced our exposure in taxi medallion loans while maintaining exceptional credit quality in the remainder of our loan portfolio.

To this end, nonaccrual loans excluding loan medallions are only 4 basis points of total assets.

We added 8 private banking teams including the Fund Banking Division, which is the equivalent of several banking teams and established a full-service banking office in San Francisco.

We launched Signet, a new proprietary blockchain based digital payments platform, allowing our commercial clients to interact in a real time and transparent manner.

We maintained our already superb efficiency ratio at 34.9% for the year, while continuing to invest in our risk management and compliance functions.

We maintained a robust capital position while instituting our inaugural quarterly dividend and stock repurchase programs.

And finally, focusing on the power of our franchise, we delivered an outstanding $505 million in net income, an increase of 31% and a 12% return on equity, in spite of medallion write-downs.

We welcome 2019 as we plan to strengthen our foundation by continuing to make major investments in our loan systems, payments architectural platform and new foreign-exchange system.

We also look forward to expanding our presence in San Francisco where we have client synergies.

Finally, we continue -- we will continue our focus on increasing floating-rate assets as a percentage of our balance sheet, predominately through the growth of our newly added Fund Banking Division.

Now we are happy to answer any questions you might have.

Christy, I'll turn it over to you.

(Operator Instructions) And your first question is coming from Ken Zerbe of Morgan Stanley.

I guess, the first question I had was just on the stock buybacks, obviously, you guys have a fair bit of approval still remaining. Can you just talk about your plans or expectations for repurchasing shares throughout 2019? Or what might change that?

Yes, I'll think we'll be repurchasing a similar level per quarter as we did this quarter, and I'd say a $30 million to $50 million range. The binding constraint on how much we can repurchase there is still our commercial real estate concentration, which we were able to bring down by 8 basis points this quarter, even with the dividend and the buyback. So we're pleased with that effort, but that's going to be the mitigator on as to how much we can buy back because we do want to bring down that concentration level, and we want to increase the mix of floating rate assets that we have on our balance sheet.

Got you, okay. That helps, and then in terms of when we think about 2019, I know last year I think you were targeting about $3 billion to $5 billion roughly of total asset growth. Is that a realistic target this year? Could it be sort of lower end, higher end of that especially given your new private equity teams?

The $3 billion to $5 billion is realistic, particularly on the loan side. I think the most important thing is funding it with deposits. And we know that the competition is pretty strenuous out there, but we're confident that we'll be able to be in that $3 billion to $5 billion range.

Okay, perfect. And I guess, just the last question to follow-up on the deposit comment that you just had. Looks like deposits terrific growth trailed loan growth by a fair amount this quarter. Are you comfortable -- if that were to continue, and maybe it doesn't, but if it does continue, looks like you increased your borrowings to fund some of those variable rate loans, presumably they're all short-duration borrowings, funding short-duration loans, so it kind of makes sense from a spread perspective, but does there come a point where if deposit growth doesn't meaningfully pick up that you would be uncomfortable or choose to scale back on funding loans with borrowings?

Well we're pretty confident, or let me rephrase that, we're fairly confident that we're going to be able to fund the lending side with deposits. We -- in terms of not a comfort level, we're not really where we want to be at 99%, I'd like to be lower than that and we have a plan with a number of initiatives to increase the deposit growth. One of the initiatives is the Signet platform. That should help us. We also, don't forget, have 8 new teams, including the fund division, the Fund Banking Division. And traditionally, where they came from, the bank or banks that they came from, they self-funded, although it lags and takes time, so we're confident that the outstandings that they have in loans will be covered by their own deposits that they'll bring in, and they've actually done a fairly good job this quarter with bringing in a number of deposits. And then we have the digital banking team that came on board about a year ago. And then we have 6 other teams that are new and really have not yet contributed and we expect them to contribute this year. And then we have the whole West Coast and San Francisco, our office is officially opening up on Monday and will start bringing in some more business.

Your next question is from Dave Rochester of Deutsche Bank.

So you guys obviously had some great growth in C&I this quarter. Good start for the new Fund Banking Division. How does the overall loan pipeline look at this point heading into 1Q? And then what do you guys see as a

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division in particular as we look out over this year?

Could you please, say the second part, the last part again?

Yes, I was just wondering how the loan pipeline, how that looks heading into 1Q? And then what's the growth potential for the new Fund Banking Division in particular as you look out over 2019?

Well the potential is pretty enormous. They've hit the ground running, they have just in this 1 quarter have over $1 billion in lines. They have about $650 million in outstanding and that's just hitting the ground running. So we're very happy about that. The loan prospects for then and for the other areas are pretty robust. That's why we have to make sure that we fund with deposits, because we have a robust pipeline.

Perfect. And then just turning to the NIM, was curious what you're seeing now on new loan pricing for all the different buckets? And then how you're thinking about that NIM trend overall for 1Q?

Well I'll start off with commercial real estate. We're seeing 5-year fixed came down a little bit, we're at 4.5%. We were at 4.875% and at one point at 4.75%. We're at 4.5% right now on the 5-year fixed.

And that's for multi-family?

Yes.

Okay. And then so the CRE would be, I guess, 25, 35 bps wider than that?

Correct, yes.

Yes.

And then how about capital call lines and Sig Fin at this point?

Yes, thus far we're seeing the capital call facilities come in at L plus 170 to 200, Signature Financial is coming in these days right around 5%, (inaudible) range. Traditional C&Is coming in north of 5%. So asset yields are still quite accretive to what's existing on our book.

Yes. Great. And then how do you think about the NIM for 1Q?

Well given the Fed move in December, we expect to have a little bit more pressure in the first quarter so we're looking at 2 to 4 basis points, NIM compression in the first quarter, hopefully, closer to the 2 basis points especially, given day count in the first quarter. And then from there, it's all going to be Fed dependent, if the Fed doesn't move, we'll see NIM stabilize to really go up.

Very nice. And suppose we do get sort of like a midyear hike or whatever, would you expect that the better spacing of hikes to maybe translate into a little bit of a lower deposit beta going forward in that situation?

Yes, Dave.

Our next question is from Brocker Vandervliet of UBS.

Could you kind of give us a look under the hood on the prepaid fees in terms of where they've averaged, where they came from short term and kind of how you look at that going forward? And then I've got a follow-up.

We look at this particular quarter where we had a significant amount of pre-pays. We look at it as something that we didn't expect because we had a number of large packages paid down early, in particular, one was fairly large, but they were all in the low 3s, 3.375%. So whether we refinance them or they refinanced out, we were happy to get rid of loans that were paying at 3.375%. One of them, in particular, wanted 10-year money and we keep everything on our balance sheet so we don't do 10-year fixed, we really do 5-year fixed and on a rare occasion, we'll do a 7-year fixed, but that's the one area that's very hard to predict prepayments. So to give you an idea of what would happen in the near future is very difficult. It was just when you thought it was going to slow, it actually sped up.

And this is -- is it fair to say this is a mix between your outreach to clients to potentially pull them toward a refinanced decision as well as kind of a reaction by clients to look to reprice for fear of having the rate tick up at the refi date?

Well, it's a very good question. The interesting thing is those that we pulled in, we waived the prepayment penalty. We waived the prepayment penalty because they weren't expecting or projecting to prepay now and refinance and when we point out certain aspects of what's going to -- we think is going to happen in the market, then all of a sudden, they'll pre -- they'll refinance, but they don't pay a prepayment penalty because we're the ones that did the outreach. But that helps, because even though we waived the prepayment penalty, it helps us because we've gone off from 3.375% to 4.375% or 4.5%.

Your next question is from Casey Haire of Jefferies.

I wanted to follow-up on some of the NIM line of questioning. So the loan to deposit ratio, obviously, near 100%, is there a internal limit where you guys would not want to see that internal ceiling where you would not want to see that go above?

Yes, Casey, we do have board-approved limits, but we we're not -- we're not going to disclose what those are. And safe to say that we're at the high-end of the range that we feel comfortable. So our focus is really to go grow core deposits here.

Okay, got you. And it sounds like the capital call is really off to a strong start here and my impression is that's a very liquid lending vertical. Are you guys seeing strong deposit growth in that, along with that product? Or is that more on the common underlying your confidence on the deposit growth?

I would say that it's both. We have strong deposit growth. Usually it lags little more than what we've had, but we're very happy with the growth thus far. Our expectation is that it really will take a year.

Understood. And on the expense front, is the outlook still 10% growth? And is that off of the 486 GAAP number in 2018?

It's 10% growth but you do have to normalize it because we did have some quarters where we had some large write-downs on repossessed medallions, Casey, so…

Okay. So that 25 and the -- okay so strip out the 25 in the first quarter of '18 for the fair value adjustment and then so 10% off of that?

Correct.

Your next question is from Jared Shaw with Wells Fargo Securities.

I guess so far -- so as we look at the -- was that 10% growth that was 10% growth in C&I or that was, I'm sorry I missed the end of that last question?

It's 10% growth in expenses.

Okay, okay. As we look at C&I growth through 2019, do you think that's going to be able to continue to serve, outpace and take share from the other components of growth? Should we see the C&I continue to outpace CRE growth in 2019?

Yes, because that's part of our plan to transform where we had a predominant amount of fixed income and we want to have a better balance of fixed and variable or floating rate loans. And we have the capability and the teams to do that.

Okay. And then looking at the deposits, it looked like the average noninterest-bearing DDA was higher than period end. Were there any flows that happened at the end of the quarter there that could be reversed and should we be looking at growth off of average DDA for first quarter?

I mean, there was -- the fourth quarter is a quarter that's hard to predict, but it's -- in terms of growth, it's the quarter that has the least amount of growth and there's a lot of outflow just simply, because it was a buildup of partnership dollars that didn't get distributed at the end of the year. It was some escrows where they needed to have closings before the end of the year, so it was typical.

Okay. And then on the fund's business, do you think that ultimately that could -- could that be a billion-dollar deposit business for 2019, do you think? As the teams get up and running.

Yes. Yes.

Your next question comes from Ebrahim Poonawala of Bank of America.

Just a follow-up on what Jared just said in terms of the fund team up and running. My sense is they are up and running, right? Like the growth that we saw on loan growth fourth quarter was very strong and I recognize you'd like to be conservative in thinking about deposit growth from that team. But if pipelines are strong, 4Q is any evidence of the capacity of this team, you would think that there is potential for $1 billion plus growth coming from that team, next year, in '19, no?

Yes.

Clear. Okay. And just switching Eric for a second in terms of provisioning between the CRE, capital call line book, assuming they're all low credit risks books or should we expect reserves to stay around the 60 basis points range incrementally? Like or if you could just talk about that a little bit.

I mean, it certainly seems reasonable. The capital call facilities are extremely well secured and well-structured and have little to no history of losses over many decades, so it's a pristine asset class. And we certainly feel our CRE as we've talked about for a long time now is also a pristine asset class. So we don't really anticipate seeing a meaningful change in our provisioning going forward.

And just on that, like in Signature Financial, can we talk about the type of loan growth that's coming through there in terms of -- or is it an industry vertical that you're targeting? And I just want to understand that better from a credit risk standpoint.

Well, it's really all forms of equipment finance and we focus on revenue-producing equipment that businesses have to have to run their business to produce revenue. So that's extremely protective and in times downturn, that's a lot of yellow metals, trucks, buses, trailers, manufacturing equipment and such so. But we feel very good about what they've done thus far here since 2012 and the level of losses that we've seen in their portfolios, even when they include the oil and gas and obviously, excluding [taxis] has been well below what we anticipated from that group.

Your next question is from Chris McGratty of KBW.

Eric, on the deposit betas, they came in a little bit this quarter. Wondering, one, can you speak about competition for deposits a little bit more, I may have missed it. And also kind of the spot rate, where the spot rate was in December?

The way I described it at a conference in December was it was a steel cage match wrestling. It is gotten more competitive, I haven't seen it this competitive in my lifetime anyway. The want for deposits and the lack of liquidity out there makes it very, very difficult, but we have an offside. We think we have the best teams, we think we have the best equipment financing group in Signature Financial. We have -- the commercial real estate group constantly asks for deposits and then we have now the Fund Banking Division. And everyone is focused on deposit growth. And that would -- that's what gives us somewhat of an advantage, along with the fact that we get large deposits and not single dollars, but millions and sometimes billions. So I'll paint it this way, it's very difficult out there, but we're ready for the challenge. We also have a number of initiatives that Eric and I decided that with -- a few years ago that we would not disclose some of the initiatives, just simply because we don't want the competition to know what we're doing, but they can move us quickly into another deposit-generating machine that we were a few years ago.

That's great. And do you have the -- where the -- deposit cost worth in the month of December versus the average for the quarter?

Yes, we only have averages.

Okay. I can follow up. In terms of -- kind of a modeling question, the tax rate and adjustment in the noninterest income, care to assume that your kind of go forward rates for both items?

For taxes, it's 25% effective tax rate, that's what I would use going forward.

Your next question is from Steven Alexopoulos of JPMorgan.

Joe, to follow-up on your comments on the deposit environment, which you described now as the worst of your lifetime. Tell us what's changed in the market? Like are these new entrants -- like what's really driving this level of ferocity around deposits?

The biggest driver is really the reversal of quantitative easing, right -- sucking trillions of -- at least a $1 trillion last year, $600 million I think they're saying over the course of the coming year, so or $1 billion, excuse me, so that's creating quite a bit of headwind.

Okay. And what you guys...

No. I was going to say that for a lot of banks that need to fund their asset side, they -- that have retail groups, even though it's cheaper, right? Still you have to have this massive amount of branches to attract all those dollars, and what we're finding is they're getting -- there is some desperation there because just to turn on the lights on all their location they have to make some sort of revenue, and with the yield curve the way it is and the amount of expense that they have. You get into a situation where they're starting to raise rates to a point that, we're so far away from what we think is fair and normal. For instance, we're now talking about rates in the 2% range but we have some banks that are going close to the 3% range. But it makes no sense to do so. That's why I feel that it's so difficult out there. Because you can tell a client I'm worth at least 25 basis points. Well if somebody's offering me 225, I should be able to pay at 195, 200 because of the white-glove treatment I've been getting, but it's hard to tell a client that's being offered 50 to 55 basis points more than what you're willing to offer them.

And then quite frankly we're seeing clients utilize their deposits again, right? And they're investing in their businesses which they hadn't done for quite a while. And we're also seeing off balance sheet alternatives, which we hadn't had to compete with for a decade. So there's other places for our clients to put their money and they are starting to put into their businesses, which ultimately, will be good.

Yes, we're pretty proud of the fact that we're just under $3 billion in deposit growth because one of the areas that was a big initiative for us, was EB-5 and we're down to $1 billion in EB-5. So we're bringing in the money, but like Eric said, some of the areas the money is being used, we have some -- we had strong 1031 that's down a bit, bankruptcy is down a bit and we all -- came all those headwinds and still had nearly $3 billion in deposit growth.

I want to understand Eric your response to Casey's question. Did you say that you guys are unlikely to push the loan-to-deposit ratio above 100%? Is that what you said?

Yes, I mean we -- what I indicated is that we're really not going to get into what our limits are, but 100% would be pushing it for us.

Okay, got you. And then just on the Signet, sounds like you're not charging customers for that, it's a deposit opportunity. Can you give us a rough sense like how meaningful is this deposit opportunity and are those noninterest-bearing deposits?

In noninterest-bearing deposits, it'd be hard for me to framework an amount, but it really depends upon the number of ecosystems that we can sit our payment platform in with various ecosystems. We can tell you that at least in the crypto world, which I hate using that terminology, it's really the digital world. In the digital world we see an enormous opportunity, but that's not going to be overall the only ecosystems that we'll be in. But the -- it's in the billions, I mean it's in the billions.

Your next question is from Matthew Breese with Piper Jaffray.

I was hoping to get a little bit more of a dynamic view on the margin and the margin outlook. I think you suggest that with no Fed hikes perhaps we see stabilization or some upside by the midpoint of this year. Does that include the yield curve being basically flat where it is now?

Yes, that includes the yield curve being similar to where it is now, that's right.

Okay. And so any sort of steepening would be beneficial?

Correct.

Okay. And then could you give us just a sense in terms of your multi-family commercial real estate book, what the backlog is of loans that will reprice this year and what the pricing gap is that will help the margin as well?

It's very hard to predict what's going to reprice this year and we've talked about that, discussing the prepayment penalty income, it's very difficult to predict client behavior. 2014, 2015 and 2016 were huge years for us volume wise, so you'd anticipate that we'd have quite a bit coming due many, many billions should reprice this year, most of those would be in the low to mid-3% range and we should see them price into the mid-4s.

My last one is, I guess if we were to roll back the tape a year or 1.5 years, many of the initiatives that we're talking about now, whether it's a digital asset team, Signet, capital call lines, they were really not part of the discussion. And so I know you're hesitant to say what the deposit balances on any of those items will be but maybe you can give us an outlook for forecast to deposit balances as a whole from those items as we look out the next year or 2 years? And then secondly, could you give us an idea of what you're working on that might be outside these items that will help loan to deposit growth beyond 2019?

We won't project or predict publicly what our thoughts are, it's too difficult. Well one of the things that I will say is we believe that our geographical growth to San Francisco and one of the things we've mentioned in the past but didn't come up today that we'd love to open up in Los Angeles as well, that will help us. The expectation in both locales would be that we need to have more deposit growth than loan growth.

Understood. Is M&A part of the discussion as you think about the West Coast expansion?

Every time I discuss M&A, it just gets me in trouble. So I would never say never. I think it'd be more likely. If we ever did M&A, it would be outside our market and not in our market.

This concludes our allotted time and today's teleconference. If you like to listen to a replay of today's conference, please dial (800) 585-8367 and refer to conference ID 3184218. 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.