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Signature Bank (SBNY)
Q1Â 2019 Earnings Call
April 17, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to Signature Bank's 2019 First Quarter Results Conference Call. Hosting the call today from Signature Bank are Joseph J. DePaolo, President and Chief Executive Officer and Eric R. Howell, Executive Vice President, Corporate and Business Development. Today's call is being recorded.
At this time all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. (Operator Instructions)
It is 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
Thank you, Samantha. Good morning and thank you for joining us today for the Signature Bank 2019 first quarter results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.
Susan J. Lewis -- Media Contact
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 results and then Eric Howell, our EVP of Corporate & 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 past several quarters have been extremely productive for Signature Bank as we build for the future. We've been quite busy. During this time, we started two best-in-class businesses the Fund Banking Division and the Venture Banking Group while also commencing our West Coast operations with the opening of our San Francisco private client office. Additionally, we launched Signet, our proprietary, blockchain-based real time payments platform, while also adding qualified colleagues to our team across the board to support all of these new businesses. We embarked arguably on these timely growth initiatives simultaneously as we believe they will all contribute to strengthening our franchise and help position the Bank for continued success.
Signature Bank delivered another quarter of growth and performance led by $1 billion in loan growth, while maintaining overall strong credit quality and delivering solid earnings.
Net income for the 2019 first quarter was $144.1 million or $2.65 diluted earnings per share, compared with $34.5 million or $0.63 diluted earnings per share for last year. The increase in net income was driven by a decrease in charge-offs and writedowns for the medallion portfolio, which we took last year. We also grew net interest income despite a decline of $4.3 million in prepayment penalty income. Offsetting these increases was a rise in non-interest expense due to the addition of new private client banking teams, including the Fund Banking Division and the Venture Banking Group.
Looking at deposits, while confronted by a challenging deposit environment, we still increased deposits by $244 million to $36.6 billion this quarter and average deposits grew $210 million. Growth for the quarter was affected by a decline of $660 million in escrow deposits. However, I would be remiss if we didn't break protocol here and note thus far this quarter, we are up $650 million in average deposits. Since the end of the 2018 first quarter deposits increased $1.8 billion and average deposits increased $2.3 billion.
Non-interest bearing deposits of $11.7 billion still represent a high 32% of total deposits. Deposit and loan growth coupled with earnings retention led to an increase of $4.1 billion or over (ph) 9% in total assets since the first quarter of last year.
Now let's take a look at our lending businesses. Loans during the 2019 first quarter increased $1 billion or 3% to $37.5 billion. For the prior 12 months, loans grew $4.2 billion. Now the increase in loans this quarter was again driven primarily by fund banking and specialty finance. This is the second consecutive quarter where C&I outpaced CRE growth furthering the transformation of the balance sheet to include more floating rate assets and diversifying the credit profile.
Turning to credit quality. Our core portfolio continues to perform well, excluding medallions, non-accrual loans are just $18.6 million or nearly 5 basis points of total loan. Overall, non-accrual loans decreased again this quarter by $14 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 loans at $23.9 million, and 90-day plus past due loans at a low $1.9 million.
Net charge-offs for the 2019 first quarter were $879,000, compared with $128 million from the 2018 first quarter, which were driven by taxis, no pun intended. The provision for loan losses for the 2019 first quarter was $6.3 million, compared with $140.8 million for the 2018 first quarter, again through the medallion loans. The allowance for loan losses remained unchanged 63 basis points of loans and now that we have substantially lowered our taxi medallion exposure, our coverage ratio has increased nicely over the last few quarters to 249%.
Now let's talk about the team front. We've added two private client banking teams in the first quarter; including the Venture Banking Group, which in and of itself is multiple teams. Thus far in the 2019 second quarter, we added one more team to our San Francisco office where our pipeline remains active.
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 first quarter reached $319 million, up $846,000 or 0.3% when compared with the 2018 first quarter and a decrease of $16 million from the 2018 fourth quarter.
Net interest margin decreased 26 basis points in the quarter versus the comparable period a year ago and declined 15 basis points on a linked quarter basis to 2.75%. Excluding prepayment penalty income, core net interest margin for the linked quarter decreased 7 basis points to 2.73%. The decrease was driven by an outflow of non-interest bearing escrow deposits, which were replaced by higher cost borrowings.
Let's look at asset yields and funding costs for a moment. Interest earning asset yields increased 26 basis points from a year ago and 2 basis points from the linked quarter to 4.01%. The increase in overall asset yields was driven by higher reinvestment rates in all of our asset classes. Yields on the securities portfolio increased 3 basis points linked quarter to 3.31%, given stable CPR speeds and accretive reinvestment yields. The duration of the portfolio decreased to 2.9 years, as a result of significantly lower market rates at quarter-end.
Turning to our loan portfolio, yields on average commercial loans and commercial mortgages remained stable at 4.21%, compared with the 2018 fourth quarter. Excluding prepayment penalties from both quarters, yields increased 10 basis points. Prepayment penalties for the 2019 first quarter were only $2.4 million, down $9.4 million, compared to the 2018 fourth quarter, as the dramatic decline in longer term rates led to a significant slowdown in CRE prepayment activity.
Now looking at liabilities. Our overall deposit cost this quarter increased 18 basis points to 1.16%, mostly due to the December increase in the fed funds rate and significant outflows of non-interest bearing escrow deposits. However, thus far in the second quarter, we have seen deposit inflows including non-interest bearing deposits. Average borrowings, excluding subordinated debt, increased $819.3 million to $6.1 billion or 12.8% of our average balance sheet. The average borrowing cost increased 17 basis points from the prior quarter to 2.58%. And overall the cost of funds for the linked quarter increased 20 basis points to 1.39%.
On to non-interest income expense. Non-interest income for the 2019 first quarter was $6.1 million, a decrease of $1.1 million when compared with the 2018 first quarter. The decline was due to an increase of $3.3 million in other losses from low income housing tax credit investments, which positively impacts our effective tax rate.
Non-interest expense for the 2019 first quarter was $125.1 million versus $137.3 million for the same period a year ago. The $12.3 million or 9% decrease was due to a decline in writedowns for taxi medallion loans. Excluding these writedowns, non-interest expense would have increased 11.5% for the quarter. This was partially offset by an increase in expenses from the addition of new private client banking teams. The Bank's efficiency ratio was 38.5% for the 2019 first quarter versus 34.9% for the 2018 fourth quarter and 42.2% for the 2018 first quarter.
And turning to capital. In the first quarter of 2019 the Bank paid a cash dividend of $0.56 per share. Additionally during the 2019 first quarter, the Bank repurchased approximately 173,000 shares of common stock for a total of $22.9 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 a Tier 1 leverage ratio of 9.68%, and total risk base ratio of 13.24% as of the 2019 first quarter.
Now I'll turn the call back to Joe. Thank you.
Joseph J. DePaolo -- President and Chief Executive Officer
Thanks, Eric. As I stated earlier we are motivated by the initiatives that we have recently put in place, because you can't stop the future. We are engaged on a number of projects simultaneously as undertaking one at a time is the recipe for a bank to fall behind its competitors or worse.
First, our Fund Banking Division is affording us the opportunity to transform our balance sheet from both a credit and asset liability perspective, given the floating rate nature of their loans. The addition of the Venture Banking Group will extend our offerings to an ever expanding area of our economy. We continue to build out our San Francisco operations with the hiring of a team that started on April 1st. Both the Fund Banking Division and the Venture Banking Group will be well represented on the West Coast. And lastly setting the stage for the future, we launched Signet, our proprietary blockchain-based real time payments platform.
Now we are happy to answer any questions you might have. Samantha we'll turn it over to you.
Questions and Answers:
Operator
The floor is now open for questions. (Operator Instructions) Our first question comes from the line of Dave Rochester with Deutsche Bank.
Dave Rochester -- Deutsche Bank -- Analyst
Hey, good morning guys.
Joseph J. DePaolo -- President and Chief Executive Officer
Hey Dave. Good morning.
Dave Rochester -- Deutsche Bank -- Analyst
On the NIM, can you just talk about what the main differentials were, and the results versus what you guys were expecting going into 1Q, or was it just the escrow outflows that you talked about or maybe other pressures? And then if you just talked about how deposit competition looks today given the new rate backdrop and then how you're thinking about the NIM going forward?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Yeah, Dave we had a significant amount of DDA escrow outflows for varying reasons. We've pointed to the choppiness in our deposit base before. Since we don't have a retail channel, we tend to be a little bit more choppy. So -- but there's not anything in particular to point to, but we did see significant amount of DDA outflows. Fortunately a fair amount of that has come back this quarter, as Joe pointed out. Our scripted response were up $650 million in average deposit thus far this quarter. So we have seen that flow back. But that was really the main driver. We anticipated that those DDAs, those escrows will come back during the first quarter. Unfortunately, the timing didn't work out and they came back early -- early in the second quarter. So that was really what pressured the margin a little bit more than what we had guided to.
Joseph J. DePaolo -- President and Chief Executive Officer
And the competition is, it hasn't let up. We have -- we continue to find ways to add on quality people with quality experience, example is our latest foray into the venture banking world. This team is incredibly professional very much like the Fund Banking Group that came in last year. This team in the Venture Banking Group will probably (inaudible) as they were at Square 1 was deposits versus loans 3 to 1 to 4 to 1. So we're always finding ways to lessen the competition by going to other areas, but the competition is incredibly strong. And that's about it.
Dave Rochester -- Deutsche Bank -- Analyst
Okay. And then how are you guys thinking about the NIM trend in 2Q and then maybe in the back half of the year as well as maybe deposit cost increases subside a little bit?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Well, if there's any silver lining in the stable probably at or near the inflection point in our NIM depending on deposit growth. We really should see it stabilize from here. We could be down a few basis points but we certainly could be up as well. I think with a reasonable amount of deposit growth, we should see an upward bias in the NIM, certainly as we look out toward the end of the year.
Dave Rochester -- Deutsche Bank -- Analyst
Yeah. Okay. And so for 2Q, you're thinking maybe down a few basis points, but then stable to up beyond that or I guess dissolves as much as possible.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
2Q could be stable, certainly could be down, a few could be stable.
Dave Rochester -- Deutsche Bank -- Analyst
Okay.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
It could be up even potentially given what we've seen thus far. But I would say stable with a slight downward bias for Q2 and then upward bias for 3 and 4.
Dave Rochester -- Deutsche Bank -- Analyst
Okay, great. And then, just on the earning asset side of that, you mentioned higher loan yields and whatnot, with the curve coming down just curious where pricing was across the loan book on new loans whether it's multi-family CRE or C&I just any color you can give there would be great.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Yeah. Well, I mean CRE, repricing were at 4.375% (ph) to 4.25% (ph) for our best CRE clients. And then that's for the multifamily space. For other forms of CRE, we are probably close to 4.75%. Just keep in mind that we are slowing the growth down and we're seeing a natural slowdown in the growth in that space given what's happened with the -- with the interest rate environment people are less likely to refinance and rush to refinance for sure. Signature Financials generally coming in at a 4.50% to 5% range. Our Funds Banking Division is, I'd say between a 4.15% to 4.50% range on their loans. And then traditional C&Is north of 5%. So -- and we (multiple speakers). I am sorry, Dave I was just going to say, we expect north of 5% (ph) for the Venture Banking Group as well.
Dave Rochester -- Deutsche Bank -- Analyst
North of 5%. Okay, great. And then security, is there any runoff where you guys put that or? What's that?
Joseph J. DePaolo -- President and Chief Executive Officer
I was saying on the commercial real estate side, the rates that we're charging is a little bit more spread than the norm because we're starting to see some 4% on the multi-family side. And so (multiple speakers) is slowly going to three-eights (ph) to three-quarters (ph).
Dave Rochester -- Deutsche Bank -- Analyst
Okay, great. That's great color. Anything on the security side where you're seeing purchase rates these days?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Right now we're really not purchasing. So if we had to we'd probably be around 3%, low 3%-ish. (ph)
Dave Rochester -- Deutsche Bank -- Analyst
All right. Great. Thanks for the color guys. Appreciate it.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you, Dave.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Thanks, Dave.
Operator
Your next question comes from the line of Ken Zerbe with Morgan Stanley.
Ken Zerbe -- Morgan Stanley -- Analyst
Great, thanks. Good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Hi.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Good morning, Ken.
Ken Zerbe -- Morgan Stanley -- Analyst
Joe or Eric, I was hoping you can just talk a little bit more about the Venture Banking Group. Like how -- I know they recently just came on. How quickly do you envision these guys actually starting, like when should they start adding loans and so if we think out, I don't know call it a year from now, what's the balances that you might kind of expect or hope that they could be contributing at that point?
Joseph J. DePaolo -- President and Chief Executive Officer
I can tell you they have a pipeline already of several hundreds of millions both on the deposit and loan side. We know they got their first term sheet out the other day, which is extraordinary because they literally just came on at the end of March and they're trying to get to know their whereabouts here within the institution. This is a group that is incredibly professional. Not only do they have experience and knowledge, but they actually started Square 1, took it public and then sold it. So they know what it is to run a business on their own, and we expect that they'll hit the ground running for the second quarter.
Ken Zerbe -- Morgan Stanley -- Analyst
Got you. Understood. Okay. And then, just a follow-up on the capital call lines. I think -- I think it was Eric, you mentioned the yield is 4.15 (ph) to 4.50 (ph). I always envisioned those to be sort of incredibly high quality loans but very, very price sensitive or incredibly low yields. Can you just talk about how that 4.15 (ph) to 4.50 (ph) compares to other banks who are also offering similar capital called lending. Thanks.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
I think it's right in the range of what other banks are offering. We're not really competing on price here. We believe that we've hired the best of class in this team. And they're really competing our relationship and they have great and strong relationships with our clients. So we're not having to offer significantly below other competitors in the space in order to garner the business here. So it's really the acuity with which they execute their business models is truly best of class and that's allowed us to bring on very high quality credits at a reasonable price.
All right. Perfect. And then, just one last question in terms your asset or liability sensitivity, obviously, you've gotten hurt given the rising interest rate environment, but now that the Fed potentially looks like it may cut rates either late '19 sometime in 2020. I know you're adding a lot of these more asset sensitive products or variable rate products and makes you a little more asset sensitive. Can you just talk about how you're thinking about interest rate management and how you're positioned if the Fed actually does cut rates?
It's going to take us a long time to achieve asset liability neutrality right. So we're still liability sensitive. If the Fed does cut and when they do cut, it'll take us a little while to reprice that through to our deposit base. But it should ultimately be beneficial to us and we're going to be a liability sensitive for a long time we're really moving a ship here. But we're happy with the strides that we've taken in moving those floating rate assets. I think we're 10% or sub-10% early last year and now we're over 13% of floating rate assets and we expect that trend to continue.
Ultimately our goal for the long-term is to really be neutral and try to take as much as we can thee NIM discussion out of the equation and operate it in a much tighter band of NIM going forward.
Joseph J. DePaolo -- President and Chief Executive Officer
And it is the benefit of teams that have come on that's going to help us move this big ship. This fee income and they are like the parts that come along with it. So there are other benefits as well.
Ken Zerbe -- Morgan Stanley -- Analyst
Alright, perfect. Thank you very much.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Thank you, Ken.
Operator
Your next question comes from the line of Jared Shaw with Wells Fargo Securities.
Jared Shaw -- Wells Fargo Securities -- Analyst
Hi, good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Hi Jared. Good morning.
Jared Shaw -- Wells Fargo Securities -- Analyst
On the CRE prepayment penalty this quarter, do you think that have we hit an inflection point there as well or do you think that that's going to be at significantly lower levels for a while or was there anything more unique to the quarter where we could see some of that coming back?
Joseph J. DePaolo -- President and Chief Executive Officer
I would expect that the level we are at is close to the level that it will be in the near future. This quarter was the lowest quarter of prepayment penalty income in seven years. And we don't think it's an anomaly. So, I would expect that it will be close to the $2 million to $3 million as opposed to the $11 million, we had in the fourth quarter.
Jared Shaw -- Wells Fargo Securities -- Analyst
When you're talking to your borrowers on the multi-family side any conversation around or any thought around them actually keeping loans outstanding through the reset period or how as we come to the end of the fixed period, do you think the owners will react to the current rate environment?
Joseph J. DePaolo -- President and Chief Executive Officer
I think the owners are thinking more about what's going to happen politically in the city and in the state. They're really not having conversation. Well, I could tell you this, on the prepayment as Eric said, we had a lot of activity when they thought rates were going up and now they agree rates are going to go down even further. There's less activity to extent but I think the more -- the bigger issue, believe it or not is the state and city and what they're going to do with new rules for multifamily. That's really what they're talking about.
Jared Shaw -- Wells Fargo Securities -- Analyst
Okay. Got it. Thanks. And then, can you give us an update on where the balance is for the capital call business were at the end of the quarter as well as the West Coast balances?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Go ahead, Joe.
Joseph J. DePaolo -- President and Chief Executive Officer
We don't break out the balances in the West Coast or different teams but we will tell you on the Fund Banking year-to-date -- it's not year-to-date I guess when you take the fourth quarter last year and the first quarter this year we're about $1.2 billion in outstandings.
Jared Shaw -- Wells Fargo Securities -- Analyst
Okay, that's great. And then, you've mentioned in the past that ultimately this is going to be a business that's a bigger deposit generator than loan business. And then with the tech lending, you mentioned that 3 to 4 times deposits to loans. How long will that take to actually get up to speed where you actually see that loan to deposit ratio flowing through like that in those businesses?
Joseph J. DePaolo -- President and Chief Executive Officer
Well, I think on the Fund Banking side, it's going to take a little while, it's going to take much more quarters for it to catch up, the deposits to loans. On the Venture Banking because they are much smaller loans and because the lending we do to the investor companies, we think that'll be quicker, could the investors put the money in before the debt.
Jared Shaw -- Wells Fargo Securities -- Analyst
Great. Thanks very much.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Ebrahim Poonawala from Bank of America.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Good morning, guys.
Joseph J. DePaolo -- President and Chief Executive Officer
Good morning.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Good morning.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
I just wanted to follow-up on your comments, Eric around the margin, and just looking at sort of going through the loan yields that you broke out, is it fair to assume that the average origination yields are coming in around 4.5% on a blended rate? And what would you pay cost of deposits like when you talk about deposit growth coming through NIB and interest bearing, what's a good sort of expectation there given that interest rates are on a pause now?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Yeah, I think it is safe to say we're right around 4.5% on incremental loan yields blended. If you look at deposit costs were right around that 2% mark on interest bearing deposits on the incremental new deposits, but we have to pay to bring them over. But then if you blend in a reasonable amount of DDA, so say 25%, our average rate now is 32%. If we bring in 25% DDA that brings our blended average on the deposit side down to 150. So we're looking about 3% incremental margin on new growth.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
That's helpful. And just following up on the question around the capital call line team. I guess that it will take a few quarters before they catch up on deposit growth, but have they brought in any deposit so far over the last couple of quarters?
Joseph J. DePaolo -- President and Chief Executive Officer
Yeah, several hundreds of millions.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
So, they have, so the deposit flows -- so you meant in terms of for them to be fully funded, it's going to take a few quarters?
Joseph J. DePaolo -- President and Chief Executive Officer
Yeah. Oh, sure.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
It's going to -- they're going to be playing catch up for quite a while everyday (ph).
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Understood. And in terms of expense outlook, so obviously you hired this team. 11.5%, I think you mentioned Eric, on a core business expense growth year-over-year. Is 11.5% to 12% kind of what we should think about how expense growth should trend?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Well, remember that team came in really at the end of the first quarter. So full quarter's worth of expense is not in there for them. So we would anticipate a 12% to 14% year-over-year expense growth probably 14% in the second quarter and working its way down to 12% throughout the course of the year.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Understood.
Joseph J. DePaolo -- President and Chief Executive Officer
You have to understand between those two teams there's a slightly over 40 professionals that we've brought in.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
No, no. I appreciate that and that makes sense. And one last question, Eric you mentioned the securities book. Is there any reason why you would be buying any security right now given sort of borrowing cost like should we expect securities book to stay flat to lower?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Correct, yes. And what we see is significant amount of deposit flows, but even with that, we probably pay down borrowings.
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Got it. Thank you, Dave 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
Your next question comes from the line of Steven Alexopoulos from JP Morgan.
Steven Alexopoulos -- JP Morgan -- Analyst
Hey. Good morning, everybody.
Joseph J. DePaolo -- President and Chief Executive Officer
Hi, Steve. Good morning.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Good morning, Steve.
Steven Alexopoulos -- JP Morgan -- Analyst
First on the margin, I want to follow up on the outlook for NIM expansion in the second half. First, do you assume that the deposit environment improves to see that expansion and do you need a steeper curve to see that or with the current curve, do you think you will still see expansion?
Joseph J. DePaolo -- President and Chief Executive Officer
The deposits, I don't think the environment is going to get easier, but we have different teams and different businesses that are going to give us an opportunity to bring in deposits that we never had before, such as the Fund Banking and the Venture Banking Group. And then we have the West Coast. So those are three areas that we never really had the opportunity before to bring in deposits, as well as the government settles on a few other things in EB5, we'll be back in that business as well. So I don't think it's going to get easier. I think we just have more opportunity to bring in pilots because of the areas we haven't been in before.
Steven Alexopoulos -- JP Morgan -- Analyst
Okay.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
And we did kind of see a leveling off of deposit pressures in March from what we would probably characterize as pretty difficult deposit environment in January and February coming off of that increase. As it relates to the steepness of the curves, Steve remember we're now investing in loans at the short end of the curve. So the steepness doesn't quite matter as much to us in that the Fund Banking Division, Signature Financial is tied to the shorter end of the curve. Certainly the traditional C&I or asset based lending group, as well are all tied to the short end of the curve. So the areas of growth that we have and also with the Venture Banking Group are really coming in at the short end of the curve. So if the steepness doesn't matter as much to us.
Steven Alexopoulos -- JP Morgan -- Analyst
Got it. Okay. And then, I know it's a slow start. 1Q on the deposit side and you're indicating that we're seeing already a nice pickup in 2Q. How do you think about the full year $3 billion to $5 billion prior guidance, are we trending toward the lower end of that range at this juncture, I know we have new teams coming on too?
Joseph J. DePaolo -- President and Chief Executive Officer
Yeah, I don't believe so. We believe that the $3 billion to $5 billion is a good range and not that we're trending lower -- to the lower end because of the activities that we see going on right now that we hadn't had six months ago. So we're pretty confident that we're going to be within that range.
Steven Alexopoulos -- JP Morgan -- Analyst
Okay. And then, just finally -- thanks Joe. The new Venture Banking Group, could you tell us what's been the composition of their deposits in terms of non-interest bearing. I think they had more interest bearing than we have seen at other venture teams. What's the rough mix of their deposits?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Yeah. It's roughly 50% DDA to the interest bearing.
Steven Alexopoulos -- JP Morgan -- Analyst
50/50, OK. And just to follow-up on Jared's question, do you think you'll need to lead on credit to get that business over, do you see the deposits really coming over first?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Ultimately it's a relationship based business right. So to get to deposits you have to make the loan. Here, we will be making a loan in conjunction with the Venture Group putting equity into the transaction. So just to give an example. If an equity front puts in $10 million, we make a $1 million to $2 million loan, we'll see that that $11 million to $12 million in deposits come to us immediately. But you do have to make the loan and we want to make the loan, we want to be part of this economy, growing part of the economy, right. So the loans and the deposits come together.
Steven Alexopoulos -- JP Morgan -- Analyst
But still favorable mix out of the gate. Okay.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Correct, exactly.
Joseph J. DePaolo -- President and Chief Executive Officer
Yeah. In fact in some of the pipeline that they have, they have a notation that they'll be giving a line of credit that won't be used immediately and so the deposits will flow out with that loan because it doesn't flow down for a while.
Steven Alexopoulos -- JP Morgan -- Analyst
Right, right. Okay, thanks for all the color.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you, Steve.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Thank you, Steve.
Operator
Your next question comes from the line of Casey Haire with Jefferies.
Casey Haire -- Jefferies -- Analyst
Yeah. Thanks. Good morning guys. Wanted to follow up on the deposit growth outlook. Obviously you guys have a number of initiatives in place here, but I was just wondering how long do you think -- what's a reasonable time frame for when the -- these initiatives really start to take traction and can match -- dollar match, dollar to dollar the loan growth? And until that happens, how much room is there to move the loan to deposit ratio up from 102 (ph)?
Joseph J. DePaolo -- President and Chief Executive Officer
We expect the initiatives to be this year, not anytime later. We expect that they're going to -- whether it's Signet, West Coast or the new teams that we've brought on. Our expectation is that we'll be able to run the business with deposits sourcing -- as a source for the loans this year.
Casey Haire -- Jefferies -- Analyst
Okay, so your outlook does not --
Joseph J. DePaolo -- President and Chief Executive Officer
We still have over 100 teams that are primarily deposit -- majority deposit generators. You can't forget the teams that we've brought on over the last 17 years, they're still developing business.
Casey Haire -- Jefferies -- Analyst
No. I understood, but there I mean -- and I appreciate you guys have more initiatives on the come, but I mean the loan generation has been much stronger. So I mean basically your outlook assumes that deposits will match loan growth dollar for dollar going forward.
Joseph J. DePaolo -- President and Chief Executive Officer
More or less, yes.
Casey Haire -- Jefferies -- Analyst
Okay. Thank you.
Joseph J. DePaolo -- President and Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Chris McGratty with KBW.
Chris McGratty -- KBW -- Analyst
Very good morning. Thanks for the question. Eric or Joe one of the attractive features of the Company historically has been the simple business model and really withstanding the taxi, the clean credit culture. I'm interested in how you're thinking about the incremental risk awards from the Venture Banking initiative at this stage of the cycle, and how it might impact future credit costs?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
We're well aware of the risks that are associated with this business, but we feel that the rewards far outweigh the risks. We've hired a team with a deep and long-standing relationships that know how to navigate these risks and have a strong track record of having done so. So in addition to the senior management team that we've brought on board and lending teams, we've also hired credit and portfolio management as part of the initial team to help to mitigate that risk. And if you go back to the track records at Square 1, if you look at the primary competitor Silicon Valley Bank, Comerica and others, the level of losses have been very well contained in this business. So we're well aware of the risks associated with it, but we really think that the risk far outweighs that. And if you look at peak losses at Square 1 it was 170 basis points coming out of the crisis. So that's far better than most banks in the country coming through the crisis. So we feel pretty good about the credit aspects.
Chris McGratty -- KBW -- Analyst
Okay.
Joseph J. DePaolo -- President and Chief Executive Officer
Plus the best use of capital is putting on teams and not to buy businesses or buy a company. And that weighs in -- when we do the due diligence. And like we did with all the other initiatives, this team is incredibly professional, they know the business very well. In fact they ran their own business before they were sold, before they sold themselves. So we're very confident in their capabilities.
Chris McGratty -- KBW -- Analyst
Okay. Thanks for that Joe. Eric, on the buyback, I think in the past you said $30 million to $50 million approximately a quarter, quarter is a little wide. I guess thoughts on kind of pace of activity given the run in the stock year-to-date and a little bit of a pullback today. Thanks.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Well, yeah. We'll probably be a buyer in the near-term for sure. We're being very selective around when we buy, when we see the stock price rise, we're going to buy less, when we see pullbacks, we're going to buy more Chris. So being very careful in how we execute on that buyback. We do have a number of initiatives under way that we ultimately believe will lead to growth. So we want to be prudent around the levels of capital that we maintain. So we eased off the buyback program a little bit this quarter. And we anticipate, we'll be back and we can start buying back, once we're out of the blackout period on Monday. So we'll start again then and we'll probably be in the $20 million to $50 million range again this quarter.
Chris McGratty -- KBW -- Analyst
Okay, great. And then the last one, Eric, on the tax rate. Same tax rate going forward and also the offset in the fee, it's kind of one for one, is that right?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Yeah, I mean we anticipate that we'll have a 25% effective tax rate moving forward. We did have some discrete items that ran through this quarter and bumped it up a little bit. So we'll probably go back down to a 25% range moving forward the rest of the year.
Chris McGratty -- KBW -- Analyst
Great. Thank you.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Thank you, Chris.
Joseph J. DePaolo -- President and Chief Executive Officer
Thanks.
Operator
Your next question comes from the line of Matthew Breese with Piper Jaffray.
Matthew Breese -- Piper Jaffray -- Analyst
Good morning.
Joseph J. DePaolo -- President and Chief Executive Officer
Good morning, Matthew.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Good morning, Matt.
Matthew Breese -- Piper Jaffray -- Analyst
I just wanted to hone in on the escrow deposit outflows this quarter, inflows quarter-to-date. How much of the core NIM compression that 7 basis points was isolated just to the escrow deposit outflows?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
A lot.
Joseph J. DePaolo -- President and Chief Executive Officer
A lot of it.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Yeah, a significant portion of it.
Matthew Breese -- Piper Jaffray -- Analyst
And is that the primary variable to basically get you back or keep the NIM flat for 2Q? Is it based on (multiple speakers)
Joseph J. DePaolo -- President and Chief Executive Officer
Absolutely. Absolutely.
Matthew Breese -- Piper Jaffray -- Analyst
Okay. And could you just give us an idea of the borrowings associated with the escrow deposit outflows?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Well, I mean our borrowings are up $800 million, rates on those are probably in the mid 2s, 2.50, 2.60 (ph). We did go out a little bit with some of our borrowing, so it didn't cost us incrementally that much more.
Joseph J. DePaolo -- President and Chief Executive Officer
In our history, we've always had -- we've only disclosed when we had large movements of escrow, whether they were positive or negative. To give you an example on April 1st, we had $700 million. We had three clients deposit over $700 million on April 1st. And if that money came in on March 29th people would say, wow, you had over $1 billion with this $700 million . I'm sorry, it's $400 million. This $400 million between three clients. So it's very choppy, but as Eric reiterated and I had said during the script the average deposit growth thus far is $660 million.
Matthew Breese -- Piper Jaffray -- Analyst
Got it. Okay. All right. And then just focusing on the Venture Banking, the new team there, what are the associated costs with the team?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
We're not going to give out that number.
Matthew Breese -- Piper Jaffray -- Analyst
Okay.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
It's in that 40% expense growth.
Matthew Breese -- Piper Jaffray -- Analyst
And what's the breakdown between what they're producing in terms of capital call lines versus pure venture capital lending?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
They're predominantly going to do pure venture lending. There will be some call facilities. It's a little early on to estimate what that will be. But it'll be -- have to guess around 25%, 35% of the portfolio.
Matthew Breese -- Piper Jaffray -- Analyst
Okay, OK. And then just continuing to capital, I mean the credit discussion with that team. And if you look at what Pac West and their performance the last couple of years there were a couple of hiccups in that Venture Banking Division, couple of a charge-offs, as you think about some of the lumps and bumps, was this team responsible for that or are there lessons learned and ways to avoid kind of the volatility from a credit perspective?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
I think that it's safe to say that there was a significant disconnect between Square 1 and Pac West and the way in which they dealt with credits. And that's why the team is now here. I'll let Pac West speak for the actions and why they took them. But if you look at the strong track record that they had at Square 1 prior to them going to Pac West when you look at the primary competitors that we've talked about in that space, the level of charge-offs have been significantly less than what we had seen a Pac West. But we'd rather not speak for them.
Matthew Breese -- Piper Jaffray -- Analyst
Okay.
Joseph J. DePaolo -- President and Chief Executive Officer
If you look -- look at the performance at Square 1 that's what you should concentrate on. It's part of our due diligence. They had nearly 12 years of great performance and that's more representative than being part of Pac West.
Matthew Breese -- Piper Jaffray -- Analyst
Okay. So with the on-boarding of the team, given that credit profile, do you expect any changes to the provision going forward?
Eric R. Howell -- Executive Vice President, Corporate & Business Development
There will be no meaningful changes really to our provision. I mean ultimately the early stage lending that we're going to do is, going to be such a small percentage of our balance sheet for quite a while that we don't think it will meaningfully affect our provisioning when you couple that with the fact that we're putting on capital coal facilities that we could easily argue really require no provision, right, offsetting that though we don't really see meaningful difference in provision going forward.
Joseph J. DePaolo -- President and Chief Executive Officer
I mean think about, you put on a $200 million facility credit capital call with a very meaningless provision and then you couple that with $1 million loan on the venture side and you put a little bit of the reserves on that, it's so meaningless.
Matthew Breese -- Piper Jaffray -- Analyst
Got it. Okay. Last one is just on the New York City multi-family environment, in couple of months the rent guidelines board will sit down and meet. The politicians are talking about some sweeping changes to the rent regulated apartment business. What do you expect and if the changes are sweeping, what do you expect for kind of underlying property valuations and potential changes there?
Joseph J. DePaolo -- President and Chief Executive Officer
Well, I'll tell you. I think that personally, they're not going to drive business out. So I think there'll be some rationale. I think the governor will hopefully -- he doesn't want to turn the business away. He doesn't want to turn the business upside down. But it's not going to be good, but it won't be horrible. Most of our clients are talking about it, but I don't believe that they will react in a fashion that would have the politicians get angry. I think they're talking right now and they're going to keep on talking because they don't want to let the public know that there's this disconnect between the owners and the tenant.
Matthew Breese -- Piper Jaffray -- Analyst
Understood. Okay. That's all I had. Appreciate taking my questions. Thanks.
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Thank you, Matt.
Operator
This concludes our allotted time for questions 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 the conference ID number 2615648. 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: 49 minutes
Call participants:
Joseph J. DePaolo -- President and Chief Executive Officer
Susan J. Lewis -- Media Contact
Eric R. Howell -- Executive Vice President, Corporate & Business Development
Dave Rochester -- Deutsche Bank -- Analyst
Ken Zerbe -- Morgan Stanley -- Analyst
Jared Shaw -- Wells Fargo Securities -- Analyst
Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst
Steven Alexopoulos -- JP Morgan -- Analyst
Casey Haire -- Jefferies -- Analyst
Chris McGratty -- KBW -- Analyst
Matthew Breese -- Piper Jaffray -- Analyst
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