SBNY (2021 - Q1)

Welcome to Signature Bank's 2021 First Quarter Results Conference Call. Hosting the call today from Signature Bank are Joseph DePaolo, President and Chief Executive Officer; and Eric Howell, Senior 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 DePaolo, President and Chief Executive Officer. You may begin. Joseph D

Thank you, Erica. Good morning and thank you for joining us today for the Signature Bank 2021 first 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 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, business strategy and the impact of COVID-19 pandemic on each of the foregoing and on our business overall. 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 and annual results, and then Eric Howell, our Senior Executive Vice President 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. We started 2021 in an astonishing manner, with another quarter of record deposit growth of $10.7 billion, emanating from our core client relationships. Coming off the heels of 2020 where we grew record deposits by nearly $23 billion, it's clear that the bank is firing on all cylinders, including our newer business lines, where, again, many contributed to this quarter's phenomenal growth. Looking at earnings, we had another quarter of record net interest income, driven by record deposit growth, strong loan growth and record securities purchases. Additionally, we had record fee income and contained expense growth, which culminated in record net income. Bottom line, we are delivering strong results for our shareholders, even with significant excess liquidity. This liquidity bodes well for future earnings as the unlocking of excess cash, especially for higher yielding loan growth has a far greater impact than any Fed or political action. In retrospect, it's really not that astonishing to see we delivered another quarter of record earnings and growth as we have done for the past 20 years. In fact, our 20-year anniversary is less than two weeks away on May 1. We've remained true to our founding principles of a team-based single point of contact model that caters to privately-owned businesses and their owners and managers. This focused model has allowed us to distinguish ourselves from the pack and deliver outstanding performance consistently throughout Signature Bank's existence. It's hard to believe that the bank started with nearly $50 million in assets and grew organically without ever making an acquisition to an $85 billion bank. Separately, I would be remiss not to mention how proud we are of the recently issued 2020 annual report, highlighting essential frontline healthcare workers that are closely associated with our colleagues. We wanted to showcase the unrelenting dedication and sacrifices of these frontline heroes, including our own and thank them for their service. Now let's take a look at earnings. Pre-tax pre-provision earnings for the 2021 first quarter were a record $272.8 million, an increase of $54 million or 25% compared with $218.5 million for the 2020 first quarter. Net income for the 2021 first quarter was a record $191 million, or $3.24 diluted earnings per share compared with $99.6 million, or $1.88 diluted earnings per share reported in the same period last year. The increase in income was predominantly driven by substantial asset growth of $32.3 billion over the last 12 months as well as the decrease in the provision for credit losses, which was substantially impacted by COVID-19 in the first quarter of 2020. Looking at deposits. Deposits increased a record $10.7 billion, or 17% to $74 billion this quarter while average deposits grew $6.8 billion. This quarter's growth, which was across the board, was driven by the Digital Asset Banking team, which grew deposits by $4.4 billion; the specialized Mortgage Banking Solutions team, which grew to $2.3 billion; the Fund Banking team, which was up nearly $700 million; our Venture Banking Group, which increased over $300 million; and nine Private Client Banking teams across the spectrum of Metro New York which grew over $100 million each, including five of the teams that exceeded $200 million. Since the end of the 2020 first quarter, deposits increased a remarkable $31.7 billion, or 75% and average deposits increased nearly $28 billion. Noninterest-bearing deposits increased $3.8 billion to $22.5 billion, which represent a high of 30.5% of total deposits. Our deposit growth, plus capital raises as well as earnings retention led to an increase of $32.3 billion, or 61% in total assets since the first quarter of last year. Now let's take a look at our lending businesses. Core loans or loans excluding PPP during the 2021 first quarter increased $1.3 billion or 2.8% to $48 billion. For the prior 12 months, core loans grew $7.3 billion, or 17.8%. The increase in loans this quarter was again driven primarily by new fund banking capital call facilities. This is the tenth quarter or tenth consecutive quarter where C&I outpaced CRE growth furthering the rapid transformation of the balance sheet to include more floating rate assets as we continue to diversify our portfolio. We are well positioned in all our lending businesses to capitalize on opportunities based on our pipeline and a recovering economy. Turning to credit quality. Our portfolio continues to perform well. Nonaccrual loans were $134 million or 26 basis points of total loans compared with $120 million or 25 basis points for the 2020 fourth quarter. Our past due loans returned to the pre-COVID-19 levels with 30 to 89 past due loans decreasing to $39 million, and our 90-day-plus past due loans remained very low at $4.9 million. Net charge-offs for the 2021 first quarter was $17.9 million or 15 basis points of average loans compared with $11.4 million in the 2020 fourth quarter. Provision for credit losses for the 2021 first quarter was $30.9 million compared with $35.6 million in the 2020 fourth quarter. This brought the bank's allowance for credit losses to 1.02% and the coverage ratio stands at a healthy 390%. I would like to point out that excluding well -- very well secured Fund Banking loans and government-guaranteed PPP loans, the allowance of credit loss ratio would be much higher at 1.43%. Turning to modifications. As of April 15, the bank's COVID-19-related nonpayment modifications reduced by $329 million to $983 million or 1.9% of loans when compared with the balance at the end of 2020 fourth quarter. Now onto the expanding team front where we continue to have success. In the 2021 first quarter, the bank onboarded 3 Private Client Banking teams, including 2 in the West Coast. Additionally, the bank added 4 Private Client Banking Group directors to existing California teams and Signature Financial added 7 executive sales offices throughout its national footprint. 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 first quarter reached $407 million, an increase of $11.5 million from the 2020 fourth quarter. Net interest margin declined 13 basis points to 2.1% compared with 2.23% for the 2020 fourth quarter. The entire decrease and then some was due to massive excess cash balances from significant deposit flows which impacted margin by 58 basis points. Now let's look at asset yields and funding costs for a moment. Interest-earning asset yields for the 2021 first quarter decreased 21 basis points from the linked quarter to 2.54%. The decrease in overall asset yields was again driven by the massive excess average cash balances, which grew from $12.5 billion to $17.1 billion during the quarter. Additionally, asset yields continue to be affected by lower reinvestment rates in all of our asset classes. Yields on the securities portfolio decreased 25 basis points linked quarter to 1.88% due to lower reinvestment rates as well as the bank investing in floating rate securities and our portfolio duration increased to 3.25 years, which was due to a steeper yield curve. Given the better rate environment, we aggressively grew the securities portfolio by a record $2.1 billion, and we anticipate similar growth in future quarters. Turning to our loan portfolio. Yields on average commercial loans and commercial mortgages decreased 6 basis points to 3.54% compared with the 2020 fourth quarter. This was mostly due to lower origination yields. Excluding prepayment penalties from both quarters, yields decreased by 9 basis points. And now looking at liabilities. Our overall deposit cost this quarter decreased 8 basis points to 34 basis points due to the low interest rate environment as we gradually lower our relationship-based deposit rates. We anticipate this downward trend to continue in the coming quarters. During the quarter, average borrowing balances decreased by $7 million and the cost of borrowings increased by 1 basis point to 2.41%. The overall cost of funds for the quarter decreased 10 basis points to 47 basis points, driven by the reduction in deposit costs. And now on to noninterest income and expense. We continue to emphasize fee income. And noninterest income for the 2021 first quarter was $32.7 million, an increase of $18.5 million or 131% when compared with the 2020 first quarter. The increase is mostly due to a rise in fees and service charges, net gains on sales of loans and trading income. Noninterest expense for the 2021 first quarter was $166.4 million versus $144 million for the same period a year ago. The $22.4 million or 15.6% increase was principally due to the addition of new Private Client Banking teams and operational support to meet the bank's growing needs. Despite our significant team hirings and margin compression from substantial cash balances, the bank continues to gain operating leverage. And as a result, our efficiency ratio improved to 37.9% for the 2021 first quarter versus 39.7% for the comparable period last year. And turning to capital. During the quarter, the bank successfully issued $708 million of common stock. All capital ratios remain well in excess of regulatory requirements and augment the relatively low-risk profile of the balance sheet, as evidenced by a common equity Tier 1 risk-based ratio of 10.92% and total risk-based ratio of 14.41% as of the 2021 first quarter. And given our robust total risk-based ratio, we redeemed $260 million of subordinated debt at a rate of 5.3% on April 19, which will further reduce our interest expense in coming quarters. And now I'll turn the call back to Joe. Thank you.

Thanks, Eric. I'd like to thank my colleagues who have demonstrated their dedication to our clients and their needs during this pandemic. Times like these, our clients truly value the level of care and advice that we provide. And our performance once again this quarter reflects their extraordinary efforts as we continue to execute on many fronts. We look forward to a healthier 2021 as recovery from the COVID-19 pandemic continues. The collective strength of our franchise led to an unbelievable quarter of record deposit growth, record pretax pre-provision earnings and record net income. Bottom line, we delivered another strong quarter and we are well positioned for the future. Now, we are happy to answer any questions you might have. Erica, we’ll turn it over to you.

The floor is now open for question. [Operator Instructions] Thank you. Our first question is coming from Matthew Breese with Stephens Inc.

Good morning.

Good morning, Matt.

Good morning, Matt.

Maybe first, we can just address the liquidity position of the bank with over $19 billion of cash. Eric, you addressed the outlook for the securities portfolio, but could you give us an update on how you feel about loan growth through the end of the year, what it could look like? And then maybe provide some details on the new upcoming two asset-generating verticals that we've discussed, but haven't quite gotten a lot of detail on yet?

Well, sure, Matt. We expect that we'll see loan growth per quarter in the $1 billion to $2 billion range. So we should see anywhere from $4 billion to $8 billion in loan growth coupled with roughly $1 billion to $2 billion in securities purchases, hopefully closer to the $2 billion in both cases, right? So we should have asset growth anywhere. We're giving pretty broad ranges because it can be choppy in both deposit -- in both loans and securities, but anywhere from $8 billion to $16 billion for the year. So we certainly have ample places to put the deposit growth and the cash to use. On the new business line front, there are -- the two new businesses that we've been talking to about for a little while, the gentlemen leading those efforts are both here. The first is the mortgage warehouse lending team, which is being led by Ken Logan. Ken has been a 35-year industry veteran. He founded and led the Mortgage Banking Finance Group at Wells Fargo. He actually started at Wachovia from scratch. And when they were acquired by Wells, he continued the efforts there. So a substantial track record in the space, has built that business at a few different institutions from scratch, extremely well known, and we're very excited to be answering it. Clearly, it's a very logical fit with the mortgage -- specialized mortgage banking team that we brought on board that really is the deposit-generating side. So now we've got the lending side. And I'd say that our clients are very pleased on both fronts and then that we’re in this business. And that, from a growth perspective, can be a little choppy again, but we're looking at $200 million to $1 billion in growth per quarter. So we should see at least $1 billion in growth for the year, if not closer to $4 billion in growth from that space. So very excited to have him on board. We don't really anticipate anything meaningful on the growth front until the third quarter and fourth quarters, we could see some participations in the second quarter. The second business line that we've onboarded is the SBA origination business. As many of you know, we're one of the largest buyers of SBA loans in the market. We have a very large business out of our Houston office where we buy the loans, pool them, securitize them and sell them to accredited investors. Now we're getting into the origination business. We've done so once again with a 30-plus-year industry veteran, George Glines, who comes out of Bank of the West, and we'll really be focused on the California marketplace. So this business was very strategically important to us and to our growth initiatives on the West Coast. The cost of real estate often makes it prohibitive for our businesses to buy their real estate, so they really need that government helping there and we're very happy to be involved in that space. On the growth side, it's a little lower growth. We're talking anywhere from $200 million to $500 million per quarter. And we don't really anticipate seeing that growth until the third -- I'm sorry, $200 million to $500 million per year, not per quarter, per year, and we don't see that growth coming until the latter half of this year. So in both cases, once again, it is a continuation of the Signature Bank model, where we've hired very well-seasoned knowledgeable banking veterans to spearhead the efforts in both of these spaces. So we're very excited to have both teams on board.

We're also starting really deep into the process of putting policies and procedures together. We're only going to use it for the very, very best clients, but we're going to start doing some lending in the crypto digital world. There'll be a very deep discount, the quality custodians will allow us to liquidate when necessary. We're going to crawl before we walk and we're going to walk before we run.

Understood. Maybe just -- you gave us a sense of size for these three verticals, could you give us a sense of incremental loan yields? And as we start thinking about putting the liquidity to work, is it likely that not until 3Q, 4Q that we should really start to see that $19 billion turnaround and become something less?

Well, on the latter part of that, I mean that's really all dependent on how much deposit flows we have. So we're confident that in the latter part of this year, we'll start to see some positive movement on both those fronts. But deposits aren't stopping anytime soon. So hard to say, that's really put a dent in that or not. On the earlier part, I mean, this is going to -- generally both of these business lines will be in line with our existing asset yield. So -- but it's early on to say, I wouldn't want to say exactly what rates we’ll be getting in either space until we actually do it.

Your next question is from Ebrahim Poonawala with Bank of America.

Hi, Ebrahim.

Good morning, Joe. Good morning, Eric. I guess just following up on the deposit comment, Eric. We've seen two quarters of close to $10 billion sequential deposit growth. Is it safe for us to assume that continues as we look forward given the momentum you've had? Or is there any reason to believe that, that $8 billion to $10 billion range is unlikely as we think about the second quarter or the rest of the year?

Second quarter has kicked off very nicely. We expect continued deposit growth because we have all these new businesses, and they're all contributing. In fact, we've had to turn down deposits because we have limitations or we set internal limitations on concentrations. So we've had to turn away deposits. So our expectation is that we'll continue to grow, maybe not at a $10.7 billion level, but there'll certainly be growth.

Safe to assume you'll be growing in excess of that $4 billion high-end range that you’d previously talked about?

Yes.

Well, since that was an annual number, we kind of already beat that this quarter. So yes, I think that's pretty safe.

So – understood.

[Multiple Speakers] is that the deposits are coming from all over across the board in all the businesses. In fact, that is something we want to get across.

And so I guess, just tied to that, I think there's been a fair amount of conversations, Joe, around the stickiness of your crypto-related deposits. So if you could touch upon that in terms of as we think about, one, your ability to deploy those funds into longer-duration assets? And how do you see them in terms of if we get into a higher rate environment, how rate sensitive are those deposits?

Well, 30% of the digital deposits are usually in DDA because we're getting the operating accounts. So I think it's important to understand, just like all our other businesses, that our clients are in, the key thing is to have their operating accounts and tie them in to making it difficult to leave, and we give great performance, great support for the clients' operating accounts. Now within digital, we're in all different areas of digital. We do stable coin reserves, we're dealing with the OTC desks, the clients' digital asset exchanges, blockchain technology, digital miners and that we have those that use Signet and then we have some of the traditional. So within digital, we have a mix shift. And outside of digital, we have a mix shift because of all the businesses. So we feel that they’re fairly sticky deposits. I know it's early on, but we have a team -- we have 2 teams, 1 that handles Signet, 1 that handles the clients and tries to get the business into the institution. And that team has been around for over 8 years, and they have a knowledge base and they're a key into getting these actual operating accounts. So we feel the stickiness is there. We've been asked what about the competition, like the big banks, the Chases and the Cities, if they get into digital in a big way? Well, we've been competing with them for 20 years. So we're not worried about the big players, nor are we worried about the stickiness of the deposit. Having said that, we do keep a decent amount of liquidity. We won't say what the percentage is all, but we do keep a decent amount of liquidity against these deposits because it's still early on, although we have a team that's been around for 8 years in the business, it's still early on in the crypto world.

And just sticking with Joe, so we saw this announcement with your partnership with Circle yesterday. Are you able to share any stats around the transaction or the volume of transaction that was processed over Signet over the last quarter compared to maybe the fourth quarter a year ago and just the number of clients that you are adding each quarter?

Well, I won't give you statistics as it relates to Circle because I'm sure our competition is listening. But the clients have grown. We had about 630 clients at the end of the year, and we have about 740 clients now.

Got it. And 1 last question. All this hiring, Eric, any change in expense growth guidance as we look forward should continue to decelerate from 1Q? Or any update there?

We still expect it to decelerate from this point. So we should see it come down in a linear fashion each quarter throughout the course of this year.

Your next question is from Casey Haire with Jefferies.

Wanted to follow up on the liquidity deployment. It sounds like the securities up $2 billion this past quarter. If I'm understanding you correctly, Eric, it sounds like you want to keep that pace going forward. I guess my question is, why not do more given there's clearly capacity? And you sound decently comfortable with the duration of the deposit franchise. Just why not step up the securities purchases?

It's -- I mean it's a good question, Casey. I mean we certainly will try to. We are a little bit mindful that we do feel interest rates can continue to rise. So we don't want to incur too much in unrealized losses on that portfolio. So we're trying to be smart and thoughtful around that. But it's just hard finding the paper, right? We're not the only ones in this position and people are fighting for the securities. So really, that's the other side of the equation. We have a lot of cash flow coming back at us on that portfolio and just trying to reinvest and find a good paper to put it into is harder and harder these days. So -- but we are trying to deploy more. Hopefully, like I said, it's in excess of the $2 billion, but that's -- we don't want to guarantee that.

Understood. And is -- are you guys predominantly doing -- is it a mix of floating rate and longer duration stuff? And sort of what is the blended new money yield on your securities purchases today?

It's about 20%, 25% floating rate. We're doing a bit more in fixed with the pickup in the yield curve. I’d say, blended, we're at 1.5%, like that right now.

And then just finishing up on capital. CET1 ratio is in pretty solid shape here at just under 11%, but the deposit outlook sounds still very strong. I'm just curious as to, is CET1, the ratio that you guys are looking at over TCE? And at what level would you address capital?

Well, that's the level we can't really speak to, right? That depends on so many factors. But we're primarily focused on the regulatory ratios and the risk-based ratios versus just a straight TCE ratio, given the nature of our growth, right? We've grown cash, we've grown securities, and we've grown well secured fund banking loans. So we've really put on little to no risk. So we're not focused on the TCE for sure, but it's more the CET1, the Tier 1 and total risk-based capital ratios. That's our focus. And we're well above our peers now in those levels as well as the level that we need to be well capitalized. So right now, we feel comfortable where -- with where our capital ratios are today. But look, we're an opportunistic organization, and that's the approach that we've always taken to growth, that's the same approach that we take with capital to support that growth.

Okay. Great. And just to clarify, the loan growth of $1 billion to $2 billion per quarter, is that inclusive of these -- of the new lending verticals in SBA and mortgage warehouse?

No, that's the traditional businesses that we're already in.

Okay. So these new verticals would provide upside to that loan growth guide?

Potentially. But let's get them up and running first.

Your next question is from Dave Rochester with Compass Point.

Congrats on a solid 20 years and a great quarter.

Thank you.

I just wanted to start on the crypto side of things. When are you guys expecting to get that up and running? And any sense for how much volume you'd be willing to do there on a quarterly basis? It just -- it sounds like there's a lot of demand there from everything we've been hearing from other players in the space. It seems like the biggest question would be what you're willing to do there?

Well, we wanted to be a zero-loss business. And so we're only going to have it for the very, very best clients. We're going to underwrite it to death. You're going to have deep discounts and quality custodians. So it will contribute in 2021, but not necessarily in the second quarter to a great extent. And as I said, we'll crawl before we walk and walk before we run. We want to be very safe in this space. But having said that, we also want to be in the space because we're 1 of the predominant, if not the predominant bank in the space, particularly we're the largest bank in the space. And we know that there is a need by clients, and we'll take care of those clients. I know that's kind of nebulous, but we don't have an expectation of dollar amount yet until we finish everything policies, procedures and the due diligence that we're doing on the custodians.

So that answers my next question is you guys aren't going to take custody of the assets, you're going to hammer out some agreements with third parties.

Top-line custodians that we can look to date, we also want to have the ability to liquidate quickly, and we won't negotiate on margin or liquidation conversions. Do you want to…

Would you guys limit it to just -- oh sorry, go ahead.

No, no. Go ahead.

I was just going to say, are you just limiting this to Bitcoin? Or are you open to other currencies?

Yes. Not necessarily just Bitcoin.

Okay. Great. And then in terms of the yields on that, I mean we've heard mid to high single-digits. Is that kind of what you guys are thinking there?

Yes. We really don't want to comment because we're not -- we haven't done 1 of the loans yet. But I would say it would be more than our traditional C&I.

Yes. Okay. Great. Maybe just switching to deposit growth. I was just hoping to get a breakdown of that across your different drivers you've got. And regarding the start to the quarter that you just mentioned, that was -- it sounds like that was good. I was just curious where you are at this point. And I know that the spot levels kind of bounced around, but I was just curious how much growth you've seen so far this quarter.

The first part was you wanted to break down of the growth?

Yes, please.

Right. So we had $4.4 billion in digital, $2.3 billion in the mortgage servicing -- specialized mortgage servicing, $700 million in Fund Banking, $300 million in Venture. We had 9 teams in New York, more than $100 million in each of the 9 teams, of which 5 had $200 million each of the 9. So it really was across the board.

Yes, that's great. I mean -- go ahead

I was just going to say, we're also bringing down the cost. We had 42 basis points, we brought it down to 34 basis points. The month of March was 31 basis points. And right now in April, we're at about just slightly below 30 basis points, in the 29 basis point area.

And what do you think the potential is? Go ahead.

No, we're happy with how it's declining. I don't know, the mid-2s, mid-20s, we have a chance at -- as Eric said earlier, we're a relationship-based organization. And a lot of these clients keep significant DDAs represented by the 30.5% in DDA we have of total deposits. We'll probably give an update. We have a couple of conferences in the second quarter. We'll probably give an update of deposits in those conferences. We won't give an update now. It's still a little too early, but it's robust.

Yes, I'm sure. And then you've got the Circle relationship, which, I mean, it sounds like they've got, I think the press release had $13 billion in deposits -- reserve deposits, and you guys are going to become the major bank that they're using for that, right? So that's a lot of potential growth there, at least just from that 1 relationship alone. Maybe just switching to -- back to the Fund Banking piece. I mean the $700 million of growth, that's some pretty good growth for that group. And I know you talked originally when these guys came on board that you were hoping that 1 day they'd be self-funded. Are we -- do you think moving closer to that? Do you expect to see that deposit growth continue to remain strong or maybe even ramp up from here as that business sort of matures at Signature?

Well, let me say that I'm happy they’ve got self-funded right now. That’s quite a bit of deposit growth. Tom and his group -- Tom Byrne and his group is concentrating on building their loan business. We're happy with where they are on the deposit side. They can have more time to bring in deposits over the next quarters and years, but we'd like to see them continue to do the depth that they have in the lending side in the business.

Your next question is from Ken Zerbe with Morgan Stanley.

Take a break from talking about loans for just a second, I guess. Very nice growth in fee income. We -- obviously, I know the fee income is sort of a bigger focus for you guys. Is there anything in there that's sort of unsustainable? And how do you view your fee income growth over the next several quarters, starting with this level of base?

Yes. No, it was certainly a very strong quarter across the board there from many of our initiatives. The net gains on sales of loans, we had a phenomenal quarter from our SBA business as well as from Signature Financial. That's probably a number that we're not going to see again in the following quarter as well as our trading income we had some nice initiatives that help on that front as well. But I'm not so sure we'll be able to maintain that rate. We try to look at fee income year-over-year as it can be a bit volatile. If we look back to the second quarter of last year, we should be able to double that number during this quarter. So we expect a 100% increase over the prior year's numbers, but it probably will not be quite what we saw in the first quarter of this year. But we're very, very pleased with all the initiatives that we have in place. We really saw across the board growth in every aspect of our fee income.

And then in terms of the provision expense or the reserve more specifically, I certainly won't imply to give you guys a hard time for not releasing reserves, given you're 1 of the only banks that's truly growing loans in a very rapid way. And I get that you have to build reserves for those new loans. But when we think about sort of day 1 CECL reserve levels versus kind of where you're at today, and it just seems that you're adding a lot of very high-quality loans, especially on the Fund Banking side, is there any reason to think that eventually, you won't get back down to that CECL day 1 of, I don’t know, call it, 80 basis points roughly or 75 basis points versus stay at a fairly higher level around the 1%?

One of the things you have to consider is that, although we're very bullish on Manhattan, we have quite a bit of business, commercial real estate in Manhattan. And that's 1 thing we have that others don't. And that's 1 of the reasons the uncertainty that -- it's the uncertainty. Manhattan is just starting to open up. And like I said, we're very bullish on it. But we try to account for the level of uncertainty in the economic environment in Manhattan, and that is a factor.

Got it. Okay. So it sounds like if Manhattan were to improve over the next, however, long it takes, it could trend lower but not until then. Understood.

And we are seeing it trend down, right, just a few basis points per quarter over the last few quarters, Ken. We just need to see that trend continue. And we need to see the uncertainty be removed. And there's nothing that we see right now that leads us to believe that we're not going to continue to see that trend. But there still is enough uncertainty out there that it makes sense for us to continue to provide and be safe.

Okay. And just the last question in terms of tax rate, on a fee basis it looked like it was a little lower than expected, maybe unusual in there this quarter?

That came through a little bit troubled. So -- but I think that question was related to our tax rate. We did have a one-time benefit from restricted shares that, that came due at a higher level. So we gained a tax benefit from that and brought our effective -- our overall rate down, utilize a 29% effective tax rate moving forward.

This concludes our allotted time in today's teleconference. If you'd like to listen to a replay of today's conference, please dial (800) 585-8367 and refer to conference ID 3598015. 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.