SBNY (2019 - Q2)

Welcome to Signature Bank's 2019 Second 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 open 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 D

Thank you, Dorothy. Good morning and thank you for joining us today for the Signature Bank 2019 second quarter results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.

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. 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.

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. The 2019 second quarter was another strong quarter of deposits and loan growth leading to solid earnings. Additionally, we continued the momentum we experienced in prior quarters with commercial and industrial loan productions far outpacing commercial real estate loans. Major initiatives have taken place over the last several quarters helping us to continue driving our deposit growth as well as furthering our asset and geographic diversification strategy. This includes the launch of Signet as well as the addition of both the Digital Banking Team and Fund Banking Division, which have already made meaningful contributions. Moreover, we recently added the Venture Banking Group, as well as the Kanno-Wood Team, which is focused on treasury management products and services related to the deposit rich residential and commercial mortgage services amongst others. All these banking teams, which are national in scope, have helped elevate Signature Bank's profile and offerings and will contribute to a more diversified credit and asset liability positions over the short and long-term. Let me sum it up by saying we are incredibly busy. Now on to the quarter, Signature Bank delivered another quarter on growth and performance led by more than 900 million in deposit growth, while maintaining overall strong credit and credit quality and delivering solid earnings. Net income for the 2019 second quarter was $147.9 million or $2.72 diluted earnings per share compared with $154.6 million or $2.83 diluted earnings per share for last year. The decrease in net income was due to a rise in non-interest expense from the significant investment in new private client banking teams including nearly 50 employees added to the Fund Banking division of the Venture Banking Group and the Kanno-Wood Team collectively. Looking at deposits, while confronted by a challenging deposit environment, we increased deposits by 980 million to 37.5 billion this quarter and average deposits grew 466 million. Since the end of the 2018 second quarter deposits and average deposits both increased 2.5 billion. Non-interest bearing deposits increased 546 million to 12.3 billion and still represent a high 33% of total deposits. The deposit and loan growth coupled with earnings retention, led to an increase of 3.7 billion or over 8% in total assets from a year ago. Now let's take a look at our lending business. Loans going to 2019 second quarter increased 467 million or 1% to 37.9 billion. For the prior 12 months, loans grew 3.8 billion. The increase in loans this quarter was again driven primarily by our Fund Banking division. This is a third consecutive quarter where C&I growth outpaced CRE furthering the transformation of our balance sheet to include more floating rate assets and diversified in the credit profile. Additionally during the quarter, we saw 47 million of Taxi Medallion Loans and 91.8 million portfolio of Signature Financial Equipment loans. Turning to credit quality, our core portfolio continues to perform well. We've substantially reduced our risk exposure with the sale of Medallion Loans. Now, we have a total of 41.3 million in non-performing loans or just 11 basis points of total loans. Our pass-through loans remained in the normal range with 30 to 89 days past due loans at 51 million, 90 days plus past due loans at a low $4.7 million. Net recoveries for the 2019 second quarter were $3.7 million compared with net charge offs of 3 million for the 2018 second quarter. The provision for loan loss for 2019 second quarter was $5.4 million compared with $8 million from the 2018 second quarter. The allowance for loan losses decreased by 1 basis point to 64 basis points of loans, and now that we are substantially lowered on the Medallion exposure, our coverage ratio has significantly improved over the last few quarters to 593%. Yes, that's nearly six times coverage. Now onto the team front, we had two private client banking teams in the second quarter including the large Kanno-Wood team specializing in mortgage servicing banking. At this point, I'll turn the call over to Eric and he will review the quarter's financial results in greater detail.

Thank you, Joe, and good morning, everyone. I'll start by reviewing net interest income and margin. Net interest income for the second quarter reached $326 million, up $5 million or 1.6% when compared with the 2018 second quarter and an increase of $7 million from the 2019 first quarter. Net interest margin decreased 20 basis points in the quarter versus the comparable period a year ago and declined 1 basis point on a linked quarter basis to 2.74%. Excluding prepayment penalty income, core net interest margin for the linked quarter decreased 2 basis points to 2.71%. Let's look at asset yields and funding costs for a moment. Interest earning asset yields increased 21 basis points from a year ago and 2 basis points from the linked quarter to 4.03%. The increase in overall asset yields was driven by higher reinvestment rates and commercial loans. Yields on the securities portfolio decreased 4 basis points linked quarter to 3.27% due to the dramatic decline in market rates, which also led to our portfolio duration coming into 2.5 years. Turning to our loan portfolio, yields on average commercial loans and commercial mortgages increased 3 basis points to 4.24% compared with the 2019 first quarter. Excluding prepayment penalties from both quarters, yields increased 2 basis points. Prepayment penalties for the 2019 second quarter were only $3.6 million, up slightly when compared with $2.4 million for 2019 first quarter, but down significantly from the $6.1 million in the 2018 second quarter, as a slowdown in transaction activity led to a decline in CRE prepayments which we anticipate will continue. Now looking at liabilities, our overall deposit costs this quarter increased by only 3 basis points to 1.19%, which is much less of an increase than the previous several quarters. Due to an increase in noninterest bearing deposits as well as the leveling off of deposit pricing, given that we're six months renewed from the last fed increase. Average borrowings excluding subordinated debt, increased $201 million to $6.3 billion, or 12.9% of our average balance sheet. The average borrowing costs increased 5 basis points from the prior quarter to 2.63%. Overall, the cost of funds for a linked quarter increased 3 basis points to 1.42%. And on to non-interest income and expense, non-interest income for the 2019 second quarter was 8.6 million, an increase of 3 million when compared with the 2018 second quarter. The increase was due to an increase of $3 million in net gains on sales of loans mostly due to the Signature Financial equipment portfolio sale. Non-interest expense from 2019 second quarter was 131.9 million versus 112.6 million for the same period a year ago. The 19.3 million or 17% increase was mostly due to the meaningful addition of private client banking teams. The bank's efficiency ratio was 39.4% for the 2019 second quarter versus 38.5% for the 2019 first quarter. The efficiency ratio has been negatively affected by the declining NIM and our investments in long-term strategic initiatives. Turning to our capital. In the second quarter of 2019, the bank paid a cash dividend of $0.56 per share. Additionally, during the 2019 second quarter the bank repurchased approximately 413,000 shares of common stock for a total of $50 million. The dividend and share buybacks had a minor effect on capital ratios, which all remained well in excess of regulatory requirements and augment the relatively low risk profile of the balance sheet, as evidenced by our tangible common equity ratio that increased 17 basis points to 9.46%. And now, I'll turn the call back to Joe. Thank you.

Thanks, Eric. This quarter was a return to the original Signature Bank script with earnings driven by solid deposit growth, nearly doubling our loan growth. Additionally, we significantly reduced our Medallion portfolio with the sale of 47 million in Medallion loans, which now represent just 5 basis points of total loans. We're also added that the Kanno-Wood Team to spearhead our efforts into the deposit rich mortgage servicing space. In the past several quarters, there have been numerous mentions of both the new initiatives and lines of businesses we've added. I would be remiss if I didn't mention the strength of our hundred plus private client groups, which are the foundation of Signature Bank. These traditional banking teams continue to add to the growth of the bank and we look forward to their future contributions as well as those of our new initiatives in lines of business. Now, we are happy to answer any questions you might have. Dorothy, I'll turn it over to you.

The floor is now open for questions. [Operator Instructions] Our first question comes from Ken Zerbe with Morgan Stanley.

In terms of the new hires, obviously, expenses ticked up. I totally get it you're hiring talents going to help grow the business. How quickly should those new private banking teams actually start contributing to deposit growth?

We anticipate that the Kanno-Wood Team is going to take a couple quarters to ramp up. So, we should see them start to add to deposit growth, I'd say early next year, if not late this year. As for the Venture Banking Team that started in March, they did close a few transactions in the second quarter, but really their pipeline for the third quarter is quite robust. They already have 12 accepted term sheets. We expect the commitments to be north of 18 million, outstanding to be north of 30 million and deposits should be well north of 100 million, if not close to 200 million. They've got about another 25 term sheets out and we'll win our fair share of those. So that could lead to another 200 million to 300 million in deposit growth as well as 200 million in commitment. So they've been very, very active since starting, and they gained really solid traction early on. So we're very pleased with what they've done. The Fund Banking team continues to add. They're over 3 billion now. In commitments, they added over 600 million in loans again this quarter and we anticipate that the deposit flows really start for them in next couple quarters.

Is there a way to quantify between the Fund Banking, the Venture Banking, and then Kanno-Wood Team like who is probably the, potentially could bring in the most deposits or could be the most successful? Because I know they all have different characteristics?

Can we really little break that out? We have other 100 plus teams that all contribute in various ways. And on deposits, loans, fee income we just don't break that out.

Okay. And then, maybe just one question in terms of the outlook for margin. I get that, this quarter, just we didn't have the rate cuts. Next quarter very flat yield curve is probably going to be a bit of a headwind. But we think about, say 2020, if the fed does kind of keep cutting rates, is do you need the 10-year long end of the curve to actually go up before you see them expansion? Or is just that nature of the fed cutting driving a bit of a steeper yield curve vented at very low levels, but is that enough to drive NIM expansion? Thanks.

Well, we anticipate NIM's going to be stable at this point. We would need some steepness to the curve, Ken, for us to really see meaningful expansion at this point with an inverted curve. If the fed continues to cut up the curve remains inverted, that's not a good environment for any bank. So we would be stable in that scenario, if the fed cuts but we see the 10 year stay where it is or increased and we get some steepness to the curve then we would expect to have some margin expansion. But right now, we're very pleased with the fact that we've more or less hit a bottom on our margin. And now it's just looking to drive net interest income through that.

Okay, that makes sense. And that was just one more question. In terms of the taxi loans, obviously you've sold a chunk. Why didn't you sell the rest of your taxi loans?

We sold all the loans that were performing for a period of time, Ken. The rests are performing at varying levels. So, we sold most of our loans. We have about $16 million remaining loans, most of our exposure now is in repossessed assets or we have approximately $37 million in repossessed assets. Our team there is working hard to getting new borrowers to purchase those Medallions and then put them back into a performing category. Actually, about 70% of those repos already have payments coming in on them, so we're pretty pleased with that. And as we see those payments being made consistently for a period of time, we think we'll be able to sell those loans as well.

Our next question comes from the line of Jared Shaw with Wells Fargo Securities.

You're looking at the national lending platform, is that set? Are you happy with how that setup now? Or do you think that there's room for incremental hiring in that segment? Or maybe even extension to other lines?

Yes, I'd say that we've added to the Fund Banking Division this quarter. We don't really anticipate adding there. We really have a powerful team there. And they drove loan growth pretty significantly, again, this quarter. We'll be building out the Kanno-Wood Team. We hired 8 very experienced professionals there, but we'll build out their staff, probably another 3 to 4 hires to come there. The Venture Banking Groups up to about 20 to 30 people. I don't anticipate we'll be hiring in the near-term, but certainly as they grow, we'll look to add to them as well. I don't think we really anticipate adding any more national businesses at this point, but we'll always be opportunistic on that front.

And then on the borrowing side, given the lower rate environment, does that change your appetite to lower borrowings as a percentage of funding? Or does that take some of the pressure off in the near-term?

It certainly takes some pressure off and we're looking to reduce those borrowing costs and hopefully really replace those borrowings with even lower cost core deposits. That's really our focus.

Okay. And then, can you just give an update on the multifamily portfolio in light of the law change? And how you're viewing the strength of that from one a credit point of view? And also, have you seen any change in the competitive dynamics there sort of given the reduced cash flows longer term?

Well, we certainly are taking it very seriously. We did a super deep dive into portfolio and we cast a pretty wide net. So let me give you some statistics. We have a multifamily portfolio of 17.5 billion, and of that 14.5 billion is in New York City multifamily. So, we carved out what was outside of New York City, since the rent stabilization laws affect New York City area. And of that 14.5 billion about 10 billion or 70% of the properties had some level of rent stabilization. So we exclude 4.5 billion on buildings that are fully market rent. So now we bought that down to 10 billion. Additionally, we exclude fully subsidized buildings where we never anticipated having market rents at all. So that brought it down to approximately 5.6 billion, and then we did a deep dive in that 5.6 billion of New York City multifamily loans and we review them all, and we concluded that and that included all the renovation loans. And we concluded after reviewing the portfolio, that we're not seeing any new issues related to rent stabilized portfolio. However, we're pretty mindful of the fact that of the environment and we're monitoring closely. The next step is to do a deep dive now we're meeting with those, those owners or followers face-to-face to ensure that the properties in good shape and that the cash flows of that.

Great, thanks. And does it change the competitive dynamic at all in the space?

I don't see any…

Except the pricing or, okay.

I just believe it is less activity. And those experienced owners who have a multitude of properties they have been in the business are looking at those individual owners who have one or two buildings and may not do well under the new rents stabilization laws. And as a result, they may see some activities happening soon.

Our next question comes from the line of Ebrahim Poonawala with Bank of America.

Good morning guys. First question, I think, Joe you mentioned, return to sort of deposit growth-driven balance sheet growth. So I think this following up to an earlier question. Talk to us in terms of all these teams just in aggregate as you think about deposit growth from year on? We've talked about the $3 billion to $5 billion range, but deposit growth has lagged over the last few years. Just what your expectations are and should we start seeing a little more of a momentum on the deposit growth side in the back half into 2020?

Certainly, we don't give predictions of numbers as relates to deposit growth. But certainly, we believe our deposit growth in the second half is going to be greater than that we had in the first half. And we're still looking at the $3 billion to $5 billion below at the lower end.

Understood. And in terms of just the pricing dynamics in the market, it seem like it's still extremely competitive if the fed cuts at the end of July. If you can, Eric, just talk about your ability to sort of flex down deposit cost to start having those negotiations with our clients?

I believe that will have somewhere between 40% to 50% of the decline in fed funds rate that we'll be able to pass along. It will be over time like you said negotiations because a significant portion of the deposits were negotiated under money market side. So, one thing we will do, we will be a little bit more aggressive than we were last time because I think there're some clients that we get that the last time when we dropped rate. We did it slowly, gradually and the competitors did it, as if it was first time. We dropped them more quickly. On the way up, the clients forgot how gradually we're on the way down. They wanted swiftly moved up on the interest rates when the rates were going up. At this time, we're going to be able to a little bit more aggressive in dropping the rates that we want to be passed.

Understood. And just switching gears to the asset side in terms of the loan growth, so, obviously it dominated by C&I growth over the last few quarters, just the outlook there in terms of the makeup of growth that you expect and the outlook for the CRE book relative to where it ended the second quarter?

Well with the CRE book, we still have a book of $28 billion and it has to be managed and we're doing business with our current clientele. What we've been trying to move off the loans that have no relationship, where they have one loan, maybe two, and they never fulfill their promise of bringing over deposit. Those we'd like to finance, refinance away, and will be flexible on the prepayment penalty. We also don't believe we're going to bring on any new clients in CRE, but we have some very sophisticated significant clientele that we want to keep and we're going to refinance those loans here. So one thing I will say, on the interest rate side as it relates to loans. So there's a wider gap between us and the competitors. And we just don't understand how competitors, who can borrow at a certain rate and then lend on multifamily at a spread that is ridiculously low. We try not to do anything sub 4%, we will do it for clients. But we have about a 50 basis points spread right now between us and what a client -- I'm sorry between us and what a competitor is charging and we just don't understand how their margins not going to go below 200.

Given the market dynamics that we've seen in the multifamily space, we're very surprised that we have not seen credit spreads widely.

And is that because just there hasn't been enough activity to reflect all the changes? Or do you think just there are enough players to keep those spreads tight?

I think the only business that they are in probably some of the banks, we diversified since 2012 and we have more flexibility and we'll continue have more flexibility as results of more diversified portfolio.

Our next question comes from the line of Casey Haire with Jefferies.

Just to follow up on that question. So, the New York City multifamily 14.5 billion, you guys are pushing for 3 billion to 5 billion of asset growth per year. You're currently not pricing multifamily to grow. So can you just walk us through, how do you see this portfolio evolving over the next couple of years? And what level I'm assuming it's going to decline? What level -- what pace of decline do you need to have without jeopardizing the 3 billion to 5 billion of assets growth?

Well, on the CRE portfolio, we were thinking that over the next several years it will remain somewhat flat, because we're in the business. It could decline a little bit, but that's why we started in 2012 to bring on different businesses like Signature Financial and then ABL, which is going on now. Now, we have three or four other businesses that report on where there is deposit growth and loan growth. And we really believe that along with the existing 100 team, we can make 3 million to 5 billion level of growth. But the Fund Banking team could do anywhere between 0.5 billion and 3 quarters of a 1 billion growth on the credit side a quarter.

Right, I understand like I mean, I see the new verticals, C&I verticals. But I mean multifamily is a 5-year product, '14 and '15 were pretty big vintage years for you guys. And, I mean, I guess another way, where do you see the multifamily balance a year or two from now versus that $14.5 billion today?

Slightly down.

Slightly down, okay. but is that possible, if you're that far above the market in terms of...

We're that far above the market, if somebody new comes on, although we're not taking our new clients, but if there's an opportunity. But for existing clientele, I can tell you we're doing a deal right now for 375.

Okay. All right. And then just…

Flexibility, we can't do everything at sub -- we can't do everything starting with a four-handle.

Got you, okay. On the deposit side, I apologize if I missed this. In the release, you've mentioned it's still a challenging deposit environment. Any color on where average deposits are quarter-to-date?

They're higher than they were during the second quarter. The average is higher.

Ok, and then just…

Meaningfully higher.

Great, yes, understood. And just lastly, on the expense front, tracking a little bit higher here, quarter-to-date, obviously, year-to-date, obviously another team add, another big team add. Is 15% year-over-year should we expect that through 2020 is until we anniversary these team hires?

For 2020 that's reasonable. Yes, I think we'll be in a 12% to 16% expense growth, starting at 16% for next quarter, and it should start to trickle down each quarter as we move forward.

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

Just a follow-up on NIM. Eric, the guidance you gave for stable NIM in 3Q that obviously assumed that the fed cuts in July, correct?

Correct.

Okay. It's assuming that the intermediate portion of the curve holds, which we don't know if it will or not, but assuming it does. Shouldn't the fed cut be more beneficial to NIM and really start unwinding some of that in pressure you saw over the past year?

Yes, it should be.

Oh, it should be, okay. Thanks. And then on the new rent regulations, I'm curious, what are you hearing from your customers here? Our volume just falling off a cliff, is the practice of building owners taking out cash to make capital improvements, is that just done? And then I have a question on the credit deep dive.

Well, it could be done because there's no incentive to take out cash to refurbish buildings and whatnot. That is clear. What we're hearing from our clients is. They're upset. They can't understand how this could have happened. They ask us clearly about refinancing how that's going to be handled. And we said, it's based on cash flow, not based on the value so much of the property because certainly, the values have dropped. But if a client has been paying and has no issues with us, and he has a cash flow, we will continue to refinance those clients.

Okay, that's helpful. And Joe, on the deep dive, you did into the portfolio, you are even more confident that this is not a credit challenge?

Yes, I am more confident that it's not a credit challenge. It's more of a growth challenge for most.

And then just separately, it's good to see another team here with the mortgage servicing segment. Could you give us a sense? What do you see as the size of that deposit opportunity over time?

Over time, I would say, it'd start with a D instead of an M.

Our next question comes from the line of Brock Vandervliet with UBS.

Eric, you've mentioned steepness of the curve and just going back to the NIM discussion for Signature. What part of the curve is most relevant when you think of steepness?

I'd say the 5 years most relevant for us.

Okay. Like fed funds to the 5-year that part of the curve?

That's right, Brock.

Okay. And to the extent the forward -- the forward implied rate show steepening in that segment, that would be favorable for your NIM?

Correct.

Okay. And I don't know, how much repositioning you did in the quarter relative to the, that static shock analysis that we see in the queue? How much different would that potentially be this quarter?

It's improved slightly. So the differences in 100, 200, 300 shock will come in a little bit. It really shows us being more stable Brock in our margins.

Our next question comes from the line of Matthew Breese with Piper Jaffray.

Joe or Eric, I wanted to focus in on the multifamily portfolio. Just make sure I had it clear so the 10 billion, the 70% that had some level of rent stabilization, you got that down to 5.6 billion. Is that 5 points -- again, is that 5.6 billion just the fully rent stabilized buildings, nothing but?

No. What we did is, we subtracted from the 10 billion, about 4.5 billion with the fully subsidized buildings where we never anticipated any market rent. That bought it down to the 5.6 billion.

And so, on the 5.6 billion, what is the average LTV of that portfolio? And what cap rates? What was the average cap rate tax rate you underwrote those loans to?

That's not information we would give out.

Did you -- when the market was in the 3.5% to 4% cap rate kind of range for those loans that you would typically underwrite? Or would you stressing things a little bit higher?

Yes, we use the much higher cap rates than the industry.

And have customers given you any sort of indications of what evaluation impacts to their rent stabilized properties might be? Is there any sort of range right now that you would think about?

What we're talking about is cash flow, that's the conversation we're having on the clients, not so much the valuation of the buildings.

Okay.

It's a little too early to tell that, Matt. Just half and it's working its way through the marketplace. Certainly, we feel that values have been affected. But again, as Joe said, our focus is on cash flow. That's how you get paid back. And LTV is a fallback when the cash flows aren't there. So, our primary source of repayment is cash flow and that's where our focus is, and we feel comfortable with that.

Okay.

I think the phrase that we trying to figure out how to appraise.

I mean, at the very least, do you expect any your qualitative factors that go into the allowance because of such large change in the industry? Any of those qualitative factors going to have to change therefore increase your allowance at least?

We did change our qualitative factors this quarter, and we added to environmental reserves with the performance of our portfolio, however, that was offset. So we would have taken back provisions had we not added qualitative factors this quarter. We're very mindful of the environment. And we're keeping a very close eye on it. We do think that we are dealing with very strong owners and landlords that will be able to fight their way through this, these changes, but we're keeping a close eye on it. And we are trying to prove the reserve for any anticipated issues. But right now, given this deep dive that we've done, and what we've seen, we don't really see any issues.

Just curious, I think your multifamily CRE reserve was something like 65, maybe 68 basis points. How much of that environmental inputs impact at 68 basis points?

Probably, I'd say 2 to 3 basis points.

Okay. Going back, I think you said that the $5.6 billion included some of the construction loans?

For the renovation loans, yes.

Renovation loans. How much of that was tied to potentially pro forma rents or those all based on current rents?

Very little was based on future rents, most of it will based on current.

And at least 50% of that portfolio was all market rent to begin with.

Right. So, it's roughly 50-50 market rate and then based on forward rates, is that accurate?

Some forward, very little, most of it was current.

Okay. And then in all the cases, or how many of the cases where you also underwriting the property itself and therefore had kind of a first lien position on the construction?

We don't do construction financing.

None of its construction, it's all renovation loans where we always have the first lien.

Got it? Okay. And then because of this, are there any changes to the risk weighting or risk ratings of your multifamily loans? And how would that work through?

We don't anticipate any changes to our risk ratings.

Okay.

And there's been a lot of doing that there's been a lot of noise around that in the risk ratings. If we took all of our loans that are in the 50% bucket, and move them to 100%. It costs us 100 basis points in our capital. It is a non event for us period. And it's not something that we're concerned about at all.

Our next question comes from the line of Chris McGratty from KBW.

Joe and Eric, with the $3 billion to $5 billion of asset growth I think you said, lower end near term. How do you feel about the rest of the buyback and the pace of the buyback? You were a little more aggressive this quarter, but any thoughts on whether you think you can finish it in the next maybe year and a half or the pace of buybacks?

It's going to be dependent upon where the price is, how quickly we're using capital, none of the factors change that went into last few quarters when we were buying back. We saw an opportunity to increase the second quarter. And if we see the same opportunity in the third quarter, we'll do so. We won't be specific and we won't be shy about increasing it in any one quarter.

Okay. What would this be a quarter that you would say is kind of as aggressive as you be or if your stock is at these levels next quarter, you could even do more?

Well that some of 18 day, so let's see how the market reacts to our quarterly earnings. Let's see how the market reacts to the fed dropping their rate. I don't mean the stock market, I mean, our clients.

And then one housekeeping item, the tax rate in the offset and the expense. Is that this quarter a fair estimate going forward?

Yes.

This concludes our allotted time and today's teleconference. If you'd like to listen to a replay of today's conference, please dial 800-585-8367 and refer to the conference ID number 6935767. 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.