Q2 2022 Signature Bank Earnings Call

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Speaker 2: Please stand by your program is about to begin. If you need audio assistance during today's program, please press star zero.

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Welcome to signature Bank's 2022 second quarter results conference call hosting the call today from signature Bank are Joseph J, Depaolo, President and Chief Executive Officer.

Speaker 1: you

Speaker 2: Welcome to Signature Banks 2022 Second Quarter Results Conference Call. Hosting the call today from Signature Bank are Joseph J. DiPolo, President and Chief Executive Officer. Eric R. Hollow.

Eric our hollow.

Senior Executive Vice President and Chief operating Officer, and Stephen Why Rimsky Senior Vice President and Chief Financial Officer.

Speaker 2: Senior Executive Vice President and Chief Operating Officer, and Steven Wyromski, Senior Vice President and Chief Financial Officer.

Today's call is being recorded at this time all participants have been placed in a listen only mode and the floor will be open for your questions. Following the presentation. If you would like to ask a question at that time. Please press star one on your telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing the punky, we ask that you. Please.

Speaker 2: Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero.

Up your handset to allow optimal sound quality lastly, if you should require operator assistance. Please press star zero. It is now my pleasure to turn the floor over to Joseph J, Depaolo, President and Chief Executive Officer, you may begin.

Speaker 2: It is now my pleasure to turn the floor over to Joseph J. DePolo, President and Chief Executive Officer. You may begin.

Thank you good morning, and thank you for joining us today for the signature Bank 2022 second quarter results Conference call.

Speaker 3: Thank you, Gretchen. Good morning, and thank you for joining us today for the signature bank 2022 second quarter results conference call. Before I begin my formal remarks, Sluzimu will read the following book in disclaimer. Please go ahead, Sluzim.

Before I begin my formal remarks, excuse me Lewis will read the forward looking disclaimer.

Please go ahead Susan.

Thank you Joe This conference call and oral statements made from time to time by our representatives contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, 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.

Speaker 2: 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 Security's Litigation Reform Act of 1995. You should not place under 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 and maybe beyond our control. Forward-looking statements include information concerning our expectations regarding future results, interest rates in the interest rate environment.

Difficult to predict and may be beyond our control forward looking statements include information concerning our expectations regarding future results interest rates and the interest rate environment loan and deposit growth loan performance operations, New private client team hires new office openings and business strategy and the impact of the COVID-19 pandemic on each of the foregoing and on up.

Speaker 2: loan and deposit growth, loan performance, operations, new private client team hires, new office openings, business strategy, and the impact of the COVID-19 pandemic on each of the four going and on our business overall.

Overall.

Forward looking statements often include words, such as May believe expect anticipate intend potential opportunity could project seek should target Kohl's should will would plan estimate or other similar expressions. As you consider forward looking statements you should understand that these statements are not guarantees of performance or results.

Speaker 2: Forward-looking statements often include words such as may, believe, expect, anticipate, intend, potential, opportunity, could, project, seek, target, goal, should, will, would, plan, estimate, or other similar expressions. 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 and can change.

Risks uncertainties and assumptions that could cause actual results to differ materially from those in the forward looking statements and can change as a result of many possible events or factors not all of which are known to us or in our control. These factors include those described in our quarterly and annual reports filed with the FDIC, which you should review carefully for further information.

Speaker 2: As a result of many possible events or factors, not all of which are known to us or in our control. 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 banks speak only as of the date on which they were made. Now I'd like to turn the call back to Joe.

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.

I will provide some overview went through the quarterly results.

Kind of a chief operating officer, and Steve <unk>.

Speaker 3: Thank you, Susan. I will provide some overview into the quarterly results and then Eric Hovland, our Chief Operating Officer, and Steve Wabinska, our Chief Financial Officer, will review the grant's financial performance in greater detail.

Chief Financial Officer will review the financial performance in greater detail.

See you.

Your questions at the end of our remarks.

As we anticipated.

Speaker 3: Eric, Steve, and I will address your questions at the end of our remarks.

Very strong quarter for earnings.

There's good increases to pretax pre provision earnings and net income both of them.

Speaker 3: As we anticipated, this is a very strong corner for earnings, and we saw significant increases to pre-tax, pre-pervigilatorning, and net income, in both income records.

Our records.

We funded a substantial loan growth.

Just kidding balances we maintained from the 66 million is causing.

Speaker 3: We funded our substantial loan growth with the significant access cash balances we maintained from the 66-million profits that we grew over the last two years. It's led to our strongest growth ever and pre-task pre-vision earnings has 54% versus the pride in years.

That'd be Google over the last two years.

That's true.

Two of our strongest ever pre tax pre provision earnings at 54%.

Friday, yes.

It is not a sprint it's a marathon.

Ah patients rely upon every single day.

Speaker 3: It is not a sprint.

Let's take a look at our earnings pretax pre provision earnings for the 2022 second quarter were a record 477 billion an increase of 168 million.

Speaker 3: It is a marathon. We are patients and we grind by every single death. We are patients and we grind by every single death.

Speaker 3: Let's take a look at earnings. Pre-tax, pre-provisioned earnings for the 2022 second quarter were a record 477 million, an increase of 168 million or 54% compared to the 309 million for the 2021 second quarter.

These workers.

This compares with 309 million for 2021 second quarter.

Net income for the 2022 second quarter increased $125 million or 58% to a record 339 million or $5.26 diluted earnings per share.

Speaker 3: Net income for the 2022 second quarter increased $125 million, or 58%, to a record $339 million, or $5.26 diluted earnings per share, and $214 million, or $3.57, which will be running this per share for last year.

214, bringing on the $3 57.

This year for last year.

The increase in income was predominantly driven by strong growth net interest income, which was fueled by substantial asset growth of 19 billion over the last 12 months as well as the rise in interest rate.

Speaker 3: The increase in income was predominantly driven by strong growth in that interest income, which was fueled by substantial ask-a-code, the 19 billion on less 12 months, as well as the rise in interest rate and the utilization of the SSCASH.

Utilization of the excess cash.

Now, let's take a closer look at deposits.

Given the dramatic rise in interest rates the deposit environment was particularly challenging.

Speaker 3: Now let's hit the closer look at the positive.

Speaker 3: Given the dramatic rise in interest rates, the deposit environment was particularly challenging and it's fully anticipated we still had the increase in most of our department-owned businesses.

It's fully anticipated we saw a decrease in most of our economy.

Total deposits decreased five 5% 104 billion this quarter.

Speaker 3: Total deposits decreased 5 billion or 5% to 104 billion this quarter while average deposits grew 1 billion.

Deposits grew one day.

This quarter's decline was driven by one of your themes, which were down $2 4 billion.

Speaker 3: This court's decline was driven by one, the New York banking teams, which were down 2.4 billion, which included, with that included, 1.3 billion.

Which included.

Included $1 3 billion.

What will you be paying declining 31 transaction balances.

Speaker 3: One point three billion decline in 1031 transaction balances.

So that was 10 31 transaction balances of $1 3 billion that will include as part of the 2.4.

Speaker 3: So that was 1031 transactions and balances of 1.3 billion that were included as part of 2.4. Two, the digital assets banking team, which also declined 2.4 billion, conversely, all balance fee treasuries increased 1.5 billion in that space.

Two digital advertising too, which also declined $2 4 billion, Conversely off balance sheet treasuries increased $1 5 billion in that space.

Three the west coast banking teams to call 427 million.

One client who purchased 450 billion in treasuries.

Speaker 3: Three, the West Coast Banking Team has acquired 427 million, and included one client who purchased 450 million in Treasury. And for the funding decision was down 414 million.

For the fund banking division was down $414 million.

Noninterest bearing deposits decreased $5 3 billion to 41 billion.

During the quarter for large escrow outflows with $1 6 billion decline in D E.

Speaker 3: 90% of the positive decrease 5.3 billion to 41 billion.

Speaker 3: During the quarter, four light-score workflows made up 1.6 billion of the decline in DHEA, and we're not related to interest rates.

Were not related to interest rates.

Just eat for accounts alone like a 30% decrease in G D. A.

Despite this decline in noninterest bearing deposits remain relatively high 40%.

Speaker 3: Just seats for accounts alone, make of 30% of the decrease in DDA.

Speaker 3: Despite the decline, I'm despairing the power to be in a relatively high 40%.

Total deposits.

Give me a call later on in the Q&A.

Since the end of the 2021 second quarter deposits increased 18.6 theaters with 22%.

Speaker 3: of total deposits.

Speaker 3: We'll give you a couple later on in the Q&A.

Speaker 3: Since the end of the 2021 second quarter, deposits increased 18.6 billion for 22%, and the average deposits increased 31.5 billion.

<unk> increased $31 5 billion.

Most of the deposit ratio now stand at 69%, which is up from 64% one year ago.

Speaker 3: Along with the private ratio now stands at 69%, which is up from 64% one year ago.

On the digital front.

The significant decline in the value of crypto currencies and the latest digital winter this quarter.

Speaker 3: On the digital front, despite the significant decline in the value of cryptocurrencies in the latest digital winter, its quarter, our deposits were only down 2.4 billion, which includes the movement of 1.5 billion to off-balance key treasuries. This resulted in a minimal impact of 900 million. Some analysts say there is still confusion as to what we do in this space.

This is only down $2 4 billion, which includes the movement of $1 5 billion off balance sheet treasuries. This resulted in minimal impact with 900 million some analysts.

And again to make it clear we have no crystal currencies.

Speaker 3: To make it clear, we hold no cryptocurrencies.

Taking U S dollar deposit clients.

Speaker 3: I'll say that again, to make it clear, we hold no critical currencies. We are taking US dollar deposits, now clients use our payments platform, SIDNET, to trend that, in real time, 24 by seven by 365. For us, it is all about the future of finance. What we believe is the blockchain technology, the Java ecosystem is all about over time.

Payments platforms, Signet tranche to transact real time 24 by seven for 365 trucks. It is all about the future of finance.

Please use the blockchain technology drove ecosystems, what was the off over time.

Yeah.

To wrap up on that I really want to causes. This was only the second quarter of negative deposit growth nearly 15 years, we were not surprised at all as we knew there was some.

Speaker 3: To wrap up our narrative on deposits, this was only the second quarter of negative deposits of growth in nearly 15 years. We were not surprised at all as we knew there was so excess deposits, I think we were really nearly fully exposed.

What I want to.

Cordless floor.

Although the deposit environment will remain difficult.

During the recent policy of quantitative tightening we continue to focus on growth for example, E B five COVID-19.

Speaker 3: Although the carbon environment will remain just a coat.

Speaker 3: Through the Fed's recent policy of quantitative tightening, we continue to focus on growth. For example, the EB-5 program, new legislation in Washington has been passed which reauthorizes the EB-5 program for a period of five years. It is an understatement to say we have a significant pipeline. I'll say that again. It is an understatement to say we have a significant pipeline for EB-5.

Deflation in Washington has been Paas, which reauthorizing the easy five program for a period of five years.

The other thing to say you have to signet.

Pipeline.

But again it is known to statement.

Have a good pipeline.

It would be fine.

Our specialized mortgage banking solutions team.

Any declines in their pipeline. Our newest addition, health care banking and finance team will help to raise deposits.

Speaker 3: A specialized wound banking solution team has many new clients in their pipeline. A newest addition to health care banking and finance team will help to raise deposits. A new client's team will help to raise deposits.

The fund banking division has firmly established.

It was one of the leading language in their space.

Speaker 3: The Fund Banking Division has firmly established their position as one of the leading lenders in their space.

And I'll emphasize is a pilot well prospectively to fund their business.

Speaker 3: and emphasizing the part of the world respectively the funding business. And I would respect the funding business. And I would respect the funding business.

The fund banking Division.

This is expected after four years with next month it'll be here four years was expected to fund.

Speaker 3: The fund bank division was expected at the four years, which next month, they'll be here four years, was expected to fund themselves 100%. They're below 10%. And so we expect that they'll continue and emphasize the positive growth as they have just started to do so this month. And last week we hired 11 new teams, coupled with the 127 existing teams who are all highly interested to buy.

Themselves, 100% it dipped below 10% and so we expect it will continue to emphasize deposit growth as it has just started to do so.

Small and lastly, probably 11 joint fees, coupled with 127 existing teams who are all highly incentivized to grow core deposits.

I'd like to turn the call over to Eric.

Thank you Joe and good morning, everyone I'd like to turn our attention to our lending businesses, where we had our second strongest quarter ever.

Speaker 3: to grow cause deposits. Now I'd like to turn the call over to Eric.

Speaker 4: Thank you, Joe. Good morning, everyone. I'd like to turn our attention to our lending businesses where we had our second strongest quarter ever.

Let's turn to 2022 second quarter increased $5 6 billion or 8% to 72 billion.

Speaker 4: Loans during the 2022 second quarter increased five point six billion or 8%. The seventy-two billion.

For the prior 12 months loans grew 70 billion or 32%.

Speaker 4: For the prior 12 months, loans grew 17 billion or 32%.

The power of diversification continues to take hold with our lending businesses.

Numerous teams contributing to our growth this quarter.

Speaker 4: The power of diversification continues to take hold with our lending businesses.

So our banking division once again led the charge with growth of $3 5 billion.

Speaker 4: with numerous teams contributing to our growth this quarter.

Speaker 4: The Fund Banking Division once again led the charge with growth of $3.5 billion.

By $1 3 billion of growth from our CRE.

Yeah.

Our newest through the health care banking and finance team hit the ground running with $80 million of loads of Marinol girl quarter Court.

Speaker 4: followed by 1.3 billion in growth from our CRA fat 15.

Speaker 4: Our newest group, the Healthcare Banking and Finance team, hit the ground running with 80 million loans in their inaugural quarter. The Healthcare Banking and Finance team, the Healthcare Banking and Finance team, their inaugural quarter.

Corporate finance team had another solid quarter with 271 billion of growth.

Speaker 4: The corporate mortgage finance team had another solid quarter with 271 million growth.

Additionally, we saw positive contributions from all our other lending businesses.

591 million out of signature financial $34 million from our venture banking group 145 million for East Coast, C&I, and 93 million from our West Coast C&I businesses.

Speaker 4: Additionally, we saw positive contributions from all our other lending businesses, including 591 million out of signature financial, 34 million from our venture bank group, 145 million from East Coast CNI, 93 million from our West Coast CNI businesses. And 93 million from our West Coast CNI businesses.

Also important to note the single $100 million loan exposure collateralized by digital assets.

Speaker 4: Also, important to note, the single $100 million loan exposure collateralized by digital assets at our books, Paid Off, Water 30 prices do not see in public that are seeing consumers

It's paid off.

Our loan balances are now is zero.

Space.

Turning to credit quality, our portfolio continues to perform well.

Speaker 4: And our low balances are now zero in that space.

Non accrual loans further declined to 168 billion or 23 basis points total loans.

Speaker 4: Turning to credit quality, our portfolio continues to perform well.

Speaker 4: Not a cruel launch further declines to 168 million or 23 basis forms total loans, compared to 178 million or 27 basis points for the 2022 first quarter. For the 2022 first quarter.

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78 million or 27 basis points for the 2020 to first quarter.

Our 30 to 89 day past due loans increased to $152 4 million or 21 basis points.

Speaker 4: Our 30th 89 day pass due loans increased to 152.4 million or 21 basis points.

It is important to note that $91 8 billion of the 30 to 89 day past dues were primarily caused by the documentation delays and are now current.

Speaker 4: It is important to note that 91.8 billion of the 30 to 89 day pass throughs were primarily caused by documentation delays and are now current.

Excluding these our 30 to 89 day past dues would've been well within our normal range at $60 6 million or eight basis points total loans.

Speaker 4: Excluding these, our 3089 day past dues would have been well within our normal range at 60.6 million or 8 basis points total loans.

Our 90 day, plus past dues were $49 1 million or seven basis points of total loans.

Speaker 4: Our 90-day plus pass dues were 49.1 million and we're 7 of the basis points total on it. We're 7 of the basis points total on it.

Excluding two loans for $23 9 million that have been approved for refinancing but are still in process as well as $15 6 million of loans delay due to documentation.

Speaker 4: Excluding two loans for 23.9 million that have been approved for refinancing, but are still in process, as well as 15.6 million a month, the lay do the documentation and are now current. 90-day plus passcode would have been 9.6 million with just one reason to point.

Now current 90 day, plus past dues would've been $9 6 million or just one basis point.

Net charge offs for 'twenty for the 2020 through second quarter were 19, 7 million or 11 basis points of average loans.

Speaker 4: Net charge loss for the 2020-22nd quarter were 19.7 million or 11 basis points of average loans. Net charge loss for the 2020-22nd quarter

Compared with $17 8 million for the 2020 to first quarter.

The provision for credit losses for the 2022 second quarter increased to 4 million compared with $2 7 million for the 2020 to first quarter.

Speaker 4: compared with $17.8 million for the 2022 first quarter.

Speaker 4: The provision for credit losses for the 2022 second quarter increased to 4 million in power of the 2.7 million 2022 first quarter. The provision for credit losses for the 2022 first quarter.

This brought the bank's allowance for credit losses to 62 basis points.

Coverage ratio stands at a healthy 266%.

Speaker 4: This profit banks allowance for credit losses to 62 basis points. And in coverage ratio, stands at a healthy 266%.

I'd like to point out that excluding very well secured fund banking capital call facilities and government guaranteed PPP loans the allowance for credit loss ratio will be much higher at 190 basis points.

Speaker 4: I'd like to point out that excluding very well secured fund banking capital call facilities

Speaker 4: and government-arrotty PPP loans, the allowance for credit for us ratio will be much higher at 109 basis points.

Now onto the expanded team front, where we continue to realize success with one of our strongest quarters of T environments ever.

Speaker 4: And now onto the expanding team front where we continue to realize success with one of our strongest supporters of Team Byron ever.

As mentioned earlier the bank on boarded 11 private client banking teams, including five in New York.

Speaker 4: As mentioned earlier, the bank on boarded 11 private client banking teams, including five in New York and six on the West Coast, starting the quarter. And our pipeline for additional teams this year remains strong.

Six on the West coast during the quarter and our pipeline for additional teams this year remains strong.

This quarter also marked award for our newest national banking practice, the healthcare banking and finance to you.

Speaker 4: This Court also marked the launch of our newest national banking practice that helped tear-breaking and finance to you. The Court also marked the launch of our newest national banking practice that helped tear-breaking and finance to you. The Court also marked the launch of our newest national banking practice that helped tear-breaking and finance to you. The Court also marked the launch of our newest national banking practice that helped tear-breaking and finance to you. The Court also marked the launch of our newest national banking practice that helped

With the Onboarding of 10 colleagues to provide lending services.

<unk> garner deposits in this space.

Speaker 4: with the onboarding of 10 colleagues to provide lending services and garner deposits in this space.

In order to support our team expansion and we continue to hire extensively throughout our operations and support infrastructure. So that we can best serve our clients' needs.

Speaker 4: In order to support our team expansion, we continue to hire extensively throughout our operations and support infrastructure so that we can best serve our clients' needs.

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

Speaker 4: At this point, I'll turn the call over to Steve, and he will review the course financial results in greater detail.

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

Speaker 4: Thank you, Eric, and good morning, everyone. I'll start by reviewing net interest income and margin.

Our continued emphasis on cash deployment and higher prevailing market interest rates. Our net interest income reached $649 million for the second quarter, an increase of 76 million or 13% from 2022 first quarter and an increase of $192 million for 42% from the 2021.

Speaker 4: With our continued emphasis on cash deployment and higher for value market interest rates, our net interest income reached $649 million for the second quarter, an increase of $76 million for 13% in the 2022 first quarter, an increase of $192 million for 42% from the 2021 second quarter. $242% from the 2021 second quarter.

Second quarter.

Net interest margin increased 24 basis points to 223% compared with $1, 99% for the 2020 to first quarter.

Speaker 4: That interest margin increased 24 basis points to 2.23% compared with 1.99% for the 2022 Thank you all.

The increase in asset yields far outpaced the rise in our cost of funds, which led to significant margin expansion during the quarter.

Speaker 4: The increase in asset yields far outpaced the rise in our cost of funds, which led to significant margin expansion during the quarter.

We expect this trend to continue in the quarters ahead.

Let's look at asset yields and funding costs for a moment.

Speaker 4: We expect this trend to continue in the quarters ahead.

Interest, earning asset yields for the 2022 second quarter increased 44 basis points from the linked quarter to 266%.

Speaker 4: Let's look at asset yields and funding costs for a moment.

Speaker 4: Interest earning asset yields for the 2022 second quarter increased 44 basis points from the link quarter to 2.66%.

The increase in overall asset yields was across all of our asset classes and was driven by higher rates as well as the deployment of cash into higher yielding loans.

Speaker 4: The increase in overall asset yields was across all of our asset classes and was driven by higher rates as well as the deployment of cash and the higher yielding loans.

Yields on the securities portfolio increased 29 basis points linked quarter.

190%, given higher replacement rates and slower CPR speeds on our mortgage backed securities portfolio. Additionally, our portfolio duration increased to $4 43 years due to the higher interest rate environment.

Speaker 4: Yields in a securities portfolio increase 29 basis points when quarter

Speaker 4: to 1.90% given higher replacement rates and slower CPR speeds on our mortgage backed securities portfolio.

Speaker 4: Additionally, our portfolio duration increased to 4.43 years due to the higher interest rate environment.

Turning to our loan portfolio yields on average commercial loans and commercial mortgages increased 20 basis points to 353% compared with the 2020 to first quarter.

Speaker 4: Turning to our loan portfolio, yields on average commercial loans and commercial mortgages increased 20 basis points to 3.53% compared with the 2022 first quarter.

Again, the increasing yields was driven by our portfolio repricing higher.

Since over 40% of our loans are reset within 90 days or less we expect loan yields to continue to increase significantly as short term rates move higher this year.

Speaker 4: Again, increasing yields are driven by our portfolio repricing higher.

Speaker 4: Since over 40% of our laundry is set within 90 days or less, we've specced loan yields to continue to increase significant length by short term rates in higher this year.

Now looking at liabilities, given the 150 basis points of fed moves since March our overall deposit cost this quarter.

Speaker 4: Now looking at liabilities. Given the 150 basis points of FedMUSed since March are overall deposit costs this quarter. Our overall deposit cost is quarter.

Increased 22 basis points to 40 basis points.

The pace of the deposit re pricing is in line with our expectations during.

Speaker 4: Increase 22 basis points to 40 basis points.

During the quarter average borrowing balances decreased $554 million and the cost of borrowing decreased by four basis points to 281%.

Speaker 4: The piece of the department of repressing is in line with our expectations.

Speaker 4: During the quarter, average barring balances decreased 504 million, and the cost of barring decreased by 4 basis points to 2.81%.

The overall cost of funds for the quarter increased 21 basis points to 46 basis points driven by the increase in deposit costs.

Speaker 4: The overall cost of funds per quarter increased 21 basis points to 46 basis points driven by the increase in deposit costs.

As we have pointed out the bank has significantly asset sensitive the bank's focus on growing floating rate loans, which now comprise 52% of our loan portfolio, coupled with our core deposit funding make us extremely well positioned to continue to take advantage of a rising rate environment.

Speaker 4: As we have pointed out, the bank is significantly asset-sensitive. The bank's focus on growing floating rate loans, which now comprise 52% of our loan portfolio, coupled with our core to profit funding, make us extremely well positioned to continue to take advantage of a rising rate environment. For those who have major not now know here, however, how the bank would continue to take advantage you

On to non interest income and expense with our plan to grow noninterest income, we achieved growth of $14 3 million or 61% to.

Speaker 4: Onto non-interest income and expense. With our plans to grow non-interest income, we achieve growth of 14.3 million or 61%. The 37.7 million one compared with the 2021 second quarter. The 37.7 million one compared with the 2021 second quarter.

The $37 7 million when compared with the 2021 second quarter.

The increase was generally across the board as many of our fee income initiatives continued to take hold.

Speaker 4: The increase was generally across the board as many of our fee income initiatives continue to take hold.

Noninterest expense for the 2022 second quarter was $210 million versus $172 million for the same period a year ago.

Speaker 4: Non-interested expense for the 2022 second quarter was 210 million versus 172 million for the same period a year ago. But for the last month, often we soon ???? that a variety of those quotes are from the No-interested expense for the same period a 80-year- McN daily you

The $38 million or 22% increase was principally due to the addition of new private client banking teams national banking practices and operational personnel as well as consulting and professional fees related to various new projects, which we have initiated to support the growing needs of our clients.

Speaker 4: The 38 million or 22 percent increase was principally due to the addition of new private client banking teams, national banking practices, and operational personnel, as well as consulting and professional fees related to various new projects which we've initiated to support the growing needs of our clients.

Despite a significant hiring and operational investments to <unk>.

<unk> continues to gain operating leverage and as a result, our efficiency ratio improved by 36 improved to 36%.

Speaker 4: Despite a significant high-erring and operational investment,

Speaker 4: The bank continues to gain operating leverage, and as a result, our efficiency ratio improved by 30.6, improved to 30.6%.

For the 2022 second quarter versus 35, 8% for the comparable period last year.

Speaker 4: For the 2022 second quarter, versus 35.8% for the comparable period last year. For the comparable period last year. For the comparable period last year.

Turning to capital our 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 996% and total.

Speaker 4: Turning to capital, our capital ratios remain well in excess of regulatory requirements and augment the relatively low risk profile of the balance sheet as evidenced by a common equity tier 1 risk-based ratio of 9.96% and total risk-based ratio of 11.85% as of the 2022 second quarter.

Total risk based ratio of 11, 85%.

As of the 2022 second quarter.

Now I will turn the call back to Joe. Thank you. Thanks, Steve.

This quarter, we continue to perform at an elevated level. Despite the uncertainty in the <unk>.

Speaker 3: Now we'll turn the call back to Joe. Thank you. Thanks Steve. This quarter we continue to perform at an elevated level of spiny uncertainty in the financial markets. The spiny uncertainty in the financial markets.

Financial markets.

We achieved a return on common equity of 17, 9% very strong quarter earnings.

Speaker 3: We achieve the return of common equity of 17.9%, very strong quality of earnings.

We saw substantial loan growth of five 6 billion, which ranks as the second strongest growth quarter in our history.

Speaker 3: We saw substantial long-road, the 5.6 billion, which ran for the second strongest growth quarter in our history, and contribution spend all of our lending businesses.

Distribution spend all of our lending businesses.

Our revenue growth continued retail continues to drive our efficiency ratio, Lola, which improved to 36% even with higher than expected expense growth.

Speaker 3: Our revenue growth continues to drive our efficiency making our lower, which improves to 30.6% even with higher than expected expense growth.

We know many of you are thinking the efficiency ratio got better begs. The question are we investing enough to support our growth.

Speaker 3: We know that many of you are thinking the efficiency ratio is not that bad. And thanks to the question, how we are investing enough to support our growth?

And we are for instance, this quarter, we spent more than we had budgeted to strengthen support Aries products.

Speaker 3: And we are. For instance, this quarter we spent more than we had budgeted to strengthen our support areas, products and capabilities, which will ultimately drive future net income.

Capabilities, which will ultimately drive future net income.

They always seem to exceed the budget due to growth.

We continue to pave the way for future growth. So the onboarding of new teams such as the healthcare banking and finance team as well as the addition of 11 teams across our New York and West Coast footprint.

Speaker 3: The fact that we seem to exceed the budget due to growth.

Speaker 3: We continue to pave the way for future growth through the onboarding of new teams, such as the healthcare banking and finance team, as well as the addition of 11 teams across our Newmarket West Coast footprints.

Today, we continue to be stimulated by the enormity of opportunity to grow our franchise of which we will continue to take advantage and remained focused on the long term.

Speaker 3: Today, we continue to be stimulated by the enormity of opportunities to grow our franchise, of which we will continue to take advantage and remain focused on the long term.

We are not distracted by the uncertainty in the markets in the near term are going to continue to rely on a conservative relationship based model, which is proven to be durable and test to thrive in times of stress.

Speaker 3: We are not distracted by the uncertainty in the markets in the near term, because we continue to rely on a conservative relationship-based model, which has proven to be durable and intended to thrive in times of stress.

During periods, such as the great recession and narrative.

As well as the Covid pandemic, we find clients rely on this I think it was more solid and now that signature bank is diversified across many different businesses and is not reliant on any single one area. We feel we are better positioned than ever before.

Speaker 3: During periods such as the Green Recession, and now the, and not, as well as the Coleman pandemic, we find flying through mile in the tank is more so. And now that signature bank has the birth spot across many different businesses, and it's not be lied on any single one area, we feel we are better positioned than ever before.

And like I said earlier it is not a sprint is a marathon.

Patient can be glad hard every single day now, Steve Eric and I'm happy to answer any questions you might have questions, we'll turn it back to you.

Speaker 3: But then, like I said earlier, it is not spring, it is a marathon.

Speaker 3: We are patient and we grind hard every single day. Now Steve, Eric, and I happen to answer any questions you might have. Gretchen, we'll turn it back 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 telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing the pumpkin again, we do ask that while you pose your question that you pick up your handset to provide optimal sound quality.

Speaker 5: The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Again, we do ask that while you pose your question that you pick up your handset to provide optimal sound quality.

Yeah.

Thank you. Our first question is coming from Abraham villas from UBS.

Speaker 5: Thank you. Our first question is coming from Abraham Villas from UBS.

Okay.

Hey, everyone.

For the question.

So at the time of the mid quarter update.

Speaker 6: Hey everyone, thanks for the question. So at the time of the mid-quarter update, digital asset deposits were about flat, I believe, but they ended the quarter down to an $1.5 billion. And that seems to be the main driver of some of that overall change to deposit balances since then. Can you talk about what changed there? And does it have anything to do with some of the crypto lending platforms and some of the revenue that the uncertainty is that have you not answered them yet. that

Digital asset deposits, where you know we're about flat I believe but they ended the quarter down two 5 billion and that seems to be the main driver of us some of that overall change too.

Deposit balances. Since then can you talk about what changed there and.

Does it have anything to do with.

Some of the crypto lending platforms.

Some of the fun that we saw in that space are coming under stress over the last several weeks.

A large part of this disease.

The decrease was $1 5 billion of the $2 4 billion of the total decrease for the quarter, our clients into digital World training $1 5 billion into treasuries.

That was a large part of the of the decrease.

They took money out of out of the balance sheet side.

Balance sheet.

Cost of treasuries.

Okay.

Speaker 3: balance sheet size and put a north balance sheet through the purchase of treasuries.

Okay. Okay.

And then just kind of overall.

Speaker 6: Okay, okay. Um, and then just kind of overall.

Deposit trends it sounds like there are opportunities ahead for you guys with the pipeline you mentioned around.

Speaker 6: deposit trends. It sounds like there are opportunities ahead for you guys with the pipeline you mentioned around EB5. So from here on out, you feel like it's going to be net inflows in deposit growth or could there still be some volatility for the rest of the year here to the downside.

Around <unk> five so you know from here on out.

Do you feel like it.

It's going to be.

Net inflows in deposit growth or could there could there still be.

<unk> be some volatility.

For the rest of the year here.

Downside.

As always Charles there's always choppiness.

Feel really good because.

Speaker 3: There's always choppiness, but we feel really good because we not only have EB-5, we believe we have the best team for EB-5. And it's gotten a little bit more complicated, which may remove some competitors, and we have an incredibly strong pipeline. It's just a matter of when the dollars come in, the third quarter, fourth quarter, or first quarter of next year. But we're expecting them to come in. And then our special mortgage solutions team.

We not only have a <unk> five we believe we have the best team for <unk> five.

Got a little bit more complicated, which may remove some competitors and we have an incredibly strong pipeline.

That $1 come in in the third quarter fourth quarter, the first quarter of next year, but.

We're expecting them to come in and then all of a special mortgage solutions team.

That's a very strong pipeline are.

They have Uh huh.

A very strong pipeline.

Speaker 3: has a very strong pipeline. They have a

Below the lines of whatever they had in the last few years, it's better than it has been so we're confident that and then the 11 teams that we brought on in addition to the country.

Speaker 3: A very strong pipeline. Along the lines of whatever they had in the last few years, it's better than it has been. So we're confident there. And then the 11 teams that we brought on, in addition to the 120 plus teams we have, we expect deposits to come there. So we're feeling very good about that. And then what happened this past quarter was we had a number of escrows we.

Plus teams we have we.

We expect deposits to come to come there so we've been.

We're feeling very good about that and then what happened. This past quarter was we had an over <unk> as we and number of 10 31.

So the deposit sweep. So there was there were a lot of one offs.

Speaker 3: the number of 1031 Departments leave so they were there a lot of one loss For instance we had in DDA 1.6 billion of the 5.3 billion were in for four transactions

For instance, we had in DDA.

One 6 billion of the $5 3 billion, putting forth for transactions.

And so $1 6 billion, leaving in four transactions, it's pretty significant and the clients didn't need it was set the transactions they have came to fruition.

Speaker 3: And so 1.6 billion in leaving in four transactions is pretty significant. And the clients didn't leave, they were set to transactions they had, came to us for wishing.

And to any of those escrow come back later in the year or are they.

Speaker 6: And do any of those escrows come back later in the year or are they?

One was a class action $148 million that that one will come back with the company and law firms that we deal with.

Speaker 3: Well, thank you. For instance, one was a class action of 140 million, that one won't come back, but the company and more firms that we deal with constantly have transactions that go flowing an hour. We had a bankruptcy of 250 million leaves. And again, that happens in and out. It just happened that one large, one less. We had a pension distribution under the American Rescue Plan.

Constantly have.

Transactions that go flow in and out we had a bankruptcy of 250 million leads and again.

It happens.

In and out.

This happened at one large one unless we had a pension distributions under the American rescue plan we're on.

The fund's underfunded pensions.

Provided the money by the government to show up pension, we had a distribution of $550 million Nobody had a corridor of distributions of $650 million. So those are the things that occurred throughout the year. It just so happened that there were four large transactions that occurred all at once.

Speaker 3: The underfunded pensions were provided money by the government to shore up the pension. We had a distribution of 550 million. And then we had a court-ordered distribution of 650 million. So those are things that occur throughout the year. It just so happened that there were four large transactions that occurred all at once.

Okay.

Got it Okay, and then just on expenses if I could squeeze one last one in here.

Speaker 6: Yeah, that's okay. And then just on expenses, if I could squeeze one last one in here, you know, you guys have been pretty straight down to spare way relative to your guide for several quarters now. You know, Q2 came, you know, little bit on the high side. You know, obviously done, you know, great job hiring and executing growth in that way. So just, you know, just wondering, just from here, you know, you're going to drop back to that, you know, made, you know.

Guys have been pretty straight down the fairway relative to your guide for several quarters now Q2 came in a little bit on the high side, obviously done a great job of hiring and you know.

Executing.

Growth in that way. So just wondering just from here you know.

Is it going to drop back to that mid mid to high teens I believe year on year growth rate that you've been talking about just whats the trajectory from here.

Sure. So I think we'll be in the same range in the next few quarters, which is the low 20% range.

Quite frankly, you just given their new product initiatives that we are some new projects that we started entering into this quarter to bring some products and services to our clients that they were demanding as we continue to bring on new teams. We continue to expect to do that over the course of the coming quarters, but quite frankly.

Speaker 4: and services to our clients that they were demanding as we continue to bring on new teams. We can continue to expect to do that over the course of the coming course, but quite frankly, given our operating leverage that we continue to gain, and the fact that we improved our efficiency ratio, we still expect to maintain this low level efficiency ratio, given our asset sensitivity, so we feel really good about where we are.

Given our operating leverage that we continue to gain and the fact that we improved our efficiency ratio, we still expect to maintain this low level efficiency ratio given our asset sensitivity. So we feel really good about where we are.

And our next question comes from Dave Rochester from Compass point.

Speaker 5: And our next question comes from Dave Rochester from Compass Point.

Hey, good morning, guys.

Good morning, Josh.

Just wanted to get a sense for which customer segments drove that decline in the digital asset deposit space.

Speaker 7: Have a good one you guys.

Speaker 7: Just wanted to get a sense for which customer segments drove that decline in the digital asset deposit space. Do you guys have a breakdown of that bucket per customer type for all those segments you talked about before? That would be great. Ok.

So the breakdown of that bucket.

For customer type for all of the segments, you've talked about before that'd be great.

Okay.

Sure Dave.

Digital asset exchanges, they were down about one 8 billion.

Speaker 4: So digital asset exchanges, they were down about 1.8 billion.

Our stable coin issues were down $395 million.

Our OTC deaths in institutional traders were down about.

Speaker 4: Our stable point of share is we're down to 395, noyan.

About 100 million and then a blockchain tech and digital miners were down about $40 million.

Speaker 4: Our OTC deaths and institutional traders were down

Speaker 4: About a hundred million and then our blockchain tech and digital miners were down about 40 million

Got it so that the $1 5 billion transfer came out of the exchanges like us.

Speaker 7: Got it. So that's the 1.5 billion transfer came out of each??? mm m

That's right.

Yes.

Okay. I was hoping you could just give an update on where deposit levels are.

Speaker 8: Yeah, that's right.

Speaker 7: Yep. Okay, and it was hoping you could just give an update on where the positive levels are today in July in that digital segment and for the positive role if you have any of that. And it sounds like you're really positive on the EV5 going forward, the mortgage team. It sounds like it has a strong pipeline. Are you guys expecting deposit growth in general for the back half of the year at this point?

Today in July and that that's all segment and for deposits. Overall, if you have any of that and it sounds like Youre really positive on the EB five going forward the mortgage team it sounds like there's a strong pipeline.

Are you guys expecting deposit growth in general for the back half of the year at this point.

Well we have.

All the all the things in place you mentioned.

Speaker 3: What we have are...

<unk>, five and especially I'm always banking solutions and.

Speaker 3: All the things in place, we mentioned, you know, the EB-5 and the special needs banking solutions, and we also want to add the fund banking division. We expected them after four years to be self-funding, and they're funding about 4% right now. They're gonna make a concentrated effort in the second half of the year, now that one of the leading fund banking teams in the country in the top five or so.

We also are in the fund banking Division, we expect about four years to be self funding and that funding of about 4% right now.

Making a concentrated effort in the second half of the year now that one of the leading.

One banking teams in the country in the top five or so on the lending side, we want them to be one of the top performing teams on deposit gathering side. So that protocol. So all the pieces are in place.

Speaker 3: On the lending side we want them to be one of the top performing teams on the hot scattering side So that goes well. So all the pieces are in place.

We just have to execute.

Got it and any update on deposit balances at this point in July <unk>.

Speaker 3: We just have to execute.

Thank you.

Speaker 7: Got it. Any update on the positive balances at this point in July in 3Q?

Too early in the quarter.

Okay.

Yeah.

Well Jeff.

Speaker 3: to early the quarter.

Yeah, No I got you.

Speaker 9: Okay.

And would you be able to give the spot rate on deposits at the end of Q2.

Speaker 4: Oh, yeah,

Speaker 7: Would you be able to give the spot rate on deposits at the end of 2Q?

And then what you're seeing in <unk>.

New loans and.

Our new loan yields in the securities purchase rates at this point that'd be great.

Speaker 7: And then what you're seeing in terms of new loans and or new loan yields and securities purchase rates at this point, that'd be great.

Sure. So I'll start with our security is where in.

Speaker 4: Sure, so I'll start with security. Okay, so we're in...

375%, 4% range on new purchases CRE is at about five and a quarter.

Speaker 4: 3.754% range on new purchases, you can see or use that about five and a quarter. 3.754% range on new purchases,

And I believe you also ask on the deposit operated from that was 67 basis points to start July .

Speaker 4: And I believe you also asked on the positive spot rate and that was 67 basis points

Okay.

Yeah.

Speaker 4: Distort July .

And our next question comes from Steven Alexopoulos from J P. Morgan.

Speaker 5: And our next question comes from Stephen, Alex O'Pas, from JP Morgan.

Hey, good morning, everyone.

<unk> works through.

Want to start first so on the deposits that you just called out from the exchanges the decline of $1 8 billion and I hear you on that the larger transfer.

Speaker 10: Take good morning everyone.

Speaker 9: More in speed, more speed.

Speaker 10: I wanted to start first. So on the deposits that you just called out from the exchanges, the decline of $1.8 billion, and I hear you on the larger transfer, but as we're all starting to learn about this business and how it impacts your company. So if we think about crypto prices declined in a quarter, volumes were up a bit. Walk us through how that drove deposit outflows for you guys, right? Are the exchanges just looking for a higher yield than you're willing to offer so they're moving to alternatives or are they seeing.

We're all starting to learn about this business and how it impacts your company. So if we think about crypto prices declined in the quarter volumes were up a bit walk us through how that drove deposit outflows for you guys right or the exchanges just looking for a higher yield and youre willing to offer so they're moving to alternatives or are they seeing.

Deposit outflows themselves and because of that you're seeing deposit outflows, hoping you could connect what's happening in their business to what's happening in your business.

Speaker 10: deposit outflows themselves and because that you're seeing deposit outflows, I hope you can connect what's happening in their business to what's happening in your business.

Okay.

Okay.

Tough to answer Steve.

We saw a 65% decline in the price of bitcoin.

Speaker 4: It's kind of tough to answer, Steve. You know, I mean, we saw a 65% decline in the price of Bitcoin.

And that we were not even 10% deposits in that space. So you know clearly.

Speaker 4: in debt we were, you know, hardly down, not even 10% in deposits in that space. So, you know, clearly there are people leaving that space, therefore deposits leaving. That was some of the headwinds, you know, as we talked about, a billion five went off balance sheet, right? You know, the off balance sheet alternatives for yield are certainly there. So that's kind of pressured us a bit. So we're seeing, you know, people look for more yield, looking at off balance sheet alternatives coupled with, you know, people exiting the space.

Clearly there are people, leaving that.

That space and therefore deposits leave at that.

With some of the headwinds you know as we've talked about.

$1 five went off balance sheet right the off balance sheet alternatives.

For yield certainly there so that's kind of pressure a bit.

So we so we're seeing you know people look for where yields looking at off balance sheet alternatives, coupled with you know people exiting the space a little bit, but you know I think given the dramatic decline in values, we're pretty pleased with the fact that we only saw.

Speaker 4: Little bit, but you know, I think given the dramatic decline in values We're pretty pleased with the fact that we only saw you know a less than 10% outflow in our deposit base there But look, I mean we're still it's still probably gonna be a headwind for a little while It's very choppy in that space, you know digital winter hasn't quite got away yet although we are starting to see the value of Bitcoin firm up a little bit off of the close, so

Less than 10% outflow there not deposit base there.

But look I mean, we're still it's still probably going to be a headwind for a little while it's very choppy in that space digital winter hasn't quite got away yet, although we are starting to see the value of bitcoin firm up a little bit off of it flows so.

It could be a positive as we look out over the quarter, but right now we anticipate that that will still be a headwind.

Speaker 4: You know that it could be a positive as we look out over the quarter But right now we anticipate that that'll still be a headwind.

Eric would you say that people are exiting the space are you use suggesting your own digital ASIC customers.

Speaker 10: Eric, when you say that people are exiting this space, are you suggesting your own digital asset customers? They left this space and maybe give us an update of where you ended the quarter. I think you were at over 1200 last quarter.

They left the space. So maybe you can give us an update on where you ended the quarter I think you're right. That's.

It's over 1200 last quarter.

So the clients were up 121 clients. So we had a very good quarter. There were at <unk> 223 in total I think.

Speaker 4: Well, clients were up 121 clients, so we had a very good quarter there. We were at 1,323 in total. I think we've got the strong, and it was our best transfer volume ever at 254 billion. So it was a really strong quarter from a client acquisition standpoint. So we're seeing more and more people come into this space, which will both well, we onboard a few more exchanges that have met with more of their relationships of that, and we're both well as across in the future also.

We've got the strong and it was our best transfer volume ever at 254.

Billions. So it was a really strong quarter from a client acquisition standpoint, so we're seeing more and more people come into the space.

Which will bode well, we on boarded a few more exchanges.

I just have to move over there their relationship is a battle.

Well as you know for us in the future also.

But clearly if people you know deposits or exit.

Hum.

We have exited two to a pretty small extent, though at what he thinks about it seemed like I said, given the value mhm decline there.

Speaker 4: But clearly, people, you know, deposits are exited, and it has aggregate to a pretty small extent of what he's thinking about it, see, like you said, given the value, decline there.

Two exchanges that Eric mentioned are starting on July 29.

Speaker 3: Those two exchanges that Eric mentioned were starting on July 29th. We had to acquire them as clients in the first quarter, but it took a while to get them on board, and they'll be starting to like 29th. That holds well for us, we're adding on those two exchanges. They're adding on another exchange, and it's starting quarter now.

We had to acquire them as clients in the first quarter, but it took a while to get them on board and they'll be starting July 2019 that bodes well for us.

It's waiting on those to exchanges are waiting on another exchange.

Third quarter now.

Mhm Okay.

That's helpful and on the balance sheet growth.

Speaker 11: Okay.

Speaker 10: Okay, that's helpful. On the balance sheet growth,

We know you funded quite a bit of the growth this quarter with cash, but first from like a gross for you do you still think that $4 7 billion of <unk>.

Speaker 10: We know you funded quite a bit of the growth this quarter with cash, but first from like a gross view, do you still think that four to seven billion of loan and security growth is that intact? And you're getting a lot of question on deposits. Do you think this quarter is a bottom-end deposits or could we actually trend lower and fund even more of that as a growth from cash as we move into 3Q?

Loan and security growth is that intact and youre getting a lot of question on deposit do you think this quarter is the bottom of deposits or could we actually trend lower and fund even more of that asset growth.

Cash as we move into <unk>.

Well, we'd like to fund our growth through deposits.

Now instead of a four to seven on the loans and investment securities to close with the Street.

Speaker 3: Well, we'd like to fund our growth through deposits. We're guiding now, instead of four to seven, on loans and investment securities, the growth would be between one to three billion.

103 billion.

The reason why we're doing that is just the uncertainty with the fed actions, we're not we're not sure how.

Speaker 3: The reason why we're doing that is the uncertainty with those being fed actions.

How much deposit activity is going to be out there.

Speaker 3: We're not sure how much deposit activity is going to be out there.

What the fed doing the continued tightening and so that's good.

And I suppose that's going to allow us to be cautious.

Speaker 3: with what the Fed doing this to continue tightening. And so that's going to.

Don't want to get into a situation where.

Speaker 3: That's going to allow us to be cautious.

We are not funding with deposits. So we're going to slow down the growth on the interest, earning asset side between $1 billion to $3 billion.

Speaker 3: We don't want to get into a situation where we're not funding with deposits.

Speaker 3: So we're going to slow down the growth on the interest earning asset side to three billion, one to three billion, and to ensure that we'll do it with deposit growth and not anything else.

To assure that.

With deposit growth.

Not anything else.

Yeah.

Our next question comes from Casey Haire from Jefferies.

Yeah. Thanks, good morning, guys.

Speaker 10: My next question comes from Casey Hare from Jefferies. Yeah, thanks. Good morning, guys. Wanted to touch on deposit pricing. You guys have talked about a 40% deposit beta through the cycle. I'm calculating in the low 30s after the second quarter here. Do you just give us some updated thoughts on whether or not you still feel comfortable with that 40%?

Wanted to touch on on the deposit pricing.

You guys have talked about a 40% deposit beta through the cycle I'm calculating in the low thirty's. After the second quarter here do you can you just give us some updated thoughts on.

Whether or not you still feel comfortable with that 40%.

Yes, I think right now we're at 34% as of the end of the quarter from a beta standpoint, and we continue to expect that I mean, that's right, where we thought we would be at this point are we continue to expect that.

Speaker 4: Yeah, I think right now we're at 34% as of the end of the quarter from a beta standpoint, and we continue to expect that. I mean, that's right where we thought we would be at this point, and we continue to expect that to trend upward at this point into the low 40s.

The trend of upward at this born into the low forties.

Okay very good and just following up on the on the new.

Asset guide of $1 billion to $3 billion.

Speaker 7: Okay, very good. And just following up on the new asset guide of one to three billion, what will be, I mean, I'm assuming that, you know, obviously the deposit growth is still choppy. They outlook there, but is that one to three billion? Are you comfortable that you can grow that without using borrowings? Meaning it'll be dollar for dollar funded with the deposit growth.

So what will be I mean, I'm, assuming that you know obviously the deposit growth is still choppy.

Outlook, there, but is that $1 billion to $3 billion or are you comfortable that you can grow that without using borrowings.

It'll be dollar for dollar funded with deposit growth.

That's the plan.

But that's what we're planning on.

Okay.

Speaker 3: That's the plan. That's what we're planning on.

We think we're at or near the bottom up.

Positive hopefully work.

Speaker 7: Okay, we think we're at our near the bottom up on the positive hopefully work. We have an upward trajectory for the hair. It's got to be choppy that's that's that's quality. Titan is going to be difficult for us to find through but we think yourself. But that's the fun that that grows in the possible. And just the cash position at down a little under 15 billion is that that's roughly 13% of the balance sheet is that is that kind of a floor for you guys or

Trajectory from here, it's got to be choppy.

Let's not kid ourselves quantitative tightening is gonna be difficult for us to fight through but we think for yourself, but that's the plan is to fund that growth with deposits.

And just the cash position that down a little under $15 billion is that.

That's roughly 13% of the balance sheet is that is that kind of a floor for you guys or is there a little bit more room to fund out of that position as well.

There's a little bit more room, where we can run it at around 10% of total deposits. So we still have excess cash that we're holding.

Sure.

Okay very good and just just last one from me and apologies if I missed this on the expense side.

You know it.

What specific.

Is there a specific client base that is.

Driving this expense pressure and then was there any was this at all motivated by regulatory pressure.

Speaker 7: pressure and then was this at all motivated by regulatory pressure.

No not not too much from the regulatory pressure I mean, we certainly have spending in there for resolution planning etcetera, but relatively manageable it's really about.

No, not too much from the regulatory pressure. We certainly have spending in there for resolution planning, et cetera, but relatively manageable. It's really about client product offerings and talking about client base. I mean, are some of the new... I mean, are some of the new...

Client and product offerings, then talking about client base I mean are some of the new.

Teams and groups that we have added such as commercial mortgage finance team, we've done a little bit to spend there from an API standpoint to improve processing collateral management and from our West coast standpoint, integrating API technology for those clients.

Teams and groups that we add, except such as commercial mortgage finance team, we've done a little bit to spend there from an API standpoint to improve processing collateral management, then from a West Coast standpoint, integrating API technology for those clients to continue to grow there has really been the focus of using your projects.

Continue the growth there has really been the focus of these new projects.

Great. Thank you.

Thank you.

Okay.

Great, thank you. Thank you. Our next question comes from Abraham Punawala from Bank of America.

The next question comes from Ebrahim <unk> from Bank of America.

Hey, good morning.

Good morning.

I guess just following up on some of these questions are doing that at all.

Good morning.

Good morning, everybody.

On deposits I think the expectation will be and I heard everything on <unk>, even the cross currents, there, but given what we're seeing with industrywide.

I guess just following up on some of these questions, Geo and Eric, on deposits, I think the expectation will be, and I heard everything around EB5 and the cross currents there, but given what we are seeing with industry wide, crypto-deliveraging, I think the sense will be, we probably do see deposit outflows at signature for them in the near term. Just talk to us when we look at the loan to deposit ratio at 70%, how do you think about this? Like, you've seen this in the past, be it over 90%.

Pepto deleveraging I think the same will be the probably do see deposit outflows at signature for them in the near term.

Talk to us when you look at the loan to deposit ratio at 70%.

How do you think about this like we've seen this in the past to be over 90% I'm. Just wondering why can screen asset growth because of funding or are you not seeing as attractive opportunities on the asset side also would love to sort of Oh God.

I'm just wondering why constrained asset growth because of funding or are you not seeing as attractive opportunities on the asset side also? Would love to sort of get context to why you're actually down asset growth with the real funding?

Oh, good context to why Youre ratcheting down asset growth VW funding.

Exactly.

The funding is that that's part of it.

The charges come to be to be to a funding. It's just expose. It's part of it.

The other party.

The ratio of allowance to pilots.

We don't want to get into a situation, where we are above.

The other part is the ratio of loans to pilots.

Not that we're comfortable with and we don't necessarily divulge what that amount is.

We don't want to get into a situation where we are above the amount that we're comfortable with. We don't necessarily devote what that amount is, but we don't want to get anywhere near it. So we are being cautious because this is unprecedented times where rates are being increased, we fit funds 75 basis points at a time, and couple that with the quantitative tightening, we are.

But we don't want to get any way anyway.

So we are being cautious because this is unprecedented times and the rates are being increased in fed funds 75 basis points.

And couple that with the quantitative tightening.

It's it's unprecedented and it could make it tough.

On the deposit side. So we're just being cautious once it really doesn't mean that we'll stick with wants it right. We're just saying that would give you a guidance for the third quarter and fourth quarter. If you go back to four to seven.

It's unprecedented and it couldn't make it tough on the deposit side, so we're just being cautious. One to three doesn't mean that we'll stick with one to three. We're just saying that we're giving that guidance for the third quarter and fourth quarter. If you go back to four to seven, it's just that we don't feel comfortable in the short term.

It's just not we don't feel comfortable in the short term.

Noted.

Thanks for that and I think you mentioned earlier the fund banking was about 10% deposit for loans.

noted thanks for that and I think you mentioned earlier that fund banking was about 10 percent deposit for loans I'm just wondering in a world where deposits are just tight across the system how do you have those clients bring in more deposits at this stage I'm just wondering is it realistic that we see a big contribution for fund banking and what would drive that to bring those deposits into signature given that it's not happened in the last four years well they were constantly going developing the

Wondering in a world where deposits are just state across the system. How do you have those clients bring in more deposits at this stage I'm. Just wondering is it realistic that we see a big contribution from banking and what would drive that.

And to bring those deposits into signature given that it has not happened in the last four years.

Well they they were concentrating on developing the the lending side.

I wanted to we kind of took our eye off the ball as well yeah.

At 4% right now and if they go to 10% not even asking to be ideally you go to 10%. That's an extra 2 billion <unk> 3 billion as deposit so it really where I'm concentrating extensively on deposits and now they are in the second half. So we expect that there'll be some.

Growth there that we didn't have enough test for years.

Yeah.

Got it and then I guess, one last question, maybe for Steve or Eric.

have in the test for years.

You don't give margin guidance, but I think given just the moving pieces when you think about spread revenue.

Got it, and I guess one last question, maybe first Steve or Eric.

You don't give margin guidance, but I think given just the moving pieces, when we think about spread revenue, like where do you see NRI moving, think about third quarter, or maybe as we exit fourth quarter of this year, it consensus about high 700, is that realistic? Just how do you see it? Would love any perspective there?

Where do you see NII.

I'm moving think about third quarter or maybe as we exit the fourth quarter was designated <unk>.

Consensus about high seven hundreds is that realistic just how do you see it.

Would love any perspective there.

Yeah. So unfortunately, its really difficult to say and guide specifically given our asset sensitivity. We do expect to continue to see expansion just a degree based upon client impact or quantitative tightening as well as the magnitude and frequency of February to Christ, its just too difficult and too many different scenarios.

Yes, so unfortunately it's really difficult to say in guides specifically. Given our acid sensitivity, we do expect to continue to see expansion just to degree based upon quant-impact of quantitative tightening, as well as the magnitude and frequency of set rate height. It's just too difficult and too many different scenarios to give specific guidance there. So we do expect.

To give specific guidance there, but we do expect.

A meaningful expansion right should be significantly higher.

So is it safe to assume that you saw and I move up about $75 million sequentially.

Meaningful expansion should be significantly higher.

So, and is it safe to assume like this or NII move up about $75 million sequentially given Steve as you mentioned the rate hikes, we should see an even greater increase in NII in terms of the third quarter reset and potentially again in the fourth quarter, is that reasonable?

Steve as you mentioned that he takes we should see an even greater increase in NII in terms of the third quarter, you said and potentially again in the fourth quarter is that reasonable.

Alright, that's hard to say, there's a lot that goes into that.

So we expect that without any meaningful fashion.

All right, that's hard to say. There's a lot that goes into that.

Got it alright, thanks for taking my questions.

So if we expect of a lot of workforce perhaps we have a

Thank you.

All right, thanks for taking my questions.

Our next question comes from man and Gossip Leah from Morgan Stanley .

Thank you.

Our next question comes from Manin, I'm Gossalia from Morgan Stanley .

Hey, good morning.

A couple of questions on the loan growth side.

Hey, good morning. A couple of questions on the long road side. You know, see you brought on 11 new teams, you know, you study over pretty strong pipeline there as well. And I think you've done this successfully for several quarters now, but I was wondering, you know, what's your appetite to continue doing that at the same pace, particularly, you know, given that, you know, the headwinds that you mentioned on the deposit side.

On 11, new teams I know you said you have a pretty strong pipeline there as well and I think you've done this successfully for several quarters now, but I was wondering you know what's your appetite to continue doing that at the same pace, particularly given that the headwinds that you mentioned on the on the deposit side.

It's all opportunistic.

Growth.

It seems presents themselves.

It's all opportunities that grow if the teams present themselves.

And we can get a good teams there.

Revenue producing teams will bring them on board it won't it won't affect us.

And we think that good teams, revenue producing teams will bring them on board. It won't affect how we feel about expense. I think I said many times over the last few years, not the last few years, since the beginning, that if our expenses went up to 30% and they were all based on, we brought on a significant number of teams.

How we feel about expense I think I've said many times over the last few years and that's the way I see it.

At the beginning.

If our expenses went up to 30% and they were all based on.

We brought on a significant number of teams we would have no problem doing that because the revenue follows quickly and it's it's it's opportunistic.

we would have no problem doing that because the revenue follows quickly and it's opportunistic. I think that if we did an acquisition, people would be less concerned about the expense because it's an acquisition. Well, we're doing an acquisition utilizing capital better than if we did an acquisition. We're doing an acquisition of people that generate revenue. So if we find the teams, we'll hire them.

And I think that if we did an acquisition.

People would be less concerned about the expense because it's an acquisition, but we're doing an acquisition.

Utilizing capital better than if we did an acquisition we're doing an acquisition of people that generate revenue. So if.

If we find the teams well higher than if we don't find any teams that we won't have the expense, but we won't have the revenue.

So therefore, we don't we don't control the expense based on the number of teams.

If we don't find any teams, then we won't have the expense, but we won't have the value. Therefore, we don't control the expense based on the number of teams.

But it sounds like if the opportunity is there and presumably that might be more opportunity as the overall environment slows that you'd be willing to go in there and then get to you get new teams on board.

But it sounds like if the opportunity is there and presumably there might be more opportunity is the overall environment slows that you'd be willing to go and and get you team John Bord. And get you team John Bord.

Yes.

Absolutely.

Okay and then.

Yes.

That's definitely.

That's the result for 2021 years.

Everyone asked is how.

How much deeply how many teams do we project that we're going to have.

Next year in the first 10 years, I think Eric and I would say that we would.

Budget for Fourteens with three to five teams and that we go out and hire 12 13, and then we use that we said three to five and we ended up hiring three really depends on what opportunities present themselves.

We've been running the organization.

Okay.

Great that makes sense and then you know I was just wondering if you could give us an update on fund banking and the impact on demand that youre seeing from.

Given higher rates and lower public market valuations, yes, I think you saw some really nice growth there this quarter of about three and a half billion. Despite.

The market is looking like.

How are fine.

Managers are approaching the current market environment and you know what are you hearing from them.

What we're hearing from them is that.

We harvest the number one another to a precedent fund banking.

With four or five organizations.

And can bring all of the <unk>.

Their clientele, so it's the hardest thing.

We're still acquiring clients at the same rate that we started in the first here now in the fourth year.

So there's still opportunities.

Which is slowing down a bit.

Make sure that we funded with deposits.

The opportunities seem to be as great as they were four years ago.

Yeah.

That's great color and then maybe just a quick clarification question you mentioned that the 100 million in crypto back loans paid off slowly.

Does that mean you have no exposure at all on the asset side to participants in the crypto industry.

We have very minimal exposure there are some letters of credits that are fully pasture.

Slides of her but it's really de Minimis at this point, we havent been a whole loans that are backed by crypto currency.

Yeah.

Yeah.

Our next question comes from Jared Shaw from Wells Fargo.

Hey, guys. Good morning, Thanks, Hey, Kevin just a couple of follow ups, maybe for somebody that's not bitcoin long does that mean that you're you're not interested in that product anymore that paid off at your.

Encouragement or is that just a paid off and you'd still be open to doing lending secured by crypto.

We didn't ask.

Our clients are paying a lot of clients taking off on their own.

I would say right now we're poised pause is probably the best way to use pausing.

See what happens in the near term since we're in the crypto winter.

Uh huh.

We still have a product.

And we saw clients that want it but I would say pause is the best number to use.

Okay. That's good color. Thanks, and then Joe you had earlier said you thought that there was some fluff and the the deposit base and they weren't expecting that werent I'm surprised to see some of that go yeah. If we look at where we are today with the.

You know the pull down in DDA. This quarter do you think that you could see.

Yeah more drawdown in DDA, if theres more fluff or that it would be more interest rate sensitive customers have shifted to an interest rate product in the beta will come more from paying up for those deposits versus deposit remix.

Our feeling is that D D a.

History has been between 25% 35%.

So we expect that at.

Somewhere along the lines of DDA will reduce.

That could be some fluff is some shifting from DDA to money market because the interest rate is appealing when it wasn't appealing are just a few quarters ago and so that will allow.

Our clients to get interest.

I think that being between 25% and 35%.

We'll be fine, but we will continue to have client growth. So one thing we haven't seen is a reduction in client growth is back with bringing on 500 more clients.

A quarter.

Now more than we had in the past that.

That's because of all the teams that we have but it takes a while one of those clients open up the account it takes a while for funding excuse me a quarter or two before they fund.

Well that was it.

Picking up 500, new clients.

And we had you know growth in the Pan.

Our system.

Okay. Thanks, and then just finally for me you know as we look at.

The allowance for credit loss of the allowance for loan loss as a ratio.

You know that.

It keeps coming down.

Is this is this sort of a floor for this as a ratio.

Or I guess, how are how should we think about.

You know the seasonal modeling and some of the underlying macro weakness versus the strength in Europe your portfolio.

Yeah sure Gerard sorry.

Really our approach.

Since the adoption of C suite C. So it has really been a prudent approach.

We have always had positive provisions, whereas you know last year or so other institutions were reporting negative provision certainly we're utilizing our reserves.

We have them set aside against specific loans for charge offs, but we have continued to provide from a macroeconomic scenario standpoint, we actually this quarter are using a slightly more pessimistic, we use Moody's and we're using a slightly more pessimistic scenario than the Moody's baseline suggests we're.

Using one that has a more aggressive interest rate path slower GDP growth and it takes.

Information macroeconomic assumptions from various constituents and therefore, you know given our prudent approach to reserving, including this quarter, we're using more pessimistic scenario.

In combination with our client base relationship model, we feel very good about where we're positioned well if we enter into some instance, where macro.

Deep recession, certainly we'll see there.

There, but we feel very good about where.

Where we're positioned today from an allowance standpoint.

Okay. Thank you.

Thank you.

Our next question comes from Matthew Breese from Stephens, Inc.

Good morning.

Can you talk a little bit about the outlook for loan yields as fed fund hikes are fully absorbed I guess, there was a little bit surprised by the relatively similar moves in deposit cost and loan yields this quarter versus the interest rate sensitivity of the bank's I was hoping for some more color in and near term expectations for the loan yields in <unk> and what kind of rate assumptions you have in there.

<unk>.

I mean, right now were being 45% of our book re prices within 90 days. So as we saw this quarter I mean, the focus thus far has been on our deposit costs, but as we mentioned in the prepared remarks.

Yields were up 44% and given that re pricing. We would expect continued significant expansion into the third quarter third and fourth quarter of the fed hikes I mean in particular, the short end of the curve is what's driving our fund banking portfolio, which comprises a significant portion of that 45% that's repricing.

So we should continue to see expansion there.

Okay.

And then back to asset growth can you just talk about the pipeline.

And where do you expect loan growth to come from obviously.

What segments are you looking to slow down or they're supposed to be or do you expect there to be run off.

Yeah.

It's too early we expect the slow progress with focusing our attention to slow is commercial real estate and fund banking because it is the two largest by far.

All the others that have come onboard recent.

Including.

The health care.

We're going to let them grow because they're the newest when they have the the.

Clients that they wanted to bring all of them.

We're not going to.

Well right now.

We're not going to let them do what it is that they do.

And.

Like I said, it will slow down the two biggest segments.

But again, if we get deposit growth of $10 billion.

But we utilize that 10 day too.

To fund to fund loans.

So it depends on where we end up with the cloud.

Yeah.

And I appreciate you know the hesitancy on on providing color on on deposit growth.

I expect that to be more of a near term issue.

If we were to extend the timeframe and look out 12 to 18 months.

Given you know you noted that all the pieces are in place for deposit growth could you give us some idea over the next year or 18 months to the extent you should expect to see you know call. It on.

Average deposit growth.

Well, if we if we feel that it's at normal whatever normal is we feel is slow moving probably go back to the four to seven per quarter.

That may be a while.

You just don't know if it's a yes.

Never really give any guidance around deposit growth, it's very difficult for us but.

The God of that that's why we're talking about asset growth.

If we could we see a pipeline of loans.

We can ratchet up the securities purchases.

It's come in.

For us to predict deposit growth is near a pulse.

Got it okay.

And then just just a credit for the entire banking universe becomes more of a forefront issue I was hoping you could just give us an update on two portfolio segments. You know the first one is the specialty finance book just curious what types of equipment are in there and being underwritten historical loss content any recent update to provide on health of the book or signs of.

Erosion and the second one is the New York City Office book, just again I would appreciate it.

Highs ltvs and any notable changes you've seen our performance there.

So, especially finance book was really made up of revenue producing collateral.

It's fair to extremely well through all cycles that we've you know we've been through a number of cycles now with our portfolio.

I think peak losses prior to that team coming to signature bank was about like one 5%.

Through the financial recession through the pandemic.

Seen losses significantly muted from a higher level. So I don't I don't think reach.

Anywhere near 1%, even right Steve Yeah. So it's a very low level of losses because of our focus there of really lending on revenue producing collateral.

So it's a lot of trucks trailers buses.

Heavy metals yellow yellow yellow metals as they call them.

We really don't we haven't seen any degradation.

They're in credit quality.

We feel very comfortable about how the outperformance.

It's a recession or.

A prolonged recession.

As for the office space again, we're not really seeing any issues in our office portfolio either.

This point, we have no nonaccrual office loans.

We do anticipate that it's gonna be a path over the next several years, but given the relationship nature of our lending in that space, We think together.

The level of losses will be pretty easy to do.

If you look at our provisioning, that's where we really put our provisions in the office and the retail space, We've got about 2% and provisions in those two groups.

Sectors.

That's where we do think that we'll see some pressures but.

As of now we're not seeing any at all.

Yeah.

Our next question comes from Bernie <unk> from Deutsche Bank.

Oh, Hi, good morning. So my first question on the crypto deposit portfolio. So currently I believe most of this funding hasn't been deployed given the uncertainty in the crypto markets.

No you don't charge fees generally.

You know, we just saw that you would do still real cash levels down to about $15 billion I'm not sure. If I missed this but how much cash are you holding against these deposits now and I'm wondering could you just walk us through how you can monetize this positioning like overtime.

But we really havent disclosed what level of catastrophe hold against like I suppose those positions certainly more cash that we hold against those and we do get seller types.

Types of deposits, but over time as we as we see.

And kind of a greater history, certainly going through this this motor started digital winter as they call it.

We see the deposit behaviors, where we've seen a significant decline in the value of the cryptocurrencies, yet our deposit base.

Near nearly as down as much as the decline in the values I think that's going to help us support our having.

Having to maintain less cash against those those deposits over time.

It will allow us to lend against that.

But we need a longer history, and we need to go through more varied cycles.

Before we can you can start to utilize more for Linda.

Okay.

Okay and I was just wondering if this is a follow up on I know you provided some stats on signet I believe the clients are up 121 QQ.

And you had your best transfer volume with I think you said over 254 million.

I know in our Paas you noted a number of ecosystems that could utilize signet over time and you know I understand you want to keep certain details on that day for competitive purposes, but you know just in light of the crypto collapse, you know could you possibly size what the second biggest ecosystem is answering that.

And then just how these volumes may compare between Krypton whenever.

Whenever one is number two.

Thank you.

We've been.

<unk> been able to sign the opportunities outside of the digital space a pretty enormous.

Whether whether it would be payroll, which is a massive part of the economy to trucking shipping trading energy trading.

These are massive ecosystems that we barely barely scratched the surface on so.

You know as we've said before.

That was really capturing the power of blockchain blockchain technology moving forward.

We think that more and more ecosystems are going to are going to embrace a blockchain technology as they do.

We've got food.

The platform that can run parallel to the various blockades that they'll be putting in place.

My belief is that the.

Digital World.

Crystal World, we're not even be in the top 10.

Did you.

Okay.

Clients.

On on the payments platform I think that.

Once everyone understands with blockchain technology is what it can do for them.

He vitamins.

Uh huh.

We will be in great shape, because were the first ones out of the gate.

And I've done this.

And.

It's very exciting for us.

Know that we have.

Blockchain technology.

Uh huh.

Move payments.

And at a rate greater than their moving today.

Yeah.

Okay. Thank you.

The next question comes from Chris Mcgratty from K B W.

Hey, good morning.

Recruits are Eric if I think about just the efficiency comments in your prepared remarks, I did take everything you've disclosed on the call I'll just take a step back.

Given the size and the growth profile of the company in the regulatory World How do we think about.

That 30, and 31% efficiency ratio like cadence from here or is there pressure on it because of the investments that you kind of hold serve because of the revenue growth like how do we think about that Broadway.

Well I mean, it's a great question I mean, we're certainly investing significantly in it. So we saw a 42% increase in our expenses and we expect that that will continue for quite some time.

But fortunately.

We've got a really powerful earnings story here.

Still have significant asset sensitivity.

And we'd expect that that'll play out over the next several quarters.

So there's going to be a tremendous revenue expansion that we believe will more than offset.

The additional expenses that we're putting on.

It will lead to further further efficiencies.

As Joe said.

Our prepared remarks.

We get efficiencies going down its got it begs the question are we spending enough.

We're spending off where we're spending a tremendous amount.

To ensure that we've got the appropriate systems and platforms and products and services in place to.

To meet our clients' needs.

But the.

The revenue the revenue power here is tremendous it should really further draw.

Drive down that efficiency ratio.

Okay.

Thank you and then in the past you've given some comments on the cadence of the growth in noninterest income given given some of the strategies there how do we think about that.

The outlook for noninterest income from here I know you called out a derivative mark to market in the quarter.

Yeah, I mean, we expect that will continue to further drive that north.

I think if you look at the trend over the last couple of quarters could you do that that trend world.

Million quarter over quarter.

We have a lot of opportunity there you have to tap whether it's you know foreign exchange credit cards. Some of these projects that we've been talking about for <unk>.

While.

A number of the new business lots of initiatives that we brought on board you know tend to generate more fee income, especially the mortgage banking.

P amongst others so.

Got some we've got some positive fee income there.

But you know meaningfully moved without higher as a percentage of overall revenues, it's gotta be tough just because of how much net interest income go backwards.

It's tremendous growth on that front.

Great. Thank you.

Thank you Chris.

Yeah.

This concludes our allotted time for today's conference call, if you'd like to listen to a replay of today's conference. Please dial 808 395128, a webcast archive of this call can also be found at www dot signature and why dot com. Please.

Disconnect. Your line at this time and have a wonderful day.

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