Signature Bank Q2 2008 Earnings Call Transcript

Jul.29.09 | About: Signature Bank (SBNY)

Signature Bank (NASDAQ:SBNY)

Q2 2008 Earnings Call

July 28, 2009; 10:00 am ET

Executives

Joseph J. DePaolo - President & Chief Executive Officer

Eric R. Howell - Chief Financial Officer

Susan Lewis - Investor Relations

Analysts

Matthew Clark - KBW

Amanda Larson - Raymond James

Bob Ramsey - FBR

Lana Chan - BMO Capital Markets

Christopher Nolan - Maxim Group

Avi Barak - Sandler O’Neill

David Darst - FTN

Andy Stapp - B. Riley

Tom Alonso - FPK

Peyton Green - Sterne Agee

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Signature Bank’s 2009 second quarter results conference call. (Operator Instructions) As a reminder, this conference is being recorded today, Tuesday, July 28, 2009.

Our hosts for today’s conference will be Joseph J. DePaolo, President and Chief Executive Officer; and Eric R. Howell, Chief Financial Officer of Signature Bank. Mr. DePaolo, you may now begin your conference at this time.

Joseph J. DePaolo

Thank you, Craig. Good morning and thank you for joining us today, for the Signature Bank 2009 second quarter results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.

Susan Lewis

Thank you, Joe. This conference call and oral statements made from time-to-time by our representatives contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties.

Forward-looking statements include information concerning our future results, interest rate and the interest rate environment, loan and deposit growth, loan performance, operations, capitalization, new private client team hires, new office openings, the regulatory environment and business strategy.

These statements often include words such as may, believe, expect, anticipate, intend, 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 statement.

These factors include, but are not limited to; one, prevailing economic and regular conditions. Two, changes in interest rates, loan demand, real estate values and competition, which can materially affect origination levels and gain on sale results in our business, as well as other aspects of our financial performance.

Three, the level of defaults, losses and prepayment on loans made by us, whether held in portfolio or sold in the whole loan secondary markets, which can materially affect charge-off levels and required credit loss reserve levels and four, competition for qualified personnel and available office locations.

Additional risks are described in our quarterly and annual reports filed with the FDIC. You should keep in mind that any forward-looking statements made by Signature Bank speak only as of the date on which they were made. New risks and uncertainties come up from time-to-time and we cannot predict these events or how they may affect the Bank.

Signature Bank has no duty to, and does not intend to, update or revise the forward-looking statements after the date on which they are made. In light of these risks and uncertainties you should keep in mind that any forward-looking statement made in this conference call or elsewhere might not reflect actual results.

Now, I’d like to turn the call back to Joe.

Joseph J. DePaolo

Thank you, Susan. I will provide some overview, and then Eric Howell, our Chief Financial Officer, will review the Bank’s financial results in greater detail. Eric and I will address your questions at the end of our remarks.

The Bank’s performance during the second quarter again exhibited our commitment to depositors, which sets us apart in the metro New York marketplace. Most notably this quarter we saw record core deposit growth of $470 million. For the year thus far core deposits have increased $784 million.

Now let me review the other highlights for the second quarter. Loans were up $200 million or 5.6%, reaching $3.77 billion. Net income was up 10% to $12 million or $0.32 diluted earnings per share. Excluding the after tax effect of the FDIC Special Assessment fee of $3.5 million, net income for the quarter was $13.9 million, or $0.38 diluted earnings per share, up 28%.

We added eight private client banking teams. We successfully completed a common equity offering of $127 million and our credit quality remains stable, despite the current difficult environment.

Now let’s further review deposits. Total deposits for the second quarter rose $267 million, reaching $6.1 billion. This includes record core deposit growth of $470 million, along with decreases of $152 million in short term escrow deposits, and $51 million in brokered deposits. Average deposits for the quarter were at $5.88 billion, up $400 million or 7% versus the 2009 first quarter. As a reminder, this is a key deposit metric, which we closely monitor due to fluctuations in short term escrow deposits.

Non-interest bearing deposits of $1.59 billion represented 26% of total deposits. Off-balance sheet money market deposits declined in the second quarter to $1.31 billion, a decrease of $190 million versus the first quarter. Total assets were at $7.88 billion, an increase of $1.5 billion, when compared with the same period a year ago. Average assets for the second quarter grew $1.4 billion or 23% versus the 2008 second quarter.

On to loans; loans increased $200 million in the quarter, up nearly 6% to $3.77 billion, representing 48% of total assets at quarter end. Non-performing loans were stable at 1.27% of total loans or $47.9 million, compared with the 2009 first quarter, which was 1.26% of total loans or $45.1 million.

The provision for loan losses for the 2009 second quarter was $9.4 million versus $9.6 million in the 2009 first quarter. The elevated level of provisioning in 2009 was primarily driven by the growth in the loan portfolio, combined with an increase in non-performing loans and provisions for the deteriorating economic environment.

Net charge-offs for the second quarter of 2009 were $4.4 million or 0.48% annualized, compared with $7.2 million or 0.82% for the 2009 first quarter. As we have continually communicated, we are well aware of the impact the current economic situation has had on the financial services marketplace, and the probability of more disruption is obvious. Therefore, once again for this quarter, our provision for loan losses remains high and we expect that this will continue.

Now on to earnings; as we stated earlier, net income for the 2009 second quarter was $12 million or $0.32 diluted earnings per share. Excluding the FDIC Special Assessment fee of $3.5 million, net income for the quarter was $13.9 million or $0.38 diluted earnings per share. This compares with $10.9 million or $0.36 diluted earnings per share for the 2008 second quarter.

This quarter’s growth in net income is primarily due to several factors, including record core deposit growth, solid loan growth and net interest margin expansion. These factors were partially offset by increases in non-interest expense, including the FDIC Special Assessment and the provision for loan losses.

Of significant importance to our ongoing growth are the common equity offerings, we completed since September of 2008 of $275 million, $127 million of which was raised during the 2009 second quarter. This common equity further strengthened our already solid capital position and is allowing the bank to capture additional market share and it is aiding in the future growth of this franchise by enabling us to take full advantage of hiring opportunities.

Toward that end, we added eight private client banking teams, and expanded another with the appointment of an additional Group Director this quarter. For the first half of 2009, we added a total of 10 teams, while expanding three others. Now 65 teams and 82 Group Directors strong, we are seeing and capitalizing on the tremendous opportunities out there for further recruitment and growth.

Now, I will turn the call over to Eric and he will review the financial results in greater detail.

Eric R. Howell

Thank you, Joe and good morning everyone. I will start by reviewing net interest income and margin. Net interest income for the second quarter reached $60.5 million, up $15.5 million or 34% versus the 2008 second quarter and an increase of 5.3% or $3 million from the 2009 first quarter.

Net interest margin on a tax equivalent basis grew 25 basis points in the quarter at 3.39% versus the same period last year. On a linked-quarter basis, net interest margin increased two basis points. The linked-quarter increase was mostly due to a decrease in our deposit costs and an increase in the yield on loans.

Let’s look at asset yields and funding costs for a moment. Yields on investment securities decreased 14 basis points to 4.84% this quarter versus last quarter. In keeping with our conservative investment philosophy, we continue to predominately invest in U.S. agency and high quality investments with a short average duration. The overall duration of the portfolio is two years, and continues to provide significant cash flow and liquidity.

Turning to our loan portfolio, yields on average commercial loans and commercial mortgages increased back nine basis points to 5.51% this quarter from last quarter due to the reduced competition for loans.

Now on liabilities, cost of deposits for the quarter decreased 15 basis points to 1.4% due to lower short-term rates and a less competitive deposit environment. We continue to be able to slowly reduce deposit costs given the abnormally low interest rate environment, and diminish competition on this front.

There will be a point, however, where we will either not be able to reduce these costs much further. We are also using our strong and stable balance sheet to attract new core depositors, where we may choose to pay a higher than average market rate in the short term. These core deposits will prove more beneficial in a rising rate environment.

Looking at non-interest income and expense, non-interest income for the 2009 second quarter was $7.3 million, a decrease of $2.5 million, when compared with the 2008 second quarter. The decrease was predominantly driven by a $1.5 million decline in the market value of credit default swaps that we entered into to hedge certain of our bank corporate debt investments.

Additionally, commissions we earn on off-balance sheet money market accounts continue to be significantly reduced, and for some funds even eliminated in order to maintain positive yields on the funds in this unusually low interest rate environment.

Non-interest expense for the second quarter of 2009 was $38.9 million versus $30.7 million for the same period a year ago. The $8.2 million increase or 27% was mainly due to several factors. First, the addition of new private client banking teams, offices, and growth in client activity; second, increased cost of $1.4 million related to FDIC deposit assessment fees and the FDIC deposit guarantee program and lastly, additional expense of $3.5 million for the FDIC special assessment fee.

Excluding the FDIC special assessment fee, non-interest expense for the quarter would have been $35.4 million, which represents a $4.7 million or 15% increase over the prior year. Given the FDIC special assessment fee, the Bank’s efficiency ratio increased to 57.4% for the 2009 second quarter. Excluding the FDIC special assessment fee, the Bank’s efficiency ratio improved to 52.2%, compared with 56% for the second quarter of 2008.

Now turning to capital, as Joe discussed earlier, we bolstered our capital position further this quarter with the successful completion of our common equity offering of $127 million. Additionally this quarter, we adopted the new accounting literature for other than temporary impairment on securities. In order to do so we had to assess the amount of credit loss versus other valuation factors, such as liquidity, in securities we had already impaired.

As a result, we increased the overall book value of certain securities by an increase in retained earnings of $6.1 million and an equal and offsetting decrease in other comprehensive income. This adjustment positively affected our tier one leverage ratio, but has no effect on our tangible common equity ratio.

Our capital levels are among the strongest industry wide, with a tangible common equity ratio of 9.34%, tier one risk-based of 15.26%, total risk-based ratio of 16.11%, and leveraged capital ratio of 10.65% as of June 30, 2009. Our capital ratios were all well in excess of regulatory requirements and reflect the relatively low risk profile of the balance sheet.

Now, I’ll turn the call back to Joe. Thank you.

Joseph J. DePaolo

Thanks, Eric. Each quarter Signature Bank continues to deliver on our model and convey the same key messages to you. One, our emphasis remains focused on our depositors and continually ensuring that we are offering them a well capitalized financially sound institution with high quality investment and loan portfolios.

One, where they can sleep at night knowing their deposits are safe. Two, we remain focused on investing in our future growth through the recruitment of veteran banking professionals. Three, while maintaining a strong balance sheet and continually investing in our future, our model enables us to deliver solid earnings growth. Our message, like our model and our performance remains consistent.

To summarize the second quarter, we had record core deposit growth, strong loan growth, increased margins, stable credit quality, and despite a significant increase in provisions and FDIC insurance costs. We grew net income by 10%, while hiring an additional eight teams to fuel future growth.

Now, we are happy to answer any questions you might have. Craig, I’ll turn it to you.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Matthew Clark - KBW.

Matthew Clark - KBW

Can you offer us some more color? I understand the accounting change as it relates to the new mark-to-market. Can you give us a better sense of really what’s left that remains, I guess at risk in terms of the bank pooled trusts and where you guys have those carried out relative to the amortized cost? Maybe as a follow-on addressing any CDOs, that are left on the books and so forth?

Eric R. Howell

We have bank pooled trust preferred securities with a book value of $36 million, carried at a market of $17 million. So it’s about $0.48 on the dollar. Given the change in the literature, there is certainly potential for further OTTI to be taken on that portfolio, but I wouldn’t expect it to be very impactful going forward.

Now that we can breakout the credit versus the other factors that are taking place in the market today. So there is some exposure there. On the CDOs, we have a book value of $25 million with a market value of $16 million. It’s about $0.64 on the dollar. Again, there is certainly potential for OTTI in future periods, but I really wouldn’t expect it to be all that meaningful going forward.

Matthew Clark - KBW

Then can you update us on the delinquencies? I think I was able to get that 30 to 89 day past due, that if you also had the 90 plus that would be helpful?

Eric R. Howell

The 30 to 89 past due, just to run through that one, at 12/31/08 it was $32 million. At the end of the first quarter of ‘09, it went down to $20 million. We really thought that first quarter was an anomaly, given what’s going on in the current environment. It has increased back to $33 million. So from year end it has gone from $32 million to $33 million at the end of the second quarter. At 0.87% of total loans, it is a number that is well inline with where it’s been going back to 2006 and 2007. So it is not an alarming number.

The 90 day past due is at $15 million or 0.4% of overall loans. That’s an increase from about $10 million last quarter. Half of those loans are in SBA guaranteed loans that we purchased through our operations in Houston, that we’re not concerned about. Again, at 0.4% of total loans that is a number, again that’s inline with where we’ve been over the last several years. So again it’s at an alarming level.

Matthew Clark - KBW

Then lastly on the core deposit side you guys have put up, obviously some pretty big numbers cumulatively year-to-date. I think you surpassed your original goal of $650 million for the year. I’m just curious, if you can update us there on your outlook for the second half there and any update on the loan growth side too?

Joseph J. DePaolo

On the core deposit growth I don’t know if I would give you some idea of, what we think we’re going to have in the second half. We certainly don’t expect to continue to have record growth, but we could have growth that we had in the first quarter. What is interesting for us is that the deposits that are coming on from core clients. There is no any real hot dollars, hot funds or hot clients that are coming onboard. So that is the good news.

What is hard to distinguish in this current environment is how much we’ll stay. What I mean by that, if I can give you an example, two years ago for clients were $12 million in deposits that was $12 million that was for the bank. If a client today brings $12 million, it is hard to distinguish is $8 million of it really for the Bank and the other $4 million would have been for real estate investments or for treasuries or some other fixed income instruments.

Yet it’s hard to distinguish that, because they are not necessarily buying investments yet, because the yields are too low, particularly in treasuries, or they’re not going into the real estate market. So what we are seeing is being the beneficiary of some additional dollars because of the current environment, particularly with the low interest rates and treasury funds in treasury.

It is kind of hard to say, what the next six months will bring, but because our existing teams have been doing such a good job. The new teams that we brought onboard in 2008 in 2009 and the expectations we have there, because remember we had only projected four teams and we have already brought on 10. So we clearly will continue to have a very good growth in deposits.

On the loan growth side, we’re not going to have the levels of the $300 million to the $350 million that we had in 2008. The $200 million that we had in the second quarter is probably a good gauge of the loan growth for the next two quarters.

Operator

Your next question comes from Amanda Larson - Raymond James.

Amanda Larson - Raymond James

I had a question about operating expense this quarter. Obviously, the full impact of the additional teams has not yet hit. Could you provide us with a potential run rate for operating expense per quarter?

Eric R. Howell

The teams that we hired in the second quarter came on right at the end of May. So we saw about one third of their full quarter’s impact in the second quarter. So when you factor that in, I think we’d be closer to the 20% year-over-year growth in non-interest expense for the third quarter and going forward.

Amanda Larson - Raymond James

Also on the commercial loan growth, is there anyway to divide what was CRE and what was C&I?

Eric R. Howell

It was predominantly CRE. We continue to see a weakness in demand on the C&I front. So the growth was in CRE, a little over half of the growth was in multifamily.

Amanda Larson - Raymond James

Then on the CDS loss you took this quarter, are those something that you like to extinguish in the future?

Eric R. Howell

We have actually extinguished a bit of it already this quarter, and we’ll look for opportunities to get out of the rest of it. We put those CDS’s on in the wake of Lehman Brothers and what happened there, and some of our larger bank corporate debt exposures that we had in our securities portfolio. We saw a significant tightening this quarter in the spreads there.

So that tightening led to an improvement in our other comprehensive income. Unfortunately, the credit default swaps that we put on the hedges run through the P&L. So we saw a decline in the value of the credit default swaps. We have exited some of those positions, and we’ll look to exit the rest, and therefore cap our exposure there.

Amanda Larson - Raymond James

Just as a follow-up to that the, where will we have seen the impact of that the extinguishment that you’ve done so far on the income statement, they have shown up?

Eric R. Howell

I wouldn’t expect to see much, because we had them marked down. So we’re getting out at the levels that they are marked at or slightly higher. So we might see possibly a little bit of a gain this quarter. I wouldn’t expect too much, because we’re getting out at the levels that we have those written down to.

Operator

Your next question comes from Bob Ramsey - FBR.

Bob Ramsey - FBR

The question first question I’ve got, I know you all previously guided for a 20% to 25% sort of year-over-year expense growth based on four new teams. As you pointed out, you all have now added 10 this year. I guess, from an earlier question, it sounds like you’re still kind of thinking 20% to 25% year-over-year, is that correct?

Eric R. Howell

I think we’ll still be in that range, hopefully closer to the 20% than 25%, but I think you’ll still be in that range. We’re certainly driving and gaining some efficiencies over the large infrastructure that we built out from day one. With the significant hiring that we did and with the hiring that we expect to continue, we should get back to that 20% mark next quarter.

Bob Ramsey - FBR

On that front you all, as I said, have done more than you had played out in your plans for this year. Do you anticipate any further additional teams to the back half of the year?

Joseph J. DePaolo

Bob, interestingly enough when we raised capital in the early part of June and we were on conference calls with investors and analysts. We told everyone at that point, that the pipeline for teams had really depleted because of the eight teams that we hired. Well, surprisingly over the last six to seven weeks that pipeline that we completed back then is now filling up again.

Although, I can’t really let you know right now, because I don’t know myself, how many additional teams we will bring on, if any. There clearly is a pipeline and an opportunity to bring more on. So we will over the next month or so, doing more due diligence in discussions and if we can bring them on, we will.

As we get closer though towards the end of the third quarter. You start thinking about whether or not the team should be brought on now or in the beginning of next year, because of the economics that are involved of having to guarantee some sort of level of income for this year, when you really don’t have them for a long period of time.

Bob Ramsey - FBR

Then could you just sort of remind me too, how long it normally takes when a new team is brought over for them to bring over the bulk of their, I guess first deposits and then loans? How long does that whole process take?

Joseph J. DePaolo

For a team that’s a fairly decent size or average size to breakeven and bring their business over. It take somewhere between 15 and 18 months. Where they really start feeling good about bringing a significant part of their book, you’re really talking three years. The timeframe to look at is 15 to 18 months.

Bob Ramsey - FBR

I guess maybe the last question I’ve got for you, if I shift subject a little bit. The commissions’ line was down a little bit further this quarter. I know that reflects the lower interest rates. Do you feel that we’ve reached a floor, or as long as rates are where they are today, could you see further pressure on that line item?

Joseph J. DePaolo

We’re probably getting close to a floor, because our commissions have dropped so much. We’re talking millions of dollars since the second quarter of last year. It’s being driven in small part by the decline in the off-balance sheet money market balances, but in large part because of the fee income.

We would earn somewhere let’s say between 50 and 65-bips on average. In some of those funds we’re actually getting zero. The fees for us have been totally eliminated. Particularly, in the treasury funds where clients are just getting a handful of basis points, it’s very hard to be paying us. So therefore, we’re probably close to a low end.

Operator

Your next question comes from Lana Chan - BMO Capital Markets.

Lana Chan - BMO Capital Markets

One quick question on the borrowings, it looks like your costs of borrowings have moved up over the last two, three quarters. I’m wondering with the liquidity generated from the deposit generation is there opportunities to pay down some of those potentially higher cost borrowings over the next few quarters?

Eric R. Howell

There is limited opportunity Lana, because we have those staggered out over a period of time, and we’ve paid down all of the short term overnight borrowing that we have. That’s why you’ve seen an increase over the last couple of quarters in the cost of borrowings. We did have one fairly sizable borrowing run off this quarter. We’ll continue to have some staggered out through the next several quarters, but there’s limited opportunity there.

Operator

Your next question comes from Christopher Nolan - Maxim Group.

Christopher Nolan - Maxim Group

Could you elaborate a little bit the reason for the jump in loans held for sale? Is that a reflection of increased activity in the SBA front?

Eric R. Howell

The SBA business has certainly improved a little bit. We’re starting to see those markets open up a bit. So we’ve been able to purchase some SBA loans at attractive levels. We’re looking to form some pools and sell those over the next quarter or two. We’re seeing that market open up a little bit.

Christopher Nolan - Maxim Group

I have the follow-up on the net charge-offs. In the first quarter the charge-off ratios elevated because of one or two large C&I credits. For this quarter, were there any C&I related loan losses? So what’s the composition of the net charge-offs?

Joseph J. DePaolo

I’d say it was primarily C&I, but that they were all granular. We didn’t have one charge-offs greater than $500,000 in that number.

Operator

Your next question comes from Avi Barak - Sandler O’Neill.

Avi Barak - Sandler O’Neill

A couple of quick questions; first, could you remind us the dollar amount of your multifamily portfolio that’s either rent controlled or rent stabilized? Then maybe just some thoughts on the new guidelines that came out, I guess a month ago or so?

Eric R. Howell

Multifamily overall is $862 million Avi, which the majority of which is rent controlled or rent stabilized. I think the guidelines that you referring to is that the increase in the rent control level?

Avi Barak - Sandler O’Neill

I think, you can raise like 3% or something like that?

Eric R. Howell

Well, because we underwrite on current cash flows. We don’t expect really that to have any impact on our portfolio. We do not underwrite and never have underwritten on future looking cash flows, which is what’s causing a lot of the issues out there for other banks. Since we’ve underwritten on current cash flows, we don’t expect that to have an issue.

Avi Barak - Sandler O’Neill

So $872 million and the majority is…?

Eric R. Howell

$862 million and the majority is rent controlled, rent stabilized.

Avi Barak - Sandler O’Neill

Then separately, a couple of the other local banks that have reported earnings so far saw a little bit of weakness in their mixed use properties. I’m wondering, if you are seeing any of that? Maybe if you are not, why they would be or if you are? What’s going on there?

Joseph J. DePaolo

I can tell you, we just did an extensive review, credit review of all of the commercial real estate that we’ve brought on since the end of ‘07, beginning of ‘08 with the new team that we hired from North Fork and happy to report that we haven’t seen any kinks in the armor in any of the properties thus far, whether they were commercial, industrial, mixed use or multifamily.

So I guess in the mixed use, they’re seeing some issues and maybe the vacancies that are occurring in the retail. We’re trying to stay certainly on top of that. We haven’t seen anything that causes us any alarm to-date.

Operator

Your next question comes from David Darst - FTN.

David Darst - FTN

Are you making a larger push to move some of the off-balance sheet money market back on balance sheet?

Joseph J. DePaolo

We’ve actually been the beneficiary of some of that, because the yield was so low. We get involved in quite a few escrow situations, particularly some class actions or some court dictated deposits.

Usually they have to be put into treasuries, or treasury funds. Even if you can move them on balance sheet into full FDIC insured accounts, like a DDA account, where they’re getting no interest versus let’s say getting one basis point in treasury. The costs really haven’t caught up yet. So therefore, in a large amount of those deposits that we have off-balance sheet, they had no choice, but to be off-balance sheet.

Then some of them have large movements of money on a daily basis. If you have movements of money, where you are sweeping back and forth you have to keep it off-balance sheet, because there’s no limit on transactions.

We’re on money market accounts on balance sheet there are limits. So I think we’ve done a decent job of moving, where we can, that money off-balance sheet on balance sheet, but the $1.3 billion that’s still in the off-balance sheet, probably has to stay there for a reason.

David Darst - FTN

Then what’s your average C&I loan size?

Joseph J. DePaolo

About $3 million.

Operator

Your next question comes from Andy Stapp - B. Riley.

Andy Stapp - B. Riley

Did you have any OREO at quarter end?

Eric R. Howell

Yes. We had one REO for $700,000 at quarter end.

Andy Stapp - B. Riley

Similar to the question on the composition of net charge-offs, could you provide similar color on non-performing loans?

Eric R. Howell

No, it is still non-performers, really over 50% of it is still comprised of three loans, which are those completed condos that we have where the losses are very well contained on those, and we’re working through them. That comprises the majority of the non-performers, those three condo projects. The rest of it is predominately C&I, not in any one particular sector or area. We’re pretty well diversified.

Operator

Your next question comes from Tom Alonso - FPK.

Tom Alonso - FPK

Just real quick on your commentary on the improved loan yield, can you sort of give us a sense of where the stuff you originated this quarter went out? How that compares maybe to, what it was last quarter?

Eric R. Howell

Loans that we’re originating today are predominately in the 5.75% to 6.25% arena. There are some loans that were LIBOR or prime based, that are rolling off and we’re renewing, where we are trying to put a floor in at around 4% on those loans. So we’re getting a little bit of pickup from some loans that are priced down in the 3% that we’re renewing and putting a floor on. For the most part we’re putting on commercial real estate loans in the 5.75% to 6.25% arena.

Operator

Your next question comes from Christopher Nolan - Maxim Group.

Christopher Nolan - Maxim Group

Eric, a quick question, for multifamily loans that you guys are putting on, what is the loan to value that you guys are proposing to borrowers?

Eric R. Howell

Nothing north of 65%.

Christopher Nolan - Maxim Group

So it could be less than 65%?

Eric R. Howell

Correct.

Christopher Nolan - Maxim Group

Is it more often 60% or is 65% the norm?

Eric R. Howell

It’s usually less than 65%.

Joseph J. DePaolo

Yes, lately we’ve had quite a few loans, where we’ve had opportunities where clients are just refinancing very conservative, and the loan to values have been well south of 65%.

Operator

Your final question comes from Peyton Green - Sterne Agee.

Peyton Green - Sterne Agee

Question, to what degree did the watchlist change on a linked quarter or year-to-date basis and then maybe in dollar volume and then also kind of composition, if there has been any change there? Then second question would be in terms of the deposit growth. Why wouldn’t the deposit growth ramp compared to what you’ve done over the first half of the year, given the load of the teams?

Eric R. Howell

On the watchlist question, at year end ‘08 we were at $93 million watchlist loans. Last quarter we went down to $89 million. Again we thought that that was an anomaly given the current environment that we’re in. We went up this quarter to $102 million. So it went from $93 million at year end to $102 million. The mix is really across the Board. It was a blend of CRE and C&I, nothing really not more granular. I wouldn’t say any particular items, Peyton.

Joseph J. DePaolo

On the deposit growth, I’m just taking a step back and I understand your question, why will the growth not continue ramp up in the second half. I’m glad you asked the question, because I know a lot of Signature Bank, my colleagues are listening.

So all those teams that are listening, you can see that our analysts are expecting that. We’re going to continue to have the deposit growth in the second half that we had in the first half. So Peyton, I probably would expect that there would be some really good growth, but we are just not sure. We don’t want to give an expectation out there that we can’t meet.

Operator

Gentlemen, at this time there do not appear to be any further questions. Please continue with any closing comments that you may have.

Joseph J. DePaolo

Thank you, Craig. Thank you for joining us today. We appreciate your interest in Signature Bank. As always, we look forward to keeping you apprised of our developments. Enjoy the rest of the day. Thank you.

Operator

Thank you. Ladies and gentlemen, this does conclude our conference call for today. If you would like to listen to a replay of the conference, you may do so by dialing either 303-590-3030 or 1-800-406-7325. You will need to enter the access code of 4121600. This conference is also available via webcast. We do thank you for your participation. You may now disconnect your lines at this time.

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