Signature Bank at Barclays Global Financial Services Conference

Sep 17, 2015 AM EDT
SBNY - Signature Bank
Signature Bank at Barclays Global Financial Services Conference
Sep 17, 2015 / 01:45PM GMT 

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Corporate Participants
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   *  Joe DePaolo
      Signature Bank - President & CEO
   *  Eric Howell
      Signature Bank - EVP & President of Corporate and Business Development

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Conference Call Participants
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   *  Matt Keating
      Barclays Capital - Analyst

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Presentation
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 Matt Keating,  Barclays Capital - Analyst   [1]
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 Mood morning. My name is Matt Keating and I cover the mid-cap banks for Barclays. Welcome to our fireside chat without any fire, obviously, with Signature Bank. We're very pleased to welcome back Signature to our conference. We have President and CEO Joe DePaolo and EVP of Corporate Business Development Eric Howell here to participate in our discussion. I think it's going to be a pretty informative I think discussion for those maybe that are newer to the Signature story, and even those that have known the stock for some time.

 So I guess with that as a background, why don't we get right into some of our questions.

 So (inaudible) a lot of the banks that have been presenting here, it's not that long ago that Signature was formed. I think it was early 2001, to be exact, that you guys started operating or commenced operation. And then since then the bank's grown to over $30 billion in assets, $21 billion in loans, $25 billion in deposits without really making any acquisitions. And I guess as we think about that growth story into becoming a top 50 bank, I'd appreciate it, Joe and Eric, if you could highlight some of the milestones throughout that development.

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 Joe DePaolo,  Signature Bank - President & CEO   [2]
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 Well, we opened up on May 1st of 2001. And I think the first milestone would have been our 21st month when we had our first profitable month, so after 21 months. And then I think the 30 -- as of 33 months when we did our IPO in March of 2004. And then we did a follow-on offering in September of 2004 and March of 2005 and by March of 2005 we were 100% public. So those were, I would say, the major milestones early on. And then it's just a matter of every year or every quarter being able to add teams on for the growth.

 What I wanted to ask you, though, if I could ask a question, is what I thought I would do if it's okay with you is to give a little update of the quarter.

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 Matt Keating,  Barclays Capital - Analyst   [3]
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 Yes, we'd love that. That'd be great.

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 Joe DePaolo,  Signature Bank - President & CEO   [4]
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 Since this is a public forum, we thought we would talk a little bit about some things that we're excited about and I think our investors will be excited about.

 So let's talk about the loan growth for a moment. Our record loan growth occurred in the first quarter of this year where we had I think $1.44 billion in loan growth. It's more likely than not that the third quarter we will surpass that number and have a record loan growth in the third quarter.

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 Matt Keating,  Barclays Capital - Analyst   [5]
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 That's pretty impressive.

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 Joe DePaolo,  Signature Bank - President & CEO   [6]
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 More likely than not. Without getting into too much detail, that included a number of packages and a number of loans that are large that we would certainly discuss when we have our earnings call. But I could say that when you take the packages that we've done this quarter and the loans that we've done above $25 million, it's more than it had been in any other quarter previously.

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 Matt Keating,  Barclays Capital - Analyst   [7]
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 So I guess there wasn't that attritional seasonal slowdown in August with summer vacations. I guess it goes without saying that that didn't occur this year.

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 Joe DePaolo,  Signature Bank - President & CEO   [8]
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 Well, there was a concern because -- I know I get crazy with this. With Labor Day being as late as it could be and then a number of the holidays that occur in September, the religious holidays, we did a significant amount of business in July and August. So, we were very well prepared for any sort of slowdown in September.

 On the deposit side, something that Eric always talks about, he likes the word choppiness. We tried to talk a little bit about in the second quarter how we had nearly $500 million in growth in deposits, but you had to look at our average deposits, which the growth was $1.1 billion because we have significant flows in and out. It's going to be close, but the record deposit growth for Signature was about $1.56 billion in the third quarter of 2014. I would love to say it's more likely than not that we will have deposit growth record for the third quarter. At this moment our deposit growth is probably about $2.5 billion.

 Now, I did say that I would like to say it's more likely than not we'll break the record. The reason why I'm not sure is because we've had significant flows in and out. We've had a client sell a building and deposit $800 million. We had a couple of escrows whereby we had some bankruptcy deposits, we had some 1031 deposits, we had some class action deposits. We've had just a number of things going our way, but then some of them are short term and will certainly flow out. It's hard to say how much will flow out between now and the end of the quarter. However, our average deposit growth quarter to date is about $1.4 billion; the average.

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 Matt Keating,  Barclays Capital - Analyst   [9]
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 Interesting.

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 Joe DePaolo,  Signature Bank - President & CEO   [10]
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 I knew you'd like this.

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 Matt Keating,  Barclays Capital - Analyst   [11]
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 Yes, this is great. Yes, this is terrific. Wow. And that makes the rest of the questions I was thinking about asking so mundane by comparison. But I guess we will stick to the outline here.

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 Joe DePaolo,  Signature Bank - President & CEO   [12]
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 Yes. And there's two other things. One thing I think everyone should be aware of, and now I'm going to ask Eric to give a little update on the medallion business, but something you should be aware of. Again, this is something that we've said ad nauseam and I'll continue to say it so hopefully you don't all get ill. But we always said that margin to us wasn't as important when you compare it to building a franchise and growing the business. Well, if you have significant deposit flows in which helps build the franchise, you're going to have it have an effect on the margin. Without giving any numbers, because we still have some time to go in the quarter, the margin will be affected because you will see excess cash that hasn't yet been deployed. Even though we're going to have a record, most likely, a record in loan growth, the deposit growth has been in hundreds of millions, if not a billion, more than the loan growth. So that could -- and again, that's a good problem to have if you have pressure on margins because of the deposit growth that you have.

 And before it gets asked, Eric can talk about the medallions.

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 Matt Keating,  Barclays Capital - Analyst   [13]
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 Yes. We were going to ask about that so let's get it out there, yes.

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 Joe DePaolo,  Signature Bank - President & CEO   [14]
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 So might as well get everything out front.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [15]
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 So we've made some pretty good progress on the medallion front this quarter. In Chicago in particular we've refinanced approximately $120 million out of the $170 million that we have on our books. Obviously, when we're going through these restructurings with the clients we're doing them at levels that we feel very comfortable that they'll repay us at and that they feel very comfortable that they're going to be able to make repayment. So, that's a good sign. And we continue to work on the remaining $50 million as we speak and we're hoping to get some more of that done this quarter, but it'll probably be next quarter.

 Haven't seen much sales activity in Chicago, but we are in the process of selling eight medallions that we've taken back. We wrote those medallions down to about $200,000. We're marketing those in the mid-$200,000 range and we expect that to close in short order. It might be shortly after the quarter end, but we're hoping again that that happens by quarter end, but I anticipate that'll probably happen in October. So, those are some good things around Chicago.

 It seems like the valuations are leveling off in that mid-$200,000 range, the low-$200,000 range. Cash flows continue to be supportive and at about a 120 debt service coverage ratio there. So we feel comfortable that clearly the ride-share business is taking its toll. We could see a further downdraft, but we don't anticipate a significant downdraft from where we are today. And that's, again, $170 million of our portfolio.

 If you look at New York, which is $625 million, we've had some very supportive sales happen there in the month of August. There were four sales of individual medallions that went from $715,000 to $725,000. Two of those are foreclosures and two of those were normal-way transactions. So it's great to see that these medallions are starting to trade hands in normal transactions. At $700,000 that's, again, supportive to the values that we've lent on there so we feel good about that.

 Then we had two corporate medallions sell at $875,000 each. So again, those are very supportive to the levels that we have the corporates at. So, we feel good about the activity that's taking place in New York. Debt service coverage again is maintained there. We have not taken any medallions back there. We're working on a few that we may have to foreclose on, but some of those are normal foreclosures, I'd say, because they're due to health issues which happen from time to time in that marketplace. But overall, again in New York we've seen -- feel that it's settling down. We see what the effect is of the ride-share on that marketplace. We're taking appropriate steps and the transactions that are occurring are supportive to the values that we have lent on. So, we feel that overall the marketplace seems to be settling and dealing with the effects of Uber and others.

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 Matt Keating,  Barclays Capital - Analyst   [16]
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 So just to delve a little more deeply in the Chicago market, on the eight medallions that you've foreclosed upon and taken back, what is the loss content on those loans? How much does the bank actually lose?

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [17]
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 Well, we've already taken losses on those so we worked them down to $200,000. Roughly I'd say we took anywhere from $30,000 to $50,000 losses on each one of those. So if we market them and resell them at let's say $240,000 we're going to get -- we'll write that value back up by $40,000.

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 Matt Keating,  Barclays Capital - Analyst   [18]
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 And the refinancing that you've done on maybe $120 million of those balances, what does that process look like? Are you essentially just putting out new loans for them on different terms? How does that work?

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [19]
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 What we've effectively done is, traditionally these are three-year interest-only loans, right? So what we've done is we've -- and at a rate that's let's say around 3%. We've given them some rate relief, so we've reduced the interest rate that we're charging. But as somewhat of an offset, not totally offsetting that, we've asked for them to give us some amortization. And typically, it's 40-year amortization for the first 18 months and then it drops to 30-year amortization. So it's very little amortization, but it's better than nothing and that'll help us to whittle this portfolio down. And we're giving some interest rate relief which ultimately leads to overall cash flow relief to the borrower.

 Now, in Chicago we're lending more on the fleets there. There are -- now what we're working on is the individual drivers that we have that remain, that $50 million that remains. There, we're able to remove the middleman which is typically a fleet owner and they're taking anywhere from 25 to 75 basis points for arranging the financing. We're able to take that out of the equation so that's going to give even more cash flow relief to these drivers. And those are what we're going through now and it's a little bit more of a longer process because we're dealing with individual and smaller fleet owners.

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 Joe DePaolo,  Signature Bank - President & CEO   [20]
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 We try to tell everyone not to get caught up in the sensationalism of the articles that are written, particularly the credit unions that have that lawsuit when they say that they have all these medallion loans maturing. Well, if this wasn't the situation, let's say it was two years ago and you didn't have Uber and all these loans were maturing, well, as Eric said, they're three years interest only. You usually just refinance them. So it's not as if all these loans are coming up and they're not going to be able to be paid off. They're bullet loans that have to be refinanced. And something we always talk about when we talk about medallions is its cash flow. Don't worry about how much the medallion is valued as much as if there's cash flow there and they can pay their bills, including paying back the bank or the credit union. That's the most important.

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 Matt Keating,  Barclays Capital - Analyst   [21]
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 So given all the focus on this area, the bank hasn't decided if they'd be inclined to let those loans refinance away from Signature going forward. You want to keep this business. Is that the current philosophy?

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 Joe DePaolo,  Signature Bank - President & CEO   [22]
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 If they want to refinance and they refinance away and we get paid 100% then we'd be fine with that.

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 Matt Keating,  Barclays Capital - Analyst   [23]
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 Okay. That's fair. So we've talked about (inaudible) potentially more likely than not that you might have a record loan growth this quarter. The bank's grown to $30 billion in assets. Do you think that the franchise can remain primarily a New York area centric institution and kind of take the next leg of its growth profile? Can it grow into a $60 billion, $100 billion asset type organization by sticking to its current strategy or does additional geographic market expansion need to play a role as the bank continues its growth profile?

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 Joe DePaolo,  Signature Bank - President & CEO   [24]
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 I think a geographic addition would occur somewhere down the road because there's so much runway, as we like to say, here in the New York metropolitan area. We just opened up an office in Greenwich so we still have a world of Connecticut to do things in, which we have been but we can do more. Something my colleague would like to do is open up in New Jersey at some point in the future.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [25]
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 If we find the right bankers.

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 Joe DePaolo,  Signature Bank - President & CEO   [26]
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 Right. If we find the right bankers. So our plan right now is that we're getting ready for $50 billion from a regulatory standpoint, although we believe that that number will be changed. We are getting ready for $50 billion and that plan is that we would be at $50 billion in the New York metropolitan area, that we would not need to go geographically outside the New York metropolitan area to get to $50 billion. Although you have to understand we do have with Signature Financial, our equipment leasing and financing business. That is a national business. So we do have that and that would be part of the growth. But the main banking, so to speak, business would be the New York metropolitan area and we would not have to go outside geographically to go beyond $50 billion. In terms of going from $50 billion or $60 billion to $100 billion, not quite sure, but let's take -- let's get to the (inaudible)--.

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 Matt Keating,  Barclays Capital - Analyst   [27]
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 A step at a time. That makes sense. So Signature is the second bank I've spoken to in the past couple of days that's expressed optimism that the $50 billion (inaudible) might get increased. It's also interesting that Signature in mid-June announced that it was putting Barney Frank on its board of directors. So obviously Barney some might describe as one of the cheap architects of the current regulatory landscape for the bank. But what gives you optimism, I guess, that there may be some regulatory relief, specifically as it relates to being systemically important?

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 Joe DePaolo,  Signature Bank - President & CEO   [28]
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 Well, prior to Congressman Frank joining us -- actually, prior to him even having any discussions with us, he publicly said that he thought the $50 billion needed to be changed. And as a result, the -- he's the Frank of Dodd-Frank and his belief, as well as ours, is that the $50 billion is too low, that the $500 billion that was proposed by Senator Shelby is clearly too high of a number to have and that somewhere in-between, but much closer to the $50 billion, is something that's doable, whether it's $100 billion or so with an opportunity for that number to move if it's indexed, so to speak.

 So, we're confident because we have not only Congressman Frank, but we have Senator D'Amato, both of them now out of the political world, but both very much connected to that world. And just of the conversations we've had, it seems that the $50 billion would move. I guess the question's going to be whether it moves now or it moves after the election in November of 2016. For us, we will not be at $50 billion in November of 2016. Unfortunately, if it waits that long we will not stop no matter what our feeling is about that number being moved in pursuing with our consultants those things that need to be done to prepare for $50 billion. We don't want to put ourselves in any sort of hole by holding back. So what that means is we may incur some costs that may not be necessary, but that's okay. We're rather not take the chance.

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 Matt Keating,  Barclays Capital - Analyst   [29]
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 Maybe we can get back to the competitive environment in kind of the New York region. So last quarter a lot was made of your announcement that, given changes in the credit landscape, you're actually to raise pricing by 1/8 on your multifamily/CRE type production. How has that pricing environment trended now here in the third quarter? Does it still seem like pricing is getting a bit better? Maybe you could provide any commentary there.

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 Joe DePaolo,  Signature Bank - President & CEO   [30]
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 Well, another piece of new information for those out there. The 3.5% -- that's for [Dow]. What we're referring to is for the five-year fixed multifamily for our better clients we had made an announcement that we were going from 3 3/8 to 3.5 during the earnings call in July. Shortly thereafter that rate went back down to 3 3/8. The 10 year went down. We had raised our rate -- we always say that we could be 1/8 to 1/4 to 3/8 higher than our competitors, and we still are, but it's hard if they're at 3% and you're at 3.5%. So we saw our competitors go back down from 3 1/4 to 3 1/8 to 3 so we dropped our rate back to 3 3/8.

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 Matt Keating,  Barclays Capital - Analyst   [31]
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 That's helpful. So we're about halfway through the presentation. At this point we'd like to take a break and allow some participation from the audience. So if you could please pull up our audience response questions it would be appreciated.

 So you all see buzzers in front of you to vote on these questions, but our first question would be if you don't own shares of Signature or are underweight the stock at the moment, what could cause you to change your view: one, valuation multiples coming in; two, comfort that the law of large numbers is unlikely to have a material impact on loan growth near term; three, eventually divesting its taxi and medallion portfolio; four, additional price increases on its multifamily loans; or five, confidence its regulatory compliance infrastructure is appropriately built out. And so we'll take 10 seconds to vote.

 Okay. And so the results from the audience show that the number one choice would be comfort with the law of large numbers is not going to slow loan growth near term. Certainly we know that's not the case in the third quarter from your opening remarks. 46% of the audience voted that way. That was followed at 42% by valuation multiples declining. I think that a lot of investors are maybe waiting for that signature moment to invest in the stock and maybe the recent decline in the share price offers that opportunity.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [32]
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 I was just going to say that. I think they just got that, right?

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 Matt Keating,  Barclays Capital - Analyst   [33]
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 So why don't we move on to the next question. I think that's very self-explanatory. So our second question would where would you prefer to Signature focus its resources in the next year: adding additional private client banking teams; two, growing Signature Financial; three, positioning its balance sheet to be more asset sensitive in front of a potentially rising interest rate environment; four, investing in its regulatory compliance infrastructure; or five, slowing expense growth.

 Okay. So it looks from our responses that most of the audience would prefer to see Signature continue to add private client banking teams. That's 60% of respondents. That was followed at 20% by positioning its balance sheet to be more asset sensitive.

 But maybe we could talk about the hiring environment for teams. I know there is some seasonality at play in terms of when the bank makes new hires from teams. It tends to be not a lot towards the end of the year, but if you could provide some commentary or color on how that's trended as of late that would be great.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [34]
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 Sure. I mean we're currently talking to a number of teams. There is seasonality, as you pointed to, Matt. Normally this late in the year we're hesitant to bring on a team because we're going to have to cover their bonus for the full year. So we're really setting the stage for next year. We've done a fair amount of hiring this year with five teams and a couple additions of product lines or offerings within Signature Financial. So we're really setting the stage for next year.

 There are a few teams in the pipeline focused on Connecticut a bit. Hiring from some institutions where we really haven't hired from before as well. But the pipeline is there. We continue to see opportunities out of the mega institutions who in various ways, shapes or forms continue to devalue bankers and banking relationships. So, that continues to be beneficial for us.

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 Joe DePaolo,  Signature Bank - President & CEO   [35]
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 And clearly, anybody in the audience or anybody listening that has a referral for us, just give Eric a call. You know his number and we'll see that potential team.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [36]
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 (Inaudible)

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 Matt Keating,  Barclays Capital - Analyst   [37]
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 Maybe -- I think just stepping back while we're on this front, like, has Signature noticed a clear transition from -- when you were founded in the early 2000s, right, you had to make a lot of outgoing calls to attract bankers. Now it's been one of those great growth stories of -- really the most recent (inaudible) I can think of. Is the bank just fielding incoming calls all the time now or how do you manage that?

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [38]
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 Yes. I wouldn't say all the time, right, but we're certainly fielding a fair amount of incoming calls. We very rarely go out and search for bankers now. One of the changes in my role over the last couple of years was to allow for myself and John Tamberlane to have more time vetting all the bankers that are calling us. Because we're finding that that devaluation that I talked about is leading to some pretty unhappy people out there who, quite frankly, might just be coming to us for a base salary, which that wasn't the case certainly seven, eight years ago. So we have to really ensure that they truly have a book of business and truly have clients and can move those clients to us. So there's more of a vetting process on our side so we're spending more time having to do that than we did in the past.

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 Matt Keating,  Barclays Capital - Analyst   [39]
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 Gotcha. I want to move on to question three, please. Okay. So the genesis of this question really reverts back to some comments the Company made on the second quarter conference call about trying to really decide whether or not -- it could take two tracks. Like one, it could raise capital today to keep its capital levels as high as any peers or, two, they could say, hey, we're -- and support its future growth -- or two, you could take the track that, listen, we're less risky than a lot of the competitors. Maybe we don't need to keep our capital levels quite so high.

 And so I'm going to ask the audience first whether they think Signature needs to raise growth capital over the next year and then I'd appreciate any feedback the Company could offer on whether its refined its thought process around this issue. So we'll take eight seconds to vote yes or no, whether you think Signature will need to raise growth capital in the next year.

 So for those on the webcast, 59% of the audience said no, they don't think the Company will need to raise growth guidelines. 41% thinks that it might. So maybe we can just open it up to you guys in terms of how you're thinking about that dynamic.

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 Joe DePaolo,  Signature Bank - President & CEO   [40]
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 So you want me to get myself in trouble again.

 This is what we're thinking. In the past -- and we're one of the few banks that does this, but we actually do a comparison of capital and balance sheets versus our other major competitors. It's because if you work at Chase, Citi, Bank of America, you were never asked can I see your balance sheet. But I think all of you know that most of our clients have uninsured deposits with us because they're not worried about FDIC insurance. So that number is well over 80%. I'm not sure where it is. It could be well over 90% for all I know at the moment. And so it was very important for them to understand that, versus a 2.5 train or a 2 train dollar institution, we kept our capital levels higher than those institutions and our balance sheet was cleaner.

 Now -- Eric had to do this recently and I'll have him give a little bit more specifics, but now, because the banks that we compete against, the major institutions are going to have to keep larger amounts of capital because of the buffers that they'll have to have because they're riskier. We won't need to keep capital above those levels because it wouldn't make sense. We don't have the risky balance sheet and we're not required to keep those buffers. So our sales process or our business development process changes in that when it used to be we had to keep more capital than our competitors, now we don't have to keep as much.

 If you want to give that anecdotal--.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [41]
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 Yes. So a couple of weeks ago we had a client that had a fiduciary responsibility doing their due diligence on the bank and they asked us to compare our capital ratios to those of the mega institutions. So as Joe said, typically we would just show our capital versus them. But now that they have to maintain these buffers, obviously they've raised a significant amount of capital over the last few years and their capital levels are quite high right now. So what we did was we changed the way in which we showed it to the client and said, okay, here's our capital compared to our minimums and here's their capital compared to their minimums. And we showed them the spread of what we maintain over the minimums versus what they maintain and it was quite favorable. And the client was very appreciative of that, understood that we're not a risky bank, we don't take the risks on that those institutions do and therefore we could maintain a dollar or an ultimate level of capital that's below theirs.

 So it went well, but it's truly a feeling-out processes and that was the first client that we've had to try that with. So, we're going to have to see how that works through with other clients. And more importantly, we're probably going to have to see how that plays out in a time of stress and we just don't know. So the capital equation for us is much more of an art than a science and it's taking the pulse of our depositors and ultimately ensuring that they're comfortable. And we've in the past raised capital when we see opportunities for growth and I don't think that message has changed.

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 Joe DePaolo,  Signature Bank - President & CEO   [42]
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 No.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [43]
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 When we see opportunities for growth we're going to raise capital.

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 Joe DePaolo,  Signature Bank - President & CEO   [44]
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 So it's clear we're not shy about doing it. We've never had to do it [for sins of the past]. And as Eric said, it's more of an art than a science. And it's important for us -- not so much when we need it for growth, but also for our picture of what we look like versus those that we compete against. And those that we compete against are the multi-trillion-dollar institutions. It's not some of the smaller institutions that try to act like us.

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 Matt Keating,  Barclays Capital - Analyst   [45]
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 That's helpful. And then maybe there's a fourth and final [RAS] question. So over the next two years do you think Signature is more likely to, one, acquire a smaller bank; two, enter into a MOE transaction; three, sell to a larger institution; or four, refrain from M&A? And we'll take 10 seconds to vote.

 So the response from the audience shows that 74% think the Company sticks to its strategy of not doing M&A over the next couple of years. 19% think it may acquire a smaller bank.

 As you guys think about your strategy of the organic growth potential that the bank has, is there any reason to do acquisitions at this point? How are you guys thinking about that.

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 Joe DePaolo,  Signature Bank - President & CEO   [46]
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 Well, we have discussions where sometimes we get opportunities. We get a package to look at a bank, whether in the past it was through the FDIC or it was -- or it's just a private transaction and we look at it and say we could hire a team to do that.

 There was an institution that was closed by the FDIC and taken over by a bank. This was several years ago. I'll even say it. We could say. It was LibertyPointe Bank was taken over by Valley and we hired the vice chairman at LibertyPointe. LibertyPointe Bank was a bank that was closed by the FDIC as a result of some poor lending problems that they've had, or had, and it was primarily in commercial real estate. The gentleman we hired was not on the asset side, but was on the deposit gathering side. Today that team that he runs has more deposits that LibertyPointe Bank had when it was closed and more demand deposits, non-interest-bearing checking today by far than the amount of deposits that they had. So when we were approached about whether or not we wanted LibertyPointe and involved in the seven single individuals, merging systems, trying to keep the clients, our stance was let's hire what we believe to be the person that could bring the business over.

 So that's just one example of why we would prefer to continue on -- if I walk in to Eric and say what do you think about this, he's like we can hire a team that can develop deposits or loans more than that.

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 Eric Howell,  Signature Bank - EVP & President of Corporate and Business Development   [47]
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 Growing roughly $5 billion a year is a pretty fair level of growth, sustainable level of growth, controllable level of growth where you don't have all the integration issues that you get into with acquisitions. So if we can grow that roughly $5 billion a year organically, why would we ever think about an acquisition. Where it could come into play someday is when we determine, okay, New York we're -- you name it, $60 billion bank, $80 billion bank. It's time for us to take this on the road. That's when we may want to look to an acquisition so that we have a platform in that local area to work from. But in the foreseeable future we don't really see much of a need for an acquisition. Not much reason to do it.

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 Joe DePaolo,  Signature Bank - President & CEO   [48]
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 Right. When Provident acquired Sterling a number of investors or analysts asked us were we thinking about doing the same and we showed that the three previous years we actually had acquired a Sterling. We had grown greater than -- in terms of deposits, loans and total assets greater than the actual amount that Sterling was when Provident acquired it. So our belief is that we are doing acquisitions organically.

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 Matt Keating,  Barclays Capital - Analyst   [49]
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 Interesting. Only have a few minutes. I do want to make sure that the audience has some opportunity to ask questions, so maybe if you'd bring out the microphone that'd be great.

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Unidentified Audience Member   [50]
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 Joe, Eric, I'm confused at your answer to the capital question. I mean on your call you basically floated the idea that you're thinking about raising capital and then you just announced that you're going to have record -- most likely have record loan growth in the third quarter. So why wouldn't our conclusion be that you're more likely to raise growth capital in the near term than not? What has changed in the last six weeks?

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 Joe DePaolo,  Signature Bank - President & CEO   [51]
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 Well I don't believe that in the second quarter earnings call we said we were going to raise capital. I said that -- I laid out -- I looked at the answer, and it's pretty long, and I laid out all the things we were thinking about. I mean we're pretty open about what we're thinking. And I said we were not shy, but not indicating one way or the other if we were going to raise capital, that we were spending a lot of time thinking about it. And I think the example that Eric used was that now that we're in a transformative stage of one where we used to keep levels of capital higher than our competitors, now the viewpoint is that it can't be that high because we don't have all the issues that they have. So that's what we're thinking about. When the quarter ends we look at it and see whether or not we would need to raise capital. So nothing has changed one way or the other.

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 Matt Keating,  Barclays Capital - Analyst   [52]
------------------------------
 Any additional questions from the audience?

 I guess one thing we didn't get into too much is Signature Financial and its growth prospects. Maybe you can talk about, within that business line, which particular opportunities the organization is the most excited about at this juncture.

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 Joe DePaolo,  Signature Bank - President & CEO   [53]
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 Well we've added on four -- we would characterize them as four new lines of business. We get corrected by them by saying it's same business, it's different collateral. So, okay. The municipal business and the commercial marine and the franchise and our latest, which is the commercial vertical. It's exciting for us because it adds on more opportunities for us to do business with loans that have a very short term, three to five years. They were very big in the municipal business, Capital One, and so that's exciting for us because we hope that we're going to have that same opportunity.

 One thing I think we should point out is that when we took the team on board in March of 2012, $2 billion out of the $4.5 billion was municipal. And we were talking about how we were excited for years about that happening for us when they bring on a municipal team, but there is one striking difference. At Capital One they did longer-term deals, right? They did 15-year term as part of the municipal. That's something we will not do; or if we do that, we will use our capital markets desk to sell off because we want to keep it short. And there will have to be some municipal deals that go out 15 years.

 But part of the time that's being spent -- there's time being spent growing the business. There's time being spent bringing on new what we call executive sales officers around the country. We've hired a little less than a handful from GE. So that's what's happening there. Unfortunately, that's offset by the amount of time -- and we try to stay ahead of it, the amount of time we're spending on taxi and medallion to keep ahead of that. But that's a good example of a business that we brought on without having to buy it.

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 Matt Keating,  Barclays Capital - Analyst   [54]
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 Yes, definitely.

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 Joe DePaolo,  Signature Bank - President & CEO   [55]
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 We hired -- Eric led the charge and we hired about 55 people from the team. I guess it was -- let's say from March of 2012 to about May of 2012 we brought on 55. Now it's closer to 100. But those are 55 people, with the exception of one person that came from Wells Fargo. Everybody else came from the group that they had at Capital One. That's a good example of bringing on quality people as opposed to buying a business and spending a premium and having an intangible on your books.

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 Matt Keating,  Barclays Capital - Analyst   [56]
------------------------------
 Great.

------------------------------
 Joe DePaolo,  Signature Bank - President & CEO   [57]
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 So that's another reason why we try not to do M&A.

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 Matt Keating,  Barclays Capital - Analyst   [58]
------------------------------
 Well we've covered a lot this morning. I really appreciate it. There will be a breakout session in the Madison Suite directly after this. So please join me in thanking Signature and Joe and Eric for their time today.

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 Joe DePaolo,  Signature Bank - President & CEO   [59]
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 Thank you.




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