Q1 2020 Earnings Call
[music].
Welcome to signature bank, 2021st quarter results Conference call.
Hosting the call from signature Bank, our Joseph J., Depaolo, President and Chief Executive Officer, and Eric R., Howell Executive Vice President corporate and business development.
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And it's now my pleasure to turn the floor over to Joseph J., Depaolo, President and Chief Executive Officer, you may begin.
Thanks Maria.
Good morning, Thank you for joining us today for the signature bank 2021st quarter results Conference call.
Before I begin my formal remarks, Susan movie the forward looking disclaimer. Please go ahead Susan.
Thank you Joe This conference call an oral statements made from time to time BYOD 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 the statements because they are subject to numerous risks and uncertainties relating to.
Our operations and business environment, all of which are difficult to predict maybe beyond our control forward. Looking statements include information concerning our future results interest rates in the interest rate environment loan and deposit growth loan performance operations, New private client team hires you 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 went through the quarterly results and then Eric how are you VP of corporate and business development review the banks financial performance in greater detail, Eric and I will address your question at the end of Baltimore.
Let me begin by saying all Hearts go out to walk client colleagues, Ryan and their families.
During this tumultuous time in the world.
We're proud about how we dedicate their client.
Families and communities.
They persevered through these extraordinary circumstances.
We have come together during the call Big 19 endemic.
Where the personal stress level of many have reached monumental proportion like.
Life and death situation for the masses.
We will endure.
He was not that address them an organization been such periods in history.
Nine years since we began operation Windoor 911, just if the opening outdoors.
In the financial crisis, we not only subodh rather drive.
And finally, we overcame superstorm sandy.
Now we are facing covered 19 and government.
And despite the turmoil is causing worldwide I'm encouraged to navigate these uncharted waters.
Hey management team at my side since the bank sounding <unk>.
It's incredibly important distress experience what tested veteran management team.
We are evaluating and reacting to the crop complex environment, and we know exactly what each of us will handle.
Together not only how we proven our ability to navigate through difficult times well, we have continually demonstrated the successful execution or single point of contact founding model well, both good and all the time.
We recognize the one [laughter] the time, we need to shine well why continue meeting their banking me.
Oh colleagues have been working round the clock going through all clients businesses, which include many essential services operating at full strength.
We also grateful all clients recognize the strength of our balance sheet.
This quarter alone or deposits nearly 1.9 billion, a new funds with Uh huh.
Well I see signature bank is it safe haven for their phones, because they know we value well capital and liquidity as a way to go into their security.
Well the bulk winds appreciate defaulted student thinking about banking model as they have watched in Florida over the years.
I've unwavering focus on organic growth has a hiring a veteran banking team even on news colleague well for expertise near field, which is complimentary to the strength of the signature Bank management team that has always loved to say Oh.
As we pass Crazy, we want to assure you management remains dedicated guiding the bank.
The unsettling time.
Well focus on the soundness of all conservative risk management and capital allocation practice.
Ensuring the safety.
About 1500 colleagues and their family.
Hi, supporting all clients by meeting their needs the safety and health of all stakeholders remain Paramount to our franchise as we navigate the times ahead.
We know that Q1 earnings sounds like 18 history.
But they are important because although they are about the path.
Hey, good yes.
The bright future.
Now, let's take a look at earning.
The tax pre provision earnings for the 2021st quarter were 218.5 million compared with 207.
Point 9 million for the 2019 first quarter. The increase was predominantly driven by substantial asked a good growth 4.5 billion offset by the investments we've made this initiative.
Putting all west coast expansion.
Net income for the 2024th quarter.
It was 99.6 million a $1.88 cents <unk> earnings per share had been working 43.5 million with $2.63 diluted earnings per share last year.
The implementation of diesel the decrease in net income was driven by a first quarter provisions for credit losses.
66.8 million, which was wholly attributable to covert 19.
Looking at the pod core about philosophy.
Deposits increased 1.9 billion to 42.2 billion quarter, well average deposits grew by 1.1 billion.
[laughter] second.
Corridor of deposits will we ever reported.
Oh. This is that was a third quarter in a row of over $1 billion dollars into pauses in both total and average deposit growth.
Since the end of the 2019 first quarter deposits have increased 5.6 billion an average deposits increased 4.7.
Non interest bearing deposits of 13.4 billion still represent a high 32% of total deposits.
The positive in low coupled would only be crazy, but to increase of 4.5 billion over 9% in total assets.
First quarter of last year.
Now, let's take a look at all blending business.
It was going to 2021st quarter increased 1.9 billion or 5% before yeah.
For the prior 12 month loans grew 3.5 billion.
The increase in loans this quarter was again driven primarily by you.
Well in banking capital call facility.
This is the six consecutive quarter, we'll see an eye out they see all be growth for doing the rapid transformation of the balance sheet to include more floating rate assets and diversifying our credit portfolio.
Turning to credit quality, all core portfolio continues to perform well.
Non accrual loans.
59 million, well 14 basis points of total home compared with 57.4 million.
<unk> million or 15 basis points for the 2019 fourth quarter.
A 30 to 89 days past due loans increased 118.6 million, mostly due to processing and documentation delayed given to cope with 19 circumstance.
A 90 day, well past due loans remain low with 4.1 million.
Net charge offs for the 2021st quarter were 1.7 billion compared with 2.5 million through 2019 fourth quarter.
We do adoption of Cecil the provision for credit losses from 2024th quarter was 66.8 million bodes well compared with 9.8 million through 2019 fourth quarter.
The sport the banks allowance for credit losses to 87 basis points of loan.
The coverage ratio.
Dan.
Help me, 603% or.
As I mentioned earlier the increase in the provision was wholly attributable to Cobiz 19.
Looking at the effects of Cold 19, we thus far has a little global 5100 client would 5.6 billion alone asked with some form of temporary short term payments the flow.
We are happy to work with these coins.
Well clearly struggling to find who the calling crisis.
Most appear to recognize its pepperoni and I'm not looking to give up their businesses in livelihoods at this point of course.
Let's go on for an extended period of time.
This meeting.
On the payroll production on the table protection program again, we participated.
Hope all clients and the committee at Lauren We funded approximately five always is being a pool loan request.
[laughter] loan requests.
Now onto the team fun.
Despite dealing with all the calling turmoil we continue to move forward.
The 2021st quarter Bankcard, New leadership for the West Coast, and Onboarded 12, private client banking team.
Five additional teams to both through our presence.
In the San Francisco market, and seven to spearhead the banks ethics, and the greater Los Angeles marketplace, where we plan to open up for new offices.
Hey, and thus far in April.
Already required to do feel team.
Well, let's see Angela.
At this point I'll turn the call over the 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 margin.
Net interest income for the first quarter reached 348 million up 29 million or 9% when compared with the 2019 first quarter and.
And then increase of 10 million from the 2019 fourth quarter.
Net interest margin increased four basis points in the quarter versus the comparable period, a year ago and increased seven basis points on a linked quarter basis to 2.7 million person.
Excluding prepayment penalty income core net interest margin for the linked quarter increased four basis points to 2.71 person.
The increase was driven by a significant decrease in deposit costs.
Looking at asset yields and funding cost for a moment.
Interest, earning asset yields decreased 18 basis points from a year ago, and four basis points from a weird quarter to 3.83%.
Decrease in overall asset yields was driven by lower reinvestment rates in all of our asset classes as well as the repricing of floating rate loans due to declining interest rates that took place during the quarter.
Yields on the securities portfolio decreased 13 basis points linked quarter, 2.92%, given a much lower market for reinvestment rates and higher CPR speeds.
The duration of the portfolio decreased slightly to 2.5 years as a result of significantly lower market reach that quarter runs.
Turning to our loan portfolio yields on average commercial loans and commercial mortgages declined five basis points to 4.13% compared with the 2019 fourth quarter.
Excluding prepayment penalties from both quarters yields decreased seven basis points.
[noise] prepayment penalties for the 2021st quarter were 9.2 million up 2.5 million compared to the 2019 fourth quarter as the dramatic decline and longer term rates went through a significant increase in Syria prepayment activity.
Now looking at liabilities.
Our overall deposit costs this quarter decreased 10 basis points to 98 basis points due to the significant decrease in the fed funds rate.
Average borrowings excluding subordinated debt decreased 273 million to 4.2 billion or 8.2% of our average balance sheet.
The average borrowing costs decreased nine basis points from the prior quarter to 2.49%.
Overall, the cost of funds for the linked quarter decreased 10 basis points to 1.16%.
Looking at our liquidity position, we're in a very strong floating.
We increased our cash position substantially to over $1 billion. In addition, we have ample borrowing capacity at the FHLB. We also have additional borrowing capacity at the fed discount window.
We have free securities that provides significant liquidity and finally, we have unsecured overnight axis the fed fund mines with various counterparties.
The bottom line, we have more than an ample liquidity to meet our coinage needs.
Onto the non interest income and expense.
Non interest income for the 2021st quarter was 14.2 million increase of 300000, when compared with the 2019 first quarter.
This quarter, we change the method of accounting for our low income housing tax credits the related quarterly amortization of 9.1 noises now reported an income tax expense instead of non interest income.
This change is also reflected in prior periods.
Noninterest expense for the 2021st quarter was 144 million versus 125.1 million for the same period a year ago.
18.9 million or 15% increase was due to the significant hiring a private client banking teams in Los Angeles to launch our presence there as well as the five additional teams for San Francisco.
The banks efficiency ratio was 39.7% food 2021st quarter versus 39% for the 2019 fourth quarter and 37.6% from 2019 first quarter.
Looking at our taxes, there was a $7.8 million discrete item related to the difference between the best me price and grant price of restricted shares that vested during the quarter.
Additionally, as mentioned earlier tax expense included 9.1 million and low income housing tax credit amortization expense the effective tax rate. Excluding these items was 23.2%.
Turning to capital.
As a result of adopting Cecil.
We recorded a onetime cumulative pre tax adjustment of 45.8 million.
Additionally, there was a cumulative adjustment for the adoption of the proportional amortization method of accounting for a low income housing tax credits of 24.6 million.
And the first quarter of 2020, the bank paid a cash dividend of 56 cents per share.
Additionally, during the 2021st quarter the bank repurchased approximately 393000 shares of common stock for a total of 50 million.
During the quarter, we temporarily stopped their repurchase activity given the cobot 19 circumstances, and we have no plans to repurchase shares in the future until these circumstances change.
The dividend and share buybacks kind of minor effect on capital ratios, which all remain well in excess of regulatory requirements and augment the relatively low risk profiles and balance sheet as evidenced by a tier one leverage ratio 9.4 or 5% in total risk based ratio of 12.77%.
As up to 2021st quarter, and now I'll turn the call back to John Thank you.
We are motivated by the initiatives.
We recently put in place.
Such as our California expansion.
Because the enormity of the current environment.
He has to be outweighed by the importance of the future.
The bank must forging ahead and continue a path to growth.
Opportunities abound.
As difficult as the current environment is this is went off high touch service model truly differentiates us in the marketplace.
Furthermore, we never lose sight of the fact that people want to know that money is safe in difficult times.
We look forward to continuing to be a trusted banking partner to our clients and helping them to this quagmire.
Now we're happy to answer any questions you might have movie year I'll turn it over to you.
Thank you Sir the floor is now open for questions.
This time, if you have a question or comment please press star one on your Touchtone phone.
At any point. Your question has been answered you may remove yourself from the Q by pressing the pound key.
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Our first question comes from the line as Dave Rochester of Compass point.
Hey, good morning, guys nice quarter.
Hey, Dave made good to see your number one in Q again, [laughter] right Baghdad.
Hey, that's great news on the teams are really nice AD for you guys. So I was just hoping to get some more color on those maybe how large the teams are from a book of business perspective, and what they can do for you guys and then maybe just from an expense perspective, we get to get the timing of their joining and how they impact your outlook there.
Yeah, you know, we're very excited about the but seems that we'd been borders are truly high quality experience banking teams each.
Each one of them has you know books of business in the hundreds of millions and we're excited about the higher Juniper Johnson <unk> read our efforts out there.
She is 30 plus year veteran out of bank of the West and no. She is already made a huge impacts honor San Francisco business and certainly in L.A. will anticipate opening up those four offices.
So so it's it's clearly.
Area that we'd expect a.
Significant opportunities.
On the expense front related to that.
We had said we'd be in a 15% expense range going down to about 10% to 12% by year end, though we continue to hold for that so we're right right out that 15% number this quarter will probably be a similar 14 or 15% growth for the second quarter, I think you'll see that trend down linearly down to.
30, the 12 in 11 in 10, although obviously when we see opportunities or the marketplace. We're not shy, we'll we'll look to bring more people and act on those opportunities. So we'll be happy to announce at any point that we might have to do that expense guidance.
Well again, but for now we anticipate that will trend down in the course of the year.
That's great to hear any Ah systems build out or any tech investment you have to make for any of these guys are 10, a pretty much of the ground running.
Oh <unk> they pretty much can hit the ground running now we don't really see a meaningful tech spend there I'm, obviously, we'll have to expense associated with opening the locations, but we're going to give a little bit more of a branch like strategy in the Los Angeles marketplace.
As we really bring the banking services to our clients Oh, there's not much need to build out to a traditional bank infrastructure. There I'm sure that should help keep the expenses mitigated somewhat yeah great.
Maybe just switching to credit real quick if he just talk about what you're saying in terms of loan deferral activity modifications and then maybe if you just give some color on how your retail CRT customers are doing through the locked down and how cash flows are trending there with multifamily booking.
I know you have some really low ltvs in that part of the business, maybe just talk about those as well to be great.
Well, we'll talk a little bit about the payment default.
We have a 14% of the portfolio.
I've asked for Florals, that's about a 5.6 billion.
For the 14%.
In particular, if you look at CRB.
It's a 4.1 billion.
A 15%.
The highest percentage, the which is expected signature financial which that 25, 25%.
As it relates to Uh huh.
See I read.
Well, we hearing all that ever talk about the retail I'll talk about the multifamily well be hearing on multifamily side is that market rentals are about EUR, 80%.
They are collecting rent.
80% of market rental.
And then on makes security on site rent stabilized, it's about 50% of the rent being collected.
Oh.
Very few transactions are occurring.
In in a in the marketplace.
We were not doing any new business.
With Uh Huh.
Prospects, because we're not really taking on any new clients.
Oh, well only doing business with.
Existing clients.
And.
I think the most important thing to understand.
As it relates to a payment to florals.
Is that we're doing them for three months.
Either April May and June well May June and July.
Well it confirming the principal Andorra interest.
And well also.
Adding it onto the backend.
Well go well go from three months six months, if we need to.
It really depends upon how long the current circumstances exists.
I know the governor has extended its the 15th May should it go beyond that and we'd have to look at extending.
Hi, there is a little detail on the retail pie.
On the retail front, we've got about 1.35 billion over five point.
I believe dollar portfolio or 24% Bitesize for.
Deferral there.
Over a third of the items in our neighborhood retail.
Clients Oh, that's that's an asset class that we've talked about for years now that we really like a lot.
Held up incredibly well through the great recession. Unfortunately. This is just a rare set of circumstances that is significantly impacting that the dry cleaners. The Harrison ones. The barber's the pizza places the everything's been affected by this in this environment, so but at a 50% 56 per.
Sent LTV and a 1.62 debt service coverage.
We're not overly concerned with it at this point.
Our clients generally are working with us they recognize that this to be a temporary situation.
They're not looking to hand over building and give up there you know 30% to 50% equity in the properties.
You know they recognize that they're going to need it.
When this temporary situations over so ultimately you know there they're happy with the girls I would give it and as Joe said, we'll have to see what would what happens in the future. This is.
Two three months more but we should be fine it for now beyond six months.
That's where it's got to get a bit more difficult for us yeah I'll add on the multifamily. The LTV is 61% debt service coverage is 1.38.
Okay, Great and then on the a those retail strip centers those are located and high density areas right and primarily on long Island.
Yes, well, it's in outer boroughs right, So Queens, Brooklyn, Bronx Long Island in Westchester Yep got it.
Great. Appreciate all the color guys, maybe just one last one real quick on the NIM of you just talked about where you guys were expecting for to chew given a full quarter impact to the rate cuts I know you've been moving deposit costs down fairly aggressively in the last couple of months. So if you have any updates there on what the deposit the Casa deposits is maybe a march or April every group yeah, what Joe.
Much on the deposit side of equation that I can hit on the rest the Ah.
The average deposit cost for the first quarter was 98 basis points.
Included in that was the month of March which averaged 80 basis points.
And in the month of April so far we're averaging 60 basis points.
So last two cuts in March I really starting to be effect of felt in April so it bodes well for us going following that we troughing the costs and we still have a tremendous opportunity continue to do so.
On the liability side.
Right.
Looking out the overall margin really we have a flat to upward bias, yeah, I'd say, a little bit more strongly that we'd have an upward bias. If it were not for significant deposit flows that we've seen thus far this quarter.
Today were up over $2 billion simple average and ending deposits for the second quarter. So we're seeing from undisclosed there. So we're sitting on a bit more cash than we normally what other than that we'd have more conviction around our margin being up but we still we still anticipate it will be I'm not as much as we as we.
Let's go up so on the asset side, we really see in credit spreads widen and all of our asset classes. So, but that's been very beneficial to us is receiving the run off being replaced.
By a lower asset yields, but not nearly as well as you as we might have anticipated a month or two ago.
And really you know we put floors in in our foreign banking.
Area, we now have a lot more floor at 1% and we're seeing spreads to 200 275 basis points over LIBOR, so that being or bigger sorry growth. That's been that's been very helpful to the margin outlook for us.
That's great appreciate all the color guys. Thanks.
Thank you.
Our next question comes from a lot of conserving of Morgan Stanley.
Great. Thanks, I guess im starting off in in terms of the loan growth can you just talked about how much of that growth was actually as you remember the funds banking business versus all the other categories. Thanks.
And we really had a solid growth in this year or so you can see an eye fronts across the board. So a 1.4 billion. All this was driven by the phone banking Division, but then you know traditional Oh, Gee and I was up 157 million.
Nice performance out of our house, if there's one new group, which was up 77 million.
Venture capital was up 88 million and specialty finance was up 42 million. This tends to be there are weak this quarter I'm coming off the fourth quarter, which is their strongest oh I'm sorry, so that was anticipated, but we saw across the board increases unforeseen things, which is great to see signs you know the continuance of.
Diversification strategy that we put in place a couple of years ago.
Okay. That's great and then just in terms of the deposit growth I mean, obviously incredibly strong deposit growth last quarter, and if I heard the $2 billion right this quarter.
Two questions around this so one just what's driving this level of growth like what's changed there or is this just fear in the market and then also when you think about the rest of the year.
Is this a level or at least to serve an elevated pace that could continue in the back half of the year in into 2021.
Well, let me start off by saying that I'd be very disappointed if we weren't at the exceeding the high end by average.
Well it took three to 5 billion.
It's that it's that confidence.
That we are because it's a combination of things.
One in new initiatives that we started.
During the last two years.
They all contributing.
And they're contributing a in a fashion that we expected to grow even more.
The growth percentage to grow even more.
And we have the teams coming from California.
No we have our existing teams that is still.
Performing at a double digit increase.
And we're also seeing.
New deposits coming in.
From clients that can't find their banker.
And we had that single point of contact.
Custom Oh client centric model.
That is really allowing us to.
Show you prospects that they can find us and we can find then.
So we've been out it's across its across the board.
Ah we know of some prospects that are turning into clients.
That would they be deposits of hundreds of millions.
In the coming quarters.
So it's just.
The initiatives are coming to fruition.
Along with the continuing track record.
Couple that with the.
Carbon environment.
And it's like a perfect storm.
That's can go on for several years.
Alright, perfect that's great.
Sorry got.
Oh this is going to say that nobody's ever gave.
I mean, we knew it normally wouldn't.
He stopped giving or.
Numbers in the quarter or the beginning of quarters.
Because you know we have choppiness it on deposit.
But as the Choppiness of a deposit of 300 million going out.
We have to deposits coming in at 500 million.
So we're fairly confident in the growth that's going to occur needs for Tuesday.
That's perfect day that actually May.
Slowed down the growth in and then two positive because of all the cash will have.
Well, we're glad to have these core deposits did not happen.
We'll take that trade off every time.
Sounds good alright, thank you very much.
Our next question comes from line have Abraham from the law of Bank of America Securities.
Good morning, guys.
Morning, everyone. Good morning Abraham.
So I can't give just wanted to follow up on the name and Oh, let's all doesn't seem like they positive outlook on balance sheet growth, both oh loans and deposits. They can you talk about upward bias and it can dump the margin I get the that stronger deposit growth could have an impact but outside of that like if the reason why.
I'm into means you're just talk to us and don't have the tragic you have the margin as we look out into the back half of the a and b on they.
Because that can be stable do still see some downward.
Sure I'm deeply looking out into the back half into next year.
Figure if we look out into the back half of this year, it's it's relatively stable.
And then if we look out to two the following year no should the yield curve stay similarly shades.
Well, we'll start to see the margin decline at about a pretty slow pace you know.
At this point or a few basis points a quarter.
But that's that's given that the shape of the curve stays where it is.
Essentially assets will catch up to the liability decline, but it's going to take some time because like I said, we have seen credit spreads widen I mean, we're picking up a securities now and you know before foreign half range, which was just unheard of you know a month ago. So I'm not so help us to really.
You know stemmed the tide of the decline in on the asset side.
Got it and I guess, it's moving back to I think Dave asked about the CD book I feel like that's the biggest jag on the stock like no and you provided good color around that but just don't wasn't don't know.
The underlying borrowers your comfort level around them being able to sort of come to this yeah I mean.
Assuming they could be open up into next seem to six months. Just don't think if you can give some confident on the confidence it on the VP landlords to borrowers.
Our relationship with them in terms of the visibility that you have that you know.
Unless we in late one year loved all these things should not be credit issues for significant if you like that's going up it's sort of underpinning why the stock is trading ranges.
Well on the multifamily side.
And even on the come a best the commercial real estate.
We have some.
Every large clients that a multi generational.
[noise] that has been around.
Decades.
[noise] had the way I was at all.
In terms of cash.
Naturally a waiting on the sidelines for those.
Well not identified that way.
Because they believe there will be an opportunity Dubai.
They're not ones to give up to say here are the key.
That many of those large families we were talking to our.
Commercial real estate Oh.
Bankers.
The saying just the opposite of.
What many are doing in payment the files they have been asked the payment to file.
Because they have the where with all.
That's all client.
And they're the ones that are giving us.
The confidence.
At least.
It's this pandemic he's Andy.
Sometime during the summer then if you do what you're going to second half of the year.
You're gonna see opportunity to buy.
And it's going to be all clients that are doing the buying off to selling.
That's kind of the background of of the type of signature.
Commercial real estate client.
We're not on and not on the fifth they're not really on fifth Avenue and the smaller blocks.
And.
It's not going to be an issue sedan.
Bye.
At discounts.
They just waiting on the sidelines.
Got it yeah no stuff.
You know everything I think it does and I think it's just a matter of time in terms of it it's been unprecedented what's happened in things.
In terms of having complete this out and it just one last one if you think way, let's put it this way.
We have clients on the Grand conquest in the Bronx.
Some of those stores had a close.
It's temporary.
He tells it wasn't go back up come back up on foreign vote in the Bronx.
We use the blas because I'm a firm I'm from the box.
Four of them road.
Stores that have closed isn't a comeback.
People going to shop.
People that there may be few people on for them go today, but there's going to be a lot more once we come back.
Yeah, I mean, there in areas like Eric said earlier.
The pizza, we had been nail salon.
The Baba all that data close today I'm going to be open whether it's whether they open them.
With somebody else comes to open up.
So as it was where that you see that vacancy.
So we will be viewed this as temporary.
And we feel like to those that will not survive.
For clients as long as not on it.
For the most part.
Got it [laughter], just edick vipin signature financial anything they didn't that portfolio that seems like at higher. This because also the logged onto any data that might be overly susceptible hospitality leisure travel related.
Yeah, I think you know it's the areas that we've discussed.
Pass that.
Anticipate being affected by this its transportation and trucking and franchises or construction and manufacturing <unk> those are the primary categories.
And the trucking space, you're talking about the charter buses the school buses things that are.
We're obviously impaired no franchise were mostly in the fast food.
No. So there was a good obviously imperative if they don't have drive through window certainly so.
You know they got married as as the same with the properties were lending on revenue producing equipment revenue producing collateral and our clients really see this you know it's been temporary in nature, they're not about to give us back the property or the collateral and equipment that they need to run their business.
Right they want to get back to work they want to drive that truck they want to open up their franchises and you know, they're not giving up.
I think broadly very broadly everyone sees this.
As a temporary situation everyone's looking to muscle through it and we're there to do that with them and help them through this environment. So I'm. So we have not yet had anyone give us back the keys to their truck or say hey, take my property back we're just not seeing not at all.
Expected to have seen a little bit overarching we're just not.
So we're not overly concerned right now.
Cause of the well collateralized nature of our land.
I think that's very very important for us the to point out that for the for the vast majority of our loans, we have a piece of collateral.
Well not lending on Hearables, so I've seen some franchise stores.
Hello.
Well I've foods.
At 40, causing them.
People are not going to stop eating dairy Queen Mcdonalds.
And.
We can we use the word temporary to temporary situation for those that have drive-thrus.
Had a line of 40 cars.
It is showing that people are really looking forward to going back to places that gave them comfort food.
And then you know the areas that everyone's talking about it that are very high wish the hotels hospitality travel oil and gas our exposure to those two is asset classes are de minimis.
Oh.
But thanks for taking my questions. Thank you. Thank thank you.
Our next question comes from lot of Casey Haire of Jefferies.
Yeah. Thanks, good morning, guys.
Yeah, Hey, a sort of follow up on the on the rent controlled multifamily the 50% rent roll.
You know how is that how does that trending is that is that does that stabilized at 50% is it still building or is it down from a peak and then what what does the provision.
Reserve build assume one that that normalizes lower because I can't imagine this provision here captures captures that kind of [noise].
That fall in rent.
It's hard to say Casey.
Now we thought it stabilized.
But then who knows if everyone's going to go on Iran strike.
Hi rent stabilized they said they were going to do that may fronts, we don't believe that.
Most people wanted to that.
Uh huh, so it's hard to say if it's if it's going to move up or down any further I will say this we had a number of Ah onez.
Tell us that.
It's Kevin section eight clipping about 80% of the rents.
And what what some of the some of them are doing well.
We had that collecting the 80%.
They're working with the retail stores.
According to say, he 80% companies, but they need on the multifamily side.
Well, it's a 50% is again, we're not we're not concerned about it.
Because we believe that.
It's a temporary situation that will come back once a blue collar workers that we're talking about gets his job hi, John back.
If they didn't want to stop and I'll cover.
And again at 60% LTV once 140 debt service coverage and you know I think the key to all this really is the fact that we talked about this for decades now we want to to the jockey not to the horse right. We're dealing with multi generational a multi property owning a fan.
Please that have been through environments.
Troubling environments before that that's easy to see this or recognize this as a temporary.
Environment. So we.
We just we just don't see a level of losses really or any losses really meaningfully coming out of this.
Okay understood just another follow up on on the margin.
I'm just wondering you know the deposit trends obviously saw are favorable for you.
Are you guys going to continue to pay down borrowings is that a is that part of the ER. The upward NIM bias and then <unk> the securities book with with yields at four and a half is that should we expect that to grow going forward.
Yeah, well before it happens on the top and those yields I mean, we're getting anywhere from three three or 4% on securities book, but yes, we will.
Certainly look to in Boston and grow that portfolio, we've been wanting to do that for quite some time, but haven't had environment to do it on the borrowings absolutely anticipate pay no borrowings we have.
About 450 million in borrowings coming due over the next three months I'm that we'll be looking to pay down some pretty high prices.
So some of which are north of 3%.
So that that will definitely be beneficial to the margin.
Okay. Yeah. Yeah. This is the borrowings as it was 250 or so in the quarter, where where where it went that settle and that's going forward.
Oh I'm not sure case.
Sure.
Expect would get and another 10 basis points, if not more out of that again.
Well right, Okay, great [noise] just last one for me the I caught the the a the tax rate is there was sounds like there was a discrete item and then obviously an accounting change on the fee side, just where do we settle all im going forward.
Yeah, I think the B to B, a conservative we stick with the 25% effective tax rate.
Great. Thank you.
Hey, good case.
Our next question comes from Wanna, Steven Alexopoulos of JP Morgan.
Hey, good morning, everyone is waiting for you.
To start just to follow up on signature financial what was the balance of signature financial at the end of the quarter, maybe Eric can you quantify I know you called out a couple of exposures can you quantify those cobot exposed exposures.
Yes, so signature financial was 4.6 billion at the ended the quarter.
That we've got 1.2, a little bit less than 1.2 billion or 25% that's asked for deferral.
Transportation, which includes you know trucking charter buses school buses that a bunch of different things that go going there no.
That was 424 million.
Of the Oh, the amount of relief.
And then franchise was another 300 million. So those were a two biggest buckets and that's that's broadly what we anticipated.
We see.
And what were the balances on the transportation and franchise. That's committed 1.1 billion 1.15, so about 37% of the transportation has asked for relief and a franchise was 455 million so about 70% of franchise, but back.
Clearly percentage wise is truly area that's been harvested.
Okay.
That's helpful and then on loan growth, we're seem quite a bit of disruption at p. as well as VC firms do you guys expect a slowdown in capital call lending volumes into Q.
No not based on the pipeline that we see going right now we don't see a slow down at all.
Okay.
Great and then finally.
Look at the West Coast team hires where these all deposit teams.
And why so many this quarter or did they come as a group from one bank. Thanks.
Well, we right I mean, there put up predominantly traditional cnine and deposit teams are fairly equal amount a little bit more deposits that loans overall, but each team has its own unique mix of that.
Yeah, we were able to hire someone else bank at Western Judy for John had mentioned.
Earlier to leave and spearhead our initiative there a upon her joining joining US there were many people have thought institution that reached out to her I'm looking to find a new homes. So that's where a seven up in new teams came from.
And then we have four come out of Chase and one actually came out mountain itself.
Additionally, you fired from Citi Bank be evaluate heritage bank, suppose, but a few other institutions, where we've hired people from.
Okay, and maybe if I could squeeze when and where the contribution of deposits from the kind of whats team material in the quarter. Thanks.
They approached the 100 million in deposits and they have some significant opportunities that you anticipate landing relatively soon.
Like multiple for that.
[laughter].
Terrific. Thanks for taking my questions. Thank <unk>.
Our next question comes from a lot of Jared Shaw of Wells Fargo Securities.
Hi, Thanks, a lot good morning.
Hey, Canada.
When you when you look at the West Coast do you feel that that's I'm.
Sure built out where you wanted to be now or should we expect that there's additional opportunities as we that's your go through the year there.
Well as you go for the next several years I'd like to see the West coast equally East coast.
We believe we want they want to take that opportunity.
To to grow up business.
And in order to be 100 billion dollar business.
We have to continue to go in New York, but we have to go in Los Angeles, and San Francisco and.
Some of the city.
In California so.
So.
We have a we had an ambitious ideas.
And when you when you look at the teams that you brought on you said their traditional seen I lenders and he specialty any any industry focus or is it really just you know sort of it to standardize signature model of.
Going after the the Influencers economic Influencers, that's right I would say I would say standard standard business.
Handled by both way above standard bankers.
Okay.
That's great and then on the capital call lines have you seen any.
Increasing the duration of the capital call lines are you seeing the GPS uses to maybe a.
For a LP calls or is it just you know growth is coming from good investment opportunities and market share gain.
Hey, its growth in market share gain for four or find a way.
Oh, okay still bringing on their clientele.
And new business.
We we looked at this closely because we've seen other to say that yeah. It's in the drawing of the headlines but not not here.
<unk>.
Okay.
And then just give us an update on the on the balances the multifamily ancillary balances at the ended the quarter and then what multifamily originations were and what the current pricing is on that.
Yes balances and ER in multifamily or were 14.88 billion.
And commercial property other forms of sea area were 10.53 billion.
And I constructional when it was 1.2 billion.
The multifamily five year fixed is 3.75.
And some really good deals three and five eight.
So essentially the high to me.
And pushing higher if anything.
Okay.
And what did the utilization rates look like at the capital call lines, sorry, circling back on that.
There's 65% they've been 65% for several quarters now hasn't changed at all.
So remember as you know in the capital call business, we're dealing with very very well established a foreign companies that are dealing with the best LP is out there.
So there.
They're not going to panic and draw down on lines are not gonna look to call from the LPG is either I mean this is this environment right now where we're there I'm looking for opportunities.
Right and we think it quarter to two quarters from now.
That's when you'll see them draw on their lines in order to seize on those opportunities. So so right now it's pretty steady, but we do anticipate in a quarter or too as they see opportunities on falls in the marketplace, but that's where no draw.
In fact since the end of March all the way to currently in April.
It actually utilization is actually down in the entire portfolio.
Okay, great good color.
Sure My chest.
Thank you. Thank you.
Our next question comes from one of massive receipt of Stephens Inc.
Hey, good morning, guys and morning, though.
Just curious on the New York City rent Rolls, you mentioned, 80% collection from market rate, 50% for rent stabilized could you give us to break down between your exposure to market rate and rent stabilized.
Yes, it's right around 50 50.
Okay.
HM.
And then you know fee income this quarter was was pretty strong.
Even outside the accounting change can you talk about the drivers there and prospects for future growth I'd imagine capricor lines, Encana, which are helping.
But I'd like to hear your thoughts and then as we look further out yeah. Once these businesses get fully ramped up what proportion of revenues do you envision fees, making up.
Well I mean at 5% now that they're not they're not much right. We've got a lot of work to do on that front not certainly on some of our focus over the course of this year next year fund banking definitely would the on utilize fees a day obtain that's helping to move the needle I certainly specialize mortgage servicing in that group.
We absolutely think as they will be able to move that line item as well.
You know foreign exchange is an area that we put any significant emphasis on and we hope a throughout the course since year, we'll start to really.
See the revenues move there.
And then we've got a credit cards, which is something that we really don't need anything from I think we've made under $100000 and fee income from credit cards last year that should be many many millions of dollars. So that's going to be an emphasis for US no later part of this year and through next year, you know and B.
We see our venture banking group will be a pretty large contributor of fee income as well bolted FX and credit card. So we need to get those products up and running for them as well as many of our other existing teams. So so there's a lot of work to be done a we'd love to move that 5% to 10 per se.
But it is you know turning a ship and.
Sure.
An aircraft carrier notion so it's kind of take some time, but we're pleased with.
The progress we've seen thus far.
But there's a lot of work left to do yeah, we're going to be dependent wouldn't be dependent upon the new you would change the new initiatives because the traditional teams that we've had all along.
Uh huh.
There's very little fee income being collected because.
They do a great job of having their clients keeps decision to Matt sufficient amount of D.A. <unk>.
Hence our D.A. is 32% of total deposits. If we can have clients continue to keep it at that level well you know we waived the fees. So that's why we lived dependent upon these other initiatives to drive that 5% did have extensive 10.
Understood. Okay last one from me just you know the deposit growth this quarter, how much of that was driven by you know revolver draw down only to be redeposit. It was there any of that going on.
Got it diminimus amount.
Only area that we saw a little bit about it was in our venture banking group.
But as you know given that they just started really it wasn't a meaningful amount.
Great Okay.
That's only had I appreciate taking my questions. Thank you and I didn't Matt.
And thank you ladies and gentlemen, this concludes our allotted time and today's teleconference.
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