Signature Bank's (SBNY) CEO Joseph DePaolo on Q1 2016 Results - Earnings Call Transcript

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Signature Bank (NASDAQ:SBNY) Q1 2016 Earnings Conference Call April 20, 2016 10:00 AM ET

Executives

Susan Lewis - IR

Joseph DePaolo - President & CEO

Eric Howell - EVP, Corporate & Business Development

Analysts

Jared Shaw - Wells Fargo

Chris McGratty - KBW

Ken Zerbe - Morgan Stanley

Casey Haire - Jefferies

Carl Peterson - FBR

Dave Rochester - Deutsche Bank

Steven Alexopoulos - JP Morgan

Peyton Green - Piper Jaffray

Operator

Welcome to Signature Bank's 2016 First Quarter Results Conference Call. Hosting the call today from Signature Bank are Joseph J. DePaolo, President and Chief Executive Officer; and Eric R. Howell, Executive Vice President, Corporate and Business Development. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions].

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

Joseph DePaolo

Good morning and thank you for joining us today for the Signature Bank's 2016 first 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. You should not place undue reliance on those statements, because they are subject to numerous risks and uncertainties relating to our operations and business environment, all of which are difficult to predict and may be beyond our control.

Forward-looking statements include information concerning our future results, interest rates and the interest rate environment, loan and deposit growth, loan performance, operations, new private client team hires, new office openings and business strategy. As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results.

They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements. These factors include those described in our quarterly and annual reports filed with the FDIC, which you should review carefully for further information. You should keep in mind that any forward-looking statements made by Signature Bank speak only as of the date on which they were made.

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

Joseph DePaolo

Thank you, Susan. I will provide some overview into the quarterly results and then Eric Howell, our EVP of Corporate and Business Development, 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 delivered another exceptional quarter of growth and performance, resulting in our 26th consecutive quarter of record earnings. We, again, delivered record deposit and loan growth, expanded top-line revenues, maintained overall strong credit quality, and continued to invest in our future with the hiring of another private client banking team. Moreover, during the first quarter we successfully raised $319 million in common equity and yesterday we issued $260 million in subordinating debt.

These two capital raises were strictly motivated by future growth expectations. I will start by reviewing earnings. Net income for the 2016 first quarter reached a record $104 million or $1.97 earnings per share, an increase of $20.6 million or 25% compared with $83.4 million or $1.64 earnings per share reported in the same period last year. A considerable improvement in net income is mainly the result in increase in net interest income, primarily driven by strong deposit and loan growth, each surpassing $1.2 billion in growth during the quarter.

Each factor were partially offset by an increase in non-interest expense attributable to our revenue growth initiatives as well as in part regulatory and compliance course. Looking at deposits, deposits increased $1.5 billion or 5% to 28.1 billion this quarter including core deposit growth of $1.5 billion, an average deposit growth of $600 million. Since the end of the 2015 first quarter deposits increased $4.1 billion. Core deposits increased $3.7 billion and average deposits increased $4.3 billion. Non-interest bearing deposits of $9 billion represented 32% of total deposits and grew $417 million this quarter.

The substantial deposit and loan growth coupled with earnings retention and our equity capital raise led to an increase of $6.3 billion or 22% in total assets since the first quarter of last year. The ongoing strong deposit growth contributable to superior level of service provided by all of our private client banking teams who continue to serve as a single point of contact for their clients. Now, let's take a look at our lending businesses. Loans during the 2016 first quarter increased a record $1.2 billion, or 5.2%, to $25 billion. For the prior 12 months, loans grew $5.7 billion and represents 71.8% of total assets, compared with 67.5% one year ago. The increase in loans this quarter was primarily driven by growth in commercial real estate and multi-family loans as well as C&I loans.

Turning to credit quality; our credit metrics all remain strong this quarter. However, as expected we again saw deterioration in our taxi medallion portfolio which impacted each of the following. Watch those credits increased $52.9 million to $403.3 million, still a low 1.61% of loans compared with $350.4 million or 1.5% of loans for the 2015 fourth quarter. During the 2016 first quarter we saw an increase of $10.3 million in our 30-day to 89-day past due loans to $101.1 million while 90-day-plus past due loans increased by $13.8 million to $19.8 million. Non - accrual loans increased to $105 million or 42 basis points of total loans, compared with $71.9 million or 30 basis points for the 2015 fourth quarter and $27.8 million or 14 basis points for the 2015 first quarter.

The provision for loan losses for the 2016 first quarter was the $19.8 million compared with $16.7 million for the 2015 fourth quarter and $7.9 million for the 2015 first quarter. Net charge-offs for the 2016 first quarter was $7.8 million, or an annualized 13 basis points, compared with $4.6 million, or 8 basis points for the 2015 second quarter and $1.5 million or 3 basis points for the 2015 first quarter. The allowance for loan losses increased slightly to 0.83% of loans versus 0.82% in the 2015 fourth quarter. It was 0.88% for the 2015 first quarter.

Additionally, the coverage ratio remained strong at 197%. Just to review this for a moment we started 2016 with the addition of one team. Our team pipeline remains active and we look forward to the opportunity for attracting talented banking professionals to our network.

At this point, I'll 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 first quarter reached $278.3 million, up $55.8 million or 25% when compared with the 2015 first quarter. An increase of 3.7% or $10 million from the 2015 fourth quarter. Net interest margin increased 6 basis points in the quarter versus the comparable period a year ago and increased 2 basis points on the linked quarter basis to 3.32% excluding prepayment penalty income. Core net interest margin for the linked quarter also increased 2 basis points to 3.17%. The linked quarter increases in overall core margins are due to increase our yields in the securities portfolio and an increase in loans as a percentage of the balance sheet.

Let's look at asset yields and funding cost for a moment. Interest starting asset yields increase 4 basis points from a year ago and increased 5 basis points from the linked quarter to 3.76%. The increase in overall asset yields was due to a slowdown in premium amortization on securities. An increase in loan prepayment penalty income and again an increase in loans as a percentage of the balance sheet.

Yield on the securities portfolio increased 8 basis points linked quarter to 3.15% given the slowdown in premium amortization on securities from slowing CPR speeds and stronger reinvestment yields. The duration of the portfolio decreased to 2.8 years. Returning to our loan portfolio yield on average commercial loans and commercial mortgages remained stable at 4.06% compared with the 2015 fourth quarter. Excluding prepayment penalties from both quarters' yields would have declined 1 basis point. Now looking at liabilities, our overall deposit costs this quarter increased 2 basis points to 41 basis points, mostly due to an increase of 2 basis points in money market costs driven by selective increases to certain deposit clients as a result of the fed rate increase in mid-December.

Average borrowings increased $504 million to $3 billion or only 8.8% of our average balance sheet. The average borrowing cost increased 11 basis points from the prior quarter to 1.24% as a result of the fed raise. Overall the cost of funds for the quarter increased 3 basis points to 49 basis points.

Now onto non-interest income and expense; non-interest income for the 2016 first quarter was $8.5 million, a decrease of $1.7 million when compared with the 2015 first quarter. The decrease was due to a decline in net gains on sales of loans of $1.8 million predominantly from our SBA pool assembly activities. Non-interest expense for the 2016 first quarter was $92.3 million versus $81.7 million for the same period a year ago. The $10.6 million or13% increase was principally due to the addition of new private client banking teams, our continued investment in the growth of Signature Financial as well as an increase in costs in our risk management and compliance activities.

Factoring in the significant hiring since last year and increased regulatory costs. The bank's efficiency ratio still improved 32.2% for the 2016 first quarter compared with 35.1% for the 2015 first quarter. Now turning to capital in the 2016 first quarter we successfully raised $318.7 million in common equity to further bolster our capital base and prepare for future growth. Our capital ratios were all well in excess of regulatory requirements and augment the relatively rough low risk profile of the balance sheet. As evidence by Tier I leverage ratio of 9.7% in a total risk based ratio of 13.19% as of the 2016 first quarter. Additionally yesterday we closed the subordinated debt offering for $260 million which will further enhance our total risk based capital ratio.

And now I will turn the call back to Joe. Thank you.

Joseph DePaolo

Thanks, Eric. As we kick off 2016 which marks our 15th year in operation. Signature Banking will deliver another quarter of solid financial performance. 2016 first quarter saw record earnings for the 26th consecutive time as well as both strong deposit and loan growth. Additionally in 2016 we successfully raised $579 million in capital motivated by future growth expectations. Also this quarter we added one private client banking team. We remain focused on growing our network by continuing to attract veteran bankers who can flourish at signature bank and in turn provide the level of service to which our clients have grown accustomed.

In light of our 15th anniversary this year, we see this as an opportune time to reflect on the growth of our business founding. We are extremely proud of the strong foundation and infrastructure we have built and nurtured over the years which has helped to sustain a consistent strong, organic growth. Now we are happy to answer any questions you might have.

Lori, I will turn it over to you.

Question-and-Answer Session

Operator

The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Jared Shaw of Wells Fargo.

Jared Shaw

Hey, good morning. Just could you speak a little bit about what you see in terms of any potential large packages completed in 1Q and how that pipeline looks going into second quarter?

Joseph DePaolo

Well good morning. We had no large packages but we did have about $500 million in loans that weigh in excess of $25 million for the quarter. And the pipeline is for the second quarter as strong as it's ever been.

Jared Shaw

Okay. Great thanks and then in terms of specialty finance, Signature Financial how is the hiring been going there and whether the growth expectations we can expect to see from there, the rest of the year?

Eric Howell

They grew about $82 million in the first quarter which is typically their slowest quarter coming out, coming out a year end where a lot of clients are looking to get full year tax benefits by closing deals in December. You know we anticipate that they will grow in an area of around a hundred million per quarter going forward.

Jared Shaw

Great. Thank you.

Eric Howell

Thank you.

Joseph DePaolo

Thank you.

Operator

Your next question comes from the line of Chris McGratty at KBW.

ChrisMcGratty

Hey, good morning everyone. Joe, Eric you know your provisioning rights because the taxi book has kind of moved from that 20 basis point range recorded to about thirty over the past six months. Can you maybe opine about the outlook for maybe additional needs to provide not only growth but also you know rising non-performers in the taxi book?

Eric Howell

Yes, I think we anticipate provisioning levels to be of similar level this quarter. Chris we certainly don't see it going meaningfully down, I mean these levels you could be slightly up from these levels as we look out but that's going to be dependent on many variables most of which is probably growth.

ChrisMcGratty

And just to clear that, debt as a percentage of the book right now and not as dollars.

Eric Howell

Correct.

ChrisMcGratty

Okay. Maybe you have one more on the deposit pricing. Maybe I missed it in your prepared remarks. Have you seen any notable changes in the market I noticed, you know you're checking in now counter up a couple basis point, anything notable from December?

Joseph DePaolo

I know nothing notable. I would say that it is pretty stable out there. There was some noise with the first raise but most of it was just noise.

ChrisMcGratty

Great, thanks a lot.

Joseph DePaolo

Thank you.

Operator

Your next question comes from the line of Ken Zerbe of Morgan Stanley.

Ken Zerbe

Thank you. Just a quick question on the taxi actually taxi charge offs. When we think about the provision of $20 million this quarter all in, the charge offs still remain pretty low. How are you thinking about how taxi losses materialize in the portfolio? I am just trying to get a sense of like when would we start to see it? Thanks.

Eric Howell

We saw about $4.4 million in charge offs this quarter. We're really working through you know the, not as good credits in our portfolio now, so I would anticipate things to get worse in that portfolio for the next couple quarters and we'll probably see an uptick in charge offs over the next few quarters. And then we should see it start to stabilize again.

Ken Zerbe

Understood and this the fact because when you guys renegotiate the taxi loans, if I'm right I figure extended duration or at least you put them into new three year loans with some amortization. Does that alter the lost history or do you are you taking meanings like there's a delay for three years? I was trying to get a sense of if that changes the dynamics a little bit.

Eric Howell

Well it depends Ken if we restructure those prior to going into non-accrual then we wouldn't take a charge off and we'll have to obviously make an assessment if we believe that they can pay us back to full amount of principal even if it is over extended period of time. We wouldn't have to charge it down so it would delay a charge off and if it goes into non-accrual at the time that the loan goes into non-accrual, we take a charge down to fair market value. Then we looked at other sell. The medallion in the open market or restructure it to the existing borrower on terms we would have to take the charge off at the time that it goes to non-accrual. So really depends on the timing of the restructuring.

Ken Zerbe

All right, makes sense and then just on the commercial real estate market in general know. I know NYCB had some cops call this morning. You know fairly cautious terms of the overall industry, slowing activity; you've given that your pipeline is really strong. He's helped to make sure we understand the difference between, you know, are you seeing different dynamics in the market? I know you have a great sales process and service but is that enough to overcome broader weakness in the overall industry if that continues to worsen?

Joseph DePaolo

Well we don't we don't see a broader weakness. We would be more selective number one because we can be. And number two in the market that we were in, primarily low to moderate income areas for the multi-family we have seen very little if any vacancies. We are not seeing any weakness in the markets we are in right now. There is weakness in the higher end large dollar co-ops, the large dollar condos but that's not the market that we are in. The cautiousness on our part is that in terms of being selective is because we can be and yet we have a robust pipeline.

Ken Zerbe

Okay. Great that helps. Thank you.

Operator

Your next question comes from the line of Casey Haire of Jefferies.

Casey Haire

Hey, good morning guys. Wanted to follow-up on the medallion, just looking at the transfer of medallion in the quarter, down pretty significantly about 20% versus fourth quarter which appears to outpace a little bit of the reserve build in the medallion portfolio for you guys. And was just wondering, you know, Eric you were saying that you expect provision levels to be pretty similar. Does that presume that we hold the line on medallion transfers and where is the LLR today and LPV?

Eric Howell

The LPV is right around the 100% to turning on the values we use. There is not a lot of transfer activity today Casey so we're really looking at a more cash flow model and to provide us a value with these medallions. The cash flows in New York are roughly the debt service coverage is about 1.2%, so there is good debt service coverage still there. We have seen cash flows stabilize. We do expect them to continue to get worse before they get better but they seem to be leveling off. And we hope that a number of the changes in regulation issues that happened at the end of first quarter will continue to help cash flows for the medallion. So debt service coverage remains above on the LPVs are around a 100% and we anticipate that we will continue to get paid back through cash flows.

Casey Haire

Okay. Understood and just switching to capital adequacy, the sub-debt raised last night, my assumption is that that's to address the total capital ratio which is eroded in the last couple of years due to growth. Should we be thinking about you guys addressing capital going forward, the Tier 1 leverage will obviously continue to be common and then the total capital would be ongoing sub-debt raises and if so how much capacity do you guys have for further sub-debt raises?

Joseph DePaolo

I would say that you are correct in terms of what you said regarding equity, common equity and the sub-debt. We, first I will say this, I said it in our remarks that where our pipeline is and our expectations of growth we did the issuance of both the common equity and the debt strictly for and it was motivated by future growth. We get the added benefit with the sub-debt of it being Tier II and it's not diluted as much as the common equity would be and when you take into consideration and the fact that it counts against total capital, that helps against the CRE loans where we were about 600% and now we are down to about 500% with the equity with the debt raise.

Casey Haire

Okay, great. And just last one from me on the team outlook. Last month you guys were talking about, you know, pretty optimistic about some high profile teams around earnings was the expectations. Obviously I haven't seen that. Just an update on the female log if you would?

Joseph DePaolo

Well, we did have one team come on board about several weeks ago. It was actually in the first quarter and we expect another team or two to come on board rather quickly so around earnings, you know today's earnings and the last month, we surely will have another one or two very quickly. So the team outlook is very good.

Casey Haire

Okay. Thank you.

Operator

Your next question comes from the line of Abraham [ph] of Bank of America.

Unidentified Analyst

Good morning guys, I want to quickly touch base on expenses. We have 13% year-over-year growth. As we look out should we expect that sort of growth rate to be sustainable or is that likely to drift higher as you bring on these teams and the rest of debt compliance expenses?

Eric Howell

As we said in the last quarter's call we anticipated expenses to be in the lower teen's growth range so we continue to expect that over the course of this year that will be in 12% to 15% growth range on overall expenses.

Unidentified Analyst

Got it and just a separate question in terms of everything in terms of non-fiery that we are doing on the loan growth side, are they new initiatives as you think about it in terms of industry verticals or business lines that you might sort of expand into as you see the opportunity to pick up talent or for market dislocations?

Joseph DePaolo

Well we do have an initiative, it's not on any particular industry but we recently made a change by creating a new position in C&I and we filled it internally and we are very excited about this position and this person is going to be working with the teams and the lenders because we see that we are getting more opportunities to do C&I where it's primarily variable rate loans and so having floaters added on to our portfolio would be very good thing for us.

Unidentified Analyst

Got it. Thanks for taking my questions.

Joseph DePaolo

Thank you.

Operator

Your next question comes from the line of Bob Ramsey of FBR.

Carl Peterson

Hi, this is actually Carl Peterson actually speaking for Bob today. Good morning guys. I was wondering if you might be able to go into a little more detail kind of on to the previous question regarding pipeline. I know you guys said it was probably one of the strongest one's ever but is that still predominantly multi-family or I guess when can we start to think about when C&I might start to contribute a bit more and add a little more floaters to the book?

Joseph DePaolo

I would say in the second to third quarters you should start seeing more C&I. When I was thinking of pipeline, I was thinking predominantly multi-family in CRE but in addition to that we do have a pretty good pipeline on Signature Financial. We have a couple of fairly large yield in ABL and we actually have some fairly large deals on the C&I side. So it seems like all the sunders are cooking but in terms -- relative one to the other the CRE and the wealthy families are probably still the largest for at least the near term.

Carl Peterson

Okay, great. Yes thanks for taking my question.

Operator

Your next question comes from the line of Dave Rochester of Deutsche Bank.

Dave Rochester

Hey, good morning guys. On the NIMM trends, sorry if I missed this, what was your expectation for the next quarter and then for the back half of the year if we continue to have this interest rate curve persists through year-end?

Eric Howell

Yes, you know looking at next quarter, there is some pressure which they count as well as the -- it's up that great that we did. So I expect two to three basis points of pressure in the second quarter and then looking on beyond that we should really be right around these levels, up or down of base as 42.

Dave Rochester

Great. And then any sense for whether security screening them could tick up in 2Q and I would imagine that's already baked into your guidance, we're just wondering what you're seeing there.

Eric Howell

Yes, now we do anticipate that we'll see a slight uptick in that, it's come down over the last three quarters or so, given where rates have been now for a little where we anticipate them and could be -- we do expect that premium to pick up a little bit.

Dave Rochester

Great. And then the switching to a multi-family commercial real estate, you guys had mentioned and some other banks had mentioned during the quarter seeing some of the smaller players pull back a bit, just given some pressure they were getting. I was just curious if you're continuing to see that dynamic persist into this quarter and how that's impacting you guys?

Joseph DePaolo

It is persisting but there is not much of an impact because the competition is still very strong, particularly with the seven year product.

Dave Rochester

Got you. And then switching to securities, you had a little bit of growth there, can you just talk about what you're buying this quarter and at what yields and then where reinvestment rates are today?

Eric Howell

Reinvestment rates are really in high tunes, we're being very selective as to when we enter the market. We selectively purchased more than ten-year brick 185 during the course of the first quarter and we're continuing to target more than five-year average life securities and primarily agencies, as well some new issue non-agency securities and selective corporates.

Dave Rochester

Great. And then our multi-family pricing, you guys still in that rates 3.5 range for five year?

Joseph DePaolo

Yes, exactly.

Dave Rochester

And then on the sevens, did you actually lower pricing at all or is it about where it was?

Joseph DePaolo

Unfortunately we were at three and seven A's, we had to do some deals in three and three quarters, and still very good deals between five [ph].

Dave Rochester

Sounds good. Alright, thank guys.

Eric Howell

Thank you.

Joseph DePaolo

Thank you.

Operator

Your next question comes from the line of Steven Alexopoulos of JP Morgan.

Steven Alexopoulos

Good morning everyone.

Eric Howell

Good morning, Steve.

Joseph DePaolo

Hey Steve, good morning.

Steven Alexopoulos

Eric, could you -- you gave some of the stats around taxi but could you also give the outstandings where they ended up with the balance now in TDR and what the reserves are maybe dissect between New York and Chicago?

Eric Howell

Sure, Steve. So balances in New York are $597 million and in Chicago there are $166 million. I don't have balances on TDRs, I don't think they meaningful changed in Chicago. I think we had a slight uptick in New York as we're just starting to work through and more troubled credits. The allowances, overall, it's around 5% overall, reserves a little under 5% in New York and a little over 5% in Chicago.

Steven Alexopoulos

Okay. And Eric, I know you'd say you were looking at cash flow to establish the value of medallions not where we've had a couple of transfers. Have you taken any medallions back at this point? Just curious what the experience has been with exiting these?

Eric Howell

We have, we've recently taken a number of them back. And ultimately right now we're in the process of marketing about 18 medallions that we anticipate selling at fairly reasonable levels, let's say in the mid $600,000 range on those. So we're pretty pleased with what we're hearing about sales/prices in the market. We're also hearing about others -- other sales happening with the six handle on them in the marketplace right now. But ultimately when we take them back, we'll either restructure and try to work with the existing borrowers still, even though we've taken back medallions or we'll look to foreclose and sell or we might even put them in other assets held and lease them out to qualify garages where we anticipate we can get between $2,000 and $4,000 -- say, per month.

Steven Alexopoulos

Okay. I assume those are in New York City. Have you taken any back in Chicago?

Eric Howell

We have not as many in Chicago and we're still working through selling some of those.

Steven Alexopoulos

Okay. I mean it seems to us like the credit cycles advancing for a taxi, is anything noticeably changing? Like you're noticing any behavior change or in the part of the borrowers that we're seeing more of this come through this quarter?

Eric Howell

Not meaningfully, Steven. I think we're just seeing the first, the worst credits working their way through first. We do anticipate that -- like it will settle, it will get worse for a few more quarters but then we should -- by then work through the real troubled credits. There are number of loans, many loans that continue to pay as expected under the existing terms that we just don't see having a problem with. So we're really just working through the worst credits now.

Steven Alexopoulos

Okay. And then completely shifted gears, just regarding eventually crossing the $50 billion threshold, do you guys have any thoughts around moderating growth at some point to manage when you cross or do you just keep doing whatever the market gives you and you cross when you cross? Thanks.

Joseph DePaolo

We're just going to keep on seizing the opportunity. We've started -- more than a year and a half ago we would plan of what needs to be done operationally to get ready for $50 billion and that plan will be executed before we reach the $50 billion, so we're ready for. It's hard to test the business, you only get one opportunity and in sometimes don't get a second opportunity. So we'll still stick with that $46 billion on an annual basis.

Steven Alexopoulos

Okay, great. Thanks for all the color guys.

Joseph DePaolo

Thank you.

Operator

Our next question comes from the line of Peyton Green of Piper Jaffray.

Peyton Green

Hi, Eric. Just a question on the 18 taxi medallions that you're marketing, would those be a cash sale or would you advance the loan to somebody that might take those?

Eric Howell

Well, I'm anticipating we'll have to advance them.

Peyton Green

Okay, alright. And then just as you think through -- I mean you mentioned couple of times during the call that these were the more problem taxi medallion loans that moved into NPL from performing during the quarter, how much -- was there any material change in the TDR amount? I'm sorry if I've missed you clarifying that earlier.

Eric Howell

Yes, not that I'm aware of. I don't have TDR numbers there right now but I don't think there is much of a change in Chicago because we have gotten through most of that portfolio couple of quarters ago and I'm assuming there was a small change in New York.

Peyton Green

Okay. And then you mentioned that you are optimistic that the cash flows would start to stabilize. What gives you more confidence about that now relative to the 90 or 180 days ago?

Eric Howell

First of all, it's just what we're seeing happening in the industry, there has been about a 15% to 20% decline from the peaks and cash flows and we haven't really been seeing that meaningfully change over the last several months. There were a number of things that TMC New York have done such as universal licensing which will allow second shift drivers to come back more easily in the taxi space because that's really where the issues are in attracting second shift drivers over. They've also done away with the owner must drive rule, so that allows owners to find other people to drive that first shift. Also allows us to take back taxis, make it easier for us to take them back into lease them out to fleets and garages.

And we've also seen already a pretty nice impact out of the illegal street hells and pickups where the TMC is enforcing that more aggressively and has significantly increased the fines to the TMC. So we're seeing less illegal street held activity, so that's helping with the cash flows as well. So those are some of the things that I feel that we're starting to see a stabilization there in the cash flows.

Peyton Green

Okay, great. And then Joe you mentioned that there is a renewed effort on growing C&I outside of Signature Finance. Could you talk about maybe what you would expect that to do from a volume perspective? I mean, historically Signature has been a very good C&I lender prior to the entry of the multi-family. Is this -- maybe if you could characterize the growth opportunity there?

Joseph DePaolo

What is a big growth opportunity, I won't dare to try to forget what the volume will ultimately be on a quarterly basis near term for us until we had an opportunity to see how it just works out with the new position and how that's executed. But that clearly is a big opportunity. Rather we talking more about the growth of overall loan instead of talking about taxi.

Peyton Green

Right. No, no, I get that but I guess in terms of pricing, as you look to get more variable rate credit, what pricing would you expect to achieve on those loans given current market conditions?

Joseph DePaolo

It's probably in likelihood going to be more good days, some will have to do in the high ones, some low to mid two's and some three and three handles. It will be quite a different mix, some of it could be healthcare, some of it can be manufacturing but we're getting opportunities more so than we've had in the past and we want to seize on that. And if we have to give a little mend, we'll do so to get floaters and to get -- because we've seen you get a big opportunity to bringing the positive into our cash management services. It posts an opportunity in seeing all those grade and positive opportunities in CRE.

Peyton Green

Okay. So overtime you would expect us to balance out the dependency on commercial real estate and multi-family growth. So is that fair?

Joseph DePaolo

There won't be lot of that.

Peyton Green

Okay, great. Thank you for taking my questions.

Joseph DePaolo

Alright, thanks.

Operator

This concludes our allotted time and today's teleconference. If you would like to listen to a replay of today's conference, please dial 800-585-8367 and refer to conference ID number 87922279. A webcast archive of this call can also be found at www.signatureny.com. Please disconnect your lines at this time. And have a wonderful day.

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