Q1 2021 Signature Bank Earnings Call
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Ladies and gentlemen, this is the operator in today's conference is scheduled to begin momentarily until that time your lines will be placed on music hold thank you for your patience.
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Yeah.
Welcome to signature Bank 2021 first quarter results conference call.
Call today from signature Bank are Joseph Depaolo, President and Chief Executive Officer, and Eric Howell Senior Executive Vice President of corporate and business development today's call is being recorded.
All participants have been placed in a listen only mode and the floor will be open for your questions. Following the presentation.
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It's now my pleasure to turn the floor over to Joseph Apollo President and Chief Executive Officer, you may begin.
Thank you Erika.
Morning, and thank you for joining us today for the signature Bank 2021 first quarter results conference call before I begin my formal remarks.
Susan Lewis moving this 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 maybe 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 business strategy and the impact of COVID-19 pandemic.
On each of the foregoing and 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 Joe.
Thank you Susan I will provide some overview into the quarterly and annual results and then Eric Howell, Our senior executive Vice President of corporate and business development.
The bank's financial performance in greater detail, Eric and I will address your questions at the end of our remarks.
We started 2021 and an astonishing manner with another quarter of record deposit growth of 10.7 billion Emma.
Emanating from all our core client relationships coming off the heels of 2020, where we grew record deposits by nearly 23 day it's.
It's clear that the bank is firing on all cylinders, including our newer business lines, where again, many contributing to this quarter's phenomenal growth.
When looking at earnings we had another quarter of record net interest income driven by record deposit growth strong loan growth and record securities purchases.
Additionally, we had record fee income and contain expense growth.
Which culminated in record net income.
Bottom line.
Delivering strong results for shareholders Kiva.
With these significant excess liquidity.
Cause liquidity bodes well for future earnings as the unlocking of excess cash, especially for higher yielding loan growth as our fall credit impact in any state while political action.
In retrospect, it's really not that astonishing to see we delivered another quarter of record earnings and growth as we have done for the past 20 years.
First our 20 year anniversary is less than two weeks away on day.
These firms.
We've remained true to our Oh.
Rounding principles of a team based single point of contact model that caters to privately owned businesses and their owners and managers.
This focused model has allowed us to distinguish ourselves from the pack and deliver outstanding performance consistently throughout signature bank's existence.
It's hard to believe that the bank started with nearly 50 million asset.
And grew organically without ever making an acquisition to an $85 billion bank.
Separately I would be remiss not to mention how proud we are of the recently issued 2020 annual report highlight.
Highlighting the essential frontline health care workers that are closely associated with all colleagues.
We wanted to showcase the unrelenting dedication and sacrifices of the frontline heroes, including our own and thank them for their service.
Now, let's take a look at earnings.
Pre tax pre provision earnings from 2021 first quarter.
A record $272 8 million, an increase of 54 million or <unk> 25 per cent compared with $218 5 million from for 2021st quarter.
Net income for the 2021 first quarter was a record $191 million or $3.24 per diluted earnings per share compared with $99 6 million or $1.88 per diluted earnings per share reported in the same period last year.
The increase in income was predominantly driven by a substantial asset growth.
$32 3 billion over the last 12 months as well as the decrease in the provision for credit losses, which was substantially impacted by COVID-19, and the first quarter of 2020.
Looking at deposits.
This increase the roughly 10.7 billion or 17% to 74 billion this quarter.
Average deposits grew $6 8 billion.
This quarters growth, which was a force before.
It was driven by the digital asset banking team, which grew deposits by four four per year.
The specialized mortgage banking solutions team, which grew.
Two 3 billion the fund banking team, which was up nearly $700 million.
The venture banking group, which increased over 300 million and nine private client banking teams across the spectrum of the Metro New York, which grew over 100 million each including Pfizer the teams that exceeded 200 million.
Since the end of the 2021st quarter deposits increased a remarkable 31 7 billion was 75% and average deposits increased nearly 28 day.
Noninterest bearing deposits increased $3 8 billion to $22 5 billion, which represent a high as 35% of total deposits.
Deposit growth plus capital raises as well as earnings retention led to an increase of $32 3 billion or 61% in total assets since the first quarter of last year.
Now, let's take a look at all lending business.
Our loans.
Loans, excluding PPP during the 2021.
First quarter increased 1.3 day or two 8% to 48.
For the prior 12 months.
Core loans grew seven three day or 17, 8%.
The increase in loans. This quarter was again, driven primarily by new fund banking capital call facilities.
This is the 10th quarter, a 10th consecutive quarter.
C&I outpaced CRE growth furthering the rapid transformation of the balance sheet to include more floating rate assets as we continue to diversify our portfolio.
We are well positioned in all lending business is to capitalize on opportunities.
Based on our pipeline and a recovering economy.
Turning to credit quality.
Our portfolio continues to perform well.
Non accrual loans were $134 million or 26 basis points of total loans.
With $120 million or 25 basis points for the 2024th quarter.
Our past due loans returned to the pre COVID-19 levels with 30 to 89 past due loans decreasing to $39 million and our 90 day plus past due loans remained very low at $4 9 million.
Net charge offs for the 2021 first quarter was $17 9 million or 15 basis points of average loans compared with $11 4 million in 2024th quarter.
The provision for credit losses from the 2021 first quarter.
Viewpoint, 9 million compared with $35 $6 million from 2024th quarter.
Support the bank's allowance for credit losses to 1.0% to 2%.
And the coverage ratio stands at a healthy 390%.
I would like to point out that excluding well very well secured one bank loans.
And government guaranteed PPP loans.
The allowance for credit loss ratio would be much higher.
143%.
Turning to modifications as of April.
<unk>.
Thanks, COVID-19 related non payment modifications reduced.
Reduced by 329 billion.
$983 million or one nine per set of loans.
When compared with the balance at the end of 2024th quarter.
Now on the expand the answer they expanding team front, where we continue to have success.
From the 2021 first quarter the bank on boarded three private client banking teams, including two in the West coast.
Additionally, the bank it small private client banking group directors to existing California teams and signature financial in seven consecutive sales offices throughout its national footprint.
At this point I'll turn the call over to Eric and he will review the quarters 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 from the first quarter reached $407 million, an increase of $11 5 million from the 2024th quarter.
Net interest margin declined 13 basis points to two 1% compared with $2 two 3% for the 2024th quarter. The entire decrease and then some was due to massive excess cash balances from significant deposit flows which impacted margin by 50.
Eight basis points.
Now, let's look at asset yields and funding costs for a moment interest, earning asset yields for the 2021 first quarter decreased 21 basis points from the linked quarter to 254% debt.
A decrease in overall asset yields was again driven by the massive excess average cash balances, which grew from $12 5 billion to $17 1 billion during the quarter. Additionally, asset yields continued to be affected by lower reinvestment rates in all of our asset classes.
Yields on the securities portfolio decreased 25 basis points linked quarter to 188% due to lower reinvestment rates as well as the bank investing in floating rate securities and our portfolio duration increased to three to five years, which was due to a steeper yield.
Kirk.
Given the better rate environment, we aggressively grow the securities portfolio by a record $2 1 billion.
And we anticipate similar growth in future quarters.
Turning to our loan portfolio yields on average commercial loans and commercial mortgages decreased six basis points to 354% compared with the 2024th quarter.
This was mostly due to lower origination yields excluding prepayment penalties from both quarters yields decreased by nine basis points.
And now looking at liabilities, our overall deposit cost this quarter decreased eight basis points to 34 basis points due to the low interest rate environment as we gradually lower our relationship based deposit rates. We anticipate this downward trend to continue in the coming quarters.
During the quarter average borrowing balances decreased by $7 million and the cost of borrowings increased by one basis point to 241%.
The overall cost of funds for the quarter decreased 10 basis points to 47 basis points driven by the reduction in deposit costs.
Now onto noninterest income and expense, we continue to emphasize fee income and noninterest income from the 2021 first quarter was $32 7 million, an increase of $18 5 million or 131% when compared with the 2021st quarter. The.
Increase was mostly due to a rise in fees and service charges net gains on sales of loans and trading income.
Noninterest expense for the 2021 first quarter was $166 4 million versus $144 million for the same period, a year ago to $22 4 million or 15, 6% increase was principally due to the addition of new private client banking teams and operational.
<unk> support to meet the bank's growing needs.
Despite our significant team hirings and margin compression from substantial cash balances.
The bank continues to gain operating leverage and as a result, our efficiency ratio improved to 37, 9% from 2021 first quarter versus 39, 7% for the comparable period last year.
Turning to capital during the quarter the bank successfully issued $708 million of common stock.
All capital ratios remain well in excess of regulatory requirements and augment the relatively low risk profile of the balance sheet as evidenced by our common equity tier one risk based ratio of 10, 92% and total risk based ratio of 14, four 1% as of the 2021 first quarter.
Given our robust total risk base ratio, we redeemed $260 million of subordinated debt at a rate of five 3% on April 19th which will further reduce our interest expense in coming quarters, and now I will turn the call back to Joe. Thank you.
Thanks, Eric.
I'd like to thank my colleagues, who have demonstrated their dedication to our clients.
And their needs during this pandemic.
Times like these our clients truly value the level of care and advice that we provide.
Our performance once again this quarter reflects their extraordinary efforts as we continue to execute on many fronts.
We look forward to a healthy at 2021 and recovery from the COVID-19 pandemic continues.
The collective strength of our franchise led to an unbelievable quarter record deposit growth.
Record pre tax pre provision earnings and record net income.
Bottom line, we delivered another strong quarter, and we are well positioned for the future.
Now we are happy to answer any questions you might have evercore will turn it over to you.
Yes.
The floor is now open for questions.
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Thank you. Our first question is coming from Matthew Breese with Stephens.
Good morning.
Morning, Matt Good morning, maybe first we can just adjust addressed the liquidity position of the bank with over $19 billion of cash Eric you address the outlook for the securities portfolio, but could you give us an update on.
How do you feel about loan growth through the end of the year, what it could look like and then maybe provide some details on the new upcoming two asset generating verticals that we've discussed, but havent quite gotten a lot of detail on yet.
Well sure.
We expect that we'll see loan growth.
Per quarter, and the 1 billion to $2 billion range. So we should see anywhere from $4 billion to $8 billion.
And loan growth coupled with.
Roughly 1% to $2 billion of securities purchases, hopefully closer to the $2 billion.
In both cases right so.
We should have asset growth anywhere we're giving.
Pretty broad range is because it can be choppy in both deposits and both loans and securities book anywhere from $8 billion to $16 billion.
For the year. So we certainly have ample places to put.
The deposit growth and the cash to use.
On the new business line from.
<unk>.
The two new businesses that we've been talking to you about for a little while the gentleman leading those efforts are both here.
The first is a mortgage warehouse lending team, which is being led by Ken Logan.
Ken has been a 35 year industry veteran.
He founded and led the mortgage banking finance group at Wells Fargo.
He actually started at what Covia from scratch.
And when they were acquired by Wells should continue the efforts there.
So a substantial track record in the space has built that business at a few different interest.
Institutions from scratch.
Extremely well known and we're very excited to be entering it clear.
Clearly, it's a very logical fit with the mortgage special.
Specialized mortgage banking team that we brought on board.
And that really is the deposit generating side. So now we've got the lending side.
Say that our clients are very pleased.
On both fronts that were in this business.
That from a growth perspective.
Can be a little choppy again, but we're looking at $200 million to $1 billion.
And growth per quarter.
So we should see at least $1 billion in growth for the year, if not closer to $4 billion and growth from that space. So very excited to have him on board.
We don't really anticipate anything meaningful on the growth front until.
The third quarter and fourth quarters, we could see some participations.
In the second quarter.
The second business line that we brought on board as the SBA origination business as many of you know.
We're one of the largest buyers of SBA loans in the market.
A very large business out of our Houston office.
Where we buy the loans pull them and securitize them and sell them to a credit investors now.
Now, we're getting into the origination business.
So once again with a 30 plus year industry veteran George clients, who comes out of bank of the west.
And we'll really be focused on the California market place. So this business was very strategically important to us and to our growth initiatives on the west coast.
The cost of real estate, often makes it prohibitive for businesses to to buy their real estate, so they really need that government.
Helping there.
And we're very happy to be involved in that space on the growth side, its a little lower growth, we're talking anywhere from $200 million to $500 million.
Per quarter, and we don't really anticipate seeing that growth until the third.
I am sorry, 2% to $500 million per year on that.
Per quarter per year, and we don't see that growth coming until the latter half of this year, so but in both cases.
Once again is a continuation of the signature bank model, where we've hired very well seasoned knowledgeable banking veterans to spearhead the efforts in both from spaces. So we're very excited to have both teams on board.
Also.
Starting.
Really deep into the processes underway.
Putting policies and procedures together.
And they're going to use it for the very very best clients.
We're going to start doing some lending in the digital world.
There'll be a very deep discounts.
And quality custodians to allow us to liquidate when necessary moving to crawl before we walk and little.
Walk before we run.
Understood.
Maybe just you gave us a sense of size for these three verticals could you give us a sense of incremental loan yields.
<unk>.
As we start thinking about putting putting the liquidity to work.
Is it likely that non until <unk> <unk> that we should really start to see that 19 billion turnaround and become something less.
Well on the latter part of that I mean, thats really all dependent on how much in deposit flows we have.
We're confident that in the latter part of this year, we'll start to see some positive movement on both those fronts, but.
Yes.
<unk> aren't stopping anytime soon so.
Hard to say, that's really going to put a dent from that or not.
On the earlier part I mean this is Scott generally both of these business lines will be in line with our existing asset yields so.
But it's early on to say I wouldn't want to say exactly what rates will be getting your test.
Either space until we actually do it.
Okay.
Your next question is from Ebrahim <unk> with Bank of America.
Hi, Ebrahim.
Good morning, Joe Good morning.
I guess just following up on the day.
What was that comment Eric.
We've seen two quarters of close to $10 billion of sequential deposit growth.
Is it safe for us to assume that continues as we look forward given the momentum you had or is there any reason to believe that debt.
$10 billion range is unlikely as we think about the second quarter or the rest of the year.
Second quarter has kicked off very nicely.
We expect continued deposit growth.
We have all these new businesses and then we'll all contributing.
In fact, we've had to turn down deposits.
We have limitations fully set in China limitations.
Concentrations.
So we've had to turn away deposits. So our expectation is that we'll continue to grow maybe not at a $10 7 billion dollar level.
Can you be growth.
Safe to assume you'll be growing in excess of debt $4 billion high end range that you'd previously talked about.
Yes.
Well since that was an annual number we kind of already beat that this quarter. So yes, I think that's pretty safe.
So.
I'm just starting small with regard to deposits are coming from all across the board.
And all of the business and.
That's something we wanted to get across.
And.
So I guess just tied to that I think theres been a fair amount of validation Joe around the stickiness of your crypto related deposits. So if you could touch upon that income is off as we think about one you have the ability to deploy those funds into longer duration assets and how do you see them in terms of if we get into a higher rate environment.
How rate sensitive about those deposits.
30%.
Digital deposits are usually in DDA, because we are getting the operating accounts. So I think it's important to understand just like all our other businesses.
Net all clients Helane.
Key thing is to have their operating accounts.
And tied to me.
Two two making it difficult to lease and we give great performance great support for.
For the.
For the.
Clients operating accounts now within.
Within digital.
Different areas in digital.
Stable corn reserves with dealing with the LTC desks.
Our clients digital asset exchanges blockchain technology digital miners.
We have those that you said net.
And then we have some of the traditional.
So within.
Digital we have a mixed shift.
Outside of digital we have a mix shift because of all the businesses. So we feel.
Fairly sticky deposits.
Early on but we have a team we.
We have two teams one that handle signature one that handles the clients.
And price too.
The business.
Into the institution.
That team has been around for over eight years.
And they have a knowledge base.
The key to getting the actual operating accounts. So we feel the stickiness is debt.
We've been asked.
What about the competition.
Big banks the cases in the cities if they get can continue on a big way, while we've been we've been competing with them for 20 years. So we're not we're not worried about the big players.
Nor are we worried about.
Stickiness of the deposits.
Having said that.
We do.
Keith.
Decent amount of liquidity, we don't say what the percentage is all we can keep a decent amount of liquidity against these deposits.
It's still early on although we have a team that's been around for eight years.
It's still early on.
The crypto loans.
And just sticking with Joseph we saw this announcement with your partnership with Circle yesterday.
Are you able to share any stats around the transaction or the volume will transition that was processed with signature over the last quarter compared to maybe the fourth quarter a year ago and just the number of clients that you are adding each quarter.
Sure.
Well I won't I won't give you statistics as it relates to circle, Chris I'm sure competition is listening.
The clients have growth.
We had about 630 clients at.
At the end of the year and we have about 740 clients now.
Got it.
And one last question all this hiring Eric any.
Any change in expense growth guidance as we look forward should we continue to decelerate from <unk> or any update there.
Sure.
We still expect it to decelerate from this point, so we should see it come down in a linear fashion each quarter throughout the course of this year.
Thanks for taking my questions.
Thank you for pleasure.
Your next question is from Casey Haire with Jefferies.
Hey, Thanks, good morning, guys.
Mark I wanted to follow up on the on the liquidity deployment it sounds like the.
Securities up $2 billion this past quarter.
<unk>.
If I'm understanding you correctly, Eric it sounds like you want to keep that pace going forward.
I guess my question is why not do more given theres clearly capacity.
Some decently comfortable with the duration of the deposit franchise.
Just why not why not step up.
The securities purchases.
I mean, it's a good question Casey I mean, we certainly will try to.
We are a little bit mindful that we do feel interest rates can continue to rise. So we don't want to incur too much in unrealized losses on our portfolio. So we're trying to be smart and thoughtful around that.
But it's just hard finding the paper right, we're not the only ones in this position and people are fighting for the for the securities. So really that's the other side of the equation, we have a lot of cash flow coming back at us on that portfolio and just trying to reinvest.
Find the good paper to put it into his harder harder these days.
So, but we are trying we are trying to deploy more hopefully like you said, it's in excess of the $2 billion.
But that's we don't want to guarantee that.
Understood.
Are you guys predominantly doing is it a mix of floating rate and.
And longer duration stuff and sort of what is what is the blended new money yield on your securities purchase today.
It's about 20%, 25% floating rate, we're doing a bit more and fix with the pickup in the yield curve.
I'd say blended whereas one 5% right now.
Okay, Okay, and then just finishing up on capital.
CET, one ratios and pretty.
Pretty solid shape here just under 11%.
But the deposit outlook sounds still very strong and I'm just curious as to is CET. One ratio that you guys are looking at over TCE and at what level would you would you address capital.
Well.
That's the level, we can't really speak to right.
Hands on so many factors but.
We're primarily focused on the regulatory ratios and the risk based ratios versus just the straight TCE ratio.
Given the.
The nature of our growth rate, we've grown cash we've grown securities and we've grown well secured fund banking loans. So we've really put on a little to no risk. So we're not focused on the TCE for sure, but it's more of the CET, one tier one and total risk based capital ratios.
Focus and were well above our peers.
Now in those levels as well as the level that we need to be well capitalized so.
So right now, we feel comfortable where with where our capital ratios are today.
But we're an opportunistic organization.
That's the approach that we've always taken the growth and that's the same approach that we take with capital to support that growth.
Okay, great and just to clarify that the loan growth of one 2 billion per quarter or is that inclusive of these of the new.
Lending verticals in SBA and mortgage warehouse.
No that's just.
That's true.
Traditional businesses that we're already in.
So.
So these new verticals wood wood would provide upside to that loan growth guide.
<unk>.
Let's get them up and running first no I understood. Okay. Thanks, guys.
Thank you. Thank you Casey.
Your next question is from Dave Rochester, with Compass point.
Good morning, Dave Hey, Good morning, guys. Congrats on a solid 20 years on a great quarter.
Thank you.
I just wanted to start on the crypto side of things.
Are you guys expecting.
To get that up and running and any sense for how much volume you'd be willing to do there on a quarterly basis.
It sounds like there's a lot of demand there from everything we've been hearing from other players in the space and it seems like the biggest question would be what you are willing to do there.
Well, we wanted to be a zero loss business.
And so we're only going to happen from the very very best clients.
Underwriting suggest.
I have deep discounts.
And quality custodians so.
It will contribute.
In 2021.
But not necessarily in the second quarter two great expense.
As I said will crawl before we walk and walk before we run.
We want to be very safe.
In this space, but having said that we also want to be in this space because.
One of the predominant if not the predominant bank in this space, particularly and we're the largest bank in the space.
And we know that there is a need by clients.
And we'll take care of those clients.
That's kind of a nebulous, but we don't have an expectation of dollar amount yet.
Till we finish everything policies procedures and did due diligence that were doing on the.
On the custodians.
So that answers. My next question as you guys aren't going to take custody of the assets Youre going to hammer out some agreements with third parties.
Topline custodians that day, we also want to have the ability to liquidate.
Quickly.
And we won't negotiate on marginal liquidation from patients.
If you wanted to would you guys limited to just.
Sorry go ahead.
Okay.
I was just going to say or are you just eliminate that as a bitcoin or are you open to other currencies.
Yes, not necessarily just bitcoin.
Okay.
Great and then in terms of the yields on that I mean, we've heard you know mid to high single digits is that kind of what you guys are thinking there.
Yes.
We really don't want to comment because we're not we haven't done one one of the loans yet.
I would say.
It would be more than a traditional C&I.
Yes.
Okay.
Great.
Maybe just switching to deposit growth I was just hoping to get a breakdown of that across your different drivers you got.
And regarding the start to the quarter that you just mentioned that was it sounds like that was good I was just curious where you are at this point and I know that the spot levels kind of bounce around but was just curious how.
How much growth you've seen so far this quarter.
First the first partly he wanted the breakdown of the growth.
Yes. Please alright, so we had $4 4 billion in digital.
$2 3 billion.
The mortgage servicing specialized mortgage servicing.
$700 million in.
Fund banking.
$300 million in venture.
We had nine teams in New York.
More than $100 million in each of the 19 of which five had 200 million each.
Benign so it really was across the board.
Yes, that's great.
Okay all right.
I was just going to say, we're also bringing down the costs, we were at 42 basis points.
Got it down at 34 basis points, the month of March 31 basis points.
Right now in April.
At about just slightly below 30 basis points from the 29 basis point area.
What do you think the potential is.
We will go ahead.
No we're happy with how it's declining.
I don't know if the mid twos Mitch.
Mid twenties.
They have a chance.
And so we may as Eric said earlier, we're a relationship based organization and a lot of these clients significant.
Significant DDA as represented by the 35% in DDA, we haven't of total deposits.
We'll probably give an update we have a couple of months.
Conferences.
Second quarter, we'll probably give an update of deposits.
And those conferences won't give an update now it's still a little too early.
But it's robust.
Yes.
No I'm sure and then you've got the circle relationship, which I mean, it sounds like they've got pretty good.
Press release said 13 billion in deposits reserve deposits and you guys are going to become the major.
Bank that they are using for that rate. So that's that's a lot of.
Potential growth there at least just from that one relationship alone.
Maybe just switching to back from the fund banking piece, I mean, thats the $700 million growth.
That's some pretty good growth for that group and I know you talked originally when these guys came on board that you were you were hoping that one day they would be self funded or we do think moving closer to that do you expect to see that deposit growth continued to remain strong or maybe even ramp up from here.
Is that business sort of matures that signature.
Well, let me say that.
Self funded right now.
Understood.
Deposit growth.
That's right.
And his group.
Tom and his group.
Concentrating on building.
Loans business.
We're happy with where they are on the deposit side.
They can have more time to simply in deposits over the next quarters and years.
We'd like to season continues.
That they have in the lending side.
<unk>.
Alright, great. Thanks for all the color guys.
Thank you. Thank you bill.
Your next question is from Ken Zerbe with Morgan Stanley.
Hi, great. Thanks, good morning.
Morning.
Take a break from talking about loans for just a second I guess.
Very nice growth in fee income.
Obviously, I know fee income is sort of a bigger focus for you guys.
Is there anything in there that's sort of unsustainable and how do you view your fee income growth over the next several quarters, starting with the levels of base. Thanks.
It was certainly a very strong quarter across the board there from many of our initiatives.
Net gains on sales of loans, we had a phenomenal quarter from our SBA business as well as from signature financial.
It's probably a number that we're not going to see again in the following quarter as well as our trading income we had some nice.
Initiatives to help on that front as well, but I'm not so sure we will be able to maintain that rate.
We try to look at fee income year over year as it can be a bit volatile.
We look back to the second quarter of last year.
We should be able to.
Double that number.
During this quarter.
So we expect a 100% increase over the prior year's numbers.
We will not be quite what we saw in the first quarter of this year.
But we're very very pleased with.
All the initiatives that we have in place.
We really saw across the board growth in every aspect of our fee income.
Got it okay perfect.
In terms of the provision expense or the reserve more specifically.
I certainly wouldn't imply to give you guys a hard time for not releasing reserves given you're one of the only banks that's truly growing loans in a very rapid way and I guess you have to build reserves for those for those new loans, but when we think about sort of day, one T. So reserve levels versus kind of where youre at today.
And it just seems that you are adding a lot of very high quality loans, especially on the fund banking side is there any reason to think that eventually you won't get back down to that seasonal day one of <unk>.
Call It 80 basis points roughly.
75 basis points versus say, it apparently higher level throughout the 1%.
Yes.
One of the things you have to consider.
Is that although we are very bullish on Manhattan.
We have quite a bit of business.
Real estate in Manhattan, and that's one thing we have that others don't.
<unk>.
That's one of the reasons the uncertainty.
It's the uncertainty Manhattan is just starting to open up.
We're very bullish on it.
But we try to account for the level of uncertainty in the economic environment.
Net net AD is a factor.
Got it okay. Okay. So it sounds like as if Manhattan were to improve over the next however, long it takes that could trend lower.
But not until that understood.
We are seeing a trend down right just a few basis points per quarter over the last few quarters strength.
We just need to see that trend continue.
Good to see the uncertainty would be removed.
There is nothing that we see right now.
Leads us to believe that we're not going to continue to see that trend, but there's still a there's enough uncertainty out there on that.
It makes sense for us to continue to provide and be safe.
Okay. Thanks, a lot question from the tax rate per FTE basis, I think it was a little over the second quarter.
But we came through a little bit garbled, so, but I think the question was related to our tax rate.
We did have a onetime.
<unk> benefit from restricted shares that.
That came due at a higher level, so we gain and tax benefit.
From that.
Brought our effective.
Overall rate down.
You utilize a 29% effective tax rate moving forward.
Alright, thank you.
Thank you.
This concludes our allotted time.
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Okay.
Okay.
Hum.
Yes.
Good day.
Right.
Okay.
Okay.
[music].
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