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Signature Bank Inc. (NASDAQ:SBNY)

Q2 2010 Earnings Call

July 27, 2010; 10:00 am ET

Executives

Joseph J. DePaolo - President & Chief Executive Officer

Eric R. Howell - Chief Financial Officer

Susan Lewis - Investor Relations

Analysts

Bob Ramsey - FBR Capital Markets

Christopher Nolan - Maxim Group

Lana Chan - BMO Capital Markets

Tom Alonso - Macquarie

Casey Haire - Bank of America Merrill Lynch

Jeff Bernstein - AH Lisanti Capital Growth

Peyton Green - Sterne, Agee

Bruce Harting - Barclays

Operator

Good morning ladies and gentlemen, and thank you for standing by. Welcome to Signature Bank's fiscal 2010, second quarter results conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions)

I would now like to turn the conference over to Joseph J. DePaolo, President and CEO and Eric R. Howell, CFO of Signature Bank. Mr. DePaolo, please go ahead.

Joseph DePaolo

Thank you Mitch. Good morning and thank you for joining us today for the Signature Bank 2010 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 all 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 rates and the interest rate environment, loan and deposit growth, loan performance, operations, competition, 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 statements. These factors include but are not limited to one, prevailing economic and regulatory 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 in prepayments 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 require credit loss reserve levels and four, competition for client's loans, deposits, qualified personnel and desirable 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 or elsewhere might not reflect actual results.

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

Joseph DePaolo

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

Signature Bank posted another quarter, a solid financial performance, highlighted by crossing $10 billion in total assets, exceeding $8 billion in deposit, increasing loans by $195 million approaching $900 million in capital, while maintaining stable credit quality.

I will jump right into the results starting with deposits. Deposits increased $571 million reaching nearly $8.5 billion. This includes quarterly core deposit growth of $508 million or 7%. Since the second quarter of last year, older deposits grew $2.4 billion or 39% during the past 12 months.

Also in the quarter short term relationship based escrow deposits rose $63 million, now totaling $523 million. Average deposits in the 2010 second quarter were $8.14 billion, an increase of $2.3 billion or 39% compared with $5.88 billion reported in the 2009 second quarter. Remember this is a key deposit metric, which we closely monitor due to fluctuations in short-term escrow deposits.

Non-interest bearing deposits are $1.94 billion represented 23% of total deposits. With the significant deposit growth, total assets reached $10.4 billion, up $2.5 billion or 32% since the 2009 second quarter. We achieved this milestone in assets, organically and just a little over nine years after commencing operations with only $42.5 million in initial capital.

Moving on to loans. Loans during 2010 second quarter rose $195 million or 4% reaching $4.69 billion, which represented 45% of total assets at quarter end. The increases in loans during the quarter were primarily driven by growth in commercial real estate multifamily loans, with continued conservative underwriting standards.

Non-performing loans remained stable this quarter at 0.95% of total loans and only 0.43% of total assets or $44.6 million. This compares with 0.99% of total loans or $44.4 million at the end of the 2010 first quarter and 1.27% of total loans or $47.9 million in the 2009 second quarter. The provision for loan loss in the second quarter 2010 is $11.1 million, compared with $11.2 million for the 2010 first quarter and $9.4 million for the 2009 second quarter. This is now the 11th consecutive quarter, where our provision significantly exceeded charge offs.

Continued elevated level of provisioning was primarily driven by the potential effect of the current economic environment. The provisioning led to a further increase in our allowance for loan losses, which was 1.38% of loans compared with 1.33% in the 2010 first quarter. Additionally, the coverage ratio or the ratio of allowance for loan losses to non-performing loans improved again 145%.

Net charge offs for the 2010 second quarter was $6.3 million or an annualized 55 basis points, compared with $6.4 million or 59 basis points in the 2010 first quarter and $4.4 million or 48 basis points for the 2009 second quarter.

During the 2010 second quarter, we showed a decrease in our 30 to 89 day past-due loans, a $5.9 million to $35.2 million and an increase in the 90 day plus past-due category of $5.2 million to $13.5 million. With this in prospective the 90 day plus past-due category is actually down from $15.1 million at June 30, 2009. Although our credit metrics remain stable and we see credit as manageable, we remain mindful of the uncertainty in the economic environment, therefore we continue to prudently build our reserves.

Let’s look at earnings. Net income for the second quarter of 2010 reached a record $22.3 million or $0.54 diluted earnings per share, an increase of $10.3 million or 86% versus $12 million or $0.32 diluted earnings per share reported in the second quarter of last year. Considerable improvement in net income when compared with the second quarter of last year is mostly in the result of an increase in net interest income, fueled by significant core deposit growth and continued long growth. These factors were partially offset by increases in the provision for loan losses and non-interest expenses.

Just to review team expansion for a moment, we added four teams during the first half of 2010. We now have 72 teams headed by 92 group directors and we remain focused on identifying opportunities for attracting new, talented banking professionals.

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

Eric 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 $81.1 million, up $20.5 million or 34% when compared with the 2009 second quarter and an increase of 3% or $2.3 million from the 2010 first quarter.

Net interest margin decreased one basis point in the quarter versus the comparable period a year ago and declined 13 basis points on a linked quarter basis to 3.38%. The linked quarter decrease is mostly due to a significantly higher than normal level of cash this quarter. Cash-on-hand was driven by deposit flows and are focused on our prudent long-term deployment strategy. In June, we invested a considerable amount of cash into loans and securities, which will prove beneficial for our margin in the third quarter.

Let’s turn to asset yields and funding costs for a moment. Overall interest earning yields declined 16 basis points this quarter to 4.69%, due to the continued low interest rate environment and the unusually high levels of cash. In keeping with our conservative investment philosophy, we are selectively deploying cash while maintaining our high quality short duration investment portfolio. As a result, yields on investment securities decreased 26 basis points to 4.09% this quarter versus the first quarter of 2010.

Turning to our loan portfolio, yields on average commercial loans and commercial mortgages increased six basis points to 5.62% this quarter from the first quarter of 2010, as we continue to selectively identify quality lending opportunities at appropriate pricing.

Now looking at liabilities, cost of deposits for the quarter further decreased two basis points to 1.1%, as we further adjust deposit cost given the abnormally low interest rate environment.

Our borrowings remain stable this quarter; however, it should be noted that in August $122 million in long-term borrowings at an average rate of 4.73% rolls off. This too will be beneficial for the margin.

On to non-interest income and expense, non-interest income for the 2010 second quarter was $10.3 million up $2.9 million versus the 2009 second quarter. The increase was mostly the result of an increase in net gains on sale of securities and loans. This is partially offset by a decrease in commissions, as well as an increase in other than temporary impairment losses on securities.

Further explained, given the volatile market conditions, we again capitalized on the opportunity to sell securities resulting in gains of $5.2 million. Inversely during the quarter, we recognized OTTI of $1.9 million primarily on CDOs and Bank-pooled trust preferred securities.

Commission income further declined by $624,000 versus the 2009 second quarter, as deposits and off balance sheet money market funds decreased $723 million. Commissions we earn on off balance sheet money markets continue to be significantly reduced or even eliminated to maintain positive yields on the funds in this unusually low interest environment.

Now looking at non-interest expense for the 2010 second quarter of $41.7 million versus $38.9 million for the same period last year, $2.8 million or 7% increase was principally due to the addition of new private client banking teams and grown in client activity. As a remainder, the 2009 second quarter included an FDIC special assessment fee of $3.5 million.

Bank’s efficiency ratio improved to 45.7% for the 2010 second quarter, compared with 57.4% for the same period last year. Excluding the FDIC special assessment fee, efficiency ratio for the 2009 second quarter was 52.2%. The improvement was primarily due to growth in net interest income coupled with expense contained.

Now turning to capital, our capital levels remained strong, with a tangible common equity ratio of 8.54%, tier one risk base of 13.55%, total risk based ratio of 14.54% and leverage capital ratio of 8.98% as of June 30, 2010. Our regulatory capital ratios were all well in excess of regulatory requirements and augments the relatively low risk profile of the balance sheet.

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

Joseph DePaolo

Thanks Eric. We continue to demonstrate that our focus on deposited safety first and adherence to our business model allowed us to deliver strong results this quarter with significant core deposit growth, strong loan growth, stable credit quality and record net income.

I just want to address another key point. As financial reform takes shape, our depositor focused model, an emphasis on serving privately owned businesses is largely unaffected by the new legislation. In fact, Signature Bank is already prepared to meet potentially more stringent capital requirement and is isolated by many of the issues at hand, which has among others consumer financial protection, derivatives regulations and proprietary trading rules. Therefore, the industry’s current focus on financial reform will not give distraction for us and our ability to serve our clients.

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

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions) And our first question comes from the line of Bob Ramsey with FBR Capital Markets; go ahead please.

Bob Ramsey - FBR Capital Markets

Hey. Good morning guys.

Joseph DePaolo

Bob, good morning

Bob Ramsey

You mentioned deploying the excess liquidity in the month of Jan. Can you talk about -- sort of quantify the impact of margin that that has and then talk a little bit about the quarterly cash flows that are coming off the securities books and where you are reinvesting today?

Joseph DePaolo

To give you an idea about the margins during the quarter and the effect that we had on deployment, the net interest margin for the month of May was 3.30% and the net interest margin for the month of June is 3.48%. You could tell by that increase the effect that some of the deployment had on the net interest margin.

Also, before I’ll have Eric get into the details on the cash flows, let me just point out two other things while we are on subject to the margin and which Eric mentioned during the call. I just want to reemphasize, we have $122 million of borrowings rolling off in mid or late August, an average rate of 4.73%. Well that bodes well for the margin for the third quarter.

Another point I’d like to bring out is, during the first half of the year, we thought where we were with our deposit costs that we were going to have some movement downward for our clients in reducing deposit interest rates. We are more encouraged now that we can be a little bit more aggressive in reducing interest rates, because our expectations in the earlier part of this year was that interest rates were going plateau and they were going to start to raise.

Now we can see that they will not rise in the reminder of this year and certainly going into 2011, but we feel that that bodes well for us as well. That we will have the ability to reduce -- like as an example, our money market went from 162 to 147 in the first quarter, to 141 in the second quarter. We’ll be able to continue to drop the interest rates on the money market accounts even further. So we are encouraged by all those that helped margin and I’ll let Eric get into the cash flows.

Eric Howell

Yeah, on the cash flow we have approximately $100 million to $125 million rolling off the securities portfolio a month, at an average yield I’d say in the mid fours. We are redeploying that now back into the securities portfolio in the mid-3% range.

What we did in the second quarter was we had delayed deploying cash into the securities portfolio with the hope that as quantitative easing was ending we’d get wider credit spreads and better investment opportunities. Unfortunately Greece and the events of Europe and Goldman Sachs and a few things threw that off course and we decided to deploy cash late in the second quarter, which will certainly prove beneficial to the margins in the third quarter, but that’s why you saw the drag in the margin really in the second quarter that we deliberately held out for a little while in investing in the securities portfolio.

Bob Ramsey - FBR Capital Markets

Okay, thank you, and then with the money market rate that you talked about, is the 141, is that still sort of where rates are today or have you already began to sort of take those rates lower.

Joseph DePaolo

Actually on July 15 for a portion of our population we dropped the rate on the money market account and on August 2 for another portion of the population we’ll be dropping. One thing to keep in mind, we are not a mass market retail player, so with the mass market retail banks where clients may keep $10,000 in an account, they can pretty much dictate where they are going to drop their rates and drop them very steep.

We happen to have a higher quality cliental and when we are bring them over from other institutions, they are the quality clients with the balances of millions of dollars, so they have a tendency to get the higher rates. As we are bringing them over, we have to maintain that higher rate for a period of time and then gradually drop them.

We are encouraged by the fact that we will have some movement of down from that 140 and that 141. So we’ve already started in the middle of July and we will begin next Monday the beginning of August, start dropping the rates even further.

Bob Ramsey - FBR Capital Markets

Okay and roughly how much is the adjustment that you will have done in July and are planning early August.

Joseph DePaolo

Because the clients, each of them have their special deals, it’s hard for me to give you a range of the drop in rates, but I think that the money market rates will probably drop anywhere -- they went down 15 basis points in the first quarter, six basis points second quarter; probably somewhere in between that for the third quarter.

Bob Ramsey - FBR Capital Markets

Okay. Thank you guys very much.

Joseph DePaolo

Thanks Bob

Eric Howell

Thanks Bob

Operator

Thank you. And our next question comes from the line of Christopher Nolan with Maxim Group; go ahead please

Christopher Nolan - Maxim Group

Good morning guys. Thanks for taking my call. Is there any particular target that you guys have discussed publicly in terms for the loan loss reserve ratio?

Joseph DePaolo

We don’t have a target in mind. What we are seeing is that the environment continues to be as we would like to say, cloudy, and so right now we may slow down. As you see we have had a little less provisioning this quarter than last and from the previous fourth quarter. We may slow down on the speed at which we are building reserves.

We don’t believe right now it’s time to stop building reverses; there is too much uncertainty out there. Although our credit metrics were very good, it’s the environment that continues to give us some pause. So we don’t have a particular target in mind; it will just be dictated by the environment.

Christopher Nolan - Maxim Group

Great and a strategic question; are you giving any consideration of broadening out your team’s geographically, possibly to market such as Florida and so forth. Talking to various people who own business in New York and seems more and more of them are talking about possibly doing a geographic move for various reasons.

Joseph DePaolo

Not on the near term horizon. If anything, the geographic would be just a contiguous growth in Connecticut and New Jersey. We’ve always been asked the question about Florida. They tell them that a lot of our clients are in Florida, but none of their businesses, our client’s business are here and that’s where we want to be and if they have a tendency to spend time in Florida, they could easily do their banking here in New York.

Christopher Nolan - Maxim Group

Great. Thank you very much.

Joseph DePaolo

Thank you Chris.

Operator

Thank you. And our next question comes from the line of Lana Chan with BMO Capital Markets; go ahead please.

Lana Chan – BMO Capital Markets

Hi, good morning.

Joseph DePaolo

Good morning Lana

Lana Chan – BMO Capital Markets

You’ve hired four teams year-to-date. Could you just give us thoughts about the potential additional team hires for the rest of the year?

Joseph DePaolo

We have a potential to open up a new office, our 24th office possibly in the fourth quarter and if that does happen, it would be at least one to possibly two teams, that’s pretty much on pipeline at the moment.

Lana Chan – BMO Capital Markets

Okay. Thanks Joe.

Joseph DePaolo

Thank you

Operator

Thank you. And our next question comes from the line of Tom Alonso with Macquarie; go ahead please.

Thomas Alonso – Macquarie

Good morning guys.

Eric Howell

Good morning Tom.

Joseph DePaolo

Hey Tom. Good morning.

Thomas Alonso – Macquarie

Just curious, this new potential $30 billion SBA lending program, you guys see any potential benefit to you and what you do in that market if that comes to fruition?

Eric Howell

We haven’t really dug into that too much, but I don’t think we see it as being much of a benefit to us.

Joseph DePaolo

Yeah, in fact we believe that there maybe some talk like restrictions on it and we don’t believe that it would benefit us, so we wouldn’t be properly participating.

Thomas Alonso – Macquarie

Well, I don’t mean as a participant. I mean it would increased the volume of SBA loans and you guys tend to sort of, you buy kind of trading notes…

Joseph DePaolo

Our business is taxes.

Thomas Alonso – Macquarie

Yes.

Joseph DePaolo

The SBA, the pool assembling business.

Thomas Alonso – Macquarie

Yes.

Eric Howell

I mean I think potentially that could help that this is why now we’ll have to see how it works its way through, and there have been several initiatives that have helped that business activity out on the small business side over the last and had some pretty good quarters over the last two or three in that arena. So hopefully it will proof beneficial, but we’ll have to see how it plays out.

Thomas Alonso – Macquarie

Okay, fair enough. And then just on the big swing in the AOC in this quarter, is that all just gains on the ASS portfolio?

Eric Howell

I’d say we saw significant improvements in the ASS portfolio this quarter.

Thomas Alonso – Macquarie

Okay. That’s very helpful. Alright, thanks guys.

Joseph DePaolo

Thanks Tom.

Operator

Thank you. And our next question comes from the line of Casey Haire with Bank of America Merrill Lynch; go ahead please.

Casey Haire – Bank of American Merrill Lynch

Good morning guys.

Joseph DePaolo

Hi Casey.

Casey Haire – Bank of American Merrill Lynch

Just a question on the deposit growth and how the teams are -- or what level of capacity they are operating at. The deposit growth is obviously strong again this quarter. Is that a function of the teams that you guys have brought on, operating or getting more efficient or is there still some upside there and is there room to improve upon this deposit growth in the second quarter?

Joseph DePaolo

Pleasantly Haire, well I’ll tell you that the deposit growth is across the Board. Usually from a percentage basis the growth from the newer teams is going to be there, because it had a lower base, but in terms of real dollars we are pleasantly surprised, I shouldn’t say surprised, we pleasantly happy to report that the growth has been across the Board. We have 72 teams, the newer ones and the ones from the beginning. So not that we are making any projections, but we expect to continue to have deposit growths for the remainder of this year into 2011.

It’s hard to predict where we’ll end up, because first six months of this year, we had $1.25 billion in growth and last year we had $1.8 billion. So we had in a year and a half, 18 months, $3 billion from deposit growth. Sure I couldn’t ever have promised you that we would be duplicating that over the next 18 months, but we’re still seeing quite a bit of opportunities.

What we would like to see more is the DDA growth. What we’ve been seeing is that a lot of the interest bearing comes before the DDA, the operating account. So what we would like to see in the mix certainly helps the net interest margin, there’d be more DDA growth. So that’s what we are looking forward to in the next two quarters.

Casey Haire – Bank of American Merrill Lynch

Okay great, thank you.

Joseph DePaolo

Thanks.

Operator

Thank you. (Operator Instructions) And our next question comes from the line of Jeff Bernstein with AH Lisanti Capital Growth; go ahead please.

Jeff Bernstein – AH Lisanti Capital Growth

Hi guys.

Joseph DePaolo

Good morning.

Jeff Bernstein – AH Lisanti Capital Growth

It’s a nice quarter. Like the loan growth, can you give us a little bit of color on that. I guess Bob Nicholson is expecting a 40% growth in transactions in that New York market in the second half of the year and its off a low base, but little activity perking up there, so can you talk about that a little bit?

Eric Howell

Yeah, I mean most of the loan growth we continue to see coming out of the CRE arena in the family loans, but we continue to bring in loans over that, going off to the fourth predecessor bags. We are starting to see C&I open up a little bit this quarter, starting to see some C&I opportunities, but again the first six months of this year has been choppy on that front still. It doesn’t seem like our clients are looking to pull down their lines and grow their inventories and produce product quite yet, given the environment that we are operating in, but we are starting to see some opportunity on that front.

Jeff Bernstein – AH Lisanti Capital Growth

Yeah. Great thanks.

Eric Howell

Just that, if we look at the rest of the year, it’s difficult to predict. Early on, I think actually in the first quarter’s conference call we had said that we’d have long growth in excess of in the second quarter of what we had in the first quarter.

That went well for a little while in the second quarter and then it seemed to slow down and we had some pay downs and some other loans that paid us back and then loan growth started to pick up again really June, and that’s why we are looking for some benefit in the margin there where we grew $100 million out of $195 million in June. So it’s a choppy environment right now on the long front and its difficult to predict.

Looking at the third quarter, we’ve had good growth so far; however, the month of August is typically very dead for loan growth, so we don’t expect much coming out of there. So we really don’t want to get into predicting what the level of growth would be this quarter, but we will have growth.

Jeff Bernstein – AH Lisanti Capital Growth

And you guys have talked about potentially working with some of your larger clients to finance them buying discounted notes. Is that kind of any traction at all?

Joseph DePaolo

Probably less than a hand full at the moment, but they know that we are out there should an opportunity arise within our space of what we do in dollars, up to around the $25 million, $30 million level. We believe we will get opportunities because they know that we are in the market.

Jeff Bernstein – AH Lisanti Capital Growth

That’s great. Thanks very much.

Joseph DePaolo

Thank you.

Operator

Thank you. And our next question comes from the line of Peyton Green with Sterne Agee; go ahead please

Peyton Green – Sterne, Agee

Okay. Actually, my question has been asked and answered. Thank you very much.

Joseph DePaolo

Okay.

Operator

Thank you. Our next question is a follow up from Tom Alonso with Macquarie; go ahead please.

Thomas Alonso – Macquarie

Hey, thanks for taking the follow-up guys. Just real quick, it’s a couple I guess of numbers questions. What percentage is your portfolio slowing rate?

Eric Howell

About 31%.

Thomas Alonso – Macquarie

Okay and of that what has force do you know, off the top of your head?

Eric Howell

Roughly half of the 31%.

Thomas Alonso – Macquarie

Okay great. Okay, that’s all I had. Thanks guys.

Joseph DePaolo

Alright. Thank you.

Operator

Thank you. And our next question is another follow-up from Christopher Nolan with Maxim Group; go ahead please.

Christopher Nolan – Maxim Group

Hey guys. Any update to the deposit growth guides that you gave earlier in the year. I wasn’t quite sure if you mentioned it earlier.

Joseph DePaolo

We actually blew away the projections that we gave. We are not at this moment giving any projections on the growth. What I have said earlier is that we didn’t expect that we’ll have a $3 billion growth in 18 month period. It’s a very hard jet, because they are a few factors that have interest rates being so low and not existent in treasury funds and treasury bills, but you getting an overflow from that, because clients are looking for some grade. So you get some excess deposits from your existing clients. Those that are in the real estate market are flush with cash, because they are not investing at the moment; you have some excess dollars there.

Now what will be good news is if decide to invest in these C projects that they wanted to buy or buildings that they want to buy. Hopefully for us, even though they have used some of the deposit money for their equity piece, they will be doing along with us. So that will help us on the asset on the asset side, but there’s too many factors that are known to try to project the remainder of the year. We just over phased and will continue to have growth.

Christopher Nolan – Maxim Group

Also are you getting interest back from clients who are seeking longer terms? I know you guys are typically five-year lenders.

Joseph DePaolo

Yes we are. I wouldn’t say a lot of push back, but we have been asked about doing ten year deals and seven year deals and we are avoiding that as much as we can.

Christopher Nolan – Maxim Group

Great and on the operating expenses, sort of where you guys were guiding from 18% to 20% year over year. Is that still a range to work with?

Eric Howell

I think that’s a conservative range to work with, because if you back out the one time FDSE special assessment that happened in the second quarter of last year, roughly about 16.5% second quarter over second quarter, so I think it will be in that arena going forward.

Christopher Nolan – Maxim Group

Great. Thanks for taking my follow-up.

Joseph DePaolo

Thanks Chris.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of [Gary Thompson with Hill Thompson Capital]; go ahead please.

Gary Thompson – Hill Thompson Capital

Good morning and how are you?

Joseph DePaolo

Gary, good morning. How are doing?

Gary Thompson – Hill Thompson Capital

Fine thanks. Have you noticed any note worthy changes in competitive behavior in the last quarter, either in the loan or deposit side?

Joseph DePaolo

Well interestingly enough, on the loan side we’ve seen on commercial real estate some competitors, particularly savings banks going sub 5% on five-year deals, which is something we would not want to do.

On the C&I side, we’ve seen some of the bigger institutions having rates in the 3% range. I think it’s tied to LIBOR and that’s something we don’t want to participate in. Not a lot of, but I am just kind of giving you some anecdotal things that we have seen.

On the deposit side we have seen the main, the big institutions, the too big to fail really dropping their rates, but the banks that we are taking the deposits from at a capital one or a PV bank, the way we’ve hired a number of people far more recently. They are keeping their rates for their quality clients at a higher level, which makes it a little bit more difficult for us, but on the whole we are seeing service levels really deteriorate at some of the other institutions, which is allowing our bankers to really try one premier service that they give. I think we did this, hence a $3 billion growth in a year and half.

Gary Thompson – Hill Thompson Capital

And those service declines are due to reduction in personnel levels of competitors or are they giving up products or services or how are they approaching it?

Joseph DePaolo

That’s a great question and I’m not so sure what the answer is. I will tell you, anecdotally the things we are hearing is that some of the bigger institutions are flush with deposits and not always treating their higher deposit level clients the way they need to be treated and include the way we treat them, and that has certainly driven some of them, some of the newer business that we getting. I am not quite sure; I don’t think the reduction in personnel have occurred at the editors that we are taking business from for those types of clients.

Gary Thompson – Hill Thompson Capital

Thank you, Joe.

Joseph DePaolo

Hey Garry, thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Ruth Harting with Barclays; go ahead please.

Bruce Harting – Barclays

Do you have any sense of the addressable market. I mean your growth has been great and in the New York metro area, I mean is there any data on the market segment that you target to suggest or do you sense any slowdown in the growth rate coming in a year or two or is there a pretty deep well of the kind of customers you are tapping.

I mean playing off the comment you made that you are in the sweet spot relative to the legislation, it really doesn’t touch you and that you are not in the mass market for retail deposits. Joe if you did if you did -- lets says in a year or two you saw the competition level for that market segment getting such that you felt you tapped out a pretty big part of it, would you move geographically or I’d doubt you’d change strategy in terms of your target market, but maybe you can just address that. Thanks.

Joseph DePaolo

Yes, okay Bruce. The well its very deep. The New York market, including New York, West Chester and then also Long Island, both National and Suffolk County is by far the largest market in the country for businesses that employ less than 500 people, which are primarily privately owned businesses. Also by far the largest deposit markets in the country. That includes all deposits, all segments, by three times the number two market.

So for us it’s a matter of whether we execute, the market is there, our market share is less than 1%. So we really can grow the business if we properly execute. Should at some point that dry up, well we have an opportunity to expand in New Jersey and the Connecticut, because those markets are fairly large and at least geographic those that are close to the New York metropolitan area. So we don’t see a change in these business plans to save a few. Thanks Bruce.

Bruce Harting – Barclays

And it would seem that -- I am trying to get off my speaker here, but I don’t know if I am, but it would seem as though none of the cardact or over draft, real changes from the Fed really impacted the kind of relationship you have with your customers; is that what you are saying?

Joseph DePaolo

We truly believe we are largely unaffected by the legislation and we hope that while others are concentrating on it, that will be an opportunity for us to continue to take some more business.

Bruce Harting – Barclays

Thank you.

Joseph DePaolo

Thank you.

Operator

Thank you. (Operator Instructions) And we have no further audio questions at this time. I’d like to turn the conference back over to Mr. DePaolo for any closing statements.

Joseph DePaolo

Thank you for joining us today. We appreciate your interest in Signature Bank and as always we look forward to keeping you apprised of our developments. Mitch I’ll turn it back to you for closing.

Operator

Thank you sir. Ladies and gentlemen, this concludes the Signature Bank’s fiscal 2010 second quarter results conference call. The replay of this conference is available via phone or Signature Bank’s website at www.signatureny.com. Thank you for using ACT conferencing and you may now disconnect.

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Source: Signature Bank Inc. Q2 2010 Earnings Call Transcript
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