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Signature Bank (SBNY)
Q4Â 2018 Earnings Conference Call
Jan. 17, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Welcome to Signature Bank's 2018 Fourth Quarter and Full Year 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 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 J. DePaolo -- President and Chief Executive Officer
Good morning and thank you for joining us today for the Signature Bank 2018 fourth quarter and year-end results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.
Susan J. Lewis -- Investor Relations
Thank you, Joe. This conference call and oral statements made from time to time by our representatives contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You should not place undue reliance on those statements because they are subject to numerous risks and uncertainties relating to our operations and business environment, all of which are difficult to predict and may be beyond our control. Forward-looking statements include information concerning our future results, interest rates and the interest rate environment, loan and deposit growth, loan performance, operations, new private client team hires, new office openings and business strategy.
As you consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions that could cause actual results to differ materially from those in the forward-looking statements. These factors include those described in our quarterly and annual reports filed with the FDIC, which you should review carefully for further information. You should keep in mind that any forward-looking statements made by Signature Bank speak only as of the date on which they were made.
Now, I'd like to turn the call back to Joe.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you, Susan. I will provide some overview into the quarterly and annual 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. 2018 was a volatile time for the banking industry, driven by a variety of external factors. However, we continue to perform in keeping with our founding mission to be a leader in serving privately held businesses.
Our focus, initiatives and proven capabilities should differentiate us from the pack and we are prepared to address any challenges ahead. This year was highlighted by several achievements starting with hiring eight teams, including the Fund Banking Division, growing assets by over $2.4 billion, putting the medallion portfolio behind us and increasing net income by 30%, exceeding $500 million. Additionally, we ended the year with a very strong fourth quarter. Assets grew $1.5 billion, driven by solid C&I growth, earnings topped $160 million, ROE was nearly 15% and capital levels remained strong while paying a solid dividend and buying back stock for the first time.
Now, let's take a closer look at earnings. Net income for the 2014 -- excuse me, for the 2018 fourth quarter was $160.8 million or $2.94 diluted earnings per share compared with $114.9 million or $2.11 diluted earnings per share reported in the same period last year. The improvement in net income is mainly the result of an increase in net interest income, primarily driven by strong average deposit and loan growth, as well as a decrease in the provision for loan losses attributable to taxi medallion loans. The improvement was partially offset by an increase in non-interest expenses resulting from hiring new private client banking teams, including the Fund Banking Division, as well as increased compliance costs. Looking at deposits, deposits increased $288 million to $36.4 billion this quarter, while average deposits grew by $541 million. For the year, deposits increased $2.9 billion and average deposits increased $2 billion. Non-interest-bearing deposits of $12 billion represented 33% of total deposits and grew $663 million or 6% for the year. Our deposit and loan growth led to an increase of $4.2 billion or 10% in total assets for the year which crossed $47 billion.
Now, let's take a look at our lending businesses. Loans during the 2018 fourth quarter increased $1.3 billion or 3.7%, and for the year loans grew $3.8 billion or 12%. The increase in loans this quarter was primarily driven by growth in commercial and industrial loans and specialty finance. This is the first time in at least 11 years that C&I growth outpaced CRE growth substantially and speeds up the transformation of the balance sheet to include more floating rate assets.
Turning to credit quality. Our core portfolio continues to perform remarkably well. Excluding medallion loans, non-accrual loans are $20.1 million or just 6 basis points of total loans. Overall, non-accrual loans decreased again this quarter by $26 million to $109 million as we further work down our remaining medallion portfolio. Our past due loans remained in their normal range with 30 to 89 day past due loans at $63 million, while 90-day plus past due loans remained low at $8.8 million. For the 2018 fourth quarter, we had net recoveries of $2.9 million compared with net charge-offs of just $11,000 for the 2018 third quarter.
The provision for loan losses for the 2018 fourth quarter was $6.4 million compared with $7.4 million for the 2018 third quarter and $41.7 million for the 2017 fourth quarter. The allowance for loan losses held flat at 62 basis points of loans while our coverage ratio climbs back to over 200%. Now, on to the team front. In 2018, we added eight private client banking teams, including the Fund Banking Division. Additionally, we appointed eight banking professionals to our asset-based lending business in specialty finance subsidiary. Looking ahead to 2019, the pipeline for teams is solid. In fact, we've already hired a team in 2019, and we look forward to the ongoing opportunities to attract talented banking professionals to our network.
At this point, I'll turn the call over to Eric and he will review the quarter's financial results in greater detail.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Thank you, Joe, and good morning, everyone. I'll start by reviewing net interest income and margin. Net interest income for the fourth quarter reached $335 million, up $15 million or 4.8% when compared with the 2017 fourth quarter, and an increase of 3.2% or $10.2 million from the 2018 third quarter. Net interest margin on a linked-quarter basis improved 2 basis points and, compared with last year's fourth quarter, decreased 17 basis points to 2.9%. Excluding prepayment penalty income, core net interest margin for the linked quarter decreased 5 basis points to 2.8%.
Let's look at yields -- at asset yields and funding costs for a moment. Interest-earning asset yields for the 2018 fourth quarter increased 14 basis points linked quarter and 28 basis points when compared to the 2017 fourth quarter to 3.99%. The increase was predominantly driven by a rise in loan prepayment penalty income and higher reinvestment rates. Yields on the securities portfolio increased 2 basis points linked quarter to 3.28% due to a slowdown in premium amortization from reduced CPR speeds and higher reinvestment yields. Also, the duration of the portfolio came in a little to 3.3 years given lower market rates at the end of the year.
And turning to our loan portfolio. Yields on average commercial loans and commercial mortgages increased 16 basis points to 4.21% compared with the 2018 third quarter. This was mostly due to a rise in prepayment penalty income. Excluding prepayment penalties from both quarters, yields increased by 7 basis points, which is our largest quarterly increase in core loan yields in many years. Now, looking at liabilities. Our overall deposit cost this quarter increased 10 basis points to 98 basis points. Average borrowings excluding subordinated debt increased $436 million to $5.3 billion or 11% of our average balance sheet. The average borrowing cost increased 24 basis points from the linked quarter to 2.41% given the higher short-term interest rate environment. The overall cost of funds for the quarter increased 13 basis points to 1.19%, predominantly driven by increased borrowings this quarter.
And on to noninterest income and expense. Noninterest income for the 2018 fourth quarter was $5.9 million, a decrease of $2.6 million when compared with the 2017 fourth quarter. The decrease was all due to an increase of $4.2 million and other losses from additional amortization of low income housing tax credit investments, which positively impacts our effective tax rate. Noninterest expense for the 2018 fourth quarter was $119 million versus $110 million for the same period a year ago. The $9 million or 8% increase was principally due to the addition of new private client banking teams, as well as further costs in our risk management and compliance activities. The bank's efficiency ratio remained stable at 34.9% for the 2018 fourth quarter versus 33.5% for the comparable period last year and 35.6% for the 2018 third quarter.
And turning to capital. In the fourth quarter of 2018, the bank paid a cash dividend of $0.56 per share. Additionally, during the 2018 fourth quarter, the bank repurchased approximately 358,000 shares of common stock for a total of $41.8 million. The dividend and share buybacks had a negligible 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 a Tier 1 leverage ratio that improved slightly to 9.7% and total risk-based ratio of 13.39% as of the 2018 fourth quarter.
And now, I'll turn the call back to Joe. Thank you.
Joseph J. DePaolo -- President and Chief Executive Officer
Thanks, Eric. In summary, in 2018, we grew deposits $2.9 billion or 9%, we increased total loans by $3.8 billion or 12%. Commercial and industrial loans comprised 42% of the increase for the year and 85% for the fourth quarter alone. Total assets increased by $4.2 billion or 10%, slightly above the midpoint of our guidance of $3 billion to $5 billion in asset growth. We significantly reduced our exposure in taxi medallion loans while maintaining exceptional credit quality in the remainder of our loan portfolio. To this end, non-accrual loans excluding all medallion loan is 4 basis points of total assets. We added eight private client banking teams including the Fund Banking Division, which is the equivalent of several banking teams and established the full service banking office in San Francisco. We launched Signet, a new proprietary blockchain-based digital payments platform, allowing our commercial clients to interact in a real-time and transparent manner. We maintained our already superb efficiency ratio at 34.9% for the year while continuing to invest in our risk management and compliance functions.
We maintained a robust capital position while instituting our inaugural quarterly dividend and stock repurchase programs. And finally, focusing on the power of our franchise, we delivered an outstanding $505 million in net income, an increase of 31% and a 12% return on equity in spite of medallion writedowns. We welcome 2019 as we plan to strengthen our foundation by continuing to make major investments in our loan systems, payments architectural platform, a new foreign exchange system. We also look forward to expanding our presence in San Francisco where we have client synergies. Finally, we continue -- we will continue our focus on increasing floating rate assets as a percentage of our balance sheet, predominantly through the growth of our newly added Fund Banking Division.
Now, we are happy to answer any questions you might have. Christie, I'll turn it over to you.
Questions and Answers:
Operator
Thank you. The floor is now open for questions. (Operator Instructions) And your first question is coming from Ken Zerbe of Morgan Stanley.
Ken Zerbe -- Morgan Stanley -- Analyst
Great, thanks, good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Good Morning, Ken.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Good morning.
Ken Zerbe -- Morgan Stanley -- Analyst
I guess, the first question I had was just on the stock buybacks. Obviously, you guys have a fair bit of approval still remaining. Can you just talk about your plans or expectations for repurchasing shares throughout 2019, what might change that? Thanks.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yeah, I think we will be repurchasing a similar level per quarter as we did this quarter in like, say, a $30 million to $50 million range. The binding constraint on how much we can repurchase, they're still our commercial real estate concentration, which we were able to bring down by 8 basis points this quarter even with the dividend and the buyback. So, we're pleased with that effort, but that's going to be the mitigator on as to how much we can buy back, because we do want to bring down that concentration level and we want to increase the mix of floating rate assets that we have on our balance sheet.
Ken Zerbe -- Morgan Stanley -- Analyst
Got you. Okay. That helps. And then in terms of when we think about 2019, I know last year I think you were targeting about $3 billion to $5 billion roughly of total asset growth. Is that a realistic target this year? Could it be sort of lower and higher end of that, especially given your new private equity teams?
Joseph J. DePaolo -- President and Chief Executive Officer
The $3 billion to $5 billion is realistic, particularly on the loan side. I think the most important thing is funding it with deposits. We know that the competition is pretty strenuous out there, but we're confident that we'll be able to be in that $3 billion to $5 billion range.
Ken Zerbe -- Morgan Stanley -- Analyst
Okay, perfect. And I guess just the last question to follow up on the deposit comment that you just had, looks like deposits with the growth trailed loan growth by a fair amount this quarter. Are you comfortable if that were to continue and maybe it doesn't, but if it does continue, looks like you increased your borrowings to fund some of those variable rate loans, presumably they're all short-duration borrowings funding short-duration loans. So it kind of makes sense from a spread perspective, but does it come a point where if deposit growth doesn't meaningfully pick up that you would be uncomfortable or choose to scale back on funding loans with borrowings? Thanks.
Joseph J. DePaolo -- President and Chief Executive Officer
Well, we're pretty confident -- well, let me rephrase it, we're fairly confident that we're going to be able to fund the lending side with deposits. We -- in terms of not a comfort level, we're not really where we want to be at 99%, if I could be lower than that, then we have a plan with a number of initiatives to increase the deposit growth. One of the initiatives is the Signet platform that should help us.
We also, don't forget, have eight new teams including the Fund Division -- the Fund Banking Division. And traditionally where they came from the bank -- or banks that they came from, they self-funded, although it lags and takes time. So we're confident that the outstandings that they have in loans would be covered by their own deposits that they'll bring in and they've actually done a fairly good job this quarter with putting in non-core deposits. And then we have the digital banking team that came on board about a year ago and then we have six other teams that are new and really have not yet contributed and we expect them to contribute this year. And then we have the whole West Coast in San Francisco. Our office is officially opening up on Monday and we'll start bringing in some more business.
Ken Zerbe -- Morgan Stanley -- Analyst
Alright, perfect. Thank you very much.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Operator
Your next question is from Dave Rochester of Deutsche Bank.
Dave Rochester -- Deutsche Bank -- Analyst
Hey, good morning, guys. Nice quarter.
Joseph J. DePaolo -- President and Chief Executive Officer
Hey, Dave. Good morning. Thank you.
Dave Rochester -- Deutsche Bank -- Analyst
So, you guys obviously had some great growth in C&I this quarter, good start for the new Fund Banking Division. How does the overall loan pipeline look at this point heading into 1Q? And then what do you guys see as (technical difficulty) division in particular as we look out over this year?
Joseph J. DePaolo -- President and Chief Executive Officer
Could you please say the second part, the last part again?
Dave Rochester -- Deutsche Bank -- Analyst
Yeah, I was just wondering how the sort of loan pipeline, how that looks heading into 1Q and then what's the growth potential for the new Fund Banking Division in particular as you look out over 2019?
Joseph J. DePaolo -- President and Chief Executive Officer
Well, the potential is pretty enormous. They've hit the ground running. They have -- just in this one quarter have over $1 billion in lines. They have about $650 million in outstandings and that's just hitting the ground running.
Dave Rochester -- Deutsche Bank -- Analyst
Yeah.
Joseph J. DePaolo -- President and Chief Executive Officer
So, we're very happy about that. The loan prospects for them and for the other areas are pretty robust, that's why we have to make sure that we fund with deposits, because we have a robust pipeline.
Dave Rochester -- Deutsche Bank -- Analyst
Perfect. And then just turning to the NIM. I was curious what you're seeing now on new loan pricing for all the different buckets? And then how you're thinking about that NIM trend overall for 1Q?
Joseph J. DePaolo -- President and Chief Executive Officer
Well, I'll start off with commercial real estate. We're seeing five-year fixed came down a little bit with 4.5 . We were at four and seven-eighths and at 1.4 and three-quarters. We're at 4.5 right now on the five-year fix.
Dave Rochester -- Deutsche Bank -- Analyst
And that's for multi-family?
Joseph J. DePaolo -- President and Chief Executive Officer
Yes.
Dave Rochester -- Deutsche Bank -- Analyst
Okay. And then so the CRE would be, I guess, 25, 35 bps wider than that?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Correct, yes.
Joseph J. DePaolo -- President and Chief Executive Officer
Yes.
Dave Rochester -- Deutsche Bank -- Analyst
And then how about capital call lines and SigFin at this point?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yeah, thus far, we're seeing the capital call facilities coming at L plus 170 to 200. Signature Financials coming in these days and right around 5% (inaudible) range. Traditional C&I is coming in north of 5%. So asset yields are still quite accretive to what's existing on our book.
Dave Rochester -- Deutsche Bank -- Analyst
Okay, great. And then how do you think about the NIM for 1Q?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Given the Fed move in December, we expect to have a little bit more pressure in the first quarter, so we're looking at 2 to 4 basis points NIM compression in the first quarter, hopefully closer to the 2 basis points, especially given day count in the first quarter. And then from there, it's all going to be Fed dependent. If Fed doesn't move, we'll see NIM stabilize to really go up.
Dave Rochester -- Deutsche Bank -- Analyst
Very nice. And suppose we do get sort of like a midyear hike or whatever, would you expect that the better spacing of hikes to maybe translate into a little bit of a lower deposit beta going forward in that situation?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yes, Dave.
Dave Rochester -- Deutsche Bank -- Analyst
Okay. Perfect. All right. Thanks, guys. Appreciate it.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you, Dave.
Operator
Thank you. Your next question is from Brock Vandervliet of UBS.
Brock Vandervliet -- UBS. -- Analyst
Great. Good morning. Can you kind of give us a look under the hood on the prepay fees in terms of where they've averaged, where they came from short term and kind of how you look at that going forward? And I've got a follow up.
Joseph J. DePaolo -- President and Chief Executive Officer
We look at this particular quarter, where we had a significant amount of prepays, look at it as something that we didn't expect, because we had a number of large packages paid down early, in particular one was fairly large, but they were all in low 3s, three and three-eighths. So whether we refinance them or they refinanced out, we were happy to get rid of the loans that we're paying at three and three-eighths. One of them in particular wanted 10-year money. We keep everything on our balance sheet, so we don't do 10-year fixed. We really do five-year fixed and on a rare occasion we will do a seven-year fixed. But that's the one area that's very hard to predict prepayments. So, to give you an idea of what would happen in the near future is very difficult. We just wonder to what it was going to slow and actually spread up.
Brock Vandervliet -- UBS. -- Analyst
And this is -- is it fair to say this is a mix between your outreach to clients to potentially pull them toward a refinance decision as well as kind of a reaction by clients to look to reprice for fear of having the the rate tick up at the refi date?
Joseph J. DePaolo -- President and Chief Executive Officer
Very good question. The interesting thing is those that we pulled in, we waived the prepayment penalty. We waived the prepayment penalty, because they weren't expecting or projecting to prepay now and refinance. And when we point out certain aspects of what's going to, we think is going to happen in the market, then all of a sudden they'll pre -- they'll refinance, but they don't pay a prepayment penalty, because we're the ones that did the outreach. But that helps, because even though we waived the prepayment penalty, it helps us, because we're going from three and three-eighths to four and three-eighths or 4.5.
Brock Vandervliet -- UBS. -- Analyst
Got it. Thank you very much.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Next question is from Casey Haire of Jefferies .
Casey Haire -- Jefferies -- Analyst
Thanks. Good morning, guys. Wanted to follow up on some of the NIM line of questioning. The -- so the loan to deposit ratio obviously near 100%. Is there a internal limit where you guys would not want to see that, no internal ceiling where you would not want to see that go above?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yeah. Casey, we do have Board approved limits, but we're not going to disclose what those are, and safe to say that we're at the high end of the range that we feel comfortable with. So our focus is really to grow core deposits here.
Casey Haire -- Jefferies -- Analyst
Okay, got you. And it sounds like the capital call is really off to a strong start here and my impression is that's a very liquid lending vertical. Are you guys seeing strong deposit growth along with that product or is that more on the common underlying your confidence on the deposit growth.
Joseph J. DePaolo -- President and Chief Executive Officer
I would say that it's both. We have strong deposit growth. Usually it lags a little more than what we've had, but we're very happy with the growth thus far.
Casey Haire -- Jefferies -- Analyst
Okay, great.
Joseph J. DePaolo -- President and Chief Executive Officer
Out expectation is that it really will take a year.
Casey Haire -- Jefferies -- Analyst
Understood. And on the expense front, is the -- is the outlook still 10% growth and is that off of the 486 GAAP number in 2018?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
It's 10% growth, but you do have to normalize it, because we did have some quarters where we had some large writedowns on repossessed medallions Casey, so...
Casey Haire -- Jefferies -- Analyst
Okay, so that we've had 25 in the -- OK, so strip out the 25 in the first quarter of '18 for the fair value adjustment and then so 10% off of that.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Correct.
Casey Haire -- Jefferies -- Analyst
Great. Thank you.
Joseph J. DePaolo -- President and Chief Executive Officer
Thanks, Casey.
Operator
Thank you. Your next question is from Jared Shaw with Wells Fargo Securities.
Jared Shaw -- Wells Fargo Securities -- Analyst
Hi, good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Good morning, Jared.
Jared Shaw -- Wells Fargo Securities -- Analyst
I guess, it's sort of funny (ph). So, as we look at the -- was that 10% growth that was 10% growth in C&I or that was, I'm sorry I missed the end of that last question.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
It's 10% growth in expenses.
Jared Shaw -- Wells Fargo Securities -- Analyst
Okay. As we look at C&I growth through 2019, do you think that that's going to be able to continue to sort of outpace and take share from the other components of growth should we see the C&I continue to outpace CRE growth in 2019?
Joseph J. DePaolo -- President and Chief Executive Officer
Yes, because that's part of our plan to transform where we had a predominant amount of fixed income. We want to have a better balance of fixed and variable or floating rate loans and we have the capability and the teams to do that.
Jared Shaw -- Wells Fargo Securities -- Analyst
Okay. And then, looking at the deposits, it looked like the average non-interest-bearing DDA was higher than period end. Were there any flows that happened at the end of the quarter there that could be reverse? And should we be looking at growth off of average GA for first quarter?
Joseph J. DePaolo -- President and Chief Executive Officer
There was -- the fourth quarter is a quarter that's hard to predict, but it's -- in terms of growth, it's the quarter that we -- that has the least amount of growth and there's a lot of outflow too simply, because there was a buildup of partnership dollars that then get distributed at the end of the year. There were some escrows where they needed to have closings before the end of the year. So it was typical.
Jared Shaw -- Wells Fargo Securities -- Analyst
Okay. And then on the funds business, do you think that ultimately that could -- could that be a $1 billion deposit business for 2019, do you think, as the teams get up and running?
Joseph J. DePaolo -- President and Chief Executive Officer
Yes.
Jared Shaw -- Wells Fargo Securities -- Analyst
Okay. Great, thank you very much.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from Ebrahim Poonawala of Bank of America.
Ebrahim Poonawala -- Bank of America -- Analyst
Hey, guys. Good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Hi, Ebrahim. Good morning.
Ebrahim Poonawala -- Bank of America -- Analyst
Just a follow up on what Jared just said in terms of the fund team up and running, my sense is they are up and running, right, like the growth that we saw on loan growth, fourth quarter was very strong and I recognize you would like to be conservative in thinking about deposit growth from that team, but if pipelines are strong, 4Q is any evidence of the capacity of this team, you would think that there's potential for $1 billion plus growth coming from that team next year in '19, no?
Joseph J. DePaolo -- President and Chief Executive Officer
Yes.
Ebrahim Poonawala -- Bank of America -- Analyst
Clear. Okay. And just switching Eric for a second in terms of provisioning between the CRE Capital call line book assuming that all low credit risk books or should we expect results to stay around the 60 basis points range incrementally like or if we could just talk about that a little bit?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yeah, I mean it certainly seems reasonable. The capital call facilities are extremely well secured, well structured and have little to know history of losses over many decades. So it's a pristine asset class, and we certainly feel our CRE as we talk about for a long time now is also a pristine asset class. So we don't really anticipate seeing a meaningful change in our provisioning going forward.
Ebrahim Poonawala -- Bank of America -- Analyst
And just on that like in Signature Financial, can we talk about the type of loan growth that's coming through there in terms of, is it an industry vertical that you're targeting? And I just want to understand that better from a credit risk standpoint?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Well, it's really all forms of equipment finance and we focus on revenue-producing equipment that businesses have to have to run their business to produce revenues. So, that's extremely protective in times of downturn with a lot of yellow metals, trucks, buses, trailers, manufacturing equipment and such so. But we feel very good about what they've done thus far here since 2012. The level of losses that we've seen in their portfolios even when you include the oil and gas, and obviously excluding taxis has been well below what we anticipated from that group.
Ebrahim Poonawala -- Bank of America -- Analyst
Understood. Helpful. Thanks for taking my questions.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Thank you.
Operator
Thank you. Your next question is from Chris McGratty of KBW.
Christopher McGratty -- KBW -- Analyst
Hi, good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Hey, Chris, good morning.
Christopher McGratty -- KBW -- Analyst
Eric, on the deposit betas, they came in a little bit this quarter, wondering one, can you speak about competition for deposits a little bit more, I may have missed it, and also kind of the spot rate, where the spot rate was in December? Thanks.
Joseph J. DePaolo -- President and Chief Executive Officer
The comp -- the way I described it at a conference in December was a steel cage match wrestling. It has gotten more competitive. I haven't seen it as competitive in my lifetime anyway. They want the deposits and the lack of liquidity out there makes it very, very difficult. But we have -- on our side, we think we have the best teams basically of the best equipment financing group and Signature Financial. We have the commercial real estate group constantly asks for deposits and then we have now the Fund Banking Division, and everyone is focused on deposit growth. And that's what gives us somewhat of an advantage along with the fact that we get large deposits and not single dollars, but millions and sometimes billions. So I'll paint it this way. It's very difficult out there, but we're ready for the challenge. We also have a number of initiatives that Eric and I had decided, but with -- a few years ago that we would not disclose some of the initiatives just simply, because we don't want the competition to know what we're doing. But they can move us quickly into another deposit-generating machine that we were a few years ago.
Christopher McGratty -- KBW -- Analyst
That's great. Thank you. And do you have the -- do you have where the deposit costs worth in the month of December versus average for the quarter?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
We only have averages.
Christopher McGratty -- KBW -- Analyst
Okay. I can follow up. In terms of kind of a modeling question, the tax rate and the adjustment in the non-interest income, is it fair to assume that your kind of go-forward rates for both items?
Joseph J. DePaolo -- President and Chief Executive Officer
So for the tax is 25% effective tax rate that's what I would use going forward.
Christopher McGratty -- KBW -- Analyst
Okay. Thank you.
Operator
Thank you. Next question is from Steven Alexopoulos of JP Morgan.
Steven Alexopoulos -- JP Morgan. -- Analyst
Hey, good morning, everybody.
Joseph J. DePaolo -- President and Chief Executive Officer
Hey, Steve. Good morning.
Steven Alexopoulos -- JP Morgan. -- Analyst
Joe, to follow up on your comments on the deposit environment, which you described now as the worst for your lifetime. What -- tell us what's changed in the market like are these new entrants like -- what's really driving this level of ferocity around deposits?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
You know the biggest driver is really the reversal of quantitative using, right, sucking trillions of -- at least a trillion last year, $600 million, I think it'll stand over the course of the coming year or so or billion, excuse me. So that's creating quite a bit of headwind.
Steven Alexopoulos -- JP Morgan. -- Analyst
Okay. And what you guys -- go ahead, Joe.
Joseph J. DePaolo -- President and Chief Executive Officer
I was going to say that there are a lot of banks that need to fund their asset side that have retail groups, even though it's cheaper, right. But still you have to have this massive amount of branches to attract all those dollars and what we are finding is they're getting -- there's some desperation there, because just to turn on the lights in all their locations, they have to make some sort of revenue and with the yield curve the way it is and the amount of expense that they have, you get into a situation where they're starting to raise rates to a point that they're so far away from what we think is fair and normal. For instance, we are now talking about rates in the 2% range. But we have some banks that are going close to the 3% range, but it makes no sense to do so. That's why, I feel that it's so difficult out there. But you can tell a client I'm worth at least 25 basis points, so if somebody is offering you 225, I should be able to pay it 195, 200 because of the like of treatment I've been getting, but it's hard to tell a client that's being offered 50 basis point to 55 basis points more than what you're willing to offer them.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
I mean you know quite frankly we're seeing clients utilize their deposits again and are investing in their businesses which they hadn't done for quite a while. And we're also seeing off balance sheet alternatives which we haven't had to compete with for a decade, right. So there's other places for our clients to put their money and now we're starting to put it into their businesses which ultimately will be good.
Steven Alexopoulos -- JP Morgan. -- Analyst
Right.
Joseph J. DePaolo -- President and Chief Executive Officer
Yeah, we're pretty proud of the fact that we've just under $3 billion in deposit growth, because one of the areas that was a big initiative for us is EB5. We're down to $1 billion in EB5. So we're bringing in the money. Like Eric said, you know some of the areas the money is being used, we had some 1031 -- we had strong 1031 that's down a bit, bankruptcy is down a bit and we overcame all those headwinds and still had nearly $3 billion in deposit growth.
Steven Alexopoulos -- JP Morgan. -- Analyst
I want to understand, Eric, your response to Casey's question. Did you say that you guys are unlikely to push the loan-to-deposit ratio above 100. Is that what you said?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yeah. I mean, what I indicated was we're really not going to get into what our limits are, but 100% would be pushing it for us.
Steven Alexopoulos -- JP Morgan. -- Analyst
Okay. And then just on the Signet, it sounds like you're not charging customers, so that it's a deposit opportunity. Can you give us a rough sense like how meaningful is this deposit opportunity and are those non-interest-bearing deposits? Thanks.
Joseph J. DePaolo -- President and Chief Executive Officer
In non-interest-bearing deposits did (inaudible) framework an amount, but it really depends upon the number of ecosystems that we can sit on a payment platform in with various ecosystems. We could tell you that at least in the crypto world which I hate using that terminology, it's really the digital world. In the digital world, we see an enormous opportunity, but that's not going to be our only -- the only ecosystem that we will be in, but it's in the billions. I mean it's in the billion (ph).
Steven Alexopoulos -- JP Morgan. -- Analyst
Okay. Great, thanks for taking my questions.
Joseph J. DePaolo -- President and Chief Executive Officer
Thanks, Steve.
Operator
Thank you. Next question is from Matthew Breese of Piper Jaffray.
Matthew Breese -- Piper Jaffray -- Analyst
Good morning, everybody.
Joseph J. DePaolo -- President and Chief Executive Officer
Good morning.
Matthew Breese -- Piper Jaffray -- Analyst
I was hoping to get a little bit more of a dynamic view on the margin and the margin outlook. I think you suggest that with no Fed hikes, perhaps we see stabilization or some upside by the midpoint of this year. Does that include the yield curve being basically flat where it is now.
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Yes, that includes the yield curves being similar to where it is now. That's right.
Matthew Breese -- Piper Jaffray -- Analyst
Okay. And so any sort of steepening would be beneficial?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Correct.
Matthew Breese -- Piper Jaffray -- Analyst
Okay. And then, could you give us just a sense in terms of your multifamily commercial real estate book, what the backlog is of loans that are repriced this year and what the pricing gap is that'll help the margin as well?
Eric R. Howell -- Executive Vice President-Corporate & Business Development
You know it's very hard to predict to know what's going to reprice this year. We've talked about that and discussed in the prepayment penalty income, it's very difficult to predict client behavior. 2014, 2015 and 2016 were huge years for us volume wise. So you'd anticipate that we have quite a bit coming due, many, many billions should reprice this year. Most of those will be in the low to mid 3% range and we should see them priced into the mid-4s.
Matthew Breese -- Piper Jaffray -- Analyst
Okay. My last one is, I guess, if we roll back the tape a year or a year and a half, maybe the initiatives that we're talking about now whether it's the digital asset team, Signet, capital call lines, they were really not part of the discussion. And so I know you're hesitant to say what the deposit balances on any of those items will be, but maybe you can give us an outlook for forecast the deposit balances as a whole from those items as we look out the next year or two years. And then secondly, could you give us an idea of what you're working on that might be outside of these items that will help loan-to-deposit growth beyond 2019?
Joseph J. DePaolo -- President and Chief Executive Officer
We won't project or predict publicly what our thoughts are. It's too difficult. Well, one of the things that I will say is we believe that our geographical growth for San Francisco and one of the things we've mentioned in the past, but didn't come up today that we'd love to open up in Los Angeles as well. That will help us, because the expectation in both locales would be that we need to have more deposit growth and loan growth.
Matthew Breese -- Piper Jaffray -- Analyst
Understood. Is M&A part of the discussion as you think about the West Coast expansion?
Joseph J. DePaolo -- President and Chief Executive Officer
Every time I discuss M&A, it just gets me in trouble. So we never say never. I think it would be more likely if ever did M&A would be outside our market and not in our market.
Matthew Breese -- Piper Jaffray -- Analyst
Understood. Okay, that's all I had. Thank you very much.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Operator
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 conference ID, 3184218. 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.
Duration: 45 minutes
Call participants:
Joseph J. DePaolo -- President and Chief Executive Officer
Susan J. Lewis -- Investor Relations
Eric R. Howell -- Executive Vice President-Corporate & Business Development
Ken Zerbe -- Morgan Stanley -- Analyst
Dave Rochester -- Deutsche Bank -- Analyst
Brock Vandervliet -- UBS. -- Analyst
Casey Haire -- Jefferies -- Analyst
Jared Shaw -- Wells Fargo Securities -- Analyst
Ebrahim Poonawala -- Bank of America -- Analyst
Christopher McGratty -- KBW -- Analyst
Steven Alexopoulos -- JP Morgan. -- Analyst
Matthew Breese -- Piper Jaffray -- Analyst
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