Q2 2020 Signature Bank Earnings Call
Welcome to submit your banks Twentytwenty second quarter results conference call.
Hosting the call today from signature Bank, our 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.
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It is now my pleasure to turn the floor over to Joseph J., Depaolo, President and Chief Executive Officer, you may begin.
Thank you Laurie.
Good morning, Thank you for joining us today for the signature bank 2022nd quarter results Conference call before.
Before I begin my formal remarks, so who knows who read the forward looking disclaimer. Please go ahead Susan.
Thank you Joe This conference call an oral statements made from time to time by a 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 maybe beyond our control forward. Looking statements include information concerning our future result interest rates and the interest rate environment.
Loan and deposit growth loan performance operations, new price kind team hires new office openings business strategy and the impact of the covert 19 pandemic on each of the for going in on our business overall 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 John.
Thank you Susan I will provide some overview into the quarterly results that ever Kowaleski VP of corporate and business development will review the bank.
Yeah sure performance in greater detail I look and I will address your questions at the end of watermarks.
Signature bank experienced an extraordinary corner of growth in spite of the economic uncertainty, resulting from the coldest 19 environment.
The record quarterly deposit growth of 8 billion emanated from all.
Right.
Drilling a well established Florida quite banking team and business units.
Block chain based payments platform Signet.
More recently formed digital banking group, one banking division that's it back in <unk>.
I was mortgage servicing banking team.
As well as old latest expansion to the West coast.
Additionally, this quarter, we saw that could bone growth both with.
And without the payroll protection program loans.
All this growth occurred while we also continued asset diversification strategy.
Why furthering commercial and industrial then due primarily to the fun banking division and selectively growing all commercial real estate portfolio.
Yeah most.
Certainly the best inflection of recorded strong results can be evident.
The reduction of payments to follow.
As of July 16 of the loans that had.
We had payments a formal come due after three months.
We've seen 60% of the loans resumed payment data.
So now let's take a look at our earnings.
The tax pre provision earnings for the 2022nd quarter, what 247.9 million compared with 211.4 million for 2019 second quarter.
The increase of 36.5 million was 17.3%.
Was predominately driven by substantial asset growth of 11.5 billion.
Offset by the investments, we made in business initiatives, including our West coast expansion.
Net income for the 2022nd quarter was 170.2 million with $2.21 diluted earnings per share compared with 147.3 million with $2.71 diluted earnings per share last years second quarter.
Decrease in net income was driven by a second quarter provision for credit losses of 93 million.
It was predominantly attributable to cope with 19.
Looking at deposit the core about philosophy.
This was the best quarter of died of deposit growth.
Reported deposits increased 8 billion or 19% to be point 2 billion. This quarter well average deposits grew by 6.2 billion.
Moreover, this is now the fourth consecutive quarter exceeding 1 billion in both.
Total.
An average deposit cool.
Non interest bearing deposits of 16.1 billion still represent a high 32% of total deposits.
The second quarter of last year deposit and loan growth coupled with earnings retention increased total assets 11.5 billion well over 23%.
Now, let's take a look at all lending business.
Core loans, excluding P.P.P. loans during the 2022nd quarter increased roughly 2.2 billion.
Well, 5% to 43.2 billion.
For the prior 12 months core loans grew 5.3 billion the increase in loans. This quarter was again, driven primarily by new ones banking capital call facility.
The second excuse me. This is the seven consecutive quarter, we see at all I outpace the already grown furthering the rapid friends <unk> family formation.
The balance sheet to include more floating rate assets as we continue to diversify our portfolio.
On the P.P. fraud, we funded approximately 1.4 billion in the second quarter from an overall total of 1.9 billion in P.P.P. loans.
Tony.
The credit quality.
Non accrual loans.
A 47 million, what 10 basis points of total loans, compared with 59 million or 14 basis points.
The 2021st quarter.
A 30 to 89 days past due loans increased to 159.4, well listen carefully it's important to know 93.5 million. The 30 to 89 days past due.
Caused by processing Documentations away, given Cobiz 19 circumstances and are now current.
This brings the total 30 to 89 day past the balances.
65.9 million, which is within normal range.
Oh, sorry, excuse me, our 90 day plus past due loans remained low at 16.9 million.
Net charge offs for the 2022nd quarter were 4.6 million or four basis points.
It was 1.7 billion for the 2021st quarter.
Well the adoption the c. so at the beginning of year provision for credit losses for the 2022nd quarter was 93 million compared with 66.8 million for the 2021st quarter.
What's the banks allowance for credit losses to 98 basis points of loans.
And the coverage ratio now stand.
At a healthy.
947%.
As I mentioned earlier the increase in the provision was predominantly attributable to cope with 19.
For this next part please listen very carefully.
Looking at the affects of Cobiz 19 loan deferrals peak, the 10.9 billion.
As of July 15th we only had approximately 2.2 billion scheduled to come back here initial 90 day to flow period, because most of the deferrals.
Don't come due until August or later.
So of the 2.2 billion.
Over 1.3 billion was 60%.
Began paying again.
Additionally, we had another 295 million of coins.
That began paying.
For the deferral period ended bringing our total deferrals.
To 9.4 billion.
So let me repeat that.
Hi.
Oh loan deferrals peak.
A 10.9 billion.
As of July 15th.
We had only approximately 2.2 billion scheduled to come out of their 90 day period deferral period, because most of the deferrals don't come due until August the later.
So of the 2.2 coming due over one point not excuse me over 1.3 billion or 60% began paying very happy with that number.
Additionally, we had another 295 million.
Oh clients deferral that began paying for the deferral period ended.
Total deferrals down to 9.4 billion.
In fact in offering try space, which on a percentage basis was the most affected we witnessed the only 100% of all clients who turns pain in some form.
Most appears recognize it's temporary no nothing to give up their businesses.
Shouldn't go for an extended period of time this may change.
Now onto the team fraud.
22nd quarter, the bank Onboarded three private client banking teams in grades in the greater Los Angeles marketplace, bringing the total dependency there.
Together with our San Francisco Office. The Bank now has a total of 19 private client banking teams on the West coast.
It's been busy.
Additionally, the bank expects to open up its Warner Center, Newport Beach, and Ontario, California, private client banking offices during the summer of 2000 doing this summer right now 2020 with Beverly Hills closely following in the fall.
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 that interest income and margin.
Net interest income for the second quarter reached 387 million up 61 million or 19% when compared with a 2019 second quarter and an increase of 39 million from a 2021st quarter.
Net interest margin increased three basis points in the quarter versus the comparable period, a year ago and decreased two basis points on a linked quarter basis to 2.77%.
Excluding prepayment penalty income core net interest margin for the linked quarter decreased two basis points to 2.69%.
The decrease was completely driven by significant deposit flows, resulting in an average cash position of 4.12 billion for the 2022nd quarter.
The excess cash balances caused a 15 basis point drag on core net interest margin.
And look at asset yields and funding cost for a moment interest, earning asset yields decreased 59 basis points from a year ago, and 39 basis points from a one quarter to 3.44%.
The decrease in overall asset yields was driven by lower reinvestment rates and 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. Additionally, excess cash and P.P.P. loans significantly affected the average yields.
[noise] yields on the securities portfolio decreased 40 basis points linked quarter to 2.72% given a much lower market for reinvestment and higher CPR speeds. The duration of the portfolio decreased to 2.1 years as a result of lower rates and higher.
PR speeds.
Turning to our loan portfolio yields on average commercial loans and commercial mortgages declined 22 basis points to 3.91 per cent compared with 2021st quarter, excluding prepayment penalties from both quarters yields decreased 24 basis points.
Prepayment penalties for the 2022nd quarter were 11.7 million up 2.5 million compared to the 2021st quarter as the decline in longer term rates led to increased CRT prepayment activity.
Now looking at liabilities, our overall deposit cost this quarter significantly decreased by 42 basis points from 98 to 56 basis points due to lower interest rate environment.
During the quarter borrowings decreased 800, and the 95 million to 4 billion or 6.7% over average of our balance sheet.
Average borrowing cost decreased 32 basis points from the prior quarter to 2.17%.
Overall, the cost of funds for the linked quarter decreased 43 basis points to 73 basis points.
Now onto non interest income and expense noninterest income for the 2022nd quarter was 12.7 million a decrease of 4.4 million when compared with the 2019 second quarter. The prior years second quarter included $2.6 million gain on sale of say.
Sure financial loans as well as several other onetime items.
Noninterest expense for the 2022nd quarter was 151.9 million versus 131.9 million for the same period, a year ago, the 20 million or 15% increase was due to the significant hiring a private client banking teams on the west coast and continued investment.
And our national initiatives.
Even with the significant hiring the banks efficiency ratio improved to 38% for the 2022nd quarter versus 39.7% for 2021st quarter and 38.4% for the 2019 second quarter.
Turning to capital in the second quarter of 2020, the bank paid a cash dividend of 56 cents per share the dividend had a minor effect on all capital ratios, which remain well in excess of our regulatory requirements and augment the relatively low risk profile the balance sheet as evidenced by a tier.
One leverage ratio, 8.76% in total risk base ratio of 12.13% adds up to 2022nd quarter and now we'll turn the call back to Joe. Thank you.
Thanks, Eric This is truly an exceptional corridor, where we witnessed strong performances across the entire bank.
We are grateful acquiring to recognize the strength of our balance sheet, having already the positive nearly 10 billion in new funds this year.
During difficult times high touch service model truly differentiates us.
We maintained steady contact with all clients informing them of new developments, such as TPP, which led to a strengthening of our client relationships.
Furthermore, never lose sight of the fact that people want to know their phones a safe.
Difficult times.
As it has crises.
We want to assure you management remains dedicated to guiding the bank, who these unsettling times.
We'll focus on the soundness about conservative risk management and capital allocation practices, ensuring the safety of O'neill, not nearly 1600 colleagues and their families and supporting our clients by meeting their needs.
The safety and health ball stakeholders stakeholders remains Paramount.
To a franchise as we navigate the times ahead.
We are motivated by the initiatives, we recently put in place such as our California expansion and like I said before the enormity of the current environment has to be outweighed by the importance of the future.
Bank must forge ahead and continue a path to growth.
Opportunities abound.
Now we are happy to answer any questions you might have lorry ill turn it over to you.
The floor is now open for questions. At this time, if you have a question or comment. Please press star one on your Touchtone phone if at any point. Your question has been answered ebay remove yourself from the Q by pressing the pound key again, we do ask the while you pose your question that you. Please pick up your handset to provide optimal sound quality.
Our first question comes more lineup, Ken Zerbe of Morgan Stanley.
Great. Thanks, good morning.
So great job keeping the them stable. Despite the the 50 basis point headwind from the excess deposits I guess, there's a question that I want to ask though is if we think about if we sort of back out the excess deposits that 50 basis points your NIM would've been up materially.
I know, it's probably not that's simple, but it's still a major improvement.
Given where we are today right given the fact that you do have those excess deposits given the fact the rates are still low how do you see yeah.
Crashing into third quarter.
Yeah, it's really going to be dependent on how much we've seen and further deposit flows and we know that we'd have a very robust deposit pipeline over the next several quarters.
Questions, what's going to we clearly have PPP farms that we anticipate people will utilize.
And then we'll see what the deposits outflow or but.
If we can get back to I'd say more normal level deposit growth.
Anywhere from 500 million 2 billion a half.
Okay, then you should have a stable.
They have if not upward bias and a lot of it's also going to be depending on how much we can deploy into into loans and into securities.
In both cases, we think.
We'll have opportunities to invest so so ultimately we think we've got a stable NIM with an upward bias.
Dissipating that we'll get back to it to a more us a stable level deposit flows.
No we have no business as we have little bit of a headwind.
In that the first half of July we saw some outflows due to tax payment.
So we're gonna have to make up for that and I think we will but it's one thing that we had in this in this quarter. The third quarter started third quarter that we didn't have into second quarter.
Got it okay, perfect and then maybe just to follow in terms of expenses.
She's just address your expense outlook given the growth in the West Coast team is because I know before I think it was like 15% year over year.
Oh, absolutely declining, but it seems that should change given the the number of new hires recently.
Well, we really anticipate those new hires in the guidance that we gave coming out of the first quarter. So we came right on top of our 15% target for this quarter and we do expect it to declining a linear fashion.
Going forward it each quarter. So it should be 14, and 13 12, and so on you know the only caveat would give is that we are having quite a few discussions with bankers on the west coast and we'll see if those opportunities.
Actually we are.
Pleased with a number of people that were talking through there and there could be.
Some further opportunity for team hires in the near future.
But we'll let the marketplace no one will change that guidance if need be but for now we think we'll see a continue to trickle down from this 15% level.
Excellent. Thank you.
Thank you Ken.
Your next question comes from the line of deep Rochester of Compass point.
Hey, good morning, guys nice quarter, Hi, David Good morning. Thank you.
Definitely appreciated the a deferral staff as well that those are pretty solid.
Along those lines I guess I was just wondering if you had any updates on the collections data you guys have been tracking and talking about some of the multifamily side for rent stabilized market right.
Sure.
On the multifamily side.
Oh, it's been actually very very.
Pleasant surprise, it's 80% plus.
Generally all clients feel very comfortable with their collections on multi family it's 80%.
On office, its 65% to 85%.
And on retail, it's very wide anywhere between 35.
65%.
The one thing we try to point out on retail is that we have very little destination.
Retail.
Most of our retail is in the.
It's more so the neighborhood.
Type retail it's in its not only in Manhattan, but it's in the outer boroughs.
Oh the majority of.
That is the nail salons pizzeria CBS.
The shoe store.
He Bobby shop.
The bagel store.
And they they will have.
Really.
Backbone of the neighborhood.
So yeah that so what happens there is.
What assumes they open.
They'll be Oh busy because everyone is neighborhood wanted the stores to be supported and that's what we've seen.
Yep.
Well I would imagine phase four is going to give that a nice boost as well.
A phase.
These forward will certainly help the Jim.
Oh.
Hurting because they're not open.
Oh.
I think you have to keep in mind.
That.
He's done a very good job.
And.
If they continue to do so we'll be very encouraged.
We're very very optimistic.
Sounds good and then just switching to the NIM.
You guys had a great job, reducing deposit costs this quarter, but if I look at each of these pockets in the average balance sheet. It seems like you have even more room to go to get back to pre rate cycle lows. So it's just curious to get your thoughts on that.
And if you think that can be a good support for the them through the end of this year.
Okay, Yeah for sure the it I mean, we're actively working on bringing down somewhat higher cost deposits that we have in fact, Joe and I were discussing it this morning and go through a lift so.
You know, it's it's we have we have quite a bit of space yet to reduce the deposit costs, albeit it'll be at a slow pace took us many years through the last cycle to get down to that 40 39 basis point I think was or ultimate low so it's going to pick while but we've got we've got ample room and we'll continue to move that there.
Give me an idea current cost of deposits.
Eric said, one from 90 856.
And the multi unit was 54.
And in the currently in July it before.
Great, we really have to get that down into the fortys.
Yeah.
Alright, thanks for all the color guys. Appreciate it thank you Dave.
[laughter] line of Ebrahim Poonawala of Bank of America Securities.
Good morning, guys.
Mining Ebrahim.
I guess is the first question, though I mean, that's been a very strong quarter for the industry on deposit growth. So wanted to get a sense. So vicki.
You guys do you spoke out some of this independent leaves, but it's Joe you can talk about Oh I just don't read the deposit go just coming from and how sustainable. This is going forward I do think about even be on third quarter.
If they've done some outflows in Threeq you bought it gets a central just what this means of given all the strategic actions you've taken over the last two years and what this means and sustainability of deposit growth. He would have been duffy interrupting the flow down over the next few months in quarters.
Well I think there's sustainability certainly not at 8 billion, though corridor, but ER in the first quarter. One that was our third largest growth quarter ops in in the first quarter. So if we did something along those lines all or like Eric said earlier, if we could do 500 million 2 billion, we'd be happy but.
Give me an idea of where the deposits came from the venture capital group was 345 million.
One banking was 310, we don't normally give this but the numbers is so large that we thought it would be makes sense to do a once digital was nearly a billion.
The mortgage servicing specialized mortgage servicing banking team was a billion.
West Coast was 340 million.
We had 21 teams.
Broken up in the following fashion either the Ti teams.
The private client banking teams, we had seven teams with over 200 million in growth. We had 18 with over 100 million and growth. We had six teams with over 75 million in growth. So you can see is well established teams that have been here for a number of years plus all the new initiatives.
So it was kind of like of course.
Perfect Storm initially.
I I Didnt say this but I should have there were some fluff in the deposits, but we always have flaw.
Deposit growth some of that was the tax payments.
But in times like this.
We always have fourth because we're a safe haven.
For deposits for quite a bit of excess deposits.
I don't want to keep it where they're at night, they want to sleep with their head on the pillow.
The pillow on their head.
And so it's a safe Haven, and that's where we get some of the fluff, but having said all that we still think we're going to be nice positive growth in the second here for the year I think you have to look at it as the second half as opposed to the third quarter versus the fourth quarter.
Well, we'll have a.
Nice growth level, but not nearly at the 8 billion level.
Got it and it gives just moving on I think the single biggest Oh, what I'm going to stock remains.
Certain key ONEOK cod in credit Oh, you provided some good update from the deferrals on the cure rates seem pretty strong just talk to US I think the biggest concern is that the more talked over and the deferrals come to an end assuming there's no for that extension and we see some of these loans going delinquent or nonperforming loans like.
Visibility do you have dead and secondarily, what's the loss content. When you think about that then that could do a reserve adequacy, even if some of these loans do end up being delinquent and non performing.
Well under the cares that.
There are some there's some industries that we have.
That aren't really cares that you can continue to defer into 2021, it's not just six months.
As long as they meet criteria.
Such as well as of 12 31 2019, they will current that's one of the criteria. So let me give you. An example of one area that is going to have a look need a little bit more time Broadway. What we're hearing is they officially said they wouldn't open up until the beginning began.
Larry it's more likely that mode open up until March or April so, they're going to need deferrals leased to that time before the cash post that's coming in.
For the purchase a ticket.
So that is an area or an industry that will not go on nonperforming.
Not or non accrual because onto the carriers that.
We can go out into 2021 is long as we.
To the season told me to I'm, sorry, the deferral.
As long as AFFO is done during 2020, if you go through 2021.
So that would be one area that the garik has another area.
And then well yeah I mean, we will also have the charter bus area would signature financial its a.
About 180 million dollar exposure there that will work on putting some long term deferrals in place is you know good thing was that as we have a collateral on each one of those and to the extent that that collaterals not being used its not depreciating, either so we feel pretty well protected there will be creative.
Working on it on a restructuring that that works for our clients as well as US Yeah. I'd say overall generally you know you're asking about the Siri try again, we we bet on the jockey and not the horse we've talked about that consistently over the years.
These are deep.
Deep pocketed borrowers that can bridge and temporary.
Fall in cash flow necessary and add a averaged 50, 556% LTV, we feel pretty well.
Protected.
And in RCR report.
Thanks, Joe talked about earlier in particular in the retail portfolio that neighborhood retail.
As an area, that's been our bread and butter and behaved really well through the great recession.
We see the neighborhood retail being really in the first wants to come back.
And as Joe alluded to it's really the culture of those neighborhoods in people ultimately want to support that they're neighborhoods and we are starting to see that come back so that gives us some encouragement as well.
And collections are starting to come around and a lot of what we have that are essential businesses are banks that are walking medical their drug stores there pharmacies.
So that's that's certainly helping to boy the collections as well. So we think that the vast majority after another 90 day deferral.
You know, we'll go back to paying us and believe that the loss factors on whatever doesn't go back to paying us will be pretty de Minimis. So one thing you have to remember on CRV.
If a client of ours comes in because he has an issue with one P. One property. He has put the photos on all 10, many homes were shield.
And we would normally give it to him or her oil 10.
So with where we're comfortable with the fact that more.
Deferrals will come off and become a current because they didn't really needed in the beginning of the first tranche of 90 days.
Got it thank you.
Thank you.
Your next question comes from the line of Matthew Breese Stephens, Inc.
Hey, good morning.
<unk>.
Joe and they're just going back to that the cure rate discussion, 60% do you think that's something we should apply to the remaining balance or can you give us any color as to where do you think that cure rate might migrate to overtime.
Well I mean given.
We think that that's reasonable.
You know rate to use on the remainder of the portfolio that has yet to come out of its 90 days deferral.
Most of that as Joe said, it's happening in August the majority of it would sum.
In September as well.
So we think 60% is a reasonable number to use obviously, we're going to try to get better than that.
If that happens if you extrapolate that out that brings us down to about a 10%.
Deferral rate after the initial 90 day deferral period.
And then we're happy to give that that on the 10% of portfolio will be happy to give another nine more wins are happy, but we'll give another 90 days deferral and see where we go from there.
But it's a pointed out we still we haven't had acquired you have to sit here take my keys back to take back my business take back my collateral and that's important people still recognize us as a temporary event.
And they very much want to be able to operate their businesses.
The last thing that they want to do is giving back to us.
Okay, and just to better understand the portion that doesn't cure. So this quarter's around 900 million. That's just goes into another bucket a deferral. It doesn't go to and PPA. Your NPL. Yeah. That's that's up to you correct. Yes, we made the decision they give 90 day deferrals, we could check in with our clients. After 90 days a lot of our competitors want right out.
The box to through a six month deferral. So we always had the plan that we would give 90 days.
See how the business was doing and give another 90 days if need be.
Understood and then for the long term deferral should we think that think of it as you have the option as you know call. It 12 31 2020.
Add another hundred 80 days and that's kind of the stopping point now where deferral should migrate MPL is that correct.
You know app after the six months it will really be on a case by case basis, depending on really what's happening with onto long Cline.
And their property and or slush collateral.
Okay. I mean, why did you Broadway as an example is because we know they're not going to open up by the end of the year.
And then just on the on the retail book, Yeah. That's a really wide range of payment collection could you give us you know perhaps.
Some anecdotes, it's what's going on with the you know the property, it's only collecting 35% versus the property at the high end is there tenants that are not a central versus essential or or or their properties that are deemed to mixed use and better collecting rent than pure retail could you just give us some some better idea what's going on with the range.
Well I'm clearly, there's some properties, where we have gyms and restaurants you know.
That's just are performing this at this point so versus more of the central businesses like the.
Walk in medical the drug stores, the pharmacies, the banks and such so.
That's why we have such a broad range.
Do you have the breakdown of essential versus non essential tenants, though we did not.
Keep in mind it changes on a monthly basis right peoples.
People's leases coming due and.
Those who goes into that property or who says.
Okay and then just last one from me is just just with the reserve where it is do you feel like you have the level of protection there that that matches there the current risk environment post to Q and.
And just wanted to get a sense for where you think the provision might go as we as we're now in the back half a year.
Well I mean, obviously in accordance with death, we feel like we're adequately reserved so.
Well, we'll have to see where the economic forecast really goes I mean, that's that's what's driving the vast majority of our provisioning right now is the economic modeling.
As we've said in the past we use Moody's model use their June baseline, which incorporates a significant amount of uncertainty in the economy I think as as we start to see more certainty.
Yeah that'll help us too.
Hopefully review some of those reserves, but it really all depends on where the weather forecasting goes at this point, we're not seeing anything in our underlying metrics that's really driving.
The provision at this point is more of that economic forecast got it just last one is what did PPP contribute to Eni and expenses for the quarter.
Okay, and I don't know.
You know certainly helpful, but I don't know the exact breakouts.
<unk>.
Expenses in the quarter.
It's overall was many billions of dollars an expense that will be amortized over.
The way for those loans.
So several hundred thousands of dollars in the quarter.
No I guess I wanted to mention something on the allowance.
No. It's at 98 basis points, but if you exclude phone banking, which we had very little on and the P.P.P. loans were actually at 124.
Yes.
Great I appreciate taking my questions. Thank you.
Your next question comes from the line of Jared Shaw with Wells Fargo.
Hi, good morning.
No one in Kansas.
Just looking at the deposit flows again, you know you're continuing to grow in areas that long term, we're going to be you know net contributors of deposits.
You know longer term, what some of the fluff from second quarter, you said is out.
Should we be how should we be thinking about this liquidity deployment and sort of an ultimate loan to deposit ratio.
You do you feel comfortable.
Building out a securities portfolio I guess, if the loan growth isn't.
Batching, the the a deposit growth or should we.
I expect to see a lower funny, reducing a FHLB funding and hanging on to more cash against sort of longer term what are you thinking about liquidity there.
Yeah, I mean would certainly take down borrowings to accept that they're coming due and they were pretty low right now 6.7% of our balance sheet and borrowings, but there are.
Ones that are coming through a little bit higher percentage rates will be nice the pillars off for the coming quarters, but we've got no problem growing our securities portfolio at all in fact, we'd like to that affords us a significant amount of liquidity, which is very important.
To us and we have a very robust securities function that we grew up really when we started the bank.
Knowing that we were going to be deposit rich and and low in late so yeah. We're happy brought the securities portfolio would that would you see like extended duration and trying to get a little little better yield out of that or I guess, how would I don't necessarily think it's the right time to potentially do that there would be certain.
Asset classes, and the securities portfolio, where that might make sense, but.
Were you know, we're we're going to do a little bit of everything.
Certainly not going to pass if the opportunity to bring on deposits.
Yep.
Okay and then.
The deferral extensions.
As you negotiate with these these borrowers are you able to get any enhancements to either either additional collateral or guarantees or any type of you know <unk> ability to restructure or some of those loans your favor.
Well, we've been we've been able to do a little bit or in fact, some of the ones that came off of deferral, we could some refinancing.
For them.
And then in refinancing for them, we get something for that whether it's a a partial guarantee a screen guarantee some cash <unk> put into it.
NESCOE account for a for taxes and alike. So there is some negotiation.
But not not not a lot.
Great. Thanks, a lot.
Thank you Gerry.
Your next question comes from the line of Steven Alexopoulos of JP Morgan.
Hey, good morning, everybody, Hey, sporting stay morning.
To start if we look at the short term liquidity build up how much of that will that tax related payment outflows consume in threeq you.
Probably 500 million 2 billion.
Okay.
Okay. That's helpful. And then you guys called that Signet as being a billion dollar contributor this quarter what are the total balances there in could you give color on why you saw such strong growth this quarter.
Isn't that was apart the part of it to digital team is a combination of things so signet.
It's usually not how much the balances are you seeing that is how much activity occurring.
Because the balances don't always stancik, yet so I would say it was about 20% of digital.
Okay.
Thanks, and then finally just to follow up on Matts question on P.P.P. do you do the yield on P.P. Pugh loans in the corner.
Thing was to.
Through 70 to 75 in that range okay.
Perfect. Thanks for taking my questions. Thank you Steve.
Your next question comes from the line of Chris Mcgratty of KBW.
Great. Thanks for the question.
Eric I just want to go back to Jerritts question about the liquidity for a second historically, you've kind of run the balance sheet with roughly 20% of earning assets.
Today, it's around 17, because the cash how long do we what's a reasonable time to get back ended up a target kind of one of the medium term.
It's really hard to say, it's all going to be depended on deposit flows.
I I at this point I don't think we can really predict that.
Okay and did you provide or could you the new money yields on purchases today.
Yeah, I'd say for the securities portfolio, where in the low twos on new money.
You know anywhere from two to 250.
Probably averaging around 3%.
Okay.
And then last if I could the growth in the first half there's has really been a surprising to the street.
How do we think about capital offensive capital at this point given the outlook.
Well, we think our capital ratios in good shape. It really is going to depend on something over to said which was growth.
Well, if we have Ah hey, if we grow 8 billion in a 9 billion in a quarter.
First is you know stands at 500 to 1.5 billion will need capital sooner, but when it went up and to be shy about raising it.
For growth.
Thank you.
Thank you thank you Chris.
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